Endeavor

this framework, following the others used as references, there is a human capital determinant, for which we collect indicators relative to both the basic labor supply and the population's educational levels in the city, as well as the supply of qualified professionals for new business owners. The first six determinants deal almost exclusively with objective aspects of each city's business environment. Mostly it relates to the supply of people, resources and opportunities for entrepreneurs. However, the literature on the determinants of entrepreneurship attaches great importance to cultural aspects that motivate individuals to open new business as an alternate profession. It is quite likely that cities with similar objective conditions, but with different entrepreneurial cultures have different entrepre - neurial rate in the population. ConstruCtIng pErFormanCE dEtErmInants and standardIzIng IndICators One of the major challenges in developing the ranking is measuring determinants. Although we can intuitively define what each determinant represents, creating ap- propriate measures for each determinant is very com- plex. How to measure whether there is or not access to capital for entrepreneurs in each city? How to measure the regulatory environment in a region? Even if we can describe them accurately, each determinant comprises more than one relevant factor in explaining entrepre- neurial performance. For example, we can think generically about the inno- vation determinant as being investment in research and the availability of results for business innovation. However, you can observe and measure only a set of indicators: private investment in innovation, public spending on science and technology, number of patent applications, and so on. Following in the footsteps of other analysis tools, Endeavor produced a set of indi - cators that when combined adequately represent each of the determinants. That is, as mentioned above, no indicator alone is sufficient to measure a determinant, but all indicators represent some aspects relevant to explain entrepreneurial performance. Within each determinant there are indicators that ad - dress correlated factors and that represent the same aspect. The determinants are organized into sub de- terminants, there function is to organize the indica- tors and rationalize their combination. There are al- ways two sub determinants organizing the indicators within each determinant. For example, the Regulatory Environment determinant consists of the following sub determinants: "Time pro- cess", composed of the obstacles faced while opening a business, dealing with licenses etc., and the "tax costs", particularly those ranging from capital to capital. Certainly there are other regulatory issues affecting entrepreneurs in Brazil. For this framework, however, what matters are the factors that vary between cities and that can be influ- enced by local public managers. The collected indicators for the construction of determi- nants and application of the framework are measured in many ways and represent very different quantities. While the indicator "price per square meter", in the infrastruc- ture determinant, is measured in current prices (R$), the indicator "higher education" is only a portion of the popu- lation and has no unit of measure. How to compare and group indicators 7 that are so different? To make it possible to combine the indicators in sub deter- minants, the solution was to standardize them in a score with 0 average and standard deviation 1. This is a conven- tional method and well suited for comparing variables from different sources. The indicator score for each city is obtained by subtracting the average of the 14 capital and dividing the result by the standard deviation using the formula below: Indicator_k' = Indicator_k – Average (Indicators) / Stand.dev (Indicators) Standardizing indicators allows us to add them, even if they originally represent different amounts. The construc- tion of each sub determinant is the sum of each of the standard indicators that compose it. For example, within the determinant "Infrastructure", the sub determinant "Intercity Transportation" is the sum of the standardized 7 The completed list is on page 93 90

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