Unleashing entrepreneurship growth in Bangladesh: Why and how

The answer to the inquiry proposed in the headline is rather easy, as there are lots of evidence supporting the fact that entrepreneurship levers the process of economic development and social transformation by (a) new firm creation (starting a business or enterprise) and consequently, (b) creating employment, including self-employment, (c) innovation (providing the essential analytical link between entrepreneurship and development) and, (d) wealth creation.

Who is an Entrepreneur?

According to Schumpeter, entrepreneurship is a driving force of innovation and more generally an engine for economic development entrepreneurs are believed to contribute to economic development and structural transformation in the economy by reallocating resources from less to more productive uses (ACs and Story (2004) and by performing "cost-cutting", "gap-filling", and "input completing" functions in the economy and Hausman. 

Many other eminent economists and scholars including Adam Smith, J.B.Say, Alfred Marshall, and Frank Knight also emphasise an entrepreneur's role as a leader and organiser, and coordinator of production and recognise entrepreneurship as the "fourth factor" of production.

Though entrepreneurship is commonly regarded as an important input of economic development, there is no universally accepted definition of the term. There are too many definitions that rarely agree with one another, rendering the task of finding an unambiguous definition of the concept almost impossible.

However, the most popularly used concept of entrepreneurship is provided by Joshep who calls him an innovator, bringing new ideas, new goods, and technologies to market, opening up new markets, processes, and commercialising new knowledge in the developed countries. 

The Schumpeterian entrepreneur is noted to be characterised as a coordinator of production and an agent of change. As argued by Audretsch entrepreneurship is about change, just as the entrepreneurs are agents of change.

Schumpeterian innovative entrepreneurs also coexist with "defensive", and "necessity" entrepreneurs who enter a business, not because of market opportunities and innovative ideas, but simply because they need an income to survive. This type of "distress pushed" or "survival driven" and self-employment seeking entrepreneurs is particularly defused in developing countries. 

In these countries, poverty, unemployment, and lack of economic opportunities in the formal wage sector often push people into entrepreneurial activities ranging from street vending to traditional and personal services, in most cases within the informal sector of the economy. This leads us to believe that there are alternative ways of looking at the concept of entrepreneurship and binding it rigidly with the motion of entrepreneurship being synonymous with "innovation" will be narrow. 

Later on, Schumpeter (1934) himself modified his position since the generic term entrepreneur may include a population of very heterogeneous "agents", comprising real innovative entrepreneurs bringing in "creative destruction" together with "positive followers" bringing in overoptimistic and even escapees (self-employment seekers) from positive unemployment. Hence adopting a provocative and/or rigid stance regarding radical innovation and entrepreneurship as synonymous may lead to unfavourable consequences of overoptimistic implications.

Besides differences in the entrepreneurial types noted above, some other important issues need to be briefly highlighted which significantly influence entrepreneurial characteristics. At the macro level, three important types of entrepreneurial activities/or enterprises are distinguished by three influential sources. 

For example, the ILO measures "self-employment", The Global Entrepreneurship Monitor (G E M) measures start-up rates of "new firms", and the World Bank measures registration of "new firms". All these databases are noted to be concerned with formal versus informal firms and their implications for types of relationships between entrepreneurship and economic development.

As far as new enterprise formation is concerned, it is an outcome of both objective economic pull factors (i.e. profitability and industry growth) and subjective non-economic push factors including defensive drivers (i.e. uncertain future career prospects, escape from unemployment, etc.). These environmental drivers also interact with the potential entrepreneur's traits. 

For example, the potential entrepreneurs tend to be strongly influenced by specific psychological inner drives, such as the need to achieve (termed "N-achievers" by David Malleland, 1965), desire to be independent, a locus of control, a search for autonomy in the workplace, a desire to be socially useful and to acquire improved social status. 

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Bates (1993) held the view that the availability of socio-cultural, financial, and educational support tends to determine the extent to which individuals with the above traits will emerge as entrepreneurs. These personal traits are generally found to be strongly associated with entry into self-employment. While new start-ups are important for the development of an entrepreneurial economy, one must not be simplistic to believe that all start-ups are successful and drivers of subsequent economic growth. 

On the contrary, many of them are also doomed to early failure and generate only temporary jobs. That entrepreneurship is more than new venture creation and it is a factor of production in its own right is also strongly supported by Acs and Storey (2004) in the sense that it improves the allocation of resources and offers new products and services.

Underlying these deliberations is the conclusion that there are alternative ways of looking at the concept of entrepreneurship and binding it rigidly to the notion of entrepreneurship being synonymous with innovation may be too narrow. 

Later on, Shumpeter (1934)  himself modified his position since the generic term entrepreneur may include a population of very heterogeneous categories consisting of real innovative entrepreneurs bringing in "creative destruction" together with positive followers and even "escapees" (self-employed) from positive unemployment. Thus adopting a provocative stance and defining entrepreneurship in a narrow perspective may be too narrow and create confusion. 

It is thus obvious that entrepreneurship is an exceedingly complex concept and needs to be defined carefully and from a broader perspective. Keeping the various caveats in mind, it may be useful to define the term taking note of the contexts in which it is being discussed and used as opposed to labelling it with any stereotypes.

Hence a broad operational definition may be to identify entrepreneurship as the process or act of identifying business opportunities in the marketplace, mobilising resources required to pursue these, and investing resources to exploit the opportunities for earning long-term returns. 

Here comes the issue of taking risks, a missing component we have to look for in any definition of entrepreneurship. Hence we should define an entrepreneur as someone who identifies a business opportunity and assumes the risk of creating and running a business to gain advantages in terms of profits and revenues. 

Another important issue involved is that while entrepreneurship is a conceptual issue, an entrepreneur is a person who performs, organises, innovates, and takes risks. Hence looking more closely at the definitions of entrepreneurship, we can identify at least three significant dimensions of entrepreneurial activities: Running a business, setting up a business, and running it to make profits; Taking Risks; Innovation.

Who becomes an entrepreneur and why?

To find answers to the above questions we have to elaborate on the "characteristics" of those who start businesses from those who don't. There are then some common "motivational" factors for starting a business. There is no "ideal" entrepreneur type because "the term entrepreneur implies a configuration of psychological traits, attributes, attitudes, and values of an individual motivated to initiate a business venture". 

Thomas and Muller's study finds that the important personality traits or characteristics seem to include: (i) a high Energy level, (ii) personally feel in control of one's destiny (confidence), and (iii) have a high-risk tolerance. However, "innovation" which is considered the prime driver of entrepreneurial activity is found to be unrelated to having a cultural similarity to the "US origin groups''.

How do entrepreneurs contribute to development?

As noted earlier, economic development involves change and structural transformation and an entrepreneur performs as the best agent of change. Indeed, empirical evidence strongly supports the link between entrepreneurship and economic growth in the developed countries where new enterprise creation, employment generation, etc. are well documented in the literature. Entrepreneurship is essential for economic development for filling important gaps left by incomplete and underdeveloped markets in developing countries. 

In the developing countries, a key function of entrepreneurship is agreed by the experts on the subject, is to mobilise factors such as capital and specialised labour which being imperfectly marketed, might otherwise not be supplied or allocated to the activities/sectors where their productivity is the highest. 

Indeed the "disruptive innovating energy" or the "creative destruction" process upset and disorganised the business environment. This involves dealing with uncertainty and with the unknown and having the ability to exploit or respond intelligently to change. Entrepreneurship is also important for new firm creation, job creation in the private sector, and legitimate wealth creation. 

While there is plenty of empirical evidence supporting positive evidence on the contributions of entrepreneurship in developed countries, such evidence is not well documented in the developing countries. It is nevertheless a proven experience that entrepreneurship has the potential to be the engine of economic growth through its impact on technology and innovation and the allocation and mobilisation of the factors of production from lower to higher growth optimum resource allocation possibilities, impacting high productivity growth and national economic development. 

The Bangladesh Scenario

Discussions in the previous sections made it abundantly clear that there is no need to rehearse the case for promoting entrepreneurship development in Bangladesh. In keeping with the current surge of academic interest and policy focus on the subject of entrepreneurship especially since the 1990s as a determinant of economic growth, entrepreneurship development has come to the centre stage of policymaking in Bangladesh also.

On the policy front, SME Policies 2019 mention on page 8 about taking some steps on new entrepreneurship development, i.e. training courses and database creation in the relevant training institutes. It also emphasises effective mutual collaboration and the increase of cooperative efforts among the training providers. 

These initiatives are mostly from the Government, i.e. the Ministry of Industries, BSCIC, Institute of Management Development, SME Foundation etc to name a few. Such programmes are also run by the Ministry of Youth Development through running training programmes, especially for the youth and women. 

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Not surprisingly, such initiatives are also forthcoming from the private sector. For example, the DCCI initiated a project of creating 2000 innovative entrepreneurs with financial assistance from Bangladesh Bank. The introduction of an undergraduate course by the Daffodils University where I delivered an invited (by the Dean of Business Faculty) speech on SMEs and Entrepreneurship Development is a notable example of patronising entrepreneurship education and institutionalising it at the higher education levels from the private sector. 

"Freelancers to Entrepreneurs Program" by the Government to develop freelancers engaged in outsourcing, IT-based jobs, business competition models like the "The Startup Cup" by IBA, D.U. etc are other examples of encouraging youth entrepreneurship development in the country which also deserve commendation for taking steps in the right direction, towards creating a pro-business environment. 

This exuberance displayed at both public and private sector levels towards entrepreneurship development, though laudable, no information on the outcomes, (i.e. new business start-ups, employment generated etc.) are available in the public domain for use by researchers like us. Caution also needs to be urged concerning some pertinent issues, such as "who are the entrepreneurs in our context, what type of entrepreneurs are prone to contribute to innovation and how to support these through policies and institutional arrangements to maximize their potential contributions to our national economic growth. 

A modest attempt was made by me through publishing an article in the Daffodils International University Journal of Business and Economics, Vol. 9, No. 1, June 2015. I want to emphasise here an important point that running a course on entrepreneurship without teaching a course on Small and Medium Enterprises (SMEs) development is rather an incomplete programme. I hope to take up this issue soon and deliberate on entrepreneurship and SMEs in detail. 

Entrepreneurial Performance Levels in Bangladesh

We know entrepreneurs are not born, they have to be nourished, developed, and trained to perform important functions that will help enhance economic development. Unfortunately, he does not have relevant information to assess the performance of the entrepreneurs in Bangladesh at this moment. 

Such information needs to be gathered through undertaking a sample survey in which I tend to undertake soon after the pandemic is over. However, to fall back on a study finding i.e. The Rural Industries Study Project (RISP) conducted over three years between 1979-1981 in 11 Upazilas of Bangladesh (in which I participated as a Core Research Team Member in my capacity as a part-time Visiting Scholar of the BIDS), Dr Zaid Bakht, a renowned BIDS Researcher, made an excellent effort to assess the performance level of the Entrepreneurial functions of the proprietors of the enterprises surveyed. 

He constructed an Entrepreneurial Involvement (E.I) Index, a composite index exhibiting the levels of (i) initiation (ii) management, and (iii) innovation. Based on the scoring done by using this composite index, he concluded that the RISP proprietors performed at a medium level which was influenced by various factors, such as occupational background, formal education levels, and training, etc. 

Hence through conducting a sample survey study we need to gather relevant information to assess performance levels of the Bangladesh entrepreneurs in terms of their capacity to "initiate", management, and innovation to justify their potentials to contribute to economic growth and social transformation. 

Conclusions and Policy Suggestion

The subject of Entrepreneurship is a vast area of discourse and analysis. It has developed and developing country perspectives, rural-urban, and formal-informal perspectives, etc. all of which need careful attention. Conceptualisation, typologies, theoretical perspectives, and developmental roles, enterprise versus entrepreneurs' contexts' etc. add multifaceted dimensions to the subject. 

Our concern in this exercise has been to focus on the conceptual issues, highlight the role and importance of entrepreneurial activities on economic development. Given the positive empirical findings on the close relationship between entrepreneurship, economic growth, and social transformation we would strongly recommend a development strategy in Bangladesh that encourages entrepreneurship growth and development.

A few words on the policy aspects which are relevant for entrepreneurship promotion and development, particularly in emerging countries like Bangladesh:

• removing distortions affecting .........operations of the market forces
• encouraging human capital development through training, general education, and research for knowledge creation and dissemination
• better allocation of scarce resources especially in the developing countries
• as the efficiency of the public sector entities are always questionable, markets should be made free of all distortions and supported by market-friendly institutions
• finally, fostering entrepreneurship education and training, so that opportunity perception and motivations may have a mediating role between the overall macroeconomic environment and entrepreneurial activities.   

Dr Momtaz Uddin Ahmed is a former Professor and Chairman of the Department of Economics at the University of Dhaka.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.