INSTITUTIONAL DIMENSIONS AND ALLOCATION OF ENTREPRENEURIAL TALENTS TOWARD INNOVATIVE ACTIVITY IN NIGERIA

Abstract

This study explores how certain institutional dimensions influence entrepreneurial allocations in Nigeria and its sectorial heterogeneity. We apply unconditional fixed-effect Tobit regression estimators on a combined dataset extracted from various sources over the period 2011-2015. Our findings suggest that property rights and oil rents strongly encourage young entrepreneurs to be innovative, while a number of business procedures and the rule of law discourage them from being innovative. The findings suggest that some of the institutions are complementary to one another in improving entrepreneurial innovativeness. Interactions between them are positive and significant. Sectorial results reveal that property rights, government effectiveness and oil rents significantly enhance entrepreneurial innovativeness, whereas government size reduces innovativeness among young entrepreneurs in the manufacturing sector. In the IT sector, property rights, control of corruption, regulatory quality and government effectiveness increase entrepreneurial innovativeness. Government size, business procedures and the rule of law reduce innovativeness. Overall, the institutions appear to have stronger and bigger effects in the IT sector than they do in the manufacturing sector. Policy implications include the need for institutional reforms targeting productive entrepreneurship to focus more on making business regulation and procedures more competition-friendly and less cumbersome and strengthening the quality of anti-graft and property right institutions.