Capitalist economies are not the only ones encouraging entrepreneurs. Managed economies such as China are beginning to promote and facilitate entrepreneurship. They found that entrepreneurial activities, once considered a threat to the established system, are essential to maintaining economic competitiveness and long-term success. In the early 1990s, the United States negotiated with Mexico the North American Free Trade Agreement (NAFTA), an agreement that reduced tariffs, import quotas and non-tariff barriers between the United States, Mexico and Canada. H. Ross Perot, a 1992 U.S. presidential candidate, said in leading campaign arguments that if the U.S. expanded trade with Mexico, there would be a „huge look” as U.S. employers move to Mexico to use lower wages. After all, average wages in Mexico at that time were about one-eighth of nationals in the United States.
NAFTA passed Congress, President Bill Clinton signed it and came into force in 1995. Over the next six years, the U.S. economy has experienced some of the fastest increases in employment and low unemployment in its history. Those who feared that open trade with Mexico would lead to dramatic job cuts turned out to be wrong. Even if trade does not reduce the number of jobs, it could affect wages. In this regard, it is important to separate the issues relating to the average level of wages from the question of whether the wages of certain workers can be helped or harmed by trade. Government policy and property rights legislation are important in shaping a country`s capacity for innovation. Protecting physical property rights ensures that any heritage training remains in the realm of entrepreneurship, while the protection of intellectual property rights fosters entrepreneurship and innovation. And we don`t know enough about failure rates. About half of the businesses close in the first five years.
However, recent studies show that survival rates may be higher. It is not yet clear whether innovative entrepreneurs survive more often than non-innovative entrepreneurs. Studies that have been reported here before this report have shown otherwise. It is also not clear whether the link between failure/closure and survival years is linear. Some empirical analyses find a linear relationship, while others find a higher failure/closure rate in the first year. Sometimes excessive regulation can even make entrepreneurship impossible by limiting or prohibiting market entry in certain economic sectors through strict licensing controls. Licenses and licences can be considered non-competitive agreements. Overregulated markets can transform potentially productive entrepreneurs into non-productive, asset-creating activities.
And because there are many potential markets for high-tech innovation around the world, innovative companies, discouraged by over-regulation of one market, can turn to another market.