Yearly Archives: 2013

End-of-year twitter digest, 2013

Thank you to all our readers for joining the conversation here in 2013.  We wish you all a happy and prosperous 2014, and look forward to seeing many of you at the Florida Venture Capital Conference, January 28&29 at Hyatt Regency Orlando.

Offered for your reading pleasure, in case you missed any:  a compendium of our twitter highlights from 2013.

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Finding the right angel – redux

Florida Trend  has an interesting piece about the entrepreneurial ecosystem in our state that highlights the Florida Angel Nexus and the incubator at UCF.

The Florida Angel Nexus has teamed up with UCF’s Business Incubator Program and other groups such as the Tamiami Angel Fund, the Florida Institute for Commercialization of Public Research, and the Florida Next Foundation in order to connect qualified companies with the mentorship and capital needed to create a viable company and product…

The Florida Angel Nexus’ partnership with UCF is already seeing success; it has closed three deals, and is on track to meeting its goal of investing $1 million by years end. With this team, the Nexus plans to make Florida the next major innovative ecosystem in the U.S.

The Florida Trend article floats a distinction between angels and VCs – the former provide experience and guidance while the latter provide only capital – that doesn’t really match our M.O. or the early-stage investors with whom we work.

As a matter of fact, the management teams at our portfolio companies typically value our experience, guidance, and extensive network (which includes many angels who invest in BPV and work with our portfolio companies) even more than our capital.

Early stage investors don’t always fit neatly into angel or venture capital categories, and can take varied approaches to working with entrepreneurs.

In Finding the right angel we covered Scale Finance’s six categories of angels and “The Chaperone Rule”:  the odds of a startup company succeeding are significantly enhanced when the company has a chaperone from the get-go, an experienced guide on the trip from the embryo to the IPO.  Here’s an excerpt:

Good angel investors provide much more than capital.  Their networks and reputations can assist early stage companies with introductions to additional sources of financing, expertise, customers, and strategic partners.  It’s a long and difficult journey from idea to successful business, and entrepreneurs need partners who intuitively understand the right kind of support to offer over the long term during the inevitable challenges of building a business.

Angels have varied experiences, interests, strategies, reputations, and (in the case of angel groups) cultures.  Choosing the one who best fits requires as much rigor and thoughtfulness as any decision an entrepreneur makes.

Serial angels – perhaps the most productive type, often adds significant value to the companies in which they invest because they’ve done it before.

Tire kickers – the opposite of serial agents. They lack a genuine commitment to angel investing – at least at present – but they’re using the process as a means of educating themselves.

Trailblazer angels – experienced investors, typically partners in investment banks and venture capital firms who incubate deals too small for their firms while maintaining a link to their company for larger/later rounds.

Retired angels – business executives with enough personal capital to enable them to quit their jobs and “retire,” but who remain perfectly capable (and eager) to keep up in the so-called rat race.

Socially responsible angels – investors who are interested in doublebottom-line investing – that is, doing well by doing good.

Angel syndicates – groups who episodically invest together, joining their capital for more influence in more material deals.

N.B.  In 2013 the Business Incubation Program at the University of Central Florida (UCF) was named Business Incubator Network of the Year by the National Association of Business Incubators and also was selected as one of four Best Under the Radar Business Incubators by Entrepreneur magazine.

The Wright Stuff

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The Wright Brothers’ flyer next to Apollo capsule in the Smithsonian

Earlier this week, on the 110th anniversary of the Wright Brother’s first flight, we learned that Neil Armstrong carried part of the Wright Flyer with him to the moon – a piece of muslin fabric from the left wing and a piece of wood from the left propeller.  (From History.com’s 10 Things You May Not Know About the Wright Brothers.)

That he would choose such a deeply symbolic gesture, done without fanfare, is consistent with what we know and admire about Neil Armstrong – who was in many respects the opposite of the swaggering-right-stuff-machismo portrayal of astronauts in film.  In 2012 we compared his description of the successful culture of the Apollo 11 mission to that of the esprit de corps we find in good private growth companies.

Mr. Armstrong described the required reliability of each component used in an Apollo mission – statistically speaking 0.99996, a mere 4 failures per 100,000 operations – and pointed out that such reliability would still yield roughly 1000 separate identifiable failures per flight.   In reality, though, they experienced only 150 per flight.  What explained the dramatic difference?

I can only attribute that to the fact that every guy in the project, every guy at the bench building something, every assembler, every inspector, every guy that’s setting up the tests, cranking the torque wrench, and so on, is saying, man or woman, “If anything goes wrong here, it’s not going to be my fault, because my part is going to be better than I have to make it.” And when you have hundreds of thousands of people all doing their job a little better than they have to, you get an improvement in performance… this was a project in which everybody involved was, one, interested, two, dedicated, and, three, fascinated by the job they were doing.

We can see the same entrepreneurial motivation at work in the origin story of that same space-faring muslin and wood:  the race to achieve powered flight between the Wright Brothers and Samuel Langley.  The former were interested, dedicated, fascinated, and trying to change the world with the loyalty and support of people who shared their dream.  The latter was using other people’s money to fuel his pride with the support of Harvard, The Smithsonian, The New York Times, and Teddy Roosevelt.  Langley’s spectacular failure in the nation’s capital was much more well attended than the little-noted (at the time) success in Kitty Hawk, but Langley’s support – as well as his own motivation – evaporated once his efforts became a well-publicized object of scorn and derision.

(See The Only Thing He Ever Made Fly Was Government Money to learn not only how Langley lost, but how he attempted to re-write history.)

Is there such a thing as too much incentive for an entrepreneur?

incentivesWhen we’ve written on the subject of board performance, we’ve emphasized that private company boards often have greater chemistry and transparency because the incentives of the entrepreneur and investors are more easily and perfectly aligned than in public companies.

Here’s how we put it in 2010 in Communicating good news and bad:

In our experience, the relationship between entrepreneur and venture partner in private companies is more cooperative, longer-term, and (mercifully) not subject to the quarterly reporting pressures of public companies.  Moreover, venture investors have real “skin in the game” and have the same incentive as the entrepreneur to understand the nuances of the business and focus on long term value creation.  As a result, the communication of good news and bad tends to be more forthright and in real-time, enabling partners (assuming they are good partners!) to understand intuitively the right kind of counsel and support to offer during both the good times and during the inevitable challenges of building a business.

Not too long ago we came across a great piece at HBR Blog Network on the importance of aligned incentives.  In There Is Such a Thing as Too Much Incentive for Entrepreneurs, N. Taylor Thompson makes the case that there are instances in which  an entrepreneur ought to “take some money off the table”:  when lack of diversification in his wealth creates a difference in economic incentive between himself and his investors.  If all his money is tied up in the startup, it could (quite reasonably) cause him to “prioritize exit probability above expected value because of diminishing marginal utility and loss-aversion.”

In other words, if all his money is in the company he founded, but it’s just one of several investments for the venture firm, the pressures and logic of decision-making within the partnership can be different.

From the HBR piece:

Behavioral economist Dan Ariely has conducted a set of experiments to gauge the relationships between economic incentives and performance. In one experiment, he offered participants payments for pressing alternating keys on a keyboard; in another, he offered payment for math problems – and, in both he varied the incentive so that participants could earn either up to $30 or up to $300. For key-pressing, stronger incentives led to better performance. For math problems, incentives decreased performance.

Ariely’s interpretation is that simple tasks requiring no cognitive engagement respond as expected to increased incentives, while cognitively complex tasks peak and then show decreasing performance, as increasing incentive distracts from cognitive performance…

Taking a small amount of money off the table aligns incentives much better to focus on making a big, world-changing impact. And diversifying also can remove the performance-destroying stress that comes with overly strong incentives.

To be clear, aligning incentives remains critical to startup success; my argument is simply that a modicum of diversification helps both entrepreneurs and investors. Taking money off the table isn’t about getting rich, it’s about freeing entrepreneurs to focus on doing something great – not just good enough.

While we (also quite reasonably) prefer to have our capital directed toward growing the business, we understand there are times it makes sense to achieve partial liquidity for founders who want to continue building the business but would also like to realize a portion of the value they have created to date.

On a related note:  buying out a minority or absentee partner’s interest can also often better align incentives and remove a barrier to rapid growth.

See you next month in Orlando

If you are an entrepreneur or part of thehodge-podge of scientists, institutions, and fundingthat make up our state’s entrepreneurial ecosystem, please join us at the 2014 Florida Venture Capital Conference. 

On January 28 & 29, hundreds of venture capitalists and private equity investors from across the U.S. and the world will be at the Hyatt Regency Orlando to listen to some of the most dynamic high-growth companies in Florida.  (You can click here to register.)FVFCC_logo(1)

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The conference will feature expert panel discussions, exclusive networking opportunities, featured speakers and many of Florida’s top companies presenting to a national audience of venture capitalists, investment bankers and private equity investors.

The Florida Venture Capital Conference highlights both mid and later stage investment opportunities throughout the State of Florida.  Past Presenters have attracted more than $2.8 billion in investments.

The Psychological Price of Entrepreneurship

Bill Walsh

Conqueror or consumed? Likely both.

Jessica Bruder writes in Inc. magazine that entrepreneurs are “vulnerable to the dark side of obsession.”  She echoes something we wrote last January about a famous football innovator:  Hall of Fame coach Bill Walsh and his obsession to conquer the game of football itself.  Here’s Bruder:

But it may be more than a stressful job that pushes some founders over the edge. According to researchers, many entrepreneurs share innate character traits that make them more vulnerable to mood swings. “People who are on the energetic, motivated, and creative side are both more likely to be entrepreneurial and more likely to have strong emotional states,” says Freeman. Those states may include depression, despair, hopelessness, worthlessness, loss of motivation, and suicidal thinking.

Call it the downside of being up. The same passionate dispositions that drive founders heedlessly toward success can sometimes consume them. Business owners are “vulnerable to the dark side of obsession,” suggest researchers from the Swinburne University of Technology in Melbourne, Australia. They conducted interviews with founders for a study about entrepreneurial passion. The researchers found that many subjects displayed signs of clinical obsession, including strong feelings of distress and anxiety, which have “the potential to lead to impaired functioning,” they wrote in a paper published in the Entrepreneurship Research Journal in April.

Here’s an excerpt from our January piece on Walsh, The Imperfect Perfectionist:

Over the next few years, as Walsh turned Ken Anderson into one of the league’s most accurate passers, the system worked so well that Walsh began to think he could do something no coach had done: conquer the game itself. His offense became so precise that it couldn’t be stopped when executed perfectly, so Walsh became obsessed with always executing perfectly. “It would grind on him,” says longtime friend Dick Vermeil. “He was so perceptive and detailed and emotional, and he put so much of himself into a game plan, that he took it personally if it didn’t work…  After the 49ers hired him in 1979, Walsh won a total of eight games in his first two seasons. Ridiculed in the media, he grew so despondent that he considered resigning, convinced he didn’t have the answers. Even after Walsh turned an inconsistent Notre Dame quarterback named Joe Montana from a third-round pick into a future Hall of Famer, winning Super Bowls in 1981 and 1984, he felt more angst than validation. “Bill had to prove himself to himself all the time,” Vermeil says. “His past success could never overcome a recent failure, and nothing was enough to fill that little hole in his personality.” … By the late ’80s, as Walsh’s definition of success became so narrow as to be unattainable, the Walsh Way started to cripple the coach. He would sit dazed in his hot tub even after wins, despondent that he had miscalculated a play or two. “I was a tortured person,” Walsh later told biographer Harris. “I felt the failure so personally … eventually I couldn’t get out from under it all. You can’t live that way long. You can only attack that part of your nervous system so many times.”

Back to Bruder… she also cites a psychologist from John Hopkins whose theory about entrepreneurs adds another wrinkle to our recently completed 4-part series on Entrepreneurship and global wealth since 1850.

Reinforcing that message is John Gartner, a practicing psychologist who teaches at Johns Hopkins University Medical School. In his book The Hypomanic Edge: The Link Between (a Little) Craziness and (a Lot of) Success in America, Gartner argues that an often-overlooked temperament–hypomania–may be responsible for some entrepreneurs’ strengths as well as their flaws.

A milder version of mania, hypomania often occurs in the relatives of manic-depressives and affects an estimated 5 percent to 10 percent of Americans. “If you’re manic, you think you’re Jesus,” says Gartner. “If you’re hypomanic, you think you’re God’s gift to technology investing. We’re talking about different levels of grandiosity but the same symptoms.”

Gartner theorizes that there are so many hypomanics–and so many entrepreneurs–in the U.S. because our country’s national character rose on waves of immigration. “We’re a self-selected population,” he says. “Immigrants have unusual ambition, energy, drive, and risk tolerance, which lets them take a chance on moving for a better opportunity. These are biologically based temperament traits. If you seed an entire continent with them, you’re going to get a nation of entrepreneurs.”

Though driven and innovative, hypomanics are at much higher risk for depression than the general population, notes Gartner. Failure can spark these depressive episodes, of course, but so can anything that slows a hypomanic’s momentum. “They’re like border collies–they have to run,” says Gartner. “If you keep them inside, they chew up the furniture. They go crazy; they just pace around. That’s what hypomanics do. They need to be busy, active, overworking.”

Thanksgiving: the forgotten entrepreneurial tale

Every child in America learns of the hardships endured by the Pilgrims as they established Plymouth Colony.  Some lucky ones even learn how the Pilgrims found salvation via private property, division of labor, and capitalism.  The luckiest ones of all learn about capital preservation when a venture capital investment fails.

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Mayflower with shallop – William Halsall, 1882

When a group of Puritans known as “Separatists” fled England they first settled in the Netherlands, where they took menial jobs and over time grew to miss their native culture.  They lacked the resources for a passage to North America, so they sent two entrepreneurs from their congregation to London to seek financial backing – a successful merchant named John Carver and Robert Cushman, a “wool comber of some means.”  While those two were in London, an ironmonger (a dealer in metal utensils, hardware, locks, etc.) from that city named Thomas Weston was visiting one of Carver’s in-laws in the Netherlands and learned of the Pilgrims’ need for funds.

Whether we call that serendipity or opportunistic networking, it resulted in Weston putting together an investor group to back the voyage.  Weston and his London Merchant Adventurers put up 7000 pounds and also recruited experts to assist with the enterprise:  roughly 50 additional settlers with the vocational skills to help build a colony in the new world.  These “non-Separatists” crammed aboard the Mayflower with the Separatists and together became known as the Pilgrims.

What happened to that £7000 investment, you ask?  Here is the story as told at encyclopedia.com

Weston and his fellow investors were dismayed when the Mayflower returned to England in April 1621 without cargo. The malnourished Pilgrims had been subjected to “the Great Sickness” after the arrival at Plymouth, and the survivors had had little time for anything other than burying their dead and ensuring their own survival. Weston sold his London Merchant Adventurer shares in December, although he did send a ship, the Sparrow, in 1622 as his own private business venture.

The Pilgrims attempted to make their first payment by loading the Fortune, which had brought 35 additional settlers in November 1621, with beaver and otter skins and timber estimated to be worth 500 pounds. The ship was captured by French privateers and stripped of its cargo, leaving investors empty-handed again.

A second attempt, in 1624 or 1625, to ship goods to England failed when the Little James got caught in a gale in the English Channel and was seized by Barbary Coast pirates. Again the London Adventurers received nothing for their investment. Relations, always tempestuous between the colonists and their backers, faltered.

Facing a huge debt, the Pilgrims dispatched Isaac Allerton to England in 1626 to negotiate a settlement. The Adventurers, deciding their investment might never pay off, sold their shares to the Pilgrims for 1,800 pounds. Captain Smith, of the failed Jamestown venture, felt the London Merchant Adventurers had settled favorably, pointing out that the Virginia Company had invested 200,000 pounds in Jamestown and never received a shilling for their investment.

By our back-of-the-envelope calculation, the investors got back 26% of their invested capital.  If only they’d kept their long-term perspective…

On a more serious note, that outcome fits into the first category of entrepreneurial failure listed in Fail the Right Way and reflects well on those involved:

1. Liquidate all assets, investors lose most/all money: 30-40%
2. Not realizing the projected return:  70-80%
3. Falling short of initial projections: 90-95%

With “failure” this common, he urges executives to distinguish between business failure and personal failure.  It’s vital to not let the former, which can be a valuable learning experience, pressure you into the latter, which can become a career-damning ethical lapse:

Although the original backers did not get the return for which they’d hoped, the endeavor ultimately succeeded thanks to the intrepid settlers who displayed many of the noble traits found in entrepreneurs:  flexibility (they had to settle further north than intended), persistence (through brutal hardships), the value of good partners (Squanto and the Wampanoag tribe), and the courage and optimism necessary to accomplish the impossible and stupid.

All great and honorable actions are accompanied with great difficulties, and both must be enterprised and overcome with answerable courage.

– William Bradford, 2nd, 5th, 7th, 9th & 11th Governor of Plymouth Colony

Our business – like every business – has its ups and down, but we have much to be thankful for.  Much.   So we’d like to take this opportunity, here at NVSE, to give thanks for the trust and patience of our Limited Partners, the initiative and dedication of our entrepreneurs, the support provided to them by the many friends in our network, and the nation that offers the freedom to pursue happiness.  We love our work, have been blessed with terrific successes and honorable failures, and get to do it all with great people in beautiful weather.   God Bless you and your families – we hope you have a wonderful Thanksgiving.

Update: Jocks and Bonds

Arian Foster for NVSEOn the first of this month we wrote about the planned “IPO” of shares in Arian Foster, running back for the Houston Texans.  Fantex, Inc. is applying the concept of celebrity bonds to professional athletes and securitizing their potential future earnings.

At that time we expressed concerns about the business model and the ability to quantify risks or conduct due diligence:  (a) it’d be analogous to a musician securitizing songs he planned to compose rather than his library of existing proven songs, (b) a professional athlete’s fortunes can turn on a dime, and (c) their “brand” is easily tarnished by revelations about past or current activities.

Last Tuesday brought unfortunate news for Mr. Foster.  (Unfortunate but impeccably timed as follow-up to the original story…)  He must have season-ending surgery and as a result, Fantex has postponed the IPO.

San Francisco-based Fantex last month filed with the U.S. Securities and Exchange Commission to raise $10.6 million in an initial public offering priced at $10 a share for Foster, who pledged 20 percent of his on- and off-field earnings to the company in exchange for most of the proceeds of the IPO. It was to be the first public offering for a professional athlete.

“After consideration, we have made the decision to postpone the offering for Fantex Arian Foster,” Fantex Chief Executive Buck French said yesterday in a statement. “We feel this is a prudent course of action under the current circumstances…  We continue to support Arian and his brand, and we wish him well in his recovery.  We will continue to work with him through his recovery and intend to continue with this offering at an appropriate time in the future based on an assessment of these events.”

Entrepreneurs and global wealth since 1850 – Part IV

51-BIsCgxALWhy, after the Industrial Revolution began in the West, did the Rest struggle to catch up?  Professor Geoffrey Jones argues that entrepreneurs are the missing gap in the analysis of what creates a prosperous modern economy.  Since 1850 those countries with the most friendly environments for entrepreneurs have innovated and prospered.

In this final installment we excerpt the author’s thinking on three more factors at the national level that affect entrepreneurship:  human capital, geography, and infrastructure.  We then close below the jump with his conclusion (verbatim) from the working paper that led to the book. 

(Here are links to Part IPart II, and Part III of this series.)

A popular explanation for wealth and poverty is egalitarian mass provision of secular education.  We agree that investing in human capital is important in its own right, but also agree with the author that it does not guarantee the spontaneous emergence of entrepreneurship.  Other vital pieces have to be in place as well:

Knowing that political and legal institutions or human capital matter is important – but a further set of critical questions relate to how firms and entrepreneurs interact with these aspects of an economy. It is firms and entrepreneurs which create wealth and innovation, rather than governmental institutions or schools. Here the economics literature is less well-developed. Institutions and human capital are treated as the first order causes of economic growth. The assumption is that if a society evolves or adopts the right institutions, or else has good human capital investment, firms and entrepreneurs will more or less appear spontaneously and create economic growth. The business history literature suggests that this is a considerable over-simplification… This brief survey of the historical evidence suggests that neither institutions nor human capital are fully discrete, and that historical case studies provide different answers to the question about what matters most. There are likely to have been other factors at work also. To have entrepreneurship, there must be entrepreneurial opportunities.

Regarding the role of geography and infrastructure, Professor Jones appears to ascribe the emergence of large integrated firms in the U.S. to the “Chandlerian” model and offers keen observations about two other interesting cases:

The growth and size of the American market provides a key component of the Chandlerian explanation for the emergence of large integrated firms in the United States.  It seems plausible that both in the case of Britain, the first industrializer, and Japan, the first successful non-Western catch-up, identification of entrepreneurial opportunities, and the building of managerial structures which permitted their exploitation, was facilitated by geographically compact domestic markets and unusually large capital cities.  The market opportunities for firms and entrepreneurs in most of Asia, Latin America and Africa were more constrained. They often faced great difficulties if they wanted to sell beyond their local markets because of poor transport and communications infrastructure. In India, market conditions have been identified as one explanation why India’s powerful and rich merchants in the seventeenth and eighteenth centuries left manufacturing in the hands of small artisans, pointing to fragmented markets, inadequate transport infrastructure, lawlessness and disregard for property rights.  These constraints were relaxed as the British colonial regime imposed political stability and promoted transport infrastructure, but a well-established argument in the literature on nineteenth century India has maintained that the small scale of the domestic market retarded the growth of a modern machinery industry…

The role of the state in catching up economic backwardness has been debated since the writings of Gershenkron decades ago.  However, the ways in which governments facilitated entrepreneurial perception and exploitation of opportunities has not been the primary emphasis of this research. Yet it is difficult to account for the rapid economic growth of the United States in the nineteenth century without mentioning government policy. The Federal government purchased, or annexed, much of the territory of the present day country, and then largely gave it away. State governments were active promoters of infrastructure investment. High levels of tariff protection widened the market opportunities for entrepreneurs and firms by shutting out cheaper imports from Europe.

Please find the summary/conclusion from Professor Jones’s white paper below:

(more…)

Entrepreneurs and global wealth since 1850 – Part III

“We live today in a world where most people are poor and some are very rich, and the category in which you find yourself is largely determined not by your job, your age or your gender but by your location.”

According to HBS Professor Geoffrey Jones’s latest book, much research has analyzed why firms and business systems vary among nations but very little has focused on “why the entrepreneurs and firms in Latin America, Africa, and most of Asia were so delayed in producing powerhouses of corporate innovation.”

In Part I we outlined Jones’s framework of three eras of economic development since 1850, and in Part II we discussed how national institutions encourage or discourage entrepreneurial energy.  Here in Part III we recount a few of his thoughts on colonialism and culture.

The role of colonialism poses the most serious challenge to institutional explanations of variations in the allocation of entrepreneurial energy. Colonialism forms an important element of the institutional economics explanation for the lack of growth in developing countries, but much of the treatment is ahistorical.

Colonialism changed greatly over time, but most attention is given to the highly exploitative first stages of European colonialism. While colonialism is from today’s perspective wholly unacceptable, there was a huge difference between Spanish conquistadores in the sixteenth century looting the Aztec and Inca empires, and pious (if racist) late Victorian British colonial officials in India and Africa. There was a huge difference between those Victorian officials and their rapacious eighteenth century predecessors in the East India Company. The policy regime of empires changed over time. While traditional Indian handicraft industries suffered from British free trade policies in the nineteenth century, during the interwar decades British India was protectionist, including against British imports. In general, empire was a heterogeneous rather than a homogeneous phenomenon. British colonies got common law systems, while French colonies got civil law systems, with all the consequent different alleged effects on corporate governance. In Africa, while the vast Belgian possessions in the Congo in the late nineteenth century have long been regarded as a prime example of worst-case exploitative imperialism, in the British colonies the relationship between the colonial administration and expatriate business were much more distant and nuanced.

The late nineteenth century British colonial regime is especially interesting for its impact on entrepreneurship. The British brought not only political stability, but their legal system with protection of property rights and contract enforcement. The empire even offered the prospect of upward social advancement for highly successful business leaders of any ethnicity. Ethnic Indian, Jewish, Chinese and other diaspora moved within the imperial umbrella, frequently being co-opted into the British imperial system.

In fact, Professor Jones concludes that the best equipped to overcome the challenges of colonialism were often entrepreneurs from within minority communities:

However, the pre-eminence of ethnic and religious minorities in entrepreneurial activity does point towards some combination of cultural and institutional explanations of retarded entrepreneurship.  As many Asian, African, and Latin American countries began to industrialize, minorities or immigrants were especially important in new firm creation.  These included Chinese in southeast Asia, Indians in east Africa, Lebanese in west Africa, Italians in Argentina, and French in Mexico.  Their success was often ascribed to particular ethical or working practices, but their role is more plausibly explained as a demonstration of the challenges faced by entrepreneurs in societies where trust levels were poor, information flows inadequate, institutions weak and capital scarce.  In such situations, small groups with shared values held major advantages as entrepreneurs.  If in addition they established an intermediary role between “more local locals” and Western firms, they could secure easier access to knowledge and information, from and about, Western countries.

Jones also refers to the work of Mark Casson, professor of economics at the University of Reading in England and Director of the Centre for Institutional Performance:

Mark Casson has gone furthest in identifying the features of societies which may cause them to differ in their receptiveness of entrepreneurship. He defines an “entrepreneurial culture” using theories of entrepreneurship that emphasize the functions of innovation, risk-bearing, and arbitrage. Entrepreneurial cultures, he proposes, can thus be defined in terms of attributes – such as scientific and systems thinking – that promotes or retards these functions in a society. Cultural differences towards information and “trust” levels may have been especially important in explaining variations in the quality of entrepreneurial judgments.

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