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Entrepreneurs among the happiest people in the world, GEM report

Entrepreneurs among the happiest people in the world, GEM report

Saturday February 22, 2014 , 9 min Read

Global Entrepreneurship Monitor (GEM) report finds entrepreneurship a satisfying career choice worldwide -- especially for women within innovation-driven economies. Entrepreneurs are among the happiest individuals across the globe when it comes to individual well-being and satisfaction with their work conditions, according to the Global Entrepreneurship Monitor 2013 Global Report.

Happy people

The GEM report’s special topic, ‘Entrepreneurship and Well-Being’, also found that women entrepreneurs from innovation-driven economies showed, on an average, higher degrees of personal well-being than their male counterparts.

Entrepreneurs worldwide – at both the established and early-stage phases – exhibited higher ratings on subjective well-being compared to populations not involved in entrepreneurship activities, suggesting that entrepreneurship could be a good career choice for most.

“Our idea,” said José Ernesto Amorós, report co-author, “is to contribute to a better understanding about what influences a population’s perceptions about well-being and how that consequently shapes entrepreneurship indicators. One interesting finding is that in all regions, entrepreneurs exhibit relatively higher rates of subjective well-being in comparison to individuals who are not involved in the process of starting a business or owning/managing a business. Another relevant result is that female entrepreneurs in innovation-driven economies exhibit on average a higher degree of subjective well-being than males. This initial assessment opens up possibilities for exploring the role of women and men entrepreneurs beyond the traditional notion of development generally associated with economic indicators,” Amorós said.

About the report

The report, unveiled at the GEM Annual Meeting in Santiago, Chile, is the 15th annual survey of entrepreneurship worldwide and is the largest single study of its kind. It is co-authored by José Ernesto Amorós, Universidad del Desarrollo in Chile and Global Entrepreneurship Research Association (GERA); and Niels Bosma, Utrecht University in the Netherlands.

In 2013, more than 197,000 individuals were surveyed and approximately 3,800 national experts on entrepreneurship participated in the GEM study across 70 economies, collectively representing all global regions of the world and a broad range of economic development levels (GEM groups the economies into three development levels based primarily on GDP/capita: factor-driven, efficiency-driven and innovation-driven). The samples in the GEM 2013 Global report represent an estimated 75 percent of the world’s population and 90 percent of the world’s total GDP. In addition to its annual measures of entrepreneurship dynamics, GEM analyzed well-being as a special topic in 2013.

India took part in the GEM Survey 2013, after a gap of 12 years. GEM data is gathered and derived from two main sources -- Adult Population Survey (APS), and National Experts Survey (NES). The APS is administered with the sample size of 3,000 adults aged 18 to 64 years old from five regions across the country.

The survey was conducted by GEM India National Team, which comprises Entrepreneurship Development Institute of India (EDI), Ahmedabad, Wadhwani Centre for Entrepreneurship Development (WCED) at Indian School of Business (ISB), and Institute of Management Technology (IMT), Ghaziabad. The lead institution in the survey was EDI Ahmedabad.

Key findings in entrepreneurial activity

• In general, less developed regions of the world exhibit higher levels of entrepreneurship activity. TEA rates (Total Early-stage Entrepreneurial Activity) are typically highest for factor-driven economies and decline with increasing levels of GDP (Gross Domestic Product). This is mainly because higher levels of GDP yield more and better job opportunities.

• Early-stage entrepreneurs in factor-driven economies have the highest proportion of necessity-driven motives (no other options for work) while innovation-driven economies with the lowest TEA rates have highest proportion of opportunity-driven motives.

• Some of the opportunity-driven entrepreneurs recognize and pursue opportunities that will improve their incomes as well as their degree of independence. In Canada, Finland, the Netherlands, Singapore and Switzerland, roughly two out of three early-stage entrepreneurs showed the highest proportion of improvement-driven opportunity motives.

• Among factor-driven economies, Sub-Saharan African economies have the highest TEA rates especially Zambia and Nigeria with 39 percent among 18-64 year olds. Efficiency-driven Latin American and Caribbean economies scored highest while MENA and EU economies reported lower TEA levels. Trinidad, Tobago and the United States showed the highest TEA rates among innovation economies. In 2013, Italy and Japan reported the lowest TEA rates at 3.4 percent and 3.7 percent respectively.

• The rate of established business ownership (owner-managers in businesses that exist three-and-a-half years or more) varies greatly across economies. GEM found that in many factor and efficiency-driven economies, the limited sustainability of many startup attempts is a serious concern.

• The rate of business discontinuance is highest in factor-driven economies ─ mainly Sub-Saharan African economies ─ where unprofitability, financing difficulties, and personal reasons were the most common reasons for discontinuance. Among all economies, financial issues were the number one reported reason for business discontinuation. Some innovation economies reported ‘positive’ reasons for discontinuation such as being able to sell the business, find a better job, or improve their personal situation.

• Looking at demographics within every phase of economic development, GEM found more early-stage entrepreneurs in the 25-34 age group than any other age range.

• Gender parity also varies markedly. In MENA economies, more than two-thirds of early-stage entrepreneurs are men, while in sub-Saharan African economies, there are nearly the same number of men and women starting and owning/managing new businesses.

• Entrepreneurs in factor-driven economies (dominated by subsistence agriculture and extraction businesses, unskilled labour and natural resources) are more positive in their attitudes about perceived opportunities to start businesses than those in efficiency-driven (countries producing more advanced products and services) and innovation-driven economies (knowledge-intensive businesses with expanded service-sectors).

• Sub-Saharan African economies are highly optimistic with 69 percent of respondents seeing good opportunities to start a business. Respondents (74 percent) also believe they have the skills and knowledge to carry it out. Only 24 percent experience any fear of failure.

• European Union economies show lower perceptions on all of these measures. The EU hosts primarily innovation-driven businesses and GEM speculates that attitudes about starting new businesses tend to decline within nations as economic development levels rise.

• Still, differences in the prevalence and nature of entrepreneurship vary among similar levels of economic development. Latin American and Caribbean efficiency-driven economies report high rates of perceived opportunities and capabilities while economies in Eastern Europe and Asia Pacific (also efficiency-driven) scored lower on these measures.

• Among the innovation-driven economies of Finland, and in southern Europe’s Spain and Greece, levels of capability perception are low even when opportunity outlook is consistently high.

• Attitudes about being an entrepreneur vary depending on two key factors ─ whether society places a high status on being an entrepreneur, and how often and to what degree the media cover successful entrepreneurs. Entrepreneurial attractiveness is high in the Sub-Saharan, Latin American and Caribbean, and MENA economies (Middle East and North Africa) but much lower percentages are found in EU economies, particularly when it comes to media attention.

Key findings about entrepreneurial aspirations

• Growth expectations and aspirations of early-stage entrepreneurs are key factors in determining entrepreneurial impact and policy objectives that will help create more jobs. GEM found that a simple count of startups does not necessarily equal high economic performance. In economies with high TEA rates, the number of early-stage entrepreneurs indicating they expect to employ five employees within the next five years is rather low. Yet, MENA and EU economies pair low TEA rates with relatively higher percentages of early-stage entrepreneurs with high-growth expectations.

• Innovative orientation varies among regions and increases with the level of economic development. Japan, Korea and China have high degrees of innovative products and services closely followed by entrepreneurs in North America and the EU. Sub-Saharan economies, European economies outside the EU report lower proportions. In emerging nations, Colombia, Chile, Taiwan and South Africa offer products or services that are new to their customers and see few local competitors.

• Factor-driven economies revealed the lowest level of international customers, on average. EU economies generally showed a high level while economies with big territories and big internal markets ─ Brazil, Russia, China, India ─ continue to exhibit lower international orientation. Innovation-driven countries such as Singapore, Luxemburg and Israel with relatively small local markets have a high international orientation.

Special topic – Entrepreneurship and Well-Being

The GEM 2013 Global Report includes a special topic that explores and measures the level of individual well-being (happiness or satisfaction) among entrepreneurial economies in order to develop better policies of support in the future. The report also researched self-assessments of work conditions and work-life balance, and how an economy’s entrepreneurship framework contributes to the work-life balance of entrepreneurs.

• Subjective well-being indicators vary widely across world regions. Sub-Saharan African economies exhibit the lowest rates, while Latin and North Americans have the highest rates.

• ‘Traditional’ welfare states like Nordic economies and well-developed economies like the Netherlands, Switzerland and Singapore also showed high rates of subjective well-being.

• In all regions, the average of both TEA and established entrepreneurs find relatively higher rates of subjective well-being contrasted with all populations and individuals not involved in entrepreneurship activities.

• The report found that women entrepreneurs from innovation-driven economies exhibit on average a higher degree of subjective well-being than their male counterparts in the early-stages.

Entrepreneurship Frameworks

GEM interviewed country experts about the kinds of Entrepreneurship Framework Conditions (EFCs), including financial and government support, specific regulations, market openness, R&D transfer, entrepreneurship education and cultural norms and values related to entrepreneurship.

• Overall, experts in innovation-driven economies (EU and North America) gave higher rating to EFCs. In contrast, ratings were lower in Sub-Saharan African economies particularly related to R&D transfer.

• Emerging economies like Argentina and Brazil in Latin America, Malawi and Uganda in Africa, Indonesia and Philippines in Asia Pacific and Bosnia, Herzegovina and Romania in Europe have little support from government. Experts in Italy, Croatia and Lithuania were critical of government regulations there. Overall, education and training in primary and secondary schools and regulations impacting new and growing firms were among the most negatively evaluated factors.

Policy Implications

GEM researchers offer several guidelines for policy makers, entrepreneurs and academics to help them build entrepreneurial eco-systems that enable entrepreneurship to flourish in every world economy.

• Focus entrepreneurial education and training on the needs of early-stage entrepreneurs with work-life balance issues.

• Develop policies to promote societal attitude changes about women; and train, support and encourage women entrepreneurs.

• Identify the various types and phases of entrepreneurship in order to fully compare the entrepreneurial landscapes among economies all over the world.

• Create ways to stimulate entrepreneurship from a behavioural approach with the understanding that entrepreneurship manifests itself differently within particular economies, and is about cultivating entrepreneurial thinking in addition to increasing the number of startups or self-employment.