Portfolio entrepreneurs and economic growth: the case of Uganda

Abstract

Many developing countries have not benefited from the technological changes that have \ntaken place over the last 30 years. Uganda has been no exception. The country \ncontinues to have over 30 percent of its people below the poverty line. This is despite \nthe appropriateness of macro economic policy and government action in many of these \ncountries. Even in the developed countries, slowness in growth has been attributed to \nlack of enterprise rather than policy and government action. For this reason, \ngovernments and multilateral institutions like the World Bank, have attributed the \ncontinued poverty or the slow growth to other factors like governance, institutions but \nmore importantly, entrepreneurship. \nClassical, and indeed neo-classical economists, did not pay much attention to \nentrepreneurship as a determinant of growth and therefore this relationship has not been \nexplored in most of the research that has attempted to explain determinants of economic \ngrowth. It was Schumpeter who suggested that the entrepreneur had a role in economic \ngrowth but no empirical studies have been undertaken to verify this. Thus was until \nrecently when the Global Entrepreneurship Monitor (GEM) studies were initiated in \n1999 led by Paul Reynolds who had done some previous research in this area. The \ncurrent GEM studies have focused on small firms and yet the model has existing large \nfirms. This study identifies this gap and it is that gap that the study attempts to explain. \nHaving no firm theoretical foundation, the study adopted an inductive approach using \nmainly qualitative techniques but also adopted quantitative techniques given the nature \nof the relationship among the variables. \nTheoretical sampling was used initially to identify the study population. The study \nidentified large scale portfolio entrepreneurs as a unit of analysis and Uganda being a \nsmall country, it was possible to assume some kind of laboratory conditions in which \nthe study was undertaken. The study’s overall aim was to establish whether a \nrelationship existed between entrepreneurship and economic growth. To achieve this, \nthe study examined the patterns of growth in the Uganda economy between 1962-2005, \nthe opportunities, the macro economic policy in place, the opportunities that emerged \nand the role of the entrepreneur in those conditions. The study also examined the \nemergence of new industries in the economy, the start-ups and exits of firms in the \nrespective industries and the role of the entrepreneur and how this related to economic \ngrowth. To secure the data, the study used a case study design for portfolio \nentrepreneurs combined with a survey for small and medium and corporate \nentrepreneurs. Unstructured interviews were conducted with portfolio entrepreneurs \nand self administered questionnaires were used for the other respondents. Secondary \ndata were collected from numerous published sources. \nThe study confirmed that there existed a relationship between macro economic policy \nand economic growth which confirmed assertions by mainstream economists. The \nstudy also established that a relationship existed between entrepreneurship and \neconomic growth. The Uganda economy as a small economy gives that ability to see \nthe relationship. The study reveals, using the Uganda economy, that large scale \nportfolio entrepreneurs have an important role to play in orchestrating economic growth \nthrough their activities of start-up, job creation and infrastructural development. \nThe study further confirms that liberalization of an economy as in the case of Uganda \ncreates opportunities and that these opportunities are seized by entrepreneurs. Portfolio \nentrepreneurs play a key role in this process. Technology too has an important role \namong other factors. As an industry is formed, many new firms enter it. This creates \ncompetition. Competition may lead to development of new technologies, products, \nservices and processes. This leads to firm exiting the industry. The start-up and exit of \nfirms in an industry leads to job creation and loss. It is this process that Schumpeter \ncalled the creative destruction where job creation and job losses that creates growth. \nThis study brings out the importance of the large scale portfolio entrepreneurs, how \nthey start business, perceive opportunities, and compete. The conclusions from the \nstudy are that a relationship exists between entrepreneurial activity and economic \ngrowth, and that large scale entrepreneurs have a major role to play in an economy. \nThey are job creators, tax payers, wealth creators, and through the multiplier effect. \nThere is need for deductive studies in an attempt to confirm this relationship.

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