Reflecting on the Entrepreneurship Paradox in Sub-Saharan Africa

Abstract

Entrepreneurship is a strategy for economic growth and it is perceived to be higher in developing countries. But other scholars found that it does not bring economic growth in developing countries. The purpose of the study was to reflect on this paradox in Sub Saharan Africa from neoclassical economic theory where entrepreneurship is perceived as carrying out innovations. A cross-sectional survey of enterprises was undertaken in Malawi to measure values of new products, new methods of production, new markets and new enterprises. Comparison of mean values and 2 independent samples tests were used to analyse innovations carried out, types of entrepreneurial enterprises and their prevalence. The study found that carrying out innovations among enterprises in Malawi is low. Opportunity-motivated, growth-oriented and limited liability enterprises are entrepreneurial types of enterprises but there were very few. Therefore the paradox depends on the theory which guides the understanding of entrepreneurship. The classical economic perspective reflects the paradox while the neoclassical economic perspective does not. The study contributes to knowledge on the types of entrepreneurial enterprises and that the paradox depends on the understanding of entrepreneurship. The findings imply that entrepreneurship is ineffective for economic growth in developing countries because of a lack of carrying out innovations. Therefore, the understanding of entrepreneurship in developing countries needs to be adjusted to neoclassical economic theories so that policy focuses on supporting entrepreneurial enterprises for entrepreneurship to be effective for economic growth, ceteris paribus.

Foreign Direct Investment, Public Sector Venality and Entrepreneurship Development in Developing Countries

“…Thus, entrepreneurial activities can help absorb the shocks of the pandemic on a relatively shorter turnaround time compared to large businesses (Abdelkafi and Refas, 2021). Other studies report that entrepreneurship in developing countries is critical for local economic development, which could be challenging to attain with only public sector parastatals (Mwatsika, 2022). In this case, Neumann (2021) reasons that policy makers must distinguish between progressive and weak entrepreneurs to achieve the expected impact from funding entrepreneurs.…”

“…Notwithstanding their crucial role towards economic renewal, entrepreneurs in developing countries operate under several constraints, resulting in most of them failing to attain the expected impact (Mwatsika, 2022). Among other factors, the World Bank (2021) submits that most formal and informal small businesses are still struggling to access funding to establish and grow their businesses.…”