Recasting Job Creation Strategies in Developing Regions: A Role for Entrepreneurial Finance

Abstract

Efforts to develop private equity finance in some countries in the Middle East and North Africa (MENA) are yielding job creation rates up to five times the average rate of labour market growth in the region. This article argues that we should learn and generalise from this experience and from related experiences in other parts of the world because of the pressing need for regions like MENA to promote employment-generating growth. The paper draws on illustrative developments in the financial sector, education and business in MENA to recommend a new generation of reforms that promote entrepreneurial finance because of its high job creation potential for emerging markets. Requisite reforms include proactive new financial institutions and incentives, financial instruments such as private equity funds, and an array of complementary educational programmes. The task of providing the right macro-economic and regulatory environment for the private sector is no less important. However, it is no longer sufficient. Regional private equity industry surveys conducted for this article assess the developments across countries in MENA, and relay the sector’s need for proactive reforms that support it. The article also shows how developments in entrepreneurial finance in MENA coincide with a growing interest over the past fifteen years in research, business schools and the financial sector in furthering ideas, designing educational programmes and creating funds that promote the study and practice of entrepreneurship. It explains how in research, a paradigm shift in economic theory has renewed interest in the entrepreneurial firm from a micro perspective, in contrast to the neo-classical conception of the firm as a black box production function. It also shows that international financial market interest in private equity finance does not seem to have abated with the recent market bust. These factors explain the growing attention to the arguably ‘old’ concept of entrepreneurship. The article concludes by identifying priority areas for future policy and research.