FT.com / Columnists / Luke Johnson - All of the effort with none of the impact

FT.com / Columnists / Luke Johnson - All of the effort with none of the impact

This was an interesting article that may have serious implications for public policy. Particularly for the entrepreneurial politics as I described in a previous post. The central thesis of the book described here (The Illusions of Entrepreneurship) is that "the entrepreneurs who matter economically are the select few who start innovative, super-successful firms. These tend to be the larger, well-capitalised projects planned by professional teams, not sole operators. All the other small new businesses created every year are pretty irrelevant in terms of job creation and value added."

If this is truth, government agencies trying to improve entrepeneurial spirit to accelerate the economic development of the country, should avoid encouraging people to start their own firms. Instead they should focus on backing the reduced number of firms that have the potential of becoming the next Google. All the other small firms contribution to growth and economic value is negligible.

What does it mean to the entrepreneur? It also appears that the standard of living and wealth created by the micro enterprises provides a standard of living that is worse than the entrepreneur had before. The message is that you better think twice if you're starting another me too enterprise. Rather, try to think big and focus on creating immense value. Yes, easier said than done.

That's why, I wonder if it is not true that you actually need an environment of entrepreneurial spirit, both small and big, success and failure, if you expect the new Google to emerge. Besides, there's always the argument of personal fulfilment, following ones' dreams,..., that impulses many entrepreneurs to be in the direction of creating their own firm.

Good thinking for policy makers and investors alike when deciding how to invest their funds.