The role of the public sector in promoting entrepreneurship by Endeavor

INVEST IN ARGENTINA

Argentinaâ&#x20AC;&#x2122;s Investment Development Agency

The role of the public sector in promoting entrepreneurship National Conference on Entrepreneurial Development November 16th, 2009

The role of the public sector in promoting entrepreneurship

The following document aims to contribute to the discussion regarding the role of the public sector in promoting and developing entrepreneurship. It was presented on November 16, 2009, at the National Congress on Entrepreneurial Development. Argentina’s Investment Development Agency (ProsperAR) acknowledges the authors of the document, specifically Natalia Mendez Huergo, who drafted the document, as well as contributors Beatriz Nofal, Alejandro Mashad, Maria Eugenia Donadille and Juan Savino, as well as participants Jonathan Elist and Silvia de Torres Carbonell. The copyright for this document belongs to Argentina’s Investment Development Agency (ProsperAR). No part of this document may be reproduced in any form or by any means without the prior written consent of Argentina’s Investment Development Agency and due acknowledgement of the source.

Contents Introduction

SECTION 1

– Definition of entrepreneurial activity

– The social and economic impact of opportunity-driven enterprises

– The role of the public sector in promoting entrepreneurship

SECTION 2

– Some outstanding examples of public practices in promoting entrepreneurship

– Case study: Israel

– Case study: Barcelona Activa

– Case study: Santiago Innova

– Proposed framework to provide for specific measures in the area of entrepreneurship

SECTION 3

– Argentina and entrepreneurship

– Annex A: Glossary

– Annex B: GEM 2008 – Executive Summary

– Annex C: The Israeli case

– Annex D: Main programs of Barcelona Activa

– Annex E: Santiago Innova

– About ProsperAr

– About Endeavor

– Bibliography and sources

“Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” – Margaret Mead

Introduction The development of an entrepreneurial culture occupies an increasingly important place on governments’ agendas in a number of countries, where consensus exists in regards to the critical relevance of entrepreneurship to economic expansion in terms of stimulating productivity and growth through the creation of new and innovative companies, which create quality employment opportunities. * The public sector has begun to regard entrepreneurship as a dynamic process of the creation and development of new companies, enhanced by the existence of a favorable entrepreneurial climate in which the state plays a key role, interconnecting and complementing the contributions made by different sectors.

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

This paper aims to contribute to the discussion regarding the role played by the Argentine State

in fostering entrepreneurship in the local market. The document is divided into three sections. The first section describes entrepreneurship and its effects on economic development. tThe second outlines the conceptual guidelines for analyzing the role of the State in fostering an entrepreneurial culture and presents three successful international case studies. The final section provides a brief overview of the current situation facing entrepreneurs in Argentina, identifying strengths and weaknesses of local entrepreneurial activity and presents the main initiatives launched by the public sector.

*In this document, the term ‘productivity’ is used as a synonym of competitiveness.

SECTION 1 – Definition of entrepreneurship – The social and economic impact of opportunity-driven enterprises – The role of the public sector in promoting entrepreneurship

Definition of entrepreneurship Definitions of entrepreneurship put forth in economic literature have largely been based on an analysis of small and medium-sized enterprises (SMEs), generally described in a static fashion in terms of their size, like the number of employees or sales. However, these definitions make no reference to the qualitative nature or the sheer dynamism of these companies. In fact, many SMEs are stable and comfortable with their small size. Over the last few years, specialized business and economic publications have begun to shift their focus from SMEs to the concept of an enterprise understood as part of the process of the creation and development of new companies. An enterprise is no more and no less than the result of a process of value creation led by an entrepreneurial team in which the greater initial risks are mitigated until the company embarks along a path of growth. Figure 1 illustrates the typical process of an enterprise from conception to maturity:

Figure 1: An enterprise is born

Stages of Growth

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

Time

Potential • Has propensity to become an entrepreneur • Acquires knowledge and skills.

Conception

Start-Up

• Has an idea

• Begins operating

• Evaluates the opportunity behind the idea (as a technical/ commercial venture)

• Struggling / reaches the point of equilibrium

• Pulls together the team and resources

• First clients and suppliers

• Fine-tunes the business concept

Growth • Develops market potential and builds a platform to support growth • Focuses on delegation, fund management and cost control

Maturity • Established business • Introduces new lines or makes further investments

The Global Entrepreneurship Monitor (GEM) indicates that the different factors determining the various stages of a company’s development process need to be weighed in order to understand the extent to which a particular economy has an entrepreneurial culture. The business community’s aspirations and attitudes, as well as levels of their activity, should be contemplated. In the process, it is also extremely important to analyze the gross and net levels of the number of companies created, taking into account the number of failed start-ups and the reasons for their failure. Two different regions can share the same net rate of the creation of new businesses but present very different data about the gross rate of start-ups and their respective discontinuation rates, which reflect different kinds of policies from the public sector. As we delve deeper into the qualitative aspects of the nature of the entrepreneurial process, we can identify three types of entrepreneurs, as illustrated in Figure 2. A person working as a travelling salesperson on a bus is an entrepreneur by definition (they are their own boss). However, because the work chosen is most likely due to a lack of better alternatives, the abovementioned role is generally defined as an entrepreneur driven by need.

Individuals who decide to start a new project because they have identified a business opportunity, develop how they might take advantage of it and then decide to make it happen are called opportunity-driven entrepreneurs. Stevenson defines this class of entrepreneurial activity as “the search for an opportunity without considering the resources available at the time”.Despite not having all the resources required to take advantage of the opportunity, these entrepreneurs set off to try to make the most of it. If their start-ups survive, they become entrepreneurs, known as lifestyle entrepreneurs or high-impact entrepreneurs. The opportunity identified by the first group of entrepreneurs—lifestyle entrepreneurs—does not require high standards of innovation nor differentiation, nor does it allow the company to attain a significant rate of growth. A classic example is someone who decides to open a restaurant. High-impact entrepreneurs are individuals who “think big”, representing innovators who generate scalable models and generate significant rates of expansion, achieving double-digit growth rates year after year over entended periods of time.

Opportunity-driven entrepreneurs

High-impact entrepreneurs

• Characterized by their projects with double-digit growth rates. • Innovative: introduce new technology, new models and transform complete industries

• They arise on the basis of an identiﬁed opportunity Lifestyle entrepreneurs

• They achieve low to middle growth rates

e.g., global software innovator e.g., regional franchise concept

e.g., restaurants e.g., small agriculture farmer of organic produce

• They do not innovate

Need-driven entrepreneurs

• They arise due to a lack of alternatives

e.g., travelling salesman on a bus

• They do not come about on the basis of an idea but rather due to the need to generate income

e.g., windshield washer at a trafﬁc light

Because it is not easy to differentiate a lifestyle entrepreneur from a high-impact entrepreneur at the initial stages—for example, a restaurant may continue to be a single business or end up as an innovative franchise model—public policies tend to aim at both kinds of opportunity-driven entrepreneurs. However, as the process unfolds, the idea is to identify and stimulate the high-impact entrepreneurs, who, if successful, generate jobs and wealth, creating supply chains which make a significant contribution to social and economic development in their area of influence, resulting in the greatest overall change in an economy.

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Figura 2: Clases de Emprendedores

International research indicates that there is a correlation between economic growth and entrepreneurial activity. As illustrated in Figure 3, the relationship between GDP per capita and the level of entrepreneurship takes the form of a “U” shape, reflecting how the more deficient an economy, the greater the level of entrepreneurship, although the proportion of need-driven enterprises is also greater. In a developing economy, the economically active population has no formal job alternatives (no industry, no growth, no developed job market). As an economy progresses and GDP per capita rises, the number of needdriven enterprises falls rapidly as the economy fosters industries capable of offering work alternatives. As the economy continues to grow, the number of projects carried out by opportunity-driven entrepreneurs rises, particularly the kind featuring high-impact entrepreneurs, although not necessarily in the same proportion. Unlike the case of needdriven entrepreneurship, the number of opportunity-driven entrepreneurs mirrors certain cultural factors (a population willing to take on risk), the availability of skills and capabilities, and real opportunities for entrepreneurs to be taken advantage of.

Rate of prevalence of early-stage entrepreneurial activity

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Figure 3: Early-stage entrepreneurial activity indicators and GDP per capita, 2008

30%

AO: Angola AR: Argentina BA: BosniaHerzegovina BE: Belgium BO: Bolivia BR: Brazil CL: Chile CO: Colombia DE: Germany DM: Denmark DO: Dominican Republic EC: Ecuador EG: Egypt ES: Spain

25%

CO AU DO

20%

EC AR

15%

FL: Finland FR: France GR: Greece HR: Croatia HU: Hungary E: Ireland IL: Israel IN: India IR: Iran IS: Iceland IT: Italy JM: Jamaica JP: Japan KR: Korea LV: Latvia MX: Mexico

10%

BA ZA YU

HR TR

NL: The Netherlands NO: Norway PE: Peru RO: Romania RU: Russia SL: Slovenia TR: Turkey UK: United Kingdom US: United States UY: Uruguay YU: Serbia ZA: South Africa

FR IT

Source GEM / IMF Adult Population Survey: database of the World Economic Outlook (October 2008)

DE BE

0% 0

10,000

20,000

30,000

40,000

50,000

60,000

GDP per capita in terms of Purchasing Power Parity (PPP)

Because of the relation between the economic growth and entrepreneurial activity –specially with opportunity-driven new starts up, it is important to understand not only absolute levels of entrepreneurship but also the qualitative nature of entrepreneurial activity, as well as the level of involvement of high-impact companies in each market. In other words, what kind of entrepreneurship takes place in my country? What percentage is need-driven and what percentage is opportunity-driven? Within the opportunity-driven segment, how many of these projects have a high impact on the economy? What structural and cultural factors within the economy impact these levels? To what extent are enterprises using know-how intensively or how much are they export driven?

1 See Annex A: Glossary for the main statistical definitions related to the measurement of entrepreneurial activity and Annex B with the Executive Summary of the Global Entrepreneurship Monitor 2008

The social and economic impact of opportunity-driven enterprises How do opportunity-driven entrepreneurs—particularly high-impact entrepreneurs—influence a specific economy? According to Tea Petrin, Chairperson of the European Cluster Policy Group, “in the current context, which is characterized by swift economic exchange and intense competition at both domestic and foreign levels, companies from around the world are under constant pressure to reach and hold onto their competitive advantage… Entrepreneurship is a driving force for economic restructuring. It stands apart from the generation of old services and products with little added value, obsolete technology and antiquated organizational capabilities, and constitutes the vehicle for the transformation of existing companies and the development of new ones. It is a driving force for innovation, competitiveness and growth” 2 We can identify seven benefits associated with high-impact entrepreneurship: 1. Innovation: This includes, by definition, new technologies, products, business processes and/or models and represents one of the main forces driving competitiveness in an industry or economy. Extensive research undertaken in the United States shows that since the Second and 95% of all radical innovations. Wennekers and others demonstrated in developed nations such as the U.S., and some European countries that there is a direct correlation between the volume of entrepreneurial activity in a country and its capacity for innovation. Similarly, Acs and Varga observed a positive relationship between entrepreneurship and technological change in the European Union. 2. Job creation: Van Praag and Versloot analyzed 27 cases from all over Europe in which there was a positive correlation between entrepreneurship and employment.3 In the U.S., of the number of companies with an annual growth rate of at least 20% during four consecutive years, only 0.6% were new companies, however, they generated two-thirds of the new jobs created between 1993 and 1996. 3. Creation of wealth: the process of value generation described under the first heading is another key element of the positive impact made by entrepreneurial companies. Companies which start out with an initially low level of financing can come to be worth millions after their growth phase. These new companies pay their taxes, social security taxes and so forth, becoming a new contributor to the public coffers. Furthermore, when an entrepreneurial company is successful, it creates a chain of value which affects its whole area of influence (employees, direct and indirect suppliers, etc.) and becomes a net creator of wealth through these other entities and people.

2 Tea Petrin, “Entrepreneurship and European Growth”, EFMD Global Focus, Vol. 2, January 2008. 3 C. Miriam Van Praag and Peter H. Versloot, “What is the value of Entrepreneurship? A review of recent research”, Small Business Economics, 2007. Robert D. Atkinson and Randolph H. Court, National Commission for Entrepreneurship, “Embracing Innovation: Entrepreneurship and American Economic Growth”, April 2000, pages 4-5. “The New Economic Index: Understanding America’s Economic Transformation”, Progressive Policy Institute, November 1988.

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World War small entrepreneurial companies have generated half of the innovations introduced

4. Community development: Successful entrepreneurial companies not only create employment but also stimulate the development of the neighboring community. Job creation is just one way of measuring economic development. As a company grows in size, it needs suppliers that will grow alongside it, resulting in a multiplier effect. Furthermore, if these new firms are concerned about their social responsibility, they take the initiative to create programs to help develop their surrounding communities. 5. Formation of new industries: As innovators, entrepreneurs are both the creators and leaders of new industries; they breathe life into existing ones and reinvent them, thus redefining industrial working patterns. The first laptop, the first international airmail, the Pentium and Centrino processors, the flash drive, ICQ and the first firewall are just some of the many examples of innovative technologies invented by entrepreneurs who transformed industries and created new ones. 6. Social and economic mobility: As a consequence of the wealth created and subsequent increase in annual income levels, entrepreneurial firms’ success generates social and economic mobility (once again, as much for the entrepreneur as for the surrounding community). The impact of successful entrepreneurial firms in developing countries is much higher than in developed nations such as the U.S.; for example, 50 large-sized start-ups in Mexico would contribute 1% of GDP growth, a percentage considerably higher than the 0.2% they would represent in the U.S.

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7. Entrepreneurial culture: Entrepreneurship generates more entrepreneurship. Successful

entrepreneurs are community models. They change the way in which a community perceives entrepreneurial projects. They motivate people to seek out new opportunities, generate new ideas and change the perception of risk versus return. This can lead to the creation of a virtuous circle of vital communities in which the opportunities to create further innovation, new industries, more jobs and greater wealth grow exponentially. Taking these seven benefits as the key variables, the Global Entrepreneurship Monitor (GEM) 2008 compiled an index aimed at measuring the level of entrepreneurship in a given economy. In Figure 4, the data collected in 2008 shows that there is a significant correlation between the level of entrepreneurship and GDP measured in terms of Purchasing Power Parity (PPP). 6

6. Ewing Marion Kauffman Foundation, “’Entrepreneurship Summit Executive Summary’ from the Kauffman Foundation and the International Economic Development Council”, September 2008

Figure 4: Index of Entrepreneurship and GDP PPP per capita

0.8 R2 = 0.65

Index of global entrepreneurship

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0 10,000 GDP PPP average 2007-2008

20,000

30,000

40,000

50,000

60,000

Source: Acs and Szerb, 2008

The positive correlation between the level of entrepreneurial activity and the purchasing power of a population illustrates the importance of a proactive commitment from the public sector to develop an entrepreneurial culture able to stimulate innovation, competitiveness and growth. In the next section, we analyze the mechanisms to be used to promote entrepreneurship from a conceptual point of view as well as on the basis of the analysis of benchmark international experiences.

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

The role of the public sector in promoting entrepreneurship To establish the conditions required for a given economy to foster successful enterprises, a number of different mechanisms to promote entrepreneurship are available to the public sector --outlined in Figure 5.

Figure 5. Ways the public sector impacts entrepreneurship

Eliminate / Simplify

General

Specific

Measures to simplify or eliminate obstacles to a company’s normal growth process, whatever its size, dynamism or nature. For example:

Measures to simplify or eliminate barriers to the development of processes relevant to entrepreneurship, and/or which offer preferred treatment to promote entrepreneurship. For example:

• Time, number of bureaucratic procedures, the complexity of calculating and paying taxes.

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

• Time, cost and complexity of hiring employees and managing the payroll

Measures to facilitate or promote economic development for all companies, regardless of size, dynamism or nature. For example:

Facilitate / Promote

• Special organizations for the creation of new companies. • Assistance with completing procedures

Measures to facilitate and promote entrepreneurship in itself. For example:

• A relatively stable macroeconomy.

• The development of networks of agents directly related to entrepreneurial activity.

• The promotion of education leads to better training of the labor force.

• The assembly of financing options for entrepreneurs and start-ups.

• The development of infrastructure facilitates communications and the trade of goods and services.

Figure 5 describes general and specific measures the public sector can take in order to have a positive impact on entrepreneurship. General measures include regulations, policies and action programs which improve the environment for the development of start-ups, regardless the size or nature of the company. These measures help to eliminate barriers or simplify the processes companies need to follow in order to carry out their activities. For example, hiring procedures: How many forms need to be filled out? How much time does the process take from start to finish? What is the total cost involved? How complex is it to carry out? In answering these queries, the state can remove barriers which may be complicating economic activity in general. Similarly, the public sector can promote general measures to foster the generation and growth of companies indirectly. Examples include measures targeting education, which improve the quality of the

labor force; investments in infrastructure to facilitate the economic trade of goods and services (in terms of logistics and communications). Although general measures are crucial for the development of entrepreneurship 5, this report examines specific measures such as regulations, policies and action programs, which reduce or eliminate barriers facing entrepreneurs; and/or measures which offer entrepreneurs preferential treatment for the purpose of encouraging their development. In this framework, what can the public sector do to generate a favorable environment for entrepreneurs? Entrepreneurial development is the combined result of entrepreneurs’ attitudes, aspirations and activities, as described by the GEM. These three dimensions are interconnected and work together to build an economy and a society, which may be more or less entrepreneurial in nature. For example, if society bestows greater status on entrepreneurs as a group, there will be greater incentives for people to opt for this activity as a personal career path. If start-ups aspire to achieve high growth rates with a focus on innovation and job creation, then the chances of them reaching these goals will multiply accordingly. This means that a virtuous circle is created: the higher the aspirations entrepreneurs hold for their projects, the greater the positive impact on the economy and on society as a whole will be, in turn elevating the status of those choosing this activity as a professional career. If this process is supported by a network where successful entrepreneurs, educational institutions and non-profit organizations facilitate and promote entrepreneurial aspirations to achieve high growth rates and provide inspiration for the next

As said earlier, the level of entrepreneurship is enhanced by the existence of an ecosystem designed to encourage, train and interact with entrepreneurs, with the active participation of public and private sector organizations and entrepreneurs alike. An analysis of the different actors, their attitudes and aspirations, as well as their levels of activity, including the way they interact, allows for a greater understanding of just how much the ecosystem impacts on entrepreneurship overall in a given country. For example, the academic sector is responsible for educating the part of the population that is economically active and also plays a special role in research and development, i.e., innovation. Academic institutions make an important contribution to the development of entrepreneurial activity, motivating and instructing their pupils in the art of entrepreneurship and helping to ensure that the know-how generated by R&D activities is translated into high-impact innovative projects. The public sector enjoys a privileged place within society given its understanding of the way this ecosystem functions, and it can act as a connector between its different parts. The public sector does not need to act as a replacement for those players currently rendering constructive services to entrepreneurship but rather help to enhance their activity and build alliances with the private sector. It can also identify the weak links in the chain of the entrepreneurship development process and work to strengthen them. As expressed by the Kauffman Foundation, public programs must act as “intermediaries in the community” 6, coordinating and lending assistance to build a trustworthy environment based on complementarity.

5. For further information on this subject, please see the World Bank’s annual “Doing Business” report which identifies ten typical commercial processes directly related to public procedures and regulations (http://www.doingbusiness.org). 6. Ewing Marion Kauffman Foundation, “’Entrepreneurship Summit Executive Summary’ from the Kauffman Foundation and the International Economic Development Council”, September 2008.

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generations of entrepreneurs, then the chances of success become even higher.

Figure 6: The entrepreneurship environment and key components for success

Academic sector

Local business community

Start-ups

Successful entrepreneurs

Public sector

Society

Global multinationals

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Angel investors

Venture Capital Funds

NGOs

• The public sector as coordinator and facilitator • A focus based on consensus • Focus on achieving objectives • Responsible for generating certainty and trust • Everybody does what they are good at • Complementarity

See Annex A: Glossary, for the definitions of “interested parties”.

SECTION 2 – Some outstanding examples of public practices in promoting entrepreneurship – Case study: Israel – Case study: Barcelona Activa – Case study: Santiago Innova – The framework proposed to provide for specific measures in the area of entrepreneurship

Some outstanding examples of public practices in promoting entrepreneurship Each country has its own cultural and structural factors, which create endogenous conditions for the development of entrepreneurial activity, for example, a populationâ&#x20AC;&#x2122;s level of aversion to risk. They need to be taken into account when formulating or implementing exogenous proactive measures to stimulate entrepreneurial activity. There are countries with a wide range of private agencies created to foster entrepreneurship, resulting in a less relevant role for the State. On the other hand, there are many examples of institutions, which emerged from the public sphere, that have had many successful experiences strengthening the weaker links in the ecosystem and stimulating the development of entrepreneurship in their regions or countries. The following sections present three institutions which originated in the public sector to develop entrepreneurial activity. The institutions selected were chosen based on their experience, concrete results achieved and international or regional acknowledgement for their work;

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

additional criteria included their cultural or regional affinity with Argentina.

Case Study: Israel Outside of the United States, Israel is probably the most enterprising economy in the world. It has more start-ups per year than all of Europe, a situation due to internal factors, as well as the government’s role in promoting entrepreneurial activity. In terms of endogenous factors, Israel has the highest rate of scientists per capita in the world, a solid educational and research system, a naturally entrepreneurial culture (low risk aversion, no fear of failure, community-oriented, among other traits and a technological sector which is welldeveloped in domestic terms. The latter arose as a consequence of the Israeli defense policy which led to the development of domestic technology suppliers. The role of the government has been critical in leveraging the local factors and turning the economy into what it is today. The Government largely centered its activities regarding entrepreneurship in two areas: (a) assistance for and the promotion of the development of a constant flow of new technologies and innovations to be transformed into commercial products and services, and (b) access to financing. a) Innovation The development of the technology sector is part of Israel’s vision and strategy. Within the Israeli Ministry of Industry, Trade and Labor is the Office of the Chief Scientist (OCS). “The medium to stimulate the Israeli economy, support industrial R&D, encourage entrepreneurs in high-tech start-up companies, leverage Israel’s highly capable scientific and technological labor force, facilitate the academic industrial interface for the transfer of scientific know-how and technology and in general to stimulate cooperation in state-of-the-art R&D at national and international levels. (www.israeltrade.gov.il) 7 b) Financing In the 80s and 90s, the OCS identified the need to shift its focus from R&D to supporting the development, survival, and growth of high-impact technology enterprises. The OCS identified the main obstacle for these companies as their ability to survive after developing the project. The problem was as much one of financing, as of marketing and management. The solution they hit on was to develop the venture capital and risk capital market. In 1993, the venture capital fund Yozma was created. The program’s objective was to create a venture capital market with an international profile to support new technological projects. The funds were distributed among private venture capital firms focusing on the technology sector with the participation of at least one international investor, and included an option to purchase the public sector stake (a public funding option was also included in the original plan which was subsequently privatized). The total amount of public funding was USD 100 million, used to create ten separate funds under the umbrella of Yozma. The public fund was privatized four years later and most co-investors from the private funds exercised their purchase options, reflecting the high degree of success achieved by these funds.

7. Israeli Ministry of Industry, Trade and Labor. Office of the Chief Scientist. www.israeltrade.gov.il

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objectives of the OCS are to provide support for the development of new technologies as a

Today there are over 100 venture capital funds in Israel. The Government is currently supplying financial resources and assistance as an intermediary for the strategic programs still in force. To find out more details about the Israeli case, including more information about each specific program, see Annex C.

Key messages

Outstanding features

» Role of the government in developing

» The first fund, Yozma, integrated by ten

venture capital through the partial financing provided by local and foreign funds.

» Role of the OCS in promoting innovation, working on all the stages of the process to create innovation (from basic R&D to commercialization) and in generating

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

networks within and outside Israel.

private and public venture capital funds which had a major positive impact on the development of the Venture Capital market. Today there are over 100 risk capital funds.

» The OCS incubator program is currently the leading source of new companies in Israel, with the launch of over 70 new companies per year in 24 technological incubators all over the country.

Case study: Barcelona Activa Barcelona Activa is a municipal limited-liability company which focuses on the following areas: • Promoting entrepreneurship as a key factor in contributing to social cohesion and inclusion. • Promoting the creation of businesses as a job creation mechanism. • Promoting an entrepreneurial culture and stimulating innovation in SMEs, as well as throughout the local economy. The company has played a key role in the transformation of the City of Barcelona. From a depressed economy (an unemployment rate of 21% in 1986),8 Barcelona is now a thriving city with levels of entrepreneurship reaching 8.9% in 2006, placing just behind Iceland and Norway. It is also considered to be the fifth best place in Europe to do business (2008) and the top city in terms of lifestyle according to the European Cities Monitor 2008. Barcelona Activa originally started out as a business incubator in 1986. The development agency was conceived in the framework of a broad regional strategy aimed at transforming Barcelona and Cataluña. This process of transformation initially targeted the physical restoration of the city’s infrastructure, which culminated with the holding of the Olympic Games in 1992. The agreement and develop a sense of collective collaboration. After the Olympics, Barcelona focused on creating a brand for its enterprising spirit and high quality of life, targeting in the human talent and creative businesses in the knowledge-based services sector. Since 2008, the agency’s focus has shifted towards the promotion of the entrepreneurship in the area of technology. With 23 years of experience under its belt, Barcelona Activa has grown gradually and implemented new programs and activities each year, targeting four main lines of action:

a) The creation of companies and an entrepreneurial culture: a range of programs and measures have been created to attract potential entrepreneurs and help them to identify and develop ideas and opportunities. b) The consolidation and growth of innovative companies: this includes an incubator, a technology park, exchange and cooperation networks and access to financing. c) Development of human capital and new employment opportunities: based on an Internet portal. d) Access to improved employment opportunities: work reinsertion programs, training and ensuring people’s skills bases are kept up-to-date.

8. The GEM began to draw up statistics on the level of entrepreneurship in 1999, when it started with just ten countries. This is why there are no relevant statistics from when Barcelona Activa started up

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1992 deadline obliged all of the city’s interested parties to work together and reach a common

The success of Barcelona Activa springs from the leadership assumed by the city council combined with an emphasis on results, a growth model guided by the businesses and oriented towards the support and facilitation provided by the sector in general, rather than towards competition with the private sector. Since its creation, Barcelona Activa has helped to create 7,000 start-ups, of which 574 have received training in growth strategies. Training and orientation has also been provided for nearly 12,000 projects and over 300,000 people have received knowhow and technical training. For further details on the specific programs involved, see Annex D.

Key messages

Outstanding results

» Barcelona Activa began as a business

» 7,000 start-ups created. 574 companies

incubator in the 1980s and now offers a wide range of activities, recognized internationally as a shining example of a local organization with the ability to promote entrepreneurship.

» It works through consensus created

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between the private and public sectors, and its growth over the years reflects the scope of the success achieved by the organization.

received training in growth strategies.

» Orientation was provided for 11,892 business projects.

» 326,999 people were able to access knowhow and technical training.

Case study: Santiago Innova The Santiago Innova Corporation is an initiative created and driven by the Municipality of Santiago, Chile to foster the development of start-ups and empower existing companies. The origins of Santiago Innova are rooted in the national commercial promotion agency CORFO and the first Metropolitan Convention on SMEs and the ensuing Strategic Plan held on a municipal level. During the 1990s, CORFO focused its activities on increasing the competitiveness of value chains and the business environment, bearing in mind that they are all part of systems which link up together. The agency’s activities covered aspects such as technological innovation, access to financing and inter-company coordination and cooperation, for instance. The work of this entrepreneurial development center began in 1992 as the Center for Economic Initiative of Santiago (Centro de Iniciativa Económica de Santiago – CIES), after the First Metropolitan Convention for SMEs was held to define a strategic plan for the 1990-2000 period. In 1995, Santiago Innova began as a business incubator (just like Barcelona Activa). As a result of the gradual expansion of functions, project development and the accumulation of experience in the area of fostering production, it became a private non-profit organization in 1998 with public goals and objectives. In 2007, just 14% of financing for its activities was provided by the public sector, a significant drop from 62% in 1998.

board of directors is made up of members from the City Council as well as the private sector and its 20-member board includes representatives from unions, universities, financial companies, Chile-European entities and local captains of industry, among others. Santiago Innova aims to create and develop start-ups, focusing its activities on (a) technology transfer, (b) the provision of support services, and (c) the development of networks to facilitate and accelerate the creation of start-ups, innovation processes, investments and general entrepreneurial activities. In order to implement these activities, Santiago Innova—in its role as a developer of networks—has forged numerous national and international cooperation agreements over the years. This has strengthened links with interested parties from the city as well as the national and international entrepreneur community. For further details on the specific programs involved, see Annex D.

Key messages

Outstanding results

» Santiago Innova began as a business incubator in the 1990s and now develops activities in four key areas.

» Services have been provided to 1,572 entrepreneurs and 1,173 companies, totaling 2,745 clients.

» It is an independent non profit corporation with both public and private sector partners.

» From a total of 144 companies which received services from 1995-2007 in the framework of the business incubator, 108 are successfully operating today.

» It has a broad network of alliances with national and international players.

» By September 2007, the incubator activity had created 1,002 jobs and generated USD 3.8 billion in financing from public and private sources.

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Santiago Innova is the result of a strategic alliance between the public and private sectors. Its

The framework proposed to provide for specific measures in the area of entrepreneurship The key elements which define a framework for action regarding public policies to foster and facilitate entrepreneurship may be classified in terms of two dimensions. On one hand, public policies can be categorized according to the main subjects of interest. These are related to the critical factors required to put a business idea into practice, and, if possible, to transform someone into a high-impact entrepreneur in a company with a double-digit growth rate. Public policy design should focus on the aspects or critical factors of entrepreneurship it aims to strengthen or develop. On the other hand, public policies may be classified in terms of their degree of empowerment, or as facilitators (to be referred to as ‘levers’ from now on in this report) of the entrepreneur process: consciousness-raising efforts, networks, support services, financing and so forth. In other words, it refers to the tools, activities and ways in which the public sector intervenes to influence the abovementioned critical factors.

Figure 7: Key factors and mechanisms for developing entrepreneurial initiatives

Potential Key entrepreneurial factors

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

Entrepreneurial scenarios Conception

Start-Up

Growth

Maturity

Entrepreneurship culture Skills and capabilities Development of ideas / innovation Access to ﬁnancing Acceso a Recursos Humanos Internationalization Consciousnessraising

Education and training

Support services

Network building

Financing

Legal / Tax incentives

Levers /mechanisms

As observed in Figure 7, the main factors influencing entrepreneurial initiative are the following: a) Culture: The first step in an entrepreneurial process is the existence of a potential entrepreneur: the pursuit of this course of action as a professional career. Entrepreneurs flourish is an entrepreneurial culture, where a social status is bestowed on entrepreneurs, the awareness of their success and failures and the qualitative nature of the ambition expressed by those aspiring to be entrepreneurs (particularly among the younger population), among other aspects . b) Skills and capabilities: To become an entrepreneur, a person must not only feel comfortable with his or her chosen profession, but also be capable of leading an enterprise.

They must have the requisite skills and capabilities. For example, Israel’s military service with its decentralized structure places promising young people in management positions and encourages the training of engineers and science professionals. As a result, young people conclude their military service with experience in management and decision-making roles as well as with the technical knowledge necessary to become entrepreneurs. c) Development of ideas and innovation: In order to concretize an opportunity, an entrepreneur must have an idea and be capable of making it happen and commercializing it. Innovative companies which pursue a new enterprise have greater chances of success if they are surrounded by an innovative ecosystem with universities, basic and applied R&D centers, established links between the spheres of scientific and commercial activity, and support for innovative companies dedicated to entrepreneurial activity. This ecosystem should act as a ‘sound box’ for ideas, providing guidance and promoting networks between peers, among other functions. d) Access to human resources: Although a nascent enterprise usually has a leader and/or an entrepreneurial team playing every role in the initial stages, it will need a team of human resources to make the opportunity a successful company. Access to human resources means being able to attract skilled and talented people. An entrepreneur’s skills and capabilities in addition to access to human resources are factors in the evolution of the entrepreneurial process illustrated in Figure 8. At an initial stage, the entrepreneur’s ability to concretize and commercialize the opportunity is crucial. However, as the start-up becomes a company, increasing earnings and scaling up its structure, it requires At this point, it is key for the entrepreneur to have the right human resources and be able to delegate responsibilities as necessary in order to fulfill the growth strategy.

Fig ure 8: Key factors in the process of evolution of entrepreneurial companies

Ability of the entrepreneur to put the opportunity into practice

Critical for growth

Important but manageable IT, processes and human resources

Moderately irrelevant

Entrepreneur’s ability to delegate

Time

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

new human resources and the right processes and IT to support growth.

e) Access to financing: To kick off an idea, to innovate, to commercialize the idea and to reach double-digit growth rates, start-ups need access to financing. In this regard, high-impact entrepreneurial companies make up a peculiar group, given that they have no financial history (precedents) but require growing funds as their project evolves. Financing for the entrepreneurial process works according to rules that are different to those governing bank loans. Banks concentrate on the history of a company in order to evaluate the likelihood of a loan being repaid. Venture capitalists diversify risk by investing in a portfolio of projects and define their investment in terms of the entrepreneurial team, the idea and its future potential. The typical behavior of capital requirements during the entrepreneurial process is illustrated in Figure 9. At its inception, an entrepreneurial project needs funding to develop the opportunity (refining the idea, putting it into practice, pulling together the resources, gaining its first clients and finding suppliers). The most common source of funding in these cases is the entrepreneur or family and friends. Only a very small proportion of entrepreneurs with highly innovative ideas and a moderately developed business plan are able to attract angel investors or start-up capital (for example, through an incubation agency). As the company inserts itself into the market and begins to make sales, reaching the break-even point, its cash requirements drop considerably. However, to reach double-digit growth rates, the company needs fresh funding to finance growth and consolidate its market position. This is generally where entrepreneur capital funds

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

(formerly known as risk or venture capital)9 come in to provide funding.

Figura 9: Requerimiento de fondos a lo largo del proceso emprendedor

Critical for growth Funding

Important but manageable

Moderately irrelevant Time

9. In general, the term entrepreneur capital is thought to be the most suitable for the concept to be transmitted in relation to the capital used for entrepreneur projects which are in the early phases of development

f) Growth and globalization: a)

One of the main characteristics of high-impact entrepreneurs

is year-after-year of double-digit growth rates for numerous years running. Except for the U.S., China and India, which have vast domestic markets, most entrepreneurial companies need to undergo a process of regionalization and/or globalization to take their companies to this stage of growth. It is in the global arena where entrepreneurial companies can truly test their competitiveness. In the growth phase, as shown in Figure 8, the start-up needs to change its entrepreneurial nature (for example, small in size with a limited number of employees, flexible and informal personality, mostly dependant on the entrepreneur) in order to become a consolidated company (increased number of employees and expanded IT connectivity and processes based on an organizational chart in which the entrepreneur has a secondary or executive role, with branches in different regions and/or countries). This means having access to market information and understanding possible entry strategies to these markets, supported by access to contacts which are able to help effect successful entry. These key entrepreneurship-enhancing factors may be achieved by activating different levers. In fact, when the cases and best practices described earlier are analyzed, it becomes clear that one single key factor can be achieved by using various different levers (which increases the chances of bringing about the effect desired on the ecosystem). The levers for entrepreneurship are:

Consciousness-raising as a lever works to raise the issue of entrepreneurial development as an item on the agenda in the different ambits. Raising consciousness is central to the creation of a culture of entrepreneurship. It not only helps to increase the number of nascent entrepreneurs but also encourages other key aspects to flourish, such as financing (through the culture of investing in entrepreneur capital and the development of a capital market), network building and so forth. Publicity for successful cases, conferences and seminars are just some of the examples of actions that can strengthen and expand a culture of entrepreneurship throughout the different layers typifying public and private realms. The European Trade Association for Business Angels (EBAN) is a transnational entity which plays a key role in creating awareness about its membersâ&#x20AC;&#x2122; successes. It publishes successful case studies in its magazine Science Business, publicizes them at seminars, compiles annual statistics and holds an award ceremony every year. Another example of consciousness-raising activities are business plan competitions. They encourage the acquisition of new capabilities among entrepreneurs; promote the concept of a system based on meritocracy to select the best projects; foster network building. In Colombia, the government-run Fondo Emprender (Emprender Fund) holds a national and regional business plan competition for university graduates; winners then participate in a series of different events to raise awareness of entrpreneurship. In Argentina there are several business plan competitions, the oldest of which is NAVES, set up by the Center of Entrepreneurship at the IAE Business School. There is also the BID Challenge (Business In Development network) sponsored by The Netherlands, and DesafĂo Joven (Youth Challenge) organized by the Christian Association for Company Directors

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

a) Creating awareness

(AsociaciĂłn Cristiana de Dirigentes de Empresas â&#x20AC;&#x201C; ACDE) and Shell, to mention a few.

b) Education and training This lever includes the transfer of know-how and attitude training, which have an impact on the different levels of education (preschool, primary school, secondary education, undergraduate and post-graduate levels) as well as the promotion of institutions and centers which support entrepreneurship. For example, the Colombian government offered a specific graduate program aimed at promoting an understanding of entrepreneurship and provided basic tools through a range of courses given at different universities. Furthermore, in 2006, entrepreneurship was introduced as a required course in both primary and secondary schools. Another course of action is the creation of entrepreneur centers within universities. Israel places the emphasis on science and technology education as a national priority and invests accordingly. The leading universities in Israel are top-ranking multidisciplinary research institutes, such as the Technion - Israel Institute of Technology and the Weizmann Institute of Science (focused on life sciences), for instance. These organizations offer specific programs to transform general R&D results into innovations with a commercial application. In the U.S., Project Lead The Way (PLTW) combines science, technology, engineering and math (STEM) THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

courses with practical experience solving real-life problems in high schools in Kansas City.

Training activities are designed for entrepreneurs and aim to develop the management skills needed to run an enterprise: how to draw up a business plan, obtain financing and managing growth are all key issues for entrepreneur training. Furthermore, training may also be aimed at other interested parties, such as business angels, educators or other players who provide entrepreneurs with services. For example, France Angels is a non-profit organization which groups together French private investors and holds conferences for business angels. The EBAN Ready for Equity Program trains entrepreneurs how to draw up business plans, identify the key people to whom they should be presented and how to present them, seeking to reduce the gap between them and angel investors. As can be seen in the examples so far, this lever operates on various key factors: the culture of entrepreneurship, access to financing, skills and capabilities, and the development of ideas and innovation.

c) Support services This lever includes expert support specializing in legal, tax and accounting areas as well as advice on specific regulatory market norms, information on international markets and consultancy services, among others. For instance, KCSourceLInk, a public-private sector initiative, links up emerging businesses, start-ups and small companies in the metropolitan area around Kansas City through a

network of 140 not-for-profit entities which provide commercial organization services. Another example is the government-run organization Enterprise Ireland. In 2008, it organized 26 missions aimed at providing support to local businessmen in the early stages of development to help them access opportunities abroad, among other aspects. In Israel, Matimop is an example of another program that offers a range of support services to help with the process of internationalization and commercialization of innovations. One particular kind of support service for entrepreneurs is the space provided for the incubation or generation of new projects. This kind of service can involve different levels of assistance. The Spanish program Barcelona Activa runs the Glòries Entrepreneur Center, an open space for entrepreneurs to work and develop their ideas. In addition to other services, incubators offer a physical space as well as support to implement innovations and assistance for obtaining financing. Technology parks are another kind of this type of support and are generally oriented towards new owners of companies rather than nascent entrepreneurs.

d) Networks According to the Kauffman Foundation, which is the leading not-for-profit organization in the area of entrepreneurship in the U.S., the development of relationships between entrepreneurs together with guidance and effective training are the “best practices” of the programs parties). Albert-László Barabasi, a leading expert in the science of networks, considers that networks define our ability to be successful in practically every aspect of our lives. 10

Networks connect entrepreneurs at similar stages of development or not (for example, more advanced entrepreneurs are able to mentor those starting out). The networks connecting entrepreneurs with mentors are also important, including academics, businessmen and investors. Investor networks complement those directly involving entrepreneurs, as do those which link up academic institutions and not-for-profit institutions specializing in the area. There are as many kinds of networks as there are interested parties, as described in Figure 6. Some examples of best practices include the following: − The U.S.-based Larta Institute (www.larta.org) is a hub for entrepreneurs specializing in life sciences and high technology all over the world. − The roundtable approach used in the “PeerSpectives Roundtable System” set up by the Edward Lowe Foundation focuses on encouraging the champions of entrepreneurship to share experiences rather than offering entrepreneurs advice. − Enterprise Ireland has an innovative collaboration program which links companies with

10. Two of the many works published by Barabasi on this subject which specifically deserves a mention is Linked: How Everything is Connected to Everything Else and What it Means (Plume, 2003) and The Structure and Dynamics of Networks, co-authored with Mark Newman and Duncan J. Watts (Princeton University Press, 2006).

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

designed to support entrepreneurship (not only for entrepreneurs but also for other interested

researchers. In 2008, 50 companies benefited from the extensive research resources made available to them as participants in the program. – Furthermore, Enterprise Ireland created three Innovation Networks, each of which focuses on a different area of research or technology. – The Swedish venture capital fund Sting Capital builds bridges between business angels and risk capital. – Israel has a host of different programs aimed at creating networks and building bridges between different interested parties, including the international community – In Argentina, the Endeavor Foundation (www.endeavor.org.ar) was the first organization to build a network of mentors and strategic partners to support entrepreneurs.

e) Financing a)

Financing refers to the monetary resources in terms of both debt and capital required

to support corporate growth, entrepreneur and investor training, R&D and other key areas related to the development of entrepreneurship.

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

Financing the entrepreneurial process extends from the initial phases (generally through

business angels) to the subsequent stages of high growth (generally through entrepreneur capital funds and/or debt if the company has the capacity to take it on, although this tends to be infrequent during the first years of life of a company). The “exit” of the investors, regarded as an achievement in terms of the realization of value created during the process, may be carried out either by selling the company or through an IPO. The development of a thriving local capital market (such as Bovespa in Brazil where successful Brazilian companies enter the stock market) is a long-term need which must be addressed. As regards financing, supportive public sector best practices mean that the public and private sectors have to work together in a relationship where the public sector intervenes by promoting the creation of capital funds with public resources. It may also leverage existing private funds as described in the Yozma Israeli venture capital fund example. In 2008, Enterprise Ireland destined EUR 175 million to develop seed and entrepreneur capital markets, limiting financing to less than 50% of any entrepreneur capital fund. Financing for innovation is aimed not only at academic research but also at building bridges between scientific discoveries and market innovation. Enterprise Ireland’s R&D Fund supports market-focused innovation in companies producing goods and services to help companies move from the initial findings of a research project to the undertaking of activities in R&D and high-level innovation. In 2008, Enterprise Ireland approved funding for EUR 61.4 million to support R&D projects for companies. Israel has several of these financing systems in place. Other kinds of supportive funding combine access to financing with the development of innovations. The Center of Incubators for Technological Initiative under Israel’s Office of the Chief Scientist offers funding between USD 300,000 and USD 600,000 per project and involves

an exhaustive selection process to identify the most innovative projects. Repayment is only required if the company is successful. Other benefits include access to incubation facilities and a range of complementary support services. Other solid financing sources are business angel organizations. In Scotland, business angel networks gradually gave way to mature professional organizations, of which there are now 18 in operation. In 2006, ÂŁ 11 million were invested in these organizations. Unlike informal networks, they have the advantage of being able to combine funds, share risk and leverage their joint resources to manage and follow up with their investments. The government also had the chance to intervene during the initial stages when the business angel networks were being set up and operations were launched, providing support for training and the organization of network members until the entities reached maturity. In Argentina, the Ministry of Science and Technology has been addressing the issue of the generation of innovation and its connection with the market through a wide range of different programs for several years.

f) Legal and fiscal incentives In terms of promotion and facilitation, one of the best examples of legislation promoting innovation is the Bayh-Dole Act, or the University and Small Business Patent Procedures Act, order to commercialize R&D applications arising from federally funded research. Another example is the creation of the NASDAQ Stock Market in the U.S. Nearly all the companies currently trading on NASDAQ would never have been listed on the New York Stock Exchange. Ireland, for its part, offers an example of a group of companies which got together to introduce specific incentives to promote start-ups with measures such as preferential corporate taxation and employment and capital subsidies. However, it should be noted that the bibliography on this kind of method presents conflicting points of view.

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

passed in 1980 in the U.S. It enabled universities to retain their intellectual property rights in

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

SECTION 3 – Argentina and entrepreneurship – Annex A: Glossary – Annex B: GEM 2008 – Executive Summary – Annex C: Case study: Israel – Annex D: Main programs of Barcelona Activa – Annex E: Santiago Innova

Argentina and entrepreneurship While our country has great strengths in terms of its development and its entrepreneurship potential, it also faces challenges.

Strengths Like all middle-income economies, Argentina has a high level of entrepreneurship, as shown in Figure 3. Based on data from the Global Entrepreneurship Monitor (GEM), table 10 compares Argentina with countries where entrepreneurship is well developed and flourishing, such as Israel and Ireland, as well as with other countries in the region. The level of early-stage entrepreneurial activity in Argentina is 14.4%, which includes entrepreneurs who are starting out as well as new company owners. Argentina places among the top ten ranked nations in the world in terms of entrepreneurship. However, it should be noted that opportunity-driven enterprises represent 44% of the total, below the rate in countries such as Ireland, Spain, Israel and neighboring Chile. A similar analysis may be made concerning the prevalence of entrepreneurs with high growth expectations. The rate in Argentina is low compared with Ireland or Israel, but is quite high compared with other countries in Latin America. Finally, an outstanding feature of

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

entrepreneurship in Argentina is the high proportion of female entrepreneurs.

Figure 10: Main levels of entrepreneurship in selected countries in 2007

Ireland

Israel

Spain Argentina

Brazil

Chile

Nascent entrepreneurial activity

4.20% 3.60%

3.50%

7.80%

4.30% 7.30%

Owner-manager of new business

4.20%

1.50%

4.30%

7.10%

8.70% 6.50%

Early-stage entrepreneurial activity

8.20%

7.60%

9% 5.60%

6.40%

16.80% 10.40%

13.40%

Owner of established company Total Entrepreneurship Rate (TER)

Opportunity-driven entrepreneurship as % of TER

56%

52%

54%

Relative prevalence of high-growth expectations as % of TER

12%

15%

14.40% 12.70% 13.40% 10%

9.90% 8.70%

24.10% 22.40% 21.40%

44%

39%

62%

8.50% 4. 50%

N/A

Source: Global Entrepreneurial Monitor 2007

From the data in Table 10, it may be inferred that Argentinaâ&#x20AC;&#x2122;s cultural foundations are sufficiently robust to foster entrepreneurship. The Argentine people are not averse to risk. Two-thirds of the population considers that being an entrepreneur is a desirable profession. As for the social perception of entrepreneurs, the evolution over the last ten years has been markedly positive.

Today, an entrepreneur is well-regarded, while being a successful entrepreneur is worthy of respect. The emergence of an entrepreneurial ecosystem in Buenos Aires, spearheaded by the Endeavor Foundation in 1998, has contributed significantly to this evolution, establishing the issue of entrepreneurial development and publicizing successful Argentine cases in conferences and the media. There is a group of organizations in Buenos Aires responsible for supporting the development of entrepreneurs at different stages of growth. This ecosystem is made up of universities (with courses and centers for entrepreneurship); training programs, like the one run by the Emprear Foundation, part of the entrepreneurship center at the Technological Institute of Buenos Aires (Instituto Tecnológico Buenos Aires - ITBA); not-for-profit organizations specializing in the area (such as Impulsar, Inicia, Fundes and Endeavor); players dedicated to providing financing, such as entrepreneur capital funds and business angel groups, and other foundations which help to promote the entrepreneur capital market industry through their activities. While the ecosystem is in its early stages of development, it has experienced a significant evolution over the last ten years. During the 1990s, entrepreneurship began to gain a higher profile, coinciding with an increase in the number of technology-based projects, particularly those related to the internet. This was when the first generation of successful entrepreneurs emerged, people that are today’s referents for others just starting out; role models were born, key to the development of a culture

Challenges In light of the international success stories described earlier, and taking into consideration the current state of entrepreneurship development in Argentina, the areas still needing work in order to consolidate the activity in the local market can be identified. As regards entrepreneurs, these challenges are related to their aspirations and capabilities, for example: “thinking big” and creating scalable companies with regional or global potential are not necessarily characteristics of every startup. Entrepreneurs tend to approach their activity from a local perspective rather than a regional or global one. The percentage of companies with an international clientele is limited. The fact that the Argentine economy is mid-sized plays an important role when it comes to maintaining high growth rates or reaching international levels of competitiveness. Reaching and maintaining high growth rates require professional entrepreneurs with the right skills. As for networks, although these have developed significantly over the last few years, particularly those set up by entrepreneurs as well as investors and institutions working in this area, there is a prevalence of closed networks that are concentrated in specific geographic zones. Positive experiences include the Endeavor Foundation’s network of mentors and strategic partners, as well as the network of mentors set up by NAVES from the IAE Business School and the Fundes network. Access to capital is another crucial obstacle. The country does not yet possess a developed, entrepreneur capital market to meet the dynamic financing needs of start-ups through the entire

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

of entrepreneurship and the source of inspiration for upcoming generations.

process. The development of business angel networks is still in its early stages, with the first Angels Club created only three years ago. Currently, there are other business angel networks being formed, although very much in their initial stages, such as IECyT, Emprear and Inversor Global. Currently, in terms of entrepreneur capital funds, there are some initiatives which have given rise to a rebirth in this area of activity. Worthy of note is the recent constitution of ARCAP, an association to bring together key entrepreneur capital players in the country.11 Added to the incipient offer of funding mentioned previously, there are also relatively few initiatives which contemplate access to contacts and the importance of developing relationships between entrepreneurs and investors. One interesting experience is the Entrepreneur Capital Forums organized by IECyT begun four years ago. Finally, the local capital market is not sufficiently developed to meet the needs of local companies facing an IPO. Another major challenge is the building of entrepreneurial ecosystems in the cities throughout the country truly able to drive the sustainable development of entrepreneurship in their respective communities. It should be noted that despite being in their early stages, there are initiatives which receive commitment and support from local governments, whose involvement is

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

key for the development of a prosperous entrepreneur ecosystem.

Algunas iniciativas del sector público para el fomento al desarrollo emprendedor en Argentina La promoción al desarrollo emprendedor en Argentina se presenta como un desafío de gran importancia dentro de la agenda de políticas del sector público nacional y provincial. Esto se ha reflejado en una serie de iniciativas formuladas con el objeto de promover la creación de los emprendimientos de alto impacto analizados en la Sección 2. Se presentan a continuación algunos de los principales programas: el Programa de Desarrollo Emprendedor, el Programa de Desarrollo de la Industria del Capital de Riesgo y el programa Pioneros, impulsados por la Agencia Nacional de Desarrollo de Inversiones (ProsperAr); el Programa de Capital de Riesgo para Empresas del Área de Ciencia, Tecnología e Innovación Productiva desarrollado por el Ministerio de Ciencia, Tecnología e Innovación Productiva; y los programas impulsados por Subsecretaria de la Pequeña y Mediana Empresa (SEPYME). Estas actividades se encuentran en una etapa temprana de implementación, razón por la cuál sería apresurado realizar una evaluación de su impacto. Sin embargo, estas iniciativas reflejan cómo la temática emprendedora va cobrando relevancia dentro de la estrategia de desarrollo nacional y local, habiendo todavía un largo camino por recorrer en este sentido.

11. As regards information about the financing available for the entrepreneur community, there are some interesting reports covering the activity, such as the Endeavor Foundation’s Guide to Entrepreneur Capital. For the complete list of investors, see www.endeavor.org.ar and the Observatory of Entrepreneur Capital of the Institute for Scientific and Technological Undertakings (Instituto de Emprendimientos Científicos y Tecnológicos – IECyT).

Argentina’s Investment Development Agency, ProsperAr: Entrepreneurship Development Program (Programa de Desarrollo Emprendedor), Program to Develop the Risk Capital Industry (Programa de Desarrollo de la Industria del Capital de Riesgo), Pioneers Program 1. Entrepreneurship Development Program The Entrepreneurship Development Program provides a framework for ProsperAr to work closely with the provincial governments—through its National Investment Development Network— and non-governmental institutions, in order to contribute to the sustainable generation of entrepreneurship and the development of a culture of innovation. It aims to promote the creation of dynamic companies able to generate quality jobs to drive the social and economic growth of the communities to which they belong. With this objective in mind, general action lines were laid out as headings for the activities described below. The four action lines are: • To contribute to the promotion of a culture of entrepreneurship • To improve entrepreneur training standards, thus raising the quality of their project preparation processes • To strengthen the institutions that support entrepreneurship. • To develop the entrepreneur capital industry

Activity

1. Entrepreneurs Conference

Objective Contribute to the promotion of entrepreneurship by presenting successful entrepreneurs and experts with a view to providing training and motivation

2. Business Plan Competition

Help publicize entrepreneurship by stimulating project generation and providing customized training to draw up business plans

3. Train the Training courses

Provide the capabilities and tools required to train, evaluate and incubate entrepreneurs to create high-growth potential companies

Target • Current or potential entrepreneurs • Institutions from the entrepreneur ecosystem

• Entrepreneurs and potential entrepreneurs

• Academics • Heads of local development agencies

Actions & results • 5 conferences were held for entrepreneurs in the provinces of Cordoba, Chubut, Santa Fe and Mendoza (2) • 1950 entrepreneurs and others took part

• 205 projects were presented in 2008, of which 25 were shortlisted, with 5 winners and 2 receiving cash prizes.. • In 2009, 150 projects were entered of which 50 were selected for the end-ofyear competition • 4 general training courses were held at regional level (22 provinces) and specific training exercise was held in the City of Buenos Aires • 100 people received training

4. Entrepreneur Capital Forums

Facilitate access by entrepreneurs to project financing by calling for tenders, selecting and grooming those projects with the greatest potential to be presented to investors

• Entrepreneurs and/or owners / managers of small companies seeking seed capital to grow

• 5 entrepreneur forums were held in Tucumán, Formosa, Mendoza, Chaco, San Juan and Rio Negro

5. Training workshops for entrepreneurs

transfer capabilities and knowhow in the following management areas: drawing up business plans, finance and administration, human resources, so that entrepreneurs can apply their acquired knowledge to their projects

• Entrepreneurs at different stages of business development

• 5 workshops were carried out in the framework of the Entrepreneur Conferences, 5 in the framework of the Workshops and one specific workshop was held in Misiones

6. National Meeting on Entrepreneurial Development

raise awareness of the importance of entrepreneurship as a source of development, identify the steps required to develop a prosperous ecosystem and share best practices from the local and international scene

• Public authorities from different levels of government with competence in this area, academic authorities and representatives from the local business community

• Conferences, panels and individual meetings with international experts • November 16, 2009

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

Actividades 2008-2009 en el marco del Programa de Desarrollo Emprendedor de ProsperAr

2. Program to Develop the Risk Capital Industry Given the indispensable role of risk capital in promoting the birth, growth and consolidation of new and innovative companies, public policy makers consider it necessary to design mechanisms that help to attract more investors to finance these kinds of enterprises, as well as provide entrepreneurs with information to help them gauge their chances of obtaining financing for their projects using this kind of capital. ProsperAr has designed two instruments within this framework aimed at contributing to the development of the risk capital industry and its sustainability in the medium term: the ProsperAr Seed Capital Funding Program (Programa de Fondo ProsperAr de Capital Semilla) and the ProsperAr Program for Co-investment in Risk Capital Funds (A Fund of Venture Capital Funds) (Programa ProsperAr de Co-inversi贸n en Fondos de Capital de Riesgo (Fondo de Fondos)), whose objectives and particular features are given in the following tables:

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

ProsperAr Seed Capital Funding Program

Objective

To attract management talent to contribute private sector methods and expertise to public sector; to encourage the investment community to invest in new and innovative companies with a high growth potential; and to encourage the entrepreneur community to use this kind of financing.

Legal structure

Trust fund to be set up by ProsperAr.

Initial capital commitment

ARS 20 million.

Administrator

A management company will be selected by means of a call for tender: it must contribute at least 2% of the capital committed by ProsperAr. The eligibility criteria include an evaluation of the relevant experience and background relating to the administration of third party funds applied to the risk capital industry.

Target population

Start-up projects, nascent enterprises or those in the early stages of development.

Co-investment

The fund must co-invest on a 1:1 basis with Angel investors in each company selected. The investments will have a balanced regional distribution.

ProsperAr Program for Co-investment in Risk Capital Funds Objective

To encourage investment in growth companies by developing the Argentine entrepreneur capital industry.

Legal structure

Trust funds to be set up to co-invest in entrepreneur capital funds to invest in Argentina.

Initial capital commitment

ARS 40 million.

Administrator

Management companies to be chosen on the basis of calls for tender. They must have experience in the administration of entrepreneur capital funds.

Target population

Innovative companies with high growth potential.

Co-investment

The entrepreneur capital funds must co-invest on a 1:1 basis with the selected investment funds.

During 2008, the procurement documentation and specifications for the call for tenders from fund management companies were drawn up, while the designs for a program to foster investment in medium-sized enterprises (Programa de Est铆mulo a la Inversi贸n de la Mediana Empresa) and others to develop the risk capital industry (Programa ProsperAr Fondo de Capital Semilla y Fondo de Fondos)

were finalized. The funding for these programs was approved by the 2009 Budget Law. A proposal for a law to create a trust fund for their instrumentation was made which was approved by the Ministry of Economy and is currently under review by the Ministry of Industry and Tourism. 3. ProsperAr Pioneers Program: The Pioneers Program was designed to strengthen the tactical and strategic capabilities of pioneer companies in order to contribute to their growth and internationalization. The program has three stages: 1. Self-diagnosis and reflection workshops on the strategic capabilities and critical tactics necessary to make the qualitative leap in terms of growth and internationalization. 2. Introduction to developing a strategic growth plan for companies. 3. Selection of the companies taking part and provision of access to individual consultancy and advice to help with the process of strengthening the capabilities necessary to carry out their plan. During 2009, the first pilot version of the program was implemented with a group of companies from the software and IT sectors. New versions of the program will be offered during 2010 for

Ministry of Science, Technology and Innovation in Production - Risk Capital Program for Companies from the Areas of Science, Technology and Innovation in Production The program’s objectives are: • To drive the development of risk capital investment in Argentina; • To develop local knowledge of alternative instruments and tools; • To build bridges between entrepreneurs and private investors; • To foster the creation of new companies to exploit the results of R&D projects financed by the National Agency for the Promotion Science and Technology; • To provide technical assistance to public entities interested in risk capital. The main areas covered by the program include: • The creation of risk capital fund management companies, with the objective of publicizing information and technical assistance, attracting investors and channeling public resources to catalyze private investment. A Risk Capital Investment System program (Sistema de Inversión de Capital de Riesgo - SICAR) is included, providing up to 50% in fiscal credit over the investment made by a godmother company in an innovative start-up based on technological • Risk Capital Forums: a permanent agenda of meetings between entrepreneurs and investors (http://forocrearcit.secyt.gov.ar). • Training programs for risk capital industry agents.

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companies from other sectors.

Department for Small and Medium-sized Enterprises and Regional Development (Subsecretaría de la Pequeña y Mediana Empresa y Desarrollo Regional - SEPyME) The Department for Small and Medium-sized Enterprises and Regional Development designs, implements and supervises public policies to stimulate the development of small and mediumsized enterprises. The objective is to integrate the productive structures across all the regions in Argentina. The SEPyME is working to reactivate the web of regional production and promote sector development by strengthening and creating value chains and new companies as well as generating more and better-quality jobs. The SEPyME offers the following services: • Financial Assistance: National Fund for the Development of Micro companies and SMEs (Fondo Nacional de Desarrollo para la Micro, Pequeña y Mediana Empresa - Fonapyme) This is a direct credit program which offers soft financing for micro, small and medium-sized enterprises that are developing productive activities throughout the country. From time to time, the program calls for tenders so that Argentine SMEs can present their projects at regional development centers.

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Interest rate rebates

The objective is to help Argentine SMEs to grow, facilitating their access to competitive financing by means of offering them rebates on the interest rates set by financial institutions. The program also provides preferential treatment to SMEs from areas characterized by a relatively low economic development by offering them special rebates. Guarantee System The guarantee system includes mutual guarantee societies (MGS) and provincial guarantee funds. For many SMEs, these guarantees are a prerequisite to access financing. The SEPyME, which oversees the activity of the MGS, seeks to improve credit conditions and access for SMEs by monitoring and regulating the system.

• Technical Assistance: Program to Foster Access Credit and Competitiveness (Programa de Acceso al Crédito y Competitividad - PACC) The program helps to improve levels of competitiveness and increase added value in SMEs, as well as helping to strengthen their institutional and financial environment. The program provides co-financing by means of non-refundable contributions (NRC) of up to 60% of the investments made during the set up and implementation of business development projects. In order to fulfill its goals, the program relies on the following tools:

– Direct support for businesses. – Support for local production systems. – Support for entrepreneurial activity. – Institutional platform.

• Training: Fiscal credits for training Businesses may be reimbursed for expenses incurred when training staff. Reimbursements are made by means of an endorsable Fiscal Credit Certificate which may be used to pay national taxes.

National Training Program SME management and business executives qualify for free training from a non-profit foundation led by SEPyME, which is responsible for presenting, organizing and carrying out the project.

• Regional Development: Local Production Systems

constituting a group association (Grupo Asociativo).

Network of Production Development Agencies The network of agencies makes up a platform of institutions–Development Agencies–which promote and administrate local development, articulating the relationship between SMEs and the Department for Small and Medium-sized Enterprises and Regional Development.

• National Program to Support Young Business People The national program to support young business people, Young SMEs (Jóvenes Pyme) is aimed at: 1) young people between the ages of 18 and 35, who want to set up a productive enterprise, and 2) young people who own at least 51% of a SME and are responsible for its management and want to help it grow The program Young SMEs takes into account the different stages at which entrepreneurs or their businesses may be, offering three support components. While all interconnected, they are clearly differentiated and aim to address the different specific needs of SMEs at each stage as well as facilitate the move onto the next stage: 1. Training young business people (a module aimed at strengthening the management capabilities of young businesspersons and entrepreneurs); 2. Financing for start-up or investment in an enterprise (aimed at young people with a fully-fledged business plan seeking financing as follows: a. Program for financial

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

The agency finances technical support for SMEs grouped together to reach common goals,

backing for young entrepreneurs; b. Young Fonapyme; c. Partial subsidies for business ventures over two years old (PACC Programa de Apoyo directo a Empresas); d. Partial subsidies for enterprises under two years old–PACC Emprendedor-; e. Links with other sources of financing for entrepreneurs, for example BNA-Proder, among others; 3. Program for financial backing for young entrepreneurs, focused on those companies whose controlling shareholders and managers are young entrepreneurs, to consolidate and promote their growth.

Some programs and provincial activities to promote entrepreneurship The table below outlines a series of initiatives fostered by provincial governments to promote entrepreneurship. These public policies aim to consolidate the growth and sustainable economic development of local communities by promoting business activity with social inclusion and a strong platform of entrepreneurial focus and innovation. The examples listed below illustrate the diverse range of existing programs, their outreach and the extent of their development throughout the entire country; however, they do not represent a comprehensive list of all the provincial programs available.

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Province

Autonomous City of Buenos Aires

Program

Objectives

Description

Incuba (CMD) Metropolitan Center for Design

• To foster business networks in the areas of creative industries and design.

• Incubating businesses what have a focus in design and creative industries; business plans follow-through with specialized mentors; promoting the right environment for the gestation and growth of companies.

Buenos Aires Starts-up (Buenos Aires Emprende)

• To foster the creation and sustainability of innovative businesses.

• Annual competition for projects presented by sponsoring agencies.

Network of Porteño Entrepreneurs

• To support the management and development of new enterprises.

• Organization of workshops, seminars, business breakfasts and media events.

• To support the management and development of new businesses.

• A series of modules on: technical assistance with business plans; project mentoring; access to software to test business ideas; experience-sharing clinics with businesspersons; advice on financing alternatives.

Entrepreneurial Development (Desarrollo Emprendedor)

Province

Program

Objectives

Description

BA Design Program (BA Diseño)

• To help SMEs improve in areas of: quality, competitive differentiation, innovation and productivity.

• To promote the competitive development of businesses using design management as an instrument for innovation and continuous improvement. The aim is to generate spaces for commercial exchange between design offers and business demands.

SME Experience Program

• To help SMEs grow.

• Businesses are offered technical assistance by an experienced professional to develop their business.

BA Innovates Program

• To support SMEs whose activity is connected with the development of innovative projects and/or up-dating technology.

• Providing a line of credit with funds available from a Guarantee Trust, through a call for tenders for business ideas and projects. The program has two stages of evaluation and selection.

Subprogram to train coaches in entrepreneurship

• To offer training opportunities in • Training programs are held entrepreneurship and business for future instructors of creation aimed at institutions entrepreneurs, providing them and instructors interested in with the tools necessary to supporting the emergence and stimulate and develop the development of start-ups with entrepreneurial spirit of the an emphasis on the intensive institutions to which the future use of knowledge, science and trainers belong. technology.

Subprogram to promote entrepreneurial development and create innovative businesses in rural areas

• To contribute to the socioeconomic development of Greater Buenos Aires, promoting entrepreneurial development and the creation of innovative businesses in rural areas.

• Training and technical assistance programs are held, as well as meetings to encourage entrepreneurial development.

Moreover, the province of Buenos Aires has other programs related to the financing of investment projects, which aim to improve access to credit for SMEs. These programs are the Productive Force Program (Programa de Fuerza Productiva) and the Buenos Aires Guarantee Fund (Fondo de Garantías de Buenos Aires)..

Santa Fe

Network of Young Business People

• To encourage business networking skills and entrepreneurship among young people from five regions in the province of Santa Fe by co-coordinating technical assistance tools for entrepreneurs.

• Organization of the Forum for Young Business People. Setting up a web page for entrepreneurs. Channeling SME resources to young businesspersons’ associations. Holding conferences for young businesspersons in five regions: “Santa Fe Emprende” including workshops and seminars to raise awareness of entrepreneurship.

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Buenos Aires

Province

Santa Fe

Program

Objectives

Description

Forum of Capital for Innovation (SECTeI)

• To link innovative entrepreneurs, potential investors from the central Litoral region of the country and representatives of financing agencies intending to promote investments in the real economy through risk capital.

• An open call for tenders is held for innovative projects so that businesses and individuals can present their ideas and/or business plans to be evaulated by a jury of experts from different institutions. Mentoring and consciousness-raising activities for market players are also organized.

Financial support for Scientific, Technological and Innovative projects

• To strengthen the innovation capabilities of the productive, R&D, and institutional systems in the province of Santa Fe by financing projects offering creative solutions to current and potential socio-productive problems in the province.

• Financing involves nonreimbursable contributions by SECTeI, matched by the beneficiaries. The call for tenders is annual and is limited to the province. Projects are evaluated by committees of experts from the spheres of science and technology as well as business production.

The State Department for Science, Technology and Innovation (Secretaría de Estado de Ciencia, Tecnología e Innovación) is also promoting the development of the culture of entrepreneurship and strengthening entrepreneurial capabilities by supporting and organizing different activities such as:

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“Desafio SEBRAE”, “SimulARG”, and the Endeavor Conferences (“Conferencias Endeavor”), as initiatives to promote technological high-impact enterprises in key knowledge areas together with the Central Litoral Technological Park SAPEM and the Biotechnology Pole in Rosario as well as other public agencies, universities, companies and R&D centers.

La Pampa

First Enterprise Program (Primer Emprendimiento)

• To identify and support young businesspersons’ investment projects, helping to transform their ideas into business projects. To establish mechanisms that strengthen nascent business ventures, installing a support system based on the existence of tutors, consultants, and a range of events and seminars.

Program for Follow-up and Technical Advice to and Technical Assessment of micro companies and SMEs (Programa de Acompañamiento y Asesorías Técnicas a MiPEs - PAAT)

• To strengthen local skills at • Consultancy and technical municipality level, providing assistance over a period of time the technical capabilities for business ventures financed required to improve enterprise through the Provincial Program follow-up efficiency and deepen First Enterprise decentralization policies. (Primer Emprendimiento), in the Interaction with other private initial stages of development. sector institutions.

Program for Technology Based Incubators (INCUBATEC) and Textiles (DEDI)

• To significantly increase the chances of success of a technology-based project in a new business.

• Selection of innovative project ideas once a year. Face-to-face training and virtual follow-up for selected entrepreneurs. Assistance in drawing up business projects and links to credit lines.

• To provide resources and services to businesses incubated during a two-year period.

Moreover, the provincial government has encouraged activities such as Entrepreneurship in La Pampa (Emprender La Pampa), to promote the culture of entrepreneurship in the region, sharing motivating experiences with participants and strengthening the initiatives of young business people through theoretical and practical resources that professionalize the decision-making process.

Province

Program

Objectives

Description

1st Northeast Argentina (NEA) Forum for Entrepreneurial Capital (2008)

• To link up businesspersons and entrepreneurs, business angels and entrepreneur capital funds.

• The forum was aimed at promoting the use of venture capital as a tool to finance new projects. Selected trained entrepreneurs presented their projects to investors.

Open School of Entrepreneurship

• To raise awareness of the culture of entrepreneurship, to develop entrepreneurial attitudes in the students, to incorporate knowledge related to the creation and administration of new businesses.

• Cycles of conferences, seminars and workshops held in the university and its institutions.

Business Incubator Program and Entrepreneurial Development (Proincube)

• To promote the development of business incubators as a dynamic tool for local development. To encourage the culture of entrepreneurship at all institutional levels in the province.

• To support ideas oriented towards setting up businesses with a social, technological and/ or innovative base, instructing and providing support for entrepreneurs in the first stage of development of their project ideas.

Formosa

Mendoza

Santiago del Estero

Chubut

Courses and Workshops for Entrepreneurs

Entrepreneurship in Chubut (Chubut Emprende)

• To provide tools for administration, management, commercial and human resources in business ventures.

• Courses for businesses and entrepreneur workshops (between 16 and 30 hours). Training in management tools, self-assessment and technical assistance with the participation of university professors.

• To foster, train and provide financial assistance to new and existing business ventures.

• Conferences for entrepreneurs (Endeavor) in Comodoro Rivadavia and talks in different cities, to promote a culture of entrepreneurship. Training workshops for entrepreneurs aimed to improve the preparation of the projects to access credit and capital.

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The provincial government is also promoting the development of a entrepreneurship cuslture by holding conferences for entrepreneurs (Endeavor) and Forums for Entrepreneur Capital to encourage risk investments in nascent or early-phase development companies.

Conclusions Today there is growing consensus about the importance of entrepreneurship as a critical factor for economic development. The creation of new innovative enterprises generating high-quality employment translates directly into economies with higher levels of productivity and growth. Likewise, referents from the public, private and academic sectors all agree that a necessary condition for the dynamic development of entrepreneurial activity is the existence of an entrepreneur-friendly ecosystem. With this in mind, the Argentine government is in a unique position to understand the network of this ecosystem and work on it as an articulator of the different actors who make up it. The government should by no means replace those players who provide effective services but rather empower them, working in tandem through public-private alliances, while strengthening the weaker links identified in the entrepreneurial process, as shown in the three international examples presented in this document. Argentinaâ&#x20AC;&#x2122;s cultural foundations are sufficiently robust to foster entrepreneurship. By nature, Argentines are not averse to risk. Two-thirds of the population considers being an entrepreneur a desirable profession, evidenced by the level of early-stage entrepreneurial activity in Argentina (14.4%), one of the highest in the world. However, it should be noted that opportunitydriven enterprises represent 44% of the total, below the rate recorded in countries such as THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

Ireland, Spain, Israel and neighboring Chile. Stimulating the generation of opportunity-driven

enterprises, particularly high-impact ones, is one of the main challenges ahead. The rise of a series of public initiatives such as the Entrepreneurial Development Program, the Venture Capital Development for Industry and the Pioneers Program from ProsperAr, the Venture Capital Program for Technological Enterprises from the Mincyt and the many programs driven by SEPyME is an encouraging sign. All these programs reflect the growing importance of entrepreneurship as an area within the strategy of national development. It is still too early to evaluate the impact of these public policies on entrepreneurship as a whole. Further research is required to make a detailed study of public policies at national and provincial levels to evaluate their impact on entrepreneurial activity in Argentina. The results of such research should contribute to a greater efficiency in public policies aimed at strengthening entrepreneurship in this country.

Annex A: Glossary Index of nascent entrepreneurial activity The percentage of people between the ages of 18 and 64 who are currently nascent entrepreneurs, which means that they are actively involved in starting up a business where they will either be owners or co-owners. However, said business has not yet paid out salaries or wages and neither has it generated any kind of return for the owners for over three months. Index of ownership in new companies The percentage of people between the ages of 18 and 64 who are currently owners/managers of a start-up, that is to say they are owners managing an on-going concern which has paid salaries, wages and dividends to the owners for over 3 months and less than 42 months. Early-stage entrepreneurial activity (Total Entrepreneurial Activity - TEA) The percentage of people between the ages of 18 and 64 who are nascent entrepreneurs or owner-administrators of a start-up (as defined above). Index of ownership in established companies The percentage of people between the ages of 18 and 64 who are currently owner-managers of an established business, for example they are owners and manage an active business which has

General index of entrepreneurial activity The percentage of people between the ages of 18 and 64 who participate in early-stage entrepreneurial activity or who are owner-managers of an established business (as defined above). Index of discontinuity of businesses The percentage of people between the ages of 18 and 64 who have abandoned a business within the last 12 months, whether due to sale or closure, or any other reason that meant they ceased to have an owner-manager relation with the business. NB: This index is NOT an indicator of the commercial failure rate. Opportunity-driven entrepreneurial activity aimed at improvements The percentage of the relative prevalence of people involved in early-stage entrepreneurial activity (as defined above) who (i) indicate that they are motivated by opportunity and not by having no other work alternative; and (ii) who indicate that the main aspect that motivates them to get involved in this opportunity is to increase their independence and earnings, instead of simply maintaining income levels. Early-stage entrepreneurial activity with high growth expectations (High Expectation Entrepreneurial Activity - HEA) The percentage of people between the ages of 18 and 64 who are start-up entrepreneurs or owner-managers of a start-up business (as defined above) and expect to employ at least 20 people within the next five years. Relative prevalence of early-stage entrepreneurial activity with high-growth expectations The percentage of early-stage entrepreneurs (as defined above) who expect to employ at least 20

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paid salaries, wages and dividends to the owners for over 42 months.

people in the next five years. Relative prevalence of early-stage entrepreneurial activity aimed at the market for new products The percentage of early-stage entrepreneurs (as defined above) who indicate that their product or service is new at least to some of their clients and can state that few other companies offer the same product or service. Relative prevalence of early-stage entrepreneurial activity in technological sectors The percentage of early-stage entrepreneurs (as defined above) who actively participate in hightech areas or medium to high-tech areas, according to the OECDâ&#x20AC;&#x2122;s classification (2003). Business angel A person who invests their own funds in start-ups (new companies). Generally characterized for their extensive business experience, sometimes including entrepreneurial projects which have already been sold, business angels may also participate actively in the management of the startup. As well as supplying funds, they add value to the business with their experience, contacts and advice. Entrepreneurial Capital Funds (ex Risk Capital) Companies that are professionally organized to attract funds from a group of people and institutional investors, on the one hand; and, on the other, able to identify and evaluate different THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

entrepreneurial projects in which to invest. After investing in the enterprise, they can also add

value through their contacts and experience (smart money). They sit on the board of directors and help the entrepreneurs define their strategy by offering them industry know-how and helping them forge agreements with suppliers, clients and banks, as well as implementing best practices in terms of transparency and governance. These funds seek out entrepreneurial projects with a clear success strategy to ensure they can sell their stock and make a profit. In developed countries this period lasts five to seven years. A typically successful enterprise receives between one and three rounds of risk capital financing. Experience shows that two out of every ten investments made by risk capital funds are successful. Private capital funds A growth-financing mechanism for firms with experience in consolidated industries that are looking for funds to develop a new project. The funds work in a similar way to risk capital but are aimed at companies and industries that are more mature, as opposed to those targeted by risk capital. Private capital funds frequently participate in buyouts of other companies (leveraged or managed buyouts, or others), restructuring and recapitalizations that represent interesting business opportunities. Private capital investments may either be minority or majority shareholdings. Seed capital Financing for projects that have not yet begun operations or have only recently started. The financing is usually aimed at helping to set up the company, including R&D, products evaluation, patents and other expenditure and investments necessary to start up a project. The usual sources of seed capital are family and friends, the entrepreneur him or herself or, alternatively,

business angels. Academic sector This refers in general to universities and other educational and research institutions. Global multinationals Multinational companies operating on a global level; characterized by their budgets, in some cases larger than some countries’ GDP, they are large companies with branches in different countries. NGO This refers to legally constituted not-for-profit non-governmental organizations created either by physical or legal persons who do not participate in or represent any government. They make up a sector that is independent and voluntary, featuring civil society, organizations with popular grassroots, transnational social movements, private voluntary organizations, self-help organizations and non-state actors (NSA). NGOs vary in their methods. Some work mainly through lobbying efforts, while others dedicate themselves principally to carrying out programs and activities.

The Global Entrepreneurship Monitor (GEM) is a study carried out worldwide that analyzes the relationship between entrepreneurial activity and economic growth. This study was initiated in 1997 by the London Business School and Babson College. GEM’s first global study was carried out in ten countries in 1999. By 2008, the GEM report included 43 countries. Since the end of 1999, the IAE’s Entrepreneurship Center, the Business and Management School of the Austral University, has been spearheading GEM’s research in Argentina. GEM’s study focuses on the role played by people in the entrepreneurial process, studying people’s behavior as regards starting and running a business. It also identifies the three main components associated with the entrepreneurial process: entrepreneurial attitudes, activities and aspirations. These premises provide the basis for the rigorous analysis of a range of entrepreneurial characteristics such as motivation, innovation, competiveness and aspirations to achieve high growth. This differentiates the GEM from other databases, many of which simply harvest their data from inscriptions or registrations of new companies. The GEM collects data from every stage of the lifecycle of the entrepreneurial process and looks at the person from the moment he/she wishes to start a business (nascent entrepreneur), to when he/she has become owner and manage his/her own business, having paid salaries for over three months but no longer than 42 (start-up owner); and subsequently when they are the owner of an established business that has been operating for longer than 42 months.

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Anexo B: GEM 2008 – Resumen Ejecutivo

Argentina: Principales Resultados Type of study: National Census Target universe: General population over 18 years old Methodology: Pure probabilistic telephone survey based on a random list of home telephone numbers with the final selection of the person surveyed using the last-birthday method. Characteristics of the sample: National sample, stratified by city size. Size of sample: 2031 cases from locations with three populational strata. Analysis: The data was analyzed by education according to populational strata. Date of field work: June-July 2008

Level of entrepreneurial activity: In Argentina, the total rate of entrepreneurial activity in its initial stages (nascent companies and start-ups) was 16.5% in 2008, up from 14.4% recorded in 2007. This rate ranks Argentina once again among the ten leading entrepreneurial countries featured in the 2008 GEM. This value is higher than the average of most countries analyzed by the GEM, standing at 9.9%, and below the Latin American average which is 18.51%. The GEM results prompt the estimate that one in seven Argentines (between the ages of 18 and THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

64) are involved in some type of entrepreneurial activity. The proportion of the activity of need-

driven entrepreneurs was 38.4% in 2008, up significantly from the 32.2% recorded in 2007 figures (around 26% in 2006, 30% in 2005, 28.9% in 2004 and a marked difference from the 50% reached in 2002 and 40% in 2003). This means that approximately 60% of Argentine entrepreneurs are opportunity-driven. During 2003, 2004, 2005 and 2006, there was a drop in need-based enterprises which explained a large part of the reduction in the number of early-stage enterprises, pointing to a more stable situation with a much improved outlook compared with future prospects as seen during the economic and social crisis that struck the country at the end of 2001. Nevertheless, in 2007, for the first time since the crisis, there was an increase in need-driven enterprises, which translated into a rise in the rate of early stage entrepreneurial activity. In 2008, this trend continued, resulting in an increase in the percentage of need-driven enterprises. The number of need-driven entrepreneurs in Argentina is high (compared with 10.8% in the U.S. and 7.6% in Ireland), but it is relatively low when compared with other countries in Latin America (29.8% in Bolivia and 24.5% in Colombia). Argentina, with almost 16 women entrepreneurs out of every 100, ranks amongst the countries with the highest participation of women. Men are 1.3 times more entrepreneurial than women, according to GEM 2008. This reflects an important increase in the number of women active as early-stage entrepreneurs, which explains another of the causes of the increase in the general TEA rate in Argentina in 2008. It is possible to make an interesting analysis of the motivations behind entrepreneurship from a gender perspective. According to the 2008 GEM, 72% of men are opportunity-driven

entrepreneurs and only 28% are need-driven. However, 45% of women are opportunity-driven entrepreneurs and 55% are need-driven. This trend reflects a similar situation to that which occurred during the 2001-2002 crisis. Entrepreneurial activity in Argentina, whether among men or women, rises with the level of education. Two-thirds of the population agrees that being a businessperson is a desirable career choice. Being a successful businessperson continues to be a symbol of status and respect. Eight out of ten people interviewed agree that the media frequently showcase stories of successful business people. No change is observed with respect to their perception of the opportunities for developing new business. However, young people are slightly more optimistic in this sense. The percentage of businesses that trade abroad continues to be low. Only 33% of entrepreneurs claim to have foreign clients. The percentage of entrepreneurs that use new technologies is 25.62%, above the global average. In 2008, entrepreneurs lowered their expectations about increasing the number of jobs they would create. 11.7% estimate that they will employ one or more people over the next five years, and only 2.8% estimate they will employ 20 people. In general, Argentine entrepreneurs consider themselves to have the skills and knowledge new enterprise. Government policy, followed by the financial markets, is the main area of weakness according to the experts. The opening-up of the market, social and cultural norms and the quality of education are considered to be Argentinaâ&#x20AC;&#x2122;s greatest strengths. Access to capital is the aspect most criticized from the point of view of entrepreneurs. 27% of those interviewed calculate that they would need between ARS 3,000 and ARS 10,000 to start up their business. Just as in the previous year, investments are made by relatives or close friends of the entrepreneurs. Even though the percentage of investors who do not expect to see returns within the next ten years is growing, the data also indicates that the percentage of those expecting a higher return has increased.

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necessary to start up a new business and fear of failure does not stop them from embarking on a

Annex C: Case Study: Israel Endogenous factors

Government influence

• Closely linked and well connected community.

• Program of technological incubators

• High rate of R&D.

• Magnet

• Low rate of aversion to risk.

• Matimop

• Highly qualified immigrants from Russia

• Invention Promotion Center

• Connections all over the world. • Highly-militarized society led to development of strong R&D engine within military sector.

Results to-date • Headquarters of 4,000 hightech companies. • Over 70 companies trading on NASDAQ. • Over 100 risk capital funds.

• Tax incentives • Strong investment in R&D and in education • Seed capital and risk capital funds, past and present

• During 1995-2005, the risk capital fund sector contributed to economic growth with a 40% rise in GDP and a 15% increase in employment.

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a. Innovation

The main programs in this line of action include the following: Program for Technological Incubators Created in 1991, this program offers physical installations, financial resources, tools, professional orientation and administrative assistance for technology entrepreneurs. To apply for this program, entrepreneurs must present their R&D project which is subject to a meticulous evaluation process. If it is selected, they will have access to an incubator for a period of two years, with funding for amounts that vary between USD 350,000 and USD 600,000, and the entrepreneur keeps approximately 50% of the new company. The fund has a ceiling of 85% of the budget in the form of a subsidy or soft loan which must be repaid only if the project is successful. Currently, there are 24 technological incubators working with over 200 projects at any given time. At the end of 2006, more than 1,000 projects had reached maturity and withdrawn from incubators of which 57% attracted private investment. This program is considered to be the leading generator of start-ups in the country (approximately 70 new ones per year).

Matimop Matimop promotes and provides assistance to Israeli companies taking part in an international bilateral co-operation program for R&D in industry. Matimop also functions as a clearinghouse linking well-developed Israeli R& D centers with domestic and foreign partners alike.

The center is equipped with databases and networks for this purpose and also advertises on the internet, as well as publishing bi-monthly newsletters and an annual catalogue. The Matimop Center for Innovation Program is aimed at implementing innovations for commercial purposes. It provides support for innovators in the following process areas of a start-up business. - Application engineers help the innovator to manufacture a commercial product. - Assistance for registering patents. - Assisting in the retail of the product (by developing a business plan) - Offering experience and contacts to find financing, including a special in-house fund

Magnet This program supports the creation of alliances formed between industrial companies and academic institutions in order to develop pre-competitive/generic technologies. It offers grants of up to 66% of the approved budget.

Currently the Government is continuing with its strategy of financing strategic programs currently in operation and providing assistance as a financial intermediary. The programs include: R&D Fund: A grant of up to 50% of expenses on R&D projects which lead to the development of a new project or a significant improvement, or a new/improved industrial process. This fund has an annual budget of USD 300 million for 1,000 projects corresponding to 500 companies. If the project is successful, the company must repay the loan as royalties. Heznek â&#x20AC;&#x201C; Government seed capital fund: It promotes investment in start-ups, using a system whereby it matches the funds contributed by the private sector.

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b. Financing

Annex D: The main programs of Barcelona Activa The main programs and lines of action developed by Barcelona Activa are: a) Business creation and entrepreneurship culture Over 700 activities are offered, including classical training, dissemination and knowledge capsules, personalized coaching, and a top-quality website with content, activities and selfaccess tools designed to provide online coaching for business plans. The main initiatives carried out under this line of action are: • Glories Entrepreneurial Center (2004): It was created as a space open to the public where anybody can work on an idea and transform it into a business. The space provides the users with the tools to prepare their business plan, with a set of activities to define and work out their idea, and a group of professional advisors to provide assistance in addition to a complete set of services to facilitate the tasks of the entrepreneurs throughout the process. • BarcelonaNETactiva (1999): An e-coaching program to train entrepreneurs online, developed on the basis of a state-of-the-art multimedia application that facilitates the preparation of the business plan with virtual examples, tools and advice.

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

• The Day of the Entrepreneur (2001): The event aims to publicize the commitment of the local

authorities to support the businesses and entrepreneurs in the city. This major conference provides a platform for knowledge-exchange, networking, learning and entrepreneur recognition.

b) Consolidation and growth of innovative businesses • The Business Incubator (1986): There are three business incubators, (Glòries, Nou Baris and Sant Andreu), which serve as spaces to develop high-quality enterprises, promote entrepreneurial cooperation and spread the culture of entrepreneurship. Companies up to 12 months old can set up there and stay on for a maximum of three years. The businesses in the incubator must be innovative, have growth potential, create jobs and have a committed team. • Barcelona Nord Technological Park (1988): This is Barcelona’s urban technology park which boasts a surface area of 10,000 m2 dedicated to the economic activity of young technology companies (particularly in the field of engineering) seeking to expand their operations. • Ready for Growth (2002): This facilitates access to capital for new business projects with a strong innovation component. The program offers a series of seminars for small business entrepreneurs with high growth potential. It operates mainly in the e-content sector, enabling them to access the finance needed for their growth. This started as a joint program with the local development agency of London, UK. • Business cooperation programs: There are a wide range of different activities aimed at helping companies to meet with the objective of exchanging experiences with one another in order to increase business opportunities and growth. The Xarxactiva enterprise network was

created in 2004 as a source of experience and a platform for entrepreneurial exchange. In 2007, Xarxactiva had over 600 members with over 3,000 people participating in its activities. • Barcelona Empren SCR (1999): This is the first risk capital fund aimed at financing start-ups and innovative SMEs. The City Council has a minority capital stake and the fund involves 19 participating companies and financial entities from the private sector.

c) Human capital development and new employment opportunities • Porta22 (2003): It facilitates the access to information and knowledge in relation to new professions, innovative sectors and new working cultures. In 2007, the Porta22’s intranet featured over 700 professional profiles in 13 economic sectors, various testimonials and other tools relevant for an assessment of the user’s skills and fields of interest. Porta 22 has assisted over 35,000 participants so far.

d) Access to and improvement of employment • Can Jaumandreu: This is the center for the improvement of professional occupation. It offers vocational training programs in different trades to improve access to better quality jobs and employment inclusion. In particular, it provides the following services: labor orientation and administration; and workshops on different trades. • Sant Agusti Conventi: Another space of reference for labor inclusion which focuses on people with special difficulties. It carries out the following activities: point of information and development for the Socio-labor Insertion Program; headquarters of the Socio-labor Insertion Network of Barcelona; service point for the Youth Plan; programs of seminars and activities for professional orientation and job search; labor orientation and insertion programs for the unemployed. The rate of insertion reached 72% in 2007, with over 20,000 people taking part in the various programs offered • Can Andalet: The center where all the training and skills development activities are designed, this is the City’s referent in regards to the improvement of knowledge and professional skills. The center offers various services, including: vocational training aimed at upgrading the skills of the under-qualified and unemployed; training in new technologies and business management; and professional certification. The training center is now specializing in training personnel from the emerging services sector. • Cibernarium: This is the center for technological diffusion and literacy which aims to publicize the new opportunities that players in the knowledge economy —particularly new technologies—offers in terms of the personal and professional development of students, jobseekers and enterprises. The Cibernarium trains people to use and understand information and communication technologies. Over 53,000 participants signed up in 2007. Source: OECD Leed Programme, “Promoting Entrepreneurship, employment and business competitiveness: The Experience of Barcelona “, OECD 2009.

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

insertion programs for the unemployed; job search services; ; training in the field of business

Annex E: Santiago Innova Currently, Santiago Innova has four main service areas: a) Business incubator unit: The unit has a surface area of 3,800 m2 including 24 work modules, meeting rooms, work cubicles, integral communications stations and training rooms, among other resources. Recently a 280-meter seedbed of projects was added with support from the DuocUC (Departamento Universitario Obrero Campesino Universidad de Chile, part of the Catholic University of Chile); this is an area where teachers and students can work to develop their ideas, pilot projects and business plans (after first passing a test and being accepted by the institutionâ&#x20AC;&#x2122;s Head of Innovation). Lastly, it includes the first virtual incubator in Chile and in Latin America (this virtual incubator is the result of alliance with Barcelona Activa and another seven cities in Europe and Latin America under the URB-AL Regional Cooperation Program). In this way Santiago Innova helps entrepreneurs to access different types of financial aid (financing with networks of business angels, CORFO or Chile Innova, among others). b) Business and consultancy unit: Offers support services in groups or individually (cofinanced). It carries out R&D projects in the area of technology and carries out commercial and THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

technological missions abroad.

c) Business and micro-enterprise unit: Oriented towards labor reinsertion, whether independently or as a full-time employee. d) Legal services unit: Helps companies to formalize their activities and provides other legal services (contracts, corporate constitution and other legal instruments).

SANTIAGO INNOVA AND ITS INSTITUTIONAL NETWORK: Universities: The business incubator unit has developed projects jointly with different universities, including: Universidad de Santiago de Chile Universidad Católica de Chile, USACH, Diego Portales, Mayor, Universidad de Chile, Andres Bello, Las Americas, de La Frontera and Finis Terrae. Duoc: Santiago Innova has incorporated the seed-bed of projects described earlier during its work with this academic institution in order to focus on technological products. ASEXMA: Santiago Innova works in association with the Association of Exporters of Manufactured Products and Services to promote entrepreneurial activity. This organization is also a member of the Board of Governors and the Project Selection Committee. FEMPIA: The union that represents small industries and artisans in the Metropolitan Region. ASIMPRES: Graphic industry union. Fundación Chile: This institution provides assistance in particular to companies that are part of incubators. Endeavor Chile: It works hand-in-hand with Santiago Innova to develop entrepreneurial activities, and is a source of interesting projects for Santiago Innova’s incubator unit. Southern Angels: This network of investor angels signed a special agreement with Santiago Innova allowing it to participate in the incubator projects at every stage of the selection

Genera UC: Provides access to the business angel network of the DICTUC branch of the Catholic University of Chile run by Unidad Genera UC. Ventana UC: Allows access to the network of the Ventana UC investors. Councils: Covers specific co-operation agreements with 11 municipalities throughout the country. Euro Office Service: Network of business incubators and science and technology parks made up of 21 countries worldwide. The members of this incubator network act as ambassadors taking incubated entrepreneurs under their wing, allowing them to develop their projects at other latitudes at minimum expense. ChileINCUBA: Chilean Business Incubator Association. RedLAC: Network of entrepreneur entities in Latin America and the Caribbean that includes business incubators and technology parks in the region. Barcelona Activa: Working with Santiago Innova in the transfer of methodological and technological experiences, as well as in the transfer of multimedia tools to support the creation and consolidation of new companies under a virtual format. Fundación Ciudad del Saber: NGO from Panama CEDIAL: Center for Cooperation and Industrial Development from Paraguay (Centro de Cooperación Empresarial y Desarrollo Industrial) Ayuntamiento de Bilbao: Bilbao City Council (Spain) Municipio de Roma: Municipality of Rome (Italy) Ciudad Autónoma de Buenos Aires: Autonomous City of Buenos Aires (Argentina)

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

process for financing.

ProsperAr is Argentinaâ&#x20AC;&#x2122;s Investment Development Agency.

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

Our mission is to develop national and foreign direct investment to increase competitiveness and contribute to Argentinaâ&#x20AC;&#x2122;s sustainable development.

What can Prosperar do for you?: >> Provide specific information about business sectors and geographical locations in Argentina >> Identify investment and innovation opportunities in strategic sectors >> Offer customized professional assistance to potential investors at each stage of the investment process >> Match international investors with local companies to help them work together

Prosperarâ&#x20AC;&#x2122;s four main objectives are:

To provide Investor Services ProsperAr offers local and foreign investors a single point of contact to assist companies with their investment projects in Argentina. The agency offers personalized professional assistance to potential investors at every stage of the investment process, from project evaluation to after-care during the postinvestment phase.

To promote and attract investment ProsperAr works to promote, attract and expand local and foreign investment in the country. To that end, it identifies investment opportunities in sectors with a high potential for growth in Argentina and provides domestic and foreign investors with the information to evaluate them. Using investment missions, presentations to business people and by participating in international fairs, ProsperAr networks with the investment community to demonstrate the many reasons why Argentina is an attractive, strategic and profitable place to invest. ProsperAr also offers assistance to multinational companies interested in

To optimize the investment environment ProsperAr works to improve the local investment environment in order to foster the development of businesses in Argentina. By maintaining an active dialogue with local and foreign companies and co-coordinating with other public sector departments, ProsperAr seeks to optimize the business environment by identifying any possible obstacles to investment at a local level.

To encourage the creation, growth and internationalization of companies ProsperAr encourages business development with the aim of increasing the innovative impetus and international competitiveness of Argentine companies. To this end ProsperAr has set two programs in motion: Pioneers and Desarrollo Emprendedor, the Entrepreneurial Development Program, with the aim of promoting a culture of entrepreneurship and the capabilities of local companies at every stage of their growth.

ProsperAr is your strategic partner to invest and prosper in Argentina

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

investing and working with Argentine partners on global joint ventures.

“We inspire entrepreneurs. We inspire change”. Endeavor works to liberate Argentina’s entrepreneurial potential and is the landmark organization for entrepreneurial development in the country. Endeavor aims to promote the development of a culture of entrepreneurship, the foundation of economic and social development. It started in 1998 and its model, with proven success in Argentina, was subsequently extended to 11 countries across the world. Today, Endeavor is a global organization present in America, Africa, Asia and Europe. Endeavor builds bridges and opens doors to facilitate access to capital, information and qualified THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

support networks for entrepreneurs. The organization focuses its work on two main support areas:

actions with high-impact entrepreneurs and actions with the entrepreneurial world in general. On the one hand, Endeavor selects entrepreneurs with high potential to provide them with focused support in order to boost their companies’ growth. In a rigorous selection process, Endeavor interviews and evaluates hundreds of entrepreneurs to identify the country’s top talent. These are the most innovative candidates, whose high-potential companies have a positive impact on the socio-economic development and may simultaneously serve as models to be followed by future generations of businesspeople. These candidates are chosen to be Endeavour entrepreneurs. Once chosen, they receive the highest standard of local and international services such as:

• Strategic consultancy and management • Personalized mentoring • Networking with other entrepreneurs • Network of international contacts • Workshops and training sessions • Guided tours around leading companies abroad • Publicity in the media

Endeavor also works to generate and articulate entrepreneurial ecosystems in different parts of the country. With the aim of inspiring, training and providing influence, Endeavor works in the private sector and with the public sector by means of a series of mass actions, such as: • Programs for entrepreneurial development in the public sphere • Programs with private companies • Conferences in Buenos Aires and in provinces in the interior of the country • Case studies • Talks by entrepreneurs. Endeavor in universities and other arenas • Open training sessions • Publications about entrepreneurship • Organizing workshops and seminars with experts in the field

In its ten years of activity, Endeavor has had a significant influence on entrepreneurial development in Argentina, being the first organization in the country to focus on the issue of entrepreneurial development.

Over 3,000 companies under analyzed.

16,200 jobs created by entrepreneurs. 20% average annual growth rates in their companies. Over 35 strategic partners providing support services. Over 120 mentors in the Argentine Endeavor network. Over 400 national and international CEOs committed to Endeavor’s network. Development of entrepreneurial support ecosystems in seven Argentine provinces initiated by Endeavor. Over 2,400 mentoring hours. Over 950 weeks of national and foreign MBAs. Over 215 consulting projects. Over 12 case studies written about Endeavor Entrepreneurs. 25 conferences (in Buenos Aires and in the provinces). Over 120 seminars and training workshops

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

86 entrepreneurs from 55 companies selected.

Bibliography • William Sahlman, Howard H. Stevenson, Michael J. Brothers and Amar Bhide, “The Entrepreneurial Venture”, Harvard Business School Press, 2nd edition, 1999, Boston, Massachusetts, USA. • Paul A. Gompers and Josh Lerner, “The Money of Invention”, Harvard Business School Press, 2001, Boston, Massachusetts, USA. • The Economist, “A special report on Entrepreneurship”, March 12, 2009 > “Global Heroes”, > “Managing Entrepreneurship”, > “Time for Entrepreneurship”, > “The United States of Entrepreneurs”, > “Entrepreneurs in India and China”, > “Lands of opportunity”, > “The formula for entrepreneurship”, > “Entrepreneurs doing good”, > “The entrepreneurial society”, > ”Sources and acknowledgements” http://www.economist.com/surveys/displaystory.cfm?story_ id=13216025

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

• World Bank and IMF reports, “Doing Business 2008”, Washington DC, USA

• Tea Petrin, “Entrepreneurship and European Growth”, EFMD Global Focus, Vol 2, January 2008, pages 3033 • C. Kirjam van Praag and Peter H. Versloot, “What is the value of entrepreneurship? A review of recent research”, Small Bus Econ, published online September 25, 2007, Springer Science+Business Media, LLC • Steve Buttress and Don Macke, “Energizing entrepreneurs”, Economic Development Journal, Fall 2008, Vol. 7, # 4, pages 20-25 • The Kauffman Foundation, “On the road to an Entrepreneurial Economy: A research and Policy Guide” Version 2.0, July 2007 • European Trade Association for Business Angels network, White Paper: “Stimulating the European informal venture capital market”, March 2007 • Cristian Larroulet and Juan Pablo Couyoumdjian, “Entrepreneurship and Growth: A Latin American Paradox?”, The Independent Review, Summer 2009, page 81 • Pablo Javier Angelelli and Juan Jose Llisterri, “El BID y la promocion de la empresarialidad: Lecciones aprendidas y recomendaciones para nuevos programas”, March 2003, Washington DC • Ewing Marion Kauffman Foundation, “Entrepreneurship Summit Executive Summary” from the Kauffman Foundation and the International Economic Development Council”, September 2008 • National Commission on Entrepreneurship, “American Formula for Growth: Federal Policy and the Entrepreneurial Economy 1958-1998”, October 2002 • NGA Center for Best Practices, “A Governor’s Guide to Strengthening State Entrepreneurship Policy”, 2004 • Erik Stam, Kashifa Suddle, S. Jolanda A. Hessels and Andre J. Van Stel, “High Growth Entrepreneurs, Public Policies and Economic Growth”, Jena Economic, Research Paper No. 2007-019, Research Paper from the Hudson Institute No. 08-02, 2008 • Ewing Marion Kauffman Foundation, “Understanding Entrepreneurship”, a Research and Policy Report, 2005

• EU, General Business Board, “Entrepreneurship for the future”, Sweden, 2001, http://ec.europa.eu/ enterprise/entrepreneurship/support_measures/top-class/final-report_vaxjo_2001en.pdf • OECD LEED, “Promoting Entrepreneurship in South East Europe – Policies and Tools” • OECD Local Entrepreneurship Reviews, “Strengthening Entrepreneurship and Economic Development in East Germany: Lessons from Local Approaches”, March 2009 • John E. Young, Wee-Liang Tan and Teck-Men Tan, “The Decision to Participate in Entrepreneurial Networks: the Case of Singapore” • Wee-Liang Tan, “Entrepreneurship Challenges ahead for Singapore” • Abraham, George, “SME Development in Singapore”, SME Development Committee, CACCI • Enterprise Ireland, 2008 Annual Report & Accounts • Forfas, Mapping of Initiatives to support Entrepreneurship in Ireland, October 2007 • Zoltan Acs, Colm O’Gorman, Laszlo Szerb and Siri Terjesen, “Could the Irish Miracle be Repeated in Hungary?”, #3305, Discussion Papers on Entrepreneurship, Growth and Public Policy, Max – Planck – Gesellschaft, ISSN 1613-8333 • Enterprise Ireland, “Best Connected, Software from Ireland, A strategy for development of the indigenous software industry 2009-2013” • Goodbody Economic Consultants, “Entrepreneurship in Ireland”, November 2002 • National Competitiveness Department, Forfas, “Background Report: Detailed Assessment of Ireland’s Productivity Performance 1980-2005”, • Enterprise Ireland, “Transforming Irish Industry: Enterprise Ireland Strategy 2008-2010”

• Catherine de Fontenay and Erran Carmen, “Israel’s Silicon Wadi: The forces behind cluster formation”, to be published as a chapter in: Bresnahan T. Gambardella and Saxenian A (eds.), “Silicon Valley and its imitators” (book title to be defined), June 2002 • 2006, Brochure for the Office of the Chief Scientist • Harry Yuklea, “An Integrated Approach to VC Financing Policy: The Plumber’s Model of Entrepreneurial Finance”, The Hebrew University of Jerusalem, February 2009 • T. Vinig, “Determinant of Successful Technology Sector”, University of Amsterdam, The Netherlands • Office of the Chief Scientist. “The Technological Incubators Program: Establishing Start-up companies from Innovative Ideas”, Ministry of Industry, Trade and Labor, http://www.incubators.org.il/program.htm • Gil Avnimelech and Morris Teubal, “Venture Capital Policy in Israel: A comparative analysis & lessons for other countries”, October 2002 • www.startups.co.il • Website of the Office of the Chief Scientist. http://www.moital.gov.il/NR/exeres/B3F78073-454A-48D5A8BA-6D088DDECCD5.htm • Jeffry A Timmons y Stephen Spinelli, “New Venture Creation: Entrepreneurship for the 21st century”, 7th Edition, McGraw-Hill Irwin, 2007 • Wennekers, S., Van Stel, A., Thrurik, R., & Reynolds, P., “Nascent entrepreneurship and the level of economic development”, Small Business Economics, 2005, 24(3), pages 293–309 • Acs, Z. J., & Varga, A., “Entrepreneurship, agglomeration and technological change”, Small Business Economics, 2005, 24(3), 323–334 • OECD Leed Programme, “Promoting Entrepreneurship, employment and business competitiveness: The Experience of Barcelona”, OCDE 2009

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• Dr. Georges Haour, “Israel, a powerhouse for Networked entrepreneurship”, Institute for Management Development, Switzerland

• www.santiagoinnova.cl • www.corfo.cl • Ricardo Neves, “The Promised Land for Innovation”, Revista Epoca, March 3, 2008, page 3 • Alvaro Bustos Torreblanca, Executive Director of Santiago Innova and Chairman of Chile Incuba, “Corporacion Santiago Innova, Municipalidad de Santiago: Modelo de Agencia de desarrollo e Innovacion economicoterritorial” • Sue Birley & Daniel F. Muzyka, “Mastering Enterprise”, Pearson Education Limited, UK, 1997

THE ROLE OF THE PUBLIC SECTOR IN PROMOTING ENTREPRENEURSHIP

• Jeffrey Timmons y Stephen Spinelli, “New Venture Creation: Entrepreneurship for the 21st Century”, 7th Edition, McGraw-Hill Irwin, New York, 2007

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