Harnessing the benefits of diversity is essential for
encouraging entrepreneurship in the transition region
Entrepreneurship is an important lever for spurring transition
in the economies of the former Soviet Union and Central and Eastern Europe. Utilizing
diversity, in terms of religion or gender, can positively affect entrepreneurial development.
Programs that encourage entrepreneurial initiatives (such as business start-ups) in culturally
diverse localities should rank high on the policy agenda. Prompting women to start a business,
along with female-friendly measures (including targeted legislation), can positively affect
entrepreneurial behaviour and the performance of existing enterprises.
Individual and environmental factors can lead
women to start innovative market-expanding and export-oriented ventures—or
Female-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.
The type, quality, and quantity of
entrepreneurship are influenced significantly by corporate income
taxes—though only slightly
Corporate income taxation influences the
quantity and type of entrepreneurship, which in turn affects economic
development. Empirical evidence shows that higher corporate income tax rates
reduce business density and entrepreneurship entry rates and increase the
capital size of new firms. The progressivity of tax rates increases
entrepreneurship entry rates, whereas highly complex tax codes reduce them.
Policymakers should understand the effects and underlying mechanisms that
determine how corporate income taxation influences entrepreneurship in order
to provide a favorable business environment.
Family and kinship ties offer multiple benefits
to developing country entrepreneurs but can also have adverse effects
Family and kinship networks are important in
helping people get jobs and start companies, as statistics for developing
countries show. Promising new research has begun to assess the positive and
negative effects of these family and kinship ties on entrepreneurial
success. To what extent, and why, are family networks used, and do they
result in better economic outcomes for entrepreneurs? Results point to the
need for policymakers to identify and emulate efficient informal networks in
order to develop innovative support policies for vulnerable entrepreneurs,
especially for those who are attached to weak or inefficient networks.
In post-Soviet countries, well-functioning
institutions are needed to foster productive entrepreneurial development and
Supportive institutional environments help build
the foundations for innovative and productive entrepreneurship. A few
post-Soviet countries have benefitted from international integration through
EU membership, which enabled the development of democracy and free market
principles. However, many post-Soviet economies continue to face high levels
of corruption, complex business regulations, weak rule of law and uncertain
property rights. For them, international integration can provide the needed
support to push through unpopular yet necessary stages of the reform
Productive entrepreneurs can invigorate the
economy by creating jobs and new technologies, and increasing
Entrepreneurs are a rare species. Even in
innovation-driven economies, only 1–2% of the work force starts a business
in any given year. Yet entrepreneurs, particularly innovative entrepreneurs,
are vital to the competitiveness of the economy. The gains of
entrepreneurship are only realized, however, if the business environment is
receptive to innovation. In addition, policymakers need to prepare for the
potential job losses that can occur in the medium term through “creative
destruction” as entrepreneurs strive for increased productivity.
Nascent entrepreneurship can have some predictive
power over the business cycle
Entrepreneurship has a cyclical component,
raising two questions. Is the entrepreneurship cycle related to the business
cycle? And is there causality? A two-way relationship between
entrepreneurship and the business cycle would be in line with the two faces
of entrepreneurs: as agents of change creating upswings (opportunity
entrepreneurship) and as rational actors escaping unemployment by setting up
a business (necessity entrepreneurship). Nascent entrepreneurship can indeed
be precyclical, implying that the two faces of entrepreneurship also show up
in the business cycle, with promising policy implications.
Well-designed entrepreneurship programs show
promise for improving earnings and livelihoods of poor workers
Can 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
Poor paid employment prospects push minority
workers into working for themselves, often in low-reward work
In many countries, ethnic minority groups are
over-represented in self-employment compared with the majority community.
The kind of work done by minority entrepreneurs can therefore be an
important driver of the economic well-being of their ethnic group.
Furthermore, growing the self-employment sector is a policy objective for
many governments, which see it as a source of innovation, economic growth,
and employment. While self-employment might offer economic opportunities to
minority groups, it is important to understand the factors that underlie the
nature and extent of ethnic entrepreneurship to evaluate whether policy
measures should support it.