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C o m m u n i c a t i o n s a n d S o c i e t y P r o g r a m The Global Wave of Entrepreneurialism Harnessing the Synergies of Personal Initiative, Digital Technologies, and Global Commerce David Bollier, Rapporteur Communications and Society Program Charles M. Firestone Executive Director Washington, DC 1999 The Global Wave of Entrepreneurialism: Harnessing the Synergies of Personal Initiative, Digital Technologies, and Global Commerce The Report of the Seventh Annual Aspen Institute Roundtable on Information Technology David Bollier Rapporteur To purchase additional copies of this report, please contact: The Aspen Institute Publications Office P.O. Box 222 109 Houghton Lab Lane Queenstown, Maryland 21658 Phone: (410) 820-5326 Fax: (410) 827-9174 E-mail: publications@aspeninstitute.org For all other inquiries, please contact: The Aspen Institute Communications and Society Program One Dupont Circle, N.W. Suite 700 Washington, D.C. 20036 Phone: (202) 736-5818 Fax: (202) 467-0790 Charles M. Firestone Amy Korzick Garmer Executive Director Associate Director Copyright © 1999 by The Aspen Institute The Aspen Institute One Dupont Circle, N.W. Suite 700 Washington, D.C. 20036 Published in the United States of America in 1999 by The Aspen Institute All rights reserved Printed in the United States of America ISBN: 0-89843-264-2 99-019 Contents FOREWORD.............................................................................................v THE GLOBAL WAVE OF ENTREPRENEURIALISM: HARNESSING THE SYNERGIES OF PERSONAL INITIATIVE, DIGITAL TECHNOLOGIES, AND GLOBAL COMMERCE by David Bollier The Traits of An Entrepreneur.........................................................2 Environmental Factors That Nourish the Entrepreneur...........5 How Governments Foster Entrepreneurialism.................................6 The Rise of the Venture Capitalist ....................................................8 How Information Technologies and the Internet are Spurring Entrepreneurialism...................................................10 Big Companies, Small Entrepreneurs: Which Does a Networked Marketplace Favor?........................................................................15 Culture as a Seedbed For Entrepreneurialism .........................20 Entrepreneurialism as a Social Enactment......................................20 Entrepreneurship and National Culture..........................................23 The Importance of Regional Culture ..............................................27 Blending Organizational Culture with Entrepreneurialism ...........30 Conclusion..........................................................................................32 Notes ....................................................................................................34 APPENDIX List of Participants............................................................................37 About the Author .............................................................................39 The Aspen Institute Communications and Society Program.........41 iii Foreword For the past six years The Aspen Institute’s Roundtable on Information Technology has brought together leaders, academics, and experts in the information and communications fields to address an aspect of the communications revolution and its impact on societies, organizations, and individuals. During that time, the Roundtable has examined such subjects as electronic commerce, sovereignty, communities and personal identity. In each case, participants explore how the new information technologies and networks are impacting a particular field. The observations of each are suggestive of a new Digital Age. At the same time, however, another over-riding trend has emerged that has impacted similar phenomena. That trend is a new emphasis on entrepreneurialism, to differing degrees worldwide; indeed, some call this an Age of Entrepreneurialism. The Seventh Annual Aspen Institute Roundtable on Information Technology, convened by The Aspen Institute Communications and Society Program, sought to explore the inter-relationship between these two trends, that of digitalization and networking, on the one hand, and that of entrepreneurialism, on the other. To what extent could we have one “age” without the other? That is, could the information technological world have developed into such a formative element of our society without a strong dosage of entrepreneurialism? Or, for that matter, would entrepreneurialism have gained such a foothold in the minds and spirits of individuals throughout the globe without the new information and communications technologies? And what are we to make of the combination—the co-evolution—of the two? To address these and related questions, the Roundtable, 28 individuals from the United States, China, Spain, England, Bangladesh, and Venezuela met at The Aspen Institute in August, 1998. Participants are listed in the Appendix to this volume. What follows is a report of this meeting by journalist/author David Bollier. The report is designed to give the reader an understanding of the concepts and insights discussed at the Roundtable in accessible and meaningful fashion. That is, it is not “who said v vi THE GLOBAL WAVE OF ENTREPRENEURIALISM what” nor is it a report approved by each participant. Rather, it is the observation of the rapporteur, quoting some of the participants at times for spice and emphasis. The following paragraphs provide a flavor of the content of Bollier’s report. Roots of Entrepreneurialism Some of the most important characteristics of entrepreneurialism have their foundations in the personal traits of the entrepreneur. Optimism and faith in the future, coupled with a self-confi- dence to bounce back after failure, are often seminal characteristics of the entrepreneurial personality. Some attribute greed as the motivating factor for entrepreneurship, while others suggest quite the opposite, that it is service to society that is the true motivator, or a drive to succeed regardless of monetary reward. Individual personality traits are important, but are only part of the picture. Some cultures tolerate the failure necessary to entrepreneurialism more than others do. Liberal American bankruptcy laws allow a new start and permit entrepreneurs to recover from failed experiments without social stigma. European laws and culture do not seem to have had the same effect, perhaps accounting for the smaller extent of entrepreneurialism there compared to America. Government can both foster the growth of entrepreneurialism as well as put boundaries on its excesses. Antitrust, consumer protection, securities laws, research and development, and other governmental measures have helped create trust for markets, stability for financing, and new research in risky fields. While many entrepreneurs want the government out of their way, the role of government in establishing a milieu for entrepreneurialism, both positive and negative, cannot be ignored. New Elements—Venture Capitalism and Information Technology Also helping to spur the growth of entrepreneurialism around the world has been the growth of venture capitalism—funding sources willing to take the economic risk along with the entrepreneur. The Report includes a discussion of how the increase in venture capital- The Report vii ism has fueled innovation and underscores the fact that new ideas produce few benefits without adequate capital. Additional discussion ponders whether this symbiotic growth of venture capitalism and entrepreneurialism is sustainable over the long haul. The exponential growth of information technology and the Internet are new elements that also add to entrepreneurialism worldwide. One of the most important factors in allowing new entrants into the global market is the decrease in infrastructure costs, making use and acquisition of new technology less expensive for new businesses than for traditional players. And while the technology forms the basis for much of today’s entrepreneurial activities, the effects of using technology provide more insight into why entrepreneurialism has exploded. The report examines how knowledge is no longer the exclusive domain of existing companies and how the outward migration of knowledge has become a new avenue for business and wealth creation. The Effects of Culture Whether it is national or organizational, entrepreneurs cannot escape the effects of culture on their actions. The Roundtable participants discussed national and regional cultural differences that support or hinder entrepreneurialism. The report examines the cultures of a number of countries with respect to the encouragement of entrepreneurialism. Interestingly, even poor countries with little modern infrastructure can become seedbeds for entrepreneurialism in comparison to those countries whose politics and national cultures do not support failure and change. Organizational culture can take advantage of entrepreneurialism or be hurt by it. Organizations that insist on doing things as they always have been done, or that fail to understand that they no longer have exclusive dominion over information, are bound to be left behind. Existing firms incapable of reacting quickly to market changes may find that current employees with the entrepreneurial spirit leave to become their competitors. Participants noted, however, that having a good idea is not enough — implementation is still important, and implementation requires organization. The key to success will likely be a blending of the traditional strengths of the organization with risk-taking and support of innovation. The report concludes by stating that the growth of entrepreneurialism and digital technologies will have its problems. Expansion and the bare acquisition of profit may have to be tempered by government intervention. Countries, while wanting the benefits of entrepreneurialism, may learn that prosperity comes at the price of national culture. Governments may find that old ways of control are ineffective in a world of global information technology. Obviously, a generally high level of prosperity will not affect all people in a given society equally. Whether global entrepreneurialism presages worldwide adoption of free trade and political and social freedoms is still open to debate. Acknowledgments Finally, I would like to thank and acknowledge the following sponsors for their generous support of the Roundtable: BT Ventures, Hewlett-Packard, Novell, Inc., Oracle Corporation, Philips Electronics NV, and E.M. Warburg Pincus. I would also like to thank David Bollier, rapporteur, and all of the participants in the Seventh Annual Aspen Institute Roundtable on Information Technology for their time, energy and insights reflected in the Report. A special thank you goes to Jerry Murdock, co-founder of the Roundtable, and Ray Lane, its longest continuous supporter. Finally, I want to express my appreciation to Patricia Katopol, program associate, Patricia Kelly, senior program coordinator, and Sunny Sana, publications manager, for their help within the Communications and Society Program on the conference and this volume. Charles Firestone Executive Vice President, Policy Programs and Executive Director, Communications and Society Program The Aspen Institute June, 1999 viii THE GLOBAL WAVE OF ENTREPRENEURIALISM The Global Wave of Entrepreneurialism: Harnessing the Synergies of Personal Initiative, Digital Technologies, and Global Commerce Future historians may call this period the entrepreneurial age. Rarely has such an explosion of new business ventures, technological innovation, and cultural experimentation swept across diverse cultures of the globe simultaneously. Government leaders in Beijing and Singapore, Warsaw and Caracas, Moscow and London are looking to business mavericks to energize their economies. Multinational companies are eager to instill entrepreneurial values within their workforces to boost their competitiveness. On the periphery of such power centers, meanwhile, entrepreneurs large and small are remaking entire sectors of the economy and creating high-tech boomtowns in San Jose, California; Bangalore, India; Cambridge, England; Austin, Texas; and many other places. What most distinguishes this rich explosion of entrepreneurialism may be its global scope. Like a crustacean shedding an exoskeleton, societies around the world are shaking free of Communist restraints, autocratic rule, government restrictions, and inherited traditions—and embracing distinctly new patterns of economic, political, and social life. Fueled in significant part by global commerce and Internet-driven communications, individual freedom, social openness, and entrepreneurial zeal are ascendant in many nations. The phenomenon has many faces: the lacemaking firm in the Czech Republic that uses the Internet to find buyers from around the world; the Norwegian student who recruits hundreds of hackers worldwide to develop Linux (a widely respected, free operating system); the American-educated Bangladeshi who returns to his homeland to bring state-of-the-art cellular telephony to remote rural villages. This report seeks to explore provocative questions raised by the remarkable outpouring of entrepreneurialism in the 1990s. How does this wave of entrepreneurialism differ from previous 1 2 THE GLOBAL WAVE OF ENTREPRENEURIALISM paroxysms of business innovation? What is nurturing this economic and cultural outpouring? How is it related to the Internet? Why is it often resisted? One conclusion of this report is that the global upsurge in entrepreneurialism has a lot to do with the proliferation of digital technologies and the Internet. Combining these tools with individual creativity can release powerful synergies. The outcomes are social, cultural, and personal—as well as economic. Nations that encourage entrepreneurialism improve their material well-being and tend to generate new opportunities for individual betterment. Entrepreneurialism also tends to challenge barriers of ideology, social caste, and tradition and engender new demands for political freedoms. Yet the grand drama that is now unfolding—a complex interplay among multinational firms, entrepreneurs, technology, national economies, politics, and culture—also raises perplexing questions. For example, why are some geographic regions teeming with startup businesses, especially in high technology, while others remain moribund? Why are some nations renowned for their entrepreneurial prowess, while others seem culturally indifferent or hostile to business innovation? Why are some companies so consistently adept at anticipating market demands and responding flexibly, while others are more rigid, sluggish, and unimaginative? Finding provisional answers to these questions could help nations and businesses encourage entrepreneurial success and the economic, social, and personal benefits that typically result. The themes and insights in this report are based on discussions among 28 leading technologists, business executives, venture capitalists, entrepreneurs, academics, and writers at the Seventh Annual Aspen Institute Roundtable on Information Technology. (The Appendix contains a list of conference participants.) The conference, sponsored by the Aspen Institute Communications and Society Program, took place August 20–23, 1998, in Aspen, Colorado. The author is grateful to conference participants for their insights, while exonerating them from any responsibility for this text. The Traits of An Entrepreneur At the heart of entrepreneurialism are the personal creativity and enterprising initiatives that a person brings to the market- The Report 3 place. Is there an archetype or taxonomy of qualities that defines an entrepreneur? What exactly is an entrepreneur, and what personal trait does he or she exhibit? An entrepreneur, conference participants agreed, is someone who tries to actualize a personal vision for redefining certain aspects of life, especially by marketing new products and services. Entrepreneurs are willing to take personal risks to fulfill their goals. They possess supreme self-confidence and optimism about the future. They show persistence and courage in the face of adversity. They tend to appreciate the deeper, long-term dynamics of a given domain. All of these qualities are oriented toward the enterpreneur’s core mission: the development of innovative products and services that will support a flourishing business and—the entrepreneur hopes—generate a great deal of money. The owner of a small business is not necessarily an entrepreneur. Opening a new coffee shop is not entrepreneurial except in the broadest sense. The inventor of a different kind of coffee shop may qualify as an entrepreneur, however. Case in point: Howard Schultz, who created the Starbucks concept of premium coffees, innovative drinks, attentive service, and a stylish, hip mystique. As this example suggests, the real entrepreneur is the businessperson who reconceptualizes a product or service or invents an entirely new market. Henry Ford, King C. Gillette, and Alexander Graham Bell became legendary entrepreneurs by conceiving, manufacturing, and selling utterly novel products that changed important aspects of American life: inexpensive, mass-produced automobiles; disposable razor blades; and the telephone, respectively. Americans have an abiding fascination with the personal characteristics and talents that enable entrepreneurs to come up with original ideas and then turn them into wealth. George Gilder, a writer on entrepreneurship and president of Gilder Technology Group, argued that the successful entrepreneur has three essential virtues: service to others, humility, and faith and commitment in his or her vision. Entrepreneurs give to others by envisioning a socially useful innovation, Gilder suggested; whatever personal wealth or benefits accrue to them are puny compared to the larger societal benefits. “A selfish entrepreneur will not succeed,” Gilder contended, because entrepreneurs “have to have an imaginative understand- 4 THE GLOBAL WAVE OF ENTREPRENEURIALISM ing of what other people want. We’ve seen all too many entrepreneurs who really are too obsessed with their own interests and special visions, who never accomplish anything—not only because they may not be able to cooperate with others but also because they can’t grasp the nature of the marketplace they have to serve. Ultimately, it is service to others that makes the moral center of enterprise.” Mike Maples, ambassador to Microsoft, countered that simple greed is a more influential motivation for entrepreneurs than selflessness: “An entrepreneur sets out to do something, and the means of winning is solving a real problem for people. But that is not the motive,” said Maples. “Most entrepreneurs don’t start off with social responsibility high on their list.” Gilder’s reply: “Greed is the desire for wealth that you haven’t earned; entrepreneurship is based on wealth earned through serving others.” An entrepreneur is “a revolutionary hero in some sense,” Gilder continued, “because leadership implies orientation toward others.… Entrepreneurship is the opposite of greed.” Whether the entrepreneurial impulse constitutes greed or public service, the more consequential point may be that some societies honor it, whereas others do not. Edward Tian, president of AsianInfo (an Internet/intranet company based in Beijing), explained that in China, at least, social responsibility is a motivation for many entrepreneurs. Although the Chinese Communists had no place for entrepreneurs, “They did have a role for sacri- fice for one’s country and aspirations to become a hero and revolutionary.” As China opens up, said Tian, “These qualities are becoming important cultural elements for entrepreneurialism. Entrepreneuralism in China has a great sense of responsibility—to do something for your country, do something larger than oneself.” Although the external cultural forces that shape entrepreneurialism can be enormously influential, the inner psychological needs of an individual remain primary forces, argued Morton Meyerson, chairman and CEO of 2M Companies, Inc., and former chairman and CEO of Perot Systems Software. Whether the motive is greed or altruism, Meyerson believes, “Entrepreneurs bring their personal needs to bear. Those with powerful personas and drives make a difference. The need for power is also enormous. The The Report 5 need for recognition is enormous. I believe it supersedes the drive for wealth—or may be another way of expressing it.” It was unclear to Meyerson whether entrepreneurs are really out to earn money or to find meaning for themselves. Such questions preoccupy the biographers of John D. Rockefeller and William Randolph Hearst as they probe how personal character intersects with the contingencies of history, technology, and business opportunity. Economist Joseph Schumpter had a useful insight on this point: “Successful innovation is a task entirely of its own, a feat not of intellect but of will. It is a special case of the phenomenon of leadership.” In short, entrepreneurship will always be surrounded by a significant measure of mystery. Environmental Factors That Nourish the Entrepreneur The folklore of capitalism typically portrays entrepreneurial success as an individual achievement. This interpretation is reflected in the hardy American cultural archetype, the self-made man—to which Time magazine devoted an entire issue on December 8, 1998. “Builders and Titans of the 20th Century” featured the stories of Henry Ford, Walt Disney, Akio Morita, Sam Walton, and Bill Gates, among dozens of others. All of this attention to successful individuals tends to obscure environmental factors—societal support mechanisms that contribute to entrepreneurial endeavors. These factors include the basic legal structures of civil society that allow a marketplace to function; financial mechanisms that actualize entrepreneurial vision; family and ethnic networks that provide investment capital, labor, and moral support; educational institutions that generate research, skilled workers, and managers; and government programs that provide subsidies or infrastructure support. A more elusive but influential factor is the cultural milieu that sustains— or deters—the would-be entrepreneur. The celebrity of individual entrepreneurs generally overshadows the environmental factors that make their success possible, said John Vincent C. Nye, associate professor of economics and history at Washington University in St. Louis. Nye calls successful entrepreneurs “lucky fools.” He contends that they emerge only 6 THE GLOBAL WAVE OF ENTREPRENEURIALISM because “society both creates individuals and fosters the structures in which the ‘lucky fools’ will continue to grow.” The story of Henry Ford is an illustrative example, Nye said: “The textbook story is that Ford invented mass production. But that’s wrong. People knew about mass production at the time of Henry Ford. The big debate was whether people would buy cars in large quantities if you made them cheap enough. Expert opinion at the time was that companies had to go ‘up market’ with luxury cars because not enough Americans would buy cheap cars to justify mass production.” Not only was conventional wisdom arrayed against Ford, according to Nye; Ford himself was an implausible champion of a contrarian idea, having bankrupted two companies and shown himself to be inept at personal relationships. In short, Nye said, by the reckoning of his contemporaries Ford “seemed like a fool.” By focusing on Ford as an individual, said Nye, we can easily lose sight of the factors that contributed to his success—and the wider impact his initiatives had. The real beneficiaries of Ford’s success, said Nye, included not just Ford and its customers but General Motors, which adopted the same mass-production ideas and took the lion’s share of the car market. As an economic historian, Nye is prompted to ask: “What is it about the society that makes Henry Fords possible?