The Pathway to Prosperity
What can policymakers do to stimulate economic growth? The Monitor Group, a business consultancy, has recently released an interesting look at global patterns of entrepreneurship. The study, Paths to Prosperity: Promoting Entrepreneurship in the 21st Century, reports on the findings of the Monitor Entrepreneurship Benchmarking Survey, which assesses entrepreneurial activity in 22 countries.
The Survey finds that India and China lead the world in Monitor’s measures of entrepreneurial dynamism. The US also scored quite highly, but most European economies under-performed. While efforts clearly should be driven by local conditions, the study suggests a few areas in which further policy efforts are "universally desirable" in all countries:
Foster a more entrepreneurial mindset in the population, for instance through campaigns that increase the social legitimacy of entrepreneurs or by teaching entrepreneurial skills and dispositions at all educational levels.
Ensure that the real or perceived costs of bankruptcy do not overly dissuade potential entrepreneurs. This should be part of a broader effort to create an attractive structure of risks and rewards. On the rewards side, non-confiscatory tax policies are also important if entrepreneurs are to profit from their efforts, as are high-reward exit strategies like buy-outs and IPOs.
- In attempting to shape the entrepreneurial environment through policy measures, coordinate the roles of various levels of government to make sure responsibilities are adequately distributed and efforts are well aligned.
For those policymakers looking for additional information to apply to their community, the study also delineates four separate paths for how entrepreneurship arises in local economies:
- The Classic Model where intellectual property developed at or near major universities is commercialized
- The Anchor Firm Model where a large firm spawns new ventures through spin-offs or from employees who leave to start their own companies
- The Event-Driven Model where downsizing at major local institutions leads employees and local residents to start new ventures on their own
- The Local Hero Model where a local entrepreneur enjoys great success and opens opportunities for others
While each pathway has a different trajectory and different contributing factors, they all help stimulate innovation and spur prosperity in local economies.