Industrial Policy
Training Workshop
(TIPS-SADRN-CREI)
Promotion of Entrepreneurship and
New Firm Growth
(with emphasis on SMEs)
Hugo Kantis (PhD)
A)
The entrepreneurial process: a
systemic approach
B)
Entrepreneurship policy
Entrepreneurship & development
Population’s effective capacity of
creating and developing dynamic and
sustainable organizations- firmsinnovative projects: key driver
Entrepreneurship: main contributions
Employment,
Innovation,
Growth,
Local and regional development,
Equalization of opportunities,
Economic power dissemination,
A)
The entrepreneurial process: a
systemic approach
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.
The birth of a firm ...
Personal
Aspects
Opportunities
Resources
New Firm
... Towards and integrated
approach
Socio-economic conditions
Personal
Aspects
Regulations
Factors
Market
Opportunities
Resources
New Firm
Conceptual Framework
The Entrepreneurial Process
Start-up
Inception


Acquisition of
motivations and
skills
Identification of
the opportunity

Business
planning

Resources

Final decision
Early Years

Market entry

Firm
management
Conceptual Framework
The Entrepreneurial Process
Start-up
Inception


Acquisition of
motivations and
skills
Identification of
the opportunity

Business
planning

Access to resouces

Final decision
Early Years

Market entry

Firm
management
The Entrepreneurial Development System
Culture and
educational
system
Socioeconomic
conditions
Personal
Aspects
Industrial
structure
and
dynamism
Networks
Inception
Start-up
Factor
Markets
conditions
Early
years
Regulations
and policies
A new generation of dynamic
entrepreneurs
Middle-class families
University graduates

Entrepreneurial teams
Start young
A new generation of dynamic
entrepreneurs
•
5 main initial motivations:
1.
To achieve self realization
2.
To put their knowledge into practice
3.
To increase their income
4.
To be their own boss
5.
To contribute to society
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
Key factors influencing the
entrepreneurial process
Technical knowledge
(University)
Key factors influencing the
entrepreneurial process
Entrepreneurial
competences (work
experience)
Key factors influencing the
entrepreneurial process
Entrepreneurial
teams
Key factors influencing the
entrepreneurial process
Projects profile
Key factors influencing the
entrepreneurial process
Networks
Key factors influencing the
entrepreneurial process
Bootstrapping
Key factors influencing the
entrepreneurial process
Technical
knowledge
(Univ)
Teams
Networks
Entrepreneurial Projects profile
competences
(work experience)
Bootstrapping
Typical negative factors
Culture &
social structure
Typical negative factors
Entrepreneurial
competences
(educational system)
Typical negative factors
Institutional
networks
Typical negative factors
Links with large
companies
(industry
structure)
Typical negative factors
Finance
Typical negative factors
Links with large
companies
Finance
Entrepreneurial
competences
(educational system)
Regulatory
framework
Culture & social
structure
New enterprises in knowledgeintensive 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
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
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?
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.
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
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 selfsustaining.
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
How does it work the
Entrepreneurial Development System
in the South African countries?
B) Entrepreneurship promotion:
Policy justification
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
Justification:
entrepreneurship and its contribution

There’s 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)
Justification:
Growing demand of entrepreneurial
capabilities

The demand of entrepreneurial capabilities grows:
–
–
–

To create a company (whether it’s 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 that’s more uncertain every day (Ministerie van
Economische Zaken 2000, FORFAS 2007).
Justification:
to 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 that’s too polarized).
The entrepreneurs’ transactions costs are higher than
the ones of established companies: an uneven
competition.
Justification:
to 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)
Justification:
to 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.

The entrepreneurial process, market failures and
policy areas
Culture
Education
Social Capital
DEVELOPMENT
Market Failure
Institutional
Capital
Tacit knowledge and Technical
Information about the
information
entrepreneurial option
Asistence
Entrepreneurial human
Networks Financing
capital
PROJECT
ELABORATION
IDEA
IDENTIFICATION
DEVELOPMENT OF
CAPACITIES
VOCATION/MOTIVATION
entrepreneurial process
NEW
COMPANY
Financial
Capital
C) Typologies of policies and main areas
Policies Space
SMEs Policies
DEVELOPMENT
NEW COMPANY
Short term policies
PROJECT
Entrepreneurship
Policies
IDEA
MOTIVATION
Long term policies
Evolutional Perspective
80’s
Extension of
SMEs policies
90’s
Policies for
new firm
creation
Programs and institutions
exclusively oriented
towards assisting new
ventures appear.
Integrality.
Generic
policies
Directed
towards creating
companies in
general
Niche
policies
Directed towards specific
segments (of the population
or of the companies)
Strategy types
80’s
Extension of
SMEs policies
90’s
Generic
policies
Policies for
new firm
creation
Niche
policies
People:
social inclusion
Firms:
competitiveness
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)
Entrepreneurship policies
Generic entrepreneurship policies
“Niche” entrepreneurship policies
Social Inclusion
Competitiveness
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)
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)
Las
CCdel
emprendedor
¨ del
desarrollo
emprendedor
Las
The ¨44C
“C’s”
ofdesarrollo
the
Entrepeneurial
Development
Human Capital
Social
Capital
Financial
Capital
Institutional Capital
Institutional subsystem of entrepreneurial development
Public Sector
( universities, R+D institutions
Governments, incubators, colleges, etc.
Private Sector (Banks, existing companies,
Business chambers,
Venture capital funds, investors, etc.)
Entrepreneurial Development Institutions
Root Institution
“
”
Program
Root Institution
“
“
”
Root Institution
Beneficiarios
Graduates
University
Students
Program
Young people
Program
Program
Program
Rapid growth
firms
Root Institution”
“
”
Root Institution
Technology
Based firms
Young firms
Third Sector (Fundations, non-gubernamental organizations
THE MISSION OF THE ENTREPRENEURSHIP SUPPORT
INSTITUTIONS: REDUCING TRANSACTION COSTS BY
NETWORKS DEVELOPMENT
Opportunities/
resources
Suppliers
Clients
$
Human
Resources
Business
networks?
?
Technical
assistance
??
Knowledge
Financing
sources??
sources??
Training?
Government
instruments??
Regulation
s??
Contacts with
entrepreneurs
??
D) Generic policies? High growth
policies? Dynamic entrepreneurship
policies?
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.
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.
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)
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
Dynamic entrepreneurship:
% of companies
at birth
Dynamic
Companies
<10%
% of employment
N years after
% with IANGs <0,5%
Dynamic entrepreneurship:
the challenge
% of companies
At birth
Dynamic
Companies:
<10%
% with IANGs < 0,5%
Challenge
Sustainability and dynamic
entrepreneurship
 Sustainable employment in long term
Competitive
Growth
Innovation
Dynamic
entrepreneurship
 Self-employment and micro by necessity: social net
Does the “theory of the business agent” work?
E) Examples and lessons:
key factors in the design and
implementation of policies
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
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
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
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
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…)
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)
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
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
entrepreneurial
style
should
itself
be
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
Thank you !
hkantis@fibertel.com.ar