The future of entrepreneurship

By Dane Stangler on Wednesday, 13 July 2016.

At the end of May 2016, we hosted the first annual IGL Global Conference with over 230 participants from 27 countries. Dane Stangler, vice president of research and policy at the Kauffman Foundation was one of our opening speakers. Here is his speech from our opening session. 

As part of today’s opening, I have been asked to say something about the future of entrepreneurship policy, what is shaping it, where it might be going, and conversely where I think it should go - even if it is actually going in the opposite direction.

From our perspective at the Kauffman Foundation in the United States, having studied the US economy, US entrepreneurship and global entrepreneurship, I think there are two major forces that are shaping the future of entrepreneurship, whether we like it or not.

The first is demographic change. This is a topic that receives surprisingly little attention from policy makers, in part because it is very slow-moving. It is not something that policy makers can necessarily take into account on a daily, weekly or monthly basis. And yet I am hard pressed to come up with anything that is more important to the future of entrepreneurship and entrepreneurship policy than demographic change.

Every country is struggling with its own version of this, its own specific demographic trends. My colleague, Phil Auerswald, has published on this topic and points out that today half of the world’s population lives in a country that has either very low or below replacement population growth, or is actually de-populating. This is a trend that no individual country, let alone humanity, has ever faced before. In the past, entrepreneurship has had a huge boost from demographic growth in the US, in the UK, and other countries. What will happen in entrepreneurship in the absence of population growth, and in the context of fast-diversifying populations, is really open to question. This is a matter which policy makers who are concerned with entrepreneurship and innovation have got to take into account.

The second major context for entrepreneurship in the US, the UK and elsewhere is the current economic environment of low, slow, almost zero growth. This is a reason why we need to promote entrepreneurship and to get policy in this area right. Simultaneously it is also very worrying to think what is going to happen to entrepreneurial opportunities in this environment of almost non-existent growth. This adds urgency to our task because the future of our economies rides on getting innovation and entrepreneurship policy correct.

In my opinion, what will happen in the near term is, in part because of efforts by the Kauffman Foundation, Nesta and others, that we are going to have a steady accretion of policies, whether experimental, evidence-based, or non-evidence-based. The problem is that they will continue to build up with no cohesion or coherence – something that is already happening today. Part of our task is to bring a vision to these policies, so that we do not accumulate a random jumble of policies that have the noble intention of promoting entrepreneurship but end up doing nothing.

Governments and public and private institutions have been pouring vast amounts of money into entrepreneurship programmes and support, with the promise of great outcomes. However, a lot of these activities are experimental, and we know they may not have immediate payoffs. In the past, entrepreneurship in the US has had a huge boost from the financial crisis and the recession. This is where we have seen the growth of accelerators and venture funding, among others, as people cast around for solutions, opportunities and jobs. As that begins to decline, as the lending environment gets tighter and as demographic change sets in, I foresee a backlash if policy makers do not see immediate results in terms of growth or innovation payoffs from these policies and programmes, as right or wrong as that may be.

Given these two contextual shifts, there are two things that we at Kauffman would like to see from policy makers on the entrepreneurship front.

The first is one of the themes of this conference: experimentation or small bets. This is part of what the Innovation Growth Lab is about, and what Nesta is advocating for. The small bets approach runs contrary to a lot of impulses in public and private policy making because our policy makers like to see big ribbon cutting ceremonies, and new programmes or funding streams they can announce. But often these approaches do not actually stimulate much innovation or entrepreneurship. This is why all of us need to be advocating for a more experimental approach, not just for actual experiments, but a more humble, small bets approach to entrepreneurship, innovation and growth.

Secondly, entrepreneurship and innovation policy needs a more indirect approach. At Kauffman, and in the US more generally, we have spent a lot of time and energy doing the opposite. We are not seeing very strong results coming from direct approaches, such as direct subsidies or education programmes, to supporting innovation and entrepreneurship. In IGL’s latest policy brief, the lack of evidence on what works in entrepreneurship education, policies and programmes is well set out. As a funder this is something the Kauffman Foundation has experienced first-hand.  It seems to us that a much more fruitful approach is to have something indirect, to get entrepreneurship by not trying to get more entrepreneurship. By recognising that effects may be non-linear and by focusing on the basics of training people - not necessarily on entrepreneurship or the mechanics thereof, but more generally, we will get more entrepreneurship, more growth, and in the end higher payoffs.

That is where I think things are headed. A lot of it is easier said than done, especially in the policy context, but hopefully it at least offers food for thought for discussions both at the conference and outside of it.  Finally, I would like to know if you find any of the above to be wrong. Are there glimmers of hope in your countries or organisations? If you are finding evidence for better ways to support entrepreneurship and innovation then please do let us know.