Current Events in International Entrepreneurship - Term Paper Example

? Current Events in International Entrepreneurship Global Entrepreneurship The beginning of entrepreneurship is in potential entrepreneurs. In other words, entrepreneurship can be defined as the interest of people in setting up and running new businesses. Thus, the measures in this field include believing that one possesses the capabilities to start a business, feeling that there are opportunities in ones own territory, and the feeling of optimism about the success of ones own business. According to Acs and Szerb, entrepreneurship can be defined as a dynamic interaction of entrepreneurial attitudes, entrepreneurial activity, and entrepreneurial aspiration that vary across stages of economic development (7). What is observable is the general rise in the Total Early-stage Entrepreneurial Activity throughout the world between the year 2010 and 2011 which contradicts with the experience in previous years. While efficiency-driven economies improved by nearly 25%, innovation-driven economies followed with a 22% increase. In fact, there are various factors that can be measured in order to understand entrepreneurship in a nation. The first one among them is the percentage of working age population who own or are engaged in setting up a new business. In addition, it is helpful to understand the informal investment rate. It means the percentage of the population who has personally invested in the business run by some other one. According to the GEM 2011 Global Report, some other important measures are the percentage of ventures with new products and new services, the percentage of foreign customers, and people’s belief about the chances for setting up a new business in their country. In order to understand the situation in the nation, it may also be useful to assess people’s attitude towards new entrepreneurs in the society. It can be understood by checking if people believe entrepreneurs get high status in the society. Another vital measure is the involvement of media. For example, people’s perception of the degree of media exposure new successful ventures get has an impact on the entrepreneurship in total. 2. Entrepreneurial Ecosystem and Its Components In fact, the entrepreneurship ecosystem consists of six domains which effectively classify the hundreds of elements the ecosystem. They are conducive culture, enabling policies and leadership, availability of appropriate finance, quality human capital, venture-friendly markets, and infrastructural supports. The mere fact is that each ecosystem is in fact unique in nature with its own features. For example, in Taiwan, the ecosystem developed in the context of a huge accrual of highly successful Taiwanese expatriates in the US. Similarly, the Chinese ecosystem is marked by a totalitarian government and diverse regional policies. Another interesting point is that a time comes when an entrepreneurship ecosystem becomes self-sustaining in nature. To illustrate, when it is found that all the six domains are strong enough to reinforce mutually, it is possible for the government to reduce its control over the market. As Isenberg points out, the various domains of entrepreneurship ecosystem can be identified as leadership, government financial capital, early customers, networks, labor, educational institutions, infrastructure, support professions, nongovernment institutions, societal norms, and success stories. Out of these factors, the leadership helps through social legitimacy, support, and policies. Also, there can be investment support, regulatory frameworks, and tax benefits. While educational institutions help in the form of special entrepreneurship training and degrees, societal norms help through tolerance of risk, mistakes and failure. 3. Entrepreneurial Finance across the World It is generally found that in all countries, young and new firms have les dependence on bank financing and are more inclined towards informal financing. However, it is seen that in those nations with strict rules and better credit information, the young firms have better access to bank finance. The fact is that entrepreneurial companies differ from other publicly traded firms in various ways. First of all, they often exhibit high growth rates per year. The problem with this growth is that they need more cash than they generate. The second important factor is that for these entrepreneurship companies, most of the time, the valuable asset is their patents and intellectual property rights. As it is known, it is difficult to use this to raise finance. The third difficult fact is that most of these new entrepreneurs try to sell untested technologies and new services. That means there is a high risk of failure. Thus, “entrepreneurs tend to depend on three primary sources of equity financing; venture capital funds, angel investors, and corporate investors. Out of them, venture capital funds refer to limited partnerships in which the managing partners invest money for the limited partners. Angel investors are those high net worth individuals who are ready to invest their own money into a small set of companies. The investment from corporations comes on behalf of their shareholders or due to technical reasons” (Denis 304). 4. Post socialist Countries In fact, the post-socialist countries are exhibiting high rates of entrepreneurial activity in their changing economies. The reasons behind this increasing entrepreneurship, according to experts, are credit availability, contract enforcement, and low government corruption followed by good financial policies and the availability of foreign direct investment. However, despite these improvements, one can see that the nations still lag behind other nations. For example, the percentage of working-age population who own a new business is just 1.7% in Slovenia, 2.3% in Russia, and 4.5 % and 2.7% in Slovak Republic and Czech Republic respectively. Yet another interesting factor is the low levels of perceived opportunities to do business in the area one lives in. In Russia, only slightly more than a quarter of the people feel that they have opportunities to do business in their territory. As Ovaska and Sobel report, the percentage is 36%, 23%, and 18% in Slovenia, Slovak Republic and Czech Republic respectively. It is followed by the low levels of perceptions about the possibility of media support. For example, only 45% to 60% of the working-age population in these nations believes that media frequently report successful business stories (5). However, these nations have exhibited a growth rate much higher than many other nations. It seems that having such policies which allow new business creation and fostering new high-tech innovation will boost entrepreneurship. Some important policies are low taxes, low rules and regulations, and good property right laws. In total, these nations are marked by a marked increase in the number of new enterprises. 5. Arab Nations Arab nations too have faced a considerable improvement in entrepreneurship. However, a look into the data proves that these nations, which heavily depend on extractive resources, have the lowest entrepreneurial intentions in the world. Yet another vital feature is the low percentage of the working –age female entrepreneurs in these nations. It is seen that the percentage of working age population who own or run a new business that is less than four years old is between 3.9 % and 2.6% in the Arabic nations. In addition, only about 5% of them have personally invested money in new firms run by others. Yet another vital feature is the attitude of the young people towards starting up a business. As Kelley, Singer, and Herrington notes in GEM data, only 7% of the working age population in United Arab Emirates feel that setting up a new business is a good career option. One can find various reasons behind this trend. The first one is the dependence on extractive resources. Also, there onslaught of foreign businesses into each and every sphere of life too has a role in scaring the young people away as they feel that they will not be able to compete with the multinational giants. Another surprising feature is the less attention paid by media towards the new ventures by the working age people within the nation. It is found that only a negligent percentage of the people believe that media is giving adequate coverage to stories of successful entrepreneurs. Considering these factors, the low levels of entrepreneurship in these nations is not surprising. 6. Africa As compared to many other nations like China and India, Africa has witnessed a slow pace. However, the African entrepreneurship has two peculiar features which make it different from others. They are hyper-entrepreneurship and excess diversification. It is observed that in Africa, workers are more interested in setting up their own business instead of working as a wage-worker than workers in any other parts of the world. Thus, what happens is that companies often lack good managerial talent. Another vital point is excess diversification. It is observed by people that in Africa entrepreneurs are likely to own many businesses at the same time, and this results poor management and growth of businesses. This information is supported by the figures. For example, as Simons points out, it is seen that 14.3% of the working-age population in South Africa intend to own a business in less than three years. More interestingly, nearly three quarters of the people feel that setting up a business is a good career option for their future. Furthermore, nearly half of the people feel that there is good opportunity to start a business in the place they in. As a result of all these, nearly 10% of the working age population intends to start a business or own a business that is young. In addition, around half of them comes up with products and services which are new to the people. In total, it becomes evident that Africa is in the path of growth. However, its growth has been slowed down by hyper-entrepreneurship and excessive levels of diversification. 7. China China shows a far better growth than other nations and other Asian counterparts like India in new business ownership rate. As Ueng reports in Wral Techwire dated May 4, 2012, in China, nearly 14.2% of the people between the age of 18 and 64 own a new business. Similarly, 12.7% of the people have a well-established business that is more than four years old. Also, as compared to other Asian powers like India, the Chinese entrepreneurs are more optimistic about the future possibility of growth. For example, 73% of the working age people feel that successful entrepreneurs are given high regard in the nation. Similarly, nearly three quarters of the people feel that in their country, most people consider starting business as a valuable career choice. Yet another interesting feature is the high percentage of people who feel that there is a high chance to start a successful business in the area they live in. in fact, nearly half of the people from the age group 18 to 64 possess the belief. Moreover, the growth of new industries and ventures in China is much higher than other nations. For example, nearly 60% of the new ventures try products and services which are new for the customers. In China, according to Ueng, nearly a quarter of the people in the working age own a business and nearly 10% of the same group is engaged in the efforts of setting up a new business. It is seen that the main areas of entrepreneurship in China are alternative energy, food and beverage, luxury goods, agriculture, professional social work, and marriage match. 8. India India has a growing economy. Out of the Total Early-stage Entrepreneurial Activity (TEA), nearly 23% claim that their products and services are new to the customers. That means new forms of businesses and products are coming up in the nation. However, the disappointing thing about Indian entrepreneurship is the less availability of foreign customers. Only 5% of the total TEA claims that at least 25% of their customers come from other nations. Another disappointing thing is the slow expected growth rate of these companies. Out of the new TEA, just 7% claims that they will be able to employ at least five employees after five years. However, the interesting fact is the reasonable rate of the informal investors. In simple words, nearly 19% of the people between 18 and 64 have personally invested money in business ventures. However, the low status of women in the nation is visible in the entrepreneurial area too. Out of the total TEA, only 7.1% is females between 18 and 64 years of age. Another point of attraction about entrepreneurship in India is that almost a half of the new entrepreneurs do so because they think it improves their income. As per the planning Commission report on Entrepreneurship in India, though it is rather disappointing that only 6.9% of the existing population between 18 and 64 years of age are in the process of setting up a business, it is rather pleasing to note that 82% of the entrepreneurs believe that successful entrepreneurs enjoy high status in the society. Similarly, while 81% of them agree that the media in the nation give adequate publicity to successful initiatives, nearly 67% consider entrepreneurship as a suitable career option (Planning Commission report on Entrepreneurship in India). 10. Interesting Things about Global Entrepreneurship In fact, the world economies can be divided into factor-driven economies, efficiency-driven economies, and innovation-driven economies. Some of the factor-driven economies are Bangladesh, Iran, Pakistan and Algeria. These nations are marked by higher perceptions of entrepreneurial opportunities in the area, and higher perceived personal capabilities to start a business. However, the European and American countries followed by nations like Japan are seriously affected by the economic crisis, and as a result of this, these nations are marked by low rates of perceived opportunities for businesses. However, there is a slight contradiction in the fact that people in America generally possess high levels of confidence in their abilities to start a business. The efficiency driven economies like Brazil and Colombia are marked by high perceptions of media coverage for successful business ventures. Yet another vital feature is that in these nations, people believe that successful businessmen enjoy high status in the society. In total, what is observable is the general rise in the Total Early-stage Entrepreneurial Activity throughout the world between the year 2010 and 2011 which contradicts with the experience in previous years. While efficiency-driven economies improved by nearly 25%, innovation-driven economies followed with a 22% increase. Another vital area of consideration is the difference between necessity-driven entrepreneurship and opportunity-driven entrepreneurship. It is clear from analysis that as compared to previous years, the percentage of necessity-driven entrepreneurs has declined considerably whereas that of opportunity-driven entrepreneurs has increased considerably. That means these days people venture into businesses not because they are forced but because they see future prospects in that (“Panel discussion on market trends…”). It is seen that in the factor-driven economies, some countries like Iran, Bangladesh and Pakistan exhibit very low women participation while other nations in the category like Latin American nations exhibit high levels of female participation. Similarly, in efficiency-driven economies, Thailand and Brazil have high female participation rates and European nations have low levels. Also, in the innovation-driven societies, France and Korea show low female involvement and Singapore and Switzerland exhibit high women involvement. However, it is visible that in most nations around the world, the number of female entrepreneurs is far less than that of male entrepreneurs. Works Cited Acs, Zoltan J and Szerb, Laszlo. The global entrepreneurship and development index. DRUID, (2010). Web 10 Nov 2012 Denis, David J. “Entrepreneurial finance: an overview of the issues and evidence”. Journal of Corporate Finance 10 (2004) 301 – 326. Web 10 Nov 2012 GEM, Global Entrepreneurship Monitor, Key Indicators. We 10 Nov 2012 Isenberg, Daniel. “Introducing the entrepreneurship ecosystem: four defining characteristics”. Forbes, Nov 5, 2011. Web 10 Nov 2012 Kelley, Donna J, Singer, Slavica, and Herrington, Mike. Global Entrepreneurship Monitor, 2011 Global Report, GEM. Web 10 Nov 2012 Ovaska, Tomi., Sobel, Russell S. “Entrepreneurship in post-Socialist economies”. Web 10 Nov 2012 Planning Commission report on Entrepreneurship in India. Web 10 Nov 2012 Panel discussion on market trends and entrepreneurial opportunities. TiE Islamabad Fostering Entrepreneurship Globally. Web 10 Nov 2012 Simons, Bright B. “What Africa’s entrepreneurs can teach the world”. Harvard Business Review, March 5, 2012. Web 10 Nov 2012 Ueng, Grace Whi-Tze. Top six emerging entrepreneurial trends in China. Wral Techware, May 4, 2012. Web 10 Nov 2012 Read More