Pathways to Successful Entrepreneurship in Developing Countries

The distinction between developed and developing countries lies in their level of economic development, infrastructure, and living standards. Developed countries exhibit advanced economies, high GDP per capita, and well-developed infrastructure while developing countries face challenges related to poverty, limited infrastructure, and lower levels of human development. It is important to note that these classifications can be dynamic, as some developing countries may experience rapid growth and transition into developed status over time. Entrepreneurship in developing countries is made more difficult because of the characteristics of developing countries and the institutional voids that exist more often in such countries. “Institutional voids” result in the higher transaction costs commonly found in emerging markets representing the geographical regions of Africa, East, South and Western Asia, Latin America, and the Caribbean. These voids relate to political and economic systems, trade policies, and product, labour, and capital markets and denote the absence of specialized intermediaries, regulatory systems, and contract enforcement mechanisms. Institutional voids can be formal or informal and they make the transaction costs of doing business higher for both market exchange and for new firm entry. This chapter will introduce pathways through which entrepreneurship allows individuals in developing countries to escape poverty while creating superior-value businesses. It will be a guide for would-be and practising entrepreneurs and policymakers in developing countries in helping them to navigate the institutional voids in their countries.