In the market economy, innovative entrepreneurship acts as the main sector that determines the rate of economic growth of the Gross National Product.
According to Prieger et al. (2016), when the level of entrepreneurial activity in the country deviates in any direction, it impacts economic growth negatively, lowering national potential. Urbano et al. (2019) add that the multitude of factors associated with entrepreneurship, such as an excessive number of legal procedures, affects heavily the business opportunities the population of developing countries gets.
This, in turn, has the potential of creating the deviation mentioned previously. Flaaen and Pierce (2019, p. 21) suggest that “the traditional use of trade policy as a tool for the protection and promotion of domestic manufacturing is complicated by globally interconnected supply chains” (p. 21). Without legal access to these chains, entrepreneurs have no potential to enhance the economic growth of the county. Finally, Avnimelech et al. (2014) provide evidence of the negative impact the corruption levels have on the matter. In developing countries, corruption is usually a standing issue, so even innovative entrepreneurs do not bring out the national potential of the country, and the people suffer from poverty.
Globalization of the world economy during the last three decades has been accompanied by a significant intensification of international trade. However, the study by Samimi and Jenatabadi (2014) shows that the effect of globalization on the country’s economy is highly dependent on the state income level. Countries with low incomes, such as those that belong to the third world, do not benefit from globalization. This, in turn, negatively influences the country’s potential for innovation. Hisrich and Kearney (2014) also state that there are some economic conditions that must be met in order for a domestic businesses to benefit from innovation and entrepreneurship in the age of globalization.
According to Mitra (2020), people, organizations and the environment of the country have an inextricable link to the potential of entrepreneurship and innovations. Globalization has only underlined the importance of that link. For example, Gutiérrez and Philippon (2017) claim that Chinese competition proved to induce a decline in the number of domestic businesses in some countries while simultaneously causing an increase in investments. Finally, Decker and Maciariello (2015) state that entrepreneurs have to constantly perform a purposeful search for innovations have to pinpoint the changes that provide entrepreneurial opportunities.
Reference List
Avnimelech, G., Zelekha, Y. & Sharabi, E., 2014. The effect of corruption on entrepreneurship in developed vs non-developed countries. International Journal of Entrepreneurial Behavior & Research, 20(3), pp.237–262.
Drucker, P.F. & Maciariello, J.A., 2015. Innovation and entrepreneurship, Abingdon, Oxon: Routledge.
Flaaen, A. & Pierce, J., 2019. Disentangling the effects of the 2018-2019 tariffs on a globally connected U.S. manufacturing sector. Finance and Economics Discussion Series, 2019(086).
Gutiérrez, G. & Philippon, T., 2017. Declining competition and investment in the U.S.
Hisrich, R.D. & Kearney, C., 2014. Managing innovation and entrepreneurship, Thousand Oaks, CA: SAGE Publications, Inc.
Mitra, J., 2020. Entrepreneurship, innovation and regional development an introduction, London, UK: Routledge.
Prieger, J.E. et al., 2016. Economic growth and the optimal level of entrepreneurship. World Development, 82, pp.95–109.
Samimi, P. & Jenatabadi, H.S., 2014. Globalization and economic growth: Empirical evidence on the role of complementarities. PLoS ONE, 9(4).
Urbano, D. et al., 2019. Does entrepreneurial activity matter for economic growth in developing countries? The role of the institutional environment. International Entrepreneurship and Management Journal, 16(3), pp.1065–1099.