Entrepreneurship in developing countries: GEM 2014

The Global Entrepreneurship Monitor (GEM) 2014 report is a very important one indeed. As a very nice short video explains, GEM has created a growing network of scholars and evidence base comparing entrepreneurial activity across the world. The 2014 report is important as it includes growing coverage of and information on African countries.

As the global report and the Africa Report highlight, African economies show high social valuation of entrepreneurship (while European economies show the lowest). Pages 44-45 describe the growing evidence on African entrepreneurship. One’s initial reaction might be that you’d expect this to be the case, as people in poorer countries simply don’t have any other opportunities.

But the story is more complex. While 22% of male entrepreneurs and 31% of female entrepreneurs in Africa (table A.5) start enterprises out of necessity rather than opportunity, this is not much higher than in other regions (for example, in Canada too20% of women who started a business did so out of necessity). Of course, as circumstances and expectations are different, comparisons of valuation are not easily made particularly across contexts with hugely varying income levels.

But there is also a remarkable difference across lower-income countries in terms of entrepreneurship rates, which does seem to give reason for an optimism about and in Africa. The Table below reproduces data for a selection of developing countries. From these data, one can only speculate, but it definitely seems worth exploring why rates in India are so much lower than in Botswana and Cameroon, and what – if these data do indeed reflect differences on the ground – what this might mean for policy.

Another gold mine of information from GEM is the gender-disaggregated data. GEM surveys how that early-stage entrepreneurial activity is gender sensitive, and that this is die to cultural, societal and economic reasons. While there are no differences in individual attributes, according to previous surveys, more men than women start enterprises, and they more often do this driven by opportunity rather than necessity. This gap varies too and is particularly high in for example Burkina Faso and Chile. Only in a few cases, including India, do men more often than women start business out of necessity. Again, this is only the aggregated data, and the surveys provide much more information to better understand both individual motives and country environment for entrepreneurship.

Early stage entrepreneurship (TEA), selection of countries , 2014
TEA TEA female TEA male
Angola 21.5 20.4 22.8
Argentina 14.4 11.2 17.8
Bolivia 27.4 25.0 29.9
Botswana 32.8 30.9 34.8
Brazil 17.2 17.5 17.0
Burkina Faso 21.7 18.7 25.4
Cameroon 37.4 34.1 40.9
Chile 26.8 23.7 30.1
China 15.5 14.2 16.8
Colombia 18.6 14.6 22.8
Costa Rica 11.3 11.0 11.7
Ecuador 32.6 32.2 33.0
El Salvador 19.5 19.7 19.3
Guatemala 20.4 16.9 24.4
India 6.6 4.6 8.5
Indonesia 14.2 15.2 13.2
Peru 28.8 28.0 29.7
Philippines 18.4 20.8 15.9
Puerto Rico 10.0 9.1 11.1
South Africa 7.0 6.3 7.7
Thailand 23.3 22.1 24.5
Uganda 35.5 37.2 33.7
Uruguay 16.1 13.2 19.2
Vietnam 15.3 15.5 15.1
Source: http://www.gemconsortium.org/key-indicators
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More evidence on gender equality and growth?

Our IDRC program GrOW has just issued a new call for research proposal, to synthesize what we know about whether and how women’s economic empowerment impacts growth. Here are my own thoughts about why this exercise is important.

This is a call for a review of evidence. This partly follows a practical consideration: primary research is expensive and takes a long time. And we know there already is much research out there – by Naila Kabeer, Ester Duflo, Akram-Lodi, amongst others – and we believe it is important we produce a good and updated summary of what we already know. The research will follow principles of systematic review, and while there has been some critique of this methodology, we believe in the basics of this: that we need apply the same rigorous principles in literature reviews as we expect in primary data collection (see the great in the Journal of Development Effectiveness on this).

That’s just the methodology. What about the subject: why do we need and want to know about the impact of women’s economic empowerment on economic growth? Isn’t it enough to identify what barriers hinder women to develop their capabilities, as is done in most of the current projects under GrOW, or at the Gender Innovation Lab? The answer to this hinges on two things.

First, has been much emphasis on the smart economics of women’s economics. This stresses the positive benefits of investing on women’s economic empowerment for societies and economies as a whole. The World Economic Forum argues that closing gender gaps is good for countries competitiveness. But these relationships are not extremely strong, and of course they are correlations not causation. They are very complex, context-dependent, and influenced by a wide range of factors. Thus even if the basic correlations holds, which it possibly does, our best research to understand these in detail can be of great value.

Second, the case for this work hinges on appreciation of the instrumental versus the intrinsic value of equality. The intrinsic value is key: we believe that all women should have equal access, and we believe that public policies should support that all should be able to fully develop their capabilities. While the fundamental rights are non-negotiable, there will always be debates about the means and resource allocations. Amartya Sen’s argument with respect to ‘freedoms’ I believe applies here: “It is indeed the combination of the intrinsic considerations and instrumental analyses that can lead the way to an adequate examination of what should be done and why.”

For me, it is because the topic is so important that we need the best evidence available. Hence, this call for proposals: http://alturl.com/6gq8d