It's a matter of policy

The United States is often looked to as a place where entrepreneurs thrive. Yet many other countries are trying to ...

The United States is often looked to as a place where entrepreneurs thrive. Yet many other countries are trying to cultivate their own culture of entrepreneurship. Will they succeed? Robert Litan, Robert Strom, and Alyse Freilich outline five factors that will help decide
Its a matter of policy

Many believe that the United States is the hotbed of entrepreneurs at work. And, to be sure, the US does set a fast pace in this area, but the world is moving so rapidly into an entrepreneurial economy that, right now, it’s critical to think about the factors that can stimulate the same level of entrepreneurship – or suppress it. A lot of important questions need to be addressed when it comes to determining whether a nation can both engage in, and benefit from, actively supporting entrepreneurs. And that’s why so many countries are exploring these questions:

  • In Russia, a centre dedicated to economic and financial research did a formal study in 2006 comparing entrepreneurs in Russia and China. According to the National Dialogue on Entrepreneurship, “The researchers surveyed approximately 800 entrepreneurs in 14 different locations (7 each in Russia and China) to assess their educational backgrounds, family backgrounds, and other factors influencing their interest in entrepreneurship.” Part of their quest was to size up the motivations of entrepreneurs in both countries so as to assess the social and business environment that would most favour the expansion of entrepreneurship.
  • When US President George Bush visited India and Pakistan in early 2006, he appeared before the students at the Indian School of Business in Hyderabad, India. If you check the transcript of questions and answers from the students, you’ll see that they raised concerns about matters such as government sanctions and export restrictions, as today’s entrepreneurs are thinking more globally than ever before.
  • Speaking of India, Financial Times correspondent Edward Luce said, in September 2006, that “The Indian economy is definitely an entrepreneurial driven model, a possible boilerplate for Asia.” In sum, Luce told an interviewer that India’s corporate and governmental policies bear watching.
  • On the website of Mexico’s embassy to the US, there’s a page of links that discuss the “Partnership for Prosperity” between the two countries. There are at least six links to matters related to entrepreneurship, and many other of the listed events promote the conditions for entrepreneurs to thrive.
  • A Harvard newsletter, Working Knowledge, reported in April 2006 on research done concerning the history of business networks in both Mexico and Brazil. What answers did the research hope to find? “Did entrepreneurs in these two countries organize their business networks differently to deal with the different institutional settings? And, how can we compare the impact of the institutional structure of Mexico and Brazil on the networks of entrepreneurial finance and entrepreneurship in general?” In short, the research noted what many are also taking an interest in today: it’s not just the individual who determines whether he or she will be an entrepreneurial success; it’s the country and policies under which the individual must work that also matter.
  • Which is why saw this as significant news: “South Africa: Entrepreneurs Free to Pursue Profit But Red Tape May Yet Spoil the Party”. The September 2006 article was tied to a World Bank study of the African economy that investigated the impact of societal factors on entrepreneurial growth. Those factors included “employment of people, licensing, property registration, credit funding, investor protection, tax regimes, cross-border trading, enforcing contracts, and the starting and closing of businesses”.

This is all heady, but increasingly important, stuff to be aware of. Yet, no matter what country you’re thinking about, there are some overarching elements – beyond the psychological profile of an individual entrepreneur – that seem to make a difference.

So, for a moment, let’s focus on what happened in the US since the early 1990s. Our purpose is not to present the US as a model, but to glean what we can about the conditions that made entrepreneurship flourish there in the hopes that we can pinpoint the factors that could put other countries on exactly the same economic path.

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