Indian and American Entrepreneurs Are Similar

Dane Stangler’s enlightening April 7 article, “Entrepreneurship: What’s in a Name?,” makes the very good point that the newness of firms is an important element in defining entrepreneurship. He also helpfully points out that entrepreneurship needs to be understood in terms of its contribution to the growth of the economy, especially in the sense that entrepreneurs create jobs.

This prompted me to do a little cross-cultural examination by sifting through the Legatum Institute’s data from a panel survey of 2,000 entrepreneurs in India. We created the survey to help us “get inside the head” of the Indian entrepreneur and understand how the enterprising class in one of the world’s largest and consequential countries regards its future, its government, the sources of its success and inspiration, and so on.

When one thinks of “entrepreneurship” in developing and emerging economies, one usually pictures sole traders selling something day-by-day in a village market or along the roadside. In India, however, entrepreneurship in the sense that Stangler describes is alive and well. As I wrote in this article at Real Clear Politics, Indian entrepreneurs, regardless of their age or size of their company, are gritty, optimistic, suspicious of government, heavily reliant on their ability to innovate around bureaucratic barriers, very family-centric, and highly motivated by the social—not merely the financial—effects of their enterprises.

Looking specifically at respondents who run new, ascendant enterprises, we find that they make a special contribution to the Indian economy. Indian enterprises less than three years old are more likely grow at rates above 50 percent than older companies. Only 17 percent of young firms are run by a single, self-employed owner. Half of them have less than 10 employees besides the owner, and another 25 percent have between 10 and 50 employees. In other words, new firms in India create a significant share of jobs. In addition, nearly one in five firms less than three years old generates annual revenue between $100,000 and $550,000, which is real money in India.

The owners of new, fast-growing enterprises are especially interesting when one looks at the characteristics that distinguish them from those running more established businesses. Two-thirds of them say the social impact of their business is a main motivator, compared to less than half of those running companies between four and ten years old. They are more skeptical of government than their peers, the only class of entrepreneur to say they started their own business to try something new (the majority of every other group said “being my own boss” was the main motivator), and far more reliant on personal savings to start their businesses than on family resources or loans (the two main sources of financing for every other group). Perhaps not surprisingly, then, more than other groups of business owners, they value their internal determination and ability to weather risk in uncertain circumstances much more than accessing finance as a key to their success.

In other words, those who seem most self-reliant, creative, and risk-prone are also among the most socially minded and libertarian. In many ways, the typical Indian entrepreneur looks a lot like the idealized American entrepreneur—one who is self-determined, risk-prone, and determined not only to make money but to make a difference. It is also clear that this special enterprising class in India is creating jobs and making a contribution to the economy that is not insignificant, which is no small task in a country famous for paralyzing bureaucracies and corruption at every turn. Much more research needs to be done to determine whether the contribution of entrepreneurship outside the United States is different in important respects from that within the country, but an initial look at India suggests that Indian and American entrepreneurs have some important similarities.

Ryan Streeter is a senior fellow at the London-based Legatum Institute and can be followed on Twitter here.