Institutional Environment, Entrepreneurial Activities and Economic Growth across Selected Arab Countries

Purpose: This paper explores the institutional factors that promote entrepreneurship and contributes with other factors in achieving higher economic growth in the context of Arab Countries. Design/Methodology/Approach: A panel-data analysis for eleven Arab countries covering the period (2006 – 2017) are undertaken. Simultaneous equation models for economic growth and entrepreneurial activity are applied to the dataset using three stages least estimators (3SLS) to gauge the strength of the relationship between institutions, entrepreneurship, and economic growth rates. Findings: The results indicate that entrepreneurship indicators (NBD) are highly positively associated with economic growth rates (at 1% level of significance) in the sampled Arab countries. These results are confirmed by robustness analysis conducted using different types of estimators for the sampled Arab countries. The positive coefficients indicate that an increase in entrepreneurship level encourages economic growth in sampled Arab countries. Further, institutional indicators proxied by the regulation quality and government efficiency are highly associated with economic growth. Similarly, economic growth is affected by human capital indicators significantly. Other variables such as financial freedom and cost of starting a business are not significant for economic growth performance in the sampled Arab countries. Practical Implications: The Arab countries have their special political and economic environment and institutional setting that require special attention by researchers from different deciplines. These institutions and environment are created by specific cultural, language, religious and geographical factors. Originality/Value: The investigation would hope to identify the institutional factors that encourage entrepreneurial activity and contribute to boosting the process of economic development across the sampled Arab countries.