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© USIP 2012 • All rights reserved.

“[T]he resilience of the 

‘survival economy’ in most 

fragile regions suggests that 

the learning curve might not 

be as steep if appropriate 

policies and programs were 

put in place. Entrepreneurship rewards innovation, 

helps build local capacity, 

and bodes well for sustainability and stability.”

September 27, 2012

Using Entrepreneurship to Promote 

Stability in Fragile Regions

Summary

•	 Described asthe productive combination of innovation, initiative, risk and capital, entrepreneurship could provide a crucial underpinning forstability in conflict-affected regions via job

creation and improved human security.

•	 State building initiativesregularly tout entrepreneurship as an integral part of broader economic development, political orsecurity strategies butseldom explain the thinking behind

purported causal linkages.

•	 The Six + Six model offers a targeted and comprehensive strategy to promote entrepreneurship in conflict-affected states. It provides a dynamic alternative to aid-based strategies.

•	 Given the growing success of impact investing, it isimperative for bilateral and multilateral

development agenciesto help facilitate such investment by co-investing and seeding further

impact investing.

•	 Entrepreneursin fragile regions urgently need support in the form of enabling environments

and innovative approachesthat reward their creativity and risk-taking. To bolster entrepreneurs’chancesforsuccess, policymakersshould consider: redirecting foreign assistance;

re-focusing private sector development interventions; re-conceptualizing state building; and

re-valuing individuals.

Introduction

Entrepreneurship isthe productive combination of innovation, initiative, risk and capital.1In

conflict-affected regions, entrepreneurship could provide a crucial underpinning forstability by

creating jobs, reducing aid dependency and improving prospectsfor economic development. The

importance of entrepreneurship in foreign policy is only slowly being understood. State building

initiatives by a wide range ofstakeholdersregularly tout entrepreneurship as an integral part of

broader economic development, political orsecurity strategies butseldom explain the thinking

behind purported causal linkages. Thisislargely because in most cases entrepreneurship is often

viewed, and implemented as an ad hoc policy instrument and not as an integral part of a rebuilding strategy.

Israel and Rwanda are examples of the role entrepreneurship could play in rebuilding states.

Confronted with severe and potentially devastating economic stagnation between the mid-1970s

and early 1980s, the Israeli government created the Yozma venture capital program that focused

on strengthening itsrole in facilitating financing for budding entrepreneurs. This program revived

Raymond Gilpin

E-mail: rgilpin@usip.org

Steven Koltai

E-mail: steven@koltai.net

PEACEBRIEF134
© USIP 2012 • All rights reserved.

Using Entrepreneurship to Promote Stability in Fragile Regions

page 2 • PB 134 • September 27, 2012

Israel’s economic fortunes and today Israel leadsthe world in venture financing. In 2010, Israel

attracted $170 of venture capital per person, well over twice America’s $75 per person. Rwanda’s

post-genocide National Innovation and Competitiveness(RNIC) Program anchored the country’s

economic fortunes on entrepreneurship by revising laws and regulations, reducing red-tape and

reforming accessto credit. Consequently, Rwanda improved from 143rd out of 183 countriesin the

World Bank’s Ease of Doing Business Dataset in 2009 to 45th in 2012.

Most people find it difficult to envisage prospectsfor entrepreneurship in fragile states. Investors must contend with a persistent war economy, a perverse political economy, weak regulatory

and institutional frameworks, a deficient labor force and endemic corruption. However, the

resilience of the survival economy in most fragile regionssuggeststhat the learning curve might

not be assteep if appropriate policies and programs were put in place. Entrepreneurship rewards

innovation, helps build local capacity, and bodes well forsustainability and stability.

This paper examinesthe underestimated, frequently misunderstood and often-neglected

potential of entrepreneurship to underpin the establishment of capable,sustainable, representative and accountable states. The following sections provide an overview of ways entrepreneurship

could promote stability in regionsthat have been affected by conflict, analyze the applicability of

the Six + Six model and present a set of practical recommendations.

Four Ways Entrepreneurship Could Promote Stability in 

Conflict-Prone Regions

•	 Kick startsustainable economic development. Entrepreneurship helps trigger economic

progress by creating jobs when they are needed the most. It contrasts with the aid-fueled

economic growth common in most conflict-affected regions because it makes more use of

domestic resources and could be more effective at spurring economic diversification. Successful approaches that could encourage meaningful linkages between the local economy

and the value chain of core economic activity would include reconstruction zones2 and

resource corridors3. 

•	 Reduce aid dependency. Entrepreneurship reduces aid dependency in two important ways.

First, it provides an alternative to employment and contracting directly tied to donor aid

and projects (typical of many post-conflict regions.) Second, entrepreneurship helps lay the

foundation for sustained and diversified economic growth. Progressively, tax receipts and

export earnings from such growth would eventually reduce fiscal dependence on budgetary and program assistance.

•	 Develop capital and skills. Most conflict-affected or post-crisis states suffer from a dearth of

technical skills and administrative capacity. Promoting entrepreneurship could help spur

job growth and increase the demand for skilled workers. Although the labor market might

be slow to respond in the initial months, longer-term benefits will accrue. This is why it is

important to train‘entrepreneur enablers’ like teachers, consultants, advisors, and informal

investors, who can identify and support entrepreneurs because many entrepreneurs are

often unlikely to self-identify.4

•	 Reduce poverty. A significant proportion of existing and potential entrepreneurs in conflictaffected regions are both income- and asset-poor. In addition to losing their means of livelihood as a result of war, they have usually liquidated (or lost) their assets (e.g. homes, tools,

livestock, equipment) making them particularly vulnerable and severely disadvantaged.

Support for entrepreneurship is neither a quick-fix nor a handout. It is an investment in
© USIP 2012 • All rights reserved.

Using Entrepreneurship to Promote Stability in Fragile Regions

page 3 • PB 134 • September 27, 2012

risk-taking individuals who will be able to overcome poverty by creating jobs and acquiring

assets like equipment, services and property.

The ‘Six + Six Model’ for Conflict-Sensitive 

Entrepreneurship5

The conditions under which entrepreneurs can thrive in conflict-affected regions are beginning to

be understood by social and politicalscientists. While designing successfulstrategies has proved

challenging, it is clear that an effective approach must be targeted and comprehensive. Thisis

what the‘Six + Six model’offers. It entails an entrepreneurship ecosystem based on the following

six inter-related parameters: Identify, Train, Connect & Sustain, Fund, Enable, and Celebrate and the

active involvement ofsix partners: government, corporations, foundations, universities, NGOs, and

investors.

Identifying entrepreneursisthe firststep towardstheir eventualsuccess, however, many

potential entrepreneurs do not have the training and skills needed to open and operate a business. Thus, a successful entrepreneurial ecosystem requires an educational framework that

transfers knowledge and builds human capital. Entrepreneurs also need to be connected both to

other entrepreneurs and to veteran businessleadersin order to continually develop their business

acumen. Funding, of course, isthe lifeblood of any successful business, insuring that entrepreneurs

have the financial meansto build upon businessideas. Entrepreneurs must also be enabled by an

economic, legal and cultural environment which isfriendly to starting a business. Finally, entrepreneurship must be celebrated within the culture as a desirable and socially valuable career path.

Promoting entrepreneurship is complex. A viable entrepreneurial ecosystem must rely on six

partners: Government, corporations, foundations, universities, NGOs, and investors. The relationship

between each of these entities and the six parametersresemblessomething like an inter-related

web. Investors, for example, are crucial for funding entrepreneurs, but often also serve as mentors

to the businessesthey are financing. Similarly, business plan competitions are a great way to

identify and celebrate entrepreneurs, but also present a unique networking opportunity for the

participants. Governments not only enable entrepreneurship through good policy, but can help to

fund entrepreneurs as well.

Using the Six + Six Model to Support Entrepreneurship

Progress with entrepreneurship islikely to be slow and initial gainsfew and far between in fragile

environments. The Six + Six model outlines how a combination ofstrategic investments and

patience could help lay the foundation forsuccess, particularly in the areas of financing, training

and mentorship.

Financing 

Investorstend to shy away from investmentsin conflict-affected states because information asymmetries make it difficult to price risk, traditional banking institutions are poorly equipped to service

thissector and judicial/regulatory arrangements are weak. Alternative financing optionsinclude

angel investors and the creative use of remittance flows. Angel investorsfacilitate entrepreneurship by providing capital forstart-upsin high-risk sectors or regions. They are typically wealthy

individuals who invest in start-upsin exchange forstocks or convertible debt. Angel investor

networks work best when they are paired with other pillars of the ecosystem6. Remittancesto

developing countries have reached $372 billion in 2011, with annual increases expected to be
© USIP 2012 • All rights reserved.

Using Entrepreneurship to Promote Stability in Fragile Regions

page 4 • PB 134 • September 27, 2012

around 7-8 percent in the coming years.7 Currently, these funds are mainly used for consumption

and debt repayment. However, many countries and members of the diaspora are now recognizing

the possibility of using remittance flowsfor investment purposesthrough such instruments as

‘diaspora bonds.’8

Education and Training

Entrepreneurial education programs can run from weekend-long boot camps, to multi-year

advanced degreesfocusing specifically on entrepreneurship. Boot camps are usually short, 2-3 day

intensive training sessions, which are focused on quickly acquiring knowledge in everything from

creating innovative concepts and comprehensive business plans, to acquiring funding. Long-term,

multi-year entrepreneurial education programs can be excellent vehiclesfor promoting entrepreneurship pedagogy. Babson Global, for example, attemptsto compliment Babson College’s

research into entrepreneurship studies by jumpstarting international entrepreneurship programs

and producing the Global Entrepreneurship Monitor.9

Mentorship and Celebration

Mentoring is an important pillar of the ecosystem because it impartsthe experience necessary for

young entrepreneursto turn training and funding opportunitiesinto a successful business. Businessincubators and accelerators are organizationsthat provide entrepreneurs with a combination

of mentoring, funding, and accessto facilities. Celebrating entrepreneurship itself is crucial to

building awareness of the positive role that entrepreneurs play in society, as well as attracting new

people to the entrepreneurial lifestyle. One way to celebrate entrepreneursis by increasing press

coverage through training in‘entrepreneurship journalism.’ 

Invest, Don’t Donate 

Investment in entrepreneurship is a dynamic alternative to aid-based strategiesin conflict-affected

states. In conflict-affected countries, these investments are a hybrid of both social benefit and

financial returns. Known variously as double bottom line,social benefit or impact investments, these

investments are often more sustainable than their traditional counterparts and are therefore more

advantageousto beneficiaries.10 The online system known asthe Artha Platform providessome

insight into how these investors operate.11 Given the growing success of entrepreneurship, it is

imperative for bilateral and multilateral development agenciesto help facilitate such investment

by co-investing and‘seeding’further impact investing.12 Could recent progress with entrepreneurship have been achieved with grants? Perhaps. But could the relationship with the promoters, their

sense of achievement and ownership, and their future prosperity have been recreated and secured

today in the absence ofsuch investment? Doubtful.

Recommendations

This paper has argued that entrepreneurship is a central pillar of job creation and economic

development in post-conflict countries. Entrepreneurs already know how to mitigate many of the

challengesthey face but they need support in the form of enabling environments and innovative

approachesthat reward their creativity and risk-taking. The following policy recommendations

could support a much-needed (and long overdue) transition to stability and sustainability in

conflict-affected states:
© USIP 2012 • All rights reserved.

USIP provides the analysis, training and 

tools that prevent and end conflicts, 

promotes stability and professionalizes 

the field of peacebuilding.

For media inquiries, contact the office 

of Public Affairs and Communications, 

202.429.4725

2301 Constitution Ave., NW

Washington, D.C. 20037

Using Entrepreneurship to Promote Stability in Fragile Regions

page 5 • PB 134 • September 27, 2012

About This Brief

USIP’s Center for Sustainable 

Economies hosted a series of 

blogs on entrepreneurship in 

conflict-affected states on the 

International Network for Economics and Conflict (http://inec.usip.

org) from March to July 2012. 

The lead contributor was Steven 

Koltai, an executive with 30 years 

of experience in entrepreneurship. 

This paper synthesizes the main 

conclusions and pertinent lessons 

for policymakers and practitioners.

About the Authors

As director of USIP’s Center for 

Sustainable Economies, Raymond 

Gilpin co-chairs the Business and 

Peace Taskforce and manages the 

International Network on Economics and Conflict.

Steven Koltai is a multi-time successful entrepreneur, who created 

and ran the State Department’s 

Global Entrepreneurship Program 

(GEP) from 2010 to 2012.

Research assistance from Brett 

Boor is gratefully acknowledged.

•	 Re-direct foreign assistance. Measures should be taken to alter the overwhelming public

sector orientation of foreign assistance and establish initiatives that promote entrepreneurship specifically. In order to achieve this, financing mechanisms should be reconfigured to

improve the delivery, flexibility and sustainability of foreign assistance.

•	 Re-focus private sector development interventions. Private sector development has traditionally

focused on foreign direct investment (usually revolving around large extractive firms) at the

expense of entrepreneurship. The Six + Six model provides a comprehensive way forward

that would progressively enhance identification, intermediation, regulations, country ownership and sustainability.

•	 Re-conceptualize supportive state building. To succeed,state building strategiesin fragile regions

should go beyond measuresto stop violence and provide humanitarian assistance. Concomitant

entrepreneurship initiatives would help rebuild communities, create employment and ensure

stability.Thisis why entrepreneurship should be an integral part of any state building agenda.

•	 Re-value individuals. One of the greatest (but often overlooked) post-conflict challenges is

providing an enabling environment that identifies and supports potential entrepreneurs

(especially small- and medium-scale) and does not view them as helpless recipients of charity. By adopting the Six + Six model, all stakeholders will be able to recognize the potential of

entrepreneurs and entrepreneurship to foster lasting results.

Notes

1.	 Kacou, Eric. Entrepreneurial Solutionsfor Prosperity in BoP Markets: Strategiesfor Business and

Economic Transformation. Upper Saddle River, NJ: Wharton School Pub., 2011. Print.

2.	 Del Castillo, Graciana. Reconstruction Zonesin Afghanistan and Haiti: A Way to Enhance Aid

Effectiveness and Accountability. Rep. no. SR 292. Washington, D.C.: USIP, 2011. Print.

3.	 ExtractivesforDevelopment(E4D). AProgrammaticApproachtoLeverage Extractive Industriesfor

EconomicDevelopment(E4D):BackgroundNoteResourceCorridors. Rep.Washington,D.C.: E4D, 2011. Print.

4.	 Mellalieu, Peter.“Case Study: Capacity Building for Entrepreneur Enabling in Southern Africa.”

The International IndigenousJournal of Entrepreneurship, Advancement, Strategy and Education (2006):

n. pag. Print.

5.	 © Koltai & Company 2010

6.	 Debaise, Colleen.“What’s an Angel Investor?”Wall StreetJournal, 18 Apr. 2010. Web. 17 Aug.

2012. <http://online.wsj.com/article/SB10001424052702303491304575188420191459904.html>.

7.	 Ratha, Dilip, and Ani Silwal. Remittance Flowsin 2011: An Update. Rep. Washington, D.C.: World

Bank, 2012. Print.

8.	 See http://www.foreignpolicy.com/articles/2011/05/24/a_bond_for_the_homeland?page=full 

and https://www.homestrings.com.

9.	 See http://www.gemconsortium.org/

10.	 The Global Impact Investing Network is a de facto“trade association”for impact investors http://

www.thegiin.org/cgi-bin/iowa/home/index.html

11.	 “Artha Platform: An Impact Investing Portal for High Impact Small & Medium-sized Enterprises

in India.”Artha Platform: An Impact Investing Portal for High Impact Small & Medium-sized Enterprisesin

India. Rianta Philanthropy Ltd., 2012. Web. 17 Aug. 2012. <http://www.arthaplatform.com/>.

12.	 Josh Lerner’s“Boulevard of Broken Dreams: Why Public Effortsto Boost Entrepreneurship and

venture Capital have Failed and What to do About it,” Princeton University Press, 2009