Global Entrepreneurship

Environment and Strategy

Nir Kshetri

• Publisher: Routledge
• Year: 2018
• ISBN:
  9780429859373
• Edition: 2
• Topic: Negocios y empresa
• Subtopic: Emprendimiento

This second edition of a Choice Outstanding Academic Title improves coverage of the global environments in which entrepreneurs operate. In Global Entrepreneurship: Environment and Strategy, Nir Kshetri explores and illuminates the economic, political, cultural, geographical, and technological environments that affect entrepreneurs as they exploit opportunities and create value in economies around the world.

Grounded in theory, the book begins by laying out the concepts, indicators, and measurements that have unique impacts on entrepreneurs in different regions. This framework sets the scene for a close examination of global variations in entrepreneurial ecosystems and finance. Kshetri methodically examines entrepreneurship patterns in diverse economies through the lenses of economic system, political system, culture and religion, and geography (both by country and continent) – and for the first time, includes an entire chapter on entrepreneurship in Latin America.

All new for this edition, Global Entrepreneurship offers case studies at the end of each chapter to illustrate relevant concepts, as well as two detailed cases in an appendix, to encourage broader reflection.

Chapter 1

Global Entrepreneurship

The Current Status, Definitions, Types, and Measures

This chapter’s objectives include:

1. To demonstrate an understanding of the current Global Entrepreneurial Revolution.
2. To identify the major trends and forces shaping the Global Entrepreneurial Revolution.
3. To analyze various metrics in order to measure the determinants, performance, and impacts of entrepreneurship in an economy.
4. To apply the tools and concepts learnt in the chapter to asses an economy’s entrepreneurial performance and success.
5. To demonstrate an understanding of the international heterogeneity in the development of entrepreneurship and entrepreneurial capability.

A Global Entrepreneurial Revolution

A number of trends and indicators point toward the fact that entrepreneurship has become a truly global phenomenon. One such indicator concerns the appetite for entrepreneurial ventures. Highly successful entrepreneurial firms are found across the world. In the 2017 Forbes’ global list of the 2,000 biggest public companies, 58 countries were represented.¹ Moreover, companies from emerging markets such as Colombia, Saudi Arabia, South Africa, Turkey, and UAE were featured in the Forbes’ 2017 list of 100 Top Regarded Companies (www.forbes.com/top-regarded-companies/list/#tab:rank). Various forces and events have shaped this global entrepreneurial revolution.

Favorable Attitude toward Capitalism and Social Acceptance of Entrepreneurship

One important trend facilitating a global entrepreneurial revolution and growing entrepreneurial spirit concerns a favorable attitude toward free market capitalism. Note that capitalism is the foundation of entrepreneurship.

According to a Gallup poll conducted in 2010, 61% of Americans had a positive view of capitalism and about the same proportion had a negative view of socialism. In 2016, 60% in the U.S. had a positive view of capitalism, which is unchanged from 2010.²

Among the most encouraging developments in the global entrepreneurial arena has been the acceptance of the ideas of free market capitalism in countries with a history of socialism. For instance, in a 2009 Global Attitudes Survey conducted by the Pew Research Center, the proportions of respondents agreeing to the statement “Most people are better off in a free market economy, even though some people are rich and some are poor” were 79% in China, 65% in Poland, and 51% in Russia. As a point of comparison, the corresponding proportion was 41% for Japan, which is historically a capitalist country. Likewise, according to a survey conducted by the Yury Levada Analytical Center, about 80% of young Russians said that they had successfully adapted to capitalism.³ This does not mean that these young Russians have a favorable attitude toward the country’s wealthy business tycoons, also known as the “oligarchs.” Nonetheless, they have readily and enthusiastically accepted the idea that free market economy is good for the society.

The development of a successful entrepreneurial society rests upon social acceptance of entrepreneurship and entrepreneurial activities. Positive developments on this front are worth noting in emerging economies. For instance, a survey conducted by YouGov, which was released in 2010, found that about 50% respondents in China and India believed that their societies were more welcoming of entrepreneurial activities compared to a decade ago.⁴

Responses of Policy Makers

In response to the demands of various forces and as their own priority, policy makers in most countries are directing efforts to encourage entrepreneurship among local communities and promoting the creation of entrepreneurial societies. They have realized the potential contributions of entrepreneurship to economic growth and development. According to the World Bank’s Doing Business 2018 report, between June 2016 and June 2017, 190 economies tracked by the World Bank undertook 264 business reforms. Among the most common reforms in 2016/2017 were those related to reducing the complexity and cost of regulatory processes to start a business and getting credit. These were followed by trading across borders.⁵

Young People’s Engagement in Entrepreneurial Activities

One of the most encouraging trends in global entrepreneurship in recent years is young people’s desire to be entrepreneurs and their engagement in entrepreneurial activities in emerging economies. For instance, according to the World Bank, 40% of Latin American youth have reported a desire to become an entrepreneur.⁶ Likewise, according to a survey conducted by the telecom provider Ooredoo in 2014, 83% of Qatari youth said they would like to be entrepreneurs.⁷ The proportions for other GCC countries were Saudi Arabia, 81%; UAE, 79%; Kuwait, 78%; Bahrain, 69%; and Oman, 69%. In other Arab countries, young people have demonstrated high levels of entrepreneurial inclination. For instance, according to a 2009 Gallup Poll conducted among Arab youth who did not own businesses, the proportions that were planning to start their own businesses “in the next 12 months” were 38% in Tunisia, Comoros, and Iraq; 39% in Djibouti; and 46% in Sudan.⁸

Likewise, at the time of starting their companies, the average ages of founders in Saudi Arabia’s fastest growing 100 companies were in the 30–33 years range in 2009 and 2010.⁹ These are big achievements for these countries, where entrepreneurship is a relatively new phenomenon.

While only 1.6% of Chinese college graduates started businesses in 2011, some young entrepreneurs have been highly successful. They have started many successful entrepreneurial ventures such as introduction of Disney movies to the country, efficient health care delivery, cutting-edge online games, and web applications.¹⁰

Various Types of Capitalism and Their Influences on Entrepreneurial Activities

Capitalism is the foundation of entrepreneurial opportunities. In capitalistic economies, the means of production are mostly privately owned and a market economy operates. That is, economic decisions are influenced by competition, supply, and demand. However, it would be erroneous to conclude that only one form of capitalism exists. There are a number of variations in the way capitalism functions across the world.

At least four prevalent forms of capitalism have been identified: (i) entrepreneurial, (ii) big firm, (iii) state directed, and (iv) oligarchic.¹¹ Entrepreneurial capitalism is characterized by the presence of high-impact entrepreneurs with radical ideas in which small, innovative firms play a major role. Note that high-impact entrepreneurs are people involved in launching and growing of companies with an above-average impact on the creation of jobs and wealth.¹² Some examples include the founders of companies such as Twitter, Uber, Apple, Facebook, Yahoo, Microsoft, and Google. These entrepreneurs possess capability to bring innovative products, services, and business models that meet marketplace needs. The U.S. is viewed as a fertile place for high-impact entrepreneurs due to its pro-private sector culture and a smaller state sector compared to Western European countries.

In a big firm capitalism, radical entrepreneurship tends to be absent and the economic growth is mainly driven by the government through the collaboration with big businesses. This form of capitalism is prevalent in Japan and some European countries. Japan has many innovative large firms, but the country has among the lowest per capita rate of entrepreneurial activities.

Some developing countries such as China have found state-guided capitalism as a way to achieve economic growth (Chapter 8). In such model, the government guides the market, typically by supporting few industries that are expected to perform well. For one thing, the deep entrenchment in the economy allows the Chinese government to intervene quickly and produce desired outputs. The cash-rich Chinese government has also been pressuring as well as providing a wide range of incentives for its firms to expand overseas.

In an oligarchic capitalism, a small group of individuals and families control the majority of the national wealth and power, in some cases with the support of corrupt politicians. This form of capitalism is thus associated with and facilitated by “politically embedded cronyism.”¹³ In this form of capitalism, entrepreneurs use political power, capital, and social networks to maximize economic rewards. That is, a small group of wealthy people tend to maintain a grip over the country’s economy, polity, and society.¹⁴ In some cases, oligarchic capitalism is characterized by a symbiosis of political and economic elites. That is, political elites such as rulers, elected officials, party leaders, and bureaucrats are also economic elites or successful entrepreneurs. In such a system, state incumbents may generate and maintain uneven distribution of property rights, which favor a few private actors. There tends to be a limited role of societal groups.

This system may serve as a tactic of survival for a ruling regime. In some economies such as Ukraine, powerful oligarchs tend to provide financial resources to the ruling elites, and in return, they exert a strong influence on government policies. For instance, three top oligarchs¹⁵ in Ukraine reportedly played key roles in supporting the former President Kuchma’s regime. Some developing economies in Asia (e.g., India), Africa, Latin America (e.g., Colombia), and the Middle East have also exhibited characteristics of this form of capitalism. Despite the existence of certain elements of a market economy and political democracy, this form of capitalism lacks a true market system.

Variation in Entrepreneurial Activities across the World

While the general trend discussed above suggests a growth in entrepreneurial ventures worldwide, significant cross-country variation exists in entrepreneurial success and a number of features of entrepreneurship. This section sheds light on some of the important international differences in various aspects of entrepreneurial opportunities, behaviors, and performance.

First, economies worldwide differ drastically in terms of their populations’ willingness to engage and actual engagement in entrepreneurial ventures as well as the nature of entrepreneurial activities pursued. For instance, only 0.18% of the population in Indonesia is engaged in entrepreneurial activities¹⁶ compared to about 7.5% in the U.S.¹⁷ According to a Global Entrepreneurshi...