The Impact of Institutions on Entrepreneurship in Developing Countries

Abstract

There is a growing body of research investigating the relationship between entrepreneurship¹ and basic regional and national economic variables such as aggregate income and competitiveness (e.g. Acs and Armington 2004; Blanchflower 2000; Carree et al. 2002; Carree and Thurik 2003; van Stel et al. 2005; Wennekers et al. 2005). Empirical contributions based on the Global Entrepreneurship Monitor (GEM) research initiative show that variations in economic growth rates can be explained by differing rates of entrepreneurship (Reynolds et al. 1999; Zacharakis et al. 2000). As such the creation of new ventures² may contribute to the economic performance of countries and regions because entrepreneurial activities introduce innovation, create competition and enhance rivalry (Audretsch and Keilbach 2004; Wong et al. 2005). Nevertheless, the impact of these entrepreneurial efforts on economic growth differs not only between countries at similar levels of development (Carree et al. 2002, 2007) but also between countries at different stages of development (Acs and Amorós 2008; Wennekers et al. 2005), as well as among regions within a single country (Acs and Armington 2004; Belso-Martínez 2005; Hall and Sobel 2008).