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Opportunity or necessity? The spatial determinants of entrepreneurship in South Africa

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  • Willem A. Naude
  • Louw Van Der Walt

Abstract

In South Africa's mainly rural provinces, the lack of entrepreneurial activity may be due to the lack of opportunities or the lack of ability to engage in opportunities. If the latter is the case, then one would predominantly see entrepreneurial activity arise out of necessity. To find an empirical answer to the question, we focus on the determinants of profits and profit rates across the magisterial districts of these two provinces. We use panel data across 50 magisterial districts from 1996 to 2001, in both a simple OLS model as well as a one-step GMM panel data model, to find that profits are higher in those districts with higher levels of educational attainment. Profits are also high where the informal sector is smaller. This suggests that the informal sector attracts mainly necessity entrepreneurs. The findings in this paper are also consistent with a situation wherein those unemployed from the rural areas migrate towards urban areas to join the informal sector in those areas. This kind of migration depresses profit rates in these urban areas.

Suggested Citation

  • Willem A. Naude & Louw Van Der Walt, 2006. "Opportunity or necessity? The spatial determinants of entrepreneurship in South Africa," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 3(2), pages 245-265.
    • Handle: RePEc:ids:ijesbu:v:3:y:2006:i:2:p:245-265
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    Cited by:

    1. Ali˙ye A. Akgün & Tüzi˙n Baycan-Levent & Peter Nijkamp & Jacques Poot, 2011. "Roles of Local and Newcomer Entrepreneurs in Rural Development: A Comparative Meta-analytic Study," Regional Studies, Taylor & Francis Journals, vol. 45(9), pages 1207-1223, February.
    2. Traikova, Diana, 2013. "Determinants of non-farm entrepreneurial intentions in a transitional context: Evidence from rural Bulgaria," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 72, number 72.

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