Entrepreneurship and productivity in Africa: the role of institutions

Abstract

Through an empirical analysis of selected African countries for a period of 2006–2017, this paper explores three hypotheses suggesting that African entrepreneurship does not promote productivity except there are conducive institutional environments. The study applies panel data estimation techniques on data obtained from seventeen countries in Africa. The results obtained are summarized as follows: (1) African entrepreneurship does not promote productivity. (2) We do not confirm any significant U-shaped relationship between entrepreneurship and productivity in Africa. (3) African entrepreneurship promotes productivity via conducive institutional quality at a threshold value of 4.56 on a scale of 0 to 5 point. Among the institutional dimensions, government effectiveness, regulatory quality, rule of law, and control of corruption respectively turn to be more relevant in the selected countries. The study concludes that strong institutional quality would help in promoting total factor productivity in Africa.