OECD Observer Published: January 2005
Governments are always keen to do their utmost to help businesses thrive, not least in local economies, and to encourage initiative and entrepreneurial attitudes to become more widespread. But the stakes are high. Some two-thirds of new firms survive at least two years, and only about half survive at least four. OECD figures show that firms that remain in business after the first two years have a 60-70% chance of surviving for at least five more years.
Nevertheless, despite the risks, encouraging business creation remains a key part of the drive to create jobs and spread development beyond major cities, since entrepreneurship and local development are key for creating jobs, fostering initiative and fuelling innovation. They also encourage social cohesion and community. Take small and medium-sized enterprises (SMEs), for instance. These are the dominant form of business in every country of the world. In the OECD area alone, small firms account for over 95% of all enterprises and employ between 60%- 70% of all workers. And women-owned businesses account for up to a third of all SMEs.
The interface between entrepreneurship, SMEs and local enterprise should be tapped further, as well as strengthened, since many of the traditional problems facing entrepreneurs and local communities — lack of financing, difficulties in exploiting technology, constrained managerial capabilities and regulatory burdens — become more acute in a globalised environment.
To help achieve this, the OECD has taken a lead by investing in a new initiative of its own: the Centre for Entrepreneurship, SMEs and Local Development (CFE). By forging the Organisation’s considerable expertise in SME work and local development, notably drawing on the OECD Bologna Process for SME Policies and the organisation’s Local Economic and Employment Development programme (LEED), the new Centre will address not only the needs of new and existing businesses, but will seek to foster the development of an entrepreneurial society. The Centre’s aims, like promoting competitiveness, sustainable growth and cohesion, as well as innovation, jobs and opportunity in this age of globalisation, are laudable, but challenging.
In its favour, the Centre will be able to draw on the OECD’s already rich resource of intelligence, contacts and experience in all areas of public policy, from economics and finance, to education, governance and the environment. The Centre will act as a "one-stop shop" for OECD policymakers. It will concentrate on getting some basic messages across. For instance, entrepreneurship is not just about risk, but to be effective, local development strategies must incorporate the core factors of skills, social capital and innovation, as well as aim to inspire a culture of constant evaluation. Strategists must encourage synergies and partnerships, as well as improved local governance. In short, they must aim to create what the Centre calls an Entrepreneurial Business Environment.
© OECD Observer No. 245, November 2004