Investigating Critical Resource Determinants of Start-ups: An Empirical Analysis of the MENA Region
Purpose: By drawing upon the resource-based view theory, this study investigates the critical resource determinants of start-up companies in the Middle East and North Africa (MENA) region. Design/methodology/approach: A quantitative approach based on multiple linear regression analysis was used. Three sets of data were employed. Firstly, the study used the World Bank’s Doing Business Report which investigated the ease of starting businesses, access to electricity and access to credit across the 23 MENA countries. Secondly, the study also used the human capital index from the Global Entrepreneurship Index as one of the predictor variables of start-ups. Finally, three specific data sets - namely population, Foreign Direct Investment (FDI) and Gross Domestic Product - of the 23 MENA countries were used as control variables. Findings: The results of this study indicate that two critical resources, namely electricity and credit, have contributed to the formation of start-ups in the MENA region. However, the current level of human capital in the region does not support entrepreneurial activity, hence its inability to support entrepreneurs in the venture creation process. There is a need to augment entrepreneurship education across the region, as well as the provision of entrepreneurial skill development to current and potential entrepreneurs. Research limitations/implications: Firstly, the study depended heavily on secondary data to examine the determinants of startups in the MENA region. Even though the sources of these data are credible, it is impossible to determine any anomalies in their aggregation. Secondly, the model used in this study is parsimonious in the sense that many more predictor variables could have been explored in understanding the determinants of start-ups in the region. Future research could therefore investigate other factors, such as technology, property rights, the legal system and other important factors in the entrepreneurial ecosystem of the MENA region. Originality/value: Start-ups are a major source of new employment in a country. However, it is essential to understand the various factors which foster their survival and growth. Even though similar studies have been conducted in various settings, this is one of the few studies which has conducted an empirical investigation into the resource determinants of start-ups in the MENA region.