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Entrepreneurship and Innovation: The Bothersome Truth

Entrepreneurs are broadly believed to be the agents behind economical expansion and innovation. They are, we are told, the movers and shakers who create new industries, oust, overthrow, dethrone current leaders from their thrones, and open new frontiers for everyone. Well-known culture tirelessly propagates one success story after another - from Facebook's Draw Zuckerberg, who had recently been glorified in "The Sociable Network" movie, to Tesla's Elon Musk, an migrant who became a home name, to Google's Sergey Brin, whose internet search engine name has legally become a verb in English.

So persuasive is the narrative of the entrepreneurial technological prowess and success, that many countries - including developing countries that feel they are lagging behind - develop comprehensive policies to support and promote entrepreneurship and even set aside significant funds to invest in startups via government-run opportunity capital programs. But is this fascination with and belief in entrepreneurs validated sergey anokhin.? How likely are business owners to enhance the technical frontier and bring about the sort of change that authorities want? Entrepreneurship Professor Sergey Anokhin from Kent Point out University says the data is far less genuine than the popular culture makes you believe.

The dark side of entrepreneurship

In a study of 35 countries over a 7-year period, Professor Anokhin from Kent State and Professor Joakim Wincent from Sweden's Lulea University of Technology show that there is no universally positive relationship between entrepreneurship and innovation. While for the world's leading economies including the United states of america the positive hyperlink between startup rates and innovation may be true, for the developing financial systems the relationship is in fact negative. Such countries may see innovation championed by the existing companies, not online companies. With few exceptions, business owners there pursue opportunities of the different kind that depend on imitation and dissemination of others' ideas, and are certainly not equipped to produce truly advanced "grand" innovations. In average, startups are less efficient than existing businesses. Accordingly, if local government authorities support entrepreneurship, monetary efficiency may suffer, and creativity is less likely to occur. Actually successful scientific development in emerging financial systems is often associated with an aggressive entrepreneurial patterns of large corporations, not individual entrepreneurs. Such is the case, for occasion, of South Korea using its chaebols.

The figure below shows the vastly different impact of startup rates on innovation and technical development (as measured by patent applications) across countries. Only rich countries can anticipate more entrepreneurship to cause more innovation, says Doctor Anokhin. For the smaller developed countries, as the plot demonstrates, an increase in startup rates will only lead to less, not more ground breaking activities. The problem, according to Sergey Anokhin, is that developing countries often look up to the leading economies when trying to design their own plans. Moreover, quite naturally, the very textbooks that the students across the world use, are written by the scholars from the world's leading countries, , nor take developing economies' situation into account. Taken along, attempting to locks plan makers in assuming the relationship between entrepreneurship and innovation that will not hold in their particular parts of the soil. The pro-entrepreneurship policies will never bring about the results expected, and the limited resources will be thrown away to support activities that are largely detrimental.

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