There are too many people who do not want to work, claim unemployment benefits for the maximum period of time possible, or collect food stamps when they could otherwise work. Most people are too scared to get more education to qualify for better jobs because they are forced to take out student loans and risk failure. It is a precarious situation.
Our country’s leaders have a lot of excuses and few answers to why unemployment lingers (it remains above 8%).
What is the key to creating more value, wealth, and yes, jobs? Entrepreneurism. What makes entrepreneurs so important? They take risks, spend investment capital, and hire new employees that stimulate the economy. President Obama made clear the importance small companies play in job creation in the recent State of the Union address. What proof do I offer that entrepreneurs drive wealth and job creation? Israel Kirzner (1973, 1999 http://www.nyu.edu/econ/dept/vitae/kirzner.htm) along with Grebel, Pyka, and Hanusch (1987) focused a lifetime of research on entrepreneurs as catalysts for market growth and change. These scholars provided the foundation for what should become an environment friendly to the entrepreneur. But most policy makers and citizens are confused about why a friendly environment for entrepreneurism is critical for prosperity.
Entrepreneurs I meet with every day are faced with more regulation, taxes and mandated employee benefits than ever before in our history. The current political enviornment is much more friendly to unions and unskilled workers than entrepreneurs. Entrepreneurs risk their livelihoods, reputations, wealth and family life to create value and jobs. Unions leaders and supporters of the President complain successful entrepreneurs are not doing enough or paying their fair share.
I believe a friendly environment for entrepreneurs is the catalyst for job growth–it is the essential ingredient missing in our economic recovery. Suggestions for policy changes are 1) reducing barriers to starting limited liability companies that reduce the risk to the personal assets of entrepreneurs, 2) reduce the mandated employee benefits and strengthen the at-will employment laws. An example is limiting wrongful termination awards and responsibility companies have when market forces cause them to reduce their employee count 3) allow entrepreneurs to more easily protect their intellectual property both home and abroad 4) reorganize the Small Business Administration around accredited schools of business. What are the benefits of these changes? Job growth and greater prosperity.
Even in a tough economy, entrepreneurs are the first to adapt to changing circumstances and keep economic activity at its highest level. Entrepreneurs are flexible and adaptable. When a viable market surfaces, they are willing to adapt their business model to the opportunity, often at the same time larger companies suffer the brunt of market gyrations and downturns.
Modern researchers built upon the theories of “creative destruction” and the entrepreneur as hero put forward by Joseph Schumpeter . Schumpeter provides the most substantive theory to demonstrate how entrepreneurs add value to products and services and most importantly buoy the financial markets.
Entrepreneurs are important because they are willing to risk their capital training and paying for new workers who are not immediately productive. If you want to put your finger on a leading indicator for job growth, take a look at the start rate for small companies who added more than five employees to their payroll in a calendar year.
We need to be competitive with companies abroad. International entrepreneurism involves the added complexity of adapting a product or service to a new market or culture. International entrepreneurs face numerous challenges and barriers that add complexity to any venture such as trade barriers, legal constraints, distribution limitations, and human resource issues not found in their home country. Government can be a help in the area of breaking down barriers to entry and protecting intellectual property.
Entrepreneurs are willing to take significant risks to achieve results. I am working with several right now that recognize incredible international opportunities. By staying abreast on the best methods and products in their respective industries, they could be part of the engine that could help our nation compete more effectively . Entrepreneurs are the most efficient players in gathering or assembling resources from all over the globe and are both close and accountable to the customer, whether they compete in Canada, India or Brazil.
Based on my experience at three start-ups ventures, Netcentives (1997-2000), Capener Advertising-San Diego (1987-1992), and Above the Rim (1988-1993), I spent a significant amount of time finding, interviewing, and training new employees with entrepreneurial drive and smarts. Those new employees that could deal with ambiguity and change thrived. Those that were willing to change and adapt as we uncovered market opportunities found working in a start-up a thrilling ride. Others hesitated or became scared watching the changing landscape. The speed required to seize these opportunities seemed to be similar to the metaphor of the train pulling into an intermediate stop and the passenger chooses to get aboard or watch the train leave the station as fast as it pulled in. Successful entrepreneurs know when to jump on to (the train) something and when to get off in a hurry.
Block and MacMillan wrote, “The entrepreneurial drive to pursue [opportunities] is a combination of many factors, chief among them motivation and attitude. These attributes in turn, affected by childhood influences, role models, and later workplace environments. Providing they work hard, those with more talent will clearly do better than those with less; entrepreneurial ability can be directly influenced by education, training, and experience. In other words, entrepreneurs are made, not born” (Block).
Entrepreneurs must be able to influence others to succeed. As a company grows, many rules or cultural norms become large barriers to change or even [continuous] improvement. These barriers prevent entrepreneurs from succeeding unless they can persuade their colleagues to follow them or provide them with support and additional resources, so the best entrepreneurs tend to be skilled at negotiation, diplomacy and mediation.
From my experience in both corporations and start-ups, the typical entrepreneur is more like a “Bull in a China Closet” when it comes to corporate politics until they fail a few times. They can run ruff shod over people who do not have thick skin until it hurts their business or they lose key employees. One example is a successful entrepreneurial relative of mine who said, “I have no patience or time for these corporate bozos”. If you set corporate policy or work in government, make sure you don’t put up barriers in front of the entrepreneurs or small businessman that are adding employees. Entrepreneurs are the heroes and should be treated as such; they are the engine for economic prosperity. Let’s let our local policy makers know that government is more of a hinderence than a help to creating successful new companies. Let’s reverse the trend towards greater government involvement in regulating and taxing business. This couse of action will free entrepreneurs to do what they do best: drive productivity, wealth creation, product value, and create jobs.
