Start-up activity will not fall during global financial crisis

The global financial crisis will not cause a fall in entrepreneurial start-up activity around the world, according to the Global Entrepreneurship Monitor 2008 report. However it is already having an impact on perceived opportunities that might propel a non-entrepreneur to start their own business.

These are the findings from 150,000 adults surveyed last June in 43 countries (Australia was not included), before the true scale of the global financial crisis was revealed. The survey found that intentions to start a business within three years have not declined.

Reasons for this could include the recession, causing individuals to seriously consider becoming entrepreneurs in the near future because they fear losing their jobs. Or the group of potential entrepreneurs may be less pessimistic than the total population and do not consider the financial crisis as a reason not to get their business off the ground.

Previous GEM research has shown the impact of an economic crisis suggests the number of necessity-driven entrepreneurs will rise in 2009 in low and middle income countries.

Entrepreneurs’ growth intentions also appeared to be unaffected by the crisis. The US, New Zealand, Iceland and Canada have the highest rates of high growth expectation among the wealthier innovation-driven countries.

However the survey did find that there was an overall decline in perceived opportunities to start a business in 2008.

The GEM also examined reasons for business discontinuation, confirming that closing a business does not always mean that business fails. One third of businesses that were closed by their owners continued in another form or with new owners.

And entrepreneurs who exited were more likely to go and start a new business and to invest in another person’s business. GEM also found high rates of business discontinuation in low income countries and low rates in innovation-driven economies.

Norway, the US, Korea and Ireland showed the highest rate of business discontinuation among innovation-driven countries suggesting a rapid turnover of business experiments.

The report also found that most entrepreneurs expect no or limited job creation from their ventures and a small share of entrepreneurs is responsible for a high share of total expected job creation.

The most frequent source of training was self directed learning such as reading, observing, or working in other people’s businesses, followed by voluntary formal education and by voluntary training provided by a university but outside the formal education system. Other sources, such as business or trade organisations, typically were used by 3% of less of individuals.

The report also looked at entrepreneur education and training and found a huge variation across countries in the extent of which individuals had training in starting a business at school or after school.

The survey found that generally training undertaken voluntarily results in more entrepreneurial activity than compulsory training. The survey notes that much can be learnt from the experiences of different countries in the area of training. Chile has linked online training with business registration, while compulsory training in Belgium appears to have positive results.

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