Scope of entrepreneurial activity
GEM 2004 shows that many people around the world are involved in starting a business. Total Entrepreneurship Activity (TEA) reported in 2004 varied from a low of 1.5 percent of the adult population to a high of 40 percent with Uganda, Peru, Ecuador and Brazil emerging as the countries with the highest TEA. Necessity entrepreneurship in these countries is high: in Peru and Uganda, as many as one in seven working adults are active entrepreneurs by necessity. Japan, Belgium, Italy, Sweden and Finland have the lowest levels of overall TEA. The level of entrepreneurship activity reflects differences in countries' national income, increasing or decreasing depending on their per capita income level and living standards.
Characteristics of the active entrepreneur
Most entrepreneurs are opportunity driven (they perceive a real business opportunity). Three in five (65%) are opportunity entrepreneurs versus two in five (35%) who operate out of necessity (they have no other employment options, or options are unsatisfactory). Opportunity entrepreneurs are more dominant in high-income countries while necessity entrepreneurship is more prevalent in low-income countries.
Young people tend to be more involved in entrepreneurial activity in every country regardless of the level of GDP per capita. The younger generation typically spur new business. Most entrepreneurial activity is carried out by 25-34 year olds, regardless of the level of income in their countries. Low-income countries have the highest level of entrepreneurial activity across all age groups, followed by high-income countries and finally middle-income countries.
The gender gap continues. The large gender gap around the world remains, with almost two-thirds of entrepreneurial activity reported by men. In middle-income countries, men are 75 percent more likely to be active entrepreneurs than women while in Ecuador, Hungary, Peru and South Africa (low-income) and Finland, Japan and the United States (high-income), male and female participation rates are statistically identical. In no country are there more female entrepreneurs than male.
The relationship between entrepreneurial activity and education tends to be positive in high-income countries and negative in low-income countries. In low-income countries, those with lower levels of education start businesses. In high-income countries those with higher levels of education start businesses. This suggests that the more educated entrepreneurs are pursuing more opportunity-based ventures, while less educated entrepreneurs are involved out of necessity, and that most people who have a secondary level education are more inclined to work for wages than become entrepreneurs.
Most entrepreneurs are already employed. The overwhelming majority of people starting businesses in all national income groups were employed while developing their business. In middle-income countries 91 percent have jobs. In high-income countries the figure is 81 percent and in low-income countries it is 77 percent.
Characteristics of new businesses
'Consumer' businesses outnumber businesses in the services sector. At all levels of per capita GDP, the largest numbers of start-ups are in the consumer services sector. As national incomes increase, so does proportion of start-ups in the services sector. Almost no entrepreneurial activity exists in the healthcare sector.
Opportunity start-ups are exporting more products. A link exists between exports and necessity/opportunity entrepreneurship. As the level of necessity entrepreneurship (more common in low-income countries) falls, so does the proportion of start-ups that do not expect to export products.
Over 50 percent of start-ups do not expect to export any products. Exporting companies are more prevalent in high-income countries. Low-income countries record the highest level of non-exporting start-ups and this reduces as nations become wealthier.
High-potential start-ups are on the decline. Only 3 percent of all start-ups qualify as businesses with high potential, that is businesses that expect to have few competitors, intend to bring innovations to the market and use state-of-the-art technology.
Two thirds of start-ups expect to create either no jobs or, at most, up to two jobs within five years. The expectations of entrepreneurs in the low and high-income countries are similar with roughly 30 percent of respondents expecting to employ between three and 10 people and 9 percent expecting to employ more than 10. By contrast, the expectations of entrepreneurs in the middle-income nations are about 30 percent lower.
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