Foreign aid and entrepreneurship in Africa: the role of remittances and institutional quality

Folorunsho Ajide and Tolulope Osinubi

Economic Change and Restructuring, 2022, vol. 55, issue 1, No 6, 193-224

Abstract: Abstract This study investigates the impact of foreign aid and remittance inflows on entrepreneurship progress in Africa. The role of institutional quality in the relationship between foreign aid and entrepreneurship is also investigated. We explore data of 19 African countries for a period of 2006–2017, and panel data regression techniques are employed. The study finds that: (1) Foreign aid impact on entrepreneurship is negative. (2) The remittances mediate the negative impact of foreign aid on entrepreneurship. (3) Institutional quality mediates the negative impact of foreign aid on entrepreneurial progress. (4) The threshold level of remittance at which foreign aid would meaningfully enhance entrepreneurship is 10.59 as a percentage of GDP while that of institutional quality is 5.04 on a scale of 10 point. (5) The role of remittances and foreign aids is complementary in firm start-up activities. (6) Institutional quality plays important roles in moderating impact of foreign aid on firm start-up activities. In addition, our results show that concentration in banking industry does not benefit entrepreneurial activities. The study concludes that foreign aids and remittances perform complementary roles in improving the level of entrepreneurial development in Africa. The strong institutional environment is very important in promoting entrepreneurial success. These findings are robust to alternative estimations.

Keywords: Aid; Bank concentration; Entrepreneurship; Institutions; Remittances (search for similar items in EconPapers)
JEL-codes: F35 F36 L26 O55 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://link.springer.com/10.1007/s10644-020-09305-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ecopln:v:55:y:2022:i:1:d:10.1007_s10644-020-09305-5

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/10644/PS2

DOI: 10.1007/s10644-020-09305-5

Access Statistics for this article

Economic Change and Restructuring is currently edited by George Hondroyiannis

More articles in Economic Change and Restructuring from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().