Entrepreneurship in Emerging Economies: The Creation and Development of New Firms in Latin America and East Asia

This report presents the results of a comparative study of entrepreneurship in Latin America and East Asia. Entrepreneurship is defined as the capacity to create and develop new business ventures. The study focuses on the process of creation of new companies. That process is analyzed at three different stages: inception of the entrepreneurial venture, company start-up, and its early development. From the initial motivation to become an entrepreneur to the contacts needed to help solve problems as the business gets underway and grows, a number of factors affect the behavior of potential entrepreneurs.

This study aims to identify the leading factors that stimulate or limit entrepreneurship at each stage of the entrepreneurial process in Latin America and East Asia. These leading factors have been analyzed, a number of conclusions have been drawn, and policy recommendations have been reached for promoting entrepreneurship in different socio-economic contexts. ...

POLICY RECOMMENDATIONS

This study points to the main areas where policies are needed to promote entrepreneurship in Latin America. At the same time, the specific features of the entrepreneurial process in each country are revealed, enabling more precise consideration of the policies and programs necessary in each national context. A methodology similar to the one used in this study could also be applied to regions within each country in order to develop policies and programs aimed at regional concerns. These are the main general recommendations of the study:

1. Policies for boosting entrepreneurial capacity should set out to broaden the base of entrepreneurs who have access to the means to start up a new business. Strategies of this kind should set out to include potential entrepreneurs from all social classes, women, and indigenous people. This would also contribute to increasing the potential social mobility of the population.

2. A coordinated set of programs is needed to deal with the different factors that affect each stage of the entrepreneurial process.

3. Initiatives to promote entrepreneurship must involve a long-term political, economic, and social commitment. The process of identifying business opportunities and starting up a business takes several years.

4. Policies for encouraging entrepreneurship must consider the importance of work experience and the entrepreneur’s contact network as key factors for entrepreneurial success.

On the basis of these guidelines, regional policy-makers could consider the following specific recommendations:

1. To help motivate young people in Latin America to start new businesses, entrepreneurial role models should be disseminated and innovations should be introduced into the educational system.

2. The development of entrepreneurial networks and the creation of teams of entrepreneurs should be promoted. Entrepreneurial networks can be encouraged in different ways, including special forums or clubs where new entrepreneurs can get to know one another and share experiences with more experienced business people, and with consultants, investors, and policy-makers in their sector. Training programs can be implemented to promote teamwork. These could require entrepreneurs to work in teams or participate in competitions where groups of entrepreneurs compete for awards for their collective business plans.

3. The inception period of new companies should be shortened by encouraging innovation, entrepreneurial connections, and new business opportunities, and by providing relevant information and support for the business venture.

4. Creating suitable financial infrastructure, eliminating bureaucratic red tape and costs, and reorienting existing SME support programs to cover the needs of new entrepreneurs could reduce the most significant impediments to the creation and development of new businesses in Latin America.

5. A strategy for boosting entrepreneurship must include many different organizations with different faculties and areas of specialization, all working together in a highly efficient and coordinated way. This means government bodies at various levels (national, local, and regional), universities and other institutions such as technical training institutes, private foundations, chambers of commerce, and other social entities.

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ENTREPRENEURSHIP IN EMERGING ECONOMIES:
The Creation and Development of New Firms in Latin America and East Asia

Hugo Kantis, Masahiko Ishida, Masahiko Komori.

Inter-American Development Bank
Sustainable Development Department
Private Enterprise and Financial Markets Subdepartment
Micro, Small and Medium Enterprise Division

Download Entrepreneurship in Emerging Economies

PDF format, 787KB, 131Pages.

CONTENTS
Executive Summary ................................................. i
Chapter 1: The Goals and Focus of this Study ............ 1
Chapter 2: Comparative Analysis of the Entrepreneurial Process in East Asia and Latin America ................................... 11
Chapter 3: The Entrepreneurial Process in Latin America ... 29
Chapter 4: The Entrepreneurial Process in East Asia ........... 51
Chapter 5: Conclusions and Policy Implications .................. 69
Bibliography.............................................. 79
Articles by Experts ................................... 83
Methodological Annex .............................107

FOREWORD:

Entrepreneurship is receiving greater attention from policymakers and experts in developed and developing countries. New dynamic enterprises contribute to economic development in several ways: as an important channel to convert innovative ideas into economic opportunities, as the basis for competitiveness through the revitalization of social and productive networks, as a source of new employment, and as a way to increase productivity.

The latest studies are gradually demystifying the enterprise creation process. This process covers the period from a potential entrepreneur’s initial inspirational spark and motivation to begin a new venture up through its startup and early development. However, the current literature still does not pinpoint which factors are most influential in encouraging or limiting the entry and progress of new dynamic enterprises within different local contexts.

In answering this question, this study analyzes data drawn from surveys of more than 1,200 new entrepreneurs in Latin America and East Asia.

During the last five years, the Inter-American Development Bank has supported more than 15 programs designed to promote new enterprise creation. These cover a wide variety of services for individuals that are embarking on an entrepreneurial career. As we look toward the future, and given the importance of enterprise creation to economic development, the Bank needs to increase its participation in these types of programs. The findings and policy implications of this study offer important guidance to direct those resources effectively.

We would like to thank the government of Japan, which made this study possible through its continuous support of the Japanese Trust Fund for Consultancy Services and the Japan Program. Researchers from nine countries participated in this large-scale study, which was supervised by three academic coordinators, under the guidance of the Inter-American Development Bank.

We hope that this report will serve as a reference for encouraging economic development based on the creation and promotion of new enterprises. We also hope that the findings of this study will lead to innovative programs to promote entrepreneurship.

Antonio Vives
Deputy Manager
Private Enterprise and Financial Markets Subdepartment
Sustainable Development Department

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