Promoting the Capabilities of Entrepreneurs Beyond the operational environment, various factors are important for entrepreneurial experimentation. Figure 8.2 and the discussion that follows explore two main sets of factors.
Entrepreneurs’ Personality Traits and Regional Culture Fundamentally, regions need people who can experiment with potential industries, evaluate the likely risks and returns, and successfully implement projects. Certain psychological, personality, or cultural traits of individual entrepreneurs affect their abilities to carry out these tasks. Three broad entrepreneurial characteristics have been found in the business and economics literature to be especially important: risk attitude and patience; entrepreneurial orientation (drive or grit, including aggressiveness and proactivity, autonomy, and innovativeness); and the ability to identify opportunities (see Grover, Medvedev, and Olafsen [2018] for a more detailed exposition). Regional differences in the distribution of these characteristics are frequently asserted—the Gujaratis in India or the Paisas (Antioqueños) in Colombia, for example—and closely associated with the relative prosperity of the region. Because the roots of such differences are often not well understood, the policy levers are still being explored.5
Human Capital In addition, entrepreneurs require an array of human capital, ranging from general analytic and communication skills to sophisticated entrepreneurial and technical training. Basic Human Capital To recognize a new technological opportunity and make it a business opportunity requires the ability to collect and interpret information; organize the project logistically; analyze the technical feasibility; form the long-term risk-return profile of the project; and compare it with other alternatives; as well as to navigate property rights, financial markets, and government regulation. Various other forms of human capital are explored next. In each case, a variety of market failures may impinge, reducing the socially optimal amount and depressing entrepreneurship. Managerial Capabilities Sophisticated entrepreneurship will typically require general analytical skills at a high level. An additional skill required to arbitrage technological opportunities is the ability to make decisions that are neither routine nor repetitive. This is as central to entrepreneurs’ success as is their efficiency in acquiring information and in formulating and
202
Place, Productivity, and Prosperity
