Years of entrepreneurs’ schooling and business performance nexus: evidence from an emerging economy

The primary objective of this study is to estimate the causal impact of entrepreneurs’ education on the performance of their businesses. In this study, parental education is used as an instrumental variable for the years of education of the entrepreneur. The data analyzed in this study are retrieved from the third wave of the Ghana Socioeconomic Panel Survey. It is a nationally representative survey covering all the 10 regions of Ghana when the survey was conducted in 2017/2018. Our results suggest that an additional year of education for a parent with the highest education increases the years of schooling of the entrepreneur by 0.35–0.49 years. Findings from our instrumental variable estimation also suggest that an additional year of schooling increases entrepreneurial profits by 6–12 percent and sales by 12–15 percent. The study addresses the endogeneity problem in the performance equation by using an instrumental variable for an entrepreneur’s education. This augments the literature in this area of study. Second, despite the policy relevance of understanding the causal impact of education on entrepreneurial business success, the phenomenon is understudied, particularly from a developing economy context perspective. This study contributes to closing these literature gaps.