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Entrepreneurs: the barometer for economic development in Scotland

By Tobias Pret - Posted on 29 May 2014

Tobias Pret, A PhD student specialising in Entrepreneurship, breaks down findings from yesterday’s Global Entrepreneurship Monitor for Scotland report…

Following years of recovery from one of the worst recessions in recent history, entrepreneurship is seen by many as the Holy Grail for both employment creation and economic development. However, opinions differ about what factors help to foster entrepreneurship, which makes it such an interesting and hotly debated topic for scholars and policy makers alike.

One of the most comprehensive research projects in the area is the Global Entrepreneurship Monitor (GEM), which analyses and compares the entrepreneurial activity of 70 world economies. After 14 years of data collection, GEM Scotland is able to provide us with great insight into the nature and level of entrepreneurial activity in the country.

The latest findings have both positive and negative implications for the industry.

For the first time since the start of the recession, total early-stage entrepreneurial activity (TEA) in Scotland is statistically identical with the rest of the UK and other innovation-driven nations. TEA in the UK as a whole, dropped significantly from 2012 to 2013, while remaining stable in Scotland.

The report shows that the percentage of early-stage entrepreneurs who expect to employ 10 more people in the next five years has doubled from 2010 - 2013. It can be hoped that recent government initiatives, such as EDGE and ‘Scotland Can Do’, will encourage more positive developments in new venture creation processes in Scotland.

Every year GEM Scotland also explores a set of special topics. For the first time since 2004, this report focuses on entrepreneurship among men and women. Although the report does not aim to explore differences, its findings show funding expectations for business start-ups are much higher for Scottish male entrepreneurs (£12,000) than for female entrepreneurs (£3,000). Its results also demonstrate that more than 50% of all female-owned businesses are consumer-oriented, while male-owned businesses are more evenly distributed among different industries.

Nevertheless, both female and male early-stage entrepreneurs feel that they could benefit from more mentoring by experienced entrepreneurs. This finding should encourage the government to develop relevant business support schemes.

Finally, this year’s GEM report also investigates senior entrepreneurship in Scotland. Following the extension of the PRIME initiative to Scotland – which aims to help people over the age of 50 start their own businesses – there has been an increased interest in entrepreneurship opportunities for those aged over 50. Accordingly, the new GEM Scotland report finds that business ownership is highest between the ages of 50 and 64.

However, half of these individuals are self-employed and have no intention of employing anyone, which suggests that their impact on the economy may be lower than that of younger entrepreneurs. Perhaps unsurprisingly, the report also shows that entrepreneurial activity and intention decrease rapidly after the age of 64. Notwithstanding, entrepreneurship is considered a means of decreasing social exclusion, which is why the government should continue to foster its development for people of all ages.

As a whole the report suggests that things are looking up for the industry, but in order to flourish, it will need continued support. As Sir Tom Hunter aptly summarises in the foreword to the latest report: “This Scottish GEM report for 2013 underscores just how much more we – in government, academia, education and business – need to do if we are to be a leading entrepreneurial nation in the world.”

Have you ever started your own business? How difficult was the process, and did you make use any of government funded initiatives available? Let us know in the comments below…

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