Beyond the Borders: An Empirical Exploration of Trade Openness and Entrepreneurial Activities: Does Financial Development Plays Moderating Effect

Abstract

Opening trade horizon is pivotal to instigating entrepreneurial activities in this modern era of technological advancement. Trade openness fosters an atmosphere that allows entrepreneurs to thrive, innovate, and maintain long-term viability through the exchange of products and technologies. The study explores the effect of trading beyond the borders for entrepreneurial activities. The estimation techniques used for this research are OLS, Fixed-Effects (FE) and a two-step system GMM. The study uses unbalanced panel data collected on a yearly basis across the nations for the period of 23 years starting from 1999 to 2022. Results obtained from the entire sample indicate that trade openness consistently produced positive and significant effects on entrepreneurial activities and prompted new business density. The results are also robust with total early-stage entrepreneurial activities as a dependent variable. The baseline results obtained from the GMM demonstrate that if there is one unit change in trade openness, it will bring an 88.2% change in the dependent variable to promote entrepreneurial activities. The results also indicate that financial development moderates proposed relationship of trade openness and entrepreneurial activities positively and significantly. Entrepreneurs can take advantage of possibilities, efficiently utilize resources, and make significant contributions on a larger scale for economic development just because of the connection of economies globally. The study guides the policymakers to provide trading opportunities to entrepreneurs across international borders at the global scale.