A number of studies have shown that encouraging greater entrepreneurship has been key to the recovery of the global economy after the Covid pandemic. As a result, understanding how this act of creating and growing a new business makes a difference to nations across the World is now even more essential.
That is why the results of the latest Global Entrepreneurship Monitor (GEM) are so important for policymakers as they provide an insight into how to support those individuals who start a new business and, in doing so, generate employment and prosperity in their local communities.
Launched twenty-four years ago, GEM carries out annual survey-based research studies on entrepreneurship and enterprise ecosystems from around the world. In 2022, over 170,000 individuals were interviewed across 49 different economies which represent about two-thirds of the global population.
So what are some of the more interesting findings from this year’s study? The good news is that entrepreneurship continues to become an acceptable and recognised form of work activity in countries across the World with more than half of the population in 60% of the participating countries stating that they know someone who has started a business in the last two years.
This finding is important in that the perception of entrepreneurship as a future viable career choice may well be influenced by whether the individual has gained knowledge of what it takes to be an entrepreneur through personal friendships or professional links with individuals who have successfully launched a start-up.
Another abiding theme in terms of generating greater entrepreneurial activity has been minimising a fear of failure by those who are considering starting a business as this is a serious constraint on business start-ups in many economies from all income groups.
On a positive note, a high proportion of adults agree that starting a business is relatively easy, see good opportunities to start a new venture locally, and consider themselves to have the skills and experience to create a new business. However, around half of those seeing such opportunities are then deterred from acting to become entrepreneurially active by fear of failure.
If the start-up rate is to be improved, then it is imperative that policymakers develop new ways of reducing the risks to potential entrepreneurs and perceived costs of new business failure.
This can be done by making changes to insolvency regulations, ensuring that entrepreneurs are financially literate, and promoting entrepreneurial successes and role models, especially amongst groups such as women who should be making a far higher contribution to entrepreneurial activity.
The issue of a continuing gender difference in those starting a business remains a major obstacle in ensuring that the full potential of entrepreneurship is realised. Yet again, the GEM study showed that men are still more likely than women to start a new business with only four of the countries participating in the study demonstrating a higher level of female entrepreneurial activity than that for men.
However, that gender gap has decreased in over half of those economies that took part in the GEM study in 2019 and 2022, indicating that the pandemic may have stimulated greater entrepreneurial activity by women across the World.
In terms of age, younger people are still more likely than older people to be starting new businesses with entrepreneurial activity of those aged between 18-34 years being higher than those in the 35-64 age group in three quarters of the countries surveyed. This suggests that countries with an ageing population, such as those found in North America and Europe, will be disadvantaged in the future if measures are not taken to increase the rate of new businesses in all age groups.
Another important trend that has been identified in the study is that an increasing number of new entrepreneurs are taking social and environmental implications into account when making strategic decisions about the future of their business. This reflects other more recent findings that those starting new businesses are not only doing so for profit but also to change the world around them and to make it a better place for others to live and work in.
Therefore, as the 2022 GEM report notes, entrepreneurship matters because it brings jobs and incomes, turns ideas into new goods and services, hastens structural change and improves lives.
More importantly, such entrepreneurs are at the forefront of changing the world in so many ways through their innovation and their disruption of markets and, most critical of all, have social and environmental priorities at the heart of their business models.
Certainly, much remains to be done to change perceptions around failure, close the gender gap in entrepreneurship and ensure all age groups are supported to set up a new business and it can only be hoped that if the global economy is to be revitalised, then politicians ensure that entrepreneurs are front and centre in any plans for recovery over the next few years.
