key topic
Entrepreneurship, jobs, and economic growth
Promoting entrepreneurship is a national priority in most developed countries, motivated primarily by views that small businesses create a disproportionate share of new jobs, represent an important source of innovation, boost national productivity, and alleviate poverty. In developing countries fostering entrepreneurship is widely perceived to be critical for expanding employment and earning opportunities and for reducing poverty. However, differentiating between so-called “necessity” versus “opportunity” entrepreneurship is important. Another important aspect is financial constraints and bureaucratic hurdles for would-be entrepreneurs in transition economies.
In sum, the benefits of entrepreneurship are greater in economies where entrepreneurs can operate flexibly, develop their ideas, and reap the rewards. To attract productive entrepreneurs, governments need to cut red tape, streamline regulations, and prepare for the negative effects of layoffs in incumbent firms that fail because of the new competition.
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Immigrants and entrepreneurship Updated
Business ownership is higher among immigrants, but promoting self-employment is unlikely to improve outcomes for the less skilled
Magnus LofstromChunbei Wang, June 2019Immigrants are widely perceived to be highly entrepreneurial, contributing to economic growth and innovation, and self-employment is often viewed as a means of enhancing labor market integration and success among immigrants. Accordingly, many countries have established special visas and entry requirements to attract immigrant entrepreneurs. Research supports some of these stances, but expectations may be too high. There is no strong evidence that self-employment is an effective tool of upward economic mobility among low-skilled immigrants. More broadly prioritizing high-skilled immigrants may prove to be more successful than focusing on entrepreneurship.MoreLess -
How digital payments can benefit entrepreneurs
Digital payments can increase firms’ profits by allowing more efficient and cost-effective financial transactions
Leora Klapper, November 2017Digital payment systems can conveniently and affordably connect entrepreneurs with banks, employees, suppliers, and new markets for their goods and services. These systems can accelerate business registration and payments for business licenses and permits by reducing travel time and expenses. Digital financial services can also improve access to savings accounts and loans. Electronic wage payments to workers can increase security and reduce the time and cost of paying employees. Yet, there are challenges as many entrepreneurs and employees lack bank accounts, digital devices, and reliable technology infrastructure.MoreLess -
Measuring entrepreneurship: Type, motivation, and growth
Effective measurement can help policymakers harness a wide variety of gains from entrepreneurship
Sameeksha Desai, January 2017Policymakers rely on entrepreneurs to create jobs, provide incomes, innovate, pay taxes to support public revenues, create competition in industries, and much more. Due to its highly heterogeneous nature, the choice of entrepreneurship measures is critically important, impacting the diagnosis, analysis, projection, and understanding of potential and existing policy. Some key aspects to measure include the how (self-employment, new firm formation), why (necessity, opportunity), and what (growth). As such, gaining better insight into the challenges of measuring entrepreneurship is a necessary and productive investment for policymakers.MoreLess -
Financing high-potential entrepreneurship
Government should create an enabling environment—for entrepreneurs and investors—rather than try to pick “winners”
Ramana Nanda, April 2016Entrepreneurship is essential to job creation and to productivity growth and therefore is an important matter for government policy. However, policymakers face a difficult challenge because successful growth for a few firms—which cannot easily be identified in advance—is accompanied by widespread failure for most other new firms. Predicting which firms will fail and which will succeed is nearly impossible. Instead of futilely trying to pick winners, governments can play a useful role in facilitating the growth of the most promising firms by setting the conditions for efficient trial-and-error experimentation across firms.MoreLess -
Conditions for high-potential female entrepreneurship
Individual and environmental factors can lead women to start innovative market-expanding and export-oriented ventures—or block them
Siri A. Terjesen, April 2016Female-led ventures that are market-expanding, export-oriented, and innovative contribute substantially to local and national economic development, as well as to the female entrepreneur’s economic welfare. Female-led ventures also serve as models that can encourage other high-potential female entrepreneurs. The supply of high-potential entrepreneurial ventures is driven by individuals’ entrepreneurial attitudes and institutional factors associated with a country’s conditions for entrepreneurial expansion. A systematic assessment of those factors can show policymakers the strengths and weaknesses of the environment for high-potential female entrepreneurship.MoreLess -
Entrepreneurship for the poor in developing countries
Well-designed entrepreneurship programs show promise for improving earnings and livelihoods of poor workers
Yoonyoung Cho, July 2015Can entrepreneurship programs be successful labor market policies for the poor? A large share of workers in developing countries are self-employed in low-paying work or engage in low-return entrepreneurial activities that keep these workers in poverty. Entrepreneurship programs provide business training and access to finance, advisory, and networking services with the aim of boosting workers’ earnings and reducing poverty. Programs vary in design, which can affect their impact on outcomes. Recent studies have identified some promising approaches that are yielding positive results, such as combining training and financial support.MoreLess