Early-stage entrepreneurial activity in the European Union: some issues and challenges

Abstract

In this paper the authors present the levels of Total early-stage Entrepreneurial Activity (TEA) across 16 Member States of the European Union participating in the Global Entrepreneurship Monitor (GEM - 2004 research 2). They also compare the average TEA rate for these 16 EU-countries participating in GEM with the average for some other OECD-countries, further referred to as 'Anglo'-countries: the United States of America, Canada, Australia and New Zealand. Next, they relate the striking differences in TEA across countries to underlying cultural and institutional differences. And also they examine some other current issues associated with entrepreneurial activity in Europe, such as ageing of the population, and technology-based start-ups.

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SCALES-paper N200502 SCALES-paper N200502
Early-stage entrepreneurial activity
in the European Union: some issues
and challenges


Niels Bosma
Stephen Hunt
Sander Wennekers
Jolanda Hessels



Zoetermeer, March, 2005

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EARLY-STAGE ENTREPRENEURIAL ACTIVITY IN THE EUROPEAN
UNION:
SOME ISSUES AND CHALLENGES

by Niels Bosma, Stephen Hunt, Sander Wennekers and Jolanda Hessels

1 Introduction
In this document1 we present the levels of Total early-stage Entrepreneurial Activity
(TEA) across 16 Member States of the European Union participating in the Global
Entrepreneurship Monitor (GEM) 2004 research2. We also compare the average TEA
rate for these 16 EU-countries participating in GEM with the average for some other
OECD-countries, further referred to as “Anglo”-countries: the United States of
America, Canada, Australia and New Zealand. Next, we relate the striking differences
in TEA across countries to underlying cultural and institutional differences. We also
examine some other current issues associated with entrepreneurial activity in Europe,
such as ageing of the population, and technology-based start-ups. Finally, we draw
some conclusions and formulate policy challenges for the EU.

2 Early-Stage Entrepreneurial Activity in the European Union
The Total early-stage Entrepreneurial Activity (TEA) rates for the 16 countries in the
European Union (5.1% on average) are remarkably and significantly lower than those
for the Anglo-countries (12% on average). This geographical distinction between
Europe and these four other economies suggests that there may be various cultural
and institutional factors at play. However, within the European Union, there are also
some notable differences between countries’ entrepreneurial activity rates. The TEA
rates for the sixteen European Union Member States involved in GEM 2004 are
presented in figure 1.3 The vertical bars indicate the statistical precision of the
estimate at the 95% confidence level. Where these bars overlap, as is the case for
Belgium and Slovenia, it is impossible to state with certainty that there is a difference

1 This document is an expanded version of Bosma N., S. Hunt and S. Wennekers (2005), ‘Regional
Commentary: European Union’, in: Hancock, M. and P. Fitzsimons, Global Entrepreneurship Monitor
2004, National & regional summaries.
2 Acs, Zoltan J., Pia Arenius, Michael Hay and Maria Minniti, Global Entrepreneurship Monitor, 2004
Executive Report, Babson College/London Business School. Detailed information on GEM and reports
can be found on www.gemconsortium.org.
3 The figure also includes TEA rates in Croatia, Iceland and Norway.

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in these countries’ TEA rates. Similarly, while the TEA rate for Poland is not
significantly greater than Ireland’s it is greater than those for all other EU countries.

Poland and Ireland then emerge as the EU-countries with the highest TEA rates.
However, the two countries do not share identical patterns of entrepreneurial activity:
in Poland, as many as 35% of entrepreneurs indicated their involvement was
motivated by necessity, while in Ireland this figure was only 13%.4 Furthermore, the
relatively higher rates of entrepreneurship in Ireland and the United Kingdom may
partly reflect the importance of the English language in the contemporary business
world, as Canada, United States, Australia and New Zealand also have relatively high
TEA rates. Ireland and United Kingdom also have relatively low costs associated with
starting a business.5 Southern European countries (Portugal, Spain, Italy and Greece)
have higher levels of self-employment, with a relatively large number of small
businesses involved in retail. However, entrepreneurial dynamics, as reflected in TEA
rates, are relatively low in these countries.


4 Other countries with relatively high shares of necessity entrepreneurship are Hungary (29%), Greece
(29%), Germany (27%), Portugal (25%) and France (23%).
5 Worldbank: Doing Business 2005. Denmark, Sweden and France also have low start-up costs relative
to GNP per capita.

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Figure 1 Total early-stage Entrepreneurial Activity (TEA Prevalence) in Europe
2004, by country
-
2,00
4,00
6,00
8,00
10,00
12,00
14,00
16,00
Slovenia
Belgium
Sweden
Portugal
Hungary
Italy
Finland
Germany
Netherlands
Spain
Denmark
Greece
France
United Kingdom
Ireland
Poland
Croatia
Norway
Iceland
EU-16
Anglo
#/ 100 Adults, 18-64 Years Old [95% Confidence Interval]

Below, we describe some features of entrepreneurship in the European Union and
assess key issues related to entrepreneurship.

3 Some cultural and institutional factors
3.1 The entrepreneurial mindset
Attitudes towards entrepreneurship in the EU tend be less positive than in the Anglo-
countries. Table 1 shows that this holds for national support for entrepreneurship, for
perceived individual opportunities and for entrepreneurial intentions. There also
appears to be a high degree of variation between the EU-countries. The relative gap
between the EU-16 average and that of the Anglo-countries is slightly larger in the
final two columns of table 1, where the assessment is “closer to the individual”. Put
differently, national support for entrepreneurship in the EU is, in comparison with the
Anglo-countries, less frequently reflected in perceived entrepreneurial skills and
opportunities, or in entrepreneurial intentions.