Policy Wonks and Young Entrepreneurs
As economic recovery indicators fell flat last week, the leaders of G20 nations held meetings in Russia. Entrepreneurs were present and armed with a two reports from a couple of “Big 4” heavyweights to help them deliver their message -- “Help us help you stimulate job creation.” We take a look this week at some of the highlights of what the authors had to say.
While I left Russia last week before the important government leaders arrived, I was there for the release by Ernst & Young and Accenture of their reports measuring entrepreneurship. This year’s Ernst & Young Entrepreneurship Competitiveness Barometer, which measures the entrepreneurship competitiveness amongst the G20 countries, highlights the fact that youth unemployment has reached critical levels (higher than 30% in the worst-hit countries). Making matters worse, these levels are expected to rise over the next five years, raising the specter of what the report calls a “lost generation.” The loss of this untapped generation is significant not only because of their numbers (290 million young people neither working nor studying according to The Economist) but also because young people around the world are under-employed relative to their training and capabilities.
So how can young people capitalize on their training or potential? The Ernst & Young report calls for young entrepreneurs to start a new wave of enterprises. According to their research, businesses with fewer than 250 employees: represented, on average, two-thirds of G20 employment; add jobs at about twice the rate of their larger rivals; and are more likely than larger companies to recruit previously unemployed people. I agree, but urge G20 nations to be even more ambitious and call for a new wave of not just small enterprises, but high-growth firms. Not all startups will get there the first time but that should be our goal.
The young entrepreneurs who responded to the Ernst & Young survey, identified five key imperatives:
- Expand the choice of funding alternatives
- Increase mentoring and broader support
- Change the culture to tolerate failure
- Target and speed up incentives
- Reduce red tape and excessive taxation
Accenture also unveiled a survey during the G20 Summit in Moscow of 1,000 young entrepreneurs across G20 countries. My favorite finding is that the entrepreneurs surveyed clearly saw the glass half-full with a majority of them optimistic about their ability to drive growth and create jobs in the coming years. Despite the stagnant global economic growth, 41 percent of the respondents are confident that their business will grow more than eight percent per year and 81 percent believe they will create new jobs in the next two years. Other Accenture findings include the fact that 78 percent of them feel technology-driven innovation is a strategic priority for their businesses. These innovations make entrepreneurs confident about their role as catalysts.
The survey of G20 young entrepreneurs also shows that one-third of all the entrepreneurs surveyed, and 45 percent of those based in an emerging market, expect the next wave of innovation to come primarily from emerging markets. Not only do young entrepreneurs see across borders, but across business boundaries. According to the study, they believe in collaboration with large companies on innovation with 46 percent planning to do so in the next two years.
Young entrepreneurs are not waiting for policy to solve everything. Nonetheless, through workshops with entrepreneurs in selected countries, entrepreneurs identified 12 policy actions they believe can help build an environment conducive to innovation including:
- Tax incentives
- Development of technology education and training
- “Small Business Acts”
- Development of a public bank to finance entrepreneurs and small and medium enterprises
- Supportive environments for angel investors and venture capital funds
- Reducing red tape and regulation for entrepreneurs
- Opening public procurement to innovate small and medium enterprises
- Public investment in R&D and technology infrastructures
- Development of local technology clusters
- Improvement of Intellectual Property Rights
- Open immigration policies to attract skilled workers
- Open data promotion
While I do not share enthusiasm for all the priorities outlined by the entrepreneurs surveyed, Accenture and Ernst & Young are to be applauded for investing in the important work of asking entrepreneurs how government can help. These reports are important contributions because they highlight entrepreneurs’ views globally on what they themselves consider policy enablers and inhibitors of entrepreneurial activity. These voices are a unifying force between entrepreneurs and their national leaders who set the rules and incentives – but do not create new firms.
Offering a steady drumbeat of entrepreneur voices to the G20 and other global meetings is essential in helping global economic leaders determine which levers to pull in order to help their own entrepreneurs. The Center for Entrepreneurship should be congratulated for pulling this together and setting the tone for future discussions. For example, in October, President Obama will speak to entrepreneurs in Kuala Lumpur at his Global Entrepreneurship Summit – sending an important message about their role in global economic stability. Then in November, Global Entrepreneurship Week, representing entrepreneurs from 135 nations, will release its own report listing entrepreneur-defined priorities for policymakers. And the following March, the Global Entrepreneurship Congress will pull all this together with thousands of entrepreneurs and their policymakers present in an effort to share ideas across boundaries for implementing the best policies.
Blog posts about entrepreneurs and government have typically in the past been met with a chuckle from both government representatives and entrepreneurs. However, regardless of which is the “leader” and which is the “feeder,” government and entrepreneurs need each other. While at times it might feel like mixing oil and water, these forums with the research and stories they illuminate will be essential over the next few years if well-meaning top-down and bottom-up efforts are to be channeled in a mutually constructive direction.