Entrepreneurial Policies: Portugal in the Context of The European Union

i Entrepreneurial Policies: Portugal in the context of the European Union Luís Guilherme Ranito Cabral dos Santos Master Dissertation in Economics and Innovation Management Supervised by: Sandra Maria Tavares da Silva Maria Isabel Gonçalves da Mota Campos September, 2013 i Biographic note Luís Guilherme Ranito Cabral dos Santos concluded his bachelor degree in Management in Universidade Católica Portuguesa in February 2011. Since September 2011, he has been attending the Master in Economics and Management Innovation, at Faculty of Economics, University of Porto. ii Acknowledgements First and foremost, I would like to thank Prof. Sandra Maria Tavares da Silva and Prof. Maria Isabel Gonçalves da Mota Campos for their help and guidance throughout these last months. I would also like to thank my family and my friends for their support. iii Abstract This thesis aims at analyzing entrepreneurship activity in Portugal since 1994. A comparative analysis with the Netherlands is developed, since this country is one of the European innovation driven countries, as recognized by the Global Entrepreneurship Monitor. A mapping of entrepreneurship policies of both countries is proposed in order to identify the areas that should be as priorities for enhancing entrepreneurial activity in Portugal by the government. With this mapping, and also based on the analysis of relevant statistical indicators, we systematize a set of measures that may be able to promote a better performance in terms of the growth dynamics of Portuguese Small and Medium Enterprises (SME). Keywords: entrepreneurship, innovation, government policy JEL-codes: M13, O25, O38 iv Resumo Esta tese analisa o fenómeno do empreendedorismo em Portugal, desde 1994 até aos dias de hoje. É desenvolvida uma análise comparativa com a Holanda, que é um dos países europeus orientados para a inovação, como é reconhecido pelo Global Entrepreneurship Monitor. É proposto um mapeamento das políticas de empreendedorismo lançadas pelos governos dos dois países desde 1994, com o objetivo de identificar as áreas prioritárias para a promoção do empreendedorismo em Portugal. Com base neste mapeamento e também a partir da análise de indicadores estatísticos relevantes, é sistematizado um conjunto de medidas capazes de melhorar o desempenho da dinâmica de crescimento das Pequenas e Médias Empresas em Portugal. Palavras-chave: Empreendedorismo, Inovação, Políticas Governamentais Códigos JEL: M13, O25, O38 v Table of Contents Biographic note .................................................................................................................. i Acknowledgements ........................................................................................................... ii Abstract ............................................................................................................................ iii Resumo ............................................................................................................................ iv Table of Contents .............................................................................................................. v List of Tables .................................................................................................................. vii List of Figures ................................................................................................................ viii 1. Introduction ................................................................................................................... 1 2. A Literature Review on Entrepreneurship .................................................................... 4 2.1. Concepts of Entrepreneurship ................................................................................ 4 2.1.1. The economic approach ................................................................................... 4 2.1.2. The psychological approach ............................................................................ 7 2.1.3. Corporate entrepreneurship ........................................................................... 10 2.2. Entrepreneurship Policies: a discussion ............................................................... 13 2.2.1. Policies of entrepreneurship: a theoretical perspective ................................. 13 2.2.2. Main typologies for entrepreneurial policies ................................................. 14 2.2.3. The contribution of the entrepreneurial concepts to policy making .............. 16 2.2.4. European entrepreneurship policies .............................................................. 18 2.2.5 Entrepreneurship policies in Portugal ............................................................ 22 3. Mapping entrepreneurship policies in Portugal and in the EU ................................... 24 3.1. Statistical Analysis of Entrepreneurship in EU .................................................... 24 3.1.1. Entrepreneurship conditions in Portugal (input indicators) ........................... 25 3.1.2. Business demography and characteristics of Portuguese entrepreneurs (output indicators) ................................................................................................................ 28 vi 3.2. The EU Funds ...................................................................................................... 31 3.3. Mapping of entrepreneurial policies .................................................................... 33 3.3.1. The selection of the benchmark country ....................................................... 33 3.3.2. Entrepreneurial facilities in Portugal and Netherlands .................................. 37 3.3.3. Mapping of public entrepreneurship policies: Portugal and Netherlands ..... 40 4. Conclusions ................................................................................................................. 56 References ....................................................................................................................... 59 vii List of Tables Table 1: EU entrepreneurship policies since 2000 ......................................................... 18 Table 2: Entrepreneurial Framework Conditions (EFC) for EU countries ..................... 27 Table 3: Entrepreneurship in Europe: birth and death of firms (2010) .......................... 28 Table 4: Level of Education of Entrepreneurs ................................................................ 29 Table 5: Enterprises by sector and size ........................................................................... 30 Table 6: TEA in several countries, 2012 ........................................................................ 31 Table 7: Some statistics about Portugal and Netherlands ............................................... 34 Table 8: Rank of Portugal and the Netherlands in Doing Business variables ................ 37 Table 9: Starting a Business ............................................................................................ 37 Table 10: Paying Taxes ................................................................................................... 38 Table 11: Getting Credit ................................................................................................. 39 Table 12: Resolving Insolvency ..................................................................................... 39 Table 13: Trading Across Borders .................................................................................. 40 Table 14: Mapping EFCs in Portugal since 1994 ........................................................... 48 Table 15: Mapping EFCs in the Netherlands since 1994 ............................................... 54 viii List of Figures Figure 1: Regions in Portugal ......................................................................................... 32 7 Schumpeter as the force that prevents the economy to stay in a stationary state, as proposed by the neoclassical approach (Ricketts (2006) in Casson, 2006). Schumpeter is also the first economist to treat innovation as an endogenous process where the entrepreneur leads the economy away from equilibrium positions (Landström et al., 2012). Schumpeter’s and Kirzner’s perspectives are different: Schumpeter says that the entrepreneur creates disruption in the market through innovation, whereas Kirzner says that the entrepreneur explores market failures and helps the market to reach equilibrium (Klein et al., 2010). Leibenstein’s perspective is similar to Schumpeter’s. The author defends that the entrepreneur’s role is to coordinate the firm’s assets in order to create or carry on an activity that fills in for market deficiencies. Leibenstein refers to this type of entrepreneurship as “new type” or Schumpeterian entrepreneurship, which is crucially responsible for assuming the functions of gap filler and input completer (Leibenstein, 1968). The Schumpeterian definition of entrepreneurship will be reviewed below, associated with the management approach to the concept of entrepreneurship. 2.1.2. The psychological approach This approach is related to the personality of the entrepreneur. It is argued that to be a successful entrepreneur, certain personality traits, values and beliefs must be present (Cunningham and Lischeron, 1991). The psychological side of the entrepreneur is here emphasised, highlighting the personal characteristics of the entrepreneur. There are divergent opinions concerning the relation between the personal values of the entrepreneur and the entrepreneurial activity. In this subsection some perspectives that corroborate the relation between personality and entrepreneurship will be presented. This school of thinking believes that entrepreneurs are people with an ethical sense and have social-oriented behaviour. But there is also the stereotype that entrepreneurs and other business men pursue relentlessly their goals, and do not care how they are achieved (Cunningham and Lischeron, 1991). Lachman (1980) states that people who share the same personal traits as entrepreneurs are more likely to engage in 8 entrepreneurial activity than people who do not possess those characteristics (in Koh, 1996). This subsection analyzes the relation between entrepreneurs and personality traits, which are the risk-taking propensity, the need for achievement, the locus of control and the tolerance for ambiguity. The risk-taking propensity The relation between risk and entrepreneurial activity has been studied by some of the most well-known economists. John Stuart Mill states that the most important characteristic of an entrepreneur is his ability to bear and calculate risk (in Cunningham and Lischeron, 1991). In Mill’s opinion, the ability of the entrepreneur to bear risk is what distinguishes him or her from a manager (Brockhaus, 1980 in Birley, 1998). The degree of risk aversion is related to the need for achievement. Entrepreneurs prefer intermediate risk opportunities because they present challenges whose goals are reachable. Those challenges are pursued by entrepreneurs with high need for achievement. On the other hand, people with high levels of failure avoidance pursue both low risk goals because they are easier to reach, and extremely high risk goals since inability to obtain success is more easily explained (Atkinson, 1957 in Shane, 2000). Moreover, the risk faced by the entrepreneur is not just the risk of a business to go wrong. When an individual starts his own firm, he has also to manage the influence this decision might have on his career, his family and his psychological health (Liles, 1974 in Birley, 1998). The need for achievement The identification of this personality trait of the entrepreneur was earlier proposed by McClelland (1961). The author distinguished entrepreneurs as “high achievers” since they have a drive to achieve goals in relation to a set of standards, trying to accomplish some defined targets. Typically, entrepreneurs want to take personal responsibility for finding solutions to problems; hate situations in which they succeed by chance and like to have fast feedback, so that they can decide if there is something that needs to change in their business or not. As remarked before, they prefer intermediate risk situations, 9 because those situations present a challenge and are not beyond their capabilities (in Chell, 2008). The relation between need of achievement and the entrepreneurial activity is confirmed in subsequent studies. Komives (1972) finds that high levels of need of achievement are a common characteristic in a sample of 20 successful high-tech entrepreneurs. Smith and Miner (1984) find that there is a positive relation between high needs of achievement among entrepreneurs and the growth rate of their companies (Begley and Boyd, 1987 in Birley 1998). However, there is some criticism concerning the need of achievement as a personality trait of an entrepreneur. The need of achievement of a person may not be always related to the will of starting a business. The person may want to achieve a certain job position or status in his own community and that has nothing to do with entrepreneurship. That is why need of achievement may be a weak predictor of an individual’s tendency to start a business (Cunningham and Lischeron, 1991). Locus of Control The concept of the locus of control as a personal trait was first introduced by Rotter, (1966) in Chell (2008). The author states that people with an internal locus of control are those who believe that they are in control of their own destiny, whereas people with an external locus of control believe that factors outside of their control, such as more powerful people and luck, have a dominant effect on their lives (Chell, 2008). The connection with entrepreneurial activity is made in several studies (Rotter, 1966 in Chen, 2008) that relate the locus of control between firm founders and the rest of the population. Studies show that firm founders are more internal than the rest of the population. Brockhaus (1982) found evidence that owners of surviving firms have a higher internal locus of control than those who have failed (Begley and Boyd, 1987 in Birley, 1998). Nevertheless, there are studies that do not find evidence of internal locus of control as a personal trait for an entrepreneur (Babb and Babb, 1992). This conclusion comes mostly from the attempt to compare firm founders and firm managers, despite the fact that there 10 are firm managers that can also be highly entrepreneurial, for example the manager of a recently founded firm, characterised as high-technologically advanced (Shane, 2000). Tolerance for ambiguity Tolerance for ambiguity is a personal trait that has been connected to entrepreneurs by some authors. Budner (1982) defines it as the propensity to see situations without clear outcomes. Schere (1982) argues for the importance of the concept because the challenges and the results of a start-up company are unpredictable (in Shane 2003). Tolerance for ambiguity is also related to entrepreneurship because individuals with a high level of tolerance for ambiguity find ambiguous situations as challenging and strive to turn an unpredictable situation and have a good performance (Koh 1996). Begley and Boyd (1987), Schere (1982), and Miller and Drodge (1986) find that firm founders have higher levels of tolerance of ambiguity than managers. Sexton and Bowman (1986) are also in line with these authors perspective, identifying tolerance for ambiguity as a distinguishing psychological characteristic, which enables to distinguish between firm founders and managers (in Shane 2003). In Section 2.2.3 we will systematize the relevance of the above concepts for entrepreneurship policy making, highlighting common features and main divergent aspects. Before this, in the next section, we will bring in a discussion on entrepreneurship policies. 2.1.3. Corporate entrepreneurship In the previous subsections, we analysed the contribution of some economists to the definition of entrepreneurship, being focused the personality traits of an entrepreneur. Now, the perspective of corporate management will be studied. Corporate entrepreneurship does not have a unique definition. Zahra (1991) defines Corporate Entrepreneurship as the formal or informal activities that take place at the corporate, division, functional or project levels, whose goal is to create new businesses in established economies, through production, process and market innovations (Morris et al., 2007). Corporate entrepreneurship also bridges the gap between science and the marketplace (Hisrich et al., 2008). 11 Guth and Ginsberg (1990) state that corporate entrepreneurship occurs through the creation of new ventures within existing organizations or the transformation of those organizations through strategic renewal. Sharma and Christman (1999) define corporate entrepreneurship as the process that creates a new organization, or as innovation within organizations (in Morris et al., 2007). A relevant factor within the corporate entrepreneurship framework is the importance of competition, as already stressed by Schumpeter. The process of creative destruction describes competition between companies, when they try to turn obsolete the products of other companies. To invest in new products, companies have to feel the pressure to innovate. In this era of hyper competition, the need for new products and for implementing the entrepreneurial spirit makes companies even more attracted to develop an entrepreneurial corporate environment (Hisrich et al., 2008). This transformation of the company can also occur by the inability or the unwillingness to adapt to market transformations (Tushman et al. (1986) in Kuratko (2007)). So, corporate entrepreneurship needs to be supported by proactive market orientation and flexible management practices (van Wyk and Adonisi, 2012). Companies need to respond to the threats that they face. Competition between firms creates pressure on the quality of their products and on satisfying the customers’ needs. This probably induces the company to spend more on Research and Development (R&D) so that its products meet market needs and gain competitive advantage. Thus, the company develops strong efforts in order to ensure that the strategy followed is the right one (Ahuja and Lampert, 2001). Corporate entrepreneurship takes two different forms: corporate venturing or strategic entrepreneurship (Kuratko, 2007). Corporate venturing refers to the creation, addition and investment in new businesses. Corporate venturing can be internal, cooperative or external. The internal form is characterized by the introduction of new products produced by the company. So, internal cooperative corporate venturing happens when a company, alongside its partners, promotes entrepreneurial activity. External corporate venturing refers to entrepreneurial activity that the company purchases from others (Morris et al., 2007). 12 A company that engages in a process of corporate venturing is seeking to (Kuratko, 2007): Exploit underutilized resources; Extract further value from existing resources; Apply competitive pressure on internal suppliers; Spread the risk and costs of product development; Divest noncore activities. Miles and Convin (2002) state that firms engage in corporate venturing for three reasons: to build an innovative capability so that the company can be more entrepreneurial and more prone to change; to extract greater value from the existing competencies or to expand the firms’ operations and the knowledge in areas of interest; and generate quick financial returns (Morris et al., 2007). The other form of corporate entrepreneurship is strategic entrepreneurship where the goal is to innovate in the pursuit of competitive advantage, which involves opportunityseeking and advantage-seeking behaviors (Ireland et al., 2003). Here the main goal is to achieve and maintain a competitively advantageous position for the firm. This type of corporate entrepreneurship can assume the following forms (Morris et al., 2007): Strategic renewal; Sustained regeneration; Domain redefinition; Organizational rejuvenation; Business model reconstruction. Strategic renewal is a transformation of a firm’s scope of business or strategic approach (Zahra, 1996) and occurs when a firm changes the way it competes, redefining the relationship established with its competitors (Cavin and Miles, 1999 in Saéz-Martinez et al., 2011). In other words, it is the transformation of organizations through the renewal of their key ideas (Guth and Ginsberg, 1990 in Morris et al., 2007). Strategic renewal is 13 not just a change of strategy; it also involves repositioning efforts in order to change its perspective concerning its reference market (Morris et al., 2007). As the name suggests, sustained regeneration refers to a type of entrepreneurial activity where a company introduces new products or enters new markets in a consistent way. This type of entrepreneurial activity is more common in markets whose products have short life-cycles, changing technological standards or segmented product categories (Morris et al., 2007). Domain redefinition is an entrepreneurial activity where a company decides to be the first mover in an unknown or unexploited market. This move is caused by radical innovations where these new products are viewed by consumers as highly replaceable, yet completely different from other products ((Kelley et al., 2005 in Morris et al., 2007). Organizational rejuvenation refers to the process where a company tries to sustain or improve its competitive advantage by changing its internal mechanisms and capabilities (Covin and Miles, 1999). A successful organizational rejuvenation process enables a firm to reach a competitive advantage without changing its strategy, product offers or markets (in Morris et al., 2007). Business model reconstruction happens when a firm tries to relate the design or redesign of its business model in order to increase its operational efficiencies or differentiate itself from industry competitors, which is valued by the market (Kuratko and Audretsch, 2009). 2.2. Entrepreneurship Policies: a discussion 2.2.1. Policies of entrepreneurship: a theoretical perspective Lundström and Stevenson (2005, pp. 45-46) define entrepreneurship policy as a policy measures taken to stimulate entrepreneurship, aimed at the pre-start, start-up, and early post start-up phases of the entrepreneurial process, designed and delivered to address the areas of “Motivation”, “Opportunity” and “Skills”, as defined in Lundström and Stevenson’s book. The primary goal of entrepreneurship policy was to encourage more people to consider entrepreneurship, to move into the nascent stage and proceed into the start-up and early phases of a business. 14 The areas of “Motivation, Skills and Opportunity” deserve substantial attention from Lundström and Stevenson. These authors state that there are higher levels of entrepreneurial activity in an economy if people see entrepreneurship as a real career option and are willing to explore that way of life. Moreover, they must have access to opportunities in order to gain the knowledge, skills and ability to pursue such an endeavour and (Lundström and Stevenson, 2005). Lundström and Stevenson also defend that it is not enough to create the right conditions for the emergence of start-up entrepreneurs. It is also crucial to help start-ups in the initial survival and growth phases, when they are already competing in the market. The authors define a 42 month period for an effective entrepreneurial policy because new firms are very vulnerable in the first three to five years (OECD, 2002) and high growth firms usually start their development in their early years of activity. The 42 month limit period is also an idea shared by the GEM research team (Lundström and Stevenson, 2005). The definition of entrepreneurship policy is often confused with Small and Medium Enterprises (SME) policy. Audretsch (2004) provides a distinction for these two types of policy. The author defines SME policies as those implemented by national governments with the purpose to promote SME, like fiscal incentives and access to finance. In contrast, an entrepreneurship policy has a wider focus, where the focus of the policy is the environment that influences the entrepreneurial activity, encompassing subjects like education, trade and immigration (Audretsch, 2004). Hölzl (2010) also offers a way to distinguish both policies. SME policy only focuses on the needs of start-ups and SMEs, and its goal is to level the size-related disadvantages of small firms. Entrepreneurship policy focuses not only on that kind of companies, but also aims to provide the right economic environment for any firm to succeed, and the size of that company is not the relevant criterion (Hölzl, 2010). 2.2.2. Main typologies for entrepreneurial policies According to Lundström and Stevenson (2005) there are four different types of entrepreneurial policies: Entrepreneurship - Extension Policy; 15 New Firm Creation Policy; “Niche” Policy; Holistic Entrepreneurship Policy. The definition of these types of entrepreneurial policies will help to understand the different areas where entrepreneurial policy making and its different instruments may act in order to promote entrepreneurship as a viable career option. Entrepreneurship - Extension Policy The E-extension policy, mainly concerned with offering better conditions for new entrepreneurs, has the goal of improving the access to information for starting-up a business. Taking into account the concept of entrepreneurship policy above described, this policy stimulates “Opportunities”. It reduces asymmetries of information, making it easier for entrepreneurs to obtain relevant information to start a business. This policy is concerned with the development and emergence of small and medium enterprises (SME), aiming at the creation of new jobs. Within this type of policies, government authorities provide micro-loans and consulting for entrepreneurs (Lundström and Stevenson, 2005). New firm creation policy The goal of these policies is to simplify start-up processes by eliminating administrative and regulatory barriers to business entry and exit, so that there can be a higher number of start-ups. The objective of this type of policy is to reduce the costs and time of creation of firms. This type of policy involves economic, legal and fiscal changes in a country’s law. Some of these changes are: less harsh bankruptcy laws, reduction of the tax burden of start-ups, and fewer business registration steps (Lundström and Stevenson, 2005). “Niche” target group policy The objective of these policies is to increase entrepreneurial activity among specific groups of the population. In Lundström and Stevenson’s book, two types of specific 16 groups are considered as the niche groups: the under-represented groups in business ownership levels (Type 1) and technologically-oriented researchers and experts (Type 2). These groups face some barriers: concerning the first, women and ethnical minorities may face social prejudice and economic struggles; regarding the second, technological-based businesses face high uncertainty levels. Different policy measures can be taken in order to enhance entrepreneurship in those two different groups: implementation of entrepreneurial development programmes for women entrepreneurs and ethnic minorities; funding for the incubation of new firms, pre-seed funding for R&D that can be commercialized and national business plan competitions (Lundström and Stevenson, 2005). Holistic entrepreneurship policy Holistic entrepreneurship policy incorporates all the three policy types: reducing barriers to business entry ensures that the small business support system responds to the needs of nascent and new entrepreneurs making financing available for start-up businesses. It also promotes entrepreneurship by integrating entrepreneurship in the education system and by the creation of a positive climate for start-up initiatives (Lundström and Stevenson, 2005). The tendency nowadays is to define an entrepreneurship policy as a horizontally oriented policy. This means that there is not just the concern to help everybody to create their own business and job, and to provide assistance through the first phases of growth. There is also a government obligation to make sure that the legal system is aligned with entrepreneurs’ needs, providing the bridge between technology owners and market demand and making sure that entrepreneurship is a part of the education system (Hölzl, 2010). 2.2.3. The contribution of the entrepreneurial concepts to policy making As already mentioned in the Introduction, the goal of this dissertation is to make a comparative analysis of European and Portuguese entrepreneurial policies. The concepts studied in the previous sections help demystifying some previous conceptions about being an entrepreneur. 23 Technological Centres, which objective is to promote knowledge flows between industries and firms; Technological Parks that promote scientific, technological and industrial development through the flows between firms and universities; Incubation Centres, which goal is to help in the development of start-ups; Associated Laboratories, that work with the government in order to define scientific and technological programmes; Knowledge Transfer Centres; Innovation Relay Centre Network, that interacts with the network of SME support for an easier transfer of technology between firms; New Technological Centres, that accelerates the incorporation of new technologies in the industrial processes; and Armed Forces Investigation Units. The role of Portuguese public authorities is to promote the link between these organizations in order to create innovation and knowledge at the economic and social level (Unidade de Coordenação do Plano Tecnológico, 2005). After describing the entrepreneurship policies that took place in Portugal since the entrance of Portugal in the EU, we now proceed to a critical systematization of these policies, also supported by some statistical analysis. A mapping of Portuguese policies, in comparison with another European country, will be implemented, aiming at identifying the areas where entrepreneurship policies should mainly operate. 24 3. Mapping entrepreneurship policies in Portugal and in the EU In the previous section, the most important entrepreneurial policies in the European Union and in Portugal were identified, being mentioned their goals and the way that public authorities were trying to achieve them. In order to bring more clarity and rigour to the comparative analysis of those policies, we propose to implement their mapping, based on a systematic registering procedure. Our information will be gathered from GEM, which records in a regular way the evaluation made by national experts in each country concerning the development of entrepreneurship in the respective economy. Another source of information is the annual report made by the World Bank (2013), named Doing Business. This report measures the easiness for a local entrepreneur to run a small or medium-size business: it measures and tracks changes in regulations affecting 11 areas in the life cycle of a business, from which we will select and mentioned later the relevant ones to this dissertation. Previously, we will develop a statistical analysis of the evolution of the main indicators on entrepreneurship in Portugal, comparing with European innovation driven economies. 3.1. Statistical Analysis of Entrepreneurship in EU In this section we intend to provide a comparison of entrepreneurship indicators across the EU, focusing on the European innovation driven economies,2 where Portugal is included. In fact, and according to the GEM (2010), in spite of the development of entrepreneurship policies in Portugal and the work made by authorities, entrepreneurial activity is still not a career option that the Portuguese follow, being that one of the reasons why this subject was chosen as a theme for this thesis. 2 Innovation driven economies: Australia, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Iceland, Israel, Italy, Japan, the Netherlands, Norway, Portugal, Slovenia, Spain, South Korea, Sweden, Switzerland, United Kingdom and USA (GEM, 2012). 25 Inspired in the Global Entrepreneurship Monitor, we will select statistical information at different levels. We start by considering external determinants of entrepreneurship (or input indicators) either linked with financial conditions to start a new business or related with infrastructures that are relevant for the entrepreneurial activity as well as some firms’ demographic indicators that may give a perception of the results of entrepreneurship policies (output indicators). As input indicators, we will consider variables such as the measurement of the efficiency of the financial conditions to start a business, based on the opinion of experts about the access to financial sources, the bureaucratic characteristics of the start-up process and the tax burden. The assessment of the entrepreneurial supporting infrastructures includes the evaluation of the role played by incubators and science parks, while the quality of communication networks is assessed in terms of their importance to the emergence of the entrepreneurial activity. Finally, the output indicators include information about firms’ demography such as firms’ birth rates by sector of activity; proportion of entrepreneurs aged 18-64; qualification of entrepreneurs, etc. After collecting this information we will use descriptive statistics to portrait the entrepreneurial activity in Portugal and other European countries. The data used in this statistical analysis are collected from the GEM and from Eurostat.3 In order to keep a fair evaluation of entrepreneurship in Portugal, we will focus on European innovation driven economies, as defined by the GEM. 3.1.1. Entrepreneurship conditions in Portugal (input indicators) As mentioned above, the evaluation of experts about the easiness to start a business, either measured by financial or legal reasons and other factors that can provide help to the development of small businesses, is going to be evaluated in this subsection. The GEM defines a national team per country, where it is made a survey called National Experts’ Survey (NES) where nine Entrepreneurial Framework Conditions (EFCs), that 3 There are tables where some innovation driven economies are not mentioned due to lack of information about those countries in the Eurostat statistics. 26 are factors that can influence the climate for entrepreneurship and the level and nature of this activity, are evaluated by national experts. The nine EFCs are (GEM, 2012): Entrepreneurial Finance (1): refers to the availability of financial resources, equity and debt, for new and growing firms, including grants and subsidies; Government Policy (2a and 2b): mentions the extent to which government policies are size neutral or encourage new and growing firms; Government Entrepreneurship Programmes (3): refers to the extent to which regulations and taxes encourage the growth of new firms; Entrepreneurship Education (4a and 4b): measures the extent to which the promotion of entrepreneurial abilities is incorporated in the education and training system; R&D Transfer (5): evaluates the extent to which R&D leads to new commercial opportunities and if it is available for start-ups; Commercial and Legal Infrastructure (6): evaluates the presence of commercial, accounting and other legal services and institutions that encourage entrepreneurship; Entry Regulations (7): measures the market dynamics and openness; Physical Infrastructure (8): measures the access to available physical resources at a non discrimination price for start-ups; Cultural and Social Norms (9): that encourage (or do not interfere) new ways of conducting businesses. The NES questionnaire aims at gathering the views of experts on a wide set of items designed to capture a different dimension of a specific EFC. The evaluation of a set of statements is based on a five-point Likert scale, where 1 means the statement is completely false and 5 means it is completely true (GEM, 2011). Table 2 presents the NES’ results for the EU countries included in the 2011 GEM Global Report:4 4 The 2012 NES results are not available yet. 27 Table 2: Entrepreneurial Framework Conditions (EFC) for EU countries 1 2a 2b 3 4a 4b 5 6 7a 7b 8 9 Finland (FIN) 2,6 3,2 2,9 2,7 2,3 2,8 2,6 3,3 2,9 2,6 4 2,7 France (FRA) 2,5 3,1 2,9 3,6 1,9 2,7 2,4 3 3,2 2,1 4,2 2,4 Germany (GER) 3 2,9 2,9 3,6 1,9 2,6 2,9 3,3 2,9 3 3,8 2,6 Greece 1,9 1,9 1,8 2 1,9 2,6 2,1 2,9 3,1 2,2 3,5 2,4 Ireland (IRL) 2,4 2,7 2,6 3.2 2.0 2.9 2,8 3,3 3,1 2,9 3,5 3,2 Netherlands (NET) 2,9 2,5 2,6 3,1 2,9 3,2 2,9 3,6 2,6 3,3 4,6 3 Portugal 2,9 2,5 2,1 2,9 1,9 2,9 2,6 3,1 2,9 2,4 4,1 1,9 Slovenia 2,4 2,4 2,1 2,7 1,8 2,6 2,5 2,9 3 2,5 4 2,2 Spain 2,1 2,1 2,2 2,7 1,6 2,3 2,1 2,6 2,7 2,2 3,5 2,2 Sweden 2,7 2,6 2,6 2,8 2,3 2,8 2,6 3,1 3,2 2,5 4,4 2,9 United Kingdom (UK) 2,3 2,6 3 2,3 2,2 2,6 2,2 3,3 3 3 3,9 3,1 Average 2,5 2,6 2,5 2,8 2,1 2,7 2,5 3,1 3,0 2,6 4,0 2,6 Highest score (country) GER FIN UK FRA/GER NET NET NET NET FRA/SWE NET NET IRL 1 – Entrepreneurial Finance; 2a – Entrepreneurship as a relevant economic issue; 2b – Taxes or regulations are either size-neutral or encourage new and SMEs; 3 – Government Entrepreneurship Programs; 4a – Entrepreneurship Education at basic school; 4b – Entrepreneurship Education at post-secondary levels; 5 – R&D transfer; 6 – Commercial and Legal Infrastructure; 7a – Internal Marker Dynamics; 7b – Internal Market Openness; 8 – Physical Infrastructure; 9 – Cultural and Social Norms. Source: GEM Global Report (2011). For most of the EFC categories, Portugal has results that are close to the EU average. The lowest level is registered in the category Cultural and Social Norms (EFC9) and in the Entrepreneurship Education in the Basic School (EFC4a); the highest is scored for the access to Physical Infrastructures by entrepreneurs (EFC8). In what respect the easiness of accessing credit and effectiveness of the financing instruments (EFC1) that are available for Portuguese entrepreneurs, the experts rank them in a very positive way, giving a 2,9 score that is above average. A positive evaluation is also given to access to commercial and legal infrastructure (EFC6), where science parks and incubators and their role on developing businesses is measured in this EFC. 28 One of the EFCs that has a lower evaluation in Portugal is the one concerning the governmental support to the entrepreneurial activity, where the tax burden is evaluated (EFC2b). This low score refers that the tax burden in Portugal is not friendly for start-up companies. 3.1.2. Business demography and characteristics of Portuguese entrepreneurs (output indicators) In this subsection, some statistics concerning firms’ demography and entrepreneurs profile will be presented. We start by considering the birth and death of companies in several EU countries (Table 3): Table 3: Entrepreneurship in Europe: birth and death of firms (2010) Countries Firms’ births in the EU (number) Firms’ births over population (%) Firms’ deaths 2010 (number) Firms’ deaths over population (%) Belgium 27969 0,30% 18558 0,20% Denmark 23266 0,40% 26820 0,50% Germany 258076 0,30% 235281 0,30% Ireland 11237 0,30% 31440 0,70% Spain 242228 0,50% 80317 0,20% France 376631 0,60% 202274 0,30% Italy 265060 0,40% 308624 0,50% Netherlands 77530 0,50% 53170 0,30% Portugal 103950 1,00% 174589 1,6% Slovenia 12757 0,60% 9725 0,50% Finland 28887 0,50% 31598 0,60% Sweden 50214 0,50% 40687 0,40% United Kingdom 210955 0,30% 285195 0,50% EU average 129905 0,48% 115252 0,42% Source: Eurostat (2010). When considering the proportion of enterprises’ births in the population, Portugal is clearly above the average in the EU countries. Focusing on firms’ deaths, Portugal has the second highest position in this ranking, both in absolute and relative terms. As it can be seen in this table, there are, on average, more companies being founded than the ones 29 that do not survive, which is also the case for Portugal. So, there is a bigger struggle to keep a company alive than to create it. One of the factors that may lead to the poor performance in terms of firms’ deaths is the level of education of Portuguese entrepreneurs, as it can be seen in table 4: Table 4: Level of Education of Entrepreneurs Source: Eurostat (2005) As it can be noticed in Table 4, most entrepreneurs in Portugal have only the primary and lower secondary education, while the proportion that reach a tertiary education degree is one of the lowest in the countries that are mentioned in this table. In Table 5, we show the proportion of enterprises in each sector of activity and size class: Countries All ISCED 1997 levels Primary and lower secondary education Upper secondary education Post-secondary non-tertiary education First and second stage of tertiary education European Union 202048 18,65% 27,61% 32,44% 21,29% Denmark 7433 22,33% 20,76% 16,79% 40,12% France 22181 22,39% 32,78% 0,00% 44,83% Italy 37449 35,62% 49,14% 1,93% 13,31% Portugal 49319 53,07% 23,47% 6,07% 17,40% Slovenia 2168 4,34% 37,22% 26,66% 31,78% Sweden 5920 18,28% 37,16% 19,61% 24,95% 30 Table 5: Enterprises by sector and size Manufacturing Services Construction Country 1-9 1019 2049 50249 25 0+ 1-9 1019 2049 50249 25 0+ 1-9 1019 2049 50249 250+ Belgium 83,1 7,0 5,9 3,3 0,8 95,2 2,5 1,5 0,7 0,1 94,7 3,1 1,7 0,5 0,6 Denmark 80,2 8,2 6,7 4,1 0,9 92,3 4,0 2,4 1,1 0,2 90,6 5,8 2,7 0,8 0,9 Finland 82,6 7,4 5,6 3,5 0,9 93,8 3,3 1,8 0,8 0,2 93,3 4,1 1,9 0,5 0,6 France 86,5 5,5 4,7 2,6 0,7 95,2 2,5 1,5 0,6 0,1 94,8 3,0 1,7 >0.1 >0.1 Germany 61,6 20,7 7,8 8,0 2,0 85,8 7,7 4,3 1,9 0,3 83,6 10, 8 4,2 1,3 1,4 Ireland 48,0 22,0 15, 8 11,1 3,1 90,4 5,3 2,6 1,5 0,2 96,0 2,6 1,0 >0.1 >0.1 Israel 70,8 12,1 9,4 6,5 1,2 85,1 7,9 4,7 2,0 0,4 Italy 82,0 10,5 5,0 2,1 0,3 96,4 2,3 0,8 0,4 0,1 95,1 3,6 1,1 >0.1 >0.1 Netherlan ds 82,7 6,9 5,5 4,1 0,8 94,9 2,5 1,5 0,8 0,2 94,9 2,7 1,6 0,7 0,8 Norway 80,4 8,1 6,8 3,9 0,8 94,5 3,0 1,6 0,7 0,1 92,2 4,8 2,3 0,6 0,7 Portugal 82,0 8,7 6,0 3,0 0,4 97,3 1,5 0,8 0,3 0,1 92,6 4,6 2,0 0,6 0,7 Russia 54,0 14,8 14, 7 12,1 4,4 76,9 11 7,6 3,9 0,5 Slovenia 87,4 5,1 3,5 3,3 0,7 95,7 2,5 1,2 0,5 0,1 93,2 4,1 1,9 0,7 0,8 Spain 82,9 8,3 5,9 2,4 0,4 95,2 2,7 1,4 0,6 0,1 92,9 4,5 2,0 0,6 0,6 Sweden 87,4 5,4 3,9 2,6 0,7 96,0 2,1 1,2 0,5 0,1 94,3 3,4 1,8 >0.1 0,5 Switzerlan d 55,5 19,3 14, 0 9,2 2,0 73,3 16 7,4 3,0 0,5 64,4 20, 2 11, 3 3,8 4,2 United Kingdom 75,9 10,4 7,6 5,0 1,1 90,4 5,2 2,7 1,4 0,3 Average 75,5 10,6 7,6 5,1 1,2 91,1 4,8 2,7 1,2 0,2 90,9 5,5 2,7 1,0 1,1 Source: Eurostat (2013) Table 5 shows us that typically, for all European innovation driven economies and considering the above sectors, the large proportion of firms consists in small enterprises with less than 10 employees. Another important statistics in order to evaluate the entrepreneurial activity in Portugal is the number of people aged from 18 to 64 years old, who are either a nascent entrepreneur or an owner-manager of a new business Total early-stage Entrepreneurship Average (TEA). Being a nascent entrepreneur is, for the GEM, anyone that is actively involved in starting up a business or eventually own or co-own a business, whereas an owner-manager is someone who is currently an owner-manager of a new business. Table 6 gives us the values registered in TEA in several European countries in the year 2012. 31 Table 6: TEA in several countries, 2012 Country 2012 Belgium 5,2 Denmark 5,4 Finland 6 France 5,2 Germany 5,3 Greece 6,5 Ireland 6,2 Israel 6,5 Italy 4,3 Netherlands 10,3 Norway 6,8 Portugal 7,7 Russia 4,3 Slovenia 5,4 Spain 5,7 Sweden 6,4 Switzerland 5,9 United Kingdom 9 Average 6,2 Source: GEM (2012) As it can be seen in Table 6, Portugal is one of the innovation driven economies with a better TEA, meaning that more people are an owner manager of a new business or a nascent entrepreneur than in most of the countries above. In the next section we will briefly introduce the origin of the entrepreneurial policies in EU, and in particular, in Portugal, having in mind the goal of mapping the entrepreneurial policies that will be done in section 3.3. 3.2. The EU Funds The adhesion of Portugal to the EU meant the reception of Structural Funds that allowed the development of the Portuguese economy. From 1989 to 2006, three QCA were launched and in 2007 the QREN was launched. These initiatives were supported 32 by the two major funds provided by the EU: the European Regional Development Fund (ERDF) and the European Social Fund (ESF). The ESF is EU’s main instrument for supporting jobs, helping people get better jobs and ensuring fairer jobs opportunities for all EU citizens. The European Commission sets four priorities on how to spend its resources: adaptability of workers, access to employment, vocational training and help disadvantaged groups. The ERDF aims to strengthen economic and social cohesion in the European Union by correcting imbalances between its regions. This fund finances direct aid to investments in companies to create sustainable jobs, infrastructures linked notably to research and innovation, telecommunications, environment, energy and transport; financial instruments to support regional and local development and to faster cooperation between towns and regions and technical assistance measures. It also acts in regional policy, considering three types of regions: Convergence (objective 1), Regional Competitiveness and Employment (objective 2) and European Territorial Cooperation (objective 3). Figure 1: Regions in Portugal Source: http://ec.europa.eu/regional_policy/atlas2007/portugal/index_pt.htm Convergence regions Phasing-out regions Phasing-in regions Competitiveness and Employment regions 39 Table 11: Getting Credit Indicator Portugal Netherlands OECD high income OECD Strength of legal rights index (0-10) 3 6 -- 7 Depth of credit information index (0-6) 5 5 -- 5 Public registry coverage (% of adults) 90.7 0 -- 10.2 Private bureau coverage (% of adults) 22.9 81.7 -- 67.4 Source: World Bank (2013) As seen in table 11, neither of the two countries has a high protection of legal rights, being both below OECD average, which means that there is not consistent protection of lenders and borrowers when it comes to finance projects, not encouraging the financing of start-ups. However, both countries keep a historical archive that mentions the creditworthiness of borrowers, being the Dutch made by private bureaus and the Portuguese by the Central Bank. Obviously, there is a need to support a start-up process, but entrepreneurship has a high level of risk involved. So the next tables refer the conditions that both countries have in when it comes to declare insolvency. Table 12: Resolving Insolvency Indicator Portugal Netherlands OECD high income OECD Time (years) 2 1.1 -- 1.7 Cost (% of estate) 9 4 -- 9 Outcome (0 as piecemeal sale and 1 as a going concern) 1 1 -- 1 Recovery rate (cents on the dollar) 74.6 88.8 -- 70.6 Source: World Bank (2013) As it is noticed in Table 12, it is still a going concern among entrepreneurs the process to declare insolvency. However, the Netherlands offer better conditions, with a higher level of recovery rate and it is also a faster process. 40 One EFC that was not mentioned in the mapping of entrepreneurial policies is the EFC named Entry Regulation. The next tables will show the conditions to export and import new products. Table 13: Trading Across Borders Indicator Portugal Netherlands OECD high income OECD Documents to export (number) 4 4 -- 4 Time to export (days) 13 6 -- 10 Cost to export (US $ per container) 685 895 -- 1028 Documents to import (number) 5 4 -- 5 Time to import (days) 12 6 -- 10 Cost to import (US $ per container) 899 975 -- 1080 Source: World Bank (2013) As it is noticed in Table 13, there is a negative relation between the cost and the time that it takes to either import or export. The Netherlands have much faster process to import or export, having also fewer documents needed for a foreign company to export to the Dutch market than to the Portuguese. However, the costs to make these kinds of transactions are more expensive in the Dutch case. 3.3.3. Mapping of public entrepreneurship policies: Portugal and Netherlands In this subsection, we implement a mapping of the entrepreneurship policies launched in Portugal and in the Netherlands since the year 1994. This year is very significant in terms of the entrepreneurial policy both in Portugal and in the Netherlands. In fact, in 1994 there was the implementation QCA II in Portugal, and it was also the beginning of a revolution of public entrepreneurial policies in the Netherlands associated with the election of a left-liberal coalition government in the country that started a deregulation of the start-up processes, encouraging more people to pursue entrepreneurship as a viable career opportunity. As we have seen in previous sections, much of these policies were supported by the Structural Funds received from the EU. Each policy is characterized for each country 41 and then the mapping is made taking into consideration the EFCs, which, as above described, are used by the GEM to measure the entrepreneurial activity in Portugal and in the Netherlands. Much of the Dutch and Portuguese national entrepreneurship policies are financed by the European Regional Development Funds (ERFD). Each country has a National Strategic Reference Framework (NSRF) that is integrated in the Ministry of Economic Affairs in the Netherlands and in the first place in Ministério do Ambiente, Ordenamento do Território e do Desenvolvimento Regional in Portugal, being currently under the management of Ministério da Economia. The Portuguese NSRF was responsible for the implementation of the QCA I (19891993), II (1994-1999), III (2000-2006)) and the QREN (2007-2013) that oriented the destiny of the EU Structural Funds, and that were divided into different operational programmes. The Dutch NSRF was also responsible for the allocation of EU funds by the Dutch government. Instead of distinguishing the several operational programmes by theme, the Dutch NSRF defined four different multiregional operational programmes: North, South and East Netherlands, and Urban Areas in the period from 2000 to2006, and North, South, West and East Netherlands in the period 2007-2013. We will also analyse some other entrepreneurial policies that were also launched by the Dutch Government since 1994 that were not directly a part of a strategy supported by Structural Funds. Portugal The QCA II was launched in Portugal, in 1994. This strategic framework aimed to support the convergence of Portugal to EU and to reduce regional asymmetries. In order to achieve these two goals, several operational programmes and four lines of intervention were defined. These intervention lines are the following (QCA, 1994): Raise the level of qualifications of the population and the quality of employment; Enhance the competitive factors of the Portuguese economy; Promote life quality and social cohesion; 42 Strengthen the regional economy basis. From the above list, the second intervention line is the one most related with our analysis since it focus on the need to invest in raising the competitive edge of Portuguese companies. Regarding the operational programmes proposed by QCA II, the most relevant for our mapping exercise are the Plano Operacional de Modernização do Tecido Económico (POMTE), which aimed to modernize the Portuguese economy, and the PRAXIS XXI, concerned with policy intervention in industry and technology. The POMTE programme has as strategic goals the promotion of the competitive edge of Portuguese companies: the internationalization of businesses, the improvement of the qualifications of human resources and of the economic structure. In order to achieve these goals, the POMTE programme defined six measures, of which three have a direct relevance for our purpose analysis (POMTE, 2003). More precisely, the second measure of the POMTE programme involves the promotion of different tools to finance SMEs such as the use of risk capital and mutual guarantee systems (POMTE, 2003). The third and fourth measures that are mentioned in the POMTE programme aim at strengthening firms’ strategies in order to increase their productivity, quality and internationalization. Within these measures we find several lines of action related to the promotion of entrepreneurship in Portugal in association with the goal to modernize economic activities, for example incentives to R&D transfer, and support and counselling for companies strategically choosing internationalization (POMTE, 2003). In what regards the PRAXIS XXI programme, there is a specific focus on technological change. It enhances the importance of R&D laboratories, R&D transfer and the access to physical infrastructures for the development of specific manufacturing activities (PRAXIS XXI, 2002). In the year 2000, the QCA III was launched by the Portuguese Government to promote innovation in the Portuguese economy. Its main goal was to implement the 2000 Lisbon Agenda in Portugal. The three main areas of intervention defined by QCA III (QCA, 2000) to increase the competitive edge of Portuguese companies are: 43 Human Potential, since it was acknowledged that the low productivity of the Portuguese economy is strongly related with the low level of qualification of the population; Productive Activity, to provide competitiveness for Portuguese firms through helping them in defining efficient strategies and in perceiving scientific progress and technological innovation as fundamental to improve competitiveness; Territorial Organization, since the Portuguese territory is considered as a factor of cohesion and integration in the European economy. The intervention at this level is based on the construction of infrastructures to promote the development of all Portuguese regions, aiming to reduce regional asymmetries. The part of QCA that is related to the research goal of the present dissertation is mentioned in the Operational Programme Economia that frames the goal of increasing the competitive edge for Portuguese SMEs. The QCA establishes that the support to SMEs should represent 50% or 60% of the budget defined to this programme because the promotion of economic growth and employment is considered its main priority. In this framework, the measures proposed to support SMEs are (QCA, 2000): Improve the access to financing; Stimulate innovation; Provide information for a successful internationalization strategy; Support R&D transfer; Improve the support services for SMEs. The main role of QCA is twofold: (i) to turn the entrepreneurship process into a more flexible one, so that it can play a bigger role in creating jobs, and (ii) to raise the level of education of the Portuguese population. It also aims at decreasing the importance of direct supports to investment, raising the relevance of alternative forms of financing, like risk capital funds, mutual guarantees system and other type of refundable supports (QCA, 2000). Another Operational Programme with relevance for our analysis is Ciência, Tecnologia e Inovação, which focuses on the issue of R&D transfer within entrepreneurship. This 44 programme stimulates R&D transfer policies like economic support to technology and patents acquisition, improvements in information networks and promotion and diffusion of existing opportunities (QCA, 2000). QREN (2007-2013) aims at providing a strategic framework for the implementation of EU policies focused on economic and social cohesion in Portugal. This framework is designed in order to promote the upgrade of knowledge, science, technology and innovation in the Portuguese economy, as well as high and sustainable levels of economic and social development. It is also oriented towards territorial qualification, to be achieved by valuing opportunity equality in public institutions, making them more efficient (QREN, 2012). In order to prosecute that strategic framework, QREN creates three Operational Agendas: Factors of competitiveness, Human potential and Territorial Enhancement. For our research purposes, the most relevant is the first one, describing the factors that can provide competitiveness to the Portuguese economy. This Operational Agenda is called COMPETE and centres its activity on stimulating sustainable economic development. This agenda aims at achieving its goal by (COMPETE, 2012): Centring on the investments and collective services that can create long term competitiveness and job creation; Raising investment in human capital; Transforming and restructuring the production ability of each Portuguese region; Increasing institutional capabilities able to create and execute effective policies. COMPETE defines six different lines of action so that its main goal can be more easily prosecuted (COMPETE, 2012): 1. Technological knowledge and development; 2. Innovation and transformation of the business model and specialization patterns of Portuguese companies; 3. Financing and risk sharing; 4. Achieving a better and more efficient public administration; 5. Business development networks; 45 6. Technical assistance. The first line of action defends that to achieve a sustained economic growth, Portugal should centre its economic activity on innovation and knowledge. It is defended by the document, being these conclusions based on successful cases, that there should be an increase of the importance given by firms to R&D expenditures (in order to raise the country’s competitiveness) and a need to strengthen the relations between knowledge centres (colleges and R&D institutions) and companies, accelerating the diffusion, transfer and knowledge provided by the R&D activity developed in enterprises (COMPETE, 2012). In order to achieve the first goal of this line of action, the programme defines as a priority the fact that the investment on R&D should be coherent with the national and European priorities, improving the Portuguese National Scientific and Technological System (COMPETE, 2012). The strengthening of the relations between knowledge centres and companies will be achieved through supporting R&D transfer, the creation of R&D nucleus in companies and raising technological demand. These actions will provide a connection between the creation of knowledge and the market, making the investment on the creation of knowledge profitable (COMPETE, 2012). In second place emerges another action that proposes the need to design policies that are able to guide firms in pursuing their best strategy. Within this line of action also appears as crucial the investment oriented towards promoting higher levels of employment and benefiting from economic regions with high growth potential (COMPETE, 2012). The third line of action is focused on the financing of start-ups. Much of the financing that supports the creation of new businesses comes from loans provided by banks. However the conditions that these institutions offer to entrepreneurs are not adequate, making nearly impossible for their idea to flourish. So, this line of action defends that there is a need to promote alternative ways to finance the creation of new firms. These alternative ways of financing are risk capital, microcredit and the consolidation of the mutual guarantee system. The COMPETE programme also mentions that is important to facilitate the access to financial support to women and to the youth, which are demanded for more guarantees than the rest of the population. This way, there is room 46 to enhance the competitiveness and innovative potential of the Portuguese economic sector, where financial constraints should not be an excuse for firms to develop their strategies, either in start-up process but also in growth and for a possible internationalization (COMPETE, 2012). The efficiency of the public sector in making entrepreneurship as a viable career option appears associated with the fourth line of action. This efficiency must be focused on reforming and modernizing the Public Administration system, through administrative and legislative simplification and rationalizing the distribution of public services, by promoting the intensive use of Information and Communication Technologies (ICT) (COMPETE, 2012). The fifth action line refers to the need of improving public services in order to provide better services to start-ups and promote cooperation between them. The offer of the services that support start-ups, should be focused on the needs of SMEs, where it is promoted a better link between SMEs and universities, promoting better access to market information and stimulating cooperation and network between companies (COMPETE, 2012). Finally, the sixth line of action describes the importance of creating infrastructures able to support entrepreneurial activity, namely in what concerns technical assistance (COMPETE, 2012). In spite of not focusing directly on the promotion of entrepreneurship, the operational agenda of QREN regarding human capital might also be relevant for our research purpose. As it was shown in Table 3, in comparison with the Netherlands, Portugal has a lower percentage of population with tertiary education, meaning that the Portuguese population is relatively less qualified. This Operational Agenda has four main goals: overcome the situation of sub qualification of the Portuguese population; promote scientific knowledge, innovation and modernization of the Portuguese companies and Public Administration; stimulate not only the creation but also the quality of jobs; and promote equal opportunities, avoiding social exclusion (POPH, 2007). One line of action that the Operational Agenda on human capital promotes in order to achieve the four goals previously mentioned, is the one that supports entrepreneurship. This line of action defines six main goals (POPH, 2007): 47 Support the creation of jobs and entrepreneurship; Support projects that target the creation of SMEs promoting the creation of jobs for people currently unemployed; Promote local economies, through low scale investments, minimizing the inequalities between Portuguese regions, in terms of their ability to attract workers and investors; Support the transition of students to job market; Guarantee job security and the improvement of qualifications of the Portuguese people, even in less prosperous economic situations; Improve employment levels and stimulate the reintegration in the labour market of unemployed individuals. Table 14 refers to the EFCs that are presented in the two QREN operational programmes and in QCA III. Following Oliveira and Teixeira (2009), we implement the mapping of entrepreneurship policies by identifying the presence of relevant associated measures with 1 and its absence with 0. 48 Table 14: Mapping EFCs in Portugal since 1994 EFCs QCA II (19941999) QCA III (20002006) QREN (20072013) 1. Entrepreneurial Finance Policies providing different ways of financing SMEs 1 1 1 Consolidation of a mutual guaranty system 1 1 1 2. Government Policy Reduction of bureaucracy 0 0 1 Reduction of the tax burden 0 0 1 3. Government Entrepreneurship Programmes Support for the creation of SMEs 0 1 1 4. Education on entrepreneurship Promote Entrepreneurship in the Educational System 0 0 0 5. R&D Transfer Policies stimulating R&D efforts 1 1 1 Networks between companies and R&D research centres 0 0 1 6. Commercial and Legal Infrastructure Creation of structures that provide technical and logistic support 1 1 1 7. Entry Regulations 0 0 0 8. Physical Infrastructure Provide access to communications 0 0 1 Guarantee good ICT service 0 0 1 9. Cultural and Social Norms Make entrepreneurship as suitable career option for youngsters 0 0 1 Make entrepreneurship as suitable career option for women 0 0 1 55 One of the conclusions found by the analysis of the two tables referring to the entrepreneurial activity of Portugal and the Netherlands is the fact that the Dutch authorities have been concerned with the importance of entrepreneurship before the Portuguese Government, creating specialized policies in developing the entrepreneurial activity. Although the QCA II was created almost at the same as the first Dutch entrepreneurial policy, the fact is that Jobs through Enterprise mentions more EFC’s than the QCA II, being much more elaborated than the last instrument. It also should be mentioned that the only EFC for which Portugal does not have a policy to promote entrepreneurship is education. According to the documents in analysis, there are not activities developed at basic school levels to promote entrepreneurship skills. Hence, we will systematize some measures that have taken place in the Netherlands and could be implemented in Portugal. The topic of education for entrepreneurship becomes more relevant if we take in consideration the information presented in Table 5, which shows that the level of education of the Portuguese entrepreneurs is quite low. According to Table 2, the evaluation from the experts about the entrepreneurship education, in EU, at the basic school level is negative. The report mentions that most of the countries teach entrepreneurship as a cross-curricular activity, which means that it is integrated in different subjects. Just at the lower secondary level it is taught as a separate subject. At this level of education, the Dutch government launched a programme named Education and Entrepreneurship Action Programme in 2007 and 2009. Here, teachers received a training programme to ensure that they could successfully encourage entrepreneurial behaviour in their students (European Commission, 2012). 56 4. Conclusions This dissertation aimed at analysing the state of entrepreneurship in Portugal, trying to highlight the areas where government policy should act in order to increase the level of the national entrepreneurial activity. In Chapter 2, a theoretical review of the seminal contributions in the field was made, in order to understand the various concepts that have been associated to the entrepreneur, at the lens of distinct perspectives, namely, economics, corporate management and psychology. F the economic approach, three main concepts of entrepreneurship were discussed: first, the perspective of Kirzner (1973, 1997) that defines entrepreneurship as opportunity identification, where an entrepreneur takes advantage of market failures, shifting the market from a disequilibrium to an equilibrium situation; second, the view of Knight (1921) (in Klein et al., 2010)that sustains the idea that the entrepreneur bases his decisions on previous experiences, assigning different levels of uncertainty; finally, the Schumpeterian view of the entrepreneur as an innovator. The author brings the concept of creative destruction, where the process of introducing new products turns the existing ones obsolete. Here, the entrepreneur creates a disequilibrium situation by innovating. The psychological approach brings the perspective that there are personality traits that are common amongst entrepreneurs. Four different personality traits are studied: risk taking propensity, need for achievement, locus of control and tolerance for ambiguity. The relation between entrepreneurs and the need for achievement was brought by McClelland (1961), who defines entrepreneurs as high achievers that prefer riskier situations that are not beyond their capabilities. Rotter, (1966) in Chell (2008) sustains that successful entrepreneurs have a high internal locus of control, which means that they are in full control of their decisions. Tolerance for ambiguity refers to the propensity of the entrepreneurs to see situations without clear outcomes, where entrepreneurs with a high level of tolerance find ambiguous situations challenging, appreciating the process of turning them into successful ones. The management view of entrepreneurship adopts an organization perspective. This perspective is studied due to the increasing competition between companies and the two 57 main forms of corporate entrepreneurship are defined by Kuratko (2007): corporate venturing and strategic renewal. After the literature review, in Chapter 3, we have analyzed statistical data in order to compare the performance of firms, level of education of entrepreneurs and the evaluation made by national experts about each country’s EFC. Some important conclusions are possible to derive. First, the less developed intervention areas for promoting entrepreneurship are: a relatively low sensitivity for the fact that taxes should encourage the creation of SMEs; the implementation of entrepreneurship as a primary subject at the basic school level, and the cultural component of entrepreneurship (see Tables 2 up to 5). Specifically, important evidence emerges from the analysis of Table 3. First, in 2010, the number of firms that died or went into a bankruptcy process was higher that the number of new bourn or founded firms. Portugal has the highest value of more firms’ deaths per population in comparison with the other countries analyzed in Table 3. At least in part, a possible explanation for this last evidence is that the level of education of Portuguese entrepreneurs is quite low, with the majority just having completed the mandatory level of education, which is primary and lower secondary (Table 4). The data of the World Bank (2013) report about entrepreneurship, Doing Business, mentions that Portugal is actually a better country to start a business than the Netherlands. However, the analysis developed throughout this thesis, shows that Portugal must improve several dimensions regarding the promotion of entrepreneurship. For instance, at the fiscal level, it is significantly high the amount of taxes payed by firms (Table 10) and it is highly bureaucratic and long the processes associated with insolvency situations (as seen in Table 12). Moving on to the mapping exercise for entrepreneurship policies in Portugal and in the Netherlands, it is clear the conclusion that the only EFC that Portugal has not a specific strategy is the one associated with the education curricula. This fact is consistent with the EU average situation since national experts rate as low the implementation of entrepreneurship education at the basic school level. The Netherlands emerges as the better rated country in GEM, which is certainly associated with the higher number of 58 specific strategies that this country have been implementing on each of the EFCs in analysis. 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