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					“Entrepreneurial Challenge”


               Prof. Anne Flynn
                  04/14/2005
  Traditional Irish Greeting


              A chairde.

Tá áthus orm bheith anseo libh agus mo
 bhuiochas libh as an fáilte a thug sibh
                 dom.
Entrepreneurship is?

   One of the cornerstones of a modern,
    fully developed economy and the
    lifeblood of thriving local
    communities.
   An important contributor to
    economic growth, employment,
    innovation, and competitiveness.
          Structure

 Global Assessment [GEM]
 Entrepreneurial Activity:
  Ireland, Europe, US
 Entrepreneurship in Europe
 Entrepreneurial Challenges in
  Ireland
 Closing Remarks
Global Assessment

   The Global Entrepreneurship
    Monitor (GEM) research program - is
    a global assessment of the national
    level of entrepreneurial activity.
   Initiated in 1999 with 10 countries,
    the fifth assessment was completed
    in 2003 with 41 countries.
             www.gemconsortium.org
    GEM Program Objectives

   Are there national differences in
    entrepreneurial activity?
   National consequences of
    entrepreneurial activity [scope, job
    creation, growth]?
   Why are some countries more
    entrepreneurial than others?
   What can be done to enhance
    entrepreneurial activity?
        GEM Research Activities

   Adult population surveys
       Random sample of adults, 2,000 or more
       Grass roots entrepreneurial activity
   National expert interviews
       National teams, [18-70 per country]
   National expert questionnaires
       Follows personal interview
   Standardised national data
       IMF, World Bank, UN, OECD, etc
Measures

   Total Entrepreneurial Activity (TEA)
    –   provides a measure of those active in
        starting a new business [start up process &
        owning/managing a new firm 3-42 months]
   Firm Entrepreneurial Activity [FEA]
    –   an indicator of entrepreneurial activity
        among established firms
    –   firms provide new innovations, not just
        replicate existing goods or services
What is National Entrepreneurship?

   People Creating New Firms
   Start-up phase, before firm operational
   Young firm, up to 3.5 yrs old
   Entrepreneurship among existing firms
   Produce market innovation, Focus on growth
   National Infrastructure focuses on
    adaptation
   Coordinated effort, Collaboration among
    major sectors, Government, research,
    education, financial
Overall National Entrepreneurial Activity
     Two Dimensional Classification

         Low TEA                       Medium TEA              High TEA

High     Hong Kong,                    China,                  Chile, Korea (South),
FEA      Slovenia                      Mexico                  New Zealand,
                                                               Uganda, Venezuela


Medium   Belgium, Finland,             Australia, Canada,      Brazil,
FEA      Italy, Sweden                 Denmark, Iceland,       India
                                       Ireland,
                                       Hungary, Singapore,
                                       Spain, UK, US

Low      Chinese Taipei [Taiwan],      Germany, Greece,        Argentina,
FEA      Croatia, France, Japan,       Israel, Norway, South   Thailand
         Netherlands, Poland, Russia   Africa, Switzerland
  Opportunity vs. Necessity

Are you involved

   Totake advantage of a business
   opportunity
                 or

   Becauseyou have no better choices
   for work?
     Willing volunteers or draftees?
     Entrepreneurial Activity

   US (TEA) rate 11.9% in 2003, 7th highest.
   Ireland (TEA) rate 8.1%, fore in Europe,
    most entrepreneurial country in EU.
   76% of Americans opportunity vs. 85%
    of Irish entrepreneurs
   US (FEA) rate of 2.4%, the 10th highest,
    Ireland (FEA) rate 1.6%
Nascent and New Firm Rates
      Entrepreneurship and Job
              Creation

   US - 70% [employ at least 1 person]
   Ireland - 84% [employ 5 or fewer]
    third only entrepreneur employed.
    Most expect they will remain small.
   High growth aspirations [20+ staff in 5
    years time] [Ireland 16%, US 20%, Europe
    5.9% ]
    Entrepreneurship and Population
                Profile

   US: Most active [25-34] years, TEA 15.7%
    men vs. 8.2% women, specialized
    professional, technological, or business
    degree [highest TEA 17.8% &
    opportunity driven 13.3%]
   Island of Ireland: Most active [35-44]
    years, 12.5% male vs. women (3.7%), high
    level of education.
Rates of Entrepreneurial Activity for Men
               and Women
    Entrepreneurship and Cultural
               Values

   The strength of support for
    entrepreneurship among the general
    adult population within Ireland is
    stronger than in the US.
   Ireland vs. US
     – Good career choice [66% - 63%]
     – High degree of status [76% - 64%]
     – Positive media coverage [84% - 64%]
          Personal Context of the
                Population

Personal Indicators    Ireland   Northern   UK    US    European
                                  Ireland               Average   *
                         *                         *
I have the skills to    46%        42%      48%   54%     40%
start a business *

I see good              33%        32%      35%   31%     32%
opportunities
I know a recent         43%        25%      25%   39%     40%
entrepreneur

Fear of failure *       41%        40%      34%   23%     38%
would prevent me
starting a business
       Entrepreneurship and
            Financing

   Av. Cost of Start-up [US $29,600 /
    €26,200) Europe $53,800 / €47,600]
   US - highest prevalence rate of
    informal investors with 5 /100 adults
    having invested in someone else's
    business during the previous 3 years
   Ireland - Low level of informal
    investment (2.6%) are active business
    angels, compared to 4.9% in the US.
Rates of Business Angel Activity
       Shortcomings that Inhibit
       Entrepreneurial Activity

         Ireland                 United States
   Small size of home       Reduce gender gap [1.9
    market                    men for every woman]
   Early stage finance      Lack of financial
   Fear of failure           capabilities - acquiring
   Rate of                   latest technology
    commercialization of     Stronger IPR laws to
    research                  enhance R&D
   Skills and experience     transfers
   Physical                 Build sustainable
    infrastructure            financing venues
    Entrepreneurship in Europe

   SME’s backbone of European economy
   Conditions in Europe vs. US
   Green Paper on Entrepreneurship
    –   How to produce more entrepreneurs?
    –   How to get more firms to grow?
   Action Plan: 5 policy areas:
    entrepreneurial mindsets, incentives for
    entrepreneurs, competitiveness &
    growth, access to finance and red tape
Entrepreneurial Mindsets

   “Promote awareness of the
    entrepreneurial spirit by presenting
    best practice models and fostering
    entrepreneurial attitudes and skills
    among young people”
   Educational Policy
   Entrepreneurs are not a homogenous
    group
Incentives for Entrepreneurs

   Fairer balance between risk & reward
   Tackle the negative effects of business
    failures
   Facilitate the transfer of companies
    and amend social security systems for
    entrepreneurs.
   Entrepreneurship gap between Europe
    & US is widening.
Incentives for Entrepreneurs

   Why do fewer Europeans have what it
    takes? (Eurobarometer 01/2005)
   Balancing the risks: [A regular income,
    Job stability, Fear of failure]
   Rewards [EU - greater independence &
    self-fulfillment, US - creating one's own
    working environment]
   Similar perceived obstacles
   Good management = Success
Competitiveness & Growth

   Promote access to support &
    management training for
    entrepreneurs from all backgrounds,
    especially women and ethnic
    minorities.
   View immigration as an opportunity
    for stronger entrepreneurship (US)
   Exchange of Good Practice
Access to Finance

   Improve the availability of venture
    capital, business angel finance and
    investments by private individuals
    (US)
   Continue efforts to mobilize capital to
    support young, risk-taking businesses.
Red Tape

   Reduce & simplify administrative
    barriers & regulatory burdens
   World Bank "Doing Business Survey
    2005” [ease of starting a business]
   EU busy pushing reforms, still lag US
   US [5 days & 5 administrative steps to
    start a business] vs. EU [36 days, 7.5
    steps]
Entrepreneurial Challenges in
          Ireland

   172,000 small
    businesses
   60% of total turnover
   66% of employment
   50% of private sector
    employment
   80% service sector
   16,000 new
    enterprises are
    created per annum
Enterprise Driven Society

   Less employment in large companies &
    public sector
   Size of the domestic economy
   Government foster an entrepreneurial
    climate & enterprise culture
   Small Firms Association of Ireland -
    major impediments and challenges
    facing the enterprise led sector &
    appropriate actions
Competitiveness

   Ireland’s competitive position is now in a
    tailspin [4th position 2000 - 30th today!]
   An expensive & less attractive place to do
    business. [min wage 22% higher, insurance
    costs risen 100% in 2 years, retail space Dublin
    (capital city) most expensive in the world! red
    tape adds 4% to product cost]
   SME’s - [non-pay costs 23.7% 2002 - 2004]
   “You must create wealth before you can
    redistribute it.”
    Skilled Workforce & Knowledge
            Driven Economy

   In a knowledge-based economy
     – Well-supported process of life long
       learning, training & up-skilling
       programs
     – Intellectual property system is open
       and inviting
     – Focus on technology transfer,
       licensing, the importance of 'change'
       or 'new ideas’ rather than 'R&D'
Infrastructure

   Current gridlock is threatening
    enterprise formation & development
   Specialized body assessing planning
    applications & reprioritizing projects
   Liberalization & deregulation within the
    energy market
   Strive to have the "best in class"
    telecommunications infrastructure
   “Environmental accreditation”
Government Support

   Comprehensive fiscal approach to
    enterprise
     – Retaining low corporation tax rates
       (12.5%)
     – Reducing inflation below 2%
     – Standard rate of VAT to 17.5%
     – No increases in labor costs
Regulatory Burden

   “Simplicity needs to be rediscovered as
                    a virtue.”
   Comply - An owner manager would
    have to read almost one million words
    per annum & complete forms running
    to over 500 feet in length.
   SME’s cite legislation as the most
    significant problem for their business.
   Cost impact analysis on businesses
Encouraging Business Start Ups


   Develop an" Enterprise Culture”
   Remove barriers to entrepreneurship
   Availability of pre and start up seed
    capital
   Increase number of female
    entrepreneurs
ICT & Training

   Maximize the potential of ICT for
    every small business & speed up the
    roll-out of broadband digital access
   Training objectives - driven by business
    needs & Increase management
    competency among small firms
   Enterprise courses
Value of Sectors

   “Value Added" economy
   Barriers to trade within the Eurozone
      “Create a business environment which
     makes it possible to sustain an economic
    and social shift to a high skill, higher value
        added competitive environment.”
   “Ahead of the Curve: Ireland's Place in
    the Global Economy.”
          Closing Remarks

   Strong positive contributors and the
    shortcomings that inhibit
    entrepreneurial activity
   Shared challenges in fostering
    entrepreneurship

    “Go raibh maith agaibh go léir .”

				
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