What about the Bottom Billions and Business Creation?!

What do people do when they are poor, hungry, and desperate? Some among the bottom billions pursue dangerous migration across oceans, deserts and jungles, the young and beautiful may get  trapped into prostitution, others join criminal gangs or pirates, a few pursue terrorism to make their mark, and suicides are not unknown. A small businessman’s suicide initiated the Arab Spring revolution. Improved national institutions, more attention to these billions as corporate customers, and an enormous range of charitable programs have been proposed to ease the situation of the bottom billions. A recent emphasis has been to promote high growth firms in poor countries, assuming they will provide jobs for the poor at the bottom.

But the vast majority of the bottom billions are not waiting for outside help; they are engaged in business creation. It has only recently been possible to determine the scope of these efforts to participate in market economies by providing legal goods and services. Harmonized surveys of adults in over 70 countries identifying those active in business creation have been completed since the year 2000; these representative samples represent three fourths of the global population.

Among the four billion adults in their work years (18-64 years old), over 200 million are in the start-up phase of firm creation and another 250 million are managing a new firm. Almost half of these entrepreneurs have emerged from the 1.8 billion living on less than $15 per day. They are concentrated in developing countries in Latin America, Africa, and the Middle East; half are located in Asia, with a massive presence in China and India.

Many of these efforts are small scale replications of existing activities, such as another carpenter or seamstress offering their services. A substantial minority, however, plan to grow, export, have an innovative impact on their markets, and operate in high technology sectors. The poor are responsible for about half of all new firms and one third of new firm jobs in the world. A few create substantial businesses with a global reach. Collectively they are a major source of job creation and economic adaptation.

While men tend to be more active among those from wealthier households, there is gender equality in firm creation among the bottom billions. Those with energy and optimism, young adults under 30, are the most involved, and the least active are those over 55. Regardless of their economic status, those with more education, who identify good business opportunities, have confidence in their entrepreneurial abilities, and know others starting businesses are more likely to be involved.

These efforts are facilitated in countries where informal financial support is available and national values emphasize self-reliance, personal responsibility for household wellbeing, and self-expression. While “business friendly” agencies and regulations can ease the pain of firm creation, this impact is less significant.

It has been estimated by the International Labor Organization that between 2007 and 2011 the world lost 80 million jobs, 53 million in the developing world. If half of 100 million bottom billion start-up ventures were able to create a job for their owner and one employee, this would more than offset these recent job losses and dwarf the contributions of from several thousand few high growth firms.

While micro-finance programs are making a contribution to assist these nascent entrepreneurs, an expansion of access to secondary education, training in business skills, and formal recognition of these emergent firms would have a major impact. More serious attention to this mass of nascent entrepreneurs could do much to improve indigenous job growth and reduce the human and social cost of dangerous migration, criminal activity and terrorism.

Panel Session at forthcoming ICSB conference in Washington DC – Oct. 11th-13th

complete article: http://www.nowpublishers.com/product.aspx?product=ENT

written by: Paul D. Reynolds
email: PaulDavidsonReynolds@gmail.com

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Resolving the Disconnects Between Academics and Practice in Entrepreneurship

Resolving the Disconnects Between Academics and Practice in Entrepreneurship
Dr. Suresh U. Kumar (email: drkumar@email.phoenix.edu)

During the past few years, as an entrepreneur and a doctoral researcher, I had the unique opportunity to straddle the worlds of practice (founding Inc 500/5000 ranked firms) and academics (education research, and outreach) in the field of entrepreneurship. In mid 2008, driven by intellectual curiosity and the excitement of new learning, I went about exploring what lay at the intersection of the worlds of academics and practice. Since the United States has been the leading economy in the world for several decades now, prior to my study I had assumed that there would be a high degree of interplay between the world of academics and practice. To my great surprise I discovered how loosely connected (or disconnected) the two worlds were from each other. While there are many parts and players, large and small, involved in the complex yet highly evolved entrepreneurial eco-system of the United States, this article highlights some of the gap that exists between the worlds of academics and practice in the field of entrepreneurship.

The Entrepreneurial Eco-system in the United States: For those who are not fully conversant with the entrepreneurial eco-system in the United States, it will help to get an overview of the key players. Among the well-known government agencies and organizations that have entrepreneurship development as one of their primary objectives are the U.S. Department of Commerce, the U.S. Small Business Administration (SBA), and the state/county/township level Economic Development Authorities (EDA’s). There are several well known foundations such as the Kauffman Foundation and the Coleman Foundation that play important roles in promoting entrepreneurship. There are hundreds of reputed universities, business schools, community collages, and centers of entrepreneurship all over the United States that teach, conduct research and promote entrepreneurship. The premier associations that represent academic institutions include the Academy of Management (AoM), the U.S. Association for Small Business and Entrepreneurship (USASBE) – the U.S. affiliate of the International Council of Small Business (ICSB), and the National Association for Community College Entrepreneurship (NACCE). Advocacy organizations such as the U.S. Chamber of Commerce, various state and city chambers, and the National Federation of Independent Businesses (NFIB) play important roles in the formulation of policy related to small business and entrepreneurship. The more recent and fast growing part of the eco-system is represented by social and professional networks of successful minority and immigrant groups such as the Indus Entrepreneur (TIE) for South Asian Americans and the Monte Jade Science and Technology Association of Greater Washington for Chinese Americans. Popular national and regional media outlets such as Inc. magazine and Entrepreneur; publishing houses, and a host of blogs/ social media outlets are heavily invested in supporting and promoting entrepreneurship. Put together all these organizations, along with thousands of others that has a secondary focus on entrepreneurship, play vital roles in the development, education, research, advocacy, outreach, and in provide networking opportunities for entrepreneurs.

The Disconnect: As previously stated, I limit my observations to the world of academics and practice in the field of entrepreneurship. Many major academic and practitioner organizations such as AoM, USASBE, INC, and TIE conduct large annual conferences for their members. My experience attending some of the events has been that, barring a few exceptions, there is very little by way of strategic dialogue and sustainable partnerships between academic and practitioner organizations that tie in practice, research, education, advocacy and policy in meaningful ways. I have found that organizations charged with fostering the practice and education of entrepreneurship, at least for the most part, operate in silos that separate entrepreneurs from educators and researchers. For example, academic conferences that are focused on entrepreneurship organized by USASBE and ICSB are attended just by a handful of practicing entrepreneurs, usually those who have a recent success story and have been invited to speak. The reasons? (a) there is hardly any outreach by academic conferences to entrepreneurs, (b) entrepreneurs have busy schedules and select events where they can get proven and practical ideas that could address they immediate concerns and have can be applied to their businesses, not abstract research finding, and (c) entrepreneurs and the organization that represent them often lack the training to find and see the relevance in academic research that could contribute to better decision-making. The disconnects are amplified as you go down the line to state and local organizations.

I have invited some of my entrepreneur friends to attend academic conference and the response almost every time has been some version of either “How will it benefit me?” or “I don’t know anyone there”. Having being part of the doctoral consortia of USASBE and ICSB, I can testify that there are plenty of excellent mentoring and learning opportunities for researchers at academic conferences. However, the value proposition for practitioners is not the same as for the majority of the papers presented at academic conferences the practical applicability is suspect. Why? As was brilliantly argued by William Bygrave, Ph.D., (2007), professor emeritus of Babson Collage, one of the most highly regarded expert in entrepreneurship in the United States, I found that the primary reasons are the use of improper datasets (examples: mom and pop business thrown in with high-growth businesses; or findings from VC funded firms, which are relatively few in numbers used to make broader generalizations), widespread use of secondary data, research models based on weak theory, research questions that are irrelevant, and use of esoteric quantitative techniques that is for the most part far removed from the reality of what actually happens inside the complex and chaotic world of start-up’s. According to Dale Meyer, Ph.D., (2011), professor emeritus at the University of Colorado, the academic field of entrepreneurship is “stalled” due the use of econometric methodologies and secondary databases that “distance researchers from actual people and behaviors that catalyze entrepreneurs and entrepreneurship” (p. 7). Truth be told, having sat through over 25 research paper presentations, including many award wining ones, barring a couple of notable exceptions, there has not been many  ‘takeaway’s’ that I could apply to my business. And remember, I was the one who went to the academic conferences actively seeking research findings I could apply to my study and practice.

On the practitioner organization side, over the years, I have attended many events and annual conferences such as the Americas Small Business Summit organized by the US Chamber of Commerce, Tie-con of TIE, and the annual Inc. 500/5000 Conference by Inc. magazine. At each of these events I was hard pressed to find well respected experts from research and academia. The reasons for this missed opportunity? (a) there is hardly any outreach by practitioner organizations to the entrepreneurship educators and researchers, (b) majority of the organizations representing practitioners stick with a narrow agenda that is designed get the immediate attention of their membership at the cost of addressing long term systemic issues that are supported and validated by painstaking research, (c) educational institutions do not give tenure credit to researcher who conduct workshops, do research, or speak at non-academic conferences, (d) universities and business schools do not reimburse researchers the fee and expenses for non-academic conferences. So why would a researcher with limited time and resources who has the tenure sword hanging over his or her head, attend a practitioner conference? The irony is that practitioner conferences are attended by large numbers of entrepreneurs and has the potential to be rich sources of collection of raw data and can serve as excellent testing labs for theory.

Some Suggestions for Bridging the Gaps: Based on my personal experiences, I propose a few recommendations for bridging the gaps between academics and practice in the field of entrepreneurship: (a) practitioner conferences should take the lead in shifting the paradigm of conference agendas to incorporate cutting edge research and by inviting academic experts and organizations, (b) academic conferences should have more workshops devoted to practitioner oriented research that emphasizes field studies and case studies of entrepreneurs and their ventures, (c) given the applied nature of entrepreneurship a strong case can be made for the presentation of a workshop or research paper at a practitioner conference counting towards tenure credit. I cannot think of any thing more important that a researcher can do than informing and improving practice and in fact, given the opportunity, many researchers I have met really want to. This of course is easier said than done as it will necessitate getting various accreditation intuitions onboard so that the proposed changes are credible, systemic, and sustainable, (d) reserving few seats at national conferences and other events at discounted fees on a reciprocal basis so as to encourage participation from both sides, (e) practitioner and academic institutions can work together to co-develop specially tailored experiential learning programs for entrepreneurs and educators, that incorporates critical contextual factors like human capital, nascency, ethnicity, minority/immigrant status, industry expertise, culture, and social/professional networks, and (f) more applied approaches to developing research-based knowledge that team researchers with entrepreneurs with the objective of making research questions and methods grounded in reality and therefore more relevant to policy and practice.

Entrepreneurship Education: Challenges and Solutions: A related area of concern is about how entrepreneurship is being taught at schools and universities to students who have an interest in the topic, some of who would eventually end up as practitioners or educators or policy makers. Several experts have raised questions about the effectiveness of teaching methodologies currently used in the classroom. Carl Schramm, Ph.D., President and CEO of the Kauffman Foundation, one of the foremost thinkers on entrepreneurship and economic policy, has questioned the usefulness of business plans and case studies as teaching tools and has contended that what is being taught at our schools and universities has very little relevance to the real world in which entrepreneurs work. Schramm (2011) has called for a “New Learning in Entrepreneurship” that will entail re-thinking what is taught, how it is taught, and to whom, when, and where. The widespread use of education models that are based on entrepreneurship as a linear process has been called to question by Norris Krueger, Ph.D., of Entrepreneurship Northwest, one the pioneers of research into entrepreneurial cognition. According to Krueger (2007) education should focus on constructivistic methods such as field studies and teaming with real entrepreneurs.

The applied nature and the social impact of entrepreneurship education demand a close collaboration between educators, researchers, practitioners and policy makers. Acknowledging the limited utility of current approaches to entrepreneurship education in an unpredictable world, Heidi Neck and Patricia Greene (2011) of Babson Collage has recommended new approaches that emphasize methods that involve applying, using, and acting. According to Per Davidsson (2002), entrepreneurship professor at Queensland University of Technology, Australia, putting research-based knowledge in business to better use requires academics who care about practice in the ways they source their research questions and disseminate their results. My research on high-growth Asian American immigrant high-tech entrepreneurs (Kumar, 2011) indicated that successful entrepreneurs have an intuitive way of learning from prior experiences and gaining entrepreneurial expertise quickly. Entrepreneurs, especially those with high human capital, if equipped with the proper theoretical foundation using online and just-in-time learning programs (Schramm, 2011) made available by business schools and centers for entrepreneurship, working in collaboration with researchers, could play an important role in finding solutions to some of the challenges discussed in this section.

Conclusion: Despite the rapid growth experienced by the academic field of entrepreneurship and the practice of entrepreneurship as two distinct endeavors, the challenges faced at their intersection are deep and multifaceted. It can be reasonably argued that the primary focus of academic and practioners organizations is different. My response is that if the end goals of organizations, regardless of academic or practitioner focused, are more or less similar, then organizational leaders have the responsibility to ensure greater collaboration. While there may not be a one size fits all solution, it is critical for academic and practitioner organizations and their individual members to explore avenues for collaboration to find out what works and what does not. To advance the field of entrepreneurship the internal disconnects discussed have to be addressed.

The good news is that the solutions to some of the challenges highlighted in this article are already emerging from institutions that have leaders who think like entrepreneurs do. Some examples that I have come across are: (a) Kauffmans practitioner oriented programs such as Labs and Education Ventures, where carefully screened entrepreneurs who are ready to start their ventures are mentored and provided with the coaching and tools needed to grow rapidly scaleable firms; (b) the Startup Weekend – a 54 hour hands-on iterative experience that brings together aspiring entrepreneurs with experienced mentors to share ideas, build teams, and launch startups; (c) Babsons flagship Symposia for Entrepreneurship Educators’ (SEE) that pairs educators and entrepreneurs in cross disciplinary teams that combines entrepreneurship theory and practice in teaching; (d) the Experiential Classroom organized by Oklahoma State University which retools teachers new to entrepreneurship with the best educational practices; (e) the 3E-Learning exercise run by the George Washington University that is designed for educators, practitioners and researchers to collaborate on new ideas, new knowledge, and new skills. In particular, some of the initiatives taken by Kauffman and Babson Collage to collaborate directly with well run and highly networked practitioner organizations such as Inc. and TIE hold great promise and must not only be enhanced and accelerated, but also reciprocated.

In order to capture the richness and the subtle intricacies of a complex, nonlinear, and disjointed social phenomenon such as entrepreneurship, a broad nationwide policy framework is needed that promotes collaboration and information sharing. A need exists for the cross-pollination of ideas and best practices between the various government agencies, foundations, universities, chambers of commerce, media outlets, and other independent organizations that represent and promote entrepreneurship. I am greatly encouraged by the creation of such as forum at the Future of Entrepreneurship Education Summit (feesummit.com) sponsored by Kauffman Foundation and organized by Extreme Entrepreneurship Education which is scheduled to be held at DC in November 2011. For an applied field such as entrepreneurship that some experts think is still in its infancy, a need exists for collaborative approaches that will further the understanding of the antecedents of successful entrepreneurship and how it is practiced.  For the framework to be relevant to practice, the individual entrepreneur must have a central role within it.

Note: Dr. Suresh Kumar is the founder of INC 500 ranked firms Green Earth LLC and NexAge Technologies USA Inc. His doctoral research study titled “The Linkages Between Cognition, Behavior, Culture, and Opportunity Among High-growth Asian Indian Immigrant High-tech Entrepreneurs” has been presented at various international academic and practitioner conferences. Contact: drkumar@email.phoenix.edu; website www.drsureshkumar.net


Bygrave, W. D. (2007). The entrepreneurship paradigm (I) revisited. In H. Neergaard and J. P. Ulhoi (Eds.), Handbook of qualitative research methods in entrepreneurship (pp. 17-48). Cheltenham, UK: Edward Elgar.

Davidsson, P. (2011) Putting business research to practice. Brisbane Business News, 2011 Annual Edition, Brisbane, Australia.

Krueger, N. F. (2007). The microfoundations of entrepreneurial learning and education. In E. Gatewood & G. P. West (Eds.), The handbook of university wide entrepreneurship. Cheltenham, UK: Elgar.

Kumar, S. (2011). Linkages between cognition, behavior, culture, and opportunity among high-growth Asian American immigrant entrepreneurs. Accessed online on July 25, 2011, from http://www.drsureshkumar.net/suresh/DoctoralStudy.aspx

Meyer, G. D. (2011). The reinvention of academic entrepreneurship. Journal of Small Business Management, 49, 1-8.

Neck, H. M., & Greene, P. G. (2011). Entrepreneurship education: Known worlds and new frontiers. Journal of Small Business Management, 49, 55-70.

Schramm, C. J. (2011). The “new learning” in entrepreneurship. Ninth anniversary address, Ewing Marion Kauffman Foundation, Kansas City, MO. Accessed online on July 30, 2011, from  http://steveblank.files.wordpress.com/2011/05/kauffman-9th-anniversary-speech-041511.pdf

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A Family Venture around the World: A real life learning experience

by Oyvin Kyvik

According to my wife, on our second date I told her that I had a plan…… a plan to travel around the world.

Growing up in a Norwegian family where my father, an engineer and entrepreneur with business interests in a range of industries related to the sea, I was early made to understand that the smell from the local fish processing factories was the “smell of money” and given the impression that all males in the family had been to sea for a period at least once in their lifetime. Conversations in family get-togethers were speckled with stories from ports around the world, technical- and navigational problems, risky explorations……… Money made, but also money lost. The ambience was business-oriented, entrepreneurial and international.

Based on this family and cultural setting, when my own children were small, I told them self-made short-stories about how “Ola”, a young chief mate on a Norwegian freighter, faced challenges and solved the difficulties he encountered on his travels around the world. These were also stories with ethical and moral undertones emphasizing the importance of a quick mind, decision-making and strong virtues. Over time these stories simply converted themselves into the scaffold of the dream of once making a travel around the world together. This travel – “A Family Venture around the World – a real life learning experience” – will commence in June 2011 – http://elworldtrip.com/.

Admittedly, we are not the first family making a trip around the world. However, we distinguish ourselves by doing it with 4 adult or semi-adult children (between 15 and 20 years of age), doing part of the tour using our old Toyota, appropriately equipped for the venture of passing through North- and South America, before we continue backpacking through Asia. Our project is also different by its objective of active real life learning and converting this into a platform for teaching entrepreneurship, internationalization and intercultural understanding. The 3EP Challenge Report offers a more extensive description of the project, its preparation and planned execution.

Our “Family Venture around the World” is a real international entrepreneurial project and as such serves to illustrate the intellectual and cognitive process from idea, evaluation of resources and capabilities to actual decision to go ahead and implementation. In addition, as our venture progresses, we will add empirical experiences as storytelling filled with anecdotes, impressions and emotions, perceptions from interviews, videos and photographs. There will be a story to tell – a story about entrepreneurship, a story about intercultural understanding, a story about solving navigational and technical problems and stories not the least about personal experiences as perceived by the different members of the team.

The itinerary of our project with estimated times of arrival are as follows:

Date Country City
28/06/2011 DURBAN
03/07/2011 CAPE TOWN
08/07/2011 USA NEW YORK
12/07/2011 WASHINGTON DC
20/07/2011 CHICAGO
04/08/2011 SAN FRANCISCO
04/12/2011 ECUADOR QUITO
02/02/2012 Sao Paulo
12/03/2012 SINGAPUR
20/04/2012 GOA

We would very much appreciate an opportunity to present our project and our story at ICSB-member institutions along the route or at any other organization or association which might be inspired!

May be we meet at your university or business school?

Hasta la vista,



Please click here to view the 3EP Challenge Report

Please click here to view the elWorldTour Presentation


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Seven Years of a Best Paper Award for Women’s Entrepreneurship Research: What Have We Learned?

by Julie R. Weeks and Susan Duffy

In 2003, the International Council for Small Business (ICSB) and the National Women’s Business Council (NWBC), a Federally-funded public policy advisory body established in the US in 1989, joined forces to offer a best paper award for research focused on women’s enterprise development. The award is now in its 8th year, and the International Journal of Gender and Entrepreneurship (IJGE), which has cosponsored the award since its launch in 2009, asked us what we’ve learned through this award.

Our reflections have been published in an article in Volume 3, No. 1 of the IJGE, which you can access HERE. (URL: http://www.emeraldinsight.com/journals.htm?issn=1756-6266&volume=3&issue=1&articleid=1915637&show=abstract&PHPSESSID=rtla9r9bsa7q1g1l3v8bgdk0v6)

So, seven years on, what have we learned?

First, although this award started out with a different twist, and remains unique when compared with other best paper awards – in that it requires that the paper focus, in an integral way, on practical outcomes and implications for policy and practice – all of the awardees thus far have been researchers from academic institutions. This may speak to a need to have a more proactive focus on attracting practitioner papers.

The geographic focus of the papers, while national, has been wide-ranging, from the United Kingdom and Ireland to countries in Africa, Asia and North America. The subjects, too, have been wide-ranging – from the impact of public sector support on the growth of women-owned enterprises and a societal view of the growth of women-owned firms in an Islamic culture , to a case-study perspective on how technology incubators can be decidedly gender unfriendly. While they don’t fit neatly into a pattern, the papers are – as time goes on – tackling broader and more growth-focused topics.

The papers are all available on the ICSB’s Women’s Entrepreneurship page, at  http://www.icsb.org/wec.asp

What about the award process itself? First and foremost, the collaboration has been a success: Interest in the award is growing, and the share of women’s enterprise-focused papers that contain a focus on policy and/or practice is on the rise. Second, the addition of a journal focused on gender and entrepreneurship, which also contains practitioner-targeted content, is of great benefit. But certainly more can and should be done to increase communication about the award itself, and about the lessons learned from the research receiving the award recognition.

In particular, we’d like to see more submissions from ‘practitioners’: people working in women’s enterprise development policy or program delivery. How can we reach more of them, and convince them to take the time to summarize and share what they are learning in their work? This is a question that goes beyond women’s enterprise development, certainly, to the entire entrepreneurship community. Building bridges from research and education to policy and practice has been an integral goal of the ICSB since its inception – so we all have a vested interest in this issue. Ideas anyone?

Julie R. Weeks is President and CEO of Womenable, a research consultancy that works to enable women’s entrepreneurship worldwide. She is on the editorial board of the IJGE, the board of ICSB, and was the Executive Director of the NWBC when the best paper award was established. Susan Duffy is Assistant Professor of Entrepreneurship at Simmons College in Boston, MA, USA, and currently serves as the ICSB Senior Vice President of Membership and Affiliates. They can be reached at jweeks@womenable.com and susan.duffy@simmons.edu.

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Egypt – Pressures for Change

The Will of Life

If the people will to live
Providence is destined to favourably respond
And night is destined to fold
And the chains are certain to be broken
And he who has not embraced the love of life
Will evaporate in its atmosphere and disappear
Abu al-Qasim al-Shabi

As an Egyptian-American just returned from Cairo I have been witnessing firsthand the unrest in Egypt.  I have watched people in the streets clashing with the police and security forces. Pundits, print and video media, journalists and experts have categorized the events in Egypt as an uprising or a revolution against President Hosni Mobarak’s long-term rule. I would like to offer another assessment of the situation. What is happening in Egypt is not just a revolution.  It is the result of socio-cultural change that has been in motion for longer than the 30 years reign of Mobarak. This change has been amplified by the development of social media like twitter, facebook, and blogs. The Jasmin Revolution in Tunisia, an apparently uncoordinated and unanticipated mass action, represents the first explosion of change, sending a wave of hope throughout the Arab nations and a corresponding wave of fear among the rulers of those nations.

The initial phase of the change I refer to is seen in population growth in the less-developed nations and regions, including (but not limited to) much of the middle-east.  The result is that at the beginning of the 21st century there were more than one billion young people between the ages of 15 and 24.  They represent just under 20 percent of the world population but more than 40 percent of the unemployed.  At least 85 percent of these young unemployed people live in developing countries.  A recent UN World Youth Report pointed out that the solution to youth unemployment is typically seen as centered on education and social integration.  But this strategy may simply result in increased numbers of qualified and willing potential employees who have no jobs, as in Tunisia—and Egypt.  Throughout the Arab world, and in Egypt, young people are finding that their educational achievements do not lead to jobs, not just good jobs but any jobs.

An approach to youth unemployment is to promote economic growth and consequent new job creation. But even though Egypt’s 8% GDP growth rate is the envy of Americans, it is not enough to create the technologically-advanced jobs needed to employ all the trained university graduates being turned out every year.  This should not be a surprise.  Theory tells us and research confirms that lasting economic development as well as the degree of job creation needed to address problems of youth unemployment depends on more than just starting up another grocery store or another shop that makes signs to order. The real engine of GDP growth—and new jobs—is innovation. And crucial to innovation is the role of the entrepreneur.

Starting up small businesses—and sometimes growing them into larger firms—is an important aspect of job growth, but entrepreneurs generate economic growth and development on a much larger scale.  They create new industries, like Bill Gates or Steve Jobs.  Like Ted Turner, they fuel the process of what the European economist Joseph Schumpeter called “creative destruction”.  In Egypt, the concern of the government is not starting new businesses and or ventures but to employ people in bureaucracies. Their Competitiveness Strategy report that I reviewed while in Cairo had an objective of creating one million new jobs. I asked them what is their strategy in creating new businesses to help support the one million job creation mark and their answer was muted.

It was only twenty years ago that Dave Birch of MIT discovered that a major source of new jobs was new firms; it has now been found that that new firms create about half of all new jobs in advanced economies;  expansion of existing firms create the other half. New firms not only play a major role in economic adaptation and change, but they provide a major opportunity for personal economic advancement. Almost 6 million Egyptians are actively trying to create new businesses; most of them are under 30 years old. It is not clear that the Egyptian government has recognized the entrepreneurial engine as a major source of job creation; it does not seem to be part of their Competitive Strategy.

Over the past year I lectured at various public and private universities in Egypt.  I emphasized the importance of integrating entrepreneurship education into  university curricula. As Executive Director of the International Council for Small Business, a multi-national NGO representing more than a dozen national affiliates, I met with the Minister of Higher Education, who understood the importance of entrepreneurial education.  We signed an agreement, involving ICSB’s Egyptian affiliate, to start implementing the new curriculum. However, long before the project would be in the implementation phase he had to resign, along with the rest of the cabinet.

On my most recent visit, in Cairo last week, I met with the president and top leaders of Nile University.  I asked the director of venture capital at a major bank, one of the university’s private sector advisers, whether he supported the creation of entrepreneurship incubation centers within the university, to help students with innovative ideas start their own entrepreneurial businesses. He told me that such a program could not be done in Egypt, that it would violate cultural norms. I pressed him to explain why he ignores young entrepreneurs, who have few sources of help in implementing innovations.

The failure of individuals in business and education to aid in the development of young entrepreneurs, in effect dismissing their efforts as culturally unacceptable, not only hampers the sort of innovation that leads to fast job growth, it leaves Egyptian young people very angry.  They see themselves as excluded from the economic life of the nation. And we now see a lot of this anger expressed on the streets of Egyptian cities.

Throughout the world economy there is concern with finding new ways of economic growth in order to provide good jobs for the large proportion of unemployed youth in less-developed sectors.  But without entrepreneurial innovation, economic growth—even at a level that Americans would envy—is far too slow to meet the needs of countries with large and increasing numbers of educated (and relatively less-educated) youth.  Entrepreneurial innovation drives growth, and open innovation has the potential to dramatically increase GDP growth and economic development by accelerating the effects of innovation.

Entrepreneurs in high growth industries substantially change not only the world economy but also change the daily life of citizens. Entrepreneurial innovation activity has and will continue to introduce monumental changes in the day-to-day lives of human beings. Leaders everywhere must be encouraged to revisit this history. Top level government and private sector leaders must not only support education and training.  They need to emphasize entrepreneurship and innovation to address the problems of youth unemployment and job scarcity crisis.  Only then will the pressure of these problems be directed productively rather than to revolution.

blog written by: Ayman El Tarabishy

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When are firms born?

Paul Reynolds
Howard Hoffman Visiting Scholar
George Washington University
Co-Principal Investigator, US PSED II
Founding Coordinating Principal Investigator, Global Entrepreneurship Monitor
Everybody has seen the framed dollar bill over the cash register of a small business. The founding team clearly considers the first sale an important milestone in the life of their firm. The importance of new firm to economic growth has led to the development of two major research programs. The first, the Panel Study of Entrepreneurial Dynamics [PSED], involved locating those actively involved in business creation and tracking their efforts until they either gave up had an operational new firm. The second, the Global Entrepreneurship Monitor [GEM], involved identifying those active in different stages of firm life course, either working on nascent ventures that were not yet operational or owner-managers of operational new firms.

Analysis of data from both projects requires a distinction to be made between ventures or efforts prior to a firm birth and those after a firm is created. This has identified a central problem; there is no widely accepted criteria for this transition—the birth of a new firm. At least four different approaches have been identified.

Initial business registrations as defining the transition from start-up to an operational new firm has been a popular choice, as it is convenient to obtain lists of new entries in a credit agency file, such as Dun and Bradstreet, or new members of a trade association, or newly incorporated firms, or newly acquired Employer Identification Numbers [EIN] or even new ‘fictitious” business names [DBA or Doing Business As registrations]. But even the most casual observer realizes that while many of these activities are critical for ventures that become substantial firms; many ventures with registry listings never engage in any serious economic activity. Creating a corporation is much easier than doing corporate work.

Initial economic transactions, represented by framing the first dollar of income, represents participation in a market, an exchange of goods or services for some type of compensation. Others exchanges might involve the purchase of supplies, inventory, purchase or lease of assets such as vehicles, equipment, or buildings. One important form of economic transaction is hiring employees, which can be tracked in the United States by initial payments into the state unemployment insurance programs or the initial payment of federal social security payments. Because these latter two registries are associated with required tax payments, they have very broad coverage of “employer firms,” those firms that have a legally defined relationship with employees. Longitudinal analysis of the PSED cohorts indicates that when first listed in the state unemployment insurance programs or the federal social security register over 80% of the ventures are not yet profitable. While engaging in economic transactions may affect the prices and quantity of goods exchanged, if a firm is not profitable this market participation cannot be sustained.

Labor contributions to a business venture may be considered the critical transition. Leaving aside the issue of how much effort is required to be significant, it is again a controversial criteria. A start-up team may invest hundreds of hours in working on a new business without producing a good or service or actually having any revenue or income. In the PSED data files there are examples, fortunately few in number, that claims to have been working on a start-up for 15 or 20 years without ever creating much income or any profits for the owners. These are like long engagements that never become marriages.

Initial profits seem to be a reasonable benchmark, as it represents a transition from operating at a loss to the beginning of economic viability. This would seem to be the objective of most of those engaged in business creation. Most businesspersons are involved to make a profit, even if the first dollar of revenue has pride of place. This criterion has been employed in both the longitudinal studies, where the transition is critical for the PSED data collection procedures, as well as the GEM surveys, where nascent entrepreneurs are separated from owner-managers of firms in profit for analysis. But there are still problems, for many ventures that employ substantial number of individuals and process considerable amounts of funds may not be profitable. Amazon was a major source of employment, processed millions of dollars, and was listed on a wide range of registries long before it was able to report a profit. For many years the initial investors subsidizing the purchase of every book or item sold by Amazon.

So there are four conceptions of a firm birth—registry listings, economic transactions, labor input, or initial profits—and substantial research activity associated with each. But the consequences of a lack of agreement on a conceptual or operational definition of a firm birth are considerable, leading to different descriptions of the firm life course and different interpretations about what leads to firm success.

What is to be done? Continue with no attempt to describe or identify or harmonize these incommensurate images of a new firm or attempt to develop a uniform theoretical definition, which can be the basis for developing empirical indicators. If a uniform definition for firm birth is to be developed—who will take the lead?

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The Reinvention of Academic Entrepreneurship

G. Dale Meyer, PhD

*Originally prepared for the Journal of Small Business Management (JSBM) Special Edition 49.1. Article adapted to fit the style of this blog and represents ICSB’s new mission to provide more synergy with the journal through outlets where our members can actively discuss JSBM content. You can find the complete JSBM article here –http://www.icsb.org/assets/reinventionofacademicentrepreneurship.pdf.

In the heat of the long “battle” advocating the legitimacy of academic entrepreneurship, few, if any, of we early advocates predicted the great swarm of colleges and universities that now embrace the academic entrepreneurship discipline. Present-and-growing, one now finds academic departments, hybrid departments, institutes, centers and even one encompassing school now focusing on academic entrepreneurship. I celebrate the positive outcome after the long trek for acceptance and support for entrepreneurship in the academic world. That world often is known to resist change (as one long-ago colleague often said “changing a university is like moving a cemetery”). I applaud the teachers and researchers who are currently plowing the ground by teaching entrepreneurial “skills” and researching and publishing “entrepreneurship” content in the huge number of academic journals now open to SME and entrepreneurship subject matter.

My focus here, however, is on a number of “elephants in the room.” I have been known for pointing out such elephants – such as the worship of the rational business plan in curricula; the blind pursuit of magazine entrepreneurship reputation rankings; and that academic entrepreneurship is not the property of B-Schools. Who better to point a few foibles and stumbling blocks than an old guy (Dr. Quandam Erstwhile – look up the words folks).

Elephants and More Elephants

First, with the academic entrepreneurship boom going strong, is it not about time that rigorous measurements of results and accountability be required? Accountability is more than cheer-leading; it is providing metrics to report results that create a platform for improvement. Those academic entrepreneurship programs that are, in fact, conducting rigorous measurement on how entrepreneurship education and research are benefiting students and society should also publish their results in academic journals and in other media that reach important populations. Over 10 years ago in what was then labeled the USASBE Coleman White Paper Series, I spoke of the dangers in magazine reputation rankings. These rankings have proliferated and all PR materials of ranked entrepreneurship programs loudly tout their rankings. Sorry, but rankings are not rigorous metrics to account for the results of academic entrepreneurship.

Second, academic entrepreneurship is constrained by old paradigms that are primarily the products of neoclassical economics and its attendant theories. Another of my former PhD students, Sharon Alvarez of Ohio State, now focuses on theory building in academic entrepreneurship. Alvarez has published articles and a monograph titled Theories of Entrepreneurship (2005). And economist Scott Shane published a book in 2003 titled A General Theory of Entrepreneurship. My point is that, when one examines carefully the scholars and the academic jargon utilized in these efforts at entrepreneurship theory building, it is apparent that economic theory is the overwhelming backbone of what is presented and published. The modern field of strategic management attained legitimacy by assimilating industrial organization economics. Why comment on this? – The Academy of Management Entrepreneurship Division greatly overlaps membership with the AOM Strategic Management Division. This overlap is one of the reasons that Ted Baker was able to assert in Strategic Organization (2007) that “strategy is succeeding in its takeover of the academic field of entrepreneurship”.

Third, academic research in entrepreneurship has forfeited much of its uniqueness at the alter of academic journal publishing leading to tenure. Historically, young PhDs focusing on entrepreneurship were counseled early in their careers before tenure to publish in “A-level” journals. In addition, they were apprised that these journals would not publish entrepreneurship subject content. The validity of this advice can be questioned but, personally, I knew quite a number of young scholars who were denied tenure even though they had published in the available entrepreneurship journals. This perhaps faux situation has changed dramatically partially due to the fact that entrepreneurship journals have transformed themselves to accommodate tenure portfolios. The research designs, database creation, and econometric statistical techniques are the key to the A-level journal count. This transformation to the A-level journal model progression is over 50 years old in business disciplines.

Fourth, it is notable that the topics that are chosen for research are often compatible with easily available secondary databases. Examples of this are the plethora of articles that deal with venture capital, IPOs, and other financial topics. In addition the richly endowed Kauffman Foundation has worked hard to create and lobby for more small business databases to support research in entrepreneurship. This comes as no surprise since the CEO and his research director at Kauffman are educated in economics. But consider the following:  Abraham Maslow in a neglected book titled The Psychology of Science (1966) spoke of “problem-centered” and “means/methods-centered” research. In problem-centered research the “messiness” of the research project is put aside because it can create real understanding and advance science. In the “methods-centered” approach to research, one is schooled in “rigorous” methods that are ready to be applied, and then the statistical technician researcher looks for a research problem on which to apply that magical method.

Fifth, entrepreneurship theory building, research, and teaching mostly ignore the effectual creative energy of real entrepreneurs. Some of my colleagues are aware that in addition to my 35 years in academia that I left that world midway in my career to found and successfully grow three thriving entrepreneurial businesses. These are not small hobby businesses but those that eventually catalyzed their way to millions and one to billions of dollars in revenue. I know just a little firsthand about the creative processes of true entrepreneurs. Entrepreneurship theory building and research by academics have the potential to understand more. Creativity and creative self-organizing systems are mostly neglected in entrepreneurship curricula. The Neck and Greene paper in this issue of JSBM is worth not only reading but also applying to the teaching of entrepreneurship. It is built on the neglected creative self-organizing process that is so fundamental to entrepreneurship. As I wrap up this essay, I will offer what I consider a new way to theorizing about entrepreneurs and entrepreneurship.

Sixth, another elephant in the room is the blurring of the domains of entrepreneurship and SME management. Pascal Zachary wrote an op-ed piece in the New York Times that appeared on June 3, 2007 titled “Creativity and Misfits as the Genesis of Entrepreneurship”. In this editorial Zachary also mentions Kuhn’s analysis of paradigms. Zachary argues that what is often ignored in Kuhn’s theses is that for long stretches of time institutions [for example, research paradigms, small business management, academic research] continue established regimes growing blind to signs that “the times are a-changin.”  During these times, quietly in the background are those “creatives” who “see the unseen wind” of a new grand vision. And the contented “gatekeepers” continue to mend their fated garden. Some SME owners and managers are certainly among the creative coterie. However, the SME processes are seldom creative in the same mode as are the most successful and society-changing entrepreneurs. Renowned Professor Jonathan R. T. Hughes in 1983 stated the following about how Professor A. C. Cole, who founded and directed the Harvard Center for Entrepreneurship History from 1948-1958. Cole defined what entrepreneurship research should focus upon. Hughes quotes Cole as follows:

“The study of entrepreneurship is similar to the study of creativity in any field, for example, musical composition. On the grand scale of Schumpeter’s conception (“creative destruction”) to the more modest approach of Kirzner (the entrepreneur as arbitrager), it is creativity, originality which should be the central focus of entrepreneurial studies. The entrepreneurial contribution is precisely that of original perception, new ideas, new departures. The unexpected is made to happen.”

(Hughes, 1983, p. 136).

A New Paradigm for Entrepreneurship Research Teaching at the Back Door!

My personal view is that both economists and economist wanna’ be’s who are the current gatekeepers in entrepreneurship are leading others down a dead-end road. How many quite brilliant people who are not economists now read economics journals? Are entrepreneurship journals migrating down the same dead-end road that economics journals continue to travel? I say yes, but a new paradigm is rustling in the bushes.

In my opinion: (a) the academic field of entrepreneurship is “stalled” in both research and teaching; (b) modified economic theory and secondary database/model testing/econometric methodologies distance researchers from actual people and behaviors that catalyze entrepreneurs and entrepreneurship; (c) small business management and entrepreneurship are different phenomena – if entrepreneurship is everything, maybe it is nothing; (e) substantive entrepreneurship research is best created utilizing interdisciplinary theories and methods; and, (f) tenure and its gatekeepers are the “elephants in the room” that preclude more innovative and meaningful research and teaching in the field of entrepreneurship.

Entrepreneurship scholarship has, so far, mostly excluded rigorous examinations of complexity science. I highly recommend Bill McKelvey’s article in Journal of Business Venturing in 2004.

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Are Free Markets Fair To Small Business?

by: Michael T. Schaper, Ph.D.
SEAANZ Affiliate
Adjunct Professor, Curtin University of Technology, Western Australia
Deputy Chairman, Australian Competition & Consumer Commission[1]
Email: Michael.Schaper@accc.gov.au or michael.schaper@gmail.com
Small businesses face an interesting, two-edged sword when dealing with the marketplace. On the one hand, free markets are essential to entrepreneurial success – they provide the means by which new ideas, new products, innovations and original business models can be introduced and, if they are effective enough, succeed.

At the same time, though, SMEs often have less capacity than their larger counterparts to succeed and thrive in an arena of open competition. They have smaller market share, less money, fewer in-house marketing skills and market data, and less access to professional advisers to help them fight back effectively, to name just a few comparative weaknesses (see table).

SMEs Large Firms
Number of business establishments Single Multiple
Geographical distribution Limited Limited or wide
Product/service range Limited Limited or wide
Market share Limited Significant
Customer base Small Numerous
Likelihood of business failure/exit High Low
Knowledge of, and to access to, regulatory information Limited; ad-hoc Sophisticated; extensive
Knowledge of, and to access to, marketplace information Limited; ad-hoc Sophisticated; extensive
Ability to access established supply sources Difficult Easy
Level of financial resources Typically small and limited Substantial
Use of external legal and economic advisers Limited; ad-hoc Systematic; structured

Surprisingly, although it’s an issue that has pre-occupied many economists, there is very limited research into the effect of competition on SMEs.

The limited data published to date seems to suggest some unusual findings as well – for example, most small businesses report that other SMEs are just as much a competitive threat as are large firms. Most SMEs state that they face a moderate-to-high level of challenge from their competitors, but another third seem to face very little competitive tension. And although a reasonable minority (somewhere between a quarter and a third) have had first-hand experience of anti-competitive conduct in their particular industry, most would not bother reporting any such breaches of competition laws to the relevant regulator for action.

Across the world, almost every country today has some form of legal framework for dealing with these competition issues. Amongst other things, there are rules that prohibit the formation of cartels, and which outlaw market-sharing, price-fixing and bid-rigging. There are laws for the vetting of mergers (especially if these might lead to market dominance or a reduction in competition overall), and mechanisms to ensure businesses don’t engage in false or misleading conduct, deceive consumers, or tell untruths.

But it’s not always easy to ensure that the role of small businesses is taken into account. For example, most competition laws treat all businesses (regardless of size) in the same way – which might mean, for example, that a self-employed micro-business owner is bound by the same rules that are designed to deal with the actions of large multinational corporations. SME owners often have little knowledge of what their rights and responsibilities are in this area, and may not have the capacity or the funds to employ legal counsel. Some regulators will enforce the law on behalf of consumers and the general public, but will expect business enterprises to fund their own legal actions when they are the victim of anti-competitive behaviour – which can be difficult if you don’t have a lot of money to begin with.

On the other hand, plenty of SMEs already succeed despite these challenges. They start, grow and succeed and, in the process, are able to effectively overcome all of the obstacles thrown at them by their competitors. For many of them, the relative imbalance in competitive power is just one more issue to deal with, not the determinant of their success or failure.

This produces two interesting questions:

-         Do we need to make special provisions for SMEs – and if so, are there particular “best practice” ways in which we can design laws and regulatory regimes to ensure that they have the best chance of succeeding on their own merits in a fully competitive marketplace?

-         Can more academic research help us to better understand this phenomenon, and to test the impact of different regulatory approaches on small business?

I’d be interested in hearing your opinions

[1] The views expressed in this paper are those of the author only and do not necessarily reflect those of the Australian Competition & Consumer Commission (ACCC) itself.

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