Presented at the Regional Meeting on SME, Entrepreneurship and Access to Finance Indicators, organised by the OECD-MENA Investment Initiative, December 2011. http://www.oecd.org/mena/investment

1. D.J Storey
University of Sussex, UK
Presentation to Regional Meeting of the GCC countries on SME, Entrepreneurship and
Access to finance Indicators, 6-7 December 2011, Dubai, UAE

2. Four economic benefits of
entrepreneurship
job generation;
innovation;
productivity and growth;
A valid career option for individuals
the potential to increase the ‘utility’ of individuals by
increasing their, for example, satisfaction or income.

3. The role of government
From the viewpoint of business owners
Governments can exert either a positive or a negative
influence on the extent to which these benefits
materialise.

4. Positives
Create an enforceable legal framework for business in
which fair competition takes place
Provide a stable macro economic environment
Create a low tax and low regulation environment
Provide “support” for new and small firms in the form
publicly funded training/ advice/ finance
More generally provide an education framework for
its citizens from which business benefits

5. Negatives
High barriers to starting a business –permits/ cost/
time
High regulations in operating a business
High taxes on business owners
Can favour powerful cartels
Corruption

6. A Simple Model
Determinants of Entrepreneurship
Entrepreneurial Performance
Impact of Entrepreneurship

7. A Framework for Indicators
Determinants
Entrepreneurial
Performance
Impact
Regulatory R&D and Entrepreneurial
Framework Technology Capabilities
Firm-based Indicators
Job Creation
Employment-based Indicators
Economic Growth
Other Indicators of
Entrepreneurial Performance
Poverty Reduction
Culture
Access to
Finance
Market
Conditions

8. Determinants
Regulatory
Framework
R&D and
Technology
Entrepreneurial
Capabilities
Administrative
Burdens for Entry
R&D Investment
Training and
experience of
entrepreneurs
Administrative
Burdens for Growth
University/ Industry
Interface
Business and
Entrepreneurship
Education (skills)
Bankruptcy
Regulations
Technological
Cooperation
Between Firms
Safety, Health and
Environmental
Regulations
Technology
Diffusion
Product & Labour
Market Regulation
Broadband
Access
Court & Legal
Framework
Patent System;
Standards
Social and Health
Security
Income,
Wealth,Business
and Capital Taxes
Access to
Finance
Market
Conditions
Access to
Debt Financing
Anti-Trust
Laws
Attitudes Towards
Entrepreneurs
Business Angels
Competition
Entrepreneurship
Infrastructure
Desire for Business
Ownership
Access to VC
Access to the
Domestic Market
Immigration
Entrepreneurship
Education
(mindset)
Access to Other
Types of Equity
Access to
Foreign Markets
Stock Markets
Degree of Public
Involvement
Culture
Risk Attitude
in Society
Public Procurement

9. The 2 big decisions
1. Focus on general firm creation or Focus on high
potential firms - Selectivity?
2. Focus on Macro policies or Focus on Micro
policies?

10. The case for general firm Creation policies
Source : Paul. D. Reynolds
Higher levels of firm (and job) churning is associated
with subsequent increases in net job growth and
productivity increases
New (not small) firms are one major source of jobs
(some for short periods of time, some for longer).
Some firms grow (creating create jobs) by expanding
the economy, others by driving out competitors
leading to offsetting job losses with less net job
creation.

11. Numbers involved in business creation
Source : Paul D. Reynolds
Nascent
Entrepreneurs
Egypt
New Firm
Ownermanagers
3,372,889
1,496,645
253,576
191,916
1,117,332
1,523,067
Tunisia
149,848
488,697
UAE
169,794
213,980
Jordan
Morocco

12. The Case against general firm creation
policies
Promoting firm creation is a waste of resources – 2/3
die in six years and <1% of new firms have >20
employees after 5 years.
It encourages optimistic but poorly resourced
individuals to take a risk and in many cases make
their own position worse
The link between general firm creation rates and
economic development remains opaque

13. The case for Selectivity
Significant job creation takes place in only a tiny
proportion of firms
It is the gazelles that transform an economy by
changing the economic and competitive landscape
There are examples of long run, government-funded
selective technology projects -SBIR
Business Support programmes that are selective are
successful – UK Business Links
There are too many businesses for everyone to be
helped

14. The case against selectivity
Selecting the businesses to support is very difficult
The VC sector gets most of its investments “wrong” –
but makes its money from the extreme successes
It is too politically risky for governments to have this
form of payoff
The net impact on employment – in a sector/region/
economy of gazelles can be much less than the gross
impact

15. The Case for Micro policies
Every developed country has them
Information; Training; Advice ; access to finance;
public procurement; export support etc
SMEs expect this form of support on the grounds that
governments also help large firms (even more!)
Self-report data indicates those using this support
find it helpful.
It can be targeted at specific types of firms [high
tech?]or owners [females?] or locations [areas of
deprivation?]

16. The case against Micro policies
Careful evaluation studies assessing whether the
assistance influences the performance of the assisted
firms point to very weak and sometimes no impact.
Delivering micro policies requires a substantial
bureaucracy and an enlightened and well-informed
political system
It can be very expensive indeed
Impact is only apparent in the medium term

17. Macro Policy components
Ease of doing business
Governance
Macro-Economic stability
Tax regime
Formal/ Informality
Ethics/ Religion
Role of Females
SMEs respond to, rather than lead, changes in welfare

18. So, what policies seem to work?
Varies by country and region
Varies by “problem” being addressed
Varies by assessment method used
Varies with macro-economic circumstances
Varies with level of economic development
So, no “one size fits all”
BUT

19. Where is the Jury still out?
Policies to improve access to finance
Policies to change “attitudes”
Policies to encourage SMEs to provide more
workforce training
Policies to provide firms or individuals with “advice”

20. Conclusion
New and small firms can contribute to economic welfare
and development
Governments can contribute or reduce that contribution
The effectiveness of policies depends on the circumstances
of the country/region
Very broadly there seems clearer evidence of the impact of
macro policies –regulation, tax, macro-environment,
competition, policy delivery
Less evidence of impact of micro policies on access to
finance, advice, training or cultural change