What Entrepreneurship Looks Like Around The World
If your name is Evan Williams, Jack Dorsey or Biz Stone, the current state of global entrepreneurship is outstanding. But even for entrepreneurs who aren’t co-founders of Twitter basking in the glow of the flashiest IPO since Facebook, the picture is still pretty positive.
Entrepreneurial activity is generally on an upward trend in many countries, according to the Global Entrepreneurship Monitor (GEM), which has compared how well different nations nurture entrepreneurs since 1999. “Globally, entrepreneurs are contributing to the development and well-being of their societies at many levels,” says Donna Kelley, an entrepreneurship professor at Babson College and co-author of the 2013 GEM report, which covers 75 percent of the world’s population and nearly 90 percent of global GDP.
Just as every startup doesn’t turn into Twitter, every country doesn’t host equally active entrepreneurial environments. But surprisingly, according to GEM, the hottest local centers of entrepreneurial activity are far from places like Silicon Valley. Instead, they’re found primarily in emerging economies.
Most Entrepreneurial Nations
The world’s top average entrepreneurship rate is found in Zambia. Forty-one percent of the African nation’s adult citizens are in the process of starting or are already running new businesses, according to GEM’s “Total Entrepreneurship Activity” metric. Other Sub-Saharan nations—including Angola, Botswana, Ethiopia, Ghana, Malawi, Nigeria and Uganda—are similarly entrepreneurial, making the region GEM’s global leader in entrepreneurial activity.
A lot of this has to do with the fact that in developing countries at large, established employers are few and far between. “Where there isn't a sufficient supply of jobs, necessity-based entrepreneurs are creating their own businesses, which in turn provides a source of income for their families and collectively helps lift their societies out of poverty,” Kelley says. Thus these entrepreneurs are primarily creating jobs for themselves, not fast-growing Twitters that may grow to employ thousands.
The next-most entrepreneurial region by GEM’s reckoning is Latin America and the Caribbean, led by Ecuador with a total entrepreneurship activity figure of 27 percent. This group, which includes Mexico and Brazil, is distinguished by greater economic development than Africa's entrepreneurial leaders. They are also much more likely to have been inspired by the opportunity to grow a significant enterprise, rather than to primarily provide jobs for the founders.
The opportunity angle is the one where the United States does stand out as an entrepreneurial leader. The GEM report divides the globe into seven regions, such as the European Union and Asia-South Pacific, with the U.S as a separate region. And when it comes to opportunity-driven entrepreneurs as a percentage of total entrepreneurship activity, the U.S. leads all the other regions.
Another measure, the Global Entrepreneurship and Development Index produced by George Mason University, focuses on the quality aspect of a country’s entrepreneurship activities, rather than just the quantity. In the 2014 GEDI, which looked at 121 countries, the top spot is occupied by the United States, followed by Canada and Australia, with Sweden and Denmark rounding out the top five. According to the GEDI, Zambia ranks 91st with a score about one-third as high as the U.S.
Good News, Bad News
Despite the glaring contradictions in how they rank individual countries, both of these global entrepreneurship measures report generally positive overall trends among the world’s entrepreneurs. For instance, GEM found that the number of Americans who believed good entrepreneurship opportunities were available jumped 20 percent from 2011 to 2012 to reach the highest point since it first asked in 1999.
Still, not all the news is good. The GEDI researchers created a Global Entrepreneurship Barometer (GEBAR), which estimates that today’s world operates at just 25 percent of its entrepreneurial capacity. While that's an improvement over a generally gloomy outlook the last year few years, the researchers said, it is barely half of what it could be in a few decades given careful nurturing.
And among women, global entrepreneurship has even further to go, according to GEM, with men generally much more likely to be entrepreneurs. Regionally, the imbalance was particularly lopsided in the Middle East and North Africa, where men were nearly three times as likely to be entrepreneurs as women. Among countries, Pakistan was least gender-balanced, with women making up just one in 20 entrepreneurs. There were some exceptions, however. In Ecuador, Panama, Ghana, Nigeria and Thailand, women are actually more likely to start businesses.
Some entrepreneurs are still trying to regain their economic and psychological health after the pounding of the last global recession. This is often tied to specific national economic events. For instance, GEM found that three Nordic European Union countries—Denmark, Finland and Norway—have been consistently more active over the last five years than three EU countries—Greece, Hungary and Spain—from the southern portion. They suggest this is partially due to the financial crises in Southern Europe, and the accompanying austerity measures and uncertainties.
The Next Young Billionaires
One thing is crystal clear: Whether male or female, African or Latin American, the people most likely to be entrepreneurs are young. GEM found the highest entrepreneurship rates among 25- to 34-year-olds. If you add the 35- to 44-year-olds, that accounts for nearly half of all entrepreneurs. The U.S. as well as a few other countries skewed somewhat higher, with 35- to 44-year-olds reporting the highest level of entrepreneurship
Billion-dollar IPOs aside, the portrait of the world’s entrepreneurs that emerges is one of a highly diverse group of business owners, driven by needs ranging from survival to self-fulfillment. And whether in the developing nations where people start businesses to provide themselves with jobs or the advanced economies featuring opportunities to create high-growth enterprises, the overall entrepreneurial ecosystem appears to be healthy and growing.
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