Agriculture,

Small Business
and Entrepreneurship

In a Nutshell

April 2008
utshell In a Nutshell This series seeks to stimulate interest, inform and
educate on issues and topics of importance to
sustainable agricultural development in the
Caribbean.

A common thread in almost all strategies for improving the

situation in agriculture and rural areas is that of developing an
entrepreneurial and small business culture. This issue focuses on
'entrepreneurship' and its role in growth and development of
agriculture, rural communities and national economies. Therefore
an understanding of the concept, its relationship to national
growth and the role of public policy is essential.

The internet holds substantial literature on the topic. The main

references for this issue are:
1. http://www.be.wvu.edu/divecon/econ/sobel/Entr/Papers/Hall&S
obel.pdf "Public Policy and Entrepreneurship" Joshua Hall &
Russell Sobel. 2006
2. http://citeseer.ist.psu.edu/virtanen97role.html "The role of
different theories in explaining entrepreneurship", Markku
Virtanen;
3. http://www3.babson.edu/ESHIP/research-publications/gem.cfm;
Babson College, "Global Entrepreneurship Monitor (GEM)";
4. http://www.cambridge.org/uk/catalogue/catalogue.asp?isbn=05
21828139 "The Economics of Self-Employment and
Entrepreneurship" Simon C. Parker;
5. http://www.sbaer.uca.edu/research/icsb/1999/47.pdf; " Secular
trends in self-employment" Sander Wennekers, Niels Bosma
and André van Stel;
6. http://www.dartmouth.edu/~blnchflr/papers/Comment%20on%
20Blanchflower%20SEPR%20Final%20Aug%202004.pdf; "Is
Self-employment Good or Bad? Comment on David
Blanchflower" Magnus Henrekson, 2004;
7. How Small Businesses Contribute to US Economic Expansion,
Derek Leebaert
http://usinfo.state.gov/journals/ites/0106/ijee/leebaert.htm
8. http://www.ilocarib.org.tt/oldwww/infsources/small_enterprise/s
me_caribbean/index.html "Small enterprise development in the
Caribbean"
9. http://www.youthbusiness.bb/cms/files/stories/articles/.
10. http://www.entre-ed.org/_entre/index.htm "Entrepreneurship
Education Concepts" Consortium for Entrepreneurship
Education.

We hope that this information will contribute to the enabling and

empowering process that drives individuals and institutions into action.
In a Nutshell 1

Small
Enterprises

often the beginnings

of large business
business

The International Labour Organisation (ILO) noted that there is

no universal definition of "micro", "small" or "medium" sized
businesses. But micro and small enterprise (MSEs) are a
distinctly vibrant sector in the Caribbean. Between 70% and
85% of enterprises in the Caribbean are MSEs, employing less
than twenty-five persons. Women comprise between 35% and
50% of these. Most MSEs are in the food and agro-processing,
marine and fishing, wood work and furniture, light engineering
and electronics, garments and handicrafts, tourism and service
related activities and the emerging technologies sectors. MSEs
create and expand employment opportunities, develop
entrepreneurial skills, utilize local raw materials and enhance
market opportunities. They represent the most realistic vehicle
for meeting the employment and poverty challenge in many
Caribbean countries.

Worldwide, self-employment through MSEs is on the rise, due

partly to the increasing variety of demand for specialised goods
and services and a growing appreciation of self-employment as
a career option. Leebaert (7) concluded that small businesses
act as a shock absorber for fluctuations in employment. They
also are more receptive to creating opportunities for women and
minorities, and activities in distressed areas. They tend to be
more economically innovative than larger companies and
responsive to changing consumer demand. Building, running,
and growing a small business is part of a virtuous cycle of
creativity and increasing prosperity that can be applied by
dedicated and thoughtful people anywhere. There are no
secrets and frequently money is less important than a
combination of imagination and effort.
In a Nutshell 2

1 the Entrepreneur - - -
- - - one of the most intriguing and most elusive characters

‘Economic growth is bound to slow unless there

is an adequate supply of entrepreneurs looking
out for new ideas, and willing to take the risk of
introducing them.’ Sir William Arthur Lewis, The
Theory of Economic Growth 1955, p. 182

All entrepreneurs have the desire to discover and exploit

profit opportunities. They have a certain responsibility to
themselves. But they also have a responsibility to their
customers, suppliers and associates. The character of
individual determines the entrepreneurial attitude (behaviour)
of the firm or business regardless of size.

Individuals start business

business!
siness!

Typically, they are either:

pulled into entrepreneurial activity -improvement-
opportunity, driven by the desire for independence and to
increase incomes, instead of simply just being an
employee;
or

pushed into entrepreneurship -necessity-motivated,
because they have no other means of making a living and
maintaining their current income.

Entrepreneurs are either:

early stage, i.e., those involved in owning and managing,
alone or with others, a budding business (less than 42
months in operation);
or

established, i.e., those involved in owning and managing,
alone or with others, a business that has successfully
survived in the market for more than 42 months, the
critical period within which a business is more likely to fail.
In a Nutshell 3

The word entrepreneur originates from

the French: "entre" - to enter and
"prende" - to take. There is no
universally accepted definition and
'Entrepreneur' is subject to a wide range of
interpretations, from individuals of very high
aptitude who pioneer change, to anyone wanting to work
for him/her-self.

Richard Cantillon (1730), the first to use the word

academically, described an entrepreneur as having a
willingness to bear the personal financial risk of a business
venture. Joseph Schumpeter (1950), described an
entrepreneur as a person who is willing and able to convert a
new idea or invention into a successful innovation,
sometimes using new technologies to introduce new product
market combinations or innovations.

Entrepreneurship theories range from economic,

psychological, sociological, anthropological, managerial or
ecological perspectives. The concepts also differ based on


entrepreneur - individual actor in the market,


entrepreneurial - behaviour in the market,


entrepreneurship - combines the actor (entrepreneur) and
the behaviour (entrepreneurial),


entrepreneurial process - combines the times dimension
and behaviour in the market.

Global Entrepreneurship Monitor (GEM - 3) sees

entrepreneurship as a process and considers people in
entrepreneurial activity from the very early 'gestation' phase,
to the established phase and possibly discontinuation of the
business. Despite the lack of consensus in theory and
definition, there is clear evidence that entrepreneurship is an
ever-present feature of human nature.
In a Nutshell 4

2 Entrepreneurial Activity - - -
- - - entries and exits of business are part of the process
"The traditional admonition of one generation to the next
'Get a Job' has been replaced with the more complex and
bewildering mandate, 'Go out and create a job for yourself.'
"A review of 'Job Shift', by William Bridges by Cathy Ashmore,
The Consortium for Entrepreneurship Education, Columbus, OH"

Entrepreneurs, the self-employed and ordinary business people

are similar, but not identical.

Ordinary business people mainly perform traditional
management functions, such as, planning, organization and
coordination.

Being self-employed may or may not be entrepreneurial as
explained by Henrekson (2004) below. At an earlier time, self-
employment was the primary way by which individuals
offered/sold their labour in a market economy. Today, it is of
growing economic importance.

Entrepreneurs are a subset of 'the self-employed'.

Motives: Entrepreneurial Non-

Non- Entrepreneurial
First Pursue a business 1. Seeking independence, a
Best opportunity most certain lifestyle etc.
suitable pursued in a 2. Local service production;
new firm working in networks in
temporary projects.
Second 1. Necessity 1. Safety valve to circumvent
Best entrepreneurship. excessive labour market
2. Inferior management regulations.
by current employers 2. Means to achieve flexibility
bars efficient hindered by other regulations
intrapreneurship;
3. Mechanism to escape effect of discrimination or lack
of social capital for marginal groups;
Rent Set up a business to 1. Transform consumption
Seeking exploit subsidies and tax expenditure into deductible
breaks rather than business costs.
create value for 2. Fraud, where revenue is
customers partly unreported etc.
In a Nutshell 5

What is intrapreneurship? It occurs where
entrepreneurship is pursued efficiently
within an existing institution, firm,
organisation. (see Henrekson, #6)

What is Rent seeking? It occurs when an

individual, organization or firm seeks to
make money by manipulating the
economic and/or legal environment rather than by trade and
production of wealth. (http://en.wikipedia.org/wiki/Rent-seeking)

GEM suggests that entrepreneurial activity is significantly higher in

low- to middle-income countries than in the high-income countries.
In richer, high-income countries, larger companies and public
employment may be more likely to offer health care and support
for working mothers, thereby tilting women’s incentives away from
start-ups and self-employment. Cities, especially, tend to generate
more improvement-driven, opportunity entrepreneurs because
opportunities are expected to be more abundant. Also, individuals
may have more alternatives to make a living due to the social and
economic benefits of close proximity to many customers, suppliers
and competitors.

GEM also observed the natural tendency to focus on the process

of starting a business rather than what happens when
entrepreneurs discontinue, sell, or quit their business. Non-
profitability and the inability to raise further financing, are major
factors in business discontinuation. It concluded that business
discontinuation or rapid turnover of business experiments', often
called 'failures' is an important part of the entrepreneurial process
of opportunity recognition and pursuit. It is also a natural and
normal feature of dynamic economies where entries and exits of
businesses are closely correlated.

A thriving economy depends on the ability of individual

entrepreneurs to try their own ideas, without approval from
anyone else, and then let the profit and loss mechanisms of the
marketplace answer this question once the product is developed.
Smart professors, business leaders and government officials
cannot possibly pre-evaluate business ideas and pick those that
will be most successful from those that will fail.
In a Nutshell 6

3 Being Enterprising - - -
- - - from idea to business
"Creativity is thinking new things and
innovation is doing new things. While thinking
is good, transforming this idea into something
real (product or service) is important."
[Theodore Levitt professor at Harvard Business School]

In the beginning there was an idea!

Entrepreneurs need an idea to start a business. They also
need 'entrepreneurial insight', i.e., seeing something about
an industry or a market that others miss or fail to
understand. Ideas and insight come from creative minds, a
stepping stone to innovation.

How to generate an idea?

idea?
Sajjad Hamid, Small Business Consultant in Trinidad,
suggests the following:
▪ Attitude - a positive attitude frees the mind to think. If you
think you are not, you will not be creative;
▪ Adapt It - sometimes a product born in one culture can be
adapted to another, such as the 'caribbeanising' of the
US hamburger to Trinidadian culture;
▪ MiM: Missing in Market - a product or service that you and
others would like is not present. This 'latent demand'
provides an untapped opportunity for the entrepreneur;
▪ From Trash to Cash - If something is discarded, it does not
mean it is no good. Bad can mean good. Discarded oil
drums meant the only musical instrument (steel pan)
invented in the 20th century!
▪ Take and Run- taking someone’s idea might not be the
honourable thing to do. But if they are sitting on it and
bringing no value to society why let it go to waste? Take
it before someone does.
Entrepreneurship Means Change!
In a Nutshell 7

"Business ... has just two functions and only two:

marketing and innovation...that make money.
Everything else is a cost. ...... Innovation is the
specific tool of entrepreneurs... by which they exploit
change as an opportunity for a different business or
... service..." [Innovation and Entrepreneurship, Peter F. Drucker]

And the idea turned

turned into a business!
New ideas and insights are essential, but are not enough to
start business. Entrepreneurship is about finding and
capitalising on opportunities to start business, driven by
marketing and innovation. Running your own business is a
tremendous responsibility. Nothing is sure in the business
world.

How to get started?

Critical steps are:
1. Identify an opportunity: Keep your ears and eyes open;
ask lots of questions and look for unmet needs that
can be met through a new product/service.
2. Market Research: Determine if the opportunity is real by
reading all you can in this area and talk to potential
customers and others in the same field.
3. Develop a business plan: Write things down to help refine
your thinking and focus efforts on critical elements,
especially, market research, business operations and
financial planning.
4. Secure Financing: Some possible sources include
savings, family, friends, lending institutions and
venture capitalists. Remember all come with a cost!
5. Establish legal status and obtain licenses: options
include - sole proprietorship, partnership, limited
partnership and corporation.

Entrepreneurs make things happen!

happen!
In a Nutshell 8

4 Stimulating Entrepreneurship - - -
- - - - building national entrepreneurial capacity
capacity
"The issue is not therefore diversification….it is the
breeding for the first time inshore of entrepreneurs,
meaning autonomous producers and managers"
Lloyd Best (2001)

The number and rate of 'early stage entrepreneurs' is a good

measure of a country's entrepreneurial landscape. It shows
the percentage of the population who are willing and able to
undertake an entrepreneurial venture. Cultural, institutional,
economic and demographic aspects play a major role in the
willingness and ability of individuals to become entrepreneurs.
An individual's perception of entrepreneurship is also an
important driver of national entrepreneurial capacity. It affects
both the supply of and demand for entrepreneurs.

The supply or “pool” of potential entrepreneurs is affected by

both willingness and perceived ability to become an
entrepreneur. Education levels, availability and quality of
entrepreneurship training programs can determine how
individuals perceive their ability or skill levels. The demand, or
the “space for” entrepreneurship, is affected both by the
existence of opportunities and by how entrepreneurs perceive
such opportunities to start a business. The quantity and
quality of perceived opportunities may be enhanced by
national conditions - economic growth, culture and
entrepreneurship policy, etc.

Government entrepreneurship policies can have a huge

impact on individuals' perceptions of ability and opportunities
for business. Some government actions that can have positive
effects include improving access to capital, facilitating
business education, promoting entrepreneurship, reducing
regulatory burdens and protecting intellectual property. These
are critical components of a framework for entrepreneurship.
In a Nutshell 9

Public Policy and Entrepreneurship

The rise in state venture capital

programs, targeted small business
subsidies and other forms of aid to those
interested in starting new businesses is
evidence that policy-makers understand the importance of
entrepreneurship. An increasing amount of economic evidence,
however, indicates that an ad hoc programmatic approach to
promoting entrepreneurship is not effective.

"The efforts of Caribbean Governments to stem the

unemployment problem ..... are ever increasing. However
there is still a considerable gap to be closed, because at the
root, it is more than simply stemming the issue of un-
employment. Rather it is about the nurturing of a spirit of
innovation, of developing and implementing the
infrastructure and framework to do so and believing in the
genuine work ethic and enterprise."
Michelle Daniel, Head of Small Business,
Caribbean Development Bank

Great opportunities also exist for governments at all levels to

tap into the under-utilized potential of women and youth.

Entrepreneurship has been gaining respect as a viable

career choice for youth and women. The policies towards
creating an enabling environment are also becoming more
viable in many countries. The aim is not to create
subsistence businesses, but to nurture and socialize a new
breed of entrepreneurs who can create competitiveness,
wealth and jobs, to grow and sustain regional economies.”
Marcia Brandon, Executive Director,
Barbados Youth Business Trust (BYBT)
In a Nutshell 10

5 Women and Youth Entrepreneurs

- - - when women and youth do well, everybody does well!
"When women and youth are empowered,
decently employed and encouraged to take full
economic participation and their abilities to
start and grow businesses are strengthened, all
stakeholders will see the tremendous benefits.
Marcia Brandon, Executive Director, BYBT

Women’s entrepreneurship matters!

Women are an important component of the world economy, its
productivity growth and its struggle against poverty. According
to GEM, women are creating and running businesses across a
wide range of countries, under varying circumstances.
Increasingly, they are essential to economic activity in many
countries and are key contributors to economic growth. This is
especially so for low and middle-income countries in Latin
America and the Caribbean (LAC). Women entrepreneurs are
motivated by both opportunity and necessity. Their need to
balance family obligations and have a career is an important
driver in necessity entrepreneurship.

Kr edifanm
Haitian women make up over 52% of the total population
and 60% of the rural population. They are generally fully
involved in production and marketing of agricultural produce
and commercial activities. In 1994 the Inter-American
Institute for Cooperation on Agriculture (IICA), with financial
support of the Funds of the United Nations for Population
(FNUAP) initiated the Kredifanm project to improve the lives
of Haiti’s poor through credit for women. But Kredifanm is
more than credit. It empowers rural women through an
integrated package of training in group dynamics, simple
accounting tools, credit and savings management, group
organization, marketing, family planning, female health
issues and human rights. Kredifanm has evolved from a
mere project into a movement driven by the women
themselves. It is, in effect, the bank for poor women in Haiti.
(http://www.iica.int)
In a Nutshell 11

Youth
entrepreneurship matters!
In some Caribbean islands, youth make up 40-60% of the
unemployed. This is a real waste and presents the business
world with a real challenge and opportunity to help reduce
youth unemployment. Youth entrepreneurship development
is focused on building a culture of entrepreneurship among
a nation’s youth by encouraging, nurturing and socializing
young men and women into recognizing entrepreneurship
as a viable career choice and assisting them with the
necessary tools to start and grow sustainable business
ventures. Today the focus on youth entrepreneurship
development in the Caribbean is the strongest it has been.

BYBT
In 1994 the alarming increase in youth unemployment led the
Government of Barbados and the OAS to sponsor a youth
symposium to gather information on the needs of the youth. In
October 1996 a group of Barbadian social entrepreneurs
addressed the youth unemployment challenge by launching the
Barbados Youth Business Trust (BYBT), focused on helping
young unemployed and underemployed persons 18-35 years,
with good business ideas to start their own businesses. It also
aims to sensitise young people into viewing entrepreneurship
as an alternate career choice. BYBT’s niche is on developing
the entire human being and linking business, Government and
academia in support of youth entrepreneurship.
(http://www.youthbusiness.bb)
In a Nutshell 12

6 Entrepreneurship Education
- - - tomorrow's entrepreneurs are in schools today!

The Consortium for Entrepreneurship Education state that

entrepreneurs are not “born”, rather they “become” through
the experiences of their lives. (Albert Shapiro, The Ohio State
University). Through effective entrepreneurship education,
people can access the skills and knowledge needed to start
and grow a new business. Vocational programs provide
millions of young people with access to the skills and
knowledge they need for all types of work, including
agriculture. But in the world of work, nothing stays the same.
Entrepreneurship education as a part of the vocational
curriculum is an excellent vehicle for teaching students about
change...change that occurs naturally or change that is
caused by invention.

Entrepreneurship education is not textbook education.

Entrepreneurship education:

prepares people, especially youth, to be responsible,
enterprising individuals who become entrepreneurs or
entrepreneurial thinkers and who contribute to
economic development and sustainable communities.

immerses students in real life learning experiences where
they have an opportunity to take risks, manage the
results and learn from the outcomes.

encourages creative thinking and promoting a strong
sense of self-worth and accountability. Not just about
teaching someone to run a business.

Entrepreneurship education contributes to new business

start-ups. Communities who embrace entrepreneurship
education also find that students perform better in school,
resulting in an improved overall school performance. A wise
vocational teacher knows that students need to be taught
how to understand their options, to analyse opportunities
available to them and to be encouraged to look for
entrepreneurial opportunities for themselves.
In a Nutshell 13

in
. . . a Nutshell
Entrepreneurship is central to growth,
growth, poverty reduction and
development.
GEM notes that entrepreneurial activity occurs in an economic
system that must provide the 'oxygen' of resources, incentives,
markets and supporting institutions to the growth of new firms.
They offer ten key Entrepreneurial Framework Conditions as
follows:

1. Financial Support: including grants, subsidies, loans and equity

for new and growing firms;
2. Government Policies: the extent to which new and growing firms
are prioritised in policy and regulation for new and growing
firms.
3. Government Programmes: existence of direct programmes to
assist new and growing firms at all levels of government.
4. Education and Training: extent to which training in creating or
managing small, new and growing business is incorporated in
the educational and training system.
5. Research and Development Transfer: the extent to which
national R&D will lead to new commercial opportunities and
whether or not these are available to new, small and growing
firms;
6. Commercial, Professional Infrastructure: accounting, legal
services and institutions that allow or promote the emergence
of new, small and growing firms;
7. Internal Market Openness: extent to which markets change
dramatically from year to year and new firms are free to enter
existing markets;
8. Access to Physical Resources: communication, utilities,
transportation, land or space, at prices that do not discriminate
against new, small and growing firms;
9. Cultural, Social Norms: extent to which they encourage or do not
discourage individual actions that may lead to new ways of
doing business or economic activities - culture of
entrepreneurship and status or respect for entrepreneurs.
10. Intellectual Property (IP) Rights Protection: extent to which the
IP of new and growing firms is protected and enforced under
the law.
utshell
In a Nutshell 14

Issue #14
April 2008
ISSN-1991-2323 CaRC/TT/01/08

Research, Preparation and Layout

Diana Francis
Regional Specialist
Trade Policy and Negotiations Programme
IICA Caribbean Region

Printing
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This issue is printed with financing from the

Technical Centre for Agricultural and Rural Cooperation

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INTER-AMERICAN INSTITUTE FOR COOPERATION ON

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