Reflecting on the Entrepreneurship Paradox in Sub-Saharan Africa

Abstract

Entrepreneurship is a strategy for economic growth and is perceived to be higher in developing countries. However, other scholars found that it does not bring economic growth in developing countries. The purpose of the study was to reflect on this paradox in Sub-Saharan Africa from neoclassical economic theory, where entrepreneurship is perceived as carrying out innovations. In Malawi, a cross-sectional survey of enterprises was conducted to assess the values of new products, new production methods, new markets, and new enterprises. A comparison of mean values and two independent sample tests were used to analyse innovations carried out, types of entrepreneurial enterprises, and their prevalence. The study found that carrying out innovations among enterprises in Malawi is low. Very few entrepreneurial enterprises were opportunity-motivated, growth-oriented, and limited liability. Therefore, the paradox depends on the theory which guides the understanding of entrepreneurship. The classical economic perspective reflects the paradox, while the neoclassical economic perspective does not. This study contributes to knowledge of the types of entrepreneurial enterprises and shows that the paradox depends on the understanding of entrepreneurship. The findings imply that entrepreneurship is ineffective for economic growth in developing countries because of a lack of carrying out innovation. Therefore, the understanding of entrepreneurship in developing countries needs to be adjusted to neoclassical economic theories so that policy focuses on supporting entrepreneurial enterprises for entrepreneurship to be effective for economic growth, ceteris paribus.

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