Productive entrepreneurship plays a critical role in driving economic diversification in emerging economies. This paper aims to synthesize existing literature on how value-generating entrepreneurial activities contribute to diversification and sustainable growth. Using Schumpeterian innovation theory and institutional theory as frameworks, the study identifies key factors influencing productive entrepreneurship, such as innovation, institutional support, and access to resources. A comprehensive review of empirical studies reveals that productive entrepreneurship fosters job creation, innovation, and competitiveness, which are essential for reducing dependence on limited industries. However, entrepreneurs face significant challenges, including weak institutional frameworks, limited access to finance, and infrastructural deficiencies. The review also identifies research gaps and offers policy recommendations to enhance the entrepreneurial ecosystem in emerging markets. These include improving access to finance, strengthening institutions, and promoting entrepreneurship education. The findings provide valuable insights for policymakers aiming to leverage entrepreneurship as a tool for economic diversification and long-term economic resilience.