In the face of the pandemic, it was not the most developed economies where people felt the most confident to start a business. Instead, entrepreneurs from regions such as Latin America, the Middle East and Africa were more likely to see opportunity last year, according to Global Entrepreneurship Monitor’s 2020/2021 report, released Wednesday.
The pandemic made starting a business more difficult in most economies across the world. Respondents from 43 economies were more likely to know someone who closed their business than someone who started one.
Still, many saw new opportunities created by the pandemic and its implications.
The highest, but most variable, levels of entrepreneurs starting or running a new business are from the Middle East and Africa. The most consistently highest was in Latin America and the Caribbean. Meanwhile, the lowest was in North America and Europe, where in 14 out of 20 economies, less than one in 10 adults started or ran a new business, according to the report, which was written by lead author and professor Stephen Hill and five other experts: : Niels Bosma, a professor at Utrecht University in the Netherlands, Aileen Ionescu-Somers, the executive director of GEM, Donna Kelly, a professor at Babson College in Massachusetts, Maribel Guerrero, a professor at Universidad del Desarrollo in Chile and Thomas Schott, a professor at the University of Southern Denmark.
The West Falls Behind
In the Middle East, entrepreneurship is growing, “despite the pandemic, or maybe even partly because of it,” they write — a possible red flag for some governments in developed economies, since “this is much less the case” in Europe and North America, the authors indicate.
“Developments in emerging economies are worth monitoring closely in a world that is changing at an increasingly accelerated pace because of the pandemic,” its writers note.
The trends of entrepreneurship are more vital now than ever. If history is any indication, entrepreneurship will be a driving force coming out of the COVID-19 pandemic. “Much as vaccination is the key to global health recovery, so too is entrepreneurship the key to unlocking worldwide economic recovery,” the report authors write.
GEM has been actively studying entrepreneurship since 1999. This year’s report was based on about 140,000 interviews of people ages 18-64 across two surveys from 46 economies across the world.
The first survey, the Adult Population Survey, captures the “attitudes, behaviors and expectations” of at least 2,000 adults in each of the 43 economies who partook, according to the report. It covers all levels of the entrepreneurial process, “from those with intentions to start a business, to those actively starting but not yet trading (the nascent entrepreneur), to those running a new business (the new business owner), as well as those owning and running an existing established business,” according to the report. This survey also was anonymous, which can provide information on business in the informal economy, too, according to the report. The second survey, the National Expert Survey, focuses on the influences for people to start a business. Selected experts from 46 economies participated in this one.
Data collection mainly took place during the third quarter, and stopped in August 2020. Yet the report offers an evidence-based glimpse into impacts of COVID-19 on levels of entrepreneurship across the world.
What GEM researchers found is entrepreneurs aren’t backing down despite a worldwide pandemic. “There is little evidence of any COVID-led sharp deterioration in the environment for entrepreneurship,” the authors write.
In terms of perception, more than half the population in the majority of the economies agree that it’s easy to start a business, but there’s still many that disagree, mostly in middle- and high-income economies, according to the report. Its writers point to the reasons this likely is: there are fewer restrictions in less-developed economies and higher-income countries offer more alternatives to entrepreneurship.
Most of the early-stage entrepreneurs that saw new opportunities because of the pandemic are from Latin America, the Caribbean and to some extent the Middle East, Africa and India, according to the report.
Opportunity perceptions for starting a business fell compared to 2019 in Europe and North America. Meanwhile, more than 80% of the adult population in Indonesia, India, Oman and Saudi Arabia found it plausible to start a business. “This is a strong indicator of the entrepreneurial outlook and mindset — as well as the conduciveness of the environment for entrepreneurship — in these countries,” according to the report.
Across the board, more than a third of all surveyed who see good opportunities to start a business also agree they have the skills, knowledge and experience to do it. But in eight economies — six from Europe and North America, plus Taiwan and Israel — more than half of those who see good opportunities do not believe they can capitalize on them.
The gender gap continues to close as it has been for years, but men are still more likely to start a business than women are in most places in the world, according to the report. Though, in a few economies the reverse is true.
Six of the 43 economies have early-stage entrepreneurial activity rates for women that are at least as high as those for men. But those economies are not in Europe nor North America. There, nine of 20 economies have less than one in 20 women starting or running a new business.
The lowest rates of female early-stage entrepreneurship are in Italy, Poland and India, according to the report. Meanwhile, the highest levels of female entrepreneurship are in the Middle East and Africa.
The lowest ratios of female to male entrepreneurship are in Italy, India, and Egypt — where about three men start or run a new business for every woman doing the same.
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Overall, the propensity of entrepreneurship tends to follow an age pattern. In most of the economies, it increases with age, and then declines. For many economies, the 25-34 age group has the highest level of new businesses started. Also, the oldest age group, 55-64 years old, is the least likely to start a business.
There’s an outlier, though: in Kazakhstan, the oldest age group is most likely to start a business.
In six economies from Europe and North America, plus Guatemala, Egypt and Kuwait, entrepreneurs between 18 and 24 years old are most likely to start or run a business. However, in three economies — India, Taiwan and Republic of Korea– this age group is least likely to start a business.
European, North American, Latin American and Caribbean entrepreneurs are more motivated to create a business to “make a difference in the world” than the rest of the globe. That’s good news for the United Nations’ Sustainable Development Goals, which are pushing for more purpose-driven companies, according to the report. Though, it’s not so uniform in the rest of the world.
“It would be unwise to go overboard with too much optimism,” its authors write. “The global picture is highly fragmented.
In Central and East Asia, the Middle East and Africa, entrepreneurs were mostly motivated to create a business to “build wealth or higher income,” according to the report. Overall, there was a large drive to create a business because “jobs were scarce,” which may be tied to the pandemic, according to the report.
‘Keep Moving Faster‘
Because the report stopped in August, it’s a limited view of the pandemic’s impact on entrepreneurship. Next year’s report will likely reveal more about the effects of COVID-19, the authors write.
“In the meantime,” they write, “governments need to keep moving faster in order not to lose momentum in the post-pandemic recovery period, which, hopefully, is looming.”
This story and others on New Builders Dispatch are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit www.kauffman.org and connect with www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.