Youth Entrepreneurship: Policy Support and Key Ingredients for Success, Study notes of Business

Download Youth Entrepreneurship: Policy Support and Key Ingredients for Success and more Study notes Business in PDF only on Docsity! Supporting Youth in Entrepreneurship Summary report of a policy development seminar organised by the OECD and the European Commission, Brussels, 22nd-23rd September 2014 2 This seminar was part of a series of actions on inclusive entrepreneurship undertaken by the OECD Centre for Entrepreneurship, SMEs and Local Development and the European Commission Directorate General for Employment, Social Affairs and Inclusion. These actions include publication of policy briefs on youth entrepreneurship, senior entrepreneurship, social entrepreneurship, financing business start-up by social excluded groups and entrepreneurship by the disabled as well as annual reports on `The Missing Entrepreneurs’. All these documents are available at: http://www.oecd.org/cfe/leed/inclusive-entrepreneurship.htm Actions also include youth entrepreneurship policy reviews and rapid policy assessments. The work is led by Dr Jonathan Potter and David Halabisky of the OECD. This summary was prepared by Dr Jonathan Potter, David Halabisky and Stuart Thompson of the OECD Secretariat together with Professor Robert Blackburn (Kingston Business School, UK) and Professor Klaas Molenaar (the Hague University of Applied Sciences, the Netherlands) 5 TABLE OF CONTENTS EXECUTIVE SUMMARY ........................................................................................................... 3 1. Introduction ........................................................................................................................ 6 2. The rationale and opportunities for developing youth entrepreneurship policies .............. 7 Youth entrepreneurship is important ...................................................................................... 7 Young entrepreneurs face real barriers .................................................................................. 7 European Union funds can be used to address these barriers................................................. 8 There are lessons to be learned from existing experience .................................................... 11 3. The key ingredients of training coaching and mentoring for youth entrepreneurs ........... 13 Contextualising Youth Entrepreneurship ............................................................................. 13 Key features of training and mentoring programmes: content and curriculum ................... 14 Conclusions .......................................................................................................................... 16 Further reading ..................................................................................................................... 17 4. Addressing issues related to finance ................................................................................. 18 Capacity determines the type of enterprises to be set up ..................................................... 18 Enterprising attitude and entrepreneurship .......................................................................... 18 Differentiation of youth groups ............................................................................................ 19 Training and related business development ......................................................................... 19 Approaches at different stages ............................................................................................. 20 Lessons learned .................................................................................................................... 22 5. Key issues related to networking ...................................................................................... 23 The role and nature of entrepreneurial networks ................................................................. 23 Key characteristics ............................................................................................................... 24 Challenges for youth ............................................................................................................ 24 The main policy approaches ................................................................................................. 25 6. Key features of a successful youth entrepreneurship programme .................................... 26 Skills, abilities, attitudes ...................................................................................................... 26 Financial support .................................................................................................................. 26 Networking ........................................................................................................................... 26 Policy design and delivery ................................................................................................... 27 Tables Table 1. Examples of measures to support YG on entrepreneurship and self-employment 9 Table 2. Successful youth entrepreneurship projects ........................................................ 11 Table 3. Trends in learning in small firms: 1980s to 2000s .............................................. 15 Table 4. Examples of financing at different stages ........................................................... 21 Figures Figure 1. Levels of entrepreneurship engagement by the youth population ....................... 13 Figure 2. Career intentions: 5 years and immediately after studies .................................... 14 Figure 3. Classification of income-generating activities and types of business ................. 18 Figure 4. Approaches to training ........................................................................................ 20 6 1. Introduction A seminar was organised by the European Commission and Organisation for Economic Co- operation and Development for senior policy-makers in European Union Member States, particularly those involved in dealing with the European Social Fund, on policy support for youth entrepreneurship in Brussels on 22nd and 23rd September 2014. The seminar examined: • The importance of developing youth entrepreneurship policies • The EU funding opportunities for youth entrepreneurship programmes • The ways in which obstacles to youth entrepreneurship can be addressed using specific programmes, illustrated by a number of inspiring practices • Key aspects of successful youth entrepreneurship programmes This paper provides a summary of the main messages of the seminar, focusing on: • The rationale and opportunities for developing youth entrepreneurship policies • The key ingredients of training, coaching and mentoring for youth entrepreneurs • The key ingredients of financial supports for youth entrepreneurs • The key ingredients of schemes fostering entrepreneurs' networks • The key features of successful youth entrepreneurship programmes 7 2. The rationale and opportunities for developing youth entrepreneurship policies Youth entrepreneurship is important The unemployment rate in the EU in 2013 was 10.9%. It was more than double for youth: 23.4%. This has been consistent over the last few decades, and did it change during and after the crisis. A second point to note is that there are small gender differences. For adults, the unemployment rates for men and women converged during the crisis. For youth the unemployment rates for men and women diverged since the crisis. Unemployment rates for youth and adults vary substantially across Member States. In 2013, these range from 5.4% and 7.9% for adults and youth in Germany to 27.7% and 58.3% in Greece. One possible way to address youth unemployment is to support young people in creating their own businesses. They have the interest and potential to become self-employed. Youth are more likely to have a preference for self-employment than adults: 45% of youth prefer self-employment to employment, whereas 37% of adults prefer self-employment. Youth are also more likely to believe that self-employment is feasible: 41% of youth think that they could be self-employed within the next 5 years compared to 30% of adults who think that it is feasible. Despite having a preference for self-employment, few youth are able to sustain themselves in self-employment. Nearly 15% of people working in the EU are self-employed. This proportion has been constant over the past decade. The self-employment rate for youth in the EU is just over 4%. As with adults, the self-employment rate has been quite constant. These data only cover youth in the labour force, i.e. those in school full-time are not counted. Youth self-employment rates vary greatly across Member States, ranging from 1.1% in Denmark to 12.5% in Italy. Young entrepreneurs face real barriers Young entrepreneurs face a variety of barriers • Lack of awareness of potential for entrepreneurship among role models results in a lack of encouragement or even negative social attitudes. • Education and training programmes generally do not do enough to nurture entrepreneurial attitudes and skills. • Lack of prior work and entrepreneurship experience is a major determinant to business start- up and entrepreneurship performance. • Fewer financial resources and difficulty obtaining external finance, including debt finance, hampers business start-up. • Limited business networks and business-related social capital have consequences for business start-up and obtaining legitimacy. • Market barriers, including a bias in financial markets away from supporting youth-owned businesses and ‘discrimination’ in product markets. 10 Youth Guarantee Implementation Plans (YGIPs) have been created by all 28 Member States setting out national Youth Guarantee schemes. In 14 of these plans, entrepreneurship is integrated into the YG schemes, in 7 there is no explicit mention of entrepreneurship, and for the remaining 7 there is very limited allusion to entrepreneurship. European Globalisation Adjustment Fund EGF – European Globalisation Adjustment Fund – was established by the European Parliament and the Council in 2006 / operational since 2007 / renewed in 2013 for the period 2014 to 2020 – Regulation (EC) 1309/2013. Its objective is to help workers losing their jobs due to the impact of globalisation or the global financial and economic crisis to find new jobs as soon as possible and applies to cases of at least 500 redundancies over a 4-month period (including suppliers and customers affected), or at least 500 redundancies over a 9 month period, particularly in small and medium-sized enterprises (SMEs), in a NACE 2 division (sectoral definition) in one region or two contiguous regions at NUTS II level (regional definition) By way of derogation and for a limited period only ( 31 December 2017) young people who are neither in employment, nor in education or training (NEETs) can be conditionally eligible to participate in EGF funded measures. For 2014 18 applications were received from 9 member states. 1893 NEETS were targeted in 5 applications while 16 applications included measures to support entrepreneurship. Eligible measures include both tailor-made training and retraining, and special time-limited measures, such as job-search allowances. The design of the coordinated package of personalised services should anticipate future labour market perspectives and required skills. The coordinated package should be compatible with the shift towards a resource-efficient and sustainable economy. 11 Table 2. Successful youth entrepreneurship projects Programme Country Target Type of support Impact estimate .garage Hamburg (ongoing) Germany Unemployed youth under the aged of 35 Training, finance, incubator 83% of participants in 2000-2002 carried on in self- employment and 10% were in employment or apprenticeships. First business year baskets for youth (2011-2013) Lithuania Youth under the age of 29 Vouchers for BDS Improved survival rates: 98.9% for 1 year vs. 63.3% (2012) Programme for NEETs to move into self- employment (2007-2010) Slovenia Unemployed youth under the age of 25 Grants; training Improved survival rates: 85% for first 2 years The Prince’s Trust Youth Business Scotland United Kingdom “Unbankable” youth who are 18- 25 years old Finance; coaching and mentoring; training Generated 155 additional start- ups in 2004/05 and 416 start-ups started sooner, on a larger scale, or higher quality. There are lessons to be learned from existing experience Policy makers need to recognise that there will be a high rate of failures and need to accept that. But the objective is to minimise this failure rate, and at the same time minimise any displacement effects and deadweight loss. The evidence to date suggests that when designing and delivering youth entrepreneurship programmes, policymakers should pay particular attention to three considerations. • Use strong selection criteria to select ideas and projects with the greatest chances of success. Focus selection on the project rather than the individual so that skilled youth as well as disadvantaged youth can receive support. • Build support in stages, making more intensive support available when participants demonstrate capabilities. • Offer complementary supports to help youth develop sustainable projects. This means providing training to provide basic skills, along with more individual support such as coaching/mentoring to support individual projects. This also means providing financing with skills development so that the support offerings reinforce each other. Some pitfalls to avoid when designing support for youth entrepreneurship include: • Supporting projects in excess supply industries 12 • Supporting projects with little chance of success • Providing insufficient financial supports that cannot lead to the creation of sustainable businesses • Providing one-shot supports that are temporary 15 • Possessing the knowledge and professional practice to run a business: (e.g. competency development finance). The literature suggests that students for example need to possess different ‘resource logics’ of other entrepreneurs (Politis et al., 2013). • Skills and attitudes: behavioural (e.g. leadership technical). Younger people may have the determination and enthusiasm to run a business but do they have the appropriate skills-set and leadership qualities? Hence programmes should take this into consideration. • Meta-qualities: (e.g. ability to reflect on self-knowledge, collect new knowledge). How do younger people differ from other groups of the population? When seeking to enhance skills and competencies, particular attention should be given to • Enhancing the means to practise entrepreneurship (raising the ability to mobilise resources) and filling gaps in social and financial capital. These are particular issues for younger people, given their shorter periods of time in work. • Identification of wider cultural and social networks. Socio-economic-cultural contexts are important, e.g. Females, minority groups, low-income, high income localities. These will add further complexity to the development of training and mentoring programmes for younger people. Attention to Learning styles A further factor to consider in the development and delivery of training and mentoring programmes for younger people is how people learn. Approaches to learning in small firms have shown different trends over the last decades (Figure 3) Table 3. Trends in learning in small firms: 1980 onwards Behaviour – the person Whole person development – what should the entrepreneur know? (e.g. traits) Is there a recipe to be taught? - 1980s Competences – the tasks What the entrepreneur should be able to do? What can they do? Output based functional analysis - 1990s Manager in role Focused within the organisation and their community. Tacit understandings, input of others; group learning Current Manager in role – the situated learner Focused on individuals in context and their ability to critically reflect- situated learning 2000s Source: adapted from Thorpe et al 2007 It can be seen that, over time, there has been a variety of different learning approaches in business and management, starting in the top-left quadrant of Figure 3. Initially, attempts focused on 16 identifying the specific psychological characteristics of entrepreneurs and working out recipes for personal development based on these. This was then developed into a focus on the skills of the entrepreneur to be able to function and perform effectively. Third, thinking moved onto the ability of entrepreneurs to reflect on what they know and reflect on this to learn within this context. Finally, and latterly there is an emphasis on learning within the community and undertaking group rather than individual learning. Of course, this is a broader context within which learning can take place but the point is not to ignore learning theories and current practice when developing programmes for younger people. Methods of training and mentoring There are numerous ways in which training and mentoring programmes can be delivered. These can range from traditional ways of information transfer (Classroom; distance learning; self- study) through to interaction with peers and key agents in the business support network. These actual methods of delivery may be associated with different types of learning. For example: • Behavioural and human capital development may be enhanced through role plays and problem solving exercises. • Meta-qualities such as confidence and leadership may be developed through action learning sets; developing the ability of learning to learn; and identifying self-weaknesses for subsequent development. Formal approaches need also to be complemented by tacit learning with peers and networks. These may involve, for example: • Partnership involvement: meetings with financiers, banks, landlords, incubators, trade and professional organisations • Mentoring with peers – young people who have actually started and run a business • Face-to-face interaction effective • Connecting youth with knowledge networks Although there are many learning theories, care needs to be taken when interpreting these to specific situations and groups of the population. For younger people, a body of literature exists on their training gaps are, how their entrepreneurial potential may be measured, programme contents and how this should be best delivered. However, this knowledge base is not perfect and is constantly changing with the latest ideas and modes of delivery (e.g. Royal Society of Arts, 2013; Valero et al., 2014). Conclusions It is broadly understood that a gap exists between the entrepreneurial intentions and action amongst young people. In considering training and mentoring for youth entrepreneurs, there is a need to identify the specific requirements of youth entrepreneurs and the objectives of the intervention. These need to be tailored programmes, and sensitised to the context – the geographic and environmental situation - and to the desired outcomes of the intervention. The paper also emphasises the need for a segmentation of the youth enterprise market based on a range of factors. The use of real 17 examples from peers should be encouraged within the content of the curriculum but nonetheless the method of delivery should be linked with existing learning theories and prior experiences. Furthermore, monitoring and evaluation are essential parts of the process. Currently there is a lack of objective evidence on the effectiveness of interventions and programmes, and therefore it is important to feed into new programmes to increase their effectiveness. Further reading Politis, Diamanto, Joakim Winborg, and Åsa Lindholm Dahlstrand. (2012) "Exploring the resource logic of student entrepreneurs." International Small Business Journal, Sept; vol. 30: pp. 659-68. http://isb.sagepub.com/content/by/year Royal Society of Arts (2013) A Manifesto for Youth Enterprise, RSA, London. http://www.thersa.org/__data/assets/pdf_file/0006/1532715/RSA_A_manifesto_for_youth_enterprise_ 09-13.pdf Thorpe, R. et al (2007). The Evolution of Business Knowledge in SMEs: Full Research Report. ESRC End of Award Report, RES-334-25-0015. Swindon: ESRC. http://www.mbsportal.bl.uk/secure/subjareas/smlbusentrep/esrc/121251evolutionbusiness07.pdf Valerio, A., Parton, B., & Robb, A. (2014). Entrepreneurship education and training programs around the world: dimensions for success. World Bank Publications. http://elibrary.worldbank.org/doi/book/10.1596/978-1-4648-0202-7# 20 Figure 4. Approaches to training Approaches at different stages The following table illustrates different approaches to finance at different youth stages. 21 Table 4. Examples of financing at different stages Age Focus Educational actor Finance for youth Finance for support programmes Examples 9-14 Awareness stage on entrepreneursh ip and work Primary school Stimulating savings; small funds to play with businesses in training Teachers’ training, curriculum development, kick off funds, awareness campaigns CYFI, Aflatoun 15-19 Formative stage of pre- entrepreneursh ip and enterprising attitude Secondary school/ pre VTC Stimulating enterprising and entrepreneursh ip Training and lending Jong Ondernemen 20-25 Budding – preparing for entrepreneursh ip VTC, Polytechnics. Universities Business lending linked to training Loans funds, teachers’ training BDS services BEST- Ethiopia 25-29 Emerging as (growth ) entrepreneur Universities, post education programmes Loan guarantees , participations Business creation programmes, loan-guarantee finds, youth investment funds, BDS Caballero factory – The Netherlands 18-30 Unemployed youth Post education/ youth training programmes Lending , micro finance Funding for loan fund, guarantees to cover losses, financing set up of schemes including ToT Dream start – Belgium/ Crea Jeunes - France When dealing with financing of (youth) entrepreneurship programmes the following dilemmas need to be faced • Do it yourself vs. specialized financing entity 22 • Eligibility vs. Selection • Assisting vs. Helping (and to what point?) • Supervision vs. Collection (in case of BDS / Business advisory services) • Moral responsibility vs. Desired success (leave the entrepreneurs free to take his/her own decisions) • Integrated approach vs. complementing services • Including the business development costs in the Financing costs or not • Special programmes vs. Mainstreaming Lessons learned So far the following lessons learned are worthwhile to take into consideration • Selection at the beginning of an enterprise development programme pays off • Age and job placement – invest in job placement when dealing with very young persons and only at a later stage consider setting up their enterprises • Prepare youth but in a phased way: interest, awareness, entrepreneurship training, implementation skills • A phased approach – during classes and after start: savings first vs. lending/investing later • Financial education (do not overstress financing!) comes first • There is hardly any graduation from self-employment into small or medium enterprises; each segment requires its own approach • Mainstreaming pays off; start with dedicated programmes but be sure that they are incorporated later into main programmes – avoid segregation 25 Central to the challenge that young people face when seeking to build a network is that they have very little to offer to the network. This reduces the likelihood of other entrepreneurs accepting young entrepreneurs into their networks and supporting them since there is little to gain. As a result, the key issues in building entrepreneurial networks are as follows: • Ensuring that networks of entrepreneurs from under-represented and disadvantaged groups are well-linked with the wider business community to maximise the available pool of resources and to minimise the risk of a “group mentality” that reinforces the disadvantage. • Balancing the provision of targeted networking initiatives against the creation of an overabundance of competing networks. • Ensuring that network members demonstrate ownership of the network, which can be achieved by using existing community structures. This is particularly important for public networking supports because they only way to achieve an impact is to ensure that entrepreneurs from under-represented and disadvantaged groups use the resources that are made available to them. The main policy approaches Public policy initiatives that support the development of networks for entrepreneurs from under- represented and disadvantaged groups often focus on bringing entrepreneurs from a common background together to build linkages among them and with the business community (e.g. Be-Win in Italy). The strength of this approach is that the entrepreneurs easily identify with each other given their common background, which quickly builds trust among network members. The downside is that since network members have a similar background, they may not have a lot to offer each other because they likely have similar challenges with respect to their start-ups. Another common approach for public policy is to use networks as a vehicle for delivering training and other business development services. Examples of this approach include Mature Entrepreneur in Poland. While this approach also focusses on building a network of entrepreneurs with a similar background, it is much more focussed on delivering targeted business development support than networking initiatives. Policy makers need to exercise caution with this approach because it presupposes that the entrepreneurs need a certain type of support. If the entrepreneurs do not need and/or want this support, they are excluded from the network. Moreover, these networks are not always sustainable when the binding factor is a training course, for example. It is also possible to build networks to support a specific objective (e.g. business growth). In this case, meetings and events include workshops and other offerings to support network objectives. The strength of this approach is that it is very valuable for network members as there is a close tie with targeted business development support. Its weakness is that it can be resource intensive given the integration of business development support and a selective entry process. An example is Going for Growth (Ireland) which targets women entrepreneurs. Finally, it is possible to develop virtual networks. Online networks eliminate physical distances between entrepreneurs. Although face-to-face contact in online networks is not possible, online networks share some of the key characteristics of traditional networks. This includes, for example, connections built on trust and reciprocal relationships. The effectiveness of online networks is unknown but these low-cost structures can potentially deliver many of the benefits of traditional networks. 26 6. Key features of a successful youth entrepreneurship programme At the end of the seminar, participants discussed the key features of a successful youth entrepreneurship programme and developed the following points: Skills, abilities, attitudes • Participants should be selected based on their motivation to set up a business rather than other characteristics; • Segmentation can be based on background of participants and their aims (e.g. size of project); • Formal educational background is not helpful in determining success; • Even when actions do not result in actual start-ups, they should at least result in participants knowing whether they are able to start a business; • Learning by doing is important; • Youth organisations should be involved in designing the programme; • There should be training for trainers/mentors/coaches. Financial support • Financial support should be adaptive to the context (person etc); • Financial support should be linked with mentoring, though this should be adapted to specific circumstances; • The system should be sufficiently flexible to give diversified financial support linked to the specific needs of the company: e.g. start-up seed capital, loans for companies for growth etc, subsidies for technological development; • Finance is not a substitute for having both a good idea and a good person running it; • Both clients and suppliers need to understand financing and financial management. Networking • Networks need inspirational members/mentors to motivate youth; • It is important to combine people with different skills sets/profiles (though similar interests); • There should be a link with professional support; • Good communication matters; • The network needs clear aims and connection with other structures as well as a vision for the future (after the project) 27 Policy design and delivery • There should be dialogue with target group and stakeholders; • Clear objectives/outcomes/results/indicators are essential – and this should include mind-set change even if it cannot be measured during the project; • Stakeholders should have clearly defined roles to avoid duplication and disputes; • Invest in ongoing monitoring and evaluation to allow for fine tuning; • Continuous focus on lessons learned to give feedback for future development e.g. limitations, resources, timelines; • Active learning from pilot projects run in different countries.