How Does Entrepreneurship Affect Economic Growth?

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How Does Entrepreneurship Affect Economic Growth?

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Impact Investing: Realizing Economic Growth And Social Progress Through Entrepreneurship

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Received: 30 July 2021 / Revised: 9 September 2021 / Accepted: 10 September 2021 / Published: 13 October 2021

Entrepreneurship often takes place in new systems, especially in cities. Cities, with certain characteristics, may change business outcomes. This paper uses multiple regression methods to examine the impact of entrepreneurship on economic growth, taking into account the moderating effect of urban conditions. We use Gross Domestic Product (GDP) as the dependent variable and government expenditure, labor, fixed capital and finance and entrepreneurship as independent variables. Data from 2003-2017 are from Zhaoqing, Shantou and Meizu (three cities with cultural and geographical features in Guangdong, China). We conclude that (1) the GDPs of the three cities depend on general factors of production (eg, government spending, labor and fixed investment and investment) rather than business and (2) Mizo City’s conditions do not support this government grant. in GDP compared to Zhao Cheng and Shantu. This study adds to the literature by formally examining and comparing the development of businesses in three cities in China; It also informs scholars and practitioners about the effects of moderation in urban contexts.

Why Entrepreneurship Is The Engine Of Economic Development

As West [1] puts it: “So if we insist on continuous open growth, not only does it inevitably accelerate, but we have to innovate faster and faster” (p. 31). To sustain the economy, we need constant innovation and entrepreneurship, which often happens in cities. Through both tangible and intangible aspects, cities influence entrepreneurial efforts and outcomes in a variety of ways. For example, the culture of the city, as a specific feature of the area, can strengthen the commercial activities of the city in the long term [2, 3, 4, 5, 6].

Entrepreneurship and growth studies involve many disciplines (eg, macroeconomics, microeconomics, economic development) at different geographic and cross-disciplinary levels [7, 8]. At the country level, Van Stel et al. [9] estimated the macroeconomic effects of entrepreneurship in 26 OECD countries and found that the level of equality of individual self-employment is independent of the level of economic development and (both positive and negative) deviations from equilibrium will reduce growth. In contrast, Nikolaev et al. Based on a sample of 73 countries of the world, the level of economic freedom is a very powerful indicator for entrepreneurs. At the regional level, many studies have focused on the role of business ecosystems [10, 11, 12, 13] and the role of their components such as culture, geography and institutions [14, 15, 16].

This study examines the impact of entrepreneurship on economic growth in three Chinese cities, considering the moderating effect of city context (eg, culture, location, institution). The paper is organized as follows. Section 2 summarizes the relevant literature on the relationship between entrepreneurship and economic growth and the measurement of entrepreneurship. The third section presents the data source (three cities in Guangdong, China) and the research method (multiple reviews). Section 4 presents the results of multiple regression models. Section 5 discusses the findings, presents the methodology and links to the literature. Section 6 concludes the study.

In general, businesses promote economic growth due to their innovative nature [17, 18, 19, 20, 21, 22, 23]. As the neoclassical theory suggests, growth is mainly determined by fixed capital, capital, labor, technology and entrepreneurship [24, 25]. Entrepreneurs promote growth by managing resources in new ways [26]. This new type of growth is more natural than the type of growth that depends on physical capital. However, trade may hinder growth [5, 8, 27]. It is understood that as a popular name, it can attract more money and people than it is really worth, leading to an unreasonable allocation of resources.

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Context (or ecosystem) may influence the relationship between entrepreneurship and economic growth. Theoretical and empirical studies have examined ecosystem components, conditions, and processes that support or inhibit entrepreneurship [5, 28, 29, 30]. For example, Isenberg [31] constructs six key components of an entrepreneurial ecosystem (eg, policy, finance, culture, support, human capital and markets). The World Economic Forum [30] found that access to markets and high quality human and financial resources are favorable conditions for successful entrepreneurs. Recently, Stamm and van de Ven [29] organized the theoretical ecosystem into three layers, that is, institutionalization, resource sustainability and output (that is, productive trade), suggesting that the business can be seen as an emergency. Phenomena in complex systems. At the same time, the ecosystem can also be considered as the context that links the relationship between entrepreneurship and growth [10, 32]. In short, an ecosystem can be a business force or a communication platform between businesses and economic outcomes.

To measure entrepreneurship, researchers mainly look at five perspectives: self-employment, new business creation, business development, business demand and business opportunities [33, 34]. The first two (eg, self-employment, new firm creation) are applicable to almost any type of entrepreneurship research, while the other three are more specific. Business basically means creating something new. Self-employment can be considered a unique identity that encourages innovation. The new company structure is an expanded version of self-employment. This is a key metric because new production methods are often developed by the company. Entrepreneurial efforts in the early stages of business represent an important cycle of life and death; It is the leader in growth, dissemination of knowledge and creation of new job opportunities [7, 35, 36]. Business needs and opportunities discuss the causes and effects of different types of businesses. The need for business suggests that the entrepreneur has no other better opportunity to choose a job; A business opportunity suggests that an entrepreneur intends to take advantage of a business opportunity. Furthermore, entrepreneurship can be indirectly measured by innovation [35, 37] or competition [38, 39, 40].

We use data from the 2003–2017 yearbooks of three cities, Zhaoqing (ZQ), Shantou (ST), and Meizhou (MZ) in Guangdong, China [ 41 , 42 , 43 ]. These cities have similar population sizes but different cultures and geographical features. Zhaoqing is the birthplace of Guangfu culture (eg, embroidery, a metropolis) and the Cantonese language, which is the official language of Guangdong Province. The city covers an area of ​​approximately 15,000 square kilometers and has a population of approximately 4.1 million, as of 2019; It is also close to the provincial capital, Guangzhou (about 110 kilometers). In contrast, ST and MZ are located at the same distance from the provincial capital (about 420 km). ST represents Chaoshan culture (eg, hard work, entrepreneurial spirit). It is a coastal city with a population of about 4.2 million, as of 2019; Its area is 2199 square kilometers which is much smaller than the other two cities. MZ stands for Kijia culture (ie, traditionally, independence). Located in a remote mountainous area on the border of the province, it has an area of ​​15,865 square kilometers and a population of about 5.5 million as of 2019.

According to neoclassical economic theories [24, 25], growth is mainly determined by fixed capital, capital, labor, technology and entrepreneurship. We assume that the level of technology in the study areas does not change during the study period. We also consider government spending because growth is measured by gross domestic product (GDP). In other words, growth (GDP) is a function of fixed capital, capital expenditure, labor capital and government expenditure.

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We use two models to examine the relationship between entrepreneurship and growth. Model 1 accounts for individual cities (ie, ZQ, ST, MZ), shown in equation (1); Model 2 includes three cities (eg, ZQ, ST, MZ) and the relationship factors shown in Equation (2). By introducing a city dummy, Model 2 allows for comparisons between individual cities. In model 2, we consider the urban context to moderate (rather than mediate) the effect of business on growth shown in Fig.