Leveraging Entrepreneurial Ambition and Innovation: A Global Perspective on Entrepreneurship, Competitiveness and Development

January 2015Leveraging Entrepreneurial Ambition and Innovation: A Global Perspective on Entrepreneurship, Competitiveness and Development B Leveraging Entrepreneurial Ambition and InnovationWorld Economic Forum2015 – All rights reserved.No part of this publication may be reproduced or transmitted in any form or by any means,including photocopying and recording, or by any information storage and retrieval system. Leveraging Entrepreneurial Ambition and Innovation 1PrefaceContents1 Preface 2 Executive Summary 3 1. Introduction 3 1.1 Methodology 4 1.2 Sample Description 6 1.3 Report Structure 7 2. Entrepreneurship and Competitiveness: A Complicated Relationship 7 2.1 Early-stage Entrepreneurial Activity 12 2.2 Ambitious Entrepreneurship 17 2.3 Innovative Entrepreneurship 21 2.4 Summary 23 3. Five Clusters of Entrepreneurial Economies 23 3.1 Five Types of Entrepreneurial Economies 28 3.2 Understanding the Clusters 30 3.3 The Evolution of Entrepreneurial Economies33 4. Conclusion and Implications for Policy 34 Implications for Entrepreneurship Policy35 Appendix37 Acknowledgements The World Economic Forum and Global Entrepreneurship Monitor are pleased to release Leveraging Entrepreneurial Ambition and Innovation: A Global Perspective on Entrepreneurship, Competitiveness and Development, which examines the relationship of entrepreneurship and competitiveness from a fresh perspective. The report builds on and advances our extensive previous work on this issue.1 By drawing on two unique data sets – the Forum’s Global Competitiveness Index and Global Entrepreneurship Monitor’s assessment of entrepreneurial activity – the report takes a nuanced stance on the prevalence and types of entrepreneurs globally, and the environments in which they thrive. Our look at entrepreneurship aims to provide a deeper understanding of early stage entrepreneurial activity by taking into account that not all entrepreneurs are the same. Specifically, we highlight early-stage entrepreneurs that are innovative and ambitious about their growth expectations, arguably those with the highest impact on economies.What we find is thought-provoking: In general, early-stage entrepreneurial activity is higher in economies that are less competitive and lower in highly competitive economies. Conversely, the proportion of ambitious and innovative entrepreneurs is more frequently high in more competitive economies. Importantly, we find that in many highly competi-tive economies with low rates of business starts, entrepreneurial drive manifests itself through more formalized structures – in what we call “entrepreneurial employee activity” –, which should caution anyone from jumping to quick conclusions about the quality of entrepreneurial ecosystems based on entrepreneurship rates alone.Just two economies in our sample – Colombia and Chile – combine high early-stage entrepreneurial activity with a high proportion of ambitious and innovative entrepreneurs. All other economies fall within the average (or below the average) on at least one of our three dimensions and we have grouped similar economies through cluster analysis. We believe those results raise some critical insights for policymakers, first and foremost amongst which is that there is no “cookie-cutter” approach to entrepreneurship policy. Governments need a keen understanding of the specific conditions for entrepreneurs in their economies to develop successful strategies to support entrepreneurs.This report is the result of collaboration between the World Economic Forum and Global Entrepreneurship Monitor, with interviews with entrepreneurs contributed by Endeavor. We will continue to advance the entrepreneurship agenda through our multistakeholder platform and hope this report stimulates debate around this critical issue. We invite feedback and look forward to a fruitful discussion.Michael Drexler Senior DirectorHead of Investor IndustriesWorld Economic ForumMike HerringtonExecutive Director Global Entrepreneurship Research AssociationGraduate School of Business University of Cape Town, South Africa 2 Leveraging Entrepreneurial Ambition and InnovationThe study distils entrepreneurial preconditions to four categories: 1) entrepreneurial connections; 2) awareness of opportunities; 3) inherent entrepreneurial skills; and 4) a risk-taking culture. High-Activity and All-rounders, accounting for 13 countries in the sample, possess all of them. In High-Ambition and High- Innovative economies, business strategy matters, especially regarding access to foreign markets. The Neutral and High- ambition clusters are dominated by highly competitive, mostly European countries with strong corporate cultures and Latin America is not at all represented. The hidden factor in this equation is entrep