Corruption and Entrepreneurship in Developing Countries

The importance of entrepreneurship as a driver of economic development cannot be denied. Nevertheless, developing countries suffer from unsatisfactory entrepreneurship level, partially explained the low economic growth. Given the main attribute of developing countries, which is highly corrupted, this study empirically investigates the effect of corruption on entrepreneurship in 48 developing countries from 2008-2016. By using Generalized Method of Moments (GMM) estimator, the results show that an increase in corruption will promote more new business start-ups suggesting that in highly corrupted countries, potential entrepreneurs may observe that the only way to start a business is to bribe government officers to get licenses, permits and business approval. Therefore, a proactive role of government in effectively reducing and eventually eliminating corruption to create a more conducive environment for entrepreneurs to grow up is very critical.