FEMALE ENTREPRENEURSHIP - ASSESSING ITS GLOBAL IMPACT

Paraphrasing the current advertising campaign for Denmark’s most famous beer, if Carlsberg made studies of entrepreneurs, they would have created the Global Entrepreneurship Monitor (GEM).

Established in 1999, GEM is the most comprehensive longitudinal study of entrepreneurship ever undertaken.

Last year, more than 198,000 adults in 69 economies took part in the GEM survey, which represented an estimated 74 percent of the world’s population and 87 percent of its GDP.

And as part of its extensive research agenda, the GEM team recently released a special report that focuses on women who start and manage businesses across the World.

As with every GEM report, it is packed full of relevant and interesting statistics that should provide guidance to policymakers in supporting female entrepreneurship around the World.

The most striking fact is the scale of women in enterprise – the study estimates that 224 million women were starting or running businesses in those countries which took part in the GEM study in 2012.

Not all of these are one-woman bands - half of the businesses surveyed currently employ people in their businesses with an estimated 12 million planning to grow their ventures by at least six employees over the next five years.

Despite this enormous impact, entrepreneurial activity remains higher amongst men in most countries of the World, suggesting that more could and should be done to support more women into enterprise and, as a consequence, boost employment and prosperity.

One of the key factors identified in the report to get higher rates of female participation in self-employment is obvious, namely raising the awareness of entrepreneurship amongst women.

Not surprisingly, the research suggested that there tended to be higher rates of female entrepreneurship where women believed there were good opportunities for starting businesses, and where they had confidence, ability and spirit for this activity. In this respect, entrepreneurial role models can play a critical role in demonstrating success and in encouraging more women to follow in their footsteps.

However, a key constraint in female entrepreneurship seems to be the reluctance of women to move from an intention to become an entrepreneur to actually starting a business.

Whilst many indicate an intention to become their own boss, the research indicates that a far lower number than expected are translating this into the creation of a new business. More worrying still is that for those women who do start businesses do not stay long enough as owner-managers with many discontinuing operations before the venture matures.

Much of this could be down to the lack of business support available to female entrepreneurs in many countries. In fact, other studies have suggested that developing more women as mentors to business could be a positive step forward in addressing this issue, especially given that mentoring is seen as a key way of supporting startups to grow.

This lack of growth may also be due to the sector in which women start their businesses, with over half of female-owned firms being located in consumer services and there is some concern expressed by the authors as to why well-educated female entrepreneurs are running low potential businesses, especially in developed countries.

This is partly explained by the fact that whilst women entrepreneurs have higher levels of educational attainment than their male counterparts, they feel less likely to believe in their own capabilities to run a business successfully.

Again, this suggests that there is an enormous untapped potential in developing high growth businesses by female entrepreneurs and that there needs to be more training and focus on this area in the future.

This has significant implications for policymaking. If women have lower aspirations for growing their enterprises, then given the increasing focus on supporting growth firms amongst policymakers in order to get the most return for taxpayers’ support of business, there is a high likelihood that backing female business may fall off the economic development agenda. Given this, there needs to be a greater focus on how women can be supported to develop growing businesses.

Yet despite these concerns, it is clear that entrepreneurship is a viable career choice for an increasing number of women around the World.

Indeed, starting your own business it is becoming increasingly popular amongst young women in many countries around the World. Perhaps this is where policymakers should be focusing their efforts – on that slice of society where there is a growing appreciation of the potential of enterprise driven by both business and personal values.

Therefore, despite some progress during the last few years, we have yet to fully realise the full global potential of female entrepreneurship either in starting a business or, more importantly growing a successful venture. Certainly, there is far more that governments around the World can do to ensure we get more women to become involved in entrepreneurial activity, and as result, stimulate greater economic prosperity and jobs in their local communities.

WALES AND 2011 GLOBAL ENTREPRENEURSHIP MONITOR

The Global Entrepreneurship Monitor (GEM) research consortium has been measuring entrepreneurial activity and attitudes of working age adults across a wide range of countries in a comparable way since 1998.

Undoubtedly, it has been the main source of information on entrepreneurship across the World for more than a decade and its global report, published every January, is eagerly awaited by academics and policymakers.

Individual reports from the 54 countries participating in the study are published shortly after the main report is released and last week, the the 2011 GEM report for the UK was launched.

The main headlines from the research showed that more people in the UK were thinking of setting up in business in 2011 than in the previous ten years, with a fifth of adult Britons either already running a business or expecting to run one in the next three years.

It also noted a rise in female entrepreneurs, with 49 per cent of adults in the early stages of setting up a business being female, up from 44 per cent in 2010.

But what about the situation in Wales?

Annually, the Welsh Government spends tens of thousands of pounds on supporting this research project and yet, seven months after the Global GEM report was published, there is still no detailed report on the state of entrepreneurship in Wales. This is despite the fact that a separate Scottish report was published in July by the UK GEM team.

Fortunately, there are some sections of the UK report which examine entrepreneurship in the UK nations and give some idea of how entrepreneurship has developed in Wales in 2011. So what are the main headlines for Wales?

In terms of entrepreneurial attitudes, a significantly lower proportion of Welsh adults not currently involved in any entrepreneurial activity (18 per cent) reported that there were good start-up opportunities than for England (29 per cent) and Scotland (25 per cent).

In addition, there were significantly lower numbers of Welsh respondents who answered positively to the item “I personally know someone who has started a business in the last two years”. This may reflect a lower level of new business start-up in a nation as well as a lower level of networking by individuals in a nation.

It was also noted, and this may be an important finding for the Western Mail and its sister papers, that the proportion of non-entrepreneurial individuals who agreed that they often see stories about people starting successful new businesses in the media was significantly lower in Wales (38 per cent) than in the other home nations (44 per cent). Despite these poor results, the proportion of people who expected to start a business in the next three years (intention rate) rose significantly in Wales in 2011.

For the second year running entrepreneurial activity amongst 18-24 year olds was relatively strong in Wales, rising from 3.5 per cent in 2002 to 10.2 per cent in 2011 although no explanation is offered as to why this may have happened, especially during the last two years. The report also shows that the biggest difference between youth and older (55-64 years of age) entrepreneurship is to be found in Wales, which has clear implications for the role of organisations such as Prime Cymru, although again no details are given as to the reasons for this.

Finally, whilst there were small variations in the early-stage entrepreneurial activity by women, none of these differences are statistically significant, although Wales did have the highest ratio of female to male entrepreneurial activity rate (at 60 per cent), something which Chwarae Teg may find of interest. As usual, the GEM results have provided critical information on the state of entrepreneurship in the UK.

However, it is enormously disappointing that, despite accounting for nearly 30 per cent of the sample size, and presumably a proportion of the costs of the overall UK study, there has been no separate analysis on entrepreneurial activity for Wales eight months after the Global GEM report was published. Certainly, the Scottish report presents a detailed longitudinal analysis that not only examines overall entrepreneurial activity and attitudes but also looks at specific areas such entrepreneurship and multiple deprivation, start-up challenges, and entrepreneurship policy in Scotland.

The question is why a similar report has not yet been published for Wales? Good policymaking, especially in areas such as enterprise policy, needs accurate and up to date information on which to base its conclusions.

The analysis of data related to areas such as youth, female and older entrepreneurship has clear implications for business support organisations such as the Prince's Trust, Chwarae Teg and Prime Cymru, all of which have clear responsibilities within this area and are also partly funded by the Welsh Government.

Therefore, one can only hope that the 2011 GEM report for Wales will be published imminently and will be comparable in detail to both the UK and Scottish reports. With entrepreneurship becoming more critical to the revival of the Welsh economy, I fully expect that its conclusions and analysis will be shared widely amongst politicians, policymakers and those organisations on the ground who are trying to develop a more entrepreneurial business community which is so vital to the future prosperity of Wales.

WALES NEEDS NEW FIRMS NOT WHITE ELEPHANTS

As governments around the World look to reignite their economies, there is increasing interest in developing policies to encourage greater entrepreneurship. This is not surprising given that a range of studies have demonstrated the impact of both new and small firms on the economic prosperity of many nations.

Earlier this week, a major study from the European Commission showed that 85 per cent of net new jobs created in Europe between 2002 and 2010 came from small and medium sized enterprises (SMEs), far higher than their 67 per cent share of total employment. That, in itself, shows the vital importance of small firms at this critical time for Europe.

However, the one statistic that screams out for politicians to take notice and reach out for new policies immediately is the finding that all net employment growth has been generated by newly born SMEs (i.e. those aged up to five years old). In fact, the number of jobs created by new firms – 17.5 million - more than compensated for the 8.9 million jobs lost through business failure.

In contrast, employment in businesses over ten years old declined by seven per cent over the same period. This is a critical finding and demonstrates unequivocally that entrepreneurship, rather than large firm expansion, is key to the job creation potential of the Welsh economy. More importantly, entrepreneurial activity is not limited to a small number of people.

According to the latest edition of the Global Entrepreneurship Monitor (GEM) released on Thursday, it is estimated that 388 million entrepreneurs were actively engaged in starting and running new firms in 2011. And who are these entrepreneurs?

The average profile of the individual running new businesses remains largely unchanged from previous GEM studies. Through a survey undertaken in fifty-four countries, the results showed that most were often young to middle-aged (25-44 years) although there is a tendency toward younger entrepreneurs in many developing economies. In terms of gender, they tend to be overwhelmingly male although it does vary by nation.

For example, Singapore and Switzerland have comparatively high levels of female participation in entrepreneurship whilst only one in four of the entrepreneurs in France and the Republic of Korea are women.

The GEM study also confirms the findings of the European study in that new firms are job creators, with 141 million early-stage entrepreneurs expecting to create at least five new jobs in the next five years. Given this, it is not surprising that a proportion are also innovative and export-driven - 69 million new firm creators are involved in developing new products and services and 18 million sell at least a quarter of what they produce to international markets.

So what does this mean for policymakers in Wales and the UK? Certainly, it is time for politicians to start walking the talk if the economy is going to recover from its current doldrums during the next 12-18 months.

The Westminster Government should continue with programmes such as UK Start-Up to encourage a greater number of new businesses. But there needs to be more urgency to ensure a greater focus by legislators on reducing red tape and simplification. In particular, ensuring that the needs of new and small firms are taken into consideration when any laws or regulations are developed is critical.

There is also a desperate requirement for better long-term finance for new firms, something that has been sadly missing since the banking crisis despite the efforts of the Coalition government through the Merlin project. In Wales, the recently published report on micro-businesses is a step in the right direction and some of the recommendations could make a real difference. But whilst it is a valuable study in itself, it mainly deals with the issues of firms already in existence rather than addressing how a greater number of new businesses can be created and supported.

And as this blog has been stating time and time again during the last eight years, Wales, through its Entrepreneurship Action Plan (EAP), already has the structure and strategy that is light years ahead of anything else globally in terms of driving forward the creation of an enterprise culture. Through the implementation of that plan between 2000 and 2004, the number of new firms increased considerably in Wales and, not surprisingly, so did private sector employment.

And this was not done by concentrating on a ‘picking winners’ strategy of focusing on high growth start-ups, as the Welsh Government has recently adopted but by developing an enterprise culture in which more people would be encouraged to start a new business.

Unfortunately, the EAP was abandoned in 2005 by a Government that was more in favour of a “Fields of Dreams” strategy which focused on building expensive white elephants such as Techniums rather than having a comprehensive approach to developing an entrepreneurial nation rich in new employment opportunities.

And whilst attracting inward investment is of some importance to Wales, encouraging more entrepreneurs is more critical to the nation’s future, an issue that the Institute of Welsh Affairs seems to have singularly ignored as part of the theme of its third Welsh Economy conference in March.

More importantly, if the new Minister, as she has stated on numerous times, is focused predominantly on creating new jobs, then with the evidence showing that the vast majority of these come from start-ups, it is surely time for the resurrection of the EAP to create more new firms, and therefore more wealth and prosperity, in the Welsh economy.

FEMALE ENTREPRENEURSHIP - HOW CAN IT BE ENCOURAGED FURTHER IN WALES?

Western Mail Article 5th November 2011

Last month, a campaign was launched to increase the number of women entrepreneurs in the UK by 100,000 over the next decade.

Everywoman, the largest female business community in the UK, has linked up with the Federation of Small Businesses (FSB)'s Real Life Entrepreneurs Campaign to help encourage more women to set up new ventures in the UK.

Their argument is simple, namely that an extra 150,000 start-ups would be created per year if women started businesses at the same rate as men. This is not surprising as, according to the last Global Entrepreneurship Monitor report for the UK, female early-stage entrepreneurial activity in 2010 was 4 per cent of the adult population as compared to 9 per cent for men i.e. the ratio of female to male early-stage entrepreneurial activity was 44 per cent.

As well as a focus on encouraging more women, the FSB's campaign will also promote enterprise amongst young people, the over-50s, those with disabilities, ex-armed forces personnel and those who are currently living on benefits.

This strategy by the FSB should be widely applauded but for those of us who have been involved in entrepreneurship in Wales, it has a sense of real deja vu, given that, over a decade ago, there was a particular focus within the Entrepreneurship Action Plan for Wales on encouraging more starts-ups amongst women, minority ethnic groups, social enterprise and young people.

In fact, I remember that, thanks to the promotional campaigns managed by the Welsh Development Agency and the various start-ups programmes targeted at women, female entrepreneurship in Wales in 2004 was at three quarters that of the male entrepreneurial activity, one of the best gender balances in the whole World. By focusing on issues such as blocked mobility in the workplace and the issue of the so-called glass ceilings, more women in Wales were encouraged to start their own business.

Since the demise of the Entrepreneurship Action Plan in 2005, the targeting of enterprise support towards women has also died a death. In fact, there is now a policy by the Welsh Government that all new businesses are exactly the same and, as a result, there is no specific support to encourage more women to start their own businesses.

Indeed, there is an expectation that women should conform to male behaviours despite overwhelming academic evidence that female experience and practice can differ significantly to those of male entrepreneurs.

For example, there is strong evidence that women start businesses with fewer resources, restricted access to business clients, and slower and less reliable delivery of orders from suppliers. In terms of finance, there is also a widespread belief that women face greater difficulties in obtaining funding for a business start than their male counterparts, with female entrepreneurs starting off with lower levels of cash in the business.

Unlike what is happening in Wales, research shows that enterprise training courses should focus on addressing the weaker financial position that many women start from, given the reluctance of women to take on debt at start-up, which has long term implications for the development of their business. In addition, there should be greater use of training materials that feature successful women entrepreneurs in a variety of industries. Such role models expand the horizons and stimulate the aspirations of potential female entrepreneurs.

Women are a key part of any enterprise economy, and with female unemployment at its highest for twenty three years, there could, and should, be a focus on encouraging greater numbers of female run businesses if Wales is to emerge from the economic downturn as a more entrepreneurial nation.

So what could the Welsh Government do?

According to the Women’s Enterprise Policy Group, policymakers could introduce a number of measures to realise the multi-billion pound opportunity which growth from female-led enterprises can bring to the economy. These include the appointment of a women’s enterprise champion within government to raise awareness of economic benefits of encouraging more women to start and grow businesses. There should also be investment in business growth programmes for existing female entrepreneurs and doubling the number of women entrepreneurs using mentors and/or networking opportunities by promoting activities amongst networking groups. Finally, given the importance of higher and further education in economic development, government should ensure that current university and college entrepreneurship support is attractive and useful to young women, closing the gap between the numbers of young men and young women starting businesses.

Whereas very little is being done in Wales, the same is not true elsewhere in the UK. For example, a new £5.5m Women’s International Centre for Economic Development in Liverpool has just opened to provide a range of services focused on women’s start-up businesses and small and medium-sized enterprises. This includes ’incubation’ units for new and high growth women enterprises and an international research and knowledge centre focused on women’s enterprise and wider economic development issues.

The first woman to hold the business and economic development portfolio in the Welsh Government has hit the ground running with the creation of taskforces which are examining everything from micro-businesses to city regions to business rates.

Given this, isn’t it time also for this government to also look closely at the massive entrepreneurial potential that exists amongst half of the Welsh population and do something positive to encourage more female entrepreneurs in Wales?