  Entrepreneurship is often touted for its ability to generate economic growth.
Through the creative-destructive process, entrepreneurs are often able to
innovate and outperform incumbent organizations, all of which is supposed to
lead to higher employment and economic growth. Although some empirical evidence
supports this logic, it has also been the subject of recent criticisms.
Specifically, entrepreneurship does not lead to growth in developing countries;
it only does in more developed countries with higher income levels. Using
Global Entrepreneurship Monitor data for a panel of 83 countries from 2002 to
2014, we examine the contribution of entrepreneurship towards economic growth.
Our evidence validates earlier studies findings but also exposes previously
undiscovered findings. That is, we find that entrepreneurship encourages
economic growth but not in developing countries. In addition, our evidence
finds that the institutional environment of the country, as measured by GEM
Entrepreneurial Framework Conditions, only contributes to economic growth in
more developed countries but not in developing countries. These findings have
important policy implications. Namely, our evidence contradicts policy
proposals that suggest entrepreneurship and the adoption of pro-market
institutions that support it to encourage economic growth in developing
countries. Our evidence suggests these policy proposals will be unlikely to
generate the economic growth desired.
