The Key Factors Affecting Entrepreneurship in Middle East and North Africa (MENA)

Abstract

This paper aims to determine which factors have an impact on business creation in the MENA by focusing on socio-economic factors that are unemployment rate, taxation levels, income levels and the education level as a well as on governance factors more precisely the Worldwide Governance Indicators published by the World Bank. In addition, this research will also study the impact of net migration on entrepreneurship in the region which is the gap that this paper will attempt to address. Data was collected for 13 Middle East and North African countries for a period of 14 years (2006-2023). The methodology applied in this research includes Pearson correlation analysis as well as static panel data analysis which was proved to be more adequate given the data and research problematic. Our analysis included the Fixed Effects (FE) method and the Random Effects (RE) method followed by a Hausman test to help determine which model is better.  The Pearson correlation analysis followed by variance inflation factor (VIF) analysis led us to remove 3 IVs (IV) from our model. The RE method indicated that only net migration, education level and taxation level have a statistically significant (STS) impact on entrepreneurship while all the other variables are not STS. The findings of this research can be used by governments across the region to set-up entrepreneurship strategies and undertake effective reforms depending on their socio-economic and governance indicators. The findings can also be used to better manage migrant flows based on new business creation objectives.