Education For Entrepreneurship: The National Imperative

Professor Frank Roche, UCD Michael Smurfit School of Business

Most countries now pay a lot of attention to entrepreneurship in their quest for sustained economic growth and development. Frank Roche explains.

The reasons for this phenomenon are quite self-evident and may be summarised as follows. Just as businesses have to have the right mix of products to be successful, a country needs the right mix of sectors or portfolio of businesses.

The new entrepreneur, for example, Robert Noyce, who founded Fairchild Semiconductors also created an industry and spawned Silicon Valley. New ventures are also critical for job creation. In 1979, David Birch a renowned researcher, found that 66% of all new jobs created in the US between 1968 and 1976 were created by firms with fewer than 20 people. Many other researchers, such as David Storey at Warwick University, have found that 50 to 70% of all new jobs are created by 4 to 7% of the fastest growing start-ups. New firms replace uncompetitive firms in virtually all areas and they force the pace of continuous improvement, thus enhancing national competitiveness.

Ireland Is Becoming Entrepreneurial

Before 2001 we didn't know how entrepreneurial Ireland was but the general feeling was that we didn't rank very high. Since 2001 the UCD Michael Smurfit School of Business has participated in the Global Entrepreneurship Monitor (GEM) which measures the propensity of almost 40 countries to be entrepreneurial.

• Over the period 2001 to 2005, Ireland has consistently been among the top five Organisation for Economic Co-operation and Development (OECD) countries and the leading country in Europe.
  
  
• This translates into 5.7% of the adult population (120,000) who were actively involved in planning to start a business in 2005.
  
  
• This results in 20,000 to 25,000 actual start-ups each year of which about 100 might be considered to have high potential.

This is a good performance but to sustain economic growth and development in the face of increasing competitive markets and increasing pressure on our ability to attract Foreign Direct Investment (FDI), we may need to consider increasing our performance to 10% of the adult population, founding 30,000 to 40,000 new businesses per annum. Between 500 and 600 of these businesses should be high potential start-ups.

In this context, the issue of nature versus nurture inevitably arises. Are entrepreneurs born or can we teach people to be entrepreneurs? My experience of teaching this subject for over 25 years is that education and teaching plays an enormous role in creating awareness and nurturing a culture of entrepreneurship. The more we create awareness, the more willing people will be to try it for themselves and the more people do it, the more role models we will have.

his is what has happened in Ireland over the last ten to 15 years, leading to the emergence of an entrepreneurial culture. Nurturing can happen at all levels in the education systems from primary to secondary level and at third and fourth level. At undergraduate level in University College Dublin (UCD), now the UCD Quinn School of Business, we have been teaching entrepreneurship as an elective since 1978/79 and surveys have shown that some 10% of those who have taken these courses are now running their own businesses.

Global Constants

This is consistent with experiences in the US. While we haven't carried out the surveys in the Smurfit School, the number of MBA students taking electives in entrepreneurship is increasing and over 50% of the class now take these electives. These graduates are not only aware but they have the skill sets and experience needed to start new independent businesses, to create new ventures in existing businesses and to be entrepreneurial managers and chief executives.

Onward Vision

Education and training also has a critical role to play in giving those who want to be entrepreneurs the necessary skills and empowering them to do it successfully. Those who become entrepreneurs go on a journey:

• It typically starts with awareness that this is something they want to do.
  
  
• This is followed by a stage of generating ideas and identifying specific opportunities.
  
  
• The feasibility of the opportunity is then checked out and, if it looks good, a business plan is prepared to show how the business will work.
  
  
• This plan is also used to pitch the business to potential investors and bankers.
  
  
• Once the planning phase is completed successfully and the necessary resources are in place, the business is ready for launch.

The launch stage is typically followed by an early post-launch stage during which the business experiences teething problems, which, when overcome, leads to a period of consolidation and preparation for the growth stage.

At each of these six stages, the entrepreneur confronts many different issues and problems and these must be resolved to move onto successive stages. Understanding the problems and the issues at each stage requires real knowledge of what they are and how they can be resolved. Education and training has a key role to play in providing the knowledge required at each stage.

To be effective however, this education and training should be provided on a just-in-time basis so that the entrepreneur gets the knowledge and skills at the appropriate time. This will be our next task in UCD as we enter the executive education business in the Smurfit School in conjunction with NovaUCD, our innovation centre.

Playing Catch Up

Education has been a huge driver and enabler of economic development in Ireland. It is one of the main reasons why so many high quality, high technology multinational companies have located here particularly from 1970 to the late 1990s. During this period, the output of the education system was well matched to the skill levels required by multinational and indigenous companies. In recent years however, education has lost quite a bit of its momentum. As the skills requirement of much higher value added, more competitive businesses has increased significantly, education is less well matched and it is now playing catch up.

This is most evident at fourth level which includes taught masters and masters and PhD degrees by research. Continuing growth, diversification and competitiveness depends on a quantum level increase in fourth level education and research.

Key Players

While education has a very critical role to play in creating the knowledge base for the knowledge economy, the entrepreneurs are the critical players in transforming this knowledge into new businesses in future growth areas such as software, information, communications, pharmaceuticals, biotechnology, medical devices and new materials. In the main, these entrepreneurs will be people who leave existing companies with good ideas for new businesses. In the future we can expect that an increasing number of entrepreneurs will come from university-based research programmes where they have identified opportunities to commercialise some of the research outputs.

In UCD, the responsibility for this activity rests with NovaUCD. The number of patents filed from research is steadily increasing as is the selling of licences to exploit the technologies. This is in line with the establishment of almost 100 campus companies with the most successful ones attracting over €100 million of venture capital. All of this activity is inspiring the 'entrepreneurial university.'

Iincreasing Investment In Education

The storyline outlined argues very strongly for investing more in this space and at all levels of education. At primary level, the focus should be one encouraging children to be innovative and enterprising and to develop problem solving skills and a can-do mindset. This can continue at second level with more emphasis on embedding these skills in real projects that have real outcomes in activities like the Young Scientist Competition and Shell LiveWire.

At third level, all students should have access to electives in entrepreneurship like the UCD Horizons programme. While at fourth level there are many opportunities to provide electives in entrepreneurship to students doing taught masters degrees and to develop joint programmes such as a Masters in business and biotechnology. In particular, there is a major need and opportunity to provide world-class programmes on the commercialisation of research to PhD students, post doctorate students and faculty. The return on this investment will be significant as it will come from all areas and all levels within the economy.

The Practical Transition

There is a very natural and logical transition from studying the processes and models of entrepreneurship to applying them in business practice. Studying entrepreneurship creates knowledge of process and the different stages in the process. It gives people real knowledge of the requirements to complete each stage successfully. This knowledge is acquired not only through lectures and reading but also through case studies, interviews with entrepreneurs and a lot of interaction with entrepreneurs who are invited in as guest speakers.

Future Leaders

Moving to the more practical level, it involves students in developing ideas, identifying new venture opportunities, checking the feasibility of the business proposition and, where it is feasible, developing a defensible, investor-ready business plan. This part of the education process involves both good education and skills development. Many of the students who take electives in entrepreneurship are the leaders and animators of college events such as commerce day and arts day and they are running charity events and students societies, all of which provide an excellent grounding and preparation for translation into business practice. In business, these people will work in teams and many will go on to lead teams and acquire multifunctional skills and experiences. Eventually, some will identify specific opportunities to spin out of the company and become entrepreneurs.

The Cause

Entrepreneurship is critical for sustained economic and social development and for national competitiveness. High quality entrepreneurship depends on having a very supportive education system to create the knowledge base, the culture and the required skills. Investment in education and entrepreneurship will yield very high returns as these people have the potential to transform the economy through setting up new ventures and renewing existing companies.