The Interactive Effect of Entrepreneurship and Financial Development on Economic Complexity

Economic complexity indicates the amount of productive knowledge within a country and the ability to use that knowledge to produce goods with more diversity and less ubiquity, which ultimately increases national competitiveness in the global arena and accelerates the process of achieving economic growth and development. Therefore, determining the factors affecting it - especially in developing countries - is of great importance. In this regard, the present study, by approaching panel data and using the generalized moment method, has determined the interactive effect of entrepreneurship and financial development on economic complexity in two groups of developing and developed selected countries during the period 2014-2019. Estimated results showed that the dimensions of entrepreneurship, including attitudes, abilities & aspirations of entrepreneurial, as well as financial development have a positive and significant effect on economic complexity in both groups of selected countries. However, the estimated coefficient of these variables is larger for developing countries. In addition, the three dimensions of entrepreneurship and financial development have a positive and significant interactive effect on economic complexity in both groups of selected countries. Finally, the effect of the control variables of natural resource abundance and intellectual property rights on economic complexity in both groups of selected countries respectively are negative and significant and positive and significant.