SUMMARY
The role of innovation in economic development has long been a topic of discussion among economists. Despite that, the economic pay-off mechanisms which support or hinder innovative entrepreneurial acts, particularly in the emerging economy context are significantly underexplored in academic studies. In this study, we aim to fill this important gap in the literature by taking Baumol’s contestable markets theory and the typology of productive and unproductive entrepreneurship. As Baumol has advocated, the economies that offer higher pay-offs to productive entrepreneurial acts are more likely to thrive mainly due to the increased capacity of economic growth, while developing and poor economies struggle. In this study, we posit that in the developing and emerging market contexts, formal policies are claimed to prioritize the production of more innovative and productive start-ups and a climate that supports and fosters productive entrepreneurial acts. Despite that, there are still major administrative, social and cultural barriers towards creation of innovative start-ups and a productive entrepreneurship ecosystem. Here, continuing political, economic and social support towards unproductive entrepreneurship acts, in particular real-estate entrepreneurship emerges as one of the main factors that hinder the flow of funds towards innovation and technology. We thus argue that, being unable to balance the role of these unproductive entrepreneurial acts with productive ones in economy significantly deteriorates the sustainable economic growth and a high standard of living in emerging and developing economy contexts. In the implications section, several precautions and support mechanisms for overcoming the barriers towards productive entrepreneurship are presented and discussed.