2nd Global Entrepreneurship Monitor Released

Does the level of entrepreneurial activity vary between countries, and, if so, by how much? Does the level of entrepreneurial activity affect a country’s economic growth? What makes a country entrepreneurial? These questions are the focus of Global Entrepreneurship Monitor 2000, (GEM 2000), a year-long study involving 43,000 individuals in 21 countries. Researchers also interviewed almost 800 experts and scholars on entrepreneurship across the world in preparation of the report.

Key findings, many of which could also have relevance to regional differences in entrepreneurship across the US, include:

• Financial support is highly associated with the level of entrepreneurial activity. Venture capital investments accounted for 0.52 percent of the Gross Domestic Product in the United States, compared to Japan's 0.022 percent, the lowest rate found. The US led the world in this category.
• Measured by number of adults starting businesses and number of businesses that are less than 42 months old, GEM 2000 found entrepreneurial activity differs widely between countries. One out of every eight Brazilians are engaged in starting a business while only 1 out of 100 Japanese and Irish adults are doing the same. The rate in the United States, for comparison is 1 out of every 10.
• Globally, men are twice as likely as women to be entrepreneurs. Male dominance was greatest in France where the male to female ratio was 12:1.
• Entrepreneurship is highly correlated with education, economic growth, and social legitimacy or acceptance of entrepreneurship.

Six broad policy recommendations are made to encourage economic growth through entrepreneurship.

• "If the level of participation in post-secondary education were the only factor used to predict entrepreneurial activity, it would account for 40 percent of the difference between GEM countries. Providing individuals with quality entrepreneurship education (i.e., training in the requisite skills for converting a market opportunity into a commercial enterprise) was consistently one of the top priorities identified by the experts interviewed in each of the 21 countries.
• "Policies geared toward boosting entrepreneurial activity should not be confined to the entrepreneurship sector per se. From the GEM results it is clear that fundamental features of the wider economic system play a critical role. Countries with higher levels of entrepreneurial activity are characterized by comparatively lower levels of corporate and marginal personal income tax rates. The most entrepreneurially active countries also have a greater ease of doing business with the government, more flexible labor markets and lower levels of non-wage labor costs.
• "The perceived social legitimacy of entrepreneurship makes a difference. GEM 2000 used a variety of measures to determine the level of respect in the community for those starting businesses. The promotion of entrepreneurship, its role in society and the opportunities it presents for personal gain, appears to be critical for facilitating economic growth.
• "Policies geared toward enhancing the entrepreneurial capacity of a society (i.e., the skills and motivation to pursue opportunities) will have the greatest impact on the level of entrepreneurial activity.
• "Increasing the participation of women in entrepreneurship is necessary for long-term economic prosperity.
• "For the greatest long-term impact, policies should encourage the involvement of people younger than 25 and older than 44 in the entrepreneurial process.
• "Any government committed to sustained economic progress must ensure that all aspects of its economic system are conducive to and supportive of increased levels of entrepreneurial activity. This includes minimizing taxation, ensuring access to labor, lowering non-wage labor costs, reducing the regulatory burden and making it easier to do business with the government.
• "Policies should facilitate the development of a professional venture capital industry and create incentives for private individuals to invest directly in early-stage businesses."

The report also includes profiles of each of the 21 countries included in the study, as well as examples of several programs implemented to encourage entrepreneurship.

GEM 2000 was prepared by a research team from Babson College and the London Business School with support from the Ewing Marion Kauffman Foundation. The full report can be downloaded from the National Commission on Entrepreneurship's website: http://www.ncoe.org/research/index.html.