Wed | Oct 18, 2017

Martin Henry | Monitoring entrepreneurship: used and useful research

Published:Sunday | September 17, 2017 | 12:00 AM

A lot of research sits on shelves. Some of it deservingly so. But the whole point of applied research, as I used to drill into the heads of students starting their first research efforts, is to influence policy and practice.

So I was delighted to participate last Thursday at the University of Technology, (UTech) Jamaica in the public presentation of a piece of research which has been doing just that. It is the Global Entrepreneurship Monitor (GEM) Jamaica Country Report for 2016-2017, which was produced by a research team drawn from across the College of Business and Management.

UTech, Jamaica has been producing GEM reports over the last dozen years since 2005. The international Monitor has been running since 1999, adding more and more countries, and claims for itself to be "the world's foremost study of entrepreneurship".

GEM began in 1999 as a joint project between Babson College (USA) and the London Business School (UK). The aim was to consider why some countries are more entrepreneurial than others. For this latest report, 65 countries participated, covering 69.2 per cent of the world's population and 84.9 per cent of the world's GDP. Jamaica is the only Caribbean country in, and UTech, Jamaica is one of 300-plus academic and research institutions doing the research work on the ground.

Minister of State for Finance Fayval Williams, who was guest speaker, spoke of the use the Government of Jamaica has been making of the GEM reports in crafting its MSME policies. Interestingly, she threw kudos to the previous administration for the 2013 policy for the sector which they had developed and on which the present administration in which she serves is building. This drew accolades from the dean of the College of Business and Management and from the audience.

Minister Williams is herself extraordinarily well qualified in business and finance with degrees in the field from both the Harvard University and the Wharton School of Business at the University of Pennsylvania. She was a mover and shaker in one of Jamaica's most innovative and successful firms, JMMB.

This is a trend not sufficiently noticed. More and more, the people in politics are coming from the top of the education ladder (and one would assume the top of the IQ pyramid) with the Parliament thickly sprinkled with advanced degrees and professional qualifications. Why can't these people, from among the brightest and the best, collectively chart a course of action that can rescue and prosper this country which the Global Entrepreneurship Monitor is reporting to be brashly entrepreneurial?

 

Evidence-driven policies

 

The academic Dr Peter Phillips of the Opposition PNP, as he leads his party into the first annual conference with him as fifth president this weekend, and as he plots policy for government, should give careful thought to how the collective brainpower and education available to him in the party can be better applied to nation building around evidence-driven policies.

The governing JLP, with the likes of Fayval Williams on its bench in the Parliament and in the Cabinet, should do likewise and with greater urgency.

"GEM," the website would have us know, "is a trusted resource on entrepreneurship for key international organisations like the United Nations, the World Economic Forum, the World Bank, and the Organisation for Economic Cooperation and Development (OECD), providing custom data sets, special reports, and expert opinion. These important bodies leverage GEM's rich data, tried-and-tested methodology and network of local experts to promote evidence-based policies towards entrepreneurship around the world."

Also speaking on the launch programme was the assistant general manager for retail banking in the country's biggest bank (depending on how 'big' is measured), NCB, Marcia Reid-Grant. NCB has been one of the biggest and most consistent backers of the GEM research done in Jamaica. Recognising its public value, the university's own internal Research Development Fund has also provided support to the GEM project.

Laying aside the interest-rate controversy for a moment and the debate about how well the banks perform their role of financing the development of the country, NCB has been one of the business success stories since Government took over the operations of Barclays Bank in 1977 when that UK bank was pulling out of the country. Subsequent privatisation has only strengthened performance.

I see we are inching closer to having the FINSAC report on the financial-sector meltdown of the 1990s which NCB weathered, the Government having just allocated another $58.4 million and granted a three-month extension for the completion of this most important report.

The FINSAC report is going to be a gold mine for research on financial-sector collapse, an extraordinarily useful case study. UTech's College of Business & Management is now heavily into researching and writing case studies.

But back to business! NCB has been using the GEM Jamaica Country Report to guide its lending policy to the MSME sector and has been learning to use qualitative assessment criteria of bankability alongside the old numbers game.

In each participating country, GEM looks at two elements: The entrepreneurial behaviour and attitudes of individuals, and the national context and how that impacts entrepreneurship. The information gathered and carefully analysed by local GEM researchers allows a deep understanding of the environment for entrepreneurship and provides valuable insights for policy and practice.

 

Two tools for tracking

 

The Global Entrepreneurship Monitor uses two tools to track rates of entrepreneurship across multiple phases of entrepreneurial activity and to assess the characteristics, motivations and ambitions of entrepreneurs and explore the attitudes societies have towards entrepreneurship. Those two instruments are the Adult Population Survey (APS) using a random sample between the ages of 18 and 64 years, and the National Expert Survey, which interviews experts in the field.

And what is the data telling us? Jamaicans are on top of the world when it comes to respect for entrepreneurship and the willingness to get into the business; 85 per cent of us see starting a business as a desirable career choice, putting us in second position. Successful entrepreneurs are highly regarded. And people strongly agree (87 per cent) that in the media here, they often see and hear stories about successful new businesses.

But the best is that 84 per cent of Jamaicans believe that they have the required skills to start a business, placing us at number two. Fear of failure is low, and a robust 38 per cent intends to start a business over the next three years.

I'm a little worried, though, by the non-distinction between mere self-employment and genuine entrepreneurship. A large number of Jamaicans are prepared to do a lickle buyin' and sellin', fishin', plantin', providing a service, even a professional service, or whatever, out of necessity or opportunity with neither the intention nor the skill to establish and run a real business that has structure and can employ others and grow. This may be a classic case of academic researchers and respondents to their surveys speaking different languages.

We know from the global data that economic downturns like the recession which started in 2008 drive up the TEA, the Total Early-Stage Entrepreneurial Activity. TEA measures the percentage of the adult population that is in the process of starting or have just started a business. The Jamaican TEA spiked at 22.7 per cent in 2009 and is now around 10 per cent.

Entry into entrepreneurial activity is about as much driven by necessity (47 per cent) as by opportunity (50 per cent) in the Jamaican economy, with its high unemployment and underemployment and low-income conditions; 97 per cent of Jamaican households have a combined income of under $3 million.

The brash confidence for entrepreneurship is tempered by the harsh realities of what the GEM researchers describe as the "entrepreneurship ecosystem" that web of support that businesses need to thrive, from government bureaucracy to availability of credit. GEM is picking up low levels of using new technology, weak innovation, weak links to research, weak education and training support, low export levels as a proportion of business sales, and weak and slow growth for new businesses measured as adding jobs.

A particularly troubling finding is the low level of intrapreneurship, the development of new products and services within existing firms from tapping employee innovation; 95% of employed Jamaicans say they have not been involved in the development of anything new over the last three years.

Despite the upbeat launch of the GEM Jamaica Country Report for 2016-2017, I am forced to draw the downbeat conclusion that while entrepreneurial interest and energy may be high among the population, exceptionally high - the skills, opportunities and conditions for starting - sustaining and growing new businesses are way back on the poorer side. This must produce elevated levels of failure in an already risky field.

If Government, financial institutions, research academia, and other players in the field, gathered in one lecture theatre for the launch of the GEM Report, can gang up against these obstacles to stronger entrepreneurship, the country's economy would thank them for it - and grow.

- Martin Henry is a university administrator. Email feedback to columns@gleanerjm.com and medhen@gmail.com.