Article in focus: A comparative perspective of the stages of economic development and public policies relating to entrepreneurship and micro, small and medium-sized companies (MPMEs) in Brazil, Canada, Chile, Ireland and Italy.

In developed countries, micro, small and medium-sized companies (MPMEs) represent approximately 50% of the gross domestic product (GDP) and are responsible for 60% of the labor force, whereas in emerging countries, the prominence of such enterprises is much smaller, representing approximately 10% of the GDP and 30% of the jobs. For researcher Gilberto Sarfati, the differences are evidence of the importance of entrepreneurial activity in economic development. The challenge for any country is to encourage this type of activity.

In his article, “A comparative perspective of the stages of economic development and public policies relating to entrepreneurship and micro, small and medium-sized companies (MPMEs) in Brazil, Canada, Chile, Ireland and a Italy,” Sarfati presents research results based on data taken from official sources (governmental and multilateral) and from independent institutions. Interviews were also conducted with 40 authorities and academics from each country.

The comparative study allowed for an assessment of the strengths and weaknesses of the public policies of each country, which were selected in accordance with their regional weight, the size of their economy and the stage of development of their entrepreneurial activities.

Before mapping out the public policies of the countries, Sarfati discusses the theoretical reference point by posing two fundamental questions. The first question is what effect entrepreneurship has on economic development. Much of the research on this theme has reached different conclusions, most likely because being a high-impact entrepreneur, or a ‘gazelle’ entrepreneur, is not the same as being a self-employed worker or an entrepreneur by lifestyle. Whereas lifestyle entrepreneurs have a company to satisfy their minimum needs and to generate employment, ‘gazelle’ entrepreneurs are involved in a rapid-growth activity that generates jobs and adds economic value.

The second question refers to the need for and the scope of public policies for fostering entrepreneurship, where it is necessary to differentiate the incentive instruments for MPMEs from those for entrepreneurship. According to the study, public policies for MPMEs are those “[...] that support the entrepreneurial lifestyle, which can be justified by various reasons such as positive macro-economic effects for creating jobs or even compensation for collateral microeconomic effects of economies of scale.” In contrast, fostering entrepreneurship is directed at highly innovative individuals, whose expansion of the business has an impact on the growth of the economy and leads to products and services that have greater added value.

To establish the relationship between the views of public policies and the stages of development, Sarfati incorporates the classification of economic stages found in Michael Porter’s The Competitive Advantage of Nations. The first stage is that of factors, marked by an agricultural economy and lifestyle entrepreneurs. The second is the state of efficiency, in which the country must exploit economies of scale, which favor industrial concentration. The final stage is moved by innovation, in which the economy begins to be characterized by intensive knowledge activities. In mapping out each country, the policies that affect entrepreneurship and MPMEs were classified as regulatory policies (business entry and exit rules, labor and social rules, property rules, tax rules, intellectual property rules, bankruptcy rules and rules that affect liquidity and the availability of capital) and stimulation policies (promoting culture and entrepreneurial education, innovation incentives and programs for fostering internationalization).

Sarfati concludes that public policies are compatible with the economic development stage in four countries. The exception was Italy, a finding that led the researcher to formulate the following question: “[...] in the case of Italy, and perhaps other countries too, is the need for public policies for promoting entrepreneurship and MPMEs irrelevant? On the other hand, may the absence of such policies in the medium and long term lead to Italy regressing in its economic development?”

The research also established that in Ireland and Canada, the notion of the gazelle entrepreneur is present in the public discourse. With regard to Chile, the article notes that the country has no entrepreneurship policy, even though it is a country in transition from the efficiency to the innovation stage. “Just as in the case of Italy, we need to ask: is it not possible to move to an innovation economy without having an entrepreneurship policy?”

With regard to Brazil, one of the author’s conclusions is that the government option for Local Production Arrangements (APLs) seems not “[...] to involve gazelle entrepreneurs. Therefore, we also need to ask: is the choice to support all APLs incompatible with an entrepreneurial policy?”

Contact the author Gilberto Sarfati. 

Learn more about the research conducted by Gilberto Sarfati.