Global Entrepreneurship Monitor 2012 Report for Belgium & Flanders

Transcription

1 STEUNPUNT ONDERNEMEN EN REGIONALE ECONOMIE NAAMSESTRAAT 61 BUS 3550 BE-3000 LEUVEN TEL FAX store@kuleuven.be STORE-B Global Entrepreneurship Monitor 2012 Report for Belgium & Flanders Niels BOSMA Tine HOLVOET Hans CRIJNS

2 Note: This report reflects the opinion of the authors and not those of the Flemish Government. The Flemish Government is not liable for any use that might be made of the data included in this publication. 2

3 CONTENTS 1. INTRODUCTION The Global Entrepreneurship Monitor The 2012 GEM Special Topic: Entrepreneurship and Migration Reporting Philosophy and Reader Guide Policy Research Center STORE 5 2. THE GEM PROJECT GEM Methodology: Key Issues The GEM Model 7 3. NATIONAL EXPERT SURVEY (NES) Entrepreneurial Framework Conditions (EFCs) Belgian expert insights for fostering entrepreneurial activity & development Critical factors A further analysis of the suggested pros, cons and recommendations Global expert insights for fostering entrepreneurial activity: critical factors ADULT POPULATION SURVEY (APS) Entrepreneurial Attitudes Individual Self-Perceptions National Societal impressions A profile of the entrepreneurial culture in Belgium and Flanders Entrepreneurial Activities: phases of entrepreneurial activity Total early-stage Entrepreneurial Activity Total early-stage Entrepreneurial Employee Activity A profile of the entrepreneurial activities in Belgium and Flanders Entrepreneurial Aspirations Growth-orientation (job creation) Innovative orientation International orientation INCLUSIVE ENTREPRENEURSHIP Migrant entrepreneurship from a global perspective Migrant entrepreneurship in Belgium and Flanders Profile of women entrepreneurs globally Women entrepreneurship in Belgium and Flanders Young adults (18-34) in comparison with other age groups CONCLUSION Individual self-perceptions National societal impressions Entrepreneurial activity Entrepreneurial aspirations Inclusive Entrepreneurship Entrepreneurial framework conditions Overview for Belgium and Flanders 43 References 45 Annexes 47 3

4 1. INTRODUCTION Promotion of new entrepreneurial activity has been increasingly visible in many economies across the globe. It is an important pillar also in the long-term visions of the European Union, Belgium and Flanders 1. This policy mirrors the signaled transition from a managed society towards an entrepreneurial society (Thurik et al. 2013) and is based on the notion that entrepreneurship is a key ingredient for future growth. Still, considering extensive research, the characteristics of this relationship are not yet well established (Wennekers et. al, 2005; Acs, 2006; Gries & Naude, 2008). Several mechanisms have been proposed (see e.g. Wennekers and Thurik 1999) but clear-cut empirical evidence on how, to what extent and under which conditions entrepreneurship leads to growth is still lacking (Minniti, 2008). Also, this year s Global Entrepreneurship Monitor research findings indicate the differential impact entrepreneurs can have on their economies, as for example growth aspirations expressed by business owner-managers and by nascent entrepreneurs (those who are currently setting up a business they expect to own and manage) related to both job creation potential and international orientation, diverge greatly. It must be clear that not all business startup is the same (Xavier et al., 2013). This year s GEM Global Report recognizes the need to embark on issues of demography and inclusiveness in understanding economic development through entrepreneurship. GEM addresses both concepts entrepreneurship and development from a wide angle, focusing on the entrepreneurial process more than on the event of business startup 2, and centering on aspects of social well-being in its approach of economic development. The GEM 2012 report for Belgium and Flanders presents an overview of a very specific set of indicators that measure not only entrepreneurial activity rates, but also give insights in entrepreneurial attitudes of the adult population in Belgium and the Flemish Region 3 and in the growth aspirations of (prospective) business owner-managers. In addition, experts views are added to explore further the Belgian entrepreneurial framework conditions The Global Entrepreneurship Monitor As shared definitions, approaches and agreed operational definitions are scarce in the academic field of entrepreneurship (Holvoet et al. 2013), GEM responds to a persistent need for comparable measures on entrepreneurial attitudes activities and performance 4. To this end a carefully designed, harmonized approach was developed. After the first study appeared in 1999, a few years were required for the GEM methodology to establish itself and to come up with consistent measures of entrepreneurship. For GEM the idea has, from the start, been that for measuring entrepreneurship, the level of the individual (the entrepreneur or the potential entrepreneur) should be put central. Consequently GEM sets of from a behavioral perspective and not an occupational one, and focusses on the entrepreneurial process rather than on the event of business startup. This in contrast to many monitoring instruments based on administrative data on the company level. The main advantages of this method are (1) the international comparability over different country-specific administrative regulations, (2) the possibility to also detect latent entrepreneurship and (3) inform on less tangible elements of entrepreneurial culture. GEM data collection is based on an annual adult population survey (APS) directed to individuals in all participating economies. Views from national experts (NES) are added to get insights on important conditions for fostering entrepreneurial activity 5. The results are published in annual GEM Global Reports as well as GEM National reports, all available on Additionally, GEM introduces annually a special topic and has shed light on entrepreneurial finance (with a focus on informal investment), entrepreneurship education & training, social entrepreneurship and entrepreneurial employees (also referred to as intrapreneurship). The 2012 Special topic is Entrepreneurship and Migration. 1 See for example strategic growth programs for EU and Flanders: and 2 GEM s focus on entrepreneurship as a process (behavioral perspective) also includes latent entrepreneurship (pre startup) and entrepreneurship outside the formal registration of business (such as intrapreneurship). 3 In the remainder of this document we define Flanders in correspondence with the European Nuts1 classification, meaning the region of Flanders excluding Brussels. Respondents to the Belgian part of the GEM Adult Population survey are regionally stratified based on their domicile address. 4 Wennekers & Thurik (1999) for example detect no less than 13 definitions for 'entrepreneurship' only within the economic field and also Karlsson, Friis & Paulsson (2005) note how broad theoretical constructs are distinct from their operational counterparts that are most often only focusing on limited aspects of entrepreneurial behavior. 5 These National Expert Surveys (NES) data are available for Belgium for , 2009 and

5 1.2. The 2012 GEM Special Topic: Entrepreneurship and Migration This annual report, based on the GEM 2012 data collection, includes a special focus on international migration and its impact on entrepreneurship. In the GEM 2012 Global Report, Xavier et al. (2013) analyze whether migrants differ from the non-migrant population in their prevalence for entrepreneurial activity, their attitudes toward self-employment as well as their motivation for starting a firm. Data are analyzed both from the perspective of the recipient (host) countries as well as the economies of origin (home countries). Also a differentiation is made between first- and second-generation migrants. These results highlight the potential impact of migrant entrepreneurs to growth orientation as the proportion of migrant entrepreneurs expecting to create 10 or more jobs was 20% in innovation-driven economies, compared to 14% for the non-migrant group. This makes the migrant population a particularly interesting group for further research. In Chapter 5 on Inclusive Entrepreneurship we will explore this subject for Belgium and Flanders and also analyze other target groups such as women entrepreneurs and young adults. As data are still limited available and not enable precise estimates yet, we see this as an important first step and hope to elaborate further on this subject in the near future Reporting Philosophy and Reader Guide This report is targeted at readers from a wide audience with specific interest in the entrepreneurial performance of Belgium and Flanders. To further enable policy makers to derive conclusions from the GEM results, the results of the main indicators are presented in three different ways throughout the report: 1. Tables that capture the most recent outcomes of the GEM Adult Population Survey, for Belgium as a whole, for Flanders, for a set of six benchmark economies (Denmark, France, Germany, Netherlands, Spain and the United Kingdom) 6 and for the remaining 17 innovationdriven economies that were part of the 2012 GEM assessment Figures that highlight the development of the main measures over time, for Belgium and Flanders. 3. Spider diagrams that highlight the overall profiles of entrepreneurial attitudes and entrepreneurial activities, in an international context. Furthermore, for some indicators, GEM data for several years have been merged to yield more precise estimates. In particular this concerns measures on entrepreneurial aspirations and demographic characteristics of entrepreneurial attitudes and (early-stage) entrepreneurial activity. In case there are differences in outcomes, for example between countries or between specific groups in the Belgian or Flemish population, we address the statistical significance of these differences. The next chapter discusses the origin and development of the GEM project and highlights the key methodological issues. It also discusses the conceptual model that drives GEM research and that highlights entrepreneurial attitudes, activities and aspirations as dynamic components of the entrepreneurial profile in national economies. Therefore, chapters 3-4 describe the main GEM 2012 Expert and Adult Population Survey results. Chapter 5 deals with Inclusive Entrepreneurship, by highlighting the research design, presenting the main results of GEM 2012 special topic Entrepreneurship and Migration and linking this target group to women entrepreneurs and specific age groups. Finally, Chapter 6 concludes Policy Research Center STORE Since 2012 the GEM research for Belgium is conducted within the framework of the policy research center STORE (Steunpunt Ondernemen en Regionale Economie), formerly STOIO and STOOI. The GEM databank is an important indicator for the consortium that has as its main task to advise the Flemish Government on entrepreneurship and regional economy by fundamental and applied economic research excellence. Vlerick Business School, representing the Belgium national team since 2001, is providing the annual assessment on the framework conditions of entrepreneurship and the level of entrepreneurial attitudes, activity and aspirations in Belgium and Flanders. Every year an extensive report on Belgium and Flanders and an executive summary (Dutch version) informing on the major findings in the report is accessible online: 6 These reference countries are selected based on both geographic region, institutional setting and economic development level. 7 GEM adopts the categorization for innovation-driven economies from the Global Competitiveness Report ( Also included were 24 efficiency-driven economies and 7 factor-driven economies (see Kelley et al. 2012). 5

6 2. THE GEM PROJECT The Global Entrepreneurship Monitor was conceived in 1997 by Michael Hay of London Business School (LBS) and Bill Bygrave of Babson College. LBS and Babson funded a prototype study that year. Ten national teams conducted the first GEM Global study in 1999 with Paul Reynolds as the principal investigator. The Belgium national team, represented by Vlerick Business School, is participating since The Global Entrepreneurship Research Association (GERA) was formed in 2004 to serve as the oversight body for GEM. GERA is a not-for-profit organization governed by representatives of the national teams, the two founding institutions and sponsoring institutions. GERA s mission is to contribute to global economic development through entrepreneurship. To achieve this, GERA seeks to increase worldwide knowledge about entrepreneurship by conducting and disseminating world-class research that: - Uncovers and measures factors impacting the level of entrepreneurial activity among economies. - Aids in identifying policies that may lead to appropriate levels of entrepreneurial activity, and - Increases the influence of education in supporting successful entrepreneurship. GEM focuses on three main objectives: - To measure differences in entrepreneurial attitudes, activity and aspirations among economies. - To uncover factors determining the nature and level of national entrepreneurial activity. - To identify policy implications for enhancing entrepreneurship in an economy. GEM is based on the following premises. First, an economy s prosperity is highly dependent on a dynamic entrepreneurship sector. This is true across all stages of development. Yet the nature of this activity can vary in character and impact. Necessity-driven entrepreneurship, particularly in less developed regions or those regions experiencing declines in employment, can provide an alternative source of employment when there are fewer work options available. At the same time, it should be noted that the economic crisis puts tremendous pressure on these entrepreneurs who are driven into selfemployment and the existing pool of solo self-employed for that matter. Many of them are struggling to keep their business in existence. In comparison to developing economies, more developed economies generate entrepreneurial opportunities as a result of their wealth and innovation capacity, yet they also offer more wage employment options to attract those that might otherwise become independent entrepreneurs. If these opportunities for entrepreneurship and innovation are to be captured, such economies need to instill opportunity-based motives and entrepreneurial incentives. Analyzing these motivations to engage in entrepreneurship and the relative prevalence of necessity-driven (pushed) and opportunity-driven (pulled) entrepreneurship, yield important insights in the quality of early-stage entrepreneurial activity. This is relevant to understand the effect of the financial crisis, particularly given the upswing of unemployment rates. The second premise is that an economy s entrepreneurial capacity is based on individuals with the ability and motivation to start businesses, and may be strengthened by positive societal impressions of entrepreneurship. Entrepreneurship benefits from participation by all groups in society, including women, a range of age groups and education levels and disadvantaged minorities. In Chapter 5, we therefore explicitly focus on these groups and report inclusive entrepreneurial trends for Belgium and Flanders in international and subregional perspective. Finally, high-growth entrepreneurship is a key contributor to new employment in an economy, and national competitiveness depends on innovative and cross-border entrepreneurial ventures. GEM analyses growth aspirations of respondents that engage in entrepreneurial activity as an indicator of the differential impact entrepreneurs can have on their economies GEM Methodology: Key Issues While entrepreneurship is a multifaceted phenomenon with many different meanings and definitions, GEM operationalizes entrepreneurship as: Any attempt at new business or new venture creation, such as self-employment, a new business organization, or the expansion of an existing business, by an individual, a team of individuals, or an established business. Thus, while GEM defines entrepreneurship rather narrowly as new business activity, it takes a broad view of what it recognizes (new) business activity to be. For example, unlike many official records of new business activity, GEM s definition is not restricted to newly registered businesses. GEM thus adopts the behavioral perspective of entrepreneurship, looking further than individuals officially registered as self-employed, for example by identifying employees within organizations who behave entrepreneurially and individuals who can be characterized as latent or nascent entrepreneurs without having registered their business (yet). 6

7 GEM looks at entrepreneurship as a process rather than an event. For years GEM has focused on the phase that combines the stage in advance of the start of a new firm (nascent entrepreneurship being involved in a new business for less than 3 months) and the stage directly after the start of a new firm (owning-managing a new firm being involved in a new business for less than 42 months). Taken together this phase is denoted as total early-stage entrepreneurial activity (TEA) 8. In addition, individuals with entrepreneurial attitudes potentially leading to nascent entrepreneurial activity and individuals involved as owner-managers in established or discontinuing firms are identified. Recently, GEM also identified Entrepreneurial Employee Activity (EEA) as a relevant type of entrepreneurial activity. Dependent on individual drivers, organizational contexts and macro-level (institutional) characteristics, individuals may opt to pursue their entrepreneurial ambitions as an employee rather than being self-employed. Fig. 2.1 shows some details of the processes individuals may go through, as conceptualized by the GEM research framework. There is also a potential overlap between TEA and EEA, in the sense that individuals who are starting a venture for their employer may be, or expect to be, one of the owner-managers of that venture. The GEM data suggest that this concerns a minor share of the entrepreneurial employees (Bosma et al. 2013, p. 8). Fig. 2.1 The Entrepreneurship Process and GEM Operational Definitions Source: Bosma et al. (2013) 2.2. The GEM Model Since its inception, GEM has sought to explore the two-way link between entrepreneurship and economic development globally (Wennekers and Thurik, 1999; Carree and Thurik, 2003; Acs, 2006; Audretsch 2007). The complexity of these causal relationships was revised, identifying different types and phases of entrepreneurship (Bosma et al., 2009; Bosma and Levie, 2010). 9 The revised model introduced a more nuanced distinction between phases of economic development, in line with Porter s typology of factor-driven economies, efficiency-driven economies and innovation-driven economies (Porter et al., 2002), and recognized that GEM s unique contribution was to describe and measure, in detail, the conditions under which entrepreneurship and innovation can thrive. The revised model also incorporates the three main components that capture the multi-faceted nature of entrepreneurship: entrepreneurial attitudes, entrepreneurial activity, and entrepreneurial aspirations. They are included in the model as components of a black box that produces innovation, economic 8 The acronym TEA originally expressed total entrepreneurial activity. Here, the word total was meant to capture the total collection of new firm activities, including agriculture. This led to some confusion (see e.g. Hindle 2006) as the suggestion was made that, for instance; also entrepreneurial activities in established firms were captured in the measure. Hence, the words early-stage are usually included in describing the TEA acronym that has been retained, as the measure itself has not been altered since See Levie and Autio (2008) for a theoretical grounding and e.g. Shane (2009) for the importance of identifying differences in types and phases of entrepreneurship. 7

8 growth and job creation, without spelling out in detail how they affect and reinforce each other. This ambiguity was deliberate; it reflected the view that all three elements may affect each other rather than being components of a linear process and it was expected that further theoretical and empirical work would open up this black box. While the first model included capability and opportunity, it was never clear and scholars still dispute whether these are objective realities or subjective constructs, and aspiration was notably absent from the model. Aspiration or ambition is relevant because researchers increasingly realize that all entrepreneurial activity does not equally contribute to development. For example, in many countries, much employment creation comes from a small number of ambitious, fastgrowing new businesses (Autio, 2007). Furthermore, potentially ambitious entrepreneurs react differently to different regulatory and legal regimes than those who are less ambitious (Levie and Autio, 2011). Finally, the revised GEM model highlights the contributions of entrepreneurial employees as well as their role as potential future independent entrepreneurs. The current GEM conceptual model is shown in Figure 2.2. Fig. 2.2 GEM Conceptual Model Social, Cultural, Political Context From other available sources Basic requirements - Institutions - Infrastructure - Macroeconomic stability - Health and primary education Efficiency enhancers - Higher education & training - Goods market efficiency - Labor market efficiency - Financial market sophistication - Technological readiness - Market size Innovation and entrepreneurship - Entrepreneurial finance - Government policy - Government entrepreneurship programs - Entrepreneurship education - R&D transfer - Internal market openness - Physical infrastructure for entrepreneurship - Commercial, legal infrastructure for entrepreneurship - Cultural and social norms Established Firms Entrepreneurship Profile Attitudes: Perceived opportunities & capabilities; Fear of Failure; Status of entrepreneurship Aspirations: Growth, Innovation International orientation Social value creation Entrepreneurial Employee Activity From GEM 2011 Adult Population Surveys (APS) Activity: Opportunity/Necessity-driven, Early-stage; Inclusiveness; Industry; Exits From GEM Adult Population Surveys (APS) Socio- Economic Development (Jobs, Innovation, Social value) From GEM National Expert Surveys (NES) Source: Kelley et al. (2012, p.4) Based on an understanding of how economies change as they develop, the revised GEM model incorporates the changing nature and contribution of entrepreneurship across subsequent stages of development (Porter et al., 2002). The appropriate government emphasis for each stage of development is described in Figure 2.3. At the so-called factor-driven stage, production is based upon the mobilization of primary factors of production: land, primary commodities and unskilled labor. For factor-driven economies, economic development is primarily driven by improvements of basic requirements: development of institutions, infrastructure, macroeconomic stability and health and primary education. In efficiency-driven economies, at the next stage, government focus is (or should be) on getting labor and capital markets working more properly, attracting foreign direct investment and educating the workforce to successfully adopt technologies developed elsewhere. The key processes in moving from the first to the second stage are capital accumulation and technological diffusion (Wennekers et al., 2005). Even though these conditions are not directly related to entrepreneurship in the Schumpeterian sense of creative destruction, they are indirectly related since the development of markets will also attract and enable more opportunity-based entrepreneurship. 8

9 Finally, countries whose economic development is primarily innovation-driven, innovate at the global technological frontier in at least some sectors (Porter et al., 2002). This stage also implies higher per capita income. The transition to this stage requires a country to develop its ability to generate as well as commercialize new knowledge (Wennekers et al., 2005). As countries develop economically, entrepreneurial framework conditions become more important to further economic development. The outcome of the model is national economic development in terms of innovation, job creation and social value creation. In this report we focus on innovation-driven economies and a selection of benchmark countries in particular. These benchmark countries are Denmark, France, Germany, the Netherlands, Spain and the United Kingdom countries that are close to Belgium both physically and in terms of the geographic, institutional and economic setting. Fig. 2.3 Characteristics of Economic Groups & Key Development Focus Factor-Driven Economies From subsistence agriculture to extraction of natural resources, creating regional scale-intensive agglomerations. Efficiency-Driven Economies Increased industrialization and economies of scale. Large firms dominate, but supply chain niches open up for small and medium enterprises. Innovation-Driven Economies R&D, knowledge intensity, and expanding service sector. Greater potential for innovative entrepreneurial activity. Basic Requirements Efficiency Enhancers Entrepreneurship & Innovation Conditions 9

10 3. NATIONAL EXPERT SURVEY (NES): ENTREPRENEURIAL FRAMEWORK CONDITIONS 3.1 Entrepreneurial Framework Conditions (EFCs) In this chapter, we zoom in on conditions for entrepreneurial start-ups and growth in Belgium. This exploratory analysis, based on expert surveys, may help to probe the outcomes of the Adult Population Survey and is capturing insights into the ways in which entrepreneurial framework conditions (EFCs) in Belgium (national level) either foster or constrain an entrepreneurial climate. The National Expert Survey (NES) provides insights into nine entrepreneurial framework conditions (EFCs) following the GEM conceptual model: Table 3.1 The GEM Entrepreneurial Framework Conditions (EFCs) Entrepreneurial Finance The availability of financial resources, equity, and debt, for new and growing firms, including grants and subsidies. Government Policy The extent to which government policies, such as taxes or regulations are either sizeneutral or encourage new and growing firms. Government Entrepreneurship Programs The extent to which taxes or regulations are either sizeneutral or encourage new and growing firms. Entrepreneurial Education The extent to which training in creating/managing new, small or growing business entities is incorporated within the education and training system at all levels. There are two subdivisions primary and secondary school entrepreneurship education and training; and post-school entrepreneurship education and training. R&D Transfer The extent to which national research and development will lead to new commercial opportunities, and whether or not these are available for new, small and growing firms. Commercial and Legal Infrastructure The presence of commercial, accounting and other legal services and institutions that allow or promote the emergence of small, new and growing business entities. Internal Market Openness/ Entry Regulations There are two sub-divisions market dynamics, i.e. the extent to which markets change dramatically from year to year; and market openness, i.e. the extent to which new firms are free to enter existing markets. Source: GEM 2012 Global Report Physical Infrastructure Ease of access to available physical resources communication, utilities, transportation, land or space at a price that does not discriminate against new, small or growing firms. Cultural and Social Norms The extent to which existing social and cultural norms encourage, or do not discourage, individual actions that might lead to new ways of conducting business or economic activities which might, in turn, lead to greater dispersion in personal wealth and income. 3.2 Belgian expert insights for fostering entrepreneurial activity and development The National Expert Survey (NES) data are available for Belgium for , 2009 and In 2012, 53 national experts (of which 37 from Flanders) have shared their insights into stronger or weaker fundamentals for a well-functioning entrepreneurial climate in Belgium. Experts were identified and selected from a variety of sources: professional contacts and directories, trade and business magazines, Internet, newspapers, university and college lists to name just a few. It is important to note that in the questionnaire, all questions relate to the national level and hence no distinction was made between e.g. Flanders and Wallonia. Appendix I gives an overview of all participating experts Critical factors The NES is different from the APS as its key objective is to have qualified opinions. We detect the areas that might be critical using both items and open questions linked to each of nine EFCs. We then can compare the EFCs valued most positive and most negative. For each participating economy, nine openended questions are included: three factors that respondents consider inhibits or constraints for entrepreneurship in Belgium, three factors that enhance or support entrepreneurship in Belgium and three recommendations from the experts to improve the entrepreneurial framework. Also a set of 5-point Likert scales are included in the survey and the statements are phrased so that a score of 4 or 5 would 10

11 indicate that the expert regards the factor as positive for entrepreneurship, while a score of 1 or 2 would indicate that the expert regarded the factor as negative for entrepreneurship. In what follows, we will first report further on the open ended questions to detect topics that are perceived critical in constraining or fostering entrepreneurial activity in Belgium and on the recommendations to improve it. Table 3.2 gives an overview of the Top 3 themes for restrictions, supports and suggestions mentioned for these 9 open ended questions. Table 3.2 Top 3 choices by Experts for Restrictions, Supports and Suggestions to improve the Entrepreneurial Framework in Belgium Entrepreneuri al Framework Condition N 1 N 2 Restrictions Supports Suggestions N 3 Total N 1 N 2 N 3 Total N 1 N 2 N 3 Total Entrepreneurial Finance Government Policy Governmental Entrepreneurship Programs Entrepreneur ial Education Research and development transfer Commercial and legal infrastructure Internal market openness Entry regulations Physical infrastructure Cultural and social norms *Number of experts indicating an EFC in their top 3 as an area of restriction, support or a topic of suggestion for improvement respectively. N=53. Most cited restrictions: 1. Government Policy 10 (top 3 restriction by 37 of 53 experts; 67 times cited) 2. Entrepreneurial Finance (top 3 restriction by 22 of 53 experts; 29 times cited) 3. Cultural and Social Norms (top 3 restriction by 20 of 53 experts; 26 times cited) Most cited supports: 1. (Entrepreneurial) Education (top 3 support by 25 of 53 experts; 28 times cited) 2. Government Entrepreneurship Programs 11 (top 3 support by 20 of 53 experts; 26 times cited) 3. Internal Market Openness (top 3 support by 21 of 53 experts; 22 times cited) 10 The Government Policy entrepreneurial framework condition relates to the extent to which government policies seen, as a whole, influence new and growing firm. This includes the tax regime, labor market regulation, social security legislation as well as regulations and schemes that specifically aim at the small business sector. 11 The Government Programs framework condition relates to the presence of programs (at national and regional levels) and other initiatives to support new and growing firms. 11

12 Most cited suggestions for improvement: 1. Government Policy (top 3 suggestion for improvement by 37 of 53 experts; 54 times cited) 2. Cultural & Social Norms (top 3 suggestion for improvement by 20 of 53 experts; 24 times cited) 3. Entrepreneurial Education (top 3 suggestion by 18 of 53 experts; 21 times cited) A further analysis of the suggested pros, cons and recommendations A first analysis of these open ended questions to detect areas that are constraining or fostering entrepreneurial activity in Belgium, mainly shows the following pros and cons: Fig. 3.1 Pros & Cons for an entrepreneurial climate in Belgium Simple registration procedure by single Enterprise Counter Patents by university research centres Easy access to research results People want to do things right Good market opportunities Support for Complete entity of facilitating organizations Grants for startups Talent & education Subsidies, scholarships & competitions collaborative initiative Sustained efforts to promote entrepreneurship Entrepreneurial cities Multilingualism + -- Geographical location Family run business Curiosity & openness to innovation Readiness for valorisation Good infrastructure Multiculturalism Long-term stability International attitude Insufficient childcare Golden cage for employees Crisis in Europe Lack of centralization of support programs Acces regulations to private credit Administrative burden Risk aversion by venture capital providers Political maneuvers Tax system is complex & regulations often change Culture of riskaversion Perception Failure for life Traffic & mobility Inertia & bureaucracy High labor costs Restrictive credit policy policy banks No incentives for proactiveness Too much talking about the crisis Image self-employed Saturation in small country Independent status Old fashioned unions Instability of environmental legislation No mature entrepreneurial culture yet Cumbersome building permit procedures *Extract of expert views in open ended responses indicating top 3 areas of support and restriction respectively. Government Policy: A further analysis learns that Government Policy is perceived as inhibiting so called pulled entrepreneurship that is mainly driven by market opportunity. 12 In particular the difference in social benefits of the employee and self-employed status are perceived to be inhibiting for pulling new entrepreneurs, experts talk about the Golden cage for employees and the non-beneficiary fiscal status of the self-employed. The difference in status of employee and self-employed is often perceived as overwhelming. Also in this context unemployment policy and a lack of employment encouragement is mentioned. Additionally linked to Government Policy, high labor costs are mentioned as the number one inhibitor for (job) growth aspirations. Also, instability of both the tax system and the environmental legislation are called barriers for entrepreneurial trust. Here the sense of random inspection is mentioned as well. Regulation seems complex and often changes. Administrative burden is called to interfere with an essential entrepreneurial pace. Regulation seems often disparate, bureaucratic, inordinate and permits are received slow. Regarding Public procurement, the experts have different opinions, some are positive about the governmental support (especially in construction and architecture the format of competitions is 12 In contrast, pushed entrepreneurs are forced into business mainly because of circumstances beyond control. 12

13 mentioned to be important), but other experts complain that start-ups tend to lose large projects to big international companies. When we look at the experts recommendations regarding the EFC Government Policy the need for a consistent long-term policy is expressed. We first note the request for less cumbersome administration and further simplification of regulations. In general more centralized information and guidance through registration, regulations and aid programs is proposed. Second, lower labor costs and taxes are called for, with a clear link between commitment and remuneration. Regarding employment status, the status of micro entrepreneur is proposed and the tapering of fake statuses is requested. Coordinating our national policy with neighboring countries is requested. Third, political stability and legal certainty are requested, specifically, lengthy procedures by the Council of State are criticized. Additionally, a better social safety net in case of failure and efforts to see failure as an aspect of entrepreneurship rather than perception of failure for life, are called for. Incentives for proactive behavior are suggested. Also, the need for better fiscal benefits for child care are put forward. Entrepreneurial Finance: Looking at restrictions in availability of financial resources, we note that only 5 out of 29 answers are directly linked to the current economic climate. We find reflections on few available venture capital, difficult access to private funding and risk aversion by capital providers. Specific focus is drawn to a lack of funding for non-technological innovation. Subsidies to acquire business property are suggested as well as special support for start-ups in planning their debt repayment. Further governmental guided negotiation with banks is proposed. Also, criticism regarding the capital available is often linked to the general tax policy. To conclude with a positive note, the federal financial institution Participation Fund is explicitly highly evaluated by several experts. Cultural and Social Norms: First, experts note a general risk-averse culture with a negative connotation of failure and proactiveness. Additionally, several experts mention that there is no such thing as a Belgian entrepreneurial culture. Some relate this to ingrained conservatism, or to the shared notion of a difficult reconciliation of behaving entrepreneurial and the private life. Regarding the latter, absence of communicating on the advantages of the self-employed to work-life balance is stressed. However, some experts nuance that the entrepreneurial culture is just not mature yet and highly evaluate the sustained efforts to promote entrepreneurship. Public opinion and media is called to discourage taking the step towards starting up one s own business, especially in communicating on the financial crisis. Political duality of parties that over-favor or over-discourage entrepreneurship is mentioned to have a negative effect on the general perception. Finally, the lack of transparency in corporate culture, could withhold employees of entering in entrepreneurship themselves and employees are motivated to become managers, not leaders. Recommendations in this area are linked to the fields of media and education in the first place. Communication on entrepreneurship is called to be more nuanced, honest and diverse. Visibility of entrepreneurial behavior in less traditional sectors is necessary and the image of the entrepreneur should be more diverse and actively linked to minority groups. Experts stress that we need to break the myth of the one man orchestrating entrepreneur and underline the importance of the team. Sustainability should be inherently linked to the image of entrepreneurial behavior. Also, less attention on management, and more on entrepreneurial passion is recommended. Entrepreneurship should be appreciated as a part of the welfare state model. Additionally, it should be noted that NES data only pays limited attention to gender related constraints, supports and recommendations. The Belgian experts, however, mentioned that child care is limitedly available, expensive, inflexible and should be an important theme within governmental policy (financially and fiscally more interesting). Also more support for women is recommended, as well as breaking the myth of the entrepreneur man or women orchestra. We further elaborate on these findings in chapter 5 on Inclusive Entrepreneurship. Entrepreneurial Education: In answering the open questions on the extent to which training in creating and managing new, small or growing business entities is incorporated within the education and training system, the experts often refer to the high standards of education in general. Talent and skills of the population in Belgium are highly evaluated and mentioned as a support for an entrepreneurial climate. Multilingualism is mentioned explicitly. In that sense, experts see these specific work force features inherent to the EFC (Entrepreneurial) Education. Thus, this might also suggest that training in entrepreneurial behavior is less perceived as a demarcated skill taught within the school. However, more in general, practical based teaching is suggested to be important. More integrated attention for entrepreneurship education and training is requested on all levels of education. 13

14 Government Entrepreneurship Programs: Experts highly evaluate governmental programs and mention Participation Fund, FIT and UNIZO explicitly 13. However, for many the network of existing programs, organizations and supports is no longer clear and applying for support threatens to become an administrative burden. Structure and guidance should be improved. Therefore, experts suggest to continue to make the government services further efficient. A first single point of communication is necessary and a single enterprise counter is called important also after business registration. Also, the importance of real business testimonies and business networks is stressed. These testimonies should go beyond the traditional entrepreneurial fields. Persons that discontinued their business should also be included in the debate, sharing valuable information. Finally, government programs are asked to provide more free trainings for entrepreneurs. Internal Market Openness: Experts stress the unique geographic and cultural location of Belgium in the center of Europe. Market opportunities are around. Transport is easy. The general economic mindset is open-minded. There is a high purchasing power of multilingual consumers that live on a small surface. Foreign missions help to internationalize. E-commerce opens up boundaries. However, experts also stress that these advantages could be exploited more successfully and the importance of a global focus should be stressed. Information should be shared more. Alliances are mentioned as threatening. Better support to penetrate new and foreign markets is suggested. Finally, entering the market during one s studies should be encouraged. 3.3 Global expert insights for fostering entrepreneurial activity: critical factors In the GEM 2012 Global Report, Xavier et al. (2013) use the responses on a set of 5-point Likert scales to evaluate factors as positive or negative for entrepreneurship. For Belgium Government Policy, Entrepreneurial Education, Cultural and Social Norms is scored low in the Likert scales, Commercial and legal infrastructure, Internal Market Openness, Physical infrastructure score high. The authors notice that globally the EFCs Physical Infrastructure (e.g. communication, utilities, transportation, land or space available) is the highest rated factor in all surveyed regions except for Sub- Saharan Africa. Switzerland has the highest ranking for physical infrastructure. Also for Belgium, we notice that this factor receives a high score. However, this factor does not appear in any top 3 for supports in the open questions (see 3.1). We conclude that the factor is taken for granted as a positive framework condition and is no longer perceived as a key indicator for a good entrepreneurial climate by the experts surveyed. The same conclusion can be made for Commercial Infrastructure. In contrast, Internal Market Openness, the third factor with a high score in the set of Likert scales, remains a critical factor and is one of the most cited supports in the open questions. The EFC Education and Training relates to the extent to which entrepreneurship and entrepreneurial qualities receive attention in all phases of the educational and training system. The component that relates to Primary and Secondary Education was rated as one of the three most negative framework conditions by the majority of countries throughout all geographical regions. Also in Belgium we note this factor as one of the 3 EFCs valued most negatively, together with EFC Cultural and Social Norms and National Policy Regulation (as a component of Governmental Policy). This contradicts the earlier findings in the open questions, and might be explained by the positive impression of the education level in general (and to a less extent of specific entrepreneurial training) as was expressed in the experts open answers. 13 Strictly UNIZO is not a governmental program, but this non-profit organization offers subsidized programs. 14

15 Fig. 3.2 Likert scale scores on Entrepreneurship Framework Conditions (EFCs) rated by National Experts, by Geographic Region (unweight country averages) Source: GEM 2012 Global Report 15

16 4. ADULT POPULATION SURVEY: ATTITUDES, ACTIVITY, GROWTH ASPIRATIONS In 2012 more than adults in 69 countries took part in the GEM survey. GEM research teams in each economy administered this annual survey to at least adults. Belgium is participating in GEM since The GEM harmonization process allows exploring patterns over time and across countries. In 2012 a representative sample of 2010 individuals in the general population of 18 years and older was ensured. This telephone survey (fixed line via national telephone directory and mobile via random digital dialing) covered 1546 individuals for Belgium (of which 891 in Flanders) within the age range of 18-64, which constitutes the age range used for international comparison. 14 Respondent selection within a household was based on the next birthday method. This implies that after contacting a household, the person to be interviewed is the (adult) person in the household whose birthday is closest. In case this person is not available at the first contact with the household, new attempts are scheduled up to five of such call backs. The sample for landline phones was stratified by geographic region and additionally used quotas on gender and age. 15 In this chapter we will report in detail on the 2012 Adult Population Survey data Entrepreneurial Attitudes Individual Self-Perceptions Since entrepreneurship is primarily an individual-level phenomenon, perceptions that relate to opportunity recognition, skills and risk attitude can be important predictors of future entrepreneurial activity. However, even though important, the perception of for instance existing opportunities for startups and that of (matching) personal capabilities do not necessarily represent sufficient determinants of making the step to entrepreneurial activity. McMullen and Shepherd (2006) for instance, argue that individuals first react to opportunities when they are presented to them only afterwards considerations about desirability and feasibility are made. Fear of failure when it comes to starting a business (and the consequences of failure) could also deter an individual from exploiting perceived entrepreneurial opportunities. Next to these individual characteristics also elements of the context, such as the availability of (good) job alternatives in an economy can make a difference for those perceiving market opportunities and having confidence in their own entrepreneurial capabilities to actually engage in independent entrepreneurial activity or not. GEM provides insight into perceptions towards entrepreneurial activity by asking the individuals in the GEM adult population the following questions: - Do you know someone personally who started a business in the past 2 years? - In the next six months, do you see good opportunities to start a business in the area where you live? - Do you have the skills and knowledge required to start a business yourself? - Would fear of failure prevent you from starting a business? In addition, the respondents are asked whether they have startup intentions, i.e. if they expect to start a business within the next three years: - Are you, alone or with others, currently trying to start a new business, including any selfemployment or selling any goods or services to others? - Are you, alone or with others, currently trying to start a new business or a new venture for your employer as part of your normal work? Taken together, these measures provide an indication of the entrepreneurial culture across economies. In an empirical study explaining and linking entrepreneurial attitudes and activities for European regions using GEM data, Bosma and Schutjens (2011) find (only) a weakly positive relation between regional variations in entrepreneurial perceptions and those in entrepreneurial activity. This supports the notion that there is much in between. So, while positive attitudes and perceptions towards entrepreneurship may be instrumental in achieving new (high-value) entrepreneurial activities in some societies, it does certainly not form a sufficient condition for entrepreneurial activity in many societies. Bearing this in mind, we can see in Table 4.1 how innovation-driven countries compare to each other in terms of entrepreneurial perceptions and attitudes as measured through the 2012 GEM Adult Population Survey. 14 This report adopts the Nuts1 classification, meaning the region of Flanders excluding Brussels. Respondents are regionally stratified based on their domicile address. 15 For more information on GEM data collection in general we refer to the GEM Manual that is available on 16

17 We observe that in general, entrepreneurial perceptions in Belgium and Flanders are in par with those of the benchmark economies. However, compared to 2011 data, the number of individuals that see good opportunities to start a business decreased from 4 out of 10 to 3 out of 10 persons. We also notice a drop in the number of persons that believe they have the skills and knowledge to start a business themselves. Of those who see good opportunities to start a business, about four in ten individuals actually state that fear of failure would prevent them from starting, this trend remains constant compared to 2011 data. Even though this share may seem to be high, it compares well with the benchmark countries and is not that much larger than that of the United States (where roughly three out of ten would be prevented by fear of failure). Startup intentions (those expecting to start a business in the next three years excluding the individuals who are nascent entrepreneurs and hence already at the next stage) are also similar to the benchmark economies, except for France where as much as one in six individuals between years expect to be starting a new business. Table 4.1 Individual Self-Perceptions, 2012 (% pop.) Perceived Opportunities Perceived capabilities Fear of failure* Startup intentions ** Belgium Flanders Benchmark Economies Denmark France Germany Netherlands Spain United Kingdom Average Other Innovation-driven Economies Austria Finland Greece Ireland Israel Italy Japan Korea Norway Portugal Singapore Slovakia Slovenia Sweden Switzerland Taiwan United States Average all innovationdriven economies * Fear of failure measured only for the respondents who perceive good opportunities to start a business. ** Startup intentions measured only for the respondents who are currently not actively involved in entrepreneurial activity (as a nascent entrepreneur or owner-manager in new/established firm). Developments for Belgium and Flanders over time are shown in Figures 4.1 (for Belgium) and 4.2 (for Flanders). The figures demonstrate that the measure of perceived business opportunities is rather dynamic; it should be noted that these are perceptions by a random indicator that may represent the sentiment on business opportunities even though the actual pursuit of business opportunities may prove to be more stable. Shocks are indeed less prevalent in the indicators that relate to perceived skills and fear of failure, and certainly in intentions to start a business, which shows a modest upward trend between 2001 and Even though the overall picture of entrepreneurial self-perceptions suggests a slight drop, this happens after an increase in

18 Fig. 4.1 Development individual self-perceptions Belgium Percentage of individuals in the population Perceived opportunities to start business in the next 6 months Perceived skills & knowledge to start business Fear of failure for those perceiving opportunities 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% % 16% 18% 38% 43% 15% 16% 14% 15% 40% 43% 33% 30% 35% 35% 39% 44% 35% 37% 36% 37% 45% 44% 37% 38% 31% 26% 32% 29% 36% 28% 33% 28% 37% 41% 41% Intentions to start a business for those not 5% 5% 6% 6% 6% 6% 6% 5% 8% 11% 9% active in entrepreneurship - Fear of failure measured only for the respondents who perceive good opportunities - Startup intentions measured only for the respondents who are currently not actively involved in entrepreneurial activity (as a nascent entrepreneur or owner-manager in new/established firm) Fig. 4.2 Development Individual self-perceptions Flanders % Percentage of individuals in the population Perceived opportunities to start business in the next 6 months Perceived skills & knowledge to start business Fear of failure for those perceiving opportunities 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% % 13% 16% 39% 40% 12% 21% 13% 13% 38% 40% 33% 33% 37% 37% 40% 47% 36% 42% 39% 38% 41% 40% 37% 36% 26% 25% 34% 26% 26% 24% 32% 22% 36% 39% 42% Intentions to start a business for those not 3% 3% 4% 6% 3% 6% 5% 4% 7% 8% 8% active in entrepreneurship - Fear of failure measured only for the respondents who perceive good opportunities - Startup intentions measured only for the respondents who are currently not actively involved in entrepreneurial activity (as a nascent entrepreneur or owner-manager in new/established firm) 18

19 National Societal impressions Another way of addressing entrepreneurial culture is to assess the visibility and attractiveness of entrepreneurship in a country. Also here the GEM Adult population Survey provides three relevant questions: - In Belgium, starting a business is considered as a good career choice - In Belgium, persons growing a successful business receive a high status - In Belgium, there is lots of positive media coverage for new businesses We should stress here that all individuals in the Belgian sample answered these questions for Belgium as a country. However, there may still be differences in societal impressions in terms of media coverage for example, certainly since most of the relevant media tend to cover regions rather than countries. Table 4.2 shows that the results for Belgium and Flanders compare well with each other; differences are not statistically different. For Belgium, the most interesting finding from Table 4.2 is that while two out of three persons believe that entrepreneurship is accepted as a good career choice, fewer people believe that successful entrepreneurs receive high status. These scores seem to contradict each other. Also in 2012, this second indicator remains for Belgium actually lower than any of the benchmark economies. Other countries that also witness a lower indicator for status as compared to career choice are the Netherlands and Taiwan. Positive media attention for entrepreneurship is confirmed by more than half of the interviewed Belgian individuals. This is an upward trend and as this number has dropped in all benchmark countries but Spain, the 2012 result compares rather well to those of the benchmark economies but is still considerably lower than for example Finland, Singapore and Taiwan. Table 4.2 National Societal Impressions, 2012 (% pop.) Entrepreneurship as a good career choice High Status to successful entrepreneurs Media attention for entrepreneurship Belgium Flanders Benchmark Economies Denmark* France Germany Netherlands Spain United Kingdom Average Other Innovation-Driven Economies* Austria Finland Greece Ireland Israel Italy Japan Korea Norway Portugal* Singapore Slovakia Slovenia Sweden* Switzerland Taiwan United States* Average all innovation -driven economies * These data have not been collected in Denmark, Sweden, Portugal, United States 19

20 Figures 4.3 and 4.4 make clear that there has been some fluctuation in these indicators, especially regarding entrepreneurship as a good career choice and the status attached to successful entrepreneurship. Both indicators dropped after 2005 and while beliefs about career benefits for entrepreneurship have risen again after 2009 this has been less obvious for the status attached to successful entrepreneurship though more so in Flanders. Media attention has in the view of the Belgian and Flemish inhabitants been on the rise in the past three years and scored over 50% for Belgium as well as Flanders. 16 Fig. 4.3 Development National Societal Impressions Belgium Percentage of individuals in the population 80% 70% 60% 50% 40% 30% 20% 10% Belief: starting a business is considered as a good carreer choice Belief: persons growing a succesful new business receive high status Belief: lots of media coverage for new businesses 0% % 71% 67% 47% 45% 47% 46% 60% 64% 62% 54% 69% 72% 53% 51% 46% 49% 51% 55% 57% 40% 40% 48% 37% 37% 38% 33% 46% 47% 54% 16 As mentioned earlier, the questions underlying these indicators that are asked to individuals refer to the situation in Belgium, not in their local or regional environment. 20

21 Fig Development National Societal Impressions Flanders Percentage of individuals in the population 80% 70% 60% 50% 40% 30% 20% 10% Belief: starting a business is considered as a good carreer choice Belief: persons growing a succesful new business receive high status Belief: lots of media coverage for new businesses 0% % 75% 66% 46% 44% 43% 44% 63% 68% 66% 52% 69% 74% 54% 51% 44% 48% 53% 59% 60% 42% 48% 52% 42% 43% 41% 37% 45% 48% 55% A profile of the entrepreneurial culture in Belgium and Flanders Combining the indicators on entrepreneurial perceptions and attitudes in Figure 4.5 presents the profile of entrepreneurial culture for Belgium and Flanders. In future years we plan to augment this profile by also taking into account other sources, such as those of the Eurobarometer Surveys on entrepreneurship and the European Value Surveys. Figure 4.5 confirms that most indicators for Belgium and Flanders resemble the averages of the benchmark countries, except for the item on status for successful new businesses. While the below-average score on (self) perceived opportunities to start businesses may perhaps be attributed to a temporal dip, the discrepancy on the societal impression related to status of successful entrepreneurs seems to be larger and more structural. 21

22 Fig. 4.5 A Profile of Entrepreneurial Attitudes, Belgium and Flanders Belief: lots of media coverage for new businesses Sees good opportunities for starting a business in the next 6 months 80% 70% 60% 50% 40% 30% 20% 10% 0% Has the required knowledge/skills to start a business Belgium Flanders Benchmark Countries Belief: persons growing a succesful new business receive high status Fear of failure among those recognizing opportunities Belief: starting a business is considered as a good carreer choice Note: All figures are expressed as percentage of the population between years 4.2. Entrepreneurial Activities: phases of entrepreneurial activity As shown in Figure 1.1 earlier in this report, GEM conceptualizes entrepreneurship as a continuous process that includes nascent entrepreneurs involved in setting up a business, entrepreneurs who own and manage a new business and entrepreneurs who own and manage an established business. 17 In addition, GEM assesses the rate and nature of business discontinuations. As a result, indicators on several phases of the entrepreneurial process are available. In this section we elaborate on these phases of entrepreneurial activity. As usual, most attention is paid to the phase of early-stage entrepreneurial activity. This is the phase that is crucial for most entrepreneurs, while at the macro level, most dynamism, future job creation and innovation can be expected from this group of entrepreneurs. In section 4.2.2, we contrast total early-stage (independent) entrepreneurial activity (TEA) with the findings on entrepreneurial employee activity (EEA). Combining this very first measurement on entrepreneurial employee activity with the findings on independent entrepreneurial activity it appears that the Belgian context produces relatively many entrepreneurial employees Total early-stage Entrepreneurial Activity An economy s Total early-stage Entrepreneurial Activity (TEA) rate is defined as the prevalence rate of individuals in the working age population who are actively involved in business startups, either in the phase in advance of the birth of the firm (nascent entrepreneurs), or the phase spanning 42 months after the birth of the firm (owner-managers of new firms). As such, GEM takes the payment of any wages for more than three months as the birth event of the firm. Several other definitions for what constitutes the birth of a firm have been put forward in the entrepreneurship literature, using different perspectives. The payment of wages proved to be the best approach for making international comparisons. Individuals who are actively committing resources to start a business (that they expect to own or co-own) but for whom the business has not yet yielded wages or salaries are labeled nascent entrepreneurs. The individuals who did pass this birth event but are operational for less than 42 months are labeled as owner-managers in new firms. The cut-off point of 42 months has been based on a combination of theoretical and practical considerations. 18 Figure 4.6 shows the point estimates of the TEA rates for each of the 69 economies that participated in GEM 2012, by phase of economic development. The confidence intervals facilitate in interpreting differences between countries. They constitute the range within which the average value of 95 out of 100 replications of the survey would be expected to lie. Thus, in 2012 the TEA rate estimated for Flanders, 2.8, is significantly below nearly every other innovation-driven economy, while the rate of Belgium (5.2) compares rather well with most benchmark economies (United Kingdom and the Netherlands have significantly higher TEA rates in 2012). This particular finding for Flanders is in accordance with that by Startersatlas 2013 that assigns 17 For a more detailed explanation of these measures, see Annex II. 18 This is explained in Annex II. See also Reynolds et al. (2005). 22

23 the decrease in the number of start-ups in Belgium entirely to the sharp decline in Flanders. 19 Table 4.3.shows the prevalence rates of TEA, as well as those of its two components (nascent entrepreneurs and owner-managers in new firms), established entrepreneurship and discontinuations by ownermanagers. Fig. 4.6 Prevalence rates of Total early-stage Entrepreneurial Activity, 2012 Table 4.3 Phases of Entrepreneurial Activity in the GEM Countries, 2012 Nascent entrepreneurship rate New business ownership rate Early-stage entrepreneuri al activity (TEA) Established business ownership rate Discontinuati on of businesses Belgium Flanders Benchmark Economies Denmark France Germany Netherlands Spain United Kingdom Average Other Innovation-Driven Economies Austria Finland Greece Ireland Israel Italy Japan Korea Rep Norway Portugal Singapore Slovakia Slovenia Sweden Switzerland Taiwan United States Average innovation driven economies Note: all figures denote percentage of the population years 19 Unizo Startersatlas 2013, p

24 From Table 4.3 it can be seen that whereas the nascent entrepreneurship rates in Belgium and Flanders are quite low, the rate of owner-managers in new firms, i.e. those who have actually managed to get their business started, is well in line with those of the benchmark economies. 20 While much of the entrepreneurship literature documents the relevance of opportunity recognition (Shane and Venkataraman 2000), some of the entrepreneurs in the GEM samples indicate to have acted out of necessity rather than that they saw an opportunity. When further asking those who reported to be pursuing a recognized opportunity (rather than necessity), most indicated that the main driver for becoming an entrepreneur was to become more independent or to increase their personal income (taken together indicated as improvement-driven opportunity in Table 4.4), rather than just maintaining income. The results in Table 4.4 indicate that the percentage of early-stage entrepreneurs acting out of necessity was about average for Belgium and Flanders in Also in 2012 some of the economies that have faced the largest economic struggles in Europe (Greece, Ireland, Spain) also witness high necessity rates. Instead, relatively low necessity rates are reported for Portugal and Italy, while in Germany the rate of necessity-driven entrepreneurs is also quite high, suggesting that not all groups of individuals can take advantage of Germany s strong economic performance over the past few years. Finally, necessity-motivation percentages remain strikingly high in Japan and the Korean Republic. Table 4.4 Motivations for Total early-stage Entrepreneurial Activity, 2012 Necessitydriven (% of Improvementdriven Mixed / Other (% of TEA) TEA) opportunity (% of TEA) Belgium Flanders Benchmark Economies Denmark France Germany Netherlands Spain United Kingdom Average Other Innovation-Driven Economies Austria Finland Greece Ireland Israel Italy Japan Korea Rep Norway Portugal Singapore Slovakia Slovenia Sweden Switzerland Taiwan United States Average innovation driven economies Having addressed the cross-country comparison of entrepreneurial activity, we now turn to the development of nascent entrepreneurship, owner-managers in new firms and the resulting early-stage entrepreneurship over time. Figures 4.7 and 4.8 show the developments over for Belgium and Flanders respectively. While all three indicators show a drop for Flanders in 2012, the indicator for nascent entrepreneurship is somewhat higher in 2012 for Belgium as a whole. Overall the rate of nascent entrepreneurs appears to be rather stable over time (if the increase in nascent entrepreneurship in Belgium can be considered a trend is still unclear), while the general pattern of owner-managers in new firms reflects, overall, an increasing trend. 20 The nascent entrepreneurship rates for Belgium and Flanders are significantly below those of Ireland, Netherlands, Greece, United Kingdom, Czech Republic and Australia applying confidence intervals of 95%. 24

25 Fig. 4.7 Development of Entrepreneurial Activity in Belgium, % Percentage of individuals in the population 5% 4% 3% 2% 1% 0% Nascent Entrepreneurs 2.0% 2.1% 2.8% 2.2% 2.9% 1.8% 2.7% 2.0% 2.0% 2.3% 2.7% 3.3% Owner-managers in new firms 1.2% 1.1% 1.2% 1.4% 1.2% 1.1% 0.4% 0.9% 1.6% 1.4% 3.0% 2.0% Early-stage entrepreneurs 3.1% 3.0% 3.9% 3.4% 3.9% 2.7% 3.1% 2.9% 3.5% 3.7% 5.7% 5.2% Fig. 4.8 Development of Entrepreneurial Activity in Flanders, % Percentage of individuals in the population 5% 4% 3% 2% 1% 0% Nascent Entrepreneurs 1.8% 1.7% 3.1% 1.5% 2.6% 2.1% 2.7% 2.1% 1.6% 2.2% 2.3% 1.3% Owner-managers in new firms 0.7% 1.0% 1.5% 1.2% 1.3% 1.2% 0.7% 1.0% 1.8% 1.3% 2.5% 1.6% Early-stage entrepreneurs 2.4% 2.6% 4.4% 2.7% 3.7% 3.2% 3.4% 3.0% 3.3% 3.5% 4.8% 2.8% 25

26 4.2.2 Total early-stage Entrepreneurial Employee Activity While the attention so far has been focused on entrepreneurial individuals who are in the process of owning and managing a business, this is not the complete picture. First, within the group of people owning and managing businesses, some will have higher entrepreneurial aspirations than others in terms of job creation, innovativeness and international orientation (see section 4.3). Second, entrepreneurs can also be found among people who are employed by business owners. This section elaborates on the 2011 special study on entrepreneurial employee activity (EEA), that has been more extensively discussed in Bosma et al. 2013a (for Belgium and Flanders) and in Bosma et al 2013b (for global patterns). In this section we have combined the 2011 and 2012 EEA results for those countries that included the EEA module in the 2012 questionnaire. This concerns Belgium (and Flanders), Denmark and the United Kingdom. Figure 4.9 presents the overall outcomes and shows that some of the countries in our benchmark group that have the lowest TEA rates, such as Belgium and Denmark, actually have the highest EEA rates. This result hints at a possible substitution effect between independent entrepreneurship and entrepreneurial employee activity and could provide important information to entrepreneurship scholars and policy makers. For scholars it may provide partial support for the notion proposed by Baumol (1990), stating that the number of entrepreneurs can be seen as given, but that the rules and norms in society will determine how these entrepreneurs are allocated (and in turn how this results in productive or unproductive entrepreneurship). For an elaboration adopting this perspective we refer to Bosma et al. (2013b). For policy makers, these results should especially signal that a comprehensive policy approach to entrepreneurship should not only take into account entrepreneurial efforts by independent entrepreneurs but also those by entrepreneurial employees. Fig. 4.9 Total early-stage Entrepreneurial Activity (TEA) and Entrepreneurial Employee Activity (EEA), merged data 10% 9% Percentage in Population 8% 7% 6% 5% 4% 3% 2% 1% 0% Spain Germany France Netherlands United Kingdom Flanders Belgium Denmark EEA 2,5% 3,5% 3,9% 5,6% 6,5% 6,6% 6,7% 9,3% TEA 5,8% 5,6% 5,7% 8,2% 8,1% 2,4% 5,5% 5,0% A profile of the entrepreneurial activities in Belgium and Flanders Figure 4.10 summarizes the results on entrepreneurial activities provided in this chapter and clearly indicates that whereas nascent entrepreneurs and owner-managers in new and existing firms may be under-represented in Belgium and Flanders, entrepreneurial employees may be over-represented. Therefore, policy makers may do well to target the pool of entrepreneurial employees, as they are more prone to consider starting a business as a serious option and resemble independent entrepreneurs in terms of characteristics and entrepreneurial perceptions (Bosma et al 2013). 26

27 Fig Profile of Entrepreneurial Activity, Nascent entrepreneurship 7% 6% Belgium Flanders Benchmark Countries Entrepreneurial Employees 5% 4% 3% 2% 1% 0% Owner-managers in new firms Owner-managers in established firms Early-stage entrepreneurs Note: all figures in percentage of adult population between years. Entrepreneurial employees are from 2011 and 2012 data, as discussed in section Entrepreneurial Aspirations As not all business startups are the same, GEM gives an indication of the differential impact entrepreneurs can have on their economies. GEM measures the job (growth) expectation, innovation, and internationalization profiles of entrepreneurs, which may all three be viewed as impact factors. These forms of entrepreneurial aspirations have been positively associated with economic development (see e.g. Wong et al. 2005; Wennekers et al., 2010) 21. In this section, these impact profiles are assessed for early-stage entrepreneurs. The results shown in this section are based on pooling the GEM data for the periods , and economic crisis impact years By merging the data over years the estimates of the various indicators of entrepreneurial aspirations are made with higher precision Growth-orientation (job creation) Growth aspirations constitute a key dimension of the impact profiles by early-stage entrepreneurs. It is the clearest manifestation of entrepreneurship that can directly be linked to the number one objective of most governments: to create more jobs. Most studies on entrepreneurial aspirations, also denoted as ambitious entrepreneurship (Stam et al., 2012) or high-impact entrepreneurship (Acs, 2008), involve analyses focused on job creation. These analyses evolve around entrepreneurial attitudes, ambitions, expectations, and realizations in terms of job creation (see e.g. Davidsson, 1991; Wiklund and Shepherd, 2003; Wiklund et al., 2009; Levie and Autio, 2011). The typical GEM-based measures in the domain of growth aspirations are linked to job (growth) expectations. It should therefore be acknowledged that early-stage entrepreneurs may be optimistic in their expectations and that expectations for job creation certainly not always lead to realizations. At the same time, it is also well established that growth realization is seldom achieved without having expectations or ambitions for growth (Stam et al., 2012). Thus, building on these findings, country variations in the degree of (high) job growth expectations can be assumed to approximate variations in realized job creation. 21 See also Hessels et al. (2008) for an analysis on the determinants of these three distinctive entrepreneurial impact factors. 22 The assumption made here is that during the periods concerned the general aspirations profiles within economies have not substantially changed. 27

28 Entrepreneurs who are identified as such by means of the GEM Adult Population Survey are asked about the number of jobs provided at the moment of the survey as well as their expected number of jobs five years ahead. For this report we categorized the expected number of jobs five years ahead (irrespective of the current amount of jobs) for early-stage entrepreneurs as follows: - Solo early-stage entrepreneurial activity (SEA): expects no jobs (i.e. outside the entrepreneur); - Low job expectation early-stage entrepreneurial activity (LEA): expects between 1-4 jobs; - Medium job expectation early-stage entrepreneurial activity (MEA): expects between 5-19 jobs; - High job expectation early-stage entrepreneurial activity (HEA): expects 20 jobs or more. The distinction between these four categories is relevant, because there are essential differences between the characteristics of these groups and the underlying reasons for job creation. The first group consists of entrepreneurs who are self-employed and do not aim at creating any employment (SEA). This group includes both necessity-driven entrepreneurs as well as those who are very satisfied working as an independent professional. The low job expectation early-stage entrepreneurs are modest job creators and often employ people from their own personal network (such as family members and friends). Medium job expectation entrepreneurs are keen to employ people, however some of them may want to keep their business manageable and do not desire further growth. The high job expectation measure corresponds to the measure that features in the two GEM Special Reports on highexpectations Entrepreneurship (Autio, 2005, 2007) and in several academic publications (e.g. Wong et al., 2005; Levie and Autio, 2011). These entrepreneurs are very ambitious; even if they overestimate the number of jobs they expect to generate, as a group their impact on job creation will probably be substantial. Fig Development of Medium-high early-stage Entrepreneurial Activity (MHEA) Percentage of Population with job expectation >5 empl in 5 years 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% Belgium Flanders Benchmar k Average Denmark France Germany Netherlands Spain United Kingdom ,1% 0,9% 1,8% 2,2% 0,9% 1,8% 1,6% 2,0% 2,3% ,0% 0,9% 1,7% 2,0% 1,2% 1,3% 1,6% 2,1% 2,1% ,0% 0,7% 1,4% 1,3% 1,3% 1,3% 1,7% 0,8% 1,8% As the MEA indicator constitutes the main distinctions between considerable (five or more, which is high considering a representative, random group of individuals in the process of starting a firm), we take this indicator and merge it with HEA to denote medium-high job expectation (MHEA). Figure 4.11 shows the development of the MHEA indicator over time. Apparently the rates have been quite stable in Belgium and Flanders, while they are on the rise in France. Spain, as expected, shows a dramatic decline in expectations as regards job creation. Belgium and Flanders score among the lowest among the benchmark countries at about one percent twice as low as the Netherlands and the United Kingdom. Perhaps the findings earlier in this chapter, indicating that people in Belgium were relatively reluctant to esteem successful entrepreneurs, is reflected also in the outcomes for expectations. Modest expectations and/or modest ambitions may also be caused by a perception of (nascent) entrepreneurs that regulations hinder hiring employees. At the same time, we cannot rule out that Belgian entrepreneurs may exhibit more realistic expectations concerning job creation than individuals in other countries who may be overly optimistic. 28

29 4.3.2 Innovative orientation While job growth expectations and realizations arguably constitute the most visible medium term impact of entrepreneurship, innovative orientation impacts structural renewal in the long term. Innovation is viewed from the perspective of the market and industry, in line with Schumpeter s view of innovative entrepreneurship as new product-market combinations destructing older, obsolete products and services and pushing the production frontier forwards (Schumpeter 1942). It represents the perceived extent to which an entrepreneur s product or service is new to some or all customers and where few or no other businesses offer the same product. When comparing countries, it must be kept in mind that what may seem new to customers in one economy may already be familiar to customers in other ones. Nevertheless, a high degree of innovative orientation in the former economy is still expected to have a positive impact on economic development. Innovative orientation as measure in the GEM framework is therefore a context-dependent measure. Figure 4.12 shows the percentage of early-stage entrepreneurs with innovative orientations. Among the benchmark economies, Denmark and France show the highest percentage of early-stage entrepreneurs with innovative products and services. Even though there may be fewer early-stage entrepreneurs in these countries, the higher proportion of innovativeness is a quality dimension that should also be considered. The percentage of early-stage entrepreneurs with an innovative orientation for Belgium and Flanders is similar to those of Germany, the Netherlands and Spain. Fig Development of Innovation-Oriented early-stage Entrepreneurial Activity Percentage of TEA with innovative orientation 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Belgium Flanders Benchmark Average Denmark France Germany Netherlands Spain United Kingdom % 30% 28% 45% 31% 25% 22% 16% 30% % 21% 30% 38% 31% 28% 28% 25% 28% % 23% 32% 47% 40% 27% 28% 25% 28% 29

30 4.3.3 International orientation A specific GEM measure assesses the extent to which entrepreneurs sell to customers outside their economies. Figure 4.13 shows, for the benchmark economies, the proportion of early-stage entrepreneurs with at least 25% foreign customers over the three periods that were distinguished. Internationalization is relatively high in Belgium and Flanders. Of course this should be placed in the context of small countries and the existence of obvious partners in neighboring economies. Still, the international orientation of the average Belgian early-stage entrepreneurs is high. It signals that even though there appears to be fewer early-stage entrepreneurs in comparison to other countries, the international orientation is adequate. Fig Development Internationally oriented early-stage Entrepreneurial Activity Percentage of TEA with international orientation 40% 35% 30% 25% 20% 15% 10% 5% 0% Belgium Flanders Benchmar k Average Denmark France Germany Netherlands Spain United Kingdom % 27% 18% 19% 27% 12% 20% 10% 19% % 25% 19% 22% 24% 14% 16% 20% 17% % 29% 17% 21% 22% 15% 14% 10% 20% 30

31 5. INCLUSIVE ENTREPRENEURSHIP The GEM 2012 Adult Population Survey includes for the first time a special topic on international migration and its impact on entrepreneurship. In this chapter on Inclusive Entrepreneurship, we will explore this subject further and link the matter to other target groups such as women entrepreneurs and young adults. In this, we elaborate on some of the evidence provided in the GEM 2012 Global Report by Xavier et al. (2013). 5.1 Migrant entrepreneurship from a global perspective Xavier et al. (2013) analyze globally whether migrants differ from the non-migrant population in their prevalence for entrepreneurial activity, their attitudes toward self-employment as well as their motivation for starting a firm. In the GEM 2012 Global Report, data are analyzed both from the perspective of the recipient (host) countries as well as the economies of origin (home countries), also a differentiation is made between first- and second-generation migrants. In order to account for second-generation migrants, questions about the parent s country of birth are also included. As Rath & Kloosterman (2000) put forward, migrants can perceive and seek entrepreneurial opportunities through specific sets of resources and personality traits. Interesting could be to further analyze how the decision to leave one s economy of birth correlates with personality characteristics such as locus of control, self-efficacy and risk-averseness, which are also believed to have a positive effect on a person s likelihood to become engaged in entrepreneurial activity (Xavier et al., 2013). Also interesting, as Fig. 5.1 highlights, is the potential impact of migrant entrepreneurs on growth orientation. The proportion of migrant entrepreneurs expecting to create 10 or more jobs was 20% in innovationdriven economies, compared to 14% for the non-migrant group. This makes the migrant population a particularly interesting group for further research. Fig. 5.1 % of migrant and non-migrant TEA-entrepreneurs who intend to create 10 or more jobs across different stages of economic development Source: GEM 2012 Global Report A first observation discussed in the Global Report is that the prevalence of migrant entrepreneurial activity across development stages (innovation-driven, efficiency-driven, factor-driven economies) mirrors the one of non-migrant involvement in entrepreneurship (Fig. 5.2). This pattern emphasizes the importance of entrepreneurial framework conditions (economic, institutional and cultural circumstances) across regions that count both for migrant and non-migrant groups. 31