Essays on the entrepreneurship-growth nexus: an aggregate analysis

Date
2014
Authors
Mthanti, Thanti Sibonelo
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Abstract
Theoretically, entrepreneurship has been deemed crucial to economic growth. However, the literature has failed to give governments clear guidance on policy since the empirical evidence linking entrepreneurship to economic growth has been mixed. We suggest that part of the reason for these contradictory findings could be that entrepreneurship has been mispecified in the economics literature as entry density or R&D. We propose that a more accurate characterisation of entrepreneurship at the macro-level is EO. Using a sample that covers data of 93 countries over the period 1980-2008, firstly, we employ factor analysis to confirm EO as an aggregate level, reflective, unidimensional second-order construct with three indicators that covary: risk taking, innovativeness and proactiveness. Secondly, we use system GMM analysis to investigate the determinants and drivers of EO. We find that the control of corruption, banking development and human capital influence the level of EO that countries possess. However, this impact is non-linear with threshold effects and is contingent on the level of development and institutions, which are in turn shaped by inequality. Thirdly, we establish that EO and its deviation, positively predict growth and that this association is enhanced by policies and institutions. Moreover, our results suggest that the control of corruption, banking development, inequality and human capital are the determinants of EO and not economic growth as policies and institutions by themselves do not increase output. Innovative, risk taking and proactive entrepreneurial firms and entrepreneurs do. The results of this study suggest government officials, who wish to promote entrepreneurship and economic growth, should revisit their emphasis on promoting policies that erroneously encourage entry density and consider encouraging innovativeness, proactiveness and risk taking.
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Thesis (Ph.D.)--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2014.
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