On the business cycle and new business ventures: A panel analysis of selected Southern African Development Community countries

Abstract

Orientation: This article investigates the relationship between entrepreneurial activities and the business cycle for selected countries in Southern African Development Community (SADC).

Research purpose: The purpose of the study was to understand how business cycle affects the supply of small businesses in the selected SADC countries.

Motivation of the study: The regional block has been witnessing low economic growth patterns accompanied by high unemployment rates, poverty and inequality leading policymakers to start looking at small business supply as a possible solution.

Research design, approach and method: The article used panel data spanning from 2000 to 2016. It also used random and fixed-effects estimation techniques.

Main findings: The study found a negative relationship between entrepreneurial activities and business cycle. Interestingly, our findings did not show either a bidirectional or unidirectional relationship between the variables of interest although they maintained an expected sign relationship as per a prioriexpectations. The findings also showed a negative relationship between inequality and new entrepreneurial activities and the variable is significant at the 1% level.

Practical/managerial implications: The implications of this article are that governments in these selected SADC countries prioritise nurturing small businesses so that they can grow to significantly contribute to economic growth.

Contribution/value-add: The contribution of this study is in finding the nature of the relationship that exists between the business cycle and supply of small businesses in selected SADC countries.