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Does Monetary Aid Catalyse New Business Creation? Analysing the Impact of Global Aid Flows on Formal and Informal Entrepreneurship
Author(s) -
Moore Elizabeth M.,
Dau Luis Alfonso,
Doh Jonathan
Publication year - 2020
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/joms.12552
Subject(s) - entrepreneurship , development aid , aid effectiveness , government (linguistics) , economics , developing country , politics , private sector , panel data , informal sector , business , economic growth , finance , political science , linguistics , philosophy , law , econometrics
Official development aid – monetary transfers to developing countries to promote social and economic development – reached more than $140 billion in 2016. However, traditional forms of government bilateral aid continue to decline, while private aid is rising. Nevertheless, the impact of this aid, including its potential to stimulate economic development through new business formation, remains uncertain. In this study, we examine the impact of three sources of monetary aid flows on formal and informal entrepreneurship. Drawing from the international political economy literature we argue that bilateral aid and private aid are associated with higher levels of informal entrepreneurship, while multilateral aid is accompanied by lower levels. Moreover, we show that bilateral and private aid are linked with lower levels of formal entrepreneurship, while multilateral aid has no impact. The analyses of a panel of 313 observations from 49 countries provide robust support for these arguments.