As an entrepreneurship academic for over thirty years, one of the highlights in my schedule every year is the annual publication of the Global Entrepreneurship Monitor (GEM). Based on nearly 140,000 interviews with adults from 46 economies across the World, this is a study of entrepreneurial activity, attitudes and ambitions that has been gathering data since 1999.
However, the 2021 report is particularly relevant as the data has been collected during a Covid-19 pandemic which has decimated national economies and therefore this is be one of the first international measurements of the business lockdowns on levels of entrepreneurship. It is also important in trying to assess whether, as in previous recessions, entrepreneurial activity will again drive economic recovery across the World
So what are the main findings of the 2021 GEM report?
With only six GEM countries reporting that less than one in three adults had experienced a decrease in household income due to the pandemic, the study again demonstrates the importance of entrepreneurship as an income generating alternative when there is a decline in the economy especially in poorer nations.
In fact, entrepreneurial activity is at its highest in Latin America, Africa and the Middle east and lowest in Europe and North America. However, despite the potential of entrepreneurs in productive jobs and employment for many, the majority of entrepreneurs starting their business report that it is has been more difficult to do so than a year ago.
As with the rest of the productive activity in many economies, four out of ten countries in the GEM study saw the proportion of adults starting or running a
new business falling significantly although it is also worth noting that nearly a quarter of economies had seen activity increase between 2019 and 2020.
Given this, it is not surprising that respondents from 43 economies in the GEM Adult Population Survey were more likely to know an entrepreneur who stopped their businesses because of the pandemic than they were to know an entrepreneur who started their businesses due to the pandemic.
This was to be expected but it is good news that many individuals are actively pursuing opportunities related to the resulting massive shifts in business and consumer behaviours as a result of Covid-19.
Before setting up a business, entrepreneurs need to be able to spot the opportunity and see themselves as having the skills, knowledge and experience to start that business. Whilst the pandemic had probably led to a decline in opportunity perceptions for entrepreneurs in most Europe and North America economies, some countries such as India, Oman and Saudi Arabia had four out of five adults perceiving good opportunities to start a business.
In all of the GEM economies, more than a third of those who see good opportunities to start a business also agreed they have the skills, knowledge and experience to do so. However, in eight of these economies (six from Europe and North America plus Taiwan and Israel), more than half of those seeing good opportunities do not agree that they have the capabilities to capitalise on them. This demonstrates again that enterprise education for potential founders is critical, even within high performing economies, in terms of developing a more entrepreneurial economy
Unfortunately, the study shows that whilst the difference it is closing in some countries, there is still a gender gap in entrepreneurial activity which means that some economies are still missing out on the incomes, jobs and value-added that more equal representation could bring.
In terms of age, the propensity to start or run a new business tends to increase with age and then declines. Yet it is interesting to note that for the oldest age-group (55–64), entrepreneurial activity had actually increased compared to 2019 in many more economies than it had decreased, while the opposite is the case for all other age groups. Indeed, older people are still starting new businesses despite their health being affected more than other age groups by the pandemic.
And what of the future? How has the pandemic affected the motivations of entrepreneurs around the World?
Much of the entrepreneurial population from Europe and North America (as well as in Latin America and the Caribbean) have been motivated during the pandemic to create a business to “make a difference in the world” which suggests that there has been a change during the pandemic towards creating more purpose driven companies that add value to society and address some of the world’s biggest challenges.
Yet in other countries in Central and East Asia as well as the Middle East and Africa, the motivated to create a business to “build wealth or higher income” which may reflect the economies in which these new ventures were being established.
Therefore, the GEM study shows, yet again, that entrepreneurship remains an important element of economies around the World. And although there are challenges, such as closing the gender gap, that remain, those who perceive an opportunity and take a risk to create a new business will be vitally important in the recovery of the global economy from the Covid 19 pandemic over the next few years.