Entrepreneurship, foreign direct investments and economic wealth in Africa

Abstract

The paper seeks to examine the joint effect of entrepreneurship and FDI inflows on economic wealth in Africa. It employs a dynamic system called GMM for a panel dataset of 52 African economies between 2006 and 2020. The study finds that FDI inflows induced a negative impact on the ease of doing business but it increased the business capital start-ups of entrepreneurs. We find that entrepreneurship reduces economic wealth in the short term but in the long- term, entrepreneurship positively affect economic wealth. The results show that FDI inflows increase economic wealth and that FDI is an important channel through which entrepreneurship can impact economic wealth. We find evidence to support the ease of doing business and FDI inflows are substitutes, while minimum capital of starting business complements FDI inflows in determining economic wealth. Based on the marginal effects, we conclude that entrepreneurship reduces economic wealth but improves economic wealth when the level of FDI inflows increases in a country. The implementation is that countries should provide strategies that promote economic wealth. individuals, people and entrepreneurs through prudent business development frameworks and FDI support in the short term.