Description
Detailed data account global entrepreneurship monitor 2002 executive report.
Paul D. Reynolds • William D. Bygrave • Erkko Autio • Larry W. Cox • Michael Hay
2002 Executi ve Report
G L O B A L E N T R E P R E N E U R S H I P M O N I T O R
Global Entrepreneurshi p Moni tor
2 0 0 2 E x e c u t i v e R e p o r t
Paul D. Reynolds, William D. Bygrave, Erkko Autio, Larry W. Cox, Michael Hay
Babson College
Ewing Marion Kauffman Foundation
London Business School
© 2002 Paul D. Reynolds, William D. Bygrave, Erkko Autio, Michael Hay, and the Ewing Marion Kauffman Foundation. All rights reserved.
The Global Entrepreneurship Monitor (GEM) is a unique, unprecedented effort to describe and analyze
entrepreneurial processes within a wide range of nations. By so doing, GEM focuses on one of the most fundamental
forces driving and carrying economic change, one that has until now remained elusive for researchers and policymakers
due to lack of reliable, internationally comparable data. Even though many influential economists have, for more than a
century, maintained that entrepreneurship is one of the most important dynamic forces shaping the economic landscape,
the causes and impacts of the phenomenon are still only poorly understood. Consequently, policymakers have lacked the
means of shaping effective and appropriate policies to nurture this phenomenon for national economic benefit.
The distinctive benefits of the GEM measures are that they are the only ones in existence to provide a direct
measure of individual-level, grassroots entrepreneurial processes. This represents a revolutionary development in data
collection because individual persons are the primary agents of entrepreneurial activity. No other measure exists that
could be used as a basis for reliable international comparisons. No other measure can be used to determine and analyze
the motivations driving individual economic agents. No other measure can be used to inform policymakers on how to
foster the development of entrepreneurial human capital.
This is the fourth annual GEM cross-national assessment of the level of entrepreneurship. The program has
expanded from 10 countries in 1999, 20 in 2000, 28 in 2001, to 37 for 2002. National teams are operating in 34 of these
countries; their host institutions, membership and sponsors are listed starting on page 2. Another 10 national teams are
expected to join the GEM consortium for 2003.
GEM is a collaborative effort in every sense of the word, in terms of financial resources (national teams provide
60 percent of the funding), intellectual resources, as well as design and analysis. A GEM-wide assessment and planning
meeting is held early in January of each year. The 10-person coordination team is assisted by more than 150 scholars
from 34 countries. The primary data collection associated with the adult population surveys is done by survey research
firms in each country, which this year involved 37 more sets of trained professionals.
The research program would not have developed without the support and encouragement of the three institutions
that have played a key role from the beginning. Babson College and London Business School have provided an optimal
context for a complex research project emphasizing entrepreneurship. The Ewing Marion Kauffman Foundation has
provided substantial start-up funding and continues to be a major source of financial support and strategic advice.
As GEM expands and improves it should continue to provide new insights into the scope and significance of the
entrepreneurial processes and how public policy can facilitate entrepreneurial contributions to national economic well-
being. New developments, and all national reports, can be found at www.gemconsortium.org.
Paul Reynolds
Coordinating Principal Investigator
Table of Contents
List of Tables ............................................................................................................................................... 1
List of Figures ............................................................................................................................................. 1
GEM 2002 Coordination Team, National Teams and Sponsors .............................................................. 2
Executive Summary .................................................................................................................................... 5
Scope of Entrepreneurial Activity .............................................................................................................. 8
Cross-National Differences in Entrepreneurial Activity ......................................................................... 10
Changes in Entrepreneurial Activity Over Time ...................................................................................... 13
Motivations and Types of Entrepreneurial Behavior .............................................................................. 16
Science, Technology and High Potential Entrepreneurship ................................................................... 20
Association of Entrepreneurial Activity and Economic Growth ............................................................ 23
National Context and Entrepreneurial Activity........................................................................................ 25
Special Topics ........................................................................................................................................... 28
Women and Entrepreneurship .................................................................................................. 28
Entrepreneurial Finance ............................................................................................................. 32
Family-Sponsored Entrepreneurship ......................................................................................... 34
Conclusions ............................................................................................................................................... 37
Appendix A: The GEM Conceptual Model ............................................................................................. 40
Appendix B: Data Collection ................................................................................................................... 42
End Notes ................................................................................................................................................. 44
1
Li st of Tables
Table 1 Total Entrepreneurial Activity (TEA) Index and Estimated Counts by Country
Table 2 Aggregate Changes in Total Entrepreneurial Activity (TEA) Over Time
Table 3 Change in Percent Growth in GDP and Total Entrepreneurial Activity (TEA) from 2000 to 2002
Table 4 Opportunity- and Necessity-Based Entrepreneurial Activity and Business Expectations
Table 5 Correlations Between High Potential Entrepreneurial Activity and National Entrepreneurial Framework
Condition Indices
Table 6 Correlations Between Entrepreneurial Activity and National Economic Growth with Time Lags
Table 7 Correlations Between Entrepreneurial Activity and National Entrepreneurial Framework
Condition Indices
Table 8 Correlations Between Entrepreneurial Activity and Selected Factors Believed to Affect Women’s
Participation in Entrepreneurship
Table 9 Total Entrepreneurial Activity (TEA) and Family-Sponsored Entrepreneurship for Selected Countries
Table B-1 Survey Research Firms and Sample Size by Country
Table E-1 Correlations Between the TEA Index and Other Measures of Entrepreneurial Activity
Table E-2 Correlations Between Year-to-Year Changes in Entrepreneurial Activity
Li st of Fi gures
Figure 1 Total Entrepreneurial Activity (TEA) by Country
Figure 2 Total Entrepreneurial Activity (TEA) by Global Region
Figure 3 Global Distribution of Total Entrepreneurial Activity (TEA) and Labor Force
Figure 4 Opportunity-Based Entrepreneurial Activity by Country
Figure 5 Necessity-Based Entrepreneurial Activity by Country
Figure 6 Total Entrepreneurial Activity (TEA) and Subsequent Growth in GDP
Figure 7 Entrepreneurial Activity by Gender and Age
Figure 8 Entrepreneurial Activity by Gender and Country
Figure 9 Domestic Classic Venture Capital Investment as a Percent of GDP (1999-2001)
Figure 10 Domestic Capital Investment as a Percent of GDP (Informal Investment Plus Classic Venture Capital)
Figure A-1 The GEM Conceptual Model
2
Unit
GEM Project
Directors
GEM Project
Coordinator
GEM Coordination
Team
Family Business
Special Topic
Team
Argentina
Australia
Belgium
Brazil
Canada
Chile
China
Croatia
Institution
Babson College
London Business School
Babson College
London Business School
Babson College
London Business School
Alfred University
Oregon State University
Institution
Center for Entrepreneurship
IAE Management and Business School
Universidad Austral
Australian Graduate School of
Entrepreneurship
Swinburne University of Technology
Vlerick Leuven Gent Management
School
Universiteit Gent
IBQP – Instituto Brasileiro da
Qualidade e Productividade no
Paraná
York University
École des Hautes Études Commerciales
de Montréal (HEC – Montréal)
ESE – Universidad de Los Andes
Tsinghua University
SME’s Policy Centre – CEPOR
Zagreb and Faculty of Economics
University of J. J. Strossmayer, Osijek
Members
William D. Bygrave
Michael Hay
Paul D. Reynolds
Paul D. Reynolds
William D. Bygrave
Marcia Cole
Paul D. Reynolds
Erkko Autio
Marc Cowling
Michael Hay
Steven Hunt
Isabelle Servais
Natalie De Bono
Michelle Hale
Kola Azeez
Veronica Ayi-Bonte
Matthew Freegard
Anwen Garston
Ruth Lane
Shu Lyn Emily Ng
Thomas Baily
Carol Wittmeyer
Mark Green
Members
Silvia Torres Carbonell
Hector Rocha
Florencia Paolini
Kevin Hindle
Susan Rushworth
Deborah Jones
Sophie Manigart
Bart Clarysse
Hans Crijns
Dirk De Clercq
Nico Vermeiren
Frank Verzele
Fulgêncio Torres Viruel
Marcos Mueller Schlemm
Simara Maria S. S. Greco
Joana Paula Machado
Nerio Aparecido Cardoso
Daniele de Lara
Maria José R. Pontoni
Rein Peterson
Nathaly Riverin
Robert Kleiman
Alfredo Enrione
Jon Martinez
Alvaro Pezoa
Gerardo Marti
Nicolas Besa
Fernando Suarez
Jian Gao
Zhiqiang Chen
Yuan Cheng
Robert Eeng
Yanfu Jiang
Biao Jia
Tan Li
Fang Liu
Qung Qui
Zhenglei Tang
Jianfei Wang
Jun Yang
Henjun Xu
Slavica Singer
Sanja Pfeifer
Natasa Sarlija
Suncica Oberman
Financial Sponsor
Ewing Marion Kauffman Foundation
The Laing Family Charitable Settlement
David Potter Foundation
Anonymous Foundation Fellow
Raymond Family Business Institute
Financial Sponsor
IAE Management and Business School
HSBC Private Equity Latin America
Sensis Pty Ltd
Vlerick Leuven Gent Management School
Steunpunt Ondernemerschap, Ondernemingen en
Innovatie (Vlaamse Gemeenschap)
IBQP – Instituto Brasileiro da Qualidade e
Productividade no Paraná
SEBRAE – Serviço Brasileiro de Apoio às Micro e
Pequenas Empresas
Développement Économique Canada, Québec
Industry Canada, Small Business Policy Branch
Anne & Max Tanenbaum Chair, Schulich School of
Business, York University
Chaire d'entrepreneurship Maclean Hunters, HEC
Montréal
ESE Business School – Universidad de Los Andes
ADIMARK
ING Group
PriceWaterhouseCoopers
Banco de Crédito e Inversiones
National Entrepreneurship Research Center of Tsinghua
University
Asian Institute of Babson College
Faculty of Economics, University of J.J. Strossmayer
Osijek Open Society Institute
Croatia Ministry of Crafts, Small and Medium
Enterprises, Zagreb
SME‘s Policy Centre – CEPOR Zagreb
GEM 2002 Coordi nati on Team, Nati onal
Teams and Sponsors
3
Denmark
Finland
France
Germany
Hong Kong
Hungary
Iceland
India
Ireland
Israel
Italy
Japan
Korea
Mexico
New Zealand
Norway
Singapore
Slovenia
University of Southern Denmark
Centre for Small Business Studies
Helsinki University of Technology
EM Lyon
University of Cologne
The Chinese University of Hong Kong
University of Pécs
University of Baltimore (USA)
Reykjavik University
Indian Institute of Management,
Bangalore
University College, Dublin
Tel Aviv University
Babson College (USA)
Keio University
University of Marketing & Distribution
Sciences
Soongsil Unversity
ITESM-EGADE
New Zealand Centre for Innovation &
Entrepreneurship
UNITEC Institute of Technology
Bodø Graduate School of Business
National University of Singapore
Institute for Entrepreneurship and
Small Business Management,
Faculty of Economics & Business,
University of Maribor
Mick Hancock
Torben Bager
Lone Toftild
Erkko Autio
Pia Arenius
Anne Kovalainen
Daniel Evans
Isabele Servais
Aurélien Eminet
Loic Maherault
Rolf Sternberg
Heiko Bergmann
Bee-Leng Chua
David Ahlstrom
Kevin Au
Cheung-Kwok Law
Chee-Keong Low
Shige Makino
Hugh Thomas
László Szerb
Zoltán Acs
Attila Varga
József Ulbert
Éva Bodor
Agnar Hansson
Ludvik Eliasson
Gu?rún Mjöll Sigur?ardóttir
Halla Tomasdottir
Gylfi Zoega
Rognvaldur Saemundsson
Mathew J. Manimala
Malathi V. Gopal
Mukesh Sud
Ritesh Dhar
Paula Fitzsimons
Colm O'Gorman
Frank Roche
Miri Lerner
Yehushua Hendeles
Maria Minniti
Tsuneo Yahagi
Takehiko Isobe
Yun Jae Park
Hyun Duck Yoon
Young Soo Kim
Marcia Campos
Elvira E. Naranjo Priego
Howard Frederick
Peter Carswell
Helen Mitchell
Ella Henry
Andy Pivac
Paul Woodfield
Judy Campbell
Vance Walker
Lars Kolvereid
Erland Bullvåg
Svenn Are Jenssen
Eirik Pedersen
Elin Oftedal
Poh Kam Wong
Finna Wong
Lena Lee
Miroslav Rebernik
Matej Rus
Dijana Mocnik
Karin Sirec-Rantasa
Polona Tominc
Miroslav Glas
Viljem Psenicny
Erherva-og Boligstyrelsen
Ernst & Young (Denmark)
Karl Petersen og Hustrus Industrifond
Danfoss Vækstfonden
Ministry of Trade and Industry
Chaire Rodolphe Mérieux Entreprendre
Deutsche Ausgleichsbank (DtA)
Ernst & Young
Trade and Industry Department, SME Development
Fund, Hong Kong Government SAR
Asia Pacific Institute of Business
The Chinese University of Hong Kong
Chinese Executives Club
Hong Kong Management Association
University of Pécs
Ministry of Economic Affairs
University of Baltimore (USA)
REORG Gazdasagi es Penzugyi Rt
Reykjavik University
Central Bank of Iceland
The Confederation of Icelandic Employers
New Business Venture Fund
Prime Minister’s Office
N.S Raghavan Centre for Entrepreneurial Learning, IIM
Bangalore
Enterprise Ireland
HTMS – The High-Tech School at the Faculty of
Management, Tel-Aviv University
Robert Faktor
The Evens Foundation
W. Glavin Center for Entrepreneurial Leadership at
Babson College
Monitor Company
BK21 Ensb Program
EGADE
ITESM Graduate School of Business Administration and
Leadership
Ministry of Economic Development
Venture Taranaki
Enterprise Waitakere
Manukau City Council
Te Puni Kokiri / Ministry of Maori Development
North Shore City
Enterprise North Shore
Espy Magazine – The Entrepreneur’s Bible
UNITEC School of Management & Entrepreneurship
Bartercard New Zealand Ltd.
Ministry of Trade and Industry
Bodø Graduate School of Business
Kunnskapsparken AS Bodø, Center for Innovation and
Entrepreneurship
Economic Development Board of Singapore
Ministry of Education, Science and Sports
Ministry of the Economy
Small Business Development Center
Finance – Slovenian Business Daily
Team Members Institution Financial Sponsor
4
South Africa
Spain
Sweden
Switzerland
Taiwan
(Chinese Taipei)
Thailand
The Netherlands
United Kingdom
United Kingdom,
Scotland Unit
United Kingdom,
Wales Unit
United States
Graduate School of Business,
University of Cape Town
Instituto de Empresa
ESBRI Entrepreneurship and Small
Business Research Institute
HEC-Lausanne Switzerland
IMD
CERN-Geneva
St. Gallen University
National Taiwan University
College of Management Mahidol
University (CMMU)
EIM Business & Policy Research
London Business School
University of Strathclyde
Heriot Watt University
University of Glamorgan
University of Wales, Bangor
Babson College
Mike Herrington
Mary-Lyn Foxcroft
Jacqui Kew
Nick Segal
Eric Wood
Alicia Coduras Martinez
Rachida Justo
Julio DeCastro
Joseph Pistrui
Magnus Aronsson
Helene Thorgrimsson
Bernard Surlemont
Benoit Leleux
Georges Haour
Erkko Autio
Thierry Volery
Chen-en Ko
Jennifer Hui-ju Chen
Hsiu-te Sung
Chien-chi Tseng
Brian Hunt
Suphannee Leardviriyasak
Thanaphol Virasa
Sirin Chachitsophon
Rossukhon Numdeng
Sander Wennekers
Niels Bosma
Arnoud Muizer
Ro Braaksma
Heleen Stigter
Roy Thurik
Rebecca Harding
Niels Billou
Michael Hay
Jonathan Levie
Colin Mason
Wendy Mason
Laura Galloway
David Brooksbank
Dylan Jones-Evans
Heidi Neck
Andrew Zacharakis
William D. Bygrave
Paul D. Reynolds
Liberty Group
Standard Bank
South African Breweries
Khula Enterprise Finance
Ntsika Enterprise Promotion Agency
NAJETI Chair of Entrepreneurship and Family Business
Confederation of Swedish Enterprise
Ministry of Industry, Employment and Communications
Swedish Business Development Agency
Swedish Institute for Growth Policy Studies, ITPS
Chambre Vaudoise de Commerce et dl'Industrie (CVCI)
Renaissance PME
Réseau Suisse d'Innovation (RSI-SNI)
Small and Medium Enterprise Administration, Ministry
of Economic Affairs
College of Management Mahidol University
Dutch Ministry of Economic Affairs
Small Business Service
Barclays Bank
The Work Foundation
South East of England Development Agency
One North East
InvestNI
Entrepreneurial Working Party
Ernst & Young
Hunter Centre for Entrepreneurship
Welsh Development Agency
Ewing Marion Kauffman Foundation
Team Members Institution Financial Sponsor
5
Executi ve Summary
The Global Entrepreneurship Monitor (GEM), in its fourth year of assessing entrepreneurial activity worldwide,
estimates that more than 460 million adults around the globe were engaged in entrepreneurial activity in 2002. This
dramatic and unexpected conclusion is extrapolated from an extensive survey of 37 countries containing more than
three-fifths of the world’s population and 92 percent of its gross domestic product (GDP). According to GEM 2002, these
countries currently have around 286 million adults active in entrepreneurship. The other two-fifths of the world’s
population probably contain an additional 174 million individuals who are entrepreneurially active. Clearly then, the
GEM initiative has blossomed into a global assessment of a truly global phenomenon.
From its inception, the major objectives of the GEM research program have been to:
? measure differences in the level of entrepreneurial activity between countries,
? probe for a systematic relationship between entrepreneurship and national economic growth,
? uncover factors that lead to higher levels of entrepreneurship, and
? suggest policies that may enhance the national level of entrepreneurial activity.
This report focuses on the first two objectives. It also expands on previous GEM analysis with insights gained as
the result of tracking changes in entrepreneurial activity over time, and delving more deeply into the motivations and
outcomes of entrepreneurial behavior. Further, it introduces three topics of particular interest in entrepreneurship:
patterns of female participation, sources of financial support and the prevalence of family-sponsored ventures. The
latter two objectives are only partially addressed in this report but will be at the center of a series of special topic
reports to be released in the spring of 2003.
Based on the conceptual model summarized in Appendix A, four types of data collection formed the basis of the
GEM 2002 assessment. First, representative samples of 1,000 to 15,000 randomly selected adults were surveyed in
each country in order to provide a harmonized measure of the prevalence of entrepreneurial activity — the “total
entrepreneurial activity” (TEA) index
1
(i.e., that percent of the labor force that is either actively involved in starting a new
venture or the owner/manager of a business that is less than 42 months old
2
). Second, each GEM national team
performed up to 50 face-to-face interviews with experts in their country, chosen to represent nine entrepreneurial
framework features. Third, these same experts were asked to complete a standardized questionnaire in order to obtain
a precise measure of their judgments about their country as a suitable context for entrepreneurial activity. Finally,
standardized national data were obtained from international data sources such as the World Bank, International
Monetary Fund, United Nations, and the like. A longer summary of the GEM research methodology appears in
Appendix B, and technical details are available in an operations manual available upon request.
6
In general, the GEM 2002 report provides answers to the following questions:
How much entrepreneurial activity was there in 2002?
About 286 million individuals, or 12 percent of 2.4 billion adults 18 to 64 years of age in the 37 GEM 2002
countries, were either actively engaged in the start-up process or managing a business less than 42 months old in the
spring of 2002. Since these countries represent 62 percent of the world population, this would suggest that about 460
million persons are involved in entrepreneurship worldwide.
Does the level of entrepreneurial activity vary between countries?
Yes, there is substantial variation. While less than 3 percent of adults 18 to 64 years of age are involved in
entrepreneurial endeavors in Japan, Russia and Belgium, more than 18 percent are so engaged in India and Thailand.
The level of entrepreneurial activity was lowest in the developed Asian countries (Japan, Hong Kong, Chinese Taipei and
Singapore) and Central Europe (Russia, Croatia, Poland, Slovenia and Hungary), slightly higher in EU Europe plus Israel,
substantially higher in the former British Empire Anglo countries (Australia, Canada, New Zealand, South Africa, and the
United States), higher still in Latin America (Argentina, Brazil, Chile and Mexico), and highest in the developing Asian
countries (China, Korea, India, and Thailand).
Does the level of entrepreneurial activity change over time?
Yes. Entrepreneurial activity dropped 25 percent between 2001 and 2002 among the countries that participated in
GEM 2001. This is important given the fact that there was little change between 2000 and 2001. These findings appear
to reflect global stability in economic growth from 2000 to 2001 but a universal decline from 2001 to 2002. However,
despite the recent drop in entrepreneurship, the relative rankings between countries remains quite stable over time.
Why do people become entrepreneurs?
About two-thirds of the entrepreneurially active adults in the GEM 2002 countries are voluntarily pursuing an
attractive business opportunity. About one-third, on the other hand, are engaged in entrepreneurship out of necessity
— that is, they can find no other suitable work. Opportunity-motivated entrepreneurs are dominant in developed
countries, while necessity-motivated entrepreneurs comprise up to half of those involved in entrepreneurship in
developing countries.
Who are the entrepreneurs?
Age and gender have a very stable relationship to entrepreneurial activity. Men are twice as likely to be involved
as women, and those 25 to 44 years of age are most likely to be involved with all types of entrepreneurial activity. The
processes that lead to women being involved in entrepreneurial activity may be different than for men. In developed
countries women are more involved where there is equality in career opportunities; in developing countries women’s
participation may reflect the lack of jobs and an inadequate education.
7
What types of businesses are being created?
All economic sectors are reflected in the types of new businesses that are being developed. However, 93 percent
of entrepreneurially active adults consider their business to be a replication of an existing business activity. A small
minority (7 percent) expect their new firms to create a significant new market niche or economic sector, and a very small
proportion of these expect to create new market niches, provide 20 or more jobs in five years, and have exports outside
their own country. Most of these “high potential” new ventures reflect the pursuit of opportunity, though many
necessity entrepreneurs also believe that their firms will have high impact.
What is the relationship between entrepreneurship and economic growth?
Evidence continues to accumulate that the national level of entrepreneurial activity has a statistically significant
association with subsequent levels of economic growth. However, it is important to view these findings with caution
since several more years of data are necessary in order for the causal mechanisms to be determined.
How do national experts assess the entrepreneurial climate in their own countries?
Three of nine entrepreneurial framework conditions — government policies, cultural and social norms, and
education and training — are among the aspects generally acknowledged as both national strengths and weaknesses.
The availability of financial support for start-ups is typically given intermediate weight as either a strength or weakness.
National experts seem to be working with and well informed about similar opportunity-motivated sectors — even
between countries possessing quite different levels of development. None of the national experts seemed well
informed about the necessity-motivated entrepreneurship in their country.
How important is venture capital and informal finance?
The aggregate amount of venture capital allocated for start-up activities in 2001 was US$59 billion for the 37
countries included in the GEM 2002. Informal funding provided to new firms was six times greater — US$298 billion.
Further, formal venture capital was provided to less than one in 10,000 start-ups and there was substantial variation in the
average amount invested per firm — from US$400,000 to US$12 million. Informal funding, on the other hand, was
provided by 1 to 7 percent of the adult populations to literally tens of millions of individuals involved in the start-up process.
However, it was invested in very small amounts per firm, averaging from US$100 on the low end to US$60,000 on the high
end. The majority of new firms appear to be implemented with substantial support from the immediate family.
8
Scope of Entrepreneuri al Acti vi ty
Of the 2.4 billion persons comprising the labor force represented in the 37 countries of the GEM 2002 study, 12
percent (286 million) are either actively involved in a starting a business or are the owner/manager of a business that is
less than 42 months old. Each country’s portion of this entrepreneurial activity is shown in Table 1. The total population
is provided in the first column, the number of individuals 18 to 64 years old
3
(i.e., those eligible for the labor force) in the
second column, and the TEA rate in the third. The fourth column provides the estimated number of entrepreneurially
active individuals in each country. The last three columns indicate whether or not a country was involved in previous
GEM assessments.
Table 1: Total Entrepreneurial Activity (TEA) Index
and Estimated Counts by Country
Total Population Total Labor TEA Index Count of TEA GEM GEM GEM
2002 Force 2002 2002 Participants 1999 2000 2001
Country
India 1,046,000,000 591,466,000 17.9 105,872,000 x x
China 1,284,000,000 814,470,000 12.3 100,179,000
United States 280,000,000 173,911,000 10.5 18,260,000 x x x
Brazil 176,029,000 106,442,000 13.5 14,369,000 x x
Thailand 62,354,000 40,435,000 18.9 7,642,000
Mexico 103,400,000 58,331,000 12.4 7,233,000 x
Korea 48,324,000 32,117,000 14.5 4,656,000 x x
Argentina 37,812,000 21,987,000 14.2 3,122,000 x x
Germany 83,251,000 53,458,000 5.2 2,779,000 x x x
Russia 144,978,000 94,330,000 2.5 2,358,000 x
Italy 57,715,000 37,102,000 5.9 2,189,000 x x x
United Kingdom 59,778,000 36,927,000 5.4 1,994,000 x x x
Canada 31,902,000 20,565,000 8.8 1,809,000 x x x
South Africa 43,647,000 24,886,000 6.5 1,617,000 x
Chile 15,498,000 9,388,000 15.7 1,473,000
Japan 126,974,000 81,290,000 1.8 1,463,000 x x x
Spain 40,077,000 25,886,000 4.6 1,190,000 x
France 59,765,000 36,682,000 3.2 1,173,000 x x x
Poland 38,625,000 24,899,000 4.4 1,095,000 x
Australia 19,546,000 12,273,000 8.7 1,067,000 x x
Chinese Taipei (Taiwan) 22,548,000 14,708,000 4.3 632,000
The Netherlands 16,067,000 10,348,000 4.6 476,000 x
Hungary 10,075,000 6,557,000 6.6 432,000 x
New Zealand 3,908,000 2,432,000 14.0 340,000 x
Switzerland 7,301,000 4,696,000 7.1 333,000
Israel 6,029,000 3,485,000 7.1 247,000 x x x
Norway 4,525,000 2,781,000 8.7 241,000 x x
Denmark 5,368,000 3,397,000 6.5 220,000 x x x
Sweden 8,876,000 5,433,000 4.0 215,000 x x
Ireland 3,883,000 2,289,000 9.1 208,000 x x
Belgium 10,274,000 6,376,000 3.0 191,000 x x
Singapore 4,452,000 3,191,000 5.9 188,000 x x
Hong Kong 7,303,000 4,955,000 3.4 168,000
Finland 5,183,000 3,274,000 4.6 150,000 x x x
Croatia 4,390,000 2,739,000 3.6 98,000
Slovenia 1,932,000 1,278,000 4.6 58,000
Iceland 279,000 172,000 11.3 19,000
Sum 3,882,068,000 2,374,956,000 285,756,000 10 20 28
Country Average 8.0
Total Population Average 12.0
NOTE: Portugal was involved in the GEM 2001 assessment, but was not able to be part of GEM 2002.
9
The TEA index average across countries — which gives equal weight to each country regardless of size — is
8 percent. However, when the size of the labor force in each of the GEM countries is taken into account, the prevalence
rate climbs to 12 percent. This reflects the impact of the 1.4 billion persons in the labor force in China and India, half
the population represented by the sample. Further, dividing the total count of TEA participants, 286 million, by the
proportion of the world population included in the GEM 2002 countries (62 percent) yields a global estimate of 460
million. This number may in fact underestimate the scope of entrepreneurial activity worldwide because most countries
not yet included in the GEM assessment are developing nations with massive populations. Heavily populated countries
such as Egypt, Indonesia, Iran, Nigeria, Malaysia, Pakistan, Philippines, Turkey and Vietnam may exhibit higher TEA rates
than the more developed nations already represented in the GEM analysis.
What is to be made of this? One basis of comparison might be the human birth rate. For 2002 the estimated human
birth rate for the world is 2.2 births per year per 100 in the population, or 135 million births for a global population of 6.1
billion. The total estimate of the global count of those entrepreneurially active at 460 million is more than three times
that number! Participating in business start-ups is clearly a major feature of the work lives of many individuals —
affecting many of their family members and friends — thus deserving more systematic attention in its own right.
10
Cross- Nati onal Di fferences i n
Entrepreneuri al Acti vi ty
The level of entrepreneurial activity among the 37 countries in GEM 2002 is presented in Figure 1. As this chart
illustrates, the TEA rate varies from about 2 percent for Japan (1 in 50) to 19 percent for Thailand (1 in 5). The vertical
bars display the 95 percent confidence intervals — sometimes referred to as the margins of error — and indicate the
precision of these estimates. In those situations where the vertical bars overlap, there is no statistically significant
difference between the countries under consideration. Hence, Thailand, India and perhaps Chile would be considered to
have equivalent levels of entrepreneurial activity at the high end, with Japan, Russia, Belgium, France and Hong Kong at
a comparable level on the low end. The length of the bars is a reflection of differences in sample size, from wide
vertical bars for samples of 1,000 in Mexico and Thailand to narrow bars for Germany and the United Kingdom, where
samples exceeded 15,000.
Figure 1: Total Entrepreneurial Activity (TEA) by Country
– Upper
– Average
– Lower
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obvious that certain geographical/cultural clusters demonstrate remarkable similarity in terms of the level and nature of
entrepreneurial activity occurring within their borders. For the sake of comparison, the GEM 2002 countries have been
11
reordered into the following six groupings: (1) Eleven members of the European Union (EU) plus Iceland, Israel, Norway
and Switzerland; (2) five countries from Eastern Europe; (3) four Latin American countries; (4) five former British Empire
Anglo countries (Australia, Canada, New Zealand, South Africa and the United States); (5) four developed Asian
countries; and (6) four developing Asian countries. As Figure 2 illustrates, entrepreneurial activity is uniformly low in the
Developed Asian and Eastern European groups, as well as within most of the members of the EU. By contrast, the
former British Empire Anglo nations have a relatively higher level of activity, and the Latin American countries are higher
still. Yet, it is the Developing Asian countries that have the highest TEA rates. Paradoxically, many of the most and
least entrepreneurial countries are located in Asia where they often share the same cultural background and, in some
cases, contiguous borders. A more complete understanding of the diversity in this part of the world will be a major focus
of future GEM research.
Figure 3 presents each of the six regions’ percentage of the total labor force in comparison to its proportion of all
those who are entrepreneurially active. The massive populations residing in countries like India and China explain why
the Developing Asian countries (with 63 percent of the labor force) are hosting such a large portion (77 percent) of
entrepreneurial activity. Latin American and former British Empire Anglo countries contain about the same percent of
both labor force and entrepreneurially active individuals. In contrast, the EU, Eastern Europe and the Developed Asian
countries possess about 19 percent of the labor force but only 6 percent of those who are involved in entrepreneurship.
Both the levels of participation and the consequences, in terms of the numbers of active individuals, vary considerably
from region to region.
Figure 2: Total Entrepreneurial Activity (TEA) by Global Region
–
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12
Figure 3: Global Distribution of Total Entrepreneurial Activity (TEA) and Labor Force
– GEM 2002 Labor Force
– GEM 2002
Entrepreneurial Activity
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13
Changes i n Entrepreneuri al
Acti vi ty Over Ti me
The global level of entrepreneurship has certainly changed over the past three years. As seen in Table 2, for
example, the number of entrepreneurially active adults among the 20 countries included in GEM 2000 increased from 123
to 133 million between 2000 and 2001, and then to 161 million in 2002. A similar pattern was found among the 28
countries in GEM 2001. It is interesting to note, however, that these increases occurred despite the fact that the average
participation rate per country fell during this period. The explanation is that growth in the human population and
entrepreneurial activity of large developing countries more than offset the decline in entrepreneurship evidenced among
the developed countries, mostly in Western Europe. Indeed, among the G-7 countries, while the population and labor
force grew from 689 to 699 million, and 416 to 440 million, respectively, between 2000 and 2002, the number of
entrepreneurially active individuals declined from 45 to 30 million. While the United States and Canada experienced only
small declines, the other G-7 nations underwent major shifts, especially between 2001 and 2002.
Table 2: Aggregate Changes in Total Entrepreneurial Activity (TEA) Over Time
Data collection year 2000 2001 2002
Number of countries in project 20 28 37
GEM 2002 Countries
TEA index (average across countries) 8.0%
TEA Index (based on total labor force) 12.0%
Lowest TEA level of activity 1.8%
Highest TEA level of activity 18.9%
Total population, all ages (thousands) 3,882,000
Total labor force: 18-64 yrs. (thousands) 2,375,000
Total active in entrepreneurial process (thousands) 286,000
GEM 2001 Countries*
TEA index (average across countries) 9.6% 7.6%
TEA index (based on total labor force) 10.8% 11.8%
Lowest TEA level of activity 4.5% 1.8%
Highest TEA level of activity 20.7% 17.9%
Total population, all ages (thousands) 2,453,000 2,476,000
Total labor force: 18-64 yrs. (thousands) 1,462,000 1,482,000
Total active in entrepreneurial process (thousands) 158,000 175,000
GEM 2000 Countries**
TEA index (average across countries) 9.5% 9.2% 7.7%
TEA index (based on total labor force) 10.8% 10.7% 12.8%
Lowest TEA level of activity 4.2% 4.5% 1.8%
Highest TEA level of activity 21.4% 15.5% 17.9%
Total population, all ages (thousands) 2,044,000 2,089,000 2,112,000
Total labor force: 18-64 yrs. (thousands) 1,132,000 1,239,000 1,258,000
Total active in entrepreneurial process (thousands) 123,000 133,000 161,000
G-7 Countries***
TEA index (average across countries) 8.9% 8.7% 5.8%
TEA index (based on total labor force) 10.8% 8.3% 6.7%
Lowest TEA level of activity 5.6% 5.2% 1.8%
Highest TEA level of activity 16.6% 11.6% 10.5%
Total population, all ages (thousands) 689,000.00 696,000 699,000
Total labor force: 18-64 yrs. (thousands) 416,000.00 438,000 440,000
Total active in entrepreneurial process (thousands) 45,000.00 40,000 30,000
*Portugal not in project for 2002, not included for 2001 comparison, **Ireland data for 2000 was not usable, dropped for 2001, 2002 comparisons, ***Canada, France, Germany, Italy, Japan,
United Kingdom, and United States.
14
Yet, while Table 2 describes where entrepreneurship has flourished and floundered over the past few years, it
doesn’t explain why entrepreneurial activity should increase or decrease in the first place. Traditionally, two major
factors have been proffered as critical to the prevalence of entrepreneurial endeavors within a given nation: (a) current
macroeconomic conditions, and (b) enduring cultural/social norms and national institutions. Yet prior to the GEM
research program, the precise impact of either factor had not been scientifically observed or established. Theoretically,
if the state of the economy were the primary determinant of the level of entrepreneurship, then year-to-year variation in
entrepreneurial activity would be expected. If, on the other hand, cultural/social norms and national institutions were
the overriding causal mechanisms, relatively stable year-to-year levels of entrepreneurship would be anticipated. Most
of the factors previously shown through GEM research to have stable and significant relationships with the level of
entrepreneurial activity have been elements that change rather slowly over time.
4
Therefore, it has been assumed that
deeply embedded cultural and institutional characteristics are the primary drivers of national entrepreneurial activity
above and beyond the more transient economic components of the environment. Yet the generally positive economy
that enveloped the world from 1999 to early 2001 may have masked the true influence of variations in the general
macroeconomic climate.
Evidence for year-to-year stability — entrepreneurial activity reflecting slow-to-change cultural/social norms and
institutions — was found in the GEM 2001 assessment. As seen in Table 3, changes in the TEA index between 2000
and 2001 for 17 of the GEM 2000 countries were not statistically significant. That is, for all intents and purposes, they
remained unchanged from one year to the next. There was a statistically significant drop for only three countries during
this period (Brazil, Norway and the United States). However, the situation changed dramatically between 2001 and
2002. Over this time period, there was a statistically significant drop for 17 of the GEM 2001 countries, no change for
nine, and a significant increase for two — Argentina and India.
5
Significantly, this pattern of change in the TEA index appears to mirror variations in the growth of GDP.
6
Among the
20 countries in the GEM 2000, the average change in GDP growth from 1998-1999 to 1999-2000 was essentially zero
(i.e., 0.82 percent). That is, just as there was no perceptible change in the TEA rate (-0.37), there was no statistically
significant change in the annual growth rate for this period. Yet in the following period, from 1999-2000 to 2000-2001,
there was in fact a systematic decline in both the TEA rate (-2.29) and the annual rate of growth among every GEM
2001 country (-3.28)
7
. This suggests that the worldwide decline in entrepreneurial activity detected by GEM researchers
is associated with the recent drop in national economic growth.
Two phenomena illuminate how changes in national growth rates might affect the level of entrepreneurial activity.
First, about two-thirds of entrepreneurial activity reflects a desire to take advantage of a business opportunity. Second,
three-fourths or more of this opportunity-based entrepreneurship involves replication of existing business activity, thus
resulting in the creation of few (if any) new markets. Since the primary “opportunity” in most entrepreneurial efforts is
an unmet demand for goods and services, such unsatisfied demands are likely to increase with general growth in a
national economy. If, on the other hand, the national growth rate declines, there is likely to be a reduction in the
demand for goods and services and hence, less opportunity for market replication new businesses. Indeed, the
15
connection between the slowing economy and a reduction in entrepreneurial activity was most evident in those
countries — about half of the group — where a large portion of the entrepreneurship centers around opportunity-
motivated entrepreneurship.
However, the relative year-to-year rank order of the countries in GEM remains very stable. Country-by-country
comparisons of the 2000, 2001 and 2002 TEA rates yields statistically significant correlations that range from 0.61 to
0.81.
8
Therefore, it is possible to conclude that this natural experiment — a universal drop in national economic growth
rates — provides evidence that both macroeconomic conditions and enduring national characteristics have an impact on
the level of entrepreneurial activity. A uniform drop in economic growth followed immediately by an almost universal
drop in entrepreneurial activity suggests that macroeconomic conditions have an effect. On the other hand, the relative
stability in the rank order of the countries suggests that stable national characteristics also play a part. As the GEM
research program continues it may be possible to provide more precise evidence about the relative impact of these
disparate sources of influence.
Table 3: Change in Percent Growth in GDP
and Total Entrepreneurial Activity (TEA) from 2000 to 2002
Change from Total Entrepreneurial Change from
% Growth in GDP Previous Year Activity (TEA) Previous Year
Country 1999 2000 2001 1999-2000 2000-2001 2000 2001 2002 2000-2001 2001-2002
India 6.71 5.36 4.08 -1.35 -1.28 8.97 11.55 17.88 2.59 6.32*
Argentina -3.39 -0.79 -4.41 2.60 -3.62 9.22 11.11 14.15 1.89 3.05*
Israel 2.64 7.44 -0.85 4.80 -8.30 7.14 5.67 7.06 -1.47 1.39
Brazil 0.81 4.36 1.51 3.55 -2.85 21.44 12.74 13.53 -8.69* 0.78
Norway 2.10 2.40 1.40 0.30 -1.00 11.86 8.78 8.69 -3.08* -0.08
Korea 10.89 9.33 3.03 -1.57 -6.30 16.34 14.89 14.52 -1.45 -0.37
Singapore 6.93 10.26 -2.04 3.32 -12.30 4.22 6.58 5.91 2.36 -0.67
United States 4.11 3.75 0.25 -0.36 -3.50 16.58 11.61 10.51 -4.97* -1.10
Denmark 2.31 3.02 0.95 0.71 -2.07 7.17 8.01 6.53 0.85 -1.48
Belgium 3.03 4.02 1.01 1.00 -3.01 4.80 4.54 2.99 -0.27 -1.54*
The Netherlands 1.22 -2.14 4.62 -1.82
Canada 5.39 4.53 1.50 -0.86 -3.03 12.22 10.98 8.82 -1.24 -2.16
United Kingdom 2.41 3.08 1.93 0.67 -1.15 6.91 7.80 5.37 0.89 -2.43*
Sweden 4.51 3.61 1.21 -0.90 -2.40 6.67 6.68 4.00 0.01 -2.68*
Germany 2.05 2.86 0.57 0.81 -2.28 7.45 7.99 5.16 0.54 -2.83*
South Africa 2.22 -1.14 6.54 -2.90*
Ireland 5.85 -5.61 9.14 -3.09*
Finland 4.05 5.59 0.74 1.53 -4.85 8.12 7.66 4.56 -0.46 -3.10*
Japan 0.80 2.40 -0.29 1.60 -2.69 6.38 5.19 1.81 -1.19 -3.38*
Spain 4.20 4.18 2.67 -0.01 -1.51 6.85 8.16 4.59 1.31 -3.58*
New Zealand 2.51 -1.33 14.01 -4.06*
France 3.19 4.17 1.80 0.98 -2.36 5.62 7.37 3.20 1.76 -4.17*
Italy 1.59 2.87 1.78 1.27 -1.09 7.33 10.16 5.90 2.83 -4.26*
Russia 5.05 -3.99 2.52 -4.41*
Hungary 3.80 -1.44 6.64 -4.79*
Poland 1.00 -3.00 4.44 -5.53*
Australia 4.76 3.13 2.55 -1.63 -0.58 15.18 15.50 8.68 0.32 -6.83*
Mexico -0.28 -6.91 12.40 -8.33*
Column Averages 3.46 4.28 1.46 0.82 -3.28 9.52 9.15 7.65 -0.37 -2.29
*Statistically significant change, p
Detailed data account global entrepreneurship monitor 2002 executive report.
Paul D. Reynolds • William D. Bygrave • Erkko Autio • Larry W. Cox • Michael Hay
2002 Executi ve Report
G L O B A L E N T R E P R E N E U R S H I P M O N I T O R
Global Entrepreneurshi p Moni tor
2 0 0 2 E x e c u t i v e R e p o r t
Paul D. Reynolds, William D. Bygrave, Erkko Autio, Larry W. Cox, Michael Hay
Babson College
Ewing Marion Kauffman Foundation
London Business School
© 2002 Paul D. Reynolds, William D. Bygrave, Erkko Autio, Michael Hay, and the Ewing Marion Kauffman Foundation. All rights reserved.
The Global Entrepreneurship Monitor (GEM) is a unique, unprecedented effort to describe and analyze
entrepreneurial processes within a wide range of nations. By so doing, GEM focuses on one of the most fundamental
forces driving and carrying economic change, one that has until now remained elusive for researchers and policymakers
due to lack of reliable, internationally comparable data. Even though many influential economists have, for more than a
century, maintained that entrepreneurship is one of the most important dynamic forces shaping the economic landscape,
the causes and impacts of the phenomenon are still only poorly understood. Consequently, policymakers have lacked the
means of shaping effective and appropriate policies to nurture this phenomenon for national economic benefit.
The distinctive benefits of the GEM measures are that they are the only ones in existence to provide a direct
measure of individual-level, grassroots entrepreneurial processes. This represents a revolutionary development in data
collection because individual persons are the primary agents of entrepreneurial activity. No other measure exists that
could be used as a basis for reliable international comparisons. No other measure can be used to determine and analyze
the motivations driving individual economic agents. No other measure can be used to inform policymakers on how to
foster the development of entrepreneurial human capital.
This is the fourth annual GEM cross-national assessment of the level of entrepreneurship. The program has
expanded from 10 countries in 1999, 20 in 2000, 28 in 2001, to 37 for 2002. National teams are operating in 34 of these
countries; their host institutions, membership and sponsors are listed starting on page 2. Another 10 national teams are
expected to join the GEM consortium for 2003.
GEM is a collaborative effort in every sense of the word, in terms of financial resources (national teams provide
60 percent of the funding), intellectual resources, as well as design and analysis. A GEM-wide assessment and planning
meeting is held early in January of each year. The 10-person coordination team is assisted by more than 150 scholars
from 34 countries. The primary data collection associated with the adult population surveys is done by survey research
firms in each country, which this year involved 37 more sets of trained professionals.
The research program would not have developed without the support and encouragement of the three institutions
that have played a key role from the beginning. Babson College and London Business School have provided an optimal
context for a complex research project emphasizing entrepreneurship. The Ewing Marion Kauffman Foundation has
provided substantial start-up funding and continues to be a major source of financial support and strategic advice.
As GEM expands and improves it should continue to provide new insights into the scope and significance of the
entrepreneurial processes and how public policy can facilitate entrepreneurial contributions to national economic well-
being. New developments, and all national reports, can be found at www.gemconsortium.org.
Paul Reynolds
Coordinating Principal Investigator
Table of Contents
List of Tables ............................................................................................................................................... 1
List of Figures ............................................................................................................................................. 1
GEM 2002 Coordination Team, National Teams and Sponsors .............................................................. 2
Executive Summary .................................................................................................................................... 5
Scope of Entrepreneurial Activity .............................................................................................................. 8
Cross-National Differences in Entrepreneurial Activity ......................................................................... 10
Changes in Entrepreneurial Activity Over Time ...................................................................................... 13
Motivations and Types of Entrepreneurial Behavior .............................................................................. 16
Science, Technology and High Potential Entrepreneurship ................................................................... 20
Association of Entrepreneurial Activity and Economic Growth ............................................................ 23
National Context and Entrepreneurial Activity........................................................................................ 25
Special Topics ........................................................................................................................................... 28
Women and Entrepreneurship .................................................................................................. 28
Entrepreneurial Finance ............................................................................................................. 32
Family-Sponsored Entrepreneurship ......................................................................................... 34
Conclusions ............................................................................................................................................... 37
Appendix A: The GEM Conceptual Model ............................................................................................. 40
Appendix B: Data Collection ................................................................................................................... 42
End Notes ................................................................................................................................................. 44
1
Li st of Tables
Table 1 Total Entrepreneurial Activity (TEA) Index and Estimated Counts by Country
Table 2 Aggregate Changes in Total Entrepreneurial Activity (TEA) Over Time
Table 3 Change in Percent Growth in GDP and Total Entrepreneurial Activity (TEA) from 2000 to 2002
Table 4 Opportunity- and Necessity-Based Entrepreneurial Activity and Business Expectations
Table 5 Correlations Between High Potential Entrepreneurial Activity and National Entrepreneurial Framework
Condition Indices
Table 6 Correlations Between Entrepreneurial Activity and National Economic Growth with Time Lags
Table 7 Correlations Between Entrepreneurial Activity and National Entrepreneurial Framework
Condition Indices
Table 8 Correlations Between Entrepreneurial Activity and Selected Factors Believed to Affect Women’s
Participation in Entrepreneurship
Table 9 Total Entrepreneurial Activity (TEA) and Family-Sponsored Entrepreneurship for Selected Countries
Table B-1 Survey Research Firms and Sample Size by Country
Table E-1 Correlations Between the TEA Index and Other Measures of Entrepreneurial Activity
Table E-2 Correlations Between Year-to-Year Changes in Entrepreneurial Activity
Li st of Fi gures
Figure 1 Total Entrepreneurial Activity (TEA) by Country
Figure 2 Total Entrepreneurial Activity (TEA) by Global Region
Figure 3 Global Distribution of Total Entrepreneurial Activity (TEA) and Labor Force
Figure 4 Opportunity-Based Entrepreneurial Activity by Country
Figure 5 Necessity-Based Entrepreneurial Activity by Country
Figure 6 Total Entrepreneurial Activity (TEA) and Subsequent Growth in GDP
Figure 7 Entrepreneurial Activity by Gender and Age
Figure 8 Entrepreneurial Activity by Gender and Country
Figure 9 Domestic Classic Venture Capital Investment as a Percent of GDP (1999-2001)
Figure 10 Domestic Capital Investment as a Percent of GDP (Informal Investment Plus Classic Venture Capital)
Figure A-1 The GEM Conceptual Model
2
Unit
GEM Project
Directors
GEM Project
Coordinator
GEM Coordination
Team
Family Business
Special Topic
Team
Argentina
Australia
Belgium
Brazil
Canada
Chile
China
Croatia
Institution
Babson College
London Business School
Babson College
London Business School
Babson College
London Business School
Alfred University
Oregon State University
Institution
Center for Entrepreneurship
IAE Management and Business School
Universidad Austral
Australian Graduate School of
Entrepreneurship
Swinburne University of Technology
Vlerick Leuven Gent Management
School
Universiteit Gent
IBQP – Instituto Brasileiro da
Qualidade e Productividade no
Paraná
York University
École des Hautes Études Commerciales
de Montréal (HEC – Montréal)
ESE – Universidad de Los Andes
Tsinghua University
SME’s Policy Centre – CEPOR
Zagreb and Faculty of Economics
University of J. J. Strossmayer, Osijek
Members
William D. Bygrave
Michael Hay
Paul D. Reynolds
Paul D. Reynolds
William D. Bygrave
Marcia Cole
Paul D. Reynolds
Erkko Autio
Marc Cowling
Michael Hay
Steven Hunt
Isabelle Servais
Natalie De Bono
Michelle Hale
Kola Azeez
Veronica Ayi-Bonte
Matthew Freegard
Anwen Garston
Ruth Lane
Shu Lyn Emily Ng
Thomas Baily
Carol Wittmeyer
Mark Green
Members
Silvia Torres Carbonell
Hector Rocha
Florencia Paolini
Kevin Hindle
Susan Rushworth
Deborah Jones
Sophie Manigart
Bart Clarysse
Hans Crijns
Dirk De Clercq
Nico Vermeiren
Frank Verzele
Fulgêncio Torres Viruel
Marcos Mueller Schlemm
Simara Maria S. S. Greco
Joana Paula Machado
Nerio Aparecido Cardoso
Daniele de Lara
Maria José R. Pontoni
Rein Peterson
Nathaly Riverin
Robert Kleiman
Alfredo Enrione
Jon Martinez
Alvaro Pezoa
Gerardo Marti
Nicolas Besa
Fernando Suarez
Jian Gao
Zhiqiang Chen
Yuan Cheng
Robert Eeng
Yanfu Jiang
Biao Jia
Tan Li
Fang Liu
Qung Qui
Zhenglei Tang
Jianfei Wang
Jun Yang
Henjun Xu
Slavica Singer
Sanja Pfeifer
Natasa Sarlija
Suncica Oberman
Financial Sponsor
Ewing Marion Kauffman Foundation
The Laing Family Charitable Settlement
David Potter Foundation
Anonymous Foundation Fellow
Raymond Family Business Institute
Financial Sponsor
IAE Management and Business School
HSBC Private Equity Latin America
Sensis Pty Ltd
Vlerick Leuven Gent Management School
Steunpunt Ondernemerschap, Ondernemingen en
Innovatie (Vlaamse Gemeenschap)
IBQP – Instituto Brasileiro da Qualidade e
Productividade no Paraná
SEBRAE – Serviço Brasileiro de Apoio às Micro e
Pequenas Empresas
Développement Économique Canada, Québec
Industry Canada, Small Business Policy Branch
Anne & Max Tanenbaum Chair, Schulich School of
Business, York University
Chaire d'entrepreneurship Maclean Hunters, HEC
Montréal
ESE Business School – Universidad de Los Andes
ADIMARK
ING Group
PriceWaterhouseCoopers
Banco de Crédito e Inversiones
National Entrepreneurship Research Center of Tsinghua
University
Asian Institute of Babson College
Faculty of Economics, University of J.J. Strossmayer
Osijek Open Society Institute
Croatia Ministry of Crafts, Small and Medium
Enterprises, Zagreb
SME‘s Policy Centre – CEPOR Zagreb
GEM 2002 Coordi nati on Team, Nati onal
Teams and Sponsors
3
Denmark
Finland
France
Germany
Hong Kong
Hungary
Iceland
India
Ireland
Israel
Italy
Japan
Korea
Mexico
New Zealand
Norway
Singapore
Slovenia
University of Southern Denmark
Centre for Small Business Studies
Helsinki University of Technology
EM Lyon
University of Cologne
The Chinese University of Hong Kong
University of Pécs
University of Baltimore (USA)
Reykjavik University
Indian Institute of Management,
Bangalore
University College, Dublin
Tel Aviv University
Babson College (USA)
Keio University
University of Marketing & Distribution
Sciences
Soongsil Unversity
ITESM-EGADE
New Zealand Centre for Innovation &
Entrepreneurship
UNITEC Institute of Technology
Bodø Graduate School of Business
National University of Singapore
Institute for Entrepreneurship and
Small Business Management,
Faculty of Economics & Business,
University of Maribor
Mick Hancock
Torben Bager
Lone Toftild
Erkko Autio
Pia Arenius
Anne Kovalainen
Daniel Evans
Isabele Servais
Aurélien Eminet
Loic Maherault
Rolf Sternberg
Heiko Bergmann
Bee-Leng Chua
David Ahlstrom
Kevin Au
Cheung-Kwok Law
Chee-Keong Low
Shige Makino
Hugh Thomas
László Szerb
Zoltán Acs
Attila Varga
József Ulbert
Éva Bodor
Agnar Hansson
Ludvik Eliasson
Gu?rún Mjöll Sigur?ardóttir
Halla Tomasdottir
Gylfi Zoega
Rognvaldur Saemundsson
Mathew J. Manimala
Malathi V. Gopal
Mukesh Sud
Ritesh Dhar
Paula Fitzsimons
Colm O'Gorman
Frank Roche
Miri Lerner
Yehushua Hendeles
Maria Minniti
Tsuneo Yahagi
Takehiko Isobe
Yun Jae Park
Hyun Duck Yoon
Young Soo Kim
Marcia Campos
Elvira E. Naranjo Priego
Howard Frederick
Peter Carswell
Helen Mitchell
Ella Henry
Andy Pivac
Paul Woodfield
Judy Campbell
Vance Walker
Lars Kolvereid
Erland Bullvåg
Svenn Are Jenssen
Eirik Pedersen
Elin Oftedal
Poh Kam Wong
Finna Wong
Lena Lee
Miroslav Rebernik
Matej Rus
Dijana Mocnik
Karin Sirec-Rantasa
Polona Tominc
Miroslav Glas
Viljem Psenicny
Erherva-og Boligstyrelsen
Ernst & Young (Denmark)
Karl Petersen og Hustrus Industrifond
Danfoss Vækstfonden
Ministry of Trade and Industry
Chaire Rodolphe Mérieux Entreprendre
Deutsche Ausgleichsbank (DtA)
Ernst & Young
Trade and Industry Department, SME Development
Fund, Hong Kong Government SAR
Asia Pacific Institute of Business
The Chinese University of Hong Kong
Chinese Executives Club
Hong Kong Management Association
University of Pécs
Ministry of Economic Affairs
University of Baltimore (USA)
REORG Gazdasagi es Penzugyi Rt
Reykjavik University
Central Bank of Iceland
The Confederation of Icelandic Employers
New Business Venture Fund
Prime Minister’s Office
N.S Raghavan Centre for Entrepreneurial Learning, IIM
Bangalore
Enterprise Ireland
HTMS – The High-Tech School at the Faculty of
Management, Tel-Aviv University
Robert Faktor
The Evens Foundation
W. Glavin Center for Entrepreneurial Leadership at
Babson College
Monitor Company
BK21 Ensb Program
EGADE
ITESM Graduate School of Business Administration and
Leadership
Ministry of Economic Development
Venture Taranaki
Enterprise Waitakere
Manukau City Council
Te Puni Kokiri / Ministry of Maori Development
North Shore City
Enterprise North Shore
Espy Magazine – The Entrepreneur’s Bible
UNITEC School of Management & Entrepreneurship
Bartercard New Zealand Ltd.
Ministry of Trade and Industry
Bodø Graduate School of Business
Kunnskapsparken AS Bodø, Center for Innovation and
Entrepreneurship
Economic Development Board of Singapore
Ministry of Education, Science and Sports
Ministry of the Economy
Small Business Development Center
Finance – Slovenian Business Daily
Team Members Institution Financial Sponsor
4
South Africa
Spain
Sweden
Switzerland
Taiwan
(Chinese Taipei)
Thailand
The Netherlands
United Kingdom
United Kingdom,
Scotland Unit
United Kingdom,
Wales Unit
United States
Graduate School of Business,
University of Cape Town
Instituto de Empresa
ESBRI Entrepreneurship and Small
Business Research Institute
HEC-Lausanne Switzerland
IMD
CERN-Geneva
St. Gallen University
National Taiwan University
College of Management Mahidol
University (CMMU)
EIM Business & Policy Research
London Business School
University of Strathclyde
Heriot Watt University
University of Glamorgan
University of Wales, Bangor
Babson College
Mike Herrington
Mary-Lyn Foxcroft
Jacqui Kew
Nick Segal
Eric Wood
Alicia Coduras Martinez
Rachida Justo
Julio DeCastro
Joseph Pistrui
Magnus Aronsson
Helene Thorgrimsson
Bernard Surlemont
Benoit Leleux
Georges Haour
Erkko Autio
Thierry Volery
Chen-en Ko
Jennifer Hui-ju Chen
Hsiu-te Sung
Chien-chi Tseng
Brian Hunt
Suphannee Leardviriyasak
Thanaphol Virasa
Sirin Chachitsophon
Rossukhon Numdeng
Sander Wennekers
Niels Bosma
Arnoud Muizer
Ro Braaksma
Heleen Stigter
Roy Thurik
Rebecca Harding
Niels Billou
Michael Hay
Jonathan Levie
Colin Mason
Wendy Mason
Laura Galloway
David Brooksbank
Dylan Jones-Evans
Heidi Neck
Andrew Zacharakis
William D. Bygrave
Paul D. Reynolds
Liberty Group
Standard Bank
South African Breweries
Khula Enterprise Finance
Ntsika Enterprise Promotion Agency
NAJETI Chair of Entrepreneurship and Family Business
Confederation of Swedish Enterprise
Ministry of Industry, Employment and Communications
Swedish Business Development Agency
Swedish Institute for Growth Policy Studies, ITPS
Chambre Vaudoise de Commerce et dl'Industrie (CVCI)
Renaissance PME
Réseau Suisse d'Innovation (RSI-SNI)
Small and Medium Enterprise Administration, Ministry
of Economic Affairs
College of Management Mahidol University
Dutch Ministry of Economic Affairs
Small Business Service
Barclays Bank
The Work Foundation
South East of England Development Agency
One North East
InvestNI
Entrepreneurial Working Party
Ernst & Young
Hunter Centre for Entrepreneurship
Welsh Development Agency
Ewing Marion Kauffman Foundation
Team Members Institution Financial Sponsor
5
Executi ve Summary
The Global Entrepreneurship Monitor (GEM), in its fourth year of assessing entrepreneurial activity worldwide,
estimates that more than 460 million adults around the globe were engaged in entrepreneurial activity in 2002. This
dramatic and unexpected conclusion is extrapolated from an extensive survey of 37 countries containing more than
three-fifths of the world’s population and 92 percent of its gross domestic product (GDP). According to GEM 2002, these
countries currently have around 286 million adults active in entrepreneurship. The other two-fifths of the world’s
population probably contain an additional 174 million individuals who are entrepreneurially active. Clearly then, the
GEM initiative has blossomed into a global assessment of a truly global phenomenon.
From its inception, the major objectives of the GEM research program have been to:
? measure differences in the level of entrepreneurial activity between countries,
? probe for a systematic relationship between entrepreneurship and national economic growth,
? uncover factors that lead to higher levels of entrepreneurship, and
? suggest policies that may enhance the national level of entrepreneurial activity.
This report focuses on the first two objectives. It also expands on previous GEM analysis with insights gained as
the result of tracking changes in entrepreneurial activity over time, and delving more deeply into the motivations and
outcomes of entrepreneurial behavior. Further, it introduces three topics of particular interest in entrepreneurship:
patterns of female participation, sources of financial support and the prevalence of family-sponsored ventures. The
latter two objectives are only partially addressed in this report but will be at the center of a series of special topic
reports to be released in the spring of 2003.
Based on the conceptual model summarized in Appendix A, four types of data collection formed the basis of the
GEM 2002 assessment. First, representative samples of 1,000 to 15,000 randomly selected adults were surveyed in
each country in order to provide a harmonized measure of the prevalence of entrepreneurial activity — the “total
entrepreneurial activity” (TEA) index
1
(i.e., that percent of the labor force that is either actively involved in starting a new
venture or the owner/manager of a business that is less than 42 months old
2
). Second, each GEM national team
performed up to 50 face-to-face interviews with experts in their country, chosen to represent nine entrepreneurial
framework features. Third, these same experts were asked to complete a standardized questionnaire in order to obtain
a precise measure of their judgments about their country as a suitable context for entrepreneurial activity. Finally,
standardized national data were obtained from international data sources such as the World Bank, International
Monetary Fund, United Nations, and the like. A longer summary of the GEM research methodology appears in
Appendix B, and technical details are available in an operations manual available upon request.
6
In general, the GEM 2002 report provides answers to the following questions:
How much entrepreneurial activity was there in 2002?
About 286 million individuals, or 12 percent of 2.4 billion adults 18 to 64 years of age in the 37 GEM 2002
countries, were either actively engaged in the start-up process or managing a business less than 42 months old in the
spring of 2002. Since these countries represent 62 percent of the world population, this would suggest that about 460
million persons are involved in entrepreneurship worldwide.
Does the level of entrepreneurial activity vary between countries?
Yes, there is substantial variation. While less than 3 percent of adults 18 to 64 years of age are involved in
entrepreneurial endeavors in Japan, Russia and Belgium, more than 18 percent are so engaged in India and Thailand.
The level of entrepreneurial activity was lowest in the developed Asian countries (Japan, Hong Kong, Chinese Taipei and
Singapore) and Central Europe (Russia, Croatia, Poland, Slovenia and Hungary), slightly higher in EU Europe plus Israel,
substantially higher in the former British Empire Anglo countries (Australia, Canada, New Zealand, South Africa, and the
United States), higher still in Latin America (Argentina, Brazil, Chile and Mexico), and highest in the developing Asian
countries (China, Korea, India, and Thailand).
Does the level of entrepreneurial activity change over time?
Yes. Entrepreneurial activity dropped 25 percent between 2001 and 2002 among the countries that participated in
GEM 2001. This is important given the fact that there was little change between 2000 and 2001. These findings appear
to reflect global stability in economic growth from 2000 to 2001 but a universal decline from 2001 to 2002. However,
despite the recent drop in entrepreneurship, the relative rankings between countries remains quite stable over time.
Why do people become entrepreneurs?
About two-thirds of the entrepreneurially active adults in the GEM 2002 countries are voluntarily pursuing an
attractive business opportunity. About one-third, on the other hand, are engaged in entrepreneurship out of necessity
— that is, they can find no other suitable work. Opportunity-motivated entrepreneurs are dominant in developed
countries, while necessity-motivated entrepreneurs comprise up to half of those involved in entrepreneurship in
developing countries.
Who are the entrepreneurs?
Age and gender have a very stable relationship to entrepreneurial activity. Men are twice as likely to be involved
as women, and those 25 to 44 years of age are most likely to be involved with all types of entrepreneurial activity. The
processes that lead to women being involved in entrepreneurial activity may be different than for men. In developed
countries women are more involved where there is equality in career opportunities; in developing countries women’s
participation may reflect the lack of jobs and an inadequate education.
7
What types of businesses are being created?
All economic sectors are reflected in the types of new businesses that are being developed. However, 93 percent
of entrepreneurially active adults consider their business to be a replication of an existing business activity. A small
minority (7 percent) expect their new firms to create a significant new market niche or economic sector, and a very small
proportion of these expect to create new market niches, provide 20 or more jobs in five years, and have exports outside
their own country. Most of these “high potential” new ventures reflect the pursuit of opportunity, though many
necessity entrepreneurs also believe that their firms will have high impact.
What is the relationship between entrepreneurship and economic growth?
Evidence continues to accumulate that the national level of entrepreneurial activity has a statistically significant
association with subsequent levels of economic growth. However, it is important to view these findings with caution
since several more years of data are necessary in order for the causal mechanisms to be determined.
How do national experts assess the entrepreneurial climate in their own countries?
Three of nine entrepreneurial framework conditions — government policies, cultural and social norms, and
education and training — are among the aspects generally acknowledged as both national strengths and weaknesses.
The availability of financial support for start-ups is typically given intermediate weight as either a strength or weakness.
National experts seem to be working with and well informed about similar opportunity-motivated sectors — even
between countries possessing quite different levels of development. None of the national experts seemed well
informed about the necessity-motivated entrepreneurship in their country.
How important is venture capital and informal finance?
The aggregate amount of venture capital allocated for start-up activities in 2001 was US$59 billion for the 37
countries included in the GEM 2002. Informal funding provided to new firms was six times greater — US$298 billion.
Further, formal venture capital was provided to less than one in 10,000 start-ups and there was substantial variation in the
average amount invested per firm — from US$400,000 to US$12 million. Informal funding, on the other hand, was
provided by 1 to 7 percent of the adult populations to literally tens of millions of individuals involved in the start-up process.
However, it was invested in very small amounts per firm, averaging from US$100 on the low end to US$60,000 on the high
end. The majority of new firms appear to be implemented with substantial support from the immediate family.
8
Scope of Entrepreneuri al Acti vi ty
Of the 2.4 billion persons comprising the labor force represented in the 37 countries of the GEM 2002 study, 12
percent (286 million) are either actively involved in a starting a business or are the owner/manager of a business that is
less than 42 months old. Each country’s portion of this entrepreneurial activity is shown in Table 1. The total population
is provided in the first column, the number of individuals 18 to 64 years old
3
(i.e., those eligible for the labor force) in the
second column, and the TEA rate in the third. The fourth column provides the estimated number of entrepreneurially
active individuals in each country. The last three columns indicate whether or not a country was involved in previous
GEM assessments.
Table 1: Total Entrepreneurial Activity (TEA) Index
and Estimated Counts by Country
Total Population Total Labor TEA Index Count of TEA GEM GEM GEM
2002 Force 2002 2002 Participants 1999 2000 2001
Country
India 1,046,000,000 591,466,000 17.9 105,872,000 x x
China 1,284,000,000 814,470,000 12.3 100,179,000
United States 280,000,000 173,911,000 10.5 18,260,000 x x x
Brazil 176,029,000 106,442,000 13.5 14,369,000 x x
Thailand 62,354,000 40,435,000 18.9 7,642,000
Mexico 103,400,000 58,331,000 12.4 7,233,000 x
Korea 48,324,000 32,117,000 14.5 4,656,000 x x
Argentina 37,812,000 21,987,000 14.2 3,122,000 x x
Germany 83,251,000 53,458,000 5.2 2,779,000 x x x
Russia 144,978,000 94,330,000 2.5 2,358,000 x
Italy 57,715,000 37,102,000 5.9 2,189,000 x x x
United Kingdom 59,778,000 36,927,000 5.4 1,994,000 x x x
Canada 31,902,000 20,565,000 8.8 1,809,000 x x x
South Africa 43,647,000 24,886,000 6.5 1,617,000 x
Chile 15,498,000 9,388,000 15.7 1,473,000
Japan 126,974,000 81,290,000 1.8 1,463,000 x x x
Spain 40,077,000 25,886,000 4.6 1,190,000 x
France 59,765,000 36,682,000 3.2 1,173,000 x x x
Poland 38,625,000 24,899,000 4.4 1,095,000 x
Australia 19,546,000 12,273,000 8.7 1,067,000 x x
Chinese Taipei (Taiwan) 22,548,000 14,708,000 4.3 632,000
The Netherlands 16,067,000 10,348,000 4.6 476,000 x
Hungary 10,075,000 6,557,000 6.6 432,000 x
New Zealand 3,908,000 2,432,000 14.0 340,000 x
Switzerland 7,301,000 4,696,000 7.1 333,000
Israel 6,029,000 3,485,000 7.1 247,000 x x x
Norway 4,525,000 2,781,000 8.7 241,000 x x
Denmark 5,368,000 3,397,000 6.5 220,000 x x x
Sweden 8,876,000 5,433,000 4.0 215,000 x x
Ireland 3,883,000 2,289,000 9.1 208,000 x x
Belgium 10,274,000 6,376,000 3.0 191,000 x x
Singapore 4,452,000 3,191,000 5.9 188,000 x x
Hong Kong 7,303,000 4,955,000 3.4 168,000
Finland 5,183,000 3,274,000 4.6 150,000 x x x
Croatia 4,390,000 2,739,000 3.6 98,000
Slovenia 1,932,000 1,278,000 4.6 58,000
Iceland 279,000 172,000 11.3 19,000
Sum 3,882,068,000 2,374,956,000 285,756,000 10 20 28
Country Average 8.0
Total Population Average 12.0
NOTE: Portugal was involved in the GEM 2001 assessment, but was not able to be part of GEM 2002.
9
The TEA index average across countries — which gives equal weight to each country regardless of size — is
8 percent. However, when the size of the labor force in each of the GEM countries is taken into account, the prevalence
rate climbs to 12 percent. This reflects the impact of the 1.4 billion persons in the labor force in China and India, half
the population represented by the sample. Further, dividing the total count of TEA participants, 286 million, by the
proportion of the world population included in the GEM 2002 countries (62 percent) yields a global estimate of 460
million. This number may in fact underestimate the scope of entrepreneurial activity worldwide because most countries
not yet included in the GEM assessment are developing nations with massive populations. Heavily populated countries
such as Egypt, Indonesia, Iran, Nigeria, Malaysia, Pakistan, Philippines, Turkey and Vietnam may exhibit higher TEA rates
than the more developed nations already represented in the GEM analysis.
What is to be made of this? One basis of comparison might be the human birth rate. For 2002 the estimated human
birth rate for the world is 2.2 births per year per 100 in the population, or 135 million births for a global population of 6.1
billion. The total estimate of the global count of those entrepreneurially active at 460 million is more than three times
that number! Participating in business start-ups is clearly a major feature of the work lives of many individuals —
affecting many of their family members and friends — thus deserving more systematic attention in its own right.
10
Cross- Nati onal Di fferences i n
Entrepreneuri al Acti vi ty
The level of entrepreneurial activity among the 37 countries in GEM 2002 is presented in Figure 1. As this chart
illustrates, the TEA rate varies from about 2 percent for Japan (1 in 50) to 19 percent for Thailand (1 in 5). The vertical
bars display the 95 percent confidence intervals — sometimes referred to as the margins of error — and indicate the
precision of these estimates. In those situations where the vertical bars overlap, there is no statistically significant
difference between the countries under consideration. Hence, Thailand, India and perhaps Chile would be considered to
have equivalent levels of entrepreneurial activity at the high end, with Japan, Russia, Belgium, France and Hong Kong at
a comparable level on the low end. The length of the bars is a reflection of differences in sample size, from wide
vertical bars for samples of 1,000 in Mexico and Thailand to narrow bars for Germany and the United Kingdom, where
samples exceeded 15,000.
Figure 1: Total Entrepreneurial Activity (TEA) by Country
– Upper
– Average
– Lower
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It is clear from this analysis that entrepreneurship is not uniformly distributed around the world. However, it is also
obvious that certain geographical/cultural clusters demonstrate remarkable similarity in terms of the level and nature of
entrepreneurial activity occurring within their borders. For the sake of comparison, the GEM 2002 countries have been
11
reordered into the following six groupings: (1) Eleven members of the European Union (EU) plus Iceland, Israel, Norway
and Switzerland; (2) five countries from Eastern Europe; (3) four Latin American countries; (4) five former British Empire
Anglo countries (Australia, Canada, New Zealand, South Africa and the United States); (5) four developed Asian
countries; and (6) four developing Asian countries. As Figure 2 illustrates, entrepreneurial activity is uniformly low in the
Developed Asian and Eastern European groups, as well as within most of the members of the EU. By contrast, the
former British Empire Anglo nations have a relatively higher level of activity, and the Latin American countries are higher
still. Yet, it is the Developing Asian countries that have the highest TEA rates. Paradoxically, many of the most and
least entrepreneurial countries are located in Asia where they often share the same cultural background and, in some
cases, contiguous borders. A more complete understanding of the diversity in this part of the world will be a major focus
of future GEM research.
Figure 3 presents each of the six regions’ percentage of the total labor force in comparison to its proportion of all
those who are entrepreneurially active. The massive populations residing in countries like India and China explain why
the Developing Asian countries (with 63 percent of the labor force) are hosting such a large portion (77 percent) of
entrepreneurial activity. Latin American and former British Empire Anglo countries contain about the same percent of
both labor force and entrepreneurially active individuals. In contrast, the EU, Eastern Europe and the Developed Asian
countries possess about 19 percent of the labor force but only 6 percent of those who are involved in entrepreneurship.
Both the levels of participation and the consequences, in terms of the numbers of active individuals, vary considerably
from region to region.
Figure 2: Total Entrepreneurial Activity (TEA) by Global Region
–
verage
25.00
20.00
15.00
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12
Figure 3: Global Distribution of Total Entrepreneurial Activity (TEA) and Labor Force
– GEM 2002 Labor Force
– GEM 2002
Entrepreneurial Activity
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13
Changes i n Entrepreneuri al
Acti vi ty Over Ti me
The global level of entrepreneurship has certainly changed over the past three years. As seen in Table 2, for
example, the number of entrepreneurially active adults among the 20 countries included in GEM 2000 increased from 123
to 133 million between 2000 and 2001, and then to 161 million in 2002. A similar pattern was found among the 28
countries in GEM 2001. It is interesting to note, however, that these increases occurred despite the fact that the average
participation rate per country fell during this period. The explanation is that growth in the human population and
entrepreneurial activity of large developing countries more than offset the decline in entrepreneurship evidenced among
the developed countries, mostly in Western Europe. Indeed, among the G-7 countries, while the population and labor
force grew from 689 to 699 million, and 416 to 440 million, respectively, between 2000 and 2002, the number of
entrepreneurially active individuals declined from 45 to 30 million. While the United States and Canada experienced only
small declines, the other G-7 nations underwent major shifts, especially between 2001 and 2002.
Table 2: Aggregate Changes in Total Entrepreneurial Activity (TEA) Over Time
Data collection year 2000 2001 2002
Number of countries in project 20 28 37
GEM 2002 Countries
TEA index (average across countries) 8.0%
TEA Index (based on total labor force) 12.0%
Lowest TEA level of activity 1.8%
Highest TEA level of activity 18.9%
Total population, all ages (thousands) 3,882,000
Total labor force: 18-64 yrs. (thousands) 2,375,000
Total active in entrepreneurial process (thousands) 286,000
GEM 2001 Countries*
TEA index (average across countries) 9.6% 7.6%
TEA index (based on total labor force) 10.8% 11.8%
Lowest TEA level of activity 4.5% 1.8%
Highest TEA level of activity 20.7% 17.9%
Total population, all ages (thousands) 2,453,000 2,476,000
Total labor force: 18-64 yrs. (thousands) 1,462,000 1,482,000
Total active in entrepreneurial process (thousands) 158,000 175,000
GEM 2000 Countries**
TEA index (average across countries) 9.5% 9.2% 7.7%
TEA index (based on total labor force) 10.8% 10.7% 12.8%
Lowest TEA level of activity 4.2% 4.5% 1.8%
Highest TEA level of activity 21.4% 15.5% 17.9%
Total population, all ages (thousands) 2,044,000 2,089,000 2,112,000
Total labor force: 18-64 yrs. (thousands) 1,132,000 1,239,000 1,258,000
Total active in entrepreneurial process (thousands) 123,000 133,000 161,000
G-7 Countries***
TEA index (average across countries) 8.9% 8.7% 5.8%
TEA index (based on total labor force) 10.8% 8.3% 6.7%
Lowest TEA level of activity 5.6% 5.2% 1.8%
Highest TEA level of activity 16.6% 11.6% 10.5%
Total population, all ages (thousands) 689,000.00 696,000 699,000
Total labor force: 18-64 yrs. (thousands) 416,000.00 438,000 440,000
Total active in entrepreneurial process (thousands) 45,000.00 40,000 30,000
*Portugal not in project for 2002, not included for 2001 comparison, **Ireland data for 2000 was not usable, dropped for 2001, 2002 comparisons, ***Canada, France, Germany, Italy, Japan,
United Kingdom, and United States.
14
Yet, while Table 2 describes where entrepreneurship has flourished and floundered over the past few years, it
doesn’t explain why entrepreneurial activity should increase or decrease in the first place. Traditionally, two major
factors have been proffered as critical to the prevalence of entrepreneurial endeavors within a given nation: (a) current
macroeconomic conditions, and (b) enduring cultural/social norms and national institutions. Yet prior to the GEM
research program, the precise impact of either factor had not been scientifically observed or established. Theoretically,
if the state of the economy were the primary determinant of the level of entrepreneurship, then year-to-year variation in
entrepreneurial activity would be expected. If, on the other hand, cultural/social norms and national institutions were
the overriding causal mechanisms, relatively stable year-to-year levels of entrepreneurship would be anticipated. Most
of the factors previously shown through GEM research to have stable and significant relationships with the level of
entrepreneurial activity have been elements that change rather slowly over time.
4
Therefore, it has been assumed that
deeply embedded cultural and institutional characteristics are the primary drivers of national entrepreneurial activity
above and beyond the more transient economic components of the environment. Yet the generally positive economy
that enveloped the world from 1999 to early 2001 may have masked the true influence of variations in the general
macroeconomic climate.
Evidence for year-to-year stability — entrepreneurial activity reflecting slow-to-change cultural/social norms and
institutions — was found in the GEM 2001 assessment. As seen in Table 3, changes in the TEA index between 2000
and 2001 for 17 of the GEM 2000 countries were not statistically significant. That is, for all intents and purposes, they
remained unchanged from one year to the next. There was a statistically significant drop for only three countries during
this period (Brazil, Norway and the United States). However, the situation changed dramatically between 2001 and
2002. Over this time period, there was a statistically significant drop for 17 of the GEM 2001 countries, no change for
nine, and a significant increase for two — Argentina and India.
5
Significantly, this pattern of change in the TEA index appears to mirror variations in the growth of GDP.
6
Among the
20 countries in the GEM 2000, the average change in GDP growth from 1998-1999 to 1999-2000 was essentially zero
(i.e., 0.82 percent). That is, just as there was no perceptible change in the TEA rate (-0.37), there was no statistically
significant change in the annual growth rate for this period. Yet in the following period, from 1999-2000 to 2000-2001,
there was in fact a systematic decline in both the TEA rate (-2.29) and the annual rate of growth among every GEM
2001 country (-3.28)
7
. This suggests that the worldwide decline in entrepreneurial activity detected by GEM researchers
is associated with the recent drop in national economic growth.
Two phenomena illuminate how changes in national growth rates might affect the level of entrepreneurial activity.
First, about two-thirds of entrepreneurial activity reflects a desire to take advantage of a business opportunity. Second,
three-fourths or more of this opportunity-based entrepreneurship involves replication of existing business activity, thus
resulting in the creation of few (if any) new markets. Since the primary “opportunity” in most entrepreneurial efforts is
an unmet demand for goods and services, such unsatisfied demands are likely to increase with general growth in a
national economy. If, on the other hand, the national growth rate declines, there is likely to be a reduction in the
demand for goods and services and hence, less opportunity for market replication new businesses. Indeed, the
15
connection between the slowing economy and a reduction in entrepreneurial activity was most evident in those
countries — about half of the group — where a large portion of the entrepreneurship centers around opportunity-
motivated entrepreneurship.
However, the relative year-to-year rank order of the countries in GEM remains very stable. Country-by-country
comparisons of the 2000, 2001 and 2002 TEA rates yields statistically significant correlations that range from 0.61 to
0.81.
8
Therefore, it is possible to conclude that this natural experiment — a universal drop in national economic growth
rates — provides evidence that both macroeconomic conditions and enduring national characteristics have an impact on
the level of entrepreneurial activity. A uniform drop in economic growth followed immediately by an almost universal
drop in entrepreneurial activity suggests that macroeconomic conditions have an effect. On the other hand, the relative
stability in the rank order of the countries suggests that stable national characteristics also play a part. As the GEM
research program continues it may be possible to provide more precise evidence about the relative impact of these
disparate sources of influence.
Table 3: Change in Percent Growth in GDP
and Total Entrepreneurial Activity (TEA) from 2000 to 2002
Change from Total Entrepreneurial Change from
% Growth in GDP Previous Year Activity (TEA) Previous Year
Country 1999 2000 2001 1999-2000 2000-2001 2000 2001 2002 2000-2001 2001-2002
India 6.71 5.36 4.08 -1.35 -1.28 8.97 11.55 17.88 2.59 6.32*
Argentina -3.39 -0.79 -4.41 2.60 -3.62 9.22 11.11 14.15 1.89 3.05*
Israel 2.64 7.44 -0.85 4.80 -8.30 7.14 5.67 7.06 -1.47 1.39
Brazil 0.81 4.36 1.51 3.55 -2.85 21.44 12.74 13.53 -8.69* 0.78
Norway 2.10 2.40 1.40 0.30 -1.00 11.86 8.78 8.69 -3.08* -0.08
Korea 10.89 9.33 3.03 -1.57 -6.30 16.34 14.89 14.52 -1.45 -0.37
Singapore 6.93 10.26 -2.04 3.32 -12.30 4.22 6.58 5.91 2.36 -0.67
United States 4.11 3.75 0.25 -0.36 -3.50 16.58 11.61 10.51 -4.97* -1.10
Denmark 2.31 3.02 0.95 0.71 -2.07 7.17 8.01 6.53 0.85 -1.48
Belgium 3.03 4.02 1.01 1.00 -3.01 4.80 4.54 2.99 -0.27 -1.54*
The Netherlands 1.22 -2.14 4.62 -1.82
Canada 5.39 4.53 1.50 -0.86 -3.03 12.22 10.98 8.82 -1.24 -2.16
United Kingdom 2.41 3.08 1.93 0.67 -1.15 6.91 7.80 5.37 0.89 -2.43*
Sweden 4.51 3.61 1.21 -0.90 -2.40 6.67 6.68 4.00 0.01 -2.68*
Germany 2.05 2.86 0.57 0.81 -2.28 7.45 7.99 5.16 0.54 -2.83*
South Africa 2.22 -1.14 6.54 -2.90*
Ireland 5.85 -5.61 9.14 -3.09*
Finland 4.05 5.59 0.74 1.53 -4.85 8.12 7.66 4.56 -0.46 -3.10*
Japan 0.80 2.40 -0.29 1.60 -2.69 6.38 5.19 1.81 -1.19 -3.38*
Spain 4.20 4.18 2.67 -0.01 -1.51 6.85 8.16 4.59 1.31 -3.58*
New Zealand 2.51 -1.33 14.01 -4.06*
France 3.19 4.17 1.80 0.98 -2.36 5.62 7.37 3.20 1.76 -4.17*
Italy 1.59 2.87 1.78 1.27 -1.09 7.33 10.16 5.90 2.83 -4.26*
Russia 5.05 -3.99 2.52 -4.41*
Hungary 3.80 -1.44 6.64 -4.79*
Poland 1.00 -3.00 4.44 -5.53*
Australia 4.76 3.13 2.55 -1.63 -0.58 15.18 15.50 8.68 0.32 -6.83*
Mexico -0.28 -6.91 12.40 -8.33*
Column Averages 3.46 4.28 1.46 0.82 -3.28 9.52 9.15 7.65 -0.37 -2.29
*Statistically significant change, p