Wim Naudé

Investigating geography and institutions as determinants of foreign direct investment in Africa using panel data

This article uses a cross-country econometric approach to identify the determinants for foreign direct investment (FDI) in Africa. The contribution is 3-fold. Firstly, we recognize that the estimation techniques used elsewhere, such as ordinary least squares, may be flawed. We therefore use a dynamic one-step generalized method of moments (GMM) estimator due to Arellano and Bond (1991). The GMM-estimates identified a number of robust determinants of FDI, namely government consumption, inflation rate, investment, governance (political stability, accountability, regulatory burden, rule of law) and initial literacy. It is concluded that geography does not seem to have a direct influence on FDI flows to Africa. Neither market-seeking nor re-exporting motives of FDI seem to dominate, with different policy instruments being significant in the different specifications. This does not discount the importance of good policies, but probably indicates the importance of good policies made by good institutions. Institutions, in the form of political stability showed up as a significant determinant of FDI.

Entrepreneurship, Innovation, and Economic Development

Entrepreneurship and innovation are two of the most pervasive concepts of our times, yet there are still gaps in our understanding of the interactions between entrepreneurship and innovation, particularly in developing countries. This book is an attempt to fill this gap. It focuses on the entrepreneurship-innovation-development nexus, drawing heavily on empirical evidence from developing countries. Cross-country and individual country experiences cover nations as diverse as Ethiopia, India, Turkey, Vietnam, and also examine lessons from advanced economies such as Finland. Three sets of questions are addressed. What is the impact of entrepreneurship and innovation on growth and development? What determines the innovative performance of entrepreneurs in developing countries? What role does the institutional environment play in shaping the extent and impact of innovative activities? A key message is that entrepreneurial innovation, whether through small firms, large national firms, or multinational firms, is often vibrant in developing countries, but does not always realise its full potential. This is due to institutional constraints, the absence of the appropriate mix of different types of small and large and domestic and foreign firms, and insufficiently developed firm capabilities. The contributions provide a better understanding of the determinants and impacts of innovation in developing countries and the policies and institutions that support or hinder innovation. Contributors to this volume - Adam Szirmai, UNU-MERIT and Maastricht University Wim Naude, UNU-WIDER Micheline Goedhuys, UNU-MERIT and Maastricht University David B. Audretsch, Indiana University Mark Sanders, Utrecht University Alice H. Amsden, Massachusetts Institute of Technology Erik Stam, Utrecht University Andre van Stel, University of Amsterdam. Jaap Voeten, University of Tilburg Job de Haan, University of Tilburg Gerard de Groot, University of Tilburg Mulu Gebreeyesus, UNU-MERIT Elif Bascavusoglu-Moreau, Imperial College Business School Otto Toivanen, Helsinki School of Economics Sunil Mani, Centre for Development Studies, Trivandrum, Kerala I. Semih Akcomak, UNU-MERIT, Maastricht University Suma Athreye, Brunel University

An Overview of African Entrepreneurship and Small Business Research

Abstract Given the potential importance of self-employment for African economic development, the present paper provides an overview of the current state of entrepreneurship research in Africa. This is based on the compilation of a bibliography of African entrepreneurship research. To our best knowledge, this is the first time that such a bibliography has been attempted for Africa. We analyze the frequency and topics of research outputs since 1963 and provide an overview of the main themes and topics in African entrepreneurship research. It is shown that in Africa, the government impacts on entrepreneurship both directly (through for instance taxation, education and training policies as well as privatization) and indirectly through, for example, contributing to an uncertain policy environment, damaging social capital and creating institutional features that keep African firms small. The smallness of African firms, and the role of social network capital in overcoming the negative features limiting African firm growth and survival, are important topics for future research on African entrepreneurship.

Business under fire: entrepreneurship and violent conflict in developing countries

In this article, we provide an introduction to the Special Issue of the Journal of Conflict Resolution devoted to the impact of violent conflict on entrepreneurship in developing countries. First we note that there is insufficient attention in the literature on the impact of violent conflict on the firm or entrepreneur level. Then, after we define entrepreneurship and violent conflict, we provide a summary of the existing literature and give an overview of the contributions in this Special Issue. We conclude by noting policy implications and areas for further research.

Entrepreneurship and Regional Economic Growth: Towards A General Theory of Start-Ups

Start-ups of new firms are important for economic growth. However, start-up rates differ significantly between countries and within regions of the same country. A large empirical literature studies the reasons for this and endeavours to identify the regional determinants of start-ups. By contrast, there is a much smaller theoretical literature attempting the formal modelling of the start-up process within a region. In this article, we seek to contribute to this small literature by introducing a general theoretical model of the entrepreneurial start-up process. The model links start-ups to economic growth and can be applied to understand growth in a regional context. We derive a number of propositions which fit the stylised facts from the empirical literature: (i) growth in the regional economy is driven by an expansion in the number of start-up firms supplying intermediate goods and services; (ii) improvements in human capital will improve the rate of start-ups; (iii) improvements in the relative rates of return to entrepreneurs and business conditions will raise start-up rates; (iv) an increase in regional financial concentration will reduce the start-up rate in a region; and (v) increased agglomeration/urbanisation in a region has an a priori ambiguous effect on start-up rates.

The Determinants of Regional Manufactured Exports from a Developing Country

In this article, the question of the location of exporters of manufactured goods within a country is investigated. Data from 354 magisterial districts in South Africa are used with a variety of estimators to identify the determinants of regional manufactured exports. It is found that the home-market effect (measured by the size of local gross domestic product) and distance (measured as the distance in km to the nearest port) are significant determinants of regional manufactured exports. This article contributes to the literature by using developing country data and by adding to the small literature on this topic. This article complements recent work on the determinants of exports from European regions and finds that distance is relatively more important in the developing country context than in the European case.

Measuring Vulnerability: An Overview and Introduction

This paper provides an introduction to this special issue of Oxford Development Studies. It starts by contextualizing the measurement of vulnerability, pointing to the need to take risks on the level of households, regions and countries into account in designing poverty-reduction strategies. It then summarizes the papers in this special issue, highlighting the ways in which they advance the conceptualization and measurement of vulnerability, and noting directions for future research.

Small Business, Entrepreneurship and Violent Conflict in Developing Countries

Abstract This study surveys the small but growing field of entrepreneurship and conflict in developing countries, which is also the topic of this special issue of the Journal of Small Business and Entrepreneurship. We review recent contributions on how mass violent conflict such as civil war affects productive entrepreneurship and we discuss the contributions to this special issue. Furthermore, we define entrepreneurship and violent conflict and indicate how they may affect each other. We find that violent conflict has diverse impacts on entrepreneurs, firms and their investment and production processes, and that there are many ways to overcome the legacies of fighting. In fact, the post-war peace dividendand, more generally, the reconstruction of markets and economies critically depends on public policies promoting entrepreneurship.

Measuring the Vulnerability of Subnational Regions in South Africa

A small but growing literature has been concerned about the economic (and environmental) vulnerability on the level of countries. Less attention is paid to the economic vulnerability of different regions within countries. By focusing on the vulnerability of subnational regions, this paper contributes to the small literature on the “vulnerability of place”. They authors see the vulnerability of place as being due to vulnerability in various domains, such as economic vulnerability, vulnerability of environment, and governance, demographic and health fragilities. They use a subnational data set on 354 magisterial districts from South Africa, recognize the potential relevance of measuring vulnerability on a subnational level, and construct a Local Vulnerability Index for the various districts. They condition this index on district per capita income and term this a Vulnerability Intervention Index, interpreting this as an indicator of where higher income per capita, often seen in the literature as a measure of resilience, will in itself be unlikely to reduce vulnerability.

Export Specialisation and Local Economic Growth

This paper aims to provide empirical evidence on whether export specialization or diversification is better for local economic growth. Using export data from 354 magisterial districts of South Africa for 1996 and 2001 we estimate spatial growth regressions that include measures of the degree of export specialization and diversification. Overall, exporting regions outperform other (less or non-) exporting regions. Also, we find that export specialisation, rather than export diversification, has been associated with local economic growth; with specialization in mining and agriculture being especially beneficial. Our results support the view that specialization in a locality’s area of comparative advantage is good for local economic development. We also find that localities with higher initial levels of human capital, and higher subsequent population growth, performed better. This is consistent with the belief that policies aimed at strengthening human capital and improving agglomeration economies, will enhance local economic development.