Entrepreneurship Indicators Project Entrepreneurship Indicators Project

Developing Comparable Measures of Entrepreneurship and the Factors that Enhance or Impede It

Tim Davis OECD Statistics Directorate

Structural Business Statistics Meeting May 10/11, 2007, Paris

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Entrepreneurship Indicators ProjectEntrepreneurship Indicators Project

Background Fundamental Aims of the Project Engaging Countries and Other Participants Definitions and Measures Frameworks for Entrepreneurship and for Indicators Examples of Entrepreneurship Indicators Forthcoming meetings Key deliverables in 2007and 2008

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BackgroundBackground

Long history of OECD and other interest in E-Ship

Numerous OECD entrepreneurship studies

Explicit policy priority for virtually all countries

Little explicit “entrepreneurship” data at NSOs

Little sustained international statistical development

Asked to test feasibility of better international measures Financial support and a push from:

– Kauffman Foundation – International Consortium for Entrepreneurship (ICE)

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Entrepreneurship-Related Work at OECD Entrepreneurship-Related Work at OECD SMEs and Employment Creation, 1996 Fostering Entrepreneurship, (Jobs Strategy), 1998 Women Entrepreneurs in SMEs, 1998 Small Business, Job Creation and Growth, 1998 Impact of Product Market Regulation, 1999 and 2005 Linking Entrepreneurship to Growth, 2000 Business Views on Red Tape, 2001 Entrepreneurship and Local Development, 2003 Firm Demographics and Survival, 2003 Factors of Success and Statistical Strategies, 2002 Fostering Firm Creation and Entrepreneurship, 2004 Micro-Policies for Growth and Productivity, 2005

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ICE CountriesICE Countries

Canada Denmark Finland Netherlands Norway Sweden United States OECD

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Feasibility Study Feasibility Study

Confusion regarding definitions/measures Inadequacy or non-comparability of any single measure Opinion surveys and case studies supply many indicators Member-country interest and ‘support’ Demand for internationally-comparable measures

– Entrepreneurship– Determinants of entrepreneurship – Linked to Policy objectives– Relevant to policy tools available to countries

Many data gaps but also potential data sources

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2003 Entrepreneurship rates

0.0

5.0

10.0

15.0

20.0

25.0

%

GEM self employ-EIM self employ-OECD OECD - Birth rate WB - Entry rate

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2002/2001 Entrepreneurship rates variation

-60

-40

-20

0

20

40

60

%

GEM self employ-EIM self employ-OECD OECD - Birth rate WB - Entry rate

2003/2002 Entrepreneurship rates variation

-60

-40

-20

0

20

40

60

Austra

lia

Canada

Finlan

d

Franc

e

Ger

man

yIta

ly

Nether

land

s

New Z

ealand

Spain

Sweden

United

Kin

gdom

United

Sta

tes

%

GEM self employ-EIM self employ-OECD OECD - Birth rate WB - Entry rate

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Feasibility Study and Action Plan Feasibility Study and Action Plan

BUT Will countries accept to harmonise data? Will countries invest in data? Cautious “Yes” voiced through Statistics Committee With CSTAT support and additional Kauffman funding Project launched in Fall 2006 Important additional support from:

– ICE Consortium– Denmark

– OECD – Eurostat

Effectively…..a Joint OECD/Eurostat Project

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Fundamental Aims and Steps of the ProjectFundamental Aims and Steps of the Project 1. Measurement Manual: Standard definitions and measurement

tools 2. Compile and publish a Compendium on Entrepreneurship

STEPS

Engage national and international bodies so that money and effort will

be devoted to producing data

Establish Indicator Priorities: Identify data required by policy-makers

to measure Entrepreneurship and underlying factors

Agree on definitions, methods and sources

Data collection from Statistical Business Registers

Partner with other data producers; Identify and assemble other data

from existing sources

Develop, pilot and run (co-ordinate) new entrepreneurship surveys

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Engaging countries – and others – in the EIP

The Entrepreneurship Indicators Steering Group Eurostat

Broadens European input; Implementation experience Partner on Manuals and data collection

International Consortium on Entrepreneurship (ICE) Committee on Industry, Innovation, Entrepreneurship Working Party on SMEs and Entrepreneurship (OECD)

Strengthens Policy and Research inputs Committee on Statistics (OECD)

Links to Entrepreneurship Research Bodies (EIM)

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Entrepreneurship Indicators Steering Group

Australia Canada Denmark Finland Germany Hungary Italy Korea Netherlands

“Informal Body” created by Stats Directorate and Committee Sub-set of OECD countries + other experts Statistical and entrepreneurship policy/research expertise 1st Meeting: Dec 06 (Rome); 2nd Meeting: June 07 (Istanbul) Still some membership gaps

Sweden United Kingdom United States Eurostat EU Commission-DG-ENT OECD – CFE World Bank Kauffman Foundation

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What is Entrepreneurship? - Definitions What is Entrepreneurship? - Definitions

An attitude? A behaviour? A specific economic activity?

Numerous definitions exist: “Ability to marshal resources to capitalize on opportunities” “Willing to take risks, be innovative; exploit opportunities” None of these are necessarily limited to new or small firms Term is often (simplistically) applied to leaders, hard

workers, innovators, any SME or anyone in business

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Entrepreneurship Definitions Entrepreneurship Definitions

Does a single, perfect definition exist? And could it be measured? Steering Group is developing an overarching definition A conceptual description to guide choice of measures

But Statisticians want to leap ahead to the process Break it down to measure inputs and outputs If “entrepreneurship” is happening ……..

…………….what is the measurable result?

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Fundamental or “Umbrella” Definitions

• The entrepreneur is the person who creates and exchanges value through the identification and employment of changes in resources, opportunities and/or innovation.

• Entrepreneurship is the phenomena associated with the mindset, planning and activities that create and exchange value through the identification and employment of changes in resources, opportunities and/or innovation.

• Entrepreneurial activity is the enterprising human action associated with the creation and exchange of value through the identification and employment of resources, opportunities and/or innovation.

Broad by design: Vetting and approvals yet to come Will accommodate numerous, specific policy goals and associated measures

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What is Entrepreneurship? - MeasuresWhat is Entrepreneurship? - Measures

For some: It’s simply self-employment or creation of new firms Assume more firm creation leads to more high growth

But for others, including us, it is more: Important to link to (OECD/EU) policy interests Entrepreneurship is the process leading to the creation

and growth of businesses Must measure both creation and growth

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What is Entrepreneurship? - MeasuresWhat is Entrepreneurship? - Measures

Are policy-makers also interested in: Entrepreneurship in existing – even old – firms ? Take-overs, reactivations, transfers and transitions ? Export behaviour ? Innovation by young firms ? Initially, more measures are desirable Clarity and comparability are key Measures of entrepreneurship and its drivers

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Entrepreneurship Process:

Demand and Supply ModelExternal Factors

influencing

DemandOpportunities

Entrepreneurship Performance

SupplyAbilities

• Incentives

• Culture/Motivation

• Framework Conditions

• Firm Creation• High-growth firms• Business Density

• Financial Capital

• Social/Human Capital

• Technology Transfer

• Access to Market

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Organising IndicatorsOrganising Indicators

Several categories of Indicators: Determinants or Framework Conditions for Entrepreneurship Performance or Degree of Entrepreneurship Impact of Entrepreneurship

Also Attributes of entrepreneurs and entrepreneurial firms

Some indicators link to policy; e.g. Education Others enhance knowledge and help target programs:

e.g. Age, Entrepreneurial Heredity

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Entrepreneurship Framework

Entrepreneurship Performance

SurvivalBusiness Ownership/

Self-EmploymentCreation of firms High-Growth Firms

Entrepreneurship Determinants

Market Conditions

TechnologyInfrastructures

FinanceAccess to Markets

CultureMacro-Economic

Environment

Entrepreneurship ImpactPolicy Objectives

Poverty reduction Job Creation Economic Growth Reduction of the informal sector

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Indicator Priorities and Definitions Indicator Priorities and Definitions

Ideally: Establish complete indicator list first Schedule dictates simultaneous work A Steering Group Task Force is defining indicators While some data collection already under way Manual Drafting Group is joint OECD/Eurostat activity

– Joint Business Demography Manual– Joint Entrepreneurship Indicators Manual

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Indicator Examples: Indicator Examples: Entrepreneurship Performance Entrepreneurship Performance

Firm start-up rates, by size category Measures of high-growth firms ************************************************************************************************

Firm survival rates Business density Degree of entry and exit “churn” Business ownership; Self-employment Innovation measures; Commercialisation of research Attributes of the entrepreneurial firms

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Indicator Examples: Entrepreneurship Determinants

Access to financing Entrepreneurship education Taxation and incentives Business infrastructure Ease of entry Administrative and regulatory burdens Innovation and R&D Access to technology Re-start possibilities; Bankruptcy environment

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Entrepreneurship Indicators: Performance, Determinants, Impact

Market Conditions

Technology/ Infrastructures

FinanceEntrepreneurial

SpiritRegulations

Entrepreneurship Culture

Macro-Economic

Environment

Regulatory Burdens

Export propensity of

new firms

Business Ownership

Survival

Share of Innovative Firms

High-Growth / Gazelles

(2 Measures)

Self-Employment

Entrepreneurship Performance

Firm Creation / Death

Competition Socio-

demographic and Immigration

Entrepreneurship Education

Entrepreneurship Infrastructures

Access to Market

University

PatentsEase of

entry

Communication

R&D

Debt Financing

Business Angel

Venture Capital

Technology Risk Attitudes

Attitudes towards business

Desire for self-employment

Fiscal Environment

Court-legal Environment

General Regulations

Economic Growth

SME indicators

GDP

Productivity

Impacts: Policy Objectives

Sustainability

Entrepreneurship Determinants

Reduction of Informal Economy

Poverty Reduction

Intrapreneurship

Job Creation

Productivity Growth

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Key Deliverables 2007/2008

Fall 2007 High Growth Definitions and Measures (Seminar) Risk Capital Definitions and Data sources

December 2007 Preliminary OECD-Eurostat Measurement Manual Compendium of available indicators

September 2008 Measurement Manual Compendium of Entrepreneurship Indicators

2007/2008 Sponsorship and funding support

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Forthcoming Meetings and Activities Forthcoming Meetings and Activities

June 2007 (Istanbul) Entrepreneurship Indicators Steering Group Workshop on Entrepreneurship Indicators at World Forum

on Statistics, Knowledge and Policy

Fall 2007 Seminar on High Growth Entrepreneurship Indicators Steering Group ICE Consortium Meeting