2.

1 ENTREPRENEURSHIP
Entrepreneurship has become one of the most widespread topics; however, the most pressing
task is still to define it. Most people have only an imprecise idea of what is meant by
entrepreneurship, although it is a concept that has a wide range of meanings (Bokhari et al.,
2005). Entrepreneurship is the process of designing, launching, and running a new business,
which is often initially a small business. Also, entrepreneurship has been described as the
"capacity and willingness to develop, organize, and manage a business venture along with any of
its risks in order to make a profit"(Diriye et al., 2018, p17). According to Encyclopedia.Com,
(n.d.) "entrepreneurship is the practice of forming a new business or commercial enterprise,
usually in an industry or sector of the economy with a large capacity for growth”. In this study
we will take the definition of encyclopedia.
In the academic literature, a dominant definition views entrepreneurship as the process of
pursuing opportunities and mobilizing resources needed to bring new ventures to reality.
According to economic historian Fritz Redlich, entrepreneurship first emerged in the sixteenth
century, when German military officers regularly recruited mercenaries for armed expeditions
throughout Europe. In Redlich’s view, these recruiters exhibited many of the qualities of the
modern business entrepreneur, demonstrating a willingness to take great risks in traveling into
hostile territories and embarking on dangerous military campaigns (Redlich, 1979).
Thus, entrepreneurs are seen as individuals who create new or explore existing market
opportunities and pursue their goals while bearing personal, professional and financial risk
(Musa et al., n.d.). According to Encyclopedia.Com, (n.d.) the word entrepreneur was first
introduced by the Franco-Irish economist Richard Cantillon, who coined the term in his
landmark work Essay on the Nature of Commerce in General. Although Cantillon wrote the
book just before his death in 1734, it was not published until 1755. In the early nineteenth
century French political economist, Jean-Baptiste Say was among the first to argue that the
entrepreneur played an indispensable role in promoting economic growth
2.2 UNEMPLOYMENT REDUCTION
Unemployment is a macroeconomic problem that touches societies all over the World.
According to the international labour organization (2015) defines the unemployed as the number
of all economically active population who are without work but are available for and are seeking
work, including those who have lost their jobs and those who have voluntarily left work.
Unemployment reduction is one of the key indicators of the economy. Preventing mass
unemployment has universally considered primary goal. Why is it the primary goal? As
mentioned in the introduction, it is because employment indeed has great influences on both
economic and social development ( Diriye1, 2018). Unemployment in Somalia comes from
different causes. In general, can be manifested in to these couses:
2.2.1 LACK OF ENTREPRENEUR SKILLS
Unfortunately, our educational system encourages young people to accept and mold the facts and
to indulge themselves in compensation after completing their education, which has prompted less
development of entrepreneurial characteristics and increased widespread unemployment in
Somalia. (Ali Asad et al., 2014)
2.2.2 HIGH INFLATION RATE
Highly important and negative sign of inflation rate shows that there are enormous growth costs
related with inflation, an confirmation supporting the findings by High inflation in somalia may
increase the cost and risk of productive capital and may lead to misallocation of funds as argued
by Paul et al.. Inflationary finance may also be hence welfare and growth reducing.
the Somali shilling had suffered from large and continuous devaluationsThese devaluations, in
turn, added to the inflationary force, battered the purchasing power of money and caused a
chaotic financial situation that, according to many observers, was the important factor
contributing on unemployment in Somalia (Malin, 2016)
UNIT OF ANALYZE OF THIS STUDY
Unemployment people in Somalia
2.3 THEORETICAL REVIEW
2.3.1 SCHUMPETER AND REFUGEE EFFECTS

There are two different Psychological theories regarding the relationship between unemployment
and entrepreneurship these are called Schumpeter and Refugee effects. Schumpeter effect
describes negative relationship between unemployment and entrepreneurship, while Refugee
effect explains the positive relationship between unemployment and entrepreneurship (Ali Asad
et al., 2014)
Positive relationship occurs when rate of unemployment increases the number of new
enterprises or rate of entrepreneurship also increases in the economy and generates
employment. This relationship is called The Refugee Effect. When new firms are introduced or
established in the society then its needed employees work for them, and this ultimately becomes
the reason of reduction in unemployment. Negative relationship occurs when number of
entrepreneurships is increased in the economy the unemployment rate is decreased. This effect
is called Schumpeter effect (Oladele et al., 2011)
2.4 EMPIRICAL REVIEW
Previous studies have written on this topic about the role of entrepreneurship in unemployment
reduction, presenting different perspectives and results. Include Rita Remeikiene and Grazina
Startiene studied in 2019 and investigated whether the interaction between entrepreneurship and
unemployment exists. The aim of this article is to determine the interaction between
entrepreneurship and unemployment in Lithuania by using the cross-correlation method. The
analysis encompasses historical data from 1998–2007. The interdependence between three
indications of entrepreneurship level and eight comparison economic indicators is assessed using
a lag of 4 years. the results of which show that this relationship exists (Remeikiene & Startiene,
2019)

Another study supports this study that was conducted in 2012 by Mohammad Hasan Kheiravar
and Mohammad Hasan Qazvini, who investigated the relationship between entrepreneurship and
unemployment rate in the industrial sector of Azerbaijan-e-Shargi. The objective of this study is
to resolve and clarify the dubious relationship between entrepreneurship and unemployment in
industry (establishing new industrial firms) in Azerbaijan-e-Shargi province. Using descriptive
statistics associated with the number of licenses issued each year to create and launch new
manufacturing businesses (entrepreneurship), as well as the province's unemployment rate over
the last ten years, The findings indicated that, there is an inverse relationship existed between
entrepreneurship and the unemployment rate (Hasan Kheiravar & Hasan Qazvini, 2012)

In Africa, there is also another study supports this study that was conducted by Kenechukwu
Ephraim and Ogana Michael in 2014. They were investigating the influence of entrepreneurship
development on unemployment reduction in Nigeria (2009–2013). The objective of their study
was to examine the relationship between entrepreneurship development and unemployment
reduction in Nigeria using a literature review that analyzed existing research on the relationship
between entrepreneurship development and unemployment reduction in Nigeria. The authors use
a qualitative approach to synthesize and interpret the findings of previous studies, rather than
collecting new data themselves. They found that unemployment reduction and entrepreneurship
are related. One potential gap in the study is that it relies solely on a literature review of existing
research rather than collecting new data (Udeorah et al.,2014)

However, there was another study conducted by Abla Abdul Hameed Bokhari in 2012 that
investigated entrepreneurship as a solution to youth unemployment in the Kingdom of Saudi
Arabia and the main objective of the study is to investigate the effect of entrepreneurial activities
on the rate of unemployment in Saudi Arabia, with a focus on youth unemployment. The author
explores the potential of entrepreneurship to create self-employment opportunities for Saudi
youth. The author may have used a combination of literature reviews, data analysis, and case
studies to support their argument. However, the results generally validate the literature's findings.
It displays evidence signifying that the relationship between unemployment and entrepreneurship
is shrouded in ambiguity. Finally, the weakness of this study is that there are considerable
ambiguities, confusion, and disagreement among researchers when it comes to reviewing the
literature on entrepreneurship and unemployment (Bokhari et al., 2005)

In another study conducted by Abigail Padi and Alhassan Musah in 2022, they investigate
entrepreneurship as a potential solution to high unemployment: a systematic review of growing
research and lessons for Ghana. The study sought to specifically identify whether
entrepreneurship alone is sufficient to achieve unemployment reduction or whether it must be
used in tandem with other approaches and the necessary conditions for entrepreneurship as an
unemployment reducer. The systematic literature review (SLR) method was adopted to conduct a
systematic review. The results show that unemployment reduction through entrepreneurship is
not instantaneous and thus requires a minimum of five years to be evident (Abigail and
Alhassan, 2022)

In Somalia, there are many studies on this topic, the last of which was a study published in a
Somali journal by Diriye et al.( 2018) in which they investigate the topic of entrepreneurship as a
solution to unemployment: an investigation of Mogadishu graduate students while they are using
an entrepreneurial questionnaire. And the result shows there is a positive relationship between
entrepreneurship and unemployment. However, there have been no investigations on this topic in
the last five years. However, there is still a need to know the relationship between
entrepreneurship and unemployment in Somalia.

1.5 CONCEPTUAL FRAMEWORK

Independent variable (IV) dependent variable (DV)

Entrepreneur skills

High inflation rate Unemployment Reduction

Interclan conflict

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