Levels of entrepreneurship vary sharply between major countries and account for significant differences in economic growth, according to a new global study on entrepreneurship.
Among the industrialized G-7 countries (the G-7 are the group of most heavily industrialized countries, currently comprised of the United States, Japan, Germany, France, Italy, Great Britain, and Canada), in particular, there is a very strong relationship between the level of entrepreneurial activity and annual economic growth, according to the Global Entrepreneurship Monitor 2000 (GEM), a 21-country study of entrepreneurship and economic growth conducted by Babson College, the London Business School, the Kauffman Center for Entrepreneurial Leadership, and Ernst & Young (UK).
The highest level of activity within the 21 countries in new firm start-ups was found to be as much as 10 times greater than the lowest level, ranging from one in every eight adults in Brazil currently starting a business, to one in 10 in the United States, one in 12 in Australia, one in 25 in Germany, one in 33 in the United Kingdom, one in 50 in Finland and Sweden, and fewer than one in 100 in Ireland and Japan.
There are also major differences between countries in the prevalence of new firms less than 42 months old. Expressed as a portion of the adult population engaged in new firms, the rates range from nine percent in Korea to less than one half percent in Japan and Ireland.
"The underlying assumption that entrepreneurship is a key determinant of economic growth makes intuitive sense," said Paul Reynolds, GEM project coordinator and a professor at both Babson College and the London Business School. "But despite the commitment of many governments around the world to boosting entrepreneurship activity, this assumption remained largely untested. The GEM report provides conclusive evidence that promoting entrepreneurship and enhancing the entrepreneurial dynamic of a country should be an integral element of any government's commitment to boosting economic well being."
The countries covered in the GEM 2000 report include Argentina, Australia, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, India, Israel, Ireland, Italy, Japan, Korea, Norway, Singapore, Spain, Sweden, United Kingdom and the United States.
The countries were divided into three levels of entrepreneurship. The top group comprised Australia, Canada, Korea, Norway and the United States. Countries with the lowest levels of entrepreneurial activity included France and Japan.
"In countries ranking high in the GEM analysis, entrepreneurship is an integral and accepted feature of economic and personal life. It is rare to find a person who does not personally know someone who is trying to start a business," said S. Michael Camp, GEM project director and director of research at the Kauffman Center for Entrepreneurial Leadership. "In the less active countries, however, entrepreneurship remains a structural and cultural anomaly. It may be rare to find a person who knows of anyone trying to start a new firm."
The GEM 2000 study is an expansion of the groundbreaking 1999 GEM report, which analyzed entrepreneurial activity in 10 countries, including all G7 countries.
Scientific surveys of 2,000 persons in each country, over 40,000 in total, were used to determine the level of entrepreneurial activity in countries participating in the GEM 2000 study.
National research teams interviewed almost 800 experts. This provided an unprecedented portrayal of the national variation in entrepreneurial activity and its impact on economic development among these countries. As with GEM 1999, the results are likely to quickly enter the debates over public policy and educational programs for years to come.
In addition to the global study, a country-specific analysis of the level of entrepreneurship activity, its impact on economic growth, and the factors either accelerating or hindering entrepreneurial business start-ups, will be issued by each of the countries analyzed.
Adds Michael Hay, a GEM project director and professor at the London Business School, "GEM endorses the argument that entrepreneurship makes a difference to economic prosperity and that a country without high business start-up rates is risking economic stagnation. Countries that are able to replenish the stock of businesses and jobs and have the capacity to accommodate volatility and turbulence in the entrepreneurial sector are best placed to compete effectively."
The GEM project was initially launched in September 1997 to address three questions:
* Does the level of entrepreneurial activity vary between countries, and if so, to what extent?
* Does the level of entrepreneurial activity affect a country's rate of economic growth and prosperity?
* What makes a country entrepreneurial?
The study further revealed that, among the many factors that contribute to entrepreneurship, perhaps the most critical is a set of social and cultural values, along with appropriate social, economic and political institutions that legitimatize and encourage the pursuit of entrepreneurial opportunity.
In fact, the GEM researchers identified several key factors accounting for the differences in entrepreneurial activity among countries. These factors include:
* the level of perceived entrepreneurial opportunity
* entrepreneurial capacity, or the motivation and skill to take advantage of the opportunity
* infrastructure, broadly defined as the availability of financing, land, facilities, employees, suppliers, government assistance, utility costs, transportation, and tax concessions.
* the demographic make-up of the population, including age, gender and population growth
* education
* culture, particularly the expectations and participation of women in new business start-ups, the acceptance within a country of differences in the level of income among individuals, and the respect for start-ups
