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Homegrown Entrepreneurs – Kogod Now
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Kogod Now / Fall 2013  / Homegrown Entrepreneurs
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Homegrown Entrepreneurs

How do you grow, raise, and nurture a future entrepreneur – or an entire generation of them?

“You have to have a whole, integrated view, from early childhood all the way through to young adulthood,” according to former Assistant Professor Robert Edgell. “All the attributes you would need to have young entrepreneurs cranking out new, interesting ideas that become businesses, develop countries, and employ people.”

Forthcoming research from Edgell suggests that obstacles to this entrepreneurial utopia exist within all layers of society: individuals, families, cultures, and institutions. Yet these layers also harbor the seeds of opportunity.

Edgell, who studies creativity and innovation, was interested in factors that help or hinder young entrepreneurs. After exploring a wide range of interdisciplinary research, he created a frame- work for institutional change in national entrepreneurial development.

He set out to answer two questions:

  1. What factors influence creative behavior among young people in developing countries?
  2. What institutional strategies could governments use to encourage creative and entrepreneurial behavior?

Accordingly, the framework addresses individual personality and cognitive processing; socioeconomic status, parenting, and local communal networks; and national systems of social, economic, and political initiatives.

Edgell strove to transcend the “WEIRD” trap— that is, the Western, Educated, Industrialized, Rich, and Democratic perspective. The concept is from a landmark 2010 article, which argues that because affluent Westerners make up the vast majority of behavioral and psychological study samples, researchers often consider them the norm when, in fact, they are least representative of the human experience worldwide.

The more Edgell examined individual-level char- acteristics of developing nations, the more limitations he saw for future entrepreneurs.

“If kids don’t have certain resources and that’s a persistent feature across the population, that’s going to be a problem,” he said. “You’re probably not going to have creative people who can be entrepreneurs.”

AN IDEAL ENVIRONMENT?

In developing nations, nurturing creativity is important because entrepreneurship is well suited to these environments, according to Edgell.

For one, it is highly localized. People can spot and develop opportunities in ways that serve their communities. Homegrown enterprises often fare better than externally imposed models: “Entrepreneurship enables local people, to some degree, to assert themselves in their context and make sense of it,” said Edgell.

That does not make local businesses painless to start, or grow. The usual suspects are lack of funding, weak infrastructure, unstable government, and scant training—but they are not the only impediments.

When Brad Fisher, SIS/MA ’13, visited Tunisia in the summer of 2012 to work with aspiring entrepreneurs, he learned quickly that a business idea embraced in one culture may be considered disgraceful in another. Fisher’s visit was aided by Kogod’s relationship with L’Institut Arabe des Chefs d’Entreprises (IACE), or Arab Institute of Business Managers.

On Tunisia’s coast, Fisher met residents who wanted to start a food truck service at a beach resort. “I thought it was a good idea,” Fisher said, “but their family got really upset.”

The family, university educated, expected its relatives to pursue engineering or another prestigious path. Food truck service, they felt, was shamefully beneath them.

In developing nations, obstacles to entrepreneur- ship are plentiful, but shame, fear of failure, and the social values they reflect aren’t the obstacles that readily come to mind.

CHANGING TOP TO BOTTOM

After his time in Tunisia, Fisher spent a semester in Executive-in-Residence Robert Sicina’s practicum course on Peace Through Commerce, in which students generate business plans based on ideas that emerge from the program. Sicina selects students from American University and other US schools to work with the IACE in-country.

Last year, 15 graduate students, including several from AU, visited 10 Tunisian cities—often small, rural areas—to evaluate business ideas with approximately 200 would-be entrepreneurs. Fisher traveled to Thala, Regueb, Makthar, and Ghom- rassen, where local development offices were not always available.

Residents did, however, have plenty of enter- prising ideas. One wanted to provide finishing work for Thala’s marble industry. Others saw an opportunity to pelletize plastic bottles to make transport to recycling factories easier and cheaper. In Regueb, members of a cooperative wanted to build a factory to dry produce, enabling them to ship goods farther.

Certain ideas were more promising than others.

One resident, taking inspiration from a new shrimp farm announced in 2012, proposed a ques- tionable octopus farm. Another envisioned a robot factory, despite lacking materials and technological know-how. Of course, Fisher noted, off-the-mark ideas are not limited to Tunisia.

“There are plenty of bad ideas for small businesses in the US. At the same time, I was impressed with the drive of some of these people. They were really optimistic. I hope they can pull it off.”

Pulling it off, in Edgell’s framework, requires top-down and bottom-up effort.

To illustrate, Sicina points to the explosive growth of cell phones in Africa. In 2000, Africa had fewer than 20 million landline phones. By 2012, it had nearly 650 million mobile phone subscriptions, according to a report by the World Bank, African Development Bank, and African Union.

Arguably, that development improved Africans’ economic well-being more than any program in recent memory, Sicina said, adding that the market—not aid organizations—drove the growth. He believes this shows that the best solutions may grow outside the institution. “You’ve got to get on the ground, in the village, getting your hands dirty.”

At the same time, governments clearly have a role. As the report on Africa notes, “[government’s] larger role lies in creating an enabling environment—issuing licenses, making available rights of way, auctioning spectrum, or mandating infrastructure sharing and interconnection—that allows a liberalized market to thrive.”

Tunisia’s government could arguably do more to facilitate entrepreneurs. On the World Bank’s Ease of Doing Business Index, Tunisia ranks 50th of 185 regulatory environments, down from 45th in 2012. The index measures the time and money needed to get a business up and running officially, from tax registration to building permits, relative to other countries. This year, Tunisia fell in every category except cross-border trading.

“That kind of stuff needs to change,” Sicina said.

HOMELAND SUCCESS

The building block of entrepreneurship is the power of ideas. In many developing nations, however, stress and poor nutrition inhibit cognitive development. Without peak performance, young people are less likely to engage in creativity—the spark of putting ideas together.

“Those connections are fragile,” Edgell said. “It doesn’t take much for them to go away, or not be able to form at all.” An environment that puts stress on cognitive processing, therefore, may hinder the divergent thinking that leads to innovation.

Edgell’s framework also draws on research into socioeconomic status. What’s interesting, he said, is that wealth is less of a predictor for creativity than how a family allocates resources. Budding entrepreneurs fare best when families recognize their potential and support them, possibly with a disproportionate share of family resources.

The notion of favoring one child over another gave Edgell pause. Yet he recognizes its pragmatic application: “If one kid had more access to funds, maybe he or she would be better able to take care of the family long-term.”

Parents also shape children’s creativity when they engage in their own creative pursuits, expose children to diverse experiences, and express appreciation for creative expression.

Research into the relationship between income and creativity also shows that many creative people emerge from a fertile economic middle ground, between the desperate struggle to survive and a too-comfortable existence that saps ambition.

“Young people in those environments start to make a lot of things for themselves,” Edgell said. “This is not about glamorizing poverty; it’s just to say the lower-middle class may confer some incredible benefit when it comes to divergent thinking.” That divergent thinking, of course, is the hallmark of creativity.
Fisher saw a similar dynamic in Tunisia, observing that residents of poorer areas were used to being self-starters. “Those people had been neglected for decades. The only way they could make money was by…enterprise.”

CULTURAL NORMS AND VALUES

Given optimal nutrition, reduced stress, and familial support, a young person still might succumb to cultural pressures that lead him away from entrepreneurship. Attitudes about risk and failure are especially relevant.

“When people laud the wonder of entrepreneur- ship as the solution to all kinds of problems around the world,” Sicina said, “they too often ignore that there’s a lot of risk to entrepreneurship, and there’s a huge failure rate.”

That’s equally true in the United States, with one key difference. In American start-ups, risk is par for the course. Their mantra might well be “Dust yourself off and start over.” Not so in Arabic and Muslim communities, Sicina said, where business failure can stigmatize individuals and families.

“The risk of failure is so great as to be over-whelming against the potential rewards of success,” he said. “That, I think, is an important impediment to the growth of entrepreneurship.”

Edgell points to the 10-year GLOBE study— Global Leadership and Organizational Behavior Effectiveness—that examined leadership attributes in 62 countries. Many developing nations, being collective and familial, may discourage novelty and innovation—the very traits entrepreneurship requires.

In countries like China, Edgell said, cultural norms exert strong expectations on young people: “In the United States, we are a very individualist society, so we’re more accustomed to allowing some of that to flourish. But in those countries that are highly collectivist, that is sometimes not tolerated.” He cites research showing that differentiated, socially complex countries create a richer environment for divergent-thinking individuals to flourish.

Educating families about the positive side of divergence could make them more hospitable to early entrepreneurial leanings, Edgell said. “If your kid is a little bit unusual, let’s understand why that is a good thing.” Pushing against norms may be an uphill battle, he added, but that is the road to change.

BIG-PICTURE POLICIES

Government and other institutions comprise the outermost ring in Edgell’s framework. Korea, for example, successfully used national incentives to boost its information technology sector. Initiatives in Korea’s Small and Medium Business Administration include financing, developing workers’ skills, and facilitating market access. According to a Bloomberg Businessweek report, the South Korean government spent $16.7 billion in 2011 to support small-to-midsize businesses. The investment paid off: between 2007 and 2011, the number of South Korean tech start-ups jumped 83 percent.

“It’s worth noting, at the macro level, some of their policies seem to have been productive,” Edgell said.

Government-funded mentoring and education programs, like Artists for Humanity and the National FFA Organization, formerly Future Farmers of America, also could be implemented. Such programs help stem the “brain drain” that often plagues developing countries, Edgell noted.

“Intelligent or well-off kids leave and they don’t come back because they can’t deploy their skills there,” he said.

Sicina believes government can create conditions that allow promising young entrepreneurs to be discovered. “You’ve got to sort and separate the wheat and the chaff; you’ve got to find the ones who are really determined and passionate; and you’ve got to nurture them by creating conditions for learning and coaching and mentoring.”

Governments also can tailor education to the needs of business. Tunisia’s educational system, while free through the doctoral level, emphasizes science, engineering, and government jobs. As a result, Sicina said, the country has large numbers of well educated, young people waiting for jobs that may not materialize. Finally, governments can deploy traditional economic tools, such as microfinance programs and national incentive strategies.

Tunisia, then, demonstrates that family, culture, educational systems, infrastructure, and government all coalesce to grow or stifle the next generation of entrepreneurs. Their best chance, Edgell’s framework suggests, lies in a comprehensive, well- integrated strategy.

“All these conditions have to be more or less aligned,” he said.

Potential users of the framework include policy makers in developing nations, who could apply these concepts in communities. Officials could study thriving entrepreneurs to learn what path they followed and how it might be replicated, Edgell said. “See if there are young people who have been highly divergent and started their own businesses, and figure out what exactly their families did.”

That dialogue, Edgell said, has the power to introduce new ideas that challenge existing norms. “You change the language, you change the rules, and you change the behavior.”

Although top-down programs are crucial, Edgell pointed out that legislation does not necessarily change people’s minds. “You change things by going out and talking to people and introducing ideas,” he said.

For Fisher, talking to people yielded insight into the complex web of factors that, for Tunisian entrepreneurs, build up conditions for success and threaten to tear them down. “A lot of people we met were really sharp,” he said. “I feel like, given the right resources, they could do amazing things.”

“Developing nations and sustainable entrepreneurial policy: Growing into novelty, growing out of poverty” is forthcoming in the Journal of Applied Business Research in 2013.

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