For the last twenty three years, the Global Entrepreneurship Monitor (GEM) has been collecting data on entrepreneurial activity in order to inform politicians, policymakers and businesses as to the best way to increase entrepreneurial activity around the world.
As we begin to slowly emerge from the economic downturns of the last two years caused by the Covid 19 pandemic, it is becoming clear that support in entrepreneurship is vital in not only creating employment and increasing prosperity but in meeting the economic, social and environmental challenges that the World will be facing as countries adapt to the new normal.
This year’s annual report from GEM is an important marker in identifying where we are in terms of entrepreneurial activity but also where we should focus our efforts in the future.
Through interviewing 150,000 individuals in 50 economies that make up two thirds of the World’s economic output, the study not only provides information on the numbers starting and managing a new business but also paints a picture of which motivations, intentions and attitudes can lead to greater entrepreneurial activity.
More importantly, there are a number of important findings from this year’s report which are critical in enlightening policymakers on those trends that can positively influence entrepreneurship, and which can also inform them on the actions that need to be taken in the light of a post Covid recovery.
First of all, the report reinforces the finding from previous GEM reports that attitudes within the population can affect levels of entrepreneurship.
In particular, it again highlights a number of key influences that can stimulate to new business creation including observing other people in their own communities starting businesses, being able to spot business opportunities, and having confidence in their own ability to start a business. Reinforcing and strengthening these attitudes will be key in encouraging greater entrepreneurial activity in every nation.
Unfortunately, a fear of failure in starting a business can constrain individuals from taking the step into working for themselves and, according to the report, this is largely due to the business environment into which new startups are born.
Fortunately, policymakers can minimise this by creating a conducive entrepreneurial framework which includes raising awareness of previous failures by highly successful entrepreneurs and reducing the costs of exiting a business.
As with previous studies, it is not surprising to find that in most economies around the World, men are more likely to start new businesses than women, younger people are more likely to do so than older people, and graduates are more likely to start a business than non-graduates.
This again suggests that if levels of entrepreneurial (and therefore economic) activity are to increase, then policymakers must adopt a more inclusive approach to target under-represented groups – such as women or older people - so that the potential of all parts of society is maximised
In terms of the influence of the Covid pandemic on entrepreneurship since 2020, GEM suggests that the pandemic has actually made it more difficult to start a business across the World although the proportion of entrepreneurs making this sentiment has decreased in 2021 in comparison to the previous year which probably is down to the reopening of economies during the last year.
This increased positivity is also reflected in the fact that there are a greater proportion of respondents who feel that the pandemic has led to new business opportunities. Despite this, the report suggests that, with few exceptions, the level of entrepreneurial activity across the World between 2019 and 2021 has generally fallen with only a few exceptions.
As many studies have shown, new businesses create the majority of new jobs in an economy. Given this, the finding that over half of those starting a business in 2021 expected to be only employing themselves is a worrying trend although this may reflect that some of these businesses have been created because the founders had no other alternatives during the economic downturn. Nevertheless, it suggests that there needs to be greater effort in ensuring that more startups are given the support to scale-up to boost employment opportunities.
A more positive trend is that new entrepreneurs are more likely to use digital technologies which probably reflects the movement towards more online working from home during the pandemic. The GEM report also found that the majority of entrepreneurs have considered the environmental implications in the way they do business which is good news for the global drive towards net zero over the next three decades.
Therefore, entrepreneurship remains a major contributor to economic activity across the World despite the various pressures on both individuals and businesses caused by the pandemic.
More relevantly, if we are to fully realise the talents and drive of those entrepreneurs who are becoming more digitally and environmentally aware, then there must be a range of policy measures - such as reducing the fear of failure within societies across the World and developing instruments to encourage more inclusive entrepreneurship – to ensure that the entrepreneurial potential of everyone is maximised to drive forward the recovery of the global economy.