1
Entrepreneurial Challenge

• Prof. Anne Flynn
• 04/14/2005

2
Traditional Irish Greeting

• A chairde.
• Tá áthus orm bheith anseo libh agus mo
• bhuiochas libh as an fáilte a thug sibh
• dom.

3
Entrepreneurship is?

• One of the cornerstones of a modern, fully
  developed economy and the lifeblood of thriving
  local communities.
• An important contributor to economic growth,
  employment, innovation, and competitiveness.

4
Structure

• Global Assessment GEM
• Entrepreneurial Activity Ireland, Europe, US
• Entrepreneurship in Europe
• Entrepreneurial Challenges in Ireland
• Closing Remarks

5
Global Assessment

• The Global Entrepreneurship Monitor (GEM)
  research program - is a global assessment of the
  national level of entrepreneurial activity.
• Initiated in 1999 with 10 countries, the fifth
  assessment was completed in 2003 with 41
  countries.
• www.gemconsortium.org

6
GEM Program Objectives

• Are there national differences in entrepreneurial
  activity?
• National consequences of entrepreneurial activity
  scope, job creation, growth?
• Why are some countries more entrepreneurial than
  others?
• What can be done to enhance entrepreneurial
  activity?

7
GEM Research Activities

• Adult population surveys
• Random sample of adults, 2,000 or more
• Grass roots entrepreneurial activity
• National expert interviews
• National teams, 18-70 per country
• National expert questionnaires
• Follows personal interview
• Standardised national data
• IMF, World Bank, UN, OECD, etc

8
Measures

• Total Entrepreneurial Activity (TEA)
• provides a measure of those active in starting a
  new business start up process owning/managing
  a new firm 3-42 months
• Firm Entrepreneurial Activity FEA
• an indicator of entrepreneurial activity among
  established firms
• firms provide new innovations, not just replicate
  existing goods or services

9
What is National Entrepreneurship?

• People Creating New Firms
• Start-up phase, before firm operational
• Young firm, up to 3.5 yrs old
• Entrepreneurship among existing firms
• Produce market innovation, Focus on growth
• National Infrastructure focuses on adaptation
• Coordinated effort, Collaboration among major
  sectors, Government, research, education,
  financial

10
Overall National Entrepreneurial ActivityTwo
Dimensional Classification
Low TEA Medium TEA High TEA
High FEA Hong Kong, Slovenia China, Mexico Chile, Korea (South), New Zealand, Uganda, Venezuela
Medium FEA Belgium, Finland, Italy, Sweden Australia, Canada, Denmark, Iceland, Ireland, Hungary, Singapore, Spain, UK, US Brazil, India
Low FEA Chinese Taipei Taiwan, Croatia, France, Japan, Netherlands, Poland, Russia Germany, Greece, Israel, Norway, South Africa, Switzerland Argentina, Thailand
11
Opportunity vs. Necessity

• Are you involved
• To take advantage of a business opportunity
• or
• Because you have no better choices for work?
• Willing volunteers or draftees?

12
Entrepreneurial Activity

• US (TEA) rate 11.9 in 2003, 7th highest.
• Ireland (TEA) rate 8.1, fore in Europe, most
  entrepreneurial country in EU.
• 76 of Americans opportunity vs. 85 of Irish
  entrepreneurs
• US (FEA) rate of 2.4, the 10th highest, Ireland
  (FEA) rate 1.6

13
Nascent and New Firm Rates
14
Entrepreneurship and Job Creation

• US - 70 employ at least 1 person
• Ireland - 84 employ 5 or fewer third only
  entrepreneur employed. Most expect they will
  remain small.
• High growth aspirations 20 staff in 5 years
  time Ireland 16, US 20, Europe 5.9

15
Entrepreneurship and Population Profile

• US Most active 25-34 years, TEA 15.7 men vs.
  8.2 women, specialized professional,
  technological, or business degree highest TEA
  17.8 opportunity driven 13.3
• Island of Ireland Most active 35-44 years,
  12.5 male vs. women (3.7), high level of
  education.

16
Rates of Entrepreneurial Activity for Men and
Women
17
Entrepreneurship and Cultural Values

• The strength of support for entrepreneurship
  among the general adult population within Ireland
  is stronger than in the US.
• Ireland vs. US
• Good career choice 66 - 63
• High degree of status 76 - 64
• Positive media coverage 84 - 64

18
Personal Context of the Population
Personal Indicators Ireland Northern Ireland UK US European Average
I have the skills to start a business 46 42 48 54 40
I see good opportunities 33 32 35 31 32
I know a recent entrepreneur 43 25 25 39 40
Fear of failure would prevent me starting a business 41 40 34 23 38
19
Entrepreneurship and Financing

• Av. Cost of Start-up US 29,600 / 26,200)
  Europe 53,800 / 47,600
• US - highest prevalence rate of informal
  investors with 5 /100 adults having invested in
  someone else's business during the previous 3
  years
• Ireland - Low level of informal investment (2.6)
  are active business angels, compared to 4.9 in
  the US.

20
Rates of Business Angel Activity
21
Shortcomings that Inhibit Entrepreneurial Activity

• Ireland
• Small size of home market
• Early stage finance
• Fear of failure
• Rate of commercialization of research
• Skills and experience
• Physical infrastructure

• United States
• Reduce gender gap 1.9 men for every woman
• Lack of financial capabilities - acquiring latest
  technology
• Stronger IPR laws to enhance RD transfers
• Build sustainable financing venues

22
Entrepreneurship in Europe

• SMEs backbone of European economy
• Conditions in Europe vs. US
• Green Paper on Entrepreneurship
• How to produce more entrepreneurs?
• How to get more firms to grow?
• Action Plan 5 policy areas
• entrepreneurial mindsets, incentives for
  entrepreneurs, competitiveness growth, access
  to finance and red tape

23
Entrepreneurial Mindsets

• Promote awareness of the entrepreneurial spirit
  by presenting best practice models and fostering
  entrepreneurial attitudes and skills among young
  people
• Educational Policy
• Entrepreneurs are not a homogenous group

24
Incentives for Entrepreneurs

• Fairer balance between risk reward
• Tackle the negative effects of business failures
• Facilitate the transfer of companies and amend
  social security systems for entrepreneurs.
• Entrepreneurship gap between Europe US is
  widening.

25
Incentives for Entrepreneurs

• Why do fewer Europeans have what it takes?
  (Eurobarometer 01/2005)
• Balancing the risks A regular income, Job
  stability, Fear of failure
• Rewards EU - greater independence
  self-fulfillment, US - creating one's own working
  environment
• Similar perceived obstacles
• Good management Success

26
Competitiveness Growth

• Promote access to support management training
  for entrepreneurs from all backgrounds,
  especially women and ethnic minorities.
• View immigration as an opportunity for stronger
  entrepreneurship (US)
• Exchange of Good Practice

27
Access to Finance

• Improve the availability of venture capital,
  business angel finance and investments by private
  individuals (US)
• Continue efforts to mobilize capital to support
  young, risk-taking businesses.

28
Red Tape

• Reduce simplify administrative barriers
  regulatory burdens
• World Bank "Doing Business Survey 2005 ease of
  starting a business
• EU busy pushing reforms, still lag US
• US 5 days 5 administrative steps to start a
  business vs. EU 36 days, 7.5 steps

29
Entrepreneurial Challenges in Ireland

• 172,000 small businesses
• 60 of total turnover
• 66 of employment
• 50 of private sector employment
• 80 service sector
• 16,000 new enterprises are created per annum

30
Enterprise Driven Society

• Less employment in large companies public
  sector
• Size of the domestic economy
• Government foster an entrepreneurial climate
  enterprise culture
• Small Firms Association of Ireland - major
  impediments and challenges facing the enterprise
  led sector appropriate actions

31
Competitiveness

• Irelands competitive position is now in a
  tailspin 4th position 2000 - 30th today!
• An expensive less attractive place to do
  business. min wage 22 higher, insurance costs
  risen 100 in 2 years, retail space Dublin
  (capital city) most expensive in the world! red
  tape adds 4 to product cost
• SMEs - non-pay costs 23.7 2002 - 2004
• You must create wealth before you can
  redistribute it.

32
Skilled Workforce Knowledge Driven Economy

• In a knowledge-based economy
• Well-supported process of life long learning,
  training up-skilling programs
• Intellectual property system is open and inviting
• Focus on technology transfer, licensing, the
  importance of 'change' or 'new ideas rather than
  'RD'

33
Infrastructure

• Current gridlock is threatening enterprise
  formation development
• Specialized body assessing planning applications
  reprioritizing projects
• Liberalization deregulation within the energy
  market
• Strive to have the "best in class"
  telecommunications infrastructure
• Environmental accreditation

34
Government Support

• Comprehensive fiscal approach to enterprise
• Retaining low corporation tax rates (12.5)
• Reducing inflation below 2
• Standard rate of VAT to 17.5
• No increases in labor costs

35
Regulatory Burden

• Simplicity needs to be rediscovered as a
  virtue.
• Comply - An owner manager would have to read
  almost one million words per annum complete
  forms running to over 500 feet in length.
• SMEs cite legislation as the most significant
  problem for their business.
• Cost impact analysis on businesses

36
Encouraging Business Start Ups

• Develop an" Enterprise Culture
• Remove barriers to entrepreneurship
• Availability of pre and start up seed capital
• Increase number of female entrepreneurs

37
ICT Training

• Maximize the potential of ICT for every small
  business speed up the roll-out of broadband
  digital access
• Training objectives - driven by business needs
  Increase management competency among small firms
• Enterprise courses

38
Value of Sectors

• Value Added" economy
• Barriers to trade within the Eurozone
• Create a business environment which makes it
  possible to sustain an economic and social shift
  to a high skill, higher value added competitive
  environment.
• Ahead of the Curve Ireland's Place in the
  Global Economy.

39
Closing Remarks

• Strong positive contributors and the shortcomings
  that inhibit entrepreneurial activity
• Shared challenges in fostering entrepreneurship
• Go raibh maith agaibh go léir .