The role of government

In efforts to promote entrepreneurship and innovation most attention is given how to development entrepreneurs. While it is generally recognised that there is no entrepreneurial gene that is passed on from one generation to the next and that entrepreneurs are made and not born entrepreneurial, a high degree of attention is given in some quarters to testing and screening for entrepreneurs. As if these people are hidden in the woodwork and need to be found and enticed to do their thing. Significant attention is given to finding entrepreneurs and, where possible, developing entrepreneurial skills. In some quarters, entrepreneurs are cast as rugged individuals who have the will and tenacity to apply their entrepreneurial skills and succeed whatever the circumstances. Indeed, entrepreneurs are seen as people who do well in environments where others are less able to succeed, including bad or difficult business environments.

While there is a great deal of merit in understanding the skills and mindset of individual entrepreneurs and they way they respond to challenges, this should not be the central focus. Creating the right environment for entrepreneurship to occur, stimulating the flow of information and networks among entrepreneurial actors (i.e., individuals and groups), responding to new emerging opportunities, are all activities required to effectively promote entrepreneurship and innovation that require the efforts of other actors. Chief among these is the public sector.

Governments have an important role to play in the promotion of entrepreneurship and innovation within the economic and social arenas. This role requires a strategic balance that cannot be based on common blueprints. Governments must intervene without crowding out; they must incentivise without removing risk. The decisions that are taken by government will vary from country to country and with countries, according to their specific economic and social contexts and stages of development.

In general, the following principles are worthy of consideration by policy makers and their advisors working within developing economies:

1 Allow the market to operate as effectively and efficiently as possible: competitive markets drive entrepreneurship and innovation. Market pressures create opportunity for entrepreneurship and innovation. While there is evidence to suggest that the dynamics of competition, innovation and entrepreneurship are not as simple at suggested here and that care must be taken to better understand how entrepreneurial actors respond to increased competition, the merits of this statement as a general principle still stand.

2 Strengthen the signs of entrepreneurial endeavour: this involves the identification of existing assets, such as entrepreneurs and innovators. Governments need to find ways to recognise and enhance the contribution of existing entrepreneurial endeavour, rather than try to promote entrepreneurship from scratch. This is a key element to what is some have described as developing a “culture” for entrepreneurship in which entrepreneurial role models are identified and promoted. However, it is also an important step in the establishment of dialogue between government and the entrepreneurial private sector.

3 Investing in the development of human capital: entrepreneurship draws on the human resource; it is based on how people respond to a given situation. Thus, governments should invest in the development of human resources. This is a major challenge in Africa, where the level of human capital is extremely low. While this requires a need for investment in education at all levels, from primary through to secondary, tertiary and technical education, it also includes entrepreneurship education. Unlike conventional forms of education, entrepreneurship education requires a different approach to teaching and learning. In particular, it requires experiential and action learning with a focus on critical thinking and problem solving.

4 Facilitate the development of networks: one of the key success factors for entrepreneurship education is the effective development of the entrepreneurial ecosystem, in which multiple stakeholders play a role in facilitating entrepreneurship. This includes business (large and small firms as well as entrepreneurs), policy-makers (at the international, national, regional and local levels) and educational institutions (primary, secondary and higher education).

5 Help entrepreneurs and innovators manage risk: government policy makers need to introduce measures that help entrepreneurs moderate and manage risk. Entrepreneurship will not flourish in societies where the risks associated with the failure of a new venture are too great. When weighing up the risks and rewards of a new venture, the entrepreneur needs to be able to reduce the risk of failure as much as possible as well as reduce their vulnerability should failure become a reality. While this includes the need for commercial legislation that contains provisions for bankruptcy and other measures that limit liability, it also includes measures that enhance social protection.