Title: Impact of Entrepreneurship on Inclusive Economic Growth: Evidence from SMEs in Emerging and Developed Economies
Authors: Mary Yusuf Abdul
Favour Folushade Olaleye
Emmanuel Yusuf Attah
Volume: 10
Issue: 1
Pages: 386-397
Publication Date: 2026/01/28
Abstract:
Inclusive economic growth has emerged as a central policy objective as many economies continue to experience persistent inequality and uneven development despite sustained economic expansion. Entrepreneurship, particularly through small and medium-sized enterprises (SMEs), is widely promoted as a mechanism for fostering inclusive growth; however, empirical evidence on this relationship remains mixed and context-dependent. This study investigates the impact of entrepreneurship on inclusive economic growth, with particular attention to the moderating role of institutional quality and differences between emerging and developed economies. Using a cross-country panel dataset covering 62 emerging and developed economies over the period 2010-2023, the study employs fixed-effects and system GMM estimations to examine the relationship between SME entrepreneurship and a multidimensional inclusive growth index capturing employment, income distribution, poverty reduction, and shared prosperity. The results indicate that entrepreneurship has a positive and statistically significant effect on inclusive economic growth. However, this effect is strongly conditioned by institutional quality. Countries with stronger regulatory frameworks, effective rule of law, and lower corruption experience substantially greater inclusive gains from entrepreneurial activity. The findings further reveal that entrepreneurship contributes more strongly to inclusive growth in developed economies than in emerging economies, reflecting differences in entrepreneurial ecosystems and institutional capacity. Additionally, opportunity-driven entrepreneurship exhibits a significantly stronger inclusive impact than necessity-driven entrepreneurship. These results underscore the importance of shifting policy focus from increasing the quantity of entrepreneurs to enhancing the quality of entrepreneurial activity and the institutional environments that support it. The study contributes to entrepreneurship and development literature by integrating inclusive growth considerations into cross-country entrepreneurship analysis and offers policy-relevant insights for sustainable and inclusive development.