The Regional Entrepreneurship Acceleration Program carried out in February at the Massachusetts Institute of Technology (MIT) hosted discussions on the role of local entrepreneurship and innovation ecosystem in the birth of companies that change the world [1].

One of the United States’ universities, MIT was established in 1861 in Boston. Back then the city was among the important industrial centers of the country. MIT marked a departure from Europe’s polytechnic model. Its aim was to raise a skilled labor force to feed into the region’s industry. Its logo, depicting a worker holding a sledgehammer and a scholar holding a book, as well as its motto “Mens et manus,“ meaning “Mind and Hand,” illustrate the institute’s mission [2].

The overall turnover of the companies established by MIT alumni who are still alive was $1.8 trillion in 2006. 90 percent of the turnover came from companies that commercialized a technological innovation [3]. This wealth, which is three times Turkey’s GDP in the same year, could not have come about without the innovation and entrepreneurship ecosystem of the Institute and its surrounding region. People at MIT develop and commercialize state of art technologies that push the boundaries of our imagination. The developers also have the chance to become entrepreneurs themselves. This way, numerous startup companies, which quickly grow to gigantic proportions, are incorporated.

If we take the number of newly established companies as the measure of innovative capacity, Turkey performs quite well. Between 1992 and 2002, its population grew by 15 percent while the number of businesses grew by 73 percent to 1 million 860 thousand [4]. Nevertheless, Turkey’s entrepreneurs generally choose to operate in established industries and avoid uncharted territory. They are too eager minimize the possibility of failure.

Tim Harford, the author of The Undercover Economist, argues that success is the product of earlier failures. He offers three key principles for failure that will bring eventual success [5].

• The first one is not to hesitate of failure: We are highly hesitant since we still have a fresh memory of the difficulties that many entrepreneurs faced in the 2001 crisis. And for those who did not experience those times first hand, relatives fill the gap. They are usually dissuasive, let alone supportive.
• The second one is to make sure that you can survive failure. Generally in Turkey, when an entrepreneur bankrupts, so does his life. Venture capital and private equity opportunities are extremely limited here. This makes it impossible to find a partner to divide the risk for a high-risk project with great potential for returns.
• The third is to spot failure and fix it early. Unfortunately, Turkey’s entrepreneurs do not have the opportunity. The dearth of incubation centers and mentoring in the country confines entrepreneurs to learning by doing. Also, it is difficult to learn about the experience of entrepreneurs who walked the same path before.

The entrepreneurship ecosystem of Turkey is in need of restructuring. We need to make the stories of successful entrepreneurs visible, enhance venture capital and private equity opportunities and open up incubation centers. This more hospitable environment would ease entrepreneurs’ concerns about failure. Nevertheless, it is not possible to have startup giants just by strengthening the entrepreneurship infrastructure.

Parallel to these measures, Turkey needs to advance its innovation capacity. Measures are needed in an array of fields from enhancing the protection of intellectual property rights to encouraging scholars for establishing businesses, guiding academic research and TÜBİTAK grants to commercial areas and bringing together scientists with researchers from developed countries in joint projects.

If Turkey coordinates its steps in both of the above pillars, it can have companies that change the world. Making progress in one pillar and getting stuck in the other merely extends mediocrity.

[1] The Regional Entrepreneurship Acceleration Program organized by the MIT Enterprise Forum (MIT-EF) was carried out at MIT on 1-3 February. MIT-EF experts briefed the participants on the key features of the innovative entrepreneurship ecosystem of Cambridge. The workshop was attended by scholars from a number of countries. Participants were Ant Bozkaya of MIT Sloan Business School, Dilek Çetindamar of Sabancı University, Rector of Özyeğin University Erhan Erkut, MIT-EF Turkey Director Selçuk Kiper and  Ozan Acar of TEPAV.

[2]

[3] Roberts, Edwards and Eesley, Charles E. Entrepreneurial Impact: The Role of MIT – An Updated Report, Now Publisher Inc., 2011

[4] TUİK Population Statistics and 1992-2002 Business Count Statistics

[5] You can watch the video on Tim Harford’s failure principles at http://bit.ly/mO2Ubh

*Ozan Acar, TEPAV Economic Policy Analyst, http://www.tepav.org.tr/en/ekibimiz/s/1212/Ozan+Acar