Economic complexity and entrepreneurship: insights from Africa

Abstract

PurposeEconomic complexity reflects the nature of knowledge accumulated and technological capability of a nation. This study aims to evaluate the impact of economic complexity on entrepreneurship in selected African countries.Design/methodology/approachThe study uses country’s level data of 18 countries covering a period of 2006–2017. Data are sourced from Massachusetts Institute of Technology’s Observatory of Economic Complexity database, World Bank’s Entrepreneurship Database and World Development indicators. To estimate models, the study uses panel-spatial correlation consistent, which is based on Driscoll and Kraay’s (1998) standard error, Method of Moments Panel Quantile regression proposed by Machado and Silva (2019) and instrumental variables estimation techniques.FindingsThe study’s findings are as follows. First, economic complexity improves entrepreneurship in Africa. Second, there is no evidence of nonlinear relationship between economic complexity and entrepreneurship for the case of African nations. The positive impact of economic complexity on entrepreneurship is persistent across all quantiles in the analysis. The empirical analysis suggests that the beneficial impact of African entrepreneurship is further strengthened by ethnic and religious diversity but reduced by weak political institutions.Originality/valueThis study stresses the role of economic complexity in the entrepreneurial activities. To the best of the authors’ knowledge, this is the first attempt to empirically provide insights on the important role of economic complexity on entrepreneurship in Africa.