Do governance factors moderate the bidirectional relationship between entrepreneurship and unemployment in an oil-led emerging economy?

Purpose This study aims to investigate the relationship between entrepreneurship and unemployment in an oil-led emerging economy. Specifically, it examines whether political stability and government effectiveness moderate the bidirectional relationship between entrepreneurial activity and unemployment in Brunei’s emerging economy. Design/methodology/approach Using 34 years of data (1990–2023) from Brunei Darussalam, sourced from the World Bank’s WDI database, the authors use the generalised method of moments to analyse the data and uncover new empirical findings from an oil-led emerging economy. Findings The study shows that the effect of entrepreneurship on unemployment is partially supported, with self-employment and agricultural activities contributing to reducing unemployment, while fuel exports tend to increase it, consistent with the Schumpeter effect. In addition, a moderate effect of unemployment on self-employment can be observed, which partially supports the refugee effect. The moderating role of political stability and government effectiveness is significant and impacts both directions of influence between entrepreneurship and unemployment, highlighting the two moderating factors as key elements in shaping economic dynamics in oil-led emerging economies. Practical implications The findings suggest policymakers in oil-led economies can reduce unemployment by encouraging self-employment, diversifying industries beyond oil, strengthening governance structures and ensuring political stability. These strategies create a supportive environment for entrepreneurship, fostering sustainable job creation and economic resilience amid the challenges faced by oil-dependent economies. Originality/value This research makes a unique contribution by validating the relationship between entrepreneurship and unemployment within the Schumpeter and refugee effects while also examining the rarely studied moderating role of the influence of political stability and government effectiveness.