Entrepreneurship and innovation in a hybrid political order: The case of Lebanon

Governance is often treated as a 'black box' explanation for unproductive or destructive entrepreneurship. In order to improve our understanding of how governance structures influence entrepreneurship and innovation it is instructive to consider how entrepreneurs function in so-called hybrid political orders. Lebanon is such a hybrid political order in which a dual game of informal clientelism and formal programmatic competition shapes entrepreneurship.

In this paper I provide an exploratory overview of the governance-entrepreneurship nexus in Lebanon. It is argued that although Lebanese entrepreneurial attitudes appear to be very positive, entrepreneurial activity seems to be adversely impacted by governance challenges and entrepreneurial aspiration is severely underdeveloped.

In-depth interviews with Lebanese experts show that Lebanese entrepreneurs still face significant obstacles, often related to the political context and system. These include: the high costs of utilities and infrastructure; poor government support and a lack of political vision for the economy; and instability and unpredictability related to violent conflict that make investment and planning difficult and foster a short-term, migration-focused mentality.

Lebanese entrepreneurs respond to these challenges by operating as independent from government as they can; taking a regional perspective; and diversifying. The challenging context, moreover, also offers particular assets and opportunities to entrepreneurs, such as a vibrant diaspora and a supposedly resilient business mentality.

Keywords; Lebanon; governance; conflict; fragility; entrepreneurship; innovation; business

JEL Classification numbers: L26, M48, O17, O53