This OECD Forum 2019 background note will be used to prepare speakers on the panel Entrepreneurship With A Cause, taking place at the OECD headquarters from 15:00-16:30 on Monday, 20 May. Join the Forum Network to comment and help inform the upcoming debate and, whether you're with us in Paris or watching online, let us know what you think of the session!
Entrepreneurs change the way we live and work. Not only are start-ups the hubs of ground-breaking ideas, they also contribute to achieving global goals. They help create jobs and set up conditions for a flourishing society as they stimulate related businesses or sectors that support the new venture.
Most importantly though, entrepreneurs help create social change as they provide vectors of inclusion and development for marginalised populations that find it difficult to access the formal job market. From the creation of completely new markets to the inclusion of regionally marginalised workers, the globalisation of tech has revolutionised how entrepreneurs work and how they hire. A simple for-profit goal is no longer desirable, as generations change, social impact of the enterprise is the goal.
Thanks to technology and the online marketplace, starting off as an entrepreneur is easier and more affordable than ever but there are many challenges that potential entrepreneurs encounter. According to OECD research, less than 50% of start-ups survive more than five years and only a fraction develop into high-growth firms. Their survival depends on several factors: from easy access to finance to access to global value chains and issues such as regulatory uncertainty, differences in productivity and the potential for innovation based on a whole support ecosystem.
Starting entrepreneurs encounter specific problems in financing. The greater variance in profitability and survival means higher interest rates, as well as credit rationing due to shortage of collateral and a riskier setup. The expansion of private equity markets, including informal markets fuelled by technology, from mobile mini-credits to crowdsourcing has greatly improved access to venture capital for start-ups and entrepreneurs, but considerable differences still remain among regions.
At the same time, technology enables easy access to international markets and helps local entrepreneurs to enter global value chains and new financing strategies, it enables the connection of supply and demand and provides opportunities where none would otherwise be possible and evens out regional differences.
A number of intangible factors at the regional level such as culture, social capital and local networking influence entrepreneurial development and cannot be fully alleviated through technology. Here, hubs providing full ecosystems focused on building impact start-ups, especially in underprivileged regions, are crucial for the pickup and success of potential entrepreneurs.
Government regulation also plays an important role in nurturing entrepreneurship and requires a fine balancing act on the part of the regulating authority. Unregulated entrepreneurship may lead to unwanted social outcomes whereas costly, complex and lengthy compliance procedures create regulatory burdens.
Entrepreneurs and social entrepreneurs encompass a large variety of firms that do not face the same realities and cover a wide range of industries and regions. Most newly created enterprises are situated in low-wage and low productivity sectors, mostly in services, which increases the trend toward wage and productivity stagnation. As new firms grow, investment into education and new skills is crucial to avoid any productivity gaps. Here again, technology could bring in new methods of teaching skills, faster and more efficiently.
While there are many positive examples and the trend overall is good, economic prosperity for thriving (social) entrepreneurs is still uncertain. While governments all around the world have put entrepreneurs at the core of some of their economic policies for a long time, we must encourage entrepreneurs to direct their efforts toward a deeper connection to an international economy, and to use technology and digital tools to create the impact they desire.
- What led you to decide to become an entrepreneur? (question for all speakers at the beginning of the session)
- How do you define “entrepreneurship with a cause” and where does it differ from a standard business?
- What are some of the challenges that you face?
- Does entrepreneurship really work as a social elevator? What are the necessary elements that support positive income mobility?
- What is the role of networks and ecosystems when it comes to creating a viable enterprise?
- How does access to the global marketplace help local inhabitants?
- Technology is an important lever for entrepreneurship. How can we ensure that we draw on its positives?
- What regulation helps alleviate issues that potential entrepreneurs may face?
- What finance options are available in regions that are not entrepreneurship hubs?
- How important is innovation? And how can it be integrated integrally into the business model?
- What are the key factors that entrepreneurs should focus on in the future
Continue the conversation and help us co-create the agenda
|OECD Forum 2019|
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