INNOVATION CAPACITY AND ENTREPRENEURSHIP DEVELOPMENT IN AFRICA: BI-CAUSALITY ANALYSIS

Abstract

This paper investigates the interconnectedness of the capacity of innovation and entrepreneurship development in Africa. This paper provides novel empirical evidence about the bi-causality dynamics of entrepreneurship development and the capacity of innovation nexus which is virtually absent in the entrepreneurship literature. The evidence in this study has demonstrated that the data in Africa support the entrepreneurship development-led innovation hypothesis. It specifically examines the bi-causality between the variables of interest. The paper employs Toda and Yamamoto Granger’s Granger Causality approach to conducting the causality test. Annualised data from 54 African countries from 2000 to 2021 are used for the investigation. A 22-year data span with 1184 observations is used for the analyses. The data are sourced from World Bank Development Indicator (WBDI) and Global Entrepreneurship Monitor (GEM). The findings reveal that there is no bi-causality between the capacity of innovation and entrepreneurship development in Africa. It is concluded that a unidirectional causality exists between the capacity of innovation and entrepreneurship development in Africa. The causality runs from entrepreneurship development to the capacity for innovation. This means that the data in Africa support the entrepreneurship development-led innovation hypothesis.