Rural development through entrepreneurship

Section I: Entrepreneurship and supporting institutions: an analytical approach
Entrepreneurship as an economic force in rural development1
Introduction Entrepreneurship concept Environment conducive to entrepreneurship References

Entrepreneurship in the development of a rural area1
Risk taking Change and uncertainty Decision-making Entrepreneurship in rural areas Conclusion

Concept for the development of entrepreneurial activities in the rural area for farmers and managers of small- and medium-sized entreprises1
Predominant contents of the years 1945-90 Excursion The development model Production (1 of 44)3/22/2011 11:34:00 PM

Rural development through entrepreneurship

Marketing Advisory services

Institutions supporting entrepreneurial restructuring of rural areas1
Introduction Public-private institutions partnership Some examples of successful partnership and institution building as factors in rural development Conclusions References

Section I: Entrepreneurship and supporting institutions: an analytical approach
Entrepreneurship as an economic force in rural development1

paper presented at the Seventh FAO/REU International Rural Development Summer School, Herrsching, Germany, 8-14 September 1994. T. Petrin FAO, Regional Office for Europe! Viale delle Terme di Caracalla, 00100 Rome, Italy Introduction Rural development is more than ever before linked to entrepreneurship. Institutions and individuals promoting rural development now see entrepreneurship as a strategic development intervention that could accelerate the rural development process. Furthermore, institutions and individuals seem to agree on the urgent need to promote rural enterprises: development agencies see rural entrepreneurship as an enormous employment potential; politicians see it as the key strategy to prevent rural unrest; farmers see it as an instrument for improving farm earnings; and women see it as an employment possibility near their homes which provides autonomy, independence and a reduced need for social support. To all these groups, however, entrepreneurship stands as a vehicle to improve the quality of life for individuals, families and (2 of 44)3/22/2011 11:34:00 PM

Rural development through entrepreneurship

communities and to sustain a healthy economy and environment. The entrepreneurial orientation to rural development accepts entrepreneurship as the central force of economic growth and development, without it other factors of development will be wasted or frittered away. However, the acceptance of entrepreneurship as a central development force by itself will not lead to rural development and the advancement of rural enterprises. What is needed in addition is an environment enabling entrepreneurship in rural areas. The existence of such an environment largely depends on policies promoting rural entrepreneurship. The effectiveness of such policies in turn depends on a conceptual framework about entrepreneurship, i.e., what it is and where it comes from. This paper deals with the following three issues: firstly, it sets out the reasons why promoting entrepreneurship is a force of economic change that must take place if many rural communities are to survive; secondly, it deals with what policies are necessary in order to create an environment in rural areas conducive to entrepreneurship; and thirdly, it considers women and entrepreneurship. Entrepreneurship concept The entrepreneurship concept, what it means and where it comes from, is the foundation for policies promoting entrepreneurship and the key to understanding the role of entrepreneurship in development. What, who and why? Defining entrepreneurship is not an easy task. There are almost as many definitions of entrepreneurship as there are scholar books on the subjects (Byrd W.A., 1987, p. 3). To some, entrepreneurship means primarily innovation, to others it means risk-taking? to others a market stabilising force and to others still it means starting, owning and managing a small business. Accordingly, the entrepreneur is then viewed as a person who either creates new combinations of production factors such as new methods of production, new products, new markets, finds new sources of supply and new organizational forms; or as a person who is willing to take risks; or a person who, by exploiting market opportunities, eliminates disequilibrium between aggregate supply and aggregate demand, or as one who owns and operates a business (Tyson, Petrin, Rogers, 1994, p. 2-3). To choose the definition of entrepreneurship most appropriate for the rural area context, it is important to bear in mind the entrepreneurial skills that will be needed to improve the quality of life for individuals, families and communities and to sustain a healthy economy and environment. Taking this into consideration, we will find that each of the traditional definitions has its own weakness (Tyson, Petrin, Rogers, 1994, p. 4). The first definition leaves little room for innovations that are not on the technological or organizational cutting edge, such as, adaptation of older technologies to a developing-country context, or entering into export markets already tapped by other firms. Defining entrepreneurship as risk-taking neglects other major elements of what we usually think of as entrepreneurship, such as a well-developed ability to recognise unexploited market opportunities. Entrepreneurship as a stabilising force limits entrepreneurship to reading markets disequilibria, while entrepreneurship defined as owning and operating a business, denies the possibility of entrepreneurial behaviour by non-owners, employees and managers (3 of 44)3/22/2011 11:34:00 PM

Rural development through entrepreneurship

who have no equity stake in the business. Therefore, the most appropriate definition of entrepreneurship that would fit into the rural development context, argued here, is the broader one, the one which defines entrepreneurship as: "a force that mobilises other resources to meet unmet market demand", "the ability to create and build something from practically nothing", "the process of creating value by pulling together a unique package of resources to exploit an opportunity"2.

combines definitions of entrepreneurship by Jones and Sakong, 1980; Timmons, 1989; Stevenson, et al., 1985. Entrepreneurship so defined, pertains to any new organization of productive factors and not exclusively to innovations that are on the technological or organizational cutting edge, it pertains to entrepreneurial activities both within and outside the organization. Entrepreneurship need not involve anything new from a global or even national perspective, but rather the adoption of new forms of business organizations, new technologies and new enterprises producing goods not previously available at a location (Petrin, 1991). This is why entrepreneurship is considered to be a prime mover in development and why nations, regions and communities that actively promote entrepreneurship development, demonstrate much higher growth rates and consequently higher levels of development than nations, regions and communities whose institutions, politics and culture hinder entrepreneurship. An entrepreneurial economy, whether on the national, regional or community level, differs significantly from a non-entrepreneurial economy in many respects, not only by its economic structure and its economic vigorousness, but also by the social vitality and quality of life which it offers with a consequent attractiveness to people. Economic structure is very dynamic and extremely competitive due to the rapid creation of new firms and the exit of 'old' stagnant and declining firms. It is populated with rapidly growing firms, gazelles as they are called in the literature of entrepreneurship. Gazelles are the key to economic development. As described by Twaalfhoven and Indivers (1993, pp. 3-4), they are run by dynamic entrepreneurs, who manage and lead their companies not only to remain in the business but to expand it. Dynamic entrepreneurs look for growth, they do not have only a vision but are also capable of making it happen. They think and act globally, look for expansion, rely on external resources, seek professional advice or they work with professional teams. They challenge competitors instead of avoiding them and take and share risks in a way that leads to success. In this way economic vitality of a country largely depends on the overall level of entrepreneurial capacity, i.e., on its ability to create rapidly growing companies, gazelles. Equally important is the speed by which new small companies are created. These phenomena explain why countries, regions and communities with a similar number of large and small firms show a completely different economic vitality. Economic vitality of a country is no doubt a necessary condition for social vitality. Without it other important factors that make living attractive in certain areas, such as education, health, social services, housing, transport facilities, flow of information and so on, cannot be developed and sustained in the area in the long run. As evidence suggests, it is false to assume that socially and economically depressed areas will transform into fast growing areas by injection of external investment funds and external expertise. Without (4 of 44)3/22/2011 11:34:00 PM

Entrepreneurial. creativity and innovative behaviour. orientation to rural development. depopulated. such as the need to achieve. It indicates where the governments. however. contrary to development based on bringing in human capital and investment from outside. a rural entrepreneur is someone who is prepared to stay in the rural area and contribute to the creation of local wealth. create something from practically nothing and create values by pulling together a unique package of resources to exploit an opportunity. such areas will become increasingly isolated. The standard perception is that entrepreneurship is a special personal feature. only certain entrepreneurial characteristics are innate. Entrepreneurship in rural areas is finding a unique blend of resources. poorer and therefore less and less capable of attracting people who.htm (5 of 44)3/22/2011 11:34:00 PM . the economic goals of an entrepreneur and the social goals of rural development are more strongly interlinked than in urban areas. external funds will be wasted on projects that will not provide long term economic growth. national. risk taking propensity4. or is not an entrepreneur. thus building up the critical mass of first generation entrepreneurs (Petrin. the need for http://www. Consequently instead of becoming more and more integrated into other economically and socially rich areas.Rural development through entrepreneurship entrepreneurial capabilities which are well developed or potentially available. as well as a dynamic entrepreneurship. is based on stimulating local entrepreneurial talent and subsequent growth of indigenous companies. are innate. regional or local. By their example they will stimulate an autonomous entrepreneurial process. It is important to stress that rural entrepreneurship in its substance does not differ from entrepreneurship in urban areas. given other available resources. it is necessary to increase the supply of entrepreneurs. active promotion policies have a small role to play. This can be achieved by widening the base of a farm business to include all the nonagricultural uses that available resources can be put to or through any major changes in land use or level of production other than those related solely to agriculture. 3Empirical research on the sources of entrepreneurship is For this reason entrepreneurship in rural areas is usually community based. According to this perception entrepreneurial traits. either inside or outside of agriculture. who will take risks and engage in the uncertainties of a new venture creation. 1992). This in turn would create jobs and add economic value to a region and community and at the same time keep scarce resources within the community. self-esteem and internal locus of control. then active promotion policies can contribute to entrepreneurship development in the community in the region and in the nation. If instead. either a person is. since entrepreneurial skills can be acquired through training. To accelerate economic development in rural areas. for example. To some degree. Thus. should target their promotional efforts. particularly within the discipline of psychology and sociology. thereby ensuring continuous rural development. If entrepreneurial skills. has strong extended family linkages and a relatively large impact on a rural community. the understanding where entrepreneurship comes from3 is as equally important as understanding the concept of entrepreneurship. would make an impact from a development standpoint. Sources of entrepreneurship From the policy viewpoint? the promotion of entrepreneurship.

can greatly affect the supply of entrepreneurs and thus indirectly represent an important source of are all inborn. educational background and the level of education. This of course is not in conflict with findings that entrepreneurs who are better educated are more successful than the less educated ones. the factors that contribute to the supply of entrepreneurs are an inheritance of entrepreneurial tradition.fao. since according to the explanation. This view has important implications for entrepreneurship development in rural areas. Consequently. are both viewed as a significant source of entrepreneurship. It is argued. Studies of family position of existing entrepreneurs demonstrate that entrepreneurs are often found among elder children. social status. According to this view. are more likely to become entrepreneurs than others. Therefore. It is claimed that to minorities small business ownership means escape form marginality (Weber's thesis of outsider groups as a source of economic activity? Weber. Apparently two things are involved simultaneously: propensity to start an entrepreneurial venture and skills to run the venture successfully. a widely accepted view is the following: while personal characteristics as well as social aspects clearly play some role. who are by a combination of different factors rendered outsiders in relation to the social groups with whom they normally interact. has not yet produced convincing results. The outsider group. Based on research into the origins of business owners. lacking in formal qualifications. loss of family ties). the marginal person. why certain individuals become entrepreneurs. 1987. Many examples of successful entrepreneurship confirm this statement and there is no reason why there should not be plenty of them. Whether educational background influences potential entrepreneurs or not is a matter of debate. By bringing together different capabilities and different experiences in entrepreneurship http://www. The popular idea of an entrepreneur is that of a totally self-made man. it is believed that persons who come from small business owner families.htm (6 of 44)3/22/2011 11:34:00 PM . If currently entrepreneurial activities in a given rural area are not thriving? one should not jump to the conclusion that entrepreneurship is something inherently alien to rural areas. occupational primacy. ethnic minority. contribute significantly to the development of entrepreneurship. proper action can make a lot of difference with respect to entrepreneurial behaviour of people living in rural areas. Therefore. or the outsider individual. they are pressed to take more authority and responsibility at earlier stages than younger members of the family. family position. The research which tries to explain. Development of entrepreneurs and of entrepreneurship can be stimulated through a set of supporting institutions and through deliberate innovative action which stimulates changes and fully supports capable individuals or groups. by personal traits and/or other social aspects.Rural development through entrepreneurship independence. policies and programmes designed specifically for entrepreneurship promotion. entrepreneurship and entrepreneurs can also be developed through conscious action. policies directed specifically towards promoting the development of entrepreneurship would not help much since chose characteristics cannot be acquired by training. that controllable variables such as a stable system of property rights and freedom of action in the economic sphere. availability of other inputs in the economy (besides entrepreneurship) as well as education and training. Another perception is that some cultures or some social groups are more conducive to entrepreneurial behaviour than others. reprint). 4Risk talking propensity here is understood as the perceived probability of receiving rewards (personal and financial) as opposed to the perceived probability of incurring a failure (bankruptcy. While this feeling could have some legacy due to the slower pace of changes occurring in rural areas compared to urban ones. fixation upon goals and dominance.

woodlands. as well as diversification into activities other than those solely related to agricultural usage. a miniature railway. The East Cleveland Training and Enterprise Group began as a group of four people in Loftus who were angry and http://www. everyone could enhance his/her own capabilities.htm (7 of 44)3/22/2011 11:34:00 PM . They are expanding their activities and markets and they find new markets for their products and services beyond the local boundaries. p. 18). go-kart tracks. servicing (consultancy). assault courses. After three years of investment.Rural development through entrepreneurship development. retailing and wholesaling. acting in the interest of their communities while playing the same role as an individual entrepreneur. for example. etc.. Diversification into non-agricultural uses of available resources such as catering for tourists. he created employment opportunities within the community. Let me turn now to illustrations related to social entrepreneurship. They responded to the dairy quotas imposed by the Government by diversification of their land for non-agricultural usage. p. crafts). a restaurant and various shops (Johnstone et al. To leave general examples of rural entrepreneurship behind. buildings. It is an example of how seeing and seizing the opportunity are vital ingredients of entrepreneurial success. all illustrating entrepreneurial initiatives. East Cleveland Training and Enterprise Group from Loftus. all fit into rural available skills and local features.) and the possibility of off-farm work. such as: a bobsleigh run. the adventure and leisure facilities were opened in 1987. individuals and local communities from Great Britain. let us look at the real cases. Rural entrepreneurship Many examples of successful rural entrepreneurship can already be found in literature. The names of entrepreneurs I have chosen to present here are not globally known but are no less important because of that. 1990. The entrepreneurial combinations of these resources are. boasting a range of attractions entirely unconnected with agriculture. p. carpentry. are new uses of land that enable a reduction in the intensity of agricultural production. Another one is John Anderson from Kirkwhelpington. Cheshire. wood. for example: tourism. 1990. By converting a two-storey building into four workshop units. This entrepreneurial venture is an example of a straightforward entrepreneurship and not so much an example of on-farm diversification. who created employment opportunities in the local area by restoring traditional stables into business premises and renting them out to a blacksmith who shoes horses and does light engineering work for farmers (Johnstone et al. The family converted 80 acres of land into an adventure and leisure complex.fao. Here only a few will be mentioned. milk. 1990. a pitch and putt golf course. are all real examples of social entrepreneurship. blacksmithing. One of them is Graham-Probin (Johnstone et al. spinning. organic production. owner of a 110 acre farm in Malpas. etc. value added (products from meat. Small Industries Groups in Somerset and Antur Teifi from West Wales. the use of resources other than land such as water. families and communities. professional and technical training. sport and recreation facilities. 9). for example. to examples of when people have changed things. Equally entrepreneurial. England. industrial applications (engineering.. They are very well known to the communities to which they belong and their initiatives are highly appreciated by the community members. Another is the McNamara family from Canaston Bridge.. amounting to £800 000. Dynamic rural entrepreneurs can also be found. a natural history centre. 9-10). motivation and determination in achieving the goal: attaining a sustainable and healthy rural economy and environment in order to ensure a high quality of life for individuals.

female entrepreneurs in rural areas still tend to be limited to what have traditionally been viewed as women's activities. a lecturer.Rural development through entrepreneurship frustrated at the lack of action by statutory bodies to tackle the area's unemployment (Johnstone et al. was started by a group of local volunteers who were concerned with the high level of unemployment and unbalanced structure of the local population (Johnstone. The creation of such an environment starts already at the national level with the foundation policies for macro-economic stability and for well-defined property rights as well as international orientation. The group has more than achieved these objectives. The long run solution for sustainable agricultural development is only one.. although the evidence shows that there are many activities in rural areas pursued by female entrepreneurs such as: trade. 109). handicrafts. running tourist establishments. it is not surprising that rural entrepreneurship is gaining in its importance as a force of economic change that must take place if many rural communities are to to favour self employment and business expansion. affecting not only industry but any economic activity including agriculture. Too often their names are not specifically mentioned. Antur Teifi. a sub-postmaster. However.e. The Small Industries Group Somerset. Since national economies are more and more globalized and competition is intensifying at an unprecedented pace.' competitive agriculture. 107). started with the objective of helping to create local jobs. an insurance broker. 1990. from the Teifi Valley. Protection of the domestic economy hinders instead of fosters entrepreneurship. improving environmental and property acquisition to benefit the community. Environment conducive to entrepreneurship Behind each of the success stories of rural entrepreneurship there is usually some sort of institutional support. 1990. catering. rural development is increasingly linked to enterprise development. et al. National agricultural policies such as price subsidies to guarantee minimum farm incomes and the keeping of land in production when over-production already exists are definitely counter-productive to entrepreneurship. p. initiating the establishment of a training and enterprise centre. However. The Group developed a large programme of activities. the enterprise agency. Although agriculture today still provides income to rural communities.fao. The founding group consisted of a dairy farmer. youth training. a youth worker and the manager of a field studies centre (Johnstone et al.htm (8 of 44)3/22/2011 11:34:00 PM . there is no woman's name. West Somerset. Besides individual or group entrepreneurial initiative the enabling environment supporting these initiatives is of utmost importance. production of basic consumer articles. p. 1990.. and bed and breakfast arrangements.. 109). entrepreneurship demands an enabling environment in order to flourish. alternative business opportunities and so on http://www. For ten years the Group greatly fostered the development of the community and contributed to the change of attitudes of farmers as well as local communities. food processing. p. such as employment training. i. While prices can set the direction. Also the scale of their entrepreneurial operation tends to be smaller when compared with male entrepreneurs. to establish new permanent jobs and to initiate activities to prevent the area's economic and cultural decline. Among the case studies presented here. compared to male entrepreneurs. The group set the objectives as follows: to identify and support community initiatives. entrepreneurs who will meet the challenge of increasingly demanding international markets and who will find profitable alternative uses of land.

where the scarcity of 'these other inputs' is the highest. http://www. While tradition is important it is nevertheless dangerous to be over-occupied with the past.Rural development through entrepreneurship are needed. Evidence shows that where this is the case. otherwise the rural community may turn into a nostalgia-driven society. The top down approach gains effectiveness when it is tailored to the local environment that it intends to support. Other institutions that can make a difference to rural development based on entrepreneurship are agricultural extension services.htm (9 of 44)3/22/2011 11:34:00 PM .e. capital. To realise their entrepreneurial ideas or to grow and sustain in business. The regional development agencies that fit both criteria can contribute much to rural development through entrepreneurship. management. universities and the private sector. are needed. labour. It requires not only the development of local entrepreneurial capabilities but also a coherent regional/local strategy. They must seek new entrepreneurial uses of land and support local initiative in this respect. social and community development. policies for increasing the effectiveness of entrepreneurs and policies for increasing demand for entrepreneurship can significantly speed up entrepreneurial activities at national. For example. individual and social entrepreneurship play an important role in rural economic. by pooling together different sources and skills. policies and programmes targeted more specifically at the development and channelling of entrepreneurial talent. and the 'top down'. Policies to increase the supply of entrepreneurs. by reaching a greater number of would be entrepreneurs and by assisting a greater number of local entrepreneurial initiatives. Professional advice is also hard to come by. markets and good management skills. The second prerequisite for its success is that ownership of the initiative remains in the hands of members of the local community. partnership among governments or nonprofit seeking organizations. is not important in itself. regional and community levels. distribution channels and skilled labour. What differs is the availability of markets for other inputs. complement each other. From the perspective of the process of entrepreneurship. entrepreneurial behaviour.fao. These are the reasons why rural entrepreneurship is more likely to flourish in those rural areas where the two approaches to rural development.. Entrepreneurship in rural areas can benefit a lot from the so called strategic development alliances. whether the location is urban. The policies and programmes targeted specifically to the development of entrepreneurship do not differ much with respect to location. they too must be entrepreneurially minded. they all need access to capital. The inputs into an entrepreneurial process.e. can have a much more positive effect on rural development than when each agency is working on its own. Consequently. They must see agricultural activities as one of many possible activities that contribute to rural development. i. policies developing the market for other inputs into successful entrepreneurship. semi-rural or rural. the ability to spot unconventional market opportunities. tend to be easier to find in urban areas. to be able to act in this direction. is most lacking in those rural areas where it is most needed i.. the needs of a would be entrepreneur or an existing small business do not differ much from those in an urban area. Networking between different agencies involved in the promotion of rural development through entrepreneurship. technology. the 'bottom up. Developing entrepreneurs requires a much more complex approach to rural development than is many times the case in buildings. communications and transportation infrastructure. However. Therefore.

the gender issue is usually a much stronger hindering factor to potential female entrepreneurs than it is in urban areas. there is no difference in characteristics such as achievement. No. independence and benevolence between female and male entrepreneurs (Hisrich and Brush. their self-esteem and managerial skills being lower when compared to urban women and access to external financial resources more difficult than in urban areas. policy implications for rural entrepreneurship development are: · sound national economic policy with respect to agriculture. Also. aggression. to start to develop their own ventures.Rural development through entrepreneurship To summarise. the concept. p. may do things differently. It should be stressed that rural women can encounter many constraints when trying to take part in the transformation process. · entrepreneurial thinking about rural development. In rural areas. including recognition of the vital contribution of entrepreneurship to rural economic development. in comparison to male entrepreneurs. to expand their already existing businesses. women tend to work more in teams. positive discrimination and equal opportunity' politics do not help the http://www. Women entrepreneurs Is there still a need to talk specifically about women entrepreneurs. I firmly believe that quotas. 37): "Nowadays. because all that has been said about entrepreneurship is directly applicable to women. However. going all over the country and abroad to speak on development programmes for women. based on my own experience as well as on the experiences of so many entrepreneurial women I have met across the world in my profession and in business. 1984).fao. special programmes of assistance (technical and financial) to overcome these constraints should be developed and designed to meet the needs of rural women in order to be able to take an active part in entrepreneurial restructuring of their communities. autonomy. · policies and special programmes for the development and channelling of entrepreneurial talent. are less self-centred and personal ego to them is less important than success of the organization or business idea they are pursuing. To this end. However. it is the individuality which must stand out and there are no general recipes to be presented. we do need to talk explicitly about women entrepreneurs. no differences were found in risk taking propensity of male and female entrepreneurs. or to function as social entrepreneurs since their number today is still below the potential one.htm (10 of 44)3/22/2011 11:34:00 PM . reflecting on the phenomenon of the successful female manager read entrepreneur). characteristics. and · institutions supporting the development of rural entrepreneurship as well as strategic development alliances. on top of everything that has been already said'? Yes and no. For example. sources' etc. Women entrepreneurs. After my years as President of the Swiss Federation of Business and Professional Women. Rural areas tend to be more traditional in regard to the gender issue. Therefore. I very much agree with Juliana Schwager-Jebbink's comment (1991. not only by farmers but also by everyone and every rural development organization. as research

Austria. Prokopenko and and N. Cambridge. D.. D. W.htm (11 of 44)3/22/2011 11:34:00 PM .H. Pavlin (eds. MA: Harvard University Press. and. pp.D. Community Work. they will be lost and then the role of women in rural development will be much below their potential. W. 190-207. 7-13.. Washington. IL: Irwin. pp.fao. Schwager-Jebbink. Jones. B. C. Entrepreneurship Development in Public Enterprises.A. Stevenson. 'The Potential of Entrepreneurship to Create Income and New Jobs for Rural Women and Families'. and I. 'Entrepreneurship.).C. The Entrepreneurial Mind. Delwel Publisher.E. (1992). entrepreneurial opportunities will not be seen. paper presented at the Sixth Session of the FAO/ECA Working Party on Women and the Agricultural Family in Rural Development. Twaalfhoven. Petrin. L. Koellermeier (eds).. T. Management Education and Development for Women Conference. paper presented at the Fifth Session of the FAO/ECA Working Party on Women and the Agricultural Family in Rural Development. http://www.K. Petrin. Taylor (1990). Homewood. Business and Entrepreneurship in Economic Development: Korean Case. 1993. Andover: Brick House. Stone and R.M. 'Partnership and Institution Building as Factors in Rural Development'. ILO. Johonstone. (1989). H. Journal of Small Business Management. 5 October.W. (1985). pp. (1990).A. Brush (1984) 'The Women Entrepreneurs: Management Skills and Business Problems'. Government. M. Geneva and International Center for Public Enterprises in Developing Countries. Billings Book Plan. capital and ownership'. Great Britain. Without it. Timmons. T. Views From the Top. The Hague.D. Abell and T.F. " This belief is the one for which we as trainers are responsible to bring to rural women in addition to trying to put in place all factors crucial for rural women to enter into entrepreneurial activities. 22. (1987). 30-37. Innsbruck. (1991). pp. New Business Ventures and The Entrepreneur. Prague. The World Bank. Petrin. V. J. et al. Worcester. 13-16 October. References Byrd. J. Mimeo. (1991). 'The Role of Dynamic Entrepreneurs' in Dynamic Entrepreneurship in Eastern Europe. T. This is true for all of Europe.Rural development through entrepreneurship female manager (read entrepreneur): it is she herself who must do the managing of her life. Sakong (1980). Indivers (1993). C. 7-33. Nicholson. 2-5 October. R. Ljubljana. Hisrich. 'Is Entrepreneurship Possible in Public Enterprises'?' in J. Henley Management College.

In reading his obituary at the time I was beginning to think about what I wanted to discuss in this paper.D. 'Promoting Entrepreneurship in Central and Eastern Europe'. Too often we confuse entrepreneurship with business or doing business. Honda's biography quotes him as saying the following in recalling his first encounter with an automobile: "It was the first car I saw. It was then I dreamed of manufacturing a car myself some day. Honda. Weber. Kao of the Harvard Business School points out in his http://www. (1987). pp. Honda's life had a lot to say about the real 'entrepreneur'. U.htm (12 of 44)3/22/2011 11:34:00 PM . it struck me that Mr. What a thrill. a popular mode of transportation in the years following World War II. At the time of his death." Soichiro Honda was an entrepreneur. M. founded a piston ring manufacturing concern while attending school and then started what later became Honda Motor Company. Originally it attached recycled engines to bicycles. they cannot expect to do a good job. Mikkeli." Honda started as a successful mechanic. He often wore wild colours. as John J. Soichiro Honda died at the age of 84. Honda is said to have been more at home on the factory floor than in the boardroom. Petrin and H. published 1930). How nice the smell was. Rogers (1994).S. held the title of Supreme I smeared my hands with the oil and deeply inhaled the smell. who retired from Honda Motor Company in 1973. He placed great faith in the young technicians of his many factories and laboratories.fao. Honda was the son of a blacksmith and saw his first car as an 8 year old boy when a Model-T Ford rumbled into his home town in central Japan. Mr. Johnsrud US Department of Agriculture. M. The Protestant Ethic and the Spirit of Capitalism. 1-20.A. T.. 16-20 September 1991. Finland. On 5 August 1991. preferring overalls to business suits. Extension Service. The two simply are not the same. North Dakota. Oil dropped when it came to a halt.Rural development through entrepreneurship Tyson. I put down my nose to the ground like a dog and sniffed it. London (orig. explaining that unless inventors and artists "have the courage and determination to break with established ideas. Unwin. His first motorcycle called 'Dream' was introduced in 1949. Entrepreneurship in the development of a rural area1 1Keynote paper presented at the Fourth FAO/REU International Rural Development Summer School. Small Business Economics 6. L.

Entrepreneurs may flirt with danger to achieve their visions. While a little later I will briefly discuss some of the approaches we are trying in the U. entrepreneurship is fundamentally less about technical skills than about people and their passions. Yes.fao. they are risk takers. Emerging industries in some ways resemble a casino where a range of bets are placed on different strategies. but they did it anyway. I will focus most of my remarks on finding and motivating entrepreneurs encouraging risktaking and embracing change. Entrepreneurs find leverage through others to amplify their visions. Finally David was considered too young. In finding entrepreneurs and seeking out opportunities for entrepreneurship. Entrepreneurs must often create the demand for their products and/or services. They manage effectively in dealing with the ambiguity and uncertainty that surround the creation of an idea and the organizational vehicle developed around it. to encourage entrepreneurship in rural development through entrepreneurship recent book titled The Entrepreneurial Organization. entrepreneurship is the process of opportunity recognition and implementation. was judged to be too old to start a business. http://www. Florence Chadwick knew other swimmers had died crossing the English channel.A. For example. unskilled and poorly equipped to face Goliath. simply because he never combed his hair or wore socks. people.S. Entrepreneurs frequently make what seems impossible. Entrepreneurship is a lot more about inner drive than outward trappings and appearances. much of what runs into an entrepreneurial success is unpredictable. Successful entrepreneurship is hard work carried out in an unpredictable environment. people. He says that entrepreneurship has nothing to do with the setting. Colonel Sanders. The Wright Brothers knew no one had ever flown before. founder of Kentucky Fried Chicken. Just as Honda placed great faith in his young technicians. You cannot tell an entrepreneur by the way he or she dresses. Henry Ford faced a lack of demand for his autos. In short. While I will talk about patterns that tend to distinguish the mind set and behaviour of entrepreneurs from others. people and approaches. some thought Albert Einstein was mentally retarded and fit for little. Entrepreneurship is possible at any age. It often begins with a vision or idea for a product or process coupled with a passion or zeal to make that idea a reality. possible.htm (13 of 44)3/22/2011 11:34:00 PM . Simply stated. successful entrepreneurs understand that the three principles of entrepreneurship are people. It requires a blend of calculation and luck laced with the ever present possibility of failure. we have to take care not to make unfounded assumptions based on conventional wisdom.

listen. inflexible front-line people. Politics turned ugly. an entrepreneur has to match that idea or dream with what a customer thinks he or she wants. Risk taking Peter Drucker once said that "People who do not take risks generally make about two big mistakes a year. Michael Porter in his book Competitive Strategy states that new or evolving businesses must make a wide range of critical organizational choices that will determine their competitive fate. listen. inflexible systems. weaving. · being creative technologically. loving change. Why'? Because a risk averse.. Porter says these barriers against competition come less from the need to command massive resources than from: · the ability to bear risk. Today. Tom Peters. they can create barriers to competitors. and · making forward-looking decisions to attract people to work. They clung to the established order. But within only a hundred years they were overtaken by the English.Rural development through entrepreneurship The point is that entrepreneurship is usually about very determined people. a business is an organization that has customers. People who do take risks generally make about two big mistakes a year''. even chaos is a prerequisite for survival. he simply stated. If entrepreneurship is fundamentally about people and ideas. the 1 7th century Dutch were the vigorous economic and social innovators of their time. To stay in business. people who make their own circumstances and breaks and succeed. If they make the right Sometimes not taking a risk is a risk. Those who had accumulated fortunes in the years of prosperity attended exclusively to keeping them. and worst of all. Peters argues that organizations must be structured for change. in Thriving on Chaos states: "Every variable is up for grabs. They refused to risk rearranging the safety of the present and thus missed the chance to have the talents. mapmaking and navigation.htm (14 of 44)3/22/2011 11:34:00 PM . skills and organizational arrangements on line when they were needed. let alone successes". what is business'? To quote Kao again. fearful attitude settled over Holland. Public spirit disintegrated. not stability. tumult. That managers must take greater risks. trust people to innovate and insist on absolute integrity.. and again this requires understanding people. listen. get better at seeing the whole picture. fishing. we are meeting the challenge with inflexible factories. threatened by new ways of doing things. inflexible managers who still yearn for a bygone era when presiding over the opening of a new plant was the most strenuous chore to be performed. For example. http://www. The Dutch became slow to adopt new advances in shipbuilding.fao. No society or business can thrive today without taking risks and adjusting to change.

power or status. "May you live in interesting times". prioritise. Franchising is increasingly viewed as a middle ground for those who want to start a business. · are creative problem solvers. There are no magic formulas or tried and true approaches that are guaranteed to work. S. In the U. pricing. Risks are minimised for franchisee-entrepreneurs with only a 5% discontinuance rate in the first year compared with a 30-50% rate of small business failures in the first year in the U. Risk aversion may be one of the most vexing problems you face in attempting to promote rural entrepreneurship. · have strong human and organizational skills. but nearly all successful entrepreneurs: · cope well or even thrive on uncertainty. fear of losing control. Fear of failure. customer response and product/service in a reasonable length of time.S. Other strategies can also be used to help limit real risk.Rural development through entrepreneurship So what prevents people from taking risks? In short the answer is FEAR.htm (15 of 44)3/22/2011 11:34:00 PM . First.S. viability of the original idea.A. execute and most importantly. In the U. There are currently more than 2200 franchisers in more than seventy industries. but also want the security of attachment to a business already established in the market place and providing detailed operating procedures to make decisions.. Most experts agree that not everyone is suited for the entrepreneurial task. fear of uncertainty. and http://www. Interesting times are the curse and the blessing of an entrepreneurial firm and it is the true entrepreneur who can handle the sources of uncertainty that come with the territory without falling apart. fear of conflict. manage. There are strategies that can be used to encourage greater risk taking particularly by addressing people's fears.fao.A. fear of rejection. He or she must be able to lead. An entrepreneur must be more like a bamboo plant able to sway in any wind without breaking versus a rigid tree that can easily be toppled by a sudden storm. with franchising pre-eminent among them.A. identify. self-employment has tripled during the past fifteen years with women accounting for most of the growth. Change and uncertainty There is an old Chinese curse that says. the business opportunity itself is surrounded with uncertainty questions to be answered about market size. franchise-format businesses have more than doubled in the past ten years.

circumstances. we have to go ahead now. http://www. There is often a linkage between deciding and acting to carry through. The point here is that people who can judge when a decision needs to be made and make it are far more likely to succeed in entrepreneurial ventures. I have tried to review some of the most basic characteristics noted in the lives of successful entrepreneurs: · they can orchestrate people. Entrepreneurship in rural areas To recap then. Not making a decision can be a bad decision. It took Noah Webster thirtysix years to develop his dictionary. So let's move it". Entrepreneurs must also expect to put in long hours more like five to nine. founder of McDonald's hamburger chain. cannot be depended upon to carry through on decisions made. rather than nine to five and be patient with the complex. strategies and technologies to fit changing environments. Determination and discipline to see the job through separate entrepreneurial successes from failures. diverse task at hand. Cyrus Field endured nearly thirteen years of toil and thity ocean voyages before successfully laying the Atlantic development through entrepreneurship · understand the relationships between organization. but making the right decision for future.fao. In my experience. Dwight Eisenhower had a difficult time deciding on the best moment for the D Day attack. Waiting any longer could be even more dangerous. Finally he is quoted as saying. The other trick is deciding not on the basis of the past or present. · they are determined and disciplined in implementing their visions and ideas. strategies and environment. Ray Kroc. and · they enjoy deciding and make forward looking decisions. I mentioned Honda's lifetime dedication to implementing his boyhood dream.htm (16 of 44)3/22/2011 11:34:00 PM . Decision-making Making decisions is a criterion for success. as yet unknown. a person who cannot reach a decision promptly once he has all the necessary information. had the discipline to automate every step of the preparation process for his burgers and fries. "No matter what the weather looks like. · they thrive on change and cope well with uncertainty. · they are usually creative risk-takers.

D & M Computing is doing pioneering work in robotics and automation. Minnesota. seeking leadership with these characteristics is essential. I think we have done a lot for general process type community development that has not resulted in a real economic pay-off. we should not be naive about what adult training can or cannot accomplish. the Rural Economy Development Programme is another example of a programme designed http://www. Or.. could change the future of some of these areas. many of our potential rural entrepreneurs leave these areas for a variety of reasons. Ortner. His work so impressed the company that sold the arms that eventually Ortner took over assembly of the firm's robots. The firm also gets statistical research assistance from Moorhead State University and medical research help from Case Western Reserve University in Cleveland. after an investor friend of his who holds the patent on the filter decided to bring the manufacturing to Kennedy.A. Today. They did a modest business in servicing computers. before young people seek 'better' possibilities in cities and towns.Rural development through entrepreneurship In encouraging entrepreneurship in rural areas. got into the robotics business after he bought a robotic arm for an incapacitated friend that did not work properly.S. national policy and financing barriers that have also played a role. 42 years. a town of about 500 people located in Northwest Minnesota. In the U. I can be quite critical. take the case of Byron Bowman of Kennedy. from greater opportunities elsewhere to more amenities available in cities. However. Minnesota.. of course. Bowman industries produces an innovative type of water filter and provides jobs for twelve people.A. North We do know if the situation could be different. Ortner stepped in putting together an assembly line in his mother's Fargo home. Ohio.S. There are. In Wisconsin. after bouncing back and forth across the Red River between Fargo' North Dakota and Moorhead.. Bowman got into the business. Last year the Greater Minnesota Corporation granted US$99 000 to the twenty-five employee firm to fund development of a new system for analysing data from automated blood particle counters to assist in diagnosing blood diseases. in Fargo. When I look at our rural development efforts in the U. I do believe that more targeted and focused programmes directed toward real entrepreneurship could become a more viable possibility today. Let me use a case example from my home state of North Dakota. at least twice. He redesigned its electronics. particularly with new communication technologies.fao. A more long-range but perhaps more promising educational approach is to encourage development of these entrepreneurial characteristics in young people.htm (17 of 44)3/22/2011 11:34:00 PM . making a rapid transition from farming to manufacturing. They have customers world-wide and sales of more than US $2 million in 199(). In 1974 David and Michael Ortner opened D & M Computing? Inc. When the company went out of business. Putting in place local opportunities. While training can help people improve in some of these areas.

distributing wholesale pizza products. For a number of years USDA has supported Rural Development Centres in various locations in the U. We anticipate. producing neon signs and display items for retail and service industries. In July. and other countries to start businesses and market products from rural areas. The review panel recommended that each of these centres needed a strategic plan and that they should broaden their vision but sharpen their focus. market research and other business the stakeholders and the formation of new alliances and partnerships with organizations such as community colleges. Within the U.S.S. we are implementing a Presidential initiative in rural development and co-operating in the establishment of a new Rural Development Administration. marketing compressed alfalfa products.htm (18 of 44)3/22/2011 11:34:00 PM . maintaining and repairing micro-electronic equipment.Rural development through entrepreneurship to target promising entrepreneurial ventures assisting with loans and grants for feasibility studies.S. we think that the entire Co-operative Extension System can strengthen its entrepreneurial efforts in rural areas by linking with others. more links to their constituencies. to engage local planning groups in coping with these two important areas.A. Finally. as well as traditional educational delivery methods. They encouraged expanding the governing boards to get closer to the customer. growing and marketing shiitake and oyster mushrooms. The panel also said that the centres needed a broader base. manufacturing organic yoghurt. It is too early to know the full scope of funding and operations. Department of Agriculture (USDA). In Kansas. wholesaling and distribution operations. International Marketing that is assisting rural communities to better understand the global market place and begin to use computer intelligence from the U. at the request of our Users Advisory Board.fao. the universities and other Federal Government entities. however.S. Conclusion http://www. We also have a national initiative in U. restoring native plants.A.A. We will be using satellite communication technology. The panel recommended improved scanning of the regional environment to accomplish the broader vision and improve the priority setting mechanisms to assure that resources are targeted to the points most likely to make a difference. we undertook a full scale review of the activities and accomplishments of these centres. that the Co-operative Extension System will continue to have a major role in providing information and education to rural entrepreneurs and that our staff may play a broker role in assisting rural-based businesses to link with appropriate public and private sources of financing and strategic planning. We are forming a new strategic relationship with the National Association of Counties in the area of Aging Population and Aging Infrastructure. selling cut flowers. and manufacturing a new type of energy-efficient horticultural lighting developed jointly with the University of Wisconsin. Some of the recent awards went to rural businesses offering recycling services and containers. the Co-operative Extension staff are working to bring venture capital investments to rural areas in manufacturing.

fao. plead and badger government ministries for equipment. As soon as you start hesitating. you'd better just give up. 2-5 October 1990. We are going to have to be more entrepreneurial ourselves. has pulled together a virtual agricultural empire. let me just say that finding. feasibility and market studies and analysis are necessary parts of new business start-ups. You can put a frog in a pot of hot water and that frog will not notice the temperature rise. However. Just three years ago there were fewer than 1000 private farmers in the USSR. Czechoslovakia. And I will not give up. I am sure we'll make if". because I think the environment has changed and we must change with it. we shall wake up and find out that we have been boiled. I know that we in the U. This is a man who made eighty trips to Moscow to beg. Chumak.Rural development through entrepreneurship In conclusion. willingness to take risks. encouraging and motivating entrepreneurs in rural areas is not an easy proposition.and medium-sized entreprises1 1Paper presented at the Fifth Session of the FAO/ECA Working Party on Women and the Agricultural Family m Rural Development. If we do. Optimism is the heart and soul of the entrepreneur. Let me end with a story of a rural entrepreneur from another part of the world. twelve tractors. I have been asking our rural development staff some tough questions about what we are doing. we cannot ignore the changes occurring in our environment. you have got to be certain you can do it. Those of us in the business of identifying and 'developing' entrepreneurs in rural areas must build our programmes upon these human traits associated with successful change. waited for a printout to see whether they should launch their new idea. Löhmöller http://www. dreams. 1 00 head of cattle. very few real entrepreneurs. We cannot be like the frog. doubting yourself. I am always sure of myself and people.htm (19 of 44)3/22/2011 11:34:00 PM . Co-operative Extension System are going to have to change some of the ways we currently do business to be really useful to rural-based entrepreneurship. I think we must all guard against this tendency. While strategic planning. In a little more than two years. S. G. He has 1600 acres. Victor Chumak. To achieve a goal you have got to be a gambler. His achievement and maniacal dedication shatter the stereotype of Soviet passivity. described as a bull-like man whose flair for work is surpassed only by his remarkable command of Russian profanity. Now there are more than 50 000. the famous and not so famous. to the real entrepreneur looking on the dark side of the situation is fatal. two harvesters and three trucks. He has taken on four young families as partners and built a house for each of them. Let me end with a quotation from Chumak: "I have this dream and I want to see it come true. These are the words of entrepreneurship. determination. Concept for the development of entrepreneurial activities in the rural area for farmers and managers of small.

since it always has been a problem to provide sufficient food supplies for the population. It is time to substitute the antiquated concepts for new ones so that the basis of active future-shaping will be conserved. The law of diminishing rate of returns teaches us that 'close to the limit' things get harder instead of easier. Germany Due to the predominance of existing concepts of entrepreneurial thinking during the last 45 years. Considering the economy as a whole.Rural development through entrepreneurship Verein Land-Bildung In der Wehrhecke 1 D-53125 Bonn. http://www. such a concept cannot be the main pillar of entrepreneurial thinking if markets are saturated. Predominant contents of the years 1945-90 The oldest and most important concept of entrepreneurial thinking in the agricultural sector is 'production'. This concept meets its limits if markets are Figure 1 .The production concept This does not mean that production techniques and the command of productive processes are no longer important. the active shaping of the future has been neglected.htm (20 of 44)3/22/2011 11:34:00 PM .

arguing and gathering information. this concept has also been exhausted. Once things have come to that point. as we said before. Nobody talks about rising prices any more. The question now is how to avoid prices falling too much.fao. This has not been of any advantage for the development of a greater sense of responsibility for their own situation. things are not becoming easier.htm (21 of 44)3/22/2011 11:34:00 PM . the conclusion remains true that the concept 'production' can no longer be number one in entrepreneurial thinking. It also means to be subject to the laws of mass production. Development of prices became the central point of agricultural policies. since the individual farmer had little influence on the development of prices at the political level. Nevertheless.Rural development through entrepreneurship Producing close to the limit means rationalising the production processes to meet higher quality standards and to cope with falling prices. Figure 2 . This contributed very much to a positive development of income in the agricultural sector. the farmers' activities were necessarily restricted to observing.The production and price concept http://www. However. The concept 'production' was expanded in the industrialised nations during the 1950s and 1960s by the subject 'prices'.org/docrep/w6882e/w6882e02. However. only specialists can manage the situation.

Rural development through entrepreneurship Also here. as everyone knows. making profit and on growth. as an aspect of entrepreneurial thinking. as everywhere in the field of entrepreneurial thinking. a fact which also has its drawbacks. is not enough to guarantee the survival of the enterprise. It is from this third post-war concept that management thinking which is directed towards rationalising and growth. In other economic areas. Figure 3 . had to be put into practice by the individual farmer or entrepreneur. but this does not at all make it redundant. The next concept and subject. has derived its actual predominance. The law of diminishing rate of returns is again true: price policy has become mole (22 of 44)3/22/2011 11:34:00 PM . this does not mean that price policy within agricultural policies is no longer important. the assertion exists that the concentration of entrepreneurial thinking on rationalising.fao. we can say: when one concept comes to an end the next one is needed. The farmers who immediately adopted this new way of thinking are still fairly well off in relation to the rest.The cost structure concept (a) http://www. It only means that price policy can no longer be taken as the basic concept. 'optimising the cost structures within the enterprise'. but there are considerable differences to be noted.

fao.htm (23 of 44)3/22/2011 11:34:00 PM .Rural development through entrepreneurship Figure 4 .org/docrep/w6882e/w6882e02.The cost structure concept (b) http://www.

The new concept . Figure 5 . the real challenge to the future entrepreneur.htm (24 of 44)3/22/2011 11:34:00 PM .creativity and flexibility no matter whether he is a farmer or not. There are three reasons for this which will be explained after a short 'excursion'.fao.Rural development through entrepreneurship The question is: what does the concept as the basis for the future look like if 'rationalising' is no longer enough? The new concept. is: creativity and flexibility.

Investments have to pay almost without (25 of 44)3/22/2011 11:34:00 PM . That is why they are oriented towards quick profit when doing business. 6 September 1991). 37. the first one yields a profit of 70 ()00. If profit increase is put first. So other things can be given priority. the decision between two investment possibilities is easy if. Quite different are the Japanese: they do not have to make these quarterly reports. Every child knows that 70 000 is more than 20 000. American enterprises have to report their business results every three months.fao. for example.Rural development through entrepreneurship Excursion In the following we want to demonstrate the basic differences between the American and the Japanese way of thinking (compare 'Die Zeit' Nr. and the other one a profit of 20 000. If other questions are in the foreground such as: · Do I invest in an expanding or recessionary market? · Am I going to make new experiments? http://www.

markets. political systems. How difficult it is to foresee such changes was to be observed not long ago in the Eastern European countries. The three reasons why the predominant concept in the future will be 'creativity and flexibility' are the following: · the complexity of systems and the fact There is no effect without a side-effect. and · the constant devaluation of expert knowledge. The ability to adjust to new and generally not foreseeable situations is the real challenge to the future entrepreneurs/managers. whether.fao. The complexity of systems We live in systems. The cost-trap Raw material markets and markets for mass products are characterised by growing quality demands and http://www. Systems are e.Rural development through entrepreneurship · Am I going to learn new techniques? · Do I get new insights into trends and developments? · Will my market shares improve? · What would be the chances of development in one or the other case after ten or twenty years? · Etc. enterprises and above all. For many decades. More decisive is the aspect that systems change and these changes cannot be foreseen. the Japanese acted more according to the second procedure and nowadays. the rest of the world stands in fear of them. it is not possible to predict changes in systems. The question then would be.g.htm (26 of 44)3/22/2011 11:34:00 PM . The causal thinking (the liner thinking of cause/effect) does not meet reality. economic systems. There is always a network of inter-dependencies. Systems are complex. soil. the difference of 50 000 would be acceptable in exchange for the long term survival guarantee of the enterprise. referring to the above example. as a rule. This ability is called flexibility and it needs a lot of creativity. climate. · the 'cost-trap'. The judgement of the advantages of each investment might be quite different.

The more successful the rationalising process proves to be.fao. The way out is to find new solutions to the problems and new products.Marketing concepts: the way of escaping the rationalization trap http://www. profit making and expanding does not guarantee the survival of the enterprise. As long as this is the main concept there is no way of escaping the trap. The problem arising from rationalisation is the increased quantities which lead to falling prices if markets are full. There is only one way of escaping this trap: creativity and flexibility. Rationalisation means to optimise the production process taking into account the existing technical equipment and if that is no longer possible. That means rationalisation. What is really necessary for an efficient manager is to produce according to these conditions. The trend is developing towards smaller markets. Those who were able to do it have no problem for the time being but they will push others out of the market. This always results in rising fixed costs. more individual target groups and new ways of solving problems. larger production quantities and falling variable costs. starting with brand names. to start the next investment.Rural development through entrepreneurship falling prices. process is necessary for survival and at the same time it is the cause for dismissals. when changing from stables where the cows are tied up to boxes which are technically well-equipped). This shows quite clearly that the exclusive concentration of entrepreneurial thinking on rationalising. The process of rationalising brings about an automatism which in principle leads to the elimination of those offering at less competitive were forerunners. the more it is sped up.htm (27 of 44)3/22/2011 11:34:00 PM . Reduction of variable costs always includes cutting staff expenses: employees can be dismissed or one employee can manage larger quantities (e.g. That sweeps all those from the market who have not cut their variable costs in time. Figure 6 . All the marketing concepts known from business. The rationalising.

growth means way or the other? There is no doubt that economic growth is necessary. In the case of low-price mass-production.htm (28 of 44)3/22/2011 11:34:00 PM quadrupling the output. The inverse ratio of price and cost development simply demands it. Figure 7 .Rural development through entrepreneurship Growth . until it is no longer possible to produce profitably. trebling.Product lifecycle http://www. etc.

it is necessary to constantly produce increasing quantities in order to obtain a determined profit. cost structures and prices become significant again. techniques of production.htm (29 of 44)3/22/2011 11:34:00 PM . This shows that the real achievement is creativity. creativity. The necessary growth can also be reached through additional products. to already develop new products during a profitable phase in the product lifecycle. but the real achievement is creativity. The actual task of the entrepreneur is. the quantities produced become less 'profitable'. As soon as possibilities for new products have been found. together with his everyday work. therefore. another entrepreneurial quality is required. If business growth is to be achieved by introducing new The real achievement of the entrepreneur is.fao. Therefore.Growth by introducing new products http://www. New product ideas have to occur to you.Rural development through entrepreneurship As a consequence of the decline in prices. Figure 8 .

a specialist cannot afford to be just a specialist. Unfortunately specialised knowledge is far too often a trap for creativity.htm (30 of 44)3/22/2011 11:34:00 PM .org/docrep/w6882e/w6882e02. it is a model for the development of rural areas. http://www. he has to update his knowledge at short intervals.fao. The Enterprise (E) is in the centre and includes the sectors Production (P). however. it is important to keep in mind the demands which the entrepreneurs will have to meet in the future. must become a specialist and for that he needs specialised knowledge. In these fast changing times. which gives the necessary flexibility and develops creativity. The following model considers these issues and at the same time. The development model In creating the model for development and education. The practical man. He has to know methods which make it possible and easier for him to constantly acquire new knowledge.Rural development through entrepreneurship The constant devaluation of expert knowledge Knowledge in any one field becomes obsolete fast. Therefore. Marketing (M) and Development (D).

products have to develop. three steps of development are introduced for the development of the enterprise.Model for the development of rural areas Production From the production sector. New products widen the basis thus strengthening independence and helping the enterprise to The next grade follows with new product qualities (Q2). goods and services. The basis for the development is marketing of the produced goods. The basis has to be quality development. Q3). restrictive. Through the sale of the product. http://www. Grade 1 (Q1) is the brand quality which excels when compared to mass produced goods. He thus creates his own basis for a different kind of product development. That means new products. Decisive for this are prices and quality. as a rule. the enterprise has to stabilise financially to such an extent that a basis for future development will be built up.Rural development through entrepreneurship Figure 9 . The products. By introducing standards the entrepreneur frees himself from standards set by authorities and administration which are. Marketing The enterprise has to develop from marketing. In order to make that clear there are three different grades for quality development (Q1. quality is given priority. Development of new products is an investment in the future. The third quality grade means new quality standards (Q3). In this development model.fao. In order to emphasise this aspect of development and to make clear that development does not automatically and only mean increased production (doubling and trebling of quantities etc.). Q2.htm (31 of 44)3/22/2011 11:34:00 PM . have to be sold.

The production. It is important that there are new It is important to expand into new and developing markets. As long as new products do not yet exist for this process. The basis for this can be. The next step (R2) shall guarantee the long-term survival of the enterprise. higher prices could be obtained by introducing brand quality articles. Figure 10 . improved quality and new products. This offers a possibility to distinguish oneself from others and to consolidate the enterprise.htm (32 of 44)3/22/2011 11:34:00 PM . marketing and development sectors http://www.Rural development through entrepreneurship The first step of development aims at a positive development of personal capital (R1). since brand name goods offer advantages and a leading position only as long as other enterprises have not yet caught up. For the third step (R3) new forms of enterprise have to be considered. above all. The enterprise has to stabilise in order to create a basis for further future-oriented development.fao.

Such services might be offered by associations. the more the surrounding elements will have to be shaped.fao. Advisory services The development of enterprises results in challenges and chances for the service institutions that accompany the development process. The more the development is oriented towards the future. Step (B2) aims at new products and an increase in the chances of survival for the enterprises. With the movement from (B1) to (B3) we want to make clear that together with the development of the institutes for adult education as well as official and private consulting firms. Step (B3) deals with the shaping of the basic structural conditions for future entrepreneurial activities. There are sometimes compelling circumstances that are not to be foreseen. Figure 11 . This means protection from being taken by surprise and it prevents the entrepreneur from sticking to obsolete structures. Only then will he be able to further these processes. If you wish to introduce new products it is more important to have a partner who can contribute to creative thinking than one who facilitates specialised knowledge. The consultant has to become more and more a partner of conversation who is able to grasp and to understand the thinking process of his customer. The entrepreneur's partner for these tasks is the local politician who is open to innovative ideas. development always means change.htm (33 of 44)3/22/2011 11:34:00 PM . It will soon be seen who and what best meets the changing requirements.Rural development through entrepreneurship A different form of enterprise might be of advantage for some future investment possibilities or future developments. also the services offered win have to change. Step (B1 ) is oriented towards the production of brand name goods and the improvement of personal capital development.Advisory services http://www.

Rural development through entrepreneurship P1-PN: Traditional seminars aiming at optimising production processes. Decisive for creativity is the quantity and quality of knowledge at the disposal of the entrepreneur and his ability to make use of it in a flexible and unconventional way. These types of seminars for farmers and entrepreneurs U1-U20 (fig.htm (34 of 44)3/22/2011 11:34:00 PM . A profound and professional knowledge which can be used in a flexible way is a prerequisite for creativity. creating proprietary goods and stabilising the enterprise by 'positive changes in the situation of the personal capital. 11) show methods and techniques which help to acquire a broad variably organized and easily accessible basis of knowledge.fao. market development and enterprise development in order to guarantee the survival in the as well as his readiness to look with great endeavour http://www. E1-E10: Development management courses for comprehension and further development of structures for new fields of activity. new investment possibilities and the setting of political goals. U1-U20: Training courses for farmers and entrepreneurs in order to offer a wider basis of knowledge for more creativity and flexibility having in mind product development.

Petrin. T. inadequate public infrastructure (health. 'Partnership and Institution Building as a Factor m Rural Development'. 'The Potential of Entreprenership to Create Income and New lobs for Rural Women and Families'. This approach assumes that the development of rural areas is based on stimulating local entrepreneurial talent and subsequent growth of indigenous companies. http://www. with the explicit goal to ensure balanced technological development of rural areas which would offer adequate employment opportunities and a quality of life comparable to urban areas. to accelerate economic development in a rural area. a vibrant entrepreneurial spirit and a commitment and dedication to risk taking and risk sharing. the community must develop links among key institutions. While the investment in infrastructure and extension services was clearly beneficial in attracting basic commercial activities and increasing the quality of life in rural areas. It stressed the importance of community development based on local entrepreneurial initiatives. The new approach which emerged over the past decade is the development 'from below'. Regional Office for Europe. T. Prague.Rural development through entrepreneurship for appropriate opportunities for creative problem solving. To support such development. T. since many projects were too expensive to implement in all rural areas. it is necessary to increase the supply of entrepreneurs that is to build up the critical mass of first generation entrepreneurs who will take risks and accept the uncertainties of new venture creation and who will by their example stimulate an autonomous entrepreneurial process thereby ensuring continuous rural development. Rural areas throughout Europe are still facing problems such as: lack of job opportunities. human capital and investment from outside the rural community. Petrin. Innsbruck Austria. The aim of this paper is to present partnership and institutions supporting entrepreneurial rural development. 00100 Rome.htm (35 of 44)3/22/2011 11:34:00 PM . Italy Introduction The traditional approach to rural development was 'top-down' meaning that central development authorities designed programmes which brought in infrastructure. Petrin FAO. Viale delle Terme di Caracalla. it did not necessarily provide a long term growing economic base. Specifically. 13-16 October 1992. 2-5 October 1990. Institutions supporting entrepreneurial restructuring of rural areas1 1This contribution combines issues from the following two papers: a. concentration of low-income families.fao. paper presented at the Fifth Session of the FAO/ECA Working Party on Women and the Agricultural Family m Rural Development. transportation. b. Many rural areas were not beneficiaries of such schemes. schools) and the negative effects of depopulation. paper presented at the Sixth Session of the FAO/ECA Working Party on Women and the Agricultural Family in Rural Development.

In rural areas they can act as agents of change. the community should create and foster the development of institutions and a variety of partnerships to support local development. inter-firm institutions and financial institutions. First. This in turn requires an environment favourable to entrepreneurship which a community basically can create in two · developing technical training programmes to provide people with basic skills for jobs required by local businesses. the community should utilise all the available incentives provided by the government to stimulate the development of economically depressed areas. They help to create a capable labour force and to maintain a skilled work force in the community. Second. These incentives usually include favourable investment conditions. employment provisions.htm (36 of 44)3/22/2011 11:34:00 PM . personal and organizational networks are very effective in achieving broad and fast growing regional economic development.fao. Institutions of education The role of institutions of education in rural development is of crucial importance. export subsidies. all available and hidden development potential of the local community must be mobilised. Such institutions and their collaborative efforts should play a significant role in rural communities/regions where the development strategy of the rural community places entrepreneurship in the centre of economic development. As experience shows.Rural development through entrepreneurship The first part of the paper presents essential public-private institutions and partnership for successful local community development. such as: · redesigning curricula to teach students high level skills and those skills that would help to up-grade businesses. · developing and implementing programmes to improve the competitiveness of local firms and their ability to expand into new markets. subsidies on public utility charges and the like. Today we are witnessing many examples of institutional developments that are fostering businesses and community collaborative efforts-while nurturing positive government/academic/business relationships in promoting economic growth. tax concessions. Public-private institutions partnership One of the principal challenges of economic development of rural areas is the development of a socioeconomic environment that would be attractive to people. guarantees. Among the most important are: institutions of education and training. The second part presents selected examples of successful creation and development of public-private institutions and partnership relationships. To meet this challenge. and http://www. low interest rates.

business incubators.htm (37 of 44)3/22/2011 11:34:00 PM .Rural development through entrepreneurship · developing links with other higher educational institutions. industrials parks. Initially..S. The business incubator presents a rather unique approach to economic development. especially with universities outside the rural region in order to bring into the region technical expertise available outside the region and which could be beneficial to the existing businesses in the region.S. They help entrepreneurs by providing them with services which support and compliment their own talents and abilities. As such. The entrepreneurs receive not only help regarding the management of their enterprises but also other services such as provision of financial assistance and training. Their support system usually includes secretarial. 1987). They organize conferences. they thus seek to give form and substance. Among different inter-firm institutions. different non-profit seeking organizations facilitating networking and business support centres are one of the most successful ones promoting the growth of new and existing enterprises. R. They create a good business climate inside the incubator and ensure a constant inflow of moral and financial support.A.A. not because they are not innovative enough but because in their early stage they have difficulty in Unique in the sense that it is an independent enterprise whose business is the process of 'incubating' enterprises. Great Britain http://www. structure and credibility to emerging ventures. Business incubators are making great headway in other market economies too. especially in those regions which had experienced economic decline and severe job losses due to the closing down of industries. Therefore. These institutions can significantly contribute to rural development because of the following: Business incubators Business incubators are a facility designed to assist the development of new enterprises (Smilor. Nearly every regional development programme includes the development of the incubator network.W.fao. administrative and business expertise and facilities which are available to entrepreneurs below or at market rates. The business incubator industry was one of the fastest growing industries in the late eighties in the U. to new community enterprises. or to stimulate new entrepreneurship in the community. practically all incubators in the U. Many new firms fail. The business incubator has emerged as a solution to the high failure rates among new firms. for example. were publicly supported by communities or states and public funds covered practically all investment and start-up costs. business luncheons and different types of activities for the purpose of networking. the basic concept of the incubator is to nurture entrepreneurial activities so as to provide startups with the necessary services and support until they mature and are ready to enter successfully into the competitive business environment. Inter-firm institutions Efforts to support and enhance existing businesses within a community and to promote new enterprises in a community can be most successfully earned out through different inter-firm institutions.

· nurture a pool of potential growth enterprises through equity investments. · intensify training programmes to build the vocational skills of its members. diversify product lines and markets and expand. (where they are known as Managing Workspaces). · meet particular local employment needs. · promote specific types of businesses. In Central and Eastern Europe. communities could establish industrial parks by purchasing marginal agricultural property at the market price and converting it to industrial purposes in order to accelerate entrepreneurial restructuring of rural communities. by customisable layouts that could be rearranged over time to meet user needs in a flexible way and by the final price which should be much http://www.Rural development through entrepreneurship Japan.htm (38 of 44)3/22/2011 11:34:00 PM . Industrial parks As an unemployment-reducing effort and/or for revitilizing the community economic base. Communities could increase the attractiveness of industrial parks to potential entrepreneurs by delivering conventional common infrastructural services. Italy and Sweden. incubators are sought to play an important role in initiating entrepreneurial activities. · develop and produce a particular product that none of the firms could manufacture alone.fao. Prance. where entrepreneurial activity has traditionally been very low. Incubators in a rural area can be designed for a number of purposes to: · encourage skilled and professional people who have left the community to come back to the region to start new companies. Germany. laid-off skilled labour from nearby town. Business incubators are usually established by private initiative with the financial assistance from the federal. · help develop flexible manufacturing networks of co-operatives and other manufacturing businesses. · foster greater access to capital for start-up firms. state and local governments and private sector contributions. (where they go under the name of Industrial Parks). Canada. · attract to the and · develop ways by which technical engineering and management expertise from outside the enterprise can help start-ups to develop. · provide job opportunities for high-tech graduates.

those resulting from economies of scale as overhead functions among firms in the network are shared and those due to the aggregation of production of small firms with the same or compatible production and due to large scale purchases of equipment and raw material. Jutland. thus promoting their competitive efficiency. marketing. Emilia-Romagna. emerging or established businesses. in: Smaland. facilitates shifts from product to product and market to market and leads to important economies of scale as overhead functions are shared (Hatch. They provide different types of services according to the needs of the three different clients (Small Business Administration. · provide different services in the areas of finance.htm (39 of 44)3/22/2011 11:34:00 PM . large scale purchases. Haloze and Skofja loka. enables specialised firms jointly to manufacture finished products. Baden Würtemberg. and · provide common services of daily matters in production and administration in order to reduce transaction costs. areas. 19): · Assistance to start-ups: business planning and finance.fao. Denmark.6). North Italy. Networking among small firms permits aggregation of · Assistance to emerging and established businesses: management skills in the areas of finance. p. The firms in the industrial park benefit in several ways through networking. Sweden. for example. Networking among firms in the industrial park is a common outcome. Business support centres Business support centres can be established to meet the needs of start-ups. marketing and administration.Rural development through entrepreneurship lower than the price of equivalent buildings in other. Germany. research and development. Slovenia · promote co-operation between small firms in the network. 1989. Institutions facilitating networking These are non-profit seeking associations. registered or non-registered which facilitate networking between small firms located in the same region2. The benefits could be grouped into those resulting from reducing the problems of isolation in the process of starting-up. p. They usually perform the following tasks: 2Successful examples of networking between small firms are to be found. especially urban. http://www. sales.

inefficient use of natural and productive resources. Potential entrepreneurs must have access to information such as: which are the state financial agencies. the task of community leadership is to encourage close co-operation among different institutions supporting rural development. They can also be established at the community colleges or at the university to help small business owners learn necessary business skills at low cost. The key to the evolution of economic development based on a partnership approach is the leadership that could come either from the local government or from already existing successful private companies. identifying franchising opportunities to the potential local entrepreneurs.'? Public-private partnership The impact of institutions discussed earlier on rural economic development will increase if the individual efforts of those institutions are combined into a co-ordinated action. Financial institutions Communities should support the development of a strong venture capital base and risk capital networks specialising in funding new entrepreneurial activities. inability to increase local economic opportunities. special attention must be given to the creation of institutions that provide seed financing and start-ups targeted venture capital and are engaged in equity financing. issue tax free bonds. inability to create effective community infrastructure. the lead organization responsible for designing and carrying out the development strategy based upon identification of an area's http://www. What is crucial is the development of personal and organizational networks which combine otherwise individual efforts into a comprehensive approach to regional development of rural areas.htm (40 of 44)3/22/2011 11:34:00 PM . They should also be responsible for screening all financial schemes existing in the country for the development of new enterprises and for the growth of existing ones. Business support centres can be part of the local government or semi private institutions or for non-profit private organizations. Therefore. Seed financing could be an important bottleneck for new enterprise creation. it is important to identify or to establish the principal community civic agency. For this reason. production by spinning off auxiliary production units. etc. community civic inability to meet the local business needs. inability to encourage new enterprise formation.Rural development through entrepreneurship · Assistance to business partnership: sub-contracting of local firms with larger enterprises outside the community. educational institutions and the like. the community leadership must encourage existing institutions to link new start-ups or potential entrepreneurs with such institutions outside the community. Therefore. etc.fao. local development private or public agencies. If it would be difficult for such institutions to be attractive to a rural community. attracting spin-offs from fast growing firms or firms who are rationalising. direct loans to smaller enterprises or to Consortia of enterprises? What type and how many economic development funds are available? Who provides favourable investment financing for the equipment and working capital? Which development corporations finance new and expanding businesses'? What state funds are available for small and medium sized enterprise development. both public and private. in order to develop programmes that would address the key barriers to community development: human and financial capital drain. banks that provide guarantees.

businesses making speciality products such as maple candy. deteriorated social infrastructure. jams. Some examples of successful partnership and institution building as factors in rural development Many examples of successful institution building and public-private partnership as a vehicle of regional economic development exist today. http://www. The Association is an umbrella organization linking producers as well as promoting 'niche' or alternative agriculture. substandard housing. pickles. The Western Massachusetts Food Industry Association was established in 1989. This organization should act as a planning and brokering organization. Pilot programmes to the value of US$35 Last but not least. the case of 'Third Italy' as well as rural development efforts of Nov'na Studio for Rural Development. The Northern Tier project was designed to initiate partnership between business. Its main function is as a resource referral network. From the viewpoint of rural development the Northern Tier area project aiming to promote the development of small industries in the State of Massachusetts. cheese. trout. for example the US$50 000 programme that combined efforts of technical and marketing programmes for business and which created a fifthy-acre furniture-related industrial park in the city Gardner. bringing together public and private initiative to attain common community goals. It should support the creation of new agencies if ongoing implementation of a development strategy so requires. It should focus on broad community concerns and co-ordination of separate efforts in the region. scientific and marketing assistance to member businesses in the four Western Massachusetts counties. the private agency in Slovenia.). engineering. 1987). etc. bean sprouts. business management and development of new products. where new businesses could get started with the help of central facilities like a kitchen and packaging and storage space (Daily Hampshire Gazette. jellies.Rural development through entrepreneurship major problems (lack of job opportunities. Several programmes were initiated. were developed with the aim to improve engineering capabilities of small machine tool industries which do not have in-house engineering capacity. One of the Association's greatest assets is its close relationship with the University of Massachusetts.htm (41 of 44)3/22/2011 11:34:00 PM . an agricultural industrial park to house a food processing centre was established. Personnel should also include representatives of the major enterprises in the region. It aims to promote the interests of food producers and processors by providing business. universities and research and development institutions. which has an office at the University of Massachusetts in Amherst. mustard. the Association helps small firms spread out.fao. The Association has sixthy-five members. herbal and fruit vinegars and other good things coming from the garden and the kitchen. small firms spend the bulk of their time producing a product and therefore need assistance in marketing. industry and educational resources that would allow the development or recovery of small and large industries in Western Massachusetts (Union-News. natural bread and pasta. By this the Association helps small firms to overcome the lack of skills that expansion requires. 1989). will be presented here. The members of the Association have high opinions about its worthiness.

htm (42 of 44)3/22/2011 11:34:00 PM . in Slovenia. in order to reduce unemployment. Cento in Emilia Romagna. to process and retail local speciality foods and it thus contributed to the continued health of the agricultural economy of Western Massachusetts (Union-News. famous for textiles. The Region that is now known as 'Third Italy' was in the mid-1950s an agricultural region with problems of high unemployment.Rural development through entrepreneurship Another example of successful partnership between entrepreneurs. again by aggregating small production of independent farm producers. linked to local industrial networks through sectoral Consortia that provided targeted business services to the firms in the network. specializing in mechanical engineering and Nogara in Veneto. specialising in wooden furniture. based on small firms. Nov'na Studio for Rural Development. The 'Third Italy' (the Emilia-Romagna region). The purpose of the network is to develop and market a single product by aggregating small production of these two types of products. design. 1988). established its first industrial park by purchasing an area of land on the periphery of Modena. illustrates the entrepreneurial role that government can play in institution building for the provision of services within an industrial district. is the establishment of an apple barn and a commercial kitchen at Ireland Street Orchards. known for shoes. production facilities and management. The key to the success of the industrial districts of Emilia Romagna is the development of a business concept on a sector level or on the level of a group of firms by combining business ideas. 1989). Montegranaro in the Marche. is successfully initiating different types of networks. The rural development agency. p. The latest initiative of the same Agency is the development of the network of furniture producers in the rural region in Western Slovenia. are recognized as single sector industrial districts organized on a small firm network" (Pyke. 1). Such training was established to upgrade the skills required for jobs in the plastics and metal working local machine shops. The municipality. innovation. specialising in ceramic tiles. state government and the university in support of Western Massachusetts' small food growers. The State of Massachusetts promoted public-private partnership through grants for technical training programmes in order to provide basic skills required for jobs in manufacturing small firms in the region or to improve the skills of workers in order to be able to better cope with the increased In http://www. Another example of successful networking initiated by the same agency is the development and marketing of wine in specially designated bottles (amphorae). could be propelled to the top of the international income per caput regions. 1991. has become a famous example of how a region. The goal is to establish a development consortium for developing and vitalising core skills of firms in the network. The success of the Region which today is based on the export oriented small firms. The partnership allowed the owner of the apple orchard to expand. "Towns like Prato in Toscana. thereby laying down its own path to economic development of the Region based on small firms. provided by different non-profit seeking organizations (Consortia). promoting research. Conclusions Economic development in general requires more than just a proper macro economic environment. network.fao. It is an example of how state money and local businesses can utilise effectively the technology available in the university engineering departments. technical co-operation and process rationalisation. Sassuolo in Emilia Romagna. The best known is the network of independent small producers of dried fruit and wooden baskets (Mesl.

Economic development of rural areas cannot be an exception in this respect. R. Small Business Administration (the year of publishing is not listed). in G. Geneva. Business Opportunities Casebook. 4 must continuously seek new innovative approaches to economic development and must promote proper institution building and partnership in view of those mechanisms that communities could use to leverage resources in order to help potential entrepreneurs and existing companies to grow. Hatch.S.W. Smilor. C. in order to accelerate rural development. 'Incubator: a Method for Growing New Businesses'.W. T. IC Institute. http://www. (1989). Pittsburgh. The University of Texas at Austin. 'Partnership and Institution Building as a Factor in Rural Development'. paper presented at the fifth Session of the FAO/ECA Working Party on Women and the Agricultural Family in Rural Development. Mesl. Innsbruck. Pyke. (1990). ILO. (1991). Chamberlain (ed. F. Czechoslovakia. T. as well as to create more choices for entrepreneurs. 13-16 October. Saturday. Prague. U. practical mechanisms for risk taking and risk sharing in the early and most uncertain stages of entrepreneurial ventures and an organizational system conducive to growing new and existing businesses. (1989). R. (1992).R (1988).htm (43 of 44)3/22/2011 11:34:00 PM . Council of North-eastern Governors annual Conference. 'Small Firm Development and Industrial Districts: Lessons from the Italian Experience'. paper presented at the Sixth Session of the FAO/ECA Working Party on Women and the Agricultural Family in Rural Development. Petrin. 'The Potential of Entrepreneurship to Create Income and New Jobs for Rural Women and Families'. The role of public policy is therefore to continually find ways to implement critical success factors of economic development. mimeo. 'Building Manufacturing Networks in the Northeast'. 2-5 October. Petrin.Rural development through entrepreneurship addition it demands institutional framework conducive to economic development. Small Business Administration. It takes cross-institutional networking. A. The experiences in partnership and institution building presented in this paper lead to the following policy recommendation: Community leadership. (1987). Austria.) Creating the Economic Development Alliances. Kozmetsky. mimeo. RAZOR Ravne na Koroskem. Zasnova in uresnicevanje razvojnega programa za zgornjo Mezisko doling. Smilor.fao. References Daily Hampshire Gazette. M.

28 October. (1987).Rural development through entrepreneurship Union-News. Tuesday. Friday. 3 November. http://www.htm (44 of 44)3/22/2011 11:34:00 PM . (1988).fao.

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