Information technology in bottom of the pyramid (BOP) markets: impact on entrepreneurship rates in developing countries

Although 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 to date, there has been no macro-level cross-country study investigating the extent to which such market development at the BOP creates opportunities for entrepreneurship in developing countries. By bottom of the pyramid (BOP), reference is being made to the over 4 billion global poor with annual income of less than $3,000 largely residing in developing countries (World Resources Institute, 2007). Utilizing the BOP theory and the market spillover theory (Jaffe, 1996, 2005), this study sets forth and examines an original theoretical framework for the role of technology market development at the BOP in information and communications technology (ICT) sector in influencing entrepreneurship (new business formation rates) in developing countries; and the mediating role of ICT industry specialization in enhancing such spillovers. The study draws on cross-country data on BOP market for ICT from World Resources Institute and new business formation rates from World Bank. Controlling for several other factors that may affect new business formation in developing countries, the findings suggest a strong positive relationship between ICT technology market development at the BOP and new business formation rates in developing countries. Implications are drawn for theory and policy.