GEM: Uganda, Malaysia and beyond— start-ups everywhere!

I thought it might be nice to follow up on Peter’s last two posts about entrepreneurship in the Philippines with a global view of startup activity based on the wonderful work of my friends and colleagues at GEM, the Global Entrepreneurship Monitor. We often think of the United States as the entrepreneurship leader, but like anyone who takes a leadership position for granted, we need to pay attention to who’s nipping at our heels and challenging that position. If GEM's numbers are right, America’s leadership position is definitely not what it used to be relative to other nations.

In 2012, GEM published its 13^th annual survey of entrepreneurial activity around the world, interviewing over 140,000 adults in 54 economies. From this research they can estimate that as of 2011, we have about 388 million entrepreneurs on this planet starting and running new businesses. It might surprise you to learn that of those, 163 million were women and about 168 million are between the ages of 18 and 35 (which suggests that more than half are older than 35) [You can download a copy of the study from their site].

GEM's numbers are based on what they call “total entrepreneurial activity” or TEA, which consists of nascent entrepreneurs (“…entrepreneurs who are in the first three months of running a new business”) and new entrepreneurs (…”have been in business more than three months but less than three and a half years.”). When they look at countries (economies), they also look at what they call “activity phases,” which reflect the country's level of economic development. They do this because comparing a country like Uganda with the U.S., for example, is definitely comparing apples and oranges. Countries are grouped into three categories based on GDP per capita and share of exports according to the definitions in the World Economic Forum’s Global Competitiveness Report.

Factor-driven economies such as Algeria, Bangladesh, Iran, and Venezuela
Efficiency driven economies such as Brazil, China, Malaysia, and Turkey
Innovation driven economies such as France, Japan, Singapore, and the U.S.

It’s interesting that GEM finds that in countries like Bangladesh, the people may see lots of opportunities to launch businesses, but they don’t believe they have the skills to do it and their fear of failure is high. Conversely, given the recent economic climate in Europe, people in places like Greece and Spain can’t see any real opportunities for starting businesses. On the other hand, we Americans are fairly “modest” about how we perceive opportunity, but we’re very confident that we have what it takes to start a business. To use a cliché, it’s that just-do-it mentality.

One of the more interesting stats that GEM reports is the percentage of adults in each economy who are engaged in early-stage entrepreneurship (TEA). Fortunately, the study finds that TEA rates have been increasing from 2010-2011 around 25% after a decline caused by the global economic environment.

Top Entrepreneurial Activity by Phase of Economic Development, 2011 (GEM)
Type	#1 Economy	#2 Economy
Factor	Guatemala - 19.3%	Venezuela-15.4%
Efficiency	China - 24%	Chile - 23.7
Innovation	United States - 12.3	Australia - 10.5

What is interesting to note, and it goes back to my opening remark about the U.S.'s leadership position, our percentage of adults engaged in early-stage entrepreneurship (nascent and new business) is half that of China's rate and nearly half the rate of the tiny country of Chile. To be fair, GEM also found that as you move from low (factor) to high (innovation) economic development levels, the TEA levels drop steeply, but the established business ownership remains relatively level, which suggests that in countries like Guatemala and Chile, many people start businesses but they don't sustain them at the rates of the innovation economies.

If you want to have some fun comparing various economies, check out the GEM site's interactive graphics.where you can pick the countries you want to compare and generate a graphic like the one below. http://www.gemconsortium.org/visualizations

The GEM report also looks at reasons for starting (intention) and why entrepreneurs discontinue their businesses. It's a fascinating look at entrepreneurship on a global scale and I encourage you to check it out. You may come away with a new understanding of why so many of our U.S. entrepreneurs are looking at opportunities in emerging economies, because as I said earlier in this post, in those economies the perception of opportunity is high but they need a lot of help and encouragement, something we're very good at..

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The Venture Edge

GEM: Uganda, Malaysia and beyond— start-ups everywhere!

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