Empirical analysis of the impact of entrepreneurial activity on economic growth

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Issue Date
2023-04-14
Authors
Adeniji, Sesan
Advisor
Abdinnour, Sue
Citation

Adeniji, Sesan. 2023. Empirical analysis of the impact of entrepreneurial activity on economic growth. -- In Proceedings: 19th Annual Symposium on Graduate Research and Scholarly Projects. Wichita, KS: Wichita State University

Abstract

INTRODUCTION: The quest to pursue sustained economic growth across the globe has led various researchers into investigating factors, variables, or sectors of the economy that propel its growth. Recent attention of scholars has been geared toward looking at how entrepreneurship affects economic growth. PURPOSE: This study analyzes the impact of entrepreneurial activity on economic growth using Global Entrepreneurship Monitor (GEM) data from 2001 to 2021 for 23 GEM countries across the globe. We used three independent variables from the GEM data: Established Business Ownership (EBO), High Job Creation Expectation (HJCE), and Total Early-stage entrepreneurship Activity (TEA). In addition, we use the Real Gross Domestic Product Per Capita (RGDPPC) from the World Bank Development Indicator database as the dependent variable. METHODS: We employed the panel unit root method for pretesting the stationarity of the four variables and the Westerlund panel co-integration method for pretesting the long run relationship among the variables. After that, we used Dynamic Fixed Effect (DFE), Mean Group(MG), and Pooled Mean Group (PMG) from Panel Autoregressive Distributed Lag Model (ARDL) which are capable of capturing time-invariant, time-varying and heterogeneity characteristics across the individuals in the panel data to estimate the specified model. RESULTS: The results reveal that total earlier-stage entrepreneurship has no contemporaneous effect on growth in the short run. However, the long run effect is shown to be mixed depending on whether the system is driven homogenously or heterogeneously. We can deduce from the study that established business ownership impacted the target variable negatively both in the short run and long run, but its lag showed a positive and significant impact. High job creation expectations contemporaneously impact RGDPPC negatively in the short run but positively in the long run. CONCLUSION: We conclude that entrepreneurial activity does not have an immediate significant and positive impact on economic growth in the short run, but the impact could be felt in the long run.

Table of Content
Description
Presented to the 19th Annual Symposium on Graduate Research and Scholarly Projects (GRASP) held at the Rhatigan Student Center, Wichita State University, April 14, 2023.
Research completed in the Department of Finance, Real Estate, and Decision Sciences, W. Frank Barton School of Business.
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