Fear of failure discourages European entrepreneurs

2005

Britain may be the most entrepreneurial major economy in Europe, but new research shows that it still lags behind Australia, New Zealand, the US and Canada.

The Global Entrepreneurship Monitor (GEM) 2004, carried out by London Business School and Babson College in the US, found that British rates of entrepreneurship were marginally higher than those in Germany, France or Italy.

It found that 6.3 per cent of the UK population is engaged in entrepreneurial activity compared to 6.1 per cent in France, 4.5 per cent in Germany and 4.3 per cent in Italy.

In contrast, over 11 per cent of adults in the US are either already running their own businesses or plan to start one.

GEM found that entrepreneurial activity declines as countries attain higher national income, reaching its lowest point at about US $30,000 per capita GDP. Beyond that level, entrepreneurialism begins rising slowly and steadily as GDP continues to rise.

Uganda, Peru, Ecuador and Brazil – with low national incomes - emerged from the survey of 34 countries with the highest levels of entrepreneurship, where as many as one in seven working adults are active entrepreneurs through necessity.

United States and Iceland have both showed entrepreneurialism rates and high national incomes.

Japan, Belgium, Italy, Sweden and Finland have the lowest levels of entrepreneurship at around 1.5 percent of the adult population.

Globally, the survey found that 73 million people are either nascent entrepreneurs, or own or manage a young business. Most entrepreneurial activity is carried out by people aged 25-34 regardless of the income level of their home country.

Over the past year, entrepreneurial levels have declined by some eight per cent in the G7 nations (Canada, France, Germany, Italy, Japan, UK and USA), while fewer than half of the G7 nations are positive in their assessment of the skills possessed for entrepreneurial endeavours.

Cultural perception of entrepreneurs also fell. GEM found a small reduction with about two per cent less of the G7 population believing that entrepreneurship is a good choice.

In the UK, the risk of failure was cited by 32.9 per cent of respondents as a reason for not starting a company, compared with 21.2 per cent of Americans.

The same story repeats itself throughout Europe. According to recent research by the European Commission, half of Europeans agreed with the statement, "One should not start a business if there is a risk it might fail." Only one-third of Americans agreed.

Some 30 percent of Europeans also said they would prefer to be employees than self-employed cited "regular, fixed income" as a reason, compared with 16 percent of Americans. A further 24 percent of Europeans cited "stability of employment," compared with 10 percent in the United States.

In other words, Europeans want a stable income and a steady, risk-free job rather than take the risk of starting their own business.

In the UK, meanwhile, Gem found that the gap between male and female entrepreneurs has closed slightly, although women are still less than half as likely as men to start a business.

For every 100 men starting up their own business in 2004, 46 women also did so, up from 43 in 2003. Overall, some 177,000 women set up businesses in the UK last year.

Entrepreneurial activity among most ethnic minority groups was also found to be substantially higher in the UK than for white people.

The overall proportion of Britons expecting to start a business over the next three years also increased from 7.8 per cent in 2002 to 9.5 per cent in 2004.