Archives: Reports

Global Entrepreneurship Week is the world’s largest celebration of the innovators and job creators who launch startups that bring ideas to life, drive economic growth and expand human welfare.

During one week each November, GEW inspires people everywhere through local, national and global activities designed to help them explore their potential as self-starters and innovators. These activities, from large-scale competitions and events to intimate networking gatherings, connect participants to potential collaborators, mentors and even investors—introducing them to new possibilities and exciting opportunities.

Millions who had never before considered launching their own ventures soak up advice and inspiration from the likes of Richard Branson, Michael Dell and Muhammad Yunus. Thousands of brand new startups spring to life through bootcamps like Startup Weekend and competitions like Startup Open. Hundreds of universities strengthen connections that help them commercialize research from their labs. Researchers and policymakers engage in discussions around the world to examine the underlying policies necessary to promote entrepreneurial growth. And serial entrepreneurs share their expertise through activities like EO24, run by the Entrepreneurs’ Organization, and practical training courses like FastTrac.

Meanwhile, world leaders and local elected officials alike have embraced the campaign as they look to fuel the economic engine of high-growth startups in their own countries and communities. During 2012 alone, presidents and prime ministers from 20 countries supported Global Entrepreneurship Week while 93 ministers from 54 countries participated by speaking at activities during the Week, filming statements of support or otherwise endorsing the national campaigns in their countries.

GEW is more than just an awareness campaign. It is a platform for connection and collaboration—engaging all players along the entrepreneurship spectrum in strengthening ecosystems around the world.

The paper “Getting the Bug: Is (Growth) Entrepreneurship Contagious?” presents the results of a survey of 2,000 Americans across the country, asking whether they knew entrepreneurs – both in general and specifically “growth” entrepreneurs whose ventures add more employment and wealth to the economy – and if they themselves were entrepreneurs.

The data then was analyzed by age, gender, geographic region and income level.

Overall, 36.7 percent of respondents reported knowing an entrepreneur, but only 15.4 percent knew a growth entrepreneur. These differences were more dramatic when evaluated by gender: 24.8 percent of men claimed to know a growth entrepreneur, compared with 12.1 percent of women.

Similar disparities appeared by income level: lower income respondents (annual salary of $24,999 or less) were most likely to know so-called “subsistence entrepreneurs” (48.1 percent), but least likely to know a growth entrepreneur (13.8 percent), while 26.7 percent of higher-income respondents knew growth entrepreneurs.

The survey also examined whether respondents knowing entrepreneurs made them more likely to be entrepreneurs themselves. The results indicate a significant association between knowing an entrepreneur and being one: 37.8 percent of respondents who knew a growth entrepreneur were entrepreneurs themselves, as were 35.5 percent of respondents who knew entrepreneurs overall. Men were more likely to be entrepreneurs if they knew an entrepreneur than were women, in both the growth and overall entrepreneur categories.

Other survey findings include:

• People in the U.S. Northeast were more likely to know entrepreneurs overall than in other areas of the country, with 43.1 percent reporting knowing an entrepreneur. However, respondents in the U.S. West were most likely to report knowing a growth entrepreneur specifically (18.2 percent) than people in other geographic regions.
• Younger respondents (ages 25-34) had an edge over other age groups in knowing growth entrepreneurs (20.2 percent), while respondents ages 45-54 were most likely to know an entrepreneur in general (48.6 percent).

The article, published online by the Journal of Applied Research in Economic Development, points out that such rankings typically are subjective and provide little meaningful information, despite their pervasiveness.

For example, the Small Business and Entrepreneurship Council’s Small Business Survival Index – one of more than a dozen state rankings touted across the country – is based on factors such as taxes, health care costs, minimum wage level and the presence of right-to-work laws. However, this measures government costs without factoring in benefits generated by government, such as infrastructure and small business development centers.

The authors point out that Kauffman Foundation research has been used as the basis for ranking states, most notably on the rate of entrepreneurial activity, formalized in the Kauffman Index of Entrepreneurial Activity. This is an index based on data from the U.S. Census Bureau and Bureau of Labor Statistics, and it has never intended to be used to claim that one state or another is “better” for entrepreneurs.

Forthcoming Kauffman research, the article says, shows that many rankings fail even to correlate with company owners’ business climate perceptions. Further, the proliferation of state rankings can lead policymakers and economic development consultants to misuse them, either celebrating a conveniently positive ranking or initiating efforts to address a poor ranking, when neither action is based on valid economic indicators.

The authors conducted a series of exercises to demonstrate how such rankings can be manipulated. The exercises were based on eight state-level indicators related to innovation and entrepreneurship:

• Self-employment rate
• Kauffman Index of Entrepreneurial Activity
• Business startup rate
• Ratio of science and engineering bachelor degree holders to the total population
• Patents per science and engineering workforce
• Venture capital investment over Gross State Product
• Research and development expenditures
• Number of high-growth Inc. 500 firms

The indicators were chosen because they typically are used to measure entrepreneurship and innovation, two vital indicators for every state’s economic health. But after employing several analyses, the researchers found that most of the eight indicators were only modestly correlated, if at all.

To prove the point, the authors invite readers to create their own state rankings. Demonstrating that rankings can be developed in ways that favor any given state, the Kauffman researchers created a simulation analysis with randomly generated weights, which revealed that, among 1,000 different scenarios, five states were eligible to be No. 1, 16 were eligible for the Top Five and 22 could be ranked in the Top 10.

The subjectivity and limitations of state economic rankings led to four observations, according to the article:

• Policymakers should not rely on a single indicator to gauge economic conditions.
• Aggregating indicators does not provide solutions because indicators are highly variable.
• Policymakers should not focus on improving their states’ rankings because the rankings lack meaning.
• Rather, they should employ a scorecard approach, which does not create a normative, quantified measure, but descriptively assesses various conditions of each state.

Access the full article

The paper, “Path-Dependent Startup Hubs – Comparing Metropolitan Performance: High-Tech and ICT Startup Density,” says that a strong regional or local culture of technology entrepreneurship is not a recent phenomenon, contrary to the opinions of many. The top 10 cities in 2010 also ranked among the top 20 cities two decades earlier.

However, some cities, like Kansas City, which ranked No. 3 in high-tech startup growth among large metropolitan areas between 1990 and 2010, are surprising.

The analysis shows that many cities’ recent adoption of new entrepreneurship programs is more an indication of the underlying strength of the region and its base of talent on which those programs can build than it is a cause of startup activity.

Cities such as Kansas City, Seattle, Portland and Boise “all owe their emerging entrepreneurial ecosystems to many years of spinoffs and entrepreneurial spawning,” the white paper says.

Research universities and other postsecondary institutions are important for metropolitan entrepreneurship, but are not the sole cause in spurring such activity. Instead, the most fertile source of entrepreneurial spawning is “the population of existing companies, which has implications for economic policymaking and economic development strategies,” the white paper notes. The white paper confirms – at least impressionistically – the importance of spinoff activity for fostering vibrant entrepreneurial cultures. It cites research showing that the “peak age” for entrepreneurs ranges from about 35 to 45.

“Entrepreneurs come from somewhere – this seems obvious,” the white paper says. But that observation “runs against the prevailing stereotype that entrepreneurs are, or should be, recent college grads or college dropouts. That ‘somewhere’ usually is a previous job in a big company or at an institution, such as a university, which helps explain the age distribution of entrepreneurs.”

However, the paper warns, regions should be careful in turning these observations into policy. While spinoffs are important for tech startup growth, such a strategy could be wrongly interpreted as supporting traditional economic development strategies of tax incentives for big companies.