Individual business is growing in 19 countries, according to a new global report.
Across 32 economies that were surveyed for this in the Global Entrepreneurship Monitor from 2019 to 2022, there was an increase in 19 countries in the percentage of people who were starting or running a new business but did not expect to add anyone to the payroll within five years.
The leaders of this solopreneur trend, most prevalent in Europe but also occurring in other countries, were the Slovak Republic (increase from 40% in 2019 to 71% in 2022), Germany (increase from 41% to 69%) and Oman ( increase from 48% to 71%)
However, the rate of solo entrepreneurship declined in 13 countries, with the biggest declines in Poland (from 40% in 2019 to 15% in 2022), Brazil (54% to 31%) and the Republic of Korea (38% to 20% ) . This is not necessarily a negative trend: it could be because entrepreneurs in these countries are planning to hire employees.
The Global Entrepreneurship Monitor is now 24th year, offers perhaps the world’s most comprehensive view of entrepreneurship, surveying 51 economies representing about two-thirds of the global population. It started as a joint project between Babson College and London Business School. Babson is its global sponsor, and a consortium of academic experts from over 300 research institutions contribute to the report.
The researchers interviewed a random sample of at least 2,000 adults in each participating economy, for a total of 173,000 people. It also includes a survey of 36 national experts in 51 economies to provide context.
The report, written by lead author Stephen Hill, a professor at the Cleveland State University School of Business, positions entrepreneurs as a vital solution for countries around the world that are grappling with a “New Normal” shaped by climate change, rising poverty, changes, supply chain gaps, disrupted retail and distribution systems, and a rapidly changing global and economic system.
“Entrepreneurship is undoubtedly – and has always been – an important part of the solution to repairing damaged economies and societies,” GEM Executive Director Aileen Ionescu-Somers and José Ernesto Amorós Espinosa wrote in the report.
The report is organized by three groups of economies: Tier A, with GDP per capita above US$ 40,000 (countries such as USA, UK, Switzerland, Canada and Japan); Level B, with per capita GDP of US$ 20,000 to US$ 40,000 (countries such as Argentina, Chile, Greece and Poland); and Level C, with GDP per capita of less than US$ 20,000 (including Brazil, China and India).
One key finding is that many citizens around the world are suffering financially in the wake of the pandemic, with many of those least able to afford it reporting a decline in household income. Among the highest income tier A countries, the decline was 32% on average. For Level B, it was 62%. For Level C, it was 72%. Togo was the country that suffered the most widespread losses, with 90% of adults reporting a drop in household income.
Against this backdrop, people around the world cited four main reasons for starting a business: accumulating great wealth, earning a living because jobs are scarce, making a difference, and continuing a family tradition. The first two were usually the most common. Motivations for building great wealth and making a difference were not linked to income level; however, the desire for a job substitute was higher among those with lower incomes.
There were many other findings that provide a snapshot of where entrepreneurship is seeping across the world – and where support will be needed to start or revive it.
The report defines people as entrepreneurs if they are taking steps to start a business or are already running one – as opposed to someone who is considering starting.
Here are some findings that stood out:
- The proportion of adults starting and running a new business is highest in five countries: Colombia, Chile, Guatemala, Panama and Uruguay, followed by Uruguay and Togo.
- The United Arab Emirates (UAR) tops the list of the 12 countries where entrepreneurial activity has grown the most, with a share of 12%. It was followed by Colombia and Iran (both up 6%).
- There were 16 countries showing substantial declines in total business activity. The biggest declines were in Chile (down 10%), Morocco (down 7%) and Israel (down 4%).
- UAR had the highest scoring environment for starting and growing a business, for the second consecutive year, among 51 economies evaluated by experts in the National Entrepreneurial Context Index. The index measures each country’s entrepreneurial ecosystems based on factors such as access to capital, availability of entrepreneurial education and government policies.
- The next nine countries, in order, were Saudi Arabia, Taiwan, India, the Netherlands, Lithuania, Indonesia, Switzerland, the Republic of Korea and Qatar. The US was tied for fourteenth place with Norway. Venezuela, which is facing double-digit inflation and a recession in its main industry, oil, was at the bottom of the list.
- More than half of adults in Brazil, Panama, Tunisia and Togo plan to start a business within the next six months.
- Job creation is seeping into some countries. In two economies – the UAR and Panama – the percentage of adults starting businesses who expected to employ six or more people was four times the number of their counterparts who intentionally created individual businesses.
- The most popular industry to start a business in is consumer and business services. Companies in this sector represent more than 2/3 of new startups in 40 of 49 countries.
- Entrepreneurs in Latin American and Gulf economies are adopting digital technologies in their small businesses at higher rates than in other parts of the world, positioning them for success.
- The highest percentage of exits for “positive” reasons, such as selling the business or pursuing a business opportunity, came from Saudi Arabia (5%), United Arab Emirates, Canada and the United States (all 3%).
- Saudi Arabia has the highest percentage of adults (nearly 9/10) who believe there will be a good opportunity to start a local business in the next six months. Close behind was Indonesia. Japan had the lowest level.
- Saudi Arabia also has the highest percentage of adults who believe it is easy to start a business (nearly 90%), followed by the Netherlands and Norway. Israel had the lowest percentage.
- Saudi Arabia tops the list when it comes to the percentage of people who are confident they have the skills and confidence to start a business (nearly 90%), followed by Togo. The percentage is lower in Japan.
- In 37 of the 49 participating economies, more than 40% of respondents who saw good opportunities expressed fear that failure would deter them. Saudi Arabia has the highest percentage of people who see an opportunity but say they would be dissuaded from going after it for fear of failure (just under two-thirds). The Republic of Korea has the lowest percentage of adults held back by fear of failure (one in five).
- Chile had the highest percentage of adults (22%) who invested in someone else’s business in the past three years, followed by Guatemala (14%).
- Men were more likely to start a business in all but four countries – Indonesia, Poland, Qatar and Togo.
- Younger people were the most likely to start a business worldwide, with the total entrepreneurial activity of those aged 18-34 greater than that of those aged 35-64 in 37 of the countries where this was measured.
“Our aspiration at GEM is clear: to provide transparency to policymakers so that they can make better decisions to truly promote entrepreneurship by understanding specific national conditions and also observing and acting on the impact of their decision-making over time” , Professor José Ernesto Amorós, chairman of the GEM-GERA board and member of the GEM Mexico team, said in a statement.
Altogether, the data provide powerful food for thought for policymakers who believe that entrepreneurship can be a valuable way to build a better economic future.