The 2011 Global Entrepreneurship Monitor (GEM) Report

Excerpts provided by guest author Donna Kelley

In 2011, the Global Entrepreneurship Monitor (GEM) conducted its 13th annual survey of the rate and profile of entrepreneurial activity around the globe. GEM interviewed more than 140,000 adults (18-64 years of age) in 54 economies, spanning diverse regions and a range of development levels. Based on this survey, GEM estimated that there were 388 million entrepreneurs actively engaged in starting and running new businesses in 2011. Of these, there were an estimated:

• 163 million women early-stage entrepreneurs
• 165 million young early-stage entrepreneurs between the ages of 18 and 35 years
• 141 million early-stage entrepreneurs expecting to create at least five new jobs in the next five years
• 65 million early-stage entrepreneurs expecting to create 20 or more new jobs in the next five years
• 69 million early-stage entrepreneurs with innovative products and services that are new to customers and with few other competitors
• 18 million early-stage entrepreneurs selling at least 25% of their products and services internationally

A key finding of the 2011 survey is the marked increase in TEA rates from 2010 in many economies across all economic development levels. This is particularly notable given the economic distress experienced throughout much of the world in the previous years.

On average, 16 middle-stage developing economies participating in GEM in both 2010 and 2011 showed a nearly one-quarter average increase in TEA rate. Argentina, Chile, and China were among those economies with an already above average TEA rate in 2010, followed by large increases in 2011.

Twenty developed economies participating in both years showed, on average, a nearly 22% increase in 2011. TEA rates in Australia and the United States both increased substantially from above-average TEA rates in 2010.

While there is a greater prevalence of early-stage entrepreneurs in emerging economies, one must keep in mind that many are participating in this activity because they have no other options for work. In the developed economies, on the other hand, there are more employment options, and some may prefer to work as employees. Yet, while there are fewer entrepreneurs in the developed economies, these individuals are more likely to impact their societies through growth (and therefore job creation), innovation, and internationalization.

Entrepreneurial employee activity (EEA) was selected by the GEM consortium as a special topic for 2011. GEM defined this form of entrepreneurship as involving employees developing or launching new goods or services or setting up a new business unit, a new establishment or subsidiary for their main employer. Despite this broad definition, EEA was not found to be a very widespread phenomenon. On average, only about 3% of the adult population was involved in this activity, but its prevalence differed markedly across individual countries, from slightly more than zero in some emerging economies to almost 14% in Sweden.

EEA is generally low in emerging economies and most prevalent in the developed world. This observation is in contrast with the pattern for early-stage entrepreneurial activity. For some economies with the highest levels of EEA in their adult populations, they also exhibited among the lowest TEA rates: for example, Denmark, Belgium, and Sweden. This indicates that entrepreneurship in organizations replaces, to some extent, independent entrepreneurship. At the same time, the three developed economies with the highest TEA rates—the United States, Australia, and the Netherlands—also have high EEA, suggesting that entrepreneurial activity can also thrive in both forms.

Similar to early-stage entrepreneurs, entrepreneurial employees are significantly more likely to perceive entrepreneurial opportunities and believe they have the capabilities for starting a business. However, the analysis shows that employees who are involved in EEA have substantially higher job growth expectations and innovation for their new business activity than independent entrepreneurs, showing the impact this form of entrepreneurship can produce in an economy.

GEM maintains that economic development requires entrepreneurial activity and a supportive environment. To create such energy for making positive changes, it is necessary to take into account that entrepreneurship is not a heroic act of a few individuals but the accomplishments of many people who are pursuing their ambitions in a supportive cultural and institutional environment.