Creating real impacts: the role of policy in sustainable entrepreneurship

By Ziyu Huang

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During the course of the Global Entrepreneurship Congress (GEC) 2016 in Medellin, Colombia, policy makers, investors, accelerators, researchers and entrepreneurs came together to share and discuss desirable entrepreneurial practices for the common goal of creating better global solutions.

Central to the congress was the call for creating supportive entrepreneurial ecosystems in each community, which would foster the sustainability of entrepreneurial activities in the long run. Jonathan Ortmans, President of the Global Entrepreneurship Network and Chair of the GEC, emphasised the global consensus that entrepreneurial activities bring about innovation, productivity and economic growth regardless of the economy and culture. With the increasing prevalence of entrepreneurship comes higher demand for programmes helping startups to build and scale up their businesses. As a result, governments all around the world have responded to this need. Especially in Latin America, where the stage was set for the GEC this year, enterprise creation has always been given greater emphasis through economic policies, research and activities.

However, disparity in the development of entrepreneurial ecosystems is seen between more industrialised nations, such as Brazil and Venezuela, and less industrialised nations in Latin America. In Colombia, despite Medellin being the face of entrepreneurship, led by hope and the creation of possibilities by its very own people, the place with the highest concentration of entrepreneurial activities is in fact Bogota, the capital city. What made Medellin stand out is its rapid transformation from a city of violence to a city of innovation and the fact that its people made it happen after suffering through the grim days under Pablo Escobar’s reign. The unity of the people brought Medellin to greater heights as an explosive use of hash tags and trending topics propelled the city to win the title ‘Innovative City of the Year’ in 2012 during the final round of the contest. Amidst the positivism and high level of energy presented by Medellin in its creative endeavours, the city still has much to deploy in order to build an exhaustive entrepreneurial ecosystem. Ortmans, during the opening address of the GEC, told us that only 22% of Medellin’s resources have been used so far. This shows that there is much more room for further development and expansion of entrepreneurial activities.

Despite having the capacity for furious increments of entrepreneurial activities, it would be best if the government starts planning and shaping the entrepreneurial ecosystem at its early stage than exhaust all resources and attune later. For a sustainable entrepreneurial ecosystem that is vital for the continuity of entrepreneurship, we have to look at two aspects: people and ideas.

 

Generating the continuity of entrepreneurship through educating the people

People within the entrepreneurial ecosystems come in the forms of entrepreneurs and other types of labour in various industries that are indispensable to entrepreneurial enterprises. Firstly, in order to have an infinite supply of young entrepreneurs joining the entrepreneurial ecosystem and making it stronger and more influential, we need to empower the next generation. Just about a decade ago, major transformations to the city began under the lead of then mayor of Medellin, Sergio Fajardo, who is currently the governor of Antioquia. He passed pro-education policies with the intention to alleviate poverty and boost the confidence of the community by providing opportunities for lawful work. Besides creating spaces for educational activities, including building library parks and elevators that would bring people living in the mountainous areas to schools in the valley quickly, Fajardo improved the education system in Medellin and Antioquia so that people have the chance to aim higher in life. During the GEC, Federico Gutierrez, current Mayor of Medellin, emphasised again that we have to continue investing in education.

In different parts of the world, education poses different problems or solutions. In more developed cities, the question of relevance in education is more important than simply providing access to education. The truth is that many graduates today of tertiary education could not be matched with companies looking for talents despite being equipped with various skills and competencies. The reason is that they do not learn in academic institutions what they would need in real life. It is not just mainstream education that is problematic, but also education in entrepreneurship, which is gaining more attention globally as part of school and university curricula. Ivan Sandjaja, Director of Ciputra Incubator and Accelerator at the Office of International Relations of Universitas Ciputra Entrepreneurship Center, Indonesia, cited the fact that entrepreneurship courses in universities are being taught from textbooks and not real experiences. He argued that real learning for an entrepreneur is through repeated failures. Of all people, entrepreneurs should be the ones most prone to failure and mistakes because they are solving problems for the society, and therefore they are constantly trying out new solutions, made only possible with failures.

Next, the power of people who are not entrepreneurs should not be neglected as they are also vital parts of the whole ecosystem and ensure that impacts of entrepreneurial activities trickle down to the local communities. These people could be employees of institutions providing support for entrepreneurs or simply drivers who would deliver products from enterprises to individual customers. Policy involving these people should account for their welfare, the longevity of their jobs and their integration into the local or global entrepreneurial ecosystem. It is only when the supporting framework is fully functional that the various parts of the entrepreneurial ecosystem could work in unison.

 

Creating the future of entrepreneurship through ideas

One way of ensuring the sustainability of entrepreneurial enterprises is that of continuous innovation. Sandjaja warned that if an entrepreneurial enterprise loses its creative momentum, copycats would emerge as competitors for market shares. Since entrepreneurship is a medium for materialising hopes and dreams, it is fatuous for individual enterprises to stop short of achieving sustainable businesses. For entrepreneurship to make a real impact, each startup has to survive intense competition and continue generating jobs and income for people within the entrepreneurial ecosystem. For the ecosystem to expand its influence and do so ceaselessly, entrepreneurs cannot stop innovating.

Research and policy

Amid discussions on encouraging entrepreneurship through education, there is also increasing concern for embedding research in policy making. Conducting research on entrepreneurial activities would lead to more informed decisions by governments if research findings are actively engaged during policy making processes. In South America, there is much need for more research on entrepreneurial activities and policies as local entrepreneurial ecosystems are only just emerging and coming together. Alvaro Viña Vizcaíno, Associate Professor of the Director Office of Entrepreneurship and Innovation at the National University of Colombia, commented that there would soon be meaningful results in the area of policy research, which is still inadequate at present.

In general, policies encouraging entrepreneurship should consider factors which distinguish different types of entrepreneurs. Right now, too many loopholes exist in policies which at best benefit only certain groups of entrepreneurs. In an article copublished by the Inter-American Development Bank (IDB) and the World Bank, it was suggested that policy makers should promote entrepreneurship with the foci of the middle class and the lower income groups because the less well-off socio-economic groups are less likely to see much social mobility due to the influences of family background and resources in education. For the benefit of smaller players, policies should be in place to ‘democratize entrepreneurship’, meaning that opportunities should be created for them to be able to compete with the big boys in monopolised and oligopolised markets. For that to happen, there should be more precise measures to remove red tape and bureaucratic barriers, as well as reducing the cost of entering and exiting the market.

Policy makers, however, need to exercise caution when putting extra emphasis on middle class and working class entrepreneurs because too much favouritism could be as less beneficial as expected to the economy. There would be trade-offs when governments take definitive measures to promote entrepreneurship. For instance, policies meant to deal with large scale employment issues and the macro economy may hinder or indirectly downcast entrepreneurial activities built upon creative products and techonologies. Conversely, policies contributing to higher rates of entrepreneurial activities may cause difficulties to economic growth at large. Therefore, the most important thing to bear in mind when governments provide special treatments to certain groups of entrepreneurs is the local economic and cultural circumstances and, subsequently, the possible impacts of such policies to the economy.

Looking ahead

Governments and researchers are still working to have a more comprehensive picture of entrepreneurship and the entrepreneurial ecosystem. During the GEC, discourses on the lack of ‘reliable measures’ to compare entrepreneurial performances, accelerator effectiveness and other key concepts within the ecosystem were repeatedly made. Although such indicators would be handy for statistical evaluations, the effect of culture, for instance, is not something to be measured. In Latin American culture, the social stigma relating to bankruptcy is much higher than that in Anglo-Saxon cultures. For those potential entrepreneurs who were deterred by the possibility of failure and other cultural implications, it would be improbable to measure their opportunity cost to the economy. There would certainly be a limit to how much numerical figures could help us understand the actions of entrepreneurs when immeasurable factors are involved.

While it is certainly an imperative task for governments to set up good policies that would boost both the economy and entrepreneurial activities, which could possibly bring about higher employment and social mobility, entrepreneurs, on the other hand, also have to diligently fulfill their roles. They have to continue working towards what they are good at – innovating, by keeping in mind that they are the ones bringing solutions to social problems in the world.

Ziyu is a Sociology (BA) student at the University of Sheffield,  and is currently doing her dissertation on entrepreneurial inclinations. She has a keen interest in research and activities related to entrepreneurship and believes in the future of entrepreneurship for a better world.

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