Tuesday, March 2, 2021

Discover why Colombia is the country with most entrepreneurs in the world — A case study of antioquia

Medellin by night
Medellin by night

Paper initially published on Researchgate: https://goo.gl/UkWa2e

Antioquia has always been an industrial center, with a favorable climate, plenty of natural resources and a particular culture for entrepreneurship. This paper is aiming to analyse this particular propensity for entrepreneurship. The research is based on the concepts of entrepreneurial economic performance and regional characteristics between the largest industrial centers of Colombia.

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The information collected comes from personal interviews with local entrepreneurs, online opinion survey and literature review. The results are implying an historical industrialization background that would have enabled the institutional presence promoting entrepreneurship but also a very particular communitarian aspect that would encourage entrepreneurship inside of the community and a social pressure for creating its own business.

Medellin, once known for its drugs cartel, has been named “most innovative city” of the world in 2013 — Urban Land Institute

The new face of Medellin is now opening to the world. However something seems to be strongly attached to the local culture since several centuries. The purpose of this article is to analyze the differences in terms of entrepreneurship between Colombian regions in order to validate whether Antioquia has a higher propensity to entrepreneurship in comparison to other regions of Colombia.

Colombia was the country with the most entrepreneurs in the world in 2013 — GEM

Historical Background

It can be said that paisa culture is unique in Colombia. To understand these differences it is essential to be aware of the historical background.

The first inhabitants of Antioquia were migrants from Europe especially Jewish and Basques. An American historian, Everett Hagen, checked the family names in Medellin in 1957 and found that 15% of the surnames were Basques. Then he also found that employers in the percentage of surnames was up to 25%. This allows to conclude that the Basque inheritance had been crucial to explain the industrial development of Antioquia. Concerning the Jewish’s, many informal theories exist about their disproportional ability of being successful. For example, Jewish people are representing 2% of Americans population but 25% of Nobel prizes. First of all, it is due to the chameleon theory. Their nomadic past promotes the transfer of ideas and skills and thus a better market efficiency. Besides, the family pressure for being successful is especially strong. This cultural aspect is also reflected in the whole community and they use to show a lot more solidarity inside it. Finally, Jewish humor is much appreciated and this helps in social relations too.The characteristics of those two cultures are the origin of what Antioquia is today. People that first came here have taken advantages of the trades during colonial time, attracted by the mining industry.

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Then the Paisa’s started to trade with others parts of the continent such as the US, what represented an important opportunity for entrepreneurs. It was the beginning of Antioquia’s industrialization. Later the agricultural sector contributed to the development of the region thanks to the coffee cultivation’s. In the beginning of the 20th century, other type of industry appeared such as foods products or tobacco. The crisis of 1929 harmed a lot the economy but the exports helped to recover. The Second World War also had some positive impacts on paisa economy because of all the raw materials exportation needed for the war.

The more recent history of the region and especially of Medellin has been marked by years of violence and insecurity due to drug trafficking. However, nowadays Medellin is changing and it is the second industrial centre of the country. Some of the biggest companies like Bancolombia or Nutresa are part of the Business Group of Antioquia known as a conglomerate of companies. This one probably achieved the greatest success in the globalization process in Colombia.

The institutions have played a big role in the economic development of the industries setting a structure to help business expansion. The strategic vision of the Chamber of Commerce and Industry made possible the development of Antioquia through politics of cooperation’s between the public and private sector. New investments were also made in social and physical infrastructure to improve global living conditions.

The structures put in place were about local economy, small and medium companies, international promotion of the city and improvement of the employment. Today, the entrepreneurial density is higher in Antioquia than in Colombia and 99% of the companies are SME’s.

Cultural Characteristics

Plaza de las luces — Medellin
Plaza de las luces — Medellin

Antioquia has developed through the years a unique culture as geographical characteristics have made harder communication and transport creating isolation that affected ways of thinking or behaving. A cultural aspect that is also reflected in the way of doing business.

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As a measurement of paisa culture in general the context in which entrepreneurship is evolving has to be taken into account. The indicators chosen for our study were the level of education, the standard of living, the public policies, the institutional context, the geographical factors and finally the values of the paisa people.

Economic performance

The department of Antioquia has been recently positioned as the second place in the general ranking of the Indice Departamental de Competitividad (IDC). Indeed it has good performances in terms of infrastructure, environment, market size, health, innovation and entrepreneurial dynamic.

In order to confirm this trend, multiple factors were analyzed in our study, namely business density, new entrepreneurial activities, business mortality rate and new activities compared to GDP per capita.

Favela in Medellin
Favela in Medellin

Conclusion

The historical background demonstrates fairly why Antioquia is one of the industrial centers of Colombia. However, none of the formal education or standard of living reveals any evidence of correlation between a specific indicator and the entrepreneurial spirit in the region. Concerning entrepreneurial economic performance, it can be said firstly that the business density is particularly high in Medellin. Secondly, the paisa is quite inclined to undertake new ventures but is short-termist and perform badly to sustain it on average. Thirdly, the region is performing below the average in terms of entrepreneurial value creation.

In a nutshell, Antioquia is indeed more inclined to entrepreneurship than most of the regions of Colombia. However, the region is not leading in terms of entrepreneurial activities and performances. This is mostly a cultural aspect coming from an early industrialization and a protective communitarian spirit due to favorable geographical factors and migration flows.

By de Schutter Olivier

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