Examination And Analysis Of Youth Entrepreneurship

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The world, as we see it today, is poles apart from what it were a couple of years ago. Two of the major factors responsible for this difference are Change and Uncertainty. In addition to these factors, natural calamities have also taken a huge toll in altering the world. A good example of this would be the recent floods in Pakistan. According to the telegraph, The United Nations has rated the floods in Pakistan as the greatest humanitarian crisis in recent history with more people affected than the South-East Asian tsunami and the recent earthquakes in Kashmir and Haiti combined. Approximately one-fifth of the country has lost all of its infrastructure, agriculture and livestock. Currently, the country is facing problems in getting enough donations to give shelter, medicine and food to the victims but in the future, all of these people would have no means to earn a living. This would harm the youth of the affected areas the most as they would find it even harder to make a buck.

The world's youth population has been increasing rapidly, with more than a billion people aged between 15-24 today. According to recent estimates by the ILO, an estimated 660 million youngsters will either be working or looking for a job in the year 2015. (Schoof, 2006) This rapid growth in the youth population means that every job vacancy will now be contested by a much larger number which would make it much more competitive. A fine example of this would be the recent news about British Telecom's Apprenticeship. According to Sky News, BT might be growing its apprenticeship scheme after the Telecom giant managed to get more applications this year than the renowned Oxford University. The company received about 24,000 applications for the 221 places available on the scheme - more than 100 for each.

There are several other instances, which show how unemployment, especially in youth, will grow in the coming years. The topic of youth unemployment has been under debate for quite some time now and one of the suggested solutions to this dilemma is the promotion of youth entrepreneurship. This is a relatively new concept and not enough research has been conducted on it. The benefits, drawbacks, policies and procedures are still vague. However; recently a number of economists and policy-makers have realized the importance of this concept.

This paper sheds light on the concept of youth entrepreneurship. After defining the term, it goes on to study the general trends (barriers and incentives). The paper focuses on the case of Pakistan and provides informed recommendations to different institutions, from the government to private companies, on how to promote and grow youth entrepreneurship in Pakistan.

There is no general consensus on the definition of "entrepreneurship"; however, for the scope of this essay, the definition given by Greg Watson would be used. He defines entrepreneurship as "a process through which individuals identify opportunities, allocate resources, and create value.  This creation of value is often through the identification of unmet needs or through the identification of opportunities for change."

1.2 Objectives

The relationship between entrepreneurship driving economic development and job creation is well researched. This research does not concentrate on any particular area or type of entrepreneurship as it just gives an overall picture. As previously mentioned, the research on youth entrepreneurship is very limited therefore this paper aims to analyse entrepreneurship from a youth perspective and focuses it on the case of Pakistan.

There are many cultural differences between different countries. For instance, both Asian and Arab countries have a relatively high context culture whereas a country like Switzerland has a very low context culture. This means that the entrepreneurial framework to be followed would vary from region to region. In addition to that, the young entrepreneurs would have to face different types of barriers, would have different incentives and finally the processes and procedures to follow would also differ. Due to the limitation of time and words, this paper would concentrate on developing countries with a particular focus on Pakistan.

The objectives of the research are listed below:

Define and discuss the significance of youth entrepreneurship and self-employment.

This objective will clarify the definition and importance of the concept of youth entrepreneurship.

Identify key factors and challenges that inhibit young people to set up their own business.

This objective will focus on the factors and challenges involved from the start to end of setting up a business.

Identify the incentives and stimuli required to encourage youth entrepreneurship.

This objective will identify the sort of incentives that should be offered to young people to get them involved in setting up their own business.

Identify and implement the current pragmatic interventions used by other countries to the case of Pakistan (along with the socio-economic barriers present).

This objective will identify the current methods used by other countries to promote youth entrepreneurship. The methods that can be used by Pakistan will then be tailored to meet its requirement.

This paper aims to build upon the research carried out by the ILO and YEN Entrepreneurship Group to the case of Pakistan. This essay would provide general guidelines like implementing youth-friendly policies to the policy makers. These guidelines can be used to both create awareness and promote the concept of youth entrepreneurship in Pakistan. This would not only lead to a number of benefits for the people involved, it would also have a very positive effect on society as a whole.

Chapter 2

Literature Review

This chapter reviews the literature relevant to the exploratory study of Youth Entrepreneurship. This chapter has been divided into sub parts so that various aspects related to youth entrepreneurship can be discussed by explaining the core points raised by various authors relevant to the scope of this paper. The key questions that are answered in this section are: What is entrepreneurship? What is youth entrepreneurship? .Youth entrepreneurship as a window of opportunity. What are the barriers and incentives faced by youth entrepreneurs? Current programs being implemented to encourage youth entrepreneurship.

2.1. Youth entrepreneurship

The topic of "Youth entrepreneurship" is very recent and has recently become the researcher's favorite research topic to promote as a policy tool for promoting economic development and as a viable solution to unemployment. The researchers have failed to derive or agree to a common definition to describe youth entrepreneurship therefore for the scope of this paper we will follow the definition provided by Stevenson (1989) who defines entrepreneurship as the "process whereby individuals become aware of business ownership as an option or viable alternative, develop ideas for business, learn the process of becoming an entrepreneur and undertake the initiation and development of a business". According to the United Nations 'youth' is defined as an individual falling in the age bracket of 15-24 but keeping in mind the general norm amongst the literature available and keeping the social environment in mind for the scope of this paper we would consider 'youth' as individuals within the age bracket of 15-38.

2.2 Youth entrepreneurship as a window of opportunity

With the dynamics of the business world changing rapidly and the economies world wide becoming more and more complex alternate ways need to be derived to elucidate the issues of youth unemployment and integration into the labor force. Ryan (2003) suggests that the framework of potential efforts and strategies that can result in employment boost and job creation for young people is now widely accepted as an alternate source of income generation. Innovation and resilience are encouraged through youth entrepreneurship as it encourages young people to find new solutions, ideas and ways of doing things through experience-based learning (OECD, 2001; White and Kenyon, 2000).

In certain circumstances, young entrepreneurs may be particularly responsive to new economic opportunities and trends. This is especially important given the on-going globalization process. It is increasingly accepted that youth entrepreneurs can present alternatives to the organization of work, the transfer of technology, and a new perspective to the market (White and Kenyon, 2000). Maxwell (2002) adds on to this by suggesting that entrepreneurship and self-employment can be a source of new jobs and economic dynamism in developed countries, and can improve youth livelihoods and economic independence in developing countries.

Chigunta (2002) has provided reasons behind the rationale to promote Youth entrepreneurship as a policy tool. It is an avenue for employment creation as it provides opportunities for the self-employed youth and can also result in employment for others through the young entrepreneur. Provides a sense of meaning and belonging by bringing alienated and marginalized youth back into the economic mainstream. Results in skill enhancement as a result of self-employment, which can be of significant benefit to both the individual and economy. Help revitalize the local community by providing valuable goods and services due to innovation and resilience, which is a by-product of youth entrepreneurship (Chigunta, 2002; Curtain 2000; White and Kenyon 2000) The challenge for governments, private sector, international bodies and NGOs seeking to improve youth livelihoods is to "tap into the dynamism of young people and build on their strong spirit of risk-taking" Bennell (2000).

With the growing resilience amongst policy makers highlighting the importance of entrepreneurship and self-employment as a source of new jobs and economic dynamism in developed countries, and livelihoods in developing countries, there is need to promote youth entrepreneurship as a source of improved youth livelihoods and economic independence(Chigunta, 2002) .

2.3 Categorization of young entrepreneurs

Chigunta (2002) in his research based on various countries has categorized young entrepreneurs into three main categories based on age and has proposed the following:

Pre-entrepreneurs (15-19 years): At this stage the individuals are in between transition as they move from the comfort and security of their homes to the work place he has categorized this as the formative stage.

Budding entrepreneurs (20-25 years): This is categorized as the growth stage as the individuals are most likely to have gained some experience, skills and capital and are capable of running their individual businesses. At this stage the young entrepreneur is likely to face one of the following three dilemmas: stuck in marginal activities; unable to proceed further with his business; and running a successful enterprise.

Emergent entrepreneurs (26-29 years): This is the period of optimization as due to his experience the entrepreneur is more likely to run a successful business then the lower age group and this is known as the prime stage.

According to (Schoof, 2006) the categorization provided by Chigunta can only serve the transitions of young entrepreneurs in a very broad sense. Therefore it is important to observe and recognize the different stages by observing the country the policy is being designed for, however the framework provided by Lewis and Messy (2003) is more specific. It is dependent on the level of readiness and the level of intention to start an enterprise.

Figure 1: Diagnostic framework for young entrepreneurs

Group A: Enterprise able

Current status - will be an employee or

student with either business experience or

business qualifications.

Personal characteristics - likely to have

been exposed to enterprising role models

and/or had an enterprise education

experience.

Service needs - likely to require general

information and advice about business start

up.

Group B: Enterprising

Current status - will be preparing to be

self-employed, or already is self-employed.

May have business qualifications.

Personal characteristics - likely to have

self-employed parents, or prior work

experience in the same industry and had an

enterprise education experience.

Service needs - likely to require

specialized information and business

advice and/or mentoring, and the

opportunity to network with other

enterprising young people.

Group C: Pre-enterprise

Current status - will be an employee or

student

Personal characteristics - unlikely to have

been exposed to enterprising role models

and/or had an enterprise education

experience.

Service needs - likely to require exposure

to information about being enterprising and

what it takes to start a business.

Group D: Enterprise aware

Current status - will be interested in being

self-employed or already be self-employed.

Personal characteristics - likely to have

self-employed parents, prior work

experience and/or had an enterprise

education experience. May already have a

business idea.

Service needs - likely to require skill

development and information and advice

about business start-up or management.

Readiness

High

Low High

Intention

Source: Lewis and Massey (2003)

Schoof (2006)

The framework provided by Lewis and Massey can assist researchers, planners and policy-makers to obtain a more rationale picture regarding the entrepreneurial needs at different stages and can lead towards a better understandings of the particular needs of the young people as a group, and result in identifying more appropriate methods and promotion programs to improve the enterprise culture in a selected country or region (Schoof, 2006).

2.4 Motivations, Barriers and Incentives to enterprise for young people

In this section we will be going through some of the barriers that young entrepreneur's face outline the key deficiencies, constraints and impediments for young people. Then by going over a large pool of initiatives and programs being applied in various countries we will discuss the possible solutions to these barriers provided by various researchers.

2.4.1 Motivations for becoming entrepreneurs

Gray, et al.., (1995) list some of the main motivations behind starting their own business by young entrepreneurs: to be one's own boss, to be in more control over work and life; to find an alternative to the monotonous jobs offered by others; make some extra money; and be able to produce goods and services not currently available in the market. However these motivations keep changing from country to country and can be shaped depending on the culture and economic conditions prevailing in a country or region (Schoof, 2006). According to OECD (2001) desires for independence and flexibility rather than money is the main drive behind graduates want to become entrepreneurs. In the same way Chigunta (2001) noticed from his research based on Zambia that in developing countries the graduates and others want to enter entrepreneurship out of economic necessity or need to survive and to use their energy productively. Therefore the motivations vary from country to country depending on the life experiences and expectations or different socialization processes that the individuals experience in their respective social environments (Chigunta, 2002).

Opportunity-motivated entrepreneurship and necessity-motivated entrepreneurship are the two basic forms of entrepreneurship according to The Global Entrepreneurship Monitor (GEM). When there is no other alternative means of earning a living then entrepreneurship is driven by economic necessity. Factors like low tax revenue as a percentage of GDP, lower levels of participation in both secondary and tertiary education and high levels of income disparity and low levels of social security are common in countries where entrepreneurship is driven by necessity according to GEM study. Thus resulting in youth in developing and low-income countries to engage in business out of economic necessity due to lack of employment opportunities, and the need to supplement household income and poverty (GEM, 2004).

Business opportunities, and the desire to take advantage of the opportunities present in the existence of other options available for earning income is perceived as opportunity-driven entrepreneurship. Opportunity-driven entrepreneurship is usually practiced in areas that have the following support systems in place such as the presence of business angels, high level of skill set amongst the entrepreneurs and contacts with existent entrepreneurs. High-income countries are therefore a focal point for opportunity-driven entrepreneurship. However, in reality it is often difficult to distinguish between the both of them and often they are both present simultaneously as often the motives for entrepreneurship over-lap (GEM, 2003).

Schuyler (1998) noticed in his research that some young individuals are not motivated by the money aspect of entrepreneurship rather they have a strong desire to change and make the society better and are referred as social entrepreneurs. Prabhu (1999) realized that the motivation behind social entrepreneurs is based on selflessness, the need to be socially responsible and work in the long-term interest of the local economy and community, based on their values and beliefs (Henton et al., 1997).

Strengths and skills of young people can play the role of crucial catalysts in their urge to start their own business and at times can be the sole motivation behind it (Schoof, 2006). Finally for some young people according to a study by UNECE the motivation can be totally different from what is mentioned above and are categorized in the following three categories:

Technical entrepreneurs: These individuals are motivated by the love for inventing things and thus have strong technical skills. The urge to enter new markets, develop new products or even create industries previously thought unachievable. Their ideas might seem illogical to the rationale mind at times and thus for them enterprise is a way for them to achieve their goals (UNECE, 2003).

Organization builders: Some individuals specialize in developing people, systems and structures and have skills in lieu and thus like to build organizations. Thus these entrepreneurs start their own business to quench the thirst of building organizations (UNECE, 2003).

Dealmakers: Some individuals who are usually involved in financial or trade transactions like to broker deals which lead to the start-up off new ventures. They don't like to commit their long-term future to a particular firm and hence only enjoy the thrill of setting up a new venture and thus become entrepreneurs (UNECE, 2003).

2.4.2 Factors and constraints that contribute/inhibit youth entrepreneurship

In this section we will be describing the various factors and constraints that help promote youth entrepreneurship or inhibit it as described by various researchers.

Culture and Social background:

An enterprise culture is defined as "set of attitudes, values and beliefs operating within a particular community or environment that lead to both enterprising behavior and aspiration towards self-employment." Gibb (1988) Various researchers have come down to the conclusion that cultural influence plays a significant role on the entrepreneurial activities of a region, country or ethnic group and therefore in some cases the interaction between culture and entrepreneurship is more noteworthy then in others (Birley, 1987; Hofstede 1980). Culture and social background play as important a role in developing entrepreneurial activity and culture as they play in shaping an individual's life (Schoof, 2006).

According to the Mueller and Thomas (2001) cultural differences between nations are increasingly important determinants of a nation's level of economic and entrepreneurial development and this has been reinstated by GEM in its 2004 study . Hence a culture in which entrepreneurship is respected and prized, and in which business failure is treated as a useful learning experience rather than a source of stigma, and in which an individual has a quick second chance of redeeming himself will generally be more conductive to entrepreneurship (OECD, 1998).

Kreiser et al., (2003) in their article state that uncertainty avoidance or acceptance in culture is strongly linked to the level of risk-taking and pro-activeness of an individual or an organization. Therefore, these values that differ from culture to culture have an influence on entrepreneurial behavior and the decision of whether or not to become an entrepreneur. Individuals (like entrepreneurs) with a high need for achievement, such as those in uncertainty accepting societies, will be more willing to take risks than individuals in uncertainty avoiding societies (Kreiser et al., 2003). This difference in cultures regarding risk-taking and pro-activeness can partly explain why, for example, Americans are more entrepreneurial than Europeans (School, 2006). According to a survey conducted by the Euro barometer (2004) Americans (young and old) show less risk aversion to engage in entrepreneurship than Europeans. The survey shows that Europeans are more inclined towards a regular income and job stability than Americans. Europeans are more afraid of failure as compared to the Americans as half of the people interviewed agreed that risk should not be taken by setting up businesses that are likely to fail as compared to just one-third of Americans. Hence highlighting the fact that cultural traits do play a significant role regarding a societies entrepreneurial activity.

Administrative and regulatory framework

The research on youth entrepreneurship is a very recent and has only been high lightened recently therefore the research on factors that constraint its development is also very recent. Administrative and regulatory plays a very negative role in the promotion of youth entrepreneurship as the burden and hassle is very uncalled for and drives the youth away from entrepreneurship. In the survey conducted by Eurobarometer (2004) it was concluded that most of the youth recognize administrative and regulatory restrictions as one of the prime constraints. This has been further confirmed by a report published by the World Bank (2005) which states that government regulations and bureaucratic formalities are one of the prime reasons behind the development of the informal sector in the developing countries as it is not feasible to formally register or develop your enterprise.

Access to start-up finance

Access to start-up finance is considered to be one of the main factors that prevent young entrepreneurs from setting up their own business. It is the most talked about barrier to youth entrepreneurship and most of the young entrepreneurs get discouraged as they don't have access to start-up finance (School, 2006).

Entrepreneurship Education

Researchers over the year have all come down to this conclusion that entrepreneurship education is fundamental in assisting young people to develop entrepreneurial skills, attributes and behaviors as well as to develop enterprise awareness, to understand and to realize entrepreneurship as a career option. School (2006) believes that the traditional culture of 'job-for-life' careers has significantly changed due to the phenomena of globalization and high availability of labor the pressures on the economy have changed the dynamics of the job market and now it has incorporated roles such as contractual employment, freelancing and self-employment. Therefore entrepreneurial education helps develop skills such as flexibility and creativity along with the development of attitudes that promote taking more personal responsibility. Enterprise education doesn't only help foster youth entrepreneurship but also helps prepare for the changing job market and economy, which the young people of today face (School, 2006).

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