A new study challenges the dominant narrative that entrepreneurship is the key to Africa’s economic future, arguing instead that the continent has too many entrepreneurs and too few productive firms to drive long-term development.
The research suggests that Africa should pivot away from promoting more start-ups and instead adopt strategies that support the growth of large firms and the absorption of existing technologies.
The study was conducted by Professor Alex Coad of Waseda Business School, Japan, in collaboration with Dr. Clemens Domnick and Dr. Pietro Santoleri from the European Commission’s Joint Research Centre, and Assistant Professor Stjepan Srhoj from the University of Split, Croatia. Their findings were published in The Journal of Technology Transfer.
“We were concerned that a number of entrepreneurship scholars seem to be pushing an agenda for Africa’s economic development based on personal ideology rather than empirical evidence,” said Coad.
Africa’s Entrepreneurial Landscape: A Misdiagnosis?
Entrepreneurship is often seen as a panacea for Africa’s development, especially through the lens of the entrepreneurial ecosystems (EE) approach, which focuses on aligning infrastructure, finance, regulation, and talent to support business creation. However, the researchers argue that this model may be ill-suited for Africa’s current challenges.
While EE strategies are widely promoted as solutions for innovation and unemployment, the study warns that Africa already has more entrepreneurs than any other region, primarily out of necessity, not opportunity. The continent’s high self-employment rate, the authors argue, reflects a lack of alternatives rather than a thriving innovation economy.
“The African continent is in last place in terms of economic development, although it comes first in terms of having the world’s highest entrepreneurship rates (measured in terms of proportion of self-employed entrepreneurs). Boosting entrepreneurship further seems like a step in the wrong direction. The bottleneck is a lack of large firms. Africa should focus on reducing total entrepreneurship rates and building large firms,” said Coad.
Learning from East Asia and Schumpeter
To evaluate alternatives, the researchers compared EE strategies with development frameworks from East Asia and Schumpeterian growth theory. The East Asian model, used by countries like Taiwan, Korea, Singapore, and Malaysia, emphasized building large firms, supporting exports, attracting FDI, and strong government coordination. In contrast, EE approaches favor small-scale entrepreneurship, local markets, and minimal government intervention.
The study also applies Schumpeterian growth theory, which posits that countries far from the global technological frontier should focus on adopting existing technologies rather than prioritizing innovation. Given that Sub-Saharan Africa has the world’s lowest economic complexity index and received less than 1% of global venture capital investment between 2020 and 2023, the researchers conclude that investment-led growth would be more effective than promoting start-ups.
More Start-ups, Fewer Results
The data shows that Africa lacks the large and mid-sized firms necessary for productive growth. Small informal firms rarely scale, and the prevalence of low-performing entrepreneurs is associated with lower GDP per capita.
The researchers argue that increasing entrepreneurship in such a context may dilute resources and policy focus without addressing the real bottlenecks, limited firm growth, poor scalability, and underdeveloped technological infrastructure.
Rethinking the Policy Approach
The authors suggest that Africa’s development agenda should move away from promoting entrepreneurship for its own sake and toward fostering productive, job-creating firms capable of competing in regional and global markets.
Rather than encouraging self-employment, they urge policymakers to design interventions that reduce informality, enable scale, and connect African economies to global value chains.
By reassessing the assumptions behind the entrepreneurship-first narrative, the study provides a data-driven critique that could influence future policy direction on the continent. It also urges scholars and governments to shift from ideology toward empirically grounded strategies tailored to Africa’s structural realities.
Source: thehighstreetjournal
