Asia Entrepreneurship Update

Transcription

1 EE-402T: Entrepreneurship in Asian High Tech Industries Asia Entrepreneurship Update , Ph.D. Director, US-Asia Technology Management Center Executive Director, Center for Integrated Systems

2 Welcome! Weekly public lecture / panel discussion series presented by the US-Asia Technology Management Center < Through 6/02/09 Mission: new information on entrepreneurship in Asia high-tech industries Opportunities and trends Yearly: the last 12 months or so Some by region (country), some by business area Today: Dasher s perspectives into this theme Background, highlights of 2008 What to watch for over the next year

3 Important info for students registering for course EE-402T Available for credit to Stanford students EE-402T Entrepreneurship in Asian High-Tech Industries Credit requirements: see Syllabus On-site attendance at seven (7) of nine (9) sessions -- weekly sign-up sheet at auditorium Comments on eight (8) of nine (9) sessions Submit comments by within two weeks of session To Prof. Dasher <rdasher at stanford dot edu> With cc to Dilys Sun <dilyssun at stanford dot edu>

4 Request for today, 3/31 To everyone: students and visitors Please fill out demographic survey and leave with Sakiko or with me For students registering, the survey is your onsite attendance record for 3/31/09 In addition, you will need to submit comments on the content within two weeks

5 Outline Background: The Crash of 2008 What does the crash mean for Asia s role in the world economy? Entrepreneurship, reconsidered Conditions for entrepreneurship in selected Asian economies Outlook for Asia entrepreneurship under severe world economic conditions

6 Copied from 4/01/08 Update Summary Asia is the growth engine of the world economy Its growth brings opportunities especially suited to entrepreneurs Entrepreneurship patterns differ between the U.S. and Asia 2008 will be a volatile year In all Asia countries, China is an implicit factor in policies and strategies to promote entrepreneurship

7 Copied from 4/01/08 Update Troubled Waters Ahead? China bubble Olympic disappointments Political problems: UTube? Slowdown in U.S. consumer spending Industry clustering > rich versus poor gap

8 What we didn t foresee: Q4 crash World Bank, CQR 3/17/09

9 Understanding the impact of the crash: Asia s pre-crash role 1. Asia: an engine of world economic growth 2. Especially interesting: new, young, middle class Early adopters of new technologies and products 3. Asia had also become the crossroads of a worldscale supply chain Components made all over Asia > assembly in China > ultimate sale in US, Japan, EU

10 GDP, standard and PPP calculations, 2007 United States Japan Germany China India Korea (Rep. of) World #1 $ trillion # trillion # trillion # trillion # trillion # trillion $54.35 trillion #1 $13.81 trillion # trillion # trillion # trillion # trillion # trillion $65.44 trillion World Bank database 9/10/08, PPP 10/17/08

11 Predicted GDP growth AeA Competitiveness Series, China s 15-Year S&T Plan, April 2007

12 Asia growth includes rapid increase in consumption China example Retail sales of large retailers (blue line) is still around 12% yearon-year, end 2008 Consistently greater than GDP growth (est. 6.5%, not shown) World Bank, CQR 3/17/09

13 Intra-Asia trade supports global supply chain China: import growth from East Asia (% chg in $s) China trade balance: Surplus with U.S. is about 1/2 offset by trade deficit with other Asia Korea Thai Ind'sia Export growth to Asia has been a major factor in recent Japanese economy strength (Chart based on WB East Asia Update, 3/06)

14 But, one quick result of 2008 crash: drop in international trade World Bank, CQR 3/17/09

15 Some serious concerns at present Rise of protectionism G20 signed agreement in November 2008 to avoid protectionist measures Since then, 17 of the 20 countries have implemented 47 measures that restrict trade at the expense of other countries (WB study, announced 3/17/2009) Will domestic consumption be sufficient to return to growth? (not just US, what about elsewhere?) Decline in confidence may lead to over-saving behavior Where does entrepreneurship fit into this picture?

16 Entrepreneurship, reconsidered

17 Entrepreneurship: more than just entrepreneurial qualities Basic concept of entrepreneur: (for example) Schumpeter agent of creative destruction Research & education tend to focus on timeless qualities or historical case studies (Latent) entrepreneurs may be found anywhere Entrepreneurship: factors in achieving success as an entrepreneur Pretty useless unless bring in discussion of business opportunity, as well -- same solution does not always work Add range of options for interacting with (capitalizing on) a particular opportunity in a particular environment

18 Characteristics of a good entrepreneur Passion and skills to make a change Vision of an opportunity Planning ability to bring the opportunity to reality Passion for the vision Willingness to take risk in order to achieve that goal Willingness to change existing institutions in order to achieve goal Leadership, charisma to execute plan Ability to be flexible without losing big vision Team-building skills Commitment to venture more than to self

19 Factors to be added in studying entrepreneurship Analysis of business environment(s) Structure and dynamics of institutions and culture In order to see challenges and options for entrepreneurs Analysis of business opportunities Likely areas of opportunity in particular environments Effects of time-limited phenomena (the crash, etc.) To help entrepreneurs identify / create and evaluate opportunities Implementation options To find ways to overcome the challenges of particular environments Paradigms of management (which vary by firm size) Exit options

20 Conditions for entrepreneurship in selected Asia economies

21 Business environment: Ease of doing business (rankings out of 181 economies) United States Japan China India Republic of Korea Taiwan, China Hong Kong, China Singapore 2009 ranking ranking World Bank Group <

22 Explanation of previous slide: WB factors in ease of doing business Starting a business: number of procedures required, typical time required, cost (as % of GNI per capita) Construction (procedures, time, cost to build a warehouse) Employing workers (difficulty of hiring, firing, etc.) Registering property (procedures, time, cost) Getting credit (legal rights of borrowers & lenders, availability of information) Protecting investors (Degree of disclosure, director liability, etc.) Tax rates Trade across borders (documents, time, cost) Enforcing contracts (procedures, time, cost) Closing a business (time, cost, recovery rate)

23 Some comparisons USA Japan China India OECD # of procedures required to start biz Days to start biz Employment rigidity index (1 to 100 =rigid) Credit information index (1 to 10 = best) Days required to enforce contract , Cost of enforcing contract (% of claim)

24 Additional factors in entrepreneurship environments Availability of high-risk capital Angels, venture capital firms, bank lending policies People willing to work for start-up companies Workers: education level, skills sets, costs Managers: experienced -- willing to work with entrepreneur? Difficulty of acquiring early customers Availability of mentors Exit options Societal valuation of entrepreneurial careers

25 Background: entrepreneurship in Japan Shortage of mentors Lack of understanding of process of mentoring Homogenous entrepreneurial teams (lacking diversity of experience) Difficult to get really top quality workers Early customers tend to force start-up company into a niche Entrepreneurs often neglect to think about exit IPOs small, much stock retained by founders M&A traditionally meant being bought out by keiretsu

26 Snapshot: What s happening now? Japan Possible breakdown of various unwritten social contracts Layoffs of permanent employees by big firms Adoption of other Western approaches for cost-cutting Consensus building by government and press: importance of entrepreneurs, innovation, sectoral promotion M&A becoming robust Much business in fact focuses on innovation: new products, services, business approaches But, in Japan one hears a lot of whining, angst, old-style values that may lead one to underestimate them

27 Background: Entrepreneurship in China An aspect of rapid evolution of managed market economy Positive social valuation of entrepreneurial lifestyles Challenges affect start-ups -- similar to situation for foreign firms IP protection Sometimes opaque regulatory framework Rising costs Concern about impact of increasing gap between rich and poor

28 Snapshot: What s happening now? China Shift of focus to domestic market Sharp drop in exports But buying companies overseas Government stimulus package of 3 trillion RMB Continued rise in investment, including VCs

29 Background: Entrepreneurship in India Level of economic development: entrepreneurship of necessity as well as entrepreneurship of opportunity Labor force with English language abilities Activities by returnees from overseas Infrastructure, regulatory difficulties Highly mobile labor force: hiring and retention becomes more difficult Only recent entry by institutional venture capital

30 Snapshot: What s happening now? India Entrepreneurs looking at the bottom of the pyramid New products, services for rural areas, less wealthy Terrorism resurfaced Beginning to run into problems with intrinsically low profit margins of BPO and other outsourcing businesses Venture investment is up

31 Snapshot: The tigers (Korea, Singapore, Taiwan, etc.) Being hurt by slowdown of global supply chain Components businesses not doing well Taiwan: continuing exodus of people and capital to mainland investments Singapore: banking on biotech (?) Korea: Resurgence of big firms -- squeezing out start-up opportunities? Hong Kong: financial center that wants to focus more on innovation

32 Impact of the Crash of 2008 on entrepreneurship in Asia Increase in entrepreneurship of necessity Slower sales cycles: capital is harder to get But it was never easy Need for longer-term support to profitability New economic conditions may create new opportunities Different economics when commodities are cheap Government stimulus packages

33 Upcoming in this series Next week: conditions in China (Ted Lin, former associate, Bessemer Venture Partners; Hong Tan, CEO, Access Analytical) 4/14: Wireless opportunities in Asia (Gary Brown, VP, Morpho Inc.) 4/28: Joint venturing in India (Vibhay Sinh, former CEO, Kilburn Engineering) 5/12: Exit options in Japan (tentative title, Adriaan Ligtenberg, Pacific Technology Partners) Other weeks still TBA