International Journal of Academic Research in Business and Social Sciences

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The Relationship between Economic Growth and Entrepreneurship

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In this paper, we investigate the relation between entrepreneurship and innovation and economic growth. For this purpose, we investigated the data related to 76 countries throughout the world in 2008 by using endogenous growth model. In this model, we set domestic gross production as a function of entrepreneurship and innovation, physical capital and labor based on Cobb-Douglas Form. Estimated elasticity of domestic gross production included 0.80, 0.62, and 0.24 as compared to entrepreneurship and innovation, physical capital and labor, respectively. They all have high statistical significances. The results indicate positive effect of entrepreneurship and innovation on the economic growth. In other words, increase of entrepreneurship and innovation coefficient will increase domestic gross production. The positive effect of physical capital and labor on the domestic gross production is another result of this study.