Entrepreneurship in Emerging Economies

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By David Nuyoma

Entrepreneurship has become one of the most common phrases in the development arena today. In some countries, entrepreneurship development is introduced at tertiary level, while a decision was recently taken to introduce it in the school curriculum in Namibia. There is, however, no common view on the real meaning of the concept, and I will therefore start by looking at some definitions of ‘entrepreneurship’.

In their book titled Entrepreneurship, J. Kroon and P. L. Moolman highlight the fact that the word has its roots in the French verb ‘entreprendre’, which means to “undertake something”. The verb can be traced back as far as the 12th century, but the noun was only developed in the 15th century. It appears that that the concept of ‘entrepreneurship’ was used broadly in 15th century England to describe “people who had leadership qualities, were enterprising, and willing to take risk, although these individuals were not necessarily involved in the economy”.

My son’s Pocket Oxford Dictionary describes an entrepreneur as “a person who undertakes a commercial venture”. The Oxford dictionary in my office, on the other hand, describes an entrepreneur as “a person who has resourcefulness, imagination and energy, and who applies these in setting up a business”. I find the latter the most accurate description for contemporary society. However, like in virtually in all matters of human concern, definitions are in the eye of the beholder. Kroon and Moolman identify three schools of thought on the concept, namely: Classic; Neo-Classic and Modern Theorists.

The foremost British Classic economists, Smith and Ricardo, viewed the entrepreneur as a capitalist. Other Classic economists like the Frenchman, Cantillon, saw the entrepreneur as a speculator “who buys products at a known price, keep them in stock, and eventually sells them at an uncertain price”. Another British economist, Mill, regards leadership, supervision, control and risk taking as the hallmarks of an entrepreneur. Here, risk is regarded as the most important distinction between the manager and the entrepreneur.

Neo-Classic economists like Schumpeter went further. The distinguishing factor is innovation, he argues. Managers and entrepreneurs are both seen as risk takers, but the entrepreneur is the driving force for innovation and prime drivers of changing the landscape of the socio economic order. The entrepreneur brings about: the implementation of new goods and services; the development of new production techniques; the identification of new markets; the mastery of new suppliers and the development of new organisational structures.

Modern Theorists have the advantage of combining these earlier theories with the experience of contemporary society. One of these is DC McClelland, who sees motivation as being at the centre of the behaviour of economic players.

Compared to managers, the “entrepreneur will reveal a relatively high need for achievement. He will aim at better achievement than others, that is: always having the will to win, setting and demanding high standards from himself, revealing unique and innovative views and having a long term wish to attain something or to plan for it”. W. Long, another modern theorist, highlights three factors that make up an entrepreneur: uncertainty and risk; complementary managerial competency and creative opportunism.

While there is clearly no common definition of the term ‘entrepreneur’, there is a common denominator, which relates to taking risk in pursuit of a business goal.

But it doesn’t end there. According to some scholars, there are different types of entrepreneurs. Kroon and Moolman show that researchers at the University of Lund in Sweden have identified the following types of entrepreneurs:

? The Intrapreneur: This is not necessarily the owner of a business but an employee/manager. This is the person who is innovative and takes calculated risks to implement new initiatives. In a world of cutthroat competition, the intrapreneur could play a pivotal role.

? The Extrapreneur: This is the manager or employee who due to constraints to implement new ideas in a business he/she is employed, quits to go and set up a venture to realise the creative intention.

? The Novopreneur is a person who is not necessarily employed, but starts a new venture to realise a unique idea. This person is creative and innovative.

? The Interpreneur unites various businesses to establish a bigger entity that is stronger. In a world where globalisation has become a reality, the interpreneur has an important role to play.

? The Renovator is the individual who turns around businesses that were experiencing problems.

These types of entrepreneurs manifest themselves in different scenarios. These are individuals who take risks to implement their creative ideas in a sustainable manner.

One of Namibia’s foremost entrepreneurs, Frans Aupa Indongo, highlights three key factors that are necessary to be successful in business, in his biography. The person must plan, i.e. have a business plan and road map; have a financial plan with a budget and clear forecasts; and be disciplined in order to execute their plan.

On the basis of these definitions, one could argue that, if a country has a good number of entrepreneurs, their collective impact would auger very well for the economy. The countries that are categorised as industrialised, have had a strong class of entrepreneurs, big and small.

As a result of the active participation of entrepreneurs competing to keep market share and satisfy the demand for various needs of society, industrialised countries have been able to build robust economies.

It is also clear from various statistics and research that the quality of life in industrialised countries is generally much better compared to other parts of the world.

Can there, therefore, be any dispute that it is the entrepreneur that is at the forefront of developing the goods and services that have come to characterise modern day comforts?

Most, if not all, governments justify their right to rule because of their interest to advance the welfare of the populations under their constituencies, and it is therefore fair to assume that their objective is to ensure development.

The United Nations Development Programme (UNDP) has since 1990 produced a human development report that looks at the global state of human development.

According to the UNDP the basic objective of development “is to create an enabling environment in which people can enjoy long, healthy and creative lives”. The human development report is a respected document comparing countries in terms of their progress towards comprehensive development.
This report includes a human development index that provides a composite measure of three dimensions of human development. These are: Living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and enrolment at the primary, secondary and tertiary level) and having a decent standard of living (measured by purchasing power parity income).

Even though this index does not measure things that have subjective value elements like democracy and human rights, it remains a comprehensive measure of human progress with its various complex dimensions.

Countries with strong enterprise and economic activity and consequently higher income levels have a higher human development index.

For example, the 2006 Human Development Report shows that the average person in Norway, which is at the top of the index league, and the average person in countries such as Niger, which is at the bottom, certainly live in different human development villages. People in Norway are more than 40 times wealthier than people in Niger. They live almost twice as long. And they enjoy near universal enrolment for primary, secondary and tertiary education, compared with an enrolment rate of 21 % in Niger.

For the 31 countries in the low human development category, “… life expectancy at birth is 46 years or 32 years lower than in high human development countries.” Even though there are some exceptions, like Cuba and Vietnam, where, despite their low-income levels their human development index is high as a result of their strong social development policies, there is still an overwhelming relationship between the higher income and a better quality of life. It can be safely assumed that higher incomes give the populace greater choice to better their wellbeing.

It is difficult to imagine higher income levels without having a strong class of entrepreneurs who create businesses that create the necessary jobs and earning opportunities. It is also logical that the more the sophisticated the entrepreneur, the more innovative they become, producing goods and services that fetch premium prices, and in the process paying higher incomes for the highly skilled employees and broadening the tax base from where the public infrastructure is financed.

It is encouraging to see that virtually all regions of the world have seen an upward trend in their human development index since the 1970s. The only region that has seen some stagnation since the 1990s is Sub-Saharan Africa, principally due to the impact of the HIV/AIDS pandemic.

However, again the countries with high income levels have managed, to some degree, to break the disease into manageable proportions. Therefore, there is a strong case to increase entrepreneurship in order to realise higher income levels and consequent positive social impacts.

Within developing countries, some countries, newly industrialised countries have, most notably, seen phenomenal economic growth because of their very effective policies of export-led industrialisation.

Since the internal domestic market was not dynamic enough, these countries have opted to expand the horizon and space for entrepreneurship to grow.

They have also taken advantage of the opportunity to forge partnership with foreign capital to access new technologies and management techniques.

These countries have now graduated into the category of those with high human development index.

According to Professor Sachs in his book The End of Poverty, “the proportion of the extreme poor in East Asia has plummeted, from 58 percent in 1981 to 15 percent in 2001; in South Asia from 52 percent in 1981 to 31 percent in 2001.”

This brings me to the point I would like to stress. If experience shows that there is an overwhelming relationship between higher levels of income and people’s wellbeing, why do countries that are lagging behind not create the necessary enabling environment to free the potential of entrepreneurs and investors?

Rich countries are the top performers on the competitiveness index of the World Economic Forum. Equally so, rich countries top the list when it comes to ease of business establishment.

In other words, if an entrepreneur would like to establish a business venture in Sub-Saharan Africa, the barriers to entry are prohibitive.

The World Bank Group recently released its report on Doing Business 2007.

This report covers the following key areas in business establishment: starting a business – entry regulation; issuance of licenses; labour regulations;

regulation of properties; getting credit; corporate governance; cross-border trade regulations; enforcement of contracts; tax payment system; and closing a business. According to this report, several developing countries have introduced reform measures to improve their business environment, but overall ranking still lags behind the industrialized countries.

It is pleasing to note that some of the emerging economies like Singapore have reached benchmark status, implying that they have become top performers in some areas that contribute to the ease of doing business.

The different definitions on what constitutes an ‘entrepreneur’, tell us that these are individuals who are doers. If we believe that the dynamic performances of national economies are a culmination of vibrant entrepreneurial groups, it therefore makes sense that an enabling environment should be created for entrepreneurs to flourish.

Their collective impact is not academic, but has an overall positive impact on society. This forum is an ideal platform to address the pertinent questions as to what should be done to free the creative potential of entrepreneurs.
Is it not ironic, Ladies and Gentlemen, that the countries that are much more in need of improving the lot of their populations are less pronounced in their urgency to create an enabling environment for entrepreneurship to flourish? What is it that should be done to ease the barriers to entrepreneurs starting informal businesses, small and medium enterprises, big businesses and companies with innovations of technologies?

One of Namibia’s leading entrepreneurs, Mr Harold Pupkewitz, has said on several occasions that the secret of building successful nations “is not natural resources, but highly developed human resources – the dexterity of the human hand and the ingenuity of the human mind – which change dead assets into productive resources and so enrich the nation with the necessary productivity and efficiency – the wealth creators.”

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