By Simon Johnson
“Entrepreneurship Without Borders” is an MIT Sloan class, primarily designed for MBA students. The course looks at economic growth, financial crises, and the distribution of income through the details of entrepreneurship in various parts of the global economy. Below is a summary of class #1, from September 4, 2013. The full running order of classes is here; all readings are freely available, with the exception of Harvard Business School cases. The course consists of 12 sessions through mid-October, and summaries or other perspectives will appear regularly in this space.
Entrepreneurship is a broad and sometimes amorphous concept, particularly when we try to compare business conditions around the world. Who has a lot of entrepreneurs and what does that mean? Should policymakers always want more people to start their own firms? Who exactly is an entrepreneur and does using the same definition make sense in all places?
The Global Entrepreneurship Monitor (GEM) has done a great service by bringing clarity and some transparent data into this discussion. (The specifics below refer to their 2012 report.)
A particular strength is that GEM looks, through opinion surveys, at what the broader public believes about starting their own business – including whether they think there are opportunities, whether they have the right personal capabilities to be an entrepreneur, and whether they are afraid of failing.
Three points are striking. First, in many countries people would be very happy – or are actively striving – to become entrepreneurs (Table 2.2 in the GEM report). These numbers are impressive, although perhaps sometimes higher than might be plausible. Some countries with low entrepreneurial intentions include: Russia, Norway, Japan, and South Korea. But these are exceptions – entrepreneurship has appeal in many places; don’t let anyone tell you otherwise.
Second, in lower income countries there are more perceived opportunities and more early stage entrepreneurs (business up to 3 ½ years old) – but the established business ownership rate is only a bit higher than in richer countries. Presumably, much of this is driven by the lack of other good employment opportunities, so many people engage in informal small-scale activity that does not generate many jobs and perhaps not even stable income. Compared with most other rich countries, the US has slightly higher early stage entrepreneurial activity.
Third, Greece and Spain have shown a big decline in perceived opportunities since 2008 – while there has been no such decline in Scandinavia (Figure 2.2). This is presumably the effect of the euro crisis – and helps explain the lack of an economic recovery. This is not always the pattern in crises – e.g., when the real exchange rate depreciates, that often encourages new business formation for exports or to compete against imports.
Overall, there is a general perception that the US has an advantage in some dimension of entrepreneurship, but this is hard to see in these numbers. GEM may not be fully picking up the potential for technological breakthroughs developed by entrepreneurs.
These data raise a number of important policy questions (see also this perspective).
- Should governments try to increase the number of entrepreneurs?
- What is the best way to help encourage people to set up their own businesses?
- What do entrepreneurs really need to have? What would be nice to have?
- Should we think in terms of “forms” of entrepreneurship, with some being more likely to have a more positive effect on productivity and economic growth than others?
While this course will not provide full answers to all these questions, we will find some perspectives by taking the detailed viewpoint of entrepreneurs and people working to help them around the world.
Specifically, the running order of our remaining classes will be divided into three parts.
Part I: Understanding the environment for entrepreneurs – what is good, bad, indifferent and why
#2: Recovery from the euro crisis. We will talk with someone who is working to help the private sector boom in Portugal.
#3: The Big Puzzle: why doesn’t everyone want a lot of entrepreneurs trying to find ways to apply new technology – or just generating new jobs by starting companies?
Part II: So you want to help entrepreneurs develop – what should you do?
#4: Endeavor, the gold standard for global entrepreneurship promotion. We look in detail at a specific selection panel in Jordan (HBS case) and talk with an expert about the broader experience.
#5: We discuss alternative models, including recent ideas from Chile (HBS case). What exactly do entrepreneurs need and want? How exactly do you attract global talent and then persuade them to stay put?
#6: Women have been excluded from many economic opportunities around the world, but at least in some places this is now changing. How much difference will this make – and how could or should US policy help?
#7: Perhaps it is all really about access to capital – and nothing else really matters? We look at one specific case in Germany (HBS case).
Part III: New Frontiers
#8: A specific new venture in Africa, on which Sloan MBA students worked last year (and developed the case material). We talk with the entrepreneur.
#9: Social housing in India: should we think more broadly about what is entrepreneurship and how new models can be transformative? (HBS case)
#10 and #11 are sessions that will be scheduled based on material suggested by students
#12: we come back to the original questions – how can you get more entrepreneurs and how much of a priority should this be?
