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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