Technology in impoverished markets and new business formation rates : Spatial analysis of developing countries

Purpose – While it has been speculated for some time that technology market development at the bottom of the pyramid (BOP) will create millions of new entrepreneurs in developing countries, as the BOP is the largest untapped market, to date, there is hardly any macro‐level cross‐country study investigating the extent to which such market development at the BOP influences new business formation “rates” in developing countries. The purpose of this paper is to examine the role of technology market development at the BOP in the information and communications technology (ICT) sector in influencing new business formation rates in developing countries. Design/methodology/approach – The study draws on cross‐country data from developing countries from World Resources Institute and the World Bank. Several steps were taken to ensure robustness. Findings – First, a connection is established between a developing country's level BOP market for ICT and the county's “rate” of new business formation. Second, it is suggested that the level of industry specialization in a developing country enhances the relationship between BOP markets for ICT and new business formation in a developing country. Third, the empirical analysis is based upon a rigorously‐collected authoritative multi‐country data from World Bank that answers the concern voiced by researchers. Fourth, the results suggest that the established link between ICT and economic growth in developing countries may be occurring through “new business formation” acting as a mediator between the two. Research limitations/implications – Implications are drawn for policy and further research. Originality/value – The study establishes a macro‐level connection between a developing country's level of BOP market for ICT and its “rate” of new business formation.