Linking Entrepreneurship and total factor productivity What are the economic setting required?

Abstract

This paper attempts to fill this gap by highlighting the linkage between entrepreneur, total factor productivity and growths. This paper addresses the correlation between innovative entrepreneurs and total factor productivity growth. Moreover, this research aims at determining the economic settings and institutions that are correlated with higher impact of entrepreneurship on productivity. Results showed that total factor productivity is significant and positively correlated with entrepreneurship; albeit somewhat lower when OLS estimation techniques are used, suggesting that there is a positive relationship between research and development, tertiary school enrolment, imports and inflation. Moreover, it is negatively correlated with imports. Entrepreneurship is one instrument that may add to the effect of knowledge investments through R&D. This is certainly consistent with the recent statistical, systematic empirical evidence linking measures of entrepreneurship to economic growth. Implementing different regression techniques we find surprisingly robust support for entrepreneurship being one important source of growth.