Start-up trends around the world

People are more likely to start businesses in middle-income than high-income economies - although survival rates are lower, according to this authoritative study of entrepreneurship compiled by more than 150 academics.

by Global Entrepreneurship Monitor 12 January 2006
Last Updated: 23 Jul 2013

With one in four people involved in start-ups, Venezuela tops the league for early-stage entrepreneurship, followed by Thailand (21%) and New Zealand (18%) among the 35 countries surveyed. In contrast, only 2.2% of Japanese and 3.9% of Belgians are involved in start-ups.

The chance of individual entrepreneurs surviving to become established business owners (defined as being in operation for more than three and a half years) also varies significantly between countries. Low start-up Japan, for example, ranks in the middle group of countries for established businesses.

Success rates are greatest among entrepreneurs driven by opportunity rather than necessity, and this tends to favour high-income economies which have healthy and diversified labour markets or stronger welfare safety nets.

A further contrast is that entrepreneurs in high-income countries are more likely to be involved in business services. Meanwhile, while middle-income economies have a larger share of consumer-oriented activity.

But middle-income country entrepreneurs say they are using technologies unavailable to them a year ago, reflecting that they have more opportunities to upgrade than their counterparts in high-income economies. 

However, across all countries most entrepreneurs do not claim to be offering innovative products or services, and most have limited potential for job creation.

Regardless of economy type, men are also more likely to start and be involved in more established businesses than women.

High-expectation entrepreneurship – defined as early-stage businesses that expect to have at least 20 employees in five years – is rare but at its most prevalent in North America, ahead of Asia as well as Europe. 

On funding, entrepreneurs provide two-thirds of their own start-up finance on average, and for every venture funded with classic venture capital (VC), more than 10,000 are financed by entrepreneurs themselves.

Classic VC investment increased last year for the first time since 2000 (when the internet bubble burst). The US continues to dominate VC investment in hi-tech companies, investing six times as much as all European countries combined. There is similar dominance in biotech, while Europe is more focused on consumer-related companies.

By contrast, for the world's poorest entrepreneurs microcredit is a growing phenomenon, now reaching 40% or nearly 100 million of the poorest families around the globe.  

Source: Global Entrepreneurship Monitor (GEM): The definitive study of entrepreneurship in 2005
Babson College and London Business School

Review by Steve Lodge 

Global Entrepreneurship Monitor 12 January 2006 recommends

Click here to read the full article

Read more

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today