Economic Globalization, Entrepreneurship, and Inclusive Growth in Africa

Abstract

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.

Economic complexity and entrepreneurship: insights from Africa

“…In the African entrepreneurial environment, studies suggest that it involves all factors affecting entrepreneurial activities including innovation, creativity, financial and inherent risks (Ajide, 2020; Ajide et al , 2021). A large number of African economies reform their administrative procedures targeting and encouraging small business creation.…”

“…However, the statistics reveal that some selected female entrepreneurs are being driven by necessity. Just like other developing regions, African innovation levels remain low (Dvouletý and Orel, 2019; Ajide et al , 2021). This probably gives an insight that the level of economic complexity is not too higher compared to developed nations.…”

“…This suggests that an improvement in product quality reflects the production conditions in the national industrial structures and may spring up business opportunities for entrepreneurial venturing. This leads to the demand for new products and services and further creates motivation of new firm entry (Ajide et al , 2021). It also creates another level of risk including competition with multiple new entrances (Nguyen et al , 2021).…”

Evaluating the Performance of Inclusive Growth Based on the BP Neural Network and Machine Learning Approach

“…Previous studies have confirmed the positive impact of entrepreneurship [ 15 ], especially female entrepreneurship [ 67 , 68 ], on inclusive economic growth. The process of entrepreneurship can not only increase the income of entrepreneurs and reduce poverty, but it also provides employment opportunities and reduces the unemployment rate.…”

“…Further, in studying the key drivers of IG, scholars mostly use traditional econometric models and draw different conclusions. For instance, Whajah et al [ 14 ] used a fixed effect regression model to examine the relationship between government size, public debt, and IG for a panel of 54 African countries, and found that the former has a positive effect on IG, while the later has a negative effect on IG; Ajide et al [ 15 ] investigated the dynamic relationship between economic globalization, entrepreneurship, and IG using panel econometrics; Biswas et al [ 10 ] proposed foreign direct investment and trade liberalization fostering greater inclusiveness, while financial deepening and technological change have no discernible effect; Kouton [ 16 ] examined the role of trade facilitation measures in lowering barriers to trade and raising incomes and promoting IG. Furthermore, Kang and Martinez-Vazquez [ 17 ] examined the conditions under which the FDI can effectively lead to IG using a fixed effects regression; Oyinlola et al [ 18 ] explored the relationship between human capital, innovation, and IG by the fixed effects model; Seven [ 19 ] employed a series of econometric models to study the relation between financial development and income inequality.…”