Entrepreneurial activity drops off

Friday 29th November 2002

Entrepreneurial activity worldwide continues to decline and New Zealand, despite its relatively good economic performance, is no exception, the latest Global Entrepreneurship Monitor (GEM) shows.

The average decrease in the 2002 survey of 37 countries was 2.2% compared with the 2001 survey's decline of only 0.5%.

The survey conducted by Babson College and the London Business School for the Ewing Marion Kaufman Foundation found strong declines in entrepreneurial activity everywhere else it looked.

In Japan, there was a 65% decrease and in Australia it was 46%. Finland, another innovation leader, was down 51%. France was down 57% and Italy 42%. Germany saw a 35% drop and the UK experienced a 31% shrinkage.

In the US, where 10% of the adult population is either launching a business or has done so within the past 42 months, the decline on 2001 levels was a mere 0.5%.

By comparison, New Zealand's decline was 23% but its ranking remains in the top 10 countries. Only two countries, India and Argentina, showed a significant increase in entrepreneurial activity.

The 58-page GEM New Zealand report, sponsored by Bartercard and compiled by Unitec's Centre for Innovation and Entrepreneurship, shows one in seven New Zealand adults can be classed as entrepreneurs defined by the study as being involved in "commercialisation of innovation" putting the country in sixth place, behind Argentina (fifth), Korea (fourth), Chile (third), India (second), and Thailand (first).

The same survey last year, conducted among 29 member countries, ranked New Zealand second in the world, behind Mexico. Mexico slipped to eighth this year.

The report found there are 281,000 "opportunity" entrepreneurs and 55,000 "necessity" entrepreneurs in New Zealand. Opportunity entrepreneurs spot a market need and fill it, while necessity entrepreneurs are forced to start a business due to job loss or redundancy.

"New Zealand has the highest proportion of so-called opportunity entrepreneurs in the OECD and developed countries and ranks significantly higher than the US," the report's principal New Zealand author, Professor Howard Frederick, said.

The report found 84% of enterprises employ five or fewer full-time people, while 96% employ fewer than 20, but these enterprises account for 39% of the nation's economy.

The "small business GDP" grew 3.7% in the first half of 2002, outstripping the overall GDP growth of 2.7%.

"We believe that a 4% rise in total entrepreneurial activity will lead to a 1% rise in the nation's economic growth rate two years later," Professor Frederick said, though this calculation has been challenged by at least one analyst of the report.

Other findings included:

* On a regional basis, Manukau City, Waitakere City, North Shore City and Taranaki province had the highest entrepreneurship rates;

* Just under 38% of New Zealand's entrepreneurs are female (or about 5% of the female adult population); and

* Young New Zealand women aged 18-24 are more entrepreneurial than young men.

Other parts of the New Zealand report focus on family entrepreneurship, business angel activity, character traits of Kiwi entrepreneurs and ethnicity.

The survey was compiled from interviews of 2836 adult New Zealanders aged 18-64.

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