Today, I would like to speak about the MIT experience of teaching Entrepreneurship to university students (both undergraduate and graduate). I believe that MIT has been very successful at promoting entrepreneurship among its students (as well as among its faculty and staff). But contrary to some common assumptions, the MIT experience with entrepreneurship is actually quite recent. And it was built, through trial and error, by a very small but dedicated group of students, faculty and staff. To be perfectly blunt. I believe that all of our success in this area is the result of our students who pushed us…faculty and administrators alike…to change and do very different things in our classroom and even outside of our classrooms. In short, I believe that the MIT experience shows that an entrepreneurial university can indeed be built.

But how? And here is where I think that it is important that we not fall into the trap of thinking that there exists a ´´one best way´´ of promoting entrepreneurship. In other words contrary to some conventional wisdom, I do not believe that the way to become more entrepreneurial is by becoming more like MIT (or even Stanford). Instead, I think that there are a plurality of ways that one can promote entrepreneurship and that the way you, in Mexico do it, must match, be complimentary with, your own unique institutions, practices and culture.

The remainder of my talk seeks to explain some of my thoughts regarding building a more entrepreneurial economy outside of the United States. It is divided into three parts. First, I will describe what many analysts in the US (but not just the US) see as the institutional pre-requisites or ´´formula´´ required to promote and/or support the development of high tech entrepreneurship. Second, I wold like to discuss the limits of this view, of this so-called formula, especially as it applies to non-American contexts. I will argue that notwithstanding the existence of many, very different institutional arrangements in other national settings, many new, high tech entrepreneurial firms are developing and thriving in these other countries. Finally, I would like to discuss some of my ideas on how to ´´teach´´ entrepreneurship at universities, both in the US and elsewhere

2. The Institutional Formula Underlying the New Economy

In much of the academic and journalistic literature, six key institutional or contextual features are portrayed as essential, as prerequisites, for the development and success of high tech entrepreneurship. These include:

1. A stable political and macro-economic environment, one that provides potential investors with confidence in the national economy, one that avoids wide swings in interest rates, currency valuations, etc.

2. A robust legal system that promotes transparency, the protection of investor and creditor rights, that protects the interests of minority shareholders and efficient corporate governance. A streamlined legal system also facilitates the efficient and speedy incorporation (and cessation) of new start-ups. This type of legal system, like the stable macro-economic and political environment, essentially provides potential investors with sufficient confidence to risk their capital, while simultaneously facilitating the easy establishment and shutting down of new enterprises.

3. A well-developed financial system (capital markets, venture capital, etc.) capable of both supplying finance to would-be entrepreneurs but also an exit strategy for initial investors and founders through IPOs. etc, etc. Related to this is the importance of a well-developed and trust-worthy credit system that can facilitate sales over the internet, etc.

4. A labor market composed of an ample supply of technically skilled and managerially capable employees—capable of not only starting new enterprises but also managing them so that they can grow and survive. This labor market should not only have a large pool of skilled labor but also be structured in such a way that facilitates inter-firm mobility for these workers, allowing them to jump from firm to firm over the course of their careers, permitting them, for example, to begin work at a larger, more established enterprise, then go off to start his/her own firm., and then, should that start-up fail (as most do), be able to either return to work for a large enterprise or start yet another firm (but without the stigma of ´´failure´´ being attached to this person).

5. A healthy supply of Source Organizations like universities and large enterprises, perhaps even government agencies, capable of developing skilled people within their structures, capable of generating the new ideas/technology that are later spun-off to form new companies. These source organizations can also act as lead customers to the start-ups, helping them to consolidate their businesses.

6. A consumer market that is large enough and technologically sophisticated enough (i.e., internet penetration) to support these new high tech start-ups.

The above list is by no means complete or comprehensive. It is meant solely to sketch out what are considered by many analysts of the new economy to be the institutional prerequisites underlying the burst of high tech entrepreneurial activity in the United States.

As one can clearly see, this list or formula is basically a stylized description of the US system. In other words, the underlying assumption here is that to succeed in the new economy, other countries need to become more like the US, need to adapt their domestic institutions and practices so that they resemble the US institutions and practices. But what happens in other countries – countries like Singapore, Brazil, Germany, etc. – that do not possess all, or even some, of the above-listed institutional features? It is to this issue that I now turn.

3. The Limits of this Formulaic View

I believe that this list, this formula, is much too narrow. What I find interesting when I look at entrepreneurial activity across the world is how, notwithstanding the absence of most of the above-listed institutional prerequisites in most countries, the current high tech entrepreneurial revolution is sweeping across many of these same countries.

Think of countries as diverse as Israel, Ireland, Argentina and Brazil—four countries that have all witnessed a dramatic growth of new, high-tech start-ups. If one looks closely at these countries, it becomes clear that they do not possess many (if any) of the supposedly essential institutions needed for the new economy. For example, one would not necessarily characterize the macro-environments of Brazil, Argentina and even Israel as paradigms of stability. Labor markets are not especially flexible in most of these countries; nor do they have all that well-developed financial systems.

Yet, notwithstanding the absence of these features, we see some extremely interesting developments in all four of these countries. In an international survey conducted by the Kaufman Institute of entrepreneurial-friendly business environments, Brazil was ranked among the top. In Argentina, notwithstanding (perhaps, because of?) the macro-economic meltdown, thousands of new high tech start-ups are emerging in Buenos Aires and Rosario. Many of these are leaders in financial services and information security related software. In Ireland and Israel, the government has played a very important role in fostering education and training, in developing human capital for the new economy. In Israel the government is also a very important player in developing the VC industry. In Brazil, large corporations like Lojas Americanas, Rede Globo, and Banco Itau , and in Ireland, multinational corporations like Intel, play a key role in promoting high tech start-ups (by acting as source organizations, lead customers, and/or initial investors in these new companies). Almost 200 Israeli firms are listed on Nasdaq and who knows how many Latin American companies are listed in New York and/or headquartered in Miami. International networks of entrepreneurs are linking new ideas with people and financing in countries as diverse as Taiwan, India and Israel. Often these entrepreneurs have studied and worked in various countries and through these experiences, they have acquired the knowledge as well as the personal and professional networks necessary to start and finance new ventures.

The point of the above examples is to illustrate that if we look more closely at countries that have manifest some very interesting developments in high tech entrepreneurship, we see that they were able to achieve these successes notwithstanding that they lacked certain supposedly fundamental institutional attributes. What this closer examination reveals is that these countries, rather than merely copy American institutions, were able to build on and adapt some of their own structures and practices as well as develop some innovative new arrangements, which together helped foster a favorable environment for high tech entrepreneurship. What does this tell us about the current efforts by a variety of countries (or even firms within countries) to develop their own high tech entrepreneurial industries?

I think that it shows us both the limits of the ``one best way´´ view and also the underlying importance of human capital. My reading of events in Ireland, Israel, Bangalore, India, Brazil and pockets of Argentina (Rosario) is that all of these experience share one common feature: the importance of investing in human capital and thus a very important role for local universities. It is the existence of am ample supply of technically skilled and managerially competent people who can compensate for, perhaps even circumvent, whatever institutional deficits may exist in any particular country. This is most clearly visible in Argentina and India but it is true of just about all the other case (including the US) as well.

Some economists have argued that ``supply creates its own demand´´. I believe that a variant of this proposition is that an abundant supply of well-trained, would-be entrepreneurs is crucial for countries hoping to promote the new economy within their borders not simply because it is these people who in the end will create the new enterprises but also because it is they who will put pressure traditional institutions to change, to create more opportunities for and a more hospitable environment for, new entrepreneurial firms. So, if this is key, how to go about creating this supply of would-be entrepreneurs? Here I would like to share some of our own experiences at MIT.

How to Teach Entrepreneurship: Reflections on the MIT Experience.

MIT has taught courses on entrepreneurship for a long time and many professors, staff researchers and graduates of MIT have for years started their own enterprises, often building on research or knowledge that they had acquired while at MIT. But the real burst of activity surrounding entrepreneurship at MIT is quite recent, something that has taken place in the last 5 or so years. In the past, entreprenurship classes were of two types: either ´´ how to´´ classes that focused on the mechanics of writing business plans or classes taught by successful (often retired) entrepreneurs who told stories of their own experiences. In short, these courses were not very rigorous.

In recent years, we have revamped the course offerings in this area and promoted two types of courses. The first type are discipline based courses that focus on the phenomenon of entrepreneurship. In other words, we now offer courses on entrepreneurial finance, human resource management, marketing, etc. To teach these courses, we have recruited and promoted professors with a strong reputation in their disciplines, who conduct research in this area, and who are interested in the phenomenon. Five years ago we had no tenured or tenure track professors in entrepreneurship. Today we have 10. Five years ago, we had only a few of the how to and great man telling stories classes. Today we have over 20 course offerings which actually teach would-be entrepreneurs some theoretical and analytical skills.

In addition to these more academic courses, we also have practical courses: courses that provide hands-on experience for the students to actually work in a new start-up and learn by doing. The course I teach, Global Entrepreneurship Lab places students in start-up companies throughout the world (this year, I have students working in Germany, Hong Kong, Argentina, Brazil, Uruguay, Cost Rica, Japan, Australia, India and Norway). The students do a full-time internship in the firm and then come back to campus where we use their experiences as case studies and teach from their experiences. We offer a local Entrepreneurship Laboratory course as well. Both courses are extremely popular among the students. Together, these more theoretical and more hands-on courses provide our students with some good background that helps them become entrepreneurs.

Beyond the courses, we also have several student-dominated and/or run activities…like the 50K business plan competition, which takes place all year, and which teaches students how to write business plans, how to raise early stage capital, and how to translate some of their own ideas into practical businesses. In its 9 year history, the MIT 50K competition has led to the creation of 35 firms, 700 jobs, $250 million in vventure captal investment. The top ten companies that have emerged from this competition have a market value of $16 billion. Most students participating in the 50K are engineering students, who often build teams with management students and thus combine technical and managerial skills. The students now hold annual international conferences on ´´How to Run a 50K Business Plan Competition´´, in which they teach students from other countries how to replicate this activity in their own universities. This March, the conference will be held in Bologna. The students also organize annual Venture Capital conferences, Entrepreneurship In Developing Countries conferences, etc. as a way of learning more about opportunities in these fields.

In short, there has been a major culture shift at MIT among the students and a major shift in our curriculum in this area. Notwithstanding the current economic recession, classes continue to be filled (my class has over 120 students in it this term) and hundreds of students continue to develop business plans to launch their own companies. I believe that this culture shift is here to stay. At least I hope so, since it is a lot more fun to teach these students.

To conclude, I believe that entrepreneurship can be taught and that the new economy can be built in many very different economies. My advice to my academic colleagues is to listen more attentively to your students and experiment with some of this more applied, experiential learning experiences. Thank you.