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Kuala Lumpur Kicks Off ‘Startup’ Policy Network

Posted by: Jonathan Ortmans on October 21, 2013 Source: Policy Dialogue on Entrepreneurship

Following last week’s comments on the Global Entrepreneurship Research Network, I offer a second and final post on matters arising from the government-convened entrepreneurship summit in Kuala Lumpur. The roundtable discussion among “startup policy” experts on October 12 signaled a new chapter in knowledge creation around how governments can better enable their startup communities.

One of the most surprising moments for me at the Global Entrepreneurship Summit a little more than a week ago was when I was asked to join some ministers and other policymakers for a private lunch. Prime Minister Najib Razak of Malaysia—who was not expected to attend—suddenly showed while walking at a deliberate pace like a man with a mission. He stopped in his tracks. “No, no” he said. “No, I came over to sit with the young entrepreneurs while they eat. Delighted to see you all at work, but where are the teams building companies here this week?”

Of course! What was I thinking? Meeting startup entrepreneurs is much more important to policymakers. Such a conversation can offer insights into policy roadblocks that cannot be perceived from raw data from within a government agency. Such conversations can bring a better understanding of the actual challenges startups face in their risk-intense path, whether a burdensome tax code, an anti-competitive regulatory environment, limited access to capital, a lack of entrepreneurial talent or even just adverse cultural factors such as young people being discouraged by their parents to take such a risk. The Prime Minister came to soak up their innate optimism—and he would likely walk away with more.

That is why we convened a Policy Roundtable as part of the Global Entrepreneurship Summit in Kuala Lumpur side-by-side with activities underway among busy entrepreneurs. Too often these discussions are considered separate – different skill sets with different experts needed at the table.

Entrepreneurs gathering in Kuala Lumpur for various entrepreneurship events and competitions last week made their voices heard—formally and informally—during interactive exchanges of ideas between countries and sectors. During a regulatory policy roundtable discussion, issues such as making startup registration processes smoother was what policymakers had on their minds. But the audience of entrepreneurs brought other topics to the table. One asked why campaign rules allow behemoth companies to hold political power. He argued they were arcane institutions that perpetuate in anti-competitive licensing processes and procurement practices that underestimate disruptive business models and technologies, leaving sectors “immune” to entrepreneurship. The entrepreneurs provided vivid examples of those realities back home—from Argentina to Greece. As Dane Stangler, director of Research and Policy at the Kauffman Foundation, pointed out, we have a plethora of policy issues around the world still left to tackle. That includes these and other, less obvious areas that represent relevant thickets of anti-entrepreneurial incentives or that add more risk to the already risky entrepreneurial career path.

 

That could not be truer in the case of entrepreneurial finance. The JOBS Act in the U.S. is an example of a recent battle over accommodating regulations to new forms of early stage financing—mainly crowdfunding. Regulations will always need to adjust to future forms of entrepreneurial finance making it difficult to put entrepreneurship in the policy or legislative agenda. At the Policy Roundtable, Dato' Hafsah Hashim, CEO of SME Corporation in Malaysia, explained the hard work of preparing Malaysian financial institutions to use non-traditional parameters to assess businesses that are offering new and untested business ideas. It is an entirely new way of thinking for investors in developing economies where angel and venture capitalist are scarce.

 

The commercialization of university technologies is another knot that has yet to be untied by any country. The World Bank’s Esperanza Lasagabaster shared with those at the roundtable the different levers used by countries trying to hold government-funded research institutions accountable to technology commercialization—a task that requires “very specialized, sophisticated skills, involving legal, technical and financial expertise.” Denmark has established regulations that call for commercialization benefits to be shared equally between the university, the specific department and the actual researchers. China, Mexico and Brazil have all passed science and technology laws addressing incentives for faculty, demonstrating that the issue is of utmost importance for development. China has also made it easier for faculty to engage in startup creation on a part time basis while continuing to maintain their positions at the universities. The University of Manchester, in turn, recognized commercialization activities in career development evaluations. The Portugal Ministry of Education has taken a pragmatic approach to the lack of critical mass of innovations, creating a network of technology transfer offices among various universities.

Despite all this experimentation, it is important to note that few countries have focused legislation or institutions on new and young firms as a separate economic engine. That is why Mexico has caught the attention of many. At the Policy Roundtable, Adriana Tortajada explained the vision of the newly established INADEM (National Entrepreneurial Institute), of which she is acting Director General. With this new agency within the Mexico’s Ministry of the Economy, the administration of President Enrique Peña-Nieto seems to have gotten into the act. INADEM aims to help fund startups and entrepreneurial-related activities, and the world is watching for the first results.

In terms of entrepreneurship education, in many countries like Indonesia, private education programs fill the gap left by government’s typical standalone interventions. Antonius Tanan from Universitas Ciputra argued that it is curriculum programs that can grant aspiring startup entrepreneurs the needed training and plant the seed for early-stage investors that can support the next wave of graduates—helping address youth unemployment. Ciputra’s leadership through online technologies has scaled up entrepreneurship training programs, even reaching the Indonesian diaspora. This sets an example of entrepreneurial thinking in policy for governments.

 An interesting, less tangible legacy of this roundtable was related to entrepreneurship “semantics.” With an overwhelming majority of employment in most nations coming from small and medium size companies (SMEs), countries have typically discussed entrepreneurship in terms of assistance to grow the SME sector. By doing this, they completely miss the point that job creation is fueled primarily by young firms that grow as opposed to a plethora of firms that never scale. Data is emerging that shows startups are much more than a drop in the bucket for economies around the world. They create jobs faster than other companies and in the case of the U.S. they are responsible for all net new jobs.

In this regard, in his keynote at the event, Dato’ Badlisham Ghazali, CEO of Malaysia’s Multimedia Development Corporation, made it clear that there is a need to differentiate between ‘necessity entrepreneurs’ and ‘opportunity entrepreneurs.’

“Necessity entrepreneurs exist because there are no other options and their entry into business is unplanned,” Ghazali said. “Opportunity entrepreneurs, on the other hand, are individuals who see business possibilities and potentials that are currently unexploited. These are the major drivers of economic growth.”

In that context, several issues were brought to the table, such as the fact that Malaysian patenting is broken to the point where entrepreneurs seeking to commercialize end up doing so in other countries. While drawing such distinctions within the United States has been commonplace, this is very advanced thinking for emerging economies like Malaysia.

The Policy Roundtable in Kuala Lumpur advanced the shared goals of a "new" look at entrepreneurship. It nudged governments to better and more effectively pull policy levers to hone in on what might be the essential policy pieces of their entrepreneurial ecosystems and establishing a continuous dialogue with like-minded policy advisors on new practices.

Governments are traditionally linear in their thinking, yet entrepreneurship dynamics are messy. Interactions between policymakers and entrepreneurs serve as a reminder that policy work is more profound and impactful than we give it credit. Setting such gatherings like the Policy Roundtable in Kuala Lumpur within broader conversations among entrepreneurs can narrow that chasm.

This is the reason that a new global network of policymakers, announced by U.S. Secretary of State John Kerry, is forming and why they will meet for the first time in Moscow on March 17, 2014, at the Global Entrepreneurship Congress. The Global Entrepreneurship Research Network (GERN) will convene alongside the Startup Nations policy network, developed by Cristina Fernandez at GEW, offering those seeking to test smart ideas from around the world an opportunity to interface with their authors. From Start-Up Chile to the Startup Act in Italy, the community offers an unofficial means of accelerating policy efforts to support high growth entrepreneurship. Following that, Startup Nations will then convene again during Global Entrepreneurship Week in November 2014 as guests of Korea.

Both the policy and research groups will have an opportunity to discuss policy formation in the presence of actual entrepreneurs. These conversations will make for a more timely assessment of the actual barriers that matter to entrepreneurs and a considerably more representative timeline for action—without which it is hard for bureaucrats to gain interest let alone buy-in from their startups. The leaders of the summit in Kuala Lumpur should be pleased to have enabled these groups to set sail. Conferences don’t always achieve much. This one did.

Tags:  GERN, Startup Nations, GEC, Global Entrepreneurship Congress, Policy Roundtable, Malaysia, John Kerry, Najib Razak,

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