The role of entrepreneurship in transforming efficiency economies into innovation-based economies

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Authors

Van Vuuren, Jurie Jansen
Alemayehu, Binyam Zewde

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AOSIS OpenJournals.

Abstract

BACKGROUND : Entrepreneurship is believed to be a major driver of economic development. While it is right to consider entrepreneurship as a development tool, it is also crucial to identify the kind of entrepreneurship that contributes meaningfully towards economic development. Extant research revealed a U-shaped relationship between entrepreneurship and economic development and claimed that entrepreneurship in efficiency economies is dwarfed in terms of its contribution to economic development. AIM : To identify and explain factors that would assist efficiency-based countries to transform their economies using entrepreneurship as a major policy tool. SETTING : We compared two structurally separate groups of countries. Each group consists of three countries and 9 years of data were extracted from Global Entrepreneurship Monitoring (GEM) and United Nation (UN) datasets. METHODS : We examined the relationship between entrepreneurship and economic development using comparative research design. Bivariate correlation analysis was used to detect associations and various descriptive statistical tools were applied to examine and compare the entrepreneurial tendencies of countries included in our study. RESULTS : The results indicated that entrepreneurship in efficiency economies is unfairly undervalued by academic commentators and that our findings pose a serious question as to the U-shaped relationship argument. The analysis revealed that the relationship between entrepreneurship and economic development is positive in both contexts, albeit the strength of the correlation is much more pronounced for innovation-driven economies compared to efficiency-driven countries. Furthermore, the analysis revealed that the rate of total early-stage entrepreneurial activity (TEA) is strongly correlated with perceived opportunity and entrepreneurial intention scores in both contexts. CONCLUSION : It is concluded that countries seeking to transform their economy need to promote the emergence and sustenance of TEA through well-designed policy frameworks and initiatives.

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Keywords

Entrepreneurship, Economic development, Innovation-based economies, Global entrepreneurship monitoring (GEM), United Nation (UN), United Nation datasets, Efficiency economies, Total early-stage entrepreneurial activity (TEA)

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Citation

Van Vuuren, J. & Alemayehu, B.Z., 2018, ‘The role of entrepreneurship in transforming efficiency economies into innovationbased economies’, Southern African Journal of Entrepreneurship and Small Business Management 10(1), a140. https://DOI.org/10.4102/sajesbm.v10i1.140.