Global Entrepreneurship Monitor: 1999 Executive Report

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1999 Executive Report
GLOBAL ENTREPRENEURSHIP MONITOR
Paul D. Reynolds • Michael Hay • S. Michael Camp

TABLE OF CONTENTS
Page
List of Figures and Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Project Directors, Research Teams and Sponsors . . . . . . . . . . . . . . . . . . . . . . . . . 2
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
I. Entrepreneurship and Public Policy: An Overview . . . . . . . . . . . . . . . . . . . 5
II. Why Entrepreneurship? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
III. Understanding Entrepreneurship: The Global
Entrepreneurship Monitor Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
IV. Levels of Entrepreneurial Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
V. Entrepreneurship and Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . 16
VI. What Makes a Country Entrepreneurial? . . . . . . . . . . . . . . . . . . . . . . . . . 19
Entrepreneurial Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Entrepreneurial Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Infrastructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Demography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
VII. National Comparisons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
VIII. Entrepreneurship and Public Policy: Ten Propositions . . . . . . . . . . . . . . . 39
IX. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
End Notes

PAUL D. REYNOLDS Babson College
MICHAEL HAY London Business School
S. MICHAEL CAMP Kauffman Center for
Entrepreneurial Leadership
GLOBAL ENTREPRENEURSHIP MONITOR
1999 Executive Report
Copyright © 1999, Paul D. Reynolds, Michael Hay and
Kauffman Center for Entrepreneurial Leadership at the
Ewing Marion Kauffman Foundation. All rights reserved.

LIST OF FIGURES AND TABLES
1
Figures:
Figure 1: Conventional Model of National Economic Growth
Figure 2: Model of Entrepreneurial Processes Affecting National Economic Growth
Figure 3: Consolidated Model of Processes Affecting National Economic Growth
Figure 4: Global Entrepreneurship Monitor:
A Detailed Model of Entrepreneurial Processes and Economic Growth
Figure 5: National Prevalence of Start-Ups: All, Independent,
Firm-Sponsored and Growth
Figure 6: National Prevalence of Personal Investors
Figure 7: Level of Entrepreneurial Activity and Growth in GDP
Figure 8: Level of Entrepreneurial Activity and Employment
Figure 9: Level of Entrepreneurial Activity and Perception of Opportunity
Figure 10: Level of Entrepreneurial Activity and Entrepreneurial Capacity
Figure 11: Level of Entrepreneurial Activity and Infrastructure Suitability
Figure 12: Level of Entrepreneurial Activity and Demographic Factors
Figure 13: Level of Entrepreneurial Activity and Educational Emphasis
Figure 14: Level of Entrepreneurial Activity and Cultural Factors
Tables:
Table 1: Level of Entrepreneurial Activity: Three Groups
Table 2: Level of Entrepreneurial Activity and Economic Well Being
Table 3: Level of Entrepreneurial Activity and Age and Gender
Table 4: Level of Entrepreneurial Activity and Gender and Country
Table 5: Level of Entrepreneurial Activity and Percentage of Mid-Career Adults
Table 6: Level of Entrepreneurial Activity and National Educational Emphasis
Table 7: Level of Entrepreneurial Activity and Educational Attainment

PROJECT DIRECTORS, RESEARCH TEAMS AND SPONSORS
2
Unit Location Members Financial Sponsorship
GEM Project Directors Babson College Bill Bygrave Kauffman Center for
Entrepreneurial Leadership
Kauffman Center for
Entrepreneurial Leadership Michael Camp
London Business School Michael Hay
GEM Project Coordinator Babson College and
London Business School Paul Reynolds
GEM COORDINATION Babson College Bill Bygrave
TEAM Paul Reynolds
London Business School Erkko Autio EU TMR (DG12)
Michael Hay Foundation for
Jonathan Levie Entrepreneurial Management
Paul Reynolds
NATIONAL TEAMS
Canada York University Rein Peterson Office of the Dean
Alessandro Cefis Schulich School of Business
Alfred Chung York University
Charles Conrad
Walter Liu
Dale Tingley
Robert Wanless
Denmark Southern Denmark Jan Warhuus Danish Agency for Develop-
Business School Poul Rind Christensen ment of Industry and Trade
Finland Helsinki University Erkko Autio Finnish Ministry of Trade &
of Technology Pia Arenius Industry; Culminatum Oy
France Ecole du Gilles Copin
Management Lyon Alain Fayolle
Isabel Servais
Germany Universitat zu Koeln Rolf Sternberg Apax Partners & Co
Claus Otten Beteiligungsberatung GmbH
Christine Tamasy
Japan Keio University Tsueno Yahagi
Takehiko Isobe
Israel Tel Aviv University Miri Lerner Small Business Authority
Yosh Avahami of Israel, R.A.
Italy Babson College Miria Minniti
United Kingdom London Business School Michael Hay Apax Partners & Co. Ltd
Jonathan Levie
United States Babson College Andrew Zacharakis Kauffman Center for
Bill Bygrave Entrepreneurial Leadership
Carl Hedberg
Project leader in italics. Paul Reynolds

3
The Global Entrepreneurship Monitor (GEM) was created in September 1997 as a joint
research initiative by Babson College and London Business School. The central focus was to
bring together the world’s best scholars in entrepreneurship to study the complex relationship
between entrepreneurship and economic growth. From the outset, the project was designed to
be a long-term multinational enterprise. In order to obtain reliable, comparable data, GEM
focused on the G7 countries (i.e., Canada, France, Germany, Italy, Japan, United Kingdom and
United States). Three additional countries, Denmark, Finland and Israel, were added the first
year because selected scholars in these countries had particular expertise relevant to the project.
The GEM research design included data from national secondary sources, adult
population surveys and in-depth interviews with key informants in each participating country.
In this first year more than 10,000 adults worldwide were surveyed and more than 300 interviews
conducted with experts in entrepreneurship.
For the purpose of understanding the role of entrepreneurship in economic growth,
entrepreneurship was defined as:
“Any attempt at new business or new venture creation, such as self-employment,
a new business organization, or the expansion of an existing business, by an
individual, a team of individuals, or an established business.”
Three fundamental questions were implicit in the overall aim of this project:
•Does the level of entrepreneurial activity vary between countries, and, if so, to what extent?
•Does the level of entrepreneurial activity affect a country’s rate of economic growth
and prosperity?
•What makes a country entrepreneurial?
Based on first year results, the evidence is compelling . . .
• Efforts to initiate new firms in the winter of 1999 varies between countries from a low of one
per 67 adults in Finland (1.4 percent) to a high of one in 12 in the United States (8.4 percent).
• The level of entrepreneurial activity is positively correlated with recent gains in GDP for the
10 countries in the study. Variation in rates of entrepreneurship may account for as much as
one-third of the variation in economic growth.
• The 10 countries in the 1999 study can be placed in three different groups on the basis of
their level of entrepreneurial activity: High (Canada, Israel, U.S.; average level of entrepre-
neurial activity is 6.9 percent); Medium (Italy, United Kingdom; average level of entrepre-
neurial activity is 3.4 percent); and Low (Denmark, Finland, France, Germany and Japan;
average level of entrepreneurial activity is 1.8 percent).
• In the most active countries (i.e., U.S., Canada and Israel) entrepreneurial activity is an inte-
gral and accepted feature of economic and personal life. In the remaining GEM
countries, however, entrepreneurship through enterprise creation remains a structural and
cultural anomaly. In such countries it may take decades of sustained changes in many
national, cultural, political and economic institutions if they are to join the “elite” of
entrepreneurial economies.
EXECUTIVE SUMMARY

4
GEM provides a robust framework within which national governments can evolve a
set of effective policies for enhancing entrepreneurship. Ten propositions resulting from
this year’s study are highlighted below.
• Proposition 1: Promoting entrepreneurship and enhancing the entrepreneurial
dynamic of a country should be an integral element of any government’s commitment
to improving economic well being.
• Proposition 2: Government policies and programs targeted specifically at the
entrepreneurial sector will have a more significant, direct impact than programs
simply aimed at improving the national business context.
• Proposition 3: To be effective, government programs designed to encourage and
support entrepreneurial activity must be carefully coordinated and harmonized so as
to avoid confusion and to enhance their utilization by those for whom such programs
are designed.
• Proposition 4: Increasing entrepreneurial activity in any country will entail raising
the participation level of those outside the most active age group of 25-44 years old.
• Proposition 5: For most GEM countries, the greatest and most rapid gain in firm
start-ups will be achieved by increasing the participation of women in the
entrepreneurial process.
• Proposition 6: Long-term, sustained enhancement of entrepreneurial activity requires
a substantial commitment to and investment in education at the post-secondary level
(i.e., college, university or graduate programs).
• Proposition 7: Developing the skills and capabilities required to start a business
should be integrated into specific educational and vocational training programs at all
educational levels.
• Proposition 8: Regardless of education level, emphasis should be placed on
developing an individual’s capacity to recognize and pursue new opportunities.
• Proposition 9: The capacity of a society to accommodate the higher levels of income
disparity associated with entrepreneurial activity is a defining feature of a strong
entrepreneurial culture.
• Proposition 10: Government and public policy officials and opinion leaders from all
spheres have a key role to play in creating a culture that validates and promotes entre-
preneurship throughout society.
The purpose of the following report is to provide a brief overview of the GEM
initiative, to present key findings for all 10 countries and to provide support for the
principal public policy implications. In addition to the 1999 Executive Report, GEM has
published a full Research Report, which provides a more detailed examination of the
research design and in-depth findings, and an Operations Manual, which outlines the
technical procedures for how the project is conducted. Individual country reports are
also available from each of the GEM National Teams.

5
Entrepreneurship is now center stage in
the public policy arena of most countries.
The ascendance of entrepreneurship in the
last decade is reflected in several major poli-
cy initiatives around the world. Consider
the following illustrative examples:
• At the end of 1998 the United Kingdom
government’s white paper, Our
Competitive Future: Building the
Knowledge Driven Economy, focused on
a series of initiatives designed to
enhance entrepreneurship.1
• Germany has an increasing number of
programs designed to provide financial
support for new firms, to ease the
process of start-up and to encourage
the participation of women. In the
past decade approximately 200 innova-
tion centers have been established
providing space and other resources
to start-up companies.
• In 1995 the Decennium of
Entrepreneurship was launched in
Finland. Coordinated by the Finnish
Ministry of Trade and Industry, the aim
was to bring together under one umbrel-
la a host of individual initiatives in three
broad areas: creating an entrepreneurial
society, promoting entrepreneurship as a
source of employment and fostering the
growth of new ventures.
• In Israel, partly in response to the chal-
lenge to assimilate an increasing number
of immigrants, a range of small business
measures have been enacted by the
Technological Incubators Programmer.
More than 500 businesses have been
established in 26 incubators. The Small
Business Authority of Israel was created
in 1994 with a wide mandate encom-
passing training and the provision of
advice centers and financial resources.
In addition, there has been an explosive
growth of venture capital in Israel, and
more than 100 Israeli companies are now
quoted on NASDAQ.
• In France, major initiatives are under
way to promote the teaching of
entrepreneurship in universities,
particularly to engineering students.
University-based incubators are being
created, a national competition for new
high-tech companies was launched, and
the Foundation of the Academy of
Entrepreneurship was established.
Around the world, interest in entrepre-
neurship extends beyond national govern-
ments. The subject has attracted attention
from many multi-national organizations as
well. Again, consider the following:
• In 1998 the Paris-based Organization for
Economic Co-operation and
Development (OECD) published a
report, Fostering Entrepreneurship:
A Thematic Review, with the explicit
aim of understanding the state of
entrepreneurship in all OECD countries
and identifying which policies might be
most successful in fostering it.2
• In 1998, the European Commission
presented a report to the Council of
Ministers, Fostering Entrepreneurship:
Priorities for the Future. Among the
proposals was a commitment to
simplifying the start-up process for
companies, improving access to
financing and developing a “spirit of
enterprise and risk taking.”
Underpinning this program was the con-
viction that, “Europe’s place as an
economic power depends on its future
entrepreneurs and the competitiveness of
its enterprises. They will be the motor
of the market economy.”
I. ENTREPRENEURSHIP AND PUBLIC POLICY: AN OVERVIEW

6
Turning to another domain —
the creation of capital markets for
entrepreneurial businesses — we see
more indications of increasing interest.
The launch of EASDAQ, a pan-European
stock market, was modeled in large part on
the success of NASDAQ, the stock market
favored by technology companies in the U.S.
A series of other new capital markets soon
sprang forth in principal European
countries; these include EURO.NM which is
facilitating cooperation between some of the
European markets such as the Neuer Markt
and Le Nouveau Marche.
Other domains reflect a strong interest
in entrepreneurship. The World Economic
Forum, sponsor of the annual Davos
Conference for the world’s leading multi-
national businesses, has recently adopted
“Entrepreneurship in the global public
interest” as its motto and is currently
extending its membership categories to
include “Global Growth Companies.”3Also,
business schools throughout Europe, North
America and Asia report an acute shortage of
faculty capable of teaching entrepreneurship.
All such developments point to the fact
that entrepreneurship is at the top of the
public policy agenda in many countries
around the world. The question is, “Why?”

7
II.WHY ENTREPRENEURSHIP?
For many countries, the answer to this
question lies in the greatest example of
national commitment to entrepreneurship
and economic progress: the United States.
In addition to thousands of state, local and
private initiatives designed to encourage and
support entrepreneurship, the U.S.
government annually spends hundreds of
millions on business support programs.
Because of their relative success, many of
these programs are viewed as models by
other countries looking to increase their
level of entrepreneurial activity. This is
illustrated by the United Kingdom govern-
ment’s creation of a Small Business Services
Agency in 1999 modeled on the U.S. Small
Business Administration. But how signifi-
cant are the entrepreneurial activities and
the resulting economic gains in the U.S.?
The data are startling:4
Level of Entrepreneurial Activity and
Economic Progress
• Since 1980, Fortune 500 companies have
lost more than five million jobs, but
more than 34 million new jobs have
been created.
• In 1996 small businesses created 1.6
million new jobs. Fifteen percent of
the fastest-growing new firms (i.e.,
“gazelles”) accounted for 94 percent
of the net new job creation, and less
than one-third of these gazelles are in
high technology.
• Small businesses (i.e., those with fewer
than 500 employees) employ 53 percent
of the private workforce and account
for 47 percent of sales and 51 percent
of private sector Gross Domestic
Product (GDP).
• Sixteen percent of all U.S. firms have
been in existence for less than one year.
Looking more generally at the U.S.
economy, a similarly healthy picture emerges:5
• U.S. GDP grew at an annualized rate of
4.5 percent in the first quarter of 1999,
the ninth time in the last 10 quarters
that the growth rate has been 3 percent
or higher.
• Personal consumption expenditures rose
at an annual rate of 6.7 percent in the
first three months of 1999.
• The U.S. has enjoyed eight years of
economic growth, the longest period of
sustained growth this century.
From an outsider’s perspective, the
conjunction of intense entrepreneurial
dynamism and rapid economic growth —
coupled with low unemployment and low
inflation — seemingly points to only one
conclusion: entrepreneurship fuels economic
growth, creating employment and prosperity.
The buoyancy of the U.S. economy appears
to be a function, at least in part, of the
entrepreneurial vitality evident even to the
most casual observer. The United Kingdom
government’s white paper, Our Competitive
Future: Building the Knowledge Driven
Economy, referred to earlier, having raised
the question why entrepreneurship and
innovation matter, provides the following
succinct answer.6
“Entrepreneurship and innovation are
central to the creative process in the
economy and to promoting growth,
increasing productivity and creating
jobs. Entrepreneurs sense opportunities
and take risks in the face of uncertainty
to open new markets, design products
and develop innovative processes.”
At one level, these impressionistic
illustrations are somewhat superficial.
Beyond them, however, is a much deeper and
well-established stream of evidence in

8
support of the proposition that entrepre-
neurship does play a pivotal role in
economic growth. In almost all advanced
economies, new and small firms account for
99 percent of all firms. A recent study of
European Union (EU) countries suggested
that 83 percent of the annual change in
gross national product is accounted for by
the growth in sales revenue of smaller firms
outstripping the growth of larger firms.7
Where data is available, new and small firms
are consistently found to be the major
source of new jobs.8
Entrepreneurship is at the top of the
public policy agenda because of the
seemingly unambiguous relationship
between the level of entrepreneurial activity
within a country and that country’s degree
of economic prosperity. But therein lies the
mystery. Despite the impressionistic and
empirical evidence that entrepreneurship
makes a difference to economic well-being,
there is scant understanding of (a) how the
process makes a difference, (b) how much of
a difference it actually makes and (c) what
specific factors enhance the level of entrepre-
neurial activity within a given country.
The purpose of the Global
Entrepreneurship Monitor (GEM) is to
unravel or at least shed light on this mystery.
By understanding the entrepreneurial
process and its impact on economic growth
we should be better prepared to give clear
policy guidance as to how governments can
enhance the entrepreneurial process.
Before proceeding, however, we must
first review what we know about the
entrepreneurial process and how our
understanding has evolved. Such a review
ensures that we have identified the appropri-
ate factors that both support and are
supported by entrepreneurial processes.
A conceptual framework is also necessary
for guiding any future data collection,
analysis and interpretation.

9
Understanding economic growth —
how to measure it, how the growth process
operates and what factors determine it — is
at the heart of economics. To address this
phenomenon, economists have developed a
variety of approaches. They range from
descriptive models, some of which focus on
the stages of growth or development
through which an economy evolves, to for-
mal models, which emphasize factors that
are either external to the economic system
(e.g., technological sophistication) or inter-
nal (e.g., the level of savings).
These different approaches share certain
common characteristics. First, they focus
on large, established firms rather than
smaller firms. Second, they assume that
large firms constitute the real locomotive of
economic growth. Third, they are preoccu-
pied with the relationship between national
conditions (e.g., legal institutions) and the
impact that these have upon the perfor-
mance of firms. The corollary at the policy
level is a focus on creating the national eco-
nomic conditions within which businesses
can flourish. In some instances, policies are
deliberately established to foster the devel-
opment of key industries or “national
champions” capable of competing on the
world stage. This conventional view of the
economic growth process and the important
factors it includes is depicted in Figure 1.
Even a casual study of the model in
Figure 1 prompts an immediate question:
Where is entrepreneurship? The answer is
that it is accorded a role as part of the
secondary economy in the micro-, small-
and medium-sized firm sector. These firms
are considered to provide a supporting role
as suppliers of goods and services to the
established firms in the primary economic
sector. This is essentially a subordinate
role. As such, the model provides relatively
little understanding of the specific contribu-
tion entrepreneurship makes to economic
growth and little guidance on how to
enhance the level of entrepreneurial activity.
The GEM initiative begins with the
assumption that the role of entrepreneur-
ship is critical to economic growth.
The role of the entrepreneurship process in
economic growth is presented in Figure 2.
Figure 1
Conventional Model of National Economic Growth
Social,
Cultural,
Political
Context
National
Economic
Growth
(GDP, Jobs)
General National
Framework Conditions
Major Established Firms
(Primary Economy)
Micro, Small, and
Medium Firms
(Secondary Economy)
III. UNDERSTANDING ENTREPRENEURSHIP:
THE GLOBAL ENTREPRENEURSHIP MONITOR MODEL

10
The model in Figure 2 captures a num-
ber of things ignored in the conventional
framework. First is the recognition that
entrepreneurial activity is shaped by a
distinct set of factors (referred to as
Entrepreneurial Framework Conditions).
Such factors include training in entrepre-
neurship and the availability of start-up
financing. Next, the level of entrepreneurial
activity is a function of the degree to which
individuals recognize the entrepreneurial
opportunities available and that they have
the capacity — motivation and skills — to
exploit them. Then, the interaction between
perceived entrepreneurial opportunities and
the entrepreneurial capacity to pursue them
will give rise to a greater number of start-up
efforts, new firm births and jobs. As more
new firms and jobs are created, there subse-
quently may be greater firm deaths and job
destruction. Firm and job turbulence or
“churning” is what is often referred to as
Business Dynamics, which usually accompa-
nies economic growth. Lastly, economic
growth is shown to be determined, in part,
by the intensity of business dynamics.
We have, therefore, two perspectives.
The first focuses on large established firms
and the associated secondary role of smaller
firms. The other focuses on the entrepre-
neurial sector itself, the conditions that
shape it and its direct economic
consequences. To properly understand
economic growth both perspectives are
needed. In fact, they are complementary.
Economic growth reflects both sets of
processes, although the mix or contribution
made by each will vary between countries.
To illustrate, both perspectives are combined
in Figure 3.
Figure 2
Model of Entrepreneurial Processes
Affecting National Economic Growth
Social,
Cultural,
Political
Context Entrepreneurial Opportunities
Business
Dynamics
National
Economic
Growth
(GDP, Jobs)
Entrepreneurial
Framework Conditions
Entrepreneurial Capacity

11
Combining both perspectives has several
advantages. First, it reflects the contributions
of both large established and new entrepre-
neurial firms. Second, it makes clear that
existing firms can be a significant source of
start-ups. Third, it presents the context in
which the entrepreneurial sector operates.
Understanding the causal relationships in the
model is an integral element of the GEM
project. These causal relationships depicted
in Figure 3 are both incomplete and presented
in summary form. Therefore, the full GEM
model is presented in Figure 4. This frame-
work constitutes a more complete depiction
of the entrepreneurial process than was
included in lower half of Figure 3.
Figure 3
Consolidated Model of Entrepreneurial Processes Affecting
National Economic Growth
Social,
Cultural,
Political
Context
Entrepreneurial Opportunities Business
Dynamics
National
Economic
Growth
(GDP, Jobs)
Entrepreneurial
Framework Conditions Entrepreneurial Capacity
General National
Framework Conditions
Major Established Firms
(Primary Economy)
Micro, Small, and
Medium Firms
(Secondary Economy)
Figure 4
Global Entrepreneurship Monitor:
A Detailed Model of Entrepreneurial Processes and Economic Growth
Social,
Cultural,
Political
Context
General National
Framework Conditions
Entrepreneurial
Opportunities
Business
Dynamics
(Firms and Jobs)
Economic
Growth
• GDP • Jobs
• Openness • Infrastructure
• Government • Financial Markets
• Management (Skills) • Labor Markets
• Technology, R&D • Institutions
• Existence • Perception
• Births • Expansion
• Deaths • Contractions
• Skills • Motivation
• Financial • Internal Market
• Government Policies Openness
• Government Programs • Access to Physical
• Education & Training Infrastructure
• R&D Transfer • Cultural/Social Norms
• Commercial and Legal
Infrastructure
Entrepreneurial
Framework Conditions
Entrepreneurial
Capacity

12
As noted, a central aim of GEM is to
understand the relationship between entre-
preneurship and economic growth. The
GEM model sets out key elements of this
relationship and the way in which the ele-
ments interact. Moving from left to right
across the model shown in Figure 4, the key
variables are best considered in terms of five
major groups: 1) Social, Cultural and
Political Context; 2) General National
Framework Conditions and Entrepreneurial
Framework Conditions; 3) Entrepreneurial
Opportunities and Entrepreneurial
Capacity; 4) Business Dynamics; and
5) National Economic Growth.9
Social, Cultural and Political Context:
This group encompasses a range of
factors that play an important role in
shaping both the general framework con-
ditions and the entrepreneurial frame-
work conditions. Analyzing all of these
is well beyond the scope of GEM, but
certain key issues have been considered
including demographic structure, investment
in education, social norms and attitudes
associated with independence and the
perception of entrepreneurs.
General National and Entrepreneurial
Framework Conditions: This group
includes national contextual factors such
as the role of government and financial
institutions, levels of research and develop-
ment (R&D), the quality of the physical
infrastructure, labor market efficiency and
the robustness of legal and social institu-
tions. The group also includes entrepre-
neurial contextual variables such as the
availability of financial resources for new
firms, government policies and programs
designed to support start-ups, education
and training for entrepreneurship, effec-
tiveness of technology transfer mecha-
nisms and access to professional support
services such as lawyers and accountants.
Entrepreneurial Opportunity and
Capacity: Opportunity refers to both the
existence and perception of market oppor-
tunities available for exploitation. Capacity
refers to the motivation of individuals to
start new firms and the extent to which
individuals have the skills required to pur-
sue entrepreneurial initiatives.
Business Dynamics: This group of
variables includes measures of new firm
starts and the growth, decline and death
of existing firms.
National Economic Growth: This
refers to a number of measures
including GDP growth and the
level of employment.
In testing the GEM model a wide variety
of data were assembled.10 The data can be
summarized into three categories. First,
standardized national data on a wide range
of factors were assembled from a variety of
sources (e.g., OECD, UNESCO, World
Bank) supplemented, where necessary, by
data provided by the national teams on their
own country.11 Second, adult population
surveys were commissioned for each of the
10 countries and completed with at least
1,000 respondents in each country during
February and March 1999. After a brief
standardized interview schedule was adopt-
ed, translations were approved by each
national team before the phone interviews
were initiated.12 Third, in nine of the GEM
countries, all except Italy, the National
Research Teams completed one-hour
personal interviews with up to 40 experts
(also called key informants) on the entre-
preneurial sectors of their own country.
During these interviews, each expert com-
pleted a brief questionnaire (70+ items)
that involved standardized assessments,
again translated into the appropriate
languages, of important features of their
country’s entrepreneurial sector.

13
The first question GEM addresses is
whether the level of entrepreneurial activity
varies between countries, and, if so, by how
much. The answer to both is “yes,” and by
quite a bit.
Among the better measures of the level
of national entrepreneurial activity are esti-
mates of active participation in new busi-
ness creation. The population surveys in the
10 countries are used as the basis for the
current measure. A representative sample of
1,000 adults was asked a series of questions
about their participation in entrepreneurial
activities, including whether or not they
were currently starting a firm on their own
or for their employer as part of their job.
Those who responded yes to either or both
questions were considered “nascent entre-
preneurs” if they also were expecting to
own part of the new firm and the initiative
was not an operating business at the time of
the interview. A follow-up question was
asked about anticipated employment levels
five years after the firm was expected to
become an operating entity. Those initia-
tives that expected 20 or more employees
were considered “growth start-ups.” All
1,000 respondents were also asked if they
had, in the past three years, invested person-
al funds in someone else’s start-up business.
The results are presented for the 10
countries in Figure 5. Four types of compar-
isons are provided, and within each type the
countries are rank ordered in terms of over-
all start-up rates. Reading from left to right,
the four measures of start-up activity are: all
start-ups, independent start-up efforts,
business firm sponsored start-ups and
growth start-ups. The vertical bars around
the average value represent the 95 percent
confidence interval, a measure of the
precision of the estimates. In this case, if
the same survey procedure was replicated 20
times, the average value would be expected
to be in the range represented by the vertical
bar on 19 surveys.13
12.00
10.00
8.00
6.00
4.00
2.00
Persons per 100 Adults (95% Confidence Intervals)
Finland
Japan
France
Denmark
Germany
UK
Italy
Israel
Canada
US
Finland
Japan
France
Denmark
Germany
UK
Italy
Israel
Canada
US
Figure 5
National Prevalence of Start-Ups:
All, Independent, Firm-Sponsored and Growth
High
Mean
Low
Finland
Japan
France
Denmark
Germany
UK
Italy
Israel
Canada
US
Finland
Japan
France
Denmark
Germany
UK
Italy
Israel
Canada
US
All
Start-Ups Independent
Start-Ups Firm-Sponsored
Start-Ups Growth
Start-Ups
(Expect 20 jobs in 5 years)
IV. LEVELS OF ENTREPRENEURIAL ACTIVITY

14
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
Number per 100 Adults (95% Confidence Intervals)
Finland
Japan
France
Denmark
Germany
UK
Italy
Israel
Canada
US
Figure 6
National Prevalence of Personal Investors
High
Mean
Low
The differences in participation in new
firm start-ups are enormous, from more
than 8 percent of the adult population —
one in every 12 persons in the U.S. to less
than one in every 67 persons in Finland.
This is more than a five-fold difference. In
the highly active countries (i.e., U.S., Canada
and Israel), it is rare to find a person who
doesn’t personally know someone who is
trying to start a business. In the less active
countries (i.e., Finland and Japan), it may be
rare to find a person who knows of anyone
trying to start a new firm.
It is useful to separate those working on
independent start-ups from those sponsored
by an existing business. Approximately one
in four start-up efforts (or 0.7 per 100) for
the 10 countries is a business-sponsored
effort, while the other three (or 2.9 per 100)
are independent efforts. About one in six
may be considered a growth start-up, with
prevalence rates ranging from one per 100
adults in the U.S. and Canada to virtually
none in Japan and Finland. National
patterns on these different types of start-ups
correlate highly with the overall start-up
rate. Autonomous start-up rates correlate
0.99 with all start-ups rates. Firm-spon-
sored start-up rates correlate 0.96, and
growth start-up rates correlate 0.87 (all
correlations are statistically significant).
Hence, the higher the rate of start-ups, the
higher the level of activity in all types of
start-up efforts: independent, business-
sponsored and growth-oriented.
Differences in personal financial support
of new firms are also considerable for the 10
GEM countries, from less than 1 percent
(Japan) to more than 6 percent (Israel) of all
adults interviewed (see Figure 6.) However,
these rates have only a moderate correlation14
with the level of start-up activity. This
personal form of financial support may,
therefore, reflect both the level of
entrepreneurial activity and the cultural
norms reflecting expectations of support in
family networks within different countries.
And, these cultural norms may vary
across countries.

15
The results presented in Figure 5 suggest
that the countries may be considered in
terms of three distinctive levels of
entrepreneurial activity: high (U.S., Canada
and Israel); medium (Italy and United
Kingdom); and low (Denmark, Finland,
France, Germany and Japan). These three
groups are presented in Table 1. The aver-
age level of start-ups in the high group is
twice that of the intermediate group; the
level of start-ups in the intermediate group
is twice that of the low group. The differ-
ences in average start-up rates between these
groups are statistically significant. Thus, it
is appropriate to use this classification
scheme as the basis for further cross-nation-
al comparisons of entrepreneurial activity.
Differences in the rates of personal
investment shown in Table 1 are not
statistically significant.
Table 1
Level of Entrepreneurial Activity: Three Groups
Level of Entrepreneurial Activity Countries Average Business Average Personal
Start-Up Rate Investment Rate
(#/100 persons) (#/100 persons)
High United States 6.9 5.0
Canada
Israel
Medium Italy 3.4 2.4
United Kingdom
Low Denmark 1.8 3.1
Finland
France
Germany
Japan
(Statistical Significance) (0.0002) (0.1326)

16
Level of Entrepreneurial Activity Countries Average Business Average 1998 Employment Rate:
Start-Up Rate Quarterly Growth Jan 1999
(#/100 persons) in GDP
High United States 6.9 1.17% 92.8%
Canada
Israel
Medium Italy 3.4 .25% 90.8%
United Kingdom
Low Denmark 1.8 .41% 91.8%
Finland
France
Germany
Japan
(Statistical Significance) (0.0002) (0.186) (0.78)
Without Finland Without Japan
High 1.17% 92.8%
Medium 0.25% 90.8%
Low 0.26% 90.8%
(Statistical Significance) (0.13) (0.64)
The second question GEM addressed
was whether the level of entrepreneurship
has an impact on national economic
growth. The early results point to a strongly
suggestive relationship between the level of
entrepreneurial activity in a country and its
economic growth or prosperity. The tenta-
tive phrasing here is quite deliberate for
reasons that will be explored later. For
now, let us review the evidence.
When examining this relationship, two
measures of economic prosperity were used.15
The first measure was the change in GDP,
perhaps the most widely used measure of
national economic growth. The second
measure was the level of employment within
a country; this measures the percentage of
people who want to work who have jobs.
The employment level, or the percentage of
the labor force with jobs, was arrived at by
simply subtracting the unemployment rate
from 100 percent. The relationship between
new and small firm growth and job creation
was emphasized in earlier studies by David
Birch and others,16 and has the advantage of
being simpler to measure and compare
across countries than measures that rely on
currency or other measures of value. The
complexity of modern economies is reflected
in the rather low level of agreement between
these two measures of economic well being.
There is also no systematic relationship for
the GEM countries. The relationship
between the three levels of entrepreneurial
activity and these two measures of economic
growth are presented in Table 2.
V. ENTREPRENEURSHIP AND ECONOMIC ACTIVITY
Table 2
Level of Entrepreneurial Activity and Economic Well Being

17
Although not statistically significant,
there is clearly a systematic pattern in Table
2. The three countries with the highest levels
of entrepreneurial activity have higher aver-
age growth in GDP and higher levels of
employment. The lack of statistical signifi-
cance is largely due to the small number of
cases and the unusual patterns found
between the countries with intermediate and
low levels of entrepreneurial activity.
This, in turn, is due to some rather special
circumstances in some countries. In particu-
lar, one firm in Finland, Nokia, is responsi-
ble for 25-35 percent of all economic growth
in that country.17 Clearly, this is an unusual
circumstance not found in other advanced
market economies. Second, unemployment
figures for Japan are very unusual.
The Japanese unemployment rate is at the
highest level in several decades and is just
now exceeding that of the U.S., which is at
the lowest level in several decades. Thus,
whatever is represented by the Japanese
unemployment figures is not comparable
to that of other advanced countries.
Comparisons based on the national level
of entrepreneurial activity are, thus, present-
ed in the bottom of Table 2 without Finland
for economic growth and without Japan for
employment. While still not statistically sig-
nificant, the results have a pattern replicated
frequently in the following analysis. There
is a distinctive difference between countries
with a high level of entrepreneurial activity
and the other two groups; there is little
or no difference between countries with
an intermediate or low level of entrepre-
neurial activity.
Since the relationship between levels
of entrepreneurial activity and national
economic well being is an important issue,
an alternative treatment is justified.
Scattergrams and the best-fit linear regres-
sion lines are presented for start-up rates and
average recent growth in GDP (i.e., average for
all quarters in 1998) in Figure 7 and the
January 1999 employment rate in Figure 8.
For the reasons mentioned above, Finland is
excluded from the analysis in Figure 7 and
Japan is excluded from the analysis in Figure 8.
Figure 7
Level of Entrepreneurial Activity and Growth in GDP
(Finland Excluded)
-1
-0.5
1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00
(Japan)
0
0.5
1
1.5
2
Level of Entrepreneurial Activity: January 1999
Quarterly GDP Growth (Avg):1998
(Denmark)
(France)
(United Kingdom)
(Italy)
(Germany)
R2 = 0.3598
(Canada)
(United States)
(Israel)

18
The primary measure of association, the
correlation, is 0.61 for the relationship
between start-up rates and economic growth
and is marginally significant (p=0.08).
The correlation between start-up rates and
January 1999 employment is 0.46 but is not
statistically significant. Given the many
factors that affect economic growth and
employment and the small number of cases
in this analysis, these results are very
encouraging. Assuming that start-up rates
are stable over time and have an effect on
economic growth, this level of association
would suggest that about one-third
(36 percent) of the variation in economic
growth was due to variation in firm
start-up rates.
These patterns support the following
conclusions:
• There is a relationship between the
level of entrepreneurial activity and
economic growth.
• None of the countries in this sample
had a high level of start-ups and low
level of economic growth.
• Variations in the level of entrepreneurial
activity may account for one-third of the
variation in national economic growth.
• Confirmation of these patterns will
require more countries and longitudinal
data so that the level of entrepreneurial
activity can be measured prior to
measures of economic well being.
Figure 8
Level of Entrepreneurial Activity and Employment
(Japan Excluded)
87
88
89
1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00
(Finland)
91
90
92
93
95
94
97
96
Level of Entrepreneurial Activity: Winter 1999
Employment Rates: January 1999
(Denmark)
(France)
(United Kingdom)
(Italy)
(Germany)
R2 = 0.2204
(Canada)
(United States)
(Israel)

19
Determining what makes a country
entrepreneurial, the third question of the
GEM initiative, is particularly difficult.
Whereas one can readily establish a quantifi-
able measure of the level of entrepreneurial
activity across countries and assess its rela-
tionship to economic prosperity, determin-
ing what makes a country entrepreneurial
calls for a deep understanding of the coun-
try itself coupled with a range of qualitative
assessments. In many respects these assess-
ments are intrinsically subjective. Moreover,
any attempt to answer the question has to
take into account a large number of factors.
It is essential therefore that in trying to
assess what makes a country entrepreneurial
extreme care is taken, particularly when
talking about the 10 GEM countries as a
whole. It would be easy to overlook
differences between countries, thereby
obscuring the distinctive factors and features
associated with each. The GEM results will,
therefore, be presented in two parts. First,
an overall assessment for all 10 countries
will be provided in this section. The next
section will provide an in-depth look at
many of the qualitative features that distin-
guish each country.
To provide the most useful framework
within which public policy debate can take
place, the factors making up the GEM
model have been distilled into those that are
most important in explaining what makes a
country entrepreneurial. Inter-country dif-
ferences notwithstanding, it is possible to
identify six key factors that vary in terms of
their causal proximity to start-up rates.
The two that are closest are:
Factor 1: Entrepreneurial Opportunity
Factor 2: Entrepreneurial Capacity
These two factors, in turn, will be
affected by the following factors:
Factor 3: Infrastructure
Factor 4: Demography
Factor 5: Education
Factor 6: Culture
These last four are not listed in rank
order and all have a significant association
with the start-up rate. Taken together, these
six factors capture what matters most in
accounting for differences in entrepreneurial
activity between countries. There is consid-
erable overlap among these dimensions, but
until a larger number of countries is studied
over a longer period of time, it is not possi-
ble to determine the independent influence
of each factor. A discussion of the nature
and extent of the influence of each factor
will now be presented.
Factor 1: Entrepreneurial Opportunity
Entrepreneurship is anchored in oppor-
tunity. Any entrepreneurial initiative springs
from a sense that a genuine market opportu-
nity exists for the product or service that a
new firm may provide. Market opportunity
is, in a fundamental sense, the wellspring of
entrepreneurship. Understanding the level
of entrepreneurial activity within a country
entails understanding the extent to which
the people who actually start businesses per-
ceive opportunity.
This was measured directly in the 10
country survey of the adult population,
where each person was asked, “Do you think
that in the next six months good opportuni-
ties will have developed for starting a new
business in your country?” It was measured
indirectly by asking the key informants a
series of questions about the existence of
entrepreneurial opportunities within their
country with five items, such as “In my
country, one sees more good opportunities
than people able to take advantage of them”
VI. WHAT MAKES A COUNTRY ENTREPRENEURIAL?

20
and “In my country, opportunities to create a
truly high-growth firm are rare.” Responses,
provided on a five-point scale, were combined
to create an “index of perceived opportunity.”
The patterns found when the three levels of
entrepreneurial activity were compared are
presented in Figure 9.
In this, as in other comparisons in this
section, the different measures are derived
from different procedures. In order to pro-
vide a standardized comparison, each index
has been transformed so that the value for
the intermediate countries (Italy and United
Kingdom) is zero and that the value for the
high level (Canada, Israel and United States)
and low level (Denmark, Finland, France,
Germany and Japan) are as a proportion of
the difference between the highest and low-
est value. This allows comparisons of the
relative differences as well as patterns relat-
ed to the level of entrepreneurial activity.
Differences between the high, intermedi-
ate and low entrepreneurial groups could be
depicted in several patterns. Differences
may be reflected in a straight line through
the three points, suggesting that a gradual
change in the index was associated with a
gradual change in the level of
entrepreneurial activity. Another pattern
might be a reversed “L” shape, suggesting a
major difference between the high and
intermediate group, but a very small or no
difference between the intermediate and the
low group. The reversed “L” pattern would
imply that a major change in the factor is
required to make a shift from the intermedi-
ate to the high activity group.
The pattern in Figure 9, and in many of
the following presentations, suggests that
small changes in the factor may contribute
to a country’s shift from the low to the
intermediate level of entrepreneurial activity,
but that a major change is required to move
to the highest level. This pattern is repeated
in several of the following analyses. There is
no question that the level of perceived
opportunity for entrepreneurial initiatives is
dramatically higher in the most active
countries. The perceived richness or paucity
of opportunity is a key determinant of the
level of entrepreneurial activity.
HighMediumLow
Figure 9
Level of Entrepreneurial Activity and Perception of Opportunity
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
Level of Entrepreneurial Activity
Perception of Opportunity
Opportunity Perception:
Adult Survey Item
Opportunity Perception:
Key Informant Index

21
HighMediumLow
Figure 10
Level of Entrepreneurial Activity and Entrepreneurial Capacity
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Level of Entrepreneurial Activity
Entrepreneurial Capacity
Entrepreneurial
Motivation:
Key Informant Index
Entrepreneurial
Capacity:
Key Informant Index
Factor 2: Entrepreneurial Capacity
As noted, entrepreneurship is anchored
in the recognition within a population that
genuine new business opportunities exist.
However, while opportunity is a necessary
condition of entrepreneurship, it is not
sufficient. For an entrepreneurial initiative
to occur one must possess the capacity (i.e.,
the motivation and skill) to take advantage
of the opportunity by starting a new firm.
Entrepreneurship is the point at which
entrepreneurial opportunity and entrepre-
neurial capacity meet. It is quite possible to
imagine a situation rich in opportunity but
impoverished in terms of entrepreneurial
activity simply because few individuals have
the motivation or capability to do anything
about the opportunity. The flood of West
German entrepreneurs into East Germany
immediately after the wall came down was
a vivid response to such an imbalance.
Two measures of this factor were devel-
oped from the key informant interviews.
The first was a five-item index related to
judgements about the capacity of people to
start new firms. Examples include “In my
country, many people have experience in
starting new businesses” and “In my
country, many people can react quickly to
good opportunities for a new business.”
A second five-item index measured
judgements about the motivation of
individuals in the country to become
involved in entrepreneurial endeavors.
Examples of these items included “In my
country, most people consider becoming an
entrepreneur a desirable career choice” and
“In my country, you will often see stories in
the pubic media about successful
entrepreneurs.” The results, adjusted as
described above, are presented in Figure 10.

22
Again, the same pattern found with
entrepreneurial opportunity is present with
entrepreneurial capacity. The difference
between the high and intermediate levels is
dramatic. The difference between the inter-
mediate and low level of activity groups is
very modest, but in the expected direction.
These results suggest that in countries where
the potential and motivation to start a new
business are quite weak, that the level of
start-ups will be quite low regardless of the
public’s perception of the availability of
good opportunities.
Factor 3: Infrastructure
Few features have received as much atten-
tion regarding entrepreneurial capacity as the
infrastructure, broadly defined to include the
availability of financing, land, facilities,
employees, suppliers, government assistance,
utility costs, good transportation, tax con-
cessions, subsidized loans and any other item
or component or factor required in produc-
ing goods or services. A substantial part of
the analysis and a major feature of the inter-
views with the key informants focused on the
extent and suitability of the infrastructure.
Four aspects of the infrastructure appear
to have a systematic relationship to national
variations in entrepreneurial activity. Three
were indices developed from the question-
naires completed by the key informants. These
included three multi-item indices based on the
key informant interviews. One reflected the
availability of equity financing, with items
such as “In my country, private individuals
(other than founders) have provided major
financial support for new and growing firms.”
A second multi-item index reflected the avail-
ability and costs of suitable professional ser-
vices, with items such as “In my country, it is
easy for new and growing firms to get good,
professional legal and accounting services.”
The third multi-item index reflected the
potential for R&D transfer within the coun-
try with items like “In my country, new and
growing firms have just as much access to new
research and technology as large, established
firms.” A fourth feature was taken from the
Global Competitiveness Report 1997, a multi-
item index related to the flexibility of the
internal labor markets.18 The relative
Figure 11
Level of Entrepreneurial Activity and Infrastructure Suitability
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2 HighMedium
Level of Entrepreneurial Activity
Low
Infrastructure Suitability
Equity Availability:
Key Informant Index
Professional Services:
Key Informant Index
R&D Transfer:
Key Informant Index
Flexible Labor
Markets Index:
Global Competitiveness
Report

23
difference among the three groups of countries
on these four items is presented in Figure 11.
The pattern in Figure 11 is somewhat
different from that in previous figures.
In this case, the difference between the high
and intermediate countries is about the
same as that between the intermediate and
low countries. Labor market flexibility,
however, reflects the same step function as
with the previous factors, with a small
difference between the intermediate and
low group of countries. This would suggest
that infrastructure may have a continuous
and gradual influence. A modest improve-
ment in infrastructure may result in a
modest improvement in national
entrepreneurial activity.
A wide range of other infrastructure
factors, however, did not have any
significant impact on the level of activity.
These include the availability of debt or loan
subsidies; good legal, accounting and
banking services; access to the physical
infrastructure; government policies and
procurement orientations; complications
with government regulations, taxes and
licensing procedures; internal market
openness; and judgements about the
helpfulness of government programs (con-
sidered to be of little value in all countries).
Perhaps most dramatic on this list of
infrastructure features which make no differ-
ence were those related to government poli-
cies, suggesting that proactive government
policies, which may seem significant com-
pared to other government efforts, are
unable to provide the massive changes
required to enhance a nation’s level of entre-
preneurial activity. Evidence from other
research, however, suggests that government
programs are generally helpful for individual
start-ups or existing firms. This would
imply that the scope of most government
initiatives may be too small to have a signifi-
cant influence on an entire economy.19
Factor 4: Demography
People start firms, obviously. But what
is less obvious is which people. Those
engaged in starting a business represent a
small minority of the population — 8.4 per-
cent in the U.S., 1.4 percent in Finland.
This minority is in turn drawn from select
parts of the population. One of the pur-
poses of GEM is to understand the link
between the demographic make-up of a
country and the achieved level of entrepre-
neurial activity. As it turns out, this link
exhibits a very strong causal relationship.
Several demographic dimensions emerge as
being critical: the age structure of a popula-
tion, the level of participation by women in
the entrepreneurial process, and anticipated
population growth.
Table 3
Level of Entrepreneurial Activity and Age and Gender
(Number per 100) Men Women Both Genders
18-24 Years old 4.8 3.7 4.3
25-34 Years old 8.3 3.2 5.7
35-44 Years old 6.0 3.0 4.4
45-54 Years old 6.2 2.5 4.3
55-64 Years old 2.4 1.1 1.7
65 and older 1.0 0.1 0.5
All ages: 18 and older 5.0 2.2 3.6

24
A. Age, Gender and Start-Ups
Numerous studies have found that par-
ticipation in start-ups is dramatically affect-
ed by the age and gender of potential
nascent entrepreneurs. This is illustrated in
Table 3 (previous page) which shows the pro-
portion of men and women of different ages
who are associated with start-ups based on
the full adult sample from all 10 countries.
Two patterns are clear: men are much more
active in start-ups than women and the levels
of activity are highest for those 25-34 years old.
The gender difference varies by country.
Taking only those 25-44 years old for com-
parison, the start-up participation rates for
men and women are presented in Table 4 for
each country. It is clear that a major reason
for the low start-up rates among some coun-
tries is the lack of participation by women.
Women participate at 58 percent of the rate
for men in the high-participation countries
but this declines to 31 percent in the low-
participation countries. Countries that wish
to increase the level of start-up efforts may
make major gains by helping women to
become more involved.
B. Population Age Structure
If those who initiate start-ups are most
likely to be between 25 and 44 years old, will
countries with more individuals in this age
range have more start-ups? The answer is
“yes.” The correlations between the percent-
age of men and women of different ages in
the work force, defined as those 18-64 years
old,20 and the start-up rates are presented the
right hand column of Table 5.
Table 4
Level of Entrepreneurial Activity and Gender and Country
Entrepreneurial Emphasis Country Men Women Women/Men Ratio
High United States 12.5 7.6 61 %
Canada 13.5 6.8 50 %
Israel 7.7 4.9 64 %
(Average for High Level) (11.2) (6.2) (58%)
Medium Italy 8.6 2.6 30 %
United Kingdom 6.5 2.7 41 %
(Average for Medium Level) (7.6) (2.6) (35%)
Low Germany 7.0 1.2 17 %
Denmark 5.8 0.6 10 %
France 3.5 1.7 49 %
Japan 3.2 1.2 38 %
Finland 3.0 0.9 30 %
(Average for Low Level) (4.5) (1.1) (31%)
Table 5
Level of Entrepreneurial Activity and Percentage of Mid-Career Adults
All those 20-64 years old Ten country Minimum % Minimum % Correlation with
average % business start-up rates
Percentage men 25-34 years old 25.3 22.3 28.3 0.38
Percentage men 35-44 years old 24.7 20.0 28.3 0.74*
Percentage women 25-34 years old 24.6 21.8 26.9 0.39
Percentage women 35-44 years old 24.6 21.8 26.9 0.39
* Statistically significant.

25
The correlation of 0.74 for men 35-44
years old (which is statistically significant),
suggests that the presence of early career
individuals in the population is an impor-
tant determinant of the level business
start-ups. There is no ambiguity about the
causal relationship. Countries with a low
proportion of early career men, such as
Japan, may need to adjust efforts to
encourage start-ups from other age groups.
C. Population Growth: 1999-2025
Increases in the demand for goods and
services is a major source of new entrepre-
neurial opportunities. The expectation of
future opportunities may affect the partici-
pation in new firm start-ups. There is sub-
stantial variation among the 10 countries in
this analysis in expected population growth
from 1999 to 2025, from a decline of 11 per-
cent for Italy to an increase of 35 percent for
Israel.21 As it turns out, this has a very high
measure of association with firm start-up
rates measured early in 1999.
The association between these two
demographic factors and the national level
of entrepreneurial activity is presented in
Figure 12. As with several of the earlier
presentations, this allows for a standardized
comparison of the relative effects of the
participation of women in start-ups, the
proportion of early career men in the
population and the expected population
growth over the next 25 years. In all cases
the high participation countries are different
than the intermediate participation coun-
tries; the difference between the intermedi-
ate and low activity countries is very small.
HighMediumLow
Figure 12
Level of Entrepreneurial Activity and Demographic Factors
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Level of Entrepreneurial Activity
Demographic Factors
Percent Men
35-44: 1998
Population Growth
1999 - 2025

26
In terms of national policy, these factors
pose the greatest challenge. It is very
difficult to affect either the age structure of
the population or future population growth.
A shortage of those most likely to pursue
entrepreneurship under normal circum-
stances, early career men, suggests that
government policies may need to encourage
other groups, such as women, to pursue
entrepreneurial options. How easy
it will be to change the expectations
associated with women’s work careers
remains to be determined.
The anticipation of no or negative pop-
ulation growth is a major complication.
Those living in countries with stagnant
populations are quite aware of these trends
and may find it difficult to pursue
entrepreneurial career options in traditional,
stable sectors or stagnant geographic
regions. They may need assistance to find
the opportunities in growing economic
sectors or geographical regions with
economic growth potential.
Factor 5: Education
Entrepreneurship flourishes when
opportunity meets an individual with the
motivation and skills needed to turn the per-
ceived opportunity into a business reality.
Opportunity per se is worthless without
individual commitment and the capability to
take advantage of it. Since part of entrepre-
neurial capacity is the set of skills needed to
exploit an opportunity, the question imme-
diately arises as to the impact that educa-
tion has upon entrepreneurship.
Developing new products and
services or creating new ventures calls for
some degree of training and education.
Certain very sophisticated products entail a
great deal of training to produce, market
and use. It is reasonable to expect that the
better educated the population the higher
the level of entrepreneurial activity.
Does the evidence support this intuitive line
of reasoning?
Here an immediate difficulty arises,
namely providing standardized measures of
educational activity across countries with
very different education systems. Without
such measures there is no chance of making
valid comparisons. One solution has been
offered by the World Bank. The Bank
examined the depth of participation in
education programs across countries.
First, a distinction was made between three
levels of education: primary (pre-high
school), secondary (or high school) and
tertiary (or post-high school). A measure
is then taken of the proportion of the total
eligible population participating in pro-
grams at each of these levels. In other
words, what percentage of those eligible in
tertiary programs are actually enrolled at
this level? If those older than the eligible
ages participate, these indicators could
exceed 100 percent.
The results for the 10 GEM countries
are presented in Table 6 at two points in
time, 1980 and 1995.22 In this table the
countries are presented in rank order by
new firm start-up rate, as calculated by
GEM. The relationship between start-up
rates is presented in the correlation measure
in the bottom row of Table 6.

27
Table 6
Level of Entrepreneurial Activity
and National Educational Emphasis
Country Start- Primary Secondary Tertiary Primary Secondary Teritary
up Enrollment Enrollment Enrollment Enrollment Enrollment Enrollment
Rate: as a % of as a % of as a % of as a % of as a % of as a % of
1999 Eligible Eligible Eligible Eligible Eligible Eligible
Age Age Age Age Age Age
Group: Group: Group: Group: Group: Group:
1980 1980 1980 1995 1995 1995
United States 8.4 99 % 91 % 56 % 102 % 97 % 81 %
Canada 6.8 99 % 88 % 57 % 102 % 106 % 103 %
Israel 5.4 95 % 73 % 29 % 99 % 89 % 41 %
Germany 4.1 — 98 % 34 % 102 % 103 % 43 %
Italy 3.4 100 % 72 % 27 % 98 % 74 % 41 %
United Kingdom 3.3 103 % 83 % 19 % 115 % 134 % 48 %
Denmark 2.0 96 % 105 % 28 % 99 % 118 % 45 %
France 1.8 111 % 85 % 25 % 106 % 111 % 50 %
Japan 1.6 101 % 93 % 31 % 102 % 99 % 40 %
Finland 1.4 96 % 100 % 32 % 100 % 116 % 67 %
Correlation with -.25 -.26 0.78 -.07 -.31 0.61
start-up rate: 1999
This exhibit tells an interesting story.
From the columns for primary and sec-
ondary enrollments, in both 1980 and 1995,
it is evident that there is little or no relation-
ship between the proportion of the eligible
population enrolled at each level and the
new firm start-up rate in any country.
This is entirely to be expected. With enroll-
ment levels of more than 95 percent in all 10
GEM countries there is barely any variation
between countries. The picture emerging
from the tertiary level data is, however,
quite different.
Looking for example at the 1980 data,
there is a positive correlation of .78 with
business start-ups; the figure for 1995 is
slightly lower at .61. This relationship,
which is statistically significant for 1980,
is highly suggestive. Simply put, it implies
that the greater a country’s investment in
education at the tertiary level, the higher
the rate of new firm formation. An
obvious inference from this would be that
graduates are more heavily engaged in
starting new firms than those without
graduate level training.
Somewhat paradoxically, however,
the results presented in Table 7 suggest
otherwise. All the research that has been
done on people who start firms indicates
that there is only a modest relationship with
educational attainment beyond the level of
completed secondary education. This is
confirmed in Table 7. This table presents
the relationship between level of education
and participation for eight of the 10 coun-
tries in the adult population surveys. No
educational attainment information was
available from surveys in the United
Kingdom and France.
Table 7 clearly shows that those that
have not completed basic primary education
(the North American equivalent of a high
school degree) are unlikely to participate in
a start-up. On the other hand, those with
college/university degrees or a graduate

28
experience are no more likely to pursue
start-ups than those with any other type of
post-high school training. The right-hand
column of Table 7 makes clear the
consequence for start-up efforts; three in
four start-ups are initiated by those without
college/university degrees.
The relative impact of educational
emphasis on the level of business
start-ups for the three groups of countries
is presented in Figure 13. Two measures are
presented. The first measure is the rating of
the key informants in each country on the
suitability of the national educational pro-
grams, both general and those specific to
entrepreneurship. This measure was derived
from a five-item index completed at the end
of the key informant interviews. A typical
item was “In my country, the quality of
teaching in primary and secondary educa-
tion provides adequate instruction in mar-
ket economic principles.” The second
measure was the relative national emphasis
on college, university or graduate educa-
tion. As before, there is a major difference
between the countries with a high and inter-
mediate level of entrepreneurship; there is
no difference of consequence between those
countries with an intermediate and low
level of entrepreneurial activity.
HighMediumLow
Figure 13
Level of Entrepreneurial Activity and Educational Emphasis
-0.2
0
0.2
0.4
0.6
0.8
1
1.4
1.2
Level of Entrepreneurial Activity
Educational Emphasis
Percent
College/Graduate
Emphasis
Entrepreneurship
Training:
Key Informant Index
Table 7
Level of Entrepreneurial Activity and Educational Attainment
Not Completing High School 1.8 % 10 %
High School Degree 3.6 % 38 %
Post-High School, No College Degree 5.0 % 27 %
College Or University Degree Or More 5.0 % 25 %
All Respondents/Total 3.8 % 100 %
Participation in Firm
Start-Ups (n=7986) Percentage of All Start-Up
Efforts (n=306)

29
The patterns in Figure 13 make it
clear that a move to a high level of entre-
preneurial activity requires a substantial
investment in education. First, all citizens
should be encouraged or have the opportu-
nity to complete a basic education. This
would remove one of the major personal
barriers to pursuing firm start-ups among
the population.
Certainly as important, if not more so,
is an emphasis on investment in higher
education. The greater this societal invest-
ment, the more likely it is that a country
will have a strong entrepreneurial dynamic.
However, as with many aspects of GEM,
much more work is needed to understand
the causal relationships. Some preliminary
interpretations can be offered:
• First, education equips individuals with
the capacity to think for themselves; it
fosters an independent sense of identity
and enhances awareness of alternative
career choices. The sense of autonomy
and independence, combined with
greater self-confidence needed to start a
business, is a positive outcome of educa-
tion. Of course this is not true for all,
but it makes a difference to a significant
number and encourages acceptance of
autonomy as a cultural value.
• Second, education broadens horizons
and, by doing so, better positions in-
dividuals to perceive opportunities.
The capacity to observe an opportunity,
to think through what is involved in
exploiting it, and to learn from
experience are all strengthened
through education.
• Third, investment in education provides
a societal asset base in the form of intel-
lectual ideas, knowledge, information,
inventions, patents, copyrights and the
like — the knowledge resources available
in any society. This knowledge base may
lead to the development or discovery of
new entrepreneurial opportunities for
those interested in starting new firms. It
also provides a pool of capable employ-
ees and technical competence needed to
get a business off the ground. The
image that comes to mind is that of a
water table. The higher the level of the
knowledge table, as it were, the more
fertile the soil in which new businesses
can start and flourish. But the richness
of the soil is not determined by educa-
tion alone. A critical ingredient is the
broader set of social and cultural values
that drive entrepreneurship. This consti-
tutes the fourth contextual factor.
Factor 6: Culture
Providing a cultural analysis of
10 countries is beyond the scope of GEM.
Nonetheless, an attempt has been made to
understand how entrepreneurship is per-
ceived in each country, the recognition that
is given to entrepreneurs and prevailing atti-
tudes toward their success or failure.
Underpinning this is the belief that no mat-
ter how rich a country is in opportunity and
how well endowed it is with capacity for
business start-ups, the extent to which
society regards the pursuit of opportunity as
socially legitimate will impact the level of
entrepreneurial activity. A set of social and
cultural values that legitimizes — indeed
encourages — new enterprise is a prerequi-
site of entrepreneurial activity and a defin-
ing feature of an entrepreneurial society.
One cultural factor, the expectations
regarding women and their participation in
entrepreneurial activities, was discussed
along with demographic factors. It is clear
that countries with higher levels of entrepre-
neurial activity have more women involved
in firm start-ups. But several other national

30
features associated with entrepreneurship
and firm start-ups have also been identified.
Two reflect dispositions or attitudes relating
to national norms regarding entrepreneurial
efforts and the social values of indepen-
dence. The third is related to the level of
income disparity within the 10 countries in
this analysis.
The data assembled from the key infor-
mants included six items related to the value
placed on independence and autonomy in
the workplace. Typical items were “In my
country, the social security and welfare
systems provide appropriate encouragement
for people to take the initiative to be self-
sufficient” and “In my country, most
younger people believe they should not
rely too heavily on the government.” The
result was an index that shows a very high
association with levels of firm start-ups;
there was a correlation of about 0.9
between the “independence index” and the
level of business start-ups.
A second measure was an item included
in the adult population surveys, including
“Do you think starting a new business is a
respected occupation in your community?”
The percentage that responded “yes” varied
from 8 percent for Japan and 38 percent for
the United Kingdom to 86 percent for
Canada to 91 percent for the United States.
This also has a positive correlation with
firm start-ups of about 0.45.
There is one further component of an
entrepreneurial culture: its capacity to
accommodate differences in the level of
income among individuals or households.23
One useful measure is the ratio of total
income (or consumption) controlled by the
wealthiest 20 percent of the population
divided by the total income (or consump-
tion) controlled by the poorest 20 percent.
In the early 1990s this varied from 3.6 for
Denmark and Finland, where the 20 percent
of the households with the highest annual
income controlled 360 percent more income
than the 20 percent with the lowest annual
incomes, to the United States, where the
ratio was 9.4 — almost a ten-fold difference.
This measure of income disparity is strongly
associated with higher levels of firm start-
ups with a correlation of about 0.81.
The causal relationship is, however,
problematic. On one hand, higher levels of
income disparity may provide higher levels
of demand and markets for unique goods
and services, as well as a pool of financial
resources for investments in new firms.
On the other hand, entrepreneurship, while
it creates wealth for a society in the form of
economic growth and employment, also
creates wealth for individuals who succeed
in the process. A strong association has been
established between income differentials in
the early 1990s and start-up rates within a
country. The probability is that the higher
the rate of start-up the greater the number
of wealthy individuals. Tolerance of
income disparity, respect for those who
accumulate wealth through entrepreneurial
endeavors, and the absence of stigma
attached to those whose entrepreneurial ini-
tiatives fail are the hallmarks of a strong
entrepreneurial culture.
The relationship between these three
aspects of cultural differences — a national
emphasis on independence and self-reliance,
respect for those starting new businesses
and the degree of income disparity — and
the level of entrepreneurial activity is
presented in Figure 14.

31
HighMediumLow
Figure 14
Level of Entrepreneurial Activity Groups and Cultural Factors
-1
-0.5
0
1
0.5
2
1.5
Level of Entrepreneurial Activity
Cultural Factors
Income Disparity: 1992
Social Value of
Independence:
Key Informant Index
Respect for Start-Ups:
Adult Surveys Item
Two of these items have a strong linear
relationship with the level of national entre-
preneurial activity: the “independence index”
and the level of “income disparity.” The
respect for start-ups is very high for the coun-
tries with high levels of entrepreneurial activ-
ity, somewhat lower for those with a moder-
ate level of activity, and slightly higher for
those with a low level of activity.
This suggests that the people in those
countries may have learned that it is socially
acceptable to express verbal approval for the
idea of start-ups even if they are not doing it
themselves. This is certainly a step in
the right direction toward general cultural
acceptance.
What is noteworthy is the clear percep-
tion among key informants that culture,
broadly defined, plays a key role in entrepre-
neurship. In some countries, this perception
is shared by the government as well. In the
United Kingdom, for example,24
“the government’s aim is to create a
broadly based entrepreneurial culture,
in which more people of all ages and
backgrounds start their own business.
In the U.S., entrepreneurship is wide-
spread because entrepreneurs are highly
regarded and well rewarded. In the
United Kingdom, entrepreneurs are still
too often viewed as mavericks”.
(Competitiveness White Paper, 1998,
Page 15.)
The use of the word “maverick”
encapsulates the point perfectly. Derived
from the name of the 19th century Texan
cattle owner who left the calves of his herd
unbranded, maverick has two definitions in
the Oxford English Dictionary: a late 19th
century definition as “a masterless person,
one who is roving and casual,” plus a more
contemporary definition, “an unorthodox or
independent-minded individual.”
Contemporary entrepreneurs may not be
“roving and casual” but they certainly value
independence. Whether or not a society is
entrepreneurial depends in part on the
legitimacy and esteem accorded to those
who pursue the entrepreneurial route or, as
it is often called, “the road less traveled.”

32
VII. NATIONAL COMPARISONS
In this section, summary findings are
presented for each GEM country. Using the
array of data resources developed in this
project, the summaries provide an excellent
profile of each country’s most significant
findings in three areas: Level of
Entrepreneurial Activity; Unique National
Features; and Key Issues. The national sum-
maries are listed in descending order accord-
ing to their level of entrepreneurial activity.
High Level of Entrepreneurial Activity
United States
Level of Entrepreneurial Activity:
• At any point in time, 8.5 percent of the
U.S. adult population is starting new
businesses — the highest start-up rate
among the GEM countries.
• The percentage of women starting new
businesses (7 percent) is more than 10
times higher than the two countries
with the lowest rate (Finland and
France, .6 percent).
• Approximately 5.5 percent of the pop-
ulation invests directly in new business
start-ups. When extrapolated to the entire
population, this level of private investment
activity suggests that tens of billions of
dollars are being funneled into start-ups
through informal channels.
Unique National Features:
• The robust rate of start-ups in the U.S. is
grounded in a strong entrepreneurial cul-
ture. U.S. citizens value entrepreneurship
and the independence associated with
starting and managing a business.
• Compared to other countries, the U.S.
population is highly capable of recogniz-
ing entrepreneurial opportunities. A
strong infrastructure encourages and sup-
ports the pursuit of those opportunities.
• Adults are perceived to possess a greater
capacity to start new businesses in part
because society esteems entrepreneurship
education and entrepreneurial role models
are plentiful.
Key Issues:
• Despite efficient diffusion of new
technology and the world’s most
sophisticated formal venture capital
network, high technology businesses in the
U.S. tend to cluster geographically
creating regional imbalances (e.g.,
Silicon Valley).
• To accommodate the high level of
start-ups, it is important to continue
growing the capacity of the entre-
preneurship support infrastructure,
particularly the provision of risk capital to
early-stage initiatives and access to techno-
logical developments.
• More emphasis is needed on
entrepreneurship education at the
primary and secondary levels to further
enhance the public’s acceptance of and
involvement in the recognition and
pursuit of opportunities.
Canada
Level of Entrepreneurial Activity:
• With an active entrepreneurial culture,
Canada’s level of start-up activity (6.8 per-
cent) is the second highest among the
GEM countries.
• Approximately 3.4 percent of the
population directly invests in new business
start-ups, which is average for all
GEM countries.
• Both key informants and the adults
surveyed perceive a relatively large
number of opportunities for new start-
ups. The level of motivation and
capacity to pursue those opportunities
are also considered to be higher in Canada
than in most other GEM countries.

33
Unique National Features:
• Like other active entrepreneurial coun-
tries, the Canadian culture is perceived to
be very supportive of entrepreneurship
and society places a relatively high value
on personal independence in the pursuit
of opportunity.
• Relative to the other GEM countries, the
Canadian infrastructure is supportive of a
high level of entrepreneurial activity.
• The Canadian venture capital industry
is relatively young and the industry
pioneers migrated from the banking
industry. Thus, a gap exists between
what is needed to properly evaluate
and structure an equity arrangement
in a burgeoning and constantly changing
technology sector.
Key Issues:
• Entrepreneurs in Canada have a high level
of access to and awareness of debt financ-
ing. Their access to both formal (i.e.,
venture capital) and informal (i.e., private
angels) equity capital is more limited,
which tends to reduce the availability of
start-up stage risk capital.
• The tax and regulatory burden on
entrepreneurial businesses is perceived
to be excessive in Canada, and govern-
ment programs designed to encourage
and support entrepreneurial activities are
inconsistent and lack a proactive, long-
term strategy.
• Canada needs to enhance its educational
and societal resources toward a greater
focus on entrepreneurial skills at all
levels of education, training for
entrepreneurs on how to access and
utilize equity financing, and training for
scientific personnel on how to
commercialize new technologies.
Israel
Level of Entrepreneurial Activity:
• With a start-up rate of approximately
5.4 percent, Israel ranked, with the U.S.
and Canada, as one of the most entrepre-
neurially active GEM countries.
• In angel activity, Israel ranked first among
GEM countries with 6.4 percent of the
adult population investing directly in new
business start-ups.
• Despite a relatively high level of entre-
preneurial activity, the extent to which
Israeli adults believe there are ample
opportunities for new businesses
(28 percent) was just above the average
for all GEM countries.
Unique National Features:
• Three key factors account for a large share
of Israel’s high level of entrepreneurial
activity: the rapid pace of the development
and transfer of defense technology; a high-
ly educated and motivated workforce; and
governmental programs that successfully
encourage entrepreneurship.
• Investment in the education and training
of the young generation is regarded as a
national priority. The Israeli government
recognizes the value of education for
encouraging potential entrepreneurs, par-
ticularly within the high technology sector.
• Israel has recently experienced a signifi-
cant change in culture and social norms
with respect to entrepreneurship. Today,
greater emphasis is placed on individual-
ism and on the importance of self-
employment. Adult survey findings show
that independence is highly valued.

34
Key Issues:
• Key informants expressed appreciation for
the government’s programs in support of
entrepreneurship, but were concerned
about policies and restrictions that still
significantly impact the economy (e.g.,
taxation policies).
• Key informants called for more invest-
ment in education to encourage more
women to study in technology fields and
to provide entrepreneurial training at pri-
mary and secondary levels. Informants
also suggested that scientific-technologi-
cal education should include management
training to enhance the commercialization
of new developments.
• Non-tech entrepreneurship should be
recognized as an important source
for new firms and employment and
should receive assistance as necessary
to abolish bureaucratic obstacles and
discriminatory legislation.
Medium Level of Entrepreneurial Activity
Italy
Level of Entrepreneurial Activity:
• The business start-up rate in Italy
among the adult population is
3.4 percent — slightly higher than
all other European countries.
• The rate at which individuals make
private investments in new start-up
businesses (2.2 percent) is slightly less
than that of all other European countries.
This is consistent with the key informants
conclusion that access to risk capital is
problematic in Italy.
• Key informants and the adult survey
perceptions maintain that the level of
opportunities for new business start-ups
in Italy is the highest of the European
countries but below average in compari-
son to all GEM countries.
Unique National Features:
• The level of entrepreneurial activity in
Italy among young adults (18-24 years of
age) is approximately 8 percent — second
only to the U.S.
• In response to high unemployment rates
and a decline in jobs in the public sector,
an increasing number of young career
men in Italy are choosing self-employ-
ment as a viable career option.
• Key informants indicated a significant
difference in the level and nature of
entrepreneurial activity between the
South of Italy and the North. In the
North, entrepreneurship is highly valued
and entrepreneurs are recognized as role
models. In the South, however, a variety
of cultural issues have prevented such an
entrepreneurial culture from developing.
Key Issues:
• Entrepreneurs in Italy are challenged
with a variety of issues, particularly
with the cost of labor, an increased
administrative burden due to compliance
with regulations, and a relatively high
value added tax.
• The expected future decline in the popula-
tion (approximately 11 percent by 2025)
could be problematic to Italy’s efforts to
maintain a moderate level of entrepre-
neurial activity or perhaps to see its level
of activity increased.
• Ensuring that the environment is
supportive of higher levels of entrepre-
neurial activity will require more clarity
in the legal system, the establishment of
appropriate fiscal incentives, and the
transformation of the educational system.

35
United Kingdom
Level of Entrepreneurial Activity:
• The rate of business start-ups in the
United Kingdom (3.3 percent) is signifi-
cantly lower than the most active coun-
tries, but not significantly different from
other participating European nations.
• The rate of angel investment in new
start-ups in the United Kingdom
(2.2 percent) is below average for all
GEM countries and only greater than
that of Japan (.6 percent).
• The general public’s relatively low percep-
tion of opportunities for new start-ups
(16 percent) and the fact that only one-
third think that if good opportunities did
exist they would start a business is lower
than all other all other GEM countries,
except Denmark. Key informants also
perceive the entrepreneurial capacity to
pursue the available opportunities in the
United Kingdom to be below the average
of all other GEM countries.
Unique National Features:
• The United Kingdom is unique among the
GEM nations in having relatively benign
government policies.
• Entrepreneurial capacity in the United
Kingdom is depressed because a substan-
tial majority of its citizens have inade-
quate skills. In addition, entrepreneurship
education is significantly underdeveloped.
• The entrepreneurial infrastructure in the
United Kingdom is more than adequate
for the existing level of entrepreneurial
activity, and the nation’s science base is
strong and relatively under exploited.
Key Issues:
• Continued progress must be made in the
quality and effective delivery of entrepre-
neurship education. While advancements
are being made in university-based curric-
ula, little is being done at the primary and
secondary levels.
• Government support is needed for the
new National Enterprise Campaign to
enhance the understanding and public
support of the beneficial role of entrepre-
neurship in economic growth.
• Regional Development Agencies should
strive to strengthen the entrepreneurial
infrastructure by nurturing social
networks between entrepreneurs,
commercial service providers, technology
sources, and formal and informal pools of
investment capital.
Low Level of Entrepreneurial Activity
France
Level of Entrepreneurial Activity:
• Despite an average rate of GDP growth,
France’s rate of new business start-ups
(1.8 percent) is among the lowest of all
GEM countries.
• Fewer women in France are involved in
starting a business than any other
GEM country.
• Approximately 4.4 of every 100 adults in
France are actively investing their personal
funds in new business start-ups. Among
GEM countries, France’s rate of angel
investing is only less than that of Israel
(6.4 percent) and the U.S. (5.5 percent).

36
Unique National Features:
• Both key informants and the adults
surveyed see very little opportunity for
new businesses in France. Additionally,
the key informants believe that the French
lack the capacity to recognize and
pursue those opportunities that do exist.
• Key informants rated the social value of
independence in France lower than any
other GEM country.
• Despite a typical proportion of early
career men and an above-average
participation in graduate education,
experts perceive very little motivation or
incentive to pursue entrepreneurship.
Key Issues:
• The greatest limit to the level of entrepre-
neurial activity in France appears to be the
social pressure for adults to conform to
collective norms and not to independently
pursue opportunities.
• Experts believe the government programs
designed to support entrepreneurial
activity are inconsistent and unpre-
dictable and, in fact, do more to
discourage entrepreneurship.
• The experts felt that the educational sys-
tem in France is mostly oriented toward
thinking more than “doing.” Though the
rate of adults pursuing higher education
is relatively high in France, the general
business education curriculum is not
interdisciplinary. Thus, potential entre-
preneurs are not gaining the educational
skills they need to adequately recognize
and pursue opportunities.
Denmark
Level of Entrepreneurial Activity:
• Entrepreneurial activity in Denmark
(2.0 percent) is significantly less than
that of the most active GEM countries
and below the average for the other
European participants.
• Between the ages of 25 and 44, men are
almost 10 times more likely than women
to be starting a new business in Denmark
— the highest male to female ratio in this
age group among the GEM countries.
• Key informants regard the availability
of opportunities for new businesses in
Denmark as being lower than in any
other GEM country.
Unique National Features:
• The unemployment rate in Denmark
has recently declined to its lowest level
in decades, reducing much of the motiva-
tion to start a business among the most
likely entrepreneurs.
• Denmark’s business culture is marked
by an absence of large firms, numerous
small firms in fragmented industries
and a strong disposition towards
self-employment.
• Society’s “safe-seeking” mindset and
numerous small businesses partially
explain why Denmark has the lowest
level of income disparity among
GEM countries.
Key Issues:
• Government programs designed to encour-
age and support entrepreneurial activity
are often too small to have an impact and
are highly sensitive to political whims.
• Experts perceive the infrastructure to be
generally supportive, but there are
concerns over a general lack of risk
capital. Such concerns are magnified
given the entrepreneurial community’s
overreliance on debt financing.
• The number of perceived opportunities
and the motivation to pursue them are
limited in part by the public’s general
lack of respect for the opportunity-
seeking entrepreneur.

37
Finland
Level of Entrepreneurial Activity:
• The start-up participation rate for the
general adult population in Finland
(1.4 percent) is among the lowest of
all GEM countries.
• Finnish private investment in new
start-ups (2.2 percent) is among the
lowest of all GEM countries.
• The 1999 World Competitiveness Index,
which evaluates the national context for
established firms, ranked Finland as the
third most competitive country in the
world, just after the U.S. and Singapore.
• A series of new policy initiatives are
aimed at fostering entrepreneurship; for
example: alleviation of administrative
burdens and related compliance expenses;
reducing indirect salary-related costs; and
supporting the EU decision to introduce a
lower value-added tax rate.
Unique National Features:
• The Finnish public’s tolerance of entre-
preneurial success and failure is relatively
high; entrepreneurship is perceived to be a
worthy career option.
• One fact that might explain the discrep-
ancy between low start-up rates and
superior economic growth is the “Nokia
Phenomenon.” Nokia, the global leader
in mobile telecommunications, accounts
for more than one-third of GDP growth
in Finland.
Key Issues:
• Further cultural change will be required
for entrepreneurship to take root in
Finland. Key informants noted the
absence of a “growth culture” and the
need for successful role models.
• Increasing start-up participation rates are
likely to entail changes in institutional
issues such as the tax regime, social secu-
rity system and bankruptcy laws.
• The risks inherent in founding and
growing new ventures are not adequately
provided for in personal and corporate
bankruptcy laws or the access to and
availability of private equity capital. As a
result, a high number of bankruptcies and
heavy personal debts were incurred by
small business owners in the recession of
the early 1990s.
• Even though entrepreneurship is
gaining ground in the Finnish edu-
cation system, a great deal remains
to be done if it is to significantly
enhance entrepreneurial capacity.
Germany
Level of Entrepreneurial Activity:
• Germany has a below average start-up
rate, but among the highest for GEM
countries in the low start-up activity
group (2.2 percent).
• Germany’s entrepreneurial climate has
improved recently, and the adult popula-
tion has a relatively high regard for those
involved in starting a new business.
• The rate at which private individuals invest
in new start-ups in Germany (4.4 percent)
is just slightly less than that of Israel (6.4
percent) and the U.S. (5.5 percent).
Unique National Features:
• Personal wealth creation or bankruptcy,
though common consequences of entre-
preneurship, are both regarded negatively
among the German people.

38
• Though the key informants thought there
were ample entrepreneurial opportunities
in the marketplace, only 15 percent of the
adults surveyed did. This is consistent
with the high risk aversion and “safety-
first” mindset prevalent in German society.
• Germany’s entrepreneurial support infra-
structure is perceived to be relatively weak,
particularly the availability of equity
financing, professional services and access
to new technology, although a wide variety
is present.
Key Issues:
• Experts feel that too many government
programs, the lack of clarity between pub-
lic and private initiatives, and the number
of restrictive regulations impede the rate
of start-ups in Germany.
• Germany lacks effective mechanisms for
matching entrepreneurs with sources of
private investment.
• One of the most critical issues affecting
the level of entrepreneurship activity in
Germany is the lack of adequate
entrepreneurship education at all levels
within the German education system.
• Government programs should serve to cre-
ate a more positive image of entrepreneur-
ship and to minimize the effects of soci-
ety’s risk aversion and general negative
impression of self-reliance.
Japan
Level of Entrepreneurial Activity:
• Japan has one of the lowest rates
of independent start-ups among the
GEM countries at less than 1.5 percent
of the population.
• Only 1 percent of adults surveyed believe
that good opportunities for new businesses
exist in the Japanese marketplace.
• Private investment in start-up firms is
practically non-existent.
Unique National Features:
• Only 8 percent of adults believe that those
starting a business are respected; entrepre-
neurship is not recognized as a legitimate
career option in Japan.
• Key informants rated the social value of
independence in Japan lower than any
other country, except France.
• The motivation to pursue new business
opportunities is further reduced by the
practice of many larger established firms
to promote “lifetime” employment and to
base incentive pay on length of service and
age.
• Entrepreneurs who fail in their business
are unlikely to be able to try again.
Key Issues:
• The Japanese approach to education is
encapsulated in the saying, “The nail that
sticks up is hammered down.” This view
along with very little commitment to for-
mal entrepreneurship education is a major
inhibiting factor to the level of entrepre-
neurship activity in Japan.
• The projected decline of the Japanese pop-
ulation by 5 percent between now and
2025 is likely to further depress the rate of
new firm formation.
• Though necessary for increasing Japan’s
level of entrepreneurial activity, the
government’s commitment to boosting
entrepreneurship faces significant
obstacles in every direction — social,
cultural and institutional.

39
VIII. ENTREPRENEURSHIP AND PUBLIC POLICY: TEN PROPOSITIONS
Long-term plans for GEM include signif-
icantly increasing the number of participat-
ing countries. However, even with only 10
countries participating this year, several
striking differences emerged. These include
differences in the level of entrepreneurial
activity, its impact on economic growth, and
the specific factors that promote or hinder
entrepreneurship within each country. But
what is most striking is that, inter-country
differences notwithstanding, certain general
patterns are already evident. These patterns
provide an excellent backdrop against which
to elaborate a set of general policy proposi-
tions. Principal among the general patterns
are the following:
• The strong, positive association between
new firm start-up rates and measures of
economic prosperity, particularly changes
in GDP.
• The fact that there are no countries with
high levels of start-up rates and low levels
of economic growth. High start-up rates
and high levels of economic growth are
always associated.
• The correlation of start-up rates with
short-term measures of GDP growth was
0.6, suggesting that 36 percent of the vari-
ation in national economic growth is
accounted for by variation in new firm
start-up rates. It is probably appropriate
to assume that one-third of national eco-
nomic growth is related to the activities
of established firms, one-third to the
entrepreneurial sector and the remainder
to the interaction between these two sec-
tors, measurement error or unknown
processes. Clearly, this approximation
requires further testing and validation over
time. In the meantime, GEM data gives
strong support for this inference.
• There is a clear quantitative difference
between the countries in the high
entrepreneurial activity group and those in
the intermediate and low activity groups.
There is much less difference between the
intermediate and low activity groups.
These general patterns endorse the
argument that entrepreneurship makes a
difference to economic prosperity and that
a country without high start-up rates is
risking economic stagnation. It is hard to
imagine that any government could ignore
the contribution made by the entrepreneurial
sector to economic well being. Reinforcing
this picture is a further pattern for which
full data has yet to be assembled; the effect
of change in the number of new firms start-
ing, expanding, contracting or closing. This
churning or turbulence within the entrepre-
neurship sector, the process by which entre-
preneurial endeavor both creates and
destroys economic activity and employment,
is an integral part of a strong, healthy eco-
nomy. This process, labeled “creative
destruction” by the Austrian economist
Joseph Schumpeter,25 is captured well in a
1995 report to the U.S. President on the
State Of Small Business:26
“a high rate of business formation
and dissolution is characteristic of a
dynamic economy. Changing tastes
and preferences, new technologies, and
changes in demography and geography
are all accommodated by the entry and
exit of firms”.
The reference to “entry and exit” is
important. Countries that are able to
replenish the stock of businesses and jobs,
and have the capacity to accommodate
volatility and turbulence in the entrepreneur-
ial sector, are best positioned to compete
effectively in the world arena. The backdrop
to the GEM policy propositions is therefore

40
framed by two core phenomena: the demon-
strable impact that entrepreneurship has upon
economic growth and the association,
which requires further validation, between
economic prosperity and the entrepreneurial
process of “creative destruction.” Hence
the first GEM policy proposition.
Proposition 1: Promoting entrepreneur-
ship and enhancing the entrepreneurial
dynamic of a country should be an integral
element of any government’s commitment
to improving economic well being.
All other policy propositions follow
from this first one. Each will now be set
out and the rationale behind it summarized.
Proposition 2: Government policies
and programs targeted specifically at the
entrepreneurial sector will have the most
significant, direct impact.
• GEM considered two sets of framework
conditions: national framework condi-
tions and entrepreneurial framework
conditions. The relationship between the
national framework conditions and the
level of entrepreneurial activity within a
country is relatively weak.
• Efforts to improve the general economic
and institutional climate for business will
benefit the entrepreneurial sector, but the
impact is relatively difficult to demon-
strate compared to measures designed to
improve factors of immediate relevance
to the entrepreneurial sector.
• Key factors include the availability of
equity finance, cost and access to
professional services, and provision
of suitable education and training.
Proposition 3: To be effective, govern-
ment programs designed to encourage and
support entrepreneurial activity must be
carefully coordinated and harmonized so as
to avoid confusion and enhance their
utilization by those for whom such pro-
grams are designed.
• Frustration with government programs
emerged as a key issue in at least five
GEM countries: Denmark, Finland,
France, Germany and Japan. These hap-
pen to be the five GEM countries with the
lowest level of entrepreneurial activity.
• Key informants in these countries
expressed a common set of concerns
relating to program duplication, fragmen-
tation and lack of clarity, often reflecting
a lack of coordination between relevant
government agencies.
• There is evidence, particularly from
the U.S., that entrepreneurs using these
programs are more likely to successfully
launch a business and subsequently
develop it. Better program coordination
combined with good measures of
effectiveness represents a significant
policy opportunity.
Proposition 4: Increasing entrepreneur-
ial activity in any country will entail raising
the participation level of those outside the
core age group of 25-44 years old.
• There are substantial age-related differences
in terms of those engaged in starting new
firms. This is true across all countries.
• Participation in start-ups by those aged
25-44 is greater than that for any other
age group.
• Assuming that current age-related levels
of participation in entrepreneurship
remain unchanged, the impact of
projected demographic changes in the
next 25 years will, for some countries,
significantly depress the level of
entrepreneurial activity.

41
Proposition 5: For most GEM countries
the biggest and most rapid gain in firm start
-ups can be achieved by increasing the part-
icipation of women in the entrepreneurial
process.
• Men are between 1.5 (Israel, U.S.)
and 10 (Denmark) times more likely
to be involved in starting new firms
than women.
• The relative participation of women
engaged in entrepreneurial activity is
the highest in those countries with the
highest start-up rates: U.S., Canada
and Israel.
• Role models exert a powerful influence on
prospective entrepreneurs in many GEM
countries. Highlighting successful women
entrepreneurs could play a significant part
in encouraging other women to start their
own businesses.
Proposition 6: Long-term, sustained
enhancement of entrepreneurial activity
requires substantial commitment to and
investment in education at the post-
secondary level (college, university or
graduate programs).
• The greater a country’s investment in
tertiary education, the higher the rate
of new firm formation.
• Investment in education creates a
knowledge base from which those
starting new businesses are able to draw
from in the form of skilled employees,
technical and other business resources.
• Participation in new venture creation by
those who fail to complete secondary
education is substantially lower than
that for others in the same age group.
Proposition 7: Developing the skills
and capabilities required to start a business
should be integrated into educational and
vocational training programs at all levels.
• Individuals are more likely to start a
business if they believe they have some
of the skills needed to succeed.
• Differences in the assessment of
entrepreneurial skills and capabilities
of the GEM countries accounts for a
significant proportion of the variation in
the start-up rates between these countries.
• The GEM key informant assessment of
the entrepreneurial skills of the U.S., the
country with the highest level of entrepre-
neurial activity, is at the opposite end of
the spectrum to that made by the Japanese
experts whose country has the lowest
start-up rate.
Proposition 8: Regardless of edu-
cation level, emphasis should be given
to developing individual capacity to
recognize new opportunities.
• All entrepreneurial initiative springs from
the perception of market opportunity.
• The assessment of opportunity made by
both GEM key informants and adults in
the population surveys has the strongest
association with the level of entrepre-
neurial activity within a country.
• One percent of adults in Japan per-
ceives there to be good opportunities
as compared with 57 percent in the U.S.
It seems unlikely that Japan has an
extreme shortage of opportunities. It
seems more likely that the Japanese have
not learned how to recognize or value
entrepreneurial opportunities.

42
Proposition 9: The capacity of a society
to accommodate the higher levels of income
disparity associated with entrepreneurial
activity is a defining feature of a strong
entrepreneurial culture.
• Entrepreneurship fosters national
economic growth, generates employment
and creates personal wealth; entrepreneur-
ial activity and income disparity
are two sides of the same coin.
• There is a strong empirical association
between the level of income disparity
and new firm start-up rates.
• It is quite possible that income disparity
itself leads to higher rates of new firm for-
mation, but it is probable that high start-
up rates lead to an accumulation of
wealth by those directly engaged in the
entrepreneurial process.
Proposition 10: Government and public
policy officials and opinion leaders from all
spheres have a key role to play in creating a
culture that validates and promotes
entrepreneurship throughout society.
• No matter how rich a country might be
in terms of entrepreneurial opportunity,
entrepreneurship will not flourish unless
the pursuit of opportunity is regarded as
socially legitimate, entrepreneurs are
respected and their success — or failure —
is socially accepted.
• A key measure of an entrepreneurial
culture, the social value of independence,
has a strong association with the level of
entrepreneurial activity.
• In half the GEM countries, more than
one-third of all key informants identified
prevailing social and cultural values as
the single most significant inhibitor of
entrepreneurial activity. None of these
countries was in the group with the
highest level of entrepreneurial activity.
Summary:
For those countries where
entrepreneurial activity is an integral and
accepted feature of economic and personal
life, start-up rates are high (Canada, Israel
and U.S.). In all other GEM countries,
entrepreneurship and enterprise creation is a
structural and cultural anomaly and those
involved are considered mavericks. Though
two countries have slightly increased their
levels of start-up activity (Italy and United
Kingdom), there is no evidence of major
cultural or structural changes in either of
them. It may take dramatic, sustained
changes in all aspects of the cultural, politi-
cal and economic institutions to make the
quantum leap forward to join the entrepre-
neurial economies. Creating a culture of
enterprise and the associated conditions to
support entrepreneurship will take decades
— perhaps generations — requiring a sus-
tained national commitment that transcends
the political cycle and a short-term emphasis
on the “next election.”

43
IX. CONCLUSION
GEM was originally conceived as a
long-term project involving a large number
of countries. The first year initiative has
served as a pilot and has been very
successful. The GEM conceptual model
works, a unique cross-national measure of
the level of participation in start-ups has
been devised and implemented, and a
rigorous procedure based on standardized
interviews and questionnaires with key
informants has proved highly effective in
capturing the distinctive dimensions of each
country. With minor modifications, all the
GEM research procedures can be replicated
and extended with confidence.
Fully understanding the core issue
addressed by GEM — the relationship
between entrepreneurship and economic
well being — will entail collecting data
from more countries over a longer period of
time. Year one provides a snapshot. The
limitations of a snapshot not withstanding,
what GEM unambiguously shows is that
the level of entrepreneurial activity differs
significantly between countries. This
difference reflects major variations in the
degree to which opportunities are perceived
to exist, rather than differences in opportu-
nities themselves. Entrepreneurship makes
a major contribution to economic well
being, both in terms of economic growth
and job creation, accounting for roughly
one-third of the difference in economic
growth rates between GEM countries.
Among the many factors that contribute to
entrepreneurship, perhaps the most critical
is a set of social and cultural values, along
with the appropriate social, economic and
political institutions, that legitimize and
encourage the pursuit of entrepreneurial
opportunity.
Given this, it is inconceivable that any
government can afford to ignore the contri-
bution that entrepreneurship makes to
economic prosperity. Indeed, there is clear
evidence of a change taking place, with
governments throughout the world making
major commitments to boosting entrepre-
neurship. All too often, however, these
commitments are hamstrung by a lack of
real understanding of how the entrepreneur-
ial process operates. The plethora of pro-
grams and initiatives evident in many GEM
countries is symptomatic of this uncertainty.
By demonstrating the way in which entrepre-
neurship contributes to economic well
being, GEM aims to create a framework
within which effective government policy
can be developed. The ten policy proposi-
tions outlined earlier constitute the first step
in constructing such a framework.
Just as governments cannot afford to
ignore entrepreneurship, neither can those
engaged in research on major economic or
social processes, from whatever field,
responsibly ignore the entrepreneurial
dimension. To do so is to construct an
incomplete picture with limited explanatory
power or public policy value. The GEM
model and associated data collection has
provided a strong conceptual and empirical
base for future work.

44
1 Report presented to Parliament by the United
Kingdom Secretary of State for Trade and Industry,
December 1998, Our Competitive Future: Building
the Knowledge Driven Economy
(http://www.dti.gov.uk/comp/competitive)
2 OECD (Organization for Economic Co-operation
and Development.)
Fostering Entrepreneurship: A Thematic Review.Paris:
Organization for Economic Co-operation and
Development. 1998.
3 See descriptions of the organization and programs
at http://www.weforum.com.
4 Birch, David. 1981. “Who Creates Jobs?”
The Public Interest 65:3-14.
Zoltan Acs and Bruce Phillips. 1997.
“Why Does the Relative Share of Employment Stay
Constant?” Reynolds, Paul D. et al (Eds), Frontiers of
Entrepreneurship Research: 1997. Wellesley, MA:
Babson College. U.S. Small Business Administration,
1999, www.sbaonline.sba.gov. David Birch. 1987. Job
Creation in America. N.Y.: Free Press.
5 Financial Times, 1/2 May 1999.
6 See endnote 1.
7 Thurik, R. “Small Firms, Entrepreneurship, and
Economic Growth.” Rotterdam,
The Netherlands: Erasmus U. F. de Vries Lecture,
1994.
8 Schreyer, Paul. 1996. “SMEs and Employment
Creation: Overview of Selected Quantitative Studies
in OECD Member Countries,” Paris, France: OECD,
STI Working Papers 1996/4.
9 More complete conceptual and operational defini-
tions are provided in the Reference Report and the
Operations Manual.
10 Details of all data collection procedures, including
all interview schedules, and the creation of the mas-
ter data file (which contains more than 400 items)
is provided in the GEM Operations Manual. The
actual data, much of which is confidential, is con-
sidered proprietary, for use only by the GEM nat-
ional teams at this time.
11 OECD (Organization for Economic
Co-operation and Development.)
Quarterly National Accounts Database. Jan.- March
1999 (http://ww.oecd.org/std/gdp.htm).
UNESCO. (United Nations Educational, Scientific,
and Cultural Organization.) Statistical Yearbook:
1997. Paris, France: UNESCO Publishing and Bernan
Press, 1997. United States Census Bureau.
International Data Base. Washington, D.C.
(http://www.census.gov/ftp/pub/ipc/www/
idbnew.html). World Bank. World Development
Indicators: 1998. Washington, D.C.: The World Bank,
1998. Major sources for Israel, which is not part of
the OCED, included sources from the Israel Central
Bureau of Statistics (http://www.cbs.gov.il) and the
Bank of Israel (http://www.bankisrael.gov.il).
12 This work was coordinated through Audience
Selection (a division of Taylor Nelson Sofres plc) of
London, United Kingdom, who have working rela-
tionships with commercial survey research firms in
all 10 of these countries.
13 This makes clear the level of confidence
justified by the data collection procedure.
If the vertical bars do not overlap, then the differ-
ences are statistically significant at the 0.5 level. In
most cases, if the sample size is doubled, the confi-
dence intervals are cut in half. They are never zero.
END NOTES

45
14 The most widely used measure of
association in research is the Pearson Product
Moment Correlation, generally referred to as “the
correlation.” It is basically a means for precisely
describing the degree of association between two
variables, measured on an interval scale (with con-
stant, meaningful differences between the who values,
as with temperature.)
A correlation of zero indicates no association
between two variables; a correlation of 1.0 indicates
a perfect correlation. If a correlation was unlikely to
have occurred by chance less than 5 percent of the
time (in less than one in 20 occurrences), it is general-
ly considered statistically significant. Very low
correlations (or 0.05) may be statistically significant
if based on a large number of observations.
Conversely, only very high correlations are statistical-
ly significant (0.75 or greater) when the number of
observations is small, as with the nine or 10 cases
available for the current analysis. If one variable is
considered to be a cause of a second variable, the
amount of impact may be estimated by squaring the
correlation. For example, if the correlation between
a cause variable and an effect variable is 0.70, the
cause variable may be considered to account for
49 percent of the variation in the effect variable.
The other 51 percent would be attributed to other
sources of influence.
15 The source was OECD (Organization for Economic
Co-operation and Development.) Quarterly National
Accounts Database. Jan.- March 1999
(http://ww.oecd.org/std/gdp.htm), supplemented by
data from government sources in Israel, described in
a previous endnote.
16 Birch, David. 1981. “Who Creates Jobs?”
The Public Interest 65:3-14.
17 Estimates provided in a personal
communication from The Research Institute on the
Finnish Economy in Helsinki
(1 April 1999).
18 The data was taken from K. Schwab and
J. Sachs. The Global Competitiveness Report:1997.
Geneva, Switzerland: World Economic Forum, 1997.
However, considerable work was required to adjust
rank order data to provide interval level
data for each country. These were estimated using
multiple regression analysis.
19
A panel study of start-ups and new firms
in Wisconsin in 1993-95 found that those that
received government assistance were grateful for the
help, rated it highly and had more successful initia-
tives, P. Reynolds and S. White, The Entrepreneurial
Process, Westport, CT: Quorum, 1998.
20 All population data for all 10 countries were taken
from United States Census Bureau. International
Data Base. Washington, D.C. (http://www.census.gov/
ftp/pub/ipc/www/idbnew.html)
21 Projections for 100 years into the future are
available from the United States Census Bureau.
International Data Base. Washington, D.C.
(http://www.census.gov/ftp/pub/ipc/www/
idbnew.html)
22 Table 2.10 of World Bank.
World Development Indicators: 1998.
Washington, D.C.: The World Bank, 1998.
23 Table 2.8 of World Bank.
World Development Indicators: 1998.
Washington, D.C.: The World Bank, 1998.
24 U. K. Department of Trade and Industry,
Competitiveness White Paper, 1998, Page 15.
25 Schumpeter, J.A. 1934.
The Theory of Economic Development.
Cambridge, MA: Harvard U. Press.
26 U.S. Government Printing Office. 1996.
The State of Small Business:
A Report of the President, 1995.

46
For more information on the Global Entrepreneurship Monitor contact:
Paul D. Reynolds
Babson College/London Business School
reynoldspd@babson.edu
www.babson.org
Michael Hay
London Business School
mhay@lbs.ac.uk
www.lbs.ac.uk
S. Michael Camp
Kauffman Center for Entrepreneurial Leadership
at the Ewing Marion Kauffman Foundation
mcamp@emkf.org
www.entreworld.org
For additional copies of this Executive Report, contact:
www.entreworld.org
888-777-GROW (4769)