Newswise — U.S. entrepreneurs are in a league of their own when it comes to building innovative businesses that keep the economy dynamic and productive, according to the seventh annual U.S. Global Entrepreneurship Monitor (GEM). GEM is directed by Babson College and London Business School.
More than in any other nation, U.S. entrepreneurs are motivated by opportunities in what GEM researchers call 'high-potential entrepreneurship' -- fast-growing, new ventures involved in the latest technologies and knowledge-transfer businesses. Nine out of ten U.S. entrepreneurs are "opportunity entrepreneurs" ; only one in ten U.S. entrepreneurs start a new business out of necessity, where there are no better choices for work.
U.S. early-stage entrepreneurship continues to be robust; it maintained greater stability than other G7 nations (Canada, France, Germany, Great Britain, Italy, Japan) following the economic downturn in 2000.
U.S. entrepreneurs are very good at building high levels of 'dynamism' -- the ratio of early-stage entrepreneurship to established business ownership. Thus, the U.S. has more early-stage and high-expectation entrepreneurship, greater investment rates, and an overall healthier economy than other countries.
Expectations of new job creation from startups and established businesses hit record levels in 2005. There are significantly higher numbers of start-ups and new business owners providing jobs compared to 2003 and 2004. This positive trend indicates a favorable change in the U.S. business environment towards more and larger, new businesses.
High-Potential Entrepreneurs—Who Are They?
High-potential entrepreneurs (HPE) are the innovators who keep the U.S. economy competitive in the global marketplace. HPEs increased U.S. productivity levels more than 100% in recent years.
Who are U.S. HPEs?
* Young males* From upper income groups* Motivated by opportunity* Have almost no fear of failure* Social beings who benefit from a deep network of entrepreneurs and angel investors* Skillful in choosing opportunities from the business, not the consumer sector -- and 60% of the opportunities are in the innovative technology sectors* Believe they have no competitors* Think differently than the general population.
American VC Boosts Technology Innovations
Internet-related companies are the current investment darlings of VC firms. No new industry has attracted more attention from entrepreneurs, VCs, and public investors. The U.S. is in a dominant position globally for internet-related products and services. In 2004, U.S. VC firms invested $21 billion " up from $4.2 billion in 1994, and the number of companies increased from 961 to 2,399. Yet despite these figures, it is informal investing that fuels the startup and early-stage companies in this country.
How Much Funding Do Entrepreneurs Need?
U.S. entrepreneurs need $70,200 to start a business. Entrepreneurs contribute 67.9% of that amount to their ventures. Informal capital -- $92.7 billion in about 3.3 million companies at $27,100 per company -- is sufficient to meet the demand in the US.
Outlook For The Future
GEM sees the building of an entrepreneurial economy as key to continued U.S. productivity and growth. A vibrant entrepreneurial economy will keep the country competitive with new global challengers like China and India. Entrepreneurship also offers immigrants a valid means to thrive in the U.S.
According to GEM, U.S. policymakers are strong supporters of entrepreneurship and must continue to remove legal barriers, work on tax reforms, and deliver financial innovations and university research incentives.
Stephen Spinelli, Jr., Vice Provost for Entrepreneurship and Global Management at Babson College, feels confident that a healthy entrepreneurial investment environment exists in the U.S. "For U.S. entrepreneurs great and small, there is more than sufficient external financing for them to start and grow their ventures," says Spinelli.
"This is because there is much more equity capital available than before the Internet bubble, and there are almost twice as many venture capitalists looking for good companies," said Spinelli.
The Global Entrepreneurship Monitor (GEM) is a cross-national assessment of entrepreneurship. Started in 1999 with 10 participating countries, the project has expanded to include 35 countries in 2005. More than 40 countries are expected to report entrepreneurial activity in 2006. GEM has developed into one of the world's leading research consortia concerned with improving the understanding of relationships between entrepreneurial activity and national economic growth. No other research exists that can provide consistent cross-country information and measures of entrepreneurial activity in a global context.
GEM focuses on three main objectives:
* To measure differences in the level of entrepreneurial activity among countries* To uncover factors determining the levels of entrepreneurial activity* To identify policies that may enhance the level of entrepreneurial activity.
U.S. GEM is available at http://www.gemconsortium.org/document.asp?id=505
New developments, and all national reports, can be found at http://www.gemconsortium.org.
Babson College in Wellesley, Mass., is recognized internationally as a leader in entrepreneurial management education. Babson grants BS degrees through its innovative undergraduate program, and grants MBA and custom MS and MBA degrees through the F.W. Olin Graduate School of Business at Babson College. Babson Executive Education offers executive development programs to experienced managers worldwide. For information, visit http://www.babson.edu.
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