YARDSTICK INTERNATIONAL COLLEGE

MASTERS OF BUSINESS ADMINISTRATION-2013

Course: ENTREPRENEURSHIP AND ENTERPRISE DEVELOPMENT

Course Manager: DR. BEZUYE (PHD)

Assignment:

ENTREPRENEURSHIP AND ENTERPRISE DEVELOPMENT ASSIGNMENT 02

By: DANIEL AWOKE

ID Number: MAO/1522/13

APRIL 29, 2022

ADDIS ABABA, ETHIOPIA
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1. Discuss Entrepreneurship Ecosystem and its impact for Ethiopian startups to enter,
survive and grow.

ENTREPRENEURSHIP ECOSYSTEM

Entrepreneurial ecosystems are defined as a set of interdependent actors and factors

coordinated in such a way that they enable productive entrepreneurship within a particular
territory. The combinations of components of Entrepreneurship ecosystem and how they
interact are always unique, but in order to get a self-sustaining ecosystem there must be six
domains, that are presented below in no particular order:

Policy: The policy domain consists of leadership and government and the essence is that
entrepreneurship needs different policies and institutional home. Leadership relates to a social
legitimacy and unequivocal support towards entrepreneurship, and that policy strategy should
have entrepreneurship at heart. The government part includes institutions, financial support,
regulatory framework, research institutes and venture-friendly legislation.

Finance: One of the most critical features in any ecosystem is the availability of financing.
Lack of finance, which is a key driver, will prevent the creation, growth and survival of new
ventures. The domain consists of actors like venture capital funds, zero-stage venture capital,
angel investors and family and friends but also the availability of micro-loans, private equity
options and ways to use debt as financing.

Culture: The culture is also a vital feature of an ecosystem. The ecosystem generally have an
air of inclusiveness, the feeling that sharing is vital and the overall consensus that failure is
nothing shameful. The societal norms are, except for the tolerance of risk and failure, that the
social status of the entrepreneur is high and that entrepreneurship have the connotations of
wealth creation and hunger. The companies in the center of the ecosystem affects the cultural
state of the ecosystem whereas they are seen as success stories.

Supports: There are three types of supports – infrastructure, support professions and non-
government institutions. Infrastructure is the form of things as in telecommunications,
transportations, logistical capabilities and energy as well as in the meaning of zones,
incubation centers and clusters. The non-government institutions are the organisations that
arranges conferences and competitions on entrepreneurship and relating areas which help
promote entrepreneurship in a non-profitable way.

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Finally regarding supports are the different service providers. These could be lawyers,
accountants, recruitment agencies and business consultants. These providers keeps new firms
from common mistakes in their venture.

Human capital: Human capital is the skill the labor force possesses and this domain relates
to this but with the addition that the skills are applicable in the entrepreneurial sphere. Labor
is both skilled and unskilled where serial entrepreneurs have a positive impact on the general
capacity of the labor force. The domain includes entrepreneurial training which may take
many forms and can be taught at different levels of the educational system with diverse
effects.

Markets: There are two sides of this domain, there are the networks and the early customers.
The networks are on three different levels, first there are the entrepreneur’s networks which
are linked directly to the entrepreneur and his surroundings. Secondly there are the diaspora
networks which are more intangible but equally important and finally the networks that
multinational corporations makes accessible due to their presence on the scene. The early
customers refers to a bundle of groups. Included are the early adopters that can stand for
proof of concept or the reference customers that can spread the success. But also included are
the distribution channels enabling companies to reach all the critical early customers.

Figure: Isenberg’s Model of an entrepreneurship ecosystem

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THE ENTREPRENEURIAL ECOSYSTEM IN ETHIOPIA

With a population of over 112 million people, Ethiopia is a huge untapped market for
entrepreneurs to satisfy, especially as it transitions to a more digital economy. In 2020,
Ethiopia’s Startup Act established a National Startup Council to be chaired by the Minister of
Innovation and Technology, and tasked with guiding and supporting the country’s startup
ecosystem. The Ethiopian government is working on improving the business and
infrastructure conditions in the country; this is expected to make it easier for startup founders
to establish new companies. Below I will discuss Entrepreneurial Ecosystem and its impact
for Ethiopian startups to enter, survive and grow.

Main Policy initiatives in Ethiopia

In 1997, and again in 2011, the government of Ethiopia developed Micro and Small
Enterprises Development Strategies to promote MSME development in the country. Despite
this long-standing emphasis on entrepreneurship development, the government has, until
recently, placed a limited effort into setting up organisations that promote SMEs. Still, it did
set up the Federal Micro and Small Enterprise Development Agency (FeMSEDA) which has
been involved in promoting enterprise development in the country, but there appears to have
been greater emphasis by the Government on micro enterprises.

Another effort of the Ethiopian government has been to support industrial park formation.
These parks tend to cater to larger and more established firms rather than innovative start-up
enterprises.
To develop tools to create jobs and promote private sector development, the government set
up the Job Creation Commission (JCC) in 2018. The JCC reports directly to the Prime
Minister’s Office. Its mandate is wider than SME development, and includes leading the
country’s job creation agenda, coordinating stakeholders, and monitoring and evaluating
performance. JCC places a strong emphasis on promoting high-growth, innovative SMEs.
The Entrepreneurship Development Centre (EDC) is a quasi-governmental entity also
working to strengthen SME development in the country. It was launched in partnership with
the UNDP in 2013 to promote entrepreneurship development. The Centre caters to budding
entrepreneurs, and provides them with training in entrepreneurial skills. It has provided
training to over 90,000 people in Ethiopia.

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More recently, policy developments have suggested a stronger focus on SMEs. The Ethiopian
Government adopted the Entrepreneurship Strategy in 2019, developed jointly by the
Ethiopian Ministry of Trade and Industry, UNIDO and UNCTAD. It aims to transform the
economy and to establish an ecosystem fostering sustainable SME development. Another
initiative was the launch, in 2020, of the Digital Ethiopia 2025 strategy, designed to
implement projects to unlock the digital potential of Ethiopia.58
A third strategy was the Plan of Action for Job Creation 2020-2025, with a strong focus on
the development of the private sector and an emphasis on high-growth enterprises. As a part
of the implementation of these policies, the government has tasked the JCC to develop a start-
up proclamation with specific tools to promote the development of SMEs with high growth
potential. This emphasis on entrepreneurship and private sector development is a major
priority by the government that took over in Ethiopia in 2018.

Entrepreneurship and Funding

In Ethiopia, entrepreneurs have few options to get their startups funded. Specialized investors
are rare, and banks are not geared towards the needs of startups. There is a limited investment
to capitalize on potential projects. Addis Ababa has a seed of an entrepreneur support system
and community. Additionally, there are several private sector organizations helping
entrepreneurs succeed in Ethiopia’s business environment.
Several interesting initiatives are clearing a path for the development of the tech scene,
including. For example, the Digital Ethiopia 2025 program is a digital transformation strategy
that is built around leveraging four “Digitally Enabled Pathways,” taking into account current
economic drivers. This push towards digitalization signals a growing interest in the Ethiopian
government towards moving its economy into the 21st century, which is definitely great news
for the startup ecosystem.

Supportive Entrepreneurial climate and Continuous Digitalization

Ethiopia is known for its double-digit economic growth for the last few years and the
Ethiopian Government is ambitious to provide a conducive business environment to maintain
this rapidly growing economic growth. Apart from state support, the United Nations
Development Program (UNDP), in collaboration with the Ethiopian government introduced
an intensive program across Ethiopia to boost the culture of entrepreneurship, which will
ultimately accelerate the development of the private sector in the region.

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Recent Policy Reforms

Ethiopia started to work towards improving ease of doing business in a country as a part of
wider economic reforms of the newly appointed government led by Prime Minister Abiy
Ahmed, who took over the office in April 2018. This movement was initiated with an
expectation to reduce the structural problem of unemployment and Ethiopia since Abiy took
over has been undergoing a raft of reforms where he reiterated his resolve to open up a hith-
erto government-controlled economic space. The World Bank’s ease of doing business index
positions Ethiopia on 159 out of 190 and keeping in view this position and the huge potential
to grow for the businesses and attracting the foreign investments, the Ethiopian government
seems to look forward to bringing about revolutionary changes in the country to boost
startups.

The startup Academy

Ethiopia has over 250,000 new graduates every year, of whom 70% are in Science,
Technology and Engineering, making Ethiopia the highest source of technical talent in Africa
today. Keeping in view this emerging potential coupled with a speedy transition towards
economic development, Startup Ethiopia has been launched in June 2019 with an inaugural
annual flagship event targeting 2,000 participants including 1,000 youth ambassadors, 120
startup semi-finalists recruited from 14 cities around Ethiopia. The objectives of this platform
are to identify and showcase dynamic startups from all over Ethiopia and across all sectors
and to position Ethiopia as an emerging vibrant startup ecosystem. This platform also aimed
to overcome the most common challenge of lack of investments for startups by creating a
platform to connect startups with investors and raise early-stage and impact investor interest
in Ethiopian startups. Furthermore, Entrepreneurship Development Center (EDC) as an entity
is introduced to identify growth-oriented enterprises as well as potential entrepreneurs,
unemployed youth and women nationwide and provide them with direct support to enhance
their entrepreneurial skills and competencies to establish and operate profitable, competitive
businesses on a sustainable basis.

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Challenges in the Ethiopian Entrepreneurial Ecosystem

High demand for foreign currency by the Government of Ethiopia’s infrastructure projects is
creating foreign exchange shortages. Businesses can expect delays of weeks or months to
exchange currency because they must apply and be approved by the government.
Accelerators and incubators have most of their operations in Addis Ababa, so innovative
businesses outside of Addis Ababa do not get as much support as their city counterparts.
Lack of access to finance is a major constraint for local businesses, especially for SGBs
While the number of mobile subscribers and internet users has been increasing, only half of
the population are mobile subscribers and less than 15 percent of the population have access
to Internet, according to the CIA World Fact book.
There is a lack of clear information on how foreign investors can invest in local businesses.
Many organizations working to promote entrepreneurship in Ethiopia are duplicating efforts,
creating inefficiencies in the entrepreneurship-support system. Entrepreneurship education
and entrepreneurial activities are in their infancy at Ethiopian universities. The courses are
more theoretical than practical and do not build entrepreneurs’ abilities to innovate.

Opportunities in the Ethiopian Entrepreneurial Ecosystem

Ethiopia is the second most populous country in Africa and has one of the fastest-growing
economies in the world, which, with the right kind of policies and ways to ensure that growth
is not just concentrated at the top, could result in an expanding middle class with more
purchasing power.
A relatively young population is an advantage that is yet to be fully utilized. Entrepreneurship
programs could focus more on developing the entrepreneurship abilities of young people.
Equity funds and venture capitalists are showing interest in the country. Many Ethiopians in
the diaspora are also investing in the country.
The Sustainable Development Agenda, adopted by the Ethiopian government, is a good road
map for the government to work on various initiatives in the entrepreneurship sector, which
would then lead to a conducive entrepreneurial environment.
The Government of Ethiopia is committed to promoting entrepreneurship – a case in point is
the roll-out of the 10 Billion Birr revolving fund that is administered by Commercial Bank of
Ethiopia (CBE). The Government of Ethiopia is spearheading access to finance through lease
financing and is promoting entrepreneurial culture by introducing entrepreneurship course.

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2. Discuss the relationship between Entrepreneurship and Innovation

Introduction
Innovation and entrepreneurship are two different concepts having entirely different
meanings. However, there is a striking relationship between innovation and entrepreneurship
which sometimes causes confusion.
The main difference between innovation and entrepreneurship is that innovation involves
introducing something new. This can be a new business model, product, idea, or service. On
the other hand, entrepreneurship involves turning a great idea into a business opportunity.
Therefore, entrepreneurship begins with innovation.

Relationship between Entrepreneurship and Innovation

Entrepreneurship is the act of taking a risk to offer at a fee a product or a service to the
market in order to make an income. The process of entrepreneurship involves identification
of a problem and formulation of a workable solution to counter the problem. Innovation is the
means by which something is conducted in a unique manner or differently. The two concepts
are much related as entrepreneurs relies on innovation as a tool to help him provide a product
or a service in the market. Innovation might employ the use of technology that entrepreneurs
exploit to offer what they have to sell to the community. In the process of conducting a
business as, an entrepreneur challenges arise in each step of the way. Innovation helps
entrepreneurs solve such challenges in a clever way that helps them stay afloat.
Entrepreneurs calculate a risk and minimize it using innovations. The tool is applied in
adapting to new market trends where the most innovative entrepreneur always remain
relevant in the business even after introduction of new products in the market.

The Implications of the Relationship on an Individual or an Organization

There is a more direct relationship between innovation and the performance of an individual
or an organization considering them at an entrepreneurial context. The quality of service
delivery and products is directly linked to the two subjects under discussion. When there is
innovation, the individual or organization experiences competitive advantage to his peers in
the industry. It is easier for an organization to take informed steps and well-calculated risks
with the application of innovation as a tool in delivering a product or a service. When the two
relationships is good on an organizational or individual basis there is increased benefits from
increased market share, ROI (return on investment), new products, fast-mover advantage on
products and the overall firm success.

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The Role of Innovation in Entrepreneurship

With the rising competition across all facets of human endeavors, business entrepreneurs
need innovation to remain relevant. But what is the role of innovation in entrepreneurship?
Basically, innovation has to do with the replacement or improvement of something. It is the
particular instrument which entrepreneurs exploit to develop different innovation strategies.
So, an innovative entrepreneur is one who has the ability to come up with innovative products
and services to meet the market’s trends and demands.

Entrepreneurship involves turning great ideas into business opportunities by taking risks. So,
a business entrepreneur understands the business opportunity for the great ideas innovated
and adds value and creativity to the innovation. Entrepreneurs always search for innovation
sources and do not limit themselves to just one type of innovation. They set up business on
the opportunity identified and run it profitably.

Conclusion

Innovation and entrepreneurship are two closely related words used in today’s business
world. They go hand in hand as entrepreneurship is dependents on innovation. The field of
innovation is broad, but entrepreneurships cannot succeed without innovation in both aspects
of the venture. Innovation involves applying your creativity to come up with unique solutions
and ideas. It is a technological or digital invention that positions you to do things you could
not previously do. Innovation is the backbone of every organization. A business that does not
encourage innovation will soon bow to companies that do. A company needs both
entrepreneurs and innovators to remain relevant within its industry. While the business
entrepreneur may know what decision to be made, the innovator understands how to make
them work to achieve a common goal.

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3. Discuss the role of Entrepreneurship for the economic development of a nation

The role of Entrepreneurship for Economic Development of a Nation

Entrepreneurship is a blanket term related to starting a business. Economic development

essentially means a process of upward change whereby the real per capita income of a
country increases over a period of time. While there are some complicating factors to the
relationship between entrepreneurship and economic growth, entrepreneurship initiate and
sustain the process of economic development in the following ways:

1. Creation of Innovative Change: An entrepreneur is a person who always looks for

changes. Continuous dreaming helps in idea creation. Idea creation facilitates creativity
innovations which are the direct result of creative ideas. Viable innovations lead
entrepreneurial behavior. Entrepreneur is responsible for combining the factors of production
in an effective way to enlarge the production base. Economic development does not occur
spontaneously as a natural consequence when economic conditions in some sense are right. A
catalyst is needed which results in entrepreneurial activity to a considerable extent.

2. Capital Formation: Entrepreneurs promote capital formation by mobilizing idle savings

of public. Entrepreneurs mobilize the idle savings of the public through the issues of
industrial securities. Investment of public savings in industry results in productive utilization
of national resources. Rate of capital formation increases which is essential for rapid
economic growth. Thus, an entrepreneur is the creator of wealth.

3. Improvement in Per Capita Income: Each and every country has its own natural and
other resources. There is need to optimize the use of these available natural resources. In this
context, entrepreneurs convert the latent arid idle resources like land, labor and capital into
goods and services resulting in increase in the national income and wealth of a nation. They
help to increase net national product and per capita income in the country, which are
important yardsticks for measuring economic growth.

4. Generation of Employment: Entrepreneurs generate employment both directly and

indirectly. Directly, self-employment as an entrepreneur offers the best way for independent
and honorable life. Indirectly, by setting up large and small scale business units they offer
jobs to millions. Thus, entrepreneurship helps to reduce the unemployment problem in the
country.

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5. Balanced Regional Development: Government promotes decentralized development of
industries as most of the incentives are granted for establishing industries in backward and
rural areas. Entrepreneurs in the public and private sectors help to remove regional disparities
in economic development. They set up industries in backward areas to avail various
concessions and subsidies offered by the central and state governments.

Public sector steel plants and private sector industries by Modis, Tatas, Birlas and others have
put the hitherto unknown places on the international map.

6. Improvement in Living Standards: Entrepreneurs set up industries which remove

scarcity of essential commodities and introduce new products. Production of goods on mass
scale and manufacture of handicrafts, etc., in the small scale sector help to improve the
standards of life of a common man. These offer goods at lower costs and increase variety in
consumption.

7. Economic Independence: Entrepreneurship is essential for national self-reliance.

Industrialists help to manufacture indigenous substitutes of hitherto imported products
thereby reducing dependence on foreign countries. Businessmen also export goods and
services on a large scale and thereby earn the scarce foreign exchange for the country. Such
import substitution and export promotion help to ensure the economic independence of the
country without which political independence has little meaning.

8. Backward and Forward Linkages: An entrepreneur initiates change which has a chain
reaction. Setting up of an enterprise has several backward and forward linkages. For
example- the establishment of a steel plant generates several ancillary units and expands the
demand for iron ore, coal, etc. These are backward linkages. By increasing the supply of
steel, the plant facilitates the growth of machine building, tube making, utensil manufacturing
and such other units. Entrepreneurs create an atmosphere of enthusiasm and convey a sense
of purpose.

9. Facilitates Overall Development: Entrepreneurs act as catalytic agent for change which
results in chain reactions. Once an enterprise is established, the process of industrialization is
set in motion. This unit will generate demand for various types of resources and there will be
so many other units which require the output of this unit.
Vertical and horizontal establishment of industrial units optimize the use of resources
available in that particular area. This leads to overall development of an area due to increase
in demand and setting up of more and more units.

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