Entrepreneurship For Economic Growth

Entrepreneurship for
Economic Growth
A Review of Current Findings and

Implications
The Argument
 Ifthere is a causal relationship between

entrepreneurial development and economic
growth, then government policy should support
entrepreneurial development
 There is a causal relationship between
entrepreneurial development and economic growth
 Therefore, Government policy should support
more entrepreneurial development
Inherent Assumptions and Challenges
 Is there a causal relationship between

entrepreneurial development and economic
growth. What evidence is there to support this?
 What are the determinants of this causal
relationship?
 Does Government Policy currently support
entrepreneurial development, and how?
 What further steps should be taken to support
entrepreneurial development?
Contents
 Causal Relationship: Evidence
 Determinants: GEM 2000 study
 Determinants: IADB study
 Characteristics of LA entrepreneurs
 Characteristics of Dynamic Enterprises
 Policy Implications: GEM 2000
 Policy Implications: IADB study
 Conclusions for Managers and Policy Makers
Contents
Causal Relationship: Evidence
 The GEM 2000: Significant relationship controlling for

import/export and agricultural economies.
 Half of the difference in levels of economic growth can be
explained by variation in levels of entrepreneurship.
 There is no single catalyst to economic growth (i.e.
entrepreneurship is not the single key)
 Between nascent firms and new firms, new firms tend to
have the strongest association with economic growth
* GEM 2000
* GEM 2000
Contents
Determinants: GEM 2000 Study
 Demography  Entrepreneurial
– Population growth or Framework Conditions
decline – Entrepreneurial
– Structure of the population Opportunity
 Economic Order – Entrepreneurial Capacity
– Government Presence – Social Legitimacy
– Employment – Finance
– Education – Information Technology
– Participation of Woman
Demographic
* GEM 2000
Economic Order
 Government Presence
– Tax revenue as a % of GDP is lowest in “High” group
– Role of the state in the overall economy is less in
countries with “High” levels of entrepreneurs
 Employment
– High cost of employment, rigid labor markets are
deterrents to new, growing firms
 Education
– Strong link between post-secondary education and
entrepreneurship
Economic Order
 Participation of Woman
* GEM 2000
Entrepreneurial Framework
Conditions
 Entrepreneurial Opportunity
– Perception of opportunity is highly correlated with
Entrepreneurial Activity
 Entrepreneurial Capacity (Motivation and Skill)
– Expert opinion indicates a relationship between experts
perceived lack of entrepreneurial skill and new business
creation
 Social Legitimacy
– In entrepreneurial countries, people are less likely to resent
wealthy entrepreneurs.
Conditions
 Social Legitimacy
* GEM 2000
Conditions
 Finance
* GEM 2000
Conditions
 Information Technology
* GEM 2000
Contents
Determinants: IADB Study
 Culture does NOT play an active role
 Educational system does not promote the learning of a whole
set of competencies
 Previous work history is relevant, indicating differing
productive capacities may affect entrepreneurship
 Productive structures and entrepreneurial strategies influence
opportunities available
 Network are fundamental
 Financial conditions are often a bottleneck
 Regulatory obstacles and red tape negatively affects startup.
Contents
Characteristics of L.A. Entrepreneurs
 Number of partners at start-up (see graph)

 Middle aged man, average 42, with high level of
education (60% had a professional degree)
 1 in 10 was a woman
 Often formerly employed in similar sector
 4 in 10 have founded previous business
Contents
Characteristics of L.A. Enterprises
2 in 3 become dynamic enterprises with 15 workers
 On average around 6 years old
 75% are located in metropolitan areas
 Mostly conventional manufacturing activities
 Knowledge based sector accounts for 1/3 of
enterprises
 Dynamic firms show stronger growth and export
drive
 75% of the cases had initial investment < $100,000
Characteristics of Dynamic Enterprises
Inception Stage: Early Stage Development

 Network of contacts  Presence of entrepreneurial
 Role Models teams
Start ups  Distinctive problems and
 Presence of teams of challenges hiring managers and
entrepreneurs with specialized certifying quality
skills and functions
 Generalized use of personal
savings
 Generally started companies
around age of 30
 Numerous networks for non-
monetary resources
Current Government Policy in Latin
America
 Strengthen mature companies to face prevailing
challenges
 Micro-enterprise level support through training
and consulting services.
 Facilitate access to credit through subsidized
interest rates, deposit guarantee schemes, and
micro-financing, but;
 ECLAC study concluded these programs were
insignificant.
Contents
Policy Implications: GEM 2000
 Gear Policy towards enhancing entrepreneurial capacity (skills and
motivations)
 Increase the participation of woman in entrepreneurship.
 Encourage involvement of people younger than 25
 Ensure conducive economic system (less government, low tax
rates, flexible labor markets, fewer regulatory burdens)
 Encourage formal venture capital, and private investment in early
stage business
 Invest in educational system
 Make system “Incentive based” verse “Support based”
 Create a strong culture of entrepreneurship that values and is
supportive of entrepreneurs
Contents
General Implications: IADB
 The number of Dynamic enterprises must be increased and

the conditions for growth must be improved.
 Work experience and networks are key factors to consider
in policies to promote dynamic new enterprise
 Promotion must address the critical factors which affect
the entrepreneurial process, and be adjusted to appropriate
institutional and national context
 Promotion should be viewed as a social investment with
long term impact: though short-term initiatives are useful
to demonstrate results
Specific implications and
recommendations
 Broaden the base of future dynamic entrepreneurs
 Develop two key assets: entrepreneurial networks and teams
 Make the inception period shorter in order to accelerate the business
creation process
 Reduce barriers to the creation and development of new companies
– Build a solid infrastructure of venture finance
– Reduce red tape and compliance costs involved in start-up
– Help entrepreneurs resolve the initial problems of business start-up
– Modify the existing incentives for SME’s to meet the specific needs of new
businesses
 Strengthen the institutional context to promote entrepreneurship
Contents
Conclusions for Managers and Policy
Makers
 Entrepreneurship is not the only tool, but a significant
tool in shaping government policy to drive economic
growth
 Entrepreneurial growth is dynamic, and dependent on
country specific variables and initiatives. (E.S.I)
 Entrepreneurship support initiatives should be developed
at the Government and NGO level to further manage the
variable identified in these reports.
Backup Slides
TEA Index (Total Entrepreneurial Activity)
 Computed by adding the proportion of

adults involved in the creation of nascent
firms and the proportion involved in
surviving firms
 Standardized Index
Causal Relationship: Entrepreneurial
Development and Economic Growth
* GEM 2000
Factors and Stage in Entrepreneurial
Growth
Main individuals who helped identify
business opportunities
Occupations of key individuals
who helped identify business
opportunity
Number of individuals who helped
identify business opportunity
Type of Information Gathered
Factors influencing decisions to
begin: Dynamic vs Less Dynamic
Networks and Non Monetary
Resources
Financial Sources Used
Intensity of Competition in Early
Development
Size of Competitors during Early
Development
Financing Sources during
early Development
Main Problems Enterprises face:
Early Development
Bibliography
 “Entrepreneurship in Emerging Economies: The Creation
and Development of New Firms in Latin America”, Inter-
American Development Bank, March 2002.
 “Global Entrepreneurship Monitor, 2000 Executive
Report”, Babson College, Kauffman Center, London
School of Business
 “Supporting Entrepreneurship in Developing Countries:
Survey of the Field and Inventory of Initiatives”,
bridges.org for the Business Enterprise and
Entrepreneurship Working Group, May 2002.

Entrepreneurship For Economic Growth

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Enviado por

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Entrepreneurship for

A Review of Current Findings and

 Ifthere is a causal relationship between

 Is there a causal relationship between

 The GEM 2000: Significant relationship controlling for

 Number of partners at start-up (see graph)

Inception Stage: Early Stage Development

 The number of Dynamic enterprises must be increased and

 Computed by adding the proportion of

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