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Global Entrepreneurship Monitor Report Analysis
Entrepreneurship is one of the most prospective activities that allow people building the type of life that they want and in the same time stimulate the economic development of their country. Thus, stimulation of this type of economic activity should be the priority for government of any country. Therefore, each country has to evaluate the factors that influence the attitudes of the population towards entrepreneurship and impact the development of the business climate. Moreover, there are organizations that focus on such studies and compare as well as contrast different countries in terms of a wide variety of factors. As a result, they create global reports which assist the governments and citizens in perceiving this phenomenon and they provide information for further analyses.This paper aims at investigating the reports of Global Entrepreneurship Monitor (GEM) organization of the US and UK. Additionally, it provides an interpretation for the annual assessment of the national level of entrepreneurial activity, comparing and contrasting some selected countries. Moreover, it encompasses a critical analysis of the underlying differences in the entrepreneurial capacities of the US and UK. Consequently, the performed analysis allows tracking of the entrepreneurial behaviour patterns, exposing the issues that should be addressed in order to stimulate people to start their own businesses.
Purpose and Methodology
The reports of GEM compare some measures of entrepreneurial activity, aspiration and attitudes in different countries of the world. Furthermore, GEM was founded based on the belief that, too little understanding existed about the individuals that start businesses around the world (Kelley et al. 2012). GEM surveys encompass both formal and informal types of businesses, avoiding the problems faced by some researches which focus solely on registrations of business entities. Moreover, the GEM reports include summaries of the selected features regarding the national, age and gender factors as well as the entrepreneurial expectations and concerns. The aim of this study is to assess, compare, contrast and interpret the reports of two countries, the US and the UK.
The GEM research consortium has been measuring entrepreneurial activity of working age adults across a wide range of countries in a comparable way since 1998 (Levie, Hart 2012). In recent years, the researchers conducted studies of around 69 countries and presented a comprehensive analysis of entrepreneurial activities in the adult population of these countries. One of the issues that are of primary importance to GEMs studies is the differences in the levels of entrepreneurial activity. Moreover, it focuses on revealing the factors that lead to an appropriate level of entrepreneurship and suggests the policies that could enhance a national level of entrepreneurial activity (Levie, Hart 2012). Likewise, it examines such issues as nascent entrepreneurs, new and established business owner-managers. In addition, the reports address peoples intentions for starting a business as well as the cases when people have sold, quit or discontinued their businesses. It is important to note that these studies focus not on the businesses but on the entrepreneurs that once owned, own right now or are willing to start a business.
Next, one should note that GEM measures the propensity of an individual to start a business in the existing social, economic and cultural conditions. The basic methodology of gathering information for such reports relies on print, on-line and telephone surveys. Thus, in 2013, the GEM study in the UK interviewed 11,017 adults aged 16-80, whereas the study in the US is based on the interviews of 5,698 adults.
Attitudes towards Entrepreneurship, Activity and Unemployment
It some part of the differences in the levels of business activity between the selected countries can be explained by the differences of the populations attitudes towards entrepreneurship. That is why the study provides a comparison of the entrepreneurial attitudes in the US and the UK. The demographics of the people who participated in the survey include people aged 18-46 who are not already nascent entrepreneurs or owners of a business (Figure 1).
Figure 1. Attitudes towards entrepreneurship in the UK and the US percentage of working population who are neither nascent entrepreneurs nor existing business owners/managers, who expressed an opinion and agreed with the statement at the top of the column (Levie, Hart and Bonner 2013).
Consequently, the awareness of a anyone who recently created a start-up is higher in the UK than the US. At the same time, the proportion of people who believe that there is a good opportunity for a start-up in the next six month was lower in the UK compared to the US. Likewise, the rate of skill perception in the UK was also lower together with a higher rate of fear of failure, compared to the respective variables in the US. Moreover, a comparison of surveys in 2011, 2012 and 2013 reveals that the proportion of people who believe in the existence of good start-up opportunities in the UK is increasing. Next, there is a difference in the number of those people who relate the success to a social status (80%), and in the number of those who believe in that starting a business is a good career choice (55%). Experts claim that this might be caused by lack of the portrayal of successful businessmen in the UK, which might stimulate interest towards starting an own business (Levie, Hart and Bonner 2013).
Furthermore, in 2013, 47% of Americans believed there were good opportunities for starting a business and 56% believed they had the necessary capabilities for launching a business. At the same time, 37% of entrepreneurs expected to employ six or more employees in the next five years (Kelley et al. 2013). Likewise, 25 million of Americans were either starting or already running a new business and an estimated 14 million ran an established entrepreneurship. Thus, this comparison shows that the US demonstrates higher rates of entrepreneurship compared to the UK. Moreover, one should address the total early-stage entrepreneurial activity (TEA), which is the sum of the nascent entrepreneurship rates and the new business owner/manager rates (Levie, Hart and Bonner 2013). Figure 2 demonstrates that between the years of 2003 and 2013 that there is a decline in the UK TEA rate to the level of 2011, whereas the US demonstrates predominance and stability.
Figure 2. Total early-stage Entrepreneurial Activity (TEA) in the UK and the US (2003-2013) (Levie, Hart and Bonner 2013).
One should note that peoples attitudes towards starting a business and perspectives of entrepreneurship correlate with rates of unemployment. For example, the US economy added about 2.3 million non-farming jobs, and the unemployment rate decreased from 7.9% to 6.7% throughout the year 2013 (Kelley et al. 2013). In general, the US economy is characterized by a significant drop of unemployment rates with the peak being 10% in 2009 (Figure 3).
Figure 3. United States Unemployment Rate, 2009-2013 (Kelley et al. 2013).
At the same time, the unemployment rate in the UK is higher than in the US. For example, it increased from 5% to 8% in the period from 2000 to 2007 (Figure 4) (Patterson et al. 2013) balancing between 7.7-7.8% in 2013 (Pym 2013). Thus, one presumes that peoples doubts about starting a business might be connected with the perspectives of losing their current jobs and staying unemployed after possible business failure.
Figure 4. Unemployment Rate in the UK (Patterson et al. 2013).
Gender and Age
Next, one should address the gender and age factors in UK and US in order to find possible correlations of these factors with readiness to start or owning a business. For instance, it is important to stress out that in the selected countries men are approximately two thirds as likely to be entrepreneurially active as women. In the US the ratio of female to male TEA was 69% in both 2012 and 2013, whereas in the UK the level of female TEA was 66% of mens TEA, up from 57% in 2012. At the same time, in 2013, the US TEA rate remained unchanged (10.4% for women and 15.1% for men) whereas the UK TEA rate decreased significantly, from 7.1% to 5.8% for women and from 12.4% to 8.7% for men.
Figure 5. Total early-stage entrepreneurial activity by gender in the UK and the US in 2013 (Levie, Hart and Bonner 2013).
Consequently, the UK to US ratio is 55.8% for mens TEA and 58% for womens TEA (Levie, Hart and Bonner 2013).Thus, the total early-stage entrepreneurial activity remains higher in the US for both genders with the predominance of male representatives in both countries (Figure 5).
Furthermore, one may wonder whether gender may correlate with the rates of economic growth. The studies in some of the states of the US revealed the absence of such connection. Thus, overall, there are 45% more men entrepreneurs than women entrepreneurs in the US (Kelley et al. 2013). For instance, among the states under study, California comes closest to gender equality whereas Michigan and New York have the lower rates of womens entrepreneurship. However, the GEM report (Kelley et al. 2013) indicates that Michigan achieves a greater overall TEA rate with high levels of participation among men. In addition, despite the fact that the distribution of male and female employees in the UK is almost equal (with 56.6% male), the self-employed men have been occupying the dominant position (80.1% in 2006) (Entrepreneurship in the UK). Scholars associate this difference with the fact that self-employment in the UK is common in those industries in which the rates of women employment have always been low.
Figure 6. Total early-stage Entrepreneurial Activity by Age-band 2002-2013 (Levie, Hart and Bonner 2013).
Addressing the age factor, studies indicate that entrepreneurship activity of seniors (over 50 years of age) in the UK before 2013 has been lower than in other age groups. For instance, it had an average of 4% between 2002 and 2008 whereas people in the 18-29 year old group had a 5% and 30-49 year olds had a 7% shares (Levie, Hart and Bonner 2013).However, it has reached its peak in 2013 with 6.2% (Figure 6).
Furthermore, the correlation between age and level of entrepreneurial activity is different for the US. Thus, the average group of entrepreneurs nationwide are aged 18-54 (approximately 28% in total, whereas the age groups of 18-34 and 35-54 have equally 14%). At the same time, people aged over 55 represent a 5% share (Kelley et al. 2013). These figures show that the US government provides better conditions and opportunities for the senior and middle-aged entrepreneurs, whereas the senior ones require additional start-up stimulating policies. At the same time, the UK demonstrates an opposite state of affairs, in which the country stimulates start-ups by the aged groups.
Corruption Perception Index
Furthermore, it is important to highlight the influence of corruption level on the possibilities and activities of entrepreneurship. Corruption may take different forms but they all result in stealing of the resources from vulnerable communities and disrupting the functions of economic and governmental mechanisms. In order to highlight the problems of corruption, the public initiated the formation of the Corruption Perception Index. It is based on the expert opinions and measures the perceived levels of corruption in public sector worldwide, covering 177 countries (Another great year but time to reflect on how the UK can stay ahead of the pack 2015). The scores range from 0, which corresponds to highly corrupt to 100, which stands for very clean. For example, in 2013, the US scored 19, and the UK scored 14 (Another great year but time to reflect on how the UK can stay ahead of the pack 2015). Consequently, the experts indicate the problems that are typical for each of these countries.
One should stress that experts characterise the US as a country with effective anti-money laundering regulations. However, they indicate that the county at the same time has legislative and regulatory weaknesses (Corruption by Country. The USA n. d.). For instance, there are weak customer requirements, as well as loopholes in the financial and legislative spheres. The latter allows some business entities and individuals hide and launder money earned from some illegal activities. The scholars explain these negative changes as a consequence of the 2008 financial crisis (Corruption by Country. The USA n. d.). Additionally, the political sphere and US government remains one of the major concerns of addressing the problem of corruption. One of the most typical issues of the sphere is money laundering, election campaigns transparency and financing transparency. For instance, unlimited financing for political campaigns without donor disclosures results in that various interest groups can increase their influence on the countrys political system (Corruption by Country. The USA n. d.). Consequently, the interests of corporations and monopolists might be backed up by politicians which would prevent the beginner entrepreneurs from achieving their goal and seizing the opportunities. Among the factors that bettered this situation in the US one can name the pass of the Dodd-Frank Act in 2010. Its result was the provision of information concerning violations of law securities which lead to the recovery of more than US$1 million (Corruption by Country. The USA n. d.). Additionally, it demanded companies to provide information on their payments to the government. Thus, the social concern about the possibility of corporate influence on politics has been arguably resolved. Additionally, the government created Open Government Partnership that aims to implement various transparency and anti-corruption initiatives. Thus, the country is succeeding in its attempts to fight corruption, which raises social initiatives for starting a business.
At the same time, the typical corruption issues in the UK lay in the governmental sphere, anti-corruption institutions, sport and prisons. For instance, numerous scandals involving Members of Parliament and the conflicts with private sector undermine the trust in the countrys government. Additionally, there is a demand for the proof of transparency in financing of political campaigns. Politic reliance on a small number of large financial donors creates concerns about the corporate regulations of the government (Corruption by Country. The UK n. d.). Furthermore, there are no special institutions that would be responsible for revealing and fighting corruption in the country. Additionally, as sport remains one of the most financially involved spheres, its regulators organize match-fixing and bribery. Some of the most exposed to these threats sports are cricket, football, horse racing and rugby (Corruption by Country. The UK n. d.). These cases might be the primary concerns of the entrepreneurs starting their businesses in sports. However, the country implemented positive changes in this sphere. One of them is the 2010 UK Bribery Act, which makes it an offence to offer or receive a bribe and applies to both individuals and businesses (Corruption by Country. The UK n. d.). This enables the UK Serious Fraud Office to prosecute the local and foreign entrepreneurs operate a business in the country. Consequently, both countries stimulate public interest in starting businesses through the implications of anti-bribery policies. The next chapter provides the recommendations on increasing the attractiveness for global entrepreneurs of operating in the selected countries.
Recommendations on Increasing the Attractiveness for Global Entrepreneurs
In is important to note that the global market is constantly changing, which creates a basis for the competiveness in attracting new businesses from other countries. Thus, the US and the UK should have a policy that would stimulate their interest to operate on in these countries. Regionally, Western Europe and North America are viewed as the most attractive regions to establish operations (Another great year but time to reflect on how the UK can stay ahead of the pack 2015). Consequently, the UK and the US are the countries that have enough financial, political and economic attractiveness for starting a business there. At the same time, these countries need to address the introduction of some regulations that would make the financial and political processes more transparent. The reason for this is that lobbying and bribery may raise concerns of foreign investors and entrepreneurs. Additionally, some experts claim that the UK needs to broaden its connections between the government and businesses (Corruption by Country. The UK n. d.). Additional recommendations include the introduction of policies that would address foreign corruption. This need is important for the honest entrepreneurs that might lose money due to the corrupt connections of their competitors. Studies of the markets dynamics demonstrate that the most prospective business activities are software development, financial intermediations and back-office operations (Another great year but time to reflect on how the UK can stay ahead of the pack 2015). Thus, if the countries address and fix the indicated problems, their attractiveness for foreign entrepreneurs would rise significantly.
Summarizing the presented information, one may come to a conclusion that the global economic condition of the US and UK have positive characteristics. For example, the GEM report analysis indicates that both countries have enough possibilities for both women and men entrepreneurs to start a new business. That is why public interest in becoming an entrepreneur is quite high in both countries. At the same time, people willing to start a business in the UK have more doubts compared to those in the US. One might connect this with the problematic relationship between the government and the businesses in the UK. At the same time, the US provides more opportunities for starting a business for the young and middle-aged groups. A possible explanation for this is the lower level of unemployment in the country compared to the UK. As a result, people in the UK are more concerned about the risks of starting a business. Furthermore, both countries have rather low indexes of corruption. This means they have enough possibilities for the support of the local and foreign entrepreneurs. At the same time, both countries require some additional legal regulations for addressing corruption, especially in the political sphere. The reason for this is that large corporations might prevent new entrepreneurs from being successful through financing of political powers and thus securing their interests. In case the governments address this issue both countries would be very attractive for both foreign and local entrepreneurs.