SSA Prospects and Policy Implications

Understanding the causes, consequences and differences between the managed and entrepreneurial model is fundamental for policy implication regarding entrepreneurship development, such as entrepreneurship education (Wennekers, et al., 2002). Given the aforementioned differences between the two models and SSA’s conditions in the entrepreneurial economy approach, we propose a number of policy advocacies.

First, entrepreneurship education should be more widely invested and implemented. Even though SSA is dominated by high rate of business ownership, the survival rate for new ventures is low (Bowen, et al., 2009). Enhancement of the quality of SMEs should be given priority to the quantity, which can be achieved by better investment in entrepreneurship education. Even though entrepreneurship education courses do not increase the intention of participants (Oosterbeek, et al., 2010), they serve as the filter for future and current business owners to have more realistic view of founding and running a business, as well as better understand the prospects as well as obstacles of a career in entrepreneurship. Free general education could also be an important part of policy reform aiming at enhancing the general workforce’s skills. Rooted from the doctrine of the Social Market

Economy, which is centred around the idea of equality of opportunity instead of equality

of outcome, free education means children have the equal right to access to knowledge and skill provision as all others, but they succeed or not will mostly depend on their individual efforts instead of their background. It is regarded as one of the inclusive institutions that foster sustainable development and is endorsed by the UN in their Sustainable Development Goals. The provision of universal education is also related to the reduction of crime rate, which is one of the major obstacles for many SSA countries (World Bank, 2018). Furthermore, socially undesirable or low quality entrepreneurship even generates negative externalities via illegal profit gains (Baumol, 1996), which also highlights the importance of basic education on entrepreneurship development.

Second, since knowledge is the key in developing the entrepreneurial economy, knowledge and skills obtained abroad are good leverage of inland entrepreneurship

activities. The idea that SSA countries should adopt entrepreneurial economy approach is relevant to how countries should retain their well-educated citizens to stay inland, create incentives for them to use knowledge to form business instead of moving abroad (Thurik, 2011). In this respect, India, Israel and Taiwan are retaining its entrepreneurs, whilst Poland has massive exodus of skilled workforce. Highly skilled individuals can spread knowledge from advanced economy by returning from abroad to setup new business or invest venture capital in other start-ups (Saxenian, 2006). Brain drain is a common problem in many developing countries. SSA countries could retain its knowledge workforce via policies related to anti brain rain and stimulation of programs that attract its skilled individuals worldwide to return home.

Third, there is a need to foster innovation in SSA, specially aiming at promotion of SME’s innovation and frugal innovation. Innovation is considered one of the main drivers for economic competitiveness and growth. In order to strengthen SSA’s competitive advantage on the world market, the improvement of innovation policies is necessary (Draper, et al., 2012). However, building complex R&D institutions is sophisticated and requires large investment, while implementing an environment for innovation for private sectors is less costly and approachable. Good entrepreneurial environment are associated with supportive networks which provide the institutional structure to link individual entrepreneurs to organized sources of learning and resources (Thornton & Flynn, 2003). SSA should focus on developing their National Innovation System, “a network of institutions in public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies” (OECD, 1997). It is important that major players of the system: policy makers, innovation supporters and innovation producers cooperate well to make the system function completely and have positive impact on the economy. There is a vast difference between innovation systems of industrialized countries and developing ones, deeply rooted in institutional settings. A common problem in developing countries is the lack of functional institutional framework that can effectively promote science and technology, in which the heart of technological capability development is the process of learning in all its various forms. Nevertheless, the contribution for the

development of innovation systems requires the participant of major actors in the Triple- Helix model: academia, industry and government. Moreover, technology does not exist in isolation (Adeoti, 2002). That means technological capability needs to be supported and nurtured by social capability, such as the level of education.

Fourth, SSA should make a good use of global advance in telecommunication and ICT. One of the success stories is the rise of mobile banking in SSA. Using panel data from 36 SSA countries over the period from 1995 to 2010, Cleave & Yiheyis (2014) conclude that the output growth has positive correlation to the level of mobile telephony penetration. Mobile telephony has promoted economic development in SSA in a number of ways, among others are searching costs reductions and improving markets, greater efficiency in business activities e.g. improving coordination among firms, job creation, increasing availability of information and facilitating the delivery of public goods and services especially in finance, agriculture, education and healthcare (Aker & Mbiti, 2010).

As the leading country in Africa in providing mobile telephony service, in 2013 Kenya has an average of 1018 mobile money accounts per 1000 adults, the highest rate in the world (IMF, 2014). Initiated in 2007, the leading mobile payment system M-PESA in Kenya has proven to be a successful scheme, and is regarded as probably the most renowned story of mobile banking success in a developing country. M-PESA is provided by the main mobile phone company Safaricom in conjunction with Vodafone. This low cost approach of modern technology has been effectively applied in financial services, with millions of M- PESA users are able to make payments, send remittances and store funds for short periods via mobile banking. This service enables people without bank accounts to access at low risk and cost (Kimenyi & Ndung’u, 2009). In Ghana, by using mobile telephony, the micro and small enterprises have shown capacities for business innovations. The most effective use of mobile telephony so far is the facilitation of connections between suppliers and consumers in order to save the cost of transactions (Essegbey & Frempong, 2011).

Fifth, there is a need for better utilisation of technology transfer from foreign firms and knowledge spill-overs. Knowledge spill-overs are an important mechanism for endogenous

growth, in which knowledge is transmitted across firms and individuals. One of the most important sources of technology transfer to developing countries is via FDI, regarded as the North-South transmission channels of innovations. However, from Kenyans’ success story for mobile banking and its spread to nearby SSA countries, the approach for South- South transmission channels and regional integration are prospectively potent.

Although there has been increasing FDI pouring into SSA, related studies about the technology and knowledge transfers through this channel are still limited. Managi & Bwalya (2010) tested and confirmed that there are positive horizontal (intra-industry) and vertical (inter-industry) technology and productivity spill-overs from foreign firms to local firms via FDI in Kenya, which functions better compared to other countries such as Tanzania or Zimbabwe. In which, foreign firms have incentive to transfer knowledge to local firms because this enables local firms to produce intermediate inputs more efficiently for foreign firms upstream at lower cost. Moreover, technology spreads rapidly between adjacent firms in regions with high concentration of foreign firms. Gachino (2013)’s surveys in Kenya also find that foreign firms generate more spill-overs than local firms, and technology spill-overs more in machine and engineering industries than food processing and beverages. By examining construction industries in Ghana, Osabutey, et al. (2013) indicate that the presence of foreign firms helps to facilitate technology and knowledge transfer, though at a low level because of the absence of government policies and incentives to encourage foreign-local collaboration. Therefore, there is a need for institutional changes to ensure better benefits from technology spill-overs.