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During this such a detailed illustration around global entrep reneurship monitor 2008 executive report.
Niels Bosma • Zoltan J. Acs • Erkko Autio • Alicia Coduras • Jonathan Levie
2008 Executive Report
GLOBAL ENTREPRENEURSHI P MONI TOR
Gl obal Ent r epr eneur shi p Moni t or
2008 Executive Report
Niels Bosma, Zoltan J. Acs, Erkko Autio,
Alicia Coduras, Jonathan Levie
Founding and Sponsoring Institutions
Babson College, Babson Park, MA, US
Lead Sponsoring Institution and Founding Institution
Universidad del Desarrollo, Santiago, Chile
Sponsoring Institution
London Business School, London, UK
Founding Institution
Although GEM data were used in the preparation of this report, their interpretation and use are the sole responsibility of the authors.
The authors also wish to thank Marcia Cole and Sands Creative Group for their exceptional work on this report.
In addition, the authors would like to express their thanks to Chris Aylett (GEM Administrator), Marcia Cole (GEM Project Manager),
Mick Hancock (GEM Project & National Teams Manager), Mark Quill (GEM Data Manager) and all GEM National Teams
for their continued contributions and dedication to GEM.
© 2009 by N. S. Bosma, Z. J. Acs, E. Autio, A. Coduras, J. Levie, and Global Entrepreneurship Research Consortium (GERA).
2
EXECUTIVE SUMMARY 4
1.0 INTRODUCTION 9
1.1 About GEM 7
1.2 The Revised GEM Model 7
1.3 Capturing Entrepreneurship in GEM 11
1.4 GEM Website and Data Availability 13
2.0 ENTREPRENEURIAL ATTITUDES, ACTIVITY AND ASPIRATIONS 14
2.1 Entrepreneurial Attitudes and Perceptions 14
2.2 Entrepreneurial Activity 19
2.3 Entrepreneurial Aspirations 31
3.0 ENTREPRENEURSHIP, INSTITUTIONS AND ECONOMIC DEVELOPMENT 36
3.1 Linking Institutions, Entrepreneurship, and Development 36
3.2 Recognizing the Complex Relationship between Entrepreneurship and Economic
Development Using GEM Data 38
4.0 SPECIAL TOPIC 2008: ENTREPRENEURSHIP EDUCATION AND TRAINING 41
4.1 Participation in Entrepreneurship Education and Training 41
4.2 Expert Opinions on Quality of Entrepreneurship Training 45
4.3 Entrepreneurship Training and Entrepreneurial Attitudes, Aspirations, and Activity
at the Individual Level 48
REFERENCES 51
GEM NATIONAL TEAMS 2008 54
ABOUT THE AUTHORS 61
GEM SPONSORS 62
CONTACTS 63
ENDNOTES 64
Table of Contents
3
Table of Contents
List of Tables
Table 1 Entrepreneurial Attitudes and Perceptions in the 43 GEM 2008 Countries, by Phase of Economic Development 16
Table 2 Prevalence Rates (in %) of Entrepreneurial Activity and Business Owner-Managers across GEM Countries in 2008,
for those Aged 18-64, by Phase of Economic Development 20
Table 3 The Correlation Coef?cients between GE INDEX and Other Major Indices 40
Table 4 Percentage of the Population Aged 18-64 that Received Voluntary or Compulsory Training in Starting a Business
During or After School, by Type of Country 43
Table 5 Percentage of the Population Aged 18-64 that Received Any Training in Starting a Business After School,
by Type of Training Provider 44
Table 6 Perceived Need for and Availability and Quality of Entrepreneurship Education and Training,
by Country and Country Group (Average Ratings by Experts from 1 to 5) 46
Table 7 Percentage of the Population Aged 18-64 Who Are Not Running or Trying to Start a Business and Their Perceptions
of Entrepreneurship, by Type of Business Start-Up Training Received and by Type of Country 49
Table 8 Percentage of the Population Aged 18-64 Expecting to Start a Business in the Next Three Years or Engaged
in Early-Stage Entrepreneurial Activity by Type of Training Received and by Type of Country 50
List of Figures
Figure 1 The Revised GEM Model 10
Figure 2 The Entrepreneurial Process and GEM Operational De?nitions 11
Figure 3 Perceived Opportunities for Starting a Business, 2001-2008 17
Figure 4 Fear of Failure among Those who Perceive Good Start-Up Opportunities, 2001-2008 17
Figure 5 Perceived Skills and Knowledge to Start a New Business, 2001-2008 18
Figure 6 Intentions to Start a New Business in the Next Three Years, 2002-2008 18
Figure 7 Early-Stage Entrepreneurial Activity (TEA) for 43 Nations in 2008, by Phase of Economic Development,
Showing 95% Con?dence Intervals 21
Figure 8 Early-Stage Entrepreneurial Activity Rates and Per Capita GDP, 2008 22
Figure 9 Necessity- and Improvement-Driven Opportunity Motivations as a Percentage of Early-Stage Entrepreneurial Activity,
GEM 2008 Countries 24
Figure 10 Expressed Reasons behind Discontinuing Businesses, by Age, GEM 2008 24
Figure 11 Sector Distribution Early-Stage Entrepreneurial Activity 25
Figure 12 Sector Distribution Established Business 25
Figure 13 Early-Stage Entrepreneurial Activity Rates for Separate Age Groups, 2008 26
Figure 14 Early-Stage Entrepreneurial Activity Rates by Gender, 2008 27
Figure 15 Early-Stage Entrepreneurial Activity (TEA) Rates for 2001-2008, Averages over Ef?ciency-Driven Countries
and Innovation-Driven Countries 28
Figure 16 Necessity-Driven TEA Rates for 2001-2008, Averages over Ef?ciency-Driven Countries
and Innovation-Driven Countries 28
Figure 17 Prevalence Rates of High-Growth Expectation Early-Stage Entrepreneurship (HEA) in the Adult Population 31
Figure 18 Anatomy of High-Growth Expectation Early-Stage Entrepreneurship (HEA): Percentages in TEA 32
Figure 19 Percentage of Early-Stage Entrepreneurial Activity with New Product-Market Combination,
2002-2008 32
Figure 20 Percentage of Early-Stage Entrepreneurial Activity in Technology Sector, 2002-2008 33
Figure 21 Innovation Con?dence Index for 2007 and 2008 by Country and Country Group 35
Figure 22 The Global Entrepreneurship Index in Terms of GDP PPP 39
Figure 23 Relationships between the Global Entrepreneurship Index and Economic Freedom Index,
Doing Business Index and Global Competitiveness Index 40
Figure 24 Percentage of Adults Aged 18-64 Who Have Used Online Training in Starting a Business 45
4
Executive Summary
Since its inception in 1997 by scholars at Babson College and London Business School, GEM has developed into
one of the world’s leading research consortia concerned with improving our understanding of the relationships
between entrepreneurship and national development. This is the 10
th
annual GEM Global Report. Over the past
decade, harmonized data on entrepreneurial attitudes, activity and aspirations have been collected to provide
annual assessments of the entrepreneurial sector for a wide range of countries.
PARTICIPATING COUNTRIES IN 2008
In this report a distinction is made between factor-driven countries, ef?ciency-driven countries and innovation-
driven countries. This classi?cation follows the 2008 Global Competitiveness Report and is relevant to
entrepreneurship in relation to economic development. As previous GEM research has shown, the relationship
between entrepreneurship and economic development differs along phases of economic development. In 2008,
the following 43 countries participated in the GEM project.
Factor-Driven Economies
Angola, Bolivia, Bosnia and Herzegovina*, Colombia*, Ecuador*, Egypt, India, Iran*
Ef?ciency-Driven Economies
Argentina, Brazil, Chile, Croatia**, Dominican Republic, Hungary**, Jamaica, Latvia, Macedonia, Mexico, Peru,
Romania, Russia, Serbia, South Africa, Turkey, Uruguay
Innovation-Driven economies
Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Republic of Korea,
Netherlands, Norway, Slovenia, Spain, United Kingdom, United States
* Transition country: from factor-driven to ef?ciency-driven
** Transition country: from ef?ciency-driven to innovation-driven
GEM DATA COLLECTION
GEM Adult Population Survey: Measuring Attitudes, Activity and Aspirations
GEM takes a broad view of entrepreneurship and focuses on the role played by individuals in the
entrepreneurial process. The GEM Adult Population Surveys ask a representative sample of at least 2,000
adults in each country about their attitudes to and their involvement in, entrepreneurship. For many
individuals the entrepreneurial process often starts with personal assessments dealing with attitudes and
perceptions to entrepreneurship. GEM therefore collects data on attitudes and perceptions such as perceived
opportunities to start businesses, perceived skills and knowledge to start businesses, and national support for
starting a business as a good career choice. Also, GEM asks adults about intentions to start a business in the
near future.
Unlike most entrepreneurship data sets that measure newer and smaller ?rms, GEM studies individuals’
activities with respect to starting and managing a business. Furthermore, GEM views entrepreneurship as a
process and considers people in entrepreneurial activity in different phases from the very early phase when the
business is in gestation to the established phase and possibly discontinuation of the business.
Within this context, GEM provides a means by which a wide variety of important entrepreneurial aspirations
such as innovativeness, competitiveness and high-growth aspirations can be systematically and rigorously
studied.
5
GEM National Expert Survey: Measuring
Entrepreneurial Framework Conditions
To see how conditions for entrepreneurship
differ across countries, GEM countries survey
experts in several ?elds that are important for
entrepreneurship. Examples of such Entrepreneurial
Framework Conditions (EFCs) are national policies
for entrepreneurship, entrepreneurial ?nance and
the extent to which entrepreneurship is re?ected in
education and training.
KEY FINDINGS IN 2008
Entrepreneurial Attitudes
The GEM 2008 surveys were conducted mostly during
May and June, when the start of the credit crisis
loomed but before the true impact of the current
economic crisis became apparent. Nevertheless, an
overall decline in perceived opportunities to start a
business in 2008 was observed. Countries showing the
severest declines in the rate of perceived opportunities
(between 50 and 30 percent) include Iceland, Chile,
Ireland, Latvia and Hungary.
Perceived skills and knowledge to start a business
were not affected by the business cycle. Also intentions
to start a business within three years do not appear
to have declined as much in 2008 as perceived
opportunities. There are several possible explanations
for this. First, the crisis may actually cause individuals
to seriously consider becoming entrepreneurs in
the near future because they fear they might lose
their jobs. Second, the group of (potential) future
entrepreneurs may be less pessimistic than the total
adult population and may not perceive the ?nancial
crisis as a substantial burden for getting their own
business started – they might for instance draw more
heavily on their own (perceived) capabilities to start a
business. Thirdly, they may have decided to defer the
startup to near the end of the three year period, with
the expectation that the recession will be over within
three years.
Entrepreneurial Activity
In factor-driven economies, with many small-scaled
and local business activities, the rate of involvement
is high for both early-stage entrepreneurial activity
and established business activity. For Angola, however,
the rate of established business activity is very small
compared to the other factor-driven economies, while
the rate of discontinued business is very high. These
?ndings may re?ect Angola’s recent emergence from
prolonged civil war and unrest. For ef?ciency-driven
economies a clear distinction can be made between
Latin American countries with relatively high early-
stage entrepreneurial activity and Eastern European
countries with relatively low rates of early-stage
entrepreneurial activity.
In the United States there is more early-stage
entrepreneurial activity than in EU countries and
Japan. The rate of early-stage entrepreneurship in
Japan has gradually increased in recent years and is
now around the EU average. Some European countries
– most notably Belgium, Germany and France –
consistently have the lowest rates of entrepreneurial
activity levels. This possibly re?ects the relative
risk aversion of European inhabitants and their
declared relative preference for employment over self-
employment. But it also indicates that there are good
income alternatives available, through jobs or social
security.
The overall development of early-stage
entrepreneurial activity in innovation-driven
economies has been quite stable over time. A slight
and gradual rise is observed, from 5.7% in 2002
to 6.4% in 2008. For ef?ciency-driven economies
the pattern is more sensitive to the business cycle.
Argentina in particular has shown a signi?cant
reaction to its national economic crisis; in 2001-
2003 the Argentinean rate of necessity early-stage
entrepreneurs rose from 3.9 to 7.4 percent.
Entrepreneurial Aspirations
Most of the nascent and new entrepreneurs identi?ed
in GEM show either no or only limited job creation
expectations. High-growth expectation entrepreneurial
activity (HEA) varies widely between countries, as
does the relative prevalence of this activity within
early-stage entrepreneurial activity as a whole. For
example, among innovation-driven economies, there
is a 15-fold difference between the adult-population
prevalence rate of high-expectation early-stage
entrepreneurship of the United States and Greece.
The difference is over ?ve-fold between the two largest
emerging economies in the world, China and India.
Colombia, China, Peru and Chile exhibit the highest
prevalence rates of high-expectation entre pre-
neur ship of the factor- and ef?ciency-driven GEM
countries. The United States, New Zealand, Iceland,
and Canada have the highest levels of high-growth
expectation entrepreneurial activity in innovation-
driven economies. The HEA rate for these countries is
well over 1%. The lowest levels of HEA, at under 0.5%,
occur in Belgium, France, Spain, Japan, Finland and
Greece.
Executive Summary
6
Entrepreneurship: a Complex Relationship with
Institutions and Economic Development
The broad nexus between entrepreneurship, economic
development and institutions is a critical area of
inquiry for understanding entrepreneurship within
or across countries. Not just quantitative measures
of entrepreneurship, but also qualitative measures
of institutional differences are required to estimate
the impact of entrepreneurship on the economic
development of countries.
Chapter 3 introduces a newly constructed complex
index of entrepreneurship that combines GEM
measures on attitudes, activity and aspirations with
other economic indicators that concentrate more on
the institutional characteristics. The relationship
between this Global Entrepreneurship Index (GEI)
and economic development is S-shaped: when factor-
driven economies progress in economic development
beyond a certain threshold, the GEI tends to
increase. The shape of the S-curve broadly matches
the three phases of economic development. The
GEI is also positively related to three other facets
of the “development diamond:” economic freedom,
competitiveness and the ease of doing business.
The insights resulting from such an index could help
policymakers understand how different aspects of
policy can affect productive entrepreneurship through
the major phases of economic development.
GEM Special Topic 2008: Education and
Training
GEM expert surveys in most countries consistently
report that entrepreneurship education and training
is poor or inadequate. This is why entrepreneurship
education and training was chosen as a special topic
for GEM 2008. Thirty nine out of 43 GEM nations
included additional questions in their adult population
surveys and 31 included additional questions in their
expert surveys.
The relationship between training in starting a
business and entrepreneurial attitudes, aspirations
and activity is generally positive, but varies by
phase of economic development. Around one-?fth
of respondents had received some form of training
in starting a business, but this proportion varied
widely by country. For example, among factor-driven
countries, the proportion of individuals who had
received any training in starting a business, either in
school or after school, varied from 40% in Colombia to
8% in Egypt. In ef?ciency-driven countries, it varied
from 43% in Chile to 6% in Turkey. In innovation-
driven countries, it varied from 48% in Finland to
13% in Israel.
Almost 10% of the respondents had engaged in self-
directed learning, such as reading or observing or
working in other people’s businesses, but this too
varied widely by country. The next most frequent
overall training choice was voluntary formal
education, followed by voluntary training provided
by a college or university but outside the formal
education system. Other sources, such as business
or trade organizations, government agencies, or
employers, typically were used by 3% or less of
individuals. Colombia, Chile, Peru and Finland had
higher than usual usage of all sources.
In factor-driven economies, quality and quantity of
training is associated with higher levels of necessity-
based entrepreneurial activity, while in ef?ciency-
driven countries, it is associated with higher levels
of market-expansion entrepreneurial activity. In
innovation-driven countries, training levels are
negatively associated with some attitudinal and
activity measures.
Rates of early-stage entrepreneurial activity among
those who had received compulsory training were
around three-quarters of the rate of those who had
received voluntary training, while the “yield” to
training varied from 1.5 times the untrained rate for
compulsory training in factor-driven countries to 2.5
times the untrained rate for voluntary training in
innovation-driven countries.
Executive Summary
7
Introduction
1.1 ABOUT GEM
Although it is widely acknowledged that
entrepreneurship is an important force shaping the
changes in the economic landscape, our understanding
of the relationship between entrepreneurship and
development is still far from complete. The quest
to unravel the complex relationship has been
particularly hampered by a lack of cross-national
harmonized data sets on entrepreneurship. Since
1997, the GEM research program has sought to
address this by collecting relevant harmonized data
on an annual basis. GEM focuses on three main
objectives:
• To measure differences in the level of
entrepreneurial activity among countries
• To uncover factors determining national levels
of entrepreneurial activity
• To identify policies that may enhance the
national level of entrepreneurial activity
Traditional analyses of economic growth and
competitiveness have tended to neglect the role
played by new and small ?rms in the economy. GEM
takes a comprehensive approach and considers the
degree of involvement in entrepreneurial activity
within a country, identifying different types and
phases of entrepreneurship.
The Global Entrepreneurship Monitor (GEM)
was conceived in 1997 by Michael Hay and Bill
Bygrave and a prototype study was funded by the
London Business School and Babson College. The
?rst GEM Global study was conducted by a group
of 10 nations in 1999 with Paul Reynolds as the
Principal Investigator. Since then GEM has grown
into a consortium of 64 national teams. In 2004,
the London Business School and Babson College
transferred GEM’s intellectual capital to the Global
Entrepreneurship Research Association (GERA),
which is a not-for-pro?t organization governed
by representatives of the national teams, the two
founding institutions, and sponsoring institutions.
In this 10
th
annual report, we present a revised
conceptual model that will be used to further explore
the role of entrepreneurial activity in the economy.
The model has been updated in accordance with
recent insights on entrepreneurship and economic
growth. In this revised model, different phases of the
economic development of nations are recognized and
the role and nature of entrepreneurship is considered
to differ along these major phases. Three major
phases are recognized: factor-driven economies, which
are primarily extractive in nature, ef?ciency-driven
economies in which scale-intensity is a major driver
of development, and innovation-driven economies
1
. As
countries develop economically, they tend to shift from
one phase to the next.
1.2 THE REVISED GEM MODEL
There is wide agreement on the importance of
entrepreneurship for economic development
2
.
Entrepreneurs drive innovation, they speed up
structural changes in the economy and they force old
incumbent companies to shape up, thereby making
an indirect contribution to productivity. It is widely
accepted that high-impact entrepreneurs in particular
make an outsized contribution to job creation,
sometimes providing for the totality of new net job
creation in the economy
3
.
While important, the contribution of entrepreneurs
to an economy also varies according to its phase
of economic development
4
. According to “received
wisdom,” the level of necessity-driven self-
employment activity is high particularly at low levels
of economic development, as the economy may not
be able to sustain a high enough number of jobs in
high-productivity sectors. As an economy develops,
the level of necessity-driven entrepreneurial activity
gradually declines as productive sectors grow and
supply more employment opportunities. At the same
time, opportunity-driven entrepreneurial activity
tends to pick up, introducing a qualitative change
in overall entrepreneurial activity. This decline in
necessity entrepreneurship followed by an increase
in opportunity entrepreneurship is known as the
“U-curve” hypothesis.
While there is much anecdotal support for the U-curve
hypothesis, it only demonstrates an association and
does not fully re?ect the complexity of the causal
relationship between entrepreneurship and economic
growth. In this year’s GEM report, we introduce a
more nuanced distinction among phases of economic
development, in line with Porter’s typology of “factor-
driven economies,” “ef?ciency-driven economies” and
“innovation-driven economies” (2002).
8
Entrepreneurship in Factor-Driven Economies
Economic development consists of changes in the
quantity and character of economic value added
(Lewis, 1954). These changes result in greater
productivity and rising per capita incomes, and they
often coincide with migration of labor across different
economic sectors in society, for example from primary
and extractive sectors to the manufacturing sector, and
eventually, services (Gries & Naude, 2008). Countries
with low levels of economic development typically have
a large agricultural sector, which provides subsistence
for the majority of the population who mostly still live
in the countryside. This situation changes as industrial
activity starts to develop, often around the extraction
of natural resources. As extractive industry starts to
develop, this triggers economic growth, prompting
surplus population from agriculture to migrate toward
extractive and emergent scale-intensive sectors, which
are often located in speci?c regions. The resulting
oversupply of labor feeds subsistence entrepreneurship
in regional agglomerations, as surplus workers seek to
create self-employment opportunities in order to make
a living.
Entrepreneurship in Ef?ciency-Driven Economies
As the industrial sector develops further, institutions
start to emerge to support further industrialization
and the build-up of scale in the pursuit of higher
productivity through economies of scale. Typically,
national economic policies in scale-intensive economies
shape their emerging economic and ?nancial
institutions to favor large national businesses.
As increasing economic productivity contributes
to ?nancial capital formation, niches may open in
industrial supply chains that service these national
incumbents. This, combined with the opening up
of independent supply of ?nancial capital from the
emerging banking sector, would expand opportunities
for the development of small-scale and medium-sized
manufacturing sectors. Thus, in a scale-intensive
economy, one would expect necessity-driven industrial
activity to gradually fall and give way to an emerging
small-scale manufacturing sector.
Entrepreneurship in Innovation-Driven
Economies
As an economy matures and its wealth increases,
one may expect the emphasis in industrial activity to
gradually shift toward an expanding service sector
that caters to the needs of an increasingly af?uent
population and supplies the services normally
expected of a high-income society. The industrial
sector evolves and experiences improvements in
variety and sophistication. Such a development
would be typically associated with increasing
research and development and knowledge intensity,
as knowledge-generating institutions in the economy
gain momentum. This development opens the way
for the development of innovative, opportunity-
seeking entrepreneurial activity that is not afraid
to challenge established incumbents in the economy.
Often, small and innovative entrepreneurial ?rms
enjoy an innovation productivity advantage over
large incumbents, enabling them to operate as
‘agents of creative destruction.’ To the extent that the
economic and ?nancial institutions created during
the scale-intensive phase of the economy are able
to accommodate and support opportunity-seeking
entrepreneurial activity, innovative entrepreneurial
?rms may emerge as signi?cant drivers of economic
growth and wealth creation (Henrekson, 2005).
Entrepreneurship: Attitudes, Activity
and Aspirations
Different opinions on, and therefore different
de?nitions of, entrepreneurship can be observed in the
recent literature, as well as over time. These historical
views of entrepreneurship are interesting in that they
re?ect the roles of entrepreneurship in each of the
three economic phases we have just outlined. Cantillon
(1755) is believed to be the ?rst scholar to de?ne
entrepreneurship. He quali?ed entrepreneurship as
“as someone who identi?ed the willingness to bear
the personal ?nancial risk of a business venture.”
This de?nition re?ects the role of entrepreneurship
in Europe in the 18
th
century. It relates more to the
static notion of entrepreneurship as being a ‘business
owner’ than the more dynamic notion that has to do
with starting new ventures. At the end of the 19
th
century, Marshall’s view centered on the class of
entrepreneurs and their importance for the market
economy (Marshall, 1890). He described how industrial
entrepreneurs exploited economies of skill and
economies of scale, and likened the most successful of
them akin to large trees in a forest, towering above
their neighbors, depriving them of light and air. The
“Marshallian” view relates well to the economic view
of scale-intensive entrepreneurship as a re?ection of
the ef?ciency-driven stage. Schumpeter (1934;1942)
was a pioneer in linking the dynamic aspect of
entrepreneurship to innovations and economic
development. His concept of “creative destruction”
can be directly linked to the role of entrepreneurship
in innovation-driven countries. Entrepreneurs
introducing product-market combinations move the
technology frontier forward and destroy economic
activity based on older technology.
Current views on entrepreneurship vary, and
this underlines the multi-faceted nature of
entrepreneurship. Davidsson (2004) lists seven
phenomena associated with entrepreneurship,
while Wennekers and Thurik (1999) provide
thirteen different concepts of entrepreneurship.
Introduction
9
Introduction
In a recent study, Godin and colleagues (2008)
identify six common elements of entrepreneurship.
Looking at the proposed constructs in some
detail, three main components may be identi?ed:
entrepreneurial attitudes, entrepreneurial activity
and entrepreneurial aspiration (Acs and Szerb,
2008). These are interlinked in a complex set of feed-
forward and feedback loops. For example, positive
attitudes towards entrepreneurship may increase
entrepreneurial activity and aspiration, which in turn
positively affect attitudes as more positive role models
appear. Positive aspirations may change the nature of
activity, and in turn, change attitudes.
Entrepreneurial attitudes are attitudes toward
entrepreneurship. For example, the extent to
which people think there are good opportunities
for starting a business, or the degree to which they
attach high status to entrepreneurs, might be termed
entrepreneurial attitudes. Other relevant attitudes
might include the level of risk that individuals might
be willing to bear and individuals’ perception of their
own skills, knowledge and experience in business
creation.
Entrepreneurial attitudes can in?uence
entrepreneurial activity but can also be in?uenced by
entrepreneurial activity. For example, the legitimacy
of entrepreneurship in a society, as expressed in
positive entrepreneurial attitudes, can be in?uenced
by whether people know anyone who has started a
business recently. This can be a function of both levels
of entrepreneurial activity and social networking
activity in the society. Individuals who know other
individuals who recently started a business may,
through familiarity with the process, be more likely
to see it as legitimate.
Entrepreneurial attitudes are important because
they express the general feelings of the population
toward entrepreneurs and entrepreneurship. It
is important for countries to have people who can
recognize valuable business opportunities, and who
perceive they have the required skills to exploit
these opportunities. Moreover, if national attitudes
toward entrepreneurship are positive, this will
generate cultural support, help, ?nancial resources,
and networking bene?ts to those who are already
entrepreneurs or want to start a business.
Entrepreneurial activity is multi-faceted, but one
important aspect is the extent to which people in a
population are creating new business activity, both
in absolute terms and relative to other economic
activities, such as business closure. Within the
realm of new business activity, different types of
entrepreneurial activity can be distinguished. For
example, business creation may vary by industry
sector, by the size of the founding team, and by
whether the new venture is legally independent
of other businesses, and in terms of founder
demographics, such as gender, age, or education.
Entrepreneurial activity is best seen as a process
rather than an event
5
. That is why GEM measures
entrepreneurial intentions, and nascent, new, and
established business activity. Examining multiple
components of entrepreneurial activity also allows
us to explore differences among the entrepreneurial
processes across the three major phases of national
economic development. For example, nascent and new
business activity is expected to be high in factor-driven
economies mainly because much of it is motivated by
economic necessity. In innovation-driven economies,
the proportion of opportunity-driven entrepreneurship
is expected to be higher than in factor- and ef?ciency-
driven economies.
Entrepreneurial aspiration re?ects the qualitative
nature of entrepreneurial activity. For example,
entrepreneurs differ in their aspirations to introduce
new products, new production processes, to engage
with foreign markets, to develop a signi?cant
organization, and to fund growth with external
capital. These aspirations, if they are realized, can
signi?cantly affect the economic impact of these
entrepreneurial activities. Product and process
innovation, internationalization, and ambition for
high growth are regarded as hallmarks of ambitious
or high-aspiration entrepreneurship. GEM has created
measures that capture such aspirations.
Entrepreneurial Framework Conditions
The 2007 GEM Global Report discussed the relevance
of Entrepreneurial Framework Conditions (EFCs)
as indicators of a country’s potential to foster
entrepreneurship (Bosma, et al., 2008). EFCs re?ect
major features of a country’s socio-economic milieu
that are expected to have a signi?cant impact on
the entrepreneurial sector. Like the original GEM
model, the revised GEM model maintains that, at the
national level, different framework conditions apply
to established business activity and to new business
activity
6
. What is new about the revised model is
that we have related these conditions to a country’s
phase of economic development. The relevant national
conditions for factor-driven economic activity and
ef?ciency-driven economic activity are adopted from
the Global Competitiveness Report (GCR) 2008 (Porter
and Schwab, 2008). With respect to innovation-driven
economic activity, the revised GEM model makes
a contribution to the GCR perspective on economic
development by identifying framework conditions
that are speci?c to innovation and entrepreneurship.
As Acs and colleagues (2003) propose, it is the
entrepreneurial mechanism that turns innovation
into economic output. A lack of entrepreneurship can
therefore be seen as a bottleneck for innovation-driven
countries in achieving their growth ambitions.
10
It is important to recognize that all three principal
types of economic activity: factor-driven, ef?ciency-
driven, and innovation-driven, are present
in all national economies. But their relative
prevalence—and their contribution to economic
development—varies. The GCR proposition is that
each phase of economic development has a different
optimal combination of these three activities. The
three phases are labeled according to the activity
that is most signi?cant for that phase. Thus, the
relative importance of entrepreneurial framework
conditions to a country may vary by phase of economic
development. As the 2004 GEM global report noted,
one size does not ?t all (Acs, et al., 2005).
The resulting revised GEM Model is presented in
Figure 1. For factor-driven economies, emphasis is put
on basic requirements: development of institutions,
infrastructure, macroeconomic stability, health, and
primary education. These basic requirements will help
sustain necessity-based entrepreneurship, but may do
little to enable opportunity-based entrepreneurship.
As economies progress and scale economies become
more and more relevant, other conditions, which
ensure a proper functioning of the market and are
called ef?ciency enhancers, become important. Even
though these conditions are not directly related
to entrepreneurship in the Schumpeterian sense,
they are indirectly related since the development of
markets will also attract more entrepreneurship. For
countries whose economic development is primarily
innovation-driven, EFCs become more important
as levers of economic development than basic
requirements or ef?ciency enhancers.
Entrepreneurial attitudes, activity, and aspiration as
dynamic interactive components of entrepreneurship
are characterized in detail in Chapter 2, using the
results of the GEM Adult Population Survey. Chapter
3 focuses on the role of institutions in each of the three
phases. Each year, the GEM reports highlights one
aspect of the GEM conceptual model. In Chapter 4 we
focus on one EFC, entrepreneurship education and
training, which was chosen as a special topic for GEM
in 2008. Extra questions on this special topic were
included in the GEM Adult Population Survey and the
standard National Expert Survey (NES) this year, and
the answers are summarized and commented on with
respect to the revised GEM model.
Social,
Cultural,
Political
Context
Basic requirements
- Institutions
- Infrastructure
- Macroeconomic stability
- Health and primary
education
Established Firms
(primary economy)
Attitudes:
Perceived opportunities
Perceived capacity
Activity:
Early-stage
Persistence
Exits
Aspirations:
Growth
Innovation
Social value creation
New branches,
firm growth
National
Economic
Growth
(Jobs and
Technical
Innovation)
Entrepreneurship
Efficiency enhancers
- Higher education &
training
- Goods market efficiency
- Labor market efficiency
- Financial market
sophistication
- Technological readiness
- Market size
Innovation and
entrepreneurship
- Entrepreneurial finance
- Gov. entrepreneurship
programs
- Entrepreneurship
education
- R&D transfer
- Commercial, legal
infrastructure for
entrepreneurship
- Entry regulation
Figure 1 — The Revised GEM Model
Introduction
11
1.3 CAPTURING ENTREPRENEURSHIP
IN GEM
The previous section showed that entrepreneurship
is a complex phenomenon which spans a variety of
contexts. In line with its objectives, GEM takes a
broad view of entrepreneurship and focuses on the
role played by individuals in the entrepreneurial
process. Unlike most entrepreneurship data sets
that measure newer and smaller ?rms, GEM studies
the behavior of individuals with respect to starting
and managing a business. This differentiates GEM
from other data sets, most of which record ?rm-level
data on (new) ?rm registrations (see Box 1). New
?rms are, most often, started by individuals. Even in
established organizations, individuals have different
entrepreneurial attitudes, activities, and aspirations.
Another guiding principle of GEM research is that
entrepreneurship is a process. Therefore GEM needs
to do more than compare entrepreneurial attitudes
and aspirations of those who are and are not engaging
in entrepreneurship. It also needs to capture attitudes,
activities, and aspirations in different phases of
entrepreneurship, from general intentions to a more
active early or “nascent” phase where businesses are
in gestation, to new businesses that can be identi?ed
as having commenced operations, to the established
phase and possibly discontinuation of the business.
An individual entrepreneur who has succeeded in
creating and sustaining a business has gone through
a process. The entrepreneurial process starts before
the ?rm is operational. Someone who is just starting
a venture and trying to survive in a very competitive
market is an entrepreneur in spite of not having
high-growth aspirations. On the other hand, a
person may be an established business owner who
has been in business for quite a number of years
and still be innovative, competitive, and growth-
minded. This person is also an entrepreneur. GEM
provides an umbrella under which a wide variety of
entrepreneurial characteristics, such as motivations,
innovativeness, competitiveness, and high-growth
aspirations, can be systematically and rigorously
studied.
Within this context, the GEM data collection covers
the life cycle of the entrepreneurial process and
looks at individuals at the point when they commit
resources to start a business they expect to own
themselves (nascent entrepreneurs); when they
currently own and manage a new business that has
paid salaries for more than three months but not
more than 42 months (new business owners); and
when they own and manage an established business
that has been in operation for more than 42 months
(established business owners). Figure 2 summarizes
the entrepreneurial process and GEM’s operational
de?nitions.
For GEM, the payment of any wages for more than
three months to anybody, including the owners, is
considered to be the “birth event” of actual businesses.
Thus, the distinction between nascent entrepreneurs
and new business owners depends on the age of the
business. Businesses that have paid salaries and
wages for more than three months and less than 42
months may be considered new. The cut-off point
of 42 months has been made on a combination of
theoretical and operational grounds
7
.
The prevalence
rate of nascent entrepreneurs and new business
owners taken together may be viewed as an indicator
of early-stage entrepreneurial activity in a country.
It represents dynamic new ?rm activity. Even if a
fair share of nascent entrepreneurs do not succeed in
getting the business started, their actions may have
a bene?cial effect on the economy since the threat
of entry and of new competition can put pressure on
incumbent ?rms to perform better.
Business owners who have paid salaries and wages
for more than 42 months are classi?ed as “established
business owners.” Their businesses have survived
the liability of newness. High rates of established
business ownership may indicate positive conditions
for ?rm survival. However, this is not necessarily the
case. If a country exhibits a high degree of established
entrepreneurship combined with a low degree of early-
stage entrepreneurial activity, this indicates a low
level of dynamism in entrepreneurial activity
8
.
Potential
entrepreneur:
opportunities,
knowledge, and skills
Nascent
entrepreneur:
involved in setting
up a business
Owner-manager
of a new business
(up to
3.5 years old)
Owner-manager
of an established
business (more
than 3.5 years old)
Conception Firm birth Persistence
Early-stage Entrepreneurial Activity (TEA)
Figure 2 — The Entrepreneurial Process and GEM Operational De?nitions
Introduction
12
This year’s GEM report includes 43 countries across the globe. In each of these 43 countries, a survey was held
among a representative sample of at least 2,000 adults. More than 150,000 adults were interviewed between
May and October (outside holiday seasons) and answered questions on their attitudes toward and involvement
in entrepreneurial activity.
Box 1. Main Distinctions between GEM Adult
Population Survey Data and Business
Registration Data
GEM is a social survey directed at individuals. In
GEM’s research perspective, it is individuals who
are primary agents in setting up, starting, and
maintaining new and entrepreneurial businesses.
The main distinctions between GEM data and
business registrations data are as follows:
GEM data are obtained using a research design •
that is harmonized over all participating
countries. Despite recent initiatives by
Eurostat, OECD, and the World Bank,
the harmonization of national business
registrations has not yet been achieved. GEM
data uniquely enables reliable comparisons
across countries. The robustness of the GEM
method is demonstrated by the stability of
year-on-year comparisons at the country level.
GEM’s research design implies statistical •
uncertainties in the aggregate (country-
level) results. This is acknowledged by
publishing con?dence intervals for the
obtained entrepreneurship indices. Business
registration data are “count data” and as such
do not require con?dence intervals. However,
the accuracy of registration data as a measure
of new business activity is unclear for several
countries. For example, in the UK, most
businesses are not (and are not required to be)
registered at all, while in Spain registration is
compulsory before trading can commence. In
some countries, businesses may be registered
purely for tax reasons without entrepreneurial
activity taking place, while in other countries
businesses are deliberately not registered to
avoid paying taxes.
GEM tracks people who are in the process of •
setting up a business (nascent entrepreneurs),
as well as people who own and manage
running businesses. These also include
freelancers, or other entrepreneurs who in
some jurisdictions need not register. GEM
also measures attitudes and self-perceptions
regarding entrepreneurship. Insight about
the earliest phase of the start-up process and
the entrepreneurial spirit is very relevant for
policy makers.
The primary purpose of GEM is • not to
count the number of new businesses in
different countries. It is about measuring
entrepreneurial spirit and entrepreneurial
activity through different phases of the
entrepreneurial process. Therefore, GEM data
may not be the best source for some basic ?rm-
level characteristics, particularly in countries
that tightly regulate new business activity
and whose citizens have high respect for the
rule of law. For example, to determine sector
distribution of existing ?rms, registration data
are mostly preferable over GEM data (with
the possible exception of GEM countries with
a large number of respondents, such as Spain
and the UK).
GEM generates more than measures of •
entrepreneurial activity; it also generates
measures of entrepreneurial attitudes and
aspirations. Examples are motivations for
being self-employed, the degree of innovative
activities, and growth expectation. However,
these characteristics should always be derived
from an adequate sample; to achieve this, one
may need to merge the GEM samples over
several years.
In the Appendix of the GEM Global Report 2005,
measures were derived from GEM data based on
de?nitions of self-employment rates and start-up
rates as published by the OECD and Eurostat.
The rates based on GEM data appeared to
match the rates on registrations data fairly well.
Nevertheless, one should be aware that the GEM
data are distinctive, and designed to measure
entrepreneurial activity across a wide range of
countries, including those where government
business registration data may not provide a true
and fair re?ection of actual business activity.
Introduction
13
Introduction
1.4 GEM WEBSITE AND DATA AVAILABILITY
GEM is a consortium of national teams, participating in the Global Entrepreneurship Research Association
(GERA—the umbrella organization that hosts the GEM project). Thanks to the effort and dedication of
hundreds of entrepreneurship scholars as well as policy advisors across the globe, the GEM consortium consists
of a unique network building a unique data set. Contact details, GEM 2008 National Summary Sheets, and
national teams’ micro-sites can be found on www.gemconsortium.org. A selection of GEM data is also made
available on this website. The GEM website provides an updated list of the growing number of peer-reviewed
scienti?c articles based on GEM data.
Glossary of Main Measures and Terminology
MEASURE DESCRIPTION
Entrepreneurial Attitudes and Perceptions
Perceived opportunities
Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded)
who see good opportunities to start a ?rm in the area where they live
Perceived capabilities
Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded) who
believe they have the required skills and knowledge to start a business
Entrepreneurial intention
Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded) who
intend to start a business within three years
Fear of failure rate
Percentage of 18-64 population with positive perceived opportunities (individuals involved in any stage of
entrepreneurial activity excluded) who indicate that fear of failure would prevent them from setting up a
business
Entrepreneurship as desirable career choice
Percentage of 18-64 population who agree with the statement that in their country, most people consider starting
a business as a desirable career choice
Media attention for entrepreneurship
Percentage of 18-64 population who agree with the statement that in their country, they will often see stories in
the public media about successful new businesses
Entrepreneurial Activity
Nascent entrepreneurship rate
Percentage of 18-64 population who are currently a nascent entrepreneur, i.e., actively involved in setting up a
business they will own or co-own; this business has not paid salaries, wages, or any other payments to the
owners for more than three months
New business ownership rate
Percentage of 18-64 population who are currently a owner-manager of a new business, i.e., owning and
managing a running business that has paid salaries, wages, or any other payments to the owners for more than
three months, but not more than 42 months
Early-stage entrepreneurial activity (TEA)
Percentage of 18-64 population who are either a nascent entrepreneur or owner-manager of a new business
(as de?ned above)
Established business ownership rate
Percentage of 18-64 population who are currently owner-manager of an established business, i.e., owning and
managing a running business that has paid salaries, wages, or any other payments to the owners for more than
42 months
Overall entrepreneurial activity rate
Percentage of 18-64 population who are either involved in early-stage entrepreneurial activity or owner-manager
of an established business (as de?ned above)
Business discontinuation rate
Percentage of 18-64 population who have, in the past 12 months, discontinued a business, either by selling,
shutting down, or otherwise discontinuing an owner/management relationship with the business. Note: This is
NOT a measure of business failure rates.
Improvement-driven opportunity entrepreneurial
activity: relative prevalence
Percentage of those involved in early-stage entrepreneurial activity (as de?ned above) who (i) claim to be driven
by opportunity as opposed to ?nding no other option for work; and (ii) who indicate the main driver for being
involved in this opportunity is being independent or increasing their income, rather than just maintaining their
income
Entrepreneurial Aspirations
High-growth expectation early-stage
entrepreneurial activity (HEA)
Percentage of 18-64 population who are either a nascent entrepreneur or owner-manager of a new business (as
de?ned above) and expect to employ at least 20 employees ?ve years from now
High-growth expectation early-stage
entrepreneurial activity: relative prevalence
Percentage of early-stage entrepreneurs (as de?ned above) who expect to employ at least 20 employees ?ve
years from now
New product-market oriented early-stage
entrepreneurial activity: relative prevalence
Percentage of early-stage entrepreneurs (as de?ned above) who indicate that their product or service is new to
at least some customers and indicate that not many businesses offer the same product or service
Early-stage entrepreneurial activity in
technology sectors: relative prevalence
Percentage of early-stage entrepreneurs (as de?ned above) who are active in the ‘high technology’ or ‘medium high’
technology sector, as classi?ed by OECD (2003)
14
2.0 Entrepreneurial Attitudes, Activity and Aspirations
This chapter provides an assessment of the
characteristics of entrepreneurship in the 43 GEM
2008 countries by presenting several indices that
measure aspects of Entrepreneurial Attitudes,
Activity and Aspirations. The countries included in
this assessment are listed in Box 2. The countries are
grouped into three phases of economic development as
discussed in the Global Competitiveness Report 2008-
2009 (Porter and Schwab, 2008). Phases of economic
development are decided on the level of GDP per
capita and the extent to which countries are factor-
driven in terms of the shares of exports of primary
goods in total exports.
Box 2. Country Groups Used in this
Report for the 43 GEM 2008 Countries
Factor-Driven Economies
Angola, Bolivia, Bosnia and Herzegovina*,
Colombia*, Ecuador*, Egypt, India, Iran*
Ef?ciency-Driven Economies
Argentina, Brazil, Chile, Croatia**,
Dominican Republic, Hungary**, Jamaica,
Latvia, Macedonia, Mexico, Peru, Romania,
Russia, Serbia, South Africa, Turkey, Uruguay
Innovation-Driven Economies
Belgium, Denmark, Finland, France,
Germany, Greece, Iceland, Ireland, Israel,
Italy, Japan, Republic of Korea, Netherlands,
Norway, Slovenia, Spain, United Kingdom,
United States
* Transition country: from factor-driven to
ef?ciency-driven
** Transition country: from ef?ciency-driven
to innovation-driven
2.1 ENTREPRENEURIAL ATTITUDES
AND PERCEPTIONS
Perceptions about entrepreneurship may affect the
supply side and the demand side of entrepreneurship.
On the supply side, or the “pool” of potential
entrepreneurs, important perceptions include both
willingness and perceived ability to become an
entrepreneur (Davidsson, 1991). Education levels
and the availability of entrepreneurship training
programs are possible determinants of perceived
skills (see Chapter 4).
On the demand side, or “space for” entrepreneurship,
there needs to be opportunities for entrepreneurship,
but equally important is that entrepreneurs perceive
that there are opportunities for starting a business
9
.
The quantity and quality of perceived opportunities
may be enhanced by national conditions such as
economic growth, population growth, culture and
national entrepreneurship policy
10
.
But there are more factors than these at play. As
people see more and more successful entrepreneurs
in their direct environment, this may enhance
their perception of their own capabilities without
enhancing actual capabilities. This effect may be
stronger when the economic climate is favorable.
Furthermore, there may be demographic differences in
(perceived) entrepreneurial capabilities for historical
socio-economic or cultural reasons. Policy programs
may explicitly target groups exhibiting low shares
of perceived capabilities as well as low shares of
actual capabilities. Thus, several distinct national
conditions may affect perceived capabilities directly
and indirectly.
If an individual exhibits positive perceptions toward
entrepreneurship, it is by no means certain that he
or she will actually get involved in entrepreneurial
activity. There are several assessments to be made,
which may or may not be conscious. First, there is
the assessment of opportunity costs, which involves
comparing the expected returns of entrepreneurship
to the expected returns of an alternative occupation
11
.
The most common alternative is “being employed.”
Then, there is a risk-reward assessment: even if
the expected returns from entrepreneurship are
considerably higher than the best alternative, the
(perceived) risks involved may be too high for a
person who is thinking about starting a business.
An individual’s risk-avoidance preference may be a
signi?cant factor in the transition from potential (or
latent) entrepreneurship to entrepreneurial activity
(Khilstrom and Laffont, 1979). At the same time, the
individual may also be in?uenced by demographic
characteristics such as age, gender, origin, or ethnicity
15
Entrepreneurial Attitudes, Activity and Aspirations
and also by institutions. For instance, older people
might include their health and the speci?cs of the
health care system in the risk-reward assessment,
while immigrants might perceive fewer alternative
options for earning a living.
Intrinsic assessments as described on the previous
page, may ultimately lead to a proclaimed intention
(and subsequent action) to start a business with
opportunity-related entrepreneurship in mind. This
holds for the bulk of entrepreneurs, particularly
in innovation-driven countries. For some people,
however, being involved in entrepreneurial activity
is a necessity; there are simply no other options
for earning a living and there is no comparative
assessment to be made.
Also, there is no general pattern describing the
sequence in which assessments and decisions are
made and steps are taken. It is also possible that
people decide to start a business when a very speci?c
business opportunity comes into view unexpectedly.
They may act on this even though, before the
business opportunity came their way, they did not
see opportunities to start a business in their area.
These people had not considered setting up a business
until the opportunity was presented to them. Thus,
for entrepreneurs, the perception of opportunities
may come well in advance, or just before setting up
the business, or at the same time
12
. Shane (2003) has
proposed a model of the world in which opportunities
exist
13
but they need to be discovered. In this
view, national governments could consider ways of
increasing the likelihood of discovery as a means of
enhancing the entrepreneurial climate.
Table 1 lists several GEM indicators concerning
individuals’ own perceptions toward entrepreneurship
for each of the 43 GEM 2008 nations. Some countries
have favorable perceptions of entrepreneurship
combined with low rates of intentional
entrepreneurship. This is the case for many
innovation-driven economies in Europe. In other
words, although attitudes and perceptions toward
entrepreneurship are fairly high, the attractiveness of
becoming involved in entrepreneurship appears to be
low for many Europeans compared to other possible
sources of income.
A variety of national characteristics could be
underlying this phenomenon. It could be that there
is a lot of red tape (administrative burdens) attached
to starting a business, reducing the attractiveness
of entrepreneurship. It could also be the case that
employment protection is high. This could discourage
employees with positive entrepreneurial perceptions
from switching to entrepreneurship. A different effect
of stringent employment protection is that potential
entrepreneurs may think carefully before hiring
employees due to the substantial losses they would
incur if their employees became un?t for work, or if
they had to reduce the number of workers.
Fear of failure is often considered an important
cultural component that is detrimental to new ?rm
activity. However, so far this asserted effect has not
been fully con?rmed. Every year, GEM asks a random
sample of individuals if fear of failure would prevent
them from starting up a business. In order to grasp
the “fear of failure” effect, it makes sense to consider
this question only for those who are not currently
involved in entrepreneurship but do perceive good
opportunities for setting up a business. If fear of
failure is prevalent among those who in principle see
good opportunities to start a business, this may justify
intervening to reduce fear of failure.
For many countries with factor-driven and ef?ciency-
driven economies, we see that the difference between
entrepreneurial perceptions and entrepreneurial
intentions is relatively small, or even negative. This
suggests lower opportunity costs for entrepreneurial
activity and higher degrees of necessity-driven
entrepreneurship.
On the right-hand side of Table 1, we present
the results of two indicators measuring national
attitudes to entrepreneurship. The ?rst one assesses
the percentage of inhabitants who feel that in their
country, entrepreneurship is considered a desirable
career choice. This indicator varies widely within
each of the three phases of economic development.
The second indicator relates to the popularity of
entrepreneurship and asks for opinions on the
media coverage for new businesses in the country,
as perceived by the respondents. In countries with
primarily factor-driven economies, these attitudes
should not be the main concern of government (see
Figure 1). In countries with mainly ef?ciency-driven
economies, attention should begin to be paid to
attitudes. Table 1 suggests that attitudes in Hungary
could be improved, while Latin American countries
have in general quite favorable attitudes.
Looking at innovation-driven countries, some
anomalies are apparent. These could provide
governments with clues as to what they could do to
encourage entrepreneurial activity. For example,
in Japan most people agree that there is a lot of
media attention to entrepreneurship, yet starting
a business is still not regarded as a good career
choice. For Denmark it is the other way around. The
Netherlands shows the highest rates of approval
of entrepreneurship as a career, yet only 4% of the
Dutch adult population (early-stage entrepreneurs
and established business owners excluded) expects
to start a business within the next three years. The
Netherlands is an example of a country where there is
much support for entrepreneurship but where the job
market is also favorable.
16
Entrepreneurial Attitudes, Activity and Aspirations
Factor-Driven Economies
% AGREEING
WITH STATEMENT
Angola 74 45 71 44 27 49 46
Bolivia 52 49 38 67 38 81 60
Bosnia and Herzegovina 50 26 39 62 25 82 60
Colombia 65 41 34 54 60 92 78
Ecuador 50 35 33 66 37 79 57
Egypt 40 25 40 53 35 73 57
India 58 46 56 45 33 67 81
Iran 35 22 45 58 36 57 53
Ef?ciency-Driven Economies
Argentina 48 40 30 53 15 69 80
Brazil 44 43 44 49 26 68 78
Chile 30 34 41 54 29 80 44
Croatia 53 36 51 56 10 70 61
Dominican Republic 58 31 54 70 30 92 64
Hungary 26 47 26 43 6 48 19
Jamaica 52 26 46 65 17 81 71
Latvia 37 37 33 23 7 75 71
Macedonia 47 35 46 52 39 80 66
Mexico 59 31 50 55 26 66 52
Peru 60 38 50 66 34 82 71
Romania 45 52 36 21 9 . 56
Russia 39 66 33 14 3 60 50
Serbia 56 28 52 60 31 72 67
South Africa 60 38 41 31 13 65 69
Turkey 47 39 27 44 21 72 63
Uruguay 57 33 40 58 17 71 67
Innovation-Driven Economies
Belgium 23 30 28 34 6 47 38
Denmark 69 43 43 30 5 57 32
Finland 54 32 46 30 5 46 71
France 34 53 33 25 13 63 48
Germany 35 49 29 30 4 56 50
Greece 35 55 35 46 13 76 55
Iceland 38 36 60 45 12 61 81
Ireland 35 37 33 42 6 55 65
Israel 39 43 35 35 14 58 57
Italy 35 48 30 35 7 68 40
Japan 13 44 21 9 4 26 59
Republic of Korea 20 32 32 23 17 69 67
Netherlands 54 33 32 30 4 85 61
Norway 46 28 34 33 7 61 71
Slovenia 55 33 50 44 7 58 67
Spain 32 52 36 43 5 68 43
United Kingdom 41 38 23 45 5 52 54
United States 44 28 33 48 7 63 73
A) Denominator: non-entrepreneurially active adult population 18-64 years
B) Denominator: non-entrepreneurially active adult population 18-64 years that sees good opportunities to start a business
C) Denominator: adult Population 18-64 years
Source: GEM Adult Population Survey (APS)
Table 1 — Entrepreneurial Attitudes and Perceptions in the 43 GEM Countries in 2008,
by Phase of Economic Development
SEES GOOD
OPPORTUNITIES
FOR STARTING A
BUSINESS IN
THE NEXT 6
MONTHS
A)
FEAR OF
FAILURE
WOULD
PREVENT
STARTING
A BUSINESS
B)
PERSONALLY
KNOWS
SOMEONE WHO
STARTED A
BUSINESS IN THE
PAST 2 YEARS
A)
HAS THE
REQUIRED
KNOWLEDGE
AND SKILLS TO
START A
BUSINESS
A)
EXPECTS
TO START A
BUSINESS
IN THE
NEXT THREE
YEARS
A)
COUNTRY ATTITUDES
PERCEIVED BY INDIVIDUALS
ENTREPRENEURSHIP
CONSIDERED AS
DESIRABLE CAREER
CHOICE
C)
MEDIA ATTENTION
FOR
ENTREPRENEURSHIP
C)
17
Entrepreneurial Attitudes, Activity and Aspirations
Development in Perceptions, Intentions
and National Attitudes
Figure 3 displays average annual differences between
ef?ciency-driven and innovation-driven countries
in two types of entrepreneurial attitudes over the
period 2001-2008. Included in this assessment are
only countries that have been participating in GEM
over the entire period, with a maximum dropout of
one year. This includes 17 innovation-driven countries
and six ef?ciency-driven countries
14
. Figure 3 shows
that the developments in perceived opportunities run
reasonably parallel for the two stages of economic
development. Since 2003, the share of people in
ef?ciency-driven countries that see good opportunities
for start-ups in the area where they live has matched
the share in innovation-driven countries. This ?nding
is, however, primarily caused by Argentina showing
very low rates before 2003 in the aftermath of the
national economic crisis and showing high rates
afterwards. The GEM surveys have mostly been
conducted in the months May and June. In 2008, this
was after the ?rst signs of a pending ?nancial crisis
but before the scale of the current economic crisis
was fully appreciated
15
. However, most countries
show a decline in perceived opportunities from 2007-
2008, and this is re?ected in Figure 3. Countries
showing the severest declines in the rate of perceived
opportunities (between 50 and 30 percent) include
Iceland, Chile, Ireland, Latvia and Hungary.
Changes over time in the fear of failure indicator are
shown in Figure 4. The cyclical patterns of ef?ciency-
driven and innovation-driven countries track each
other fairly well. These patterns also appear to be
the inverse of the opportunity indicator. Fear of
failure has risen to some extent in 2008 for both
types of country, and by around the same amount as
opportunity perception has fallen. This ?nding can be
directly related to the perceived economic situation.
During recessions failures have bigger consequences,
as alternative sources of income are scarcer.
20%
25%
30%
35%
40%
45%
2001 2002 2003 2004 2005 2006 2007 2008
Innovation-Driven Economies Efficiency-Driven Economies
Figure 3 — Perceived Opportunities for Starting
a Business, 2001-2008
Figure 4 — Fear of Failure among Those who
Perceive Good Start-Up Opportunities,
2001-2008
Note: Each data point is a simple country average for that year
Source: GEM Adult Population Survey (APS)
Innovation-Driven Economies Efficiency-Driven Economies
25%
30%
35%
40%
45%
50%
2001 2002 2003 2004 2005 2006 2007 2008
18
Entrepreneurial Attitudes, Activity and Aspirations
While perceived opportunities have declined and
fear of failure has increased over the period from
2007-2008, perceived skills and knowledge to start
a business have remained stable, as shown in
Figure 5. Individuals’ perceptions about their own
skills do not appear to be affected by the business
cycle. Furthermore, perceived capabilities for
starting a business in ef?ciency-driven economies
are— on average—higher than in innovation-driven
economies. This is probably because the perception
of an “average” business is different across these
two types of countries (see Bosma and Schutjens,
2009). Therefore the required skills and knowledge to
start a ?rm generally associated with these “average
businesses” are not completely comparable. If the
average business in Mexico, for example, is associated
with lower required skills in comparison to Norway,
the number of people claiming to have these skills will
obviously be higher.
To ?nd out more about future expectations, since 2002
GEM has asked about intentions to start a business
some time over the next three years. Table 2 shows
the country estimates for this indicator in 2008. Here
the rates of intentions to start a business are expected
to differ between ef?ciency-driven economies and
innovation-driven economies. In the lower-income
segment of ef?ciency economies, good job alternatives
are generally more sparsely available. This implies
that more people will intend to start a business.
Indeed we observe this in Figure 6: intention rates are
consistently higher in ef?ciency-driven countries than
in innovation-driven economies. A second noteworthy
?nding is that intentions do not appear to decline
as much in 2008 as perceived opportunities. There
are several possible explanations for this. First, the
crisis may actually cause individuals to seriously
consider becoming entrepreneurs in the near future
because they fear they might lose their jobs. Second,
the group of (potential) future entrepreneurs may be
less pessimistic than the total adult population and
may not perceive the ?nancial crisis as a substantial
burden for getting their own business started—they
might, for instance, draw more heavily on their own
(perceived) capabilities to start a business. Third,
they may have decided to defer the start-up to the end
of the three-year period, in the expectation that the
recession will be over within three years.
Figure 5 — Perceived Skills and Knowledge to
Start a New Business, 2001-2008
30%
32%
34%
36%
38%
40%
42%
44%
46%
48%
50%
2001 2002 2003 2004 2005 2006 2007 2008
Innovation-Driven Economies Efficiency-Driven Economies
Figure 6 — Intentions to Start a New Business
in the Next Three Years, 2002-2008
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2001 2002 2003 2004 2005 2006 2007 2008
Innovation-Driven Economies Efficiency-Driven Economies
Note: Each data point is a simple country average for that year
Source: GEM Adult Population Survey (APS)
19
Entrepreneurial Attitudes, Activity and Aspirations
2.2 ENTREPRENEURIAL ACTIVITY
Table 2 summarizes the involvement in
entrepreneurial activity over several phases of
the entrepreneurial process (see Figure 2) for
each of the 43 GEM 2008 countries. Countries are
grouped according to the major phases of economic
development, consistent with the classi?cation of the
Global Competitiveness Report 2008-2009 (Porter
and Schwab, 2008)
16
. Taken together, the numbers
in the table provide a picture of the characteristics
of overall entrepreneurial activity for each country,
i.e., all types of entrepreneurial activity covering
the entire economic spectrum. It is no surprise that
in factor-driven economies, with many small-scale
and local business activities (see Chapter 1), the
rate of involvement is high for both early-stage
entrepreneurial activity and established business
activity. For Angola, however, the rate of established
business activity is very small compared to the
other factor-driven economies, while the rate of
discontinued business is very high. These ?ndings
may re?ect Angola’s recent emergence from prolonged
civil war and unrest.
In the United States, there is more early-stage
entrepreneurial activity than in EU-countries and
Japan. The rate of early-stage entrepreneurship in
Japan has gradually increased in recent years and
is now around the EU average. Some European
countries—and most notably Belgium, Germany,
and France—consistently have the lowest rates of
entrepreneurial engagement levels. This possibly
re?ects the relative risk aversion of European
inhabitants and their declared relative preference
for employment over self-employment (European
Commission, 2008). But it also indicates that there
are good job alternatives available. It is possible that
in Europe, entrepreneurial behavior manifests itself
more within established ?rms. This is also known as
“intrapreneurship” and “corporate entrepreneurship.”
Currently little is known about how intrapreneurship
activity differs across countries.
20
Table 2 — Prevalence Rates (in %) of Entrepreneurial Activity and Business Owner-Managers across GEM
Countries in 2008, for those Aged 18-64, by Phase of Economic Development
NASCENT
ENTREPREN-
EURIAL ACTIVITY
NEW BUSINESS
OWNER-MANAGER
EARLY-STAGE
ENTREPRENEURIAL
ACTIVITY (TEA)
ESTABLISHED
BUSINESS-OWNER
MANAGERS
OVERALL
ENTREPREN-
EURIAL ACTIVITY
BUSINESS
DISCONTIN-
UATION RATE
SAMPLE SIZE
18-64 YEARS
Factor-Driven Economies
Angola 19.3 4.1 22.7 4.1 26.0 23.4 1,490
Bolivia 17.4 14.3 29.8 19.1 45.6 10.5 1,879
Bosnia and Herzegovina 6.4 2.7 9.0 8.7 17.1 5.0 1,586
Colombia 13.8 11.7 24.5 14.1 36.7 7.1 2,000
Ecuador 8.7 9.1 17.2 11.9 28.1 5.9 2,142
Egypt 7.9 5.5 13.1 8.0 20.2 6.3 2,603
India 6.9 4.9 11.5 16.5 27.6 10.1 1,919
Iran 5.9 3.4 9.2 6.8 15.7 5.2 3,119
Ef?ciency-Driven Economies
Argentina 8.5 8.5 16.5 13.5 29.6 10.2 1,731
Brazil 2.9 9.3 12.0 14.6 26.4 3.5 2,000
Chile 8.6 5.8 14.1 6.8 20.2 5.8 4,068
Croatia 4.9 2.8 7.6 4.8 12.3 2.9 1,696
Dominican Republic 11.7 9.8 20.4 8.2 27.9 11.3 2,013
Hungary 3.8 2.8 6.6 5.3 11.8 1.1 1,994
Jamaica 9.0 7.1 15.6 9.1 24.3 8.9 2,399
Latvia 3.9 2.8 6.5 3.0 9.4 1.7 2,011
Macedonia 7.2 7.7 14.5 11.0 24.8 5.3 1,746
Mexico 9.3 4.0 13.1 4.9 17.8 13.6 2,433
Peru 19.7 6.8 25.6 8.3 32.7 10.4 1,990
Romania 2.5 1.6 4.0 2.1 5.9 2.2 1,667
Russia 1.7 2.0 3.5 1.1 4.4 1.1 1,660
Serbia 4.0 3.6 7.6 9.3 16.5 3.7 1,813
South Africa 5.7 2.1 7.8 2.3 9.9 5.8 2,719
Turkey 3.2 3.0 6.0 4.8 10.7 3.9 2,400
Uruguay 7.7 4.4 11.9 7.9 19.3 9.1 1,645
Innovation-Driven Economies
Belgium 2.0 0.9 2.9 2.6 5.3 1.5 1,997
Denmark 2.3 2.3 4.4 4.4 8.4 1.9 2,012
Finland 4.1 3.3 7.3 9.2 16.0 2.1 2,011
France 3.8 1.9 5.6 2.8 8.2 2.2 1,573
Germany 2.4 1.5 3.8 4.0 7.7 1.8 4,751
Greece 5.3 4.6 9.9 12.6 22.0 2.9 1,962
Iceland 6.5 3.6 10.1 7.1 16.7 3.4 2,002
Ireland 3.3 4.3 7.6 9.0 16.3 3.6 1,924
Israel 3.5 3.1 6.4 4.5 10.6 3.2 1,778
Italy 2.0 2.7 4.6 6.5 11.0 1.8 2,970
Japan 3.2 2.3 5.4 7.9 12.7 1.0 1,879
Republic of Korea 3.5 6.5 10.0 12.8 22.6 4.7 2,000
Netherlands 2.1 3.2 5.2 7.2 12.3 1.6 2,534
Norway 5.0 4.0 8.7 7.7 15.8 3.4 1,614
Slovenia 4.1 2.4 6.4 5.6 11.8 1.3 3,019
Spain 3.3 3.9 7.0 9.1 14.8 1.3 30,879
United Kingdom 3.1 2.9 5.9 6.0 11.7 2.1 5,892
United States 5.9 5.0 10.8 8.3 18.7 4.4 3,441
Entrepreneurial Attitudes, Activity and Aspirations
Source: GEM Adult Population Survey (APS)
21
Entrepreneurial Attitudes, Activity and Aspirations
Figure 7 presents early-stage entrepreneurial
activity (TEA) rates for each GEM 2008 country.
The TEA rate is the proportion of people aged 18-64
who are involved in entrepreneurial activity as a
nascent entrepreneur or as an owner-manager of a
new business. The countries are grouped by phase
of economic development and ranked within groups
in ascending order of the national point estimate for
TEA. Note that if the vertical bars on either side of
the point estimates for TEA of any two countries do
not overlap, this means that they have statistically
different TEA rates
17
. This ?gure serves as a
benchmark for countries to see how they compare
to other countries in similar phases of economic
development. It is certainly not the case that higher
TEA rates are always to be preferred. In factor-driven
economies, for example, a reduction in the TEA rate
may be seen as a good sign, and is especially likely
when the general economic climate is doing well
and job opportunities increase. Such reduction in
TEA would typically be due to a decline in the rate
of necessity entrepreneurship. In innovation-driven
economies, a high TEA rate may be speci?c to regional
economic, demographic, and cultural contexts and may
be composed of entrepreneurs who may vary in type
and aspiration.
GEM reports have demonstrated a consistent
U-shaped association between a country’s level of
economic development and its level and type of
entrepreneurial activity
18
. Figure 8 illustrates this
U-shaped relationship between per-capita GDP
levels and TEA rates for 2008
19
. TEA rates in 2008
are derived from the annual GEM Adult Population
Surveys (APS) administered to representative samples
of the national adult population in 43 countries.
The measure is described in more detail in the
Introduction.
The U-shape pattern can be explained as follows: in
countries with low levels of per capita income the
national economy is characterized by the prevalence
of many very small businesses. As per capita income
increases, industrialization and economies of scale
allow larger and established ?rms to satisfy the
increasing demand of growing markets and to increase
their relative role in the economy. An important
factor for achieving growth is the presence of macro-
economic and political stability, which is re?ected by
the development of strong institutions. The increase
in the role of large ?rms may be accompanied by a
reduction in the number of new businesses, since a
growing number of people ?nd stable employment in
large industrial plants.
0%
5%
10%
15%
20%
25%
30%
35%
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Efficiency-Driven Economies Innovation-Driven Economies
P
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Figure 7 — Early-Stage Entrepreneurial Activity (TEA) for 43 Nations in 2008, by Phase of Economic
Development, Showing 95% Con?dence Intervals
Source: GEM Adult Population Survey (APS)
22
Thus, for countries with low levels of per capita
income, a decrease in prevalence rates of
entrepreneurial activity may be a good sign, especially
if this is accompanied by economic growth and
political stability. As further increases in income are
experienced, the role played by the entrepreneurial
sector may increase, as more individuals can access
the resources to go into business for themselves in an
economic environment that allows the exploitation
of opportunities. Although the annual “snapshot”
of early-stage entrepreneurial activity consistently
shows the shape of the ?tted line over the years, it
does not imply that all countries follow this pattern
over time. This is because there are also other
important national conditions that determine the
rate of early-stage entrepreneurial activity. Also,
the upward slope for high-income countries is only
partially explored because the number of countries
with very high per capita income is limited. There is
no reason to expect that the upward slope will be as
steep as the downward slope.
The dispersion of TEA country estimates around
the line of best ?t in Figure 8 demonstrates that
entrepreneurship rates are not just a function of
differences in economic development (or welfare) but
also of other factors. Entrepreneurship is not just an
economic event; it is a socio-economic phenomenon.
National societies and their economies are to a
large extent shaped by historical developments. The
rapidly expanding body of entrepreneurship studies
as well as ten years of GEM research indicates that
entrepreneurial activity rates may differ across
countries for cultural, institutional, economic, and
demographic reasons. For example, motivations,
regulations, and enforcement of regulations for setting
up a business can be vastly different across the globe.
Geographical patterns can also be witnessed in Figure
8: it shows that countries with similar geographic
backgrounds and traditions tend to cluster together. A
group of EU-15 countries is situated close together at
the lower end of early-stage entrepreneurial activity.
Countries in Eastern Europe and Central Asia are
mainly situated at the left hand side, below the ?tted
curve —even though over the years they appear to
move toward the curve. People in these countries are
not as much engaged in entrepreneurial activity as
citizens of Latin American countries, the Caribbean,
and Angola with similar levels of per capita GDP.
Wealthier countries at the upper right-hand side are
industrialized countries outside the EU—with Ireland
0%
5%
10%
15%
20%
25%
30%
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP Per Capita, in Purchasing Power Parities (PPP)
IN
BO
EG
BA
YU
EC
PE
CO
AO
DO
MK
JM AR
BR UY
MX
CL
IR
ZA
RO
TR
RU
HR
LV HU
KR
GR
SI
IT
FR
IL
JP
BE
DE
DK
NL
ES
FI
UK
IS
IE
US
NO
P
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v
i
t
y
AO: Angola
AR: Argentina
BA: Bosnia & Herz.
BE: Belgium
BO: Bolivia
BR: Brazil
CL: Chile
CO: Colombia
DE: Germany
DK: Denmark
DO: Dominican Rep.
EC: Ecuador
EG: Egypt
ES: Spain
FI: Finland
FR: France
GR: Greece
HR: Croatia
HU: Hungary
IE: Ireland
IL: Israel
IN: India
IR: Iran
IS: Iceland
IT: Italy
JM: Jamaica
JP: Japan
KR: Rep. of Korea
LV: Latvia
MK: Macedonia
MX: Mexico
NL: Netherlands
NO: Norway
PE: Peru
RO: Romania
RU: Russia
SI: Slovenia
TR: Turkey
UK: United Kingdom
US: United States
UY: Uruguay
YU: Serbia
ZA: South Africa
Source: GEM Adult Population Survey (APS) and IMF: World Economic Outlook Database (October 2008 edition)
Figure 8 — Early-Stage Entrepreneurial Activity Rates and Per Capita GDP, 2008
Entrepreneurial Attitudes, Activity and Aspirations
23
as a notable exception. Japan’s rate of early-stage
entrepreneurial activity has, over the years, been
consistently lower than the ?tted curve, but has been
increasing in recent years and is now very similar to
the EU-average.
As the 2007 GEM report demonstrated, institutional
characteristics, demography, entrepreneurial culture,
and the degree of economic welfare all shape a
country’s entrepreneurial landscape. The factors
of culture, demography, institutions, and economic
welfare are linked. For example, national institutions
re?ect the national culture, since they are designed
to formalize norms and values of the country. Also,
countries with well-developed institutions generally
exhibit higher degrees of welfare. Chapter 3 further
explores the role of institutions in enhancing high
impact entrepreneurship.
Entrepreneurial Motivations
Although most individuals are pulled into
entrepreneurial activity because of opportunity
recognition, others are pushed into entrepreneurship
because they have no other means of making a living
or because they fear becoming unemployed in the near
future. For those who are pulled to entrepreneurship,
two major drivers of opportunity entrepreneurship can
be identi?ed: those who are pulled primarily because
they desire independence, and those who are primarily
pulled to entrepreneurship because they want to
increase their income as compared to, for instance,
being an employee. The remaining share includes
people who maintain that they have no other way of
earning a living (necessity-motivated entrepreneurs)
and people who became involved in entrepreneurial
activity primarily to maintain their income
20
. We
should note that GEM may underestimate necessity
entrepreneurship and overestimate opportunity
entrepreneurship. The relevant question in the
GEM survey forces respondents to choose between
“no better options for work” and “exploit business
opportunities”. That is, there is little room for choosing
an option between these extremes and those who ?nd
themselves in between may opt for the latter option
more frequently—even if they are in fact closer to the
former.
In 2007, the calculation method for opportunity-driven
early-stage entrepreneurial activity (opportunity-TEA)
was re?ned. It includes only those who are pulled to
entrepreneurship by opportunity and because they
desire independence or to increase their income, not
those who are pushed to entrepreneurship out of
necessity or those who sought only to maintain their
income. Relative prevalence rates are shown in Figure
9 in black. The countries with high relative prevalence
of improvement-driven opportunity entrepreneurship
are primarily innovation-driven countries. In these
countries, opportunities may be expected to be
more abundant, and individuals may have more
alternatives to make a living. Therefore, the trend of
the degree of opportunity TEA in relation to GDP per
capita gradually slopes upward in Figure 9. The green
line describes the pattern of the degree of necessity
entrepreneurship and is downward sloping
21
. Thus,
when countries progress in economic development,
their rate of necessity entrepreneurship decreases.
This is a clear example of economic development
impacting the TEA rate and not the other way
around. The different slopes of the two trend lines
give support for the interpretation of the U-shaped
pattern in Figure 8 as outlined above. An important
implication is that when linking entrepreneurship to
economic development, the phase of national economic
development should be taken into account.
Discontinuing Business
Business discontinuation is an important feature of
dynamic economies and entries and exits of businesses
are closely correlated
22
. Table 2 displays prevalence
rates of people who discontinued, sold, or quit a
business in the twelve months preceding the GEM
survey. It can be seen that business discontinuance
rates are relatively high in factor-driven economies
(in Angola, for example, the reported rate is as much
as 23%) and relatively low in innovation-driven
economies. Among high-income countries, Norway, the
United States, Republic of Korea, Iceland and Ireland
have the highest rates of business discontinuation.
This suggests that in some countries, there is a rapid
turnover of business experiments.
Many businesses that are discontinued are not failed
businesses. In a study by Headd (Headd, 2003),
owners of about one-third of all ?rms that closed
said their ?rm was successful at closure. In 2008,
GEM respondents who said they had discontinued
a business in the last 12 months were asked if their
business continued. It appears that, on average, about
one-third of the businesses that were discontinued
by a GEM respondent continued in another form
or with different ownership. The respondents who
discontinued a business in the last 12 months were
also asked to state the most important reason for
doing so. Figure 20 shows that the discontinuation
of a business does not necessarily mean the business
failed.
Financial problems were cited as the reason for
quitting the business by no more than 55% of all
respondents; it was cited more often by respondents in
the factor- and ef?ciency-driven economies (just over
50%) than innovation-driven countries (just over 40%).
The business itself not being pro?table was the most
reported ?nancial problem. Problems with raising
?nance were considerably lower in innovation-driven
Entrepreneurial Attitudes, Activity and Aspirations
24
R
2
= 0.41
R
2
= 0.55
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP Per Capita, in Purchasing Power Parities (PPP)
Improvement-driven opportunity Necessity; no better options for work
Linear trend Exponential trend
O
p
p
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A
Source: GEM Adult Population Survey (APS) ) and IMF: World Economic Outlook Database (October 2008 edition)
Figure 9 — Necessity- and Improvement-Driven Opportunity Motivations as a Percentage of Early-Stage
Entrepreneurial Activity, GEM 2008 Countries
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Factor- Driven
Economies
Efficiency- Driven
Economies
Innovation-Driven
Economies
Incident
Personal reasons
Retirement
Exit was planned in
advance
Other job or business
opportunity
Opportunity to sell
Problems getting
finance
Business not profitable
Figure 10 — Expressed Reasons Behind Discontinuing Businesses, by Age, GEM 2008
Source: GEM Adult Population Survey (APS)
Entrepreneurial Attitudes, Activity and Aspirations
25
countries where the Entrepreneurial Framework
Condition “Entrepreneurial Finance” is generally
more developed. “The opportunity to sell” and in
particular “retirement,” were mentioned more often
in innovation-driven countries as the most important
reason to discontinue the business. Personal reasons
caused around 20 – 25% of all discontinuations. Such
reasons could include sickness, family, or business
partner bereavement, divorce, the need to ?nance
an event such as a wedding through sale of business
assets rather than the business itself, or simply
boredom. They were more prevalent in factor- and
ef?ciency-driven countries.
For many entrepreneurs who exit a business, it is
not the end of their entrepreneurial career, but a
new beginning. “Entrepreneurial recycling” (Mason
and Harrison, 2006) manifests itself in two main
ways. First, exited entrepreneurs may start again.
This phenomenon is more than twice as prevalent
in factor-driven and ef?ciency-driven economies
than in innovation-driven economies. Seventeen
percent of nascent entrepreneurs in both factor-
driven economies and ef?ciency-driven economies had
stopped running a business in the past year, compared
with 8% of nascent entrepreneurs in innovation-
driven economies. Second, exited entrepreneurs are
more likely to invest in other people’s businesses than
the rest of the population. Almost a ?fth of exited
entrepreneurs in all three country groups were recent
informal investors: around four to ?ve times that of
other people in factor-driven and ef?ciency-driven
economies and seven times that of other people in
innovation-driven economies.
Sector Distributions
Figures 11 and 12 show the distribution of early-
stage entrepreneurial activity and established
business owner-managers by industry sector and
phase of economic development. This distribution is
different in each of the three major phases of economic
development. Extraction businesses (farming, forestry,
?shing, mining) are more prevalent in factor-driven
economies, transforming businesses (manufacturing
and construction) are more prevalent in ef?ciency-
driven economies, and business services are more
prevalent in innovation-driven economies. The
reducing prevalence of consumer services across the
three major phases is particularly noticeable. Such
services tend to have relatively low resource needs
and are often local in nature, particularly in countries
with poorly developed transportation and commercial
infrastructure.
0% 20% 40% 60% 80% 100%
Factor-Driven
Economies
Efficiency-Driven
Economies
Innovation-Driven
Economies
Extractive Transforming Business Services Consumer oriented
0% 20% 40% 60% 80% 100%
Extractive Transforming Business Services Consumer Oriented
Factor-Driven
Economies
Efficiency-Driven
Economies
Innovation-Driven
Economies
Figure 11 — Sector Distribution Early-Stage
Entrepreneurial Activity
Figure 12 — Sector Distribution
Established Business
Source: GEM Adult Population Survey (APS)
Entrepreneurial Attitudes, Activity and Aspirations
26
Age and Gender Structure
Figure 13 demonstrates that in each phase of
economic development, prevalence rates of early-stage
entrepreneurial activity differ across age groups.
The shapes of the age distributions are very similar
across country groups. The 25-34 years age group
has the highest prevalence rate for every phase of
economic development. Thereafter the prevalence
rates decrease as age increases. This inverted U-shape
pattern re?ects the interaction between desire to
start a business, which tends to reduce with age, and
perceived skills, which tends to increase with age.
Figure 14 displays the differences in female and
male participation for each country in GEM 2008,
ordered by major phase of economic development and
female participation rate
23
. The ratio of female to
male participation varies considerably in each phase,
re?ecting different culture and customs regarding
female participation in economic activity. In some
factor-driven economies, for example Ecuador and
Bolivia, female TEA rates are just below male TEA
rates. In Angola, women are actually more likely
to be involved in early-stage activity than to men.
The situation is very different for Egypt, re?ecting
different culture and customs. For ef?ciency-driven
economies, the gender gap in TEA rates is also quite
low in many Latin American countries and Jamaica.
In many, but not all, eastern European countries male
TEA rates are substantially higher than female TEA
rates. In innovation-driven countries, the general rule
of thumb is that men are twice as likely to be involved
in early-stage entrepreneurial activity than women.
However, this gap is lower in Germany, Spain, Greece,
and the United States.
Trend in Early-Stage Entrepreneurial Activity
2001-2008
According to classic economic thinking, one would
expect that when the business cycle is less favorable,
fewer people will be involved in entrepreneurial
activity because the expected returns are lower in
comparison to times of economic prosperity. A counter
argument is the so-called “refugee” hypothesis
(Storey, 1991; Thurik et al.,, 2008). This hypothesis
implies that when recessions loom, the number of
people involved in TEA should become higher because
employees either fear that their salaries are at risk,
or they have already been let go and self-employment
is the last resort. Figure 9 showed that necessity
entrepreneurship played a relatively small role in
innovation-driven countries in 2008; all high-income
countries fall under the category of innovation-driven
countries. In fact, a large share of TEA consists of
people whose main driver for starting up a business
is the fact that they can work independently. If one
accepts that desire to be independent is the main
driver, little difference over time can be expected for
national TEA rates in innovation-driven countries.
0%
5%
10%
15%
20%
25%
30%
Factor-Driven
Economies
Efficiency-Driven
Economies
Innovation-Driven
Economies
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25-34 YRS
35-44 YRS
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Figure 13 — Early-Stage Entrepreneurial Activity for Separate Age Groups, 2008
Source: GEM Adult Population Survey (APS)
Entrepreneurial Attitudes, Activity and Aspirations
27
Factor-Driven
Economies
Efficiency-Driven Economies Innovation-Driven Economies
P
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Figure 14 — Early-Stage Entrepreneurial Activity Rates by Gender, 2008
Note: Countries are ordered along phase of economic development and female early-stage entrepreneurial
activity rates
Source: GEM Adult Population Survey (APS)
Figure 15 displays the trend in average annual TEA
rates from 2001 to 2008 for a subset of GEM ef?ciency-
driven and innovation-driven countries. These are all
countries that have been part of GEM since 2001 and
have missed at most one year of data collection
24
. Data
is available for only six ef?ciency-driven economies:
Argentina, Brazil, Chile, Croatia, Hungary and South
Africa, so the results should be interpreted with
some care. A total of 17 innovation-driven economies
had suf?cient data to be included. Figure 15 shows
that the overall development over time of TEA in
innovation-driven economies is quite stable. A slight
and gradual rise is observed, from 5.7% in 2002 to
6.4% in 2008. The rates of necessity-driven TEA
are shown in Figure 16 and have, on average, been
very stable as well. For ef?ciency-driven economies,
the pattern is more sensitive to the business cycle.
Argentina, in particular, has shown a signi?cant
reaction to its national economic crisis; in 2001-
2003, the Argentinean rate of necessity early-stage
entrepreneurs rose from 3.9 to 7.4 percent. It leveled
off afterwards as the national economy recovered, but
has been increasing again in recent years.
It remains an unanswered question how much the
current global economic crisis will impact necessity-
driven TEA rates in ef?ciency-driven countries
and innovation-driven countries. Even though the
collapse of the internet bubble in 2001 did not seem
to signi?cantly affect overall TEA rates in innovation-
driven countries, the current crisis clearly poses more
threats to entrepreneurial activity and economic
activity in general. Those looking to GEM data for
guidance should bear in mind that the TEA rate covers
several phases of the start-up process. It includes
the pre-start-up phase—from the moment of actively
starting a business—and the post-start-up phase, up
to the moment a business is up and running for 42
months. In addition, most of the GEM 2008 surveys
were conducted before the summer, when the true
size of the crisis had not manifested itself yet. This
means that the impact of the crisis on TEA rates has
not yet become apparent. This will to a large extent
also hold for the 2009 results; for example, individuals
who started their business in 2007 will still be seen
as early-stage entrepreneurs. However, it is expected
that in due course the crisis will impact both the pre-
start-up phase and the post-start-up phase of early-
stage entrepreneurship in some ways (see Box 3).
Entrepreneurial Attitudes, Activity and Aspirations
28
Figure 15 — Early-Stage Entrepreneurial Activity (TEA) Rates for 2001-2008, Averages
over Ef?ciency-Driven Countries and Innovation-Driven Countries
Innovation-Driven Economies Efficiency-Driven Economies
Figure 16 — Necessity-Driven TEA Rates for 2001-2008,
Averages over Ef?ciency-Driven Countries and Innovation-Driven Countries
Note: Each data point is a simple country average for that year
Source: GEM Adult Population Survey (APS)
Innovation-Driven Economies Efficiency-Driven Economies
Entrepreneurial Attitudes, Activity and Aspirations
29
Box 3. How Does the Current Economic Crisis
Affect Entrepreneurship?
It is clear that the current economic crisis will have
a substantial impact on entrepreneurship. The
crisis started off in the ?nancial sector but has—at
the time this report went into print—already hit
many other parts of the economy severely and
production growth has come to a halt in many
industries, in many countries. In this insert, we
discuss some important implications of the crisis
for entrepreneurship along the three identi?ed
components of attitudes, activity, and aspiration.
The crisis may have different effects on different
types and phases of entrepreneurship, resulting
in both negative and positive trends in activity.
Entrepreneurship is thought to be one of the
mechanisms that helps turn around recessions by
reallocating resources in such a way that promising
new activities replace obsolete economic activities.
However, this only works well if institutions,
captured by the Entrepreneurial Framework
Conditions (EFCs) in Figure 1, are conducive to
this particular entrepreneurship mechanism and
do not, for instance, arti?cially keep alive obsolete
types of economic activity.
Attitudes and Perceptions
The GEM Adult Population Survey measures
several perceptions toward entrepreneurship of a
representative sample of adults. As a result of the
recession, their perceived opportunities for starting
a business will be lower because of (i) declining
demand for products and thus declining expected
returns, and (ii) lower supply of entrepreneurial
?nance caused by banks being more risk averse.
This GEM publication already reports a decline
in perceived opportunities for starting a business.
Fear of failure is also higher because the
implications of failure are higher: there are fewer
alternatives available on the job market for those
who will not be able to make their start-up venture
sustainable.
The issue of access to entrepreneurial ?nance
is especially important for entrepreneurs who
envision a sizeable new venture. The GEM
2006 Financing Report demonstrates that most
business founders expect to ?nance their venture
themselves, and for those who do seek external
sources of funding, relatively small sums are
involved (Bygrave and Quill, 2007). There may
be a trade-off between accessibility of external
funding and the cost of resources. In a recession,
under-used assets will be released by failing
businesses and recycled at a relatively low cost by
other businesses, including new businesses. Also,
the decision to become an entrepreneur is not only
about expected ?nancial returns versus risk, it is
also about (self-perceived) abilities (Davidsson,
1991). Perceived skills are not likely to be affected
by the crisis. The GEM perceived start-up skills
and knowledge indicator—in contrast to perceived
opportunities and fear of failure—was stable in
2008.
National attitudes towards entrepreneurship in
general are unlikely to change dramatically. Such
attitudes include the degree to which people view
entrepreneurship as a good career choice, and
the degree to which the media pays attention to
entrepreneurship.
Activity
Entrepreneurial activity comprises a static
component (in GEM, this is represented by
economic activity in “established” businesses)
and a dynamic component that focuses on early-
stage entrepreneurial activity, but it also includes
new economic activities conducted by established
businesses. Many established businesses in
established sectors may see their turnover dropping
due to a reduction in demand. Their pro?ts may
decrease and the resources for investments may
decrease sharply. Expansion may be more dif?cult
for cash-poor businesses. Factories will stop their
production or might even close permanently.
Established businesses operating in niche markets,
or serving the lower-ends of the market, may be
less harmed, and businesses that are cash-rich may
?nd good opportunities for growth by acquisition as
the value of business assets drops.
The static component of entrepreneurship is
important for preserving economic stability.
Governments may seek to support the existing
stock of businesses to some extent and help to
preserve big and important companies, as well as
help the small business sector to survive. In fact,
many small businesses’ existence is dependent on
the needs of larger businesses. However, companies
that ?nd themselves in trouble not only due to the
?nancial crisis, but also because their products and
services are essentially outdated, should perhaps
not be supported unless they adjust their economic
strategy. It is unavoidable that the number of
discontinuations will increase. The challenge for
governments is to keep alive those ?rms that still
have good potential to do well in the longer run.
While established businesses are important for
preserving stability, early-stage entrepreneurship
Entrepreneurial Attitudes, Activity and Aspirations
30
is important for creating dynamism in economic
activity. Of course, pessimistic economic projections
may lead to fewer people starting up a business.
However, (pending) job losses may also result in
more necessity-motivated entrepreneurship. In this
particular recession, the ?rst group of people to be
affected in this way, those in the ?nancial sector,
exhibit high levels of human capital and ?nancial
capital relevant to entrepreneurship. Thus, the
recession could trigger teams of bright individuals
in the ?nancial sector to start their own companies
based on new but commonly shared principles. This
would in effect be a bottom-up process of reshaping
the ?nancial sector to ?t the needs of the current
globalized economy. It is up to national authorities
to recognize and support such new initiatives
where they can.
Most individuals who planned to start a business
just before the crisis emerged are unlikely to
change these intentions, especially if they are
driven by the wish to work independently—which
is the case with most entrepreneurs in innovation-
driven countries. Figure 15 con?rms that on
average, there has been no signi?cant change
in TEA in innovation-driven countries over the
past year. Many individuals involved in the pre-
start-up phase, however, may have to rethink
their products and strategies. It is often easier
to adjust a business model in the pre-start-up
phase than in the established stage. Banks and
other investors, being less eager to lend money,
will ensure a very thorough selection of new
business activities. In conclusion, the dynamic
component of entrepreneurship, in the form of not
only early-stage entrepreneurial activity but also
new business activities carried out by established
businesses, may be important for the change
in economic activity that is needed to overcome
recessions.
Aspirations
Since many early-stage entrepreneurs lean on
their own skills and knowledge when setting
up their businesses, the impact of the crisis on
growth expectations may be rather low. However,
some new realism may be found among nascent
entrepreneurs. In general, nascent entrepreneurs
tend to overestimate their expected growth
(Koellinger, 2008), but it has also been observed
that those who expect to grow signi?cantly
will, after a few years, exhibit such expansion
more often than low-expectation entrepreneurs
(Davidsson and Wiklund, 1997).
To some extent, the recession can stimulate
innovative entrepreneurship. In economic booms,
much money is spent on research and development,
but the resulting innovations have often not yet
been implemented in new business activities
because the “old” products and processes are
still generating good returns. Times of recession
are often used to actually implement changes in
businesses. This especially goes for established
business activities because there is always much
internal resistance to organizational changes.
Innovations in recessions often pave the way
for a new period of prosperity. For example, the
?rst supermarket in America started up at the
beginning of the Great Depression (Hirooka, 2003).
Economic downturns trigger economic activity that
is directed toward the future, rather than activity
merely prolonging established routines.
Entrepreneurial Attitudes, Activity and Aspirations
31
Source: GEM Adult Population Survey (APS).
Entrepreneurial Attitudes, Activity and Aspirations
2.3 ENTREPRENEURIAL ASPIRATIONS
High-Growth Expectation Entrepreneurship
Studies show that relatively few early-stage
entrepreneurial ?rms contribute a disproportionate
share of all new jobs created by new ?rms (Autio,
2007). In the following analysis, seven years of GEM
data (years 2002-2008) are combined to take a closer
look at how growth ambitions differ among early-
stage entrepreneurs
25
. The GEM method enables
the categorization of early-stage start-up attempts
according to their growth ambition. GEM asks all
identi?ed early-stage entrepreneurs how many
employees they expect to have within ?ve years’ time.
Expectations of high-growth are rare among nascent
and new entrepreneurs. Seventy percent of all start-
up attempts expected any job creation. Only 8% of
all start-up attempts expected to create 20 or more
jobs. In the remainder of this section, we focus on the
prevalence of new and nascent entrepreneurs who
expect their business will employ at least 20 people
in ?ve years’ time. This is known as high-growth
expectation early-stage entrepreneurial activity, or
HEA.
Figure 17 presents the HEA rate in GEM countries
for which a suf?cient sample size was available,
grouped on the basis of per capita GDP. The vertical
bars indicate the 95% con?dence interval. If vertical
bars overlap between two countries, the difference
between those countries is not considered statistically
signi?cant.
Figure 17 is broadly consistent with the notion that
national HEA rates vary with economic context. The
United States, New Zealand, Iceland, and Canada
have higher levels of HEA than other innovation-
driven economies. The HEA rate for these countries
is well over 1%. In the United Kingdom, Switzerland,
Germany, Slovenia, Norway, and Denmark, the HEA
rate is between 0.5 and 0.8%. The lowest levels of
HEA, at under 0.5%, occur in Belgium, France, Spain,
Japan, Finland, and Greece. Within innovation-driven
economies, the differences in prevalence rates of HEA
are considerable, ranging from the United States and
Iceland’s mean of over 1.5%, to approximately 0.3% in
Belgium.
HEA rates can vary even among broadly similar high-
income countries. Among the large EU economies, the
United Kingdom and Germany clearly exhibit higher
levels of HEA than France and Spain. In the Benelux
countries, the Dutch HEA rate is higher than the
Belgian HEA rate. In Scandinavia, the level of HEA in
Iceland is four times higher than that of Finland.
Of the factor- and ef?ciency-driven countries,
Colombia, China, Peru, and Chile exhibit the highest
prevalence rates of high-expectation entre pre neur-
ship
26
. In fact, the HEA rate for China is the highest
of any GEM country, even though it is not statistically
different from that of the United States, New Zealand,
and Iceland. Most other middle- and low-income
countries in the sample exhibit lower HEA rates than
most high-income countries. It is notable that India’s
HEA rate is less than one-?fth that of China.
0.0%
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Percentage of adult population between 18-64 years
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Figure 17 — Prevalence Rates of High-Growth Expectation Early-Stage
Entrepreneurship (HEA) in the Adult Population
32
Efficiency-Driven Innovation-Driven
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Figure 18 — Anatomy of High-Growth Expectation Early-Stage Entrepreneurship (HEA):
Percentages in TEA
Efficiency-Driven Innovation-Driven
P
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Figure 19 — Percentage of Early-Stage Entrepreneurial Activity with New Product-Market
Combination, 2002-2008
Entrepreneurial Attitudes, Activity and Aspirations
Source: GEM Adult Population Survey (APS)
Source: GEM Adult Population Survey (APS)
33
An analysis of the anatomy of entrepreneurial
activity (de?ned as the relative prevalence of HEA
entrepreneurs among all TEA entrepreneurs) reveals
a slightly different pattern to that shown in Figure 17.
Figure 18 shows that the countries with arguably the
“healthiest” entrepreneurial anatomies, in this sample
of nations, are Singapore, Latvia, Hong Kong, China
and Turkey. In Singapore and Hong Kong, over 20%
of nascent and new entrepreneurs aspire for rapid
growth, the highest relative prevalence of HEA of
all innovation-driven countries in the sample. Thus,
in spite of their low overall rate of entrepreneurial
activity, the contribution of entrepreneurs to
these two densely populated economies may be
quite signi?cant
27
. Greece and Spain stand out
as countries where very few nascent and new
entrepreneurs (around 5%) anticipate creating a
business of signi?cant size. Also France, Finland,
Belgium, Australia, and Norway exhibit low levels of
entrepreneurial growth ambition, with less than 10%
of all start-up attempts expecting high-growth.
Among factor-driven and ef?ciency-driven economies,
China’s nascent and new entrepreneurs appear to be
the most growth-oriented, with nearly 20% of them
anticipating high-growth. Early-stage entrepreneurial
activity in India and Mexico, on the other hand, is
marked by low levels of growth expectation.
In summary, innovation-driven economies typically
have a higher relative prevalence of HEA than
ef?ciency-driven and factor-driven economies. There
are notable exceptions to this overall pattern, however.
Some high-income countries have low relative
prevalence of HEA and some middle- and low-income
economies have high relative prevalence.
Innovation- and Technology- Oriented
Entrepreneurial Activity
The essence of Schumpeter’s (1942) theory of
creative destruction is that entrepreneurs distort
the market equilibrium by introducing new product-
market combinations or innovations. Sometimes
they use new technologies to do so. By innovating,
entrepreneurs drive less productive ?rms out of
the market and advance the production frontier.
Innovation is therefore an important means by which
entrepreneurial ?rms contribute to economic growth.
GEM assesses innovation in entrepreneurial
businesses in a variety of ways. First, there are
assessments of early-stage entrepreneurs and
established business owner-managers concerning
the novelty (or unfamiliarity) of their products or
services relative to customers’ current experience. A
second way that GEM assesses the innovativeness of
entrepreneurial businesses is by measuring the degree
of competition faced by the business, or whether the
owner-manager perceives that many, few, or no other
businesses offer similar products or services.
Figure 19 evaluates GEM countries on an index that
combines the two measures of innovation discussed
above (product novelty and degree of competition), and
Efficiency-Driven Innovation-Driven
P
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Driven
Figure 20 — Percentage of Early-Stage Entrepreneurial Activity Active
in Technology Sector, 2002-2008
Entrepreneurial Attitudes, Activity and Aspirations
Source: GEM Adult Population Survey (APS)
34
Entrepreneurial Attitudes, Activity and Aspirations
ranks countries in their country groups on the relative
prevalence of innovative early-stage entrepreneurial
activity. In essence, this index measures the
percentage of early-stage entrepreneurs with novel
product-market combinations. These entrepreneurs
offer a product or service they believe is new to some
or all customers and they also believe that there are
few or no businesses offering the same product. In
order to derive more precise estimates, we combined
GEM data from 2002-2008.
Looking at the country groups, it is apparent that
in each group there are countries with high and
low relative prevalence of innovative early-stage
entrepreneurial activity. Interestingly, within the
innovation-driven country group, the EU-countries
emerge as having—on average—the highest relative
prevalence. The ?gure shows, however, a wide
variation in relative prevalence, even within the
EU block. For example, Greece, Spain, and Italy
have relatively few new product-market oriented
entrepreneurs in early-stage entrepreneurial activity,
whereas Denmark, Slovenia, France, and Ireland have
high rates. Among other innovation-driven countries,
it is striking that Asian countries have low relative
prevalence.
Turning to factor-driven and ef?ciency-driven
countries, Figure 19 demonstrates that factor-driven
countries tend to have lower rates of innovative
early-stage entrepreneurial activity, and that some
ef?ciency-driven countries appear to have the highest
rates of all countries in the sample of GEM nations.
In considering these patterns, it is important to
bear in mind that this index works well if both
the availability of new products and services and
the strength of competition are evenly distributed
throughout the world. This is a big assumption to
make. By comparing within country groups, we control
to some extent for differences in product availability
and ferocity of competition. But it may be that some
countries score high on this index merely because
relatively few new products are available in them and
competition is weak.
Information on the business activities of nascent
entrepreneurs and owner-managers is available in
some detail from the GEM Adult Population Surveys
28
.
For example, the share of early-stage entrepreneurs
who are active in technology sectors according to
the OECD de?nition can be estimated
29
. Figure 20
presents these percentages for the selected set of GEM
2008 countries. This ?gure con?rms that countries
in the innovation-driven stage have higher shares
of technology-related early-stage entrepreneurial
activity. Also here, some European countries tend
to score high, although some can also be found at
the lower end of the ranking of innovation-driven
economies on this measure. Chile, Russia, and Latvia
score high among ef?ciency-driven economies. India,
Thailand, and Brazil have the lowest scores.
35
Entrepreneurial Attitudes, Activity and Aspirations
In 2007, the IIIP Innovation Con?dence Index
was developed by the Institute for Innovation &
Information Productivity (IIIP) in association with
GERA. This year, 26 GEM countries collected
data on personal innovation con?dence through
the Adult Population Survey (APS), more than
doubling the number of participating countries
30
.
The premise behind the Index is that innovative
entrepreneurs need customers who are willing
to buy new products and services and to try
products and services that utilize new technology
(Bhidé, 2006). Consumers who are receptive to
such innovations tend to believe that they will
improve their life. The index captures these three
dimensions of innovation con?dence: willingness
to buy new products or services, willingness to try
products or services that involve new technology,
and the belief that new products or services will
improve one’s life. Each dimension is measured
using a ?ve-point scale and then combined into
an index at the country level
31
. The ?nal IC
Index is the average percentage of the sample
agreeing to each item. Figure 21 plots the results
in rank order by country. It shows that innovation
con?dence varies widely, even among countries
at similar stages of economic development, but
tends to be lower in more developed economies.
The IC Index correlates positively with early-stage
entrepreneurial activity (r = .642, p = .000) and
negatively with the mean age of the working age
(18-64) population (r = -.603, p = .001).
Seven countries participated in both 2007 and
2008, enabling an estimate of the stability of the
index. The correlation of the 2007 and 2008 IC
indices for all seven nations was .966 (p = .000).
The index does not appear to be just measuring
consumer con?dence. AC Nielsen found that
consumer con?dence in April 2008 dropped by
10 to 20% of the point estimate for April 2007 in
?ve of these seven countries. In one country, it
remained unchanged and the other country was
not measured. By contrast, the IC Index in six of
these nations dropped by only around 2 to 4% of the
2007 value; only in the UK did it drop by as much
as 9% of the previous year’s point estimate. The
IC Indices and annual changes were uncorrelated
with their respective GCC Indices and their annual
changes. This suggests that the IC Index is stable
and does not track consumer con?dence. For more
details on the IIIP Innovation Con?dence Index,
see www.iii-p.org.
Where innovation and productivity meet...
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Efficiency-Driven Econnomies
IC Index 2007 IC Index 2008 Country Average IC Index 2008
Innovation-Driven Economies Factor-Driven Economies
Figure 21 — Innovation Con?dence Index for 2007 and 2008 by Country and Country Group
Box 4. The Institute for
Innovation & Information
Productivity
36
The interdependence of economic development and
socio-political change is generally recognized by
social scientists (Adelman and Morris, 1965). Joseph
Schumpeter provided an early statement on this
(Schumpeter, 1934). In recent years, economists have
come to recognize what Leibenstein (1968) termed
the “input-completing” and “gap-?lling” capacities of
potential entrepreneurial activity in innovation and
growth, and the signi?cant contribution of innovation
and growth to prosperity and economic welfare (Acs
and Armington, 2006; Schramm, 2006; Audretsch,
2007). Entrepreneurship is considered to be an
important mechanism for economic development
through employment, innovation, and welfare effects
(Wennekers and Thurik, 1999; Baumol, 2002).
The environment shaping the economy affects
the dynamics of entrepreneurship within any
given country. This environment is marked by
interdependencies between economic development
and institutions, which affect other characteristics
such as quality of governance, access to capital, and
other resources, and the perceptions of entrepreneurs.
Institutions are critical determinants of economic
behavior and economic transactions in general, and
they can impose direct and indirect effects on both the
supply and demand of entrepreneurs. Therefore, if
one is interested in understanding entrepreneurship
within or across countries, the broad nexus among
entrepreneurship, economic development, and
institutions is a critical area of inquiry. This nexus is
especially important in helping understand why the
relative contributions of entrepreneurship can vary
signi?cantly across countries and regions.
Understanding this nexus is crucial to gain insight
into what can work for economic development. This is
for the following two reasons. First, the international
economic development community has learned that
a one-size-?ts-all approach simply does not work
(Easterly, 2001). Second, economic importance
attributed to “the entrepreneur” and concurrent
policy interest in his/her activities has exploded in
recent years. This combination suggests that public
policy needs to be informed by the dynamics of
entrepreneurship and economic development, as well
as relevant local institutional conditions and context-
speci?c variables. In fact, one of the main goals of the
GEM project is to measure differences in the level of
entrepreneurial activity among countries. The purpose
of this section is to outline the relationship between
entrepreneurship and economic development and to
sketch the beginnings of a Global Entrepreneurship
Index to measure and understand this relationship.
3.1 LINKING INSTITUTIONS,
ENTREPRENEURSHIP, AND
DEVELOPMENT
For over a century, there has been a trend in economic
activity, exhibited in virtually every developed
industrialized country, away from small ?rms and
toward larger organizations. It was, therefore,
particularly striking when a series of studies identi?ed
that this trend had not only ceased sometime during
the mid-1970s, but had actually begun to reverse
(Blau, 1987; Evans and Leighton, 1989).
More recent
studies have con?rmed this result for most developed
countries in the 1970 and 1980s (Acs, Audretsch, and
Evans, 1994). The empirical evidence clearly shows
that ?rm size distribution in developed countries
began to shift away from larger corporations and
toward entrepreneurial activity.
There are three reasons why entrepreneurial activity
rises in countries in the innovation-driven phase
of economic development: First, the innovation-
driven phase is marked by decreases in the share
of manufacturing in the economy. Virtually all
industrialized market economies experienced a
decline in manufacturing over the last thirty years.
The business service sector expanded relative to
manufacturing. Service ?rms are smaller on average
than manufacturing ?rms, therefore, economy-wide,
average ?rm size may decline. Moreover, service ?rms
provide more opportunities for entrepreneurship. This
is clearly the case in the United States, as well as in
several EU countries, including Germany and Sweden.
Second, technological change during the postwar
period has been biased toward industries in which
entrepreneurial activity is important (Jorgenson,
2001). Improvements in information technologies
such as telecommunications may increase returns to
entrepreneurship. Express mail services, photocopying
services, personal computers, the internet, web
services, and mobile phones services make it less
expensive and less time consuming for geographically
separate individuals to exchange information.
Third, some theorists suggest that the easier it is
to substitute capital for labor, the richer countries
become, and the easier it is to become an entrepreneur
(Aquilina, Klump, and Pietrobelli, 2006).
Thus in countries in the early phases of economic
development, the factor-driven and ef?ciency-driven
phases, entrepreneurial activity would be negatively
related to economic development since most people
would be trying to move from subsistence self-
employment to wage employment. In developed
3.0 Entrepreneurship, Institutions and Economic Development
37
economies, we would expect entrepreneurial activity
to be positively related to economic development
as people shift from wage work to entrepreneurial
activity. These economies have entered the innovation-
driven phase.
This framework seems to imply that the relationship
between entrepreneurial activity and economic
development in the global economy may be U-shaped.
Figure 8 shows that countries with very low levels
of per capita income like Angola, Peru, and Ecuador
all have high levels of early-stage entrepreneurial
activity. As per capita income increases,
entrepreneurial activity tends to decrease, but then
levels off. At the bottom of the U are countries that
appear to be transitioning from ef?ciency-driven
economies to innovation-driven economies, including
many Eastern European countries. Many innovation-
driven countries such as Germany, France, Belgium
and Italy have relatively low levels of entrepreneurial
activity, but the richest, such as the US, Norway, and
Iceland do tend to have higher levels.
Research on the relationship between
entrepreneurship and economic development
has greatly expanded in the past decade. For
example, in 2002, Carree and colleagues examined
the relationship between economic development
and business ownership for OECD countries and
reaf?rmed the existence of a U-shaped relationship.
In 2005, Wennekers and colleagues were the ?rst
to regress GEM data for nascent entrepreneurship
on the level of economic development. They also
found support for the U-shaped relationship among
countries at different stages of development.
However, this line of research is not without
limitations for the study of entrepreneurship and
development. For example, it considers the quantity
rather than the quality of entrepreneurship, and does
not take into account institutional differences between
countries in the same phase of economic development.
It is hard to use this U-shape relationship for
policy purposes, since it seems to suggest that less
entrepreneurship is better for developing countries,
while more is better for developed countries. In
this chapter, we consider a composite measure
of entrepreneurship that could be more useful in
understanding entrepreneurship in both developed
and developing countries. There are at least three
composite measures that have been used to measure
different aspects of economic development in the
global economy. These are brie?y reviewed in the
following paragraphs.
The Ease of Doing Business Index (EDBI) was created
by the World Bank to measure the simplicity of
regulations for businesses and the level of protection
of property rights. It was designed to evaluate the
effect of improving regulations on economic growth
and to determine the optimal levels of business
regulation. Fewer and simpler regulations generate
higher rankings. The index is based on the study of
expert opinion on laws and regulations and ranks
nations based on the average of 10 sub-indices. The
Index of Economic Freedom (IEF), created by the Wall
Street Journal and The Heritage Foundation, uses
10 economic measures to evaluate degree of economic
freedom.
It is based on economic theories of liberty, with the
objective of creating basic institutions that protect
individual liberties in pursuit of economic interests for
greater economic prosperity.
Economic freedom is de?ned as “the absolute right
of property ownership, fully realized freedom of
movement for labor, capital, and goods, and an
absolute absence of coercion or constraint of economic
liberty beyond the extent necessary for citizens to
protect and maintain liberty itself." The IEF, therefore,
evaluates the economic environment or set of policies
for their conduciveness to economic freedom, with
absolute freedom the ideal target. The index uses
statistics from the World Bank, the IMF, and the
Economist Intelligence Unit to score countries.
The Global Competitiveness Index (GCI) is an annual
report by the World Economic Forum, covering about
131 countries. It "assesses the ability of countries to
provide high levels of prosperity to their citizens,”
which is dependent on how productively a country
uses available resources (allocative ef?ciency). The
GCI measures the set of institutions, policies, and
factors that determine short- and medium-term
sustainable levels of economic prosperity. The Index is
based on theoretical and empirical research and made
up of about 90 variables, two-thirds of which come
from the Executive Opinion Survey and one-third from
publicly available data sources such as the United
Nations. It classi?es the variables into nine pillars,
each representing an area considered an important
determinant of competitiveness.
Together with GEM, these three projects represent
a sort of “development diamond” focusing on
freedom, competitiveness, cost of doing business, and
entrepreneurship. There are natural connections
between these facets of the development diamond.
For example, as Carl J. Schramm has argued, “In
the past two years…essays on entrepreneurship and
labor freedom have evinced a growing recognition
that developments on the micro level are centrally
important to economic freedom,” (Schramm, 2008,
p. 15). These facets are being measured with some
regularity but there is not a well-developed overall
measure of entrepreneurial adaptation. Much of the
material required to develop the components of such a
measure can be drawn from existing GEM data.
Entrepreneurship, Institutions and Economic Development
38
3.2 RECOGNIZING THE COMPLEX
RELATIONSHIP BETWEEN
ENTREPRENEURSHIP AND ECONOMIC
DEVELOPMENT USING GEM DATA
In the 2004 Global Entrepreneurship Report,
GEM started to pursue the idea of using the
opportunity-necessity ratio as a composite indicator of
entrepreneurial activity and economic development.
Over the years, GEM researchers began to collect
data on both opportunity entrepreneurship
(starting a business to exploit a perceived business
opportunity) and necessity entrepreneurship
(starting a business because you were pushed into
it). However, both measures show higher levels in
developing countries than in developed countries.
A clearly discernible trend occurs between the ratio
of opportunity to necessity entrepreneurship and
the per capita income of a country. Opportunity to
necessity entrepreneurship ratio is a short-hand
approach to describe the importance of the desirable,
opportunity entrepreneurship relative to the
necessity- induced entrepreneurship. Countries where
more entrepreneurship is motivated more through
the recognition of an economic opportunity than by
necessity have higher levels of income. Complex
measures such as this point the way to a more
nuanced understanding of the relationship between
entrepreneurship and economic development.
Acs and Szerb (2008), Acs and Stenholm (2008),
Ahmad and Hoffmann (2008), and Klapper, Amit,
Guillén and Quesada (2007), among others, are
developing a new family of global entrepreneurship
indices. In this chapter, one such attempt is
summarized: the Global Entrepreneurship Index
(GEI) (Acs and Szerb, 2008). The GEI uses 32
variables (19 from GEM) to create 14 indicators
and three sub indices that measure entrepreneurial
activity, entrepreneurial aspiration and
entrepreneurial attitudes for all 64 countries that
have participated in the GEM project, including
developed and developing countries across the years
2003-2008. The index takes a value from 0 to 1 and is
plotted against income per capita based on purchasing
power parity in U.S. dollars.
Acs and Szerb propose a four level index building
logic: variables and weights, indicators, sub-indices,
and ?nally, the super-index. All three sub-indices
contain several indicators; they can be interpreted
as quasi-independent building blocks of this
entrepreneurship index. The three sub-indices of
attitudes, activity, and aspiration are combined to
produce an entrepreneurship super-index, the Global
Entrepreneurship Index. In this way, the design of
GEI is consistent with the revised GEM model.
Entrepreneurial attitudes are de?ned as the general
attitude of a country population toward recognizing
opportunities, knowing entrepreneurs personally,
attaching high status to entrepreneurs, accepting the
risk associated with business start-up, and possessing
the skills required to create successful start-ups.
Entrepreneurial attitudes are important because
they express the general feelings of the population
toward entrepreneurs and entrepreneurship.
Those people that can recognize valuable business
opportunities, who have the necessary skills to
exploit these opportunities, who attach high status to
entrepreneurs, can bear and handle start-up risk, and
know entrepreneurs personally can be considered as
the reserve army of future entrepreneurial activity.
Moreover, these people can provide the cultural
support, help, ?nancial resources, and networking
potential to those who are already entrepreneurs or
want to start a business.
Entrepreneurial activity is de?ned as the new venture
start-up rate, adjusted for the churning effect of
business closures, initiated by educated entrepreneurs
and launched because of opportunity motivations. For
the calculation of start-up rate, Acs and Szerb use
the GEM TEA index that captures both independent
and “corporate” start-ups. The churning effect
measures the net change of businesses; it is based
on the assumption that a high rate of discontinued
businesses can be harmful. Quality differences in
start-ups are quanti?ed by education, i.e., having
at least post-secondary education. Opportunity
motivation is assumed to be a sign of better planning,
sophisticated strategy, and higher-growth expectations
as compared to necessity motivation.
Entrepreneurial aspiration is de?ned as the effort
of the entrepreneur to engage in introducing new
products or new production processes, to open
foreign markets, to plan to increase the number of
employees substantially, and to be able to ?nance the
business with formal and/or informal venture capital.
Product and process innovation, internationalization
and, high growth are considered to be the heart of
entrepreneurship. The benchmark businesses are
those that sell product/services considered to be new
to at least some of the customers, use a technology
less than ?ve years old, and have sales from foreign
markets. Also included in this sub-index is a ?nance
variable that serves to capture the informal and
formal venture capital potential vital for innovative
start-ups and high-growth ?rms.
The weakness of these sub-indices is that they capture
a limited number of aspects of attitudes, activity, and
aspiration. However, it is logical to expect that these
missing variables have a high correlation with the
chosen variables. Figure 22 shows that when these
sub-indices are combined into one super-index, the
picture of the relationship between entrepreneurship
Entrepreneurship, Institutions and Economic Development
39
and economic development turns out to be mildly
S-shaped rather than U-shaped. Measures such
as this can enable comparisons of developed and
developing countries in the same analysis (Acs and
Szerb, 2008).
The GEI is broadly consistent with the three-
phase model of factor-driven, ef?ciency-driven
and innovation-driven economic development
(Porter, et al., 2002). In the ef?ciency-driven stage,
entrepreneurial activity is mildly increasing or
relatively ?at as necessity entrepreneurship is steadily
reduced and innovation comes from the outside, since
developing countries are far from the technological
frontier (Acemoglu, Aghion, and Filibotti, 2006). This
has been demonstrated in the case of Latin America
by Acs and Amoros (2008). The role of foreign direct
investment becomes critical in creating ef?ciency in
the ef?ciency-driven countries. In innovation-driven
countries, knowledge spills over to move a country to
the technological frontier, enabling a further intensity
of entrepreneurial activity (Baumol, et al., 2007).
Figure 23 shows the relationship between the GEI
Index, the Ease of Doing Business Index, the Index of
Economic Freedom and the Global Competitiveness
Index. The results in Figure 23 demonstrate that
entrepreneurship complements and rounds out
the other facets of the development diamond. In
other words, while we do not imply causation
entrepreneurship, ease of doing business, economic
freedom and competitiveness are all correlated. Table
3 provides a correlation matrix of the GEI along with
the other four major measures of institutions and
development. The correlation 0.79 between the GEI
and the Doing Business Index and 0.79 between the
GEI and the Index of Economic Freedom suggests
that the different facets of the “development diamond”
move together with economic development.
R
2
= 0.65
0
0.1
0.2
0.3
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0.5
0.6
0.7
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0 10,000 20,000 30,000 40,000 50,000 60,000
2007-2008 GDP PPP Average
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Figure 22 — The Global Entrepreneurship Index in Terms of GDP PPP
Source: Acs and Szerb, 2008
Entrepreneurship, Institutions and Economic Development
40
Figure 23 — Relationships between the Global Entrepreneurship Index and Economic Freedom Index,
Doing Business Index and Global Competitiveness Index
Entrepreneurship, Institutions and Economic Development
Note: All coef?cients are signi?cant at p< 0.001
Source: Acs and Szerb, 2008
Table 3 — The Correlation Coef?cients between GE INDEX and Other Major Indices
1 2 3 4 5 6
1 Global Entrepreneurship Index 1 0.82 0.79 0.79 0.89 0.79
2 Global Competitiveness Index 1 0.82 0.76 0.88 0.83
3 Doing Business Rank (normalized) 1 0.84 0.82 0.74
4 Index of Economic Freedom 1 0.85 0.74
5 Corruption Perception Index 1 0.86
6 Per Capita GDP in PPP 2008 World Bank 1
R
2
= 0.68
0
0.1
0.2
0.3
0.4
0.5
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0 0.2 0.4 0.6 0.8 1
Doing Business Index 2008
G
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= 0.64
0
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40 60 80 100
Economic Freedom Index 2008
R
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= 0.69
0
0.1
0.2
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3 3.5 4 4.5 5 5.5 6
Global Competitiveness Index 2008
To conclude, this section introduced a complex index
of entrepreneurship, the Global Entrepreneurship
Index that goes beyond the standard GEM measure of
early-stage entrepreneurial activity. The relationship
between the GEI and the wealth of nations is a mild
S shape rather than U-shape. The GEI supports
both the revised GEM model and the notion of a
“development diamond” composed of four main facets:
economic freedom, competitiveness, the cost of doing
business, and entrepreneurship. These four facets are
positively correlated and appear to move together as
an economy develops, but associate in subtly different
ways. These new insights could help policymakers
understand how different aspects of policy can affect
productive entrepreneurship through the major
phases of economic development.
41
From 10 years of GEM data on expert perceptions
of the environment for entrepreneurship, one theme
stands out. Consistently, GEM expert surveys in every
country demonstrate a general perception that the
provision of entrepreneurship education and training
at school is inadequate. In most countries, experts
also perceive that the provision of entrepreneurship
education and training after school is poor. Yet
several studies have demonstrated links between
provision of entrepreneurship education and levels
of entrepreneurial activity
32
. This makes the topic of
entrepreneurship education and training worthy of
more detailed examination, and it was chosen by GEM
national teams as a special topic subject for 2008.
The GEM model identi?es Entrepreneurship
Education and Training as an entrepreneurial
framework condition that affects levels of
entrepreneurial attitudes, aspirations and activity,
which then affect the level of new enterprises in
the economy. This chapter uses new data collected
in order to shed light on these relationships, while
recognizing how country-level contexts can change
how individuals calculate their allocation of effort into
productive entrepreneurship rather than into other
forms of economic activity.
In 2008, 38 GEM countries collected additional data
on entrepreneurship education and training through
their Adult Population Survey
33
. Every respondent
was asked if they had had training in starting a
business during or after school, and whether this was
voluntary or compulsory. For after-school training,
the nature of the training provider was also obtained.
This provided national-level estimates of the quantity
of entrepreneurship education and training in each
nation, and of the relative importance of different
types of provider.
In addition, entrepreneurship experts in 31 countries
were asked, as usual, to rate the provision of
entrepreneurship education and training in their
country. This year they were also asked to rate
their country on two additional items: the extent to
which startup entrepreneurs in their country needed
help with their plans and the extent to which such
help was available outside the education system.
These ratings provided estimates of the quality of
entrepreneurship education and training. Data was
available for both quantity and quality of education/
training in 28 countries. Six of these were factor-
driven nations, 13 were ef?ciency-driven nations, and
nine were innovation-driven nations.
4.1 PARTICIPATION IN
ENTREPRENEURSHIP EDUCATION
AND TRAINING
Table 4 shows the percentage of working age adults
who received training in starting a business in each
country, by country groups. Overall levels of trained
individuals varied greatly by country within country
groups. For example, among factor-driven countries,
the proportion of individuals who had received any
training in starting a business, either in school or
after school, varied from 40% in Colombia to 8% in
Egypt. In ef?ciency-driven countries, it varied from
43% in Chile to 6% in Turkey. In innovation-driven
countries, it varied from 48% in Finland to 13% in
Israel. This range of training quantity across countries
with similar levels of economic development is
remarkable.
In most countries, the proportion of individuals ever
having had training in starting a business decreased
with age. However, there was no signi?cant decrease
with age in Jamaica, Greece, Iceland and Israel, while
in Japan there was a signi?cant increase in training
levels with age
34
. In India, the Dominican Republic
and Germany, training levels were highest among
adults aged 25-34. Among 18-24 year olds, diffusion of
training ranged from over 60% in Chile and Finland
to under 10% in the Dominican Republic and Turkey.
This gap was much smaller in older age groups.
Among 55-64 year olds, the gap varied from 33% in
Finland to 4% in Egypt.
Women were signi?cantly more likely to have received
training in starting a business than men in only
one country: Latvia. In all factor-driven countries,
men were signi?cantly more likely to have received
training in starting a business than women. In
only nine, or just over half of the ef?ciency-driven
countries, men were signi?cantly more likely to
have received such training. However, 11 or 73% of
innovation-driven countries had signi?cantly higher
levels of training among men than women. These
differences by country groups may re?ect differences
in attendance rates at school and workforce
participation rates among males and females at
different levels of economic development, as well as
differences in entrepreneurial attitudes, aspirations
and activity rates.
Table 5 shows the percentage of individuals who
participated in training in starting a business after
primary or secondary school, by type of training
provider and whether the training was voluntary or
compulsory. It shows that the most frequent source of
training was self-directed learning, such as reading
or observing or working in other people’s businesses,
followed by voluntary formal education and by
4.0 Special Topic 2008: Entrepreneurship Education and Training
42
Special Topic 2008: Entrepeneurship Education and Training
voluntary training provided by a college or university
but outside the formal education system. Other
sources, such as business or trade organizations,
government agencies, or employers, typically were
used by 3% or less of individuals, although Colombia,
Chile, Peru, and Finland stood out as having higher
than usual usage of all sources. Exceptions to these
general trends include Iran, where government
agencies were the most frequent source of training
after self-directed learning, Germany, where chambers
of commerce was the most frequent source of training
after self-directed learning, and Belgium, where
compulsory training was more frequently reported
than voluntary training for most types of training
provider.
Compulsory training was rarely reported by more
than 1% of individuals. However, at least 5% of
individuals in Chile, Latvia, Finland, and Slovenia
reported participating in compulsory training in
starting a business as part of their formal post-school
education.
A striking feature of the patterns in Table 5 is the
contrast in training take-up between close neighbors.
For example, Brazil has one of the lowest rates of
training across all providers, while Chile has one of
the highest. Slovenia and Croatia have relatively
high rates while Hungary, Romania, and Serbia have
relatively low rates.
Those who had participated in training in starting
a business after school were also asked if they had
taken online training. Figure 24 shows the frequency
of use of this form of training by country and country
type. Chile stands out as having a very high rate of
online training usage, with a ?fth of the population
of working age adults noting they have taken this
form of training. This is probably due to integration
of online training into online registration systems in
Chile.
43
Special Topic 2008: Entrepeneurship Education and Training
Table 4 — Percentage of the Population Aged 18-64 that Received Voluntary or Compulsory Training in Starting
a Business During or After School, by Type of Country
SCHOOL
VOLUNTARY
I
SCHOOL
COMPULSORY
SCHOOL
ANY
AFTER
SCHOOL
VOLUNTARY
I
AFTER SCHOOL
COMPULSORY
AFTER
SCHOOL
ANY
ANY
TRAINING
Factor-Driven Economies
Bolivia 8.2 2.4 10.6 10.3 3.9 14.2 19.1
Bosnia and Herzegovina 12.7 0.8 13.5 8.1 2.5 10.6 19.9
Colombia 19.2 4.0 23.2 20.7 8.7 29.4 40.0
Ecuador 16.1 4.3 20.4 8.3 7.3 15.6 27.2
Egypt 3.8 0.9 4.7 2.1 2.1 4.2 7.5
India 3.3 1.7 5.0 3.8 7.0 10.8 13.1
Iran 8.9 6.6 15.4 9.2 10.3 19.5 28.9
Country average 10.3 3.0 13.3 8.8 6.2 14.9 22.2
Ef?ciency-Driven Economies
Argentina 6.4 3.2 9.6 7.3 3.6 10.9 17.4
Brazil 4.5 0.8 5.3 1.6 5.0 6.6 9.4
Chile 16.8 8.5 25.3 18.9 13.8 32.7 42.5
Croatia 8.6 11.1 19.7 8.0 7.6 15.6 27.6
Dominican Republic 4.7 0.6 5.3 1.9 2.1 4.0 7.7
Hungary 2.8 14.2 17.1 1.4 8.6 10.0 24.4
Jamaica 6.8 9.2 16.0 2.9 6.4 9.3 21.0
Latvia 6.1 8.4 14.5 9.0 10.1 19.1 28.0
Macedonia 10.3 2.3 12.6 7.2 3.7 10.9 19.1
Mexico 5.8 3.6 9.5 3.6 5.9 9.5 15.5
Peru 11.5 2.9 14.4 12.2 12.5 24.7 29.6
Romania 3.3 2.2 5.5 2.8 1.8 4.6 8.0
Serbia 1.5 1.5 3.0 2.6 4.9 7.6 10.2
South Africa 6.6 2.7 9.3 3.8 5.2 9.0 13.8
Turkey 1.9 0.6 2.5 1.9 2.3 4.2 6.3
Uruguay 9.7 1.0 10.7 9.5 8.9 18.4 24.1
Country average 6.7 4.6 11.3 5.6 6.3 12.3 19.0
Innovation-Driven Economies
Belgium 17.8 7.0 25.0 3.0 15.2 18.2 33.3
Denmark 2.4 7.1 9.5 2.1 11.9 14.0 22.0
Finland 10.1 7.8 17.9 19.6 20.8 40.4 47.9
France 5.3 4.9 10.2 5.9 6.6 12.5 18.1
Germany 10.3 2.0 12.3 8.4 4.7 13.2 21.0
Greece 5.0 1.2 6.1 6.4 6.5 12.9 17.0
Iceland 6.5 5.3 11.8 11.3 6.5 17.8 26.7
Ireland 8.1 5.8 14.0 9.9 7.6 17.5 26.1
Israel 4.1 1.7 5.8 4.5 4.1 8.6 12.8
Italy 6.0 4.2 10.2 5.3 3.7 9.1 16.5
Japan 2.8 2.1 4.9 10.1 5.6 15.7 17.4
Republic of Korea 2.7 3.2 5.9 3.8 5.4 9.2 13.6
Slovenia 13.0 11.3 24.3 10.3 12.3 22.6 35.7
Spain 9.5 3.0 12.5 7.9 6.8 14.7 21.9
United Kingdom 5.8 3.1 8.9 7.7 6.1 13.8 19.5
Country average 7.3 4.6 11.9 7.7 8.3 16.0 23.3
i: “Voluntary” includes those reporting voluntary training or a mix of voluntary and compulsory training.
44
TYPE OF TRAINING PROVIDER
COLLEGE,
FORMAL
COLLEGE,
INFORMAL
CHAMBER OF
OF COMMERCE
GOV. AGENCY EMPLOYER OTHER
SELF
DIRECTED
LEARNING
VOLUNTARY OR COMPULSORY TRAINING V C V C V C V C V C V C
Factor- Driven Economies
Bolivia 9 1 5 1 3 0 2 0 3 0 4 0 11
Bosnia and Herzegovina 6 0 3 0 2 0 1 0 4 0 2 0 9
Colombia 20 2 10 1 6 0 5 0 4 1 7 0 24
Ecuador 10 2 4 1 4 0 2 0 3 1 3 0 10
Egypt 2 0 1 0 1 0 1 0 1 0 0 0 2
India 3 2 2 1 2 1 2 1 1 1 3 1 5
Iran 6 2 3 2 2 0 8 2 3 1 2 0 10
Country average 8 1 4 1 3 0 3 1 3 1 3 0 10
Ef?ciency-Driven Economies
Argentina 5 1 5 0 5 0 2 0 3 1 2 0 9
Brazil 1 1 1 0 4 0 1 0 1 1 0 0 2
Chile 13 5 10 1 8 1 10 1 9 3 15 0 26
Croatia 6 4 4 1 3 1 1 0 3 1 2 0 12
Dominican Republic 2 0 1 0 1 0 1 0 1 0 0 0 2
Hungary 3 1 2 0 1 0 1 0 1 0 0 0 1
Jamaica 4 3 2 1 1 0 2 1 1 1 0 0 4
Latvia 9 5 4 1 2 0 3 0 3 1 1 0 13
Macedonia 5 1 3 0 3 0 2 0 3 1 2 0 8
Mexico 2 0 1 0 2 0 1 0 2 0 0 0 4
Peru 13 2 11 1 6 0 5 1 6 2 6 1 16
Romania 2 0 1 0 1 0 0 0 1 0 1 0 3
Serbia 1 0 1 0 1 0 2 0 1 0 0 0 3
South Africa 4 2 3 1 2 1 2 1 2 1 2 1 6
Turkey 1 0 1 0 0 0 0 0 1 0 1 0 3
Uruguay 9 2 9 1 8 1 3 0 5 2 4 0 13
Country average 5 2 4 1 3 0 2 0 3 1 2 0 8
Innovation-Driven Economies
Belgium 7 3 2 3 1 2 1 3 1 1 1 2 8
Denmark 3 4 1 1 2 1 0 1 0 0 2 1 8
Finland 16 14 9 1 5 0 6 1 3 1 6 1 30
France 4 2 1 1 5 1 4 1 1 0 4 0 8
Germany 6 1 2 0 7 1 3 1 4 1 3 0 10
Greece 8 1 1 0 4 0 2 0 2 1 1 0 8
Iceland 7 3 4 1 2 0 2 0 4 1 4 0 14
Ireland 6 3 6 1 4 0 6 1 3 2 1 0 14
Israel 4 1 3 1 3 0 3 0 2 0 1 0 6
Italy 6 1 2 0 3 0 1 0 2 1 1 0 6
Japan 6 2 7 1 2 0 2 0 3 1 2 0 12
Republic of Korea 4 1 3 1 2 0 1 0 1 0 1 0 4
Slovenia 9 6 8 1 5 1 4 1 4 2 3 0 15
Spain 9 1 7 1 6 0 5 1 4 1 7 0 10
United Kingdom 6 2 4 1 3 1 3 0 2 1 1 0 10
Country average 7 3 4 1 4 1 3 1 2 1 2 0 11
Table 5 — Percentage of the Population Aged 18-64 that Received Any Training in Starting a Business
After School, by Type of Training Provider
i
Special Topic 2008: Entrepeneurship Education and Training
45
4.2 EXPERT OPINIONS ON QUALITY
OF ENTREPRENEURSHIP TRAINING
We now turn to a different source of evidence on the
state of entrepreneurship education and training
in GEM nations. The GEM national expert survey
contains several measures of quality of training
provision, and these are shown in Table 6. It should
be borne in mind that measures of quality refer to
perceptions of current quality, whereas the quantity
measures displayed in the previous tables refer to
training activities in the past—up to 50 years ago in
the case of older adults. For this reason, there may be
no relationship between current quality of provision
and current outcomes.
Table 6 shows average ratings on a 1 to 5 scale by
entrepreneurship experts in each country on the need
for, availability of, and quality of entrepreneurship
education and training by country and country
group
35
. Within each country group, average
scores varied little from country to country. The
average scores by country type suggest that start-
up entrepreneurs’ need for external help reduces
slightly as countries develop economically, and the
availability of that help increases. The perceived level
of help is insuf?cient in factor-driven countries and
generally suf?cient in innovation-driven countries.
The perceived quality of school-level entrepreneurship
education and training increases with economic
development, but perceived quality of post-school
entrepreneurship education does not, and is seen as
inadequate in almost all innovation-driven countries.
This suggests that experts in most innovation-driven
countries see plenty of help available, but question its
quality.
Among the six factor-driven countries, there was
a high correlation in average ratings by experts of
the quality of school and after-school education and
training in the country (r = .833, p = .039). There
was also a high correlation between the perceived
quality of school-based and after school-based
entrepreneurship education in the country as rated by
country experts and the proportion of individuals who
had voluntarily taken after-school training in starting
a business (r = .825, p = .043; r = .966, p = .002). There
was a high correlation between the proportion of
individuals who had taken compulsory school-based
training and the proportion of individuals who had
taken compulsory after-school-based training (r = .967,
p = .002).
Among males, the quality of post-school
entrepreneurship education and training correlated
signi?cantly with levels of necessity-driven TEA
(r = .880, p = .021) across countries with factor-
driven economies. For females in these countries, it
correlated signi?cantly with opportunity perception
(r = .875, p = .023) and start-up expectation over the
next three years (r = .845, p = .034), and with two
measures of high-growth expectation
36
(r = .881, p =
.02; r = .818, p = .047). Levels of voluntary after-school
training for males and females produced similar
high and signi?cant correlations. National levels of
opportunity perception among females correlated
highly with overall TEA rates (r = .847, p = .033),
necessity entrepreneurship (r = .963, p = .002), and
entrepreneurship aimed at developing and expanding
new markets (r = .879, p = .021).
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Factor-Driven Economies Efficiency-Driven economies Innovation-Driven Economies
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Figure 24 — Percentage of Adults Aged 18-64 Who Have Used Online Training in Starting a Business
Special Topic 2008: Entrepeneurship Education and Training
46
Special Topic 2008: Entrepeneurship Education and Training
ENTREPRENEURS IN
GENERAL NEED HELP
WITH THEIR PLANS
BEFORE STARTUP
ENOUGH HELP
AVAILABLE OUTSIDE
EDUCATION SYSTEM
QUALITY OF
ENTREPRENEURSHIP
EDUCATION AND TRAINING
AT SCHOOL
QUALITY OF
ENTREPRENEURSHIP
EDUCATION AND TRAINING
AFTER SCHOOL
Factor-Driven Economies
Bolivia
3.9
2.3 1.7 2.6
Bosnia and Herzegovina
4.1
2.7 1.9 2.4
Colombia
4.3
2.6 2.0 3.2
Ecuador
3.8
2.3 1.6 2.6
Egypt
4.3
2.1 1.3 1.8
Iran
4.5
3.2 1.7 2.4
Country averages
4.2
2.5 1.7 2.5
Ef?ciency-Driven Economies
Argentina 4.2 2.8 2.1 3.4
Brazil 4.2 2.9 1.6 2.8
Chile 4.1 2.6 1.6 2.9
Croatia 4.2 3.1 2.2 2.8
Dominican Republic 4.2 2.3 1.7 3.2
Jamaica 3.8 2.7 2.0 2.8
Macedonia 4.3 3.1 2.2 2.8
Mexico 4.4 2.9 1.7 3.0
Peru 3.9 2.5 1.9 2.9
Russia n.a. n.a. 2.5 3.1
Serbia 3.9 3.1 2.0 2.9
South Africa 4.1 2.4 1.9 2.5
Turkey 4.1 2.6 1.9 2.7
Uruguay 3.9 3.2 2.1 2.9
Country average 4.2 2.8 2.1 3.4
Innovation-Driven Economies
Denmark 4.3 3.1 2.4 2.4
Finland 4.0 3.7 2.5 2.8
Germany 3.6 3.9 1.9 2.7
Greece 3.7 2.4 1.8 2.5
Ireland 4.1 3.6 2.5 3.0
Italy 4.0 2.8 1.8 2.8
South Korea 3.9 3.6 2.4 2.9
Norway 4.3 2.9 2.6 2.9
Slovenia 3.8 3.5 2.4 3.0
Spain 4.3 3.3 1.9 2.9
United States 3.9 3.3 2.1 2.9
Country averages 4.0 3.3 2.2 2.8
Table 6 — Perceived Need for and Availability and Quality of Entrepreneurship Education and Training,
by Country and Country Group (Average Ratings by Experts from 1 to 5)
47
Special Topic 2008: Entrepeneurship Education and Training
These patterns make sense; for factor-driven
economies, where necessity entrepreneurship is an
important source of economic self-suf?ciency in the
absence of other job opportunities, the quality and
quantity of training available might be expected to
increase the rate of entrepreneurship and the extent
to which individuals can create new and growing
markets where none previously existed. Perhaps
after-school education has a more indirect effect, via
increased opportunity perception, on females than
on males in factor-driven countries. Multi-level,
multivariate analysis would be required to analyze
this in greater detail.
Among the 13 ef?ciency-driven countries, there
were no signi?cant correlations between average
expert assessments of the state of school-based
entrepreneurship education and training in their
country and country-level rates of entrepreneurial
attitudes, aspirations or activity. Expert perceptions
of post-school-based entrepreneurship education and
training correlated mildly with overall entrepreneurial
activity levels for both males and females (r = .606,
p = .028; r = .555, p = .049), and with opportunity
entrepreneurship for males (r = .563, p = .045) and
necessity entrepreneurship for females (r = .703, p =
.007). It also correlated with two measures of growth
expectation among females (r = .680, p = .011; r =
.730, p = .005). For both males and females, levels of
after-school training in starting a business (whether
voluntary or compulsory) correlated highly with
voluntary training at school level (males: r = .920, p
= .000; r = .813, p = .001; females: r = .893, r = .000;
r = .822, p = .001) but not with compulsory training
at school level, with the exception of females and
after-school compulsory training (r = .677, p = .011).
Voluntary school level training levels also correlated
signi?cantly with levels of entrepreneurship with
profound market expansion intentions among males
and females, (r = .774, p = .002; r= .713, p = .006),
and correlated mildly with growth expectation
entrepreneurship among females (r = .554, p = .049).
Among the innovation-driven countries, there
were signi?cant correlations between the
perceptions of experts on the quality of school-based
entrepreneurship education and training and both
opportunity perception rates (r = .727, p = .026)
and fear of failure rates (r = -.880, p = .009). These
correlations were similar for both males and females.
Countries with more favorable expert perceptions of
school-based entrepreneurship education and training
also tended to have higher growth expectations among
their startup entrepreneurs for the ?rst of the two
growth measures employed in this analysis (r = .803,
p = .009). There was a high correlation between the
proportion of individuals who took any school-based
training in starting a business and those who took
voluntary training after school (r = .824, p = .006).
There was a high level of correlation between the
proportion of individuals who took voluntary and
compulsory training after school (r=.729, p=.026).
There was also a signi?cant correlation between the
proportion of individuals who took any school-based
and any after school-based training (r = .775, p = .014).
In general, neither high levels of training nor high
levels of positive entrepreneurial attitudes were
signi?cantly correlated with entrepreneurial activity
rates across countries in this group. Exceptions
included a signi?cant correlation between male
necessity TEA rates and skills perception rates (r =
.885, p = .001), and a signi?cant negative correlation
between compulsory school-based training rates
for females and female necessity entrepreneurship
rates (r = -.711, p = .032). High rates of school-
based training among females were associated with
lower rates of future startup intention (r = -.785, p
= 0.012). High rates of voluntary school and after-
school training were associated with lower rates
of entrepreneurial activity involving profound
market expansion (r = -.709, p = .032; r = -.683, p
= .042). These negative correlations may re?ect
the efforts of some governments in innovation-led
countries with low entrepreneurship rates to provide
entrepreneurship education as part of the school
curriculum, in an effort to boost entrepreneurial
activity.
In summary, the quality and level of entrepreneurship
education and training may have different impacts
on attitudes, aspirations, and activity in countries
at different stages of economic development. In
factor-driven economies, the higher the quality
and quantity of after-school training, the higher
the levels of necessity entrepreneurship; this effect
may be indirect in the case of females. This is
because factor-driven economies provide few other
opportunities for employment. In ef?ciency-driven
economies, the more post-school training in starting
a business, the higher the levels of market-expansion
entrepreneurship, re?ecting the growth of these
economies. In innovation-driven economies, several
negative correlations are apparent, possibly because
governments with low levels of entrepreneurial
activity have been investing more in entrepreneurship
education and training in an effort to increase
entrepreneurial activity.
48
Special Topic 2008: Entrepeneurship Education and Training
4.3 ENTREPRENEURSHIP TRAINING
AND ENTREPRENEURIAL ATTITUDES,
ASPIRATIONS, AND ACTIVITY AT THE
INDIVIDUAL LEVEL
In this ?nal section, we consider the attitudes,
aspirations, and activities of those who have and have
not had training in starting a business. Table 7 shows
the proportions of working age individuals who are not
running or actively trying to start a business who 1)
perceive good opportunities for starting a business in
their local area and 2) perceive they have the skills,
knowledge, and experience to start a business, by
type of training received. By removing those who are
currently nascent, new or established entrepreneurs,
we remove the possibility of biased response. The
patterns are different for each attitude, with a more
mixed picture on opportunity perception than on
skills perception. Each country seems to have its own
unique pattern of relationships between training
and attitudes, and the country group averages can
be misleading. For example, in India and Greece,
only compulsory training had a positive effect on
opportunity perception, but it had a negative effect
in Colombia. Only voluntary training had a positive
effect in Romania and Finland. Both voluntary and
compulsory training had similar and positive effects in
Argentina, Hungary, Peru, Turkey, Germany, Japan,
Spain, and Slovenia.
In every country except Jamaica and the Dominican
Republic, those who had taken either voluntary
or compulsory training were more likely to have
positive self-perceptions than those who had not
taken training. In ?ve of the nine innovation-driven
countries (Italy and Spain excepted), those who had
taken voluntary training were most likely to perceive
they had the skills to start a business. In Italy and
Spain, voluntary and compulsory training appeared
to deliver similar and positive effects, but in Belgium
and Israel, those with compulsory training were more
likely to have positive skills self-perception. In most
factor-driven and ef?ciency-driven countries, both
voluntary and compulsory training produced similar
elevated levels of skills perception. Overall, levels
of skills perception were higher in factor-driven and
ef?ciency-driven countries than in innovation-driven
countries.
Table 8 shows the proportion of individuals aged
18-64 who expected to start a business in the next
three years and the proportion who were currently
actively trying to start a business or were running a
new business. In most countries, individuals who had
taken either voluntary or compulsory training were
signi?cantly more likely to expect to start a business
in the next three years, and generally those with
voluntary training had the highest levels. In Bosnia,
India, Iran, Hungary, Mexico, Romania, Turkey,
France, and the United Kingdom, both voluntary and
compulsory training produced similar elevated levels
of start-up aspiration. In Chile and Japan, those with
compulsory training were no more likely to expect to
start a business in the next three years than those
who had taken no training at all, while in Belgium,
those who had taken compulsory training had the
highest start-up aspirations. Neither voluntary nor
compulsory training appeared to make any difference
to aspiration in Jamaica or Greece.
The relationship between type of training and early-
stage entrepreneurial activity rates tended to track
the relationship with aspiration, but at a much lower
level. In some countries, including Bolivia, Iran,
and Argentina, compulsory training had no effect
on activity, although it did have a signi?cant effect
on aspiration. However, in Brazil, Turkey, Uruguay,
Iceland, and Italy, compulsory training appeared
to have a stronger effect and voluntary training
appeared to have a weaker effect on activity than
would have been predicted on the basis of aspiration.
In conclusion, the relationship between training in
starting a business and entrepreneurial attitudes,
aspirations, and activity is generally positive, but
complex. Some differences are apparent between
country groups, in line with theory and the GEM
model. However, each country seems to have a unique
training footprint, which is a function of current and
past quality and quantity of training, of demand, of
regulations, and of employment choice. The “yield”
from training, or the ratio of activity among the
trained to that among the non-trained, varies from
country to country, but on average the yield from
compulsory training is slightly more than half that of
voluntary training. Some countries, such as France
and Latvia, appear to have yields from voluntary
training as high as 5, while others have very low
yields.
Further analysis of this topic will be provided by a
special report on entrepreneurship entrepreneurship
education and training to be published later in 2009.
49
Special Topic 2008: Entrepeneurship Education and Training
PERCEIVE GOOD OPPORTUNITIES IN THE LOCAL AREA IN THE
NEXT SIX MONTHS
HAVE SKILLS, KNOWLEDGE, EXPERIENCE TO START A BUSINESS
Voluntary
training
i
Compulsory
training
No training
Voluntary
training
i
Compulsory
training
No training
Factor-Driven Economies
Bolivia 52.5 47.6 46.0 81.5 63.2 64.5
Bosnia and Herzegovina 57.1 50.0 39.1 81.8 87.5 56.9
Colombia 64.7 42.1 52.6 73.4 53.8 45.3
Ecuador 38.3 47.2 35.4 81.9 77.2 60.7
Egypt 31.7 44.4 30.1 70.2 75.0 51.1
India 47.8 81.8 52.8 64.0 86.7 42.3
Iran 34.0 32.6 29.1 76.1 73.1 51.9
Country average 46.6 49.4 40.7 75.6 73.8 53.2
Ef?ciency-Driven Economies
Argentina 56.6 50.0 39.0 80.8 62.5 48.4
Brazil 50.0 37.0 37.9 76.5 75.0 46.5
Chile 30.8 26.4 21.0 78.1 68.5 41.7
Croatia 61.3 52.1 35.6 77.4 75.2 48.1
Dominican Republic 56.5 53.8 51.2 85.2 78.6 69.0
Hungary 22.2 25.7 14.0 67.7 65.5 36.4
Jamaica 55.1 47.5 48.3 67.0 64.5 64.6
Latvia 41.9 28.6 16.0 70.9 46.8 13.3
Macedonia 50.6 46.2 43.1 74.1 71.4 47.8
Mexico 49.4 54.4 43.0 76.1 59.5 53.4
Peru 63.5 66.7 47.5 78.4 79.1 61.5
Romania 51.5 27.8 23.8 70.7 44.4 19.1
Serbia 73.7 56.4 50.9 84.2 85.7 57.2
South Africa 57.7 50.0 31.3 81.0 60.0 25.9
Turkey 53.8 50.0 33.4 71.9 76.2 42.8
Uruguay 45.2 61.0 48.7 78.5 75.0 53.2
Country average 51.2 45.9 36.5 76.2 68.0 45.6
Innovation-Driven Economies
Belgium 12.2 18.9 12.0 41.6 66.4 25.0
Denmark 57.1 65.9 60.8 50.8 45.3 25.9
Finland 56.5 48.0 45.6 57.1 36.7 16.2
France 35.7 25.0 20.5 75.8 39.0 20.3
Germany 36.2 38.0 17.7 59.9 37.5 24.8
Greece 21.5 43.6 23.9 58.8 50.0 44.0
Iceland 38.7 37.2 32.3 76.5 61.4 36.5
Ireland 29.6 28.9 24.4 66.7 56.6 34.7
Israel 41.5 52.0 21.7 55.9 73.3 31.0
Italy 33.0 35.8 28.1 53.3 53.6 32.3
Japan 13.0 16.3 6.2 34.5 19.1 6.3
Republic of Korea 36.8 19.2 10.8 39.5 20.0 21.8
Slovenia 53.9 52.9 36.5 73.6 53.8 34.0
Spain 29.7 27.5 23.4 53.2 51.4 40.2
United Kingdom 39.8 31.1 26.2 74.2 59.6 40.0
Country average 35.7 36.0 26.0 58.1 48.2 28.9
i: “Voluntary” includes those reporting voluntary training or a mix of voluntary and compulsory training.
Figures in bold denote statistically signi?cant differences in proportions of attitude by type of training, p
During this such a detailed illustration around global entrep reneurship monitor 2008 executive report.
Niels Bosma • Zoltan J. Acs • Erkko Autio • Alicia Coduras • Jonathan Levie
2008 Executive Report
GLOBAL ENTREPRENEURSHI P MONI TOR
Gl obal Ent r epr eneur shi p Moni t or
2008 Executive Report
Niels Bosma, Zoltan J. Acs, Erkko Autio,
Alicia Coduras, Jonathan Levie
Founding and Sponsoring Institutions
Babson College, Babson Park, MA, US
Lead Sponsoring Institution and Founding Institution
Universidad del Desarrollo, Santiago, Chile
Sponsoring Institution
London Business School, London, UK
Founding Institution
Although GEM data were used in the preparation of this report, their interpretation and use are the sole responsibility of the authors.
The authors also wish to thank Marcia Cole and Sands Creative Group for their exceptional work on this report.
In addition, the authors would like to express their thanks to Chris Aylett (GEM Administrator), Marcia Cole (GEM Project Manager),
Mick Hancock (GEM Project & National Teams Manager), Mark Quill (GEM Data Manager) and all GEM National Teams
for their continued contributions and dedication to GEM.
© 2009 by N. S. Bosma, Z. J. Acs, E. Autio, A. Coduras, J. Levie, and Global Entrepreneurship Research Consortium (GERA).
2
EXECUTIVE SUMMARY 4
1.0 INTRODUCTION 9
1.1 About GEM 7
1.2 The Revised GEM Model 7
1.3 Capturing Entrepreneurship in GEM 11
1.4 GEM Website and Data Availability 13
2.0 ENTREPRENEURIAL ATTITUDES, ACTIVITY AND ASPIRATIONS 14
2.1 Entrepreneurial Attitudes and Perceptions 14
2.2 Entrepreneurial Activity 19
2.3 Entrepreneurial Aspirations 31
3.0 ENTREPRENEURSHIP, INSTITUTIONS AND ECONOMIC DEVELOPMENT 36
3.1 Linking Institutions, Entrepreneurship, and Development 36
3.2 Recognizing the Complex Relationship between Entrepreneurship and Economic
Development Using GEM Data 38
4.0 SPECIAL TOPIC 2008: ENTREPRENEURSHIP EDUCATION AND TRAINING 41
4.1 Participation in Entrepreneurship Education and Training 41
4.2 Expert Opinions on Quality of Entrepreneurship Training 45
4.3 Entrepreneurship Training and Entrepreneurial Attitudes, Aspirations, and Activity
at the Individual Level 48
REFERENCES 51
GEM NATIONAL TEAMS 2008 54
ABOUT THE AUTHORS 61
GEM SPONSORS 62
CONTACTS 63
ENDNOTES 64
Table of Contents
3
Table of Contents
List of Tables
Table 1 Entrepreneurial Attitudes and Perceptions in the 43 GEM 2008 Countries, by Phase of Economic Development 16
Table 2 Prevalence Rates (in %) of Entrepreneurial Activity and Business Owner-Managers across GEM Countries in 2008,
for those Aged 18-64, by Phase of Economic Development 20
Table 3 The Correlation Coef?cients between GE INDEX and Other Major Indices 40
Table 4 Percentage of the Population Aged 18-64 that Received Voluntary or Compulsory Training in Starting a Business
During or After School, by Type of Country 43
Table 5 Percentage of the Population Aged 18-64 that Received Any Training in Starting a Business After School,
by Type of Training Provider 44
Table 6 Perceived Need for and Availability and Quality of Entrepreneurship Education and Training,
by Country and Country Group (Average Ratings by Experts from 1 to 5) 46
Table 7 Percentage of the Population Aged 18-64 Who Are Not Running or Trying to Start a Business and Their Perceptions
of Entrepreneurship, by Type of Business Start-Up Training Received and by Type of Country 49
Table 8 Percentage of the Population Aged 18-64 Expecting to Start a Business in the Next Three Years or Engaged
in Early-Stage Entrepreneurial Activity by Type of Training Received and by Type of Country 50
List of Figures
Figure 1 The Revised GEM Model 10
Figure 2 The Entrepreneurial Process and GEM Operational De?nitions 11
Figure 3 Perceived Opportunities for Starting a Business, 2001-2008 17
Figure 4 Fear of Failure among Those who Perceive Good Start-Up Opportunities, 2001-2008 17
Figure 5 Perceived Skills and Knowledge to Start a New Business, 2001-2008 18
Figure 6 Intentions to Start a New Business in the Next Three Years, 2002-2008 18
Figure 7 Early-Stage Entrepreneurial Activity (TEA) for 43 Nations in 2008, by Phase of Economic Development,
Showing 95% Con?dence Intervals 21
Figure 8 Early-Stage Entrepreneurial Activity Rates and Per Capita GDP, 2008 22
Figure 9 Necessity- and Improvement-Driven Opportunity Motivations as a Percentage of Early-Stage Entrepreneurial Activity,
GEM 2008 Countries 24
Figure 10 Expressed Reasons behind Discontinuing Businesses, by Age, GEM 2008 24
Figure 11 Sector Distribution Early-Stage Entrepreneurial Activity 25
Figure 12 Sector Distribution Established Business 25
Figure 13 Early-Stage Entrepreneurial Activity Rates for Separate Age Groups, 2008 26
Figure 14 Early-Stage Entrepreneurial Activity Rates by Gender, 2008 27
Figure 15 Early-Stage Entrepreneurial Activity (TEA) Rates for 2001-2008, Averages over Ef?ciency-Driven Countries
and Innovation-Driven Countries 28
Figure 16 Necessity-Driven TEA Rates for 2001-2008, Averages over Ef?ciency-Driven Countries
and Innovation-Driven Countries 28
Figure 17 Prevalence Rates of High-Growth Expectation Early-Stage Entrepreneurship (HEA) in the Adult Population 31
Figure 18 Anatomy of High-Growth Expectation Early-Stage Entrepreneurship (HEA): Percentages in TEA 32
Figure 19 Percentage of Early-Stage Entrepreneurial Activity with New Product-Market Combination,
2002-2008 32
Figure 20 Percentage of Early-Stage Entrepreneurial Activity in Technology Sector, 2002-2008 33
Figure 21 Innovation Con?dence Index for 2007 and 2008 by Country and Country Group 35
Figure 22 The Global Entrepreneurship Index in Terms of GDP PPP 39
Figure 23 Relationships between the Global Entrepreneurship Index and Economic Freedom Index,
Doing Business Index and Global Competitiveness Index 40
Figure 24 Percentage of Adults Aged 18-64 Who Have Used Online Training in Starting a Business 45
4
Executive Summary
Since its inception in 1997 by scholars at Babson College and London Business School, GEM has developed into
one of the world’s leading research consortia concerned with improving our understanding of the relationships
between entrepreneurship and national development. This is the 10
th
annual GEM Global Report. Over the past
decade, harmonized data on entrepreneurial attitudes, activity and aspirations have been collected to provide
annual assessments of the entrepreneurial sector for a wide range of countries.
PARTICIPATING COUNTRIES IN 2008
In this report a distinction is made between factor-driven countries, ef?ciency-driven countries and innovation-
driven countries. This classi?cation follows the 2008 Global Competitiveness Report and is relevant to
entrepreneurship in relation to economic development. As previous GEM research has shown, the relationship
between entrepreneurship and economic development differs along phases of economic development. In 2008,
the following 43 countries participated in the GEM project.
Factor-Driven Economies
Angola, Bolivia, Bosnia and Herzegovina*, Colombia*, Ecuador*, Egypt, India, Iran*
Ef?ciency-Driven Economies
Argentina, Brazil, Chile, Croatia**, Dominican Republic, Hungary**, Jamaica, Latvia, Macedonia, Mexico, Peru,
Romania, Russia, Serbia, South Africa, Turkey, Uruguay
Innovation-Driven economies
Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Republic of Korea,
Netherlands, Norway, Slovenia, Spain, United Kingdom, United States
* Transition country: from factor-driven to ef?ciency-driven
** Transition country: from ef?ciency-driven to innovation-driven
GEM DATA COLLECTION
GEM Adult Population Survey: Measuring Attitudes, Activity and Aspirations
GEM takes a broad view of entrepreneurship and focuses on the role played by individuals in the
entrepreneurial process. The GEM Adult Population Surveys ask a representative sample of at least 2,000
adults in each country about their attitudes to and their involvement in, entrepreneurship. For many
individuals the entrepreneurial process often starts with personal assessments dealing with attitudes and
perceptions to entrepreneurship. GEM therefore collects data on attitudes and perceptions such as perceived
opportunities to start businesses, perceived skills and knowledge to start businesses, and national support for
starting a business as a good career choice. Also, GEM asks adults about intentions to start a business in the
near future.
Unlike most entrepreneurship data sets that measure newer and smaller ?rms, GEM studies individuals’
activities with respect to starting and managing a business. Furthermore, GEM views entrepreneurship as a
process and considers people in entrepreneurial activity in different phases from the very early phase when the
business is in gestation to the established phase and possibly discontinuation of the business.
Within this context, GEM provides a means by which a wide variety of important entrepreneurial aspirations
such as innovativeness, competitiveness and high-growth aspirations can be systematically and rigorously
studied.
5
GEM National Expert Survey: Measuring
Entrepreneurial Framework Conditions
To see how conditions for entrepreneurship
differ across countries, GEM countries survey
experts in several ?elds that are important for
entrepreneurship. Examples of such Entrepreneurial
Framework Conditions (EFCs) are national policies
for entrepreneurship, entrepreneurial ?nance and
the extent to which entrepreneurship is re?ected in
education and training.
KEY FINDINGS IN 2008
Entrepreneurial Attitudes
The GEM 2008 surveys were conducted mostly during
May and June, when the start of the credit crisis
loomed but before the true impact of the current
economic crisis became apparent. Nevertheless, an
overall decline in perceived opportunities to start a
business in 2008 was observed. Countries showing the
severest declines in the rate of perceived opportunities
(between 50 and 30 percent) include Iceland, Chile,
Ireland, Latvia and Hungary.
Perceived skills and knowledge to start a business
were not affected by the business cycle. Also intentions
to start a business within three years do not appear
to have declined as much in 2008 as perceived
opportunities. There are several possible explanations
for this. First, the crisis may actually cause individuals
to seriously consider becoming entrepreneurs in
the near future because they fear they might lose
their jobs. Second, the group of (potential) future
entrepreneurs may be less pessimistic than the total
adult population and may not perceive the ?nancial
crisis as a substantial burden for getting their own
business started – they might for instance draw more
heavily on their own (perceived) capabilities to start a
business. Thirdly, they may have decided to defer the
startup to near the end of the three year period, with
the expectation that the recession will be over within
three years.
Entrepreneurial Activity
In factor-driven economies, with many small-scaled
and local business activities, the rate of involvement
is high for both early-stage entrepreneurial activity
and established business activity. For Angola, however,
the rate of established business activity is very small
compared to the other factor-driven economies, while
the rate of discontinued business is very high. These
?ndings may re?ect Angola’s recent emergence from
prolonged civil war and unrest. For ef?ciency-driven
economies a clear distinction can be made between
Latin American countries with relatively high early-
stage entrepreneurial activity and Eastern European
countries with relatively low rates of early-stage
entrepreneurial activity.
In the United States there is more early-stage
entrepreneurial activity than in EU countries and
Japan. The rate of early-stage entrepreneurship in
Japan has gradually increased in recent years and is
now around the EU average. Some European countries
– most notably Belgium, Germany and France –
consistently have the lowest rates of entrepreneurial
activity levels. This possibly re?ects the relative
risk aversion of European inhabitants and their
declared relative preference for employment over self-
employment. But it also indicates that there are good
income alternatives available, through jobs or social
security.
The overall development of early-stage
entrepreneurial activity in innovation-driven
economies has been quite stable over time. A slight
and gradual rise is observed, from 5.7% in 2002
to 6.4% in 2008. For ef?ciency-driven economies
the pattern is more sensitive to the business cycle.
Argentina in particular has shown a signi?cant
reaction to its national economic crisis; in 2001-
2003 the Argentinean rate of necessity early-stage
entrepreneurs rose from 3.9 to 7.4 percent.
Entrepreneurial Aspirations
Most of the nascent and new entrepreneurs identi?ed
in GEM show either no or only limited job creation
expectations. High-growth expectation entrepreneurial
activity (HEA) varies widely between countries, as
does the relative prevalence of this activity within
early-stage entrepreneurial activity as a whole. For
example, among innovation-driven economies, there
is a 15-fold difference between the adult-population
prevalence rate of high-expectation early-stage
entrepreneurship of the United States and Greece.
The difference is over ?ve-fold between the two largest
emerging economies in the world, China and India.
Colombia, China, Peru and Chile exhibit the highest
prevalence rates of high-expectation entre pre-
neur ship of the factor- and ef?ciency-driven GEM
countries. The United States, New Zealand, Iceland,
and Canada have the highest levels of high-growth
expectation entrepreneurial activity in innovation-
driven economies. The HEA rate for these countries is
well over 1%. The lowest levels of HEA, at under 0.5%,
occur in Belgium, France, Spain, Japan, Finland and
Greece.
Executive Summary
6
Entrepreneurship: a Complex Relationship with
Institutions and Economic Development
The broad nexus between entrepreneurship, economic
development and institutions is a critical area of
inquiry for understanding entrepreneurship within
or across countries. Not just quantitative measures
of entrepreneurship, but also qualitative measures
of institutional differences are required to estimate
the impact of entrepreneurship on the economic
development of countries.
Chapter 3 introduces a newly constructed complex
index of entrepreneurship that combines GEM
measures on attitudes, activity and aspirations with
other economic indicators that concentrate more on
the institutional characteristics. The relationship
between this Global Entrepreneurship Index (GEI)
and economic development is S-shaped: when factor-
driven economies progress in economic development
beyond a certain threshold, the GEI tends to
increase. The shape of the S-curve broadly matches
the three phases of economic development. The
GEI is also positively related to three other facets
of the “development diamond:” economic freedom,
competitiveness and the ease of doing business.
The insights resulting from such an index could help
policymakers understand how different aspects of
policy can affect productive entrepreneurship through
the major phases of economic development.
GEM Special Topic 2008: Education and
Training
GEM expert surveys in most countries consistently
report that entrepreneurship education and training
is poor or inadequate. This is why entrepreneurship
education and training was chosen as a special topic
for GEM 2008. Thirty nine out of 43 GEM nations
included additional questions in their adult population
surveys and 31 included additional questions in their
expert surveys.
The relationship between training in starting a
business and entrepreneurial attitudes, aspirations
and activity is generally positive, but varies by
phase of economic development. Around one-?fth
of respondents had received some form of training
in starting a business, but this proportion varied
widely by country. For example, among factor-driven
countries, the proportion of individuals who had
received any training in starting a business, either in
school or after school, varied from 40% in Colombia to
8% in Egypt. In ef?ciency-driven countries, it varied
from 43% in Chile to 6% in Turkey. In innovation-
driven countries, it varied from 48% in Finland to
13% in Israel.
Almost 10% of the respondents had engaged in self-
directed learning, such as reading or observing or
working in other people’s businesses, but this too
varied widely by country. The next most frequent
overall training choice was voluntary formal
education, followed by voluntary training provided
by a college or university but outside the formal
education system. Other sources, such as business
or trade organizations, government agencies, or
employers, typically were used by 3% or less of
individuals. Colombia, Chile, Peru and Finland had
higher than usual usage of all sources.
In factor-driven economies, quality and quantity of
training is associated with higher levels of necessity-
based entrepreneurial activity, while in ef?ciency-
driven countries, it is associated with higher levels
of market-expansion entrepreneurial activity. In
innovation-driven countries, training levels are
negatively associated with some attitudinal and
activity measures.
Rates of early-stage entrepreneurial activity among
those who had received compulsory training were
around three-quarters of the rate of those who had
received voluntary training, while the “yield” to
training varied from 1.5 times the untrained rate for
compulsory training in factor-driven countries to 2.5
times the untrained rate for voluntary training in
innovation-driven countries.
Executive Summary
7
Introduction
1.1 ABOUT GEM
Although it is widely acknowledged that
entrepreneurship is an important force shaping the
changes in the economic landscape, our understanding
of the relationship between entrepreneurship and
development is still far from complete. The quest
to unravel the complex relationship has been
particularly hampered by a lack of cross-national
harmonized data sets on entrepreneurship. Since
1997, the GEM research program has sought to
address this by collecting relevant harmonized data
on an annual basis. GEM focuses on three main
objectives:
• To measure differences in the level of
entrepreneurial activity among countries
• To uncover factors determining national levels
of entrepreneurial activity
• To identify policies that may enhance the
national level of entrepreneurial activity
Traditional analyses of economic growth and
competitiveness have tended to neglect the role
played by new and small ?rms in the economy. GEM
takes a comprehensive approach and considers the
degree of involvement in entrepreneurial activity
within a country, identifying different types and
phases of entrepreneurship.
The Global Entrepreneurship Monitor (GEM)
was conceived in 1997 by Michael Hay and Bill
Bygrave and a prototype study was funded by the
London Business School and Babson College. The
?rst GEM Global study was conducted by a group
of 10 nations in 1999 with Paul Reynolds as the
Principal Investigator. Since then GEM has grown
into a consortium of 64 national teams. In 2004,
the London Business School and Babson College
transferred GEM’s intellectual capital to the Global
Entrepreneurship Research Association (GERA),
which is a not-for-pro?t organization governed
by representatives of the national teams, the two
founding institutions, and sponsoring institutions.
In this 10
th
annual report, we present a revised
conceptual model that will be used to further explore
the role of entrepreneurial activity in the economy.
The model has been updated in accordance with
recent insights on entrepreneurship and economic
growth. In this revised model, different phases of the
economic development of nations are recognized and
the role and nature of entrepreneurship is considered
to differ along these major phases. Three major
phases are recognized: factor-driven economies, which
are primarily extractive in nature, ef?ciency-driven
economies in which scale-intensity is a major driver
of development, and innovation-driven economies
1
. As
countries develop economically, they tend to shift from
one phase to the next.
1.2 THE REVISED GEM MODEL
There is wide agreement on the importance of
entrepreneurship for economic development
2
.
Entrepreneurs drive innovation, they speed up
structural changes in the economy and they force old
incumbent companies to shape up, thereby making
an indirect contribution to productivity. It is widely
accepted that high-impact entrepreneurs in particular
make an outsized contribution to job creation,
sometimes providing for the totality of new net job
creation in the economy
3
.
While important, the contribution of entrepreneurs
to an economy also varies according to its phase
of economic development
4
. According to “received
wisdom,” the level of necessity-driven self-
employment activity is high particularly at low levels
of economic development, as the economy may not
be able to sustain a high enough number of jobs in
high-productivity sectors. As an economy develops,
the level of necessity-driven entrepreneurial activity
gradually declines as productive sectors grow and
supply more employment opportunities. At the same
time, opportunity-driven entrepreneurial activity
tends to pick up, introducing a qualitative change
in overall entrepreneurial activity. This decline in
necessity entrepreneurship followed by an increase
in opportunity entrepreneurship is known as the
“U-curve” hypothesis.
While there is much anecdotal support for the U-curve
hypothesis, it only demonstrates an association and
does not fully re?ect the complexity of the causal
relationship between entrepreneurship and economic
growth. In this year’s GEM report, we introduce a
more nuanced distinction among phases of economic
development, in line with Porter’s typology of “factor-
driven economies,” “ef?ciency-driven economies” and
“innovation-driven economies” (2002).
8
Entrepreneurship in Factor-Driven Economies
Economic development consists of changes in the
quantity and character of economic value added
(Lewis, 1954). These changes result in greater
productivity and rising per capita incomes, and they
often coincide with migration of labor across different
economic sectors in society, for example from primary
and extractive sectors to the manufacturing sector, and
eventually, services (Gries & Naude, 2008). Countries
with low levels of economic development typically have
a large agricultural sector, which provides subsistence
for the majority of the population who mostly still live
in the countryside. This situation changes as industrial
activity starts to develop, often around the extraction
of natural resources. As extractive industry starts to
develop, this triggers economic growth, prompting
surplus population from agriculture to migrate toward
extractive and emergent scale-intensive sectors, which
are often located in speci?c regions. The resulting
oversupply of labor feeds subsistence entrepreneurship
in regional agglomerations, as surplus workers seek to
create self-employment opportunities in order to make
a living.
Entrepreneurship in Ef?ciency-Driven Economies
As the industrial sector develops further, institutions
start to emerge to support further industrialization
and the build-up of scale in the pursuit of higher
productivity through economies of scale. Typically,
national economic policies in scale-intensive economies
shape their emerging economic and ?nancial
institutions to favor large national businesses.
As increasing economic productivity contributes
to ?nancial capital formation, niches may open in
industrial supply chains that service these national
incumbents. This, combined with the opening up
of independent supply of ?nancial capital from the
emerging banking sector, would expand opportunities
for the development of small-scale and medium-sized
manufacturing sectors. Thus, in a scale-intensive
economy, one would expect necessity-driven industrial
activity to gradually fall and give way to an emerging
small-scale manufacturing sector.
Entrepreneurship in Innovation-Driven
Economies
As an economy matures and its wealth increases,
one may expect the emphasis in industrial activity to
gradually shift toward an expanding service sector
that caters to the needs of an increasingly af?uent
population and supplies the services normally
expected of a high-income society. The industrial
sector evolves and experiences improvements in
variety and sophistication. Such a development
would be typically associated with increasing
research and development and knowledge intensity,
as knowledge-generating institutions in the economy
gain momentum. This development opens the way
for the development of innovative, opportunity-
seeking entrepreneurial activity that is not afraid
to challenge established incumbents in the economy.
Often, small and innovative entrepreneurial ?rms
enjoy an innovation productivity advantage over
large incumbents, enabling them to operate as
‘agents of creative destruction.’ To the extent that the
economic and ?nancial institutions created during
the scale-intensive phase of the economy are able
to accommodate and support opportunity-seeking
entrepreneurial activity, innovative entrepreneurial
?rms may emerge as signi?cant drivers of economic
growth and wealth creation (Henrekson, 2005).
Entrepreneurship: Attitudes, Activity
and Aspirations
Different opinions on, and therefore different
de?nitions of, entrepreneurship can be observed in the
recent literature, as well as over time. These historical
views of entrepreneurship are interesting in that they
re?ect the roles of entrepreneurship in each of the
three economic phases we have just outlined. Cantillon
(1755) is believed to be the ?rst scholar to de?ne
entrepreneurship. He quali?ed entrepreneurship as
“as someone who identi?ed the willingness to bear
the personal ?nancial risk of a business venture.”
This de?nition re?ects the role of entrepreneurship
in Europe in the 18
th
century. It relates more to the
static notion of entrepreneurship as being a ‘business
owner’ than the more dynamic notion that has to do
with starting new ventures. At the end of the 19
th
century, Marshall’s view centered on the class of
entrepreneurs and their importance for the market
economy (Marshall, 1890). He described how industrial
entrepreneurs exploited economies of skill and
economies of scale, and likened the most successful of
them akin to large trees in a forest, towering above
their neighbors, depriving them of light and air. The
“Marshallian” view relates well to the economic view
of scale-intensive entrepreneurship as a re?ection of
the ef?ciency-driven stage. Schumpeter (1934;1942)
was a pioneer in linking the dynamic aspect of
entrepreneurship to innovations and economic
development. His concept of “creative destruction”
can be directly linked to the role of entrepreneurship
in innovation-driven countries. Entrepreneurs
introducing product-market combinations move the
technology frontier forward and destroy economic
activity based on older technology.
Current views on entrepreneurship vary, and
this underlines the multi-faceted nature of
entrepreneurship. Davidsson (2004) lists seven
phenomena associated with entrepreneurship,
while Wennekers and Thurik (1999) provide
thirteen different concepts of entrepreneurship.
Introduction
9
Introduction
In a recent study, Godin and colleagues (2008)
identify six common elements of entrepreneurship.
Looking at the proposed constructs in some
detail, three main components may be identi?ed:
entrepreneurial attitudes, entrepreneurial activity
and entrepreneurial aspiration (Acs and Szerb,
2008). These are interlinked in a complex set of feed-
forward and feedback loops. For example, positive
attitudes towards entrepreneurship may increase
entrepreneurial activity and aspiration, which in turn
positively affect attitudes as more positive role models
appear. Positive aspirations may change the nature of
activity, and in turn, change attitudes.
Entrepreneurial attitudes are attitudes toward
entrepreneurship. For example, the extent to
which people think there are good opportunities
for starting a business, or the degree to which they
attach high status to entrepreneurs, might be termed
entrepreneurial attitudes. Other relevant attitudes
might include the level of risk that individuals might
be willing to bear and individuals’ perception of their
own skills, knowledge and experience in business
creation.
Entrepreneurial attitudes can in?uence
entrepreneurial activity but can also be in?uenced by
entrepreneurial activity. For example, the legitimacy
of entrepreneurship in a society, as expressed in
positive entrepreneurial attitudes, can be in?uenced
by whether people know anyone who has started a
business recently. This can be a function of both levels
of entrepreneurial activity and social networking
activity in the society. Individuals who know other
individuals who recently started a business may,
through familiarity with the process, be more likely
to see it as legitimate.
Entrepreneurial attitudes are important because
they express the general feelings of the population
toward entrepreneurs and entrepreneurship. It
is important for countries to have people who can
recognize valuable business opportunities, and who
perceive they have the required skills to exploit
these opportunities. Moreover, if national attitudes
toward entrepreneurship are positive, this will
generate cultural support, help, ?nancial resources,
and networking bene?ts to those who are already
entrepreneurs or want to start a business.
Entrepreneurial activity is multi-faceted, but one
important aspect is the extent to which people in a
population are creating new business activity, both
in absolute terms and relative to other economic
activities, such as business closure. Within the
realm of new business activity, different types of
entrepreneurial activity can be distinguished. For
example, business creation may vary by industry
sector, by the size of the founding team, and by
whether the new venture is legally independent
of other businesses, and in terms of founder
demographics, such as gender, age, or education.
Entrepreneurial activity is best seen as a process
rather than an event
5
. That is why GEM measures
entrepreneurial intentions, and nascent, new, and
established business activity. Examining multiple
components of entrepreneurial activity also allows
us to explore differences among the entrepreneurial
processes across the three major phases of national
economic development. For example, nascent and new
business activity is expected to be high in factor-driven
economies mainly because much of it is motivated by
economic necessity. In innovation-driven economies,
the proportion of opportunity-driven entrepreneurship
is expected to be higher than in factor- and ef?ciency-
driven economies.
Entrepreneurial aspiration re?ects the qualitative
nature of entrepreneurial activity. For example,
entrepreneurs differ in their aspirations to introduce
new products, new production processes, to engage
with foreign markets, to develop a signi?cant
organization, and to fund growth with external
capital. These aspirations, if they are realized, can
signi?cantly affect the economic impact of these
entrepreneurial activities. Product and process
innovation, internationalization, and ambition for
high growth are regarded as hallmarks of ambitious
or high-aspiration entrepreneurship. GEM has created
measures that capture such aspirations.
Entrepreneurial Framework Conditions
The 2007 GEM Global Report discussed the relevance
of Entrepreneurial Framework Conditions (EFCs)
as indicators of a country’s potential to foster
entrepreneurship (Bosma, et al., 2008). EFCs re?ect
major features of a country’s socio-economic milieu
that are expected to have a signi?cant impact on
the entrepreneurial sector. Like the original GEM
model, the revised GEM model maintains that, at the
national level, different framework conditions apply
to established business activity and to new business
activity
6
. What is new about the revised model is
that we have related these conditions to a country’s
phase of economic development. The relevant national
conditions for factor-driven economic activity and
ef?ciency-driven economic activity are adopted from
the Global Competitiveness Report (GCR) 2008 (Porter
and Schwab, 2008). With respect to innovation-driven
economic activity, the revised GEM model makes
a contribution to the GCR perspective on economic
development by identifying framework conditions
that are speci?c to innovation and entrepreneurship.
As Acs and colleagues (2003) propose, it is the
entrepreneurial mechanism that turns innovation
into economic output. A lack of entrepreneurship can
therefore be seen as a bottleneck for innovation-driven
countries in achieving their growth ambitions.
10
It is important to recognize that all three principal
types of economic activity: factor-driven, ef?ciency-
driven, and innovation-driven, are present
in all national economies. But their relative
prevalence—and their contribution to economic
development—varies. The GCR proposition is that
each phase of economic development has a different
optimal combination of these three activities. The
three phases are labeled according to the activity
that is most signi?cant for that phase. Thus, the
relative importance of entrepreneurial framework
conditions to a country may vary by phase of economic
development. As the 2004 GEM global report noted,
one size does not ?t all (Acs, et al., 2005).
The resulting revised GEM Model is presented in
Figure 1. For factor-driven economies, emphasis is put
on basic requirements: development of institutions,
infrastructure, macroeconomic stability, health, and
primary education. These basic requirements will help
sustain necessity-based entrepreneurship, but may do
little to enable opportunity-based entrepreneurship.
As economies progress and scale economies become
more and more relevant, other conditions, which
ensure a proper functioning of the market and are
called ef?ciency enhancers, become important. Even
though these conditions are not directly related
to entrepreneurship in the Schumpeterian sense,
they are indirectly related since the development of
markets will also attract more entrepreneurship. For
countries whose economic development is primarily
innovation-driven, EFCs become more important
as levers of economic development than basic
requirements or ef?ciency enhancers.
Entrepreneurial attitudes, activity, and aspiration as
dynamic interactive components of entrepreneurship
are characterized in detail in Chapter 2, using the
results of the GEM Adult Population Survey. Chapter
3 focuses on the role of institutions in each of the three
phases. Each year, the GEM reports highlights one
aspect of the GEM conceptual model. In Chapter 4 we
focus on one EFC, entrepreneurship education and
training, which was chosen as a special topic for GEM
in 2008. Extra questions on this special topic were
included in the GEM Adult Population Survey and the
standard National Expert Survey (NES) this year, and
the answers are summarized and commented on with
respect to the revised GEM model.
Social,
Cultural,
Political
Context
Basic requirements
- Institutions
- Infrastructure
- Macroeconomic stability
- Health and primary
education
Established Firms
(primary economy)
Attitudes:
Perceived opportunities
Perceived capacity
Activity:
Early-stage
Persistence
Exits
Aspirations:
Growth
Innovation
Social value creation
New branches,
firm growth
National
Economic
Growth
(Jobs and
Technical
Innovation)
Entrepreneurship
Efficiency enhancers
- Higher education &
training
- Goods market efficiency
- Labor market efficiency
- Financial market
sophistication
- Technological readiness
- Market size
Innovation and
entrepreneurship
- Entrepreneurial finance
- Gov. entrepreneurship
programs
- Entrepreneurship
education
- R&D transfer
- Commercial, legal
infrastructure for
entrepreneurship
- Entry regulation
Figure 1 — The Revised GEM Model
Introduction
11
1.3 CAPTURING ENTREPRENEURSHIP
IN GEM
The previous section showed that entrepreneurship
is a complex phenomenon which spans a variety of
contexts. In line with its objectives, GEM takes a
broad view of entrepreneurship and focuses on the
role played by individuals in the entrepreneurial
process. Unlike most entrepreneurship data sets
that measure newer and smaller ?rms, GEM studies
the behavior of individuals with respect to starting
and managing a business. This differentiates GEM
from other data sets, most of which record ?rm-level
data on (new) ?rm registrations (see Box 1). New
?rms are, most often, started by individuals. Even in
established organizations, individuals have different
entrepreneurial attitudes, activities, and aspirations.
Another guiding principle of GEM research is that
entrepreneurship is a process. Therefore GEM needs
to do more than compare entrepreneurial attitudes
and aspirations of those who are and are not engaging
in entrepreneurship. It also needs to capture attitudes,
activities, and aspirations in different phases of
entrepreneurship, from general intentions to a more
active early or “nascent” phase where businesses are
in gestation, to new businesses that can be identi?ed
as having commenced operations, to the established
phase and possibly discontinuation of the business.
An individual entrepreneur who has succeeded in
creating and sustaining a business has gone through
a process. The entrepreneurial process starts before
the ?rm is operational. Someone who is just starting
a venture and trying to survive in a very competitive
market is an entrepreneur in spite of not having
high-growth aspirations. On the other hand, a
person may be an established business owner who
has been in business for quite a number of years
and still be innovative, competitive, and growth-
minded. This person is also an entrepreneur. GEM
provides an umbrella under which a wide variety of
entrepreneurial characteristics, such as motivations,
innovativeness, competitiveness, and high-growth
aspirations, can be systematically and rigorously
studied.
Within this context, the GEM data collection covers
the life cycle of the entrepreneurial process and
looks at individuals at the point when they commit
resources to start a business they expect to own
themselves (nascent entrepreneurs); when they
currently own and manage a new business that has
paid salaries for more than three months but not
more than 42 months (new business owners); and
when they own and manage an established business
that has been in operation for more than 42 months
(established business owners). Figure 2 summarizes
the entrepreneurial process and GEM’s operational
de?nitions.
For GEM, the payment of any wages for more than
three months to anybody, including the owners, is
considered to be the “birth event” of actual businesses.
Thus, the distinction between nascent entrepreneurs
and new business owners depends on the age of the
business. Businesses that have paid salaries and
wages for more than three months and less than 42
months may be considered new. The cut-off point
of 42 months has been made on a combination of
theoretical and operational grounds
7
.
The prevalence
rate of nascent entrepreneurs and new business
owners taken together may be viewed as an indicator
of early-stage entrepreneurial activity in a country.
It represents dynamic new ?rm activity. Even if a
fair share of nascent entrepreneurs do not succeed in
getting the business started, their actions may have
a bene?cial effect on the economy since the threat
of entry and of new competition can put pressure on
incumbent ?rms to perform better.
Business owners who have paid salaries and wages
for more than 42 months are classi?ed as “established
business owners.” Their businesses have survived
the liability of newness. High rates of established
business ownership may indicate positive conditions
for ?rm survival. However, this is not necessarily the
case. If a country exhibits a high degree of established
entrepreneurship combined with a low degree of early-
stage entrepreneurial activity, this indicates a low
level of dynamism in entrepreneurial activity
8
.
Potential
entrepreneur:
opportunities,
knowledge, and skills
Nascent
entrepreneur:
involved in setting
up a business
Owner-manager
of a new business
(up to
3.5 years old)
Owner-manager
of an established
business (more
than 3.5 years old)
Conception Firm birth Persistence
Early-stage Entrepreneurial Activity (TEA)
Figure 2 — The Entrepreneurial Process and GEM Operational De?nitions
Introduction
12
This year’s GEM report includes 43 countries across the globe. In each of these 43 countries, a survey was held
among a representative sample of at least 2,000 adults. More than 150,000 adults were interviewed between
May and October (outside holiday seasons) and answered questions on their attitudes toward and involvement
in entrepreneurial activity.
Box 1. Main Distinctions between GEM Adult
Population Survey Data and Business
Registration Data
GEM is a social survey directed at individuals. In
GEM’s research perspective, it is individuals who
are primary agents in setting up, starting, and
maintaining new and entrepreneurial businesses.
The main distinctions between GEM data and
business registrations data are as follows:
GEM data are obtained using a research design •
that is harmonized over all participating
countries. Despite recent initiatives by
Eurostat, OECD, and the World Bank,
the harmonization of national business
registrations has not yet been achieved. GEM
data uniquely enables reliable comparisons
across countries. The robustness of the GEM
method is demonstrated by the stability of
year-on-year comparisons at the country level.
GEM’s research design implies statistical •
uncertainties in the aggregate (country-
level) results. This is acknowledged by
publishing con?dence intervals for the
obtained entrepreneurship indices. Business
registration data are “count data” and as such
do not require con?dence intervals. However,
the accuracy of registration data as a measure
of new business activity is unclear for several
countries. For example, in the UK, most
businesses are not (and are not required to be)
registered at all, while in Spain registration is
compulsory before trading can commence. In
some countries, businesses may be registered
purely for tax reasons without entrepreneurial
activity taking place, while in other countries
businesses are deliberately not registered to
avoid paying taxes.
GEM tracks people who are in the process of •
setting up a business (nascent entrepreneurs),
as well as people who own and manage
running businesses. These also include
freelancers, or other entrepreneurs who in
some jurisdictions need not register. GEM
also measures attitudes and self-perceptions
regarding entrepreneurship. Insight about
the earliest phase of the start-up process and
the entrepreneurial spirit is very relevant for
policy makers.
The primary purpose of GEM is • not to
count the number of new businesses in
different countries. It is about measuring
entrepreneurial spirit and entrepreneurial
activity through different phases of the
entrepreneurial process. Therefore, GEM data
may not be the best source for some basic ?rm-
level characteristics, particularly in countries
that tightly regulate new business activity
and whose citizens have high respect for the
rule of law. For example, to determine sector
distribution of existing ?rms, registration data
are mostly preferable over GEM data (with
the possible exception of GEM countries with
a large number of respondents, such as Spain
and the UK).
GEM generates more than measures of •
entrepreneurial activity; it also generates
measures of entrepreneurial attitudes and
aspirations. Examples are motivations for
being self-employed, the degree of innovative
activities, and growth expectation. However,
these characteristics should always be derived
from an adequate sample; to achieve this, one
may need to merge the GEM samples over
several years.
In the Appendix of the GEM Global Report 2005,
measures were derived from GEM data based on
de?nitions of self-employment rates and start-up
rates as published by the OECD and Eurostat.
The rates based on GEM data appeared to
match the rates on registrations data fairly well.
Nevertheless, one should be aware that the GEM
data are distinctive, and designed to measure
entrepreneurial activity across a wide range of
countries, including those where government
business registration data may not provide a true
and fair re?ection of actual business activity.
Introduction
13
Introduction
1.4 GEM WEBSITE AND DATA AVAILABILITY
GEM is a consortium of national teams, participating in the Global Entrepreneurship Research Association
(GERA—the umbrella organization that hosts the GEM project). Thanks to the effort and dedication of
hundreds of entrepreneurship scholars as well as policy advisors across the globe, the GEM consortium consists
of a unique network building a unique data set. Contact details, GEM 2008 National Summary Sheets, and
national teams’ micro-sites can be found on www.gemconsortium.org. A selection of GEM data is also made
available on this website. The GEM website provides an updated list of the growing number of peer-reviewed
scienti?c articles based on GEM data.
Glossary of Main Measures and Terminology
MEASURE DESCRIPTION
Entrepreneurial Attitudes and Perceptions
Perceived opportunities
Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded)
who see good opportunities to start a ?rm in the area where they live
Perceived capabilities
Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded) who
believe they have the required skills and knowledge to start a business
Entrepreneurial intention
Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded) who
intend to start a business within three years
Fear of failure rate
Percentage of 18-64 population with positive perceived opportunities (individuals involved in any stage of
entrepreneurial activity excluded) who indicate that fear of failure would prevent them from setting up a
business
Entrepreneurship as desirable career choice
Percentage of 18-64 population who agree with the statement that in their country, most people consider starting
a business as a desirable career choice
Media attention for entrepreneurship
Percentage of 18-64 population who agree with the statement that in their country, they will often see stories in
the public media about successful new businesses
Entrepreneurial Activity
Nascent entrepreneurship rate
Percentage of 18-64 population who are currently a nascent entrepreneur, i.e., actively involved in setting up a
business they will own or co-own; this business has not paid salaries, wages, or any other payments to the
owners for more than three months
New business ownership rate
Percentage of 18-64 population who are currently a owner-manager of a new business, i.e., owning and
managing a running business that has paid salaries, wages, or any other payments to the owners for more than
three months, but not more than 42 months
Early-stage entrepreneurial activity (TEA)
Percentage of 18-64 population who are either a nascent entrepreneur or owner-manager of a new business
(as de?ned above)
Established business ownership rate
Percentage of 18-64 population who are currently owner-manager of an established business, i.e., owning and
managing a running business that has paid salaries, wages, or any other payments to the owners for more than
42 months
Overall entrepreneurial activity rate
Percentage of 18-64 population who are either involved in early-stage entrepreneurial activity or owner-manager
of an established business (as de?ned above)
Business discontinuation rate
Percentage of 18-64 population who have, in the past 12 months, discontinued a business, either by selling,
shutting down, or otherwise discontinuing an owner/management relationship with the business. Note: This is
NOT a measure of business failure rates.
Improvement-driven opportunity entrepreneurial
activity: relative prevalence
Percentage of those involved in early-stage entrepreneurial activity (as de?ned above) who (i) claim to be driven
by opportunity as opposed to ?nding no other option for work; and (ii) who indicate the main driver for being
involved in this opportunity is being independent or increasing their income, rather than just maintaining their
income
Entrepreneurial Aspirations
High-growth expectation early-stage
entrepreneurial activity (HEA)
Percentage of 18-64 population who are either a nascent entrepreneur or owner-manager of a new business (as
de?ned above) and expect to employ at least 20 employees ?ve years from now
High-growth expectation early-stage
entrepreneurial activity: relative prevalence
Percentage of early-stage entrepreneurs (as de?ned above) who expect to employ at least 20 employees ?ve
years from now
New product-market oriented early-stage
entrepreneurial activity: relative prevalence
Percentage of early-stage entrepreneurs (as de?ned above) who indicate that their product or service is new to
at least some customers and indicate that not many businesses offer the same product or service
Early-stage entrepreneurial activity in
technology sectors: relative prevalence
Percentage of early-stage entrepreneurs (as de?ned above) who are active in the ‘high technology’ or ‘medium high’
technology sector, as classi?ed by OECD (2003)
14
2.0 Entrepreneurial Attitudes, Activity and Aspirations
This chapter provides an assessment of the
characteristics of entrepreneurship in the 43 GEM
2008 countries by presenting several indices that
measure aspects of Entrepreneurial Attitudes,
Activity and Aspirations. The countries included in
this assessment are listed in Box 2. The countries are
grouped into three phases of economic development as
discussed in the Global Competitiveness Report 2008-
2009 (Porter and Schwab, 2008). Phases of economic
development are decided on the level of GDP per
capita and the extent to which countries are factor-
driven in terms of the shares of exports of primary
goods in total exports.
Box 2. Country Groups Used in this
Report for the 43 GEM 2008 Countries
Factor-Driven Economies
Angola, Bolivia, Bosnia and Herzegovina*,
Colombia*, Ecuador*, Egypt, India, Iran*
Ef?ciency-Driven Economies
Argentina, Brazil, Chile, Croatia**,
Dominican Republic, Hungary**, Jamaica,
Latvia, Macedonia, Mexico, Peru, Romania,
Russia, Serbia, South Africa, Turkey, Uruguay
Innovation-Driven Economies
Belgium, Denmark, Finland, France,
Germany, Greece, Iceland, Ireland, Israel,
Italy, Japan, Republic of Korea, Netherlands,
Norway, Slovenia, Spain, United Kingdom,
United States
* Transition country: from factor-driven to
ef?ciency-driven
** Transition country: from ef?ciency-driven
to innovation-driven
2.1 ENTREPRENEURIAL ATTITUDES
AND PERCEPTIONS
Perceptions about entrepreneurship may affect the
supply side and the demand side of entrepreneurship.
On the supply side, or the “pool” of potential
entrepreneurs, important perceptions include both
willingness and perceived ability to become an
entrepreneur (Davidsson, 1991). Education levels
and the availability of entrepreneurship training
programs are possible determinants of perceived
skills (see Chapter 4).
On the demand side, or “space for” entrepreneurship,
there needs to be opportunities for entrepreneurship,
but equally important is that entrepreneurs perceive
that there are opportunities for starting a business
9
.
The quantity and quality of perceived opportunities
may be enhanced by national conditions such as
economic growth, population growth, culture and
national entrepreneurship policy
10
.
But there are more factors than these at play. As
people see more and more successful entrepreneurs
in their direct environment, this may enhance
their perception of their own capabilities without
enhancing actual capabilities. This effect may be
stronger when the economic climate is favorable.
Furthermore, there may be demographic differences in
(perceived) entrepreneurial capabilities for historical
socio-economic or cultural reasons. Policy programs
may explicitly target groups exhibiting low shares
of perceived capabilities as well as low shares of
actual capabilities. Thus, several distinct national
conditions may affect perceived capabilities directly
and indirectly.
If an individual exhibits positive perceptions toward
entrepreneurship, it is by no means certain that he
or she will actually get involved in entrepreneurial
activity. There are several assessments to be made,
which may or may not be conscious. First, there is
the assessment of opportunity costs, which involves
comparing the expected returns of entrepreneurship
to the expected returns of an alternative occupation
11
.
The most common alternative is “being employed.”
Then, there is a risk-reward assessment: even if
the expected returns from entrepreneurship are
considerably higher than the best alternative, the
(perceived) risks involved may be too high for a
person who is thinking about starting a business.
An individual’s risk-avoidance preference may be a
signi?cant factor in the transition from potential (or
latent) entrepreneurship to entrepreneurial activity
(Khilstrom and Laffont, 1979). At the same time, the
individual may also be in?uenced by demographic
characteristics such as age, gender, origin, or ethnicity
15
Entrepreneurial Attitudes, Activity and Aspirations
and also by institutions. For instance, older people
might include their health and the speci?cs of the
health care system in the risk-reward assessment,
while immigrants might perceive fewer alternative
options for earning a living.
Intrinsic assessments as described on the previous
page, may ultimately lead to a proclaimed intention
(and subsequent action) to start a business with
opportunity-related entrepreneurship in mind. This
holds for the bulk of entrepreneurs, particularly
in innovation-driven countries. For some people,
however, being involved in entrepreneurial activity
is a necessity; there are simply no other options
for earning a living and there is no comparative
assessment to be made.
Also, there is no general pattern describing the
sequence in which assessments and decisions are
made and steps are taken. It is also possible that
people decide to start a business when a very speci?c
business opportunity comes into view unexpectedly.
They may act on this even though, before the
business opportunity came their way, they did not
see opportunities to start a business in their area.
These people had not considered setting up a business
until the opportunity was presented to them. Thus,
for entrepreneurs, the perception of opportunities
may come well in advance, or just before setting up
the business, or at the same time
12
. Shane (2003) has
proposed a model of the world in which opportunities
exist
13
but they need to be discovered. In this
view, national governments could consider ways of
increasing the likelihood of discovery as a means of
enhancing the entrepreneurial climate.
Table 1 lists several GEM indicators concerning
individuals’ own perceptions toward entrepreneurship
for each of the 43 GEM 2008 nations. Some countries
have favorable perceptions of entrepreneurship
combined with low rates of intentional
entrepreneurship. This is the case for many
innovation-driven economies in Europe. In other
words, although attitudes and perceptions toward
entrepreneurship are fairly high, the attractiveness of
becoming involved in entrepreneurship appears to be
low for many Europeans compared to other possible
sources of income.
A variety of national characteristics could be
underlying this phenomenon. It could be that there
is a lot of red tape (administrative burdens) attached
to starting a business, reducing the attractiveness
of entrepreneurship. It could also be the case that
employment protection is high. This could discourage
employees with positive entrepreneurial perceptions
from switching to entrepreneurship. A different effect
of stringent employment protection is that potential
entrepreneurs may think carefully before hiring
employees due to the substantial losses they would
incur if their employees became un?t for work, or if
they had to reduce the number of workers.
Fear of failure is often considered an important
cultural component that is detrimental to new ?rm
activity. However, so far this asserted effect has not
been fully con?rmed. Every year, GEM asks a random
sample of individuals if fear of failure would prevent
them from starting up a business. In order to grasp
the “fear of failure” effect, it makes sense to consider
this question only for those who are not currently
involved in entrepreneurship but do perceive good
opportunities for setting up a business. If fear of
failure is prevalent among those who in principle see
good opportunities to start a business, this may justify
intervening to reduce fear of failure.
For many countries with factor-driven and ef?ciency-
driven economies, we see that the difference between
entrepreneurial perceptions and entrepreneurial
intentions is relatively small, or even negative. This
suggests lower opportunity costs for entrepreneurial
activity and higher degrees of necessity-driven
entrepreneurship.
On the right-hand side of Table 1, we present
the results of two indicators measuring national
attitudes to entrepreneurship. The ?rst one assesses
the percentage of inhabitants who feel that in their
country, entrepreneurship is considered a desirable
career choice. This indicator varies widely within
each of the three phases of economic development.
The second indicator relates to the popularity of
entrepreneurship and asks for opinions on the
media coverage for new businesses in the country,
as perceived by the respondents. In countries with
primarily factor-driven economies, these attitudes
should not be the main concern of government (see
Figure 1). In countries with mainly ef?ciency-driven
economies, attention should begin to be paid to
attitudes. Table 1 suggests that attitudes in Hungary
could be improved, while Latin American countries
have in general quite favorable attitudes.
Looking at innovation-driven countries, some
anomalies are apparent. These could provide
governments with clues as to what they could do to
encourage entrepreneurial activity. For example,
in Japan most people agree that there is a lot of
media attention to entrepreneurship, yet starting
a business is still not regarded as a good career
choice. For Denmark it is the other way around. The
Netherlands shows the highest rates of approval
of entrepreneurship as a career, yet only 4% of the
Dutch adult population (early-stage entrepreneurs
and established business owners excluded) expects
to start a business within the next three years. The
Netherlands is an example of a country where there is
much support for entrepreneurship but where the job
market is also favorable.
16
Entrepreneurial Attitudes, Activity and Aspirations
Factor-Driven Economies
% AGREEING
WITH STATEMENT
Angola 74 45 71 44 27 49 46
Bolivia 52 49 38 67 38 81 60
Bosnia and Herzegovina 50 26 39 62 25 82 60
Colombia 65 41 34 54 60 92 78
Ecuador 50 35 33 66 37 79 57
Egypt 40 25 40 53 35 73 57
India 58 46 56 45 33 67 81
Iran 35 22 45 58 36 57 53
Ef?ciency-Driven Economies
Argentina 48 40 30 53 15 69 80
Brazil 44 43 44 49 26 68 78
Chile 30 34 41 54 29 80 44
Croatia 53 36 51 56 10 70 61
Dominican Republic 58 31 54 70 30 92 64
Hungary 26 47 26 43 6 48 19
Jamaica 52 26 46 65 17 81 71
Latvia 37 37 33 23 7 75 71
Macedonia 47 35 46 52 39 80 66
Mexico 59 31 50 55 26 66 52
Peru 60 38 50 66 34 82 71
Romania 45 52 36 21 9 . 56
Russia 39 66 33 14 3 60 50
Serbia 56 28 52 60 31 72 67
South Africa 60 38 41 31 13 65 69
Turkey 47 39 27 44 21 72 63
Uruguay 57 33 40 58 17 71 67
Innovation-Driven Economies
Belgium 23 30 28 34 6 47 38
Denmark 69 43 43 30 5 57 32
Finland 54 32 46 30 5 46 71
France 34 53 33 25 13 63 48
Germany 35 49 29 30 4 56 50
Greece 35 55 35 46 13 76 55
Iceland 38 36 60 45 12 61 81
Ireland 35 37 33 42 6 55 65
Israel 39 43 35 35 14 58 57
Italy 35 48 30 35 7 68 40
Japan 13 44 21 9 4 26 59
Republic of Korea 20 32 32 23 17 69 67
Netherlands 54 33 32 30 4 85 61
Norway 46 28 34 33 7 61 71
Slovenia 55 33 50 44 7 58 67
Spain 32 52 36 43 5 68 43
United Kingdom 41 38 23 45 5 52 54
United States 44 28 33 48 7 63 73
A) Denominator: non-entrepreneurially active adult population 18-64 years
B) Denominator: non-entrepreneurially active adult population 18-64 years that sees good opportunities to start a business
C) Denominator: adult Population 18-64 years
Source: GEM Adult Population Survey (APS)
Table 1 — Entrepreneurial Attitudes and Perceptions in the 43 GEM Countries in 2008,
by Phase of Economic Development
SEES GOOD
OPPORTUNITIES
FOR STARTING A
BUSINESS IN
THE NEXT 6
MONTHS
A)
FEAR OF
FAILURE
WOULD
PREVENT
STARTING
A BUSINESS
B)
PERSONALLY
KNOWS
SOMEONE WHO
STARTED A
BUSINESS IN THE
PAST 2 YEARS
A)
HAS THE
REQUIRED
KNOWLEDGE
AND SKILLS TO
START A
BUSINESS
A)
EXPECTS
TO START A
BUSINESS
IN THE
NEXT THREE
YEARS
A)
COUNTRY ATTITUDES
PERCEIVED BY INDIVIDUALS
ENTREPRENEURSHIP
CONSIDERED AS
DESIRABLE CAREER
CHOICE
C)
MEDIA ATTENTION
FOR
ENTREPRENEURSHIP
C)
17
Entrepreneurial Attitudes, Activity and Aspirations
Development in Perceptions, Intentions
and National Attitudes
Figure 3 displays average annual differences between
ef?ciency-driven and innovation-driven countries
in two types of entrepreneurial attitudes over the
period 2001-2008. Included in this assessment are
only countries that have been participating in GEM
over the entire period, with a maximum dropout of
one year. This includes 17 innovation-driven countries
and six ef?ciency-driven countries
14
. Figure 3 shows
that the developments in perceived opportunities run
reasonably parallel for the two stages of economic
development. Since 2003, the share of people in
ef?ciency-driven countries that see good opportunities
for start-ups in the area where they live has matched
the share in innovation-driven countries. This ?nding
is, however, primarily caused by Argentina showing
very low rates before 2003 in the aftermath of the
national economic crisis and showing high rates
afterwards. The GEM surveys have mostly been
conducted in the months May and June. In 2008, this
was after the ?rst signs of a pending ?nancial crisis
but before the scale of the current economic crisis
was fully appreciated
15
. However, most countries
show a decline in perceived opportunities from 2007-
2008, and this is re?ected in Figure 3. Countries
showing the severest declines in the rate of perceived
opportunities (between 50 and 30 percent) include
Iceland, Chile, Ireland, Latvia and Hungary.
Changes over time in the fear of failure indicator are
shown in Figure 4. The cyclical patterns of ef?ciency-
driven and innovation-driven countries track each
other fairly well. These patterns also appear to be
the inverse of the opportunity indicator. Fear of
failure has risen to some extent in 2008 for both
types of country, and by around the same amount as
opportunity perception has fallen. This ?nding can be
directly related to the perceived economic situation.
During recessions failures have bigger consequences,
as alternative sources of income are scarcer.
20%
25%
30%
35%
40%
45%
2001 2002 2003 2004 2005 2006 2007 2008
Innovation-Driven Economies Efficiency-Driven Economies
Figure 3 — Perceived Opportunities for Starting
a Business, 2001-2008
Figure 4 — Fear of Failure among Those who
Perceive Good Start-Up Opportunities,
2001-2008
Note: Each data point is a simple country average for that year
Source: GEM Adult Population Survey (APS)
Innovation-Driven Economies Efficiency-Driven Economies
25%
30%
35%
40%
45%
50%
2001 2002 2003 2004 2005 2006 2007 2008
18
Entrepreneurial Attitudes, Activity and Aspirations
While perceived opportunities have declined and
fear of failure has increased over the period from
2007-2008, perceived skills and knowledge to start
a business have remained stable, as shown in
Figure 5. Individuals’ perceptions about their own
skills do not appear to be affected by the business
cycle. Furthermore, perceived capabilities for
starting a business in ef?ciency-driven economies
are— on average—higher than in innovation-driven
economies. This is probably because the perception
of an “average” business is different across these
two types of countries (see Bosma and Schutjens,
2009). Therefore the required skills and knowledge to
start a ?rm generally associated with these “average
businesses” are not completely comparable. If the
average business in Mexico, for example, is associated
with lower required skills in comparison to Norway,
the number of people claiming to have these skills will
obviously be higher.
To ?nd out more about future expectations, since 2002
GEM has asked about intentions to start a business
some time over the next three years. Table 2 shows
the country estimates for this indicator in 2008. Here
the rates of intentions to start a business are expected
to differ between ef?ciency-driven economies and
innovation-driven economies. In the lower-income
segment of ef?ciency economies, good job alternatives
are generally more sparsely available. This implies
that more people will intend to start a business.
Indeed we observe this in Figure 6: intention rates are
consistently higher in ef?ciency-driven countries than
in innovation-driven economies. A second noteworthy
?nding is that intentions do not appear to decline
as much in 2008 as perceived opportunities. There
are several possible explanations for this. First, the
crisis may actually cause individuals to seriously
consider becoming entrepreneurs in the near future
because they fear they might lose their jobs. Second,
the group of (potential) future entrepreneurs may be
less pessimistic than the total adult population and
may not perceive the ?nancial crisis as a substantial
burden for getting their own business started—they
might, for instance, draw more heavily on their own
(perceived) capabilities to start a business. Third,
they may have decided to defer the start-up to the end
of the three-year period, in the expectation that the
recession will be over within three years.
Figure 5 — Perceived Skills and Knowledge to
Start a New Business, 2001-2008
30%
32%
34%
36%
38%
40%
42%
44%
46%
48%
50%
2001 2002 2003 2004 2005 2006 2007 2008
Innovation-Driven Economies Efficiency-Driven Economies
Figure 6 — Intentions to Start a New Business
in the Next Three Years, 2002-2008
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2001 2002 2003 2004 2005 2006 2007 2008
Innovation-Driven Economies Efficiency-Driven Economies
Note: Each data point is a simple country average for that year
Source: GEM Adult Population Survey (APS)
19
Entrepreneurial Attitudes, Activity and Aspirations
2.2 ENTREPRENEURIAL ACTIVITY
Table 2 summarizes the involvement in
entrepreneurial activity over several phases of
the entrepreneurial process (see Figure 2) for
each of the 43 GEM 2008 countries. Countries are
grouped according to the major phases of economic
development, consistent with the classi?cation of the
Global Competitiveness Report 2008-2009 (Porter
and Schwab, 2008)
16
. Taken together, the numbers
in the table provide a picture of the characteristics
of overall entrepreneurial activity for each country,
i.e., all types of entrepreneurial activity covering
the entire economic spectrum. It is no surprise that
in factor-driven economies, with many small-scale
and local business activities (see Chapter 1), the
rate of involvement is high for both early-stage
entrepreneurial activity and established business
activity. For Angola, however, the rate of established
business activity is very small compared to the
other factor-driven economies, while the rate of
discontinued business is very high. These ?ndings
may re?ect Angola’s recent emergence from prolonged
civil war and unrest.
In the United States, there is more early-stage
entrepreneurial activity than in EU-countries and
Japan. The rate of early-stage entrepreneurship in
Japan has gradually increased in recent years and
is now around the EU average. Some European
countries—and most notably Belgium, Germany,
and France—consistently have the lowest rates of
entrepreneurial engagement levels. This possibly
re?ects the relative risk aversion of European
inhabitants and their declared relative preference
for employment over self-employment (European
Commission, 2008). But it also indicates that there
are good job alternatives available. It is possible that
in Europe, entrepreneurial behavior manifests itself
more within established ?rms. This is also known as
“intrapreneurship” and “corporate entrepreneurship.”
Currently little is known about how intrapreneurship
activity differs across countries.
20
Table 2 — Prevalence Rates (in %) of Entrepreneurial Activity and Business Owner-Managers across GEM
Countries in 2008, for those Aged 18-64, by Phase of Economic Development
NASCENT
ENTREPREN-
EURIAL ACTIVITY
NEW BUSINESS
OWNER-MANAGER
EARLY-STAGE
ENTREPRENEURIAL
ACTIVITY (TEA)
ESTABLISHED
BUSINESS-OWNER
MANAGERS
OVERALL
ENTREPREN-
EURIAL ACTIVITY
BUSINESS
DISCONTIN-
UATION RATE
SAMPLE SIZE
18-64 YEARS
Factor-Driven Economies
Angola 19.3 4.1 22.7 4.1 26.0 23.4 1,490
Bolivia 17.4 14.3 29.8 19.1 45.6 10.5 1,879
Bosnia and Herzegovina 6.4 2.7 9.0 8.7 17.1 5.0 1,586
Colombia 13.8 11.7 24.5 14.1 36.7 7.1 2,000
Ecuador 8.7 9.1 17.2 11.9 28.1 5.9 2,142
Egypt 7.9 5.5 13.1 8.0 20.2 6.3 2,603
India 6.9 4.9 11.5 16.5 27.6 10.1 1,919
Iran 5.9 3.4 9.2 6.8 15.7 5.2 3,119
Ef?ciency-Driven Economies
Argentina 8.5 8.5 16.5 13.5 29.6 10.2 1,731
Brazil 2.9 9.3 12.0 14.6 26.4 3.5 2,000
Chile 8.6 5.8 14.1 6.8 20.2 5.8 4,068
Croatia 4.9 2.8 7.6 4.8 12.3 2.9 1,696
Dominican Republic 11.7 9.8 20.4 8.2 27.9 11.3 2,013
Hungary 3.8 2.8 6.6 5.3 11.8 1.1 1,994
Jamaica 9.0 7.1 15.6 9.1 24.3 8.9 2,399
Latvia 3.9 2.8 6.5 3.0 9.4 1.7 2,011
Macedonia 7.2 7.7 14.5 11.0 24.8 5.3 1,746
Mexico 9.3 4.0 13.1 4.9 17.8 13.6 2,433
Peru 19.7 6.8 25.6 8.3 32.7 10.4 1,990
Romania 2.5 1.6 4.0 2.1 5.9 2.2 1,667
Russia 1.7 2.0 3.5 1.1 4.4 1.1 1,660
Serbia 4.0 3.6 7.6 9.3 16.5 3.7 1,813
South Africa 5.7 2.1 7.8 2.3 9.9 5.8 2,719
Turkey 3.2 3.0 6.0 4.8 10.7 3.9 2,400
Uruguay 7.7 4.4 11.9 7.9 19.3 9.1 1,645
Innovation-Driven Economies
Belgium 2.0 0.9 2.9 2.6 5.3 1.5 1,997
Denmark 2.3 2.3 4.4 4.4 8.4 1.9 2,012
Finland 4.1 3.3 7.3 9.2 16.0 2.1 2,011
France 3.8 1.9 5.6 2.8 8.2 2.2 1,573
Germany 2.4 1.5 3.8 4.0 7.7 1.8 4,751
Greece 5.3 4.6 9.9 12.6 22.0 2.9 1,962
Iceland 6.5 3.6 10.1 7.1 16.7 3.4 2,002
Ireland 3.3 4.3 7.6 9.0 16.3 3.6 1,924
Israel 3.5 3.1 6.4 4.5 10.6 3.2 1,778
Italy 2.0 2.7 4.6 6.5 11.0 1.8 2,970
Japan 3.2 2.3 5.4 7.9 12.7 1.0 1,879
Republic of Korea 3.5 6.5 10.0 12.8 22.6 4.7 2,000
Netherlands 2.1 3.2 5.2 7.2 12.3 1.6 2,534
Norway 5.0 4.0 8.7 7.7 15.8 3.4 1,614
Slovenia 4.1 2.4 6.4 5.6 11.8 1.3 3,019
Spain 3.3 3.9 7.0 9.1 14.8 1.3 30,879
United Kingdom 3.1 2.9 5.9 6.0 11.7 2.1 5,892
United States 5.9 5.0 10.8 8.3 18.7 4.4 3,441
Entrepreneurial Attitudes, Activity and Aspirations
Source: GEM Adult Population Survey (APS)
21
Entrepreneurial Attitudes, Activity and Aspirations
Figure 7 presents early-stage entrepreneurial
activity (TEA) rates for each GEM 2008 country.
The TEA rate is the proportion of people aged 18-64
who are involved in entrepreneurial activity as a
nascent entrepreneur or as an owner-manager of a
new business. The countries are grouped by phase
of economic development and ranked within groups
in ascending order of the national point estimate for
TEA. Note that if the vertical bars on either side of
the point estimates for TEA of any two countries do
not overlap, this means that they have statistically
different TEA rates
17
. This ?gure serves as a
benchmark for countries to see how they compare
to other countries in similar phases of economic
development. It is certainly not the case that higher
TEA rates are always to be preferred. In factor-driven
economies, for example, a reduction in the TEA rate
may be seen as a good sign, and is especially likely
when the general economic climate is doing well
and job opportunities increase. Such reduction in
TEA would typically be due to a decline in the rate
of necessity entrepreneurship. In innovation-driven
economies, a high TEA rate may be speci?c to regional
economic, demographic, and cultural contexts and may
be composed of entrepreneurs who may vary in type
and aspiration.
GEM reports have demonstrated a consistent
U-shaped association between a country’s level of
economic development and its level and type of
entrepreneurial activity
18
. Figure 8 illustrates this
U-shaped relationship between per-capita GDP
levels and TEA rates for 2008
19
. TEA rates in 2008
are derived from the annual GEM Adult Population
Surveys (APS) administered to representative samples
of the national adult population in 43 countries.
The measure is described in more detail in the
Introduction.
The U-shape pattern can be explained as follows: in
countries with low levels of per capita income the
national economy is characterized by the prevalence
of many very small businesses. As per capita income
increases, industrialization and economies of scale
allow larger and established ?rms to satisfy the
increasing demand of growing markets and to increase
their relative role in the economy. An important
factor for achieving growth is the presence of macro-
economic and political stability, which is re?ected by
the development of strong institutions. The increase
in the role of large ?rms may be accompanied by a
reduction in the number of new businesses, since a
growing number of people ?nd stable employment in
large industrial plants.
0%
5%
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15%
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Efficiency-Driven Economies Innovation-Driven Economies
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Figure 7 — Early-Stage Entrepreneurial Activity (TEA) for 43 Nations in 2008, by Phase of Economic
Development, Showing 95% Con?dence Intervals
Source: GEM Adult Population Survey (APS)
22
Thus, for countries with low levels of per capita
income, a decrease in prevalence rates of
entrepreneurial activity may be a good sign, especially
if this is accompanied by economic growth and
political stability. As further increases in income are
experienced, the role played by the entrepreneurial
sector may increase, as more individuals can access
the resources to go into business for themselves in an
economic environment that allows the exploitation
of opportunities. Although the annual “snapshot”
of early-stage entrepreneurial activity consistently
shows the shape of the ?tted line over the years, it
does not imply that all countries follow this pattern
over time. This is because there are also other
important national conditions that determine the
rate of early-stage entrepreneurial activity. Also,
the upward slope for high-income countries is only
partially explored because the number of countries
with very high per capita income is limited. There is
no reason to expect that the upward slope will be as
steep as the downward slope.
The dispersion of TEA country estimates around
the line of best ?t in Figure 8 demonstrates that
entrepreneurship rates are not just a function of
differences in economic development (or welfare) but
also of other factors. Entrepreneurship is not just an
economic event; it is a socio-economic phenomenon.
National societies and their economies are to a
large extent shaped by historical developments. The
rapidly expanding body of entrepreneurship studies
as well as ten years of GEM research indicates that
entrepreneurial activity rates may differ across
countries for cultural, institutional, economic, and
demographic reasons. For example, motivations,
regulations, and enforcement of regulations for setting
up a business can be vastly different across the globe.
Geographical patterns can also be witnessed in Figure
8: it shows that countries with similar geographic
backgrounds and traditions tend to cluster together. A
group of EU-15 countries is situated close together at
the lower end of early-stage entrepreneurial activity.
Countries in Eastern Europe and Central Asia are
mainly situated at the left hand side, below the ?tted
curve —even though over the years they appear to
move toward the curve. People in these countries are
not as much engaged in entrepreneurial activity as
citizens of Latin American countries, the Caribbean,
and Angola with similar levels of per capita GDP.
Wealthier countries at the upper right-hand side are
industrialized countries outside the EU—with Ireland
0%
5%
10%
15%
20%
25%
30%
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP Per Capita, in Purchasing Power Parities (PPP)
IN
BO
EG
BA
YU
EC
PE
CO
AO
DO
MK
JM AR
BR UY
MX
CL
IR
ZA
RO
TR
RU
HR
LV HU
KR
GR
SI
IT
FR
IL
JP
BE
DE
DK
NL
ES
FI
UK
IS
IE
US
NO
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y
AO: Angola
AR: Argentina
BA: Bosnia & Herz.
BE: Belgium
BO: Bolivia
BR: Brazil
CL: Chile
CO: Colombia
DE: Germany
DK: Denmark
DO: Dominican Rep.
EC: Ecuador
EG: Egypt
ES: Spain
FI: Finland
FR: France
GR: Greece
HR: Croatia
HU: Hungary
IE: Ireland
IL: Israel
IN: India
IR: Iran
IS: Iceland
IT: Italy
JM: Jamaica
JP: Japan
KR: Rep. of Korea
LV: Latvia
MK: Macedonia
MX: Mexico
NL: Netherlands
NO: Norway
PE: Peru
RO: Romania
RU: Russia
SI: Slovenia
TR: Turkey
UK: United Kingdom
US: United States
UY: Uruguay
YU: Serbia
ZA: South Africa
Source: GEM Adult Population Survey (APS) and IMF: World Economic Outlook Database (October 2008 edition)
Figure 8 — Early-Stage Entrepreneurial Activity Rates and Per Capita GDP, 2008
Entrepreneurial Attitudes, Activity and Aspirations
23
as a notable exception. Japan’s rate of early-stage
entrepreneurial activity has, over the years, been
consistently lower than the ?tted curve, but has been
increasing in recent years and is now very similar to
the EU-average.
As the 2007 GEM report demonstrated, institutional
characteristics, demography, entrepreneurial culture,
and the degree of economic welfare all shape a
country’s entrepreneurial landscape. The factors
of culture, demography, institutions, and economic
welfare are linked. For example, national institutions
re?ect the national culture, since they are designed
to formalize norms and values of the country. Also,
countries with well-developed institutions generally
exhibit higher degrees of welfare. Chapter 3 further
explores the role of institutions in enhancing high
impact entrepreneurship.
Entrepreneurial Motivations
Although most individuals are pulled into
entrepreneurial activity because of opportunity
recognition, others are pushed into entrepreneurship
because they have no other means of making a living
or because they fear becoming unemployed in the near
future. For those who are pulled to entrepreneurship,
two major drivers of opportunity entrepreneurship can
be identi?ed: those who are pulled primarily because
they desire independence, and those who are primarily
pulled to entrepreneurship because they want to
increase their income as compared to, for instance,
being an employee. The remaining share includes
people who maintain that they have no other way of
earning a living (necessity-motivated entrepreneurs)
and people who became involved in entrepreneurial
activity primarily to maintain their income
20
. We
should note that GEM may underestimate necessity
entrepreneurship and overestimate opportunity
entrepreneurship. The relevant question in the
GEM survey forces respondents to choose between
“no better options for work” and “exploit business
opportunities”. That is, there is little room for choosing
an option between these extremes and those who ?nd
themselves in between may opt for the latter option
more frequently—even if they are in fact closer to the
former.
In 2007, the calculation method for opportunity-driven
early-stage entrepreneurial activity (opportunity-TEA)
was re?ned. It includes only those who are pulled to
entrepreneurship by opportunity and because they
desire independence or to increase their income, not
those who are pushed to entrepreneurship out of
necessity or those who sought only to maintain their
income. Relative prevalence rates are shown in Figure
9 in black. The countries with high relative prevalence
of improvement-driven opportunity entrepreneurship
are primarily innovation-driven countries. In these
countries, opportunities may be expected to be
more abundant, and individuals may have more
alternatives to make a living. Therefore, the trend of
the degree of opportunity TEA in relation to GDP per
capita gradually slopes upward in Figure 9. The green
line describes the pattern of the degree of necessity
entrepreneurship and is downward sloping
21
. Thus,
when countries progress in economic development,
their rate of necessity entrepreneurship decreases.
This is a clear example of economic development
impacting the TEA rate and not the other way
around. The different slopes of the two trend lines
give support for the interpretation of the U-shaped
pattern in Figure 8 as outlined above. An important
implication is that when linking entrepreneurship to
economic development, the phase of national economic
development should be taken into account.
Discontinuing Business
Business discontinuation is an important feature of
dynamic economies and entries and exits of businesses
are closely correlated
22
. Table 2 displays prevalence
rates of people who discontinued, sold, or quit a
business in the twelve months preceding the GEM
survey. It can be seen that business discontinuance
rates are relatively high in factor-driven economies
(in Angola, for example, the reported rate is as much
as 23%) and relatively low in innovation-driven
economies. Among high-income countries, Norway, the
United States, Republic of Korea, Iceland and Ireland
have the highest rates of business discontinuation.
This suggests that in some countries, there is a rapid
turnover of business experiments.
Many businesses that are discontinued are not failed
businesses. In a study by Headd (Headd, 2003),
owners of about one-third of all ?rms that closed
said their ?rm was successful at closure. In 2008,
GEM respondents who said they had discontinued
a business in the last 12 months were asked if their
business continued. It appears that, on average, about
one-third of the businesses that were discontinued
by a GEM respondent continued in another form
or with different ownership. The respondents who
discontinued a business in the last 12 months were
also asked to state the most important reason for
doing so. Figure 20 shows that the discontinuation
of a business does not necessarily mean the business
failed.
Financial problems were cited as the reason for
quitting the business by no more than 55% of all
respondents; it was cited more often by respondents in
the factor- and ef?ciency-driven economies (just over
50%) than innovation-driven countries (just over 40%).
The business itself not being pro?table was the most
reported ?nancial problem. Problems with raising
?nance were considerably lower in innovation-driven
Entrepreneurial Attitudes, Activity and Aspirations
24
R
2
= 0.41
R
2
= 0.55
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP Per Capita, in Purchasing Power Parities (PPP)
Improvement-driven opportunity Necessity; no better options for work
Linear trend Exponential trend
O
p
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A
Source: GEM Adult Population Survey (APS) ) and IMF: World Economic Outlook Database (October 2008 edition)
Figure 9 — Necessity- and Improvement-Driven Opportunity Motivations as a Percentage of Early-Stage
Entrepreneurial Activity, GEM 2008 Countries
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Factor- Driven
Economies
Efficiency- Driven
Economies
Innovation-Driven
Economies
Incident
Personal reasons
Retirement
Exit was planned in
advance
Other job or business
opportunity
Opportunity to sell
Problems getting
finance
Business not profitable
Figure 10 — Expressed Reasons Behind Discontinuing Businesses, by Age, GEM 2008
Source: GEM Adult Population Survey (APS)
Entrepreneurial Attitudes, Activity and Aspirations
25
countries where the Entrepreneurial Framework
Condition “Entrepreneurial Finance” is generally
more developed. “The opportunity to sell” and in
particular “retirement,” were mentioned more often
in innovation-driven countries as the most important
reason to discontinue the business. Personal reasons
caused around 20 – 25% of all discontinuations. Such
reasons could include sickness, family, or business
partner bereavement, divorce, the need to ?nance
an event such as a wedding through sale of business
assets rather than the business itself, or simply
boredom. They were more prevalent in factor- and
ef?ciency-driven countries.
For many entrepreneurs who exit a business, it is
not the end of their entrepreneurial career, but a
new beginning. “Entrepreneurial recycling” (Mason
and Harrison, 2006) manifests itself in two main
ways. First, exited entrepreneurs may start again.
This phenomenon is more than twice as prevalent
in factor-driven and ef?ciency-driven economies
than in innovation-driven economies. Seventeen
percent of nascent entrepreneurs in both factor-
driven economies and ef?ciency-driven economies had
stopped running a business in the past year, compared
with 8% of nascent entrepreneurs in innovation-
driven economies. Second, exited entrepreneurs are
more likely to invest in other people’s businesses than
the rest of the population. Almost a ?fth of exited
entrepreneurs in all three country groups were recent
informal investors: around four to ?ve times that of
other people in factor-driven and ef?ciency-driven
economies and seven times that of other people in
innovation-driven economies.
Sector Distributions
Figures 11 and 12 show the distribution of early-
stage entrepreneurial activity and established
business owner-managers by industry sector and
phase of economic development. This distribution is
different in each of the three major phases of economic
development. Extraction businesses (farming, forestry,
?shing, mining) are more prevalent in factor-driven
economies, transforming businesses (manufacturing
and construction) are more prevalent in ef?ciency-
driven economies, and business services are more
prevalent in innovation-driven economies. The
reducing prevalence of consumer services across the
three major phases is particularly noticeable. Such
services tend to have relatively low resource needs
and are often local in nature, particularly in countries
with poorly developed transportation and commercial
infrastructure.
0% 20% 40% 60% 80% 100%
Factor-Driven
Economies
Efficiency-Driven
Economies
Innovation-Driven
Economies
Extractive Transforming Business Services Consumer oriented
0% 20% 40% 60% 80% 100%
Extractive Transforming Business Services Consumer Oriented
Factor-Driven
Economies
Efficiency-Driven
Economies
Innovation-Driven
Economies
Figure 11 — Sector Distribution Early-Stage
Entrepreneurial Activity
Figure 12 — Sector Distribution
Established Business
Source: GEM Adult Population Survey (APS)
Entrepreneurial Attitudes, Activity and Aspirations
26
Age and Gender Structure
Figure 13 demonstrates that in each phase of
economic development, prevalence rates of early-stage
entrepreneurial activity differ across age groups.
The shapes of the age distributions are very similar
across country groups. The 25-34 years age group
has the highest prevalence rate for every phase of
economic development. Thereafter the prevalence
rates decrease as age increases. This inverted U-shape
pattern re?ects the interaction between desire to
start a business, which tends to reduce with age, and
perceived skills, which tends to increase with age.
Figure 14 displays the differences in female and
male participation for each country in GEM 2008,
ordered by major phase of economic development and
female participation rate
23
. The ratio of female to
male participation varies considerably in each phase,
re?ecting different culture and customs regarding
female participation in economic activity. In some
factor-driven economies, for example Ecuador and
Bolivia, female TEA rates are just below male TEA
rates. In Angola, women are actually more likely
to be involved in early-stage activity than to men.
The situation is very different for Egypt, re?ecting
different culture and customs. For ef?ciency-driven
economies, the gender gap in TEA rates is also quite
low in many Latin American countries and Jamaica.
In many, but not all, eastern European countries male
TEA rates are substantially higher than female TEA
rates. In innovation-driven countries, the general rule
of thumb is that men are twice as likely to be involved
in early-stage entrepreneurial activity than women.
However, this gap is lower in Germany, Spain, Greece,
and the United States.
Trend in Early-Stage Entrepreneurial Activity
2001-2008
According to classic economic thinking, one would
expect that when the business cycle is less favorable,
fewer people will be involved in entrepreneurial
activity because the expected returns are lower in
comparison to times of economic prosperity. A counter
argument is the so-called “refugee” hypothesis
(Storey, 1991; Thurik et al.,, 2008). This hypothesis
implies that when recessions loom, the number of
people involved in TEA should become higher because
employees either fear that their salaries are at risk,
or they have already been let go and self-employment
is the last resort. Figure 9 showed that necessity
entrepreneurship played a relatively small role in
innovation-driven countries in 2008; all high-income
countries fall under the category of innovation-driven
countries. In fact, a large share of TEA consists of
people whose main driver for starting up a business
is the fact that they can work independently. If one
accepts that desire to be independent is the main
driver, little difference over time can be expected for
national TEA rates in innovation-driven countries.
0%
5%
10%
15%
20%
25%
30%
Factor-Driven
Economies
Efficiency-Driven
Economies
Innovation-Driven
Economies
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18-24 YRS
25-34 YRS
35-44 YRS
45-54 YRS
55-64 YRS
Figure 13 — Early-Stage Entrepreneurial Activity for Separate Age Groups, 2008
Source: GEM Adult Population Survey (APS)
Entrepreneurial Attitudes, Activity and Aspirations
27
Factor-Driven
Economies
Efficiency-Driven Economies Innovation-Driven Economies
P
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Figure 14 — Early-Stage Entrepreneurial Activity Rates by Gender, 2008
Note: Countries are ordered along phase of economic development and female early-stage entrepreneurial
activity rates
Source: GEM Adult Population Survey (APS)
Figure 15 displays the trend in average annual TEA
rates from 2001 to 2008 for a subset of GEM ef?ciency-
driven and innovation-driven countries. These are all
countries that have been part of GEM since 2001 and
have missed at most one year of data collection
24
. Data
is available for only six ef?ciency-driven economies:
Argentina, Brazil, Chile, Croatia, Hungary and South
Africa, so the results should be interpreted with
some care. A total of 17 innovation-driven economies
had suf?cient data to be included. Figure 15 shows
that the overall development over time of TEA in
innovation-driven economies is quite stable. A slight
and gradual rise is observed, from 5.7% in 2002 to
6.4% in 2008. The rates of necessity-driven TEA
are shown in Figure 16 and have, on average, been
very stable as well. For ef?ciency-driven economies,
the pattern is more sensitive to the business cycle.
Argentina, in particular, has shown a signi?cant
reaction to its national economic crisis; in 2001-
2003, the Argentinean rate of necessity early-stage
entrepreneurs rose from 3.9 to 7.4 percent. It leveled
off afterwards as the national economy recovered, but
has been increasing again in recent years.
It remains an unanswered question how much the
current global economic crisis will impact necessity-
driven TEA rates in ef?ciency-driven countries
and innovation-driven countries. Even though the
collapse of the internet bubble in 2001 did not seem
to signi?cantly affect overall TEA rates in innovation-
driven countries, the current crisis clearly poses more
threats to entrepreneurial activity and economic
activity in general. Those looking to GEM data for
guidance should bear in mind that the TEA rate covers
several phases of the start-up process. It includes
the pre-start-up phase—from the moment of actively
starting a business—and the post-start-up phase, up
to the moment a business is up and running for 42
months. In addition, most of the GEM 2008 surveys
were conducted before the summer, when the true
size of the crisis had not manifested itself yet. This
means that the impact of the crisis on TEA rates has
not yet become apparent. This will to a large extent
also hold for the 2009 results; for example, individuals
who started their business in 2007 will still be seen
as early-stage entrepreneurs. However, it is expected
that in due course the crisis will impact both the pre-
start-up phase and the post-start-up phase of early-
stage entrepreneurship in some ways (see Box 3).
Entrepreneurial Attitudes, Activity and Aspirations
28
Figure 15 — Early-Stage Entrepreneurial Activity (TEA) Rates for 2001-2008, Averages
over Ef?ciency-Driven Countries and Innovation-Driven Countries
Innovation-Driven Economies Efficiency-Driven Economies
Figure 16 — Necessity-Driven TEA Rates for 2001-2008,
Averages over Ef?ciency-Driven Countries and Innovation-Driven Countries
Note: Each data point is a simple country average for that year
Source: GEM Adult Population Survey (APS)
Innovation-Driven Economies Efficiency-Driven Economies
Entrepreneurial Attitudes, Activity and Aspirations
29
Box 3. How Does the Current Economic Crisis
Affect Entrepreneurship?
It is clear that the current economic crisis will have
a substantial impact on entrepreneurship. The
crisis started off in the ?nancial sector but has—at
the time this report went into print—already hit
many other parts of the economy severely and
production growth has come to a halt in many
industries, in many countries. In this insert, we
discuss some important implications of the crisis
for entrepreneurship along the three identi?ed
components of attitudes, activity, and aspiration.
The crisis may have different effects on different
types and phases of entrepreneurship, resulting
in both negative and positive trends in activity.
Entrepreneurship is thought to be one of the
mechanisms that helps turn around recessions by
reallocating resources in such a way that promising
new activities replace obsolete economic activities.
However, this only works well if institutions,
captured by the Entrepreneurial Framework
Conditions (EFCs) in Figure 1, are conducive to
this particular entrepreneurship mechanism and
do not, for instance, arti?cially keep alive obsolete
types of economic activity.
Attitudes and Perceptions
The GEM Adult Population Survey measures
several perceptions toward entrepreneurship of a
representative sample of adults. As a result of the
recession, their perceived opportunities for starting
a business will be lower because of (i) declining
demand for products and thus declining expected
returns, and (ii) lower supply of entrepreneurial
?nance caused by banks being more risk averse.
This GEM publication already reports a decline
in perceived opportunities for starting a business.
Fear of failure is also higher because the
implications of failure are higher: there are fewer
alternatives available on the job market for those
who will not be able to make their start-up venture
sustainable.
The issue of access to entrepreneurial ?nance
is especially important for entrepreneurs who
envision a sizeable new venture. The GEM
2006 Financing Report demonstrates that most
business founders expect to ?nance their venture
themselves, and for those who do seek external
sources of funding, relatively small sums are
involved (Bygrave and Quill, 2007). There may
be a trade-off between accessibility of external
funding and the cost of resources. In a recession,
under-used assets will be released by failing
businesses and recycled at a relatively low cost by
other businesses, including new businesses. Also,
the decision to become an entrepreneur is not only
about expected ?nancial returns versus risk, it is
also about (self-perceived) abilities (Davidsson,
1991). Perceived skills are not likely to be affected
by the crisis. The GEM perceived start-up skills
and knowledge indicator—in contrast to perceived
opportunities and fear of failure—was stable in
2008.
National attitudes towards entrepreneurship in
general are unlikely to change dramatically. Such
attitudes include the degree to which people view
entrepreneurship as a good career choice, and
the degree to which the media pays attention to
entrepreneurship.
Activity
Entrepreneurial activity comprises a static
component (in GEM, this is represented by
economic activity in “established” businesses)
and a dynamic component that focuses on early-
stage entrepreneurial activity, but it also includes
new economic activities conducted by established
businesses. Many established businesses in
established sectors may see their turnover dropping
due to a reduction in demand. Their pro?ts may
decrease and the resources for investments may
decrease sharply. Expansion may be more dif?cult
for cash-poor businesses. Factories will stop their
production or might even close permanently.
Established businesses operating in niche markets,
or serving the lower-ends of the market, may be
less harmed, and businesses that are cash-rich may
?nd good opportunities for growth by acquisition as
the value of business assets drops.
The static component of entrepreneurship is
important for preserving economic stability.
Governments may seek to support the existing
stock of businesses to some extent and help to
preserve big and important companies, as well as
help the small business sector to survive. In fact,
many small businesses’ existence is dependent on
the needs of larger businesses. However, companies
that ?nd themselves in trouble not only due to the
?nancial crisis, but also because their products and
services are essentially outdated, should perhaps
not be supported unless they adjust their economic
strategy. It is unavoidable that the number of
discontinuations will increase. The challenge for
governments is to keep alive those ?rms that still
have good potential to do well in the longer run.
While established businesses are important for
preserving stability, early-stage entrepreneurship
Entrepreneurial Attitudes, Activity and Aspirations
30
is important for creating dynamism in economic
activity. Of course, pessimistic economic projections
may lead to fewer people starting up a business.
However, (pending) job losses may also result in
more necessity-motivated entrepreneurship. In this
particular recession, the ?rst group of people to be
affected in this way, those in the ?nancial sector,
exhibit high levels of human capital and ?nancial
capital relevant to entrepreneurship. Thus, the
recession could trigger teams of bright individuals
in the ?nancial sector to start their own companies
based on new but commonly shared principles. This
would in effect be a bottom-up process of reshaping
the ?nancial sector to ?t the needs of the current
globalized economy. It is up to national authorities
to recognize and support such new initiatives
where they can.
Most individuals who planned to start a business
just before the crisis emerged are unlikely to
change these intentions, especially if they are
driven by the wish to work independently—which
is the case with most entrepreneurs in innovation-
driven countries. Figure 15 con?rms that on
average, there has been no signi?cant change
in TEA in innovation-driven countries over the
past year. Many individuals involved in the pre-
start-up phase, however, may have to rethink
their products and strategies. It is often easier
to adjust a business model in the pre-start-up
phase than in the established stage. Banks and
other investors, being less eager to lend money,
will ensure a very thorough selection of new
business activities. In conclusion, the dynamic
component of entrepreneurship, in the form of not
only early-stage entrepreneurial activity but also
new business activities carried out by established
businesses, may be important for the change
in economic activity that is needed to overcome
recessions.
Aspirations
Since many early-stage entrepreneurs lean on
their own skills and knowledge when setting
up their businesses, the impact of the crisis on
growth expectations may be rather low. However,
some new realism may be found among nascent
entrepreneurs. In general, nascent entrepreneurs
tend to overestimate their expected growth
(Koellinger, 2008), but it has also been observed
that those who expect to grow signi?cantly
will, after a few years, exhibit such expansion
more often than low-expectation entrepreneurs
(Davidsson and Wiklund, 1997).
To some extent, the recession can stimulate
innovative entrepreneurship. In economic booms,
much money is spent on research and development,
but the resulting innovations have often not yet
been implemented in new business activities
because the “old” products and processes are
still generating good returns. Times of recession
are often used to actually implement changes in
businesses. This especially goes for established
business activities because there is always much
internal resistance to organizational changes.
Innovations in recessions often pave the way
for a new period of prosperity. For example, the
?rst supermarket in America started up at the
beginning of the Great Depression (Hirooka, 2003).
Economic downturns trigger economic activity that
is directed toward the future, rather than activity
merely prolonging established routines.
Entrepreneurial Attitudes, Activity and Aspirations
31
Source: GEM Adult Population Survey (APS).
Entrepreneurial Attitudes, Activity and Aspirations
2.3 ENTREPRENEURIAL ASPIRATIONS
High-Growth Expectation Entrepreneurship
Studies show that relatively few early-stage
entrepreneurial ?rms contribute a disproportionate
share of all new jobs created by new ?rms (Autio,
2007). In the following analysis, seven years of GEM
data (years 2002-2008) are combined to take a closer
look at how growth ambitions differ among early-
stage entrepreneurs
25
. The GEM method enables
the categorization of early-stage start-up attempts
according to their growth ambition. GEM asks all
identi?ed early-stage entrepreneurs how many
employees they expect to have within ?ve years’ time.
Expectations of high-growth are rare among nascent
and new entrepreneurs. Seventy percent of all start-
up attempts expected any job creation. Only 8% of
all start-up attempts expected to create 20 or more
jobs. In the remainder of this section, we focus on the
prevalence of new and nascent entrepreneurs who
expect their business will employ at least 20 people
in ?ve years’ time. This is known as high-growth
expectation early-stage entrepreneurial activity, or
HEA.
Figure 17 presents the HEA rate in GEM countries
for which a suf?cient sample size was available,
grouped on the basis of per capita GDP. The vertical
bars indicate the 95% con?dence interval. If vertical
bars overlap between two countries, the difference
between those countries is not considered statistically
signi?cant.
Figure 17 is broadly consistent with the notion that
national HEA rates vary with economic context. The
United States, New Zealand, Iceland, and Canada
have higher levels of HEA than other innovation-
driven economies. The HEA rate for these countries
is well over 1%. In the United Kingdom, Switzerland,
Germany, Slovenia, Norway, and Denmark, the HEA
rate is between 0.5 and 0.8%. The lowest levels of
HEA, at under 0.5%, occur in Belgium, France, Spain,
Japan, Finland, and Greece. Within innovation-driven
economies, the differences in prevalence rates of HEA
are considerable, ranging from the United States and
Iceland’s mean of over 1.5%, to approximately 0.3% in
Belgium.
HEA rates can vary even among broadly similar high-
income countries. Among the large EU economies, the
United Kingdom and Germany clearly exhibit higher
levels of HEA than France and Spain. In the Benelux
countries, the Dutch HEA rate is higher than the
Belgian HEA rate. In Scandinavia, the level of HEA in
Iceland is four times higher than that of Finland.
Of the factor- and ef?ciency-driven countries,
Colombia, China, Peru, and Chile exhibit the highest
prevalence rates of high-expectation entre pre neur-
ship
26
. In fact, the HEA rate for China is the highest
of any GEM country, even though it is not statistically
different from that of the United States, New Zealand,
and Iceland. Most other middle- and low-income
countries in the sample exhibit lower HEA rates than
most high-income countries. It is notable that India’s
HEA rate is less than one-?fth that of China.
0.0%
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Percentage of adult population between 18-64 years
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Figure 17 — Prevalence Rates of High-Growth Expectation Early-Stage
Entrepreneurship (HEA) in the Adult Population
32
Efficiency-Driven Innovation-Driven
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Figure 18 — Anatomy of High-Growth Expectation Early-Stage Entrepreneurship (HEA):
Percentages in TEA
Efficiency-Driven Innovation-Driven
P
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Figure 19 — Percentage of Early-Stage Entrepreneurial Activity with New Product-Market
Combination, 2002-2008
Entrepreneurial Attitudes, Activity and Aspirations
Source: GEM Adult Population Survey (APS)
Source: GEM Adult Population Survey (APS)
33
An analysis of the anatomy of entrepreneurial
activity (de?ned as the relative prevalence of HEA
entrepreneurs among all TEA entrepreneurs) reveals
a slightly different pattern to that shown in Figure 17.
Figure 18 shows that the countries with arguably the
“healthiest” entrepreneurial anatomies, in this sample
of nations, are Singapore, Latvia, Hong Kong, China
and Turkey. In Singapore and Hong Kong, over 20%
of nascent and new entrepreneurs aspire for rapid
growth, the highest relative prevalence of HEA of
all innovation-driven countries in the sample. Thus,
in spite of their low overall rate of entrepreneurial
activity, the contribution of entrepreneurs to
these two densely populated economies may be
quite signi?cant
27
. Greece and Spain stand out
as countries where very few nascent and new
entrepreneurs (around 5%) anticipate creating a
business of signi?cant size. Also France, Finland,
Belgium, Australia, and Norway exhibit low levels of
entrepreneurial growth ambition, with less than 10%
of all start-up attempts expecting high-growth.
Among factor-driven and ef?ciency-driven economies,
China’s nascent and new entrepreneurs appear to be
the most growth-oriented, with nearly 20% of them
anticipating high-growth. Early-stage entrepreneurial
activity in India and Mexico, on the other hand, is
marked by low levels of growth expectation.
In summary, innovation-driven economies typically
have a higher relative prevalence of HEA than
ef?ciency-driven and factor-driven economies. There
are notable exceptions to this overall pattern, however.
Some high-income countries have low relative
prevalence of HEA and some middle- and low-income
economies have high relative prevalence.
Innovation- and Technology- Oriented
Entrepreneurial Activity
The essence of Schumpeter’s (1942) theory of
creative destruction is that entrepreneurs distort
the market equilibrium by introducing new product-
market combinations or innovations. Sometimes
they use new technologies to do so. By innovating,
entrepreneurs drive less productive ?rms out of
the market and advance the production frontier.
Innovation is therefore an important means by which
entrepreneurial ?rms contribute to economic growth.
GEM assesses innovation in entrepreneurial
businesses in a variety of ways. First, there are
assessments of early-stage entrepreneurs and
established business owner-managers concerning
the novelty (or unfamiliarity) of their products or
services relative to customers’ current experience. A
second way that GEM assesses the innovativeness of
entrepreneurial businesses is by measuring the degree
of competition faced by the business, or whether the
owner-manager perceives that many, few, or no other
businesses offer similar products or services.
Figure 19 evaluates GEM countries on an index that
combines the two measures of innovation discussed
above (product novelty and degree of competition), and
Efficiency-Driven Innovation-Driven
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Driven
Figure 20 — Percentage of Early-Stage Entrepreneurial Activity Active
in Technology Sector, 2002-2008
Entrepreneurial Attitudes, Activity and Aspirations
Source: GEM Adult Population Survey (APS)
34
Entrepreneurial Attitudes, Activity and Aspirations
ranks countries in their country groups on the relative
prevalence of innovative early-stage entrepreneurial
activity. In essence, this index measures the
percentage of early-stage entrepreneurs with novel
product-market combinations. These entrepreneurs
offer a product or service they believe is new to some
or all customers and they also believe that there are
few or no businesses offering the same product. In
order to derive more precise estimates, we combined
GEM data from 2002-2008.
Looking at the country groups, it is apparent that
in each group there are countries with high and
low relative prevalence of innovative early-stage
entrepreneurial activity. Interestingly, within the
innovation-driven country group, the EU-countries
emerge as having—on average—the highest relative
prevalence. The ?gure shows, however, a wide
variation in relative prevalence, even within the
EU block. For example, Greece, Spain, and Italy
have relatively few new product-market oriented
entrepreneurs in early-stage entrepreneurial activity,
whereas Denmark, Slovenia, France, and Ireland have
high rates. Among other innovation-driven countries,
it is striking that Asian countries have low relative
prevalence.
Turning to factor-driven and ef?ciency-driven
countries, Figure 19 demonstrates that factor-driven
countries tend to have lower rates of innovative
early-stage entrepreneurial activity, and that some
ef?ciency-driven countries appear to have the highest
rates of all countries in the sample of GEM nations.
In considering these patterns, it is important to
bear in mind that this index works well if both
the availability of new products and services and
the strength of competition are evenly distributed
throughout the world. This is a big assumption to
make. By comparing within country groups, we control
to some extent for differences in product availability
and ferocity of competition. But it may be that some
countries score high on this index merely because
relatively few new products are available in them and
competition is weak.
Information on the business activities of nascent
entrepreneurs and owner-managers is available in
some detail from the GEM Adult Population Surveys
28
.
For example, the share of early-stage entrepreneurs
who are active in technology sectors according to
the OECD de?nition can be estimated
29
. Figure 20
presents these percentages for the selected set of GEM
2008 countries. This ?gure con?rms that countries
in the innovation-driven stage have higher shares
of technology-related early-stage entrepreneurial
activity. Also here, some European countries tend
to score high, although some can also be found at
the lower end of the ranking of innovation-driven
economies on this measure. Chile, Russia, and Latvia
score high among ef?ciency-driven economies. India,
Thailand, and Brazil have the lowest scores.
35
Entrepreneurial Attitudes, Activity and Aspirations
In 2007, the IIIP Innovation Con?dence Index
was developed by the Institute for Innovation &
Information Productivity (IIIP) in association with
GERA. This year, 26 GEM countries collected
data on personal innovation con?dence through
the Adult Population Survey (APS), more than
doubling the number of participating countries
30
.
The premise behind the Index is that innovative
entrepreneurs need customers who are willing
to buy new products and services and to try
products and services that utilize new technology
(Bhidé, 2006). Consumers who are receptive to
such innovations tend to believe that they will
improve their life. The index captures these three
dimensions of innovation con?dence: willingness
to buy new products or services, willingness to try
products or services that involve new technology,
and the belief that new products or services will
improve one’s life. Each dimension is measured
using a ?ve-point scale and then combined into
an index at the country level
31
. The ?nal IC
Index is the average percentage of the sample
agreeing to each item. Figure 21 plots the results
in rank order by country. It shows that innovation
con?dence varies widely, even among countries
at similar stages of economic development, but
tends to be lower in more developed economies.
The IC Index correlates positively with early-stage
entrepreneurial activity (r = .642, p = .000) and
negatively with the mean age of the working age
(18-64) population (r = -.603, p = .001).
Seven countries participated in both 2007 and
2008, enabling an estimate of the stability of the
index. The correlation of the 2007 and 2008 IC
indices for all seven nations was .966 (p = .000).
The index does not appear to be just measuring
consumer con?dence. AC Nielsen found that
consumer con?dence in April 2008 dropped by
10 to 20% of the point estimate for April 2007 in
?ve of these seven countries. In one country, it
remained unchanged and the other country was
not measured. By contrast, the IC Index in six of
these nations dropped by only around 2 to 4% of the
2007 value; only in the UK did it drop by as much
as 9% of the previous year’s point estimate. The
IC Indices and annual changes were uncorrelated
with their respective GCC Indices and their annual
changes. This suggests that the IC Index is stable
and does not track consumer con?dence. For more
details on the IIIP Innovation Con?dence Index,
see www.iii-p.org.
Where innovation and productivity meet...
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Efficiency-Driven Econnomies
IC Index 2007 IC Index 2008 Country Average IC Index 2008
Innovation-Driven Economies Factor-Driven Economies
Figure 21 — Innovation Con?dence Index for 2007 and 2008 by Country and Country Group
Box 4. The Institute for
Innovation & Information
Productivity
36
The interdependence of economic development and
socio-political change is generally recognized by
social scientists (Adelman and Morris, 1965). Joseph
Schumpeter provided an early statement on this
(Schumpeter, 1934). In recent years, economists have
come to recognize what Leibenstein (1968) termed
the “input-completing” and “gap-?lling” capacities of
potential entrepreneurial activity in innovation and
growth, and the signi?cant contribution of innovation
and growth to prosperity and economic welfare (Acs
and Armington, 2006; Schramm, 2006; Audretsch,
2007). Entrepreneurship is considered to be an
important mechanism for economic development
through employment, innovation, and welfare effects
(Wennekers and Thurik, 1999; Baumol, 2002).
The environment shaping the economy affects
the dynamics of entrepreneurship within any
given country. This environment is marked by
interdependencies between economic development
and institutions, which affect other characteristics
such as quality of governance, access to capital, and
other resources, and the perceptions of entrepreneurs.
Institutions are critical determinants of economic
behavior and economic transactions in general, and
they can impose direct and indirect effects on both the
supply and demand of entrepreneurs. Therefore, if
one is interested in understanding entrepreneurship
within or across countries, the broad nexus among
entrepreneurship, economic development, and
institutions is a critical area of inquiry. This nexus is
especially important in helping understand why the
relative contributions of entrepreneurship can vary
signi?cantly across countries and regions.
Understanding this nexus is crucial to gain insight
into what can work for economic development. This is
for the following two reasons. First, the international
economic development community has learned that
a one-size-?ts-all approach simply does not work
(Easterly, 2001). Second, economic importance
attributed to “the entrepreneur” and concurrent
policy interest in his/her activities has exploded in
recent years. This combination suggests that public
policy needs to be informed by the dynamics of
entrepreneurship and economic development, as well
as relevant local institutional conditions and context-
speci?c variables. In fact, one of the main goals of the
GEM project is to measure differences in the level of
entrepreneurial activity among countries. The purpose
of this section is to outline the relationship between
entrepreneurship and economic development and to
sketch the beginnings of a Global Entrepreneurship
Index to measure and understand this relationship.
3.1 LINKING INSTITUTIONS,
ENTREPRENEURSHIP, AND
DEVELOPMENT
For over a century, there has been a trend in economic
activity, exhibited in virtually every developed
industrialized country, away from small ?rms and
toward larger organizations. It was, therefore,
particularly striking when a series of studies identi?ed
that this trend had not only ceased sometime during
the mid-1970s, but had actually begun to reverse
(Blau, 1987; Evans and Leighton, 1989).
More recent
studies have con?rmed this result for most developed
countries in the 1970 and 1980s (Acs, Audretsch, and
Evans, 1994). The empirical evidence clearly shows
that ?rm size distribution in developed countries
began to shift away from larger corporations and
toward entrepreneurial activity.
There are three reasons why entrepreneurial activity
rises in countries in the innovation-driven phase
of economic development: First, the innovation-
driven phase is marked by decreases in the share
of manufacturing in the economy. Virtually all
industrialized market economies experienced a
decline in manufacturing over the last thirty years.
The business service sector expanded relative to
manufacturing. Service ?rms are smaller on average
than manufacturing ?rms, therefore, economy-wide,
average ?rm size may decline. Moreover, service ?rms
provide more opportunities for entrepreneurship. This
is clearly the case in the United States, as well as in
several EU countries, including Germany and Sweden.
Second, technological change during the postwar
period has been biased toward industries in which
entrepreneurial activity is important (Jorgenson,
2001). Improvements in information technologies
such as telecommunications may increase returns to
entrepreneurship. Express mail services, photocopying
services, personal computers, the internet, web
services, and mobile phones services make it less
expensive and less time consuming for geographically
separate individuals to exchange information.
Third, some theorists suggest that the easier it is
to substitute capital for labor, the richer countries
become, and the easier it is to become an entrepreneur
(Aquilina, Klump, and Pietrobelli, 2006).
Thus in countries in the early phases of economic
development, the factor-driven and ef?ciency-driven
phases, entrepreneurial activity would be negatively
related to economic development since most people
would be trying to move from subsistence self-
employment to wage employment. In developed
3.0 Entrepreneurship, Institutions and Economic Development
37
economies, we would expect entrepreneurial activity
to be positively related to economic development
as people shift from wage work to entrepreneurial
activity. These economies have entered the innovation-
driven phase.
This framework seems to imply that the relationship
between entrepreneurial activity and economic
development in the global economy may be U-shaped.
Figure 8 shows that countries with very low levels
of per capita income like Angola, Peru, and Ecuador
all have high levels of early-stage entrepreneurial
activity. As per capita income increases,
entrepreneurial activity tends to decrease, but then
levels off. At the bottom of the U are countries that
appear to be transitioning from ef?ciency-driven
economies to innovation-driven economies, including
many Eastern European countries. Many innovation-
driven countries such as Germany, France, Belgium
and Italy have relatively low levels of entrepreneurial
activity, but the richest, such as the US, Norway, and
Iceland do tend to have higher levels.
Research on the relationship between
entrepreneurship and economic development
has greatly expanded in the past decade. For
example, in 2002, Carree and colleagues examined
the relationship between economic development
and business ownership for OECD countries and
reaf?rmed the existence of a U-shaped relationship.
In 2005, Wennekers and colleagues were the ?rst
to regress GEM data for nascent entrepreneurship
on the level of economic development. They also
found support for the U-shaped relationship among
countries at different stages of development.
However, this line of research is not without
limitations for the study of entrepreneurship and
development. For example, it considers the quantity
rather than the quality of entrepreneurship, and does
not take into account institutional differences between
countries in the same phase of economic development.
It is hard to use this U-shape relationship for
policy purposes, since it seems to suggest that less
entrepreneurship is better for developing countries,
while more is better for developed countries. In
this chapter, we consider a composite measure
of entrepreneurship that could be more useful in
understanding entrepreneurship in both developed
and developing countries. There are at least three
composite measures that have been used to measure
different aspects of economic development in the
global economy. These are brie?y reviewed in the
following paragraphs.
The Ease of Doing Business Index (EDBI) was created
by the World Bank to measure the simplicity of
regulations for businesses and the level of protection
of property rights. It was designed to evaluate the
effect of improving regulations on economic growth
and to determine the optimal levels of business
regulation. Fewer and simpler regulations generate
higher rankings. The index is based on the study of
expert opinion on laws and regulations and ranks
nations based on the average of 10 sub-indices. The
Index of Economic Freedom (IEF), created by the Wall
Street Journal and The Heritage Foundation, uses
10 economic measures to evaluate degree of economic
freedom.
It is based on economic theories of liberty, with the
objective of creating basic institutions that protect
individual liberties in pursuit of economic interests for
greater economic prosperity.
Economic freedom is de?ned as “the absolute right
of property ownership, fully realized freedom of
movement for labor, capital, and goods, and an
absolute absence of coercion or constraint of economic
liberty beyond the extent necessary for citizens to
protect and maintain liberty itself." The IEF, therefore,
evaluates the economic environment or set of policies
for their conduciveness to economic freedom, with
absolute freedom the ideal target. The index uses
statistics from the World Bank, the IMF, and the
Economist Intelligence Unit to score countries.
The Global Competitiveness Index (GCI) is an annual
report by the World Economic Forum, covering about
131 countries. It "assesses the ability of countries to
provide high levels of prosperity to their citizens,”
which is dependent on how productively a country
uses available resources (allocative ef?ciency). The
GCI measures the set of institutions, policies, and
factors that determine short- and medium-term
sustainable levels of economic prosperity. The Index is
based on theoretical and empirical research and made
up of about 90 variables, two-thirds of which come
from the Executive Opinion Survey and one-third from
publicly available data sources such as the United
Nations. It classi?es the variables into nine pillars,
each representing an area considered an important
determinant of competitiveness.
Together with GEM, these three projects represent
a sort of “development diamond” focusing on
freedom, competitiveness, cost of doing business, and
entrepreneurship. There are natural connections
between these facets of the development diamond.
For example, as Carl J. Schramm has argued, “In
the past two years…essays on entrepreneurship and
labor freedom have evinced a growing recognition
that developments on the micro level are centrally
important to economic freedom,” (Schramm, 2008,
p. 15). These facets are being measured with some
regularity but there is not a well-developed overall
measure of entrepreneurial adaptation. Much of the
material required to develop the components of such a
measure can be drawn from existing GEM data.
Entrepreneurship, Institutions and Economic Development
38
3.2 RECOGNIZING THE COMPLEX
RELATIONSHIP BETWEEN
ENTREPRENEURSHIP AND ECONOMIC
DEVELOPMENT USING GEM DATA
In the 2004 Global Entrepreneurship Report,
GEM started to pursue the idea of using the
opportunity-necessity ratio as a composite indicator of
entrepreneurial activity and economic development.
Over the years, GEM researchers began to collect
data on both opportunity entrepreneurship
(starting a business to exploit a perceived business
opportunity) and necessity entrepreneurship
(starting a business because you were pushed into
it). However, both measures show higher levels in
developing countries than in developed countries.
A clearly discernible trend occurs between the ratio
of opportunity to necessity entrepreneurship and
the per capita income of a country. Opportunity to
necessity entrepreneurship ratio is a short-hand
approach to describe the importance of the desirable,
opportunity entrepreneurship relative to the
necessity- induced entrepreneurship. Countries where
more entrepreneurship is motivated more through
the recognition of an economic opportunity than by
necessity have higher levels of income. Complex
measures such as this point the way to a more
nuanced understanding of the relationship between
entrepreneurship and economic development.
Acs and Szerb (2008), Acs and Stenholm (2008),
Ahmad and Hoffmann (2008), and Klapper, Amit,
Guillén and Quesada (2007), among others, are
developing a new family of global entrepreneurship
indices. In this chapter, one such attempt is
summarized: the Global Entrepreneurship Index
(GEI) (Acs and Szerb, 2008). The GEI uses 32
variables (19 from GEM) to create 14 indicators
and three sub indices that measure entrepreneurial
activity, entrepreneurial aspiration and
entrepreneurial attitudes for all 64 countries that
have participated in the GEM project, including
developed and developing countries across the years
2003-2008. The index takes a value from 0 to 1 and is
plotted against income per capita based on purchasing
power parity in U.S. dollars.
Acs and Szerb propose a four level index building
logic: variables and weights, indicators, sub-indices,
and ?nally, the super-index. All three sub-indices
contain several indicators; they can be interpreted
as quasi-independent building blocks of this
entrepreneurship index. The three sub-indices of
attitudes, activity, and aspiration are combined to
produce an entrepreneurship super-index, the Global
Entrepreneurship Index. In this way, the design of
GEI is consistent with the revised GEM model.
Entrepreneurial attitudes are de?ned as the general
attitude of a country population toward recognizing
opportunities, knowing entrepreneurs personally,
attaching high status to entrepreneurs, accepting the
risk associated with business start-up, and possessing
the skills required to create successful start-ups.
Entrepreneurial attitudes are important because
they express the general feelings of the population
toward entrepreneurs and entrepreneurship.
Those people that can recognize valuable business
opportunities, who have the necessary skills to
exploit these opportunities, who attach high status to
entrepreneurs, can bear and handle start-up risk, and
know entrepreneurs personally can be considered as
the reserve army of future entrepreneurial activity.
Moreover, these people can provide the cultural
support, help, ?nancial resources, and networking
potential to those who are already entrepreneurs or
want to start a business.
Entrepreneurial activity is de?ned as the new venture
start-up rate, adjusted for the churning effect of
business closures, initiated by educated entrepreneurs
and launched because of opportunity motivations. For
the calculation of start-up rate, Acs and Szerb use
the GEM TEA index that captures both independent
and “corporate” start-ups. The churning effect
measures the net change of businesses; it is based
on the assumption that a high rate of discontinued
businesses can be harmful. Quality differences in
start-ups are quanti?ed by education, i.e., having
at least post-secondary education. Opportunity
motivation is assumed to be a sign of better planning,
sophisticated strategy, and higher-growth expectations
as compared to necessity motivation.
Entrepreneurial aspiration is de?ned as the effort
of the entrepreneur to engage in introducing new
products or new production processes, to open
foreign markets, to plan to increase the number of
employees substantially, and to be able to ?nance the
business with formal and/or informal venture capital.
Product and process innovation, internationalization
and, high growth are considered to be the heart of
entrepreneurship. The benchmark businesses are
those that sell product/services considered to be new
to at least some of the customers, use a technology
less than ?ve years old, and have sales from foreign
markets. Also included in this sub-index is a ?nance
variable that serves to capture the informal and
formal venture capital potential vital for innovative
start-ups and high-growth ?rms.
The weakness of these sub-indices is that they capture
a limited number of aspects of attitudes, activity, and
aspiration. However, it is logical to expect that these
missing variables have a high correlation with the
chosen variables. Figure 22 shows that when these
sub-indices are combined into one super-index, the
picture of the relationship between entrepreneurship
Entrepreneurship, Institutions and Economic Development
39
and economic development turns out to be mildly
S-shaped rather than U-shaped. Measures such
as this can enable comparisons of developed and
developing countries in the same analysis (Acs and
Szerb, 2008).
The GEI is broadly consistent with the three-
phase model of factor-driven, ef?ciency-driven
and innovation-driven economic development
(Porter, et al., 2002). In the ef?ciency-driven stage,
entrepreneurial activity is mildly increasing or
relatively ?at as necessity entrepreneurship is steadily
reduced and innovation comes from the outside, since
developing countries are far from the technological
frontier (Acemoglu, Aghion, and Filibotti, 2006). This
has been demonstrated in the case of Latin America
by Acs and Amoros (2008). The role of foreign direct
investment becomes critical in creating ef?ciency in
the ef?ciency-driven countries. In innovation-driven
countries, knowledge spills over to move a country to
the technological frontier, enabling a further intensity
of entrepreneurial activity (Baumol, et al., 2007).
Figure 23 shows the relationship between the GEI
Index, the Ease of Doing Business Index, the Index of
Economic Freedom and the Global Competitiveness
Index. The results in Figure 23 demonstrate that
entrepreneurship complements and rounds out
the other facets of the development diamond. In
other words, while we do not imply causation
entrepreneurship, ease of doing business, economic
freedom and competitiveness are all correlated. Table
3 provides a correlation matrix of the GEI along with
the other four major measures of institutions and
development. The correlation 0.79 between the GEI
and the Doing Business Index and 0.79 between the
GEI and the Index of Economic Freedom suggests
that the different facets of the “development diamond”
move together with economic development.
R
2
= 0.65
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0 10,000 20,000 30,000 40,000 50,000 60,000
2007-2008 GDP PPP Average
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Figure 22 — The Global Entrepreneurship Index in Terms of GDP PPP
Source: Acs and Szerb, 2008
Entrepreneurship, Institutions and Economic Development
40
Figure 23 — Relationships between the Global Entrepreneurship Index and Economic Freedom Index,
Doing Business Index and Global Competitiveness Index
Entrepreneurship, Institutions and Economic Development
Note: All coef?cients are signi?cant at p< 0.001
Source: Acs and Szerb, 2008
Table 3 — The Correlation Coef?cients between GE INDEX and Other Major Indices
1 2 3 4 5 6
1 Global Entrepreneurship Index 1 0.82 0.79 0.79 0.89 0.79
2 Global Competitiveness Index 1 0.82 0.76 0.88 0.83
3 Doing Business Rank (normalized) 1 0.84 0.82 0.74
4 Index of Economic Freedom 1 0.85 0.74
5 Corruption Perception Index 1 0.86
6 Per Capita GDP in PPP 2008 World Bank 1
R
2
= 0.68
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0 0.2 0.4 0.6 0.8 1
Doing Business Index 2008
G
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R
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= 0.64
0
0.1
0.2
0.3
0.4
0.5
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0.8
40 60 80 100
Economic Freedom Index 2008
R
2
= 0.69
0
0.1
0.2
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3 3.5 4 4.5 5 5.5 6
Global Competitiveness Index 2008
To conclude, this section introduced a complex index
of entrepreneurship, the Global Entrepreneurship
Index that goes beyond the standard GEM measure of
early-stage entrepreneurial activity. The relationship
between the GEI and the wealth of nations is a mild
S shape rather than U-shape. The GEI supports
both the revised GEM model and the notion of a
“development diamond” composed of four main facets:
economic freedom, competitiveness, the cost of doing
business, and entrepreneurship. These four facets are
positively correlated and appear to move together as
an economy develops, but associate in subtly different
ways. These new insights could help policymakers
understand how different aspects of policy can affect
productive entrepreneurship through the major
phases of economic development.
41
From 10 years of GEM data on expert perceptions
of the environment for entrepreneurship, one theme
stands out. Consistently, GEM expert surveys in every
country demonstrate a general perception that the
provision of entrepreneurship education and training
at school is inadequate. In most countries, experts
also perceive that the provision of entrepreneurship
education and training after school is poor. Yet
several studies have demonstrated links between
provision of entrepreneurship education and levels
of entrepreneurial activity
32
. This makes the topic of
entrepreneurship education and training worthy of
more detailed examination, and it was chosen by GEM
national teams as a special topic subject for 2008.
The GEM model identi?es Entrepreneurship
Education and Training as an entrepreneurial
framework condition that affects levels of
entrepreneurial attitudes, aspirations and activity,
which then affect the level of new enterprises in
the economy. This chapter uses new data collected
in order to shed light on these relationships, while
recognizing how country-level contexts can change
how individuals calculate their allocation of effort into
productive entrepreneurship rather than into other
forms of economic activity.
In 2008, 38 GEM countries collected additional data
on entrepreneurship education and training through
their Adult Population Survey
33
. Every respondent
was asked if they had had training in starting a
business during or after school, and whether this was
voluntary or compulsory. For after-school training,
the nature of the training provider was also obtained.
This provided national-level estimates of the quantity
of entrepreneurship education and training in each
nation, and of the relative importance of different
types of provider.
In addition, entrepreneurship experts in 31 countries
were asked, as usual, to rate the provision of
entrepreneurship education and training in their
country. This year they were also asked to rate
their country on two additional items: the extent to
which startup entrepreneurs in their country needed
help with their plans and the extent to which such
help was available outside the education system.
These ratings provided estimates of the quality of
entrepreneurship education and training. Data was
available for both quantity and quality of education/
training in 28 countries. Six of these were factor-
driven nations, 13 were ef?ciency-driven nations, and
nine were innovation-driven nations.
4.1 PARTICIPATION IN
ENTREPRENEURSHIP EDUCATION
AND TRAINING
Table 4 shows the percentage of working age adults
who received training in starting a business in each
country, by country groups. Overall levels of trained
individuals varied greatly by country within country
groups. For example, among factor-driven countries,
the proportion of individuals who had received any
training in starting a business, either in school or
after school, varied from 40% in Colombia to 8% in
Egypt. In ef?ciency-driven countries, it varied from
43% in Chile to 6% in Turkey. In innovation-driven
countries, it varied from 48% in Finland to 13% in
Israel. This range of training quantity across countries
with similar levels of economic development is
remarkable.
In most countries, the proportion of individuals ever
having had training in starting a business decreased
with age. However, there was no signi?cant decrease
with age in Jamaica, Greece, Iceland and Israel, while
in Japan there was a signi?cant increase in training
levels with age
34
. In India, the Dominican Republic
and Germany, training levels were highest among
adults aged 25-34. Among 18-24 year olds, diffusion of
training ranged from over 60% in Chile and Finland
to under 10% in the Dominican Republic and Turkey.
This gap was much smaller in older age groups.
Among 55-64 year olds, the gap varied from 33% in
Finland to 4% in Egypt.
Women were signi?cantly more likely to have received
training in starting a business than men in only
one country: Latvia. In all factor-driven countries,
men were signi?cantly more likely to have received
training in starting a business than women. In
only nine, or just over half of the ef?ciency-driven
countries, men were signi?cantly more likely to
have received such training. However, 11 or 73% of
innovation-driven countries had signi?cantly higher
levels of training among men than women. These
differences by country groups may re?ect differences
in attendance rates at school and workforce
participation rates among males and females at
different levels of economic development, as well as
differences in entrepreneurial attitudes, aspirations
and activity rates.
Table 5 shows the percentage of individuals who
participated in training in starting a business after
primary or secondary school, by type of training
provider and whether the training was voluntary or
compulsory. It shows that the most frequent source of
training was self-directed learning, such as reading
or observing or working in other people’s businesses,
followed by voluntary formal education and by
4.0 Special Topic 2008: Entrepreneurship Education and Training
42
Special Topic 2008: Entrepeneurship Education and Training
voluntary training provided by a college or university
but outside the formal education system. Other
sources, such as business or trade organizations,
government agencies, or employers, typically were
used by 3% or less of individuals, although Colombia,
Chile, Peru, and Finland stood out as having higher
than usual usage of all sources. Exceptions to these
general trends include Iran, where government
agencies were the most frequent source of training
after self-directed learning, Germany, where chambers
of commerce was the most frequent source of training
after self-directed learning, and Belgium, where
compulsory training was more frequently reported
than voluntary training for most types of training
provider.
Compulsory training was rarely reported by more
than 1% of individuals. However, at least 5% of
individuals in Chile, Latvia, Finland, and Slovenia
reported participating in compulsory training in
starting a business as part of their formal post-school
education.
A striking feature of the patterns in Table 5 is the
contrast in training take-up between close neighbors.
For example, Brazil has one of the lowest rates of
training across all providers, while Chile has one of
the highest. Slovenia and Croatia have relatively
high rates while Hungary, Romania, and Serbia have
relatively low rates.
Those who had participated in training in starting
a business after school were also asked if they had
taken online training. Figure 24 shows the frequency
of use of this form of training by country and country
type. Chile stands out as having a very high rate of
online training usage, with a ?fth of the population
of working age adults noting they have taken this
form of training. This is probably due to integration
of online training into online registration systems in
Chile.
43
Special Topic 2008: Entrepeneurship Education and Training
Table 4 — Percentage of the Population Aged 18-64 that Received Voluntary or Compulsory Training in Starting
a Business During or After School, by Type of Country
SCHOOL
VOLUNTARY
I
SCHOOL
COMPULSORY
SCHOOL
ANY
AFTER
SCHOOL
VOLUNTARY
I
AFTER SCHOOL
COMPULSORY
AFTER
SCHOOL
ANY
ANY
TRAINING
Factor-Driven Economies
Bolivia 8.2 2.4 10.6 10.3 3.9 14.2 19.1
Bosnia and Herzegovina 12.7 0.8 13.5 8.1 2.5 10.6 19.9
Colombia 19.2 4.0 23.2 20.7 8.7 29.4 40.0
Ecuador 16.1 4.3 20.4 8.3 7.3 15.6 27.2
Egypt 3.8 0.9 4.7 2.1 2.1 4.2 7.5
India 3.3 1.7 5.0 3.8 7.0 10.8 13.1
Iran 8.9 6.6 15.4 9.2 10.3 19.5 28.9
Country average 10.3 3.0 13.3 8.8 6.2 14.9 22.2
Ef?ciency-Driven Economies
Argentina 6.4 3.2 9.6 7.3 3.6 10.9 17.4
Brazil 4.5 0.8 5.3 1.6 5.0 6.6 9.4
Chile 16.8 8.5 25.3 18.9 13.8 32.7 42.5
Croatia 8.6 11.1 19.7 8.0 7.6 15.6 27.6
Dominican Republic 4.7 0.6 5.3 1.9 2.1 4.0 7.7
Hungary 2.8 14.2 17.1 1.4 8.6 10.0 24.4
Jamaica 6.8 9.2 16.0 2.9 6.4 9.3 21.0
Latvia 6.1 8.4 14.5 9.0 10.1 19.1 28.0
Macedonia 10.3 2.3 12.6 7.2 3.7 10.9 19.1
Mexico 5.8 3.6 9.5 3.6 5.9 9.5 15.5
Peru 11.5 2.9 14.4 12.2 12.5 24.7 29.6
Romania 3.3 2.2 5.5 2.8 1.8 4.6 8.0
Serbia 1.5 1.5 3.0 2.6 4.9 7.6 10.2
South Africa 6.6 2.7 9.3 3.8 5.2 9.0 13.8
Turkey 1.9 0.6 2.5 1.9 2.3 4.2 6.3
Uruguay 9.7 1.0 10.7 9.5 8.9 18.4 24.1
Country average 6.7 4.6 11.3 5.6 6.3 12.3 19.0
Innovation-Driven Economies
Belgium 17.8 7.0 25.0 3.0 15.2 18.2 33.3
Denmark 2.4 7.1 9.5 2.1 11.9 14.0 22.0
Finland 10.1 7.8 17.9 19.6 20.8 40.4 47.9
France 5.3 4.9 10.2 5.9 6.6 12.5 18.1
Germany 10.3 2.0 12.3 8.4 4.7 13.2 21.0
Greece 5.0 1.2 6.1 6.4 6.5 12.9 17.0
Iceland 6.5 5.3 11.8 11.3 6.5 17.8 26.7
Ireland 8.1 5.8 14.0 9.9 7.6 17.5 26.1
Israel 4.1 1.7 5.8 4.5 4.1 8.6 12.8
Italy 6.0 4.2 10.2 5.3 3.7 9.1 16.5
Japan 2.8 2.1 4.9 10.1 5.6 15.7 17.4
Republic of Korea 2.7 3.2 5.9 3.8 5.4 9.2 13.6
Slovenia 13.0 11.3 24.3 10.3 12.3 22.6 35.7
Spain 9.5 3.0 12.5 7.9 6.8 14.7 21.9
United Kingdom 5.8 3.1 8.9 7.7 6.1 13.8 19.5
Country average 7.3 4.6 11.9 7.7 8.3 16.0 23.3
i: “Voluntary” includes those reporting voluntary training or a mix of voluntary and compulsory training.
44
TYPE OF TRAINING PROVIDER
COLLEGE,
FORMAL
COLLEGE,
INFORMAL
CHAMBER OF
OF COMMERCE
GOV. AGENCY EMPLOYER OTHER
SELF
DIRECTED
LEARNING
VOLUNTARY OR COMPULSORY TRAINING V C V C V C V C V C V C
Factor- Driven Economies
Bolivia 9 1 5 1 3 0 2 0 3 0 4 0 11
Bosnia and Herzegovina 6 0 3 0 2 0 1 0 4 0 2 0 9
Colombia 20 2 10 1 6 0 5 0 4 1 7 0 24
Ecuador 10 2 4 1 4 0 2 0 3 1 3 0 10
Egypt 2 0 1 0 1 0 1 0 1 0 0 0 2
India 3 2 2 1 2 1 2 1 1 1 3 1 5
Iran 6 2 3 2 2 0 8 2 3 1 2 0 10
Country average 8 1 4 1 3 0 3 1 3 1 3 0 10
Ef?ciency-Driven Economies
Argentina 5 1 5 0 5 0 2 0 3 1 2 0 9
Brazil 1 1 1 0 4 0 1 0 1 1 0 0 2
Chile 13 5 10 1 8 1 10 1 9 3 15 0 26
Croatia 6 4 4 1 3 1 1 0 3 1 2 0 12
Dominican Republic 2 0 1 0 1 0 1 0 1 0 0 0 2
Hungary 3 1 2 0 1 0 1 0 1 0 0 0 1
Jamaica 4 3 2 1 1 0 2 1 1 1 0 0 4
Latvia 9 5 4 1 2 0 3 0 3 1 1 0 13
Macedonia 5 1 3 0 3 0 2 0 3 1 2 0 8
Mexico 2 0 1 0 2 0 1 0 2 0 0 0 4
Peru 13 2 11 1 6 0 5 1 6 2 6 1 16
Romania 2 0 1 0 1 0 0 0 1 0 1 0 3
Serbia 1 0 1 0 1 0 2 0 1 0 0 0 3
South Africa 4 2 3 1 2 1 2 1 2 1 2 1 6
Turkey 1 0 1 0 0 0 0 0 1 0 1 0 3
Uruguay 9 2 9 1 8 1 3 0 5 2 4 0 13
Country average 5 2 4 1 3 0 2 0 3 1 2 0 8
Innovation-Driven Economies
Belgium 7 3 2 3 1 2 1 3 1 1 1 2 8
Denmark 3 4 1 1 2 1 0 1 0 0 2 1 8
Finland 16 14 9 1 5 0 6 1 3 1 6 1 30
France 4 2 1 1 5 1 4 1 1 0 4 0 8
Germany 6 1 2 0 7 1 3 1 4 1 3 0 10
Greece 8 1 1 0 4 0 2 0 2 1 1 0 8
Iceland 7 3 4 1 2 0 2 0 4 1 4 0 14
Ireland 6 3 6 1 4 0 6 1 3 2 1 0 14
Israel 4 1 3 1 3 0 3 0 2 0 1 0 6
Italy 6 1 2 0 3 0 1 0 2 1 1 0 6
Japan 6 2 7 1 2 0 2 0 3 1 2 0 12
Republic of Korea 4 1 3 1 2 0 1 0 1 0 1 0 4
Slovenia 9 6 8 1 5 1 4 1 4 2 3 0 15
Spain 9 1 7 1 6 0 5 1 4 1 7 0 10
United Kingdom 6 2 4 1 3 1 3 0 2 1 1 0 10
Country average 7 3 4 1 4 1 3 1 2 1 2 0 11
Table 5 — Percentage of the Population Aged 18-64 that Received Any Training in Starting a Business
After School, by Type of Training Provider
i
Special Topic 2008: Entrepeneurship Education and Training
45
4.2 EXPERT OPINIONS ON QUALITY
OF ENTREPRENEURSHIP TRAINING
We now turn to a different source of evidence on the
state of entrepreneurship education and training
in GEM nations. The GEM national expert survey
contains several measures of quality of training
provision, and these are shown in Table 6. It should
be borne in mind that measures of quality refer to
perceptions of current quality, whereas the quantity
measures displayed in the previous tables refer to
training activities in the past—up to 50 years ago in
the case of older adults. For this reason, there may be
no relationship between current quality of provision
and current outcomes.
Table 6 shows average ratings on a 1 to 5 scale by
entrepreneurship experts in each country on the need
for, availability of, and quality of entrepreneurship
education and training by country and country
group
35
. Within each country group, average
scores varied little from country to country. The
average scores by country type suggest that start-
up entrepreneurs’ need for external help reduces
slightly as countries develop economically, and the
availability of that help increases. The perceived level
of help is insuf?cient in factor-driven countries and
generally suf?cient in innovation-driven countries.
The perceived quality of school-level entrepreneurship
education and training increases with economic
development, but perceived quality of post-school
entrepreneurship education does not, and is seen as
inadequate in almost all innovation-driven countries.
This suggests that experts in most innovation-driven
countries see plenty of help available, but question its
quality.
Among the six factor-driven countries, there was
a high correlation in average ratings by experts of
the quality of school and after-school education and
training in the country (r = .833, p = .039). There
was also a high correlation between the perceived
quality of school-based and after school-based
entrepreneurship education in the country as rated by
country experts and the proportion of individuals who
had voluntarily taken after-school training in starting
a business (r = .825, p = .043; r = .966, p = .002). There
was a high correlation between the proportion of
individuals who had taken compulsory school-based
training and the proportion of individuals who had
taken compulsory after-school-based training (r = .967,
p = .002).
Among males, the quality of post-school
entrepreneurship education and training correlated
signi?cantly with levels of necessity-driven TEA
(r = .880, p = .021) across countries with factor-
driven economies. For females in these countries, it
correlated signi?cantly with opportunity perception
(r = .875, p = .023) and start-up expectation over the
next three years (r = .845, p = .034), and with two
measures of high-growth expectation
36
(r = .881, p =
.02; r = .818, p = .047). Levels of voluntary after-school
training for males and females produced similar
high and signi?cant correlations. National levels of
opportunity perception among females correlated
highly with overall TEA rates (r = .847, p = .033),
necessity entrepreneurship (r = .963, p = .002), and
entrepreneurship aimed at developing and expanding
new markets (r = .879, p = .021).
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Figure 24 — Percentage of Adults Aged 18-64 Who Have Used Online Training in Starting a Business
Special Topic 2008: Entrepeneurship Education and Training
46
Special Topic 2008: Entrepeneurship Education and Training
ENTREPRENEURS IN
GENERAL NEED HELP
WITH THEIR PLANS
BEFORE STARTUP
ENOUGH HELP
AVAILABLE OUTSIDE
EDUCATION SYSTEM
QUALITY OF
ENTREPRENEURSHIP
EDUCATION AND TRAINING
AT SCHOOL
QUALITY OF
ENTREPRENEURSHIP
EDUCATION AND TRAINING
AFTER SCHOOL
Factor-Driven Economies
Bolivia
3.9
2.3 1.7 2.6
Bosnia and Herzegovina
4.1
2.7 1.9 2.4
Colombia
4.3
2.6 2.0 3.2
Ecuador
3.8
2.3 1.6 2.6
Egypt
4.3
2.1 1.3 1.8
Iran
4.5
3.2 1.7 2.4
Country averages
4.2
2.5 1.7 2.5
Ef?ciency-Driven Economies
Argentina 4.2 2.8 2.1 3.4
Brazil 4.2 2.9 1.6 2.8
Chile 4.1 2.6 1.6 2.9
Croatia 4.2 3.1 2.2 2.8
Dominican Republic 4.2 2.3 1.7 3.2
Jamaica 3.8 2.7 2.0 2.8
Macedonia 4.3 3.1 2.2 2.8
Mexico 4.4 2.9 1.7 3.0
Peru 3.9 2.5 1.9 2.9
Russia n.a. n.a. 2.5 3.1
Serbia 3.9 3.1 2.0 2.9
South Africa 4.1 2.4 1.9 2.5
Turkey 4.1 2.6 1.9 2.7
Uruguay 3.9 3.2 2.1 2.9
Country average 4.2 2.8 2.1 3.4
Innovation-Driven Economies
Denmark 4.3 3.1 2.4 2.4
Finland 4.0 3.7 2.5 2.8
Germany 3.6 3.9 1.9 2.7
Greece 3.7 2.4 1.8 2.5
Ireland 4.1 3.6 2.5 3.0
Italy 4.0 2.8 1.8 2.8
South Korea 3.9 3.6 2.4 2.9
Norway 4.3 2.9 2.6 2.9
Slovenia 3.8 3.5 2.4 3.0
Spain 4.3 3.3 1.9 2.9
United States 3.9 3.3 2.1 2.9
Country averages 4.0 3.3 2.2 2.8
Table 6 — Perceived Need for and Availability and Quality of Entrepreneurship Education and Training,
by Country and Country Group (Average Ratings by Experts from 1 to 5)
47
Special Topic 2008: Entrepeneurship Education and Training
These patterns make sense; for factor-driven
economies, where necessity entrepreneurship is an
important source of economic self-suf?ciency in the
absence of other job opportunities, the quality and
quantity of training available might be expected to
increase the rate of entrepreneurship and the extent
to which individuals can create new and growing
markets where none previously existed. Perhaps
after-school education has a more indirect effect, via
increased opportunity perception, on females than
on males in factor-driven countries. Multi-level,
multivariate analysis would be required to analyze
this in greater detail.
Among the 13 ef?ciency-driven countries, there
were no signi?cant correlations between average
expert assessments of the state of school-based
entrepreneurship education and training in their
country and country-level rates of entrepreneurial
attitudes, aspirations or activity. Expert perceptions
of post-school-based entrepreneurship education and
training correlated mildly with overall entrepreneurial
activity levels for both males and females (r = .606,
p = .028; r = .555, p = .049), and with opportunity
entrepreneurship for males (r = .563, p = .045) and
necessity entrepreneurship for females (r = .703, p =
.007). It also correlated with two measures of growth
expectation among females (r = .680, p = .011; r =
.730, p = .005). For both males and females, levels of
after-school training in starting a business (whether
voluntary or compulsory) correlated highly with
voluntary training at school level (males: r = .920, p
= .000; r = .813, p = .001; females: r = .893, r = .000;
r = .822, p = .001) but not with compulsory training
at school level, with the exception of females and
after-school compulsory training (r = .677, p = .011).
Voluntary school level training levels also correlated
signi?cantly with levels of entrepreneurship with
profound market expansion intentions among males
and females, (r = .774, p = .002; r= .713, p = .006),
and correlated mildly with growth expectation
entrepreneurship among females (r = .554, p = .049).
Among the innovation-driven countries, there
were signi?cant correlations between the
perceptions of experts on the quality of school-based
entrepreneurship education and training and both
opportunity perception rates (r = .727, p = .026)
and fear of failure rates (r = -.880, p = .009). These
correlations were similar for both males and females.
Countries with more favorable expert perceptions of
school-based entrepreneurship education and training
also tended to have higher growth expectations among
their startup entrepreneurs for the ?rst of the two
growth measures employed in this analysis (r = .803,
p = .009). There was a high correlation between the
proportion of individuals who took any school-based
training in starting a business and those who took
voluntary training after school (r = .824, p = .006).
There was a high level of correlation between the
proportion of individuals who took voluntary and
compulsory training after school (r=.729, p=.026).
There was also a signi?cant correlation between the
proportion of individuals who took any school-based
and any after school-based training (r = .775, p = .014).
In general, neither high levels of training nor high
levels of positive entrepreneurial attitudes were
signi?cantly correlated with entrepreneurial activity
rates across countries in this group. Exceptions
included a signi?cant correlation between male
necessity TEA rates and skills perception rates (r =
.885, p = .001), and a signi?cant negative correlation
between compulsory school-based training rates
for females and female necessity entrepreneurship
rates (r = -.711, p = .032). High rates of school-
based training among females were associated with
lower rates of future startup intention (r = -.785, p
= 0.012). High rates of voluntary school and after-
school training were associated with lower rates
of entrepreneurial activity involving profound
market expansion (r = -.709, p = .032; r = -.683, p
= .042). These negative correlations may re?ect
the efforts of some governments in innovation-led
countries with low entrepreneurship rates to provide
entrepreneurship education as part of the school
curriculum, in an effort to boost entrepreneurial
activity.
In summary, the quality and level of entrepreneurship
education and training may have different impacts
on attitudes, aspirations, and activity in countries
at different stages of economic development. In
factor-driven economies, the higher the quality
and quantity of after-school training, the higher
the levels of necessity entrepreneurship; this effect
may be indirect in the case of females. This is
because factor-driven economies provide few other
opportunities for employment. In ef?ciency-driven
economies, the more post-school training in starting
a business, the higher the levels of market-expansion
entrepreneurship, re?ecting the growth of these
economies. In innovation-driven economies, several
negative correlations are apparent, possibly because
governments with low levels of entrepreneurial
activity have been investing more in entrepreneurship
education and training in an effort to increase
entrepreneurial activity.
48
Special Topic 2008: Entrepeneurship Education and Training
4.3 ENTREPRENEURSHIP TRAINING
AND ENTREPRENEURIAL ATTITUDES,
ASPIRATIONS, AND ACTIVITY AT THE
INDIVIDUAL LEVEL
In this ?nal section, we consider the attitudes,
aspirations, and activities of those who have and have
not had training in starting a business. Table 7 shows
the proportions of working age individuals who are not
running or actively trying to start a business who 1)
perceive good opportunities for starting a business in
their local area and 2) perceive they have the skills,
knowledge, and experience to start a business, by
type of training received. By removing those who are
currently nascent, new or established entrepreneurs,
we remove the possibility of biased response. The
patterns are different for each attitude, with a more
mixed picture on opportunity perception than on
skills perception. Each country seems to have its own
unique pattern of relationships between training
and attitudes, and the country group averages can
be misleading. For example, in India and Greece,
only compulsory training had a positive effect on
opportunity perception, but it had a negative effect
in Colombia. Only voluntary training had a positive
effect in Romania and Finland. Both voluntary and
compulsory training had similar and positive effects in
Argentina, Hungary, Peru, Turkey, Germany, Japan,
Spain, and Slovenia.
In every country except Jamaica and the Dominican
Republic, those who had taken either voluntary
or compulsory training were more likely to have
positive self-perceptions than those who had not
taken training. In ?ve of the nine innovation-driven
countries (Italy and Spain excepted), those who had
taken voluntary training were most likely to perceive
they had the skills to start a business. In Italy and
Spain, voluntary and compulsory training appeared
to deliver similar and positive effects, but in Belgium
and Israel, those with compulsory training were more
likely to have positive skills self-perception. In most
factor-driven and ef?ciency-driven countries, both
voluntary and compulsory training produced similar
elevated levels of skills perception. Overall, levels
of skills perception were higher in factor-driven and
ef?ciency-driven countries than in innovation-driven
countries.
Table 8 shows the proportion of individuals aged
18-64 who expected to start a business in the next
three years and the proportion who were currently
actively trying to start a business or were running a
new business. In most countries, individuals who had
taken either voluntary or compulsory training were
signi?cantly more likely to expect to start a business
in the next three years, and generally those with
voluntary training had the highest levels. In Bosnia,
India, Iran, Hungary, Mexico, Romania, Turkey,
France, and the United Kingdom, both voluntary and
compulsory training produced similar elevated levels
of start-up aspiration. In Chile and Japan, those with
compulsory training were no more likely to expect to
start a business in the next three years than those
who had taken no training at all, while in Belgium,
those who had taken compulsory training had the
highest start-up aspirations. Neither voluntary nor
compulsory training appeared to make any difference
to aspiration in Jamaica or Greece.
The relationship between type of training and early-
stage entrepreneurial activity rates tended to track
the relationship with aspiration, but at a much lower
level. In some countries, including Bolivia, Iran,
and Argentina, compulsory training had no effect
on activity, although it did have a signi?cant effect
on aspiration. However, in Brazil, Turkey, Uruguay,
Iceland, and Italy, compulsory training appeared
to have a stronger effect and voluntary training
appeared to have a weaker effect on activity than
would have been predicted on the basis of aspiration.
In conclusion, the relationship between training in
starting a business and entrepreneurial attitudes,
aspirations, and activity is generally positive, but
complex. Some differences are apparent between
country groups, in line with theory and the GEM
model. However, each country seems to have a unique
training footprint, which is a function of current and
past quality and quantity of training, of demand, of
regulations, and of employment choice. The “yield”
from training, or the ratio of activity among the
trained to that among the non-trained, varies from
country to country, but on average the yield from
compulsory training is slightly more than half that of
voluntary training. Some countries, such as France
and Latvia, appear to have yields from voluntary
training as high as 5, while others have very low
yields.
Further analysis of this topic will be provided by a
special report on entrepreneurship entrepreneurship
education and training to be published later in 2009.
49
Special Topic 2008: Entrepeneurship Education and Training
PERCEIVE GOOD OPPORTUNITIES IN THE LOCAL AREA IN THE
NEXT SIX MONTHS
HAVE SKILLS, KNOWLEDGE, EXPERIENCE TO START A BUSINESS
Voluntary
training
i
Compulsory
training
No training
Voluntary
training
i
Compulsory
training
No training
Factor-Driven Economies
Bolivia 52.5 47.6 46.0 81.5 63.2 64.5
Bosnia and Herzegovina 57.1 50.0 39.1 81.8 87.5 56.9
Colombia 64.7 42.1 52.6 73.4 53.8 45.3
Ecuador 38.3 47.2 35.4 81.9 77.2 60.7
Egypt 31.7 44.4 30.1 70.2 75.0 51.1
India 47.8 81.8 52.8 64.0 86.7 42.3
Iran 34.0 32.6 29.1 76.1 73.1 51.9
Country average 46.6 49.4 40.7 75.6 73.8 53.2
Ef?ciency-Driven Economies
Argentina 56.6 50.0 39.0 80.8 62.5 48.4
Brazil 50.0 37.0 37.9 76.5 75.0 46.5
Chile 30.8 26.4 21.0 78.1 68.5 41.7
Croatia 61.3 52.1 35.6 77.4 75.2 48.1
Dominican Republic 56.5 53.8 51.2 85.2 78.6 69.0
Hungary 22.2 25.7 14.0 67.7 65.5 36.4
Jamaica 55.1 47.5 48.3 67.0 64.5 64.6
Latvia 41.9 28.6 16.0 70.9 46.8 13.3
Macedonia 50.6 46.2 43.1 74.1 71.4 47.8
Mexico 49.4 54.4 43.0 76.1 59.5 53.4
Peru 63.5 66.7 47.5 78.4 79.1 61.5
Romania 51.5 27.8 23.8 70.7 44.4 19.1
Serbia 73.7 56.4 50.9 84.2 85.7 57.2
South Africa 57.7 50.0 31.3 81.0 60.0 25.9
Turkey 53.8 50.0 33.4 71.9 76.2 42.8
Uruguay 45.2 61.0 48.7 78.5 75.0 53.2
Country average 51.2 45.9 36.5 76.2 68.0 45.6
Innovation-Driven Economies
Belgium 12.2 18.9 12.0 41.6 66.4 25.0
Denmark 57.1 65.9 60.8 50.8 45.3 25.9
Finland 56.5 48.0 45.6 57.1 36.7 16.2
France 35.7 25.0 20.5 75.8 39.0 20.3
Germany 36.2 38.0 17.7 59.9 37.5 24.8
Greece 21.5 43.6 23.9 58.8 50.0 44.0
Iceland 38.7 37.2 32.3 76.5 61.4 36.5
Ireland 29.6 28.9 24.4 66.7 56.6 34.7
Israel 41.5 52.0 21.7 55.9 73.3 31.0
Italy 33.0 35.8 28.1 53.3 53.6 32.3
Japan 13.0 16.3 6.2 34.5 19.1 6.3
Republic of Korea 36.8 19.2 10.8 39.5 20.0 21.8
Slovenia 53.9 52.9 36.5 73.6 53.8 34.0
Spain 29.7 27.5 23.4 53.2 51.4 40.2
United Kingdom 39.8 31.1 26.2 74.2 59.6 40.0
Country average 35.7 36.0 26.0 58.1 48.2 28.9
i: “Voluntary” includes those reporting voluntary training or a mix of voluntary and compulsory training.
Figures in bold denote statistically signi?cant differences in proportions of attitude by type of training, p