The role of innovation and institutions in entrepreneurship and economic growth in two groups of countries

Abstract

Purpose Economic growth is one the most relevant economic objectives for policy makers. In order to determine the variables that enhance such an objective it is important to consider different types of entrepreneurial activity. It is also necessary to consider the level of development and growth of a country to design the proper economic policy measures, given that entrepreneurship motivations and circumstances vary from country to country. Therefore, the purpose of this paper is to analyse the relationship between entrepreneurship and economic growth, including the role played by institutions and innovation considering two types of entrepreneurship (necessity and opportunity) and countries. Design/methodology/approach Data analysis of 31 countries with varying levels of growth and development yielded two large groups – either innovation-driven economies or efficiency-driven economies – following GEM classification based on the phases set out by the World Economic Forum. In order to test the hypotheses, a partial least squares analysis is carried out to show the existing relationships between the different variables, specifically: innovation, institutions, entrepreneurship and economic growth. Findings The empirical analysis used demonstrates that innovation positively affects economic growth and entrepreneurship. In addition, adequate functioning of institutions is shown to enhance economic growth and opportunity entrepreneurship. Finally, there is a positive relationship between entrepreneurship and economic growth. Originality/value Unlike other studies, different types of entrepreneurship (by necessity and opportunity) are essential to this analysis of the relationship between entrepreneurship and economic growth. The country sample was divided considering some country-specific structural circumstances. Neither aspect is considered in the literature and should be considered relevant for designing measures to enhance economic activity.

Public policy recommendations for promoting female entrepreneurship in Europe

“…Today, the figure of the entrepreneur is increasingly important in our society and entrepreneurship has become a primary objective of governments of the world's leading, emerging and advanced economies due to its positive impact on wealth and employment (Thurik et al, 2008;Sugheir et al, 2013;Doran et al, 2016;Åstebro & Tåg, 2017), which in turn increases productivity, and encourages innovation (Audretsch, 2007;Cuervo et al, 2007) by enhancing competitiveness (Pradhan et al, 2020) and generating long-term economic growth (Doran et al, 2018;Galindo-Martín et al, 2019;Urbano et al, 2019;Pradhan et al, 2020). Furthermore, recent literature highlights that entrepreneurial activity not only leads to sustained economic growth and a persistent rise in living standards through innovation and enhanced competitivity, but it can also reduce income inequality and even promote social fairness and justice (Stoica et al, 2020).…”

The Relationship between Green Innovation, Social Entrepreneurship, and Sustainable Development

“…In this context and in view of the environmental problems that have been caused by policies designed to generate greater growth, the need to incorporate the environmental problem into the analysis has been highlighted. This has led to the appearance of two antagonistic positions: the first considers that contemplating environmental restrictions would have no effect on growth, and the second, on the contrary, affirms that natural limits and a lack of resources will entail the end of economic growth [43][44][45][46].…”

“…In the first case, entrepreneurs introduce green innovation to comply with environmental regulations. In the second case, they take advantage of the business opportunities of the new context in which there is a greater concern for protection of the environment [43][44][45][46]. Therefore, innovations and entrepreneurship play an essential role in stimulating sustainable development.…”

Exploring the Effects of Types of Early-Stage Entrepreneurial Activity on Subjective Well-Being

“…Individuals engage in entrepreneurial activity for one of two reasons: to act upon an identified opportunity or out of economic necessity. This motivation depends on determinants such as the individual-level characteristics of entrepreneurs (Cunningham & Lischeron, 1991;Mota et al, 2019), the economic context in which the individuals live and work (Mota et al, 2019;Schoonhoven & Romanelli, 2001), and the institutional environment (Amorós et al, 2019;Galindo-Martín et al, 2019). Because an individual's motivation to become an entrepreneur affects entrepreneurship-related goals, venture performance and perceived subjective well-being (Hessels et al, 2008), it is important to differentiate between opportunity-and necessity-driven entrepreneurship.…”