Our country is rich in raw materials, which can be used to transform the actual business culture, into an entrepreneur culture that maximizes growth and revenue.
The economy in our country is so full of hardship and struggle that business owners fight every day to survive or at least get minimal profit. This economy limits businesses to low profits and difficulty for growth. However, even though the numbers and statistics are against creating businesses, the need for jobs pushes the entrepreneurs to create small businesses that have small to none value added. Due to their structure and creation, these businesses do not add to the gdp. The manner in which they are created limits their capacity to obtain fresh capital to grow, investments, long term bonds or risk capital.
This is very common due to the manner in which business is done in Mexico; it’s in its culture. Moreover, as in every country, the depth of the entrepreneur culture is due to the institutions and infrastructures in which this culture was created. Since this culture is immerse, it has the potential to change the entrepreneur culture of Mexico into a culture of better structure and economic growth.
The eventual transformation of the Mexican entrepreneur culture is probably inevitable. New basic institutions and infrastructures are being slowly created in order to gestate these necessary changes However, if there is not a more active approach the changes will be too slow.
Even more, if these approaches are not done fast enough and adequate the institutions created as well as the infrastructure, will make the transformation the wrong way.
Mexico and other specific emergent economies, could look to the north and copy the institutions and infrastructures that have been successful to achieve these changes in the past. However, it is safe to assume that these institutions where not created or achieved as fast as we would like them to. Moreover, the US had much different circumstances to create these institutions and the changes that derived from them. We would wish to be so lucky.
It would seem here in Mexico that the creation of legitimate entrepreneur activity goes against Public Policy. However, as a temporal technic, it is possible to create false impressions of success in order to stimulate entrepreneurship. This works because it creates new opportunities that attract new people to these “created” opportunities. If this experiment is successful it may create new businesses niches for these new attracted investors, that can have a considerable growth having an influence in the economy.
A rational entrepreneur approach means that the investors decide to approach opportunities without making a predisposition of risk and profit. This means they are not affected by external opinions that can overvalue the opportunity.
The people that decide to pursue this type of projects should be cautious in being too optimistic, because the outcome can be of utter frustration.
Moreover, if these individuals do not have the adequate tools or compromise they can be persuaded to think of high profits; utterly finishing in true failure.
To avoid this mistakes the only way to succeed is to look upon successful businessman for guidance. It is also safe to assume that any “opportunity” presented with high profits has a high risk of failure.
They are not to be discarded; however, they require an elevated need of wit, hard work and luck. The highly experienced providers of risk capital understand and facilitate the optimism in the future projections of the entrepreneur.
Instead of promoting a climate of excessive optimism or irrational profits, we look to make an emphasize in four fundamental principles as tools to have successful politics. These principles promote high value added, helped by an appropriate risk capital.
A legitimate and effective policy must be based upon the creation of infrastructure that reduces the risk and/or that increases the profit of the entrepreneurs’ efforts and the risk investment in fixed assets.
It should also enable the entrepreneurs and investors to identify opportunities that achieve a competitive advantage and afront in a correct manner the risk and profit involved.
It should also help create infrastructure that reduces costs of experimenting. It should find and remove artificial barriers in order to correctly identify legitimate investments and opportunities.
This helps reduce risk and increase the chances of better profits. The majority of projects with great potential have a high risk component.
However, rational investors and entrepreneurs do accept the existence of this risk. For example, if the opportunity to invest in the same type of market with the same type of profit, in two different locations the rational decision is to choose the location with a lower risk.
The market on the higher risk factor will be less pursued due to this risk. Is obvious to assume that at higher risk the profits can easily be lost. Moreover, the Capital available for these investments, tends to lean toward the market location with fewer risk; making it harder, for these locations to flourish. Also, if the idea is to attack the same market, it is logical to assume that the location with less risk can represent a competitive advantage. It is logical to think that this better location can achieve the goal faster and with better profits.
That is why, it is important to design policies that reduce risk and that increase the competitive advantage of a designated region or location.
The same logic should be used when risk and expected profits are not dependent of location or region, but on secure access to raw materials, risk of competitors, security, etc.
Increase the exactitude of the expected profits and the risks: Keeping everything else constant, the entrepreneur hopes that it can be possible to pursue an opportunity which can be planed adequately and with as much exactitude possible.
This will make it easier to attain capital of risk. Rational entrepreneurs know that they competing against other business men that are pursuing the same opportunity.
To keep pursuing this opportunity we must first ask two questions: Why has this opportunity not being pursued?
Am I the right person to pursue this opportunity? These two questions are also very important for the investors who are risking capital. The lack of ability to answers these questions in a concrete and secure manner, makes it even more difficult to access the capital needed to start.
Moreover, a competitive advantage can be acquired also by external policies. The plan to build a certain infrastructure or incentive can provide the investors with a new incentive that will provide them with less risk and better profits.
How to reduce the cost of R & D: A key aspect to increase the rational growth in the entrepreneur culture is to reduce cost in all types of research and experiments. Experimenting can become very costly for the entrepreneur. After failing, it can become very difficult to attain a new investor or even a job. Experimenting is costly when the research and ideas you seek need lots of money and have a high risk of failure. That is why it is imperative to implement policies that seek the cost reduction in experimenting.
Modifying artificial barriers: Often the entrepreneurial opportunities are hampered if the entrepreneurs or possible risk capital providers are limited to invest by artificial means. Even though the opportunities have a high value added, if the entrepreneurs cannot experiment or if the risk capital providers do not have the opportunity to invest, the business will not be carried out. The artificial barriers do not affect those that can inject their own capital. However, the artificial barriers tend to reduce the economic value of the opportunity in any circumstances.
An entrepreneur is a person that can identify an opportunity and organizes the needed resources to implement it."
This term is usually to designate a “person that creates a business”, one who sees an opportunity and implements a business or someone that initiates its own business project.
Perception describes the entrepreneur as innovative, flexible, dynamic, and able to take risks and prone to rational growth. Popular press, describes the entrepreneur as he who is able to create, initiate and run new companies. Anyway, there is no correct definition for the act being an entrepreneur. However, it does describe a person or group that desires to be innovative, flexible and creative.
In the current economic context the need to innovate, create wealth and develop is beginning to be highly associated with SMEs and with associated companies; this in a context of economic independence and human development through a free economy that transcends monopolistic concentration of large state enterprises, private and the administrative centralization which they lack of.
In “The Education of Entrepreneurs” Arie (2003), it mentions that most likely the strong emphasis that receives the broadcast and development of the entrepreneur spirit has its roots in a multiplicity of factors, among which we can mention some:
Recognition of the outstanding role of small businesses in the creation of wealth and jobs.
The remarkable contribution of new technologies to the creation of new products and companies, with the a logical impact on the economic activity. A workers life characterized by cycles of salaried jobs, self-employment and unemployment.
The orientation of economic theories in human factors (Human Capital) that affect growth and economic development; for example the learning process.
An evident necessity to cultivate entrepreneurial spirits is to deeply modify the teaching patterns and the organizational patterns; as well as learning to manage the initial uncertainty. One of the key questions to develop a way of thinking and acting of responsibly and as entrepreneur is: How can I make flexibility and creativity operational?
In order to understand people or groups with entrepreneurs features you have to find some answers. First you have to analyze the behavior arising from entrepreneurship.
First, we should discard the notion that “entrepreneurship” is a trait that only certain people or organizations possess in a complete manner and other don’t. It is more realistic to consider that the entrepreneurial spirit is in the context of a range of behavior.