Europe's hidden entrepreneurs make up for continent's low start up rate: new report

Europe’s hidden entrepreneurs make up for the continent’s low start-up rate; but Germany, France, Italy and Spain score poorly as small Baltic and Nordic states lead the way, according to a new report co-written by Professor Jonathan Levie of the Hunter Centre for Entrepreneurship at Strathclyde Business School.

The report also reveals:

• Northern Europe has an unusually high rate of intrapreneurs, making up for low levels of start-ups and debunking the myth of Europe’s lack of entrepreneurs, a new study shows
• Germany, France, Italy and Spain, however, come in at the bottom of the combined ranking measuring entrepreneurship both at start-ups and inside established businesses
• The top overall performers are small Baltic states like Estonia and Latvia, and Nordic countries like Sweden

Europe has long had the paradoxical reputation of a continent with low levels of entrepreneurship, yet high overall levels of economic competitiveness. A new report produced by the World Economic Forum and the Global Entrepreneurship Monitor provides an explanation: Europe is home to many intrapreneurs, individuals who choose to innovate within organisations.

The findings go against the widely-held belief of the dismal state of entrepreneurship in Europe. Indeed, the report finds, what Europe lacks in early-stage entrepreneurship, it makes up for in intrapreneurship:

• Of all regions surveyed, only the US, Canada, and Australia scored better than Europe for intrapreneurship: out of every 100 workers in Europe, 8 could be classified as intrapreneurs. In other regions, including India (South Asia), China and ASEAN (Southeast Asia), Latin America and Africa, that number is lower  
• That contrasts with Europe’s score for what is traditionally seen as entrepreneurship: people involved in start-ups, or “early-stage entrepreneurial activity”: only 4 out of 100 Europeans in the workforce are active as start-up entrepreneurs, among the lowest rates in the world   

The findings are important for future potential growth in Europe, as those who innovate within organisations tend to create more jobs than those who start their own business. A correlation also exists between intrapreneurship rates and economic competitiveness: every 2.5% increase in a country’s intrapreneurship rate correlates to a 1 point increase in competitiveness as measured by the World Economic Forum’s global competitiveness data.

But the news is not all good. The European results vary widely, and are worst in its industrial heartland. The UK, one of Europe’s strongest economies, is the exception among large countries, coming in 5th overall and 3rd in intrapreneurship. But Germany (24th) and France (25th) appear at the bottom of the combined ranking, despite a moderate score in intrapreneurship. The three worst ranking countries overall are Greece (26th), Spain (27th) and Italy (28th). It is a worrying sign as Europe’s competitiveness depends on that of its heartland. Estonia, Sweden and Latvia come out on top. Other Northern countries also score well for the combined ranking of entrepreneurship and intrapreneurship, bringing up the continent’s total score.

The report explains the implications for policy makers, and ways they can design policies to enhance the economic competitiveness and unleash all types of entrepreneurship. The choice is not between start-ups and intrapreneurship as economies flourish when all types of entrepreneurship exist at healthy levels.

“In the public debate on entrepreneurship, a false contrast is often presented – the dynamic start-up entrepreneur versus the stale corporation. This report rebukes that narrow perspective on entrepreneurship,” says Michael Drexler, Head of Investors Industries at the World Economic Forum. “A better approach is to create policy frameworks that enable ‘collaborative innovation’, where young firms and established companies share complementary resources to support new ideas.”

“Countries should strive for a ‘healthy’ set of both types of entrepreneurship,” said Niels Bosma, Utrecht University and co-author from Global Entrepreneurship Monitor. “Independent, innovative entrepreneurship is important as it is allows for introducing and testing very new concepts or ideas. New entrepreneurial projects that have been successfully introduced to the market will likely have a bigger impact as these projects can tap into the resources available within the existing firm.”

Professor Jonathan Levie, of the Hunter Centre for Entrepreneurship at the University of Strathclyde Business School and co-author from Global Entrepreneurship Monitor, said, “When taken together the EEA and TEA rates provide a fuller picture of the extent of entrepreneurial activity being undertaken in a nation. The UK continues to have a relatively high rate of entrepreneurship among employees by international standards.  This is good news because resources for new business activities are often easier to access within established businesses.”

Professor Mark Hart, of the Enterprise Research Centre at Aston Business School and co-author from Global Entrepreneurship Monitor, said, “While the UK’s relatively high levels of start-up activity by European standards are often lauded this research shows that the entrepreneurial capacity of the nation goes way beyond new venture creation and is more important in terms of the future growth trajectory of existing businesses”.

Published: 20 December 2016