Jonathan Ortmans

Building One Global Entrepreneurial Ecosystem

Month: January 2009

Stimulating Entrepreneurship

Congress is considering the American Recovery and Reinvestment Bill of 2009. This new $825 billion economic stimulus package includes $275 billion in economic recovery tax cuts to individuals and businesses over two years, making it clear that the U.S. is relying heavily on entrepreneurs to jumpstart our economy. And they’re right to do so. According to the Small Business Administration Office of Advocacy, since the mid-1990s, small businesses have created 60 to 80 percent of the net new jobs. Many of these businesses become high growth companies that continuously contribute to our economy.

Entrepreneurship does not disappear during economic downturns. The Kauffman Foundation recently released a preliminary study on entrepreneurship during economic recessions. In Entrepreneurs and Recessions: Do Downturns Matter shows that the likelihood of a company going public (a measure of success) might be unrelated to whether it came from a recessionary or non-recessionary period. Companies whose founding dates trace to recessions include Genentech, Microsoft, Southwest Airlines, Morgan Stanley, Allstate, among others.

The bill under discussion is relevant to entrepreneurship in so many ways from taxes to boosting science and technology, and education.  We should support the investment in all three. The U.S. has been lagging behind for years now on both the R&D and education front which can slow down innovation and the President is right that now is not the time to take away tax incentives that encourage entrepreneurs to try and create new enterprises and jobs. (See our factsheets on these under “policy tools” in the Policy Forum tab).

The proposed legislation also includes areas in which entrepreneurs can actually help more than we frequently realize. Entrepreneurs not only preserve and create jobs, but can also help America overcome its challenges through entrepreneurial innovation. We need to be smarter than ever to test the formula of the dog food before investing scarce dollars in it.  Entrepreneurs understand this iterative process and know how to mitigate risk. They know how to create and innovate with little or no resources.

The proposed stimulus package deals, for example, with clean energy. The proposal is to invest in renewable energy production to make us more energy efficient, among other measures. But our nation is awash with investment dollars in clean tech.  What we lack is better ideas that make it viable at a time when oil is less than $40 a barrel.  Policymakers need to lean on and encourage entrepreneurs to help ensure a wise use of Federal investment if it is made at a time that private investors are sitting on the sidelines.

Policymakers can and should do more to leverage the role of entrepreneurs in stimulating our economy, but this must be done carefully. Entrepreneurs are risk-takers who respond to incentives, such as taxes, intellectual property rights and regulatory burdens. The task now is to find a smart way to unlock any caution that sets in during recessionary times.

A Policy Dialogue on Entrepreneurship

For the past five years, the National Dialogue on Entrepreneurship  has helped expand the discourse about how to best to advance innovation and catalyze economic growth beyond “small business”  to debates on science, technology, engineering and research. While we will continue to advance discussion driven by developments in the all important innovation economy, the initiative will carry a new name – the Policy Dialogue on Entrepreneurship (PDE). PDE will pick up exactly where NDE left off –- broadening attention to the field of entrepreneurship and connecting thought leaders looking to advance it.

What is new is that PDE will connect you to a wider intellectual offering in two ways:

  • Bringing you the best policy ideas emerging around the world
    While this deeper understand of entrepreneurship was taking foot in the U.S. it has also been flourishing around the globe as other thought leaders and policymakers increasingly look to high-growth entrepreneurs to spark a recovery from the global slow down. Innovation knows no national boundries.
  • PDE is now a part of entrepreneurship.org
    This new location widens your exposure to other leading edge research and programs in entrepreneurship by placing you within a premier site offered by the Kauffman Foundation to further entrepreneurship.

Time and again, entrepreneurs have moved seemingly radical ideas into the marketplace. Disruptive ideas are often the most valuable. They have the greatest potential to become high-growth, breakthrough companies that generate wealth and improve lives. All across the globe, countries that embrace entrepreneurship are making vast improvements in health, education, and the overall quality of life -– even in places where it didn’t seem possible.

From Ireland to Israel to India, national governments have altered their economic policies and changed tax structures, all with the goal of increasing entrepreneurialism. There are mountains of evidence to prove that policies designed to encourage entrepreneurial activity can be central to returning to the higher path of economic growth

It is a simple equation: Make it easy for entrepreneurs to start new ventures, and you make it easy to create wealth. Look at Australia: The World Bank ranks Australia first among 178 nations for being an easy place to start a new business. In 2007, Australia reported a per capita GDP of just over $37,000. On the other end of the scale, Bangladesh ranked 92nd and reported a per capita GDP of $1,400.

National economies have a lot to gain by supporting entrepreneurs with an essential infrastructure that ensures access to knowledge, capital, talent, and information. For all those reasons -– and more –- the Policy Dialogue on Entrepreneurship will step up its efforts to shed light on ways to create an environment conducive to entrepreneurial growth and to highlight those who are making it happen.

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