Page 63 - Azerbaijan State University of Economics

Swaty Sharma, Munish Gupta: Does the Rise of Emerging Technologies Transform Digital
Entrepreneurial Activity? Evidence from OECD Nations

increase in GDP is a cause and effect of entrepreneurship, and that this creates a
feedback loop between innovation and productivity. Research on OECD nations by
Fritsch and Wyrwich (2017) demonstrates that when GDP per capita is high, it is
easier to achieve higher rates of opportunity-based entrepreneurship than necessity-
based entrepreneurship, and digital startups follow this pattern. On the same note,
Wennekers et al. (2010) state that national income levels play an essential role in the
long-term survival of entrepreneurial ecosystems.

Thus, GDP is a versatile facilitator of digital entrepreneurship, providing market
demand, institutional support, and an innovation infrastructure.

Hypothesis 3: GDP positively influences digital entrepreneurship in OECD countries.

2.4 Financial Risk and Digital Entrepreneurship
Financial instability raises the cost of capital and increases uncertainty, which
negatively impacts entrepreneurial ventures. Investment and innovation are scared of
high financial risk environments (Afawubo & Noglo, 2022).

Research by Bhimani et al. (2019) also shows that investors' perceptions of risk,
particularly during volatile financial cycles, dim the growth of digital start-ups and
cross-border investment. Under these circumstances, tech entrepreneurs at the initial
stage will have lower chances of securing funding or partnerships, which will directly
affect TEN. This is a factor that determines the success of digital entrepreneurs.
Perceiving a lesser risk and enhanced access to financial instruments enhance
entrepreneurial engagement (Satalkina & Steiner, 2020; Ancillo, 2022).

Besides, empirical analysis across OECD and emerging economies shows that countries
with well-established fiscal policies and investor protections are better suited to digital
start-ups (Wennekers et al., 2010). Financial risk, hence, is not only an obstacle but a
determining factor on whether the digital entrepreneurship ecosystem thrives.

Hypothesis 4: Financial risk negatively influences digital entrepreneurship in OECD
countries.

2.5 Established Businesses and Digital Entrepreneurship
Established businesses within a given ecosystem lead to ecosystem development,
mentorship, and network effects. The businesses establish infrastructure and market
maturity that is friendly to start-ups (Plecko et al., 2023). Moreover, start-ups can target
established companies as acquisition targets or as potential partners, thereby enabling
them to scale more easily and gain access to resources (Zahra et al., 2023; Gonzalez-
Calatayud et al., 2022). These relationship advantages contribute indirectly towards the
occurrence of early-stage technology enterprises, summed up by TEN indicators.

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