The current state of entrepreneurship in Europe and the world

Results of the Global Entrepreneurship Monitor 2014

The biggest deterrent of entrepreneurship in Europe and around the world is the fear of failure, according to the Global Monitor Entrepreneurship 2014 study:

The Global Monitor Entrepreneurship (GEM) is a study carried out by different agents in the entrepreneurship ecosystem. Since 1999 GEM has been collecting, analyzing and interpreting data from over seventy countries in order to create a world map of entrepreneurship development.

This analysis defines the ability of individuals to act in the business environment within their countries and internationally as described by guidelines and tendencies that prevail in the participating economies. It offers a perspective of if the components of the social system support or hinder the entrepreneurial activity of an economy.

GEM Indicators

GEM is based on 3 indicators to determine entrepreneurial activity.

• Total Early-stage Entrepreneurial Activity (TEA): Percentage of individuals aged 18-64 who are either a nascent entrepreneur or owner-manager of a new business.

• Entrepreneurial Employee Activity (EEA): Rate of involvement of employees in entrepreneurial activities, such as developing or launching new goods or services, or setting up a new business unit, a new establishment or subsidiary.

• Social Entrepreneurial Activity (SEA): Rate of individuals engaged in entrepreneurial activities with a social goal.

And the world economies were divided into three categories:

• Factor-Driven Economies

• Efficiency Driven Economies

• Innovation Driven Economies

GEM results in Europe

Results from the survey state that the European Union can be divided into two of these categories: Efficiency- Driven Economies (Croatia*, Hungary*, Lithuania*, Poland*, Romania and Innovation-Driven Economies (Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Netherlands, Portugal, Slovenia, Slovakia, Spain, Sweden, United Kingdom).

The survey focused on different aspects of the entrepreneurship ecosystem to determine individual attributes and social values which aid or hinder entrepreneurial activity. They included the perceived opportunities, perceived capabilities, fear of failure and entrepreneurial intentions.

The conclusions show that countries in the European Union that have had long-term economic problems do not differ much from others in perceiving their capabilities to act entrepreneurially, but they did express the lowest perception of opportunities. With regards to entrepreneurial intentions, European economies have the lowest Total Early Stage Entrepreneurial Activity (TEA) at 7.8% which was also found to be low in North American economies. This correlates with the fact that in such economies jobs are more readily available, so although individuals perceive high capabilities and opportunities, they are not starting up their own adventures.

The fear of failure was a strong inhibitor for seizing opportunities and transforming entrepreneurial intentions into activity. The highest fear of failure in comparison to the perceived opportunities was in EU respondents (49.7%) with the highest rates coming from countries such as Poland (51.1%), Greece (61.6%), Belgium (49.4%) and Italy 49.1%). In contrast, the lowest rates were discovered in Croatia (30.3%), Slovenia (29%) and Austria (34.9%).

Social values towards entrepreneurship were also taken into consideration. Starting a venture was not seen as a good career choice by most individuals in Europe, in contrast to those in North American economies. Only 56.9% on average of individuals in EU countries thought that entrepreneurship was a good career choice, with the outstanding exception of the Netherlands where 79.1% found entrepreneurship a good option. Moreover, European countries showed the lowest values of status for entrepreneurs and lowest media attention dedicated to highlighting entrepreneurial activity.

With respect to how business dynamics affect entrepreneurship activity the GEM 2014 study showed that the European Union has a balanced level of early-stage entrepreneurs (TEA 7.8%) with the established business ownership rate (6.7%). This balance may be explained by the presence of a more efficient entrepreneurship ecosystem which supports new entrants in business activity. Similarly, it is shown that EU member states shared a reasonable difference between the rate of entrance and rate of exits from business sectors. This leads to a in Efficiency-Driven economies (4.8%) and Innovation-Driven economies (2.7%) compared to the Factor-Driven economies of Latin/ South America, and Africa (5.4% and 14% respectively). The main reason for discontinuation of a business was found to be lack of profitably.

Another business dynamic taken into consideration by GEM 2014 was that of internationalization. Early-stage entrepreneurs in EU economies were found to have the highest levels of internationalization, with some of the smallest countries taking the lead: Luxembourg 42% business, Croatia 38%, Belgium 33% and Estonia 24%.

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