1. Introduction
Entrepreneurship has become important for fostering job creation, innovation flourishing, and economic growth, and studies have covered the topic extensively [
1]; in other words, entrepreneurship is the economic growth engine for countries [
2]. Entrepreneurship has also been recognized as the main factor for the sustainable development of nations; entrepreneurship is an arduous path only chosen by those who have a high level of risk taking. On this path, entrepreneurship requires an entrepreneurial ecosystem that welcomes this type of thinking and eliminates the barriers on the path as much as possible [
3]. Entrepreneurial ecosystems (EEs) are communities consisting of many independent actors that can play a key role in the development and level of entrepreneurial activity for a given geography [
4]. Some studies have focused on understanding the EE determinants of entrepreneurial activities in different socioeconomic contexts [
4,
5,
6]. In these studies, Government Policy, R&D Transfer, Commercial and Professional Infrastructure, Physical Infrastructure, and Cultural and Social Norms are constantly highlighted as the main EEs’ determinants of entrepreneurial activity. However, there are two regions that are particularly less explored in the EEs’ literature addressing this topic: the Middle East and Latin America.
Research papers on entrepreneurship in the Middle East region demonstrate increasing interest in this area of study, with the potential to stimulate and propel future economic development and growth [
1]. Within the Middle East region, the states (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) of the Gulf Cooperation Council (GCC) have experienced significant developmental and economic advancement since the discovery of oil in the 1950s [
7], and these states share common attributes with the rest of the Middle Eastern countries, such as population demographics, religion, culture, type of government, etc. In Latin America, research on entrepreneurial ecosystems is constrained and typically relies on reports of best practices, policy summaries, and position papers issued by international organizations [
8,
9,
10,
11,
12]. Both regions are composed of developing countries with emerging economies. Studying and comparing these regions becomes relevant because conducting research on emerging economies helps to fill the gap in the literature about this regional level of analysis [
13].
Researchers of EEs consider that some regions require a higher level of analysis and measures given that EEs are a spatial concept [
3,
14,
15]. Additionally, the EEs literature has been criticized for its poor clarity concerning the level of analysis [
16], but more recently, the trend shows an emerging interest in studies conducted at the regional levels [
11,
17,
18,
19,
20,
21,
22], as well as at the city levels [
23,
24,
25,
26]. Sternberg et al. [
27] argued that studying EEs at the sub-national (meso) level of regions is the most appropriate spatial level to identify and measure EEs, as the evidence in the literature favors entrepreneurship as being primarily a regional (or local) event. While Villegas-Mateos [
11] argued that analyzing EEs by cities can be an impossible task in terms of research budget and time, hence, he studied regions in Latin America. Particularly for this research article, the authors followed the regional approach, aiming to contribute to advancing the understanding of EEs’ determinants of entrepreneurial activities, Latin American development [
28], the evolution and future perspectives of the Middle East [
29], and studying Asian entrepreneurial ecosystems and giving a multiscalar perspective [
30].
To address this issue, the paper is structured in four parts: (1) a literature review on entrepreneurial ecosystems and the determinants of entrepreneurship in the Middle East and Latin America; (2) a detailed description of the methodology employed for the data collection and statistical analysis; (3) the results and discussion of the findings; and (4) a conclusion that includes the study contributions, research limitations, and future research guidelines.
Finally, the purpose of this study is to understand the variables that impact early stage entrepreneurial activity in the Latin American and Middle Eastern entrepreneurial ecosystems. The main findings indicate that in Latin America, the most significant variable that positively impacts early stage entrepreneurial activity is “Physical Infrastructure”, while in the Middle East, the most significant positive determinants are “Commercial and Professional Infrastructure” and “Entrepreneurship Culture”. This study shows that to support entrepreneurial activities, each region requires different settings for their entrepreneurial ecosystems.
4. Method
The study is based on data obtained from the Global Entrepreneurship Monitor (GEM) from the National Experts Survey (NES) and the Adult Population Survey (APS) collected between 2015 and 2018. The effects of the COVID-19 pandemic that started in 2019 and ended in 2023 might bias the statistical measures due to inconsistencies in the data collection and other crisis management situations, so they were not included in the analysis. “The NES questionnaire is used to collect the views of experts on a wide range of items, each of which was designed to capture a different dimension of the entrepreneurial framework conditions”, and the GEM APS is a unique instrument used to measure the level and nature of entrepreneurial activity around the world” [
91]. The NES and APS databases were grouped into two regions: (1) Latin America, including Argentina, Brazil, Chile, Colombia, Guatemala, Mexico, Panama, Peru, Puerto Rico, and Uruguay; and (2) the Middle East, including Egypt, Iran, Israel, Lebanon, Morocco, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates. The sample sizes were balanced with 378 observations from Latin America and 372 from the Middle East, and average of 37 respondents per country. The 10 countries for Latin America and 10 for the Middle East were chosen because they are the most representative and their information was available.
The data analysis was conducted through a variance-based structural equations model and the specific technique of partial least squares (PLS-SEM) with the software SmartPLS version 3.0. The PLS-SEM technique was chosen because it is a second-generation statistical tool applied in empirical research in the social sciences, using unobservable variables measured indirectly by indicator variables. It is also a causal modeling technique that estimates path coefficients, helping to answer how the latent variables are related to each other by testing the hypotheses previously defined [
92]. This structural equation technique will finally indicate the path coefficients that show direct causal relationships. This technique is superior to correlation coefficients, for example, which do not indicate a causal relationship. Therefore, it is the best method to accomplish the objective of this study: exploring the relationships of variables to explain certain effects, in this case, the relationships of the EEs’ conditions that are determinants of the total early stage activity (see
Figure 1). The PLS-SEM was conducted twice with the same variables, once for each regional sample.
Measurement of the Study Variables
The measurement of each variable was created by the Global Entrepreneurship Monitor [
91].
Government Programs: This condition was measured with six items on a nine-point Likert scale comprising the following statements: (a) In my country, a wide range of government assistance for new and growing firms can be obtained through contact with a single agency; (b) In my country, science parks and business incubators provide effective support for new and growing firms; (c) In my country, there is an adequate number of government programs for new and growing businesses; (d) In my country, the people working for government agencies are competent and effective in supporting new and growing firms; (e) In my country, almost anyone who needs help from a government program for a new or growing business can find what they need; (f) In my country, government programs aimed at supporting new and growing firms are effective.
Research and Development Transfer: This condition was measured with six items on a nine-point Likert scale comprising the following statements: (a) In my country, new technology, science, and other knowledge are efficiently transferred from universities and public research centers to new and growing firms; (b) In my country, new and growing firms have just as much access to new research and technology as large, established firms; (c) In my country, new and growing firms can afford the latest technology; (d) In my country, there are adequate government subsidies for new and growing firms to acquire new technology; (e) In my country, the science and technology base efficiently supports the creation of world-class new technology-based ventures in at least one area; (f) In my country, there is good support available for engineers and scientists to have their ideas commercialized through new and growing firms.
Commercial and Professional Infrastructure: This condition was measured with five items in a nine-point Likert scale comprising the following statements: (a) In my country, there are enough subcontractors, suppliers, and consultants to support new and growing firms; (b) In my country, new and growing firms can afford the cost of using subcontractors, suppliers, and consultants; (c) In my country, it is easy for new and growing firms to find good subcontractors, suppliers, and consultants; (d) In my country, it is easy for new and growing firms to find good, professional legal and accounting services; (e) In my country, it is easy for new and growing firms to get good banking services (checking accounts, foreign exchange transactions, letters of credit, and the like).
Physical Infrastructure: This condition was measured with five items on a nine-point Likert scale comprising the following statements: (a) In my country, the physical infrastructure (roads, utilities, communications, waste disposal) provides good support for new and growing firms; (b) In my country, it is not too expensive for a new or growing firm to obtain good access to communications (phone, Internet, etc.); (c) In my country, a new or growing firm can obtain good access to communications (telephone, internet, etc.) in about a week; (d) In my country, new and growing firms can afford the cost of basic utilities (gas, water, electricity, sewer); (e) In my country, new or growing firms can obtain good access to utilities (gas, water, electricity, sewer) in about a month.
Entrepreneurship Culture: This condition was measured with five items on a nine-point Likert scale comprising the next statements: (a) In my country, the national culture is highly supportive of individual success achieved through one’s own personal efforts; (b) In my country, the national culture emphasizes self-sufficiency, autonomy, and personal initiative; (c) In my country, the national culture encourages entrepreneurial risk-taking; (d) In my country, the national culture encourages creativity and innovativeness; (e) In my country, the national culture emphasizes the responsibility that the individual (rather than the collective) has in managing his or her own life.
Total Early Stage Entrepreneurial Activity (TEA): measured by the percentage of the 18–64 population in a country who are either a nascent entrepreneur or owner-manager of a new business.
7. Conclusions
The Middle East region has elements that foster entrepreneurial activity: entrepreneurship culture and commercial and professional infrastructure. On the other hand, one of the interesting findings is that physical infrastructure negatively influences entrepreneurial activity. Amorós [
100] indicates that it is important to highlight that in reality, not all regions in a country have the same level of physical infrastructure, especially in peripheral zones where the physical infrastructure is poor; that could be the reason for this result. The zones with low physical infrastructure could have higher motivation to create wealth and the benefits that come from creating new firms. What is interesting is that this region has been investing heavily in physical infrastructure by reinvesting their oil and gas revenues for the last 20 to 30 years. However, the results are showing that more than that, entrepreneurial culture and commercial and professional infrastructure are more important.
Government programs do not impact entrepreneurial activity. The reasons could be that governments do not design public policies and programs with a customer-centric view [
52]. Research and development transfer lacks impact on entrepreneurial activity. We highlight that most of the time, the duty of research and development transfer is the responsibility of the government or public and private universities, although the main objective of these institutions is not to foster R&D transfer; that could be one of the reasons why this activity lacks impact. We propose that more R&D NGOs should be involved in a key activity that could generate more benefits for the region. These R&D NGOs will be more focused on the main purpose of linking technology and knowledge to the market, working together with government and universities. Another reason is that research and development transfer requires highly skilled talent. Some studies conducted in the Middle East found that there exists low technology absorption, poor systems that enable digital payments, and technology and knowledge transfer is limited by complex policies [
43,
46,
47]. Then, for example, the highly skilled talent to develop R&D activities will be experts on technology that enables digital payments. Other types of talent are necessary, such as those with commercial and negotiation skills. If R&D NGOs create this workforce, R&D transfer will be more successful.
In the Latin American region, the element that fosters entrepreneurial activity is physical infrastructure, which highlights the benefits of investing in this element to foster entrepreneurship. On the other hand, government programs in this region are discouraging entrepreneurial activities. Some of the reasons for this could be the levels of necessity entrepreneurs and poverty in this region, which create a cognitive disadvantage for entrepreneurs. Policymakers need to create policies with a more inclusive perspective on poor entrepreneurs and their diversity; we suggest more customer-centric government programs.
Research and development transfer does not impact entrepreneurial activity. We state that this region needs to strengthen this capacity and not only rely on the efforts that government and universities make; the main objective of these institutions is not to foster R&D transfer, which could be one of the reasons why this activity lacks impact. The R&D NGOs could work to create more projects that accomplish the transfer of knowledge and research. These NGOs will train the highly skilled talent that this type of activity needs; then technology, commercial, and negotiation talent will be serving universities, government, and entrepreneurs. These actions from R&D NGOs could help with the barriers to R&D in this region: unstable legislation, limited access to capital funding, and high levels of informal entrepreneurs [
53,
55,
76]. Commercial and professional infrastructure does not affect entrepreneurial activity; this indicates that Latin America has barriers to accessing this type of infrastructure. Strengthening the link between professionals who could help entrepreneurs with the challenges they are facing is important. We suggest that part of the entrepreneurship culture that must be developed in this region is a supportive entrepreneurship culture to foster professionals to work pro bono for entrepreneurs in adversity conditions and promote entrepreneurs asking for help.
Finally, entrepreneurship culture does not influence entrepreneurial activity in this region. Fostering a positive attitude toward entrepreneurship in society is not enough if you are in a region with adversity, a poor and scarce environment, and low social capital; a tailored entrepreneurship culture is needed to foster entrepreneurial activity. We recommend first to promote a supportive entrepreneurship culture, where part of that supportive entrepreneurship culture is to promote the change in mindset of necessity entrepreneurs through education and mentorship, and also promote the support of opportunity entrepreneurs to work with necessity entrepreneurs in this mindset change process. Entrepreneurship culture takes time, but it is not enough because if you only work on it, it could create entrepreneurship heterotopias that do not solve the root cause of the entrepreneurship disadvantage mindset problem.
7.1. Managerial Implications
For international entrepreneurs who want to have a general vision of these two regions, the findings of this study are relevant. The Middle East fosters entrepreneurship activities due to their commercial and professional infrastructure and entrepreneurship culture. In Latin America, entrepreneurial activity is fostered by physical infrastructure. That gives entrepreneurs some context of the elements that are positively affecting entrepreneurial activity in the early stages. The elements that discourage entrepreneurial activity are physical infrastructure in the Middle East and government programs in Latin America. Perhaps there exists a negative effect of physical infrastructure in the Middle East that could be because zones with less physical infrastructure have a higher motivation to create businesses that generate the wealth to create the required physical infrastructure in these zones, and zones with more physical infrastructure do not have the motivation to create more wealth. In Latin America, the negative effects of government programs are due to the diversity of entrepreneurs and the high levels of poverty and necessity entrepreneurs, which encourages policymakers to create more inclusive entrepreneurship policies that include this diversity and, most importantly, a poverty policy perspective. This overview can give international entrepreneurs the characteristics of these regions to make better decisions.
For policymakers, it is important to highlight the elements that still need to be worked on. In the Middle East region, government programs need to be developed with a customer-centric view, meaning to put the entrepreneurs at the center and develop the capacity to respond to short-term issues and work on long-term issues. They also need to reinforce research and development transfer, which could be boosted and supported by R&D NGOs that could be more effective in charge of this type of activity.
The Latin American region needs to strengthen government programs, research and development transfer, commercial and professional infrastructure, and entrepreneurship culture. Especially important are programs to strengthen the link between professionals who could help entrepreneurs with the challenges they are facing. We suggest that part of the entrepreneurship culture that must be developed in this region is a supportive entrepreneurship culture to foster professionals to work pro bono for entrepreneurs in adversity conditions and promote entrepreneurs asking for help. Also needed is an entrepreneurship culture based on promoting the change in mindset of necessity entrepreneurs. Specialized education with a diversity and necessity entrepreneurs’ perspective is necessary for this region. R&D NGOs that help to develop the highly skilled talent needed to foster collaborations between universities, government, and entrepreneurs are also needed. These strategies contribute to actions to be taken in an integrative form. The countries in this region could join efforts to create a supportive entrepreneurship culture based on the transfer of knowledge, technology, and the creation of specialized skills, but above all, an inclusive form of diversity and necessarily the entrepreneurs’ perspective.
Finally, Latin America could learn from the Middle East region about how to create an entrepreneurial culture and how to develop commercial and professional infrastructure. The interaction of these two regions could complement and create better opportunities for entrepreneurs. In addition, for business incubation program managers, these findings can help allocate resources that can aim to fill out the gaps in their local entrepreneurial ecosystems to trigger productive entrepreneurial activities. For example, targeting mindset and culture in an ideation program before moving toward business registration, product launch, and use of physical infrastructure.
7.2. Limitations
The limitation of this study is the general view of the variables because the perceptions of experts from each region and country depend on the efforts of the GEM national teams. At the same time, each region is characterized by different prominent sociodemographic factors like Islam and monarchies in the Middle East, and Catholicism and democracies in Latin America, which this study did not take into consideration to measure the direct effect. A future study in this area can include the evaluation of public policies supporting the creation of new businesses or the effects of culture and religion on the motivations of entrepreneurs in these regions.