Latin american entrepreneurs. Many firms but little innovation
Successful entrepreneurs are individuals who transform ideas into profitable commercial enterprises. This process often requires special talents, including a capacity to innovate, to introduce new products, and to explore new markets. It also requires an ability to manage others, to assign priorities to tasks to increase the efficiency of production, and to make the best use of available resources. But these talents are not enough. Successful entrepreneurs thrive in favorable economic and institutional environments that enhance the expected returns of innovation. When an enabling environment exists, entrepreneurs take risks and invest in innovation, spurring productivity gains through the dynamics of firm entry and exit and innovation by incumbent firms, thus fostering economic development.
Why should policy makers care about entrepreneurs, who tend to be among the better off in the population? The answer is simple: entrepreneurship is a fundamental driver of growth and development. Indeed, the basic premise of this report—one that is shared by most economists since Adam Smith and was greatly strengthened by the seminal work of Joseph Schumpeter—is that creative entrepreneurs are not just byproducts of the development process but important drivers of such a process. Entrepreneurs are key actors in the transformation of low-income societies characterized by low productivity and often subsistence self-employment into dynamic economies characterized by innovation and a
rising number of well-remunerated workers.
To the extent that causal links from entrepreneurship to productivity growth are at
work, there is room for using policy levers to quicken the development process by improving the incentives and supportive institutions that facilitate innovation by entrepreneurs.
These analytical and policy issues motivate this report, which explores the challenges faced by potential high-growth, transformational entrepreneurs in Latin America and the Caribbean (LAC).
