Industrial%20Policy%20Training%20Workshop%20(TIPS-SADRN-CREI)

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Industrial Policy Training Workshop
(TIPS-SADRN-CREI)

• Promotion of Entrepreneurship and
• New Firm Growth
• (with emphasis on SMEs)
• Hugo Kantis (PhD)

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• The entrepreneurial process a systemic approach
• Entrepreneurship policy

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Entrepreneurship development

• Populations effective capacity of creating and
  developing dynamic and sustainable organizations-
  firms- innovative projects key driver

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Entrepreneurship main contributions

• Employment,
• Innovation,
• Growth,
• Local and regional development,
• Equalization of opportunities,
• Economic power dissemination,

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• The entrepreneurial process a systemic approach

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Entrepreneurial development and local development

• It contributes to develop
• Institutional platform (generates externalities)
• Business platform (it rejuvenates, diversifies,
  and creates firms critical mass)
• It generates jobs and channels of
  self-realization for the population (i.e. young
  people)
• It develops endogenous capacities/local drivers.
• It increases the local appeal for extra-local
  agents.

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The birth of a firm ...
Personal Aspects
Motivation Capabilities
Opportunities
Resources
New
Firm
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... Towards and integrated approach
Socio-economic conditions
Motivation and Capabilities
Opportunities
Resources
Factors Market
Regulations
New
Firm
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Conceptual Framework
The Entrepreneurial Process
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Conceptual Framework
The Entrepreneurial Process
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The Entrepreneurial Development System
Culture and educational system
Networks
Socio-economic conditions
Personal Aspects
Industrial structure and dynamism
Factor Markets conditions
Regulations and policies
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A new generation of dynamic entrepreneurs

• Middle-class families
• University graduates

• Entrepreneurial teams

• Start young

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A new generation of dynamic entrepreneurs

• 5 main initial motivations
• To achieve self realization
• To put their knowledge into practice
• To increase their income
• To be their own boss
• To contribute to society

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The ventures

• Grow fast and become SMEs very soon (about 40
  employees in the 6th year)
• Main clients other firms in the domestic market
• Most important source of business opportunity
  differentiation

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Key factors influencing the entrepreneurial
process
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Key factors influencing the entrepreneurial
process
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Key factors influencing the entrepreneurial
process
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Key factors influencing the entrepreneurial
process
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Key factors influencing the entrepreneurial
process
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Key factors influencing the entrepreneurial
process
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Key factors influencing the entrepreneurial
process
Technical knowledge (Univ)
Networks
Teams
Bootstrapping
Projects profile
Entrepreneurial competences (work experience)
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Typical negative factors
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Typical negative factors
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Typical negative factors
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Typical negative factors
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Typical negative factors
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Typical negative factors
Entrepreneurial competences (educational system)
Links with large companies
Regulatory framework
Finance
Culture social structure
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New enterprises in knowledge-intensive sectors

• Positive contribution to the economy
• More dynamic and innovative ventures
• Higher educational level of human resources
• Higher presence of entrepreneurial teams
• But some structural obstacles
• Lower presence of role models
• Weaker learning contexts (university/work
  experience)
• Less developed specific networks
• Lower access to financial resources

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New enterprises in local areas

• Broader door to the entrepreneurial process
• Broader social origin
• More first-time entrepreneurs
• Higher presence of role models
• More support from social networks
• But in some regions lower dynamism
• More locally oriented networks
• More traditional activities
• Lower access to financial resources
• More restricted to local market

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Role of entrepreneurs in technology based clusters

• The role of entrepreneurship in the emergence of
  TBCs is often one of the least well documented,
  but most critical, elements of successful
  clusters
• Many of the factors that are identified as vital
  to cluster development (e.g. agglomeration
  economies, venture capital) lag rather than lead
  cluster emergence outcomes of entrepreneurial
  activity rather than being causal.
• Key questions
• What drives the spin-off process?
• Why does it only occur in certain locations?

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Role of entrepreneurs in technology based clusters

• Proposition entrepreneurial activity has been
  the central mechanism in the emergence of
  technology clusters (TCs)
• The essence of high-tech regions such as Silicon
  Valley and Route 128 lies in their continuous
  ability to create firms
• Existing firms are too preoccupied with their
  existing business and so under-emphasise the
  significance of new technology or are unwilling
  or unable to exploit them because it would
  involve cannibalising or writing-off much of
  their existing activities.
• By exploiting new technological opportunities
  that existing firms either fail to recognise or
  resist, this entrepreneurial process results in
  an upgrading of the regional economy.

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Role of entrepreneurs in technology based clusters

• Evidence from genealogical trees show the
  organizational origins of entrepreneurs
• Small number of organizations have been the
  source of a disproportionate number of
  entrepreneurs
• This spawning sets off a self-reinforcing cycle
• More start-ups
• Enhancement of entrepreneurial environment
• (i) successful entrepreneurs become mentors,
  investors, institution builders (ii) specialized
  infrastructure is established, (iii) suppliers
  and service providers emerge, (iv) local
  universities develop courses and research to meet
  the needs of companies
• Companies attracted from elsewhere
• Within a couple of decades there is a sizeable
  cluster of technology companies

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Role of entrepreneurs in technology based clusters

• Modeling the emergence and growth of TBCs
• Seeds of the future cluster are put in place
  investing in the research base
• Emergence of a proto-cluster a few pioneering
  individuals leave established organizations in
  the area to start their own firms
• Emergent phase increased level of
  entrepreneurial spin-offs in a narrow range of
  sectors supportive ecosystem begins to emerge
  (finance, support, institutions), collective
  sense of identity emerges, early entrepreneurs
  begin to recycle. Now self-sustaining.

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Role of entrepreneurs in technology based clusters

• Fully functioning entrepreneurial environment
• spin-offs in a wide range of technologies
• local sources of venture capital,
• wide range of customers and suppliers and
  specialized
• service organizations,
• region-wide support networks,
• universities and colleges offer specialized
  programmes
• a few of the early spin-offs will have become
  large
• MNEs will have a significant presence through
  acquisition and inward investment
• government is actively involved in supporting
  the cluster

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• How does it work the
• Entrepreneurial Development System
• in the South African countries?

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• B) Entrepreneurship promotion
• Policy justification

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ED policies on an international level...

• The number of countries that take on proactive
  strategies to encourage the creation of companies
  is growing, as is the range of policy areas to
  achieve this purpose

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Justification entrepreneurship and its
contribution

• Theres a growing consensus about its
  contribution to economic and social growth, to
  the creation of work positions, to the
  strengthening of SMEs, to innovation (Audretch
  and Thurik 2001, Acs and Armington 2004, OCDE
  2001, Reynolds and others 2001, Kantis and others
  2002, Birch 1979, Schumpeter 1934)

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Justification Growing demand of entrepreneurial
capabilities

• The demand of entrepreneurial capabilities grows
• To create a company (whether its a profit-driven
  or a non-profit company) or institution,
• To face innovative initiatives in preexisting
  organizations,
• To increase employment
• The concept of entrepreneurial society appears a
  community in which the population is capable of
  generating initiatives and innovative projects in
  different spaces of action, and of adapting
  flexibly to changes in a world thats more
  uncertain every day (Ministerie van Economische
  Zaken 2000, FORFAS 2007).

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Justificationto promote entrepreneurial
development

• The existence of gaps between the desired
  behavior of the entrepreneurial development
  system and its effective operation.
• An effective functioning of the factors that form
  the entrepreneurial system cannot be reached only
  through the market (i.e. the entrepreneurial
  education or the creation of an entrepreneurial
  culture in society).
• The existence of markets failures (i.e. the
  presence of information asymmetries) makes the
  supply for entrepreneurs (i.e. financial,
  consultancy services) to be inadequate.
• There may be barriers blocking the access to
  social capital (i.e. a very hierarchical culture
  or social structure thats too polarized).
• The entrepreneurs transactions costs are higher
  than the ones of established companies an uneven
  competition.

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Justificationto promote youth entrepreneurship

• Human capital is one the columns of
  entrepreneurial development the entrepreneurial
  vocations and capacities are forged from early
  on.
• Young people face major problems when trying to
  enter the labor market a proactive strategy of
  entrepreneurial development can increase youth
  employment in a preventive way, contributing to a
  greater social equity.
• Access to information on entrepreneurial options
  for young people is unequal (lack of information)

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Justificationto promote youth entrepreneurship

• There are cultural barriers that block perception
  and identification of opportunities.
• There is a gap between supply and demand of
  entrepreneurial capacities (they are not provided
  by families, the educational system, companies,
  or the market)
• The development of entrepreneurial capacities is
  distributed unequally.
• The are market failures (i.e. financing, human
  resources) and transaction costs are more
  significant for young people (liability of
  newness, moral hazard)
• The social capital accumulated by young people is
  lower and, among them, it is distributed
  unequally.

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The entrepreneurial process, market failures and
policy areas
Education
Culture
Social Capital
DEVELOPMENT
Institutional Capital
Market Failure
Financial Capital
Tacit knowledge and information
Information about the entrepreneurial option
Technical Asistence
Entrepreneurial human capital
Financing
Networks
NEW COMPANY
PROJECT ELABORATION
IDEA IDENTIFICATION
DEVELOPMENT OF CAPACITIES
VOCATION/MOTIVATION
entrepreneurial process
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C) Typologies of policies and main areas
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Policies Space
SMEs Policies
DEVELOPMENT
NEW COMPANY
Short term policies
PROJECT
Entrepreneurship Policies
IDEA
MOTIVATION
Long term policies
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Evolutional Perspective
80s
90s
Directed towards creating companies in general
Programs and institutions exclusively oriented
towards assisting new ventures appear.
Integrality.
Directed towards specific segments (of the
population or of the companies)
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Strategy types
80s
90s
Directed towards creating new fast growing
companies or technology-based.
Directed towards groups that are under
represented in the population of entrepreneurs
(women, young people)
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Entrepreneurship policies
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Action areas

• Promotion of the entrepreneurial culture in the
  population (USA, Taiwan, Canada, Sweden,
  Scotland, Japan)
• Entrepreneurship education (Canada, Scotland,
  Finland, Holland, Australia, UK)
• Simplification of the regulatory framework
  (Spain, Finland, Holland, UK)

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Action areas

• Improvement of the support infrastructure
• One-stop shops (Holland, Finland, Canada, UK,
  Japan, Taiwan)
• Online Portals (Ireland, UK, USA)
• Mentoring and technical assistance (USA, UK,
  Australia, Ireland, Taiwan)
• Incubators (Taiwan, Australia, Japan, USA,
  Ireland, UK)
• Networks development (Taiwan, Holland, Australia,
  Scotland, Canada)
• Access to seed capital and financing public
  sources, development of private supply, bridges,
  investment readiness (USA, UK, Japan, Canada,
  Finland, Ireland)

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Las 4 C del desarrollo emprendedor
The 4 Cs of the Entrepeneurial Development
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Institutional subsystem of entrepreneurial
development
Beneficiarios
Entrepreneurial Development Institutions
Graduates
Root


Institution
University
Students
Program
Root
Institution

Public Sector ( universities, RD institutions
Governments, incubators, colleges, etc.


Root
Institution
Program
Young people
Program
Rapid growth firms
Program
Root
Institution

Program
Technology Based firms


Root
Institution
Young firms
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THE MISSION OF THE ENTREPRENEURSHIP SUPPORT
INSTITUTIONS REDUCING TRANSACTION COSTS BY
NETWORKS DEVELOPMENT
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• D) Generic policies? High growth policies?
  Dynamic entrepreneurship policies?

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Just generic entrepreneurship?

• 1- Selecting potential high-growth firms is too
  difficult.
• 2- Venture capitalist are able to pick winners,
  with the inclusion of a considerable number of
  potential winners that turned out to be losers
  while public policy would seek to back all the
  winners and avoid any losers.
• 3- Start-ups in general deserve policy support,
  due to their seedbed function, unequal access to
  finance and information, their employment
  creation (still most of the jobs in the small
  business sector come from non high-growth firms),
  and their effect on regional prosperity in the
  long run
• 4- What is needed is an entrepreneurial culture
  that has effect on all layers of society new
  firms, small firms, large firms, public
  organizations.

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Or high growth entrepreneurship?

• there are at least as many arguments in favor
  of targeting (potential) high growth firms
• 1- It increases the effectiveness and efficiency
  of support measures. Focusing resources on a
  small group of ambitious entrepreneurs i.e.
  where they are most needed and where they can
  produce the best results is more effective than
  more generalized support.
• 2- It provides a clearer strategic focus on the
  needs of high growth businesses high levels of
  expertise are more likely to be developed both in
  the public sector as well as in the related
  support fields (such as venture capitalists,
  bankers, and consultants).
• 3- In some countries more start-ups are not
  needed.

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Dynamic entrepreneurship

• Dynamic company
• Those that transform into SMEs
• (includes high growth but it is a broader
  concept)
• ? Vegetative micro enterprises
• Recent studies show that growth oriented
  entrepreneurs generate growth (Acs 2006, Jena
  2007)

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Dynamic entrepreneurship

• In a few years less than 10 of the new companies
  (the most dynamic) generate half of the
  sustainable jobs
• UK, USA, Argentina companies of at
• least 10 employees 25 average by the
• third year

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Dynamic entrepreneurship
of companies at birth
of employment N years after
with IANGs lt0,5
Dynamic Companies lt10
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Dynamic entrepreneurship the challenge
of companies At birth
Challenge
with IANGs lt 0,5
Dynamic Companies lt10
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Sustainability and dynamic entrepreneurship

• Sustainable employment in long term

Dynamic entrepreneurship
Competitive Growth
Innovation

• Self-employment and micro by necessity social
  net

• Does the theory of the business agent work?

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• E) Examples and lessons
• key factors in the design and
• implementation of policies

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Some international experiences

• USA
• Venture corps retired businessmen (mentoring)
• Entrepreneurship education (Kauffman
  Foundation)
• Financing and promotion of innovation in a pro-
  entrepreneurial
• cultural context (SBIR, SBIC, SBDC, simplified
  loans)
• Italy and Brazil
• Information, training, tutoring and financing
• Incubation
• The SOFTEX experience

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Some international experiences

• Scotland integrality, alliances and learning
• Diagnosis
• Massive cultural campaign (PC, PES. LH)
  
  
  
• Entrepreneurial education
• Mentoring program
• Incentives and support for the creation of
  entrepreneurship
• centers in universities
• Entrepreneurs network entrepreneurial exchange
• Promotion of financing via VC and angels
  networks
• Financing via guarantee funds and simplified
  loans
• Special programs designed to promote rapid
  growth
• companies

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Some international experiences

• Germany (EXIST)
• Fund for regional entrepreneurship strategies
  presented by alliances composed by universities
  and local partners
• Grants for the development of entrepreneurial
  projects and coaching in marketing and finance
• Keim model based on the formation of capacities,
  the link of investigation with potential
  entrepreneurs, technical assistance to the
  process, network development

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Some international experiences

• Chile (Chile Innova)
• 2 lines of seed capital for innovative projects
  (less than 18 months) Prefeasibility and start
  up
• Institutional platform providing support to
  those entrepreneurs receiving seed capital
• Creation and strengthening of incubators

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Main lessons

• There are no single recipes
• Initiatives differ in strategic scope, budget,
  and geography
• Knowledge about the initial conditions is crucial
• Adoption of strategies with a systemic approach
  based on institutional value chains is needed
• If there is no overall strategic framework, ex
  post actions must be taken to coordinate efforts
• Mix (generic and niche) initiatives are possible
  and necessary (i.e young, growth
  oriented, innovatives)

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Main lessons

• Role models dissemination to foster
  entrepreneurial vocations (cultural change)
• Entrepreneurial competencies promotion through
  the educational system (but in connection with
  the business world)
• Widening the space of opportunities to start a
  dynamic business (i.e. innovation)

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Main lessons

• Development of networks and teams
• Improvement of the business environment and
  financing
• Training, consulting, and advisory programs
  appropriate to the profile and demands of
  entrepreneurs and new ventures

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Main lessons

• There must be an appropriate institutional
  setting, or when it is weak, it must be
  strengthened
• The commitment of the private sector and civil
  society is key for sustainability
• The intervention style should itself be
  entrepreneurial

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Main lessons

• The State must take the role of a second floor,
  delegating direct support to specialized and
  decentralized institutions (private, mixed,
  foundations, chambers, etc)
• It is very important that alliances with other
  institutions are created, to generate a system of
  entrepreneurial development that brings
  integrative support to the entrepreneurs.
• Alliances with the communication media must be
  included
• A flexible strategy demands an evaluation and
  learning system

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• Thank you !
• hkantis_at_fibertel.com.ar