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Leading Companies Online Magazine
Growth Entrepreneurs: Catalysts for Economic Development
By Robert Fuller, Beyster Institure Staff
 One of the first economists to tie the role of the entrepreneur to economic development was Joseph A. Schumpeter of Harvard, whose 1934 work, The Theory of Economic Development, described entrepreneurial innovation and creative destruction as catalysts for economic growth. Today there are numerous approaches to economic development being employed around the world. For the past two decades there has been a flurry of research, literature and practice focusing on the role of micro-finance and micro-enterprises in economic development, especially for poverty alleviation. These programs tend to focus on small businesses run under adverse settings, especially where entrepreneurship, or often the entrepreneurs themselves (such as women and minorities), would not be expected to flourish because of cultural, financial, or regulatory barriers. These programs help individuals free themselves from poverty, but "development" comes one person at a time.
A small but growing number of economic development programs in place today emphasize the critical role of growth-oriented entrepreneurs in fostering economic expansion, progress and job creation over a more broadly conceived area of influence. These "growth entrepreneurs," with existing companies that have survived the start-up phase, who demonstrate competitive advantage and who express a willingness and ability to grow, are an overlooked and underserved market in the international development arena. A growing body of research, literature and programs are beginning to demonstrate that growth entrepreneurs present a more fruitful target audience for economic development programs. They are better able to leverage the assistance they are given into multiple jobs, additional wealth in their economy, and stronger economic well-being of their communities than are micro-enterprises and start-ups. Studies by the United Nations Development Programme, the European Union, the Organisation for Economic Cooperation and Development (OECD), the World Bank, and numerous individual researchers have demonstrated that entrepreneurs operating in innovative, flexible, growth-oriented firms are responsible for creating the largest number of new jobs, and play a vital role in the expansion and stabilization of emerging market economies around the globe.
Now in its seventh year, the Global Entrepreneurship Monitor (GEM) report is the largest annual measure of entrepreneurial activity worldwide, compiled by more than 150 scholars from 35 countries. The GEM finds that while some countries have higher growth than would be expected from their level of entrepreneurship activity, there are no countries that have a high level of entrepreneurial activity and low growth. According to an analysis by Dr. Florence Eid of the American University of Beirut, this is a convincing argument that promoting entrepreneurial activity to enhance national economic growth is a promising option for governments.
Other lines of research focus on the role played by innovations in financial intermediation (such as the creation and proliferation of private equity funds), creation of "deal flow"[1], and implementation of legislation or regulatory policy that facilitates business transactions and provides incentives for innovation and growth in the development of a local environment conducive to the development of entrepreneurship and the emergence of growth entrepreneurs.
An interesting concept that Dr. Eid discussed in a recent article on the MENA (Middle East and North Africa) region for the World Bank Conference on Development Economics is the concept of "institutional complementarities" relating to the development of entrepreneurial cultures. In this concept, she contends that there are four complimentary elements which are required to create private sector activity in an emerging economy:
- Access to capital
- Entrepreneurial talent
- A flow of innovative ideas
- A favorable legal/regulatory infrastructure
In other words, even if finance, ideas and beneficial regulatory institutions are all present, if they are not "complemented" by the right entrepreneurial skills and know-how, they cannot create economic development; vice versa, if capital, entrepreneurial talent and deal flow are not "complemented" with regulatory institutions that serve their needs, they cannot create businesses that make a profit and drive the economy forward. Anecdotally, these are exactly the same four critical elements that the Beyster Institute identified in a 2003 white paper we authored for the U.S. Department of Commerce and Russian Federation Ministry of Industry, Science and Technology, Economic Revitalization through Entrepreneurship.
The Beyster Institute, backed by years of research and field experience in over 40 countries, has developed an intimate understanding of growth entrepreneurs and their catalytic role in development. Wherever we go in the world, the Institute assists this promising group of firms with the right mixture of technical assistance, know-how, networking and market linkages to help these entrepreneurs expand their companies, spur economic growth, generate employment, raise income levels and alleviate poverty in the developing world. In the coming months, we will present a series of articles on what growth entrepreneurs need, best practices for addressing their needs, the benefits that growth entrepreneurs provide to their communities, and practical ways to encourage the development of growth entrepreneurs.
[1] The phrase "deal flow" is used to describe the availability of a stream of innovative business ideas and business plans that constitute potential investments.
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