Opinion: How Western entrepreneurs can make it in Asia

Imagine this: You’re sitting on the back of a motorcycle in Ho Chi Minh City, Vietnam. Your knuckles are white, your face is green, and your eyes are red—bloodshot from the abject fear that this ride may be your last moment on earth.

You look ahead at a pedicab driver who’s staring you down, daring you to collide with his vehicle. You wonder, “Is this the Asian economic miracle that the West talks about?” Your knuckles grip whiter as you begin to look around.

Your first moment in Ho Chi Minh might be characterized by fear. But your second may be characterized by awe: You look up and notice the construction of the 460-meter high Vincom Landmark 81 Tower. You look to the side and see the groundbreaking ceremony for a metro system set to open in 2020. You look down and remember you booked your motorcycle on Grab.

How could a Western entrepreneur make it in rising Asia?

As parts of Asia experience rapid growth, many Western entrepreneurs wonder how they could be part of this exciting development. It’s a question that I’ve been interested in for the past decade. My family is from the US, but growing up, we bounced around Asia Pacific, living in Hong Kong, Singapore, and Taiwan at different times. I graduated from Harvard last May, so I decided to spend the following months trying to answer that question.

The question has led me to Ho Chi Minh City—the economic center of one of the fastest growing Southeast Asian economies. I’ve spent the past few months here interviewing entrepreneurs—from diaper exporters to tech VCs and founders of billion-dollar investment funds. Their stories of success and failure highlight three factors that foreign entrepreneurs should consider: environment, enterprise, and the entrepreneur.

The environment

An initial question for a wannabe-Western entrepreneur would be: “Where in Asia do I want to build a business?” A careless answer could be whichever economy is growing the fastest.

However, a more thoughtful approach would consider how fast an economy is expanding and in what way. Singapore and Vietnam are both expected to develop further, but their path to growth is fundamentally different.

To understand this, we need to explore one of the most important economic models of the 20th century: the Schumpeterian model of creative destruction.

The Schumpeterian model: Are you an imitator or an innovator?

The Schumpeterian model argues that there are two ways for productivity to increase in a country: imitation and innovation. For economies at “the technological frontier,” the only way they can grow is by innovating (i.e. creating new technologies or businesses processes). Think Silicon Valley and tech. For economies that aren’t on the frontier, however, the fastest way to grow is to imitate. Imitation is easier than innovation, but it can’t last forever. As economies approach the frontier, they tend to slow down.

When an entrepreneur looks at entering a foreign market, they should consider where their interest lies. If they’re interested in technological innovation, they should find a country that already exists at the frontier. If they’re interested in growth, then a developing economy likely provides more opportunities.

With that in mind, it’s important to also consider policies toward foreign entrepreneurs and business owners. Countries differ significantly in this regard. Indonesia, for example, provides a laborious process for incorporation, demanding a local resident director (and even locals in some regions) roughly US$300,000 in capital.

The enterprise

The entrepreneur

A ticking clock for foreign entrepreneurs

Can a Western entrepreneur make it?