Do public governance and the depth of financial intermediation impact the entrepreneurship growth relationship?

Abstract

The literature on entrepreneurship suggests that the impact of entrepreneurial activity on economic growth varies with the stage of economic development of a country. While entrepreneurial activity is positively associated with economic growth in rich countries, it has a negative effect poor countries. Our paper explores this implication by examining the association between entrepreneurial activity and economic growth for a sample of countries. Our econometric investigation suggests inadequate depth and development of the financial sector reduce the growth-enhancing impact of entrepreneurial activities. Surprisingly, the existence of corruption does not impede the beneficial impact of entrepreneurial activity on growth in our data set.