Entrepreneurship and Innovation: The Bothersome Truth

Entrepreneurs are extensively believed to be the agents behind monetary expansion and innovation. They are, we are told, the movers and shakers who create new industries, overthrow, dethrone current leaders from their thrones, and open new frontiers for everyone. Well-known culture tirelessly propagates one success story after another – from Facebook’s Tag Zuckerberg, who had recently been glorified in “The Public Network” movie, to Tesla’s Elon Musk, an zugezogener who became a home name, to Google’s Sergey Brin, whose internet search engine name has legally become a verb in English sergey anokhin.

So persuasive is the narrative of the entrepreneurial technological prowess and success, that many countries – including developing countries that feel they are lagging behind – develop comprehensive policies to support and promote entrepreneurship and even set aside considerable funds to invest in startups via government-run endeavor capital programs. But is this fascination with and belief in entrepreneurs rationalized? How likely are internet marketers to enhance the scientific frontier and bring about the sort of change that authorities want? Entrepreneurship Professor Sergey Anokhin from Kent Point out University says the facts is far less genuine than the 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 including the Usa the positive hyperlink between startup rates and innovation may be true, for the developing financial systems the relationship is really negative. Such countries may see innovation championed by the existing companies, not online companies. With few exceptions, internet marketers there pursue opportunities of any different kind that derive from imitation and dissemination of others’ ideas, and are certainly not equipped to produce truly advanced “grand” innovations. Upon average, startups are less efficient than existing companies. Accordingly, if local authorities support entrepreneurship, economical success may suffer, and development is less likely to occur. Actually successful scientific development in emerging financial systems is often associated with an aggressive entrepreneurial patterns of large corporations, not individual entrepreneurs. Such is the case, for illustration, of South Korea having its chaebols.

The figure below shows the vastly different impact of startup rates on innovation and scientific development (as measured by patent applications) across countries. Only rich countries can get more entrepreneurship to bring about more innovation, says Doctor Anokhin. For the smaller developed countries, as the plot demonstrates, an increase in startup rates will only lead to less, not more ground breaking activities. The problem, according to Sergey Anokhin, is that developing countries often look up to the leading economies when trying to design their own guidelines. Moreover, quite naturally, the very textbooks that the students across the world use, are written by the scholars from the world’s leading countries, and don’t take developing economies’ framework into account. Taken jointly, attempting to locks insurance plan makers in assuming the relationship between entrepreneurship and innovation that will not hold in their particular parts of the ground. The pro-entrepreneurship policies will never bring about the results expected, and the limited resources will be lost to support activities that are largely detrimental.

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