EUROPE’S HIDDEN ENTREPRENEURS MAKE UP FOR CONTINENT’S LOW START-UP RATE; GERMANY, FRANCE, ITALY, SPAIN SCORE POORLY AS SMALL BALTIC AND NORDIC STATES LEAD THE WAY
Europe has long had the paradoxical reputation of a continent with low levels of entrepreneurship, yet high overall levels of economic competitiveness. A new report provides an explanation: Europe is home to many intrapreneurs, individuals who choose to innovate within organizations.
The report—Europe’s Hidden Entrepreneurs: Entrepreneurial Employee Activity and Competitiveness in Europe (pdf)—was produced by the World Economic Forum (WEF) and the Global Entrepreneurship Monitor (GEM), and co-authored by Babson College ProfessorsDonna Kelley and Abdul Ali.
The findings go against the widely-held belief of the dismal state of entrepreneurship in Europe. Indeed, the report finds, what Europe lacks in early-stage entrepreneurship, it makes up for in intrapreneurship:
- Of all regions surveyed, only the U.S., Canada, and Australia scored better than Europe for intrapreneurship: out of every 100 workers in Europe, eight could be classified as intrapreneurs.
- In other regions, including India (South Asia), China and ASEAN (Southeast Asia), Latin America and Africa, that number is lower.
- That contrasts with Europe’s score for what is traditionally seen as entrepreneurship: people involved in start-ups, or “early-stage entrepreneurial activity”: only four out of 100 Europeans in the workforce are active as start-up entrepreneurs, among the lowest rates in the world.
"While policymakers have focused on encouraging entrepreneurship in independent startups, there is a wealth of value being created by entrepreneurs in organizations," said Babson College Professor and report co-author, Donna Kelley. "This is critically important to acknowledge in Europe, where employee entrepreneurs in many countries contribute substantially to the new and innovative ideas being introduced into their societies."
The findings are important for future potential growth in Europe, as those who innovate within organizations tend to create more jobs than those who start their own business. A correlation also exists between intrapreneurship rates and economic competitiveness: every 2.5 percent increase in a country’s intrapreneurship rate correlates to a one-point increase in competitiveness as measured by the World Economic Forum’s global competitiveness data.
The news, however, is not all good. The European results vary widely, and are worst in its industrial heartland.
The UK, one of Europe’s strongest economies, is the exception among large countries, ranking No. 5 overall and No. 3 in intrapreneurship. Germany (No. 24) and France (No. 25) appear at the bottom of the combined ranking, despite a moderate score in intrapreneurship. The three worst ranking countries overall are Greece (No. 26), Spain (No. 27), and Italy (No. 28). It is a worrying sign as Europe’s competitiveness depends on that of its heartland. Estonia, Sweden, and Latvia come out on top. Other Northern countries also score well for the combined ranking of entrepreneurship and intrapreneurship, bringing up the continent’s total score.
The report explains the implications for policy makers, and ways they can design policies to enhance the economic competitiveness and unleash all types of entrepreneurship. The choice is not between start-ups and intrapreneurship, as economies flourish when all types of entrepreneurship exist at healthy levels.
“In the public debate on entrepreneurship, a false contrast is often presented—the dynamic start-up entrepreneur versus the stale corporation. This report rebukes that narrow perspective on entrepreneurship,” says Michael Drexler, Head of Investors Industries at the World Economic Forum. “A better approach is to create policy frameworks that enable ‘collaborative innovation’, where young firms and established companies share complementary resources to support new ideas.”
“Countries should strive for a ‘healthy’ set of both types of entrepreneurship” said Niels Bosma, Utrecht University and co-author from Global Entrepreneurship Monitor. “Independent, innovative entrepreneurship is important as it is allows for introducing and testing very new concepts or ideas. New entrepreneurial projects that have been successfully introduced to the market will likely have a bigger impact as these projects can tap into the resources available within the existing firm.”
About World Economic Forum (WEF)
The World Economic Forum, committed to improving the state of the world—is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas.
About the Global Entrepreneurship Monitor (GEM)
The Global Entrepreneurship Monitor (GEM) was initiated in 1999 as a joint venture of Babson College and the London Business School. Starting with 10 participating economies, the project expanded to include 73 economies in its 2014 survey. The latest global survey spans 62 economies. GEM is the largest and most developed research program on entrepreneurship in the world. GEM is unique because, unlike most entrepreneurship data sets that measure newer and smaller firms, GEM studies the behavior of individuals with respect to starting and managing businesses. GEM academic teams in each participating economy are members of an exclusive research project that provides access to the collective knowledge of some of the world’s most renowned researchers and institutions involved in entrepreneurship research. At a time in history when individual entrepreneurial activity may hold the key to transforming the global economy and discouraging ingrained economic disparity in countries with minimal economic opportunity, GEM data has influenced national economic policies and continues to expand its collaborative role. For more information, follow GEM on Twitter.
About Babson College
Babson College is the educator, convener, and thought leader for Entrepreneurship of All Kinds®. The top-ranked college for entrepreneurship education, Babson is a dynamic living and learning laboratory where students, faculty, and staff work together to address the real-world problems of business and society. We prepare the entrepreneurial leaders our world needs most: those with strong functional knowledge and the skills and vision to navigate change, accommodate ambiguity, surmount complexity, and motivate teams in a common purpose to make a difference in the world, and have an impact on organizations of all sizes and types. As we have for nearly a half-century, Babson continues to advance Entrepreneurial Thought & Action® as the most positive force on the planet for generating sustainable economic and social value.