Can AI technology innovation promote national entrepreneurship development? Exploring the role of financial development

Abstract Artificial intelligence (AI) is reshaping entrepreneurship by enhancing innovation, streamlining operations, and creating new business opportunities; however, its impact varies across levels of financial development and economic contexts. Using dynamic fixed-effects and dynamic panel threshold regression techniques on a panel of 23 developed and developing countries from 2002 to 2023, this study examines how AI technology innovation affects entrepreneurship. Specifically, the dynamic fixed-effects model controls for unobserved heterogeneity and persistence in entrepreneurship, while the dynamic panel threshold approach identifies critical financial development regimes that condition AI’s impact. The findings show that AI promotes entrepreneurship by fostering innovation and efficiency, while capital formation, human development, and financial development also play essential roles in driving entrepreneurial growth. The analysis further identifies a positive moderating effect of financial development on the AI-entrepreneurship nexus, suggesting complementarities between technological innovation and financial systems. Threshold results reveal that AI significantly stimulates entrepreneurship only in financially advanced environments, where robust financial institutions and capital investment unlock its transformative potential. The findings suggest that governments should create an enabling environment that aligns AI innovation with inclusive financial systems to stimulate entrepreneurship. Policy implications emphasize on strengthening support for entrepreneurship, enhancing research and development incentives and STEM capacity, sustaining targeted innovation funding programs, and reforming financial regulations to improve start-up financing and reduce early-stage capital constraints that hinder entrepreneurship growth.