2004-07 gem 2002 canadian report - hec...
TRANSCRIPT
__________________________________ Copyright © 2004 – HEC Montréal. All rights reserved in all countries. Translation or reproduction of this document in any form whatsoever is prohibited. The authors of texts published in the Rogers – J.A.-Bombardier Chair of Entrepreneurship Working Paper series are solely liable for their contents.
Global Entrepreneurship Monitor 2002 Canadian Report
Nathaly Riverin
Working Paper # 2004-07
October 2004 ISSN : 0840-853X
Global Entrepreneurship Monitor 2002 Canadian Report
Authors :
Nathaly Riverin, , Director of GEM Canada/Québec HEC Montréal
Chaire d’entrepreneuriat Rogers AT&T Bombardier 3000, chemin de la Côte-Sainte-Catherine
Montreal, Québec H3T 2A7
Telephone : (514) 293-2994 (Chair): (514) 340-6380
Email: [email protected]; [email protected]
This GEM 2002 Canadian report was made possible with the cooperation of Canada
Economic Development (CED-Quebec) and the Rogers AT&T Bombardier
Entrepreneurship Chair. I wish to thank them for their financial support, which is
instrumental to the survival of GEM. I take sole responsibility for the results and
conclusions of this report, which are not necessarily shared by our financial associates.
I am also grateful to the 3,000 persons who contributed to the investigation undertaken by
Market Facts Canada and to the GEM coordinating team, who did a tremendous job
gathering the data collected worldwide and ensuring management of this project – a huge
task, to say the least.
A special thank you to Louis-Jacques Filion for his support on the project and for his
judicious remarks, and to Martin Veillette for his constant availability. Many thanks also
to Rein Peterson and Robert Kleiman for their participation in GEM.
Finally, I salute the staff of the Fondation de l’entrepreneurship du Québec; their close
collaboration is greatly appreciated.
Nathaly RiverinGEM web site: www.gemconsortium.org
_____________________________ GEM Canada 2002 Copyright © 2003 – HEC Montréal
ii
Summary – GEM CANADA 2002
Since 1997, the mission of the Global Entrepreneurship Monitor (GEM) has been to
study the entrepreneurial activity of different countries and the relationship between
this activity, economic growth and the national characteristics that influence
entrepreneurial activity. Canada has taken part in this project from the outset. A report
documenting the main results of the research is published yearly.
The 2002 GEM report illustrates the amplitude of the entrepreneurial phenomenon in Canada and worldwide. It shows that more than 1,809,000 Canadians (8.8% of the adult population) were involved in a new venture in 2002, thus ranking the country eighth of the 37 countries surveyed that year. This is an enviable ranking and in large part attributable to the dynamism found in Western Canada and Ontario. Further, the new businesses created in Canada demonstrate a greater tendency to export and the majority opt for a strategy based on differentiation, two factors that attest to the quality of our entrepreneurship. Depuis 1997, le Global Entrepreneurship Monitor (GEM) a pour mission d’étudier l’activité entrepreneuriale de différents pays, la relation entre cette activité et la croissance économique ainsi que les caractéristiques nationales qui l’influencent. Le Canada participe à ce projet depuis ses débuts. Chaque année, un rapport témoignant des principaux résultats de cette recherche est publié. Le rapport du GEM 2002 illustre l’ampleur du phénomène entrepreneurial au pays et dans le reste du monde. Il démontre que plus de 1 809 000 personnes (8,8 % de la population adulte) s’ingéniaient à créer une entreprise au Canada en 2002, classant le pays au 8e rang des 37 pays étudiés cette même année. C’est une position enviable et elle est grandement attribuable au dynamisme de l’Ouest du pays et de l’Ontario. Qui plus est, les nouvelles entreprises créées au Canada semblent prouver une plus forte propension à exporter et elles optent en plus grand nombre pour une stratégie de différenciation, deux facteurs témoignant de la qualité de notre entrepreneuriat.
_____________________________ GEM Canada 2002 Copyright © 2003 – HEC Montréal
iii
Noteworthy Facts – 2002 GEM
Entrepreneurial Activity in the Country
• One of the most significant findings of GEM 2002 is the vastness of the entrepreneurial phenomenon worldwide. It is estimated that 286 million adults were active as entrepreneurs in the 37 countries that took part in GEM, that is to say, 12% of the adult population. In Canada, it is estimated that 1,809,000 persons, or 8.8% of 18- to 64-year-olds, embarked on a new venture or were operating a fledgling firm (in operation for less than 42 months).
• The total entrepreneurial activity (TEA) indicator of Canada would, however, be in regression for a second consecutive year, down to 11.0% in 2001 from 12.2% in 2000.
• This downturn is due largely to a decline in new ventures. The percentage of the adult population involved in such enterprises went from 7.0% in 2001 to 5.9% in 2002, and the new firm rate decreased slightly from 3.9% in 2001 to 3.6% in 2002.
• An opportunity-driven TEA of 7.4% and a necessity-driven TEA of 1.1% indicate that the vast majority of new entrepreneurs have chosen an entrepreneurial career in order to make the most of a business opportunity rather than in reaction to a bleak job market.
• A comparison with figures from 2001 shows a clear decrease in necessity-driven entrepreneurship (from 3.0% to 1.1%), whereas opportunity-driven entrepreneurship remained near 7.5% (7.4% in 2001 versus 7.6% in 2002).
Demographics
• Twice as many men as women are involved in the initiation process of a business or the growth period of a new firm. This proportion is similar to the proportions found in the rest of the world.
Attitude and Entrepreneurial Intentions
• 11.7% of Canadians reported a desire to start a business within the next three years.
• More than 50% of adults believe they possess the capacity and skill required to launch a new venture, whereas only 34.3% claim to personally know an entrepreneur.
_____________________________ GEM Canada 2002 Copyright © 2003 – HEC Montréal
iv
Regional Activity
• Western Canada (British Columbia, Alberta, Saskatchewan, Manitoba) and Ontario stand out as the most entrepreneurial regions in the country according to all applied indicators. Eastern provinces prove to be the least dynamic.
The Strategies of New Businesses
• The large majority of new Canadian businesses, that is to say, 88%, will duplicate an existing activity that has an existing technology and that is in a sector where competition has developed.
• 23% of those launching a business intend to become self-employed. The same proportion would like to hire 20 or more employees within 5 years.
_____________________________ GEM Canada 2002 Copyright © 2003 – HEC Montréal
v
TTaabbllee ooff CCoonntteennttss Summary – GEM CANADA 2002 ................................................................................. ii Noteworthy Facts – 2002 GEM.....................................................................................iii
TTaabbllee ooff CCoonntteennttss ..........................................................................................................v Introduction..................................................................................................................... 7 Part 1: Entrepreneurship as a Process.......................................................................... 9
The Research Methodology ......................................................................................10 Part 2: Is Canada Entrepreneurial?............................................................................ 11
Pre-entrepreneurial Activities..................................................................................11 Entrepreneurial Skills and Capacities .....................................................................11 Entrepreneurial Models ...........................................................................................11 Entrepreneurial Intentions.......................................................................................13
Entrepreneurial Activities ........................................................................................14 Nascent Firms..........................................................................................................14 New Firms...............................................................................................................17 Total Entrepreneurial Activity ................................................................................19
Para-entrepreneurial Activities ......................................Erreur ! Signet non défini. Supporters ...............................................................................................................24 Business Angels ......................................................................................................25
Part 3: What Types of Activities? The Business Strategies....................................... 27 Growth Expectancy of New Businesses ...................................................................27 Exportation ................................................................................................................27 Market Positioning....................................................................................................28 Sectors of Activity .....................................................................................................28
Part 4: Entrepreneurship in Canadian Regions......................................................... 30 Specific Cultural Variables ......................................................................................30 Western Canada and Ontario: Entrepreneurial Regions......................................30 What is the Link Between the TEA and the Unemployment Rate? .....................34 Distinctive Strategic Behaviour................................................................................35
Part 5: What Can We Conclude from These Results?............................................... 36 Bibliography .................................................................................................................... x Annex 1: The GEM Model ..................................................... Erreur ! Signet non défini. Annex 2: The Relationship Between Growth and the TEA......................................xiii Annex 3- The GEM 2002 Countries ............................................................................ 14
_____________________________ GEM Canada 2002 Copyright © 2003 – HEC Montréal
vi
LLiisstt ooff TTaabblleess aanndd GGrraapphhss
Table 1:: CCaannaaddiiaann SSccoorreeccaarrdd,, GGEEMM 22000022...........................................................................8 Table 2:: IIss TThheerree aa LLiinnkk BBeettwweeeenn EEnnttrreepprreenneeuurriiaall MMooddeellss aanndd IInntteennttiioonnss?? .....................13 Table 33:: GGrroowwtthh EExxppeeccttaannccyy,, EExxppoorrttaattiioonn,, MMaarrkkeett PPoossiittiioonniinngg ffoorr NNeeww EEnnttrreepprreenneeuurriiaall AAccttiivviittiieess,, GGEEMM 22000022 .........................................................................................................27 Table 44:: SSeeccttoorrss ooff AAccttiivviittyy ooff NNeeww EEnntteerrpprriisseess bbyy GGeennddeerr,, CCaannaaddaa,, GGEEMM 22000022.............29 TTaabbllee 55:: EEnnttrreepprreenneeuurriiaall AAccttiivviittiieess bbyy MMoottiivvaattiioonn aanndd RReeggiioonn,, CCaannaaddaa,, GGEEMM 22000022 .......32 TTaabbllee 66:: NNaasscceenntt FFiirrmmss bbyy RReeggiioonn ffrroomm 11999999 ttoo 22000022,, CCaannaaddaa,, GGEEMM 22000022 ....................33 TTaabbllee 77:: NNeeww FFiirrmmss bbyy RReeggiioonn ffrroomm 22000000 ttoo 22000022,, CCaannaaddaa,, GGEEMM 22000022..........................33 Table 8: Growth Expectancy, Exportation and Market Positioning for New Activities by Region, Canada, GEM 2002 ..............................................................................................36 Graph 1:: AA SSiimmpplliiffiieedd GGEEMM MMooddeell .....................................................................................9 GGrraapphh 22:: EEnnttrreepprreenneeuurriiaall CCaappaacciittiieess,, GGEEMM 22000022.............................................................12 GGrraapphh 33:: EEnnttrreepprreenneeuurriiaall MMooddeellss,, GGEEMM 22000022..................................................................12 GGrraapphh 44:: EEnnttrreepprreenneeuurriiaall IInntteennttiioonnss,, GGEEMM 22000022..............................................................13 GGrraapphh 55:: NNaasscceenntt FFiirrmm PPrreevvaalleennccee RRaattee bbyy CCoouunnttrryy,, GGEEMM 22000022 ....................................16 GGrraapphh 66:: NNaasscceenntt FFiirrmm PPrreevvaalleennccee RRaattee bbyy GGeennddeerr aanndd AAggee,, CCaannaaddaa,, GGEEMM 22000022.........17 Graph 7: New Firm Prevalence Rate by Country, GEM 2002 ..........................................18 GGrraapphh 88:: NNeeww FFiirrmm PPrreevvaalleennccee RRaattee bbyy GGeennddeerr aanndd AAggee,, CCaannaaddaa,, GGEEMM 22000022...............19 GGrraapphh 99:: EEnnttrreepprreenneeuurriiaall AAccttiivviittyy bbyy CCoouunnttrryy,, GGEEMM 22000022...............................................21 GGrraapphh 1100:: EEnnttrreepprreenneeuurriiaall MMoottiivvaattiioonnss bbyy CCoouunnttrryy,, GGEEMM 22000022......................................22 GGrraapphh 1111:: EEnnttrreepprreenneeuurriiaall AAccttiivviittiieess ffrroomm 22000000 ttoo 22000022,, CCaannaaddaa,, GGEEMM 22000022...............23 GGrraapphh 1122:: SSuuppppoorrtteerrss,, GGEEMM 22000022.....................................................................................24 GGrraapphh 1133:: BBuussiinneessss AAnnggeellss,, GGEEMM 22000022.............................................................................25 GGrraapphh 1144:: RReellaattiioonnsshhiipp ooff BBuussiinneessss AAnnggeellss wwiitthh EEnnttrreepprreenneeuurrss,, CCaannaaddaa,, GGEEMM 22000022…………………………....26 GGrraapphh 1155:: PPrree--eennttrreepprreenneeuurriiaall AAccttiivviittiieess bbyy RReeggiioonn,, CCaannaaddaa,, GGEEMM 22000022.......................31 GGrraapphh 1166:: EEnnttrreepprreenneeuurriiaall AAccttiivviittiieess bbyy RReeggiioonn,, CCaannaaddaa,, GGEEMM 22000022 .............................32 GGrraapphh 1177:: PPaarraa--eennttrreepprreenneeuurriiaall AAccttiivviittiieess bbyy RReeggiioonn,, CCaannaaddaa,, GGEEMM 22000022.....................33 GGrraapphh 1188:: UUnneemmppllooyymmeenntt RRaattee aanndd TTEEAA RRaattee iinn 22000022 bbyy RReeggiioonn,, CCaannaaddaa .....................34 Graph 19: Unemployment Rate by Region from 1999 to 2002, Canada ..........................35
_____________________________ GEM Canada 2002 Copyright © 2003 – HEC Montréal
7
Introduction
The Global Entrepreneurship Monitor (GEM) is an international research project that was initiated in 1997. Its principal objective is to come to a better understanding of the relationship between entrepreneurship and economic growth through an empirical analysis of the entrepreneurial phenomenon in several countries over many years. The study focuses on three aspects of the broadly encompassing field that is entrepreneurship by trying to answer the following three questions:
• Do entrepreneurial activity rates vary from one country to another and, if so, by how much?
• Does the entrepreneurial activity rate of a country affect economic growth?
• What stimulates entrepreneurial activity?
Canada has been a party to this research for four years, through the initial involvement of Rein Peterson of York University. In Canada’s first year of participation (1999), GEM shed light on entrepreneurial disparities among Canadian regions. In the second year (2000), it was reported that the low representation of “gazelles” in the country had increased. And in 2001, we observed that entrepreneurship in Canada was motivated more by the quest for business opportunities than by necessity. Moreover, we pointed out that self-employment stemmed largely from new entrepreneurs, notably in Western Canada. The 2002 GEM shows that Canada has experienced a strong setback in entrepreneurship. Nevertheless, it stands among the most dynamic countries (8th position) of the 37 that took part in the study.
In addition to the usual GEM indicators that help create a profile of entrepreneurial activities, this 2002 report introduces several innovations. First, we try to appraise the entrepreneurial culture of the country and the entrepreneurial intentions of Canadians. These activities will hereinafter be characterized as “pre-entrepreneurial.” Second, we propose a snapshot of the support structure to entrepreneurship; we refer to this support structure as “para-entrepreneurial activities.” Thus we stray, albeit slightly, from the international GEM that is based on the theoretical model set out in Annex 1 of this report. The first part of this report deals with these elements of theory and the methodology used for this research. The second part showcases the body of data that relates to the entrepreneurial situation in Canada (pre-entrepreneurial, entrepreneurial and para-entrepreneurial activities).
In the third part, we try to learn more about new Canadian businesses. Hence, we examine their strategies and compare them with the strategies adopted by new businesses in the 37 countries surveyed by GEM. The fourth part sets out the entrepreneurial indicators for four Canadian regions (Western Canada, Ontario, Quebec and Eastern Canada). Finally, the fifth part suggests an interpretation of the empirical results of the 2002 GEM Canada and formulates certain recommendations.
In sum, the 2002 Canadian Report provides answers to these five questions.
• How do we put entrepreneurship into a model?
• Is Canada entrepreneurial? • What are the new activities created?
_____________________________ GEM Canada 2002 Copyright © 2003 – HEC Montréal
8
• Are there entrepreneurial disparities among Canadian regions?
• What can we conclude from the results presented in this report and what lessons can we learn from them?
Table 1 on the following page shows the principal findings of this report for Canada and the countries that took part in GEM from 1999 to 2002.
Table 1:: CCaannaaddiiaann SSccoorreeccaarrdd,, GGEEMM 22000022
CANADA GEM 2002 2001 2000 1999 2002 2001 2000 1999
PRE-ENTREPRENEURIAL ACTIVITIES (% ADULT pop.)
Cutural Variables Models 34.2 33.6 38.2 34.8 Capacity and Skill 55.5 53.0 41.3 40.5 Respect Entrepreneurial Intentions 11.7 14.7
ENTREPRENEURIAL ACTIVITIES (% ADULT pop.)
Entrepreneurial Activity (TEA) 8.8 11.0 12.2 8.01 9.9 9.5 Nascent Firms 5.9 7.0 6.6 6.8 4.7 6.4 5.2 New Firms 3.6 3.9 5.6 3.7 3.5 4.3 TEA Necessity 1.1 3.0 2.0 2.5 TEA Opportunity 7.4 7.6 5.6 6.7 TEA Men 11.7 13.4 15.0 10.3 13.1 12.8 TEA Women 6.0 8.5 9.5 5.7 6.8 6.3
PARA-ENTREPRENEURIAL ACTIVITIES (% ADULT pop.)
Supporters 4.6 5.2 3.5 Business Angels 3.2 3.0 3.1 3.0
STRATEGY OF NEW ACTIVITIES TEA-Self-employed in 5 years TEA-Job Creation (20 jobs and more)
23 23
20 28
TEA-Niche Creation 12 7 TEA-Reproduction 88 93 TEA-Exportation 0% of Sales 27 78 TEA-Exportation 25% and more of sales 73 22
ENTREPRENEURIAL ACTIVITIES IN CANADIAN REGIONS (% ADULT pop.)
TEA-Western Canada 10.8 TEA-Ontario 10.3 TEA-Quebec 6.2 TEA-Eastern Canada 3.2 N 3014 2004 2004 1008 37 29 20 8
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
9
Part 1: Entrepreneurship as a Process To answer the general questions raised in the introduction, the GEM consortium elaborated on a model representing all aspects connected to economic growth and entrepreneurship. This model is illustrated and described in Annex 1. The research methodology was developed to measure the different variables
that constitute this model. For the purpose of this 2002 Canadian report, we use a modified model that aims specifically at measuring the different steps of the process leading to the creation of a business. The following graph illustrates our model.
Graph 1:: AA SSiimmpplliiffiieedd GGEEMM MMooddeell
The variables found in the shaded zones are parts addressed in this report.
We distinguish three types of entrepreneurial activities that we differentiate from activities of a managerial nature: pre-entrepreneurial activities; entrepreneurial activities; and para-entrepreneurial activities. Pre-entrepreneurial activities refer to cultural variables and entrepreneurial intentions. Two indicators allow us to measure the cultural elements: entrepreneurial capacities and entrepreneurial models. The 2002 GEM Australian report showed that these two variables provide the most explicit references for the creation of new businesses.
In our opinion, entrepreneurial intentions represent a very important intermediary variable. They are the most tangible elements of the entrepreneurial culture. Thus, the stronger the culture, the more driven people will be toward business. The transition from intention to action has been studied by many authors – Shapero is one. It results from the operation of a trigger that can be either positive or negative. The trigger can be strongly individualized (meeting a key individual, loss of a job) or easily discernible in a certain territory (massive layoffs, regulatory
Pre-entrepreneurial activities (Cultural variables,
entrepreneurial intentions)
Trigger
Nascent and
New firms
Managerial activities:
Established firms
Closure survival, growth
Economic, cultural and
political variables and nine of the entrepreneurial
conditions
Para- entrepreneurial
activities:
Supporters Business angels
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
10
modifications, etc.). As far as we know, these elements govern the motivations that drive entrepreneurs. We categorize entrepreneurs in two groups: those who are driven by opportunity and those who are driven by necessity.
Next are entrepreneurial activities. These are thoroughly defined and measured by GEM. They comprise both nascent firms and new firms, the latter being firms whose operations have been underway for a few years (42 months or less). When a business survives its first years, it enters a managerial mode and thus becomes an established business. Consequently, the paradigm of creation is left behind.
Finally, we distinguish para-entrepreneurial activities, or forms of support, offered to entrepreneurship. These can be either heavily institutionalized or rather informal. Whatever the nature or origin, para-entrepreneurial activities evolve alongside entrepreneurship. Included are supporters, whose employment revolves around the growth of businesses and the promotion of economic activity, and financiers, who are always at centre stage in the development of a business. GEM developed a method to ascertain informal financing with its indicator pertaining to investment angels.
The economic, cultural and political variables and nine of the entrepreneurial conditions also evolve in parallel to the entrepreneurial and managerial systems. They are interdependent and dynamic. In addition to defining the entrepreneurial circles and providing a framework, these variables and conditions often act as triggers to entrepreneurship (e.g., deregulation, layoffs). Accordingly, they govern the entrepreneur’s motivations (opportunity versus necessity).
The Research Methodology
All the data set out in this report were gathered in compliance with the methodology shared by the countries that took part in GEM. The GEM methodology is uniform in its entirety – from the collection of data to analysis – so as to allow international comparisons.
Three sources enable the consortium of researchers to access uniform, comparable and reliable data. Firstly, a survey is undertaken that reaches a minimum of 2,000 respondents per country for a total of 113,000 respondents. These surveys are conducted by private firms in each of the participating countries. In Canada, the survey was carried out by Market Facts in the summer of 2002. Secondly, local experts in nine fields connected with entrepreneurship (financial support, government policies and programs, education and training, R&D transfers, commercial and professional infrastructures, cultural and social norms, barriers to entry and access to physical infrastructures) are interviewed. For the 2002 GEM, the input of 1,300 of these experts was collected. The processing and analysis of this data will form the basis of another report. Thirdly, a multitude of current economic data borrowed from national and international organizations (i.e., OECD) are used as a complement to the survey.
In Canada, more than 2,000 respondents were surveyed in 2000 and 2001. For 2002, thanks to the contribution of DEC Canada, the sample was increased by 1,000 respondents in Quebec; this brought the total to 3,014 respondents in Canada. The sample was ultimately altered to be on a par with the demographic proportions – in gender and age – of each province in Canada for 2002.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
11
Part 2: Is Canada Entrepreneurial?
Pre-entrepreneurial Activities
Entrepreneurial culture is among the most difficult elements to measure in the field of entrepreneurship. It reflects a state of mind, a collective attitude toward the business world, and it has a solid regional attachment. The indicators used to measure entrepreneurial culture are far from the most accurate and reliable. Nonetheless, they provide benchmarks that are easy to recognize and that facilitate interpretation, even though they remain the result of mere perception. The first indicator relates to the entrepreneurial capacities of the adult population, while the second pertains to the relationship between this group and entrepreneurs.
EEnnttrreepprreenneeuurriiaall SSkkiillllss aanndd CCaappaacciittiieess
We can observe, in graph 2, that a large proportion of Canadians believe they are capable of starting a business: 55.5% answered affirmatively when asked, “Do you have the capacity and the skills to start a business?” This result puts Canada slightly below the United States (56.9%), but above the G7 average of 38.5% and the countries that were part of the 2002 GEM (averaging 41.3%). More than two- thirds of the population of Argentina believe they have the capacity to start a new business, while only 10.6% of Japanese believe themselves capable in this regard.
We note that, in Canada, men show more confidence than women in their respective entrepreneurial capacities and business skills (62.4% and 49.2%). This gap is similar to that
found between 18- to -35-year-olds and 35- to 64-year-olds (49.2% and 59.1%).
EEnnttrreepprreenneeuurriiaall MMooddeellss
It was demonstrated that the closer an individual’s relationship is with entrepreneurs, the stronger the interest in a career in entrepreneurship. To measure this mirroring effect, GEM asked the adults surveyed whether they had a personal relationship with an entrepreneur who had launched a business within the last two years.
We see in graph 3 that 34.3% of Canadians answered the foregoing question affirmatively. Where this indicator is concerned, Germany (39.3%), Italy (39.2%) and the United States (37.5%) show rates that are slightly superior to Canada’s and to the G7 average of 30.8%. China, with 58.8% of its adult population stating that it knows an entrepreneur, stands a head above all the countries of the 2002 GEM. Japan is last with 12.9%.
It should be noted that China has been the principal source of immigration to Canada for the past five years (15% of immigrants to Canada were from China in 2002 and 18% in 2001). The second-largest group of immigrants originated in India. It goes without saying that these new residents bring their entrepreneurial nature to Canada with them.
In Canada, the 18- to 34-year-olds have a closer relationship with entrepreneurs than the 35- to 64-year-olds (38.6% versus 31.8%). Similarly, men have a closer relationship with entrepreneurs than women (37.9% versus 30.7%).
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
12
GGrraapphh 22:: EEnnttrreepprreenneeuurriiaall CCaappaacciittiieess,, GGEEMM 22000022
% have skills and competence to start a business
49,2
59,1
49,2
62,4
55,5 56,9
45,5
3935,2
26,3
10,6
38,5
10,6
66,8
41,3
0
10
20
30
40
50
60
70
80
Canada -18-3
4 years o
ld
Canada -35-6
4 years o
ld
Canada -Women
Canada -Men
Canada -Tota
l
United St
ates
United Kingdom Ita
ly
Germany
Franc
e
Japan
G7 Mean
Lower: J
apan
Higher: Arg
entina
GEM M
ean
% a
dul
t pop
ula
tion
GGrraapphh 33:: EEnnttrreepprreenneeuurriiaall MMooddeellss,, GGEEMM 22000022
% that personnally know an entrepreneur
38,6
31,8 30,7
37,934,3
39,3 39,237,5
29,1
23,1
12,9
30,8
12,9
58,8
38,2
0
10
20
30
40
50
60
70
Canada -18-3
4 years o
ld
Canada -35-6
4 years o
ld
Canada -Women
Canada -Men
Canada -Tota
l
Germany
Italy
United St
ates
France
United Ki
ngdomJa
pan
G7 Mean
Lower:
Japan
Higher: China
GEM M
ean
% p
opul
atio
n a
dul
t
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
13
EEnnttrreepprreenneeuurriiaall IInntteennttiioonnss
One of the new questions asked by the consortium in 2002 relates to entrepreneurial intentions. More specifically, the respondents were asked if they intended to launch a new business within the next three years. Graph 4 illustrates the results.
We see that 11.7% of Canadians intend to start a new business between 2002 and 2005. This figure is below the average of the 37 countries surveyed in the 2002 GEM (14.7%), but superior to the G7 average (8.3%). Of the G7 countries, only the United States (with 15.3%) has a rate superior to Canada’s. In Chile, the creative potential is staggering with 49%. Only 1.6% of the Japanese entertain entrepreneurial intentions.
In Canada, 15.3% of the 18- to 35-year-olds answered affirmatively. This rate drops to 9.7% for the 35- to 64-year-olds. Men (15.8%) showed more interest in a career in entrepreneurship than women (7.2%).
By extrapolating from these figures to the broader scale of the Canadian population at large, we find that 2,406,000 adults between the ages of 18 and 64 can be said to be considering entering a career in entrepreneurship between 2002 and 2005.
Finally, table 2 below underscores the strong correlation between entrepreneurial models and entrepreneurial intentions. We note, in fact, that of those who say they are interested in a career in business, twice as many are found in the group that knows an entrepreneur.
Table 2:: IIss TThheerree aa LLiinnkk BBeettwweeeenn EEnnttrreepprreenneeuurriiaall MMooddeellss aanndd IInntteennttiioonnss??
Intentions Models NO YES No 70,6% 29,7% YES 29,4% 70,3%
GGrraapphh 44 :: EEnnttrreepprreenneeuurriiaall IInntteennttiioonnss,, GGEEMM 22000022
% intended to create an entreprise in the next 3 years
15,3
9,77,6
15,8
11,7
15,3
8,5 7,4 6,34,2
1,6
8,3
1,6
43
14,7
0
5
10
15
20
25
30
35
40
45
50
Canada -18-3
4 years-
old
Canada -35-6
4 years o
ld
Canada -Women
Canada -Men
Canada -Tota
l
United St
ates
Italy
Germany
United Ki
ngdomFra
nce
Japan
G7 Mean
Lower:
Japan
Higher: Chili
GEM M
ean
% a
dul
t pop
ula
tion
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
14
Entrepreneurial Activities
The total entrepreneurial activity rate (TEA) is the aggregate of the two following indicators and is integral to the analysis of GEM:
Nascent Firm Prevalence Rate
This represents the percentage of the adult population (from 18 to 64 years of age) that
o actively took part in creating a business in the past year;
o will own this business, in whole or in part; and
o hasn’t earned a salary from this business in over three months.
New Firm Prevalence Rate
This represents the percentage of the adult population (from 18 to 64 years of age) that
o was in a position of administration or was managing a business;
o will own this business, in whole or in part; and
o was involved with a business whose operations began in or after 1998 (with no more than 42 months of activity in June 2001).
Nascent Firms
Graph 5 shows a worldwide decline in new ventures; the nascent firm prevalence rate fell from 6.1% in 2001 (table 1: 29 countries surveyed) to 4.7% in 2002 (37 countries surveyed). When considering only the participating countries in 2001, the rate drops to 4.5%. This condition affects Canada as well. Graph 4 tells us that, in 2002, 5.9% of Canadian adults (from 18 to 64 years of age) were involved in the start-up process of a business compared with 7.0% in 2001.
This places Canada eighth out of the 37 countries surveyed by GEM and denotes an improvement over the previous year when it stood 13th. For 2002, Canada finds itself in a photo finish with Korea (5.9%) and just behind the United States (7.1%). Overall, Canada’s nascent firm prevalence rate is superior to the G7 average of 3.7% and the GEM 37 mean of 4.7%.
Thailand, which took part in GEM for the first time, ranks first with the highest rate of nascent firms at 11.6%, slightly ahead of India with 10.9%. For the third year in a row, Japan finishes last with a rate of 0.9% in 2002.
We note that, like last year, underdeveloped countries tend to occupy the top part of this ranking, while European countries, with their efficient social protection programs, usually rank in the bottom part. The 2002 GEM ranking lists Canada at the end of the top half of the 37 countries surveyed, making it one of the highest-performing industrialized countries.
Graph 6 shows the nascent firm prevalence rate classified by age and gender for Canada in 2002. We note the following:
o 3.7% of women and 8.1% of men were involved in the start-up process of a business in 2002. In other words, twice as many men as women were involved.
o For the first time since the creation of the GEM project, Canadians between the ages of 18 and 24 emerge as the most entrepreneurial with a rate of 8.2%. Interestingly, in all the GEM 2002 countries, it is the 24-to-35-year-old age bracket that stands out as the most active in terms of new ventures.
o There are important differences among the male age groups – their nascent firm prevalence rate shifts from 2.9% for men between the ages of 45 and 54 to 10.7% for men 18 to 34 years of age. Women,
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
15
however, remain consistently near average.
o The gap between men and women is particularly wide among the 24- to 35-year-olds (10.7% versus 3.0%), the ages where women are more likely to be devoted to maternity. The male/female ratio is 3.6 for this age group compared to a ratio of 1.45 for GEM as a whole. Here again, Canada ranks favourably.
As illustrated in graph 6, our calculations show that, invariably, the 18- to 35-year-olds (mostly men) are responsible for the majority of new businesses launched in Canada.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
16
GGrraapphh 55:: NNaasscceenntt FFiirrmm PPrreevvaalleennccee RRaattee bbyy CCoouunnttrryy,, GGEEMM 22000022
Nascent Firms Prevalence Rate
0,9 1,1 1,31,8 2,0 2,1 2,2 2,4 2,5 2,6 2,7 2,8
3,3 3,4 3,5 3,5 3,6 3,7 3,7 3,84,0
4,44,7
5,2 5,5 5,7 5,7 5,7 5,9 5,9
7,1
8,5
9,1 9,2
10,410,9
11,6
4,7
3,7
0
2
4
6
8
10
12
14
Japa
n
Russ
ia
Chi
nese
Tai
pei
Swed
en
Hon
g Ko
ng
Belg
ium
S pai
n
Fran
ce
Uni
ted
King
dom
Net
herl
and
Finl
and
Cro
atia
Slov
inia
Isra
el
Hun
gary
Ger
man
y
Den
mar
k
Pola
nd
Ital
y
Aust
ralia
Sing
apor
e
Swit
zerl
an
Sout
h Af
rica
Nor
way
Chi
na
Icel
and
Irel
and
Braz
il
Kore
a
Can
ada
Uni
ted
Stat
es
Agen
tina
New
Zea
land
Mex
ico
Chi
le
Indi
a
Thai
land
GEM
37
Mea
n
G7
Mea
n
% a
dult
pop
ulat
ion
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
17
GGrraapphh 66:: NNaasscceenntt FFiirrmm PPrreevvaalleennccee RRaattee bbyy GGeennddeerr aanndd AAggee,, CCaannaaddaa,, GGEEMM 22000022
5,7
3
3,73,2
3,7 3,7
10,7 10,7
9,5
2,9
7,68,18,2
6,96,6
2,9
5,65,9
0
2
4
6
8
10
12
18 to 24 years old 25 to 34 years old 35 to 44 years old 45 to 54 years old 55 to 64 years old 18 to 64 years old
% a
dul
t pop
ula
tion
Women
Men
Canada
Nascent firms prevalence rate
. In a national study on the start-up process of businesses published in the fall of 2002, the authors point out that those intending to launch a business take, on average, three years to proceed: 14% will abandon the process after one year, while 34% will last two years before giving up. Seventy-six percent mention having found a new job to explain why they abandoned the process. Y. Gasse, T. Menzies, M. Diochon, M. Tremblay
New Firms
In Canada, the new firm prevalence rate experienced a decline of 0.3% in 2002 (graph 7), falling from 3.9% in 2001 to 3.6% in 2002. However, this rate remains above the 2002 GEM 37 average of 2.5% and is almost equal to the G7 average of 3.7%.
In terms of ranking, we note that Canada is 16th out of the 37 GEM countries – ahead of Switzerland (3.3%), tied with Hungary
(3.6%), and behind Israel (3.9%). Poland, France, Croatia, and Japan ranked last with rates below 1.0%. Korea, Brazil and Thailand performed better with high rates of 9.3%, 8.5% and 8.4%, respectively.
Graph 8 illustrates the new firm prevalence rate according to age and gender for Canada in 2002. It reveals that 25- to 34-year-olds are the most active in the new firm segment, with 4.5% of them being owner-managers of a business of 42 months or less.
Though the gap between 18-to-24-year-old men and women may be surprising (5.5% versus 1.1%, respectively), it reflects the observations made in previous years concerning 55- to 64-year-olds (4.9% versus 1.6%). Unexpectedly, women in the 25-to-34 age bracket fared better than men of the same age, with a rate of 4.9% for the former versus 4.1% for the latter. Despite these figures, the representation of women in this age group remains weak for nascent firms.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
18
Graph 7: New Firm Prevalence Rate by Country, GEM 2002
New firms prevalence rate
0,8 0,9 0,9 1,0 1,1 1,4 1,5 1,5
2,0 2,0 2,1 2,1 2,1 2,4 2,5 2,5
3,1 3,1 3,1 3,2 3,3 3,6 3,6
3,9 4,2 4,4 4,6
5,2 5,5
6,1 6,2 6,2
7,4 7,5
8,4 8,5
9,3
3,7
2,5
0
1
2
3
4
5
6
7
8
9
10
Pola
nd
Fran
ce
Cro
atia
Japa
n
Belg
ium
Hong
Kon
g
Slovi
nia
Russ
ia
Sout
h A
frica
Singa
pore
Finla
nd
Ger
man
y
Net
herla
nds
Italy
Swed
en
Spai
n
Unite
d K
ingd
om
Chi
nese
Tai
pei
Den
mar
k
Mex
ico
Switz
erla
nd
Can
ada
Hung
ary
Israe
l
Irela
nd
Nor
way
Unite
d S
tate
s
Aus
tralia
Chi
le
New
Zea
land
Age
ntin
a
Icel
and
Chi
na
Ind
ia
Thai
land
Braz
il
Kore
a
GEM
37
Mea
n
G7
Mea
n
% o
f ad
ult p
opul
atio
n
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
19
GGrraapphh 88:: NNeeww FFiirrmm PPrreevvaalleennccee RRaattee bbyy GGeennddeerr aanndd AAggee,, CCaannaaddaa,, GGEEMM 22000022
New firm prevalence rate
1,1
4,9
2,5
1,81,6
2,5
5,5
4,1
4,6
4,3
4,9
4,6
3,4
4,5
3,7
33,2
3,6
0
1
2
3
4
5
6
18 to 24 years old 25 to 34 years old 35 to 44 years old 45 to 54 years old 55 to 64 years old 18 to 64 years old
%a
dul
t pop
ula
tion
Women
Men
Canada
TToottaall eennttrreepprreenneeuurriiaall aaccttiivviittyy
The total entrepreneurial activity indicator (hereinafter referred to as “TEA” and depicted in graph 9) reached 8.8% in Canada in 2002. This number marks a sharp decline from the previous year (11.0%) and represents a second consecutive diminution. In essence, it ranks alongside the worldwide entrepreneurial downturn, which dropped from 9.9% in 2001 to 8.0% in 2002 (table 1).
Thailand stands out as the most entrepreneurial country with a TEA of 18.9%; India follows with a TEA of 17.9%; and Canada places 13th out of 37 countries. Japan and Russia are the two least dynamic countries with rates of 1.8% and 2.5%, respectively.
A considerable phenomenon
Statistically speaking, extrapolations ultimately enable us to estimate the amplitude of a phenomenon on a worldwide scale. The consortium estimates that 286 million individuals are active on an entrepreneurial basis, whether this is by launching a business or by strengthening a new firm. In Canada, 1,809,000 adults could qualify as such.
The Entrepreneur’s Motivations
Each respondent was asked whether the decision to create a business was motivated by a desire to seize a business opportunity or was simply the best option in the context of a bleak job market. The respondents could also specify that other motivations – pursuing the family business for instance – explained their decision. This specific question led the consortium to distinguish between two types of entrepreneurial activities: opportunity-driven and necessity-driven.
Graph 10 shows the two TEA types, opportunity-driven and necessity-driven, for the 37 countries that took part in GEM 2002. We see that, in Canada, 7.4% of adults became active in an entrepreneurial sense because they wanted to seize a business opportunity, while 1.1% preferred entrepreneurship to a job that did not meet their expectations.
This opportunity-driven TEA of 7.4% places Canada 11th out of the 37 GEM countries. The most significant proportion of necessity-driven TEA types are found in India (7.5%) and in Argentina (7.1%). The countries with the highest opportunity-driven TEA types are Thailand (15.3%) and India (12.4%). We note that, when compared with the opportunity-
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
20
driven TEA, the necessity-driven TEA rates range on a much wider scale: from 0.01% (in France) to 7.5% (in Brazil, 75 times greater than in France).
For a second consecutive year, a clear image emerges from these figures: the developing countries and those with a growing economic sector place in the higher end of the rankings of necessity-driven TEA, whereas the most “advanced” economies rank near the bottom.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
21
GGrraapphh 99:: EEnnttrreepprreenneeuurriiaall AAccttiivviittyy bbyy CCoouunnttrryy,, GGEEMM 22000022
Entrepreneurial activity rate (TEA)
1,82,5
3,0 3,2 3,4 3,6 4,0 4,3 4,4 4,6 4,6 4,6 4,65,2 5,4
5,9 5,96,5 6,5 6,6 7,1 7,1
8,7 8,7 8,8 9,1
10,511,3
12,3 12,4
13,514,0 14,2 14,5
15,7
17,918,9
8,0
5,8
0
2
4
6
8
10
12
14
16
18
20
Japa
n
Russ
ia
Belg
ium
Fran
ce
Hong
Kon
g
Cro
atia
Swed
en
Chi
nese
Tai
pei
Pola
nd
Finla
nd
Spai
n
Net
herla
nds
Slovi
nia
Ger
man
y
Unite
d K
ingd
om Italy
Singa
pore
Den
mar
k
Sout
h A
frica
Hung
ary
Israe
l
Switz
erla
nd
Aus
tralia
Nor
way
Can
ada
Irela
nd
Unite
d S
tate
s
Icel
and
Chi
na
Mex
ico
Braz
il
New
Zea
land
Age
ntin
a
Kore
a
Chi
le
Ind
ia
Thai
land
Mea
n G
EM 3
7
Mea
n G
7
% a
dul
t pop
ula
tion
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
22
GGrraapphh 1100:: EEnnttrreepprreenneeuurriiaall MMoottiivvaattiioonnss bbyy CCoouunnttrryy,, GGEEMM 22000022
1,2 1,9 2,0 2,2 2,3 2,8 2,8 3,3 3,3 3,3 3,3 3,3 3,4 3,9 3,9 4,0 4,04,9 5,2 5,6 5,8 5,9 6,0 6,7 6,8 7,4 7,8 8,3 8,5 8,6 8,6 9,1
11,6 12,4
15,3
0,50,6 0,3
0,8 1,2 0,11,3
1,42,4
0,7 0,7 0,5 1,0 0,31,1
2,10,5
0,91,4
7,0 7,5
0,4 0,91,5
7,1
0,41,4
2,7
6,7
4,1
0,91,1
2,2
5,0
3,4
5,64,64,4
7,4
1,9
0,80,7
1,1
0
2
4
6
8
10
12
14
16
18
20
Japa
n
Russ
ia
Belg
ium
Cro
atia
Hong
Kon
g
Fran
ce
Pola
nd
Slovi
nia
Sout
h A
frica
Swed
en
Chi
nese
Tai
pei
Italy
Spai
n
Finla
nd
Ger
man
y
Hung
ary
Net
herla
nds
Unite
d K
ingd
om
Singa
pore
Israe
l
Chi
na
Braz
il
Den
mar
k
Switz
erla
nd
Aus
tralia
Age
ntin
a
Can
ada
Nor
way
Irela
nd
Mex
ico
Chi
le
Kore
a
Icel
and
Unite
d S
tate
s
New
Zea
land
Ind
ia
Thai
land
GEM
37
Mea
n
G7
Mea
n
% a
dul
t pop
ula
tion
Necessity
Opportunity
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
23
Variations in Entrepreneurial Activity Between 2000 and 2002
In conclusion to this section on entrepreneurial activity, let us look at the different indicators over a three-year period.
The decline in entrepreneurial activity between 2000 and 2002 is clearly emphasized in graph 11. We note that the first decline in TEA, from 1999 to 2000, was due to a decrease in the new firm prevalence rate, while the decline that occurred between 2001 and 2002 was caused by a lower level of new ventures.
This 2002 slump is accompanied by a sharp decline in necessity-driven TEA. Opportunity-driven TEA, on the other hand, shows only a slight decline.
Finally, we shall mention that, despite a clear decrease in entrepreneurial activity in Canada, the country maintained its favourable status as one of the most dynamic countries. Additionally, entrepreneurship was driven by business opportunities rather than by necessity. We discuss these results from a regional standpoint in the fourth part.
GGrraapphh 1111:: EEnnttrreepprreenneeuurriiaall AAccttiivviittiieess FFrroomm 22000000 ttoo 22000022,, CCaannaaddaa,, GGEEMM 22000022
12,2
6,6
5,6
11
7,6
3
7
3,9
8,8
7,4
1,1
5,9
3,6
0
2
4
6
8
10
12
14
TEA TEA Opportunity TEA Necessity Nascent Firms New Firms
% a
dul
t pop
ula
tion
2000
2001
2002
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
24
Para-entrepreneurial Activities
Along with the data pertaining to entrepreneurial culture and intentions, we will add to the overall picture activities that we classify as para-entrepreneurial. The GEM project identifies two types of elements that can be measured: supporters of entrepreneurship (i.e., individuals launching businesses in the context of their paid work); and business angels (i.e., partners financially involved in new ventures).
SSuuppppoorrtteerrss
For the past four years, GEM has asked the following question of its respondents: “Are you involved in new ventures within the context of your paid employment?” Despite the fact that numerous professionals could be led to offer an affirmative answer to this question (the banking sector, different services
for the public and private sectors), we are of the opinion that this indicator provides an accurate measure of the structure supporting entrepreneurship. In addition, it includes individuals who are in the process of launching a new venture.
As graph 12 shows, in 2002, 4.6% of the work of Canada’s adult population was related to entrepreneurship. This figure places Canada just below the United States (7.0%), and far ahead of the other G7 countries. We also see that support for entrepreneurship is less prevalent in four of the G7 countries, namely, Japan (0.4%), France (0.7%), Italy (1.5%) and the United Kingdom (2.0%). Mexico has the highest proportion of supporters with 10.5%.
GGrraapphh 1122 :: SSuuppppoorrtteerrss,, GGEEMM 22000022
% that are creating enterprises within regular function
5,2 4,6
7,0
4,2
2,0 1,5
0,7 0,4
2,9
0,4
10,5
3,4
0
2
4
6
8
10
12
Canada-2001
Canada-2002
United St
ates
Germany
United Kingdom Ita
ly
France
Japan G7
Lower: J
apan
Higher: Mexic
o
GEM 37
% a
dul
t pop
ula
tion
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
25
BBuussiinneessss AAnnggeellss
Much as the TEA shows, we note that the rate of business angels in Canada suffered a slight decrease from 2001 to 2002, going from 3.8% to 3.2%, and thus ranking the country below Germany (3.4%) and the United States (4.9%) among the G7 countries. Canada nevertheless remains above the average set by the G7 (2.4%) and GEM 37 (3.0%). Frankly, we were surprised by Canada’s bleak performance in that matter given that it fared quite well in every other indicator. This finding leads us to
believe that, considering our entrepreneurial activity, business angels should have a stronger presence here.
With respect to our previous observations on the high rate of supporters, we believe that this result could be attributable to the heavily institutionalized financing of entrepreneurship. In fact, we find these variables to be highly co-related (0.816.**).
GGrraapphh 1133:: BBuussiinneessss AAnnggeellss,, GGEEMM 22000022
% business angels
3,2
4,9
3,4
1,7 1,4 1,2
0,6
2,4
0,6
3,0
3,8
7,5
0
1
2
3
4
5
6
7
8
Canada 2001
Canada-2002
United St
ates
Germany
United Kingdom Ita
ly
France
Japan G7
Lower: P
ologne, Bra
sil, Ja
pan
Higher: Icelande
GEM 37
% a
dul
t pop
ula
tion
Who are the Business Angels?
The majority of business angels in Canada (36.1% in 2002) are found in the entrepreneur’s circle of friends or neighbourhood (graph 14). The immediate family is second with 27.8%. Work colleagues are ahead of strangers with 13.9% versus 9.7%.
Iceland likely benefits from a strong proportion of adults involved in the creation of businesses through negotiated financing since it has a 7.5% rate of investment angels.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
26
GGrraapphh 1144:: RReellaattiioonnsshhiipp ooff BBuussiinneessss AAnnggeellss wwiitthh EEnnttrreepprreenneeuurrss,, CCaannaaddaa,, GGEEMM 22000022
Close Relative; 27,8%
Relative; 2,8%
Work Collegue; 13,9%
Friends/Neighborhood; 36,1%
Strangers; 9,7% Others; 1,4%
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
27
Part 3: What Types of Activities? The Business Strategies
The four strategies discussed in this third part are growth expectancy of new ventures evaluated in terms of jobs; proportion of sales destined for exportation; market positioning; and sector of activity. Tables 3 and 4 give the results for Canada and the GEM 2002 countries’ average for new and operating businesses, which comprise both nascent firms and new firms of 42 months or less. The tables also distinguish results according to gender.
Growth Expectancy of New Businesses
A recent CIBC study (2003) predicts that before the end of the decade, one in five workers will become their own boss. The importance of self-employment in Canada was previously depicted as one of the characteristic elements of Canadian entrepreneurship, particularly in Western Canada. We note in table 3 that this phenomenon of self-employed workers is even more common in Canada than in the GEM 37 for 2002. In fact, when asked, “How many employees would you like to hire in 5 years?” 23% of new Canadian businesses answered “none” compared to 20% for the GEM 37. On the other hand, we see that 23% of new businesses wish to hire 20 or more employees in five years – a smaller proportion than the GEM 37’s 28%. However, most new entrepreneurs – 37% to be precise – would be willing to hire between one and five employees. Generally speaking, it seems that growth expectancy in terms of jobs is rather modest in Canada. What is more, we note that the prospect of hiring appears to appeal more to women than men.
Exportation
Canada is an export-oriented country. As illustrated in table 3, this business strategy is deeply integrated in both established businesses and entrepreneurs in the making. This trait clearly differentiates Canada from the GEM 37 average. Indeed, we observe that only 27% of new Canadian businesses have uniquely domestic orientations.
Table 33:: GGrroowwtthh EExxppeeccttaannccyy,, EExxppoorrttaattiioonn,, MMaarrkkeett PPoossiittiioonniinngg ffoorr NNeeww EEnnttrreepprreenneeuurriiaall AAccttiivviittiieess,, GGEEMM 22000022
GEM 37
Men Women Total
Job creation in 5 yearsNone 23 22 23 20
1 to 5 jobs 38 33 37 39
6 to 19 jobs 17 20 18 12
19 jobs and more 22 25 23 28
n 133 64 197 37
Exportation (% of sales)
None 25 31 27 78
1 to 25% 52 44 49 16
26 to 50% 4 1 3 2
50% and more 18 24 20 4
n 142 71 213 37
Niche creation
None 45 47 466 73
Little 41 46 43 20
Some 7 5 6 6
Maximum 8 1 6 1
n 146 74 220 37
Canada % of new activities
This proportion reaches 78% in the rest of the world. In other words, there are nearly three (2.88) times as many businesses projecting exports in Canada than in the other GEM 37 countries. The largest proportion of new Canadian businesses, 49%, are inclined to export between 1% and 25% of their sales, while the GEM average is 16%. Finally, 23% of new Canadian businesses would like to export
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
28
26% or more of their sales. Again, we find conclusive evidence supporting the proclivity of Canadian businesses to export. As far as exports are concerned, we find no notable difference when gender is taken into account.
Market Positioning
The 2002 GEM intended to determine whether the purpose of the strategies implemented by entrepreneurs was the creation of a new market niche or the duplication of activities and markets with existing technology. In order to categorize new businesses, the following questions were asked:
1) Will the consumer consider being familiar with the goods or services offered?
2) What is the level of competition in this market?
3) Were the technologies or procedures related to these goods or services available last year?
The categories were defined as follows:
None: Technology available one year before; competitors; consumers familiar with the goods or services. Little: Technology available one year before; few or no competitors; consumers familiar or somewhat familiar with the goods or services. Some: Technology unavailable one year before; competitors; consumers somewhat familiar or unfamiliar with the goods or services. Maximum: Technology unavailable one year before; few or no competitors; consumers unfamiliar with the goods or services.
When a respondent said that consumers were unfamiliar with the goods or the services, that there were no competitors in the market and that the technology was inaccessible one year before, their business was classified among the new market ventures. Only 6% of new
Canadian businesses were qualified as such, while another 6% showed some indication of this strategic positioning. When we incorporate these two classes (“some” and “maximum”), we find there are more new market ventures in the country than in the rest of the world (12% versus 7%). Moreover, this business strategy appears to be more popular among men than among women in Canada (15% versus 6%).
The majority of new entrepreneurs (46%) responded that consumers were familiar with their goods or services, that there were a significant number of competitors in the market and that the main technology was available one year before. Another 43% gave more nuanced responses. All in all, 88% of new businesses opted for a strategy of reproduction. This distribution of results differs considerably from the GEM 37 results. Indeed, we observe that 73% of the new initiatives provide no strategic differentiation, whereas 20% (for a total of 93%) manifest a little.
It may be concluded that the vast majority of new Canadian businesses duplicate an existing activity, although in another form. The activity could be done in a new location or by proposing a different approach or a distinct price structure. However, it should be remembered that they do not create a new business from scratch. We nonetheless find that, when compared to the GEM 37, our entrepreneurs make significant efforts to attain, through differentiation and innovation, a stronger and more competitive positioning.
Sectors of Activity
Ultimately, most new businesses operate in the sectors of business services (34%) and hotels and restaurants (21%), two sectors distinctly represented by women and men, respectively. The sectors of consumer services (9%) and manufacturing (8%) come in third and fourth place, respectively, and are generally run by women.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
29
Table 44:: SSeeccttoorrss ooff AAccttiivviittyy ooff NNeeww EEnntteerrpprriisseess,, bbyy GGeennddeerr,, CCaannaaddaa,, GGEEMM 22000022
Distribution of new and nascent firms Men Women Total
Sector of activities Agriculture, Fishing, Forestry 4
11
6
Construction, Mines 8
2
6
Manufacturing 7
9
8
Transport, Communication, Publics services 6
2
4 Sales, Repairs 6
3
5
Hôtel and Restauration 15
33
21
Finance, Insurance, Real Estate 3
5
4
Business Services 44
16
34
Health, Education and social services 1
6
3
Consumers Services 7
14
9 n 123
65
188
Canada
In conclusion, we perceive that Canadian businesses have more modest growth expectancies, are dedicated to pursuing export opportunities and are more oriented toward differentiation than the GEM 37 countries. Furthermore, men and women manifest different strategies.
Canadian Entrepreneurs are Satisfied with Their Situation A 1999 study demonstrates that self-employed individuals are more content with their status than individuals working in small, medium and large enterprises and in the public sector: 63% of self-employed individuals in Canada are satisfied with their status, compared with 44% of workers in small and medium businesses and 33% of those in the public sector. Goldfard Consultants, FCEI and Scotia Bank, Small Businesses – Big Impressions: Results of a national survey on the attitude of Canadians concerning small businesses, 1003 respondents (October 1999).
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
30
Part 4: Entrepreneurship in Canadian Regions
In previous years we have seen significant differences in entrepreneurial activities among the regions of Canada. Those differences have been reaffirmed for a fourth consecutive year and are clarified in this report. We would first remind the reader, however, that Western Canada consolidates the results from British Columbia, Alberta, Saskatchewan and Manitoba, while Eastern Canada represents the collective results of the four Maritime provinces (New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador).
As we mentioned in the introduction, 1,000 respondents were added to the Quebec sample, which thus reduced the margin of error for that region and consequently for Canada as a whole.
Specific Cultural Variables
Generally speaking, we note that, regardless of the indicator, Western Canada emerges as far more entrepreneurial than Eastern Canada. However, there are some interesting distinctions.
With respect to pre-entrepreneurial activities, 61.1% of Western Canadians believe they have the capacity and skills required to launch a business, whereas 47.7% of Quebecers are of that conviction. The results for Ontario and Eastern Canada are close to the national average of 55.5%. The entrepreneurial capacities of the English-speaking regions (Eastern and Western Canada and Ontario) and Quebec all reflect similar rates.
With regard to entrepreneurial models and entrepreneurial intentions, we find two distinct groups. The first, consisting of Western Canada and Ontario, reveals highly superior rates of 41.6% and 36% for entrepreneurial models, and rates of 15.7% and 12.6% for entrepreneurial intentions. The second group includes Quebec and Eastern Canada. With rates of 25.4% and 26.7%, Quebec and Eastern Canada lag behind in both entrepreneurial models and entrepreneurial intentions. Only 7.6% of adults in Quebec and 5.9% in Eastern Canada intend to start a business in the next three years. Put another way, they are half as likely to start a business as their Western Canadian counterparts.
In line with what was presented in the first part, it is evident that the lack of models in Eastern Canada affects the choice of a career in entrepreneurship in the foreseeable future.
Western Canada and Ontario: Entrepreneurial Regions
In connection with the entrepreneurial activities presented in graph 15, we acknowledge that Western Canada and Ontario display a dynamism that is instrumental in the creation of new businesses. These regions achieved TEAs of 10.8% and 10.3%, respectively. Western Canada seems to welcome more nascent firms (7.9%) while Ontario would have a larger pool of new firms. These results rank those two regions ahead of the United States.
Quebec shows a TEA of 6.2%, which can be explained by a nascent firm prevalence rate of 4.0% and a new firm prevalence rate of 2.4%. Similarly, Eastern Canada shows a low nascent
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
31
firm rate of 2.1% and a rate of 0.5% for new firms.
These results lead us to conclude that Canada’s position, which stands among the most entrepreneurial of the 2002 GEM, is directly attributable to the entrepreneurial activity of Ontario and Western Canada.
GGrraapphh 1155:: PPrree--eennttrreepprreenneeuurriiaall AAccttiivviittiieess bbyy RReeggiioonn,, CCaannaaddaa,, GGEEMM 22000022
61,1
56,4
47,7
54,4 55,5
41,6
36,0
25,4 26,7
34,3
15,7 12,6
7,6 5,9
11,7
0
10
20
30
40
50
60
70
Western Canada Ontario Quebec Eastern Canada Canada
% a
dul
t pop
ula
tion
Entrepreneurial Capacity
Entrepreneurial Model
Entrepreneurial Intentions
GGrraapphh 1166:: EEnnttrreepprreenneeuurriiaall AAccttiivviittiieess bbyy RReeggiioonn,, CCaannaaddaa,, GGEEMM 22000022
7,9
6,3
4,0
2,1
5,9
3,8
4,7
2,4
0,5
3,6
10,8 10,3
6,2
3,2
8,9
0
2
4
6
8
10
12
Western Canada Ontario Quebec Eastern Canada Canada
% a
dul
t pop
ula
tion
Nascent firms
New firms
TEA (Entrepreneuriale activity)
TTaabbllee 55:: EEnnttrreepprreenneeuurriiaall AAccttiivviittiieess bbyy MMoottiivvaattiioonn aanndd RReeggiioonn,, CCaannaaddaa,, GGEEMM 22000022
Western Canada Ontario Quebec
Eastern Canada Canada
n % n % n % n % N % Opportunity 65 82 84 88 30 77 3 60 182 83 Necessity 10 13 10 10 6 15 2 40 28 13 Other/Don’t know/No answer 4 5 2 2 3 8 0 9 4
79 100 96 100 39 100 5 100 219 100
Likewise, we observe that opportunity-driven entrepreneurship has a large presence in Ontario – 88% of new activities – but is scarcely seen in Eastern Canada (60%) or in Quebec (77%). In comparison with the 2001 results, Quebec improved its position with 15% of respondents confirming necessity-
driven motivation as compared with 46.1% in 2001.
The picture changes when we look at para-entrepreneurial activities. It appears that the gap among the regions has narrowed. Quebec, with a rate of 5.3%, would welcome more supporters of entrepreneurship. Western Canada (4.9%),
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
33
Ontario (4.1%) and Eastern Canada (3.7%) follow.
Ontario shows the highest rate of investment angels with 3.9%, just ahead of Western Canada with 3.6%. This financial practice does not seem to be deeply integrated in
Eastern Canada, where only 1.1% of the population surveyed apply it.
GGrraapphh 1177:: PPaarraa --eennttrreepprreenneeuurriiaall AAccttiivviittiieess bbyy RReeggiioonn,, CCaannaaddaa,, GGEEMM 22000022
4,9
4,1
5,3
3,7
4,6
3,6
3,9
2,2
1,1
3,2
0
1
2
3
4
5
6
Western Canada Ontario Quebec Eastern Canada Canada
% a
dul
t pop
ulat
ion
Supporters
Business Angels
By comparing the 2002 results with those from 1999 to 2001, we again note a high volatility in the degree of activity among the regions. Then again, we have seen that this activity remains rather stable across Canada from year to year. It oscillates between 5.9% and 6.8% and between 3.6% and 5.6% for the nascent firm and new firm prevalence rates, respectively.
TTaabbllee 66:: NNaasscceenntt FFiirrmmss bbyy RReeggiioonn ffrroomm 11999999 ttoo 22000022,, CCaannaaddaa,, GGEEMM 22000022
Western Canada
Ontario
Quebec
Eastern Canada
Canada
1999 8.0 5.5 8.1 4.4 6.8 2000 8.3 7.5 3.3 2.5 6.2
2001 wh 8.4 5.2 6.5 7.7 6.7 2002 wh 7.9 6.3 4.0 2.1 5.9 Mean 8.2 6.1 5.5 4.2 6.4
TTaabbllee 77:: NNeeww FFiirrmmss bbyy RReeggiioonn ffrroomm 22000000 ttoo 22000022,, CCaannaaddaa,, GGEEMM 22000022
Western
Canada
Ontario
Quebec
Eastern
Canada
Canada
2000 3.1 2.1 1.4 1.8 5.6 2001 wh 4.0 3.9 4.4 1.1 3.9 2002 wh 3.8 4.7 2.4 0.6 3.6
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
34
Mean 3.6 3.6 2.7 1.2 4.4 It is our opinion that this high volatility is closely related to the status of the job market.
What is the Link Between the TEA and the Unemployment Rate?
At first glance, the link between the unemployment rate and the TEA might seem evident, since our observations on those two indicators for 2002 clearly reveal an inverse relationship (graph 18): those regions profoundly affected by unemployment experienced low TEA and vice versa. This finding is not so obvious, however, when we analyze the longitudinal data. In fact, the only relationship that seems to remain is the one between the volatility of entrepreneurship (the gap between the highest and lowest rates) and the unemployment rate. Indeed, in graph 19 we demonstrate that Eastern Canada and Quebec – two regions heavily affected by unemployment – underwent the strongest variations in entrepreneurship during the years included in our analysis. Western Canada – which benefits from a low unemployment rate – maintained a TEA at or close to 8.0%.
GGrraapphh 1188:: UUnneemmppllooyymmeenntt RRaattee aanndd TTEEAA RRaattee iinn 22000022 bbyy RReeggiioonn,, CCaannaaddaa
0
2
4
6
8
10
12
14
Ouest Ontario Québec Est Canada
TAE 2002Tx chômage 2002
Several authors have tried to establish a relationship between unemployment and
entrepreneurship. The results have always been mitigated, sometimes showing a positive correlation, sometimes a negative correlation, and sometimes no correlation. The relationship between the volatility of entrepreneurship and unemployment has not generated as much literature; the connection is apparent in the following graph where we used the data from the Canadian regions. We observe that, in any given year, the regions with high unemployment rates sustain significant variations in entrepreneurship. Although this is a hypothesis that has yet to be demonstrated, we believe that entrepreneurship is more sensitive to conjectural elements in these regions. From a public policy point of view, such an observation has obvious implications, notably pertaining to the definition of objectives and to budgets with a long-term perspective.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
35
Graph 19: Unemployment Rate by Region from 1999 to 2002, Canada
6,5
5,6 5,76,2
0,4
6,4
5,76,2
7,1
2,1
9,5
8,4 8,6 8,7
4,8
13
12 12,2 12,3
5,6
7,6
6,87,2
7,7
0,9
0
2
4
6
8
10
12
14
1999 2000 2001 2002 HI TEC vs LOW TEC 1999-2002
Western CanadaOntarioQuebecEastern CanadaCanada
In 2002, Mcowling and Bygrave studied the connection between unemployment and necessity-driven entrepreneurship by using the international data made available by GEM. They found
o An inverse relationship between social benefits and necessity-driven entrepreneurship;
o An inverse relationship between entrepreneurship and unemployment in the same year (as seen in Canada), but a positive relationship between the preceding year’s rate (2001) and the current year’s TEA (2002); and
o That younger, unemployed individuals and fewer barriers to entry stimulate the necessity-driven TEA.
With regard to entrepreneurship, the provinces with generous social security programs are at a disadvantage, as are those with substantial barriers to entry (i.e., regulations). They generate fewer necessity-driven entrepreneurs. The 2002 GEM establishes a relationship between necessity-driven TEA and subsequent economic growth (Annex 3). As for young, unemployed individuals, they show a higher proclivity to launch new ventures.
Distinctive Strategic Behaviour
Table 8 highlights three characteristic elements of the strategic behaviour of new businesses in any given Canadian region. One should be reminded, however, that the small sample size warrants prudence in generalizing and interpreting the results.
First, we observe that self-employment has a much stronger presence in Ontario (26%) and Western Canada (24%), while it concerns a smaller proportion of new entrepreneurs and individuals in Quebec (16%) and Eastern Canada (0%, where only five new businesses were found). Conversely, growth expectancy through job creation is stronger in Quebec, where 31% of new entrepreneurs intend to hire 20 employees or more.
Second, we note that new entrepreneurs in Quebec and Eastern Canada are half as oriented toward exports as their English-speaking counterparts; the market strategy of exportation is most favoured by businesses in Western Canada. There is no doubt in our minds that cultural and linguistic barriers amplify these differences.
Finally, we find that Ontario displays a high proportion of innovative new businesses aiming to create a new market niche where the technology is still non-existent.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
36
Table 8: Growth Expectancy, Exportation and Market Positioning for New Activities by Region, Canada, GEM 2002
WesternCanada Ontario Quebec
EasternCanada Total
Job Creation in 5 yearsNone 24 26 14 23
1 to 5 jobs 38 36 34 40 366 to 19 jobs 14 21 20 20 18
19 jobs and more 24 17 31 40 23n 74 81 35 5 195
Exportation (% of sales)None 22 25 43 50 27
1 to 25% 55 48 40 50 5026 to 50% 5 2 3 3
50% and more 18 24 14 20n 78 95 35 4 212
Niche CreationNone 46 43 53 40 46Little 44 42 39 60 43
Some 6 6 5 6Maximum 4 8 3 6
n 79 95 38 5 217
% of new activities
Canada
Part 5: What Can We Conclude from These Results?
With this 2002 GEM report, we have seen that the entrepreneurial phenomenon is mobilizing upwards of three million Canadians. It is, therefore, anything but a negligible trend. However, from 2000 to 2002, entrepreneurial activity suffered a setback principally due to a decrease in new ventures. Before any warnings are issued, however, these conclusions should be put into perspective.
2002: A Post-technology-driven Boom
The explanation proposed by American experts to decipher similar results is also relevant here, since our two economies are closely intertwined. Thus, rather than suggesting a slowdown the authors wonder whether the current situation might be a simple return to normalcy. We could be in a post-technology-driven boom. The entrepreneurial effervescence that marked Canada at the turn of the century would flatten and return entrepreneurial activity to more modest levels.
Canada on Top
Despite the entrepreneurial setback that has occurred, Canada remains in a favourable position among the 37 countries that took part in GEM 2002. Similarly, it stands as one of the strongest G7 performers, second only to the United States.
The Dynamism in Western Canada
This enviable position is due largely to Western Canada (British Columbia, Alberta, Saskatchewan, Manitoba) and Ontario, since both regions display an entrepreneurial activity clearly superior to Eastern Canada (the four Maritime provinces) and Quebec. There is no doubt that their territorial and cultural proximity to the United States influences the entrepreneurial mindset. But there is more. Indeed, not only do these regions have fewer unemployed individuals, but they also welcome the vast majority of immigrants from highly entrepreneurial economies (China and India, among others). From a political point of view they offer a more liberal environment, and self-
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
ix
employment profits from fertile ground. Moreover, the entrepreneurial sector abounds with initiatives for business services and there are more supporters. These economies seem to benefit from a rather entrepreneur-friendly conjuncture.
Opportunistic or Open Businesses
And what of the new firms created? Their strategies are more aggressive and more competitive than new firms from the other countries surveyed by GEM. Indeed, we find that, even though the majority of businesses duplicate existing activities, a higher proportion of new businesses have adopted a niche strategy (new goods or services or the absence of competitors with a new technology). We note also that our new businesses are irrefutably more open to international trade, with the majority of new Canadian businesses – those in Quebec being the exception – intending to export.
All things considered, Canada’s overall profile is positive when compared with the other 37 countries that took part in GEM in 2002. However, regional disparities reflecting territorial characteristics continue to exist within Canada. Efforts could be directed to strengthening entrepreneurial foundations by stimulating the entrepreneurial culture and encouraging the integration of entrepreneurship and its practices in our educational system. Other practices could also facilitate the development of entrepreneurship: innovation in our financial conventions, particularly regarding financing; the pursuit of measures to promote research and development and marketing; enhancement of the entrepreneurship support structure; improvement of personal and professional services for self-employed individuals through continuing education; and the development of shared infrastructures.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
x
Bibliography
BMO FINANCIAL GROUP. “ In search of Canada’s small business hotbeds .“ Small Business Research. Vol. 1 (March 2003), 18 pages.
BYGRAVE, W.D., M. HAY, and E. AUTIO. “ The Global Entrepreneurship Monitor (GEM) Model for Economic Growth: A Study of Venture Capital in 19 Nations .” Babson Conference Presentation. (2001).
CIBC, ECONOMICS DIVISION. Self-Employment in Canada: Trends and Prospects. (2001), 21 pages.
CIBC, MARCHÉS MONDIAUX. Les PME au Canada, une force en pleine croissance. (2003), 28 pages.
FÉDÉRATION CANADIENNE DE L’ENTREPRISE INDÉPENDANTE (FCEI). Regard sur la PME—2002. (2002), 9 pages.
FORTIN, P-A. “ La culture entrepreneuriale – un antidote à la pauvreté .” Collection entreprendre. (2002), 248 pages.
FILION, L-J. “ Travail autonome: des volontaires et des involontaires.” Gestion. Vol. 24, No. 4 (2000), p. 48–56.
GASSE Y., MENZIE, T., DIOCHON, M., and M. TREMBLAY. “Le processus de démarrage d’une entreprise.” (Automne 2002).
GOLDFARD CONSULTANTS, FCEI et BANQUE SCOTIA. Petites entreprises – Grosses impressions:
Résultat d’un sondage national sur l’attitude des Canadiens à l’égard des petites entreprises. (octobre 1999).
GOUVERNEMENT DU CANADA. L’observateur. (Printemps 2003).
GOUVERNEMENT DU QUÉBEC. Le taux de survie et le taux de passage des entreprises. Direction de l’analyse économique, MICC. (Mars 2001), 25 pages.
MCOWLING, M. and W. B. BYGRAVE. Entrepreneurship and Unemployment: Relationships between Unemployment and Entrepreneurship in 37 Nations Participating in the Global Entrepreneurship Monitor 2002. (2002), 12 pages. www. gemconsortium.org
PETERSON, R. Global Report: GEM Canada 1999. York University (1999).
PETERSON, R., N. RIVERIN, and R. KLEIMAN. Global Report: GEM Canada 2001. York University and HEC Montréal (2001), 25 pages.
PETERSON, R., N. RIVERIN, and R. KLEIMAN. Le rapport canadien du GEM 2001. Translated from the English by M. VEILLETTE. Montréal (2002), 38 pages.
PETERSON, R. and N. RIVERIN. Global Report: GEM Canada 2000. York University and HEC Montréal (2001), 57 pages.
REYNOLDS, P., M. CHAMPS, B. BYGRAVE, and E. AUTIO. GEM International Executive Report. (1999–2000–2001–2002).
RIVERIN, N. “L’entrepreneuriat au Québec: ce que les experts en pensent.” Revue Organisations et Territoires. Vol. 10, No. 1 (Février 2001).
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
xi
RIVERIN, N. L’entrepreneuriat au Québec en 2001: le rapport du GEM (Global Entrepreneurship Monitor) . Chaire d’entrepreneurship Maclean Hunter, HEC Montréal. Cahier de recherche no 2002-18 (2002), 32 pages.
ZACHAZARIS, A.I., BYGRAVE, W.B., H. M. NECK, and P. D. REYNOLDS. Global Entrepreneurship Monitor: National Entrepreneurship Assessment United States of America. (2002), 34 pages.
Site Internet
GEM : www.gemconsortium.org
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
xii
Annex 1: The GEM Model
A. The GEM conceptual model (the complete process)
The purpose of this model is to help understand the determining factor underlying the entrepreneurial process and to explain how it contributes to economic growth. From left to right, the key variables are classified in these five major dimensions:
1. Social, cultural, political context
2. General national and entrepreneurial framework conditions
3. Opportunities and entrepre-neurial capacity
4. Business churning 5. National economic growth
Given that the GEM data is presented in accordance with this model, we should define each of those groups of variables.
1. The social, cultural, political context encompasses factors that have gradually shaped the values and aspirations of a country. These factors play a key role in determining the structural and entrepreneurial conditions that we shall explore later. The analysis of the interrelationships among all these factors falls outside GEM’s mandate. However, certain key factors will be considered, such as the demographic framework, investment in education, social norms, entrepreneurs’ perceptions, and attitudes associated with individual initiatives.
2. General national framework conditions include the role of government and financial institutions, R & D levels, the physical quality of infrastructures, workforce efficiency
and the solidity of social and legal institutions.
3. Entrepreneurial framework conditions speak to the availability of financial resources for new ventures, programs and policies instituted to support new businesses, training in entrepreneurship, the efficiency of technology transfer mechanisms, access to professional services such as accountants and attorneys, the fluidity of commercial relations, access to physical infrastructures, and social and cultural norms regarding entrepreneurial activities.
4. Entrepreneurial opportunities refer to the perception, by samples of the general population and leading experts, of the presence or absence of opportunities that could be exploited by entrepreneurs.
5. Entrepreneurial capacity deals with mastery of the skills required in the pursuit of entrepreneurial activities and the motivations of individuals in creating a business, as perceived by samples of the general population and leading experts.
6. Business churning is the process by which new businesses are formed, thrive, decline and vanish. The net creation of jobs stemming from business churning is a key factor in the economic growth of a country and thus contributes to its overall welfare.
7. National economic growth comprises diverse measures, including GDP growth and the employment rate.
8. The International Data Bank served as a complement to the surveys. The standardized data relative to entrepreneurship and the socio-economic status of the countries were collected from different sources (World Bank, UNESCO, OECD). Data made available by the countries’ national teams was also used. These were particularly useful when we compared the political, social and cultural contexts and the structural entrepreneurial conditions of the 29 countries GEM studied in 2002.
_____________________________ GEM Canada 2002 Copyright © 2004 – HEC Montréal
xiii
Annex 2: The Relationship Between Growth and the TEA The analysis conducted by the consortium shows there would be a gap of one to two years between the development of entrepreneurial activity and its impact on growth.
In fact, the correlation between the TEA and the GDP is 0.19 the year of the survey, 0.22 on
year t+1 and 0.42 on year t+2. The economic impact of entrepreneurship takes two years to generate a significant impact on the GNP.
Moreover, the GNP could be higher when necessity-driven TEA is greater. Indeed, the correlation between necessity-driven TEA and the GDP the year of the survey is 0.23, statistically significant at 95%.
________________ Copyright © 2004 - HEC Montréal 14
Annex 3 – The GEM 2002 Countries
Country Sample South Africa 3 498 Germany 15 041 Argentina 1 999 Australia 3 378 Belgium 4 057 Brazil 2 000 Canada 3 014 Chile 2 016 China 2 054 Korea 2 015 Croatia 2 001 Denmark 2 009 Spain 2 000 United States 7 059 Finland 2 005 France 2 029 Hong Kong 2 000 Hungary 2 000 India 3 047 Ireland 2 000 Iceland 2 000 Israel 2 004 Italy 2 002 Japan 1 999 Mexico 1 002 Norway 2 036 New Zealand 2 000 Netherlands 3 510 Poland 2 000 United Kingdom 16 002 Russia 2 190 Singapore 2 005 Slovenia 2 030 Sweden 2 000 Switzerland 2 001 Taiwan 2 236 Thailand 1 043 Total : 113 282
Source : GEM research report.