Economic development and business creation

2022

JFRC

Purpose One of the main obstacles to the flourishment of African entrepreneurship is financial constraint. Existing studies on the nexus between entrepreneurship and financial development are inconclusive, while the position of African economies remains unknown. The purpose of this paper is to empirically study the impact of financial development on entrepreneurship in Africa. Design/methodology/approach This study utilizes data of 20 selected countries in Africa over a period of 2006–2017. International Monetary Fund (IMF) data on broad-based financial development were combined with World Bank Entrepreneurship database. This study uses system generalized methods of moments (system GMM) technique and the recently developed dynamic panel threshold based on dynamic panel GMM. Findings The following findings emerged: financial development does not spur entrepreneurship in Africa; there is a threshold at which financial development improves the level of African entrepreneurship; and the tendency of financial development to improve the level of entrepreneurship is conditioned on conducive business regulation and strong institutional quality at a specific threshold value. Originality/value This is one of the few studies that examines the impact of financial development on entrepreneurship in Africa. This study shows that the financial development relies on the effectiveness of regulatory environment to extend loan and other financial services to new firm entrants. In addition, the results of this study reveal that the assumption of linearity in the nexus between finance and entrepreneurship is not tenable for the case of Africa. Therefore, policymakers should keep on developing African financial system to accelerate the pace of entrepreneurship development.

Section: Methodsmentioning

confidence: 99%

Financial development and entrepreneurship: insights from Africa

2022

JFRC

“…Inflation influences the inclusiveness of growth and development in a society. A higher level of inflation reduces the standard of living (Munemo, 2018;Nica, 2020;Mutiiria et al, 2020). In addition, we control for governance quality (GQ), an important factor that can affect inclusive African growth.…”

Section: A Model Specifications and Datamentioning

confidence: 99%

“…The literature suggests that the lagged values of variables such as growth and inclusive growth may impact their current values (Mutiiria et al, 2020;Nica, 2020). This specification is allowed in our simultaneous equations at the level of analysis.…”

Section: B Estimation Strategiesmentioning

confidence: 99%

Economic Globalization, Entrepreneurship, and Inclusive Growth in Africa

Journal of Economic Integration

Osinubi

Dada

2021

An increasing number of studies are examining the relationship between entrepreneurship and growth. This relationship is controversial, especially for developing countries. Recent improvements in economic growth have led to a focus on growth inclusiveness, which spreads economic opportunities throughout a society. However, studies that focus on the role of entrepreneurship in inclusive growth remain scarce. To fill that gap, this study investigates the dynamic relationship between economic globalization, entrepreneurship, and inclusive growth in 21 African countries using panel econometrics to examine data covering 2006 to 2018. The results reveal that the impact of economic globalization and entrepreneurship on inclusive growth is positive and significant. We find that economic globalization enhances entrepreneurial development, and causality tests show that economic globalization drives inclusive growth. We also find a unidirectional causality from entrepreneurship to inclusive growth. Finally, we observe no direction of causality between economic globalization and entrepreneurship but observe a bidirectional causality between governance and entrepreneurship. We discuss the implications of these results.

“…Elitcha ( 2019) describes new business density as "newly registered corporations per 1000 working-age people (15-64 years old)." These data have been employed by previous studies (Hartwall 2014;Elitcha 2019;Ajide 2020a, b;Nica 2020).…”

Section: Data and Model Specificationsmentioning

confidence: 99%

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

Osinubi

2020

Econ Change Restruct

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.