Last year I speculated in The Telegraph that the only way for businesses in the United Kingdom to grow was to globalize. Whilst the UK remains entangled in the uncertainty of Brexit, it is Asia is at a watershed in wealth creation. Instead of younger generations in Asia joining family businesses, there are indications that a Western appreciation of entrepreneurs has become entrenched in the East.
It is easy to see why. In China, for example, Jack Ma, founder of e-commerce company Alibaba and one of the wealthiest men in the country, is a household name. He is perhaps even more admired in his country than Western counterparts such as Mark Zuckerberg, founder of Facebook, or Jeff Bezos, founder and chief executive of Amazon, are in theirs.
There are almost 4.5bn people in Asia, so generalisations are dangerous, but in my opinion advancements in technology and access to information as a result have changed things dramatically. A large proportion of the population across Asia now have smartphones and are simply more aware of the opportunities available elsewhere. Fewer people want to go into the family firm, because their eyes have been opened to the opportunities.
Whether they are right to dream of setting up on their own is still unclear. Certainly academics are unsure. “Where does growth come from? To be honest, I don’t think we have firm evidence that entrepreneurship as such is what creates the most value,” says Morten Bennedsen, professor of family enterprise at Insead, a business school that has campuses in Paris, Singapore and Abu Dhabi.
He adds that 90 per cent of companies worldwide do not survive more than 10 years. “It’s very easy to say that we have to spend a lot of money on entrepreneurship, but I don’t think there’s evidence for it.”
Yupana Wiwattanakantang, associate professor at NUS Business School at the National University of Singapore, agrees, adding: “You don’t see start-ups that have already died. Most of the time you only see the successful ones.”
Even in the US, where entrepreneurs have always attracted a lot of attention, there are doubters in the academic ranks. Andrew Keyt, president of the US chapter of the Family Business Network and executive director of the Loyola University Chicago Family Business Center, says: “I do think that we [in the US] tend to over-romanticise the start-up and the big liquidity event, and lose sight of the challenge of creating long-term sustainable value.”
However, while the academics may be unconvinced, in my opinion the enthusiasm for following the Western start-up model is growing. The West is producing lots of exponential entrepreneurs and the East is trying to catch up and follow the West. Within my area of expertise — financial technology and harnessing big data — the opportunities that exist today in Asia far exceed those in the West.
But budding Asian entrepreneurs also face certain headwinds, such as access to capital. There is no doubt that it is easier for entrepreneurs to access funding in the West. In India most entrepreneurs are self-financing, borrowing money from friends and family.
Prof Wiwattanakantang also points to the weaker legal institutions in many Asian countries, which mean entrepreneurs and those who fund them run greater risks. “We know from research that, in countries with weak legal systems, it is hard to get external finance,” she says.
Stronger family ties could also hold back some Asian entrepreneurs, say academics. “There are cultural differences and these differences are about family values — in Asia, the family culture is stronger, Prof Bennedsen says, adding that for Asian children it is a “big thing” not to obey their parents, which makes it harder for those offspring to tell their parents they do not want to join the family firm.
Things are changing, though. Prof Bennedsen says Asian students in the programmes he teaches in Singapore have often been to secondary school in the west, as well as university or graduate school. He recalls that one western-educated Chinese student in his class did not want to go back to help run his parents’ shellfish factory in China and was setting up his own business on a clandestine basis. The student hoped that when he had built a business as big as his family’s, he could let his father know, and avoid having to return.
And countries such as China believe the gains from the growth of an entrepreneurial culture could be felt at a national level too. At the beginning of 2015, China’s then-premier Li Keqiang told the World Economic Forum in Davos that “mass entrepreneurship and innovation” would ensure that China’s economy would avoid a hard landing. He was still on message in March 2015 when he promised that the government would continue to make it easier for people to start their own businesses.
If China is successful in its efforts, it could soon have a nation of entrepreneurs trying their hand at business. Prof Bennedsen is right to warn that the vast majority of them will fail, but the shift in culture hopefully will mean they will simply try again.
This post is based in part on an article which first appeared in the Financial Times.