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Hidden entrepreneurs make up for Europe’s low start-up rate

entrepreneur

20 December 2016

  • Northern Europe has an unusually high rate of ‘intrapreneurs’, making up for low levels of start-ups and debunking the myth of Europe’s lack of entrepreneurs, a new study shows
  • Germany, France, Italy and Spain, however, come in at the bottom of the combined ranking measuring entrepreneurship both at start-ups and inside established businesses
  • Aston enterprise expert Professor Mark Hart co-authors report, saying UK entrepreneurial capacity is important for growth of existing businesses

Europe has long had the paradoxical reputation of a continent with low levels of entrepreneurship, yet high overall levels of economic competitiveness. A new report produced by the World Economic Forum and the Global Entrepreneurship Monitor provides an explanation: Europe is home to many intrapreneurs, individuals who choose to innovate within organizations.

The findings go against the widely-held belief of the dismal state of entrepreneurship in Europe.Indeed, the report finds, what Europe lacks in early-stage entrepreneurship, it makes up for in intrapreneurship:

  • Of all regions surveyed, only the US, Canada, and Australia scored better than Europe for intrapreneurship: out of every 100 workers in Europe, 8 could be classified as intrapreneurs. In other regions, including India (South Asia), China and ASEAN (Southeast Asia), Latin America and Africa, that number is lower  
  • That contrasts with Europe’s score for what is traditionally seen as entrepreneurship: people involved in start-ups, or “early-stage entrepreneurial activity”: only 4 out of 100 Europeans in the workforce are active as start-up entrepreneurs, among the lowest rates in the world   

The findings are important for future potential growth in Europe, as those who innovate within organizations tend to create more jobs than those who start their own business. A correlation also exists between intrapreneurship rates and economic competitiveness: every 2.5% increase in a country’s intrapreneurship rate correlates to a 1 point increase in competitiveness as measured by the World Economic Forum’s global competitiveness data.

But the news is not all good. The European results vary widely, and are worst in its industrial heartland. The UK, one of Europe’s strongest economies, is the exception among large countries, coming in 5th overall and 3rd in intrapreneurship. But Germany (24th) and France (25th) appear at the bottom of the combined ranking, despite a moderate score in intrapreneurship. The three worst ranking countries overall are Greece (26th), Spain (27th) and Italy (28th). It is a worrying sign as Europe’s competitiveness depends on that of its heartland. Estonia, Sweden and Latvia come out on top. Other Northern countries also score well for the combined ranking of entrepreneurship and intrapreneurship, bringing up the continent’s total score.

Country

Overall rank

Intrapreneurship

Entrepreneurship

%

Rank

%

Rank

Best performers

Estonia

1

4.30%

11

12.60%

2

Sweden

2

9.10%

1

7.40%

17

Latvia

3

2.20%

24

13.30%

1

Netherlands

4

5.40%

6

9.60%

6

United Kingdom

5

6.50%

3

8.50%

11

Worst performers

Germany

24

3.50%

16

5.50%

24

France

25

3.30%

19

5.40%

26

Greece

26

1.10%

27

7.00%

19

Spain

27

2.00%

26

5.70%

22

Italy

28

0.70%

28

4.00%

28


The report explains the implications for policy makers, and ways they can design policies to enhance the economic competitiveness and unleash all types of entrepreneurship. The choice is not between start-ups and intrapreneurship as economies flourish when all types of entrepreneurship exist at healthy levels.

Professor Mark Hart, of the Enterprise Research Centre at Aston Business School and co-author from Global Entrepreneurship Monitor, said: “While the UK’s relatively high levels of start-up activity by European standards are often lauded this research shows that the entrepreneurial capacity of the nation goes way beyond new venture creation and is more important in terms of the future growth trajectory of existing businesses”.

“In the public debate on entrepreneurship, a false contrast is often presented – the dynamic start-up entrepreneur versus the stale corporation. This report rebukes that narrow perspective on entrepreneurship,” says Michael Drexler, Head of Investors Industries at the World Economic Forum. “A better approach is to create policy frameworks that enable ‘collaborative innovation’, where young firms and established companies share complementary resources to support new ideas.”

“Countries should strive for a ‘healthy’ set of both types of entrepreneurship” said Niels Bosma, Utrecht University and co-author from Global Entrepreneurship Monitor. “Independent, innovative entrepreneurship is important as it is allows for introducing and testing very new concepts or ideas. New entrepreneurial projects that have been successfully introduced to the market will likely have a bigger impact as these projects can tap into the resources available within the existing firm.”

Professor Jonathan Levie, of the Hunter Centre for Entrepreneurship at Strathclyde Business School and co-author from Global Entrepreneurship Monitor, said: “When taken together the EEA and TEA rates provide a fuller picture of the extent of entrepreneurial activity being undertaken in a nation. The UK continues to have a relatively high rate of entrepreneurship among employees by international standards.  This is good news because resources for new business activities are often easier to access within established businesses.”

Read the full report here: http://www3.weforum.org/docs/WEF_Entrepreneurship_in_Europe.pdf

ENDS 

Notes to the editor

Enterprise Research Centre, Aston Business School, Aston University (www.enterpriseresearch.ac.uk) and Aston Centre for Growth (http://www.aston.ac.uk/aston-business-school/business/centre-for-growth/)

About GERA and GEM:

The Global Entrepreneurship Research Association (GERA) is, for formal constitutional and regulatory purposes, the umbrella organization that hosts the GEM project. GERA is an association formed of Babson College, London Business School and representatives of the Association of GEM national teams.

The GEM program is a major initiative aimed at describing and analyzing entrepreneurial processes within a wide range of countries. The program has three main objectives:

  • To measure differences in the level of entrepreneurial activity between countries
  • To uncover factors leading to appropriate levels of entrepreneurship
  • To suggest policies that may enhance the national level of entrepreneurial activity

About Aston University:

  • Founded in 1895 and a University since 1966, Aston University has been always been a force for change. For 50 years the University has been transforming lives through pioneering research, innovative teaching and graduate employability success. Aston is renowned for its opportunity enabler through broad access and inspiring academics, providing education that is applied and has real impact on all areas of society, business and industry. True to Aston’s Coat of Arms which bears the word ‘Forward’, in 2016 Aston will hold a year-long anniversary celebration to recognise its heritage and achievements, but with a focus to drive forward the next stage in the University’s exciting journey. www.aston.ac.uk/50
  • Aston's Vice-Chancellor and Chief Executive, Professor Alec Cameron, is the principal academic and executive officer of the University. Alec has overall responsibility for Aston's executive management and day-to-day direction.

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