The Relationship between Entrepreneurship, Business Environment and Economic Development in GEM Countries



Extended Abstract

Economic development is a favorable aim for all nations and meeting this aim requires a good understanding of variables taking part in this process. The role of entrepreneurship in economic development has been mentioned by many authors as an important one. Although creating jobs is a function of entrepreneurial process, but it is not the only one. Entrepreneurship includes searching for opportunities, taking risks, persisting for realization of ideas and turning them to goods, services and other useful solutions.
To examine the effect of entrepreneurship on economic development, the research must explain the role of variables which indicate entrepreneurship activities, in economic development indexes like income per-capita, employment, knowledge creation and equality in income distribution. To do this, we plotted our research’s conceptual model as shown in methodology section.

Based on the literature reviewed in this article, we constructed our conceptual model which shows the hypothesized relations between variables. This model is shown as below:

Figure 1. Conceptual Framework of study

Sample of this study consisted of 59 countries which are members of Global Entrepreneurship Monitor (GEM). Data for entrepreneurial activities were adopted from Acs & Szerb’s 2010 study, as The Global Entrepreneurship Index. To measure knowledge creation in countries we used KEI index from World Bank data as the only measure suitable for this work. The ease of doing business in countries played the role of appropriateness of environment for business in this article. We also gathered data for employment rates from Trading Economics source and income per capita from indexmudy, both continuously cited websites. Finally we adopted GINI Index from United Nations data, cited in Nation Master, (2011), to measure equality in income distribution.
We analyzed hypothesized relationships by regression method and finally we reached results below.

Results and Discussion
In this article we examined variables of entrepreneurship in relation with economic development based on robust literature around this topic in case of 59 countries of global entrepreneurship monitor (GEM). We found that the level of entrepreneurial activities in these countries, positively affects employment. In addition, results show that the mentioned activities positively affect knowledge creation in countries. Results also show that entrepreneurial activities have a positive effect on income per capita and income distribution. That is it has positive effect of entrepreneurship on welfare of people of these countries. We could not find statistical support for any effects of environment on entrepreneurial activities.

This article analyzed the relationship between entrepreneurial activities in countries and economic development in terms of employment, income per-capita, equality in income distribution and knowledge creation. In addition the role of environment on in entrepreneurial activities has also been analyzed. The results of the of data analysis show that the level of entrepreneurial activities positively affect employment rate. It also implicitly means to have raise in employment in countries we have to have more entrepreneurs and their businesses. The positive effect of entrepreneurial activities on both income per-capita and equality in income distribution implies that the welfare in society is affected by entrepreneurship and these kind activities. In addition, to have a knowledge economy, it is important to reinforce entrepreneurship and entrepreneurial activities. Finally the role of environment and its hypothesized positive effect on entrepreneurial activities has not been proved statistically in this research. It may be because of the data we gathered. However, our results mostly support the positive role of entrepreneurship in economic development.