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Monitor 2008: Exports key role for entrepreneurs in High-Income Countries;
Ireland fourth in group for Early-Stage Entrepreneurial Activity among 18-34 olds but lower for older
entrepreneurship is vital to improving economic growth worldwide according to
the ninth annual
Global Entrepreneurship Monitor (GEM) 2007/2008 Global Report.
In high-income countries and depending on the size of the national economy,
10-40% of early-stage entrepreneurs expect 25% or more of their customers
to come from outside their country. GEM also found that the more burdensome a
country’s business regulations, the lower the entrepreneurs’ expectations for
Babson College and
London Business School, and
released in the US last last week, the GEM 2007 Report strongly recommends that
entrepreneurs organize to achieve political influence to liberalize trade and
investment policies on an international level.
New this year, GEM looked
at early-stage entrepreneurial activity among global cities.
Niels Bosma, Utrecht University and Research Fellow, GEM Coordination Team,
says that across GEM nations, differences in levels and characteristics of
entrepreneurial activity are not only rooted in economics and development of
institutions supporting entrepreneurship, but also in culture and demography.
Bosma, “we can observe a general tendency of a U-shaped relationship between
the rate of early-stage activity and per capita GDP. For lower income
countries, a decline in the rate of early-stage activity may reflect economic
progress and more job opportunities.”
“The world economy needs
entrepreneurs,” says Babson Professor and GEM U.S. team member Kent Jones,
“and increasingly, entrepreneurs depend on an open and expanding world
economy for new opportunities and growth-- through trade, foreign investment,
and finance. GEM research confirms that new entrepreneurial opportunities in
all countries will expand if trade, entrepreneurship and economic growth are
fostered, especially in the developing world.”
“This, GEM’s ninth annual review of entrepreneurial activity and perceptions,
spans 42 countries and is the world’s largest research project focusing on
entrepreneurs and how they affect national economic growth” says
Professor Michael Hay, Director of GEM at London
Business School. “It is a particularly important piece of research
because no other exists that can provide consistent cross-country information
and measures of entrepreneurial activity in a global context”.
Ireland is fourth after the US, Australia and New Zealand for
Entrepreneurial Activity among 18-34 olds in High-Income Countries (page 24 of
report) but the
US, Australia and New Zealand
score much higher for participation by the 45-64 age groups.
Beyond the construction sector, the Irish economy
is dominated by the foreign-owned sector. Start-up in Ireland have been
dominated in recent years by construction and related sectors. The decline will
likely result in a fall in entrepreneurial activity.
GEM found that the more burdensome a country’s new
business regulations (according to national experts in the field), the lower
the ambition for growth among a country’s entrepreneurs.
- In general, the 2007
data continue to show that early-stage entrepreneurial activity tends to be
high in countries with lower per-capita GDP, but declines in middle-income
countries, and then rises again in higher income countries. The
country-by-country profile of TEA against per-capita income thus shows a
- A new feature of the
GEM report this year presents early-stage entrepreneurial activity rates for
global cities based on the GEM Adult Population Surveys 2001-2006.
Early-stage entrepreneurial activity rates for global cities show a similar
pattern as the rates at the country level but there are also cities with
rates that diverge from this pattern. German cities stand out with the
highest rates in comparison to the average country rate. Also,
characteristics of entrepreneurship in global cities are different from
characteristics at the national level.
- Middle and low- income
countries in Latin America and Asia display high rates of early-stage
entrepreneurial activity. Among middle and low-income countries, Thailand
(26.9%), Peru (25.9%), and Colombia (22.7%) had the highest rates.
- Countries in Eastern
Europe and Central Asia traditionally have relatively low rates of
early-stage entrepreneurial activity but the evidence for Croatia points at
an increasing rate over the period 2002-2007. Instead, most Latin American
countries tend to show a drop in early-stage entrepreneurial activity, which
may be natural progression toward higher per capita income.
- As per-capita incomes
rises in high-income countries, so does the rate of early-stage
entrepreneurship. However, cultural demographic and institutional factors
are also at play. Many EU countries consistently have relatively low rates
of early-stage entrepreneurship. Iceland (12.5%), Hong Kong (10.0%) and the
United States (9.6%) show the highest levels. Lowest rates were found in
Austria (2.4%), Puerto Rico (3.1%), and
entrepreneurs from high-income countries are more likely to be
opportunity-driven (as opposed to necessity-driven and finding no other
option for work). Wider job opportunities and social security offer more
alternatives to entrepreneurship. In Norway and Sweden, most early-stage
entrepreneurial activity is part-time.
- There is a strong
correlation between the rate of early-stage entrepreneurial activity and the
general population’s positive perceptions of their entrepreneurial skills
and opportunities for starting a business. Other factors associated with
early-stage entrepreneurial activity are whether entrepreneurship is widely
believed to be a good career choice, and the degree to which it is reported
in the media.
- Among high-income
countries, the USA, Israel, Iceland, and Canada show the highest rates of
high-growth expectation entrepreneurship (expecting to employ at least 20
employees five years from now). Among middle and low-income countries,
China has the highest rate followed by Argentina.
entrepreneurs are more likely than established business owners to claim they
offer innovative products and face less competition in the marketplace. They
also claim to use technologies that were not available to them a year
earlier. GEM also found that populations that embrace innovation will have
higher levels of early-stage activity.
- Early-stagers are
young (25-34). Men are more likely to start a business than women. This
gender gap is present among all age groups, but is relatively small for
countries in Latin America and the Caribbean.
- In an increasingly
globalized economy, international economic institutions-- such as the World
Bank and the World Trade Organization--exert a growing influence on
entrepreneurs and their opportunities. They do so directly through
international trade agreements and indirectly by cultivating an economic
flexibility and adjustment—building local market institutions,
infrastructure, and financing-- in an open world economy. GEM strongly
recommends that entrepreneurs organize to achieve political influence to
liberalize trade and investment policies.
Entrepreneurship is going global—in some GEM countries, 40% of early-stage
entrepreneurs expected 24% or more of their customers to come from outside
GEM is a consortium of national teams, participating in the Global
Entrepreneurship Research Association. Contact details and national teams’
micro-sites can be found on
www.gemconsortium.org. A selection of GEM data is available including
an updated list of the growing number of peer-reviewed scientific articles
based on GEM data.
One of the main GEM indices is the rate of
early-stage entrepreneurial activity (TEA), which is the prevalence rate of
individuals who are either involved in setting up a business or owner-manager of
a new business (existing up to 42 months) in the 18-64 population.