Transcript An Introduction to Entrepreneurship and Public Policy

Entrepreneurship, Innovation and
Regional Economic Development:
Public Policy Issues and Implications
Professor Jay Mitra
School of Entrepreneurship and Business
University of Essex
Southend
Presentation for ELIOS Forum
‘Bulgarian Public Administration and the One Stop Shop
for
Productive Activities
Kempinski Hotel
Sofia, 23-24 January, 2006
©
Agenda

Entrepreneurship, Innovation and Economic
Development – significant association

Entrepreneurship, innovation and culture

Trends and Features of an entrepreneurial
and innovative economy – the idea of the
knowledge economy
Background

EU membership

Regional tensions and differences

Globalisation and internationalisation

Technology-orientation

Jobless growth in key sectors

Fragmented societies

The contribution of entrepreneurship and small firms
Entrepreneurship, Innovation and
Economic Development 1/5
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
Pre-1970s – focus on large firms (tax and other
incentives)
Strengthening large firms considered key to economic
backbone

1970s – David Birch & “ Job Creation in America: How
our Smallest Companies Put the Most People to Work

New and growing small firms – job creation, innovation,
and economic development
Entrepreneurship and Economic
Development 2/5

Global Entrepreneurship Monitor – average of 10% of adult population
starts new business

OECD growth project (1989-1994) – new firms represent significant source
of overall productivity (but not same across all industries)

OECD 2001 – 5% to 10% of employees affected by job new business
creation and exit

Small firms maximise utility of labour and capital (Robbins, et al, 2000)

Population of small firms help to attenuate trade-offs between employment
& inflation

SMEs are more innovative - flexibility
Entrepreneurship, Innovation and
Economic Development 3/5

Rates of enterprise creation differ widely across regions (birth rates
vary between 2 to 6 times, Reynolds at al, 1994)

Factors influencing variation include demographics, unemployment,
wealth, educational and occupational characteristics, prevalence of
small businesses, owner-occupied housing, infrastructure
endowment

Presence of large firms working with small firms promote
entrepreneurship and innovation

Enterprise creation is necessary but not sufficient condition of
regional growth (note differences between 1980s and 1990s –
former decade rate of business creation had no influence on
employment growth, but the 1990s did have positive correlation)
Entrepreneurship, Innovation and Economic
Development 4/5 : How Entrepreneurship affects
Local Economies?

Employment and incomes growth – close links to
place

Increases in tax revenue – highly variable
across regions and countries ( can be
accompanied by increased public spending)

Improved service provision

Demonstration and motivational effects
Entrepreneurship, Innovation and Economic Development
5/5 :
Barriers to Entrepreneurship & Innovation
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Limited social and business networks
Low levels of effective demand – savings and incomes
Value of housing
Constraints to access to finance
Lack of work experience and skills
Lack of role models
Lack f motivation
High crime rates
Sectoral clustering
Transition problems – from reliance on benefits
Government regulations
Cultural obstacles
Entrepreneurship, Innovation and Culture
1/3: Definitional Issues

Entrepreneurship = new opportunity identification &
realisation (for the purpose of this paper ‘E’ = new
business creation)

Innovation = successful exploitation of a new idea

Culture = a set of attitudes/beliefs common to a group

Culture = a set of activities concerned with moral,
aesthetic, and intellectual aspects of life (activities
include some element of creativity in production,
communication of meaning & intellectual property)

Culture = a diverse way of life (from beef steak to
Beethoven to Eminem)
Entrepreneurship Culture 2/3
Why an
entrepreneurship
culture?
What constitutes an
entrepreneurship culture?
What do citizens
want?
E = relationship with
economic growth (corelation of 0.7) & building
social capital
Growth in concentration of firms,
networks & linkages
A safer society
Best form of job creation
for yourself and others in
times of ‘jobless’ growth
Entrepreneurship lasts
longer than any functional
aspect of business
The way we live creatively
with change
A clean green
Higher levels of education, skills & environment
learning
Growth in intermediary
organisations to whom some
tasks are delegated, & in different
forms of entrepreneurship – new
firms, social entrepreneurship,
entrepreneurial culture
Direct influence of
internationalisation – technology,
human resources, capital &
information flows
More spending on
health & education
Caring communities
A well-performing
economy & growth in
business sectors
Style, design, culture
Entrepreneurship, Innovation and Culture 3/3:
Entrepreneurship and the wider public domain
Models of regional governance
Type of governance
Features
Regional managerialism
Regional entrepreneuralism
Mode of production dominating in the
world economy
fordism
post-fordism
Role of the State
important
less significant
Capital dominating in the coalitions of
power
capital tided to the local real estate
market
mobile capital of production and
services
Involvement of the capital in the local
coalitions of power
direct
indirect
Role of the local government in the
coalitions of power
forceful
weak
The prime aim of the local policy
effective management of the sources
competitive fight for the sources
Dominating scale of activities and
cooperative relations
national
international
The goal of local power execution
building the strong formal structures
of power
achieving the highest effectiveness of
activity
Dominating form of local power
execution
strong local government
effective local governance
Source: Sagan, 2005
Trends in Entrepreneurship
GEM Study 2004, Reynolds, P. D., Bygrave, W. D., Autio, E., & Others, a. (2003). Global
Entrepreneurship Monitor 2003 Executive Report. London: London Business School.
Winners and Losers
Source: OECD’s Growth Report, “The New Economy: Beyond the hype” 2001;
Tanaka, 2005.
Reason was ICT use: Pick-up in MFP growth and
increase in ICT use
Change in PC intensity per 100 inhabitants,
1992-99
50
United States
Greenspan
noticed US
productivity
growth in
late 1990s
came from
ICT use.
40
Sweden
Norway
Denmark
Australia
30
Netherlands
Canada
New Zealand
United Kingdom
20
Japan
France
Germany
Belgium
Finland
Ireland
10
Italy
Spain
0
-2
-1.5
-1
-0.5
0
0.5
1
1.5
Change in MFP growth corrected for hours worked
Note: Change in multi-factor productivity growth corrected for hours worked, average 1990s minus
average 1980s.
Source: OECD, Tanaka, 2005
GDP per capita levels and growth rates:
gap vis-à-vis the US
New Winners and
Losers
US
US
Going for Growth – Economic Policy Reforms (2005), OECD; Tanka, 2005
OECD Service Study
The contribution of services to OECD economies is growing
(share of services in total employment, 1970-2002, in %)
80
75
Canada
70
France
Germany
65
Italy
Japan
60
UK
USA
55
Finland
50
Source: OECD STAN Database, 2004
Tanaka, 2005
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
45
OECD Service Study
Services now account for almost all employment
growth … Contribution to aggregate employment
growth, 1990-2002, percentage points
5

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Other services
Manufacturing & other industries
4
in percentage points
3
2
1
0
Finland: growth in services does not compensate
loss in manufacturing
Growth in market services employment is dismally
low
Luxembourg
Ireland
Korea
Netherlands
Germany
New Zealand
Canada
Australia
Slovak Republic
United States
Spain
EU
OECD
Portugal
France
Italy
United Kingdom
Austria
Greece
Poland
Norway
Belgium
Hungary
Japan
Sweden
-2
Denmark
-1
Finland
Source: OECD STAN Database, 2004
Tanaka, OECD, 2005
Market services
OECD Service Study
… and for a considerable share of productivity growth
Contribution to aggregate productivity growth, 1990-2002,
percentage points
Total services
Manufacturing and other industries
4.5
in percentage points
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Ita
ly
Au
s tr
Ne
ia
wZ
ea
la n
d
Be
l giu
m
Ja
pa
Lu
n
xe
mb
ou
rg
Po
rtu
ga
l
Ko
rea
Ge
rm
an
y
Hu
ng
ary
De
nm
a rk
Fin
l an
d
Ca
na
da
No
rw
ay
Sw
ed
en
Au
s tr
ali a
Un
i te
dS
Sl o
tat
va
es
kR
ep
ub
lic
Gr
ee
ce
P
Un
ol a
i te
nd
dK
i ng
do
m
Sp
a in
Fra
nce
Ne
the
rl a
nd
s
0.0
Source: OECD STAN Database, 2004
Tanaka, OECD 2005
Labour market reform creates new employment
opportunities in services
OECD Service Study
Employment/population ratios in services and for women, 2002
Employment/population ratio in services, persons
aged-15-64 (%)
75
Sweden
Norway
Denmark
Switzerland
70
Netherlands
UK
US
New Zealand
Canada
Finland
65
Austria
60
Ireland
Australia
Portugal
Germany
France
Japan
55
Slovak Republic
Korea
50
Belgium
Luxembourg
Hungary
Poland
45
Spain
Greece
Italy
40
30
35
40
45
50
55
60
Employment/population ratio for women aged 15-64 (%)
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Labour force participation by providing jobs that are
needed to attract new worker groups
For example, high employment in services goes
hand-in-hand with high employment for women
65
Tanaka, 2005
25
ICT-using services have shown more rapid productivity
growth in some OECD countries
(contribution to average labour productivity growth, in
per cent)
1.4
1.2
Countries where productivity growth improved
1996-2002*
Countries where productivity growth
deteriorated
1.0
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4

Ita
ly
er
m
an
y
Fr
an
ce
G
Ja
pa
Ze n
al
an
d
ew
N
U
ni
te
d
St
at
es
Au
U
s
ni
te tral
i
d
Ki a
ng
do
m
Ire
la
n
Sw d
ed
en
C
an
ad
a
D
en
m
N
a
et
he rk
rl a
nd
s
Fi
nl
an
d
Sp
ai
n
N
or
w
ay
Au
st
ria
Ko
re
a
-0.6
But this effect has remained relatively
modest in Finland
Source: OECD, STAN Database, September 2004,
Tanaka, 2005.
OECD Service Study
1990-95
Ireland’s case:
Success of Comprehensive Strategy for Growth
Its Implication for Regions v.s. Nation States
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Education reform to create skilled workers ( English
speaking and relatively low-cost )
Trade Liberalization to enter EU in 1973
Attract Foreign Direct Investment in manufacturing ( tax
incentives ) and subsequently in services
Regulatory reform
Invest in R&D by Higher Education as well as Foreign
Business
National = Regional Strategy in the expanding EU
Regions link each other beyond the Nation States. Tokyo,
Beijing, Shanghai, Dalian, Hyderabad, Silicon Valley,
San Jose, Austin, Catalonia, Langedoc-Roussillon,
Trentino etc
Japan’s case
Source: Tanaka, 2005
Illustrative Image of Structural Reform “Special Zone”
“Special Zone” for Education
- where private entities including profit-making companies are allowed to establish and
run formal educational institutions, while only non-profit specially-permittedjuridical-persons are currently allowed in other regions.
“-Special
Zone” for Medical Services
where
private entities including profit-making companies are allowed to establish and
run hospitals to give medical services of a certain kind, while only non-profit
specially-permitted-juridical-persons are currently allowed in other regions.
- - where foreign engineers, tourists, students can obtain visas more easily and/or longer
“Special
Zone”
International Integration
than in
otherfor
regions.
e.g.. IT engineers’ can stay for 5 years instead of 3 years.
eg. The limit for the number of foreign workers whom each company can employ for the
training purpose is eased.
Others include:
Agriculture
International Transportation
Local Government Restructuring
Welfare
New Energy Source and Recycling
Eastern European Environment
Source: Sagan, 2005
Features of an Entrepreneurial
Economy

Growth in service industries

Labour productivity

Use of ICT

International linkages

Clean and healthy environment

High levels of skills

High levels of R&D investment

Presence of institutions

Social Capital
Territorial
actors
Firms
Factors of
Regional Competitiveness
Finland,
Sweden
Networking activities among local firms
Managerial skills
International openness / export orientation
Entrepreneurship
University
Presence
Industry-university linkages
Spin-off activities from university
Institutions
Access to private financing (banks, venture
capital)
Other private business support services
(consulting firms)
Availability of public financing / tax incentives
Other public business support services
(development agencies)
Source: unidentified review paper
Cambridge
Ireland, Wales,
Scotland
One Stop Shop Recommendations for the
development of an Entrepreneurial Culture
Finance
Innovation &
Internationalisation
•
Move to scale
•
•
Tackle
innovation support
knowledge-
weaknesses in
beyond high
intensive and high
business support
technology
value-added
•
Leverage the
•
Extend
Labour & social
issues
•
Increase effort on
Promote
entrepreneurship
SME
•Promote
internationalisation
enterprise
refresh the
(inward & outward
education & stress
evidence base
investment;
higher level skills
internationalising
development
institutional
•
practice
community-based
expertise further
•
Maintain and
•Pursue
finance
innovations
•improve
take up
of innovation
Promote
initiatives
Policy Framework
• Appoint
‘primary
points of contact’
• Apply
a
consistent client
interaction model
Segment the
business base
•
•
•
Build an on-line
portal of available
assistance
Use role models
and case studies
•
Increase
knowledge of
where
entrepreneurs
come from
•
Contact
Professor Jay Mitra
 Head of School of Entrepreneurship and
Business
 University of Essex
 Southend
 E-mail: [email protected]
 Tel: + 44 (0) 1702 238649
 Fax: + 44 (0) 1702 238659
