sergey anokhin

Entrepreneurship and innovation: The popular belief

Entrepreneurs are widely considered 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 search engine name has officially become a verb in English. sergey anokhin

So persuasive could be the narrative of the entrepreneurial technological prowess and success, that numerous countries - including developing countries that feel they are lagging behind - develop comprehensive policies to guide and promote entrepreneurship and even set aside 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 type of change that governments want? Entrepreneurship Professor Sergey Anokhin from Kent State University says the hard evidence is far less convincing compared to popular culture makes you believe.

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 is no universally positive relationship between entrepreneurship and innovation. While for the world's leading economies such as the United States the positive link between startup rates and innovation may be true, for the developing economies the partnership is really negative. Such countries are more prone to see innovation championed by the prevailing companies, not startups. With few exceptions, entrepreneurs there pursue opportunities of a different kind that are based on 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 inclined to occur. In fact, successful technological development in emerging economies is usually associated with an aggressive entrepreneurial behavior of large corporations, not individual entrepreneurs. Such could be the case, for example, 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 result in more innovation, says Dr. Anokhin. For the lesser developed countries, whilst the plot demonstrates, an increase in startup rates will only lead to less, no more innovative activities. The situation, in accordance with Sergey Anokhin, is that developing countries often look up to the leading economies when trying to style their very own policies. Moreover, quite naturally, the very textbooks that the students across the world use, are compiled 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 partnership between entrepreneurship and innovation that will not hold in their unique elements of the world. The pro-entrepreneurship policies will not bring about the consequences expected, and the limited resources is likely to be wasted to guide activities which are largely detrimental.

What all of it means

It's time to recognize that the partnership 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 other areas of the world. Broad-strokes policies that aim at fostering entrepreneurship to enhance country innovativeness may well be misguided. A contingency approach that takes regional specifics under consideration must be employed instead. https://www.youtube.com/watch?v=L7UJHj7VzaM