Incubating a worldwide entrepreneurial upsurge
ONE of the most comprehensive annual studies of entrepreneurship has just published its latest report – and it makes fascinating reading about how the world is embracing enterprise at all levels.
The 2016 Global Entrepreneurship Monitor (GEM) survey represents the 18th consecutive year that GEM has tracked entrepreneurial activity; assessed the characteristics, motivations and ambitions of entrepreneurs; and explored the attitudes societies have towards this activity.
The latest report summarises the findings from 65 countries which together cover nearly 70% of the world’s population and 85% of global GDP.
So what are the main findings about the state of entrepreneurship globally?
First of all, more than two-thirds of the adult population believe that entrepreneurs are well-regarded and enjoy high status within their societies, and that starting a business is a good career choice.
While we tend to see enterprise as a Western-driven concept, it is actually Africa that reports the most positive attitudes towards entrepreneurship. In contrast, Europe has the lowest belief in entrepreneurship as a good career and the lowest media publicity for this type of activity.
In terms of self-perceptions about entrepreneurship, around 42% of working-age adults see good opportunities for starting a business in their area, with more than half believing they had the required skills to start a business.
Only a third indicated that fear of failure would inhibit them from pursuing entrepreneurial opportunities.
Of course, the real challenge is in translating that entrepreneurial intention into new start-ups, and that is still an issue in many countries.
In fact, the total early-stage entrepreneurial activity (TEA) rate – measured as the percentage of individuals aged 18-64 who are either a new entrepreneur or owner-manager of a new business – is, on average, 6.7% for the most advanced countries in the survey, around half of what it is in many developed nations.
Worryingly for Europe, which has been struggling to grow its economy recently, it reports three of the four lowest rates in this region, with Italy, Germany and Bulgaria all below 5%.
In fact, European countries show the lowest female involvement in early-stage entrepreneurial activity, with women in Europe only half as likely to be engaged as their male counterparts.
Indeed, Germany, Italy and France have some of the lowest TEA rates for women in the world, with only around 3% of the adult female population engaged in entrepreneurial activity.
This is not surprising, as GEM research has shown that women are generally less likely to know an entrepreneur, as compared to men.
As a result, having fewer role models could not only affect their willingness to engage in entrepreneurial activity, but also the sustainability of their businesses in the long run through mentorship opportunities and professional connections.
Given this, it is imperative to provide women-centred support structures and mentorship networks to provide women with access to experienced people who can inspire, mentor and coach them through the entrepreneurial journey.
In terms of age, the highest prevalence of entrepreneurial activity is among 25 to 34-year-olds and 35 to 44-year-olds, which probably reflects the fact that many in their early to mid-careers have had time to develop their skills and knowledge through education as well as through work experience, building their confidence in their own abilities.
In addition, they may have accumulated necessary resources such as networks, personal savings and access to other financial resources.
The prevalence of early-stage entrepreneurial activity remains relatively low for those aged 18-24 years of age. The lower participation rates among young people may be due to factors such as high involvement in university education or compulsory military service in certain economies.
And while access to finance is one of the biggest issues for all new businesses, young people will have a bigger challenge in that they usually have no credit history or assets to serve as collateral in order to secure loans from financial institutions to fund their start-ups.
This means governments need to look to provide more financial support to those young people who are looking to become entrepreneurs. But that is not enough because, as with women, 18 to 24-year-olds often lack contact with successful entrepreneurial role models whom they can turn to for support and business advice.
Many also do not have workplace experience of their own to draw on and often struggle to build up appropriate professional networks.
That is why a range of support mechanisms, from encouraging enterprise in higher and further education to mentors and access to incubators, needs to be developed to support them in their efforts to start a new business.
Therefore, the GEM report has shown that while entrepreneurial activity remains steady across the world, there still remain challenges in getting critical parts of the population, including young people and women, to become more involved in starting a business.
And given the uncertain state of the world economy and the political changes that may affect its future growth over the next five years, it is critical that all parts of society are encouraged and supported to fulfil their entrepreneurial potential.