Global Entrepreneurship Monitor Scotland 2006

Jonathan LevieHunter Centre for Entrepreneurship

University of Strathclyde

14 December 2007

Early-stage Entrepreneurial Activity:How Scotland Compares

2005 TEA scores for 42 sovereign nations & Scotland

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Be

lgiu

mJ

ap

an

Sw

ed

enIt

aly

UA

ES

co

tla

nd

Ge

rman

yF

ran

ce

Slo

ve

nia

Sin

ga

po

reR

us

sia

Fin

lan

dM

ex

ico

S.

Afr

ica

De

nm

ark

Ne

the

rla

nd

UK

Hu

ng

ary

Tu

rke

yL

atv

iaC

an

ada

Sp

ain

Ire

lan

dC

zec

hG

ree

ce

Cro

ati

aN

orw

ay

Ch

ile

US

AA

rge

nti

na

Ind

iaM

ala

ys

iaIc

ela

nd

Bra

zil

Au

str

alia

Uru

gu

ay

Th

aila

nd

Ch

ina

Ind

on

esi

aJ

am

aic

aP

hil

ipp

ine

sC

olo

mb

iaP

eru

% o

f p

op

ula

tio

n a

ged

18-

64

Scotland United Kingdom

United States

Ireland

TEA rates in Scotland & benchmark countries

  

TEA

% change

Scottish TEA as a % of other TEA rates

2005 2006 2005 2006

Scotland 5.8 4.2 - 28% n/a n/a

UK 6.0 5.8 - 4% 97% 72%

High income nations 6.6 6.2 - 6% 87% 67%

Small high income nations 7.2 6.7 - 7% 80% 62%

Have you ever taken part in business or enterprise training at school?

0

10

20

30

40

50

60

18-24yrs 25-34yrs 35-44yrs

Age group

% t

aken

par

t SC doersSC thinkersSC avoidersUK doersUK thinkersUK avoiders

Source: GEM UK and Scotland 2004, 2005 and 2006 Surveys

In the UK, would most people consider starting a new business a desirable career choice?

0

10

20

30

40

50

60

70

80

18-24 25-34 35-44 45-54 55-64 65-80

Age group

% y

es

SC doersSC thinkersSC avoidersUK doersUK thinkersUK avoiders

Source: GEM UK and Scotland 2004, 2005 and 2006 Surveys

In the next 6 months will there be good opportunities for starting a business in the area where you live?

0

10

20

30

40

50

60

70

18-24 25-34 35-44 45-54 55-64 65-80

Age group

% a

gre

e

SC doersSC thinkersSC avoidersUK doersUK thinkersUK avoiders

Source: GEM UK and Scotland 2004, 2005 and 2006 Surveys

Would fear of failure prevent you from starting a business?

0

10

20

30

40

50

18-24 25-34 35-44 45-54 55-64 65-80

Age group

% a

gre

e

SC doersSC thinkersSC avoidersUK doersUK thinkersUK avoiders

Source: GEM UK and Scotland 2004, 2005 and 2006 Surveys

Do you have the knowledge, skill and experience required to start a new business?

0102030405060708090

100

18-24 25-34 35-44 45-54 55-64 65-80

Age group

% y

es

SC doersSC thinkersSC avoidersUK doersUK thinkersUK avoiders

Source: GEM UK and Scotland 2004, 2005 and 2006 Surveys

How many businesses fail in their first year?UK public estimates

0

10

20

30

40

Around5%

Around10%

Around aquarter

Aroundhalf

Aroundthree

quarters

Nearly all(9/10)

Per

cen

t o

f s

amp

le

Not entrepreneurially engaged %

Entrepreneurially engaged %

Source: Allinson, Braidford, Houston & Stone, 2005

% of new VAT-registered businesses still registered after one year and three years

0102030405060708090

100

95 96 97 98 99 00 01 02 03 04Year of registration for VAT

% s

till

reg

iste

red

Scotland(oneyear)

UK (one year)

Scotland(three years)

UK (three years)

Source: BERR

Most important reason for closing my business (excludes businesses that were sold)

0%10%20%30%40%50%60%70%80%90%

100%

UK (743 cases)

Scotland (39 cases)

% o

f to

tal

Personal reasons

Retirement

Found another job

Financial reasons

Lack of customers

Too muchcompetition

Source: GEMUK 2006 survey

% of those who closed a business in the last yearwho are currently starting or running a business

Reason for closure UK Scotland

Found another job 11

8Retirement 8

Personal reasons 16

Too much competition 33

40Lack of customers 27

Financial reasons 23

Entrepreneurial recycling is healthy in Scotland – Scotland does not have a business failure problem – or a business closure problem

What if we shattered the business failure rate myth?

• 11% of 18-64 years old Scots are thinkers and 2% are actively trying to start (nascent entrepreneurs)

•Fear of failure is a barrier to start-up for 42% of thinkers but only 18% of nascents

•55% of thinkers who fear failure feel much more positive about their business prospects when told the true business failure rate (Allinson et al., 2005)

•Combining these findings, if all thinkers knew how small the business failure rate is, we could

increase the number of nascents by 25%

•Fear of failure is holding the start-up process back, and affecting the next generation of entrepreneurs. •Our bankruptcy laws now provide the swiftest discharge time in Europe. •But few entrepreneurs go bankrupt anyway.

Now what?

A concerted public education campaign, aimed at thinkers, the media and the new business support industry, to shatter the business failure rate myth

Implications for Policy