Assessing the Relationship between Entrepreneurship and Economic Development in the MENA Region: An Empirical Investigation

Abstract

Purpose: Entrepreneurship has come to be considered as one key to the economic development of countries. Our work assesses the connection between entrepreneurship and the economic development of nine MENA economies for 2006-2018. We aim to shed additional light on the role of entrepreneurship in affecting the economy of the Middle East and African countries, hence, relates some policy and managerial implications with the results. Design/methodology/approach: Two different indicators of entrepreneurship are used; self-employment rates and the number of new business formations. The study employed four control variables: human capital, the money supply, governance quality, and foreign direct investment. We use an econometric analysis based on panel data with fixed and random effects methodology (for every year) to test the feed-back effects between entrepreneurship, economic development, and other control variables in the MENA region. Findings: Our empirical analysis suggests that the effectiveness of entrepreneurship in generating economic development in the MENA region is not related to the number of self-employed but to the creative and imitative entry of existing businesses into new markets. On the other hand, the growth of new businesses is insufficient to spur the economy unless good governance quality manages entrepreneurship in the region. Originality/value: This research adds to the literature in two ways: first, we provide new insights into the effect of two types of entrepreneurship (self-employment rate/new business formation) on economic development in the MENA region. Secondly, our research innovates in the selection of control variables to investigate factors that relate entrepreneurship to economic development. Additionally, the novelty of this paper is to analyze the relationship between entrepreneurship and economic development in the MENA region for a new period and new combinations of intermediates variables.