Entrepreneurship in Developing Countries

(d)  The Fundamentals – Financial Markets Development and Physical 

Infrastructure 

 

Issues pertaining to a country’s macroeconomic stability, the state of its financial 

markets and its infrastructure are pervasive in the literature on entrepreneurship in 

developing countries.  A survey of Nigerian entrepreneurs, for example, finds that access 

to credit, poor transportation infrastructure and a lack of dependable utilities are a leading 

constraints to firm growth ([106], p.59, Table 1). In a study of firms in Romania, Brown, 

Earle and Lup find that “the availability of loans is an important factor in promoting the 

growth of small start-up firms” ([112], p.62).  Yusuf and Schindehutte study the effects of 

macroeconomic performance on the types of entrepreneurial activity.  They survey 160 

entrepreneurs who had formed businesses during periods of economic decline in Nigeria 

([113], p.45).  This decline resulted from a number of poor policies ([113], p.43)  such that 

despite Nigeria’s considerable oil income, the government’s reinvestment activities “did 

not accelerate growth.” ([114], p.21). However, the authors point out that post colonial 

Nigerian government, unlike many other African countries, was not overly hostile to the 

private sector and had developed a number of programs to support the development of 

 

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indigenous SMEs ([113], p.44).  The study revealed that entrepreneurs started businesses 

for a number of reasons during the period in review.   However, “extrinsic rewards” related 

to securing income were more important than purer “Schumpeterian” type entrepreneurial 

motivations (i.e. innovation) ([113], p.49).   It would therefore appear that in periods of 

economic hardship necessity entrepreneurship rather than opportunity entrepreneurship 

becomes more important ([113]).