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ENTREPRENEURSHIP FOR SUSTAINABLE DEVELOPMENT IN AFRICA
“The term globalisation is much abused and definitions have become too broad”
Rugman (2001, p.129) For UK Prime Minster Tony Blair (2002), globalisation is the greatest challenge to our age, so what is globalisation?
Ellwood (2001) defined globalisation as a new word that describes an old process: the integration of the global economy. Globalisation is more than just producing, marketing, and distributing goods and services throughout the world. It is a new way of thinking and the social processes in which the constraints of geography on social and cultural arrangements recede and people become increasingly aware that they are receding (Waters, 1995, p.3). For Held et al. (1999, p.6), globalisation is a process or set of processes that embodies a transformation in the spatial organisation of social relations and transactions (also see Wall and Rees, 2001, for more discussion on globalisation and international business).
The global competitive environment is changing dramatically. Instead of large companies dominating international markets, with smaller businesses remaining local or regional, many small firms today have to be globally competitive, whether they enter the global arena or not. One way for small-and medium-sized enterprises to increase their global competitiveness is to form cooperative relationships with larger multi-national enterprises. Such arrangements allow small firms to reach global markets, while allowing large firms to reduce costs through greater specialisation.
Many authors also argue that entrepreneurship is largely a phenomenon of developed, industrialised countries and that, if only it could be transferred together with western management practices, can we solve the problems of underdevelopment (Scott et al., 2000, p.227). Entrepreneurship has been seen as a key to economic development in many countries across the globe for many years (OECD, 1998, 2003; UN, 2004). For instance, in the European Union’s Employment Strategies, entrepreneurship has been given a major role to increase the dynamism of economies and help employment creation and improvement (CEC, 1999, 2003). The relationship between entrepreneurship and economic growth, poverty and sustainable development (SD) is crucial for future global development, policy and research. The European Union’s ‘Gothenburg strategy’, adopted in 2001, is based upon the three complementary economic, social, and environmental pillars, recognising the inter-dependence of these factors (CEC, 2005).
Entrepreneurs and entrepreneurship play important roles in today’s global business environment. Even though entrepreneurship has been an important part of society for many years, there are still many different perceptions and misconceptions about it. Birley and Muzyka (2000) argue that downsizing, restructuring and technical change, notions of traditional careers, and ways of creating value have all been challenged and individuals are increasingly wondering whether they should strike out on their own, whether their fortune would be better realised through the pursuit of opportunities that they believe they can pursue. In effect, people are depending relatively more upon their own initiative to realise success than upon the system to deliver it to them.
This paper explores different viewpoints on entrepreneurship, management, and SD from around the world. The key objectives are to explain the different meanings of the term entrepreneurship, and its different perspectives and components in a global context and finally provide an overview of SD in relation to entrepreneurship. The next section considers ‘what is entrepreneurship?’ This is followed by Section 4, which considers ‘what is sustainable development?’ Section 5 sets out the conclusions in linking entrepreneurship and sustainable development.
2 What is entrepreneurship?
Entrepreneurship is an elusive concept (McQuaid, 2002a). There are a number of perspectives of what is meant by the term ‘entrepreneurship’, some of which focus upon business development aspects, while others focus upon entrepreneurial behaviour – which may be linked to activities of those in the non-commercial sectors as well as commercial sectors. For instance, entrepreneurship is often considered synonymous with ‘new firms’ and/or existing ‘small, micro and medium-sized enterprises’ (SMMEs), and/or owner-managers or in some cases ‘dynamic’ or fast growing new firms. Elsewhere entrepreneurship is seen as: having specific functions in the economy, particularly in innovation and resource allocation with entrepreneurs seen, for instance, as innovators; or as a form of behaviour, concerned with the systematic grasping of opportunities; or as a set of personal characteristics, cognitive styles, attributes or motivations (such as risk taking or being a ‘great leader’) of entrepreneurs. Often the term entrepreneurship is used loosely, covering a number of meanings.
Differences in what is meant by entrepreneurship can often lead to confusion. Different perspectives on what the term means, have profoundly different policy and theoretical implications. This paper does not argue that one perspective or definition is correct or better than the others. Rather the paper seeks to clarify some of its different meanings, so that when entrepreneurship is discussed in theoretical or policy circumstances, we are clear about the differing underlying assumptions and concepts being used.
In the eighteenth century, the French term entrepreneur was first used by Richard Cantillon to describe a ‘go-between’ or a ‘between-taker’, whereby they bought goods at certain prices but sold at uncertain prices (as when they purchased the goods at a given price they could not be sure what price they would sell them for). So he or she bore the risk and uncertainty of a venture but kept the surplus after the contractual payments had been made. Later, the French philosopher, Jean-Baptiste Say and others widened the concept to include not only the bearing of risks, but also the planning, supervising, organising, and even owning the factors of production. The nineteenth century was a fertile time for entrepreneurial activity, as technological advances during the Industrial Revolution provided the impetus for continued inventions and innovations.
It is important to recognise that much of the literature in the field of entrepreneurship is from the USA and Europe, and thus, is based upon western values and cultures. The study of entrepreneurship continues to grow as a field of enquiry and remains one of the most attractive areas of research in the management field (see Wickham, 2004). Entrepreneurship has only started to become distinct from other management studies in the past 15 years or so (Wickham, 2004, p.110). Table 1 outlines some different aspects of entrepreneurship as academic discipline.
Table 1 The different aspects of entrepreneurship as an academic discipline
Aspects of discipline Generally concerned with Specifics of entrepreneurship research
Range of phenomena Motivations and actions the discipline attempts to explain Creation of new wealth and new organisations by entrepreneurs
Knowledge The corpus of propositions about the world the discipline regards as true (or otherwise) Propositions about entrepreneurship in academic textbooks, journal papers, etc. held by entrepreneurs and those who interact with them
Theoretical systems Framework of explanation that connect motivations to actions Drawn from economic, strategic, psychological, sociological and anthropological theory
Methodology The investigations leading to new knowledge within the discipline Positivistic vs. Anti-positivistic
Philosophical perspectives The general world view that underpins the discipline and governs any ethical and moral assertions it makes Entrepreneurship brings benefits and should be encouraged vs. entrepreneurship reduces human welfare and should be controlled, discouraged or inhibited
Institutional system The human organisation within a social and economic system that coordinates he discovery of new knowledge within the discipline Knowledge creation, co-ordination and transfer through teaching and research in universities and consulting firms and through network links to practicing entrepreneurs and their supporters
Source: Wickham (2004, p.114)
Audretsch (1995) and Cunningham and Lischeron (1991) discuss the difficulty of reaching a consensus about an exact definition of entrepreneurship as they argue that the term ‘entrepreneurship’ in itself has three levels of meaning. In the first level entrepreneurship refers to small firms or enterprises, in the second level it refers to new firm formation and at the third level (highest) entails innovation and a system-wide coordination of complex production (Malechi, 1997; Casson, 1990).
For Malechi (1997, p.157), entrepreneurship embraces small business, innovation (particularly important to high technology) and regional and local development policy.
Stevenson (2000, p.8) argues that entrepreneurship is an approach to management that can be defined as the pursuit of opportunity without regard to resources currently controlled. In this approach, Stevenson examines six critical dimensions of business practice, namely: strategic orientation; commitment to opportunity; commitment of resources; control of resources; management structure; and reward philosophy.
The common themes found in the definitions of entrepreneurship include: the entrepreneur, innovation, organisation creation, creating value, opportunity taking, profit or not-for-profit, growth, uniqueness, process, flexibility, dynamic, creative, and risk taking. However, the two main issues agreed by most entrepreneurship researchers are that entrepreneurship is important and it is different from small business (Birley and Muzyka, 2000; Wickham, 2004). These themes can be put into overlapping typologies, and the remainder of this section sets out five different types of perspectives on what is meant by entrepreneurship. These are entrepreneurship as: an economic function; a form of behaviour; a set of characteristics; a small business; and as the creation of a new business.
3 Perspectives on entrepreneurship
3.1 Innovation, risk taking and resource allocation: entrepreneurship as an economic function
Entrepreneurship has often been considered as having an important economic function, particularly in driving innovation and in the use and allocation of resources to take opportunities presented by changes in the external environment. In addition other functions may include risk taking or creativity (Glancey and McQuaid, 2000).
Considering first the role of innovation, entrepreneurship is considered to generate innovation and changes rather than respond to them, and so causes economic development (Baumol, 1993). As Schumpeter (1942) argued, entrepreneurship leads to the implementation of new combinations of means of productions through: introducing new products and methods of production; opening new markets; gaining new sources inputs; or by changing the structure of an organisation or an industry.
Acs and Audretsch (1988) argue that small and new firms are the main engines of innovation, due to the greater incentives for the people involved (including property rights) than for those in larger firms. However, a focus on innovation does not necessarily imply a focus on new or small firms, as the relationships between firm, age, or size and innovation are not clear as the literature on entrepreneurship implies. For instance, Harrison (1997) argued that larger firms dominate innovations, as they have resource and market entry advantages and are able to receive immediate benefits from innovations due to their scale and scope. Acs et al. (1999) found that in industries where market share is more concentrated among larger firms, there is higher productivity growth. They suggested an Schumpeterian transition hypothesis, where perhaps certain small firms introduce radical innovations, but their impact is magnified by large firms (these large firms may have recently been small or new ones that grew or large ones that are particularly agile).
In terms of resource allocation, Casson (1999) argues that the role of the entrepreneur is partly to identify persistent shocks to the environment, which will offer long-term opportunities, and then to synthesise the information and make judgmental decisions based upon it. Kirzner (1997) further emphasises the function of entrepreneurs as that of being a ‘middleman’, who is alert to and sees opportunities in the economy and uses this knowledge to gain a profit. Kirzner’s view identifies a key role for entrepreneurship as an equilibrating force by restoring markets to equilibrium through the process of price adjustment. Schumpeter conversely views entrepreneurship as a disequilibrating force that causes economic development and leads to the ‘creative destruction’ within capitalism, where some large firms, new firms, and industries destroy older ones.
McQuaid (2002a) suggests a staged process starting with innovative entrepreneurial behaviour in the firms who create the catalytic Schumperterian event (such as a new technological development). This is followed by the entrepreneurial activities of identifying resulting opportunities, deciding on actions and allocating resources to take advantage of them (for example improving competitiveness through adopting new products or process innovations). Later, the opportunities presented by the innovations reduce or are exhausted, and firms focus on improving efficiency and price competition, perhaps through ‘routine’ entrepreneurship (see below), and move towards market equilibrium. At each stage there would be the need for different policies, with perhaps support for innovative start-up or more general firms or commercialising basic research and supportive ‘entrepreneurial culture’ in the first stage. In the second phase, the role of policies may be to ensure universal access to the technological or other ‘hard’ or ‘soft’ infrastructure or to help to create markets and other micro-level policies. In the final stage, the role may be to ensure a stable macro-economic environment and effective market operation. In each stage the types of policies overlap, but there needs to be integration between policies and policy actors, and a long-term perspective.
3.2 Entrepreneurial behaviour: entrepreneurship as a form of behaviour
Drucker (1985, p.49) suggests that entrepreneurship is “the purposeful and organised search for changes, and in the systematic analysis of the opportunities such changes might offer for economic or social innovation”. He continues to argue that an entrepreneur is someone who “always searches for change, responds to it, and exploits it as an opportunity” (p.25).
According to this perspective, entrepreneurship can flourish in any part of the economy or society – in government, local community organisations, and NGOs, as well as in business. Clearly each of these has a significant impact upon sustainable development and management. It also acknowledges the importance of social entrepreneurs within a society in NGO and other organisations (McQuaid, 2002b).
This perspective points to the need for an ‘holistic’ or comprehensive view of entrepreneurship incorporating the individual(s) involved, the organisation they create or recreate and the external environment within which they operate. The OECD (2003) argues that support for existing social enterprise should essentially be the same as for profit-oriented firms (p.115). This may be broadly correct, although one needs to recognise the different motivations, operation and expertise of the board of directors, and the fundamentally different patterns of setting up such social enterprises.
3.3 The entrepreneur: entrepreneurship as a set of personal characteristics
The third set of perspectives on entrepreneurship focuses upon the personal characteristics, cognitive styles, personality, and the social and institutional context in which it operates (Chell et al., 1991; Mitchell et al., 2002). Smiles (1859), wrote about many of the most famous Victorian entrepreneurs in the UK, including Josiah Wedgewood who ‘by his energy, skill and genius, established the (porcelain pottery) trade upon a new and solid foundation’, thus, providing employment and good wages to many thousands of families. According to Smiles (1859), the key psychological traits of an entrepreneur were integrity, self-learning, courage, conscientiousness, patience, perseverance, self-discipline, and self-respect. More recent psychological and sociological approaches to entrepreneurship concentrate upon: particular qualities or attitudes (Robinson et al., 1991); motivations; their being a ‘great leader’ (Hughes, 1986), or social forces (Reynolds, 1991). There are also links between entrepreneurs’ cognitive styles and how they learn or use knowledge and information and their behaviour.
These approaches to the characteristics of entrepreneurs have been criticised for sometimes providing long lists of traits that when taken together would result in the description of a sort of generic ‘Everyman’ (Storey, 1994) and they sometimes ignore the circumstances, including financial and social capital or resources and other supply and demand factors, in which the entrepreneurship takes place.
The study of characteristics can be useful in helping identify important policy questions. Why are certain groups or types of people over or under represented among entrepreneurs and how is this changing? It has, for instance, been argued that some groups, such as women or some minorities, have in the past been held back by institutional forces, including not being able to so easily access appropriate finance or information.
3.4 Small businesses: entrepreneurship as owner-management and SMMEs
Fourth, entrepreneurship has often been considered as encompassing the role of the owner-manager of a small business. However, most new businesses are not particularly innovative (Bhide, 2000). This type of entrepreneurship can be, what is termed, ‘routine entrepreneurship’ by Leibenstein (1968, p.72), which involves the routine coordination and management of an existing business, which operates in a well established and clearly defined markets.
Successful small owner-managed firms may grow rapidly and change their management and ownership structures. SMMEs and the self-employed play an important role in an economy, including providing many jobs. However, an economy that can respond to technological, social, and economic opportunities to achieve more sustainable enviro-socio-economic development is likely to also incorporate the crucial dynamism, job, and wealth creation of medium and large firms and also of those small firms that grow to become larger organisations. This perspective of entrepreneurship can sometimes fail to distinguish an ‘ordinary’, routine owner-manager from one who transforms the business. New and SMMEs are important to development. Reassessments of the history of macro-economic performance during the 20th century have given greater significance to the role of new and small firms (Acs et al., 1999; Admiraal, 1996; Storey, 1994). However, divergence from some ‘optimum’ level of SMMEs in an economy (either through relatively too many, or too few SMMEs) may hinder growth (see Audretsch et al., 2002). An entrepreneurial economy is seen, by some, as one with relatively large numbers of self employed people or small businesses, although others consider innovation to be essential and Audretsch and Thurik (2004) argue it may be an economy where knowledge is the main source of competitive advantage.
Further analysis is required into the how new and small firms and economic performance inter-relate with poverty and sustainability. The link between entrepreneurship and economic growth is not clear-cut and there is a need for more evidence on the relative growth of SMMEs numbers and reductions in poverty or income inequality. Also the term ‘entrepreneurship’ has wider implications. Entrepreneurial behaviour can be important for the wider economy with entrepreneurship training potentially improving the performance of employees as well as those seeking immediately to start up a business. Similarly, entrepreneurial behaviour in the social sectors may provide significant benefits to society and the economy.
3.5 New businesses: entrepreneurship as creating a new business or organisation
The final, but arguably the most common, perspective on entrepreneurship is that it relates to the act or event of setting up a new business (Gartner, 1988). Here, the focus is upon looking at the process of creating a new organisation rather than its current owner or manager, or even the individual person who originally created it. This suggests that the entrepreneurial role ends once a new organisation has been created. The organisation itself may continue (perhaps to growth, maturity and decline), but the original entrepreneur takes on different roles in each stage, moving from being an innovator to the non-entrepreneurial roles of being a small business owner, or senior manager of the firm if it becomes large. Others may argue that the organisation being created need not necessarily be a private business, but could be an Non-governmental Organisation (NGO) or other organisation not aimed at profit making, of which there are many local, national, or international examples.
This view has been an important component of economic development policies at the local, regional, and national levels, where encouragement of business start-ups often plays a major role. However, Binks and Vale (1990, p.19) argue that such business start-up orientated policies, if used as the exclusive means to increase employment growth, need not be synonymous with per capita income growth and may be counter-productive to wider economic development. Indeed, many developing countries have large subsistence economies have high shares of employment in new and small firms, often based upon the lack of other employment alternatives rather than as a desire to start their own business. However, if there are large numbers of start-up firms, particularly in more advanced technological sectors and in non-subsistence types of employment, then it can be argued that some of them are likely to grow into large and high productivity employers. However, new business creation is only one aspect of a sustainable economic development policy.
According to Tidd et al. (2005, p.532), the factors that were found to affect the likelihood of establishing a venture include: family background, religion, formal education and early work experience, and psychological profile. Similar results have been outlined by the Global Entrepreneurship Monitor research programme (GEM) (see Appendix A for more details and also www.gemconsortium.org). The sixth GEM 2004 study covers 34 countries1 from Africa, Asia, Middle East, Europe, and North and South America representing a total population of 784 million people (18–64), a labour force of 566 million and more than 90% of the world gross domestic product (GDP). Some interesting findings from this study include:
• 73 million adults were engaged in entrepreneurship activities worldwide in 2004 with more involvement of young people than other groups in every country regardless of the level of GDP
• although the relationship between age and entrepreneurship is found to be stable but the typical entrepreneurs were 25–34 years of age, with men twice likely to be involved than women
• one adult in eleven engages in some sort of entrepreneurial activity
• entrepreneurial activity varies significantly by geographic region, types of business, and entrepreneurial motivation
• three in five entrepreneurs are motivated by attractive business opportunities (mostly in developed countries) and two in five motivated by necessity, mostly in developing countries
• total entrepreneurship activity (TEA) rate is lowest for countries with per capita GDP of about US$28,000
• no entrepreneurial activity is found in the healthcare sector, although this may reflect a narrow definition of healthcare or a limited sample
• low-income countries have the highest level of entrepreneurial activity for all age groups, followed by high-income countries and then middle-income countries
Bruno and Tyebjee (1982) and Bearse (1981) outline the different dynamic factors that characterised the entrepreneurial environment to include:
• availability of venture capital; critical mass of experienced entrepreneurs; technically skilled labour force; land/facilities; supporting services; and favourable governmental policies
• accessibility of customers; suppliers and transportation
• proximity of universities
• receptive population and attractive living condition
• the levels of change/instability in the local economy; uncertainty due to unexpected events (rivalry); diversification and resources • degrees of fluidity in the social structure and resources
• cultural factors.
In an attempt to outline the different regional variations, in terms of entrepreneurial and managerial challenges facing different parts of the world, WREMSD engaged its international editorial board (particularly regional editors) in an e-forum in order to identify these geographical differences/challenges. The forum involved several regions namely, North America, Sub-Saharan Africa, European Union, East Asia and Pacific, Middle East and North Africa, New Zealand and Indian Ocean Commission. Table 3 outlines the geographical differences.
Table 3 Regional entrepreneurial and managerial challenges for sustainable development
East Asia and Pacific
Corporate governance; corruption; financial volatility and other economic and social disruptions; capacity building, particularly in developing good quality and appropriate human resources; challenges of globalisation; enhance self-reliance for creation and sustaining competitiveness, etc.
European Union
Environmental protection; corporate social responsibility; corporate governance and information transparency; improvement of the quality of life, economic growth, ageing population, etc.
Indian Ocean Commission
Hurricanes and climate change; fragile ecosystems; more market access and better terms of trade; renewable energy; sustainable tourism; information technology; HIV/AIDS and malaria; security and vulnerabilities; poor human and institutional capacity; lack of technology transfer; poverty reduction; human rights and cultural diversity; gender equality; democracy; full and equal access of girls and boys, women and men to all levels of education, etc.
Middle East and North Africa
Unemployment; gender equality; weak institutional and legal framework; urban and industrial pollution; land and coastal degradation; desertification; water scarcity and quality, etc.
North America
Rapid move of the Chinese and Indian economies into high tech; recent scandals at WorldCom, Enron, and Global Crossing have raised concerns about the failing corporate governance mechanisms; failure of higher education to achieve long term strategy and corporate social responsibility against profit and financial manoeuvring; sustaining higher fuel prices, etc.
New Zealand
Poor and deteriorating air quality in two of the major cities – Auckland and Christchurch; erosion on steeper landscapes and the visual impact of some land-use practices; degraded freshwater quality, especially from intensive agricultural land use; degraded marine environment in estuaries and harbours near main population centres; vision and framework for sustainable development; implementing, developing, monitoring and reviewing progress towards sustainability, etc.
Sub-Saharan Africa
Poverty; conflict prevention, peace and security; brain drain; political, economic and corporate governance; macro-economic stability; education and technical training;
HIV/AIDS, malaria and health services; cross cultural and diversity management; role of women in social and economic development; development of infrastructure; agriculture and the diversification into agro-industries and manufacturing; promoting public private partnerships; encouraging an entrepreneurial, innovative economic mindset; bridging the digital divide in information and communication technologies; promoting tourism and sustainable utilisation of natural resources, etc.
Source: Adopted and developed from different editorial notes (2005) by:
Amoateng and Rhoades (North America), Louw (Sub-Saharan
Africa), de Pablos (European Union), Foong (East Asia and Pacific),
Sohail (Middle East and North Africa), El-Kafafi (New Zealand) and Juwaheer (Indian Ocean Commission)
Conceptual framework
Sustainable Development (SD) also encompasses many different meanings, but the most frequently quoted definition is from the report Our Common Future (also known as the Brundtland Report). The Brundtland report (WCED, 1987, p.43) defined SD as “development that meets the needs of the present without comprising the ability of future generations to meet their own needs.”
This definition has been criticised by many scholars and leading international institutions, such as the United Nations Economic Commission for Europe (UNECE) (2004), as vague since it does not specify the time horizon of future generations, gives no indication of the role of the environment and refers to the opaque concept of human needs. Accordingly, a variety of definitions of sustainability and SD are used in different contexts. In simple terms, SD refers to maintaining development over time but, so far, there are well over one hundred definitions of SD currently available in the literature (Ahmed and Stein, 2004; Pearce et al., 1989; Holmberg, 1992; Morita et al., 1993; Murcott, 1997; Elliot, 2001) providing different concepts, perspectives, concerns and solutions for SD. How they relate to each other and provide a clear understanding of our common future still remain a key question to be addressed.
However, at the national level, there are several factors and conditions that need to be considered including peace, debt reduction, terms of trade, the level of foreign aid, economic policy, techniques for measuring SD, the trade-offs between conflicting environmental goals, and the limited time and distance of the horizons of elected politicians.
The Brundtland report recommended seven critical actions needed to ensure a good quality of life for people around the world: revive growth; change the quality of growth; meet essential needs and aspirations for jobs, food, energy, water, and sanitation; ensure a
sustainable level of population; conserve and enhance the resource base; reorient technology and manage risk; and include and combine environment and economics considerations in decision-making. These recommendations remain valid today (see Sarre et al., 1991, SDCN, http://www.sdcn.org/; Earth Council, http://www.ecouncil.ac.cr/) and are a call to change our actions and to do things differently. In particular, they underscore a need to: produce differently by applying concepts of eco-efficiency and sustainable livelihoods; consume differently; and organise ourselves differently by increasing public participation while reducing corruption and perverse subsidies.
According to the UN (2002a, 2002b) progress on developing the concepts of SD has been rapid since the 1980s including the Earth Summit (1992),2 the Brundtland Report and the Agenda 21. Throughout the rest of the 1990s, regional and sectoral sustainability plans were developed. A wide variety of groups, including the World Bank, have adopted the concept and given it their own particular interpretations. These initiatives have increased our understanding of what SD means within many different contexts but progress on implementing SD plans has been slow (UN, 2002a, 2002b; UNECA, 2003). Although many people originally perceived and discussed SD in relation to issues associated only with the environment (ecology, climate, water, land., etc.), now issues of social and economic sustainability are usually incorporated. SD consists of three aspects:
• economically sustainable system that produces goods and services on a continuing basis, has a manageable level of government and external debt and avoids extreme sectoral imbalances that are damaging to agriculture or industry
• environmentally sustainable system
• socially sustainable system, which achieves distributional equity, adequately provides social services and involves mass participation in an accountable-political system (see Harris, 2000).
However, in terms of the Third World perspective, it has been argued that the concept of SD is directly concerned with increasing the material standard of living of the poor in terms of increased food, real income, educational services, health care, sanitation and water supply, emergency stocks of food and cash, etc., and only indirectly concerned with economic growth at the aggregate national level (Barbier, 1987).
For the World Bank (2003), SD is a multi-dimensional concept, which combines five key perspectives:
• Financial capital: sound macroeconomic planning and prudent fiscal management
• Physical capital: infrastructure assets such as buildings, machines, roads, power plants, and ports
• Human capital: good health and education to maintain labour markets
• Social capital: peoples’ skills and abilities as well as the institutions, relationships, and norms that shape the quality and quantity of a society’s social interactions
• Natural capital: natural resources, both commercial and non-commercial, and ecological services which provide the requirements for life, including food, water, energy, fibres, waste assimilation, climate stabilisation, and other life-support services.
The sustainability agenda today not only poses challenges, but also opens up significant innovation opportunities, such as new or more sustainable products and services; new or more sustainable processes; new extended markets built on exploiting a growing concern with sustainability issues; and new business models reframing existing arrangements to emphasise sustainability (see Tidd et al., 2005, for more discussion).
A sustainable society is one that can persist over generations, one that is far-seeing enough, flexible enough, and wise enough not to undermine either its physical or its social systems of support (Meadows et al., 1992). Communities related to any stage of the product lifecycle (from production of raw materials through manufacture, use and disposal of the final product) are respected and enhanced economically, socially, culturally and physically (see the Lowell Center for Sustainable Production (LCSP, http://www.uml.edu/centers/LCSP/), for more details). LCSP and Hawken (1993, p.144) outline different factors that are important in order to achieve sustainable business, such as:
• replace nationally and internationally produced items with products created locally and regionally
• take responsibility for the effects they have on the natural world
• do not require exotic sources of capital in order to develop and grow
• engage in production processes that are human, worthy, dignified, and intrinsically satisfying
• create objects of durability and long-term utility whose ultimate use or disposition will not be harmful to future generations
• change consumers to customers through education.
Many authors also argue that the concept of SD must enhance the long-term productive capacity of the resource base and improve the long-term wealth and well-being derived from alternative resource use systems, with acceptable environmental impacts (Ahmed and Stein, 2004; Pearce et al., 1989; Holmberg, 1992; Morita et al., 1993; Murcott, 1997; Elliot, 2001). According to the Lowell Center for Sustainable Production, ‘Sustainable Production’ is the creation of goods and services using processes and systems that are: non-polluting; conserving of energy and natural resources; economically efficient; safe and healthful for workers, communities, and consumers; and socially and creatively rewarding for all working people. The following principles are essentials to any sustainable production:
• Products and services are: safe and ecologically sound throughout their life cycle; as appropriate, designed to be durable, repairable, readily recycled, compostable, or easily biodegradable; and produced and packaged using the minimal amount of material and energy possible
• Processes are designed and operated such that: wastes and ecologically incompatible by-products are reduced, eliminated or recycled on-site; chemical substances or physical agents and conditions that present hazards to human health or the environment are eliminated; energy and materials are conserved, and the forms of energy and materials used are most appropriate for the desired ends; work spaces are designed to minimise or eliminate chemical, ergonomic and physical hazard
• Workers are valued and: their work is organised to conserve and enhance their efficiency and creativity; their security and well-being is a priority; they are encouraged and helped to continuously develop of their talents and capacities; their input to and participation in the decision making process is openly accepted.
However, from these perspectives of production vs. consumption, SD is defined as the amount of consumption that can be sustained indefinitely without degrading capital stocks, including natural capital stocks. Sustainable income is hence defined as the maximum consumption in a period consistent with the maintenance of the aggregate capital stocks. However, for a flow of income to be sustainable, the stock of capital must be constant or increasing over time. Capital is hence defined to include all the productive assets available to the economy. According to the World Bank, consumption patterns on energy, water, food, manufactured goods, and services are highly skewed, and will remain so for the near future. As incomes in developing countries will need to grow, consumption in those countries will also increase with those aspirations. If subsidies, mis-pricing, and inadequate taxation of environmentally damaging products continue to provide the wrong incentives for rich-world consumers and producers, and if we add to this picture a wealthier developing world, we can expect negative consequences for both the quality of the environment and its ability to sustain further growth.
Theoretical framework
The 1992 Earth Summit stipulated that countries at the national level and international governmental and non-governmental organisations at the international level should develop indicators of SD in order to help countries making informed decisions concerning SD (UNECE, 2004). Indicators for SD were set out by the United Nations Commission for Sustainable Development (UNCSD), UN Statistics Division, OECD, Eurostat, NGOs, and other international organisations.
According to the UNECE (2004), the debate has hardly involved official statisticians and that there is still neither a definite set of indicators for SD, nor a set of sustainability indicators adopted within the framework of official statistics by any internationally authoritative body. The major challenges for the measurement of SD are the lack of a widely accepted operational definition of both SD and sustainability and the difficulties in measuring the inter-linkages of the three dimensions of SD (economic, social, environmental) are often mentioned and still not yet solved.
A set of indicators (index) recently commonly referred to is the Environmental Sustainability Index (ESI) of Yale University (Yale Center for Environmental Law and Policy, 2005) and Columbia University (Center for International Earth Science Information Network) in collaboration with World Economic Forum and Joint Research Centre of the European Commission. The ESI is a measure of overall progress towards environmental sustainability, developed for 142 and 146 countries, respectively, in 2002 and 2005. The ESI scores are based upon a set of 21 core ‘indicators’, each of which combines two to eight variables for a total of 68 underlying variables. The ESI permits cross-national comparisons of environmental progress in a systematic and quantitative fashion. It represents a first step towards a more analytically driven approach to environmental decision-making.
According to the recent ESI (2002, 2005) rankings (Table 4), Finland leads the world in environmental sustainability (as it did in the 2002 ranking). The high ESI scores in 2005 of the top five countries (Finland, Norway, Uruguay, Sweden and Iceland) are attributed to substantial natural resource endowments, low population density, and successful management of environment and development issues. The USA ranks 45th (2002 and 2005), the UK’s has rank moved from 91st in 2002 to 46th in 2005, and Kuwait that stood last in 2002 was still in the lowest 10 countries in 2005, showing that a nation’s economic status does not always correspond to its ESI performance.
Early in 2005, a new global business ranking was unveiled at the World Economic Forum, identifying the top 100 companies that are most open to leading the way to a more sustainable world, in the sense that they stand the best chance of being around in 100 years because of their demonstrated performance and strategic ability to manage the triple bottom line (society, environment, and economy). However, the definition of a ‘sustainable corporation’ is a subject of considerable debate (see Appendix B for more details and also www.global100.org). Table 5 includes examples of the top 100 most sustainable corporations in the world by countries.
CHAPTER FIVE
Summary and conclusion
5 Conclusions: linking entrepreneurship and sustainable development
In considering the relationship between entrepreneurship and sustainable environmental-socio-economic development, it is useful to start by first considering the implications of the different meanings of entrepreneurship. The concept of entrepreneurship is multi-dimensional and often unclear. Various perspectives have different implications for how entrepreneurship is related to and can help promote sustainable environmental-socio-economic development. It is essential that research and policy development fully takes account of the differing perspectives of entrepreneurship and make explicit the particular perspective(s) that they are taking. No single definition or perspective necessarily fully captures the concept, but by being clear about our meaning of the concept and the underlying assumptions, we can progress our understanding of entrepreneurship and its relationships to sustainable development.
Wealth and employment growth in many, particularly developing, countries is important, so where increased numbers of new firms and owner-managers or SMMEs help achieve this, then supporting policies may be emphasised. However, as discussed above, both relatively high and low proportions of SMMEs may be linked to low growth and inequality. Entrepreneurship as a significant source of innovation suggests that it will make a major contribution to environmental innovation, as well as to social and economic innovations that may promote sustainable development. Technology and innovation influence, and are influenced by, entrepreneurship and are important in developing new products/services and improving existing products/services, as well as doing things in a more efficient or effective way, to assist sustainable development. The technological regime has a great influence upon changes within firms, the types of firms entering an industry, and the survival of existing or new firms. It is often claimed that both large and small firms are significant engines of innovation, but in different circumstances one or other may have a relative advantage.
Also important is the perspective of entrepreneurship as a form of behaviour. This can help create different appropriate ways of doing things and of doing new things that will be essential to sustainable development. Systematic search for opportunities is important for helping to ameliorate the many problems facing the globe. Fundamentally, advocates of entrepreneurship as a form of behaviour, such as Drucker (1985), argue that such behaviour can be taught, and so development is not reliant on the personal characteristics of individuals in the population.
The interactions of entrepreneurship with the external environment within which entrepreneurship is practised in terms of a given place are important. An analogy is with the Upas tree in Africa, which stifles other vegetation nearby to ensure that it captures the maximum amount of rainfall around it. This has been used to describe the negative effects of older industries, such as shipbuilding, upon the development of new industries nearby. Braunerhjelm and Carlsson (1999) argue that the lack of entrepreneurship in Sweden and similar sized Ohio in the USA, is partly due to their history with its concentration of mature industries with declining employment. These mature industries are seen as holding back the growth of new SMMEs and the transition to a more modern industrial structure. These negative effects may be smaller than they first appear as statistical measurements are crude and disguise the new industries being generated within old Standard Industrial Classifications.
However, as Porter (1990) suggests, there may be no ‘bad’ industries only ‘bad’ firms, so the determining effects of industrial dynamics may be overplayed. Alternatively, there may be reasons for a Upas tree effect such as an absence of a locally accessible growing market, or inadequate fund providers with experience of newer industries, or the education and training networks being less geared to the newer technologies or industries, or inadequate role models. This shows the importance of path dependency for an economy, or indeed path dependency for individual entrepreneurs based upon their personal histories and experience. Flexible, effective, and efficient local policies to support entrepreneurship and to utilise its two-way links with wider environmental-socio-economic factors is important.
The OECD (2003, p.91) states that for entrepreneurship related policies, especially at the local level, it is important for ‘local flexibility in the design and implementation of policy’. There is also a need to oversee and monitor local public provision to ensure that it is delivering high quality services and support (for instance in evaluating business incubators where business development, in terms of raising productivity and improving management, may be more important than short-term job creation). A key policy dilemma will be how to have policies that promote different forms of entrepreneurship in the economy and social realms, while reducing and reversing the impacts of development on the environment. There is an urgent need for strong commitment to education and training (including in entrepreneurial behaviour in its widest senses) in all countries, particularly the low-income countries, as well as to the ‘hard’ infrastructure policies often so dominant in the past. Also the national entrepreneurship environments should be strengthened in all countries with clear policies on technology transfer, tax, finance, exports, etc.
Sustainable development is not just a concern of developing countries. All countries, whatever their level of development or past scientific and technological glories, must pay attention to it. It is important at every level, to develop a clear understanding for a consensus on the meaning of SD and the realities of our common future. SD is probably the most daunting challenge that humanity has ever faced, and achieving it requires that the fundamental issues be addressed immediately at local, regional and global levels. There is nothing new in the concept of sustainability as such; it is the political, social, and economic context that is of paramount importance. Sustainability requires new thinking across the spectrum of human endeavour, not merely among scientists and technologists. Economic, social, and institutional innovations must keep pace with technological innovations. SD is a multi-disciplinary process that involves all issues such as science, innovation, technology, research and development, information technology and e-commerce, economic development, health, FDI and MNCs, international debt and aid, trade, politics, war, natural disasters, population growth, terrorism, etc.
In terms of the definitions of entrepreneurship and sustainable development, what is important are the meanings behind the concepts and the setting out clearly of which aspects or meanings of the concepts we are using, i.e., the content of the concepts is more important than the labels. Differing concepts are likely to direct our thinking in certain ways. However, it is not a case of one definition being ‘right’ or ‘wrong’. Rather, we should clarify, early on in any paper in this Journal, the particular meaning used, and its underlying assumptions, to allow a useful discussion and progress in the development of useful ideas.
As we work toward more sustainable development, we must strive not to lose sight of the big picture and that we must think and act both globally and locally. Finally, in conclusion, we are still in search of a meaningful definition of SD, agreement on particular indicators to measure our progress, and ultimately dream of achieving SD and a world free of poverty.
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