Entrepreneurship Development - UNDP

1 ESSENTIALS. Synthesis of Lessons Learned evaluation Office No. 2, December 1999. Entrepreneurship Development Background Entrepreneurship Development (ED) refers to the process of enhancing entrepreneurial skills and knowledge through structured A worldwide consensus on the critical role of training and institution-building programmes. competitive markets and entrepreneurs in ED aims to enlarge the base of entrepreneurs in economic Development has emerged in the last order to hasten the pace at which new ventures decade. In developing countries, the primary are created. This accelerates employment barrier to economic growth is often not so generation and economic Development . much a scarcity of capital, labour or land as it is a scarcity of both the dynamic entrepreneurs Entrepreneurship Development focuses on the that can bring these together and the markets individual who wishes to start or expand a and mechanisms that can facilitate them in this business.

2 Small and medium enterprise (SME). task. Development , on the other hand, focuses on developing the enterprise, whether or not it Concept employs or is led by individuals who can be considered entrepreneurial. Furthermore, Entrepreneurship can be defined as the Entrepreneurship Development concentrates more on growth potential and innovation than process of using private initiative to transform SME Development does. However, many of the a business concept into a new venture or to lessons learned from experiences in both types grow and diversify an existing venture or of Development are similar. enterprise with high growth potential. Entrepreneurs identify an innovation to seize an opportunity, mobilize money and This note on Entrepreneurship Development management skills, and take calculated risks to complements reviews of evaluation -based open markets for new products, processes and lessons that appear in two other issues of services.

3 Essentials: one on small and medium enterprise Development (no. 1), the other on microfinance (no. 3). family environment which is oriented towards Lessons Learned business. Try to think like an entrepreneur when 1. Begin with a clear understanding of the designing ED projects, and involve private- feasibility and objectives of the sector representatives in the design process. In determining the feasibility of the ED. programme, focusing on the Development programme, do not erroneously assume that of ventures with the potential for rapid Entrepreneurship is an exclusive characteristic growth. of high-tech or knowledge-intensive enterprises. Entrepreneurs can be found in all There is a pervasive tendency to equate fields. Entrepreneurship Development (ED) with self- employment. Many self-employed individuals Example: A 1992 evaluation of a UNDP. are indeed entrepreneurs, but the majority are International Labour Organization (ILO).

4 Not. Their businesses are simply Entrepreneurship and technical training microenterprises in the informal sector, with programme in Kenya resulted in the little growth potential. The promotion of self- recommendation that electrical engineering employment is a worthwhile objective, but it graduates at a national polytechnic should be should not be confused with ED. considering such ideas as setting up a small Entrepreneurship Development programmes firm as a partnership among several graduates, that in reality focus only on self-employment with service centres in three towns under a are less likely to succeed in creating economic unified logo, followed by a franchise-type growth. outreach to other towns after an initial success. At the moment, the emphasis is too oriented What to do? toward one-person self-employment. (Source: UNDP, CEDAB, KEN/90/012). Determine from the start whether the real focus is Entrepreneurship or self-employment; then decide on the objectives accordingly.

5 Entrepreneurship Development should be about 2. Develop criteria to select carefully the helping people start and grow dynamic target group that is the most businesses that provide high value added. In entrepreneurial. determining the difference, it is useful to look at potential growth sectors or geographic areas Entrepreneurship Development programmes and to explore criteria for selecting require a selection process that attempts to beneficiaries who are entrepreneurial. A needs identify those target groups that have some of assessment before programme formulation is the key prerequisites for entrepreneurial useful. An analysis of high-growth economic success. While it can be argued that public sectors enables more focused support to funds should be spent on those who most need entrepreneurs in the most promising sectors of help, a selection process deploys limited the economy. resources where they are most effective, to the overall benefit of the community.

6 Beneficiaries To identify risks and determine the likelihood may be individuals and/or groups. of success, identify the factors that affect the levels of Entrepreneurship in a country. These factors include the perception of opportunity, degree of respect accorded to entrepreneurs, What to do? acceptance of wide disparities in income and a UNDP, evaluation Office ESSENTIALS Entrepreneurship 2. The selection of those who are most likely to security mechanisms (emergency fund, etc.) by succeed as entrepreneurs should be based on and for themselves. Other advantages may be clear and transparent criteria. For example, economies of scale, for example, by the joint entrepreneurs are characterized by the need to buying of raw materials, and marketing.. be independent, to create value, to contribute to (Source: UNDP, CEDAB, NEP/88/050). family and society, to become rich or, quite often, not to be unemployed. Potential For a UNDP Entrepreneurship project in entrepreneurs display initiative and ambition, Tanzania, "pilot results clearly demonstrate the have business sense and foresight, and are validity of the process, particularly in the more decisive.

7 They are agents of change who effective use of local government for accelerate the generation, application and community needs assessment, identifying and spread of innovative ideas. selecting youth and women's groups .". (Source: UNDP, CEDAB, URT/88/025). Most businesses are conventionally started by men aged 25-44. Focused programmes to encourage Entrepreneurship in other groups are 3. Identify the market through an effective means of increasing the volume of intensive preparation process, searching entrepreneurial activity. Promising for innovation and growth potential. entrepreneurs should be nurtured and helped to serve as role models and mentors for their In programmes focusing on self-employment, communities. Measures to target groups rather companies have often tried to copy other than individuals can mitigate income inequality successful enterprises, but they failed since the and be effective in empowering disadvantaged demand was not sufficient to support the groups, especially women, youth and additional supply.

8 In some cases, the minorities. For example, the formation of programmes themselves have reinforced this voluntary cooperatives allows groups of trend towards cookie-cutter business, often prospective entrepreneurs to help each other. erroneously supposing them to be less risky. However, successful entrepreneurial businesses Examples: UNDP and the United nations are those which meet a previously neglected or Conference on Trade and Development unforeseen need or do something better than it (UNCTAD) have had good success with the was done before. Empretec (empreendedores y technologia). Programme for stimulating enterprising What to do? persons to build enterprises, which started in Latin America and is now in African countries. An Entrepreneurship Development programme The relative success of the Empretec should help aspiring entrepreneurs to recognize programmes in these regions is due in large and design unique, innovative business measure to this careful selection of persons opportunities, based on an analysis of local with enterprise and initial motivation.

9 (Source: conditions and their own special skills. The United Nations, Economic and Social Council programme can help the entrepreneur to (ECOSOC)) diversify based on his/her basic knowledge of a product or skill in a certain sector without The evaluation of the UNDP/ILO women's distorting the local markets. In a truly Entrepreneurship project in Nepal found that entrepreneurial approach, innovative capacity Group formation among women matters more than the size of the market. entrepreneurs who live near to one another, for Diversification can be accomplished by example, in the form of a credit and savings introducing a novelty or new product feature, group, means that credit facilities which may stressing quality or value added, anticipating a otherwise not be available can be tapped and new market or even creating a market. that women can organize relevant social UNDP, evaluation Office ESSENTIALS Entrepreneurship 3.

10 Differentiated from souvenir goods sold locally Business opportunity surveys may provide in tourist shops. The niche market where the advice to entrepreneurs, but they must be Uzbek products have a specific global analysed in the context of the specific market advantage will change once the products are situation in each case. To determine market copied so the entrepreneurs must adapt and potential, it is useful to conduct a needs follow the trend from market feedback. assessment or demand survey before (Source: UNDP, CEDAB, UZB/98/005). programme formulation. The final decision should remain with the potential entrepreneur without undue pressure from the project or ED 4. Provide support through an sponsor. independent, private-sector-based organizational structure. In spite of extensive market surverys, some businesses will fail. The closure of To date, most entities providing ED. unsuccessful firms is a normal part of the programmes in developing countries have been entrepreneurial process, allowing resources to public-sector organizations.