Jan42012

Index Ranks U.S. Tops Among Entrepreneurial Nations

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By James Greif

The United States is the best country in the world to start a business, according to the 2012 Global Entrepreneurship and Development Index (GEDI), a ranking that is produced in part at Mason and that compares entrepreneurial characteristics of 79 nations and identifies the entrepreneurial strengths and weaknesses of their economies.

At the same time, the report notes that the United States has lost ground, and the drivers of entrepreneurship have deteriorated across the globe.

Rounding out the top 10 are Sweden, Australia, Iceland, Denmark, Canada, Switzerland, Belgium and Norway, with the Netherlands and Taiwan tied for 10th. A summary of the 2012 GEDI can be found online.

The annual index, now in its second edition, is a collaboration between Mason, the University of Pecs in Hungary and the Imperial College Business School in England. This year’s index was produced by Zoltan Acs, professor and director of the Center for Entrepreneurship and Public Policy in Mason’s School of Public Policy, and László Szerb, associate professor of business and economics at the University of Pecs.

The authors provide this information to help international leaders understand the entrepreneurial climate of their countries’ economies and foster productive entrepreneurship through new policies.

“If governments think that entrepreneurship is important, they promote it through their policies, including supporting education, increasing commercialization and making finance available to start businesses,” Acs says. “The basic question we are trying to answer is: What is the incentive structure in a particular country, and how do the country’s residents respond and behave to those policies?”

To compile the index, researchers survey people around the world and gather information from countries related to 15 separate variables, including quality of the education system; likelihood of corruption; amount of research and development; and government incentives related to starting a business.

Using these variables, the index takes the average of three subindices that measure entrepreneurial attitudes, entrepreneurial activity and entrepreneurial aspirations. The GEDI uses a scale of 0.0 to 1.0 and takes into account that the lowest scores from the variables may drag down the overall score to more accurately reflect the complexity of entrepreneurship.

“Entrepreneurship is a multidimensional phenomenon. The GEDI combines the variables in a way that considers the factors where the country is weakest,” says Acs. “Unless you fix the weakest link in the chain, the chain breaks. The factors related to entrepreneurship work the same way. Governments must recognize and improve the areas where they are weak in order to foster a culture of innovation in their country.”

The United States, while leading the list, has a long way to go to regain lost ground, according to the report.

“The U.S. is a society in distress, with communities hurting across the country,” Acs says.  “This does not bode well for American entrepreneurship. Entrepreneurship does not emerge from sick societies. It emerges from healthy societies.”

On a scale of 0.0 to 1.0, productive entrepreneurship declined to 0.60 from 0.67, or about a 10 percent drop overall. This drop was larger in the developed world than in the developing world, reflecting the deteriorating institutional conditions in wealthy countries. Because of these factors, the potential for productive entrepreneurship has fallen worldwide.

Other findings in the index include:

  • While the global economic crisis has hurt entrepreneurship in most countries, including the United States, the effect on individual countries varied greatly.
  • Hungary, the United Arab Emirates and Uruguay are tied for having the largest gain since last year at 0.06. Australia, Tunisia, Chile, Jamaica, Croatia, Israel and Turkey had the next largest gains.
  • The Asian countries of China, India, Korea and Malaysia had large declines in entrepreneurship.
  • The United States is the only country in the top three in all three subindices, but does not rank first in any category.
  • The top three countries in the entrepreneurial attitudes subindex are Sweden, the United States and Australia.
  • The top three countries in the entrepreneurial activity subindex are Australia, the United States and Canada.
  • The top three countries in the entrepreneurial aspirations subindex are Israel, Taiwan and the United States.

 

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