International Entrepreneurship
International entrepreneurship is the process where entrepreneurs conduct business activities outside their national borders, therefore increasing the growth of new ventures and the opportunities into the market. International entrepreneurship is affected by factors like; stage of economic development, environmental types (legal, cultural, technological and political), economics and balance of payment. The economic development is the process of targeted programs and activities that work to improve the quality and the economic wellbeing of community life. They accomplish this by ensuring that the economy is diversified, they can build local wealth and the local tax base and finally create and retain jobs for their citizens in the country. The national economic development helps individuals in the country to monitor and share the needs affecting locals in the area with regulatory agencies and public institutions to improve the business environment in the named area. The indicators that show the how the economic development in a country include; the per capita income, the physical quality life index, the growth rate of the national income capita consumption and finally the industrial progress of a country.
This paper, therefore, seeks to expound more on entrepreneurship and the national economic development where it will compare countries across the different stages of economic development. The essay will also focus on the link between the micro and the macro-level entrepreneurship process and the role of entrepreneurship in a society, therefore relating it to a country’s stage of economic development.
The Global Entrepreneurship Monitor (GEM) Data is generated annually, where they discuss the entrepreneurship levels of different countries which show the advantage of entrepreneurship in those countries. In the year 2018/2019, the report showcased the profiles of 49 economies focusing on their long term sustainability, potential impact, demographics and their diverse forms. The GEM report contains findings on the innovation of entrepreneurs in different countries depending on their economic development. The report indicates that Chile and Luxembourg have the highest innovation rate amongst the entrepreneurs in the region since 48% if those entrepreneurs introduce products that are not offered by their competitors. In the Latin America and Caribbean regions, countries like Brazil and Puerto Ricco exhibit low levels of innovation in their entrepreneurial activities. In Africa and the Middle East region, countries like Angola and Lebanon experience high innovation in their entrepreneurship ideas compared to Morocco and Qatar, which exhibit insufficient innovation. In Europe and North America, countries like Canada and the US experience high innovation from their entrepreneurs, whereas other countries like Italy and Germany have low innovation levels.
Many countries, especially with low-income economies, are motivated to venture into entrepreneurship due to the necessity rather than the opportunity in the economy. The level of necessity decreases as the level of economic development increases. In low-income economies, 35% of the entrepreneurs are motivated by necessity compared to the 28% in middle-income economies and 18% in the high-income economies. The opportunities in high-income countries like Korea motivate many people to start their businesses compared to individuals from countries like India, who engage in entrepreneurship because they have no better work options available. In European countries like Switzerland and the Netherlands, necessity does not drive their entrepreneurs to start their business.
Countries in the North American and European regions experience the lowest overall startup rates for entrepreneurs compared to the countries in the other regions. According to GEM, developed economies tend to lower their entrepreneurship rates due to the high competitiveness and availability of alternative job opportunities that could make entrepreneurship less attractive. In the African and Middle East region, countries like Angola exhibit the highest startup rates of almost 41% compared to countries like Morocco and Qatar that show less than 10% in startup rates. In the Asian regions, countries like Japan and Taiwan show exhibit low startup rates compared to countries like Thailand and Korea, which exhibit high startup rates of more than 15%.
In the micro-level of the entrepreneurship process, a personal decision of becoming an entrepreneur is influenced by individual beliefs, aspirations and perceptions where the individuals are affected by the exert of a pull or a push. There is a limited supply of entrepreneurs in the market, mainly due to the population characteristics whereas age, risk tolerance, gender and human capital greatly influence entrepreneurial activities in different countries. Individual aspects consider the entrepreneurial rate of a region; therefore, different regions experience different entrepreneurial activities. Becoming an entrepreneur requires both the economic and social aspects which motivate an individual to start their businesses. Studies indicate that many people who venture into entrepreneurship are affected by the fear to fail, therefore invading their judgement on making decisions to become entrepreneurs. The career choice model indicates that social context is one of the factors that indirectly influence entrepreneurship within an economic region and directly influences the decision of an individual to become an entrepreneur.
Finally, the personal economy of an individual also included in the micro level entrepreneurship process. It is noted that there are two types of factors that motivate individuals to engage in entrepreneurship in a country or a region; there are necessity and opportunity of business activity. The unemployment rate in different countries have a positive effect on entrepreneurship due to necessity, but it does not have any adverse effect on opportunity entrepreneurship. This is because of the relationship between unemployment and the economic situation of a country or a region. Studies, therefore, indicate that the personal economic condition of individuals is a direct essential aspect that explains the decision of many individuals to start their own business.
In the macro-level of the entrepreneurship process, decisions of entrepreneurship rely on two categories cultural and economic factors. Different economies have different cultures which either directly or indirectly affects the ability to engage in entrepreneurship. Cultural factors like beliefs and social values have a hand in some differences in the entrepreneurial rate in different cross-cultural economies. Some studies have focused on social values as the role of innovation in some countries and one of the essential aspects explaining the different rates of entrepreneurship. Other studies have concluded that the role of institutions in different economies affects the level of entrepreneurship in those countries. The economic role of institutions and the beliefs and social values shared by the population are the main explanations of how entrepreneurial rates are affected by cultural aspects.
Studies conducted in Germany showed different factors affecting entrepreneurial activity in the different counties around Germany; the factors include high and low technology initiatives in the country. For high technology initiatives, the studies found that the unemployment rate had a negative effect, and the subsidies were not statistically substantial. For the low technology initiatives, it was found out that subsidies had a strong effect on entrepreneurship even without the unemployment rate. Studies were also conducted in the Spanish region, where it was concluded that there was a positive relationship between entrepreneurial intensity and economic development. The researchers used unemployment and per capita income to explain the adjustment between the optimum and estimated rate of entrepreneurship across the Spanish area.
Entrepreneurship is essential in society, and it differs depending on the stages of economic development in different countries. Since different countries approach entrepreneurship differently, for example, the approach in developed countries is different from the approach in developing countries. The first role played by entrepreneurship is the creation of wealth by sharing where when establishing new business entities, entrepreneurs use their resources and attract more capital from lenders, the public domain and outside investors. Through this, methods of acquiring capital, the public wealth is increased as the new business has to provide equity in the form of shares to the investors or pay the loans with interest to the lenders. If the business succeeds, the investors’ given equity will benefit as the value of their shares would have increased therefore regaining the money they had invested into the new business and benefit themselves and the entire society even more. For example, in countries with high economies, new businesses are embraced therefore they gain support from affluent investors who see future potential in their businesses compared to countries with the low economy who find it hard to seek investors but still use other forms of generating capital, therefore, increasing the value of their societies.
Entrepreneurship creates employment in the societies they are situated and even later expand to accommodate other societies. Studies have concluded that entrepreneurship end job seeking and adds it to the economy of the country and creates more job opportunities for other people. People in society, especially countries with low economic development, really benefit from entrepreneurship since many unemployed individuals get the opportunity to work and earn a living from being employed in those businesses. In countries with high economic development there is also the creation of employment but most due to the low rate of unemployment in those countries, there are many jobs compared to the number of unemployed people; therefore, the society continues to grow as people get motivated to work in those companies by being given good salaries and wages. Since entrepreneurship encourages unemployment in those different sectors, it ensures that society has developed and more people are working, therefore contributing more to the GDP of the country’s economy.
Entrepreneurship regenerates communities by bringing change to society towards changing them for the better. These changes practised by entrepreneurs in society improves the living standards of many individuals in the communities and the entire country at large. As people get employed by entrepreneurs, their standards of living are improved since they can receive enough income that will satisfy their economic needs at large. Since improving the living standards of people in society is a fundamental goal of economic development of a country, entrepreneurship has contributed to making it even better for individuals living in those societies. Entrepreneurship not only creates employment but also develops and adopts innovations which generate improvements in the quality of life of their customers, stakeholders and customers in the society, therefore, generating more income for the society and the country.
Entrepreneurship ensures the development of a balanced region since entrepreneurs aim at setting up their new industrial units and businesses in less developed areas through the help from the regional development. As entrepreneurs set up their businesses and industries in these areas, it leads to the development of infrastructures like stable water and electricity supply, better rail and road linkage, schools, airport, shopping malls, hospitals and other services that may not be available when they started their businesses. Through these improvements, the society grows, and more people are even motivated to relocate to those areas for a better opportunity, whereas the individuals from that community find it hard to migrate to urban areas. As the new industrial units and businesses are located in a less developed area, both indirect and direct job opportunities are created, therefore helping in the lifting of the regional economies in the region. As the employees spend their salaries in the economy and the new business continues to support the economy of the region it is situated in, the regional economic development will continue to increase therefore balancing the regional development in the country.
In conclusion, entrepreneurship is beneficial in every country since it helps to increase the country’s economic development and ensure that development is unified and different parts of the country exhibit the same development. Countries in all stages of economic development should encourage entrepreneurship since it will ensure that those countries will continue to develop even more, therefore increasing the country’s annual GDP. The level of entrepreneurship in the country depends on the level on economic development therefore low developing economies should work to increase the number of people starting businesses which will create more wealth through job creation and other advantages.