Entrepreneurship and bottom of the pyramid (BOP) markets: the mediating role of human capital in a developing country

Although it has been speculated for some time that rural-urban migration is transforming cities in developing countries into large local markets that should be targeted by innovative entrepreneurial firms, to date, little is known about the factors that may enhance the ‟venturesomeness” of the urban poor i.e. capacity of the urban poor to recognize the value of and use new innovations and therefore be a viable market for entrepreneurial firms. Utilizing the institutional theory, bottom of the pyramid (BOP) theory and venturesome economy theory, this study sets forth and tests an original theoretical framework for the mediating role of regional human capital in enhancing the capacity of the urban poor to embrace innovations and therefore serve as attractive market for entrepreneurial firms in developing country. Based on multiple regression analysis at the regional level in Nigeria, the paper rigorously tested the influence of regional human capital in influencing urban and rural poor venturesomeness and attractiveness to entrepreneurial firms. We found that although there is a positive relationship between venturesomeness of both urban and rural poor and the geographic location of entrepreneurial firms in developing country, this relationship is mediated by regional human capital. Further, significant positive relationships were also found between venturesomeness of rural poor and the location of entrepreneurial firms, suggesting that rural poor are also an important market for entrepreneurial firms. Implications are drawn for theory, practice and policy.