Entrepreneurship, Start-н‐up Activities, and Economic Development

295 Pages·2016·13.82 MB·English

First
 published
 in
 Japan

by
 the
 Asian
 Productivity
 Organization

Leaf
 Square
 Hongo
 Building,
 2F

1-­‐24-­‐1
 Hongo,
 Bunkyo-­‐ku

Website:
 www.apo-­‐tokyo.org

Tokyo
 113-­‐0033,
 Japan

©
 2016
 Asian
 Productivity
 Organization

The
 views
 expressed
 in
 this
 publication
 do
 not
 necessarily
 reflect
 the
 official
 views
 of
 the

Asian
 Productivity
 Organization
 (APO)
 or
 any
 APO
 member.

All
 rights
 reserved.
 None
 of
 the
 contents
 of
 this
 publication
 may
 be
 used,
 reproduced,

stored,
 or
 transferred
 any
 form
 or
 by
 any
 means
 for
 purposes
 without
 prior
 written

permission
 from
 the
 APO.
contents

entrepreneurship, start-up Activities, and economic Development 1

cambodia ......................................... .8. 6
Republic o f.. .c...h..i..n...a... .....................................................................................................................................................105

India ...................................................................................................................................................116
Indon .e..s...i.a... .....................................................................................................................................................................150
Japan ....................................................................................................................................................................161
Pakist a...n... ........................................................................................................................................................................198
Philippin e...s.. ..................................................................................................................................................................227
thailand .................................................................................................................................................................261
(cid:19)(cid:148)(cid:145)(cid:976)(cid:139)(cid:142)(cid:135)(cid:3)(cid:145)(cid:136)(cid:3) (cid:8)...(cid:154)...(cid:146)..(cid:135)...(cid:148)..(cid:150)..(cid:149)..(cid:3).....................................................................................................................................................289
....................................................................................................................................................
Entrepreneurship,
 Start-­‐up
 Activities,

and
 Economic
 Development

 Dr.
  Tsuneo
 Yahagi

  Chief
 Expert
Report
 on
 Entrepreneurship
 Initiatives
 in
 APO
 Economies

INTRODUCTION

The
 Asian
 Productivity
 Organization
 (APO)
 Coordinating
 Meeting,
 held
 in
 Phnom
 Penh,

Cambodia
  from
  3
  to
  5
  August
  2013
  (hereinafter
  called
  the
  “Academic
  Meeting
  on

Entrepreneurship
  Development”)
  sought
  to
  distinguish
  “entrepreneurship”
  from
  the

start-­‐up
 activities
 of
 entrepreneurs.
 Based
 on
 discussions
 at
 the
 Academic
 Meeting
 on

Entrepreneurship
 Development,
 this
 report
 defines
 entrepreneurship
 as
 the
 mindset
 that

stimulates
 a
 person
 towards
 the
 “doing
 of
 new
 things,
 or
 the
 doing
 of
 things
 that
 are

already
  being
  done
  [but]
  in
  a
  new
  way
  (innovation)”
  [1].
  Here,
  “things”
  covers
  any

societal
 activity,
 including
 business.
 In
 the
 entrepreneurial
 process,
 existing
 things
 may

have
  to
  be
  destroyed,
  as
  Schumpeter
  has
  described
  [2].
  An
  entrepreneur,
  then,
  is

defined
 as
 a
 person
 who
 has
 a
 strong
 entrepreneurial
 mindset
 and
 “gets
 things
 done”

amid
 a
 set
 of
 risks
 and
 rewards
 that
 are
 defined
 by
 the
 entrepreneur
 [1].
 As
 Becker
 et
 al.

describe:
  “the
  will
  required
  to
  push
  innovation
  through,
  against
  all
  resistance,

characterizes
 an
 entrepreneur”
 [3].

The
 Academic
 Meeting
 on
 Entrepreneurship
 Development
 agreed
 to
 base
 its
 research
 on

the
 conceptual
 model
 of
 the
 Global
 Entrepreneurship
 Monitor
 (GEM)
 with
 respect
 to
 the

relationship
 between
 the
 level
 or
 degree
 of
 entrepreneurship,
 and
 the
 level
 of
 economic

development
 of
 a
 country
 [4].
 GEM
 affiliates
 and
 many
 other
 researchers
 argue
 that

entrepreneurship
 plays
 a
 critical
 role
 in
 the
 development
 of
 an
 economy,
 as
 well
 as
 society

as
  a
  whole,
  for
  any
  given
  country.
  The
  Academic
  Meeting
  on
  Entrepreneurship

Development
 confirmed
 that
 the
 enhancement
 of
 entrepreneurship
 is
 essential
 in
 the

development
  of
  any
  society.
  Here,
  “development”
  is
  not
  necessarily
  limited
  to
  the

economy.

Based
 on
 our
 discussions
 at
 the
 Academic
 Meeting
 on
 Entrepreneurship
 Development,

and
  previous
  relevant
  research
  from
  GEM
  and
  elsewhere,
  we
  make
  the
  following

assumptions
 throughout
 this
 report:

A1.
  There
 is
 a
 clear
 distinction
 between
 the
 start-­‐up
 activities
 of
 entrepreneurs
 and

entrepreneurship,
 the
 latter
 being
 the
 mindset
 that
 formulates
 the
 attitude,
 activity,

and
 aspirations
 of
 entrepreneurs.

A2.
  There
 is
 a
 two-­‐way
 cause–effect
 relationship
 between
 entrepreneurship
 and
 the
 level

of
 economic
 development
 in
 a
 community.

Asian
 Productivity
 Organization 2
Report
 on
 Entrepreneurship
 Initiatives
 in
 APO
 Economies

A3. The
 ultimate
 objective
 of
 the
 Academic
 Meeting
 on
 Entrepreneurship
 Development

was
 to
 provide
 a
 productive
 guideline
 for
 researchers
 and
 policy
 makers
 who
 have

serious
 interests
 in
 the
 relationship
 between
 the
 degree
 of
 entrepreneurship
 and

level
 of
 economic
 development
 of
 a
 country.

LEVEL
 OF
 ECONOMIC
 DEVELOPMENT

Classification
 of
 Economic
 Development

As
 described
 by
 Wennekers
 et
 al.
 [5],
 GEM
 has
 adopted
 the
 five-­‐stage
 model
 (three
 major

stages
 plus
 two
 transitional
 stages)
 model
 of
 economic
 development
 suggested
 by
 Porter

et
 al.
 in
 2002
 [6].
 The
 Academic
 Meeting
 on
 Entrepreneurship
 Development
 also
 agreed
 to

adopt
 this
 model
 to
 utilize
 GEM
 data
 and
 refer
 to
 GEM
 research
 works
 in
 the
 future.
 Table

1
 shows
 the
 three
 major
 stages
 and
 transitional
 stages
 between
 the
 major
 stages.
 Note

that
  the
  names
  of
  the
  Academic
  Meeting
  on
  Entrepreneurship
  Development
  member

countries
 are
 added
 to
 each
 category
 based
 on
 the
 classification
 made
 by
 Sala-­‐i-­‐Martin
 et

al.
 [7]
 using
 the
 data
 reported
 in
 The
 Global
 Competitiveness
 Report
 2013–14:

TNabol
 e
 1.
 ThSeta
 fgivee
 -­‐stage
 model
 of
 eSctoangoem
 Niacm
 dee
 velopment
  APO
 Member
 Countries

1
  1st
 stage

  Factor-­‐driven
 economies
  Cambodia,
 India,
 Pakistan

2
  1st–2nd
 transitional
  From
 factor-­‐driven
 to
  Philippines

stage
  efficiency-­‐driven

3
  2nd
 stage
  Efficiency-­‐driven
 economies
  Indonesia,
 Thailand

4
  2nd–3rd
 transitional
  From
 efficiency-­‐driven
 to
  None

stage
  innovation-­‐driven

5
  3rd
 stage
  Innovation-­‐driven
 economies
  Japan,
 Republic
 of
 China

(ROC)

Source:
 Porter
 et
 al.
 [6]

For
  the
  first
  stage,
  factor-­‐driven
  economies
  (FD),
  the
  foundations
  of
  a
  country’s

competitiveness
 are
 endowed
 natural
 resources
 and
 unskilled
 labor
 with
 low
 productivity.

Since
 basic
 products
 and/or
 commodities
 are
 the
 main
 source
 of
 merchandise,
 price
 is
 the

only
 tool
 for
 influencing
 competitiveness.
 Accordingly,
 to
 sustain
 competitiveness,
 wages

must
  be
  kept
  as
  low
  as
  possible.
  Sala-­‐i-­‐Martin
  et
  al.
  [7]
  suggest
  adopting
  four
  basic

requirements
 needed
 to
 maintain
 competitiveness:

Asian
 Productivity
 Organization 3
Report
 on
 Entrepreneurship
 Initiatives
 in
 APO
 Economies

1. Well-­‐functioning
 public
 and
 private
 institutions;

2. Well-­‐developed
 infrastructure;

3. A
 stable
 macroeconomic
 environment;
 and

4. A
 healthy
 workforce
 that
 has
 received
 at
 least
 a
 basic
 education.

If
 the
 productivity
 of
 a
 specific
 country
 starts
 improving,
 the
 country’s
 wage
 level
 would

increase
 without
 losing
 its
 price
 competitiveness.
 This
 is
 the
 1st–2nd
 transitional
 stage

from
 factor-­‐driven
 to
 efficiency-­‐driven
 (FD-­‐ED),
 where
 the
 country
 is
 approaching
 an

efficiency-­‐driven
 (ED)
 economy.
 At
 the
 early
 stage
 of
 this
 economy,
 wages
 are
 rising
 but

companies
 cannot
 increase
 prices,
 as
 the
 market
 is
 unable
 to
 perceive
 any
 significant

improvement
 in
 the
 quality
 of
 products
 or
 services.
 Therefore,
 the
 country
 should
 develop:

higher
  education
  and
  training
  systems,
  efficient
  markets
  for
  goods
  and
  services,

well-­‐functioning
  labor
  markets,
  efficient
  financial
  markets,
  an
  ability
  to
  fully
  utilize

existing
 technologies,
 larger
 domestic
 markets,
 and
 easier
 access
 to
 foreign
 markets
 [7].

As
 businesses
 accumulate
 knowledge
 and
 technological
 and
 management
 know-­‐how,
 they

will
 start
 producing
 unique
 products
 and
 services
 with
 premium
 prices
 to
 cover
 the
 cost

of
 higher
 wages.
 This
 is
 the
 2nd–3rd
 transitional
 stage,
 i.e.,
 from
 efficiency-­‐driven
 to

innovation-­‐driven
 (ED-­‐ID)
 economies.

At
  the
  third
  stage
  of
  economic
  development,
  innovation-­‐driven
  (ID)
  economies,

businesses
 seeking
 to
 sustain
 a
 competitive
 advantage
 must
 continue
 to
 offer
 products

and/or
  services
  that
  provide
  unique
  value
  to
  customers
  through
  sophisticated

inimitable
  value
  chains,
  as
  well
  as
  innovate
  products
  and/or
  services,
  and
  their

management
 skills
 [8].

Measuring
 the
 Stages
 of
 Economic
 Development

Sala-­‐i-­‐Martin
 et
 al.
 [7]
 describe
 in
 detail
 the
 criteria
 to
 define
 each
 of
 the
 three
 stages
 of

economic
 development.
 The
 major
 criterion
 is
 GDP
 per
 capita
 (USD)
 with
 systematic

adjustments
 in
 key
 sub-­‐indices
 specific
 to
 each
 stage,
 as
 follows:

1. Basic
 requirements
 sub-­‐index
 (key
 FD
 economies)

a. Institutions

b.Infrastructure

c. Macroeconomic
 environment

d.Health
 and
 primary
 education

Asian
 Productivity
 Organization 4
Report
 on
 Entrepreneurship
 Initiatives
 in
 APO
 Economies

2. Efficiency
 enhancers
 sub-­‐index
 (key
 ED
 economies)

a. Higher
 education
 and
 training

b.Goods
 market
 efficiency

c. Labor
 market
 efficiency

d.Financial
 market
 development

e. Technological
 readiness

f. Market
 size

3. Innovation
 and
 sophistication
 factors
 sub-­‐index
 (key
 for
 ID
 economies)

a. Business
 sophistication

b.Innovation

DEGREE
 OF
 ENTREPRENEURIAL
 ACTIVITIES
 AND
 ENTREPRENEURSHIP

Before
 we
 test
 existing
 hypotheses
 regarding
 the
 relationship
 between
 the
 level
 of
 a

nation’s
 economic
 activities
 and
 (a)
 entrepreneurial
 activities
 and
 (b)
 entrepreneurship,

let
 us
 briefly
 review
 how
 entrepreneurial
 activities
 and
 entrepreneurship
 are
 measured.

Measuring
 Entrepreneurial
 Activities

Discussions
 at
 the
 Academic
 Meeting
 on
 Entrepreneurship
 Development
 endorsed
 our

adoption
 of
 the
 index
 developed
 by
 GEM
 to
 measure
 entrepreneurial
 activities.
 Every
 year,

each
 GEM
 member
 country
 (of
 which
 there
 were
 100
 as
 of
 2014)
 conducts
 a
 survey
 of

entrepreneurs
 and
 entrepreneurial
 activities
 involving
 2,000
 adults
 in
 their
 respective

countries.
  Among
  the
  various
  measurements
  developed
  by
  GEM,
  the
  degree
  of

entrepreneurial
  activities
  or
  Total
  Entrepreneurial
  Activities
  (TEA)
  rate
  is
  of

primary
 importance.

TEA
 is
 defined
 by
 GEM
 as
 “the
 percentage
 of
 individuals
 in
 an
 economy
 aged
 18–64

years
  who
  are
  in
  the
  process
  of
  starting
  or
  are
  already
  running
  new
  businesses
  for

up
 to
 3.5
 years”
 [9].
 The
 TEA
 rate
 therefore
 includes
 both
 nascent
 and
 new
 entrepreneurs.

GEM
  conducts
  a
  survey
  of
  a
  random
  representative
  sample
  of
  at
  least
  2,000
  adults

(18–64
 years
 old)
 called
 the
 “Adult
 Population
 Survey
 (ASP).”

Asian
 Productivity
 Organization 5
Report
 on
 Entrepreneurship
 Initiatives
 in
 APO
 Economies

Throughout
 the
 Academic
 Meeting
 on
 Entrepreneurship
 Development,
 the
 GEM
 2012

Global
 Report
 was
 referenced
 for
 research
 data
 [9].
 Accordingly,
 the
 data
 for
 this
 current

report
 used
 the
 GEM
 data
 so
 far
 as
 they
 were
 available.

Measurement
 of
 Entrepreneurship

Although
 there
 is
 much
 benefit
 from
 the
 use
 of
 TEA
 and
 other
 indices
 developed
 by
 GEM,

every
  member
  agreed
  that
  there
  should
  be
  a
  clear
  distinction
  made
  between
  the

quantitative
  level
  of
  activities
  of
  entrepreneurs
  (e.g.,
  number
  of
  start-­‐ups)
  and
  the

qualitative
 aspect
 of
 entrepreneurs
 that
 is
 defined
 in
 our
 report
 as
 “entrepreneurship,”

although
 measuring
 the
 latter
 is
 expected
 to
 be
 challenging.

While
 the
 GEM
 TEA
 has
 become
 a
 widely
 used
 measure
 of
 entrepreneurship,
 Acs
 and

Au tio
 [10]
 point
 out
 that
 it
 has
 five
 major
 shortcomings:

1. Despite
  the
  fact
  that
  entrepreneurship
  is
  multidimensional
  in
  nature,
  TEA
  only

measures
 entrepreneurial
 activity
 levels;

2. TEA
  fails
  “to
  incorporate
  businesses
  differing
  impacts.
  A
  traditional
  agricultural

business
  established
  in
  Uganda
  or
  Peru
  is
  given
  equal
  importance
  as
  an

internet-­‐related
 venture
 in
 Silicon
 Valley;”

3. “The
 most
 entrepreneurial
 nations
 are
 defined
 as
 those
 having
 the
 largest
 number
 of

new
 businesses.
 These
 are
 generally
 developing
 countries
 in
 Africa
 or
 South
 America;”

4. TEA
  does
  “not
  take
  into
  account
  differences
  in
  environmental
  factors.
  In
  fact,
  the

efficiency
 and
 sophistication
 of
 the
 institutional
 setting
 could
 have
 a
 major
 influence

on
 the
 quality
 of
 entrepreneurship;”
 and

5. “Since
  self-­‐employment
  and
  the
  business
  ownership
  ratio
  decline
  as
  a
  country

develops,”
 TEA
 may
 “show
 that
 higher
 levels
 of
 development
 are
 associated
 with

decreasing
  levels
  of
  entrepreneurship.
  This
  phenomenon
  is
  inconsistent
  with

mainstream
  economic
  theories,
  which
  posit
  a
  direct
  connection
  between

entrepreneurship
 and
 development.”

Based
 on
 the
 above
 perception
 concerning
 the
 limitations
 of
 GEM’s
 TEA
 index,
 Acs
 and

Szerb
  developed
  a
  new
  index,
  The
  Global
  Entrepreneurship
  and
  Development
  Index

(GEDI),
 to
 capture
 multidimensional
 and
 qualitative
 aspects
 of
 entrepreneurship
 [11].

Asian
 Productivity
 Organization 6
Report
 on
 Entrepreneurship
 Initiatives
 in
 APO
 Economies

They
  define
  entrepreneurship
  as
  “a
  dynamic
  interaction
  of
  entrepreneurial
  attitudes,

entrepreneurial
  activity,
  and
  entrepreneurial
  aspiration
  that
  vary
  across
  stages
  of

economic
 development”
 [11].
 This
 definition
 intentionally
 reflects
 the
 GEM
 conceptual

model
 developed
 by
 Bygrave,
 Hay,
 Reynolds,
 and
 Yahagi
 at
 the
 time
 of
 founding
 GEM
 in

1998
 and
 refined
 by
 Xavier
 et
 al.
 in
 the
 GEM
 2012
 Global
 Report
 [4,
 9].

We
 strongly
 recommend
 referring
 to
 the
 works
 of
 Acs
 and
 Autio,
 and
 becoming
 familiar

with
  GEDI’s
  multidimensional
  index.
  The
  following
  brief
  summary
  of
  the
  three
  GEDI

sub-­‐indices
 should
 persuade
 us
 that
 we
 are
 now
 much
 closer
 to
 being
 able
 to
 measure

“entrepreneurship”
 as
 we
 have
 conceptualized,
 rather
 than
 simply
 looking
 at
 TEA
 [10].

The
 first
 sub-­‐index,
 entrepreneurial
 attitude
 (ATT)
 is
 defined
 as
 “the
 general
 disposition

of
 a
 country’s
 population
 toward
 entrepreneurs,
 entrepreneurship,
 and
 business
 start-­‐ups

[10].
 The
 index
 involves
 measuring
 the
 population’s
 opportunity
 perception
 potential,

perceived
 start-­‐up
 skills,
 fears
 of
 failure,
 networking
 prospects,
 and
 cultural
 respect
 for

the
 entrepreneur”
 [10].

The
 second
 sub-­‐index,
 entrepreneurial
 activity
 (ACT)
 is
 defined
 as
 “the
 start-­‐up
 activity
 in

the
 medium-­‐
 or
 high-­‐technology
 sector
 initiated
 by
 educated
 entrepreneurs
 in
 response

to
 business
 opportunities
 in
 a
 somewhat
 competitive
 environment
 …
 Operating
 in
 the

technology
 sector
 is
 important
 as
 high
 rates
 of
 start-­‐ups
 in
 most
 factor-­‐driven
 countries

are
  mainly
  in
  the
  traditional
  sectors
  and
  do
  not
  represent
  high
  potential.
  The

entrepreneur’s
 level
 of
 education
 is
 another
 important
 feature
 of
 a
 venture
 with
 high

growth
 potential.
 Additionally,
 cut-­‐throat
 competition
 may
 hinder
 business
 existence
 and

growth,
 giving
 a
 lower
 number
 of
 competitors
 improved
 chances
 of
 survival
 or
 future

development
 prospects”
 [10].

The
 third
 sub-­‐index,
 entrepreneurial
 aspiration
 (ASP),
 is
 defined
 as
 “the
 efforts
 of
 the

early-­‐stage
  entrepreneur
  to
  introduce
  new
  products
  and
  services,
  develop
  new

production
 processes,
 penetrate
 foreign
 markets,
 substantially
 increase
 the
 number
 of

firm
 employees,
 and
 finance
 the
 business
 with
 either
 formal
 or
 informal
 venture
 capital,

or
 both.
 Product
 and
 process
 innovation,
 internationalization,
 as
 well
 as
 high
 growth
 are

included
  in
  the
  measure.
  The
  capability
  to
  produce
  or
  sell
  products
  that
  customers

consider
 to
 be
 new
 is
 one
 of
 Schumpeter’s
 forms
 of
 creating
 ‘new
 combinations.’
 Applying

or
 creating
 new
 technology
 and
 production
 processes
 is
 another
 important
 feature
 of

businesses
 with
 high
 growth
 potential”
 [10].

Asian
 Productivity
 Organization 7