E-government and the impact of remittances on new business creation in developing countries

This study advances the remittance-entrepreneurship research by examining the effectiveness of e-government as a mechanism for reducing migrants’ transaction costs and promoting remittance-based opportunity entrepreneurship in 55 remittance-recipient countries. The study is grounded in the Transaction Cost Economics theory and uses the panel Feasible Generalized Least Squares and the Driscoll–Kraay estimation techniques with biennial data from 2007 to 2019. The findings reveal that using e-government to provide services to migrants generates a positive net association between remittances and new formal business creation. Second, there is a positive association between remittances and entrepreneurship across regional and income groups conditional on e-government development. Third, online service and telecommunication infrastructure indices positively moderate the association between remittances and entrepreneurship, with telecommunication infrastructure development playing the most important role. Lastly, entrepreneurship is positively influenced by economic globalization, financial development, and different measures of institutional quality. The policy implication is that achieving a sufficient level of government digital infrastructure development is crucial for the effective engagement of migrants, reduction of transaction costs, and increased remittance-based formal entrepreneurship in developing countries.