Political Economy and Entrepreneurship

Understanding entrepreneurship is much more complicated than a domestic business approach because countries differ in many ways. Each country has varying political, economic, and legal systems, just as cultural practices may vary. Hence, political economy has been at the heart of entrepreneurship since its outset, as political economy offers a rewarding approach to entrepreneurship. The political economy approach is indeed necessary in order to understand how the political system shapes the institutional setup.

A significant number of development economists, including Ricardo Hausmann and Dani Rodrik, have proposed the idea that the key obstacle to economic growth in less developed countries (LDCs) stems from the very insufficient level of entrepreneurship. This problem supposedly arises because markets do not generate adequate incentives to reward entrepreneurship. Thus, entrepreneurship is ...