Article
Entrepreneurship, Productivity, and the Long-Run Path of Economic Development
Entrepreneurship has long been positioned as a catalyst for economic growth, yet its role in shaping productivity dynamics and long-run development trajectories remains unevenly understood. This study revisits the entrepreneurship–development nexus by examining how different forms of entrepreneurial activity influence productivity growth and, in turn, the sustained economic advancement of nations. Moving beyond the simplistic view that “more entrepreneurship is always better,” the paper argues that the quality, orientation, and institutional embeddedness of entrepreneurship are decisive in determining developmental outcomes. Drawing on insights from growth theory, evolutionary economics, and institutional perspectives, the study conceptualises entrepreneurship as a mechanism through which resources are reallocated, innovations diffused, and productivity-enhancing structural transformation occurs over time. Particular attention is given to the distinction between necessity-driven and opportunity-driven entrepreneurship and their contrasting implications for long-run productivity gains. The paper contributes to the literature by integrating entrepreneurship into a dynamic productivity framework, highlighting why some economies experience virtuous cycles of innovation-led growth while others remain trapped in low-productivity equilibria. The findings carry important implications for development policy, suggesting that fostering entrepreneurship without parallel investments in institutions, skills, and technological capability may yield limited or even counterproductive outcomes in the long run.