Institutions, human capital and entrepreneurial orientation: implications for growth policy
Journal of Entrepreneurship and Public Policy
ISSN: 2045-2101
Article publication date: 8 May 2018
Issue publication date: 28 June 2018
Abstract
Purpose
The purpose of this paper is to establish a more robust empirical support for the long established postulation by Adam Smith and Joseph Schumpeter that human capital and institutions enable Schumpeterian entrepreneurship, which, in turn, facilitates economic growth.
Design/methodology/approach
Adopting entrepreneurial orientation (EO) (i.e. innovativeness, proactiveness and risk taking; Mthanti and Ojah, 2017, Research Policy, 46:4, pp. 724-739) as the measure of Schumpeterian entrepreneurship at the macro-level, and using a sample of 93 countries, over 1980-2008, the authors employ system Generalised Method of Moments to investigate institutions and human capital as possible determinants of Schumpeterian entrepreneurship (EO).
Findings
The authors find that the human capital-EO nexus is robust across economic development levels. However, there is a cross-country variation in the institutions-EO nexus. In line with theoretical predictions, institutions indeed drive EO in middle-to-high-income countries. However, in low-income countries, building institutions in order to foster EO yields perverse outcomes, which, for us and especially based on deeper analysis, suggest that improving the quality of institutions may not be a necessary precondition for EO/growth policy in low-income countries. Furthermore, the authors find that EO is a highly persistent series, with self-reinforcing network effects, i.e. lofty EO behaviour encourages more lofty EO behaviour.
Research limitations/implications
Drivers of macro EO are erroneously taken as of growth. This empirical analysis corrects the sequencing.
Practical implications
Policy practice must acknowledge macro-EO importantly has both direct and indirect growth effects.
Originality/value
This study is the first to empirically test the theoretical sequence between drivers of growth/EO and economic growth.
Keywords
Citation
Mthanti, T. and Ojah, K. (2018), "Institutions, human capital and entrepreneurial orientation: implications for growth policy", Journal of Entrepreneurship and Public Policy, Vol. 7 No. 2, pp. 135-160. https://doi.org/10.1108/JEPP-D-18-00002
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited