Subject Entrepreneurship

Segment Frameworks
Topic Where is Entrepreneurship?

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Table of Contents
1. Overview
2. Economic Freedom and Entrepreneurship
3. Economic Freedom and Policy
4. Entrepreneurs in Action
5. Self-Assessment
6. Summary

1. Overview

Since the fall of the Soviet Union in 1989 and the re-orientation of China under Deng
Xiao Ping in 1978, most of the world has adopted the model of entrepreneurial
capitalism in one form or another. This model allows people to start their own
businesses.
You learned about the definition of entrepreneurship. In this topic, we will continue
with the exploration of entrepreneurship.
We will explore the connection between economic freedom and entrepreneurship.
You will also learn how entrepreneurs worldwide deal with local conditions to build
their businesses.
Objectives: Where is Entrepreneurship?
Upon completion of this topic, you should be able to:
 recognise the relationship between economic freedom and entrepreneurship
 identify how the culture of an area affects entrepreneurship

2. Economic Freedom and Entrepreneurship

Two conditions must exist for entrepreneurship to flourish.
First, there must be economic freedom to establish a new venture.
Second, there must be favourable economic conditions that give an entrepreneurial
organisation the opportunity to gain and grow.
Economic freedom is based on the following set of principles that enable people to
start their own businesses.

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Subject Entrepreneurship
Segment Frameworks
Topic Where is Entrepreneurship?

 The establishment of the rule of law

 The principle of private property
 The acceptance and encouragement of private
wealth accumulation
 The mitigation of government interference and
regulation
 The promotion of free trade

Economic freedom fuels economic progress and is the foundation for promoting
individual entrepreneurship.

3. Economic Freedom and Policy

In recent years, researchers have made a number of attempts to rank countries by

the economic freedom their citizens enjoy. Such attempts require the construction of
indexes, which provide useful measures of economic freedom.
The Heritage Foundation and the Wall Street Journal® publish the annual Index of
Economic Freedom in a collaborative effort. This index is a practical reference guide
to the world's economies. It includes country-by-country analyses, and updated data
is available on foreign investment codes, taxes, tariffs, banking regulations,
monetary policy, black markets and so on.

Reading: The Index of Economic Freedom

Visit the Index of Economic Freedom website to review the Heritage Foundation's
study of Economic Freedom.
Consider the following activities while exploring the Index of Economic Freedom.
 Sort the countries by rank. Take a look at the top-ranked countries.
 Select your country and see how the foundation ranks your nation in terms of
economic freedom.
You will notice that more the economic freedom in a country, the wealthier its
citizens tend to be. For example, top-ranked Hong Kong's standard of living exceeds
that of Great Britain ($24,506 vs. $22,241), based on per capita GDP.
How are the countries ranked in the index?
The foundation examines a number of policy factors to create this index. These
policy factors include trade policies, taxation levels, government intervention and
regulation, monetary policies and so on. Different nations and geographic regions of
the world have different rankings, based on these policy factors. For example,
Argentina gets a very good ranking (4.0) for its trade policy, but a poor score for
monetary policy (1.0).

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Subject Entrepreneurship
Segment Frameworks
Topic Where is Entrepreneurship?

4. Entrepreneurs in Action
You looked at a country-by-country analysis of economic freedom while reviewing
the Index of Economic Freedom.
How do entrepreneurs cope with local conditions and strive to make their business a
success?
There are a number of great examples of entrepreneurs in action worldwide. Here
are some vignettes to give you an appreciation of how these entrepreneurs built
their businesses.
Learn more about the entrepreneurial stories by clicking the name of the country in
the presentation below.

Entrepreneurial Stories Worldwide

Let us learn more about some entrepreneurial stories from Russia, China, and
Australia.
Russia is emerging from the economic prison that was the Soviet Union. It has
become a place where entrepreneurs can flourish and succeed. It has also become
much more European, and the management and business styles of Russian
entrepreneurs are starting to converge with Western models of business behaviour
and strategy.
Mikhail Fridman is a Russian entrepreneur who finds himself on the cutting edge of
the Russian entrepreneurial revolution. He is a born entrepreneur and is now in the
process of integrating his homeland's businesses with Western corporations.
Read the article, RUSSIA: PROFILE - MIKHAIL FRIDMAN: ALFA GROUP CHAIRMAN
BUILDS RUSSIAN BENCHMARK, for an example of a Russian who is quite at home in
Europe and in the West.
Let us review an entrepreneurial story from China.
Entrepreneurship in China has flourished since the late 1970s and is responsible for
the tremendous growth of the Chinese economy. It also acted as a stabilising factor
for China as many state owned enterprises were forced to face domestic and
international competition. However, the entrepreneurs who pioneered the
revitalisation of the state sector did not always fare so well. Entrenched polices left
over from communist times are still a barrier to entrepreneurs. Corruption can
impede economic progress to a great extent, and the power of the state may inflict
hardship on entrepreneurs. However, most of the times, the struggle is worth it.
Read the article Fighting the State for an example of a risk taking Chinese
entrepreneur who found himself in jail and close to bankruptcy because of some
shady officials and the weak Chinese rule of law.
Let us review an entrepreneurial story from Australia
Rupert Murdoch and Kerry Packer are two of Australia's most famous entrepreneurs.
The sons of these two tycoons, Lachlan Murdoch and James Packer, followed their
fathers' footsteps and invested in One.Tel Ltd., the Sydney based telecom company.
One of the primary areas of entrepreneurship in Australia has been the development
of its telecommunications backbone and Internet service providers. Both Lachlan and
James were able to use their fathers' vast resources, assets and connections to

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Subject Entrepreneurship
Segment Frameworks
Topic Where is Entrepreneurship?

exploit this opportunity. Both of them are non executive directors, and play a
predominantly hands on role in the company.
Read the article, Don't Write Off This Billionaires' Boys Club, to know how they are
attempting to equal the legacy of their fathers and become significant successes in
their own right.

Note: This discussion on entrepreneurial stories worldwide references the following:

 Fridman, M., “ Alfa Group Chairman Builds Russian Benchmark”, Infoprod (30
January 2002)
 Becky, G. “ Don’t Write Off this Billionaires’ Boys Club”, BusinessWeek 3707
(13 November 2000): 32

5. Self-Assessment
Now, try the self-assessment questions to test your understanding of the topic. Click
the following link to open the Self-Assessment in a new window.
Self-Assessment
Q1. Which three of the following are factors in economic freedom?
1. The establishment of the rule of law
2. The principle of private property
3. The acceptance and encouragement of private wealth accumulation
4. Government protection for home industries
Q2. Which one of the following is NOT a barrier to entrepreneurship in China?
1. Trade Policy
2. Spoken Mandarin
3. Banking and Finance
4. Policies from the former communist regime

6. Summary
This topic covered the following points:
 Entrepreneurship and economic freedom are closely related.
 Different countries have different cultures for entrepreneurship and different
current trends.
 Understanding the culture of an area is necessary for successful business in
that area.
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