Entrepreneurship, knowledge spillover and economic growth: empirical evidence from top 40 ranked innovative countries

The objective of this thesis is to empirically investigate the linkages between entrepreneurship, knowledge spillover and economic growth in the top 40 ranked innovative countries. Despite a growing number of theoretical and empirical studies investigating the drivers of economic growth, the role and impact of entrepreneurship on economic growth have received limited attention. In recent times, given the volatility in the global economy, there is recognition of the critical role that entrepreneurship and knowledge diffusion could play in sustaining economies. Entrepreneurship has become a key focus to maintain economic growth and development due to the job opportunities and investments that will be induced due to entrepreneurial activities. The existence of entrepreneurship is one mechanism to convert newly created knowledge into an economically relevant experience. Economic agents will commercialise such an economically relevant experience; thus, contributing to country-level economic growth and development. Understanding the determinants of entrepreneurship and its impact on economic growth has generated heated debates, and the empirics are complex and unresolved. The focus of this thesis is, therefore, to bridge the knowledge gap by addressing the paradox relating to the linkage between entrepreneurship and economic growth of the top 40 ranked innovative countries. Utilising the traditional endogenous economic growth theoretical framework, this thesis extends the model by incorporating entrepreneurship based on the knowledge spillover theory of entrepreneurship. The endogenous economic growth model was estimated using panel fixed-effect least squares estimator. We use a comprehensive panel data from the top 40 ranked innovative countries based on the Global Innovation Index 2019 reported by the Cornell University, Institut Européen d’Administration des Affaires, and World Intellectual Property Organisation. The empirical results are summarised. First, knowledge spillover is negatively associated with entrepreneurship. Second, patents are negatively associated with entrepreneurship. Third, the impact of economic growth, government expenditure, urbanisation and population density on entrepreneurship are mixed depending on the measure of entrepreneurship. Fourth, the stock of capital, human capital and entrepreneurship are growth-enhancing, while government expenditure and private investment appear to be growth-impeding. The empirical findings have important policy implications. First, the empirical results highlight the importance of entrepreneurship in enhancing economic growth. This suggests the need for policymakers in the top 40 innovative countries to embark on policies aimed at promoting entrepreneurship. This could be achieved through increased investment in research and development, creating an effective financial sector that could make available funds to investors. Further, the government could create a conducive business environment through the establishment of regulatory frameworks and infrastructure and making ready access to funds for business start-ups. The government could also assist in promoting entrepreneurship through a cultural change of the citizenry and using mentors and support systems to encourage entrepreneurship to achieve sustainable economic growth and development in the top 40 ranked innovative countries.