hobday slides

50 %
50 %
Information about hobday slides

Published on April 13, 2008

Author: Margot

Source: authorstream.com

Slide1:   Latecomer Entrepreneurship: a Policy Perspective*   Mike Hobday and Fernando Perini Freeman Centre Seminar October 5th 2007 Latecomer Presentation4.doc Based on Paper Prepared for The Task Force on ‘Industrial Policies and Development’; Initiative for Policy Dialogue (IPD) directed by Joseph Stiglitz Columbia University, New York  *Forthcoming: M. Cimoli, G. Dosi and J. Stiglitz (eds); Industrial Policies and Development, (provisional title) Oxford University Press, Oxford. Key Questions:  Key Questions What does ‘entrepreneurship’ really mean in developing countries (DCs)? What policies are ‘out there’ to promote entrepreneurship – how effective are they? What do the success cases of East Asia tell us about successful entrepreneurship? and useful polices? Rationale for the research :  Rationale for the research entrepreneurship should play an important role in business growth and catching up in the DCs current policies based on ‘Washington Consensus’ - DCs should adopt policies of the successful countries - de Soto (Mystery of Capital, 2000) – too much bureaucratic ‘red tape’ - unclear property rights – remove barriers and entrpreneurship, innovation and development follows; ‘Doing Business’ (World Bank) + support for small and medium sized enterprises (SMEs) and venture capital programmes problem - little evidence on the specific innovative functions played by entrepreneurs in DCs (vs developed) Entrepreneurs and Entrepreneurship Policies :  Entrepreneurs and Entrepreneurship Policies Definitions and Functions of the Entrepreneur differ across economics, development economics, psychology, sociology, business and innovation studies many observers have adopted their own definitions according to their particular needs even within economics there are many definitions 44 refereed journals, one on ‘Developmental Entrepreneurship’ (focuses on micro-enterprise, not DCs) Slide5:    Definitions of Entrepreneurs and Entrepreneurship   In the modern literature little conceptualisation of ‘DC entrepreneur’ – as distinct from advanced country entrepreneur Schumpeterian Model(s) :  Schumpeterian Model(s) policy makers/business leaders tend to adopt a ‘Schumpeterian’ vision of the entrepreneur - risk taker and innovator whose actions lead to creative destruction – at core of growth of the economy. two types of Schumpeterian Entrepreneur (1934) ‘Mark I’ (or heroic) individual entrepreneur who establishes a temporary monopoly in an output (product) or input (process) markets and obtains ‘super’ profits from innovation via higher output prices and lower input costs. Mark II, recognises the role of large firms, Schumpeter (1943) emphasised the corporate research and development (R&D) laboratory in large firms - innovation more of a routine function Policies Towards Entrepreneurship in DCs :  Policies Towards Entrepreneurship in DCs  Policies to Reduce and Reform Government Bureaucracy de Soto (2000) highly critical of impact of Government bureaucracy in DCs a typical example: to license a small garment shop (with one worker) in Lima Peru, de Soto’s well educated team of researchers: took six hours a day for 289 days cost US$1,231 in total (31 times the monthly minimum wage) and required 207 administrative steps, involving 52 government offices. to obtain legal title for the small piece of land took a further 728 steps, a total of 26 months of red tape. de Soto provides many similar examples for the Philippines, Egypt, Haiti, Mexico and other DCs Informality: entrepreneurs and businesses are forced to operate outside the formal capitalist system - huge amount of ‘dead capital’ in DCs – cannot borrow/invest/tax etc. Policy Response:  Policy Response reform government/reduce public bureaucracy – give rights to informal workers - ideas adopted by World Bank, IMF, UNDP, IBRD: World Bank’s ‘Doing Business’ database measures state of business regulations across 155 economies (2006 data) - poor DCs impose far more obstacles to business than most developed economies - owning property, starting-up businesses, declaring bankruptcy, protecting investors, legal rights etc Doing Business (2005) key argument: more than 2% could be added to the growth of the ‘most difficult countries to do business’ if they adopted the regulations of the least difficult ones (Djankov and McLiesh 2005, p3) – citing Toronto, Helsinki, Tokyo and Singapore Informality - over-regulation etc. leads to a large informal sector, low taxes etc. Three problems with ‘doing business’ approach:  Three problems with ‘doing business’ approach 1. no explanation of why bureaucracy - possible explanations (e.g): a). expanding government bureaucracy may be one response to unemployment – a kind of social safety net b). Krueger (1974) - means of rent extraction by particular groups (granting of licences by government officials can lead to competition for very large rents/bribery etc.) If the cause is (b) then an entire structure of corruption/unhealthy firm-state relations will need to be addressed – deep political/economic changes needed (recommending best practices of advanced countries likely to have little effect) Key point – need to know the cause of bureaucracy if you want to cure it.   2nd problem with ‘doing business’ approach:  2nd problem with ‘doing business’ approach 2. no establishment of any causal relationship between excessive regulation/bureaucracy and low rates of development/entrepreneurship – this is simply ‘assumed’: a) can be many other reasons for poor development (e.g. macro/trade problems, Rodrik, 2004), dev. strategy failure, export failure, war, famine, etc. b) could actually be reverse causation – low rates of development/economic stagnation lead to low rates of entrepreneurial activity/high levels of bureacracy, Reynolds et al (2004) c) China and India (two of fastest growing economies, at ‘bottom’ of ‘Doing Business’ 2005 rankings (91 and 115 out of 155 countries) Key point – cannot simply assume bureaucracy is the problem – it may be one of many problems, may not be a key problem – if so, solving it will not enable development – China and India developed without ‘fixing’ bureacracy – and bureacracy did not stop them developing! 3rd problem with ‘doing business’ approach – policy problem:  3rd problem with ‘doing business’ approach – policy problem 3. Gerschenkron 1962 - latecomers cannot and should not adopt the policies of currently developed economies: Latecomers face very different external (market and technology) circumstances than earlier developers They have (usually) more limited and less developed institutional capabilities (compared with developed countries) - what works in advanced does not nec. work in DCs – could well be entirely inappropriate for stage of development DC path of development must build on its own resources and capabilities, opportunities – cannot simply imitate ‘best practices’ of more developed economies Key point: policy solutions must be tailored to the problems/needs of each country - growth calculations therefore misleading and naïve SME Policies as Entrepreneurship Policies:  SME Policies as Entrepreneurship Policies SME/micro-finance programmes very common – especially incentives to SMEs in high-tech industries - World Bank Group approved more than US$10 billion in SME programmes in five years 1998-2002 (Beck 2002) confusion – should not conflate (a) genuine entrepreneurial entry with (b) survival/poverty self-employment (e.g. in response to recession). An increase in SMEs/new entrants can be a measure of stagnation and dev. failure – vital not to lump (a) with (b) in analysis, data, or policy Fehr and Henrik (1995) research in Zambia (survey of 215 firms in manufacturing) – shows that small firms (large in numbers) remained small - were relatively unimportant in output/employment/source of future growth need to create an external business environment that fosters growth of all firms (large, medium and small) – not just SMEs – need for healthy industrial structure…(nb Korea, Singapore mostly large firm growth) Venture Capital Policies :  Venture Capital Policies support for venture capital as means of increasing high techn. entrepreneurship (e.g. Brazil, Korea, India, Hong Kong) But Reynolds (2003) and GEM (2003) show that even in the case of the most developed countries, venture capital is only ever a very minor source of funds for start-up investments formal venture capital market is often overestimated in its importance, - investments for start-ups often from other sources Insights from Recent Research on Entrepreneurship:  Insights from Recent Research on Entrepreneurship Motivations - risk taking/profit making view (led to the creation of centres for entrepreneurial training and education in DCs) research shows entrepreneurs often come from traditional trading/business communities - little formal training and education (e.g. India, Pakistan, Africa, China) risk-taking view? Statistical evidence from US on financial risk propensity – nascent entrepreneurs often have ‘non-pecuniary’ motives (a)    autonomy in professional and personal life – financial independence (b)    identity fulfilment – desire to ‘challenge’ themselves often risk-averse to avoid business closure – happy to ‘stay small’– cannot assume profit maximisation or desire to grow – perhaps even more true in DCs ‘Embededdness’ :  ‘Embededdness’ entrepreneurship often based on class and ethnic background in DCs - and embedded in close social/economic networks sometimes these networks are restrictive and don’t allow entry/competition (Sverrisson, 1993, Kenya and Zimbabwe) - traditions retarded adoption of new technologies etc in other cases (e.g. China, Chan 2001), entrepreneurial networks share common values which promote growth and investment Schak (2000) research on Taiwan - SMEs operated in groups in response to unfavourable government policies in favour of big business Evolution of ‘informalality’ into formal arrangements:  Evolution of ‘informalality’ into formal arrangements overseas Chinese networks - informal business networks evolved over centuries to manage and mitigate risk-taking activities (Chan 2001, Chan and Chiang, 1994). today, formalised overseas Chinese businesses control a large proportion of formal listed equity in South East Asian economies (81% in Thailand and Singapore). informality can be a ‘stage of development’ issue Slide17:    Overseas Chinese Holdings in Listed Companies in South East Asia   Chinese holdings in listed companies not under state or foreign control, as percentage of market value of all shares in such firms.   Source: Sakura Bank, Nomura Research Institute, in: Asiaweek, Oktober, 20, 1993       Successful Firm-Level Growth in East and South East Asia:  Successful Firm-Level Growth in East and South East Asia two key sets of questions re entrepreneurship in Asian NICs: 1. Local firms - what is the nature and path of technological progress of domestically-owned, indigenous firms (e.g Korea and Taiwan)? What do local entrepreneurs actually do? What business/technological function do they perform? 2. TNCs - what is the entrepreneurial role (if any) of TNCs in South East Asia (where they dominate exports)? Is there evidence of any ‘intrapreneurship’ – or are TNCs ‘passive’/assembly only? (own) research focus - electronics, the largest export sector in East and South East Asia Slide19:  original equipment manufacture (OEM) system - where large TNCs sub-contract production to local Asian firms – TNCs provide production and design in return for low cost assembly/manufacture Evolution of OEM system in Korea and Taiwan - from OEM to ODM to OBM       1. Local Firms Local Firms: Entrepreneurial Implications :  Local Firms: Entrepreneurial Implications core technological activity involved was not, in the main, a Schumpeterian/R&D-centred process – little radical innovation - gradual catch up via small, incremental improvements to existing products and processes latecomer kind of entrepreneurship based on learning of manufacturing organisation (and its internationalisation) – centred on technician and engineering skills Entrepreneurial ‘innovation’ was in organisation of basic manufacturing for exports (ie. OEM/ODM system – new to the world). Slide21:  Technological Progress in South East Asia   Notes: *Process Engineering; **Product Development 2. Foreign Firms/TNCs China enters in 1970/80s with mix of FDI (80%) and OEM – compressing cycle of catch up Foreign Firms: Implications for Entrepreneurship in DCs :  Foreign Firms: Implications for Entrepreneurship in DCs ‘latecomer’, catch-up function (enabling international technology transfer) – again centred on organisation of manufacturing (involving technicians, engineers and managers); slow and gradual technological accumulation over 20-30 years or so - core technological activity not Schumpeterian/R&D-centred, or new product development – little if any radical innovation passive/screwdriver plants vs technologically dynamic? evidence suggests the latter – ie. purposeful catch-up activities by managers in TNC plants (not investment or R&D risk, but important) some studies (e.g. in Malaysia) show that managers in the subsidiaries had to overcome major obstacles (e.g. skill shortages) to acquire technology – also rates of progress differ – linkages often weak with local economy Slide23:  Policies for ‘entrepreneurial failure’ in Asia i.e. coherent development strategy but insufficient supply of capable firms and managers – alternative, overlooked, role for policy South Korean Government supported a ‘big business’ Japanese style Zaibatsu model – creating a class of latecomer entrepreneurs and managers Singapore, Government subsidized entry of foreign TNC subsidiaries (also Malaysia and Thailand), again creating entrepreneurial capacity these acts were important (if implicit) policies towards entrepreneurship - part of a wider strategy towards industrialisation (including: export-led growth, internal market competition, macro economic stabilisation, basic education/technical education) Conclusions and Policy Implications :  Conclusions and Policy Implications conventional policies (implicitly?) based on a Schumpeterian model of entrepreneurship which imitates business functions now carried out in highly advanced countries problem: dynamic advanced ‘Schumpeterian’ context does not yet exist (yet) – what is needed is latecomer entrepreneurial development Washington Consensus approach of transferring ‘best practices’ from the now advanced countries does not address needs of individual DCs (Gerschenkron, 1962) - latecomer institutional capabilities/stage of development/context etc. must be accounted for Bureaucracy/over regulation? there can be many other causes of development failure – e.g. macro instability/inward looking policies/low value commodity exports (Rodrik, 2004) Slide25:  Conclusions: Lessons from Asia? Cannot generalise to other DCs – entrepreneurial circumstances and needs differ - in Asia, entrepreneurial role was to enable catch up, learning and ‘behind the frontier’ incremental innovation - rather than Schumpeterian or radical technological advances entrepreneurs (in new and existing firms – local and foreign firms) were the main agents for acquiring technology from abroad and ‘learning’ – also for integrating manufacturing into international value chains/networks ‘latecomer entrepreneurship’ centred on very basic learning - not a Schumpeterian (leadership) innovation function - but a highly specialised ‘catch up’ function – distinctive feature of catch up No model for other countries, but important to consider the role of the entrepreneur in each particular context Slide26:  Key Questions for Workshop on Entrepreneurship 1. When would the definition of an entrepreneur be the same in a developing country as in an industrially advanced economy? Key Questions for Workshop on Entrepreneurship:  Key Questions for Workshop on Entrepreneurship 1. When would the definition of an entrepreneur be the same in a developing country as in an industrially advanced economy? When the DC entrepreneur is not engaged in technology transfer or catching up, but instead developing new products and technologies for the world market place – this does occur, but not very often. It is also not a major part of the development history of East and South East Asia, which was based on latecomer, catching up entrepreneurship. e.g. if an entrepreneur in Africa was designing a new diagnostic system for a local disease, or if in Brazil an entrepreneur was developing a new 3rd generation bio-techn. process for agriculture. Slide28:  Key Questions for Workshop on Entrepreneurship 2. Why have India and China grown so rapidly over the past 20 or more years when they are ranked no 115 and 91 respectively (ie near the bottom) of the 2006 Doing Business database? Key Questions for Workshop on Entrepreneurship:  Key Questions for Workshop on Entrepreneurship 2. Why have India and China grown so rapidly over the past 20 or more years when they are ranked no 115 and 91 respectively (ie near the bottom) of the 2006 Doing Business database? the Doing Business data-base is irrelevant to the core development processes of both economies - countries can grow and develop despite problems of bureaucracy and over regulation entrepreneurs can ‘get around’ regulations and bureaucracy if they see an important opportunity in the market place the reform of bureaucracy and regulation follows, rather than precedes, economic development (as appears to be the case in the Indian Software/IT industry, which is a role model for other sectors in India - with government following behind. Slide30:  Key Questions for Workshop on Entrepreneurship 3. Why is the copying of ‘best practices’ of the advanced economies by developing countries probably not advisable for DCs? Key Questions for Workshop on Entrepreneurship:  Key Questions for Workshop on Entrepreneurship 3. Why is the copying of ‘best practices’ of the advanced economies by developing countries probably not advisable for DCs? DCs are at a different stage of development and need different kinds of policies appropriate to them (Geschenkron, 1962) DCs may have weak and poorly financed institutional capabilities Because policies must be based on specific development needs – these needs must be assessed before prescriptions can be put forward Developed countries might already be becoming over-bureaucratic Slide32:  Key Questions for Workshop on Entrepreneurship 4. Which entrepreneurship policies would you recommend for DCs? Key Questions for Workshop on Entrepreneurship:  Key Questions for Workshop on Entrepreneurship 4. Which entrepreneurship policies would you recommend for DCs? Depends on the country and its particular circumstances (internal and external) Policies depends especially on what major development problems/constraints the DC faces (Rodrik) What ever the policy is, it must be part of and integrated into a coherent overall strategy for development

Add a comment

Related presentations

Related pages

(slides courtesy of Alistair Hobday, CSIRO)

www.dpi.nsw.gov.au Overview Climate change predictions/data (slides courtesy of Alistair Hobday, CSIRO) Potential impacts on physical ...
Read more

Lionel Hobday ☁ | LinkedIn

Lionel Hobday ☁ Executive Recruiter, APAC, Microsoft (GM, SVP, CEOs) Location Singapore Industry Information Technology and Services
Read more

Alistair Hobday Claire Spillman - WAA14

Hobday et al, in prep . Getting future environmental information ... Extra slides . Observed ocean change: Global South-east Australia is a climate hotspot
Read more

A fresh appreciation of the career of Arthur Hobday

A fresh appreciation of the career of Arthur Hobday ... pallets and slides innumerable, not to mention wind-chests, bellows and swell-box, ...
Read more

Slides: Seasonal forecasting for decision support in ...

Slides NOT PEER REVIEWED. Open access subject to the CC BY-NC-SA Creative Commons 4.0 License. Seasonal ... Alistair Hobday, ...
Read more

Multi-Center Phase II Trial of Temsirolimus (TEM) and ...

Multi-Center Phase II Trial of Temsirolimus (TEM) and Bevacizumab (BEV) in Pancreatic Neuroendocrine Tumor (PNET) Timothy Hobday MD1, Rui Qin PhD1, Diane ...
Read more

Website Disclaimer for Hobday Real Estate (Pty) Ltd

Disclaimer for the use of www.hobday.co.za/. We specialize in property for sale and property to rent. Hobday Real Estate (Pty) Ltd - 10-16.
Read more

Toddington Tennis Club - Home

Toddington Tennis Club IN Bedfordshire offer club and social tennis on 3 beautiful carpet courts and also tennis toaching
Read more