Planning and Budgeting

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Nowadays, entrepreneurship enjoys an outstandingly important status in economic literature in a way that it is referred to as the engine of economic development. Yet, it is to be noted that in some developing countries the total extent of entrepreneurial activities is high, compared to that of the developed countries though the economic development amount is little among the former group. It is presumed that such a difference could be explained by the share of entrepreneurship in productive and non-productive activities. This article tries to study the role of productive and non-productive entrepreneurship in the economic development of countries. Thus, ‘self-employment’ is taken as an indicator for a non-productive entrepreneurship while ‘innovation’ is employed as an indicator for a productive entrepreneurship. The results of estimating regression model for 60 selected developing and developed countries with panel data method in the period within 1996-2008 demonstrate that ‘self-employment’ has a negative effect on the economic development while ‘innovation’ affects it positively. This research builds on theories of Schumpeter and Baumol and regards innovation-based entrepreneurship as the requirement of accomplishing economic development.

Keywords: Entrepreneurship, Self-Employment, Innovation, Economic Growth, Economic Development

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