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Issue 289

November 3 9, 2010

ROMANIA AND THE NEED FOR A NEW ENTREPRENEURIAL CULTURE

By Ioana Benjamin-Schonberger

This advertorial is sponsored by the Center for International Private Enterprise (CIPE)
Key points 1. Too few business ventures tackle deep social issues and poverty that affect large parts of the country. 2. Youth have the greatest potential to bridge gaps between businesses and the poor because they are more connected, idealistic, and have an actionoriented mindset geared for change. 3. Romania needs communication between urban middle class youth and those of poorer semi-urban communities. By providing new spacesboth digital and physicalfor dialogue and interaction, youth from different backgrounds and socioeconomic classes could share ideas and support the establishment of joint social enterprises. Starting up a business in Romania is no longer an unreachable quest that can only be pursued by an elite of bold and resourceful individuals. On the contrary, self-employment is seen as the ideal way of earning a living, as opposed to being employed in established companies. Even though the business environment is far from being completely stable and accommodating, those who wish to start up a company do not lack access to information, financial resources, or management knowledge.

However, the question that drives my curiosity is how many Romanian start-up owners are actually entrepreneurs. In my opinion, the difference between these two types of agents is fundamental. While start-up owners try to make the best out of a transient business opportunity simply for the sake of profits, entrepreneurs try to create authentic and sustainable added value, by introducing something new or something that has a positive impact on society. In fact, I consider the relatively new term social entrepreneurship to be more or less redundant, since all truly entrepreneurial activities should be inherently social. Since I am an aspiring entrepreneur myself, I have been evaluating for some time now the social business opportunities available in my country, and the threats that come along with them. This essay expresses my concerns and the challenges I identified in Romania, but also my enthusiasm for the potential in the country, out of which a new vision for our future can emerge. The Challenge and the Need for a New Entrepreneurial Culture If we accept that all genuine entrepreneurship is social, I can say that I am skeptical about the entrepreneurial nature of start-ups in my country. One of the reasons for my doubts is that the motivations of the people who start new businesses are usually highly individualistic and focused on self-fulfillment. According to a study conducted by the Centre for Entrepreneurship and Business Research, 1 Romanians main motivations for starting a business are the improvement of their standard of living, the presence of an individual personal plan, and the attainment of higher social status and respect. As many other Eastern European counterparts, since the early 1990s we have been striving to emulate the American way of doing business, which combined with our Balkan influences and our former communist heritage sometimes resulted in a ruthless and opportunistic business culture. While all this is not a bad thing in itself, it clashes with the spirit of community and social responsibility. Another reason why I think Romanian entrepreneurship finds it hard to be social is that social issues affecting the country seem to be strongly separated from the business environment. To illustrate this, let me give an overview of poverty in Romania. In the past ten years, the country has witnessed sustained economic growth, which caused a substantial decline in the absolute poverty rate from 35.9% in 2000 to 13.8% in 20062 and 5.7% in 20083. In spite of this good news, poverty is still severely concentrated in certain geographical areas and social groups. For example, in 2006 more than 70% of poor Romanians were living in rural areas, with the poorest region of Romania, the North-East, over four times poorer than the capital city of Bucharest. 4 These figures have not significantly changed since then. Yet, most of the economic activity is concentrated in the urban areas of the centre and west, as well as in the capital city. While regional disparities are common all across developing countries, it is interesting to note that the line between Romanias businessmen and its poor can be so accurately drawn on the map, thus highlighting a geographic gap. Furthermore, a recent World Bank report on poverty in Romania finds that poor children are channeled into low-return education paths, while wealthier children tend to attend

general secondary and tertiary education institutions.5 Consequently, this will have implications for social mobility, contributing to the persistence of poverty across generations. In other words, the people who are better off are separated from the poor not only geographically, but also in time, thus emphasizing a generation gap. Last but not least, I would argue that there is a psychological gap between the poor and the rest of the Romanians, a phenomenon which I encountered in my daily interactions, both in professional environments and personal settings. The example that best describes my point of view is rather trivial but highly representative. The Romanian winner of the European Young Journalist Award in 2008 wrote a powerful and objective article about the issues affecting the poor in a certain region of the country. Foreign audiences greatly appreciated her contribution and several websites published her work. 6 However, when reading her article online, I was surprised to see a vast amount of comments from other Romanians who were highly dissatisfied with the fact that the country was being depicted as poor and vulnerable. The readers were refusing to acknowledge the existence of impoverished groups and were eager to talk only about the countrys development and strengths. Looking at these three gaps, I would conclude that the potential entrepreneurs of the country simply do not see the less fortunate, as the developed part of Romania appears to be suffering from a sort of social myopia. Since poverty is closely related to other essential development issues such as education, health, or access to technology, the gaps mark a strong divide between the agents that produce growth and those who need to receive it, or better said who need to become an active part of it. In conclusion, the puzzling matter which I notice in my country is that although we have a great number of talented people with reasonable access to resources and an enormous potential to provoke radical change, there is a social wall that blocks genuine entrepreneurship. Usually, when saying that a country needs to develop an entrepreneurial culture, one refers to lowering risk-adversity, ensuring the support of the state in regulating and promoting new businesses, and giving individuals incentives to take up the path of self-employment. However, when I say that Romania needs to develop an entrepreneurial culture, I refer to redefining new businesses to serve the purpose of social change parallel to profits. I am not saying that all entrepreneurial activities should solve the problems affecting Romania from one day to another, but they should be much more responsible and whenever possible, they should strive to have an impact on society for the better. Thus, the purpose of this essay is to call out for new entrepreneurs and a new entrepreneurial culture. The Role of Youth in the New Entrepreneurial Culture Who else could lead the change towards a new entrepreneurial culture if not Romanias youth? A study conducted by the St. Gallen University in Switzerland on the attitudes and opinions of young professionals from all over the world found that Asian and Western European youths strongly favor employment in a large corporation, while Americans and Eastern Europeans aspire to self-employment. 7 Indeed, I can see a strong

entrepreneurial spirit developing amongst Romanian youths, and a proactive curiosity towards finding ways to successfully set-up a business. Perhaps more than a fifth of my former colleagues from the Bucharest University of Economics were seriously considering starting up a small business. The fact that young individuals represent the essential agents of change and that they should participate as much as possible in all public and private enterprises is a familiar adage. But in bridging the gaps between businesses and the poor, my generation - those who were born shortly before or during the Fall of the Berlin Wall and who are now graduating from university - definitely plays the central role. First of all, we grew up as Romania grew up. We witnessed all the transition stages, having the opportunity to learn from dramatic mistakes or successes that are not common in stable economies. We now dispose of transparent information but we have the upper hand of not taking development for granted, which should give us a thorough understanding of our environment. Second, young people form strong communities across the country. Youth organizations are widespread, powerful agents in Romania. Their purpose is to connect talented students with similar interests and make them work together on meaningful projects. Students not only get used to being team players and sharing ideas, but their projects are directed at other students: they organize personal and professional development events, facilitate debates and other forms of dialogue, and design exciting competitions to unleash all creative potential. I have been part of such a student association myself, and I can say that the quality of the learning experience was well beyond that of sitting through courses in university. The major advantage is that youth get connected and then make the most of opportunities they come across. Third, just like all young people around the globe, we are also deeply connected through social media. It is easier than ever to stay informed by sharing interesting articles and critical points of view. Without overly exaggerating, we would be able to start a revolution simply via Twitter. Being part of such interlinked networks, we can benefit from awareness and education initiatives, and we can readily organize ourselves for action. Last but not least, I feel that a strong momentum is developing for us. On one hand, the economic downfall brought back into the public eye social accountability and problems such as unemployment and poverty. University graduates find it harder and harder to get a suitable job in a private company or in the public sector. On the other hand, most young Romanians have completely lost faith in the state and see no other option than to take action themselves. As a consequence, I think now is the perfect time to give individuals purpose and incentives to make a difference in the country. In conclusion, youth have the possibility to bridge the gaps between businesses and the poor because they have a subtle understanding of the present times, are deeply connected,

are strongly oriented towards action, and have the right mindset for change. The potential exists; it is just a matter of guiding the right people on the right path. The yellow brick road If we were to map out a plan for action, a primary goal should concern increasing awareness on the disparities between Romanias developed youth and its lagging youth. At the same time, we need to facilitate dialogue by creating points of contact between the two groups. Once they start a conversation, the challenge is to make them heard by the rest of the country and by all other parties that could be stakeholders in the process of building the new entrepreneurial culture. Considering the alarming fact that almost half of the countrys poor are less than 24 years old,8 encouraging communication between different social categories becomes even more imperative. The dialogue could easily be started in various ways. One example is to provide youth with physical spaces where they could meet each other, discuss, and debate. Imagine a group of high-potential students from different regions and backgrounds going from town to town or from village to village, on a sort of a social business tour, organizing seminars with the purpose of getting in touch with impoverished communities and especially young representatives of these communities. On one hand, this would help them learn more about specific problems and inspire them to envision fresh solutions, and on the other hand, it might result in discovering talent amongst their disadvantaged counterparts. Young people in poor communities mostly fail to receive high-level education, but that does not mean they cannot bring a valuable input to a social business. They might prove to have relevant skills, talents, or knowledge. For instance, if an entrepreneur would try to set up a business that sells the products of poor farmers to restaurant chains in large cities, on one end he would need a person that understands the HORECA industry, and on the other end he would need someone with a strong connection to poor farmer communities and grassroots knowledge in agriculture. Giving this role to an individual who is actually part of a poor community and has already worked as a farmer would make most sense in this case, not to mention that it would offer that individual the possibility to complete his education. In the same line of reasoning, another possible initiative would be to have special grants for new businesses developed in cooperation between young people that come from medium or high-income families, and young people that come from low-income families. Examples continue with online tools, some as simple as a website that would explain basic management principles and the process of setting up a small business, and at the same time, the importance of acting responsibly towards the community. This could directly allow low-income young people to set up a small business which would have a social impact by employing other impoverished individuals from the community. The website could then serve networking purposes, connecting small-scale entrepreneurs from all over the country and allowing all its members to post questions and share advice.

However, such a dialogue would not be enough. If youth is the bridge between poverty and development, then it needs at least three strong pillars: financial support, regulatory support, and knowledge support. Young entrepreneurs need investors to believe in their ideas and state regulation to promote or at least not hinder their initiatives. They need universities to tailor programs or courses that offer hands-on knowledge on social, responsible businesses. They also need mentorship and insights from the market expertise of established businesses and the grassroots development work of NGOs. Ideally, after they receive all this support, they need the media to communicate their achievements to the entire country. Each one of these stakeholders plays an essential role by itself, not to mention the synergies that their collaboration could have. Conclusion The purpose of this essay has been to signal a multifaceted problem and illustrate various avenues that could be pursued. Further analysis and planning is of course necessary to determine what option is the most opportune to follow, what are the costs associated with it, and who are key players involved. However, we must first acknowledge that the problem exists and that we can only solve it together. References Lafuente, E.M., Driga O. (2007, First Report on Entrepreneurial Activities in Romania, Centre for Entrepreneurship and Business Research; 2 World Bank - Human Development Sector Unit Europe and Central Asia Region (2007), Romania Poverty Monitoring Analytical and Advisory Assistance Program First Phase Report;
3 1

http://www.hotnews.ro/stiri-esential-5721611-raport-unicef-numarul-saracilor-creste2009-370-000-ajungand-1-59-milioane.htm
4

World Bank - Human Development Sector Unit Europe and Central Asia Region (2007), Romania Poverty Monitoring Analytical and Advisory Assistance Program First Phase Report; World Bank - Human Development Sector Unit Europe and Central Asia Region (2008), Romania Poverty Monitoring Analytical and Advisory Assistance Program. Labor Market Vulnerabilities

The article can be read at http://www.cafebabel.co.uk/article/26205/romania-sex-tradeenlargement-maraseti-mausoleum.html

7

St. Gallen Leaders of Tomorrow Global Perspectives Barometer 2010 - http://www.stgallensymposium.org/en/Leaders-of-Tomorrow/Global-Perspectives-Barometer.aspx

8

Stanculescu, M.S., Marin, M. (2009), Rapid Assessment of the social and poverty impacts of the economic crisis in Romania, http://www.unicef.org/romania/resources.html

The author, Ioana, has a background in business administration and marketing, holding a Bachelors degree from the Bucharest University of Economics and currently pursuing MSc in Strategic Marketing at Maastricht University, Netherlands. Having a strong interest in development issues and avid entrepreneurial aspirations, she is now working as an intern at CDI Brazil, a wellknown NGO in South America that strives to empower low-income communities through technology and information. Her previous experience includes working as a brand consultant assistant in her home-country, Romania, and conducting various research projects in the Benelux area.

This essay was a winner in the Center for International Private Enterprise's (CIPE) 2010 International Youth Essay Contest. For more information on the essay contest and to read the rest of the winning essays please visit www.cipe.org/essay 2010 The African Executive