Global Entrepreneurship Monitor (GEM) Report
29/01/2009
The worldwide study explores the status of business start-up levels in 43 countries and is led in Spain by IE Business School under the supervision of Ignacio de la Vega, Director of IE?s Entrepreneurial Management Center and President of the Worldwide GEM Council. The Report is sponsored by the Department of SME Policy of the Spanish Ministry of Industry and the Banesto Society and Technology Foundation. The presentation of the new edition of the GEM Report took place today at IE Business School, attended by key players in the field, including Spain?s Secretary General for Industry, Teresa Santero, General Director of Banesto, Gonzalo Alonso Tejuca, and the President of IE Business School, Diego del Alcázar.
ENTREPRENEURIAL ACTIVITY. The Report analyzed the period comprising July 2007 to July 2008, noting a drop of 8% in the rate of total entrepreneurial activity (TEA) in comparison with the previous year. The rate was measured before the recession had started to bite, which means that impact of the crisis would have been fairly moderate, with a lesser effect than the September 11th terrorist attacks, when TEA fell by 24% in Spain. In terms of figures 1.8 million companies were fledgling firms, and had been operating in Spain for between 0 and 24 months in Spain in July 2008.
INNOVATION. In terms of innovation, in 2008 investment levels stalled in the case of completely innovative products and services ? remaining at 20%, the same rate as 2007. The authors of the Report highlighted the fact that innovation is key for recovery in sectors like real estate, automobile, and construction. Moreover entrepreneurs are investing less in latest generation technologies, where investment fell from 10.6% in 2007 to 9.5% in 2008.
EXPORTS. The percentage of export start-ups remained at 43%, the same figure as 2007. The percentage of consolidated companies in this sector rose by 4%, which the authors saw as logical `given that diversification of markets is a typical measure in periods of recession in a domestic market, being more typical of companies with more experience than recent start-ups`.
PULLOUT RATES. Rates of abandonment of start-up or fledgling companies increased from 1% in 2007 to 1.3% in 2008, of which 0.97% were closures and 0.33% were sold to another firm. The authors of the Report estimate that between July 2007 and July 2008 more than 250,000 firms closed, and that this figure rose during the last semester of 2008 due to the worsening macroeconomic scenario.
PROFILE OF AN ENTREPRENEUR. The typical profile of an entrepreneur has seen a rise in average age due unemployed men and women joining the ranks of entrepreneurs. The proportion of women has also grown and the woman/man ratio went up from 0.56% to 0.74% in 2008. The level of education among entrepreneurs is largely that of higher education studies, but the proportion of entrepreneurs with mid-level studies has grown. The percentage of non-Spanish entrepreneurs setting up businesses in Spain has grown from 11% to 13%, with regard to companies that had been operating for between 3 and 42 months. Argentinians headed the list of worldwide entrepreneurs setting up in Spain, and the French headed the list of entrepreneurs from the EU.
OPPORTUNITY vs. NECESSITY. 80% of entrepreneurs who launched their company in 2008 did so to leverage an opportunity, vis-a-vis the 14.8% who did it out of necessity or lack of professional opportunity and 5.2% who gave other reasons. The GEM Report authors predict a growth in rates of entrepreneurialism over the next few years given the current loss of jobs and scant job opportunities.
SIZE. In 2008, the percentage of startups employing between 1 and 5 people was, for the first time, greater than that of people who only created an employment for themselves. 40.7% were self-employed and 41.7% contracted between 1 and 5 employees. 15% employed between 6 and 19 employees and 2.6% had 20 or more workers.
FUNDING. Seed capital rose once again, showing that start-ups are increasingly ambitious. The average capital stood at ?86,351 in 2008 compared to ?79,000 in 2007. 50% of start-ups began with more than ?50,000 investment, most usually ?60,000, which is a marked increase on the ?30,000 of recent years. The proportion of entrepreneurs who contributed 100% of seed capital fell by 3.7%, which could signal a reduction in the growth potential of startups due to scant funding alternatives. The percentage of business angels investing in other people?s start-ups fell, down from 3.22% in 2007 to 2.8% in 2008, translating into a significant drop of 13% in investment, which is set to worsen in coming months.
FEAR OF FAILURE. The greatest obstacle to entrepreneurial activity is currently a rise in the fear of failure among certain segments of the population as a direct result of the climate of economic uncertainty. The entrepreneurial skills required to launch a business are less valued, and there is a lower degree of competitiveness. The view of entrepreneurship as a good career move, on the other hand, is now more widespread.
POSITIVE AND NEGATIVE ASPECTS. The 2008 GEM report is based on the opinions of over 600 experts in finance, politics and government schemes, education and other sectors. The results point to a belief that there is a need for access to physical infrastructures for companies, an adequate range of management education programs, government schemes, support for entrepreneurial women, and an appreciation of the value of innovation and resources to support high growth levels. The results also reveal, however, that a lack of solid primary and secondary school entrepreneurial education programs is hindering entrepreneurial activity, coupled with a drop in dynamics in the domestic market, red tape, taxes and access to funding in general.
IMPORTANCE OF EDUCATION. The GEM Report includes some excellent graphs that illustrate levels of education aimed specifically at entrepreneurialism. In Spain, a 12.5% of the active population has received some type of training in the field of entrepreneurship in the course of their school studies, while 14.6% did so after school. The greater part of this was on a voluntary basis and was carried out mainly through online programs, courses in business schools, and sessions provided by public organisms, chambers of commerce, and entrepreneurs? associations. The experts opined that generally speaking Spain?s entrepreneurs have an acute need of external help and assessment when it comes to designing their business plans, viability and launching their start-up.
SAMPLE. The size of the sample used for the 2008 GEM Report was 30,879 interviews with a sample population with a sampling error of +/- 0,28%, resulting in a confidence level of 95%. The GEM Team, with Alicia Coduras as technical director, interviewed 648 experts.
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