Local and Systemic Entrepreneurship: Solving the Puzzle of Entrepreneurship and Economic Development

Abstract

Most economists agree that entrepreneurship has a positive effect on growth in developed countries. However, no evidence of this has been found in the case of developing countries. Rather, in many low–income countries, one can observe productive entrepreneurship but little corresponding development. This is the puzzle of entrepreneurship and development. To solve this puzzle, we propose to look at the notions of local and systemic entrepreneurship. Using recent research on the mechanisms of social cooperation, as well as network and firm theories, we offer an explanation of why entrepreneurship has a limited impact on growth in developing countries.

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