Entrepreneurship in Emerging Markets

Abstract

The level of entrepreneurial activity is higher in emerging markets than in developed economies, driven by high levels of necessity entry and less daunting entry barriers, especially in the informal sector. However, a gap remains in our understanding of its extent and of the drivers of its change. This chapter addresses this gap by conceptualizing and providing evidence about the scale and nature of entrepreneurship in emerging markets. The chapter begins with an empirical analysis of entrepreneurship in emerging economies. In particular, it contrasts the way in which human capital is utilized by entrepreneurs in emerging market economies and in developed countries. The chapter goes on to the theme of human capital, bringing in theory, and considering entrepreneurship in emerging economies at the individual level as well as the role of entrepreneurs’ social capital in the emerging economy context. Furthermore, it considers the scale and impact of the repatriation of human and social capital from abroad, which is found to play an important role in entrepreneurship in many emerging economies, especially when considering innovation. The survey goes on to provide a macro-level analysis, with cross-country comparisons of the effects of institutions and finance on entrepreneurial activity in emerging markets. It concludes by suggesting avenues for future research.

Self-employment and eudaimonic well-being: Energized by meaning, enabled by societal legitimacy

“…This helped to isolate the effects of societal legitimation. It is likely that societal legitimacy and other cultural norms would have even more pronounced effects when more varied countries are considered, and in emerging economies where the career choice set might look very differently (due to lack of wage employment options, e.g., Estrin et al, 2018 ). Moreover, our time frame was 2010, it would be interesting to expand our findings to further time periods.…”

The tangled historical roots of entrepreneurial growth aspirations

“…This argument has been extended to HGAE by Autio and Acs (2010) and Estrin et al (2013): they suggest that inadequate institutions reduce the incentives for entrepreneurs to create high‐growth aspiration ventures. Thus, the institutional environment affects the “quality” of entrepreneurship through the aspirations of owners–managers of the new ventures, and in that way influences their impact on employment, growth, and economic development (Estrin et al, 2018). However, understanding the institutional environment is not a trivial task, and this is especially true for developing countries in general, and for Africa in particular (Michalopoulos & Papaioannou, 2018; Nunn & Wantchekon, 2011).…”

“…On the other hand, neither Nigeria nor Ghana have seen large‐scale outflow of refugees in recent years, but both continue to benefit from established diasporas based on earlier voluntary migration (van Hear, 2005). Some studies have noted that migrant returnees have a positive impact on entrepreneurial activity and that remittances and returnees are key factors facilitating business creation back in the home country (Ammassari, 2004; Estrin et al, 2018; Linde, 2013; McCormick & Wahba, 2001; Vaaler, 2011, 2013). This is not the case where migration is forced.…”

“…All these actions may be positively related to HGAE in the home country. The existence of a strong network though the diaspora supports experiences conducive to building up the resources and capacity of entrepreneurs by accumulating human and financial capital abroad, as well as by giving the ability to draw on ties within international relationships (Estrin et al, 2018). However, these effects are weak or not present in countries that have experienced massive ethnic cleansing, as for example, Uganda.…”

“…Necessity entrepreneurship and self‐employment are often conflated with low‐growth aspiration entrepreneurship and are the predominant forms of entrepreneurial activity in developing countries. They may generate some income and employment for the entrepreneurs and their close friends and family, yet their impact on economic growth is very limited (Acs, Desai, & Klapper, 2008; Estrin, Mickiewicz, Stephan, & Wright, 2018; Henrekson and Stenkula, 2016). This contrasts with HGAE, in which the entrepreneur's objective is to accumulate the resources and the competitive advantages required to appropriate the full value from identified opportunities (Bjørnskov & Foss, 2013; Hitt, Ireland, Camp, & Sexton, 2001; Hitt, Ireland, Sirmon, & Trahms, 2011; Ireland, Hitt, & Sirmon, 2003; Kuratko & Audretsch, 2009).…”