Entrepreneurship Policy Benchmarking Overview

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This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.COMPANY CONFIDENTIAL

Entrepreneurship Policy Benchmarking OverviewJanuary 2013

2Copyright © 2013 Monitor Company Group, L.P. — ConfidentialZMK-REC-Prez-Date-CTL

Confidential

Vibrant entrepreneurship is an important component of a successful advanced economy

The ChallengeGenerate high and rising standard of living,

by boosting productivity and innovation

The ContextNeed for greater flexibility and innovation given

speed and demands of global competition

The Entrepreneurship “Solution”

Entrepreneurship as a way to cultivate “economic agility”


Confidential

It is not always clear how to boost entrepreneurship because of the large number of possible actions and initiatives a region could pursue

Source: Monitor Analysis

Financing

Legislation

Skills & Talent

Technology & Infrastructure

Support Services

Administrative Burdens

Mindset

Establish community/regional investment funds; tie to local funding campaigns

Establish minimum small business lending thresholds for banks and lending institutions

Create angel funding networks Allow indirect personal contributions to

seed funding (e.g. pensions) Establish a centralized organization to

advise entrepreneurs on available financing options and strategies

Streamline listing regulations for growing firms seeking to raise public funds

Streamline regulatory barriers to mergers / buy-outs

Establish organizations to facilitate firm buy-outs

Establish government subsidies / loans for new and growing firms

Ensure lending policies are no more stringent for new/growing firms than for established firms

Establish curriculum requirements on entrepreneurship and new firm formation in primary and secondary schools

Establish colleges and university course / program offerings or distance learning partnerships on entrepreneurship and new firm creation and management education

Support / establish business programs for mid-career professionals

Support endowment giving to grow number and size of local colleges and universities

R&D grants & financing for experimentation infrastructure

Set up co-op / internship programs Scholarship/ award / sabbaticals for highly

meritous candidates to create greater access to and affordability of post-secondary schooling

Set up a regular talent scan in schools, colleges and industry for high-potential and serial entrepreneurs

Set up mentorship/ apprenticeship programs for high potential individuals

Support new venture competitions Recruiting targeted talent to a region; offer

relocation assistance

Upgrade physical infrastructure (transportation, utilities, and telecommunications) to support new and growing firms

Offer subsidies such that cost of access to infrastructure is not prohibitive

Increase number and size of specialized R&D facilities

Establish shared R&D facilities / joint university, public sector and industry facilities

Increase number, variety, and quality of business support services to fill needs of new and growing firms

Offer discounts, grants & matching programs to ensure availability of affordable support

Set up a centralized agency to link support services and government programs

Increase number and size of incubators to launch different types of firms

Create business associations

Provide incentives for colleges, government research centers and anchor firms to make their technology available to new / growing firms for commercialization

Establish formal tech transfer mechanisms to capture knowledge spillovers

Subsidize new and growing firms seeking to acquire and/or develop latest technology

Provide incentives for spin-offs from research institutions and anchor firms

Appoint a small business ombudsman to advocate for small business needs (e.g Entrepreneurship Advocacy Office)

Provide tax incentives to increase R&D activities, and to increase commercialization of R&D

Ensure business taxes have a similar effect for new, growing, and established firms

Establish tax policies that do not interfere with launch or growth

Strengthen intellectual property rights

Provide legislative incentives for use of stock options

Ensure stock option laws apply equally to new, growing and established firms

Ensure competition laws treat all firms equally; no unfair blocking of new firms entering the market by established firms

Refine regulations to ensure they do not interfere with start up of new firms and apply to new and existing firms in a predictable way

Refine procurement policies to apply equally to new as to established firms

Ensure labor regulations do not discourage hiring of small or large number of employees

Provide support for business tax filing

Ensure that administrative costs of compliance with government regulations do not unfairly burden new firms

Streamline the number licenses / permits needed to start a firm to reduce time and complexity

Establish a “Small Business Clause” in considering future legislation

Dedicate a regular media column / publication to profiles of successful and high-potential entrepreneurs

Sponsor conferences, workshops and business case competitions; leverage business associations and networking organizations

Establish entrepreneurship awards, research grants and scholarship programs

Create a regional publicity campaign to attract innovative and entrepreneurial individuals

Support regional enhancements and initiatives to attract diverse, young people and families (eg. Parks, entertainment complexes, pre-school education)

Review personal income tax levels to ensure individuals are not discouraged from starting or growing firms

Review the personal effects (financial & reputation-related) from bankruptcy; ensure these are not irreversible

Provide personal tax and health insurance breaks for entrepreneurs

Representative Sample


Confidential

…and its main conclusion is that regions need to create a vibrant eco-system for entrepreneurs…i.e. regions need to “do everything”

Heritage

Intellectual Capacity

PersonalityLife

Situation

Legislation & Regulation

Social & Cultural

Talent & Ideas

Business & Financial

Understanding who you want to develop or attract to your region influences

how you cultivate entrepreneurship Competitive

Need for achievement

Locus of control Autonomy Dominance

Personal development

Visionary

High risk-taking Tolerance of ambiguity Capacity for endurance

Age, martial and family status

Current occupation and career opportunities

Family history:– Role models– Motivations/

goals Ethnicity shapes personality traits, values, motivations and goals

Tightly-knit communities– Financial / other

support

Innate intellectual ability

Creative / innovative

Higher educational attainment

Previous shaping experiences

Current economic composition

Property rights and enforcement

Age & education

R&D Investment & Infrastructure

Population growth, diversity & creativity

Population density & social networks

Tax level & complexity

Regulatory burdens

Cross-Sector Collaboration

Technical & Business Skills

Economic history

Availability of & access to financing


Confidential

2003–2013 Entrepreneurship Benchmarking Initiative has been an effort to benchmark entrepreneurship policies in countries and regions

2003-2013 Entrepreneurship Benchmarking Initiative Countries, Regions, and Sponsors


Confidential

A number of well-known government and private sector partners have been involved in the Initiative

Country/ Region Government Involvement Other Partner(s)

Austria Denmark

Finland New Zealand Norway Singapore South Korea

Sweden

Switzerland UK US Russia China India UAE – MENA Texas/ California

Bay Area Chile Colombia Moscow Jordan Spain +35 countries 6 African

countries

Ministry for Economic Affairs and Labor Ministry of Business and Economic Affairs Agency for Enterprise and Housing Ministry of Trade and Industry Ministry of Economic Development Ministry of Trade and Industry Ministry of Trade and Industry Korea Development Institute

Ministry of Industry Ministry of Industry, Employment and Comm. State Secretariat for Economic Affairs Department of Trade and Industry Federal Reserve Bank The US-Russia Business Council Development Research Center of the State Council

Al-Maktoum Foundation Bay Area Economic Council, various municipalities

Chile National Council of Innovation The five largest chambers of commerce Mayor of the City of Moscow

ENISA Various South Africa Department of Economic

Development, Trade and Industry, National Planning Commission

Austrian Institute of Economic Research Center for Economic & Business Policy OECD

Norwegian Financial Services Association Standard, Productivity & Innovation Board Hangyang University Small and Medium Business Association Int’l Organization for Knowledge Economy &

Enterprise Dev.; Institute for Growth Policy Studies

ART and University of California at Berkeley The US-Russia Center for Entrepreneurship

Business Standard Magazine Various partners throughout MENA Univ. of California, Univ. of Texas, Livermore/

Sandia National Labs, Dallas Chamber of Com. Endeavor Chile Endeavor Colombia

Endeavor Jordan, INT@J, Young Entrepre.Assoc. IESE, Bankinter Foundation, GEW/Kauffman Foundation, various, incl. Endeavor Omidyar Network


ConfidentialA dynamic Entrepreneurship Model was developed to measure high-impact entrepreneur attitudes towards key aspects of entrepreneurship policy

Source: Monitor Group, FORA, A.R.T. analysis

Policy Drivers

Entrepreneur-ship Assets

Business Assistance

Policy Accelerators Motivations

Financing Skills and Talent Legislation Admin.

Burdens MindsetInfrastructure Support Services

Debt Financ-

ing

Equity Financing

Entrepre. Mngt.

Capacity

Business Advisory Services

Tech Commer-cialization

Taxes / Incentives

Competi-tion

Transac-tion Costs

Culture & Attitudes

Training and

Education

Supply of Equity Capital

Access to Equity Capital

Financing Strategies

Exit Strategies

Supply of Debt

Capital

Access to Debt

Capital

Skills Develop-

ment

Compe-tency /

Experien.

Supply of Business Services

Afforda-bility of

Bus. Svcs.

Govt. Programs

Network-ing Orga-nizations

Access to Tech.

Afforda-bility of Tech.

Corporate/ Business

Taxes

Credits / Incentives

Govt. Regula-

tions

Govt. Impact

Individual-ist Culture

Attitudes towards

Bankruptcy

Attitudes towards

Stock Opt.

Stock Option Rules

Market Openness

Second-Level Composite Indicator

Third-Level Composite Indicator

Fourth-Level Composite Indicator

Sixth-Level Composite Indicator

Fifth-Level Composite Indicator

First-Level Composite Indicator

IncubatorsQuality of Bus. Svcs.

Entrepre. Develop. Programs

Infra-structure

Physical Infra.

Prepara-tion

Spin-outs

Legitimacy

Attitudes towards

Income Tax

Each Sixth-level composite indicator has an average of 3-5 questions that measure various aspects of entrepreneurship assigned to it

Entrepreneurship


Confidential

A Entrepreneurship Benchmarking Survey was launched in multiple countries to measure differences in entrepreneur attitudes towards various policies

Dear [First Name]:

We are writing to ask for your help in completing a short Monitor Group survey on the competitiveness of the Massachusetts economy. This is part of an effort to gain a better understanding of the economic and innovation performance, composition, and strengths and weaknesses of a number of industry clusters in the Commonwealth. Ultimately, this work will inform policy makers in the public and private sectors as they work to improve the competitive position of Massachusetts.

Your insights will enable us to develop a deeper understanding of the Massachusetts economy, identify the sources of our current success, and help us build for our future.

Thank you in advance for your participation in this important initiative. If you have any questions, or if we can be of help in any way, please contact Pedro Arboleda at Monitor Group (617-252-2668; email [email protected] ).

Sincerely yours,

Mitchell Adams Michael E Porter Lawrence Summers Charles Vest

Mass Tech Collab Harvard University Harvard University MIT

Please click on this link to go to survey:

http://www.zoomerang.com/survey.zgi?970XV9GEXRFLDCSWJ8Y2BKRH

Monitor creates a Web-based survey and includes Web link in the letter signed by key leaders

Web-based survey was launched with the help of the leading institutions for collaboration in each participating country

Cluster Organizations

Chambers of Commerce

Regional Councils

Government Agencies

Business Associations

University Alumni

Organizations

Civic Organizations

Research Institutes

Regional Groups and Associations

Letter sent to institutions for collaboration 2

Letter with Web-link to survey is forwarded by institutions for

collaboration to their members to fill out

3

1Completed survey returned and analyzed

45



Attitudes Towards Income Tax

Legitimacy

Skills Development

Individualist Culture

50%

36%

42%

48%

49%

42%

0%

20%

40%

60%

80%

100%

Results for benchmarked vs. 13 nations


Confidential

1

2

3

4

5Survey AverageRussia Average

This model and the corresponding survey tool identifies key strengths, weaknesses, and priority areas for investment and upgrading

Source Monitor Entrepreneurship Index Survey, 2003–2004; 2004 Russia Entrepreneurship Survey

Index

Survey Average:

2.80

6th-Level Composite Indicators

Financing Skills and

Talent

Support Services Legislation Admin.

Burdens

Mindset

1: Supply of

Equity Capital

2: Access to

Equity Capital

3: Financing Strategies

4: Exit

Strategies

5: Supply of

Debt Capital

6: Skills

Development

7:Competency / Experience

8: Supply of Business Services

9: Quality of Business Services

10: Government

Programs

11:Incubators

12: Access to

Technology

13: Affordability

of Technology

14: Spin-outs

15: Credits /

Incentives

16: Corporate / Business

Taxes

17: Stock Option

Rules

18: Government Regulations

19: Government

Impact

20: Legitimacy

21: Individualist

Culture

22: Attitudes Towards

Income Tax

23: Attitudes Towards

Bankruptcy

24: Attitudes

Towards Stock Options

Strengths

Weaknesses


Confidential

Example: Question 116 – It is common for people who have failed in business to try again

…as well as for regional rankings on up to 120 specific questions relating to entrepreneurship policies

How would your region compare in

specific questions relating to

entrepreneur-ship policy?

?

?

?

16%

31%

32%

32%

48%

51%

56%

60%

62%

63%

63%

66%

75%

83%

86%

87%

89%

96%

30%

54%

38%

23%

26%

27%

29%

27%

23%

23%

21%

19%

14%

6%

3%

9%

5%

2%

53%

15%

31%

45%

26%

22%

15%

13%

15%

14%

16%

15%

12%

11%

10%

4%

5%

2%

43

13

72

62

63

59

116

234

56

447

52

29

551

50

50+

118+

35+

95+

0% 25% 50% 75% 100%

Austria

SwedenDenmark

FinlandDubai

Singapore

NorwayChile

IndiaSouth Korea

ChinaShanghai

SF Bay AreaBangalore

United Kingdom

TexasAustin

United StatesN

*

*

Agree Neither Agree / Disagree Disagree

Overview 67% 19% 14%

Note: *Respondent counts below 30 are too low to be statistically significant and are considered indicative results, + Results represent a regional or city-level subset of a larger survey and are thus excluded from totals

Source: Monitor Entrepreneurship Benchmarking Survey, 2003–2011


Confidential

A more detailed look at key indicators would allow us to reveal the variance between your region and survey leaders on a number of key dimensions

How far behind is your region

compared to survey leaders in specific areas relating to

entrepreneur-ship policy?



Attitudes Towards Income TaxLegitimacy

Skills Development

China / India

China

Singapore

China

USA

China

Survey LeaderLowest Performer

Note: Percentage refers to country mean as compared to highest possible score; shown in order of importance starting with financing strategies Source: Monitor Entrepreneurship Benchmarking Survey, 2003–2010; Monitor Analysis

Individualist Culture

0%

20%

40%

60%

80%

100%

67%

72%

73%

79%

77%

58% 46%

36%

42%

48%

49%

42%


Confidential

Classic “Silicon Valley”

Approach

We have identified several paths to greater entrepreneurship which give regions realistic alternatives to the “classic” Silicon Valley route

Pathway Brief Description Examples of Regions

University-developed IP is commercialized, in large part with the help of venture capital

Silicon ValleyBoston

1

Examples of Firms

Anchor FirmA region attracts branch plants and

R&D centers from which new firms spin-out, often with help and support of the anchor firm

Research TriangleVancouver, BC

2

Event-Driven / External Trigger

Downsizing at established firms and/or research organizations forces and motivates entrepreneurial efforts

San DiegoWashington, DC

3

Local Hero Role Model / “Home-Grown Genius”

A local entrepreneur achieves great success, and this motivates, and creates opportunities for more entrepreneurship

SeattleMinneapolis

4


Confidential

Typically regions undertake four interactive activities designed to develop a tailored plan to spur entrepreneurship in your region

How much to invest in a plan to boost entrepreneurship?

Whether to try to increase:– Entrepreneurial

attempts?– Entrepreneurial

success rates?– Both?

Assessing Goals

Benchmarking Strengths and Weaknesses

Ask the entrepreneurs What are the main

strengths relative to other regions?

What are the main weaknesses relative to other regions?

Selecting an Entrepreneurship

Model

Classic Anchor firm

spin-off Home-grown

genius Event driven

necessity

Developing an Entrepreneurship

Plan

Assess trade-offs between investment choices– Feasibility– Resources

Required– Impact


Confidential

Strategically targeted policy interventions have strengthened entrepreneurship in countries where Monitor has worked (1 of 2)

Key Challenges Identified Difficulties in sourcing capital in early stages of business

– State-owned banks were averse to lending to businesses that had not yet shown viability

Oppressive tax laws and deficiencies in bankruptcy law

Subsequent Steps Provision of targeted incentives to enhance entrepreneurial

momentum in each of the benchmarked regions– Renminbi funds established– Changes to tax laws in order to provide incentives to

entrepreneurs and SMEs– Changes to the bankruptcy law to address deficiencies

that previously existed

Impact In 2009 SMEs in China contributed to 59% of GDP, a

significant increase from the 40% contribution in 2005– They also accounted for 50% of tax revenues, 68% of

exports, and 75% of new employment

Entrepreneurship needed reform in China, given the dominance of state-owned enterprises

Benchmarking initiative was carried out in eight regions

Monitor began the work in 2005 and updated the study in 2007, cataloging the impact of reforms

Key partners: Chamber of Commerce, Development Research Centre of the State

China Entrepreneurship Benchmarking Initiative

Context

Source: 'Paths to Prosperity', Monitor Group, 2009; Zhou ‘Chinese Entrepreneurs Go Global’, Technology Information Review, 2012; T Kanamori ‘China’s SME Development Strategies in the Context of a National Innovation System’, World Bank, October 2007


Confidential

Opportunity in Mexico

New administration laser-focused on reforms to increase Mexico’s competitiveness, including in entrepreneurship

Multi-agency initiative – el Instituto Emprendedor – has been launched to consolidate, review, and reform policies and programs on entrepreneurship in Mexico

Manager of institute and Sub-Secretary Enrique Jacob has committed to using this study as the basis of his new entrepreneurship policy agenda and to repeating the study periodically to evaluate progress

• Also committed to provide financial support – skin in the game Sub-secretary and team under pressure to develop new policy platform by this

fall – time is of the essence Genuine opportunity to influence and strengthen policy environment for high-

growth, high-impact entrepreneurship in Mexico

Entrepreneurship Policy Benchmarking Overview

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