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Education level (MBA - an area of concern) and entrepreneurial success

By Paul Smith - Regenesys Entrepreneurship Lecturer

Much confusion exists around the relationship between education level and entrepreneurial success. Contrary to popular belief, research has shown that it is unusual for university dropouts to start businesses that perform better than businesses founded by graduates and postgraduates.

Robert Fairlie, a professor of economics at the University of California, Santa Cruz, has done some research that shows that entrepreneurs with postgraduate degrees started businesses that had 75% higher sales than those of university dropouts; entrepreneurs with degrees started businesses that, on average, had sales that were 25% higher than new ventures founded by dropouts.

Other studies, looking at the highest performing entrepreneurs in a particular economy, have shown that most of the best entrepreneurs have a higher level of education than that of their peers. For example; Amar Bhide, a Harvard University economist, did a study on hundreds of America’s most successful entrepreneurs and found that 89% of them had some form of tertiary education. Furthermore, there was an over-representation of entrepreneurs with MBA degrees with 35% of the group having an MBA or another form of postgraduate qualification. This means that entrepreneurs with MBA degrees are six times more likely to become high-growth entrepreneurs than entrepreneurs with only a degree.

SA’s most successful entrepreneurs

My own research has revealed a similar situation in South Africa. Analysis of the book, South Africa’s Greatest Entrepreneurs, by Moka Makura shows that 82% of successful entrepreneurs have graduate degrees and 50% of those entrepreneurs have a postgraduate degree. Many of these postgraduate degrees were MBAs. For example, Koos Bekker (the founder of M-Net) has an MBA from Columbia University, Gary Morolo (the chairman of Datacentrix, one of south Africa’s leading listed IT companies, and co-founder of AKA Capital) aquired an MBA from Michigan State University. A few other South African entrepreneurs with post graduate degrees include Sol Kerzner of Southern Sun, Alan Knott Craig of Vodacom, Mark Lamberti of Massmart, Adrian Gore of Discovery holdings and Whitey Bosson of Shoprite holdings.

Education vs. entrepreneurial spirit

Another common idea I have come across in discussing entrepreneurship with students and business people is that education may stifle an entrepreneur’s creative spirit. Contrary to this belief, much research has shown that individuals with a higher level of education are actually more likely to become entrepreneurs. In his book The Illusions of Entrepreneurship, Scott Shane, who won the equivalent of the Nobel Prize for entrepreneurship research, showed that individuals with a Grade 12 education are more likely to become entrepreneurs than individuals with only a Grade 5 education. Individuals with a master’s degree are more likely to become entrepreneurs than individuals with a bachelor’s degree and individuals with a PhD are more likely to become entrepreneurs than individuals with a master’s degree. In short, the higher ones education level the more likely one is to become an entrepreneur.

As we can see, the evidence overwhelmingly shows that a higher level of education increases the chance of an individual becoming an entrepreneur. Furthermore, education increases the chances that an entrepreneur will succeed.

This is not only important information for aspiring entrepreneurs when planning their careers, but it is also important information for governments when making policy decisions. If individuals with higher levels of education, specifically MBAs, are more likely to start businesses that created employment, generate large tax revenues and improve South Africa’s trade balance it would be good public policy for government to encourage MBA graduates to start businesses.

High-growth entrepreneurs in South Africa

As a result of these findings, Regenesys is seeking to answer the research question: What incentives would be needed to encourage more MBA students to become entrepreneurs? At the same time, we want to help to our MBA students to better understand what incentives would motivate you to become an entrepreneur.

My personal experience has brought me into contact with many people who believe that education may not be the best path to achieving entrepreneurial success. Their ideas have usually been shaped by dropouts such as Steve Jobs of Apple, Bill Gates of Microsoft and Mark Zuckerberg of Facebook. However, many people tend to forget that Zuckerberg and Gates dropped out of Harvard University (one of the world’s top academic institutions) and Steve Jobs had dropped out of Reed College (a leading American art college).

Borrowed from 
http://www.smesouthafrica.co.za/index.php/resources/sme-resources/managing-business/2331?goback=%2Egde_3719363_member_116155416

Starting your own business

Don’t Get Spooked by Starting Your Own Business 

by MyGenius on November 1, 2011 at 2:41pm

It’s that time of year when one holiday seems to follow right on the heels of another.

While ghouls and goblins should frighten you on Halloween, what about starting your own business? Fear (and more specifically, the fear of failure) is one of the strongest forces preventing budding entrepreneurs from reaching their potential. It’s fear that has stopped countless great businesses before they’ve even begun. A few simple “tricks” can help you overcome your fear of starting or growing a business:

1. Forget about perfection: To often potential entrepreneurs wait until every little detail of their business is perfected before launching. But guess what? Perfection is unattainable. So don’t wait, just go for it! So what if you’re wrong? So what if there are little glitches here and there? Just go with what you have, and build on what you learn. If you wait until your blog, product, website, etc. is perfect, you’ll never launch anything at all.

2. Really think about your worst-case scenario – is it as scary as you think? All too often, we underestimate our ability to recover from a worst-case scenario. If you start a business and fall flat on your face, how long would it take you to recover? How hard would it be to find another job or start another business venture? Would you be down for a few months, a few years? Could you handle that risk? And what’s that risk compared to a lifetime of never chasing your dream?

Of course, you, along with your family, best know your situation and your ability to assume risk. But for many, the monster hiding under the bed is not as bad as you envisioned.

3. Take steps to minimize the downside of failure: No matter your personal situation, you should always manage risk intelligently. Overcoming fear doesn’t necessarily mean you should risk losing it all. You can make the necessary preparations to minimize the downside of failure. For example, you can structure your new business so as to minimize your personal liability. You can build up an emergency fund. Or you could begin the early stages of your business while you still have a “day job.”

4. Be honest about your financing: It’s no secret that small business lending isn’t in such great shape right now. We are seeing some venture capital coming back, but for the average small business, traditional funding from banks is still tight. However, it’s more than possible to start a business with just a small investment.

5. Think about what’s truly scary: Yes, starting a business can be a scary endeavor, particularly when the news paints such a troubling economic picture. But think of it this way: Never taking a chance on your dreams can be scariest outcome of all.

This fall is the perfect time to start putting a plan in motion to launch a business for the New Year. You’ve got two months to create your business plan, assemble whatever resources you need, and research your legal and tax obligations for starting a business.

So if you’ve been considering starting a business, take a deep breath and jump right in! Set a deadline with yourself and do something that will force you into action. With every action you take, you’ll gain confidence and momentum. And who knows where this exciting entrepreneurial path will take you by next Halloween!

Source: Small Business Trends