The Entrepreneurship Paradox: More Entrepreneurs Are Not Always Good for the Economy – The Role of the Entrepreneurial Ecosystem on Economic Performance in Africa

45 Pages Posted: 9 Jan 2019

See all articles by Esteban Lafuente

Esteban Lafuente

Universitat Politecnica de Catalunya (UPC Barcelona Tech)

László Szerb

University of Pécs

Zoltan J. Acs

Schar School of Policy and Government

Date Written: November 29, 2018

Abstract

Purpose: Increased globalization, economic complexity and dynamism exacerbate contradictions between theoretical and empirical-driven arguments. This study analyzes the entrepreneurship paradox — i.e., entrepreneurship is good for the economy but entrepreneurial activity is consistently higher in less developed and developing countries over time—through the lenses of two relevant tensions that underlie this paradox: the development tension (i.e., the inconsistent relationship between entrepreneurship and economic performance) and the policy tension (i.e., the unclear role of entrepreneurship policy on entrepreneurship outcomes).

Design/methodology/approach: Building on a sample of 81 countries from Africa, America, Asia and Europe for 2013-2014, we employ regression models and cluster analysis to scrutinize the effect of both the rate of entrepreneurial activity (quantity-based entrepreneurship) and the entrepreneurial ecosystem (quality-based entrepreneurship) on economic performance (GDP per capita).

Findings: The analysis focuses on how the development tension and the policy tension shape the entrepreneurship paradox. In exploring these two elements of the entrepreneurship paradox, our analysis defines and distinguishes quantitative entrepreneurship from the systemic, quality-based entrepreneurial ecosystem, and sets forth alternative policies to reconcile the tensions between entrepreneurship and development that fuel the entrepreneurship paradox.

Originality/value: The analysis proposed in this study contributes to a better understanding of the entrepreneurship paradox. The findings support the notion that African countries — and economies in general — do not need more entrepreneurs but rather a healthy entrepreneurship ecosystem that contributes to optimally channel the outcomes of entrepreneurial actions to the economy.

Keywords: entrepreneurship paradox, entrepreneurial ecosystem, policy priorities, GEI index, Africa, developing economies

JEL Classification: C14, C43, C61, L26

Suggested Citation

Lafuente, Esteban and Szerb, Laszlo and Acs, Zoltan J., The Entrepreneurship Paradox: More Entrepreneurs Are Not Always Good for the Economy – The Role of the Entrepreneurial Ecosystem on Economic Performance in Africa (November 29, 2018). Available at SSRN: https://ssrn.com/abstract=3307617 or http://dx.doi.org/10.2139/ssrn.3307617

Esteban Lafuente (Contact Author)

Universitat Politecnica de Catalunya (UPC Barcelona Tech) ( email )

Barcelona, Barcelona
Spain

Laszlo Szerb

University of Pécs ( email )

Rákóczi st. 80
Pécs, 7622
Hungary

HOME PAGE: http://ktk.pte.hu/en/department-quantitative-management/laszlo-szerb

Zoltan J. Acs

Schar School of Policy and Government ( email )

Founders Hall
3351 Fairfax Dr.
Arlington, VA 22201
United States
703-993-1780 (Phone)

HOME PAGE: http://home.ubalt.edu/zacs

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