2013 / 5月
interview by Eric Lin /tr. by Phil Newell
In recent years countries around the world have been actively encouraging entrepreneurship and the growth of small and medium-sized enterprises (SMEs) as a means to stabilize domestic economies and create a solid foundation that will reduce the impact of crises.
The European Union, wrapped up in the euro crisis, began promoting the idea of “Think Small First” back in 2008 to encourage entrepreneurship and coordinate financing. They also launched university programs teaching “the entrepreneurial spirit.” In 2010 the EU went a step further, raising entrepreneurship to the strategic level in the “Europe 2020” growth strategy and laying out a top-down blueprint and framework for development, part of which is the concept of “Thinking Big for Small Businesses.”
Here in Taiwan, the government established an agency for small businesses at the central government level as far back as 1966, nearly half a century ago. Today’s Small and Medium Enterprise Administration (SMEA), part of the Ministry of Economic Affairs, has been around 31 years, and has enormous practical front-line experience.
In this issue of Taiwan Panorama we have an exclusive interview with Johnny Yeh, director-general of the SMEA, to talk about the trends and challenges of the current wave of entrepreneurship in Taiwan.
Q: In comparison to the past, when the manufacturing sector was the mainstream of new business creation, what is different about the current phase of entrepreneurship? What new challenges does it face?
A: Industry in Taiwan is tightly interlinked with the rest of the world. From agriculture and traditional manufacturing industry, to the service sector that emerged 10 years ago, the nature of entrepreneurship has undergone a major transformation. The new wave of entrepreneurs are defined by their micro size, emphasis on knowledge and information, and local character. They are relatively small in scale, and increasingly understand how to use all manner of government and local cultural resources. Their comparative advantage lies in innovative models and their ability to integrate knowledge and information.
However, the low barriers to entry have brought two completely new challenges.
First of all, low capital requirements mean that market competition is fierce. In the past, entrepreneurship in the manufacturing sector required an initial investment of a large amount of capital, after which the three aspects of product technology, price, and marketing would have to be coordinated. Today the main entrepreneurial form is use of the Internet. While this means capital requirements are low, the degree of novelty or creativity does not entirely equate to effective profit making. Also, having everything online makes it much easier for consumers to compare prices, and if products are not sufficiently unique, the result is quite often blood in the water—the “red ocean” of cutthroat competition.
Secondly, the new entrepreneurs in Taiwan are in the midst of creating a completely novel industrial form. However, whether we are talking about cultural and creative businesses or Internet businesses, all are in the situation of having inadequate finances and professional management. Venture capital companies in Taiwan, having gone through the bursting of the dot-com bubble in 2000, are still relatively conservative about investing their money.
Q: In recent years the government has been promoting startup incubation and has been working to help people with business ideas to find investors. How have the results been so far?
A: The SMEA has constructed a comprehensive cooperative incubation system linking industry and academia. Moreover, in 2012 we launched the “Start-Up Taiwan!” program, built around an axis of “promoting excellence through selective incubation.” The program has three core strategies: (a) inspiring creative ideas and strengthening entrepreneurial dynamism, (b) selectively incubating novel characteristics and speeding up growth of new businesses, and (c) prioritizing support networks for new enterprises. The goal is to help entrepreneurs to screen out the best creative ideas, after which veteran businesspeople will be there at their side to help them on the road to growth.
We are also actively assisting entrepreneurs to meet with investors, which will allow venture capital companies, angel investors, and private hedge funds to see who these people are and invest in their ideas.
The overall environment for the future looks quite positive.
First, the number of new SME startups in Taiwan rose continually for three years starting in 2009, reaching 99,584 in 2011. In addition, the proportion of SMEs staying in business for 10 years or more has reached 47%.
Secondly, there has been an increase of over 20,000 firms per year in terms of net increase in newly established firms (the number of new firms founded in the year minus the number of companies that have disbanded, withdrawn their registration, or suspended or terminated their operations).
Finally, colleges and universities have begun to put considerable emphasis on entrepreneurial education. There has also been the rise of e-commerce. Moreover, with relaxation of rules by the Financial Supervisory Commission on credit-card services, it has become possible for small businesses to offer consumers the convenience of paying by credit card. There have been improvements in our systems for policy, education, financial flows, and consumer protection. As a result, the overall environment provides grounds for extraordinary optimism.