Entrepreneurship and Inclusive Economic Growth

Around the world, increased attention is being paid to inclusive economic growth, which, according to the World Bank, suggests that for growth to be sustainable in the long run it should be broad-based across sectors and inclusive of the large part of the country’s labor force, regardless of demographics. Encouraging this type of growth oftentimes requires political, social, and systematic change, though action is already being taken in both the United States and abroad. The United States ranks as a leader among advanced economies in inclusive asset building and entrepreneurship, although it lags in employment and labor compensation, according to a recent report on inclusive growth and development by the World Economic Forum.

At August’s first-ever White House Demo Day, the Obama administration announced several endeavors happening nationwide to support inclusive entrepreneurship. These range from venture capital firms committing to actions that advance opportunities for women and underrepresented minorities, engineering deans committing to building a diverse talent pipeline, and technology companies committing to diverse recruitment and hiring strategies. Launched by the United States in September 2012 to help galvanize global efforts to address barriers to women’s economic participation, the Equal Futures Partnership recently committed to taking a number of additional steps to institutionalize collaboration and the exchange of best practices, according to a recent fact sheet released by the White House. 

Writing in TechCrunch, Village Capital founder and executive director Ross Baird comments on how new investment approaches are emphasizing real-world impact, geographic diversity, and inclusive entrepreneurship. Baird suggests that different approaches to investment are critical to overcoming unintentional biases against industries, geographies, and backgrounds, citing examples such as Freada Kapor Klein’s and Mitch Kapor’s announcement of $40 million in intentional investments to make the tech industry more diverse. 

Reports international in scope have also expressed the need for inclusive economic growth. The agenda outlined in the United Nations secretary-general’s synthesis report, The Road to Dignity by 2030: Ending Poverty, Transforming All Lives and Protecting the Planet, calls for transforming economies through inclusive growth, including policies that stimulate and support entrepreneurship and increase access to finance for small and medium-sized enterprises.

Likewise, the World Economic Forum’s Inclusive Growth and Development Report details how 112 countries across the world are using policy incentives and institutional mechanisms to drive inclusive economic growth. Using a seven-pillar framework to provide a snapshot of country-level performance, each pillar describes an enabling condition for inclusive growth and development. Pillars included in the framework are: education and skills development; employment and labor compensation; asset building and entrepreneurship; financial intermediation of real economy investment; corruption and rents; basic services and infrastructure; and, fiscal transfers.

The report finds that policies and institutions supporting social inclusion are apparent in countries of all income levels, and that there is no inherent trade-off in economic policymaking between promoting social inclusion and promoting economic growth. The report concludes by noting that while technological modernization will continue to create employment challenges in many countries and industries, it also has the potential to create new opportunities for entrepreneurs and small businesses by reducing costs and barriers to entry. This, coupled with an expected growth in service industries, can create additional opportunities for small-business ownership.

Among advanced economies, the United States ranks highest in the asset building and entrepreneurship pillar, where it is second only to Finland. In the small business ownership subpillar and home and financial asset ownership subpillar, the U.S. is first and fourth, respectively, among advanced economies. The United States ranks 28 among 30 advanced economies in employment and labor compensation pillar, including a last-place ranking in wage and non-wage compensation subpillar.

Policy recommendations for the United States that appear in the 2014 Global Entrepreneurship Monitor include promoting more diversity in industry participation among women, who exhibit greater impetus for starting businesses, and older entrepreneurs (ages 55 to 64 years), whose entrepreneurial activity is lower than younger ages, despite their high levels of opportunity and capability perceptions and low fear of failure.

Although the U.S. may fair better than other parts of the world in inclusive entrepreneurship and economic growth, there is still a lot of work to be done in this area – both domestically and abroad. Ultimately, in order for economic growth to be sustainable, new models must emphasize inclusion across industries, geographies, and populations.