Economic Crisis Breeds Opportunities for Entrepreneurship

January 15, 2009 09:00 AM US Eastern Timezone

Monitor Group Issues Comprehensive Report Identifying How Regions around the World can Best Drive Entrepreneurial Success

CAMBRIDGE, Mass.--(BUSINESS WIRE)--In today’s worsening economy, one of the most important roles governments, business leaders, and civic organizations can play is to take action to fuel entrepreneurship. Monitor Group, one of the world’s leading advisory and consulting firms, today releases “Paths to Prosperity; Promoting Entrepreneurship in the 21^st Century,” a first-of-its-kind study that surveyed and interviewed entrepreneurs in 22 countries to determine attitudes and critical policies required for entrepreneurship to thrive in different regions around the world.

While the study concludes there is no one-size-fits-all answer to promoting entrepreneurship, it does identify its key drivers and enables countries, regions, and cities around the world better to understand their specific circumstances and deploy programs and policies that have led to successful high-growth entrepreneurship in similar environments. By determining what matters most in each region, and what is least likely to help in stimulating entrepreneurship, the survey allows policy makers to establish meaningful priorities that will help promote entrepreneurs in this time of economic decline.

“As countries around the globe continue to discuss stimulus plans and bailouts, a critical strategy that all governments should be looking at is how to encourage entrepreneurship locally through the application of specific policies that entrepreneurs themselves have indicated are disproportionally important to ensure new, viable companies emerge from the current crisis,” said Pedro Arboleda, partner, Monitor Group and co-author of the report.

Results of the survey contradict conventional wisdom regarding entrepreneurship. Key findings of the report include:

The preponderance of an entrepreneurial mindset in the population, as defined by specific values like individualism, a belief in the legitimacy of entrepreneurship as a career choice, and the capacity to recover quickly and without excessive social stigma from a failed business attempt. In the aggregate, these cultural components are significantly more important than other indicators in helping to explain entrepreneurial performance in a region.
Incubators, venture capital funds, and administrative burdens are not nearly as important as they are often made out to be. While venture capital remains critical for the growth of new businesses, it is seed capital that ultimately determines whether they are formed in the first place.
Financing strategies like public listings, spin-offs, and buy-outs showed a high correlation with actual levels of entrepreneurship worldwide. Aside from these strategies being an effective source of funding for expansion, the mere possibility of a future public listing acts as a powerful incentive for potential entrepreneurs, by promising very large rewards in return for the equally large risks and efforts they must take to launch their business.
Lowering income taxes, increasing deductions for entrepreneurship and providing the right incentives for the commercialization of research and development are likely to have a much greater impact than building incubators, or simplifying administrative and regulatory processes.
The teaching of entrepreneurial skills at all education levels, from elementary school through university, has a significant impact on levels of entrepreneurship throughout the world. Much is made these days of which countries produce the highest numbers of scientist and engineers. It is just as important to ask which countries produce the entrepreneurs that create the businesses where most of these scientists and engineers will work.

“Paths to Prosperity” calls on accumulated findings from the Monitor Group Entrepreneurship Benchmarking Initiative Survey, a multi-year project to identify and measure key weaknesses in entrepreneurial environments around the world. Carried out in 22 countries to date, the survey has yielded a wealth of insight into critical barriers currently facing entrepreneurs across a variety of regions. Additionally, Monitor has worked on more than 150 regional economic development projects, leading to a comprehensive understanding of industrial clusters. To facilitate this process Monitor has mapped 94 percent of world GDP by competitive industry cluster. For additional comment from Pedro Arboleda please contact Andrea Krull (akrull@racepointgroup.com).

About Monitor Group

Monitor Group works with the world's leading corporations, governments and social sector organizations to drive growth on the issues that are most important to them. Founded and based in Cambridge, Massachusetts, the firm offers a range of services - advisory, capability-building and capital services &ndash designed to unlock the challenges of achieving sustained growth. Monitor brings leading-edge ideas, approaches, and methods to bear on clients' toughest problems and biggest opportunities. For more information visit www.monitor.com

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