Mediating role of research and development on entrepreneurial activities and growth Evidence from cross-country data

Abstract

Purpose - The purpose of this paper is to investigate to what extent the level of human development affects the relationships between entrepreneurial activities (EAs) and total factor productivity (TFP). The paper's objectives are threefold. First, it seeks to examine the effect of EA on TFP. Second, it attempts to test for the moderating effect of human development on the relation between EA and TFP, using the generalized methods of moments (GMM), in a panel data across two groups of countries based on their human development index during the period 2000-2008. Third, it tests the causality between TFP, EA, research and development (R&D), unemployment and inflation across countries.

Design/methodology/approach - Cross-countries study using a panel GMM for two groups of countries based on their human development index during the period 2000-2008.

Findings - Empirical evidence provides that EA have a positive significant relation across countries on TFP in the higher human development levels. The outcomes point toward the role of policies supporting EA as a vital tool to accelerate development and growth via channels such as: better education levels, enhancing R&D, creating more jobs, and stable monetary policy.

Research limitations/implications - From the paper limitation is it focusses only on very high human and high human development countries and not studying medium and low-development countries but this limitation is refereed to source of the entrepreneurship data.

Practical implications - This paper provides a comparative analysis of the empirical results and presents prospective explanations for the observed relationships between different groups of countries to study the dynamics of change with relative short time series.

Originality/value - The study is of value for policy makers of the important relation between levels of development among countries as engine to growth via EA. Moreover, the findings provide a set of policies for governments to undertake tenable actions to accelerate the effectiveness of the institutional setting.