Entrepreneurship spikes around the world, but U.S. isn’t the most innovative, study finds

January 20, 2012

More and more people around the world are becoming entrepreneurs, according to a Global Entrepreneurship Monitor 2011 report released Thursday. The world’s so-called “innovation-driven” economies saw an increase of 22 percent in early-stage entrepreneurship in 2011 over the year before, as measured by the number of people operating a business that’s less than 3.5 years old.

“One of the most surprising things is that the entrepreneurship rates were up in most of the economies we measured,” said Babson College entrepreneurship professor Donna Kelley.

For the study, GEM randomly sampled at least 2,000 adults in each of 54 economies. “Chile and China are have recently become more entrepreneurial countries, and when you look at the wealthier economies like the U.S. and Western Europe, you’re seeing a huge increase in entrepreneurship.”

In the United States, entrepreneurial activity increased a whopping 60 percent last year from 2010. However, this followed a dip in entrepreneurship in the past few years, so the increase brings us back to 2005 levels. About 12.3 percent of Americans are considered entrepreneurs by the GEM measure.

The boost in U.S. entrepreneurship is somewhat of a mixed indicator, signaling that while the economy is improving, some people are turning to entrepreneurship because it’s becoming evident that some jobs may never come back.

“People in the past two years may have delayed starting a business because conditions weren’t good,” Kelley said. “But employers are investing in capital equipment more than labor, and perhaps people are starting their own businesses as a result.”

The GEM team also took note of the countries with the most innovative entrepreneurs, meaning their product is new to the customers in that country and they face little or no competition. The percentage of American entrepreneurs with innovative products is approximately 30 percent by the GEM meaure, landing the United States somewhere in the middle of the wealthier economies. Denmark took the lead. “

But that doesn’t necessarily mean Americans aren’t innovative overall. Kelley points out that countries like Denmark also have far fewer entrepreneurs than does the United States, so entrepreneurship there is likely to be more selective there.

Despite the high percentage of entrepreneurs in the United States, however, fewer than half of them said they expect to create five or more jobs within five years. Middle-income countries tended to both have more entrepreneurs and more start-ups expecting to create five or more jobs.

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