“Entrepreneurial Challenge”

Prof. Anne Flynn04/14/2005

Traditional Irish Greeting

A chairde.

Tá áthus orm bheith anseo libh agus mo

bhuiochas libh as an fáilte a thug sibh dom.

Entrepreneurship is?

One of the cornerstones of a modern, fully developed economy and the lifeblood of thriving local communities.

An important contributor to economic growth, employment, innovation, and competitiveness.

Structure

Global Assessment [GEM]Entrepreneurial Activity:

Ireland, Europe, USEntrepreneurship in EuropeEntrepreneurial Challenges in

IrelandClosing Remarks

Global Assessment

The Global Entrepreneurship Monitor (GEM) research program - is a global assessment of the national level of entrepreneurial activity.

Initiated in 1999 with 10 countries, the fifth assessment was completed in 2003 with 41 countries.

www.gemconsortium.org

GEM Program Objectives

Are there national differences in entrepreneurial activity?

National consequences of entrepreneurial activity [scope, job creation, growth]?

Why are some countries more entrepreneurial than others?

What can be done to enhance entrepreneurial activity?

GEM Research Activities

Adult population surveys Random sample of adults, 2,000 or more Grass roots entrepreneurial activity

National expert interviews National teams, [18-70 per country]

National expert questionnaires Follows personal interview

Standardised national data IMF, World Bank, UN, OECD, etc

Measures

Total Entrepreneurial Activity (TEA)– provides a measure of those active in

starting a new business [start up process & owning/managing a new firm 3-42 months]

Firm Entrepreneurial Activity [FEA] – an indicator of entrepreneurial activity

among established firms– firms provide new innovations, not just

replicate existing goods or services

What is National Entrepreneurship?

People Creating New Firms Start-up phase, before firm operational Young firm, up to 3.5 yrs old Entrepreneurship among existing firms Produce market innovation, Focus on growth National Infrastructure focuses on

adaptation Coordinated effort, Collaboration among

major sectors, Government, research, education, financial

Overall National Entrepreneurial ActivityTwo Dimensional Classification

Low TEA Medium TEA High TEA

High

FEA

Hong Kong,

Slovenia

China,

Mexico

Chile, Korea (South),

New Zealand,

Uganda, Venezuela

Medium

FEA

Belgium, Finland,

Italy, Sweden

Australia, Canada, Denmark, Iceland, Ireland,

Hungary, Singapore, Spain, UK, US

Brazil,

India

Low

FEA

Chinese Taipei [Taiwan], Croatia, France, Japan, Netherlands, Poland, Russia

Germany, Greece, Israel, Norway, South Africa, Switzerland

Argentina,

Thailand

Opportunity vs. Necessity

Are you involved

To take advantage of a business opportunity

or

Because you have no better choices for work?

Willing volunteers or draftees?

Entrepreneurial Activity

US (TEA) rate 11.9% in 2003, 7th highest.

Ireland (TEA) rate 8.1%, fore in Europe, most entrepreneurial country in EU.

76% of Americans opportunity vs. 85% of Irish entrepreneurs

US (FEA) rate of 2.4%, the 10th highest, Ireland (FEA) rate 1.6%

Nascent and New Firm Rates

Entrepreneurship and Job Creation

US - 70% [employ at least 1 person] Ireland - 84% [employ 5 or fewer]

third only entrepreneur employed. Most expect they will remain small.

High growth aspirations [20+ staff in 5 years time] [Ireland 16%, US 20%, Europe 5.9% ]

Entrepreneurship and Population Profile

US: Most active [25-34] years, TEA 15.7% men vs. 8.2% women, specialized professional, technological, or business degree [highest TEA 17.8% & opportunity driven 13.3%]

Island of Ireland: Most active [35-44] years, 12.5% male vs. women (3.7%), high level of education.

Rates of Entrepreneurial Activity for Men and Women

Entrepreneurship and Cultural Values

The strength of support for entrepreneurship among the general adult population within Ireland is stronger than in the US.

Ireland vs. US – Good career choice [66% - 63%]– High degree of status [76% - 64%]– Positive media coverage [84% -

64%]

Personal Indicators Ireland

*

Northern Ireland

UK US

*

European

Average *

I have the skills to

start a business *46% 42% 48% 54% 40%

I see good opportunities

33% 32% 35% 31% 32%

I know a recent entrepreneur

43% 25% 25% 39% 40%

Fear of failure * would prevent me starting a business

41% 40% 34% 23% 38%

Personal Context of the Population

Entrepreneurship and Financing

Av. Cost of Start-up [US $29,600 / €26,200) Europe $53,800 / €47,600]

US - highest prevalence rate of informal investors with 5 /100 adults having invested in someone else's business during the previous 3 years

Ireland - Low level of informal investment (2.6%) are active business angels, compared to 4.9% in the US.

Rates of Business Angel Activity

Shortcomings that Inhibit Entrepreneurial Activity

Ireland Small size of home

market Early stage finance Fear of failure Rate of

commercialization of research

Skills and experience

Physical infrastructure

United States Reduce gender gap

[1.9 men for every woman]

Lack of financial capabilities - acquiring latest technology

Stronger IPR laws to enhance R&D transfers

Build sustainable financing venues

Entrepreneurship in Europe

SME’s backbone of European economy Conditions in Europe vs. US Green Paper on Entrepreneurship

– How to produce more entrepreneurs?– How to get more firms to grow?

Action Plan: 5 policy areas:entrepreneurial mindsets, incentives for entrepreneurs, competitiveness & growth, access to finance and red tape

Entrepreneurial Mindsets

“Promote awareness of the entrepreneurial spirit by presenting best practice models and fostering entrepreneurial attitudes and skills among young people”

Educational Policy Entrepreneurs are not a

homogenous group

Incentives for Entrepreneurs

Fairer balance between risk & reward

Tackle the negative effects of business failures

Facilitate the transfer of companies and amend social security systems for entrepreneurs.

Entrepreneurship gap between Europe & US is widening.

Incentives for Entrepreneurs

Why do fewer Europeans have what it takes? (Eurobarometer 01/2005)

Balancing the risks: [A regular income, Job stability, Fear of failure]

Rewards [EU - greater independence & self-fulfillment, US - creating one's own working environment]

Similar perceived obstacles Good management = Success

Competitiveness & Growth

Promote access to support & management training for entrepreneurs from all backgrounds, especially women and ethnic minorities.

View immigration as an opportunity for stronger entrepreneurship (US)

Exchange of Good Practice

Access to Finance

Improve the availability of venture capital, business angel finance and investments by private individuals (US)

Continue efforts to mobilize capital to support young, risk-taking businesses.

Red Tape

Reduce & simplify administrative barriers & regulatory burdens

World Bank "Doing Business Survey 2005” [ease of starting a business]

EU busy pushing reforms, still lag US US [5 days & 5 administrative steps

to start a business] vs. EU [36 days, 7.5 steps]

Entrepreneurial Challenges in Ireland

172,000 small businesses

60% of total turnover

66% of employment 50% of private

sector employment 80% service sector 16,000 new

enterprises are created per annum

Enterprise Driven Society

Less employment in large companies & public sector

Size of the domestic economy Government foster an

entrepreneurial climate & enterprise culture

Small Firms Association of Ireland - major impediments and challenges facing the enterprise led sector & appropriate actions

Competitiveness

Ireland’s competitive position is now in a tailspin [4th position 2000 - 30th today!]

An expensive & less attractive place to do business. [min wage 22% higher, insurance costs risen 100% in 2 years, retail space Dublin (capital city) most expensive in the world! red tape adds 4% to product cost]

SME’s - [non-pay costs 23.7% 2002 - 2004] “You must create wealth before you can

redistribute it.”

Skilled Workforce & Knowledge Driven Economy

In a knowledge-based economy– Well-supported process of life long

learning, training & up-skilling programs

– Intellectual property system is open and inviting

– Focus on technology transfer, licensing, the importance of 'change' or 'new ideas’ rather than 'R&D'

Infrastructure

Current gridlock is threatening enterprise formation & development

Specialized body assessing planning applications & reprioritizing projects

Liberalization & deregulation within the energy market

Strive to have the "best in class" telecommunications infrastructure

“Environmental accreditation”

Government Support

Comprehensive fiscal approach to enterprise– Retaining low corporation tax rates

(12.5%)– Reducing inflation below 2%– Standard rate of VAT to 17.5%– No increases in labor costs

Regulatory Burden

“Simplicity needs to be rediscovered as a virtue.”

Comply - An owner manager would have to read almost one million words per annum & complete forms running to over 500 feet in length.

SME’s cite legislation as the most significant problem for their business.

Cost impact analysis on businesses

Encouraging Business Start Ups

Develop an" Enterprise Culture” Remove barriers to

entrepreneurship Availability of pre and start up seed

capital Increase number of female

entrepreneurs

ICT & Training

Maximize the potential of ICT for every small business & speed up the roll-out of broadband digital access

Training objectives - driven by business needs & Increase management competency among small firms

Enterprise courses

Value of Sectors

“Value Added" economy Barriers to trade within the Eurozone

“Create a business environment which makes it possible to sustain an

economic and social shift to a high skill, higher value added competitive

environment.”

“Ahead of the Curve: Ireland's Place in the Global Economy.”

Closing Remarks

Strong positive contributors and the shortcomings that inhibit entrepreneurial activity

Shared challenges in fostering entrepreneurship

“Go raibh maith agaibh go léir .”