Entrepreneurship Indicators Project Entrepreneurship Indicators Project Developing Comparable Measures of Entrepreneurship and the Factors that Enhance or Impede It Tim Davis OECD Statistics Directorate Structural Business Statistics Meeting May 10/11, 2007, Paris

2 Entrepreneurship Indicators Project Background Fundamental Aims of the Project Engaging Countries and Other Participants Definitions and Measures Frameworks for Entrepreneurship and for Indicators Examples of Entrepreneurship Indicators Forthcoming meetings Key deliverables in 2007and 2008

3 Background Long history of OECD and other interest in E-Ship Numerous OECD entrepreneurship studies Explicit policy priority for virtually all countries Little explicit entrepreneurship data at NSOs Little sustained international statistical development Asked to test feasibility of better international measures Financial support and a push from: – Kauffman Foundation – International Consortium for Entrepreneurship (ICE)

4 Entrepreneurship-Related Work at OECD SMEs and Employment Creation, 1996 Fostering Entrepreneurship, (Jobs Strategy), 1998 Women Entrepreneurs in SMEs, 1998 Small Business, Job Creation and Growth, 1998 Impact of Product Market Regulation, 1999 and 2005 Linking Entrepreneurship to Growth, 2000 Business Views on Red Tape, 2001 Entrepreneurship and Local Development, 2003 Firm Demographics and Survival, 2003 Factors of Success and Statistical Strategies, 2002 Fostering Firm Creation and Entrepreneurship, 2004 Micro-Policies for Growth and Productivity, 2005

5 ICE Countries Canada Denmark Finland Netherlands Norway Sweden United States OECD

6 Feasibility Study Confusion regarding definitions/measures Inadequacy or non-comparability of any single measure Opinion surveys and case studies supply many indicators Member-country interest and support Demand for internationally-comparable measures – Entrepreneurship – Determinants of entrepreneurship – Linked to Policy objectives – Relevant to policy tools available to countries Many data gaps but also potential data sources

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9 Feasibility Study and Action Plan BUT Will countries accept to harmonise data? Will countries invest in data? Cautious Yes voiced through Statistics Committee With CSTAT support and additional Kauffman funding Project launched in Fall 2006 Important additional support from: – ICE Consortium – Denmark – OECD – Eurostat Effectively…..a Joint OECD/Eurostat Project

10 Fundamental Aims and Steps of the Project 1. Measurement Manual: Standard definitions and measurement tools 2. Compile and publish a Compendium on Entrepreneurship STEPS Engage national and international bodies so that money and effort will be devoted to producing data Establish Indicator Priorities: Identify data required by policy-makers to measure Entrepreneurship and underlying factors Agree on definitions, methods and sources Data collection from Statistical Business Registers Partner with other data producers; Identify and assemble other data from existing sources Develop, pilot and run (co-ordinate) new entrepreneurship surveys

11 Engaging countries – and others – in the EIP The Entrepreneurship Indicators Steering Group Eurostat Broadens European input; Implementation experience Partner on Manuals and data collection International Consortium on Entrepreneurship (ICE) Committee on Industry, Innovation, Entrepreneurship Working Party on SMEs and Entrepreneurship (OECD) Strengthens Policy and Research inputs Committee on Statistics (OECD) Links to Entrepreneurship Research Bodies (EIM)

12 Entrepreneurship Indicators Steering Group Australia Canada Denmark Finland Germany Hungary Italy Korea Netherlands Informal Body created by Stats Directorate and Committee Sub-set of OECD countries + other experts Statistical and entrepreneurship policy/research expertise 1 st Meeting: Dec 06 (Rome); 2 nd Meeting: June 07 (Istanbul) Still some membership gaps Sweden United Kingdom United States Eurostat EU Commission-DG-ENT OECD – CFE World Bank Kauffman Foundation

13 What is Entrepreneurship? - Definitions An attitude? A behaviour? A specific economic activity? Numerous definitions exist: Ability to marshal resources to capitalize on opportunities Willing to take risks, be innovative; exploit opportunities None of these are necessarily limited to new or small firms Term is often (simplistically) applied to leaders, hard workers, innovators, any SME or anyone in business

14 Entrepreneurship Definitions Does a single, perfect definition exist? And could it be measured? Steering Group is developing an overarching definition A conceptual description to guide choice of measures But Statisticians want to leap ahead to the process Break it down to measure inputs and outputs If entrepreneurship is happening …….. …………….what is the measurable result?

15 Fundamental or Umbrella Definitions The entrepreneur is the person who creates and exchanges value through the identification and employment of changes in resources, opportunities and/or innovation. Entrepreneurship is the phenomena associated with the mindset, planning and activities that create and exchange value through the identification and employment of changes in resources, opportunities and/or innovation. Entrepreneurial activity is the enterprising human action associated with the creation and exchange of value through the identification and employment of resources, opportunities and/or innovation. Broad by design: Vetting and approvals yet to come Will accommodate numerous, specific policy goals and associated measures

16 What is Entrepreneurship? - Measures For some: Its simply self-employment or creation of new firms Assume more firm creation leads to more high growth But for others, including us, it is more: Important to link to (OECD/EU) policy interests Entrepreneurship is the process leading to the creation and growth of businesses Must measure both creation and growth

17 What is Entrepreneurship? - Measures Are policy-makers also interested in: Entrepreneurship in existing – even old – firms ? Take-overs, reactivations, transfers and transitions ? Export behaviour ? Innovation by young firms ? Initially, more measures are desirable Clarity and comparability are key Measures of entrepreneurship and its drivers

18 Entrepreneurship Process: Demand and Supply Model External Factors influencing Demand Opportunities Entrepreneurship Performance Supply Abilities Incentives Culture/Motivation Framework Conditions Firm Creation High-growth firms Business Density Financial Capital Social/Human Capital Technology Transfer Access to Market

19 Organising Indicators Several categories of Indicators: Determinants or Framework Conditions for Entrepreneurship Performance or Degree of Entrepreneurship Impact of Entrepreneurship Also Attributes of entrepreneurs and entrepreneurial firms Some indicators link to policy; e.g. Education Others enhance knowledge and help target programs: e.g. Age, Entrepreneurial Heredity

20 Entrepreneurship Framework Entrepreneurship Determinants Market Conditions Technology Infrastructures Finance Access to Markets Culture Macro-Economic Environment Entrepreneurship Impact Policy Objectives Poverty reduction Job Creation Economic Growth Reduction of the informal sector

21 Indicator Priorities and Definitions Ideally: Establish complete indicator list first Schedule dictates simultaneous work A Steering Group Task Force is defining indicators While some data collection already under way Manual Drafting Group is joint OECD/Eurostat activity – Joint Business Demography Manual – Joint Entrepreneurship Indicators Manual

22 Indicator Examples: Entrepreneurship Performance Firm start-up rates, by size category Measures of high-growth firms ************************************************************************************************ Firm survival rates Business density Degree of entry and exit churn Business ownership; Self-employment Innovation measures; Commercialisation of research Attributes of the entrepreneurial firms

23 Indicator Examples: Entrepreneurship Determinants Access to financing Entrepreneurship education Taxation and incentives Business infrastructure Ease of entry Administrative and regulatory burdens Innovation and R&D Access to technology Re-start possibilities; Bankruptcy environment

24 Entrepreneurship Indicators: Performance, Determinants, Impact

25 Key Deliverables 2007/2008 Fall 2007 High Growth Definitions and Measures (Seminar) Risk Capital Definitions and Data sources December 2007 Preliminary OECD-Eurostat Measurement Manual Compendium of available indicators September 2008 Measurement Manual Compendium of Entrepreneurship Indicators 2007/2008 Sponsorship and funding support

26 Forthcoming Meetings and Activities June 2007 (Istanbul) Entrepreneurship Indicators Steering Group Workshop on Entrepreneurship Indicators at World Forum on Statistics, Knowledge and Policy Fall 2007 Seminar on High Growth Entrepreneurship Indicators Steering Group ICE Consortium Meeting