As the world stands on a knife edge, looking toward a second major wave of COVID-19, one imperative is keeping entrepreneurs in business, and helping new ones start.
Our recent report, Diagnosing COVID-19 Impact on Entrepreneurship, offers three broad lessons and nine pillars for how governments can sustain entrepreneurs — and therefore, economies — in the 54 countries we surveyed around the world. So, broad lessons first:
- Aim for adequacy in financial support mechanisms
- Communicate, communicate, communicate – and innovate
- Include entrepreneurs in informal sectors to help them avoid falling into poverty that might well be permanent
We do not yet have enough data to know which responses to COVID-19 work best. GEM researchers from 54 economies around the world shared details of how their government’s response to COVID-19 compared to previous crises, such as national catastrophes, the 2008 Global Financial Crisis and other world-changing events. In addition, they provide perspectives on how COVID-19 has impacted entrepreneurs, the results of immediate policy interventions and entrepreneurship policy outlook moving forward.
The analysis provided by the 54 GEM National Teams underscores the importance of policymakers taking action based on nine pillars that can stimulate economic activity or constrain it. Below, we summarize these nine conditions and share examples to illustrate how policy action can impact the ways entrepreneurs can start, grow, market and manage their business.
1. There needs to be access to entrepreneurial finance so that funds are available to new companies (informal investment, bank loans, government grants and venture capital). For example, in Chile financial organizations (national and international banks) have offered lines of credit and have delayed the payment of loans for three months.
2. Government policy needs to implement tax regimes that are both affordable for the new enterprise and easy to manage (minimum bureaucracy). Our report demonstrates the sheer extent to which countries have delayed tax payments for several months and offered different types of payment options. Particularly noteworthy is Slovakia’s government approved package of 114 measures called “Lex corona.” It is the largest package in Slovakia’s modern history aimed at improving the business environment and reducing administrative burdens. In Qatar, in an approach similar to many other countries, the General Tax Authority announced a two-month extension for the filing of tax returns for the 2019 tax year.
3. New entrepreneurs at the local, regional and national levels should have access to quality support programs. Case in point is Ecuador’s “Re-Emprende” program, a public-private academic initiative led by the Alliance for Entrepreneurship and Innovation (AEI) that seeks to help affected businesses through the financing, technical assistance and modernization of business models. ShopHERE, a program funded in part by the Canadian government, provides independent small businesses and artists with a quick, easy and no-cost way to get selling online right away.
4. Entrepreneurship education should instill values such as enquiry, opportunity recognition and creativity at the primary and secondary school levels, as well as post graduation. An example provided in our report is The JobTrainer, a program in Australia that provides access to free or low-cost training to help graduates and job seekers gain the skills they need to get a job.
5. Research and development from universities and research centers must be accessible to entrepreneurs, to maximize the possibility of research findings converting to viable commercial ventures. Poland’s “Innovation Voucher” program is a good example of promoting such synergies. When entrepreneurs have an innovative business idea, they are paired with a research institute with the requisite knowledge and technical resources to contribute to a solution.
6. Commercial and professional infrastructure needs to be in place so that entrepreneurs may access affordable professional services, such as legal experts and accountants to support the new venture. Since the COVID-19 breakout, experts and employees in Chile working in professional services have provided mentoring in digital transformation, with a particular focus on helping more vulnerable populations, such as women and migrants.
7. Ease of entry to free, open and growing markets where no large or established businesses control entry or prices is a prerequisite to a healthy economy. For this to happen, regulations should facilitate, rather than restrict, entry. A practical application of this condition can be found in Brazil. The country’s National Program to Support Micro and Small Enterprises (PRONAMPE) provides credit and productive microcredit and payroll tax exemption measures.
8. Entrepreneurs need accessible and adequate physical infrastructures such as roads, internet access, and speed and availability of physical spaces. Australia’s “JobMaker” program also aims to fast-track investment into major infrastructure projects, while providing access to a range of new grant and loan programs for certain sectors.
9. Finally, entrepreneurship thrives when it is encouraged and celebrated through social and cultural norms. There are many aspects to this but a conducive sociocultural context can include the provision of role models and mentors, as well as social support for risk-taking.
A point underscored in our report is that entrepreneurship will likely be a key component in economic recovery in the post-pandemic period. The good news for entrepreneurs is that the COVID-19 pandemic has drawn even more attention towards entrepreneurship.
The scale of governmental intervention in the first six months of 2020 has been far greater than any crisis in recent memory. The majority of the 54 GEM National Teams contributing to our report noted that government inventions have initially focused on securing workplaces, assuring financial liquidity and incentivising business model modifications. However, while continuing this focus in the immediate future is necessary, policymakers must also be forward-thinking. How can they hardwire the above entrepreneurship conditions so that they are more generally conducive to entrepreneurs?
Stanford economist Paul Romer once said: “A crisis is a terrible thing to waste”. We must use the best of our experience and knowledge to ensure that we protect everyone against the continued invasion of this virus on our livelihoods and lifestyles. At the same time, by thinking more long-term, we can also make society more resilient to an uncertain future where other pandemics may be forthcoming, where climate change increasingly becomes a harsher reality and where resources will become scarcer. All of these scenarios will bring both risk and opportunity to entrepreneurs.
By: Aileen Ionescu-Somers, Anna Tarnawa and Clark Rabbior
Dr. Aileen Ionescu-Somers is Executive Director of GEM, Anna Tarnawa is Head of the GEM Poland Team and Clark Rabbior is Head of Government Relations at Shopify. Access the report Diagnosing COVID-19 Impact on Entrepreneurship – Exploring Policy Remedies for Recovery, edited by Ionescu-Somers and Tarnawa, and sponsored by Shopify.
This story and others on Times of E are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit www.kauffman.org and connect with www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.