Many policymakers and academics continue to champion the “entrepreneurial ecosystems” (EE) blueprint as a cure-all for Africa’s economic malaise, arguing that if only roads, finance, regulation and skills were better aligned, a wave of start-ups would propel the continent forward. Yet Africa already boasts the world’s highest incidence of own-account workers and necessity entrepreneurs—people who run micro-enterprises essentially because formal jobs are scarce. Before prescribing yet more entrepreneurship, it is worth asking whether encouraging still greater numbers of small start-ups can deliver broad-based prosperity, or whether a different development emphasis is required.

That question motivated a recent study led by Professor Alex Coad of the Waseda Business School in Japan. Working with Dr Clemens Domnick and Dr Pietro Santoleri of the European Commission’s Joint Research Centre and Assistant Professor Stjepan Srhoj of the University of Split, Croatia, Coad’s team interrogated the relevance of the EE paradigm for African economies. Their findings, released as an open-access article in The Journal of Technology Transfer on May 27, 2025, are freely available for anyone wishing to scrutinise the evidence firsthand. The authors explicitly set out to test whether the recommendations so often advanced by entrepreneurship scholars rest on solid empirical ground or merely on ideological conviction.

“We became uneasy,” Coad explains, “that a sizeable faction of the literature was advancing prescriptions for Africa that looked suspiciously like a one-size-fits-all dogma, untethered from the facts on the ground.” To probe the issue, the researchers placed EE next to two alternative, and historically successful, development templates: the state-led strategies that underpinned East Asia’s post-war miracle, and Schumpeterian growth theory, which relates policy choices to a nation’s technological positioning. In doing so, they uncovered striking divergences between what EE promotes and what has worked elsewhere.

East Asian economies, such as Taiwan and South Korea—followed by Singapore and, to some extent, Malaysia—have catapulted themselves from poverty to high-middle-income status within two generations by nurturing large, internationally competitive firms. The state offered targeted support, promoted technology transfer, and invited foreign direct investment (FDI) from multinational corporations willing to embed sophisticated production networks. Crucially, these countries oriented firms towards export markets, using global demand to achieve scale and drive learning. The EE playbook, by contrast, tends to celebrate micro-enterprise and self-employment, urges governments to refrain from “picking winners,” and emphasises local market dynamism over export discipline. Coad and colleagues do not argue that Africa can replicate East Asia line by line. Still, they do suggest that adapting its focus on scale, technological upgrading, and strategic state involvement would make far more sense than doubling down on atomised start-ups.

Schumpeterian growth theory, too, offers a cautionary note. It posits that the optimal mix of policies depends on how far a country lies from the global technological frontier. Followers can proliferate by absorbing existing know-how, whereas leaders must innovate at the cutting edge—a costlier, riskier proposition. By any yardstick, Sub-Saharan Africa sits among the world’s technological laggards. The region scores lowest on the Economic Complexity Index and, between 2020 and 2023, captured less than 1% of global venture capital flows. Under such conditions, an investment-led strategy—importing machinery, courting FDI, and building capabilities within sizable firms—ought to yield higher returns than an entrepreneurship-led strategy that scatters scarce resources across thousands of small, low-productivity ventures.

The empirical record supports that view. Africa is home to remarkably few large corporations, even relative to its level of income, and mid-sized firms are similarly scarce because the vast majority of enterprises remain informal and struggle to scale. Where big firms do operate, they anchor supply chains, boost export earnings and create wage jobs that micro-businesses rarely provide. Conversely, international data reveal a negative correlation between very high self-employment rates and GDP per head—a pattern economists attribute to the proliferation of subsistence businesses that neither innovate nor invest.

Taken together, these threads lead to a stark conclusion. As Coad summarises, “Africa occupies the bottom rung of the global development ladder despite topping the league table for entrepreneurial prevalence. Pouring yet more effort into fomenting start-ups risks worsening the congestion of low-productivity firms and diverting attention from the real bottleneck: the absence of large, efficient companies.” The authors therefore call for a pivot in policy discourse—from celebrating the sheer number of entrepreneurs to fostering the emergence and expansion of firms capable of achieving scale, upgrading technology and competing beyond their localities. Such a shift would entail improving infrastructure and human capital, yes, but also deploying patient industrial policy, leveraging FDI, and—where appropriate—allowing the state to nurture priority sectors rather than pretending all sectors hold equal promise.

In short, the continent’s greatest developmental need is not another wave of necessity entrepreneurs; it is the creation of robust, growth-oriented enterprises that can absorb labour, lift productivity and integrate Africa more firmly into the global economy. Encouraging fewer, but better-resourced and better-connected, firms may ultimately do more to transform living standards than continuing to idolise entrepreneurship for its own sake.

More information: Alex Coad et al, Does Africa need entrepreneurial ecosystems thinking? The Journal of Technology Transfer. DOI: 10.1007/s10961-025-10213-x

Journal information: The Journal of Technology Transfer Provided by Waseda University