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  • Entrepreneurship in the Middle East and North Africa: Opening the Floodgates
  • Ovais Naqvi (bio)

Stimulating entrepreneurship is intrinsic to creating both sustained economic value and jobs. It is also clear that no more critical a goal exists in the Middle East and North Africa (MENA) region than creating stability and common prosperity through the long-term employment—and positive deployment—of youth.

Studies make extensive connections between entrepreneurial activity and economic development, and a 2010 report by the Kauffman Foundation makes explicit the role of start-ups in job creation. The study specifically states, “Startups are not everything when it comes to job creation. They are the only thing.”

Related Kauffman studies from the U.S. (see Kane, 2010) provide conclusive evidence that start-ups account for a substantial proportion of all net job creation. Mapped onto domestic and/or regional recession, further evidence suggests that job creation in the start-up segment remains consistent in economic downturns, whereas larger businesses are more adversely affected by the cyclical economic factors typical to the boom/bust cycle. Finally, in a 2009 study by Litan and Stangler, Kauffman concludes that two-thirds of new jobs come from firms that are between one and five years old.

It is clear that emerging and developing economies are impacted by similar dynamics, based on evidence from Brazil, Jordan, and other entrepreneur-centric economies (Ali et al, 2010; Castanhar, Dias, and Dias, 2008), in that entrepreneurship stimulus and growth metrics in such places supersedes even the pace of startup activity in the U.S.

Mapped onto the above dynamics, it is also possible to gain insight from studies such as the Startup Genome Report (Marmer, Herrmann, & Berman, 2011) as to how and why start-ups succeed, thereby creating an effective framework to facilitate such success. Projects such as Oasis 500 in Jordan have (with some early success) [End Page 11] begun to create the structured pipeline of incubated businesses that may well ensure quality. Thus the flow of venture capital may accelerate in the region over time and in a sustained fashion.

Of course, success through entrepreneurship does not depend solely on the rate of growth in the volume of start-ups. A core factor in the success of such businesses is access to an open channel of active “angel” and earlystage investors, who operate individually or through dedicated vehicles or seed funds and plug the gap of earlystage capital requirements below the $1-$2 million threshold of conventional venture capital firms. Such an approach may well give entrepreneurs the access to quality strategic insight, possibly to mentoring, and to the reasonable performance reporting requirements of a sophisticated earlystage investor. A joint Harvard-MIT study estimated that angel-funded firms have a greater chance of survival and typically outperform their non-angel-funded counterparts (Kerr, Lerner, and Schoar 2010).

The Ecosystem

Startups cannot exist in a vacuum, nor are they isolated from cultural, political, and structural factors. It is clear that an entrepreneurship ecosystem, typically at the national level to start with, is the defining factor in creating a sustainable entrepreneurship culture and in repeated success. In the words of pioneering jazz musician Dizzy Gillespie, “The professional is the guy who can do it twice.” A large part of that ethos is embedded learning, culture, and the impact of repeated success that benefits the whole ecosystem, fraternity, or community.

The broad factors that are required to make the ecosystem work in a region like MENA are:

  • Entrepreneurship education and relevant academia: One lynchpin is the “anchor” role of an innovation-driven academic institution like MIT. Its role is in entrepreneurship education, incubation, and acting as a long-term bridge for academic insight allied to closely affiliated or even in-house business expertise. Regional universities such as The American University in Cairo and the American University of Beirut also seek to create the content, bridge, and pipeline of future success stories. However, as Bill Aulet, head of the MIT Entrepreneurship Center, points out from his travels to far-flung Romania and other emerging or growth markets, it is perfectly possible to create entrepreneurial vibrancy without a single top-500 university in the vicinity, primarily because the innate...

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