The world’s biggest report on Entrepreneurship is just out – Blog #23

14, February 2022

The world’s biggest report on Entrepreneurship is just out. Here is how Canada stocks up.

The largest study of entrepreneurship in the world just issued its annual report. Here’s how Canada stacks up.

The Global Entrepreneurship Monitor (GEM) is the largest study of entrepreneurship in the world and in 2021 covered 47 countries. It has been around since 1999 and has a well-tested and validated methodology. It is unique in that it looks at entrepreneurship from the viewpoint of the entrepreneur rather than the business as most reports on entrepreneurship. Canada does very well in these reports. Some highlights:

TEA. The total entrepreneurship activity (TEA) is a measure of what percentage of the adult population is involved in starting up a new business or running one less than 3½ years old. By this measure Canada ranks #1 among rich countries, with 20.1 % of the adult population involved.

Total Early stage Entrepreneurship Activity (TEA)

 

Source: Global Entrepreneurship Monitor

Established business ownership (EBO). In Canada 8.2% of the adult population is involved in running an established business (one more than 3½ years old). This is middle of the pack compared with the 19 rich countries in the study, and is fairly stable in Canada. It is interesting to compare the TEA with EB rates. The TEA rate is more than twice as high as the EB rate, and that implies that more than half of new startups will fail.  This is consistent with Statistics Canada data showing that sixty three percent of new firms survived five years, and 43% survived for ten years.  It illustrates how risky startups are.

Finding opportunity in COVID. More Canadians (77%) say they see opportunities arising from COVID-19 that they wish to pursue than in any other country in the study. This is a very significant sign of optimism that bodes well for the recovery.

Motivation.  Canadian entrepreneurs are motivated by three main factors in almost equal measure:

  • To make a difference in the world (70.4%)
  • To build great wealth (68.4%)
  • To earn a living (70.7%)

A lesser motivation is to continue a family tradition (50%)

Gender mix. Historically in most countries male entrepreneurs have outnumbered female entrepreneurs by quite a wide margin. In Canada the rate of female entrepreneurship has usually been in the range of 65%-85% of the male rate. In 2021 the ratio was at the low end of that range, at 65%. The ratio for ownership of existing businesses (in business more than 3½ years) was 68%.  For comparison, in the US, the female rate for TEA was 85% of the male rate and 75% for EBO.  However, the actual TEA rate in Canada was much higher than in the US (20.1 vs. 16.5) so there were actually more female entrepreneurs in Canada as a percentage of the population than in the US (15.8% in Canada and 15.2% in the US).

Entrepreneurial Employee activity (EEA). Innovation and entrepreneurship also takes place in large companies and GEM measures that activity too. In 2021, the entrepreneurial employee rate in Canada was 4.7 % of the adult population. That is middle of the pack among 19 rich countries, slightly ahead of the US (at 4.5%) and well behind Switzerland (7.1%). The significance of the EEA is that it can be regarded as a rough measure of productivity, as it is a measure of change or improvement activity in  a large company.

Export Sales. Entrepreneurs in Canada rank very highly for export sales. About 29% of all early stage businesses plan to have 25% or more of their sales coming from outside the country. By this metric Canada ranks # 2 globally.  As a rule entrepreneurs in large countries have most of their sales domestically as their home market is so large.

What kind of businesses? According to the GEM data most startups in Canada are involved with consumer services, with a smaller proportion involved in business services.  This is typical of almost all GEM countries. In Canada about 52% of startups focus on consumer services and about 25% on business services.

Conclusion.  This report paints a very positive picture of entrepreneurship in Canada. But bear in mind that this report is about early stage entrepreneurship. It does not deal with scale up, an area where Canada is not so strong.

Peter Josty

The full report can be found at www.Gemconsortium.org

This Blog originally appeared at www.thecis.ca