Why Entrepreneurship Matters

Whoever is interested in entrepreneurship should check out this week’s Economist to find an interesting report on the matter. The author demystifies some common misconceptions (e.g.everyone is young, it depends on Venture Capital, it has to change the world, among others) and assesses how the enthusiasm for entrepreneurship is holding up in times of crisis.  Not so bad, apparently.

Some resources such as talent and office space are easier to find. That together with less competition in the long run allows newcomers to get their foot in the door. 85% of entrepreneurs in eight emerging markets surveyed for Endeavor indicated that they have been hit by the crisis; 88% thought that it would still get worse.  But, they also foresaw that, on average, their businesses would grow by 31%, and the number of employees by 12%. 

Yet, office space, availability of talent, and a change in competition is, of course, not everything....either are new great ideas.  Looking around the globe, the author finds that cultural and structural differences matter.  In some European countries, for example, the stigma of bankruptcy can be so strong that the risk of entrepreneurship might seem overpowering. The fact is that new ideas and entrepreneurship help moving economies forward. This is true at all times, but seems to be a particular source of hope in times of crisis.

So what can governments do?  Encourage the daring. It starts by not discouraging or disheartening entrepreneurs before they even get started. Part of this is making business regulations transparent, effective and easy to comply with. Doing Business has been tracking some of those measures by governments over the years,  and has just started working on this year’s update.  The new Doing Business report to be published in September '09 will cover regulatory reforms in 182 countries in 10 areas from starting to closing a business between June '08 and May '09.

The results should be interesting. Some opine that most efforts will go into reforming insolvency legislation, for obvious reasons one might add. Tax reforms are another bet. But, some governments might also think a bit more medium-to long term, and aim to make life easier for companies so they can either survive now or new ones can emerge creating those needed jobs.  We shall see. Stay tuned.