International Entrepreneurship

International EntrepreneurshipBy, Dr. Nina Radojevich-KelleyMetropolitan State University of DenverSchool of BusinessDepartment of [email protected]

International Entrepreneurship

• Definition• “process of an entrepreneur conducting business activities across

national boundaries” (Hisrich, 2013)• Exporting, licensing, having a sales office in another country

STATS

85% of the world’s population lives in developing countries

infrastructure development is needed Over half of world’s population lives in Asia China has 20% of world’s population India twice the size of Latin America Many new market opportunities and transitioning

countries…huge opportunities exist Russia, Serbia, China, Malaysia, Peru, Vietnam, Iraq,

countries in Africa

International Entrepreneurship

• Many potential markets and prospective countries available• Foreign market selection is critical issue• Should you…• enter the top country,• select the largest potential market or one that is easier to

navigate? • Should you go into a developed market? Or developing market?

• Decision….• Based on past sales, competitive positioning and assessment of

EACH foreign market alternative• Collect data on a regional (EU) and country basis (Southeastern

China)

BEFORE expanding abroad: Entrepreneurs should…..• Assess key indicators • Collect and analyze data (primary and secondary)• Look at stats for 3 year period of time (or more) to see trends

• Secondary Data• NAICS codes- look for equivalent industry reports• Doing Business Abroad reports• GEM reports• STAT-country (STAT-USA)• CIA World fact book• Index on Economic Freedom• Humanitarian Response Index• GLOBUS• National Trade Database

• Look at country rankings & cultural perceptions

Motivations for GOING International? Increase profits

95% of world’s population lives outside of USA =$

Competitive pressures Can’t keep up with low prices…need to manufacture abroad

To avoid increased government regulations Car manufacturing, chemicals & toxins

Unique product/service Similar markets elsewhere

Aging population, obesity, autism

Excess production capacity Have a ton of extra stuff and local market doesn’t want it

Declining home country sales In latter part of life-cycle If your technology is obsolete in your country….take it to another country which might see it at revolutionary…new

sales opportunities

Take advantage of lower costs Lower costs in labor, raw materials, manufacturing overhead Nike, Reebok, Disney

Technological advantage

Tax benefits Have advantage of having sales office and distribution

Things to Consider When Selecting a Country?• Language• Economy and type of economic system• Political and Legal environment• Labeling requirements, advertising claims, ingredients, packaging, types of legal

ownership, pricing decisions (if Value-Added-Tax) • Culture• How open is the culture to entrepreneurship?• Perceptions of local entrepreneurs• How similar/different the culture is from your own

• Technological Environment• Local competitors• Opportunity perception

• Entrepreneurs motivation for expanding international• Proximity to customers (physical and psychological closeness)• Trade Agreements (regional and free trade)• How long does it take to actually form/create a business

Best Place for Entrepreneurs to Research Foreign Markets?• World Bank• Doing Business Abroad Report• Ease of doing business

• Global Entrepreneur Monitor (GEM)

Doing Business Abroad• World Bank• Ranked 185 economies on Ease of Doing Business in 2013• Environment is more or less conducive to starting and operating a

business in a given country

• “TOP” ranked countries have less RED TAPE…• More attractive to entrepreneurs…….but is this the complete picture?

• Concerns with JUST using these reports? • Does not take into account the culture, perception among entrepreneurship

among citizens, perceived opportunities for starting ventures

Doing Business Abroad: Averages a country’s percentile rankings on 10 topics

• Starting a business• # payments, time in days, costs% income per capita, paid-in min. capital (% per capita income)

• Dealing with construction permits• # procedures and # days to obtain permits to build warehouse, cost (% per capita)

• Getting electricity• # procedures and # days to obtain permanent electricity, cost (% per capita)

• Registering property• # procedures and # days required to register property, cost (% per capita)

• Getting credit• degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and facilitate lending,

borrowing history, rules & practices• Protecting investors

• Liability, stakeholder ability to sue directors/officers, transparency of transactions, • Paying taxes

• # payments per year, time it takes to file, % of tax paid on profits, upkeep labor, % tax paid for mandatory contributions (Federal corp income tax, State prop. tax, Sales, federal unemployment tax, other (truck-lease tax, fuel tax)

• Trading across borders• total # documents required per shipment to export/import goods, costs associated with exports/imports (including

documents, admin fees for custom clearance, broker fees)• Enforcing contracts

• # of days to resolve dispute, # procedures to enforce contract, and costs of attorney fees and court fees• Resolving Insolvency

• Average time to close a business, average cost of bankruptcy proceedings, recovery rate cents-to-$

Top 10 Countries for Entrepreneurshiphttp://doingbusiness.org/rankings

EconomyEase of Doing

Business Rank

Starting a Business

Dealing with

ConstructPermits

Getting Electricity

Register Property

Getting Credit

Protecting Investors

Paying Taxes

Trading Across

BordersEnforcing Contracts

Resolving Insolvency

Singapore 1 4 2 5 36 12 2 5 1 12 2Hong Kong, China 2 6 1 4 60 4 3 4 2 10 17

New Zealand 3 1 6 32 2 4 1 21 25 17 13

United States 4 13 17 19 25 4 6 69 22 6 16

Denmark 5 33 8 14 6 23 32 13 4 34 10

Norway 6 43 23 14 7 70 25 19 21 4 3

United Kingdom 7 19 20 62 73 1 10 16 14 21 8

Korea, Rep. 8 24 26 3 75 12 49 30 3 2 14

Georgia 9 7 3 50 1 4 19 33 38 30 81

Australia 10 2 11 36 37 4 70 48 44 15 18

Finland 11 49 34 21 24 40 70 23 6 9 5



Business Rank

Starting a Business

Dealing with

Construct Permits

Getting Electricity

Register Property

Paying Taxes

Trading Across



Singapore 1 4 2 5 36 5 1 12 2

Per Capita$ 42,930

3 days3 proced.6% Cost

per capita

26 days11 proced

16.7% cost

36 days4 proced28% cost

21 days5 proced

2.9% cost

5 pymtsYR82 hrs/yr6% profit

tax27.6%

total Tax 4 docuExprt $456

150 days21 proced

.8 yearsCost 1%

estateHong Kong, China 2 6 1 4 60 4 2 10 17

Per Capita$ 35,160

3 days3 proced

1.9% Cost per capita

67 days6 proced

16.3% cost

41 days4 proced

1.6% cost

36 days5 proced

4% cost

3 pymtsYR78 hrs/yr

17% profit tax

23.% total Tax

6 docuExprt $923

360 days27 proced

1.1 yearsCost 9%

estate

New Zealand 3 1 6 32 2 21 25 17 13

Per Capita$ 36,648


per capita

89 days6 proced

29.8% cost

50 days5 proced

76.1% cost

2 days2 proced.1% cost

8 pymtsYR152 hrs/yr

28.8% profit tax

33.5.% total Tax

5 docuExprt $870

216 days30 proced

1.3 yearsCost 4%

estate



Business Rank

Starting a Business

Dealing with

Construct Permits

Getting Electricity

Register Property

Paying Taxes

Trading Across



United States 4 13 17 19 25 69 22 6 16

Per capita $48, 850

6 days6 proced

1.4% Cost per capita

27 days15 proced

14.4% cost

68 days4 proced

16.1% cost

12 days4 proced

3.5% cost

11 pmtsYR175 hrs/yr

27.6% profit tax

46.7% total Tax

4 docuExprt

$1090370 days

32 proced

1.5yearsCost 7%

estateDenmark 5 33 8 14 6 13 4 34 10

Per Capita$ 60,390


per capitaPLUS 24.2%

capital saved

68 days8 proced

57.1% cost

38 days4 proced

119.6% cost

10 days3 proced.6% cost

10 pymtsYR

130 hrs/yr20% profit

tax27.% total

Tax

4 docuExprt

$1744410 days

35 proced

1 yearsCost 4%

estate

United Kingdom 7 19 20 62 73 16 14 21 8

Per Capita$ 37,780


per capita

99 days9 proced

62.4% cost

105 days5 proced

108% cost

29 days6 proced

4.7% cost

8 pymtsYR110 hrs/yr22% profit

tax35.5.%

total Tax4docu

Exprt $950399 days

28 proced

1 yearsCost 6%

estate

Top countries• Can’t just take top 10 countries and go forward• Doing Business Abroad does not tell entire story• Must look at culture (fear of failure), perception among entrepreneurship among

citizens, perceived opportunities for starting ventures• Funding opportunities (VC, Angel investors)• Opportunity for women in entrepreneurship• GDP per capita (strength of the economy)• Free Trade Agreements• Immigration laws• Workforce-strength, skills, age• Size of market• Cultural support

• Some of the largest countries are the best countries for entrepreneurs, but some of the smaller economies made the list (New Zealand, Chile)

• Some of the smallest HAVE the great opportunities WITH LESS competition

Remember• Just because it is easy to start a business in a country does not

mean that small businesses are being started• Example: Japan, France• Always rank in top 20% of countries to start a business in• Yet have low rates of entrepreneurship

• Fear of failure• Not supported by culture

GEM Report 2012http://www.gemconsortium.org

Looks to understand societal attitudes, participant levels, characteristics of entrepreneurs, etc.Entrepreneurship is a good career choice• In the EU only 50% of respondents agreed that

entrepreneurship was a good career choice• In Latin America/Caribbean, the Middle East/North Africa

(MENA) and Sub-Saharan Africa regions, over 75% of respondents considered entrepreneurship to be a good career choice

• Asia Pacific/South Asia region estimated 30% of the population saw opportunities for entrepreneurship• Only 17% intended to actually start a business in next 3 yrs

Fear of Failurehttp://www.gemconsortium.org

• Sub-Saharan Africa exhibited the lowest levels of fear of failure. • Only 24% of all respondents indicated that fear of failure would

prevent them from starting a business. • Latin American and Caribbean economies (28%) had fear of

failure which would prevent them from starting a venture• Fear of failure generally increases as one moves from early-

stage to advanced development levels • Greece (61%) and Italy (58%) showed the highest fear of

failure levels

Perceived Opportunitieshttp://www.gemconsortium.org

• factor-driven economies (those relying on agriculture or extraction businesses with a heavy reliance on (unskilled) labor and natural resources) had highest perceptions of opportunities for entrepreneurship and intention to start business• Middle East & North Africa

• Algeria, Egypt, Iran, Palestine• Sub-Saharan Africa

• Angola, Botswana, Ethiopia, Ghana, Malawi, Nigeria, Uganda, Zambia • Asia Pacific & South Asia (Pakistan)• 70% of sub-Saharan African economies had high perceptions

about the presence of good opportunities AND 76% believed they have the skills and knowledge to start a business• Sub-Saharan Africa reports high levels of entrepreneurship

Entrepreneurship Intentionhttp://www.gemconsortium.org

• The intention to start a venture in next 3 years• Factor-driven economies (48%)

• Middle-East and North African countries, Sub-Saharan Africa• Iran, Egypt, Ethiopia, Ghana, Nigeria

• Efficiency driven economies (26%)• European Union (Hungary, Romania, Poland, Lithuania), Non-

European union (Croatia, Serbia, Russia, Turkey), Asia Pacific & South Asia (China, Thailand, Malaysia), Latin America & Caribbean (Argentina, Brazil, Chile, Costa Rica, Peru, Panama)

• Innovation-driven economies (11%)• North Africa & Middle East (Israel), South Asia & Asia Pacific (Japan,

Singapore, Taiwan), European Union (Austria, Belgium, Denmark, Germany, France, Ireland, Greece, Spain, UK, Sweden, Slovakia, Portugal), non-European Union (Norway, Switzerland), United States

Economyhttp://www.gemconsortium.org

Perceived Opportunity

Perceived Capability

Fear of Failure

EntrepreneurIntention

Good Career

Brazil 52% 54% 31% 36% 86%

Nigeria 82 88 21 44 82

China 32 38 36 20 72

Japan 6 9 53 2 30

Singapore 23 27 42 16 50

Rep. of Kor 13 27 43 13 59

UK 33 47 36 10 50

New Zealand

47 62 24 13 61

Australia 48 47 43 12 54

Denmark 44 31 39 7 NA

Greece 13 50 61 10 64

Croatia 17 44 36 19 64

Russia 20 24 47 2 60

USA 43 56 32 13 92

Economyhttp://www.gemconsortium.org

Total Entrepreneur Rate (18-64 yrs)

Necessity Driven

Opportunity Driven

Brazil 15 30 59

Nigeria 35 35 53

China 13 37 39

Japan 4 21 66

Singapore 12 15 54

Rep. of Kor 7 35 46

UK 9 18 43

New Zealand

17 7 79

Australia 10.5 15 73

Denmark 5 8 71

Greece 7 30 32

Croatia 8 34 36

Russia 4 36 31

USA 13 21 59

Conclusion: Top Countries• New Zealand• Australia• Denmark• Republic of Korea• Canada• Singapore• Chile• UK• South Korea

• Look at Doing Business Abroad• Ease of starting business

• Culture (fear of failure), perception among entrepreneurship among citizens, perceived opportunities for starting ventures (GEM)

• Funding opportunities (VC, Angel investors)

• Opportunity for women in entrepreneurship

• GDP per capita (strength of the economy)

• Free Trade Agreements• Immigration laws• Workforce-strength, skills, age• Size of market• Cultural support

Top Countries• New Zealand• Fast to start (1 day, 1 procedure, costs $ 127), strong GDP ($ 162 Bill),

maintained high percentage of companies started annually, strong opportunity driven, strong perceptions, good angel/VC. Stable business climate, good personal freedom, lacks red tape and corruption, corporate tax (28%), good FDI

• Australia• Fast to start (2 days, 2 procedures), strong GDP ($ 1.1 Trill), maintained high

percentage of companies started annually, strong opportunity driven, strong perceptions, good angel/VC, Negatives—high tax rates (47.7%), but 50% believe there is excellent opportunity, Australian Free trade Agreement, strong personal freedom and strong business climate

• Canada• Fast to start (5 days, 1 procedure, costs $ 195), strong GDP ($ 1.6 Trill),

maintained high percentage of companies started annually, strong opportunity driven, strong perceptions, good angel/VC, low tax rates (28.8% on profits versus USA 46.7%), NAFTA, not many Canadians starting businesses. But lacks innovation, but has strong investor protection

Top Countries• Denmark• GDP is one of highest in world ($59, 684 versus USA $ 48,442)(World

Bank, 2012), business-friendly climate, easy to start and run businesses and strong opportunity perceptions, good angel/VC opportunities

• Chile• More VC/angel funding available, growing economy, is one of least

restrictive systems in South America for starting a business, good perception for opportunity

• Start-up Chile- programs created by government to promote innovation..provides $40,000 equity (seed-capital) and a 1 year temporary visitor visa. Tax rate is 25% (lowest of all OECD nations)

• Singapore• Good perceptions and opportunities, economy depends on exports,

trade surplus (24% of GDP), BUT scores low on personal freedom, easy to start and run business

Top Countries• UK• Trying to lure entrepreneurs with new type of visa, hard to get a

bank loan (only 64% success rate), can settle into UK with in 2 years…depending on how much money you inject into economy, good VC/Angel opportunities, easy to start business, good business climate . Costs $ 257 to start business, takes 13 days, 6 procedures

• South Korea• Fast to start (7day, 5 procedures, $36 dollars), strong GDP ($ 1

Trill), cheap and easy to start, fear of failure is biggest concern (45%), 40% of Koreans work for companies with 10-49 employees

TOP Countries• USA???• Fell a little…but still top 10• Still very open to FDI, good opportunities for women, and to

entrepreneurs in general, great VC/Angel investor potential, minimal red tape, but……tax rates dampen the business interests (highest statutory tax rate in the world-46% which is the published rate—effective rate is lower), strong business climate, little corruption, good protection on IP, complexity of the tax code is troublesome

• Good personal freedom and monetary freedom

Conclusion: Worst CountriesPhilippines• lowest ranked Asian country and most difficult places to do business in. Low FDI,

slow economic growth, unstable legal system, violence and bureaucracy

Venezuela• Bottom when it comes to ease of paying taxes, getting credit, investor protection

laws, and cross-border trading, nationalization of the economy makes it hard for business., hard to withdraw money from your bank, inflation (26%)

Nigeria• Africa’s largest oil producer, but huge political unrest, growing ethnic tensions,

religious tensions make it hard to do business, high corruption, ranks among the lowest in the world for getting electricity (3months) and registering property.Violence, poverty, pollution, political instability

Worst CountriesRussia• Is one of the world’s fastest growing economies, but also one of most difficult

places to do business in. One of toughest places in the to get an electricity connection, (9.5 months). Major power outages and lack of investment in power sector. Trade is slow..takes 3x longer compared to other OECD nations

Argentina• It takes 1 year to get a construction permit, compared to 7 months for Latin

American countries. Starting a business takes 26 days. They scared off FDI by defaulting on debt in 2002

Indonesia• One of most difficult to start a business. Need 1.5 months to launch a business in

Indonesia, hard to get electricity. 15 million households have no access to electricity. Want FDI to provide 2/3 of $ 150 billion needed for infrastructure development in the next five years

Step to Expanding Internationally Research, research and research (see next slide) Choose an entrepreneur-friendly environment.

Look at the countries that are the most and least friendly to small business. Turn to Uncle Sam.

Your local U.S. Export Assistance Center (USAEC) can help you with tasks such as finding pre-screened partners, agents and distributors; conducting background

checks and market research; and tracking down relevant trade events in 85 countries. Investigate suppliers thoroughly.

Use sourcing sites such as Alibaba.com to search for suppliers by country and product (or service).

Avoid placing orders before you have traveled to meet potential new suppliers and tour their factories.

Do references checks BEFORE you sign a deal. Hit the trade show circuit.

Participants of shows are well-established suppliers of goods /services or logistics experts, such as freight-forwarders and customs brokers

For leads on reputable trade shows, consult your industry association U.S. Department of Commerce for non-food related businesses U.S. Foreign Agricultural Service, which have offices focused on global trade events.

http://www.export.gov/

http://www.export.gov/eac/trade_events.asp

http://www.fas.usda.gov/

Places to look for Data?

• Other places to research• STAT-country (STAT-USA)• CIA World fact book• Index on Economic Freedom• Humanitarian Response Index• GLOBUS• National Trade Database• Doing Business Abroad• GEM

International Entrepreneurship

Documents

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