Results and analysis
The next chart is based on the results of the GEDI 2017 tool 2011_2015.
Source: GEDI 2017 tool 2011_2015
According to GEI, Colombia is ranked in the position 39 with an overall GEI score of 38,7 which gives it a strong 3rd position in the region of South and Central American and Caribbean countries, just after Chile which is highly ranked 17 with a overall GEI score of 59,1, and, surprisingly, Bolivia, which with lower overall GEI score of 21,6 is ranked 34 though. The results are very satisfying if is noticed that Colombia has a high influence of paramilitary and guerrilla groups affecting the confidence of new investors.
When analyzing sub-indices is observed that Entrepreneurial Attitudes is scored 36,5, Entrepreneurial Abilities 36,5, and Entrepreneurial Aspirations 46,1. What is unusual in these results is finding that ASP gets a higher score than ATT and ABT, what means that aspirations to create companies are higher than expected in ATT and ABT.
When observing weaknesses, Entrepreneurial attitudes showed two pillars at a weak level; one is Risk acceptance, which is highly worrying since it is an important indicator of confidence by new entrepreneurs, who, just 0,24 out of 1, think this fear of failure would not be an obstacle for them to start a business. This low figure may result from the lack of reliable corporate financial information, legal protections for creditors, and institutional support of intercompany transactions what is reflected in the low score of 0,30 of the business risk variable. The other pillar at a low level is Networking, which demonstrates that just 0,24 out of 1 entrepreneurs have the knowledge and the ability to successfully connect to internet and integrate their businesses with the world, which, if done, may represent better opportunities to success.
In the same way, the Entrepreneurial Abilities sub-index shows that the Opportunity Startup pillar reaches a weak level of 0,25, which reflects the number of entrepreneurs who are willing to start a business for motivation rather than necessity. This pillar is also a reference to understand how low the quality of businesses is in Colombia.
Finally, the third sub-index, Entrepreneurial Aspirations, displayed the Process Innovation pillar at a critical weak level of 0,20. The measure shows how low the creation and application of new technology is implemented. This indicator is relevant to understand that most of technology used is more than 5 years old, what may retard the business growing in the country.
For the Entrepreneurial Attitudes, Opportunity Perception shows a high level of 0,74, followed by Start-up skills with 0,46, what reinforces the high ranking of the country in the region. These two strong pillars can be interpreted as how the size of the home market becomes an opportunity by skilled entrepreneurs who own formal education and training.
Similarly, the Entrepreneurial Abilities sub-index shows human capital as the strongest pillar with 0,46. This pillar is very relevant for the business since well qualified and available labor is a need to support innovative ideas and to enhance the organization’s performance to compete not only nationally, but also internationally.
Finally, Entrepreneurial Aspirations sub-index presents product innovation (0,71) and high growth (0,84) as the strongest pillars. The creation or imitation of new products allows the local companies to compete with developed countries companies. When observing the behavior of the other pillar’s results, it is not a surprise to see how strong is the High Grow pillar. It indicates the positive perceptions entrepreneurs have to start a business, and how optimistic they are to consider the creation of growing and solid businesses by 50% in less than 5 years, by adopting reliable and innovative business strategies.
Taking a glance at the country overall entrepreneurial profile, it can be seen that the institutional variables have got a score of 0,46, which is highly influence by a low performance of tax and government, Tech absorption, and Science variables. Tax and government intervene in the performance of the entrepreneurial activities in the country, since the high taxation, and governmental size and policies negatively affect the creation and growth of businesses. In the same way, the presence of a low score of the tech absorption variable is a worrying sign of the lack of competitive results in the country. This item does not support the achievement of a better institutional level. Together with the previous two variables, it can be seen the low performance in Science, what may retard innovation to face competitive markets and struggle challenging times.
On the other hand, the individual variables showed a high score of 0,78, being opportunity recognition, career status, competitors, gazelle and export the strongest. From this result, it can be implied that strength of this individual item lies in the amount of skillful and optimistic people who think entrepreneurship is as reliable way to make a successful living and identify great opportunities, (as the number of competitors and product and service export chances among others), to start a business that guarantees a fast and solid growth.
Colombia, Chile, and Costa Rica panorama
Source: GEDI 2017 tool 2011_2015
Chile is ranked 17 with a score of 59,1 among 93 countries and takes the first position in the region. As it can be seen in the chart, Chile shows a great advantage in almost all pillars what positions it as the best economy of the three. Product innovation, start-up skills, opportunity perception, networking, cultural support, and opportunity support are considerably strong. Nevertheless, the entrepreneurial activity shows a slow growth as displayed in the high grow pillar score. Weakness is observed in the process innovation and competition.
Costa Rica is ranked 50 with 31,1, which looks very weak when it is compared to Chile, nevertheless, it shows great strengths in cultural support and start-up skills in part due to the positive perception inhabitants have about low level of corruption in the country and the high level of education.
Colombia is ranked 39, one of the strongest economies in the region. Contrary to Chile and Costa Rica, it shows a weak cultural support due to high country corruption. In the same way, risk capital, risk acceptance and technology absorption happen to be extremely weak. Colombia shows relevant strengths in high grow, opportunity perception and internationalization, which has hindered the entrepreneurial activity. It is important to highlight that Colombia is a stable democratic government that has made significant efforts to motivate the creation and consolidation of entrepreneurship, what has helped the country reach important entrepreneurial achievements that serve as an example for the other economies, in spite of the social conflict caused by guerrilla and paramilitary groups.
Policy intervention suggestions
Results of this study have shown some specific bottlenecks which required a special intervention by the Colombian government to permit the entrepreneurial activity to get a better performance in order to compete in the home and export market. To have a target GEI change of 0,05, the government should make some new efforts that lead them to overcome the existing bottlenecks. Then, according to the measures resulted of the exercise, a 100% of resources should be distributed as follows:
Subsequently, for a Risk Acceptance improvement, a 20% effort should be made by the government, what means that the government needs to improve or create policies to assure that nascent entrepreneurs adopt a confident perception that encourages them to start a business. For Networking, it is suggested to make a 20% effort in order to accompany entrepreneurs in the acquisition of knowledge related to Internet use and the possibility of combining it with the business. A 7% effort is advised for Cultural Support, by creating policies that motivate potential entrepreneurs to start a business once an improvement of the corruption perception reflected in the country is achieved. Another 20% should be intended to enhance Opportunity Startup. The effort should be focused on creating or rewriting policies against excessive regulatory constraints so as to motivate entrepreneurs to start a quality business based on opportunities rather than financial necessities. For Process Innovation, it is recommended to make the highest effort by budgeting 31% of efforts through policies that ease the entrepreneurs the application or creation of new technology. Finally, 2% effort should be made in Risk Capital to motivate investors to take major financial risks.
Conclusions
The identified bottlenecks should be seriously intervened by the government through new and better policies that help adjust the measures for better results and bring the country closer the leader of the region, Chile. It is to say that the government should make bigger efforts to consolidate the current entrepreneurial activity and encourage new investor to take part in the exercise.
Colombian Government must face important challenges with the adoption of policies to correct the bottlenecks and increase the GEI to 0,05. Risk Acceptance, Networking, Opportunity Startup, and Process Innovation need critical interventions since they are the weakest pillars that act as obstacles in the entrepreneurial activity.
Finally, it is fair to say that the current and previous Colombian administrations have made great efforts to improve the creation and consolidation of the entrepreneurial activity through several governmental policies. Those efforts become extremely valuable once it can be seen that Colombia is ranked 39 in the entrepreneurial activity among 93 countries, with a prestigious 3rd position in the region. It is considered an extremely valuable effort to imitate by others, particularly, if it is observed the sui generis situation that Colombia has been going through for more than 50 years, first with the guerrilla groups, and then, with the emergence of paramilitary groups as a result of the cultivation and commercialization of illicit products such as marijuana and cocaine. The current peace negotiations with the last existing guerilla groups may improve the Colombian entrepreneurial raking, since resources intended to fight the war would be focused on finding better social conditions, and more solid economic sectors.
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