Entrepreneurship [The Economist] March 14th-20th 2009
I. Introduction
In recent movie, Slumdog Millionaire, it presented an inspiring story of how a despised slum boy finally became a limelighted millionaire. His success might be destiny, yet back to real we could never hardly find some best-known paragons whose success by no means depended on luck but extraordinary confidence in their spirit: Steve Jobs(Apple), Bill Gates(Microsoft), Richard Branson(Virgin), Sergey Brin and Larry Page(Google), and even ice-cream giants Ben Cohen and Jerry Greenfield(Ben and Jerry's). Those who mull in different angle, venture with profound confidence, enjoy prodigious risk, and at last create myriad fortune are honorably so-called "entrepreneurs".
II. Definition
For many people the term "entrepreneurship" simply means anyone who starts a business, no matter a small ice cream store or even a high-tech web2.0 start-up. Peter Drucker deemed the most indispensable virtue of entrepreneurs is "innovate". " Innovation is the specific instrument of entrepreneurship," he said. Howard Stevenson, the man who has done his best to champion the study of entrepreneurship at the Harvard Business School, defined entrepreneurship as "the pursuit of opportunity beyond the resource you currently control". Hence, apart from general perception, this article will use the word in a sense to "someone who offers an innovative solution to a problem", thus it's not the size of the company but the act of innovation matter.
III. The 5 myths about Entrepreneurship
Plenty of misconception about entrepreneurship are prevailed. There are five myths mostly talked by people:
1. Entrepreneurs are lonely outcasts
History evidences suggest that entrepreneurs also need partners and social network to succeed. In other words they flourished in clusters. A third of American venture capital flows into Silicon Valley and Boston, and the second third into other four places, New York, Los Angeles, San Diego and Austin. In such places entrepreneurship is a way of life - coffee shops in Silicon Valley are full of youngs loudly talking about their business plans.
2. Entrepreneurs are just out of short trousers
Some of the most celebrated entrepreneurs were indeed astonishingly young when they got going: Bill Gates, Steve Jobs, and Michael Dell all dropped out of college to start their own business, and the founders of Google and Facebook were still students when they launched theirs. Yet not all successful entrepreneurs are kids. The Kauffman Foundation surveyed 652 American-born bosses of technology companies set up in 1995-2005 and found the average age of them is 39.
3. Entrepreneurship is driven mainly by venture capital
Venture capital definitely matters in capital-intensive industries such as high-tech and biotechnology. But most of the venture capital goes into just a narrow band of business: hardware and software, semiconductors, telecommunications and bio-tech. The vast capital of start-ups comes from personal debt or from the "three fs" - friends, fools and families. Besides, "angel" investors also play the crucial role for start-ups. They usually have some personal connection with entrepreneurs and are more likely than venture capitalists to invest in a business when it is only a burgeoning idea.
4. To succeed, entrepreneurs must produce new products
Some of the most successful entrepreneurs focus on processes rather than products. Richard Branson made flying less tedious by providing his customers with entertainment. Fred Smith built a billion-dollar business by improving the delivery of packages. Oprah Winfrey has become America's richest woman through successful brand management.
5. Entrepreneurship can't flourish in big company
Big can be beautiful too. Some global giants are dedicating in keeping their people on their entrepreneurial toes. Johnson & Johnson operates like a holding company that provides financial support and marketing skills to internal entrepreneurs. Jorma Ollila transformed Nokia from a maker of rubber boots and cables into a mobile-phone giant. Moreover, big firms usually provide start-ups with their bread and butter. In many pharmaceuticals and telecoms, the giants outsource their innovation to smaller ones. Procter & Gamble tries to get half of its innovations from outside world.
IV. The environments of Entrepreneurship
The World Bank's Doing Business Ranking
In 2003 the World Bank began to publish an annual report called Doing Business (see above table), rating countries for their business-friendliness by measuring things like business regulations, property rights and access to credit it. This "naming and shaming" caused countries to compete fiercely to improve their position in the list. The next we will look at several paragons and discuss how they make entrepreneurialism thrive on their soil.
US
American remains a beacon of entrepreneurialism. Between 1996 and 2004 it created an average of 550,000 small business every month. Many factors have contributed to this glaring result. In cultural part, entrepreneurialism is so deeply rooted in its history. American school children are raised on stories about innovators such as Benjamin Franklin, Thomas Edison, Andrew Carnegie and Henry Ford. In society part, American companies have an unusual freedom to hire and fire workers, and American citizens have an unusual belief that their fate still lies in their own hands. In some countries bankruptcy spells social death, but in America, particularly in Silicon Valley, it is a badge of honor.
America also has several structural advantages. It has the world's most mature venture-capital industry. Second is a tradition of close relationships between universities and industry. About half of the start-ups in the Valley have their roots in the university. The third is an fairly open immigration policy. 52% of Silicon Valley start-ups were found by immigrants. The last reason for entrepreneurial success is "venturesome consumers", who are unusually willing to try new products of all sorts.
However, America faces numerous problems to this remarkable entrepreneurial ecology. The first is patent trolls, which has stuck some start-ups from innovating. And its tax system is so complicated and time-consuming. Then the terrorist attacks on September 11th 2001 is making th country less open to immigrants. Usually it takes six years for people from India and China to apply visas to work in America.
India
Over the past couple of decades India has been transformed from a licence Raj into a land of uncaged entrepreneurs. India has drawn heavily on its expatriate population, particularly 1m who live in America, to kick off its entrepreneurial economy. In 2003-05 some 5,000 tech-savvy Indians with more than five years working experience in America returned to their home country.Such people have helped to fill some of the skills gaps created by the country's boom.
India's another advantage is its higher education system, the top end of which is very good at discovering and developing first-class brain. The Indian Institutes of Technology and some other institutes, which are oversubscribed that only one in 75 applicants gets in, are now dedicating on producing entrepreneurs. Yet doing business in India has several depressing snags: its legal processes move at glacial speed,much of the infrastructure is a mess and over a third of the people are illiterate.
China
In some ways China has had a more difficult task than India in term of entrepreneurialism. The Cultural Revolution destroyed the country's intellectual and managerial capital. Few Chinese speak good English. The state is more interested in grand projects-from state own company to giant infrastructure schemes-than in letting a hundred flowers boom. But China shares one important advantage with India: the army of overseas Chinese who have made their home in America, particularly Silicon Valley. China has used them well.
Taiwan's experience has fully catched Chinese authorities eyes. Since the late 1990s Taiwan have been doing everything they could to tempt expatriates back, upgrading their universities, often working with foreign institutions, setting up science parks and welcoming foreign companies. So many Chinese expatriates have returned in the past few years that Valley-slang has given them a special name, B2C(back to China).
Many of China's most successful entrepreneurs have done little more than copy American brilliant stars. Baidu is a Chinese Google; Taobao is a Chinese eBay; Oak Pacific Interactive is a combination of MySpace, YouTube, Facebook and Craigslist. Besides copy and paste, China is also producing some genuinely innovative entrepreneurs. Alibaba, a website, sells goods from China's thousands of corner shops to other business. A weakness of doing business in China is the influence of politics. Businessmen often neglect their firms because they spend so much time cultivating political connections.
Israel
Israel is home to 4,000 high-tech companies, more than 100 venture-capital funds and a growing health-care industry. A brigade of American companies, including Intel and Microsoft, have established research arms here. And a host of Israelis who once emigrated to America in search of education and opportunity have returned home. The Israeli government helped by providing a ready supply of both human and physical capital. The country has the world's highest ratio of PhDs per person, the highest ratio of engineers and scientists and some of the world's best research universities. And because its army trains young Israelis in the virtues of teamwork and improvisation, it is strikingly common for young to starts businesses with friends they met in the army.
Denmark
Denmark is engaged in a social experiment to test whether it can embrace capitalist globalization yet continue to preserve its generous welfare state. The Danish economy has traditionally been divided between big multinational companies and small family firms. The government now wants to add a third economic force: start-ups with the potential for rapid growth. It has created a public venture-capital fund and is now trying to promote "education for entrepreneurship. Some accomplishments are looming, Denmark is already home to about 20% of Europe's biotech companies.
Singapore
At first sight Denmark and Singapore have little in common, yet they share not only the same official enthusiasm for entrepreneurialism but also many of the same polices. Singapore's government has invested heavily in digital media, bio-engineering, clean technology and water purification. More than 5% of Singapore-based companies are backed by venture capital. The government has also done everything in its power to make life easy for entrepreneurs. Schools teach the virtues of entrepreneurialism. The universities put ever more emphasis on business education and links with industry.
V. How downturn had brought both advantage and disadvantage to entrepreneurship?
But how is the new enthusiasm for entrepreneurship standing up to the world-wide economic downturn? Entrepreneurs are being presented with huge practical problems. Customers are harder to find. Suppliers are becoming less accommodating. Capital is harder to raise. In America venture-capital investment in the fourth quarter of 2008 was down to $5.4 billion, 33% lower than a year earlier. For many the change in public mood is equally worrying. Congress made life more difficult for start-ups with the Sarbanes-Oxley legislation on corporate governace.
Yet the threat to entrepreneurship can be exaggerated. The downturn has advantage as well as drawback. Talented staff are easier to find and office space is cheaper to rent. Harder times will eliminate the competitors and, in the long run, could make it easier for the survivors to grow. Microsoft, Genentech, Gap were all founded during recessions. Hewlett-Packard, Texas Instruments, Polaroid and Revlon started in the Depression.
Opinion polls suggest that entrepreneurs see a good as well as a bad to the recessions. 85% of the entrepreneurs said they had already felt the impact of the crisis and 88% thought that worst was yet to come. But they also predicted, on average, that their business would grow by 31% and their workforces by 12% this year. Half of them thought they would be able to hire better people and 39% said there would be less competition.
