19 March 2018
Most Entrepreneurs Start Businesses Out of Opportunity Not Necessity
The 2017/18 Global Entrepreneurship Monitor (GEM) reports that that entrepreneurship levels remain stable around the world and opportunity-driven entrepreneurship predominates.
A robust 74% of entrepreneurs around the world have started businesses in pursuit of an opportunity rather than out of necessity – this according to the Global Entrepreneurship Monitor (GEM) 2017/18 Global Report released in February with sponsors Babson College, Universidad Del Desarrollo, Universiti Tun Abdul Razak, and Korea Entrepreneurship Foundation.
“There is often a misperception that necessity drives most entrepreneurs in regions like Africa or Latin America. The reality is that opportunity is overwhelmingly the most common driver of entrepreneurship in nearly every economy we surveyed in 2017,” comments Mike Herrington Executive Director of GEM. “This finding is consistent – GEM has observed a stable pattern in recent years.”
Fifty-four economies participated in the 2017/18 annual GEM survey, covering 68% of the world’s population and 86% of the world’s GDP. In its 19th consecutive year, the report continues to serve as the largest single study of entrepreneurs in the world.
According to the Global Entrepreneurship Monitor (GEM) 2017/18 Global Report:
Total Early-Stage Entrepreneurial Activity (TEA) – measuring both necessity and opportunity entrepreneurs – is highest in Latin America and the Caribbean (LAC) where just under one-fifth of working-age adults are engaged in early-stage entrepreneurial activity. TEA rates are lowest in Europe at 8%.
While improvement-driven opportunity entrepreneurship predominates in all economies except India, economies with higher levels of economic development generally report higher levels of opportunity-driven entrepreneurship and higher levels of innovation (measured by the extent to which entrepreneurs are introducing new products that are unfamiliar to all or some customers and offered by few or no competitors). Regionally speaking, North America tops the motivation index in 2017/18 with 5.2 improvement-driven opportunity entrepreneurs for every necessity-driven entrepreneur. Africa reports the lowest levels with a ratio of just 1.5. Other regional ratios in descending order are: Europe 3.4; Asian/Oceana 3.2; LAC 2.2.
North America is also the region with the highest proportion of entrepreneurs (29.5%) expecting to create six or more jobs in the next five years. The lowest performing region is Africa where just 17% of entrepreneurs planned to create six or more jobs in five years.
LAC, and North America, demonstrate the highest rates of women entrepreneurship (17% and 13%). These two regions also have the highest rates of youth entrepreneurship (17% and 14%). The lowest rates or women and youth entrepreneurship are found in Europe (6% and 7% respectively).
A powerful lever for policy development
According to Herrington, entrepreneurship and innovation remain key levers to create jobs and contribute to economic growth and stability and GEM data continues to make a valuable contribution to policy formulation globally.
GEM tracks 12 entrepreneurship eco-system components that are considered important contributors to building a stimulating environment for entrepreneurs and those with entrepreneurial intentions. Overall, North America has the most conducive entrepreneurial framework conditions and Africa the least favourable.
Change in the environment for entrepreneurship generally happens slowly. However, positive signs can be seen in the fact that among the efficiency and innovation-driven economies that participated in GEM in both 2016 and 2017, most entrepreneurial framework conditions stayed relatively the same or showed small increases. Among 25 efficiency-driven economies, small improvements were seen in entrepreneurial finance, and in government and education conditions, from 2016 to 2017. Both government policies and programmes received higher ratings in 2017, as well as entrepreneurship education at both the school and post-school stage.
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About the Global Entrepreneurship Monitor (GEM)
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 economies, the project expanded to include 73 economies in its 2014 survey. GEM is unique because, unlike most entrepreneurship data sets that measure newer and smaller firms, GEM studies the behaviour of individuals with respect to starting and managing businesses. GEM academic teams in each participating economy 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. Follow GEM on Twitter.
Issued by Rothko on behalf of the Global Entrepreneurship Monitor.