professor anokhin

Entrepreneurship and innovation: The most popular belief

Entrepreneurs are widely thought to be the agents behind economic growth and innovation. They are, we're told, the movers and shakers who create new industries, unseat current leaders from their thrones, and open new frontiers for everyone. Popular culture tirelessly propagates one success story after another - from Facebook's Mark Zuckerberg, who was simply glorified in "The Social Network" movie, to Tesla's Elon Musk, an immigrant who became a household name, to Google's Sergey Brin, whose internet se name has officially develop into a verb in English.

So persuasive may be the narrative of the entrepreneurial technological prowess and success, that lots of countries - including developing countries that feel they are lagging behind - develop comprehensive policies to support and promote entrepreneurship and even reserve sizeable funds to buy startups via government-run venture capital programs. But is this desire for and belief in entrepreneurs justified? How likely are entrepreneurs to push the technological frontier and bring about the sort of change that governments want? Entrepreneurship Professor Sergey Anokhin from Kent State University says the hard evidence is less convincing compared to the popular culture enables you to believe. professor anokhin

The dark side of entrepreneurship

In a study of 35 countries over a 7-year period, Professor Anokhin from Kent State and Professor Joakim Wincent from Sweden's Lulea University of Technology show that there's no universally positive relationship between entrepreneurship and innovation. While for the world's leading economies including the United States the positive link between startup rates and innovation might be true, for the developing economies the connection is really negative. Such countries are more prone to see innovation championed by the present companies, not startups. With few exceptions, entrepreneurs there pursue opportunities of a different kind that are derived from imitation and dissemination of others'ideas, and are not equipped to make truly advanced "grand" innovations. Typically, startups are less efficient than existing firms. Accordingly, if local governments support entrepreneurship, economic effectiveness may suffer, and innovation is less likely to occur. In fact, successful technological development in emerging economies is often associated with an aggressive entrepreneurial behavior of large corporations, not individual entrepreneurs. Such may be the case, for instance, of South Korea with its chaebols.

The figure below shows the vastly different impact of startup rates on innovation and technological development (as measured by patent applications) across countries. Only rich countries can expect more entrepreneurship to lead to more innovation, says Dr. Anokhin. For the lesser developed countries, because the plot demonstrates, a growth in startup rates will simply result in less, no more innovative activities. The issue, according to Sergey Anokhin, is that developing countries often look up to the leading economies when trying to create their particular policies. Moreover, quite naturally, ab muscles textbooks that the students across the world use, are published by the scholars from the world's leading countries, and do not take developing economies'context into account. Taken together, it often locks policy makers in assuming the connection between entrepreneurship and innovation that'll not hold in their unique parts of the world. The pro-entrepreneurship policies won't bring about the results expected, and the limited resources will soon be wasted to support activities that are largely detrimental. professor anokhin

What everything means

It's time to identify that the connection between entrepreneurship and innovation varies across countries, says Professor Anokhin. That is why World Economic Forum's Global Agenda Council for Fostering Entrepreneurship explicitly acknowledges that Silicon Valley success stories do definitely not resonate in the rest of the world. Broad-strokes policies that aim at fostering entrepreneurship to improve country innovativeness may well be misguided. A contingency approach that takes regional specifics into consideration ought to be employed instead.