Following is a guest entry by Nathan Gamester of the London-based Legatum Institute, who discusses the organisation’s new surveys on entrepreneurship in China and India. The surveys, which are being released later today, can be read in full at Legatum’s website.
Entrepreneurship is vital to the Chinese and Indian economies, just as it is with the economies of the United States, UK, Germany, or indeed any of the other leading global powers. Yet while many recognise the valuable work of entrepreneurs in the economy and society at large, little is known about what entrepreneurs actually think. What excites them? Who inspires them? Who do they turn to when they need advice? Two surveys published today by the Legatum Institute shed light on these and many other questions, with both aiming to get ‘inside’ the minds of the entrepreneurial class in two of the world’s most exciting, dynamic, and fastest growing economies in the world.
The surveys find that both Indian and Chinese entrepreneurs are full of optimism about the future trajectory of their respective countries. In India, 60 percent of respondents stated they believed their country was headed in the ‘right direction’ (although this was down from 84 percent in 2009), while in China this figure was even higher at 75 percent. In addition, 81 percent of entrepreneurs in both countries said they believed that their country will be a stronger economic power in the next five years. Interestingly, given the current economic conditions, a notable finding among Chinese entrepreneurs was that 64 percent expect their own businesses to grow by 10 percent or more over the next year.
The relationship between business and government is always a tricky one to navigate, and it’s no different in these two countries. Since last year, Indian entrepreneurs have become slightly more critical of the government’s efficacy in making India a business-friendly country (today only 18 percent think it’s doing a ‘very good’ job, compared to 33 percent in 2009). Among Chinese entrepreneurs, 37 percent stated that the government was doing a ‘very good’ job at making China more business friendly, while a further 38 percent said it’s doing a ‘fairly good’ job.
It’s clear from the findings of our survey that Chinese entrepreneurs rely heavily on government and wider state institutions to assist them in the course of their business. However, our survey found that, in general, Chinese entrepreneurs believe that the national government has much room for improvement in fostering an economic climate favourable to entrepreneurship (a point confirmed in the World Bank’s Doing Business Report which ranks China 151st globally for the ease of starting a business in the country).
China’s aspiring entrepreneurs tell us a great deal about the biggest obstacles to starting a business because, by definition, they’ve yet to realise their desire to start a business, either by choice or circumstance. Tellingly, the most commonly commented obstacles to starting a business among this group are ‘government regulations’ (reported by 34 percent of respondents).
From a policy perspective, one of the most interesting findings to come out of China is that formal business education at school is effective at inspiring the Chinese to become entrepreneurs. When asked to identify the most important factor inspiring their decision to become an entrepreneur, about one-quarter of total respondents responded with ‘What I learned about business at university/school’, compared with only 10 percent in India. This finding deserves further study, but it suggests that the best place to start cultivating a strong, competitive, vibrant economy for the future could be in teaching business in schools.
Put simply, our surveys find that corruption is widespread throughout business practices in both India and China. Furthermore, and perhaps the most worrying finding of all, is that the problem is apparently getting worse – 66 percent of Chinese respondents and 75 percent of Indian respondents reported that corruption is worse now than a few years ago.
However, both countries have highly-developed, informal processes that allow entrepreneurs to work around prohibitive barriers. In India, perhaps the very embodiment of entrepreneurialism is ‘Jugaad’ (the Hindi word meaning ingenuity and the ability to improvise, to get around, or to deal with, rules and institutions) which is reported by 80 percent of entrepreneurs as being ‘important’. Similarly, in China there’s ‘Guanxi’ (the ability to improvise, combine limited resources and navigate around a complex system of rules), which was reported to be ‘important’ by 92 percent of respondents, with 71 percent of those asked saying it was ‘very important’.
It’s perhaps no coincidence that these informal processes, designed to circumnavigate conventional procedures, have been developed and are relied upon so much in two countries where it appears corruption has so utterly permeated the marketplace.
A surprising (but encouraging) finding in the surveys is the degree to which entrepreneurs in both India and China are motivated by the social impact of their work – 60 percent of Indian respondents stated that this was the ‘main motivation’ for why they do what they do and a further 26 percent stated that it was ‘important’. Among Chinese entrepreneurs, 64 percent said it’s the ‘main motivation’ for what they do.
However, when it comes to wider societal structures, there are a number of worrying findings: India has seen a significant reduction in the levels of reported trust within society – from 74 percent in 2009 to 50 percent in 2010. In China, the figure was 72 percent.
There’s a huge amount of scholarly literature on the economies of China and India, and yet both countries remain a source of intrigue and debate among academics, policymakers, and the globally curious. We hope these findings will provide a serious addition to this global discussion.