Entrepreneurship and Innovation Today

Gaining competitiveness through trust

Gaining competitiveness through trust: the experience of Russia

Author: Andrei Kuznetsov, Olga Kuznetsova

Address: Lancashire Business School, University of Central Lancashire, Greenbank Building, Preston, PR1 2HE, UK.  ' Manchester Metropolitan University Business School, Aytoun Building, Aytoun St., Manchester M1 3GH, UK

Journal: European J. of International Management 2008 - Vol.  2, No.1 pp.  22 - 38

Abstract:

This paper seeks to reveal the potential of the concept of national competitiveness as a practical analytical tool.  The paper offers suggestions on how research on national competitiveness can contribute to setting targets for socio-economic agenda in transition economies with special focus on Russia.  We start by stressing the importance of the institutional context as an element of national competitiveness and then concentrate on generalised trust.  We analyse the situation with generalised trust in modern Russia and suggest that the development of corporate social responsibility is the most credible remedy for the deficiency of trust and, eventually, to competitiveness, in the short term.  Keywords: national competitiveness; social trust; institutions; corporate social responsibility;

CSR; Russia; transition economies.  DOI: 10.1504/EJIM.2008.016926

http://www.inderscience.com/search/index.php?action=record&rec_id=16926&prevQuery=&ps=10&m=or

The Illusions of Entrepreneurship: Take the test

From the new book: The Illusions of Entrepreneurship; The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live by Scott Shane

Do you understand the reality of entrepreneurship or do you believe the myths?

Answer each question by clicking on your answer to each of the questions below.  Your final score will appear at the bottom of the page.  If you have a low score, don’t worry— Illusions of Entrepreneurship provides the answers to these questions and much more.

Good Luck!  Go to the test here

Which of the following 21st century asymmetric risks most concern you? Why and in which priority?

An intreguing question was asked on one of Linked IN networks & I'm sharing it with you.

2008 Risk Strategy: Which of the following 21st century asymmetric risks most concern you?  Why and in which priority? 

Climate Chaos; Global Credit Crunch; Dollar Decline; Energy Prices; Food & Basics Inflation; China's Rising Dominance; Middle East Instability; Iran/Pakistan 'Nuclear' Capability; Digital Attack and State Sponsored Hacking; Large scale Digital Identity Theft/Loss; Russia's Re-emergence; Environmental Degradation; Genetically Engineered Organisms; Water and Natural Resource shortages; Decline of Ethics in Business; Corruption; Proliferation of Robotics; Search Engine Technology; Nanotechnology; Artificial Intelligence; Financial Systemic Risk; Extremism and Radicalism; Blended Attacks; Demographic Skews; Pandemics; and Cyborgs/Transhumanism.

Not unexpectedly, Climate Chaos; Water and Natural Resource shortages; Energy Prices; and Environmental Degradation are on top of most people's list. Nanotechnolgy is closer to the bottom.

Tolerable risk and reasonable failure go hand in hand with innovation; "No risk, no progress"

My good friend Peter Cochrane, the former technology tsar at British Telecom (BT)  muses this week about risk and innovation in our society in  Peter Cochrane's weekly Blog called "No risk, no progress"

Coming from a health and safety backgorund, I clearly see Peter's points.

Peter laments:

..........We're being hamstrung by health and safety tsars

"The removal of risk from people's lives is leading to a lack of understanding, imagination and, worst of all, real progress.

Recent constraints on the working environment in the UK prompted me to muse on the following proposition.  Suppose a health and safety directorate had been the first of all human innovations and institutions.  Can you imagine the consequences?

I think it goes something like this: no running, climbing, swimming, throwing and definitely no tools or weapons - and certainly no wars.  So no progress then.  Humans would have been in stasis pretty much like most animals.

Let's fast forward to the start of the industrial revolution before we invoke health and safety systems: no large-scale smelting of ores, no engines, no advanced tools or weapons, no wire, no mass-produced glass or anything else, and certainly no telegraph.

So, no progress in communications, medicine, education or trade, and millions would be dying as a result.

Fast forward a decade or two at a time and: no trains, trucks, cars or planes, no telecoms, no space exploration, no computers or IT, no modern medicines, no idea about evolution, the cosmos or much else, and yet more millions would have died as a result.

I suppose the basket-weaving, back-to-basics fraternity might applaud such an outcome, but I do not.  I cannot see a single civilization in the long history of our species that has prospered and survived on ignorance and a lack of risk taking.  Quite the reverse - they have all perished.

And the instruments of their demise have usually been events that they could only attribute to the will of the gods.  That is because they had very little understanding of anything.

Now fast forward to today: our children are denied freedom and adventure and an exciting education just because there is too much risk in the old hands-on mode of getting to know the physics and chemistry of the real world.

And this appears to be one factor that drives them to computer games and the virtual world.  What a pity.  How much they are missing.

In Western education and industry, teachers and managers feel inhibited by the oppressive, risk-averse culture laid on them by central government and fear the potential for punitive litigation over the most trivial errors or accidents.

Contrast this with our Asian competitors, who are not subject to authoritarian health-and-safety tsars, whose hordes of inspectors dictate when people can or cannot climb ladders, or for that matter, toss a lifebelt to a drowning man.

Don't get me wrong, I am all for looking after people and keeping them safe - within reason, that is.  But I come from a culture that says: if you are not taking risks - failing and having occasional accidents - then you are not trying hard enough.

The trick is to avoid any really serious incident or damage.  But that is the role of the manager and mentor - to look after their people, to judge what is a reasonable risk.

Risks, accidents and failures are vital elements in progress and the success of any venture.  But they now seem to have been largely removed, or suppressed, in our companies and institutions to such an extent that people feel they have to climb mountains and sail the oceans for excitement.  What a shame and what a disabler.

So who are these health-and-safety tsars?  It appears we have ex-policemen dictating how ladders can be used and how scaffolding is erected.  These people have studied accidents and statistics, but never actually performed the task.

No wonder we have a no-risk-is-acceptable culture disabling our society.  But I suspect it goes well beyond these probably well-intentioned people."

Are entrepreneurs bigger risk-takers or more risk-averse?

Ask most people how entrepreneurs are different from the rest of the population, and you're likely to hear: "Entrepreneurs are risk-takers."

Not so, say researchers the Olin School of Business at Washington University in St. Louis.  Entrepreneurs are just as sensitive to uncertainty as anyone.  In fact, several studies suggest that entrepreneurs are more risk-averse than other people.  So why do they risk losing their shirts by starting a business?  They have an overdeveloped sense of confidence that that they can beat the odds, researchers says.

"There are two dimensions of uncertainty," scientists says.  "There are things that the entrepreneur cannot control, such as floods or the economy.  We call that market-demand uncertainty.  Then there are things they think they can control, such as their skills and business acumen, and that's called ability uncertainty."

Considering these two dimensions, a pattern emerges of when an entrepreneur will or won't enter a market, Knott says.  If market demand is highly uncertain - if there's a great deal of fluctuation in the market - and the entrepreneur's uncertainty of his or her ability is low, the entrepreneur will perceive the situation as too risky and not embark on a new venture.  As we would expect, when demand uncertainty is low and ability uncertainty is high, then the situation is ripe to start a business.  However, , when the entrepreneur faces conditions of high market uncertainty coupled with high ability uncertainty (overconfidence), he or she will enter markets they would ordinarily avoid "We all have dimensions in which we think we excel - and we all tend to exaggerate how much we excel," say researchers.

"There's one study which found that 60 percent of high-school seniors believe they are in the top 10 percent in their ability to get along with others, and 25 percent think they are in the top 1 percent.  With entrepreneurs, they think they're better than average at dealing with the uncertainties of running a business."

"We all have dimensions in which we think we excel - and we all tend to exaggerate how much we excel," say researchers  "There's one study which found that 60 percent of high-school seniors believe they are in the top 10 percent in their ability to get along with others, and 25 percent think they are in the top 1 percent.  With entrepreneurs, they think they're better than average at dealing with the uncertainties of running a business."

"So it's not that entrepreneurs are greater risk-takers than the rest of the population, it's that they do not view the business situation as being risky.  Instead, they believe that their skill and knowledge is above average and therefore they can succeed where others might fail."

Researchers at Washington University in St. Louis and the Wharton School at the University of Pennsylvania, drew their conclusions after studying 14 years of the banking industry.  Banking has a low rate of entry and is subject to a cyclical business cycle.  The industry is no more risky than other businesses; it has a turnover rate of 3 percent on average compared with 10 percent in the rest of the economy.  What made the banking industry ideal for this study is that there are 50 different bank markets, so the researchers could keep everything else constant and just examine changes in demand uncertainty and ability uncertainty.

"Entrepreneurs aren't different from other people," researchers says.  "They're willing to take on the huge risk tying up all their capital in a business and foregoing business not because they're bigger risk-takers, but because their tendency toward optimism compensates for uncertain market demand."