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Association Between Entrepreneurial Activity and Economic Growth Figure 6: Total Entrepreneurial Activity (TEA) and Subsequent Growth in GDP (Two year Time Lag; Data pooled from GEM 2000 and GEM 2001; excludes Hong Kong and Singapore) 25.00 20.00 TEA at Time 0 15.00 10.00 5.00 0.00 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 Percent Growth in GDP at Time +2 r = 0.47 7.00 22 some countries have followed an alternative strategy of serving as a major trading platform in the world economy. For example, both Hong Kong and Singapore have a total import and export trade that is several times their GDP. National growth in such countries is more likely to reflect international trading conditions than internal entrepreneurship. Indeed, if these two countries are removed from the analysis, the correlations between total entrepreneurial activity and growth in GDP universally increase. This suggests that there may in fact be several paths to successfully promoting national growth. 15 The correlation with a two-year lag, which combines data from GEM 2000 and 2001 TEA measures, is presented graphically in Figure 6. All data points are shown, as well as the best-fit correlation line without the high export trading countries (i.e., Hong Kong and Singapore). This presentation makes it clear that the correlation is reduced by countries with high levels of national growth and low levels of entrepreneurship (such as Belgium and Singapore), and that there are no countries with high levels of entrepreneurial activity and low levels of national economic growth. If such countries existed, they would be found in the upper left corner of Figure 6. This analysis does not suggest that entrepreneurial activity is by itself a source of economic growth. It does, however, indicate that changes in the economic structure and market processes within a country leading to economic growth may occur more quickly when an active entrepreneurial sector is available to implement such changes. Resolving the complex interrelations between basic enhancements to factor conditions, entrepreneurial activity and national economic growth will require an analysis of more countries over a longer period of time.
National Context and Entrepreneurial Activity The history, institutional structure and cultural/social systems of the 37 countries in GEM 2002 are quite diverse and may have an impact on the patterns of entrepreneurial activity observed in this year’s study. In order to “flesh out” such differences, GEM national teams in 34 of the GEM 2002 16 countries collected two types of data from national experts: 17 (a) narrative answers to semistructured face-to-face interviews, 18 and (b) quantitative responses to a 10-page questionnaire. 19 Drawing from the conceptual model presented in Appendix A, national experts were chosen by GEM national teams to represent the following nine entrepreneurial framework conditions: (1) presence of financial support, (2) government policies, (3) government programs, (4) education and training, (5) research and development transfer, (6) commercial and professional infrastructure, (7) internal market openness, (8) access to physical infrastructure, and (9) cultural and social norms related to entrepreneurship. During the course of the face-to-face interviews, each national expert was asked to articulate the strengths and weaknesses of the entrepreneurship support structure in his or her particular country. Their opinions provide an interesting general impression of the relative importance of each of the nine framework conditions. For example, across the 1,000 experts contacted for GEM 2002, cultural and social norms were clearly given emphasis as the leading strength — about 25 percent of all comments were related to this topic — or the second most important weakness. Two other areas were also strongly considered to be either a major strength or significant weakness: government policies, and education and training. With few exceptions (e.g., Singapore considered financial support to be its top strength), these three domains were consistently considered to be the leading national issues around the support of entrepreneurship. Correlations between the nine framework conditions (as measured in the expert questionnaire) and the overall TEA index, as well as opportunityand necessity-based entrepreneurial activity, are provided in Table 7. The results are quite striking. Most of the correlations associated with overall TEA or opportunity-based entrepreneurial activity are not statistically significant. There is, however, a significant positive relationship between these items and the capacity of the people in the country to implement and manage new firms. There is also a positive correlation between opportunity-based entrepreneurial activity and the perceived presence of business opportunities. On the other hand, strong protection for intellectual property is negatively associated with all three measures of entrepreneurial activity. This may be a reflection of the fact that the level of entrepreneurial activity is highest in developing countries where protection for intellectual property is yet emerging. It is the relationships to necessity-based entrepreneurial activity that are the most dramatic feature of this portion of the analysis. All seven statistically significant correlations are negative in direction. Specifically, in those countries lacking in financial support, government policies and programs, mechanisms for transferring research and development to new firms, the presence of commercial and professional infrastructures and the protection of intellectual property rights, there are higher levels of necessity entrepreneurship. The consistently negative relationship between the quality of the infrastructure and the level of necessity entrepreneurship, as well as the lack of relationship between framework conditions and opportunity entrepreneurship, may be a reflection of three phenomena. First, necessity entrepreneurship is most prevalent in developing countries such as Thailand, India, Korea, Brazil, China and Mexico, where financial support, education and training and physical infrastructure are among the least extensive. Second, entrepreneurship-enhancing programs and policies implemented by a large number of developed countries, principally in the European Union, have only resulted in modest levels of activity so far. Third, the well-educated, highly experienced experts 23
Page 1 and 2: GLOBAL ENTREPRENEURSHIP MONITOR 200
Page 3 and 4: Global Entrepreneurship Monitor 200
Page 5 and 6: Lists of Tables and Figures List of
Page 7 and 8: Team Denmark Finland France Germany
Page 9 and 10: Executive Summary The Global Entrep
Page 11 and 12: Scope of Entrepreneurial Activity O
Page 13 and 14: Cross-National Differences in Entre
Page 15 and 16: Figure 3: Global Distribution of To
Page 17 and 18: Table 3: Change in Percent Growth i
Page 19 and 20: Motivations and Types of Entreprene
Page 21 and 22: entrepreneurially active adults exp
Page 23 and 24: Science, Technology and High Potent
Page 25: Association Between Entrepreneurial
Page 29 and 30: Special Topics GEM research provide
Page 31 and 32: Correlations between several nation
Page 33 and 34: Figure 9: Domestic Classic Venture
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Page 37 and 38: y which individuals assemble the re
Page 39 and 40: (i.e., motivation and skill) of the
Page 41 and 42: International Database projections
Page 43 and 44: Table E-2: Correlations Between Yea
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