PERSPECTIVES
3.2 UNDERSTANDING ENTREPRENEURSHIP: A GLOBAL PERSPECTIVE
3.2.1 State of Entrepreneurship from an International Sphere
There is a wide consensus that entrepreneurship is important and is the main vehicle for economic development of both developed and developing countries (Mwatsika, 2015; Kaburi, Mobegi, Kombo, Omari & Sewe, 2012). The formation of new firms can be beneficial for economic growth, employment generation and poverty reduction both in developed and developing countries (Vivarelli, 2012). Entrepreneurial activities may influence a country’s economic performance by bringing new products, methods, and production processes to the market and by boosting productivity and competition more broadly. However, entrepreneurship varies from one country to another and the effect of entrepreneurship on economic development may not be consistent in developing and developed countries. Entrepreneurship is seen as greater in more developed countries with higher income levels compared to developing countries (Doran, McCarthy & O’Connor, 2018). Entrepreneurial success does not take place in a vacuum.
Entrepreneurs exist in the context of their particular geography, their local, national, or even supranational economy and society. Doran et al. (2018) postulate that total early-stage entrepreneurial activity (TEA) encourages economic growth in high-income countries but discourages growth in low-income countries. Entrepreneurial activity is negatively related to economic growth in middle/low-income countries, but entrepreneurial attitudes have a
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significantly positive effect on GDP per capita in high-income countries. According to the World Economic Forum (2015), the early-stage entrepreneurial activity is higher in economies that are less competitive and lower in highly competitive economies. Competitiveness matters for entrepreneurship, but not in any simple or straightforward way. The most competitive economies are not the ones with the newest business creators, yet on a per-entrepreneur basis, their economies tend to derive greater benefit from their smaller concentration of entrepreneurs than do less competitive economies.
It is noteworthy that some countries have the highest early-stage entrepreneurial activity but are less competitive. For instance, Uganda, Ecuador, Chile, Colombia, Peru and Argentina have the highest rate of early-stage entrepreneurial activity but have the lowest competitive economies in the world (World Economic Forum, 2015). Of the highly competitive economies, the United States of America (USA) has the highest percentage of early-stage entrepreneurship with 11%
compared to other highly competitive economies such as Switzerland, while in moderately competitive economies, Latin American and Asian countries such as China, Colombia, Chile and Brazil have the highest percentages compared to other moderately competitive economies (World Economic Forum, 2015). The World Economic Forum also found that Latin America and the Caribbean regions have the highest concentration of early-stage entrepreneurial activity, while European countries such as Belgium, Russia, Italy, Finland and Denmark have lower early-stage entrepreneurial activity. Undoubtedly, the USA is recognised as the most entrepreneurial country in the world. Some of the most developed nations such as the USA are world leaders today because of their forward-thinking innovation, research and entrepreneurial individuals. It is estimated that start-ups or new firms in the USA create 39.75% of new jobs annually, adding 6.54 jobs per new establishment on average (Badal, 2010).
Due to the development and complexity of entrepreneurial activity in the global south, entrepreneurship in developing countries has been a constant source of fascination (Quaidoo, 2018). In comparison to more established countries, emerging market entrepreneurship is unique and understudied (Lingelbach, Vina & Asel, 2010). Comparably, other African countries’
averages are 26 and 13 percent for TEA and established business ownership, respectively (Singer
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et al., 2015). Closer inspection of most African countries reveals that there is a general neglect
by African policymakers to carefully study entrepreneurship dynamics within their economies.
To illustrate this further, Singer et al. (2015) observed that numerous developing nations ignore the basic principles of entrepreneurial development such as collecting data on entrepreneurship trends within their economies. According to Lingelbach et al. (2010), entrepreneurship in developing countries is arguably the least studied and least understood major economic and social phenomenon. Doran, McCarthy and O’Connor (2018); Naude (2010) stated that the area of entrepreneurship is under-researched in the domain of entrepreneurial research in developing countries. Amankwah-Amoah and Lu (2018) argue that the evolution of entrepreneurial development in developing nations remains limited. More disconcerting is the fact that within these countries, there are no proper standards to define, explain and measure entrepreneurial activity. Hence, such a paucity means that many African countries end up adopting international entrepreneurship policies and standards to regulate entrepreneurship. A vast majority of these policies are not entirely applicable to the African context. In other words, these policies fail to account for, and address lived experiences and actual problems faced by African entrepreneurs.
Entrepreneurship in developing countries is essential for addressing developmental challenges inflicting these countries. Entrepreneurship in developing countries is advocated because of its potential to create employment through formation of new enterprises, raise productivity through innovation, facilitate transfer of technology, harness resources, stimulate growth and encourage and sustain economic dynamism (Infamidon, 2014). Scholars and policy makers believe that entrepreneurship is an important component for stimulating economic growth, innovation, competitiveness and poverty alleviation in developing countries (Incekara & Savrul, 2013;
Vivarelli, 2012). These scholars and policy makers view entrepreneurship as an engine for economic growth and development in less developed or impoverished countries.
Entrepreneurship has since gained importance for accelerating growth and development in developing countries, through capital formation, wealth creation, poverty reduction and employment creation (Kaburi et al., 2012). The assumption is that forming new businesses can help with economic growth and job creation (Vivarelli, 2012). Entrepreneurship is credited with
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a slew of beneficial improvements and is linked to the production of jobs, wealth, innovation, and other welfare impacts in emerging countries (Incekara & Savrul, 2013).
In many developing nations, entrepreneurship promotion has become a key policy agenda item and priority for job creation, poverty reduction, and economic growth and development in recent years (Adewumi & Keyser, 2020; Nwankwo & Francis, 2017; Hugo, Masahiko & Masahiko, 2002; McQuaid, 2000). According to Soluk, Kammerlander, and Darwin (2021), entrepreneurship is a critical tool for addressing the persistent problem of poverty among rural communities in developing countries. Incekara and Savrul (2013) also point out that while entrepreneurship is not a precise remedy to enhance economic development in underdeveloped nations, when done correctly, it can ameliorate economic development. The power of entrepreneurship as a catalyst for economic growth is best exemplified by the Asian Tigers (Liu, 2012). Within the last four decades, a strategic realignment of economic policies to develop small businesses and entrepreneurship in China, Singapore, South Korea and Malaysia for instance, have helped to sustain rapid economic growth (Hassan, 2007, Liu, 2012).
Entrepreneurship, thus, catapulted these economies from developing countries to middle-income countries within a short space of time (Acs & Szerb, 2007). For example, China’s GDP recorded a positive growth trend in the period from 1980 to 2014. Having witnessed such economic growth, as stimulated by entrepreneurship, numerous sub-Saharan African countries have since adopted entrepreneurship policies. Thus, the desire to enhance the economy through entrepreneurship is a common policy exerted by governments today around the world.