Entrepreneurship has long been the concern of all countries regardless of their economic development level. It has been highly concerned to minimize their overstraining challenges of unemployment, poverty, and social unrest for all low-income and some medium-income countries. It is also the focus of attention in high-income level countries to make their development consistent. Politicians, policymakers, and individuals feel concerned not only about supplying potential entrepreneurs into their economy but also assuring sustainable growth of the existing one. This progressively growing interest in entrepreneurship as a means of problem solving and development has also had an influence on the research world (Audretch, 2012). A Large number of entrepreneurship studies on different entrepreneurship issues have been conducted at different times. The issues are largely characterized as the essence of entrepreneurship (Cieslik, 2017; Stevenson & Jarillo, 1990; Baumol & Schilling, 2008), its economic and social contribution (DemirUslu & Kedikli, 2019; Meyer & de Jongh, 2018; Parker, 2009; Valliere & Peterson, 2009), and entrepreneurial environment (Mason and Brown, 2014; Zamberi Ahamad & Xavier, 2012). Thus, updating the stated research dimensions paves the way for a more understanding and explanation of the study.
Many studies have been conducted to create a communal understanding of the elusive concept of entrepreneurship. It has been a subject of much debate and is defined differently by different researchers of different disciplines over time. To mention a few from the modern times of Schumpeterian, it is the act of innovation and implementation of change through carrying out of a new combination of resources (Bygrave & Zacharakis, 2011). It is an examination of how goods and services are discovered, by whom, and with what opportunities (Shane & Venkataraman, 2000). It is a dynamic process of vision, change, and creation (Kratko & Hodgett, 2004). Bosma(2013) defined entrepreneurship as any attempt at new business or new venture creation, such as self-employment, new business organization, or the expansion of an existing business, by an individual, a team of individuals, or an established business. Drucker(1985), Barot (2015), Chang and Wyszomirski(2015), and many more stated entrepreneurship as a process of creation of new businesses or creating new ways of managing the existing one through scanning and exploiting opportunities(Cieslik, 2017; Stevenson & Jarillo, 1990; Baumol & Schilling, 2008). From these, this study has conceptualized entrepreneurship as the process of creating new business and entering a formal market.
The economic and social contribution of entrepreneurship is the other studies’ dimension and reached the conclusion that it considerably contributes to sustainable economic development. This fact is massively supported by both theoretical and empirical studies. It contributes to the economic growth by channeling new innovation into the market (Audretsch, 2002; Valliere & Peterson, 2009). Relative to the existing firms, new entrants come up with new ideas and supply variety that can have more value to the market (Koster, Van Stel, & Folkeringa, 2012). Creating jobs, increasing GDP, reducing poverty, and enhancing whole society welfare is associated contribution (Burke, 2011; Ivanovi –Djuki,, Lepojevi, & Stevanovic, 2018) although, at the same time, economic growth has a significant influence on the development of entrepreneurship (Sabella, Farraj, Burbar, & Qaimary. 2014; Casares & Khan, 2016). It also contributes to the enhancement of productivity through innovative use of the existing resources or by creating new ways of exiting modalities (Fritsch, 2008). Though common interests and motives towards the development of entrepreneurship may be almost equally there in all economic levels of nations in the world, there is a great difference in what was actually registered new business entry rate per 1000 working-age population on the ground. To show few, as examples, from countries of different economic levels from the World Bank (2020) database, in 2018, Afganistan(0.21), Burkina Faso(0.33), Ethiopia(0.51), Iceland(9.88), Kosovo(4.00), Malta(17.8), Peru(3.75), and Hong Kong(28.59).
The difference in the mentioned contribution of entrepreneurship is not created in a vacuum. It is the result of the environment where entrepreneurs are developed and enterprises are created. Many studies elsewhere in different countries try to answer the question of why do certain environments produce more entrepreneurs and what are the elements of those environments make the difference? Qualities of governance experience in a given nation are claimed to take a wider notion which is explained in proxy factors like politics, economic and labor market, entry and leaving regulations, education system, and infrastructure (Reynolds, 2004). A study conducted by Ha, Chau, and Hieu (2016) based on the World Bank database, revealed that entrepreneurship is determined by factors related to qualities of governance. Though many studies revealed the relationship between governance and entrepreneurship, there are inconsistencies among their results. Some considered only part of the factors in their studies (Friedmana, 2011). Only one study conducted by Groşanu, Boţa-Avram, Rachişan, Vesselinov, and Tiron-Tudor( 2015) considered all the worldwide governance indicators as factors. Some concluded their finding based on data only from the same economic countries, particularly from high-income countries. These and other limitations of the previous studies limit our understanding of how entrepreneurship development has long been registered differently in different degrees across the world. Therefore, this study intended to fill the mentioned gap by investigating the causal relationships between entrepreneurship and governance based on data obtained from World Bank’s worldwide governance indicators (WGI) and entrepreneurship database by taking economic development difference into consideration as the controlling variable.
The finding of this study will contribute more to the existing body of knowledge. To mention specifically, from the policymakers and entrepreneurship program developers’ side, there is a tremendous increase in demand for new business entry to their economy. This demand pressurizes them to know facts on how governance affects their entrepreneurship. Therefore, this study can help them gain a better understanding of the existing phenomenon and, eventually, make a policy framework that paves future directions. A certain number of basic ideas of this study are expected to be shared by other researchers. In this regard, the study can partly help them access information regarding how governance affects entrepreneurship, particularly in the formal sector, and carry out more effective empirical studies using quantitative modeling. The study will help both actual and potential entrepreneurs enhance their intention to engage and expand in activities of entrepreneurship by showing multifaceted factors related to entrepreneurship governance. These factors may affect their firm negatively or positively. That is depending on how the actors in charge are proactive towards them. Thus, the study will benefit these entrepreneurs as an information source.