Who is starting a business in Flanders and why (not)?
Results of the Global Entrepreneurship Monitor 2014
No less than 9% of Flemish respondents want to start a new business within the next 3 years. However, a considerable gap remains between dream and reality, mainly due to fear of failure and a lack of self-confidence. It is also striking that people who start a new business effectively tend to do so based on necessity rather than opportunity. Start-ups have low ambitions in terms of job creation and innovation. Nevertheless, the international mindset in Flanders is among the highest in Europe.
Today, Vlerick Business School is publishing the conclusions of the 14th edition of the Global Entrepreneurship Monitor (GEM). The unique feature of this annual, international survey is its extremely broad approach to entrepreneurship. The focus does not lie so much on the number of people who have set up a new business effectively but rather on entrepreneurial attitude, emerging entrepreneurship and the ambitions of start-ups. The Flemish research took place within the Enterprise and Regional Economy Centre (STORE) on behalf of the Flemish government and was carried out by Professor Hans Crijns and researchers Dr Niels Bosma and Tine Holvoet.
More Flemish people want to start a business
No less than 9% of Flemish respondents want to start a new business within the next 3 years. These are people who are not (yet) active or working on a start-up in concrete terms. This is striking in view of the high score for ‘fear of failure’ and low score for ‘confidence in one's own abilities’.
“This rise would seem to tie in nicely with the plea of many politicians and civil society bodies for more start-ups in Flanders, but we should qualify these findings”, says researcher Tine Holvoet. “From this research, we know that many Flemish people (43%) choose entrepreneurship out of necessity. In comparable innovation-driven economies in neighbouring countries, this figure is an average of 16%; in all the innovation-driven countries in the world the figure is 18%. Only Greece (35%) and Slovakia (33%) have high scores too. In this respect, are more start-ups a sign of a poor economy and few jobs rather than more opportunities? A call for more start-ups therefore seems questionable. Greater insights into Flemish entrepreneurship culture could help to enhance the entrepreneurial message.”
No lack of opportunities in Flanders
In Flanders, 41% of respondents can identify sufficient opportunities to set up a new business in the next 6 months. This figure is noticeably higher than in 2013 and 2012 (34% and 33% respectively). This brings detection of business opportunities in Flanders into line with the other European reference countries (Denmark, France, Germany, Luxembourg, the Netherlands, Spain and the UK) and the so-called innovation-driven countries.
Tine Holvoet: “Based on analyses over the years, however, we note that opportunity detection is a rather dynamic indicator. ‘Confidence in one's own abilities’ and ‘fear of failure’ – other indicators of self-perception – are evolving in a more stable fashion. We can therefore expect the effective number of start-ups to be lower. What will happen with this entrepreneurial potential? Who will start a business effectively, and why (not)?”
Fear of failure and lack of self-confidence impede effective start-ups
Alongside opportunities, starting up a new business also requires ‘will’ and ‘skill’. According to the GEM study, there is a relative lack of entrepreneurial culture in Flanders. For the half of respondents who can identify good opportunities, the fear of failure puts a structural brake on their hidden entrepreneurship. In addition, only 3 out of 10 Flemish people (29%) have sufficient confidence in their own knowledge and skills to start a business, the lowest score in years. Tine Holvoet draws a comparison: “In the European reference countries, only 39% suffer from a fear of failure while 40% believe in their own abilities. For Flemish women, this latter score during the period from 2011 to 2014 was lower than in all the reference countries; only 1 in 5 women (22%) think they have sufficient knowledge and skills to start their own business.”
Social perception of entrepreneurship
Although half the Flemish respondents (53%) regard entrepreneurship as a good career choice, the percentage that assigns successful entrepreneurs a high status (54%) is lower than in the reference countries (68%). Over recent years, this low perception seems to have been present in a structural fashion. In addition, half the Flemish respondents felt that the media paid insufficient attention to success stories regarding new businesses and entrepreneurs.
Effective start-ups more often based on necessity
In concrete terms, the number of respondents in Flanders in 2014 who had just set up a company or were currently setting one up was 4.7%. Compared with the European reference countries (7%), this is relatively low.
In addition, these start-ups often tend to be based on necessity rather than an improvement or opportunity. While in neighbouring innovation-driven economies 16% chose entrepreneurship out of necessity, 43% of Flemish respondents did so. It is apparent that the effect of the economic crisis remains perceptible, although motivation based on opportunity (‘opportunity entrepreneurship’) still has the upper hand in EU countries.
Low ambitions in terms of job creation and innovation
The percentage of new entrepreneurs who expect to create at least five jobs over the next five years is fluctuating at around 1%. This figure is half that of the Netherlands and the UK, putting Flanders in the group of countries with the lowest scores. Additional research is required in order to establish the reason for this (legislation and wages costs versus optimism and realism).
In terms of innovation, Flanders achieves a lower score than average. In the period from 2011 to 2014, 21% of Flemish start-ups stated that they were innovative, compared with an average of 33% in the reference countries.
However, the international mindset of the Flemish respondents (30%) was among the highest in Europe. Flanders is a small and open economy and the language barrier with neighbouring countries is minimal.
ABOUT THE GLOBAL ENTREPRENEURSHIP MONITOR
In 2014, the GEM study was carried out in 73 different economies. This was the 14th edition in Flanders. The results are based on a telephone survey conducted among a representative sample of 2004 respondents between the ages of 18 and 64. Since 2001, the study has been implemented in Flanders by Vlerick Business School in the context of STORE, the Enterprise and Regional Economy Centre, on behalf of the Enterprise Agency.
ABOUT THE ENTERPRISE AND REGIONAL ECONOMY CENTRE
The Enterprise and Regional Economy Centre (STORE) advises the Flemish government on the basis of top-level fundamental and applied economic research in three domains: (i) start-ups and entrepreneurial capital, (ii) the development and growth of SMEs, and (iii) the measurement and identification of economic clusters (with a special focus on the analysis and implementation of a new industrial policy). In addition, the Centre is tasked with developing a database of regional economic indicators (the so-called Regional Data Warehouse, RDW).