Global Entrepreneurship Monitor 2008

With the credit crunch hitting every business sector, little attention has been paid by politicians and policymakers to entrepreneurship and the role it can play in revitalising economies.

That is why the results from this year’s Global Entrepreneurship Monitor study are important in examining how the wealth creators are performing around the world.

The GEM programme is an annual assessment of the national level of entrepreneurial activity. Started in 1999 with 10 countries, the GEM 2008 study conducted research in 43 countries.

Released last week, the 2008 report – which surveyed 150,000 adults just before the economic slowdown last summer – shows that, even then, there were reduced opportunities to start a business among non-entrepreneurs and, more critically, more were afraid of starting a business in case it might fail.

At that stage, this fear of failure had yet to affect the rate of new start-ups globally, which had stayed at approximately the same level as last year.

Of course, as the authors of the report point out, recessions may not necessarily slow down entrepreneurial activity and, in some case, may increase it as resources tend to be cheaper and, apart from bank loans, more available.

There may also be increasing opportunities for smaller firms as large competitors are weakened and more focused on survival. Indeed, the report suggests that economic successes of the next decade may well be driven by those entrepreneurs who started their businesses at this time.
More generally, there were very few surprises from this year’s GEM study.

Yet again, the USA had nearly twice the start-up rate found in the UK and was higher than all participating European countries. The detailed analysis also showed that most new entrepreneurs expect no or limited job creation from their ventures and that it is a small number of new entrepreneurs that are responsible for a high share of total expected job creation.

However, for the first time, the research examined the impact of enterprise education across the participating countries.

As expected, it found that the relationship between training in starting a business and entrepreneurial attitudes, aspirations, and activity is generally positive, and that training undertaken voluntarily results in more entrepreneurial activity than compulsory training, ie those who have ever engaged in voluntary training are two-and-a-half times as likely to be early-stage entrepreneurs as those who have not.

So what is the impact of these global results for Wales?

Certainly, entrepreneurship continues to be an important economic driver across the world, although the GEM report seems to suggest that there is a perception of reduced opportunities which, in turn, could lead to fewer people wanting to start a business in 2009.

The question for Assembly officials is whether more needs to be done to generate further interest in enterprise as a buffer towards job losses elsewhere in the economy.

However, if policymakers are serious about the development of new businesses to stimulate the economy, then it is clear that the provision of enterprise education can be a major factor in boosting entrepreneurial activity and should be given long-term support by the Assembly Government.

Finally, and perhaps most importantly, politicians need to establish a continuous dialogue with successful entrepreneurs and draw on their knowledge and experience to support economic development policies.

One of the most notable aspects of the recent economic summits was the absence of any entrepreneurs from the discussion. Yes, business organisations were represented but, as far as I am aware, no successful owner manager was given the opportunity to sit around the table and provide some real life wisdom on the real life problems facing many businesses.

At a time when studies such as the GEM report are suggesting a potential slow down in entrepreneurial activity over the next couple of years, it is critical to develop specific policies that entrepreneurs themselves have indicated are important in ensuring the creation of new and viable companies which can emerge from the current crisis and make a real difference to the Welsh economy.

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