The Entrepreneurship Paradox: More Entrepreneurs Are Not Always Good for the Economy – The Role of the Entrepreneurial Ecosystem on Economic Performance in Africa

Abstract

Purpose: Increased globalization, economic complexity and dynamism exacerbate contradictions between theoretical and empirical-driven arguments. This study analyzes the entrepreneurship paradox — i.e., entrepreneurship is good for the economy but entrepreneurial activity is consistently higher in less developed and developing countries over time—through the lenses of two relevant tensions that underlie this paradox: the development tension (i.e., the inconsistent relationship between entrepreneurship and economic performance) and the policy tension (i.e., the unclear role of entrepreneurship policy on entrepreneurship outcomes). Design/methodology/approach: Building on a sample of 81 countries from Africa, America, Asia and Europe for 2013-2014, we employ regression models and cluster analysis to scrutinize the effect of both the rate of entrepreneurial activity (quantity-based entrepreneurship) and the entrepreneurial ecosystem (quality-based entrepreneurship) on economic performance (GDP per capita). Findings: The analysis focuses on how the development tension and the policy tension shape the entrepreneurship paradox. In exploring these two elements of the entrepreneurship paradox, our analysis defines and distinguishes quantitative entrepreneurship from the systemic, quality-based entrepreneurial ecosystem, and sets forth alternative policies to reconcile the tensions between entrepreneurship and development that fuel the entrepreneurship paradox. Originality/value: The analysis proposed in this study contributes to a better understanding of the entrepreneurship paradox. The findings support the notion that African countries — and economies in general — do not need more entrepreneurs but rather a healthy entrepreneurship ecosystem that contributes to optimally channel the outcomes of entrepreneurial actions to the economy.