Entrepreneurship as a driver of economic development

Objective: This study aims to analyse the relationship between entrepreneurship and economic development. Quantified through the gross domestic product (GDP) per capita, across selected developed and developing countries. The research seeks to clarify how variations in entrepreneurial activity, as measured by the Global Entrepreneurship Index (GEI), relate to GDP per capita, thereby contributing to the broader understanding of the economic impacts of entrepreneurship. Research Design & Methods: This study adopted a quantitative approach, employing a cross-sectional ordinary least squares (OLS) model to explore the relationship between entrepreneurship and GDP per capita. Spanning the 2015-2019 period, our analysis incorporated data from 98 countries. Recognising the potential endogeneity concerns associated with specific independent variables, we implemented the instrumental variables (IV) approach, employing the two-stage least squares (2SLS) method to mitigate this potential bias. Findings: Our findings suggest that differences in GDP per capita between countries are significantly associated with variations in entrepreneurship. This highlights the importance of entrepreneurship as a driving force for GDP per capita. According to the 2SLS model, we found a positive relationship between the global entrepreneurship index (GEI) and GDP per capita. On average, a one-percent increase in GEI is associated with a 3.04% increase in GDP per capita. Implications & Recommendations: This study underscores the significant potential of entrepreneurship to drive economic development across diverse nations, regardless of their development stage. The findings demonstrate a positive and statistically significant association between higher levels of GEI and increased economic development. Therefore, policymakers have the potential to create an environment conducive to both entrepreneurship and sustainable economic development by implementing supportive policies and investing in key areas. Contribution & Value Added: This study provides valuable insights into the relationship between entrepreneurship and economic development. It highlights the importance of creating an enabling environment supporting entrepreneurship through infrastructure, education, market development, and innovation investment. Further research is needed to explore the nuances of this relationship and develop effective policies to promote sustainable and competitive economic development.