Entrepreneurship Policy Benchmarking Overview

1. Entrepreneurship Policy Benchmarking Overview January 2013

2. Vibrant entrepreneurship is an important component of a successful advanced economy • Generate high and rising standard of living, by boosting productivity and innovation The Challenge The Context • Need for greater flexibility and innovation given speed and demands of global competition • Entrepreneurship as a way to cultivate “economic agility” The Entrepreneurship “Solution”

3. It is not always clear how to boost entrepreneurship because of the large number of possible actions and initiatives a region could pursue Financing Technology & Infrastructure • Upgrade physical infrastructure (transportation, utilities, and telecommunications) to support new and growing firms • Offer subsidies such that cost of access to infrastructure is not prohibitive • Increase number and size of specialized R&D facilities • Establish shared R&D facilities / joint university, public sector and industry facilities • Establish community/regional investment funds; tie to local funding campaigns • Establish minimum small business lending thresholds for banks and lending institutions • Create angel funding networks • Allow indirect personal contributions to seed funding (e.g. pensions) • Establish a centralized organization to advise entrepreneurs on available financing options and strategies • Streamline listing regulations for growing firms seeking to raise public funds • Streamline regulatory barriers to mergers / buy-outs • Establish organizations to facilitate firm buy-outs • Establish government subsidies / loans for new and growing firms • Ensure lending policies are no more stringent for new/growing firms than for established firms Legislation • Provide tax incentives to increase R&D activities, and to increase commercialization of R&D • Ensure business taxes have a similar effect for new, growing, and established firms • Establish tax policies that do not interfere with launch or growth • Strengthen intellectual property rights • Provide legislative incentives for use of stock options • Ensure stock option laws apply equally to new, growing and established firms • Ensure competition laws treat all firms equally; no unfair blocking of new firms entering the market by established firms Skills & Talent • Establish curriculum requirements on entrepreneurship and new firm formation in primary and secondary schools • Establish colleges and university course / program offerings or distance learning partnerships on entrepreneurship and new firm creation and management education • Support / establish business programs for mid-career professionals • Support endowment giving to grow number and size of local colleges and universities • R&D grants & financing for experimentation infrastructure • Set up co-op / internship programs • Scholarship/ award / sabbaticals for highly meritous candidates to create greater access to and affordability of post-secondary schooling • Set up a regular talent scan in schools, colleges and industry for high-potential and serial entrepreneurs • Set up mentorship/ apprenticeship programs for high potential individuals • Support new venture competitions • Recruiting targeted talent to a region; offer relocation assistance Administrative Burdens • Representative Sample • Refine regulations to ensure they do not interfere with start up of new firms and apply to new and existing firms in a predictable way • Refine procurement policies to apply equally to new as to established firms • Ensure labor regulations do not discourage hiring of small or large number of employees • Provide support for business tax filing • Ensure that administrative costs of compliance with government regulations do not unfairly burden new firms • Streamline the number licenses / permits needed to start a firm to reduce time and complexity • Establish a “Small Business Clause” in considering future legislation Support Services • Provide incentives for colleges, government research centers and anchor firms to make their technology available to new / growing firms for commercialization • Establish formal tech transfer mechanisms to capture knowledge spillovers • Subsidize new and growing firms seeking to acquire and/or develop latest technology • Provide incentives for spin-offs from research institutions and anchor firms • Appoint a small business ombudsman to advocate for small business needs (e.g Entrepreneurship Advocacy Office) Mindset • Increase number, variety, and quality of business support services to fill needs of new and growing firms • Offer discounts, grants & matching programs to ensure availability of affordable support • Set up a centralized agency to link support services and government programs • Increase number and size of incubators to launch different types of firms • Create business associations • Dedicate a regular media column / publication to profiles of successful and high-potential entrepreneurs • Sponsor conferences, workshops and business case competitions; leverage business associations and networking organizations • Establish entrepreneurship awards, research grants and scholarship programs • Create a regional publicity campaign to attract innovative and entrepreneurial individuals • Support regional enhancements and initiatives to attract diverse, young people and families (eg. Parks, entertainment complexes, pre-school education) • Review personal income tax levels to ensure individuals are not discouraged from starting or growing firms • Review the personal effects (financial & reputation-related) from bankruptcy; ensure these are not irreversible • Provide personal tax and health insurance breaks for entrepreneurs Source: Monitor Analysis

4. Business & Financial Talent & Ideas Legislation & Regulation Social & Cultural Personality Life Situation Heritage …and its main conclusion is that regions need to create a vibrant eco-system for entrepreneurs…i.e. regions need to “do everything” • Technical & Business Skills • Property rights and enforcement • Tax level & complexity • Cross-Sector Collaboration • Previous shaping experiences • Regulatory burdens • R&D Investment & Infrastructure • Innate intellectual ability • Creative / innovative Intellectual Capacity • Higher educational attainment • High risk-taking • Tolerance of ambiguity • Capacity for endurance Understanding who you want to develop or attract to your region influences how you cultivate entrepreneurship • Current occupation and career opportunities • Locus of control • Autonomy • Dominance • Competitive • Need for achievement • Age, martial and family status • Personal development • Visionary • Family history: • Role models • Motivations/ goals • Tightly-knit communities • Financial / other support • Economic history • Ethnicity shapes personality traits, values, motivations and goals • Population density & social networks • Current economic composition • Age & education • Availability of & access to financing • Population growth, diversity & creativity

5. 2003–2013 Entrepreneurship Benchmarking Initiative has been an effort to benchmark entrepreneurship policies in countries and regions 2003-2013 Entrepreneurship Benchmarking Initiative Countries, Regions, and Sponsors

6. A number of well-known government and private sector partners have been involved in the Initiative Country/ Region Government Involvement Other Partner(s) • Austrian Institute of Economic Research • Center for Economic & Business Policy • OECD • Norwegian Financial Services Association • Standard, Productivity & Innovation Board • Hangyang University • Small and Medium Business Association • Int’l Organization for Knowledge Economy & Enterprise Dev.; Institute for Growth Policy Studies • ART and University of California at Berkeley • The US-Russia Center for Entrepreneurship • Business Standard Magazine • Various partners throughout MENA • Univ. of California, Univ. of Texas, Livermore/ Sandia National Labs, Dallas Chamber of Com. • Endeavor Chile • Endeavor Colombia • Endeavor Jordan, INT@J, Young Entrepre.Assoc. • IESE, Bankinter Foundation, • GEW/Kauffman Foundation, various, incl. Endeavor • Omidyar Network • Austria • Denmark • Finland • New Zealand • Norway • Singapore • South Korea • Sweden • Switzerland • UK • US • Russia • China • India • UAE – MENA • Texas/ California Bay Area • Chile • Colombia • Moscow • Jordan • Spain • +35 countries • 6 African countries • Ministry for Economic Affairs and Labor • Ministry of Business and Economic Affairs • Agency for Enterprise and Housing • Ministry of Trade and Industry • Ministry of Economic Development • Ministry of Trade and Industry • Ministry of Trade and Industry • Korea Development Institute • Ministry of Industry • Ministry of Industry, Employment and Comm. • State Secretariat for Economic Affairs • Department of Trade and Industry • Federal Reserve Bank • The US-Russia Business Council • Development Research Center of the State Council • Al-Maktoum Foundation • Bay Area Economic Council, various municipalities • Chile National Council of Innovation • The five largest chambers of commerce • Mayor of the City of Moscow • ENISA • Various • South Africa Department of Economic Development, Trade and Industry, National Planning Commission

7. A dynamic Entrepreneurship Model was developed to measure high-impact entrepreneur attitudes towards key aspects of entrepreneurship policy Entrepreneurship Policy Drivers Entrepreneur-ship Assets Business Assistance Policy Accelerators Motivations Financing Skills and Talent Infrastructure Support Services Legislation Admin. Burdens Mindset Equity Financing Debt Financ-ing Training and Education Entrepre. Mngt. Capacity Infra-structure Business Advisory Services Entrepre. Develop. Programs Tech Commer-cialization Taxes / Incentives Competi-tion Transac-tion Costs Culture & Attitudes Market Openness Supply of Equity Capital Govt. Regula-tions Legitimacy Credits / Incentives Govt. Programs Access to Tech. Skills Develop-ment Compe-tency / Experien. Physical Infra. Supply of Business Services Supply of Debt Capital Govt. Impact Access to Equity Capital Corporate/ Business Taxes Individual-ist Culture Prepara-tion Afforda-bility of Tech. Afforda-bility of Bus. Svcs. Network-ing Orga-nizations Access to Debt Capital Financing Strategies Stock Option Rules Quality of Bus. Svcs. Attitudes towards Income Tax Incubators Spin-outs Exit Strategies Attitudes towards Bankruptcy Attitudes towards Stock Opt. • Each Sixth-level composite indicator has an average of 3-5 questions that measure various aspects of entrepreneurship assigned to it Fourth-Level Composite Indicator First-Level Composite Indicator Second-Level Composite Indicator Fifth-Level Composite Indicator Third-Level Composite Indicator Sixth-Level Composite Indicator Source: Monitor Group, FORA, A.R.T. analysis

8. Completed survey returned and analyzed 5 Results for benchmarked vs. 13 nations 4 Financing Strategies 100% 80% Skills Development Credits / Incentives 60% 40% 50% 42% 20% 36% 0% 49% 42% Attitudes Towards Income Tax 48% Legitimacy Individualist Culture Cluster Organizations Regional Councils Business Associations Letter with Web-link to survey is forwarded by institutions for collaboration to their members to fill out 3 2 Letter sent to institutions for collaboration Chambers of Commerce Government Agencies University Alumni Organizations Research Institutes Civic Organizations Regional Groups and Associations A Entrepreneurship Benchmarking Survey was launched in multiple countries to measure differences in entrepreneur attitudes towards various policies Web-based survey was launched with the help of the leading institutions for collaboration in each participating country Monitor creates a Web-based survey and includes Web link in the letter signed by key leaders 1 Dear [First Name]: We are writing to ask for your help in completing a short Monitor Group survey on the competitiveness of the Massachusetts economy. This is part of an effort to gain a better understanding of the economic and innovation performance, composition, and strengths and weaknesses of a number of industry clusters in the Commonwealth. Ultimately, this work will inform policy makers in the public and private sectors as they work to improve the competitive position of Massachusetts. Your insights will enable us to develop a deeper understanding of the Massachusetts economy, identify the sources of our current success, and help us build for our future. Thank you in advance for your participation in this important initiative. If you have any questions, or if we can be of help in any way, please contact Pedro Arboleda at Monitor Group (617-252-2668; email Pedro_Arboleda@Monitor.com ). Sincerely yours, Mitchell Adams Michael E Porter Lawrence Summers Charles Vest Mass Tech Collab Harvard University Harvard University MIT Please click on this link to go to survey: http://www.zoomerang.com/survey.zgi?970XV9GEXRFLDCSWJ8Y2BKRH

9. This model and the corresponding survey tool identifies key strengths, weaknesses, and priority areas for investment and upgrading Support Services Financing Legislation Mindset Admin. Burdens Skills and Talent Strengths Survey Average: 2.80 Index Weaknesses 1: Supply of Equity Capital 3: Financing Strategies 5: Supply of Debt Capital 7: Competency / Experience 9: Quality of Business Services 11: Incubators 13: Affordability of Technology 15: Credits / Incentives 17: Stock Option Rules 19: Government Impact 21: Individualist Culture 23: Attitudes Towards Bankruptcy 2: Access to Equity Capital 4: Exit Strategies 6: Skills Development 8: Supply of Business Services 10: Government Programs 12: Access to Technology 14: Spin-outs 16: Corporate / Business Taxes 18: Government Regulations 20: Legitimacy 22: Attitudes Towards Income Tax 24: Attitudes Towards Stock Options 6th-Level Composite Indicators Source Monitor Entrepreneurship Index Survey, 2003–2004; 2004 Russia Entrepreneurship Survey

10. …as well as for regional rankings on up to 120 specific questions relating to entrepreneurship policies Example: Question 116 – It is common for people who have failed in business to try again N * ? How would your region compare in specific questions relating to entrepreneur-ship policy? ? ? * Note: *Respondent counts below 30 are too low to be statistically significant and are considered indicative results, + Results represent a regional or city-level subset of a larger survey and are thus excluded from totals Source: Monitor Entrepreneurship Benchmarking Survey, 2003–2011

11. A more detailed look at key indicators would allow us to reveal the variance between your region and survey leaders on a number of key dimensions Financing Strategies China / India Credits / Incentives Skills Development China How far behind is your region compared to survey leaders in specific areas relating to entrepreneur-ship policy? China Singapore USA Attitudes Towards Income Tax Legitimacy Survey Leader Lowest Performer China Individualist Culture Note: Percentage refers to country mean as compared to highest possible score; shown in order of importance starting with financing strategies Source: Monitor Entrepreneurship Benchmarking Survey, 2003–2010; Monitor Analysis

12. We have identified several paths to greater entrepreneurship which give regions realistic alternatives to the “classic” Silicon Valley route • Examples of Regions • Examples of Firms • Pathway • Brief Description 1 Classic “Silicon Valley” Approach • University-developed IP is commercialized, in large part with the help of venture capital • Silicon Valley • Boston 2 Anchor Firm • A region attracts branch plants and R&D centers from which new firms spin-out, often with help and support of the anchor firm • Research Triangle • Vancouver, BC 4 Local Hero Role Model / “Home-Grown Genius” • A local entrepreneur achieves great success, and this motivates, and creates opportunities for more entrepreneurship • Seattle • Minneapolis 3 Event-Driven / External Trigger • Downsizing at established firms and/or research organizations forces and motivates entrepreneurial efforts • San Diego • Washington, DC

13. Typically regions undertake four interactive activities designed to develop a tailored plan to spur entrepreneurship in your region Assessing Goals • How much to invest in a plan to boost entrepreneurship? • Whether to try to increase: • Entrepreneurial attempts? • Entrepreneurial success rates? • Both? Benchmarking Strengths and Weaknesses Selecting an Entrepreneurship Model • Ask the entrepreneurs • What are the main strengths relative to other regions? • What are the main weaknesses relative to other regions? Developing an EntrepreneurshipPlan • Classic • Anchor firm spin-off • Home-grown genius • Event driven necessity • Assess trade-offs between investment choices • Feasibility • Resources Required • Impact

14. Strategically targeted policy interventions have strengthened entrepreneurship in countries where Monitor has worked (1 of 2) China Entrepreneurship Benchmarking Initiative Context • Entrepreneurship needed reform in China, given the dominance of state-owned enterprises • Benchmarking initiative was carried out in eight regions • Monitor began the work in 2005 and updated the study in 2007, cataloging the impact of reforms • Key partners: Chamber of Commerce, Development Research Centre of the State Source: 'Paths to Prosperity', Monitor Group, 2009; Zhou ‘Chinese Entrepreneurs Go Global’, Technology Information Review, 2012; T Kanamori ‘China’s SME Development Strategies in the Context of a National Innovation System’, World Bank, October 2007

15. Opportunity in Mexico • New administration laser-focused on reforms to increase Mexico’s competitiveness, including in entrepreneurship • Multi-agency initiative – el InstitutoEmprendedor – has been launched to consolidate, review, and reform policies and programs on entrepreneurship in Mexico • Manager of institute and Sub-Secretary Enrique Jacob has committed to using this study as the basis of his new entrepreneurship policy agenda and to repeating the study periodically to evaluate progress • Also committed to provide financial support – skin in the game • Sub-secretary and team under pressure to develop new policy platform by this fall – time is of the essence • Genuine opportunity to influence and strengthen policy environment for high-growth, high-impact entrepreneurship in Mexico