Nordic Growth Entrepreneurship Review - preliminary findings
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Transcript of Nordic Growth Entrepreneurship Review - preliminary findings
The Nordic Growth
Entrepreneurship Review
Preliminary Findings!
Glenda Napier, Chief Advisor, RegX and SDU
1
2
Content
• Findings
• Challenges
• Recommendations
• Country Findings (panel)
• Background & Methodology (handout)
Please note:
Figures and graphs presented in the Seminar (slides 4-54) are preliminary – the final figures will be available and updated by 30 September 2012
NGER Findings 2012:
Growth Entrepreneruship Performance
3
• High levels of Nordic start-up activity
• High levels of gazelles
• Nordic gazelles are mainly in services
• But not enough up-scaling activities
• Not many gazelles that grow really big
in the Nordic region
High level of Nordic start-up activity - Employer enterprise birth rates, 2009
4
0
2
4
6
8
10
12
14
16
Norway Denmark OECD average
Iceland Sweden USA Canada Finland
Source: NGER based on National Statistics offices in Nordic countries and OECD
High Nordic levels of gazelles - firms with average 20% annual growth in employment over a 3-year-period and
younger than 2 years old at the beginning of the growth period, 2009
5
0,87
0,70
0,60 0,57 0,56
0,43
0,33
0,11
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1,0
Norway Sweden OECD average Canada Finland Denmark Iceland USA
Shae
r o
f ga
zelle
s
Source: NGER based on National Statistics offices in Nordic countries and OECD
Nordic gazelles are small in
numbers, so even more
important that they become
successful growth firms!
Norway Sweden Finland Denmark Iceland
214 206 92 84 6
6
Source: NGER based on National Statistics offices in Nordic countries
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
Denmark Sweden Norway Finland Iceland
Services, more knowledge-intensive Services, less knowledge-intensive
Manufacturing, higher technology Manufacturing, lower technology
Other
Nordic gazelles are mainly in service industries
7 Source: NGER based on National Statistics offices in Nordic countries
Nordic gazelles are small in size
8
47,83
38,32
24,76
20,24
16,67
0
10
20
30
40
50
60
Pct
. of
gaze
lles
Finland Norway Sweden Denmark Iceland
Source: NGER based on National Statistics offices in Nordic countries
Share of gazelles that reach more than 50 employees
Even less ever reach 100 employees..
9
23,91
17,29
14,29
12,14
0,00 0
5
10
15
20
25
30
Pct
. of
gaze
lles
Finland Norway Denmark Sweden Iceland
Source: NGER based on National Statistics offices in Nordic countries
Share of gazelles that reach more than 100 employees
Weak Nordic ability to upscale firms compared to USA
10
20%
2,2% 1,5%
0
5
10
15
20
25
USA Finland Denmark
Share of firms with 500-999 employees and younger than 10 years-old
Source: Nordic Entrepreneurship Monitor, 2010.
11
Summary I
• Nordic gazelles are few in numbers
• Even fewer that ever reach more than 50 employees
• Only in Finland approx. 50% of gazelles reach more than 50 employees
• A challenge to create more firms that become big players in the Nordic countries
12
NGER Findings 2012:
Framework Conditions for Entrepreneurship
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• Nordic framework conditions for entrepreneurship
are catching up with the best performing countries:
USA, UK and Canada
• Nordic region are much ahead of both central
Europe (Austria, Belgium, Germany and
Netherlands) and South Europe (Greece, Italy and
Spain) in terms of framework conditions for
entrepreneurship.
Nordic region catching up
Framework conditions in Nordic region second to
USA, UK and Canada, 2012
14
0 10 20 30 40 50 60 70
South Europe
Central Europe
Nordic region
USA, UK, Canada
Source: NGER.
15
• Nordic region has particular strong framework
conditions in the policy areas related to the Regulatory
Framework and Market Conditions – on par with the
best countries.
• Easy and cheap to start a new firm
• Bankruptcy has limited financial risk
• Labor market regulations fine (despite marked
differences across Nordic countries)
Nordic strongholds is regulation and
market access
Regional comparison of the six policy areas
0
20
40
60
80
100
Regulatory Framework
Market Conditions
Access to financing
Creation and Diffusion of Knowledge
Entrepreneurial Capabilities
Entrepreneurial culture
The Nordic Region Continental Europe USA, UK, Canada
16 Source: NGER.
17
Access to finance and entrepreneurial
capabilities are challenging areas
• Access to Finance – particularly access to
venture capital at expansion stage and stock
markets are challenged in the Nordic region.
These element are critical for growth-firms
• Nordic region ranks low on Entrepreneurial
Capabilities – business education, perceived
entrepreneurial capabilities, and how much
Nordic countries allow inflows of foreign talent
• These elements are critical for the formation
and strengthening of strong management
teams in the young growth firms
18
Summary II
• Nordic region scores low on Access to
Finance/expansion capital – although
critical for growth firms!
• Entrepreneurial Capabilities and the
ability to run successful firms is a
challenge in the Nordic region
• A need to improve access to finance and
capabilities in the Nordic region.
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Thematic discussion
20
Is it one or two challenge(s)?
21
• Of all US venture-backed public companies in 1990-2005, 25% of them were immigrant-founded.
• Study conducted by NVCA!
• Much lower rate of return in Northern Europe vs. USA (Figure)
Some reflections regarding finance and
capabilities
Source: AmericanMade study, National Venture Capital
Association(NVCA)
-3,50
-3,00
-2,50
-2,00
-1,50
-1,00
-0,50
0,00
0,50
1,00
Northern Europe Western Europe North America
Figure: IRR Pooled Average, 2011
What do firms need to succeed and grow?
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Service providers
Venture capital
Established firms
Knowledge institutions
Strong ecosystem
23
Copenhagen London Silicon Valley
Zooming in on the Ecosystems..
Stockholm
1. Silicon Valley
2. Boston
3. San Diego
4. Boulder
5. Cambridge
6. København
7. RTP
8. Minneapolis
9. Stockholm
10. Seattle
11. Denver/Boulder
12. Austin
13. Chicago
14. London
15. Phoenix
16. Montreal
17. Toronto
100
75
61
53
53
44
43
33
31
29
27
27
24
24
15
6
4
BIOTEK & MEDICO
Source: NGER based on Hansen and Lempel 2012 (to be published).
1. Silicon Valley
2. Boulder
3. Austin
4. Boston
5. Seattle
6. Stockholm
7. San Diego
8. Denver/Boulder
9. RTP
10. København
11. Cambridge
12. Chicago
13. London
14. Phoenix
15. Minneapolis
16. Montreal
17. Toronto
100
43
35
31
25
24
23
21
21
19
15
15
13
13
13
3
2
ICT & TELE COMMUNICATION
Ecosystem Index value Ecosystem Index value
Composite
Index based on :
• Patents
• LQ
• Venture capital
• Dealmakers
Benchmarking Ecosystems (only with some Nordic capitals)
Startup-America Partnership to
develop stronger ecosystems
America’s Top Entrepreneurs and Business Leaders Form New
Alliance
Launched at the White House in January 2011, the Startup America
Partnership is an independent alliance of top entrepreneurs,
investors, corporations, universities, foundations, and other
leaders, joining together to grow the entrepreneurial ecosystems that
support innovative, high-growth U.S. startups.
The Startup America Partnership has already mobilized more
than $1 billion in private-sector commitments to provide
products, services, mentorship and funding to scale and grow
100,000 U.S. startups over the next three years.
What to do in the
Nordic region?
26
27
• Sharpening the Nordic Entrepreneurship policy debate and facilitate policy learning and exchange of best/worse practices across the Nordic countries
• Strengthening the Nordic entrepreneurship infrastructure in order to address the Nordic growth challenge
• Fill the Nordic knowledge gap on entrepreneurship and enhance Nordic entrepreneurship analysis and data
• RECOMMENDATIONS HAVE BEEN FOLLOWED BY THE NORDIC COUNCIL OF MINISTERS AND NORDIC INNOVATION!!
Nordic Policy Recommendations (2010)
28
• Create better data and indicators for scaling of young firms,
both for the Nordic countries and benchmark countries –
more analysis and even suggest new indicators in OECD.
• Conduct a benchmark study of Nordic and other universities’
entrepreneurship and outreach activities
• Make a comparison of selected Nordic entrepreneurship
ecosystems with some of the world's best entrepreneurship
ecosystems.
• Improve the understanding of which policy areas lead more
or less to growth-entrepreneurship, possible include new
areas such as ecosystem indicators in the model
• Develop a composite indicator for tax and free welfare
services and enhance our understanding of the topic
Knowledge-oriented Policy Recommendations
29
• Established a Nordic Startup Partnership with
participation of Nordic flagship companies, high-level
government representatives, universities, investors and
Nordic foundations/funds.
• Create an Entrepreneurship Ecosystem Forum with
private and public operators to enhance discussion on
how to strengthen the Nordic ecosystem(s).
• Initiate a Nordic discussion regarding public enterprises
and institutions' role in the entrepreneurship ecosystem.
• Encourage and create strong entrepreneurship
‘outreach’ centers at universities across the Nordic
countries with the objective to have them become much
stronger partners in the ecosystem
Action-oriented Policy Recommendations
Thank you!
Please see hand-outs for more detailed
information and/or await the NGER
publication this Fall.
30
Country Findings Glenda Napier, RegX &SDU
Petri Rouvinen, ETLA
Thorvald Finnbjornsson, RANNIS
Espen Solberg, NIFU
Dan Johansson, HUI Research
31
32
• Finland scores highest on the overall framework
condition values and Norway scores lowest.
• Finland has the strongest framework conditions
among the Nordic countries, followed by Iceland,
Denmark, Sweden and Norway (ranked in this
order).
Framework conditions across the
Nordic countries
Please note: figures and graphs presented in the
Seminar (slides 4-54) are preliminary - the final
figures will be available and updated by 30
September 2012
33
50 52 54 56 58 60 62 64
Norway
Sweden
Denmark
Iceland
Finland
USA
Finland has the best framework conditions of the
Nordic countries, 2012
Source: NGER.
0
20
40
60
80
100
Denmark Finland Iceland Norway Sweden
Regulatory framework
Market Conditions
Access to Finance
Creation and Diffusion of Knowledge
Entrepreneurial
Capabilities
Entrepreneurship Culture
Framework conditions across Nordic countries, 2012
34 Source: NGER.
Denmark
-50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0
Entrepreneurial Capabilities
Entrepreneurial culture
Access to financing
Regulatory Framework
Creation and Diffusion of Knowledge
Market Conditions
Denmark strengths vs TOP3 OECD)
-15 -10 -5 0 5 10
Entrepreneurial culture
Entrepreneurial Capabilities
Regulatory Framework
Access to financing
Market Conditions
Creation and Diffusion of Knowledge
Denmark strengths vs Nordic countries
36
-80 -75 -70 -65 -60 -55 -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15
Income Taxes Business and Entrepreneurship education (skills)
Entrepreneurial mindset Immigration
Public Procurement Business and Capital Taxes
Stock markets Court and Legal framework
Attitude to entrepreneurship Venture capital
Competition legislation Bequest and Wealth Taxes
Transfer of non-commercial knowledge Social and Health Security Patent System - Standards
R&D Activity Technology availablity and take-up
Bankruptcy legislation Administrative burdens
Foreign Markets Access to debt financing
Degree of Public Involvement Product and Labour regulations
Denmark strengths vs TOP3 OECD
37
-20 -15 -10 -5 0 5 10 15 20 25 30 35 40 45 50 55
Income Taxes Court and Legal framework
Entrepreneurial mindset Public Procurement
Attitude to entrepreneurship Venture capital
Business and Entrepreneurship education (skills) Competition legislation
Stock markets Immigration
Bequest and Wealth Taxes Business and Capital Taxes
Administrative burdens Social and Health Security
R&D Activity Bankruptcy legislation
Patent System - Standards Foreign Markets
Degree of Public Involvement Transfer of non-commercial knowledge
Technology availablity and take-up Access to debt financing
Product and Labour regulations
Denmark strengths vs Nordics countries
Finland
-45 -40 -35 -30 -25 -20 -15 -10 -5 0 5
Entrepreneurial Capabilities
Entrepreneurial culture
Market Conditions
Regulatory Framework
Access to financing
Creation and Diffusion of Knowledge
Finland strengths vs TOP3 OECD
-10 -5 0 5 10 15
Entrepreneurial Capabilities
Market Conditions
Regulatory Framework
Entrepreneurial culture
Access to financing
Creation and Diffusion of Knowledge
Finland strengths vs Nordic countries
40
-65 -60 -55 -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 5 10
Income Taxes Business and Entrepreneurship education (skills)
Product and Labour regulations Immigration
Public Procurement Entrepreneurial mindset
Business and Capital Taxes Transfer of non-commercial knowledge
Bequest and Wealth Taxes Social and Health Security
Competition legislation Court and Legal framework
Foreign Markets Stock markets
Access to debt financing Attitude to entrepreneurship Degree of Public Involvement
Venture capital Administrative burdens
Bankruptcy legislation Technology availablity and take-up
R&D Activity Patent System - Standards
Finland strengths vs TOP3 OECD
41
-20 -15 -10 -5 0 5 10 15 20
Public Procurement Business and Entrepreneurship education (skills)
Social and Health Security Bequest and Wealth Taxes
Product and Labour regulations Immigration
Transfer of non-commercial knowledge Foreign Markets
Degree of Public Involvement Administrative burdens
Income Taxes Business and Capital Taxes
Bankruptcy legislation Court and Legal framework
Access to debt financing Entrepreneurial mindset
Competition legislation Attitude to entrepreneurship
R&D Activity Venture capital
Technology availablity and take-up Patent System - Standards
Stock markets
Finland strengths vs Nordics countries
Iceland
-40 -35 -30 -25 -20 -15 -10 -5 0 5
Access to financing
Creation and Diffusion of Knowledge
Entrepreneurial culture
Entrepreneurial Capabilities
Market Conditions
Regulatory Framework
Iceland strengths vs TOP3 OECD
-30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35
Access to financing
Creation and Diffusion of Knowledge
Market Conditions
Regulatory Framework
Entrepreneurial culture
Entrepreneurial Capabilities
Iceland strengths vs Nordic countries
44
-55 -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15
Venture capital Access to debt financing
Income Taxes Competition legislation
Patent System - Standards Stock markets
Business and Entrepreneurship education (skills) Technology availablity and take-up
Foreign Markets Entrepreneurial mindset
Transfer of non-commercial knowledge Product and Labour regulations
Bequest and Wealth Taxes Attitude to entrepreneurship
R&D Activity Business and Capital Taxes
Bankruptcy legislation Public Procurement
Administrative burdens Degree of Public Involvement
Court and Legal framework Social and Health Security
Immigration
Iceland strengths vs TOP3 OECD NOT AVAILABLE
-40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35
Access to debt financing Venture capital
Patent System - Standards Competition legislation
Foreign Markets Technology availablity and take-up
Stock markets Bankruptcy legislation
R&D Activity Administrative burdens
Degree of Public Involvement Bequest and Wealth Taxes
Transfer of non-commercial knowledge Attitude to entrepreneurship
Business and Entrepreneurship education (skills) Entrepreneurial mindset
Income Taxes Public Procurement
Court and Legal framework Business and Capital Taxes Social and Health Security
Product and Labour regulations Immigration
Iceland strengths vs Nordics countries NOT AVAILABLE
Norway
-45 -40 -35 -30 -25 -20 -15 -10 -5 0
Entrepreneurial Capabilities
Creation and Diffusion of Knowledge
Entrepreneurial culture
Regulatory Framework
Access to financing
Market Conditions
Norway strengths vs TOP3 OECD
-20 -15 -10 -5 0 5 10
Creation and Diffusion of Knowledge
Entrepreneurial Capabilities
Entrepreneurial culture
Regulatory Framework
Market Conditions
Access to financing
Norway strengths vs Nordic countries
48
-85 -80 -75 -70 -65 -60 -55 -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 5 10
Product and Labour regulations Income Taxes
Business and Capital Taxes Business and Entrepreneurship education (skills)
Technology availablity and take-up Entrepreneurial mindset
Transfer of non-commercial knowledge Immigration
Bequest and Wealth Taxes Stock markets
R&D Activity Competition legislation
Attitude to entrepreneurship Social and Health Security Patent System - Standards
Degree of Public Involvement Venture capital
Public Procurement Foreign Markets
Court and Legal framework Administrative burdens
Access to debt financing Bankruptcy legislation
Norway strengths vs TOP3 OECD
-40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20
Product and Labour regulations Technology availablity and take-up
Business and Capital Taxes Bequest and Wealth Taxes
Transfer of non-commercial knowledge R&D Activity
Entrepreneurial mindset Degree of Public Involvement
Patent System - Standards Social and Health Security
Competition legislation Stock markets
Attitude to entrepreneurship Administrative burdens
Business and Entrepreneurship education (skills) Income Taxes
Foreign Markets Immigration
Venture capital Bankruptcy legislation
Court and Legal framework Access to debt financing
Public Procurement
Norway strengths vs Nordics countries
Sweden
-50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0
Entrepreneurial Capabilities
Entrepreneurial culture
Creation and Diffusion of Knowledge
Regulatory Framework
Market Conditions
Access to financing
Sweden strengths vs TOP3 OECD
-15 -10 -5 0 5 10
Entrepreneurial Capabilities
Entrepreneurial culture
Regulatory Framework
Market Conditions
Creation and Diffusion of Knowledge
Access to financing
Sweden strengths vs Nordic countries
52
-90 -85 -80 -75 -70 -65 -60 -55 -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0
Product and Labour regulations Income Taxes
Business and Entrepreneurship education (skills) Immigration
Court and Legal framework Public Procurement
Stock markets Entrepreneurial mindset
Social and Health Security Business and Capital Taxes
Attitude to entrepreneurship Bankruptcy legislation
Transfer of non-commercial knowledge R&D Activity
Degree of Public Involvement Administrative burdens
Technology availablity and take-up Venture capital
Patent System - Standards Access to debt financing
Foreign Markets Competition legislation
Bequest and Wealth Taxes
Sweden strengths vs TOP3 OECD
-50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20
Product and Labour regulations Court and Legal framework
Bankruptcy legislation Social and Health Security
Attitude to entrepreneurship Public Procurement
Stock markets Income Taxes
Degree of Public Involvement R&D Activity
Administrative burdens Transfer of non-commercial knowledge
Immigration Business and Entrepreneurship education (skills)
Business and Capital Taxes Entrepreneurial mindset
Foreign Markets Patent System - Standards
Access to debt financing Technology availablity and take-up
Venture capital Competition legislation
Bequest and Wealth Taxes
Sweden strengths vs Nordics countries
Background and Methodology
(handouts)
Background
56
Nordic Entrepreneurship Monitor 2010 - many new firms in the Nordic regions, but the new firms
do not turn into equally high levels of growth firms.
0 10 20 30 40 50 60 70
Firm growth
Firm entry
The Nordic region USA 57
58
How does NGER differ from the National
growth-entreprenership reviews?
• Iceland, Norway and Sweden do not conduct annual/biannual entrepreneurship reviews
• Denmark does conduct an annual national entrepreneurship index for Denmark (since 2004/2005).
• Finland has for 2 years conducted a national entrepreneurship review. However, it does not apply much international comparable data like OECD definitions.
• Generally the indexes provide little/none international benchmark of entrepreneurship performance and framework conditions putting all the Nordic countries in an international context
• In national reviews there are no Nordic policy recommendations, if policy recommendations at all.
• National reviews do not contribute to the development of new indicators
• !!!! NGER includes UPDATED data for ALL Nordic countries !!!!
Methodology
59
60
Entrepreneurship
Framework
Entrepreneurship
Performance
Wealth
Creation
Methodology
The Nordic Growth Entrepreneurship Review is based on an international entrepreneurship
framework condition model, which rates the entrepreneurial capacity of OECD countries
relative to each other.
According to this model, entrepreneurship is viewed as a driver of wealth creation, and
working strategically with targets for entrepreneurship enables governments to meet a
number of macroeconomic targets.
The framework identifies three separate, but inter-connected flows – all of which are
important for policy measures. Thus, entrepreneurship framework conditions reflect the key
areas affecting entrepreneurship performance, which again has an impact on the economy.
61
Methodology
The core purpose of the entrepreneurship model is to identify the policy-affected areas in
the framework conditions that will help improve entrepreneurship performance. In addition
to this, the model has the strength of being based on a broad understanding of
entrepreneurship – and therefore includes a wide variety of external factors that influence
entrepreneurship performance.
The external factors that influence entrepreneurship performance can be strengthened or
weakened through public policymaking, and governments can work strategically with
entrepreneurship through six policy areas (see also below).
The model first occur in 2004 and has been developed over the years based on the main
theoretical foundations at that time as well as work taking place in international working
groups such as the OECD.
As opposed to other approaches, this model discusses framework conditions for
entrepreneurship as opposed to specific policies. In other words, sound entrepreneurship
performance is a result of a mix of different policies (framework conditions) as opposed to
one single policy (Hoffmann and Gabr, 2006).
62
The Nordic Growth Entrepreneurship Review builds on composite index analysis. Composite Index
analysis provides a useful tool for policy analysis, i.e. how to optimise a set of framework conditions
for growth entrepreneurship. Contrary to analysis focusing on a common trend in many different
indicators, the advantage of composite indices is that they combine separate indicators into an
overall picture thereby providing an easy tool for interpretation. Composite indices are made up of
different indicators which measure different aspects of a certain area.
Throughout the publication, a four-step method is used including the following four steps.
1. Ranking and Regional Analyses
Based on the selected indicators, a complete ranking of countries is carried out in terms of both
performance and framework conditions.
2. Best Practice
The best-performing countries are identified for each of the 6 overall policy areas and the 20 sub-
policy areas describing entrepreneurship framework conditions. Best practice is drawn from each
policy area by comparing the top-performing countries to other countries.
Composite index values for entrepreneurship
framework conditions
63
3. Peer Review
Analyses are carried out for each of the Nordic countries – Denmark, Finland, Iceland,
Norway and Sweden. Individual country’s framework conditions and performance are
compared to each of the other Nordic countries and the top-performing country.
Developments are analysed over time. The results are qualified and elaborated upon by
policy experts. The analysis also covers individual country analyses in terms of the
coverage and quality of policies supporting entrepreneurship efforts.
4. Policy Recommendations
The framework conditions and performance is evaluated and analysed, providing a solid
ground for policy recommendations. The recommendations for the Nordic region are
presented in the Nordic Growth Entrepreneurship Review.
64
To measure and compare performance in growth-entrepreneurship and framework conditions
84 internationally comparable indicators for entrepreneurship framework condition are used.
Various sources are used for these indicators such as WEF, OECD, GEM etc and some
indicators are survey-based (see below). .
Fact-based surveys relate to easy quantifiable aspects, in which different people would give the
same response to a question. The OECD Regulatory Database is an example of this type
because respondents are asked about whether or not a country has a given regulation.
Action-based surveys concern issues where respondents are asked if they have performed a
given action within a given time period or not. The European Community Innovation Survey is
an example of this type of survey. In this survey, firms are asked whether they have introduced
new or technologically improved products or processes on the market during the last year.
Opinion-based surveys deal with questions asking for a subjective evaluation of a given aspect
of the economy. The World Economic Forum’s Executive Survey is an example of this type of
survey. It asks executives about their opinion of the functioning and the quality of various
aspects of the economy.
Data sources and coverage
65
Framework and performance
Framework conditions Entrepreneurship
Performance
6 overall policy areas Employment based entry rates
25 sub-policy areas Gazelles
84 international comparable indicators
for framework conditions
Sources: OECD, Eurostat, World Bank,
GEM etc.
The policy areas cover a wide variety of external factors since they include a combination of the
entrepreneurs’ opportunities, competencies and available resources. The framework conditions
are essential in order to improve entrepreneurship performance. In the following, entrepreneurship
performance and framework conditions are explained in more detail.
66
1. Regulatory framework refers to the policy areas which governments can influence directly through
regulation. Public regulations such as administrative procedures, bankruptcy and labour market
regulation have an effect on entrepreneurship performance. For instance, a strict labour market
regulation might hamper the flexibility of hiring and firing employees and thus also firm growth.
Moreover, the costs and days it takes to start a business are important issues that have direct
influence on the ability and flexibility of starting a business. Finally, the tax structure influences the
attractiveness of starting and growing a business, thereby also constituting an important area of
regulatory frameworks.
2. Market conditions have an impact on the entrepreneur’s possibility for starting a new business.
For instance, access to foreign markets determines the general market access for new firms.
Market conditions are an important underlying requirement for effective business growth and firm
entry. Firms depend to some extent on their national market; a well-organized national market is a
good starting point for business growth. Globalization has opened up for increased international
opportunities for entrepreneurs, making import and export burdens a very important aspect of
market conditions.
3. Access to finance has an impact on the resources available to entrepreneurs. This area is an
important precondition for entrepreneurial activity, and is vital for both firm entry and firm growth.
Without finance and venture capital, newly-established firms and entrepreneurs would be restricted
in their efforts toward higher growth. Different ways of financing are important for different stages in
firm development. For instance, firm entry relies on venture capital, both in the early stage and in
the expansion stage. Firm growth relies on access to loans and a well-functioning stock market.
6 Policy areas
67
4. Creation and diffusion of knowledge is related to the ability of diffusing new knowledge created
through research and development activities, as well as the availability of new technology on the
market. R&D and entrepreneurship often go hand in hand, and R&D is an important factor when
discussing entrepreneurial activity. Funding of R&D activity is essential in order to attain additional
market share and grow business opportunities, thereby enabling firm growth. Patenting might be a
tool to minimize knowledge diffusion; nonetheless, it is a central indicator on the level of R&D
activity. In addition to this, the education system is a contributing factor to transfer of non-
commercial knowledge, especially when it comes to collaboration between industry and
universities.
5. Entrepreneurial capabilities refer to the entrepreneur’s capability to create value through new
innovative products. One of the main factors for creating entrepreneurial capabilities is high-quality
business schools and universities, and their emphasis on education in entrepreneurship.
Immigration and inflow of foreign labor is also an important source of start-up and growth of
companies in many countries; in particular, immigrants with a high education are valuable and
important in creating companies with high-growth potential. Entrepreneurship capabilities can also
be strengthened through appropriate access to business services and entrepreneurship
infrastructure. However, international comparison in this area is not yet possible.
6. Entrepreneurial culture refers to how society and individuals understand entrepreneurship, as well
as the possibility for individuals to start their own firms. The culture of entrepreneurship is very
different in the individual countries; often this culture goes back many years and is not easily
changed. Indicators such as “Image of entrepreneurship” and “Desirability of becoming self-
employed” are related to the culture of entrepreneurship and the desirability of starting a new
business. The willingness to take risks is also a very important factor in the cultural understanding
of entrepreneurship, since risk tolerance is often correlated with the image of entrepreneurs. Still, it
should be noted, a strong business culture is not enough to ensure entrepreneurship performance,
since this willingness to start new businesses does not guarantee that these businesses will
generate high growth.
Framework condition model
68
Regulatory
Framework
Market
Conditions
Access to
Finance
Creation and
Diffusion of
Knowledge
Entrepreneurial
capabilities
Entrepreneurship
culture
Administrative burdens Foreign Markets Access to Debt
Financing
R&D Activity Business and
Entrepreneurship
Education (skills)
Entrepreneurial attitude
in Society
Bankrupt legislation Degree of Public
Involvement
Access to Venture
capital
Transfer of Non-
commercial Knowledge
Immigration Entrepreneurial
education (mindset)
Product and labor
legislation
Public Procurement Stock markets Co-operation Among
Firms
Court and legal
framework
Private Demand Technology Availability
and Take-up
Competition legislation
Social and health
security
Income taxes
Bequest & Wealth
Taxes
Business and Capital
Taxes
Patent System:
Standards
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Canada Czech Republic
Denmark Estonia
Finland
France
Hungary
Italy
Latvia
Lithuania
Luxembourg Netherlandfs
New Zealand
Norway
Portugal
Slovenia
Spain Sweden
USA
R² = 0,0033
0
10
20
30
40
50
60
70
80
90
0,00 10,00 20,00 30,00 40,00 50,00 60,00 70,00
Fram
ew
ork
co
nd
itio
ns
(no
rmal
ise
d v
alu
e 0
-10
0)
Growth (normalised value 0-100)
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• A part of regulatory framework is taxes, an area that
the Nordic region ranks lowest
• What would be the best incentives for growth
entrepreneurs – low taxes or access to free hospital,
schools, universities, services etc.?
• Some measures for social and health security are
already included in the NGER index and outweighs the
low tax score
• Maybe a more developed combined composite
indicator measuring tax vs. free welfare services
Nordic region scores lowest on taxes
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Some national highlights • Nordic countries have high overall score for
regulatory framework and market conditions – with
Denmark in lead due to labor market regulations.
• Sweden ranks lowest on labor regulation
• Iceland has been hit tremendously by the financial
crises and access to finance has been drained.
• Finland and Iceland score high on their
entrepreneurship culture
• Norway is particualry challenged in the area of
creation and diffusion of knowledge, partly due to
high GDP (R&D indicators are % of GDP), but also
rank low an areas such as enterprise-university
collaborations
Some recent initiatives abroad
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Startup-America Partnership to
develop stronger ecosystems America’s Top Entrepreneurs and Business Leaders Form New Alliance
Launched at the White House in January 2011, the Startup America Partnership is an independent
alliance of top entrepreneurs, investors, corporations, universities, foundations, and other
leaders, joining together to grow the entrepreneurial ecosystems that support innovative, high-
growth U.S. startups.
The Startup America Partnership has already mobilized more than $1 billion in private-
sector commitments to provide products, services, mentorship and funding to scale and
grow 100,000 U.S. startups over the next three years.
Startup Britain Partnership
StartUp Britain is a national campaign by entrepreneurs for entrepreneurs, harnessing the expertise
and passion of Britain’s leading businesspeople to celebrate, inspire and accelerate enterprise in the
UK.
The campaign was founded by eight entrepreneurs and launched on 28th March 2011 by the Prime
Minister, with the full support of the Chancellor and HM Government, although it is completely funded
by our private-sector sponsors such as AXA, Dell, Intel, Intuit, Magento Go and PayPal.
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Final NGER publication will be
finished in Fall 2012.
For further information, please
contact Glenda Napier:
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