Entrepreneurship, Governance and Economic Growth

Abstract

Entrepreneurship is often regarded as a fundamental driver of economic development (Ab Rahman et al., 2022; Bourne, 2011; Hamdan et al., 2020; Yang & Li, 2011). It generates job opportunities within societies through the production of indigenous goods and services, thereby providing a basic support for the advancement of locals in particular and nationals in general. Due to the absence of favorable regulations and procedures in emerging economies such as India, small and medium-sized businesses have struggled to establish and grow over the previous decades. In the recent past, however, various reforms have been implemented to encourage entrepreneurship, to the advantage of the entire country. Nevertheless, as a result of the current decline in employment and growth rates, the nation had to revisit its plans and policies in order to encourage entrepreneurship and, consequently, overall economic growth. Some studies have identified entrepreneurship as a factor influencing economic growth in emerging economies. For instance, Adusei, (2016) recognized entrepreneurship as the driver of economic growth in 12 African economies, while Aparicio et al., (2016) noticed that non-governmental institutions played a substantial impact on the economic growth of the 43 selected countries. Nevertheless, the importance of entrepreneurship has been acknowledged by the governments of several nations; as a result, several support programs and initiatives have been made to promote entrepreneurship in advanced economies. This demonstrates the importance of local governments in fostering entrepreneurship and, consequently, economic growth. In addition, the role of technological innovation has been well recognized in the literature (Wong et al., 2005); yet, one of the determinants of entrepreneurship, Governance, has not found a sufficient place in empirical study in emerging and transition economies such as India. Furthermore, numerous studies have examined the relationship between entrepreneurship and economic development in developing countries (Stel et al., 2005), developed countries (Méndez-Picazo et al., 2012), and in single countries (Hamdan et al., 2020), but there is a dearth of studies that highlight the role of government support policies in stimulating this relationship through the prism of India's experience. Therefore, the present study aims to find out the effect that entrepreneurship causes in the growth of an economy and the role that government policies and institution play to stimulate the economic growth through entrepreneurship. The remaining part of the study is organized as follows: the second part is the review of the literature and hypothesis development. The third part explains the methodology. The fourth part showcases the results, and the fifth part discusses the results and draws a conclusion, and the final part points out limitations and provides direction for future research.