Impact of the Pandemic on Entrepreneurship Worldwide is Mixed – GEM Global Report

20th February 2023

Posted In: International Focus

The global pandemic had a mixed effect on entrepreneurship across the world, according to the 2022/2023 Global Entrepreneurship Monitor (GEM) Global Report: Adapting to a “New Normal”.

Based on interviews with over 175,000 individuals and experts from 51 economies, the report tracks the percentage of adults who are starting or running a new business (referred to as Total early-stage Entrepreneurial Activity or TEA).

Countries have experienced variable impacts from the pandemic. Among the 38 economies that participated in GEM research both in 2019 (prior to the pandemic) and 2022, there were 12 that had a substantially higher level of TEA in 2022 compared to pre-pandemic, and 16 in which TEA dramatically levels fell. Meanwhile, in 10 of those economies, there was minimal change. All regions and income levels are represented in each group.

The pandemic’s impact on entrepreneurial perceptions has also been highly varied. Of the 38 economies participating in the GEM’s Adult Population Survey (APS) in both 2019 and in 2022, there were 12 economies in which the percentage of adults seeing good local opportunities to start a business fell by five points or more. There were another nine economies in which that percentage actually increased by more than five points. One explanation for these differences may be the level of support that governments were willing (and able) to offer to businesses and households during the pandemic.

“Our aspiration at GEM is clear: to provide transparency to policymakers so that they can make better decisions to truly promote entrepreneurship, understanding the specific national conditions, and also observe and act on the impact of their decision-making over time,” said Professor José Ernesto Amorós, GEM–GERA Board Chair and a member of the GEM Mexico Team.

Fear of failure is a serious constraint on business startups in many economies from all income groups.

In a number of economies, high proportions of adults agree that starting a business is relatively easy, and see good opportunities to start a business locally, while also considering themselves to have the skills and experience to create a startup. However, around half of those seeing such opportunities are nevertheless deterred from taking action by fear of failure.

“Access to educational programs specifically focused on risk assessment and mitigation coupled with policies that reduce the perceived personal costs of failure could unleash a significant, and pent-up, wave of entrepreneurial activity,” said Jeffrey Shay, Entrepreneurship Professor at Babson College and one of the 10 co-authors of the report.

United Arab Emirates: The Most Supportive Environment for Entrepreneurship

For the second consecutive year, the United Arab Emirates is number one in the GEM National Entrepreneurship Context Index (NECI). GEM defines the entrepreneurial context of a particular economy in terms of 13 different characteristics, labelled the Entrepreneurship Framework Conditions (EFCs):

– Entrepreneurial Finance: there are sufficient funds for new startups
– Ease of Access to Entrepreneurial Finance: and those funds are easy to access
– Government Policy — Support and Relevance: policies promote and support startups
– Government Policy — Taxes and Bureaucracy: new businesses are not over-burdened
– Government Entrepreneurial Programs: quality support programs are widely available
– Entrepreneurial Education at School: schools introduce entrepreneurial ideas
– Entrepreneurial Education Post-School: colleges offer courses in how to start a business
– Research and Development Transfers: research is easily transferred into new businesses
– Commercial and Professional infrastructure: quality services are available and affordable
– Ease of Entry — Market Dynamics: markets are free, open and growing
– Ease of Entry — Burdens and Regulations: regulations encourage not restrict entry
– Physical Infrastructure: good-quality, available and affordable
– Social and Cultural Norms: encourage and celebrate entrepreneurship

The NECI results are based on the scores of the Framework Conditions for each of the 51 economies participating in GEM. At least 36 experts, often more, are selected for their expertise by the GEM National Team and approved by GEM to assess statements that make up the scores. As the same questions are asked in all economies, scores can be compared across countries. In 2022, the UAE ranked first for seven of the 13 Framework Conditions and number one overall.

“Entrepreneurship remains a high priority in the United Arab Emirates, with the recently launched ‘Projects of the 50’ targeting the next 50 years of development,” said Teemu Kautonen, Professor at the United Arab Emirates University leading the GEM UAE National Team. “These results point to the success of recent government initiatives and the efforts of all stakeholders in our entrepreneurial ecosystem.”

“The EFCs are derived from more than two decades of GEM research, experience and knowledge,” said Aileen Ionescu-Somers, GEM Executive Director.

“The state of the EFCs can encourage and enable, or discourage and constrain, both the new start and any subsequent growth and development. The quality of the  EFCs is directly influenced by governmental policy, and therefore GEM’s NECI can be a useful strategic tool for policy decision makers that are seeking to cultivate entrepreneurship, build a robust entrepreneurship ecosystem and empower entrepreneurs.”

Entrepreneurial Support for Women and Older People 

In 2022, men were more likely than women to start a new business, according to the research.

Of the 49 economies participating in the APS, there were just four in which the level of female new entrepreneurial activity exceeded that of men: Togo, Indonesia, Qatar and Poland.

Younger people are still more likely than older adults to be starting new
businesses. The TEA rate of the 18–34 age group exceeded that of the 35–64 age group in 37 of the 49 economies in the GEM APS.

The aforementioned gaps highlight areas for improvement and should be a focus for policymakers seeking to support the success of future entrepreneurs.

You can download the full report here>>