Every year, the GEM Ecuador report includes a chapter on public policy. This year, the suggestions are all the more timely as Ecuador, and the world, grapple with the pandemic - one of the most disruptive events we have faced in our lifetimes. Three main suggestions are highlighted in the report according to Virginia Lasio, Team Leader for GEM Ecuador and a Professor at the ESPAE Escuela de Negocios.
- Because of the decline in employment, we expect a surge in necessity entrepreneurship. Thus, agile support for these activities is required to counteract an increase in poverty. Many of these new entrepreneurs need support with debts and operating capital, for example.
- Support will also be needed to sustain those business in industries and sectors which have more growth potential.
- Although not new in 2019-2020, the need to facilitate exports and internationalization for local entrepreneurs remains a priority, and much more now with the local contraction in the domestic market.
“In these last weeks, the government issued Entrepreneurship Bylaws,” Lasio explained. “Several means of support were highlighted, including crowdfunding, potential restructuring and other benefits for entrepreneurs who become part of a new registry.”
Lasio provided other related insights in the following Q and A.
The framework conditions for Ecuador show strengths and weaknesses in the environment. Among the strengths are: physical infrastructure, social and cultural norms and post-secondary entrepreneurship education. Among the weaknesses are government policies regarding taxes and bureaucracy, financing for entrepreneurs and the transfer of research and development. What should be done to continue building on the positive trends? What actions can be taken to address some of the negatives?
Regarding the strengths, the aforementioned bylaws include the development of entrepreneurial skills in basic education as well as the use of tools for business planning, defining business models and financial education. It also reinforces entrepreneurial education in higher education. Social and cultural norms in the long term are impacted by education.
Regarding financing, permitting the operation of collaborative platforms, will at least in theory bring improvements in access.
Transfer of research and development is still problematic. We interviewed executives from entrepreneurship support organizations to assess the impact of the pandemic. They see more agile collaboration among universities, business and government as a strength and opportunity. There is hope that all stakeholders are recognizing the value of collaboration and transfer.
What are some of the key findings from the report that you think can serve as helpful best practices for other countries? On the other hand, has there been any data from other GEM countries that has been useful for benchmarking in Ecuador?
We used to contrast our results with our neighboring countries, mainly Peru and Colombia. However for this report, it was interesting to also see the comparison with countries of similar income levels.
Now, with a broader view, we better understand the influence of motivation in the nature of entrepreneurial activity and its potential impact. For example, we found that those entrepreneurs motivated to make a difference in the world were more likely to create five or more jobs compared to those motivated out of necessity. It will be interesting to see if motivations are powerful in other countries as well.
How has Ecuador benefitted over the years from being part of GEM?
The greatest benefit is to receive yearly information on entrepreneurial activity. This is so important in developing countries to fight poverty and to gain in competitiveness. Results from GEM were factors in creating the Entrepreneurship Law in Ecuador. Higher education and local research have also benefitted from GEM Ecuador for more than a decade now.
Based on the research in the GEM report, are there any specific findings and/or related recommendations that are applicable to Ecuador fostering entrepreneurship in the midst of the disruptions posed by COVID-19?
We explored with entrepreneurs and support organizations the impact of the pandemic. In summary entrepreneurs who “survived” followed several practices to maintain their business: increase in marketing efforts, offer new product and services, implemented online sales and remote working.
We organized the perspective from the representatives of support organizations, as a SWOT scheme:
Strengths:
- Entrepreneurial spirit of Ecuadorians
- Technology transfer from university and private sector
Weaknesses:
- Decrease in sales and debt collection, as well as finance sources
- Weak articulation amont ecosystem actors
Opportunities:
- New digital services
Threats:
- Sectors who cannot transition to digital, such as tourism, logistics and transportation, among others.
- Growth of informality
Access the full report here.