Start-Ups Are a Contemporary Indicator of Development. How Can Institutions of Higher Education Contribute?

The prevalence of start-ups and the support they are provided by different state and municipal authorities are definitely an important indicator of contemporary development. It gives a signal that we are including innovative and forward-looking business ideas in our vision for national economic development. At present, there are hundreds of active start-ups in Latvia that have successfully managed to attract investments of over 210m euros. Is this sufficient to be able to say that we are using this comparatively new business model and the new economic sector to their full potential? 

A start-up is a company with a high potential for growth. Its principal activity is related to implementing scalable business models and producing or developing innovative products. The words associated with this field are comparatively new in Latvian – “mērogojamība” (scalability) and “jaunuzņēmums” (start-up).

The majority of start-ups nowadays work in the technology sector, and are often interdisciplinary combining financial and medical technologies, for example. It is owing to technology that these companies can reach global audiences. Technology also determines the potential for growth and wide scalability. 

Scalability has been a topic addressed by European Union business support programmes for several years now. Opening a summer café, for example, can be a good initiative and a profitable entrepreneurial activity, but it is not a start-up. If, however, you create a mobile app that brings together people who visit cafés and who are looking for the best offers, or that perhaps brings together people who have opened cafés, then this could be a start-up, because an app like this is limitless and could be used in Latvia, or Germany, or India. This attracts the interest of investors who see potential for high-growth. From a business standpoint, scalability is characterised by comparatively low increases in production costs having the possibility to result in substantially increased sales, thereby facilitating turnover and profit. 

The state and municipalities should not invest large amounts of taxpayer money into financing start-ups, as taxes are designated for more important things if we look at the social and economic development of the country. To support entrepreneurship, including start-ups and social- and export-oriented companies, the state should instead ensure a favourable climate for starting and implementing businesses, and promote the maintenance and development of reliable and attractive business environments. If there is such a climate, the “invisible hand” will help businesses develop. This concept was introduced by Scottish economist Adam Smith over 200 years ago, and is still relevant today. What this means is that investors will find and notice climates that are favourable for businesses and will provide the capital start-ups need to grow. At the same time, considering the growing importance of cooperation between public administration and the business sector to the national and global economy, public authorities (both governments on a national level and, for example, the European Commission on a supranational level) are implementing many programs to support start-ups and their scalability.

This tendency can be observed not only in the Latvian economy, but also in economically more developed countries such as Germany, for example. There support for entrepreneurship is related to individual people’s traits and experienced entrepreneurs’ desire to support newcomers. Some entrepreneurs are able to look beyond their own businesses and lend a helping hand, but at the same time, as in many other countries, some successful entrepreneurs that have gained a stable position in the market do not want to support potential rivals. It is more likely that these entrepreneurs will try to involve the new talents in their own businesses. It is precisely large companies that are potential investors that could invest resources into development when they see fresh, long-term business ideas.

In a rapidly progressing, saturated and fast-paced entrepreneurial environment, start-up entrepreneurship skills and competencies are in high demand among new and experienced entrepreneurs alike. In 2018 the Harvard Business Review published research results showing that start-up founders in the USA were more likely to be from the 30 – 39, 40 – 49 and 50 – 59 age groups, rather than the 20 – 29 group. The ages are slightly lower in Latvia and in Europe where the average age of start-up founders is 35.

In a discussion at Rīga Stradiņš University (RSU), a representative from the Latvian Chamber of Commerce and Industry spoke about business trends in Latvia and pointed out that according to the latest research what is currently lacking in the country is a qualified workforce. Universities must become a central element in ensuring the continuity of business start-ups and creating successful synergies. The new International Business and Start-up Entrepreneurship study programme at RSU, which will receive its licence in February, will be one way for ambitious people to develop their knowledge, skills and competence in international business and especially in entrepreneurship.

Nowadays international cooperation is key to developing the economy. According to one of the study programme’s international partners, Professor Christiane Trüe from Bremen University of Applied Sciences, even Germany is not considered a big country from a global perspective, and that progressive change can be achieved only through cooperation between countries. It is a good opportunity for European universities to cooperate and bring together students and interests, because students are the decision-makers of tomorrow and need international experience.

Assoc. Prof. Romāns Putāns

Programme Group Leader, Faculty of Social Sciences
Academic Staff, Faculty of Social Sciences

Study centre

Kuldīgas iela 9, Rīga

A-105

Working hours:

O. 13.00-14.00 (iepriekš informējot)

+371 29442854

romans [pts] putansrsu [pts] lv

The International Business and Start-Up Entrepreneurship study programme is one of six new internationally competitive study programmes that the university is developing by 2023 with financing from the European Social Fund and the state budget within the project Reducing Study Programme Fragmentation and Promoting the Internationalisation of Studies at Rīga Stradiņš University (project No. 8.2.1.0/18/A/014). This programme will be distinctly international with international students and lecturers, and travel abroad. The plan is for the first students to enrol in autumn 2020.