2007 Oxford Business & Economics Conference
ISBN : 978-0-9742114-7-3
The Entrepreneurship-Growth Relationship Re-Examined:
Does Governance and The Quality Of Financial Institutions Impact Entrepreneurial
Activity?
Niranjan Chipalkatti
Associate Professor of Accounting
Albers College of Business and Economics
Seattle University, Seattle, WA 98122
206-296-5764 tel; 206-296-2486 fax; chipalka@seattleu.edu
Meenakshi Rishi
Visiting Associate Professor of Economics
Albers College of Business and Economics
Seattle University, Seattle, WA 98122
206-296-2078 tel; 206-296-2486 fax; rishim@seattleu.edu
Authors listed alphabetically to reflect equal contribution.
Abstract submitted for consideration toward possible presentation at the Oxford
Business and Economics Conference, Oxford, June 2007Oxford Business & Economics
Conference (OBEC)
June 24-26, 2007
Oxford University, UK
1
2007 Oxford Business & Economics Conference
ISBN : 978-0-9742114-7-3
The Entrepreneurship-Growth Relationship Re-Examined:
Does Governance and the Quality of Financial Institutions Impact Entrepreneurial
Activity?
ABSTRACT
The literature on entrepreneurship suggests that the impact of entrepreneurial activity on
economic growth varies with the stage of economic development of a country While
entrepreneurial activity has a positive effect on the economic growth of rich (as defined
by per capita income) countries, it has a negative effect in the case of poor countries.
This implies that entrepreneurial activities create leakages in the system and are valuereducing activities for poor countries. (Sternberg and Wennekers, 2005; Van Stel, et. al.
2005). Studies also note that the impact of entrepreneurial activity on economic growth
varies with the nature of the underlying activity. For example, Wong et al. (2005)
observe that only “high growth” potential Total Entrepreneurial Activity (TEA) has a
positive impact on economic growth.
This paper re-examines the association between entrepreneurial activity and economic
growth for a panel of 36 countries. Using data from the Global Entrepreneurship Monitor
(GEM), we posit that the inverse relationship between growth and entrepreneurial activity
in poor countries has institutional causes. Our research question therefore is - does
misgovernance and the presence of poor quality financial institutions distort the impact
entrepreneurial activity on economic growth in the case of certain countries?
.
June 24-26, 2007
Oxford University, UK
2