Trade Openness and Entrepreneurship in BRICS Economies: Evidence under Common Global Shocks

Abstract

The research question in this study is as follows: how strongly domestic economic fundamentals and external integration explain the entrepreneurial activity in the BRICS economies in the years 20012023? The dependent variable of interest is the entrepreneurship where the relationship is analyzed with respect to variable of financial development, technological innovation, economic growth, government support, and trade openness under a dynamic macro-panel framework that clearly considers cross-sectional dependence, heterogeneity, and the global shocks. Using methodologies of second-generation panel unit root and cointegration tests, and then Dynamic Common Correlated Effects Mean Group (DCCE-MG) estimation and panel FMOLS as the robustness method, the research offers new data on the conditional character of entrepreneurship in large emerging markets. The findings indicate that trade openness is the only positive and statistically significant predictor of entrepreneurship when common shocks globally are adjusted. Comparatively, financial development and technological innovation have weak or negative impacts whereas economic growth and government support have estimator-dependent or non-robust impacts. These results indicate that BRICS economies have domestic financial systems and innovation systems that tend to be exclusionary or incumbent-biased and therefore not able to support entry by broad based entrepreneurship. On the whole, the paper shows that domestic fundamentals take back seat to external market integration in the conditions of global interconnectedness in the entrepreneurship, and has significant implications to the entrepreneurship policy, trade strategy, and institutional reform in developing countries.

Keywords: Entrepreneurship, Financial Development, Technological Innovation, Economic Growth, Trade Openness, BRICS, Government Support, CS-ARDL