(Monterrey, Mexico) High levels of entrepreneurial optimism, ambition and innovation are vital to advancing economies according to The Global Entrepreneurship Monitor 2014 Global Report which also found that entrepreneurship worldwide has recovered from The Great Recession.
African economies showed the highest ability to perceive and pursue entrepreneurial opportunities with little fear of failure. In contrast, European Union nations are less optimistic, see fewer opportunities and are more uncertain about their skills in acting entrepreneurially.
“Ambitious Entrepreneurship has a powerful impact on economic development through job creation and its incentive to innovate and build international marketplaces,” said Slavica Singer, GEM’s lead author from J.J. Strossmayer University, Osijek, Croatia.
The GEM report’s special topic, Youth and Entrepreneurship in Sub-Saharan Africa, also found that Africa’s boom in youth entrepreneurship is expanding globally. GEM’s full special topic report will be available this April.
U.S. Entrepreneurship Recovers
Entrepreneurship rates in the United States rose to nearly 14 percent in 2014 from a post-recession low of 7.6 percent in 2010. “We are highly optimistic because for the first time, more than half of American adults see good opportunities for starting businesses,” said lead U.S. researcher and Babson College Entrepreneurship Professor Donna Kelley. “Youth entrepreneurship is also growing. In 2014, 18 percent of 25-34 year-olds were starting or running new businesses compared to just 15 percent in 2013. This is good news because when young entrepreneurs build and practice the skills needed for entrepreneurship, they equip themselves with the capacity for pursuing opportunities throughout their careers.”
About the Report
The report, unveiled at the GEM Annual Meeting in Monterrey, Mexico, is the 16th annual survey of entrepreneurship worldwide and is the largest single study of its kind. It is coauthored by Slavica Singer, J.J. Strossmayer University, Osijek, Croatia; Jose Ernesto Amoros, Universidad del Desarrollo, Santiago, Chile; Daniel Moska Arreola, Tecnologico de Monterrey, Monterrey, Mexico and the Global Entrepreneurship Research Association (GERA).
In 2014, more than 200,000 individuals were surveyed and 3,936 national experts on entrepreneurship participated in the GEM study across 73 economies − collectively representing 72.4 percent of the world’s population and 90 percent of its Gross Domestic Product (GDP). The report analyzes entrepreneurs from all global regions of the world and a broad range of economic development levels.
More complete insight into the entrepreneurial capacity of an economy can be obtained if two indicators − Total Entrepreneurship Activity (TEA) and Entrepreneurial Employee Activity (EEA)− are used jointly, because TEA is decreasing along the developmental level, but EEA is increasing.
GEM 2014 Founding and Sponsoring Institutions are Babson College, United States, Lead Sponsoring Institution and Founding Institution; Universidad del Desarrollo, Chile, Sponsoring Institution; Universiti Tun Abdul Razak, Malaysia, Sponsoring Institution; Tecnologico de Monterrey, Mexico, Sponsoring Institution; London Business School, London, United Kingdom, Founding Institution.
Key Findings –GEM 2014 Global Report
Individual Attributes and social values toward entrepreneurship
Entrepreneurs in factor-driven economies are more positive about entrepreneurial opportunities to start a new venture and the belief in their abilities to do so. Factor-driven economies tend to move forward in relationship to their levels of institutional support, infrastructure, macroeconomic stability, and health and primary education. Fear of failure, however, is highest among entrepreneurs in innovation-driven economies where innovation and productivity growth are central to economic development.
- African economies report the highest perception of opportunities and perceived skills to act entrepreneurially with the lowest fear of failure rates.
- European Union economies are less optimistic about entrepreneurial opportunities and expressed the lowest perception globally (19.9 percent - Greece; 18.4 percent in Croatia; 17.2 percent in Slovenia; 22.6 percent in Spain; 22.9 percent in Portugal).
The social value of entrepreneurs varies globally. Starting a new venture is seen as a good career choice in Africa and North America. High status and high media attention are also associated with entrepreneurship in these regions. European Union economies reported the lowest social value ratings.
Entrepreneurial Activities
Total early-stage Entrepreneurial Activity (TEA) is highest among factor-driven economies and declines in economies with higher Gross Domestic Product per capita (GDP pc).
- Highest TEAs are in African economies (37.4 percent in Cameroon; 35.5 percent in Uganda; 32.8 percent in Botswana, joined only by Ecuador from the rest of the world with 32.6 percent TEA).
- The lowest TEA rates overall are in European economies (7.8 percent in EU economies and 6.0 percent in non-EU economies).
- Innovation-driven economies with highest TEA rates include Qatar (16.4 percent); Trinidad and Tobago (14.6 percent); United States (13.8 percent); Australia (13.1 percent); and Canada (13.0 percent). Japan with 3.8 percent and Italy with 4.4 percent TEA have the lowest share of early-stage entrepreneurs.
Motivational reasons for starting a business (necessity or improvement-driven opportunity) provide a better understanding of the entrepreneurial profile of an economy.
- Highest motivational rates are reported from innovation-driven economies (54.9 percent) vs. 45.1 percent in efficiency-driven economies or 47.0 percent in factor-driven economies.
- Singapore, Norway, France and Japan stand out with around 70 percent of early-stage entrepreneurs motivated by improvement-driven opportunity.
The report tracks business dynamics (the difference between the higher rate of business entrance and lower rate of business exits) which are key to building a vibrant business sector.
- In factor-driven economies, the dynamics ratio is 23.3 vs. 12.7; the gap narrows to 14.0 vs. 8.5 in efficiency-driven economies; and almost levels out in innovation-driven economies (8.5 vs. 6.7).
This year’s report tracks and analyzes ambitious entrepreneurship, a key indicator of the potential for growth and innovation within an economy.
- North America is highly optimistic about job creation (2.4 percent of early-stage entrepreneurs). European economies are less so, (non-EU 0.4 percent, EU 0.9 percent). GEM found that in some economies with full employment, low expectations for job creation are linked to the lack of a skilled labor force.
Innovative orientation of early-stage entrepreneurs is observed through the lenses of product and marketplace: how much a product and/or service is new to all or some customers and if few or no other businesses offer the same product/service.
- North America is more innovative than the rest of the world. Asia and Oceania display high product innovation but with modest orientation to new markets. Africa shows low measures in both. A few economies like Chile in South America are unique in working to develop both aspects of innovation capacity. Chile exhibits a high share of early-stage entrepreneurs delivering a new product/service (89 percent) to the marketplace with very little competition (59 percent).
To measure levels of internationalization, GEM looked at the share of customers living outside of the early-stage entrepreneur’s country.
- Almost 70 percent of entrepreneurs in Africa (excluding South Africa) do not have a customer outside their respective countries. Highest levels (25 percent of customers abroad) were found in EU economies: Luxembourg at 42 percent; Croatia at 38 percent; Belgium at 33 percent, Estonia at 24 percent.
The report captures entrepreneurial employee activity (EEA) − when an employee was actively involved in the development and implementation of a new idea or activity.
- EEA is increasing along the development stages, higher in innovation-driven economies (North American and EU), the lowest in factor-driven economies (Africa, Latin America and Caribbean).
Demographic characteristics (age, gender, income) help to shape an economy’s entrepreneurial profile.
- Globally, the most active persons in early-stage entrepreneurial activity are in the 25-35 years age group. The most balanced participation is in North America. Additionally, early-stage entrepreneurial activity is dominated by men with no difference in individual attributes − perceived opportunities and capabilities. However, women entrepreneurs do express a slightly higher fear of failure perception than men.
- Women more often start a business out of necessity, and the most gender-balanced necessity startups are in Australia, the Netherlands, Luxembourg, Denmark, Austria, Kazakhstan, South Africa, Singapore and Thailand.
GEM interviewed country experts about the kinds of Entrepreneurship Framework Conditions (EFCs) including financial and government support, specific regulations, market openness, R&D transfer, entrepreneurship education and cultural norms and values related to entrepreneurship.
- Overall, experts in innovation-driven economies (EU and North America) gave higher EFC ratings. In contrast, ratings were lower in Sub-Saharan African economies particularly related to R&D transfer.
About the Global Entrepreneurship Monitor
The Global Entrepreneurship Monitor (GEM) was initiated in 1999 as a joint venture of Babson College and the London Business School.
Starting with 10 participating countries, the project has expanded to include 73 countries. GEM is the largest and most developed research program on entrepreneurship in the world. GEM is unique because, unlike most entrepreneurship data sets that measure newer and smaller firms, GEM studies the behavior of individuals with respect to starting and managing a business. GEM nations are members of an exclusive research project that provides access to the collective knowledge of some of the world’s most renowned researchers and institutions involved in entrepreneurship research. At a time in history when individual entrepreneurial activity may hold the key to transforming the global economy and discouraging ingrained economic disparity in countries with minimal economic opportunity, GEM data has influenced national economic policies and continues to expand its collaborative role.
About Babson College
Babson College is the educator, convener, and thought leader for Entrepreneurship of All Kinds™. The College is a dynamic living and learning laboratory, where students, faculty, and staff work together to address the real-world problems of business and society—while at the same time evolving our methods and advancing our programs. We shape the leaders our world needs most: those with strong functional knowledge and the skills and vision to navigate change, accommodate ambiguity, surmount complexity, and motivate teams in a common purpose to create economic and social value. As we have for nearly a half-century, Babson continues to advance Entrepreneurial Thought and Action® as the most positive force on the planet for generating sustainable economic and social value.
