May 3, 2006

The Talent/Innovation Cycle (Keys, Part 2)

Before the economy got truly global, the role of entrepreneurs in economic development was open to debate. If Henry Ford hadn’t created the automobile mass market, would there have been one anyway? Well, he didn’t sell to Europe, and they had one there too, so the answer is evidently “Yes.” But while certain industries’ growth is almost inevitable, any given company’s success is in no way foreordained. Rather, that success is due in huge part to its leaders and/or engineers, and their ability to just competitively clobber all the other company leaders and engineers striving to succeed in the same markets.

And the success of any particular country or region is, of course, hugely dependent on the success of the largest companies in it. First of all, a single company can make an appreciable difference all by itself. Finland has gone from a reliance on forest products to being a technology industry leader, almost solely because of one huge company: Nokia. Second, successful companies (or particularly interesting failures) spawn others, because of the employees they spin out, the suppliers they help strengthen, and so on. Most famously, this is the Silicon Valley phenomenon.

So what can countries do to improve their chances of technology entrepreneurial success? On the engineering side, education is crucial. In 1900, the country best at training its best and brightest in science and engineering was probably Germany. In 1960 that was probably the United States. In 1990 it may well have been India. The results, whether in electronics, chemicals, or other engineering-based industries, speak for themselves.

Producing entrepreneurial business leaders, however, is a matter of culture as much as it is training. Through the mid-19th Century, the samurai of Japan were a classic caste of militaristic, landed aristocracy, who despised commerce. But Emperor Meiji, almost overnight, forbade them to wear their swords and commanded that every major business must have a samurai at least nominally in charge. Within a generation, Japan was an industrial hotbed. That particular approach to cultural change is unlikely to be repeated soon — today’s world has an extreme shortage of god-emperors — but nonetheless it illustrates a crucial point: Any culture can be made entrepreneurial. Personally, I haven’t a clue of the special factors involved in balancing a history of “Arab traders” against an Islamic religion with a strong streak of fatalism. But even so I am confident that any Arab nation that sets out to make “heroes” of its entrepreneurs will, in a short period of time, enjoy vigorous entrepreneurial activity.

At least, it will if its more tangible policies are also pro-entrepreneur. And the same goes for any other country, region, or cultural group in need of more vibrant businesses.


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