An econometric analysis of entrepreneurial activity, economic growth and employment: the case of the BRICS countries

Abstract

Entrepreneurship has been identified as a key contributor to economic growth and job creation by policy makers and researchers alike. The role of entrepreneurship has become more noticeable in societies not only in developed countries but also in developing countries which are in many instances struggling with a variety socio-economic challenges. A possible link exist between entrepreneurship, economic growth and employment but few studies have determined the degree of the relationship between these variables. The purpose of this study was to determine the relationships between economic growth (GDP), employment, entrepreneurial intention (EI), total early-stage entrepreneurial activity (TEA), and established business ownership (EBO) rate using a quantitative econometric analysis method. The study design followed a quantitative empirical approach using annual secondary data from 2001 to 2015 for the BRICS countries. A pooled panel analysis was used to test the long and short run relationships between the mentioned variables. The first model tested the relationship between GDP, TEA, EI and EBO rate, while the second model tested the relationship between employment, TEA, EI and EBO rate. In both cases it was found that a long run relationship existed between the variables by using the Fisher-Johansen cointegration analysis. Further results of the analysis indicated that TEA and EI are significant predictors of economic growth (GDP), while established business ownership (EBO) is not a significant predictor. It was also found that only established business ownership is a significant predictor of employment. In conclusion, the study proved that links between the mentioned variables do exist and that entrepreneurial activity should be improved as it has an impact on GDP and employment on various degrees.