3
Fostering collaborative entrepreneurship in
developing countries
Both financial and
non-financial restrictions that hamper
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entrepreneurship
in developing countries can be fostered through a
collaborative strategy. It is important that
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entrepreneurs
work as a community to develop and manage financial and
human resources.
Entrepreneurship provides a sustainable outcome
for a community but can lead to destructive
entrepreneurship when it is unproductive. The creative
destruction from entrepreneurship with a negative side
effect occurs when there is no added value to a
community. This can be decreased when individuals in
developing countries have
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different cultural
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attitudes
towards individualistic business growth that leads them
into collectivist or group businesses.
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The role of collectivism
in society is important in determining business activity
in developing country environments. Individuals in
developing countries may prefer a society that
encourages collective entrepreneurship and discourages
individual gain. Collective entrepreneurship occurs when
individual’s skills are integrated into a group so that
the process of innovation is made easier (Dana and Dana,
2007). The collective ability of individuals and
organisations is important in developing countries as it
enables the use of the community as a way to focus on
business opportunities. By harnessing community spirit
in developing countries the group’s collective ability
becomes more useful in accessing market resources than
individual efforts. This ability to be cooperative
allows people to join forces to highlight a common need.
Cooperatives often serve as a form of community as they
provide local employment and a sense of belonging. This
sense of belonging is an important driver of new
business ventures by individuals who use their
initiative and are
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self-motivation.
3.1 Individual entrepreneurship factors
As entrepreneurship
requires individuals and communities to have
self-discipline and initiative it may take time for
developing countries to fully embrace risk taking and
innovative business activity.
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Entrepreneurship
is a major focus of interest for public policy planners
and individuals because of its link to
economic
development. It is important to understand
entrepreneurship in developing countries as the
intention to start a business is often culturally bound.
The existing research on attitudes toward
entrepreneurship may be culturally orientated towards
developed countries and less relevant to developing
economies.
There is a need to conduct
more research into
entrepreneurial processes as it can help identify
key factors relevant for entrepreneurs in developing
regions. By doing this government agencies can give
priority to certain factors that determine the success
of new businesses. It would be helpful for research to
focus on ways of discovering
potential entrepreneurs in
developing economies. As most research on identifying
potential entrepreneurs has been obtained in developed
countries extending research into developing countries
is crucial for the advancement of the entrepreneurship
field.
3.2 Culture
There is a different
entrepreneurial culture in developing countries that may
be based on historical events that have affected trust
in businesses.
Trust is an important part of business as
it helps develop entrepreneurial activity (Welter,
2012). In order to achieve
economic prosperity developing countries need to foster
trust as part of increasing
business efficiency and maintaining competitive market
structures (Newton, 2001).
Developing countries that have a low level of trust
usually have historical traumatic
events, which lead to the people and business still
adjusting to economic conditions
(Alesina and La Ferrara, 2002). Countries with a more
trusting culture usually have more
new business and economic
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opportunities (Guiso et al.,
2006).
As countries develop it also becomes important that
institutional support increases in
order to keep up to date with international legislation
and compliance requirements.
Developing countries in West Africa including Ghana have
benefited from infrastructure
left behind by British colonists and European traders.
However, Ghana has had to
increase the level of economic and social development
occurring in order to change the
economy from being natural resource focused. Looking at
how entrepreneurship can
impact strategic development is important in developing
countries wanting to sustain
growth and increase investment income. More research is
needed on how investment
funds can be established by governments and stakeholders
in developing countries in
order to strengthen their financial sector. These funds
can be used to provide support for
businesses by
educating and training entrepreneurs.
3.3 Government intervention
More research is needed on the interpersonal behaviour
and communication between
people in developing countries to see how the role of
government intervention and
education can benefit entrepreneurial activity. The
attitudes people have towards
entrepreneurship may be based on the media portrayal of
being an entrepreneur in a
developed country. Future research could look into
attitudes towards entrepreneurship
based on historical events that have taken place in
developing countries. In order to
promote entrepreneurship in geographically isolated
cities, public policy can be used to
encourage government intervention to help
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develop business.
Government intervention can take a variety of different
forms depending on the
country and type of business involved. In Egypt, it is
difficult for entrepreneurs to access
infrastructure, public services and start-up financing (Ghanem,
2013). These difficulties
stem from government policies constraining business
development because the weak
institutional framework makes general business
conditions hard. For entrepreneurs in
countries like Egypt the political instability can be a
hindrance that affects business
performance and creates bureaucratically paperwork
requirements (Dana, 2004).
Bureaucracy can also be in the form of inflexible
business systems that make starting of
business ventures difficult without access to the right
people. Some government officials
may expect bribes and this creates a confusing business
environment for entrepreneurs
that do not play along with unwritten codes of conduct.
3.4 Informal or grey sector
The informal sector in developing countries may exceed
formal sectors as assets and
technology is controlled by government officials. This
can lead to a dysfunctional
competitive practices in industries that constrain
business development in countries such
as Ethiopia that are trying to encourage economic
development (Amin, 2007). There can
be impediments to entrepreneurship in developing
countries in Africa including Uganda
as there are increased taxes and investment (Ishengoma
and Kappel, 2008). This can lead
to business constraints in the form of limited access to
markets. In developing countries
like
South Africa more business services in the form of
managerial knowledge and
start
up acumen is needed to increase the rate of
entrepreneurship occurring in the
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SME sector.
Part of the challenge of developing countries is the
inefficient bureaucratic systems
left from colonialism that have hampered businesses from
using new technology and
infrastructure that exists in developed countries. Dana
(1993) highlighted how it can be
hard for entrepreneurs to obtain loans in developing
countries without bribes or business
connections. This can make it frustrating to
enterprising individuals who want to obtain
financial capital.
In some developing countries, the grey market encourages
informal entrepreneurship
because they do not have to pay taxes. Due to necessity,
entrepreneurs emerge in
developing countries that drive informal business
activity. The entrepreneurial mind-set
is often found in the grey or informal economy that
operates in developing countries that
affects attitudes individuals have towards commerce.
Unregistered business activity is a
key part of some developing countries as they are part
of the volatile and unstable
business environment that exists in part from war,
famine or political change.
3.5 Family business
As previous research has shown that family business
experience influences
entrepreneurial orientation (Krueger, 1993), more work
is needed on how business
exposure by parents in developing countries impacts
children’s decision to start a new
business. More research should be conducted on how the
personality of individuals in
developing countries impacts their ability to start a
business. This is because previous
research has shown that there may be an association
between exposure to business and
personal intentions to start a business (Falck et al.,
2012). In developing countries, people
who have good experiences with businesses may aspire to
have their own enterprise.
Individual personality characteristics such as being
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creative may influence the
decision to start a business (Chlosta et al., 2012).
Creativeness has been referred to as
openness to new ideas and experiences, which can be used
as a way to evaluate
entrepreneurial intentions. The ability to be responsive
to new ideas can help determined
the likelihood of an individual starting a business
based on their subjective norms
(Chlosta et al., 2012). Individuals with original ideas
can change their behaviour and
actions to suit business environments (Krueger, 1993).
In developing countries that are
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rapidly changing as a result of environment influences
such as change of government,
war or environmental catastrophe, the creativeness of
individuals helps them to be
entrepreneurial.
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Entrepreneurship is crucial to the
development of society as they shape
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innovation and
change business thinking.
3.6 Historical development
More research should be conducted on how governments can
intervene to encourage
informal business activities to become formal and pay
taxes. Kenya has benefited from
the capitalist entrepreneurs who colonised the country
and left behind an emerging
entrepreneurial class (Dana, 1996). In contrast,
Mozambique was colonised mostly by
Portuguese farmers who were focused on farming (Dana,
1996). Future research should
look at how research and development can be improved
when bureaucratic procedures
are reduced in order to encourage more flexible and
innovative business practices.
Individuals need to develop their capabilities to become
entrepreneurs through
business planning and business accounting (Dana, 1996).
The regulatory environment in
developing countries can create problems from the
procedures needed to deal with
customs and import agreements. Given the absence of
proper monitoring in countries like
Mozambique it can make it hard for businesses to obtain
and repay loans (Dana, 1996).
In
South Africa, the government’s policy in major urban
areas including Johannesburg
has been to deregulate the market to promote informal
entrepreneurship (Dana, 1996).
More research is needed on different government policy
to support micro-enterprises
including street vendors as a way of developing
entrepreneurial spirit.
3.7 Demographic differences
There are gender differences with regards to the
demographic profile of entrepreneurs in
developing countries that differ from those in developed
countries. Due to gender
stereotypes the business opportunities for women in
developing countries may be limited.
However, some research has indicated that women show
more entrepreneurial activity in
developing countries (Williams, 2008). A topic worthy of
research is how to get more
gender diversity in SMEs in developing country regions.
As a small percentage of
woman are managing directors of government controlled
state enterprises in parts of
Africa, future research should investigate why Kenyan
and Ugandan woman are
underrepresented in top management of SMEs and whether
this is similar in large
businesses. This is similar to the suggestions made by
Dana (1996) about Mozambican
woman needing to access more loans to start businesses.
Dana (1996) also highlighted
how woman in Bangladesh have successfully accessed
funding through the solidarity
group approach to finance pioneered by Grameen Bank. It
is useful to encourage woman
to apply for economic support loans to develop local
industry that can then encourage
other business development in both urban and rural areas
of developing countries.
3.8
Technological innovation
The
success of
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innovation in developing countries
involves encouraging good ideas that
are financially and socially viable. The policies of
entrepreneurship differ in developing
countries depending on their geographic location and
political condition.
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China,
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India and
Brazil have developed quickly in the past decade because
of their ability to focus on
capitalist international markets as part of their
business activity. Other developing
countries including smaller populated regions in the
South Pacific including Fiji and the
Solomon Islands have been less successful because of
their focus on craft and tourism
industries.
Technological advances in
China and
India have played an
important role in the
economic growth as they have focused on manufacturing as
well as moving towards
knowledge intensive industries. Other developing
countries have not utilised
technology
innovations that have lead to them
failing to innovate.
These countries include Papua
New Guinea and the Solomon Islands who have focused less
on technology and more on
natural resources.
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