“Entrepreneurial Challenge”

1. “Entrepreneurial Challenge” Prof. Anne Flynn 04/14/2005

2. Traditional Irish Greeting A chairde. Tá áthus orm bheith anseo libh agus mo bhuiochas libh as an fáilte a thug sibh dom.

3. Entrepreneurship is? • One of the cornerstones of a modern, fully developed economy and the lifeblood of thriving local communities. • An important contributor to economic growth, employment, innovation, and competitiveness.

4. Structure • Global Assessment [GEM] • Entrepreneurial Activity: Ireland, Europe, US • Entrepreneurship in Europe • Entrepreneurial Challenges in Ireland • Closing Remarks

5. Global Assessment • The Global Entrepreneurship Monitor (GEM) research program - is a global assessment of the national level of entrepreneurial activity. • Initiated in 1999 with 10 countries,the fifth assessment was completed in 2003 with 41 countries. www.gemconsortium.org

6. GEM Program Objectives • Are there national differences in entrepreneurial activity? • National consequences of entrepreneurial activity [scope, job creation, growth]? • Why are some countries more entrepreneurial than others? • What can be done to enhance entrepreneurial activity?

7. GEM Research Activities • Adult population surveys • Random sample of adults, 2,000 or more • Grass roots entrepreneurial activity • National expert interviews • National teams, [18-70 per country] • National expert questionnaires • Follows personal interview • Standardised national data • IMF, World Bank, UN, OECD, etc

8. Measures • Total Entrepreneurial Activity (TEA) • provides a measure of those active in starting a new business [start up process & owning/managing a new firm 3-42 months] • Firm Entrepreneurial Activity [FEA] • an indicator of entrepreneurial activity among established firms • firms provide new innovations, not just replicate existing goods or services

9. What is National Entrepreneurship? • People Creating New Firms • Start-up phase, before firm operational • Young firm, up to 3.5 yrs old • Entrepreneurship among existing firms • Produce market innovation, Focus on growth • National Infrastructure focuses on adaptation • Coordinated effort, Collaboration among major sectors, Government, research, education, financial

10. Overall National Entrepreneurial ActivityTwo Dimensional Classification

11. Opportunity vs. Necessity Are you involved • To take advantage of a business opportunity or • Because you have no better choices for work? Willing volunteers or draftees?

12. Entrepreneurial Activity • US (TEA) rate 11.9% in 2003, 7th highest. • Ireland (TEA) rate 8.1%, fore in Europe, most entrepreneurial country in EU. • 76% of Americans opportunity vs. 85% of Irish entrepreneurs • US (FEA) rate of 2.4%, the 10th highest, Ireland (FEA) rate 1.6%

13. Nascent and New Firm Rates

14. Entrepreneurship and Job Creation • US - 70% [employ at least 1 person] • Ireland - 84% [employ 5 or fewer] third only entrepreneur employed. Most expect they will remain small. • High growth aspirations [20+ staff in 5 years time] [Ireland 16%, US 20%, Europe 5.9% ]

15. Entrepreneurship and Population Profile • US: Most active [25-34] years, TEA 15.7% men vs. 8.2% women, specialized professional, technological, or business degree [highest TEA 17.8% & opportunity driven 13.3%] • Island of Ireland: Most active [35-44] years, 12.5%male vs. women (3.7%), high level of education.

16. Rates of Entrepreneurial Activity for Men and Women

17. Entrepreneurship and Cultural Values • The strength of support for entrepreneurship among the general adult population within Ireland is stronger than in the US. • Ireland vs. US • Good career choice [66% - 63%] • High degree of status [76% - 64%] • Positive media coverage [84% - 64%]

18. Personal Context of the Population

19. Entrepreneurship and Financing • Av. Cost of Start-up [US $29,600 / €26,200) Europe $53,800 / €47,600] • US - highest prevalence rate of informal investors with 5 /100 adults having invested in someone else's business during the previous 3 years • Ireland - Low level of informal investment (2.6%) are active business angels, compared to 4.9% in the US.

20. Rates of Business Angel Activity

21. Ireland Small size of home market Early stage finance Fear of failure Rate of commercialization of research Skills and experience Physical infrastructure United States Reduce gender gap [1.9 men for every woman] Lack of financial capabilities - acquiring latest technology Stronger IPR laws to enhance R&D transfers Build sustainable financing venues Shortcomings that Inhibit Entrepreneurial Activity

22. Entrepreneurship in Europe • SME’s backbone of European economy • Conditions in Europe vs. US • Green Paper on Entrepreneurship • How to produce more entrepreneurs? • How to get more firms to grow? • Action Plan: 5 policy areas: entrepreneurial mindsets, incentives for entrepreneurs, competitiveness & growth, access to finance and red tape

23. Entrepreneurial Mindsets • “Promote awareness of the entrepreneurial spirit by presenting best practice models and fostering entrepreneurial attitudes and skills among young people” • Educational Policy • Entrepreneurs are not a homogenous group

24. Incentives for Entrepreneurs • Fairer balance between risk & reward • Tackle the negative effects of business failures • Facilitate the transfer of companies and amend social security systems for entrepreneurs. • Entrepreneurship gap between Europe & US is widening.

25. Incentives for Entrepreneurs • Why do fewer Europeans have what it takes?(Eurobarometer 01/2005) • Balancing the risks: [A regular income, Job stability,Fear of failure] • Rewards [EU - greater independence & self-fulfillment, US - creating one's own working environment] • Similar perceived obstacles • Good management = Success

26. Competitiveness & Growth • Promoteaccess to support & management training for entrepreneurs from all backgrounds, especially women and ethnic minorities. • View immigration as an opportunity for stronger entrepreneurship (US) • Exchange of Good Practice

27. Access to Finance • Improve the availability of venture capital, business angel finance and investments by private individuals (US) • Continue efforts to mobilize capital to support young, risk-taking businesses.

28. Red Tape • Reduce & simplify administrative barriers & regulatory burdens • World Bank "Doing Business Survey 2005” [ease of starting a business] • EU busy pushing reforms, still lag US • US [5 days & 5 administrative steps to start a business] vs. EU [36 days, 7.5 steps]

29. Entrepreneurial Challenges in Ireland • 172,000 small businesses • 60% of total turnover • 66% of employment • 50% of private sector employment • 80% service sector • 16,000 new enterprises are created per annum

30. Enterprise Driven Society • Less employment in large companies & public sector • Size of the domestic economy • Government foster an entrepreneurial climate & enterprise culture • Small Firms Association of Ireland - major impediments and challenges facing the enterprise led sector& appropriate actions

31. Competitiveness • Ireland’s competitive position is now in a tailspin [4th position 2000 - 30th today!] • An expensive & less attractive place to do business. [min wage 22% higher, insurance costs risen 100% in 2 years, retail space Dublin (capital city) most expensive in the world! red tape adds 4% to product cost] • SME’s - [non-pay costs 23.7% 2002 - 2004] • “You must create wealth before you can redistribute it.”

32. Skilled Workforce & Knowledge Driven Economy • In a knowledge-based economy • Well-supported process of life long learning, training & up-skilling programs • Intellectual property system is open and inviting • Focus on technology transfer, licensing, the importance of 'change' or 'new ideas’ rather than 'R&D'

33. Infrastructure • Current gridlock is threatening enterprise formation & development • Specialized body assessing planning applications & reprioritizing projects • Liberalization & deregulation within the energy market • Strive to have the "best in class" telecommunications infrastructure • “Environmental accreditation”

34. Government Support • Comprehensive fiscal approach to enterprise • Retaining low corporation tax rates (12.5%) • Reducing inflation below 2% • Standard rate of VAT to 17.5% • No increases in labor costs

35. Regulatory Burden • “Simplicity needs to be rediscovered as a virtue.” • Comply - An owner manager would have to read almost one million words per annum & complete forms running to over 500 feet in length. • SME’s cite legislation as the most significant problem for their business. • Cost impact analysis on businesses

36. Encouraging Business Start Ups • Develop an" Enterprise Culture” • Remove barriers to entrepreneurship • Availability of pre and start up seed capital • Increase number of female entrepreneurs

37. ICT & Training • Maximize the potential of ICT for every small business & speed up the roll-out of broadband digital access • Training objectives - driven by business needs & Increase management competency among small firms • Enterprise courses

38. Value of Sectors • “Value Added" economy • Barriers to trade within the Eurozone “Create a business environment which makes it possible to sustain an economic and social shift to a high skill, higher value added competitive environment.” • “Ahead of the Curve: Ireland's Place in the Global Economy.”

39. Closing Remarks • Strong positive contributors and the shortcomings that inhibit entrepreneurial activity • Shared challenges in fostering entrepreneurship “Go raibh maith agaibh go léir.”