Entrepreneurship, Institutions, and Economic Growth: Does the Level of Development Matter?

Christopher Boudreaux and Steven B Caudill

MPRA Paper from University Library of Munich, Germany

Abstract: This study questions the assumption that entrepreneurship unequivocally leads to economic growth. Using insights from institutional theory and development economics, we reevaluate entrepreneurship’s contribution towards economic growth. Our study uses Global Entrepreneurship Monitor (GEM) data for a panel of 83 countries from 2002 to 2014 and highlights several important findings. First, our evidence suggests that entrepreneurship encourages economic growth but not in developing countries. Second, we find that a country’s institutional environment—measured by GEM’s Entrepreneurial Framework Conditions (EFCs)—contributes to economic growth in more developed countries but not in developing countries. Lastly, we find that opportunity-motivated entrepreneurship encourages economic growth in developed countries, while necessity-motivated entrepreneurship discourages economic growth in developing countries. These findings have important policy implications. Namely, our evidence contradicts policy proposals that suggest entrepreneurship and the adoption of pro-market institutions that support it will encourage economic growth in developing countries. Our evidence suggests these policy proposals are unlikely to generate the desired economic growth.

Keywords: Entrepreneurship; Institutions; Economic Growth; Policy; Global Entrepreneurship Monitor; Developing Countries (search for similar items in EconPapers)
JEL-codes: L26 L53 M13 O43 O47 (search for similar items in EconPapers)
Date: 2019-06-01
New Economics Papers: this item is included in nep-ent, nep-gro and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Entrepreneurship, Institutions, and Economic Growth: Does the Level of Development Matter? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:94244

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