Entrepreneurs need to think globally

Jan 18 2008 by Nic Paton Print This Article

Would-be entrepreneurs are often advised to start small and crack their local market first. But if you really want to be successful you need to be thinking globally from the start.

Research by Babson College in the U.S. and the UK's London Business School has argued that encouraging more global entrepreneurship is the key to improving economic growth worldwide.

It found that between a tenth and 40 per cent of entrepreneurs in high-income countries expected a quarter or more of their customers to come from outside their country.

Raising your sights and looking further afield can also be the key to freeing yourself from local red tape.

The 2007 Global Entrepreneurship Monitor (GEM) Report found that the more burdensome a country's business regulations, the lower entrepreneurs' expectations for growth.

The research also studied early-stage entrepreneurial activity within a number of cities around the globe.

It discovered differences in levels and characteristics of entrepreneurial activity were not only rooted in a country's local economy or the quality and number of institutions supporting entrepreneurship, but also in its culture and demography.

"The world economy needs entrepreneurs," said Babson professor and GEM U.S. team member Kent Jones, "and increasingly, entrepreneurs depend on an open and expanding world economy for new opportunities and growth Ė through trade, foreign investment, and finance.

"GEM research confirms that new entrepreneurial opportunities in all countries will expand if trade, entrepreneurship and economic growth are fostered, especially in the developing world," he added.

Early-stage entrepreneurial activity tended to be high in countries with lower per-capita GDP but declined in middle-income countries before rising again in higher income countries, the research found.

Early-stage entrepreneurial activity rates for global cities by and large showed a similar pattern as the rates at the country level.

But, intriguing, some cities reported rates that diverged from this pattern. German cities, for instance, stood out as having the highest rates in comparison to the average country rate.

Also, characteristics of entrepreneurship in global cities were sometimes different from characteristics at the national level, the GEM study suggested.

Both middle- and low-income countries in Latin America and Asia displayed high rates of early-stage entrepreneurial activity, with Thailand, Peru and Colombia reporting the highest rates.

Countries in Eastern Europe and Central Asia, by comprison, traditionally had relatively low rates of early-stage entrepreneurial activity, yet Croatia's rate appeared to be increasing between 2002-2007.

As per-capita incomes rose in high-income countries, so did the rate of early-stage entrepreneurship, the research argued.

However, cultural demographic and institutional factors also came into play.

Many European countries, perhaps surprisingly, consistently had relatively low rates of early-stage entrepreneurship.

Overall, Iceland, Hong Kong and the U.S showed the highest levels. The lowest rates were found in Austria, Puerto Rico and Belgium.

Early-stage entrepreneurs from high-income countries were more likely to be opportunity-driven, as opposed to necessity-driven where entrepreneurs have no other option for work.

In Norway and Sweden, most early-stage entrepreneurial activity was part-time, the study found.

There was also a strong correlation between the rate of early-stage entrepreneurial activity and the general population's positive perceptions of their entrepreneurial skills and opportunities for starting a business.

Other factors associated with early-stage entrepreneurial activity were whether entrepreneurship was widely believed to be a good career choice and the degree to which it was reported in the media.

Among high-income countries, the U.S., Israel, Iceland, and Canada showed the highest rates of high-growth expectation entrepreneurship, where entrepreneurs expected to employ at least 20 employees five years from now.

Among middle and low-income countries, China had the highest rate followed by Argentina.

Early-stage entrepreneurs were more likely than established business owners to claim that they offered innovative products.

They were also more likely to claim to be using use technologies that had not been available to them a year earlier.

Populations that embraced innovation also tended to have higher levels of early-stage entrepreneurial activity.

Early-stagers were by and large young (aged 25-34) and were more likely to be men.

This gender gap was present among all age groups but was relatively small for countries in Latin America and the Caribbean, said the GEM survey.

Finally, in an increasingly globalised economy, international economic institutions such as the World Bank or World Trade Organization were now exerting a growing influence on entrepreneurs and their opportunities.

This influence was either directly through international trade agreements or indirectly the fact they were cultivating an environment of economic flexibility and adjustment and an open world economy, it said.