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High-expectation entrepreneurial activity represents only a small proportion of all entrepreneurial activity, yet it explains the bulk of expected new jobs by cohorts of nascent entrepreneurs and baby businesses. Depending on country and world region, only some 3% to 17% of nascent entrepreneurs and baby businesses expect to employ 20 or more employees within five years. Only some 1 % to 7 % of nascent entrepreneurs and baby businesses expect to employ 50 or more employees within five years. However, its economic potential is significant, as high-expectation entrepreneurs are responsible for up to 80% of total expected jobs by all entrepreneurs.
The rate of high-expectation entrepreneurial activity varies significantly among world regions and individual countries. The highest adult-age population-level participation rate in high-expectation entrepreneurial activity is observed for North America (Canada and USA), Anglo-Saxon countries
1 (Australia, Ireland, New Zealand, United Kingdom, and USA), and Oceania (Australia and New Zealand). For these regions, the population-level prevalence rate of high-expectation entrepreneurial activity ranges from approximately 1% to 1.6%. The lowest adult participation rate in high-expectation activity is observed for European and highly developed Asian countries (HongKong, Korea, Japan, and Singapore), where this rate is approximately 0.5%. In Spain, adult-age participation in high-expectation entrepreneurial activity (20+ expected jobs) is only approximately 0.2%.
The prevalence rate of high-expectation entrepreneurial activity in Europe and highly developed Asia is worryingly low. There are no differences between European country groups (large EU countries, small European countries, new EU member countries), even though differences can be observed between individual countries. Spain, in particular, stands out because of its low participation rate in high-expectation entrepreneurial activity.
High household income, high education level, and opportunity motivation are most strongly associated with high-growth expectations. The greatest distinguishing elements for high-expectation entrepreneurial activity are observed for income, education, and opportunity motivation. These are suggestive of the individual-level economic trade-offs related to the entrepreneurial decision.
Population cells differ significantly in terms of high-expectation entrepreneurial activity. The highest prevalence observed for a single population cell (a ‘population cell’ refers to a sub-group of the general population, defined using one or several demographic characteristics such as age category, gender, and education level) is ten times higher than the population wide participation rate in high-expectation entrepreneurial activity. Of baby business managers, 25-34 year old, high-income and well educated males displayed a 4.4% participation rate in high-expectation activity meaning that nearly one in twenty individuals in this population cell are actively engaged with high-expectation entrepreneurial start-ups.
The relative prevalence of high-expectation activity appears positively associated with national entrepreneurial framework conditions. The correlation analysis suggests that the anatomy of entrepreneurial activity is more strongly associated with national conditions than is the overall prevalence of high-expectation activity. This may be associated with differential opportunities for entrepreneurship in high-and low-income economies.
Active policy has a role to play in promoting high-expectation entrepreneurial activity. Even though direct causal inferences are not possible from the present analysis, the evidence of differential relationships with national conditions for different forms of entrepreneurial activity suggests that there is room for active entrepreneurship policy interventions.
Governments should be aware of the importance of high-expectation and high-potential entrepreneurial activity and consider introducing highly selective support measures and policies. To the extent to which the goal of government policy is to support job creation through entrepreneurial activity, governments should be aware of the highly skewed distribution of job creation expectations within populations of nascent and baby businesses. They should study who is behind high-potential entrepreneurial activity, and how this kind of activity could be supported. Given the skewness of the distributions reported here, highly selective policy measures could prove more effective for job creation purposes than non-selective ones.
Contents
Executive Summary
Key Findings
Introduction
The GEM Method
Sources of Data
Definitions and Measurement of Nascent Entrepreneurship and Baby Businesses
Definition of High-Expectation Entrepreneurial Activity
The Importance of High-Expectation Entrepreneurship: Why it matters
Prevalence of High-Expectation Entrepreneurial Activity in Different World Regions and Countries
Conclusions
Job Generation Potential of High-Expectation Firms
Job Generation Potential by Country and World Region
Conclusions
Who is Behind High-Expectation Entrepreneurial Activity?
Global Differences Between High-Expectation and Low-Expectation Nascent and Baby Businesses
Differences between High-Expectation and Low-Expectation Nascent and Baby Businesses – Europe
Prevalence Rates among Well Educated, High-Income Males
Conclusions
National Entrepreneurial Framework Conditions and High-Expectation Entrepreneurship
Conclusions
Encouraging High-Expectation Entrepreneurship – Implications for Policy
General Policy Implications
Conclusions for High-Income Countries
Conclusions for Low-Income Countries
Endnotes
References
About the Sponsors
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