Revisiting poverty and entrepreneurship in developing countries

Abstract

Currently, the economic effect of entrepreneurship research has been highly associated with opportunity entrepreneurship, while necessity entrepreneurship has a lower effect. This manuscript revisits the relationship between poverty and entrepreneurial activity, mainly necessity-driven, analyzed by Amorós and Cristi (2011). We hypothesize that countries with a high pursuit of entrepreneurial activities reduce poverty, even if necessity-motivated entrepreneurship is developed. We test our hypothesis using Global Entrepreneurship Monitor data and the UN-UNDP, Human Development Index from 2010–2019. Our results reconfirm that total and necessity-motivated early-stage entrepreneurship both, have a positive effect on countries’ poverty reduction trends, especially in developing countries. We discuss the relevance of entrepreneurship activities on development beyond pure economic effects and highlight the importance of entrepreneurship in the pandemic situation caused by COVID-19, which is pushing more people into poverty situations.