Across the world, facilitating entrepreneurship is viewed as a key means of promoting economic development and growth. Consequently, entrepreneurship is now a focus of attention worldwide. This is especially the case in developing countries which are perceived to be at the âback of the queueâ in terms of their levels of economic development and growth. Harnessing entrepreneurship is commonly viewed as one of the means by which they might speed up their economic development and growth. To achieve this however, understanding is required not only of current levels of entrepreneurship in different contexts but also of who engages in entrepreneurial endeavour, the characteristics of this endeavour, the motives for becoming entrepreneurs and barriers that prevent the development of an enterprise culture that can act as a motor for economic development and growth. Unless these various facets of entrepreneurship in developing countries are understood, then it will not be known whether the policy approaches and measures being developed to harness entrepreneurship and enterprise culture are the most effective ones to pursue in any particular context. The Routledge Handbook of Entrepreneurship in Developing Economies seeks to provide a compendium of the scholarship being conducted to understand entrepreneurship in what are variously called developing or emerging economies, the majority world or the global South. Indeed, this handbook marks one of the first attempts to bring together within one cover the emergent array of scholarship being conducted on entrepreneurship in developing countries.
Until now, entrepreneurship in developing countries has been dominated by various widely held beliefs about the characteristics of entrepreneurship and enterprise culture. These, however, have been on the whole based on assumptions rather than evidence-based findings about entrepreneurship and enterprise culture in developing countries. One of the most common of these assumptions is that entrepreneurship in developing countries is largely undertaken by marginalized populations who, excluded from the formal labour market, have no other options available to them but to engage in necessity-driven entrepreneurship as a last resort and survival practice. Such necessity-driven entrepreneurship is thus viewed to be an unproductive, labour-intensive and inefficient endeavour conducted by poorly educated and low-skilled entrepreneurs and at best, to contribute little to economic development and growth and at worst, to hinder development and growth (La Porta and Shleifer, 2008, 2014). Much of this unproductive entrepreneurship is seen to take place in the informal economy, which is consequently seen as deleterious to economic development and growth. The consequent policy approach is to seek to eradicate such entrepreneurship and to instead focus upon harnessing legitimate opportunity-driven entrepreneurship. Womenâs entrepreneurial endeavour in developing countries, meanwhile, has sometimes been hidden from view or else denigrated as endeavour that simply helps households to âmake ends meetâ.
In this handbook however, the intention is to put under the spotlight these widely held representations and policy discourses regarding entrepreneurship in developing countries. Each part and every chapter in this handbook addresses one or more of these widely held assumptions and begins to unravel the need for a more nuanced and evidence-based understanding of entrepreneurship in developing countries. In this introductory overview, therefore, we commence by reviewing these assumptions about entrepreneurship in developing countries that are addressed in each part of this handbook. The intention in doing so is to provide the reader with a clear guide to where discussion can be found within this handbook on some of the more widely held assumptions regarding entrepreneurship in developing countries as well as information on the more nuanced understandings that are emerging.
Institutional environment of entrepreneurship
Entrepreneurship does not arise in a vacuum devoid of context. Rather, entrepreneurship is a socially constructed behaviour which is a product of the social environment, or what can be termed the institutional context, in which it takes place (Sine and David, 2010). As such, the importance of understanding the institutional context within which the entrepreneurship takes place in developing countries, cannot be over emphasized. Institutions provide âthe rules of the gameâ and norms which govern businesses in general and the nature of entrepreneurial endeavour more particularly (Baumol and Blinder, 2008; Denzau and North 1994; North, 1990). They prescribe the acceptability of activities (Mathias et al., 2014). On the one hand, all societies have formal institutions (i.e., codified laws and regulations) that define the legal rules of the game (and prescribe what we here term âstate moralityâ). On the other hand, all societies also have informal institutions which are the âsocially shared rules, usually unwritten, that are created, communicated and enforced outside of officially sanctioned channelsâ (Helmke and Levitsky, 2004: 727) and prescribe what we here term âcivic moralityâ.
Reviewing institutional theory, two schools of thought exist in relation to explaining the prevalence and nature of entrepreneurship in any context. In the first school, studies identify the relationship between the quality and intensity of formal institutions and the prevalence and nature of entrepreneurship. For example, when considering developing countries, the emphasis is often placed in this school of thought on discussing issues like how easy it is to register a new venture, the legal bureaucratic impediments to doing so, the various barriers to entry for nascent entrepreneurs, the level of property rights protection and the quality of services available. From this viewpoint, there are often deemed to be numerous formal institutional constraints that hinder the development of entrepreneurship in developing economies, including the costs of establishing a formal business venture, the existence of over-burdensome regulations, high taxes and corruption in the public sector (De Soto, 1989; Nwabuzor, 2005) but also formal institutional voids such as relatively weak or inadequate legal systems and contract enforcement regimes (Khan and Quaddus, 2015; Puffer et al., 2010; Sutter et al., 2013).
A second school of institutional thought however, turns away from studying solely the role and quality of the regulatory institutional framework. Instead, this investigates the cognitive and normative institutions (Scott, 1995), which can be joined within the broad category of the informal institutions. Seen through this lens, the relationship between formal and informal institutions matters (Vu, 2014; Webb et al., 2009, 2013, 2014). Viewing informal institutions as either âcomplementaryâ if they reinforce formal institutions, or âsubstitutiveâ if their rules are incompatible with those of the formal institutions (Helmke and Levitsky, 2004; North, 1990), the argument states that entrepreneurial endeavour is often hindered and/or takes place in the informal sector when they are substitutive. As Webb et al. (2009: 495) put it, âthe informal economy exists because of the incongruence between what is defined as legitimate by formal and informal institutionsâ. The consequent argument states that when symmetry exists between formal and informal institutions, entrepreneurship may prosper and the level of informal sector entrepreneurship will be small since the socially shared norms, values and beliefs of informal institutions (âcivic moralityâ) are aligned with the codified laws and regulations of formal institutions (âstate moralityâ). However, when asymmetry exists between the formal and informal institutions, such as due to a lack of trust in government, the result is that entrepreneurship is hindered and/or informal sector entrepreneurship emerges, which although socially âlegitimateâ in terms of the informal institutions, is deemed âillegalâ in terms of the formal rules (Kistruck et al., 2015; Siqueira et al., 2014; Sutter et al., 2013; Webb et al., 2009).
Part I of this handbook addresses issues related to this institutional context within which entrepreneurship is embedded in developing countries. Each of the chapters in Part I of the book thus reveal how entrepreneurship is a socially constructed behaviour conditioned by the institutional context in which it takes place.
Entrepreneursâ motivations in developing countries
Although there has been widespread recognition in the entrepreneurship literature that multifarious factors feed into the decision to start up a business (Baty, 1990; Bolton and Thompson, 2000; Brockhaus and Horowitz, 1986; Burns, 2001; Chell et al., 1991; Cooper, 1981; Kanter, 1983), and there have been repeated warnings not to over-simplify the complex rationales driving entrepreneurship (Rouse and Daellenbach, 1999), since the turn of the millennium, entrepreneurship scholarship has widely adopted a rather simple classificatory schema. Entrepreneurs have been classified as either ânecessityâ entrepreneurs pushed into entrepreneurship as a survival strategy in the absence of alternative means of livelihood, or as âopportunityâ entrepreneurs pulled into this endeavour more out of choice (Aidis et al., 2007; Benz, 2009; Harding et al., 2005; Maritz, 2004; Minniti et al., 2006; PerunoviÄ, 2005; Reynolds et al., 2001, 2002; Smallbone and Welter, 2004). This structure/agency binary, which views some entrepreneurs as ânecessityâ entrepreneurs and others as âopportunityâ entrepreneurs, has become ever more dominant (Acs, 2006; Bosma et al., 2008; Williams, 2007, 2008, 2009; Williams et al., 2006, 2009, 2010; Williams and Lansky, 2013).
In developing countries, the commonly held assumption in both popular portrayals and policy-making circles is that entrepreneurs are largely from marginalized populations and participate in such endeavour out of necessity as a survival practice and last resort in the absence of alternative means of livelihood. This, nevertheless, is an a priori assumption rather than an empirical finding. In recent decades, however, as the chapters in Part II highlight, this has begun to be put under the spotlight and questions raised about whether this is indeed the case (Cross, 2000; GĂ«rxhani, 2004; Maloney, 2004; Snyder, 2004). There has been an emergent recognition that many entrepreneurs in developing countries act out of choice, not least due to the flexible hours such endeavour allows, especially for women with family caring responsibilities, but also due to the economic independence, better wages and avoidance of taxes and inefficient government regulation offered by this sphere, as well as the fact that some entrepreneurs are in formal jobs and engage in entrepreneurship as an additional income-earning opportunity (Maloney, 2004; Perry and Maloney, 2007; Williams and Gurtoo, 2013).
The outcome is that studies of developing countries have started to gauge the ratio of necessity-to-opportunity entrepreneurship in different developing country contexts, as well as who engages in such entrepreneurial endeavour out of necessity and who does so voluntarily, and to decipher how the activities that they engage in differ. As the chapters in Part II will reveal, there appears to be a socio-spatial contingency of entrepreneursâ motives in terms of the ratio of necessity-to-opportunity entrepreneurship with greater proportions of necessity-driven entrepreneurship, for example in deprived populations and opportunity entrepreneurship in more affluent populations. When considering the motives of individual entrepreneurs there has also, as will be revealed, been a recognition that necessity and opportunity drivers can often combine and a recognition that entrepreneursâ motives can change over time, such as from more necessity-oriented to opportunity-oriented rationales.
It is not just the recognition that some entrepreneurs in developing countries voluntarily engage in entrepreneurial endeavour for opportunity-oriented rationales which opens the debate on re-representing the entrepreneurship in developing countries. In recent decades, the view that entrepreneurship is always and everywhere a profit-driven endeavour has also begun to be challenged. A growing literature has displayed how entrepreneurship is not always purely a profit-driven endeavour and how many entrepreneurs engage in not-for-profit activity (Austin et al., 2006; Defourny and Nyssens, 2008; Galera and Borzega, 2009; Hynes, 2009; Lyon and Sepulveda, 2009; Nicholls and Cho, 2006; Thompson, 2008). In other words, besides âcommercial entrepreneursâ who engage in entrepreneurial endeavour for a primarily for-profit objective, there are also âsocial entrepreneursâ who pursue primarily social and/or environmental objectives and reinvest the surpluses for that purpose in the business or community (e.g., Austin et al., 2006; Dees, 1998; Dees and Anderson, 2003; Defourny and Nyssens, 2008).
Until now, and grounded in the depiction of entrepreneurship in developing countries as necessity-driven and thus motivated by monetary gain, the literature on social entrepreneurship has been relatively absent compared with the burgeoning social entrepreneurship literature in the developed world. Nevertheless, as chapters in Part II of this handbook reveal, there is an emergent literature on social entrepreneurship in developing countries which reveals not only the need for, but also the existence of, social entrepreneurship in the developing world.
Gender and entrepreneurship
Part III of this handbook turns its attention to the issue of the gendering of entrepreneurship in developing countries. Until now, scholarship and discourse on entrepreneurship in developing countries has sometimes âwritten outâ women. Even when it has included them, however, women have been commonly po...
