Abstract
The current paper brings the results of the entrepreneurial activity performance in Colombia, South America, provided by GEI methodology with the instrument GEDI 2017 tool 2011_2015. The results have been analyzed in terms of sub-indices, pillars, and variables, identifying the strengths and the weaknesses. Later, the entrepreneurial activity results were compared with those of Chile and Costa Rica, which are countries with positive performance in the region. Finally, based on the bottlenecks, some recommendations are made to improve or create policies to help correct the errors.
Keywords: GEI methodology, Colombia development, entrepreneurial activity, entrepreneurship.
Colombia is a developing country according to the positive figures in the economic panorama over the last two decades. Its privileged location in the continent, its stable democratic system, and its wide variety of natural resources makes it a strategic partner by several powers in the world.
In terms of economy
According to ANDI (National Association of Businessmen of Colombia) 2016 was a hard year with restrained growths; the country went through a deceleration process which was more severe during the second semester of the year; a foreign trade that does not take off yet, and a more challenging macroeconomic environment where fiscal and foreign exchange vulnerabilities have been displayed. (ANDI, 2016, p. 2)
Despite these difficulties, Colombia ended 2016 with figures that demonstrate the strength of this economy, the growth was managed in a context of contraction in Latin America; unemployment rate maintained one-digit; the social indicators showed progress; the industry recovered; construction led the growth, and the stabilization of the macroeconomic environment was well handled, all in a deep phenomenon of inflationary pressures and volatility in the markets. (ANDI, 2016, p. 3)
According to the Spanish Government, (The Diplomatic Information Office of the Ministry of Foreign Affairs and Cooperation , 2017), the satisfactory performance of the Colombian economy over the recent years contrasted with the low growth manifested by the largest economies in the region, and by other emerging countries. The deterioration in oil prices and the adjustment of the monetary policy in the United States have impacted Colombia's economy in 2016. (p. 2)
Colombia is doing well if it compared with the other countries of the region, but it is a reality that the economy is going through a difficult situation, as it has been presented on the Ease of Doing Business where a constant deterioration on the ranking since 2009 when it was 37, descending to the position 59 in 2017. (Trading economics, 2018)
In recent years the Colombian economy has experienced a significant boom thanks to the climate of legal security, fiscal incentives, good macroeconomic management and a significant inflow of foreign capital, which have led to high growth rates, with low inflation and little public indebtedness.
In terms of Human Capital development
Colombia has a population of 49,564,411 (DIAN, 2018). (The United Nations Development Programme, 2016) published the Human Development Report 2016 for 188 countries, in which Colombia presented an estimated gross national income per capita of 15,389 for males and 10,215 for females. (pp. 211-215)
The report also brings the Multidimensional Poverty Index for developing countries based on a national survey conducted in 2010. Figures for Colombia are as follows: The Multidimensional Poverty Index was 0.032; population in severe multidimensional poverty was 1.8%, where the contribution of deprivation to overall poverty was 34.3 by education, 24.7 by health, and 41,0 by living standards; the population living below national poverty line was 27,8% and the population living below PPP$1.90 a day was 5.7%. (pp. 218-219). Other results showed an inequality in education of 17.4%, inequality in income of 39.4%, an employment rate of 61,7%, and GDP per capita of $12,988. (pp. 235-239).
Finally, The Human Development Index (HDI) ranked Colombia with a high human development in the position 95 with a value of 0.727 by 20015. (p. 202)
In terms of entrepreneurship
In Colombia, the Law 1014 of 2006 regulates the Entrepreneurship Policy, which is supervised by the Ministry of Trade, Industry and Tourism, and it is based on five strategic objectives that seek to ease the formal start-up business, promote financing access to entrepreneurs and new companies, articulate entrepreneurial networks, encourage mature organizations to support entrepreneurs during the conceptualization period, and help incorporate science, technology and innovation to new businesses (Mincomercio, Industria y Turismo, 2017).
Colombian government is making big efforts to increase self-employment through a variety of programs through what it is called to support the creation and development of new ideas, entrepreneurship and micro, small and medium-sized enterprises by providing counseling, financial and managerial training, and start-up financing funds. Among the most important ones are iNNpulsa Mipyme (Modernization and Innovation Fund for Micro, Small and Medium Enterprises), CDE Colombia (Business Development Centers), Emprende Colombia (Start Colombia), Sistema Nacional de Apoyo a las Micro Pequeña y Mediana Empresa (National System of Support for Micro Small and Medium Enterprises), Consejo Superior de la Microempresa / Consejo de la Pequeña y Mediana Empresa (Superior Council of Microenterprise / Small and Medium Business Council), ExportaFácil (EasyExport), Grupo Para la Inclusión Social (Group for Social Inclusion). (Mincomercio, Industria y Turismo, 2018). In the same way, the government has created the National Policy of Productivity and Competitiveness to improve the productivity of companies and the competitiveness of products and services in the country (Mincomercio, Industria y Turismo, 2018).
Colombia has an unusual a rate of 52% of self-employment, nevertheless, much of this population is informal independent workers with irregular contracts; Furthermore, most of independent workers work in informal businesses (83%) and are not covered by any social security (93%). Informality is also high among employees, who, around 42%, do not contribute to the pension system (OECD, 2016, pp. 12-15). Under these considerations, it is fair to say that the high rate of self-employment does not guarantee a clear panorama of the entrepreneurial activity in Colombia.
The Global Entrepreneurship Monitor (GEM) research program measures the national level of entrepreneurial activity every year. At the very beginning in 1999, only 10 countries were measured, and by 2008 there were over 60 (Ács, et al., 2008, p. 221) to more than 100 nowadays (Global Entrepreneurship Research Association, 2018).
The GEM Colombia report (Garcia Cediel, et al., 2017), showed that the Total Early-Stage Entrepreneurial Activity (TEA) Rate in Colombia reached 27% in 2016, which is considered as the highest value ever reported in the country; subsequently, Colombia was ranked in the fifth position with the highest percentage of TEA entrepreneurs worldwide, and in the third position in Latin America and the Caribbean. (p. 35)
53% of the adult population between 18 and 64 years of age intends to start a new business activity, alone or with other people, which ranks Colombia as the first country of entrepreneurial intention in Latin America and the Caribbean and third on in the world. (p. 32)
On the other hand, the report presented that there is an adult population between 18 and 64 years old (8,9%) that has successfully run their businesses more than 42 months, carrying all the legal obligations related to salaries or any other type of compensation to employees, what represents an increase of 3,2% since 2015. (p. 37)
Almost 70% of Colombian companies belongs the tertiary sector, and provides either consumer service or service to other companies (p. 4)
Regarding innovation, nascent and new entrepreneurs stated that just 12% of costumers considered their products or service as innovative, while established entrepreneurs said the just 8% of their customers considered their products or service innovative. (p. 50). One of the reasons for the slow advance in innovation in Colombia is related to technology; Nascent and new (84%) and established (92%) entrepreneurs said that they used technology which are in the market older than 5 years. (p. 48).
In terms of competition, 79% of Colombian businessmen stated that their companies offered products similar to those of the competition (p. 50)
Finally, the process of internationalization is also fragile, in 2016, just 4% of new companies (TEA) reported more than 75% of their annual sales coming from clients abroad (p. 55), and 67% of all Colombian entrepreneurs said that less than 25% of their revenues come from abroad (p. 10), what is a mirror of the Colombian balance of trade that showed a deficit of -11.455 (million dollar FOB) in 2016 (DANE, 2017), what rings the bell about the weak and precarious internationalization processes in the country.
GEI methodology Basics
GEI (previously called, Global Entrepreneurship and Development Index) stands for The Global Entrepreneurship Index which is a tool designed by Professors Acs, Autio and Szerb, to measure the country level entrepreneurship. (Szerb, et al., 2016, p. 11). GEI Methodology, endorsed by the European Commission, “is the first tool to track entrepreneurship and economic development in the global economy” (GEDI, 2018).
According to (Ács, et al., 2014), and GEI methodology provides a powerful platform not only “for future research in national-level entrepreneurship” (p. 488), but also “for the analysis of National Systems of Entrepreneurship, as well as for the design of policies geared to alleviating system-level bottlenecks”. (p. 491)
Tough economic times motivate the arrival of new entrepreneurship activity (TEA) that responds to necessity, what, according to GEDI, shows a negative correlation with economic growth, economic freedom, and global competitiveness. It is to say that TEA is measuring quantity rather than quality. Far from this definition, the GEI methodology focuses on a construction of entrepreneurship based on opportunity rather than in necessity. Under this new panorama, GEI methodology conceptualizes entrepreneurship as an opportunity to be commercially successful by standing on an environment of high growth, scalability and serious job creation; (Ács, et al., 2017, p. 2), and defines it as “the dynamic, institutionally embedded interaction between entrepreneurial attitudes, entrepreneurial abilities, and entrepreneurial aspirations by individuals, which drives the allocation of resources through the creation and operation of new ventures” (Ács, et al., 2017, p. 27).
GEI was constructed on three sub-indices (entrepreneurial attitudes, entrepreneurial abilities, and entrepreneurial aspirations); 14 Pillars divided in: Entrepreneurial Attitudes Pillars: (Opportunity Perception, Startup Skills, Risk Acceptance, Networking, Cultural Support. Entrepreneurial Abilities Pillars: Opportunity Startup, Technology Absorption, Human Capital, Competition. Entrepreneurial Aspirations Pillars: Product Innovation, Process Innovation, High Growth, Internationalization, Risk Capital; and 28 variables. (Ács, et al., 2017, pp. 27-30).
Source: (Ács, et al., 2017, p. 1)
Research methodology
For this Exercise, the data and results to interpret the Colombian entrepreneurial level are found from the GEDI 2017 tool 2011_2015 (Ács, et al., 2017). The results were observed and interpreted to find the overall GEI scores, to analyze the three sub-indices, to interpret the fourteen pillars, to interpret the country’s overall entrepreneurial profile, individual and institutional components, in terms of development, and finally, to compare the results with Chile and Costa Rica’s entrepreneurial performance.
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