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2009 Entrepreneurship Index

Entrepreneurship Conditions in Denmark

The 2009 Entrepreneurship Index presents a comprehensive mapping and evaluation of entrepreneurship in Denmark.

The Entrepreneurship Index is based on data for a number of OECD countries and identifies Denmark’s strengths and weaknesses as an entrepreneurial country.

In addition, the Index makes it possible to monitor on an ongoing basis whether Denmark’s framework conditions for entrepreneurs and their performance have improved to an extent that will enable the Danish Government to achieve its entrepreneurship goals. These goals state that Denmark must continue to be part of the European entrepreneurial elite in terms of start-up activity; and Denmark must be one of the countries in the world that has the highest percentage of high-growth start-ups by 2015.

Contents

Preface

1. Introduction

• 1.1. Report structure

2. The Impact of the Financial Crisis on Entrepreneurship

• 2.1. New enterprises in Denmark, 2001–2009
• 2.2. Impact of the crisis on the influx of new enterprises
• 2.3. New enterprises in other countries
• 2.4. New enterprises broken down by sector
• 2.5. New enterprises in the regions
• 2.6. New enterprises broken down by sector and region
• 2.7. High-growth start-ups

3. New Enterprises in Denmark, 2001–2006

• 3.1. 2001 to 2006
• 3.2. Ownership in the new enterprises
• 3.3. The new enterprises’ sectors
• 3.4. Geographic location of the new enterprises
• 3.5. Entrepreneurs’ gender
• 3.6. Entrepreneurs’ age
• 3.7. Entrepreneurs’ civil status
• 3.8. Entrepreneurs’ ethnicity
• 3.9. Entrepreneurs’ educational background
• 3.10. Entrepreneurs’ sector familiarity
• 3.11. Entrepreneurs’ business experience
• 3.12. Entrepreneurs’ contribution to the national economy

4. Entrepreneurial Activity

• 4.1. International comparisons of new start-up enterprises
• 4.2. International comparison of high-growth start-ups
• 4.3. International comparison of high-growth start-ups
• 4.4. Summary

5. Enterprise Growth

• 5.1. Fastest growing enterprises
• 5.2. High-growth enterprises and their importance for job creation
• 5.3. Size of high-growth enterprises
• 5.4. How far behind the US is Denmark?
• 5.5. Age of high-growth enterprises
• 5.6. Percentage of young enterprises among the biggest 100 enterprises

6. Framework Conditions for Entrepreneurship

• 6.1. Factors affecting entrepreneurship
• 6.2. Policy areas important to entrepreneurial activity
• 6.3. Changes in the new framework-condition model
• 6.4. Denmark’s overall ranking in 2009
• 6.5. Denmark’s overall position compared to the top four countries
• 6.6. Denmark compared to the Nordic countries and the UK
• 6.7. Denmark and the top four countries in the individual policy areas
• 6.8. Trends in selected policy areas since 2004

Appendix 1: Normalising Data for Framework Conditions

Appendix 2: Description of Framework Condition Indicators

Appendix 3: Description of New Entrepreneurship Indicators

• A3.1. Quarterly and annual statistics for the influx of new enterprises
• A3.2. Expedited statistics covering high-growth start-ups

Bibliography

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Preface

The economic crisis has clearly left its mark – also on entrepreneurs. At the same time, statistics show that the Danish Government’s actions to support Denmark’s entrepreneurs have paid off. Measured in terms of the number of high-growth start-ups, we are substantially stronger – in spite of the crisis – than we were when records began in 2004.

Fewer people have started up new enterprises over the past year. Brand-new statistics show that the start-up rate at the end of Q2 2009 was the lowest in ten years. Preliminary statistics show that other countries are also seeing a decline in the start-up rate – even if this decline is not as dramatic as in Denmark.

The Danish Government has made a targeted effort to mitigate the effects of the crisis, including by adopting the credit packages – and most recently the business package, which includes a framework allocation of DKK 4 billion targeting small and medium-sized enterprises. The business package improves enterprises’ options for exports, raising loans and gaining access to venture capital.

The positive news is that the percentage of high-growth start-ups did not decline nearly as much as the percentage of new enterprises. Despite a slight decline from 2007 to 2008, Denmark still has more than twice as many high-growth start-ups as in 2004.

Growth generated by entrepreneurs is crucial for ensuring that Denmark emerges from the crisis in good shape. Entrepreneurs create almost one-third of all new jobs in Denmark. The small group of high-growth start-ups is especially important for this job creation. In the first five years of their existence, they create almost ten times more jobs per enterprise than other entrepreneurs. Their productivity is higher as well. Thus, having more high-growth start-ups can be an important contribution to putting Denmark back on the growth track.

The Danish Government continues to focus on long-term initiatives required for ensuring that Denmark can emerge from the crisis with good framework conditions for high-growth start-ups. This annual analysis shows that Denmark has improved its framework conditions again this year, and we continue to narrow the gap with the best-performing countries. Closing it completely, however, will require a focused effort with everyone working together to maximise Denmark’s potential.

Enjoy your reading!

Lene Espersen
Danish Minister for Economic and Business Affairs
November 2009

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1. Introduction

Every year, many Danes take the leap and set up a new enterprise. On average, more than 18,000 new Danish enterprises are established each year. These new enterprises contribute to Denmark’s growth and competitiveness. Entrepreneurs create almost one-third of all new jobs in Denmark. This equated to 86,000 new jobs a year on average from 2003 to 2006. The small group of high-growth start-ups is especially important for job creation: in the first five years of their existence, high-growth start-ups create almost ten times more jobs per enterprise than other entrepreneurs. In addition, high-growth start-ups are appreciably more productive than other enterprises.

The Danish Government has set two ambitious goals for Denmark’s entrepreneurship: first, Denmark must continue to be a leading country in Europe in terms of the number of newly started enterprises; and second, by 2015, Denmark must be a world-leading country in terms of the number of high-growth start-ups.

Each year, the Danish Enterprise and Construction Authority publishes the Entrepreneurship Index to follow up on the Danish Government’s goals.

The latest international data from 2006 show that Denmark is among the top countries in terms of new-enterprise start-ups. The financial crisis has possibly changed Denmark’s ranking, as preliminary statistics for the latest trends show a sharper drop in start-ups in Denmark than in other countries. However, Denmark’s point of departure is so good that Denmark is still expected to have decent start-up statistics compared to other European countries. Accordingly, the Danish Government still expects to achieve the first goal.

Denmark performs less well in terms of high-growth start-ups. This year’s measurement is based on newly-collated OECD and Eurostat data. The new data show that Denmark is in the median range in the international comparison of high-growth start-ups. The data cover only two years, however, and are only available for a limited number of countries. This complicates specifically assessing how far the best countries are ahead. In order to create a better platform on which to assess Denmark’s ranking, the analysis is supplemented by an international comparison of high-growth enterprises. These data verify the conclusions drawn by the measurement of high-growth start-up data. Thus, Denmark is still behind the countries with the largest percentage of high-growth start-ups. In order to achieve the Danish Government’s target for high-growth start-ups, Denmark needs to increase the percentage of high-growth start-ups by more than the percentage achieved by other countries.

Entrepreneurship and the economic crisis

Two new indicators from Statistics Denmark shed light on how the crisis has affected entrepreneurship. The indicators show that the number of new enterprises and the percentage of high-growth start-ups were both steadily rising up to 2007. This trend reversed when the economic crisis started to unfold in Q4 2007. The number of new enterprises continued to decline throughout 2008 and sharpened in the first two quarters of 2009. The present level of start-ups is the lowest in a decade.

Preliminary statistics from other countries mirror the trend. Even so, preliminary data indicate that the decline of start-ups in Denmark and the US is greater than in other countries.

There is no similarly sharp decline in Denmark’s latest statistics for the number of high-growth start-ups. After having doubled in size – from 158 in 2004 to 340 in 2007 – the number of high-growth start-ups declined slightly (13 fewer or a 4% decline) from 2007 to 2008.

The sharp drop in Denmark’s start-up rate in 2009 varies from one sector to another. Thus, the Construction sector is experiencing a strikingly more severe and faster decline than Business Services. In return, the decline in number of new enterprises is fairly even across the five regions. Region Zealand is slightly harder hit than the remaining regions, however.

Good framework conditions will ensure entrepreneurial activity in the long term

Financial trends are significant for variations in entrepreneurial activity, whereas general differences between countries’ start-up rates and percentage of high-growth start-ups can be explained by the various countries’ entrepreneurship framework conditions. Previous indexes have demonstrated how factors such as easy access to capital, reasonable regulation and a sound entrepreneurial infrastructure promote a country’s entrepreneurial performance. For this reason, each year the Entrepreneurship Index compares Denmark’s framework conditions with those of the best-performing countries.

The Entrepreneurship Index has been thoroughly revised since last year. The measurements of framework conditions for start-up and growth have been renewed, and more than thirty new indicators are included in this year’s Index. The Index shows that Denmark is ranked sixth overall among the countries studied or three positions higher than last year. The countries are so closely ranked, however, that even small improvements in the framework conditions change the countries’ rankings in relation to one another.

The Entrepreneurship Index also shows that Denmark has only slightly improved its framework conditions since 2008. This trend is not surprising considering that Denmark, like many other countries, primarily concentrated its efforts over the year on mitigating the effects of the current economic crisis. The countries with the best framework conditions, for instance, experienced a slight worsening of their framework conditions.

Since the first Entrepreneurship Index in 2004, Denmark has strikingly improved its framework conditions for entrepreneurship. Today, Denmark is ranked higher than countries like Sweden and Norway, which were far ahead of Denmark in the initial analyses. The leading entrepreneurial countries have also improved over the years, however, and are still ahead of Denmark, but Denmark has narrowed the gap.

Denmark’s good framework conditions are reflected in the high start-up rate but not in the percentage of high-growth start-ups which, despite an increase, is still below the best-performing countries. This is due to a variety of reasons, including the fact that it takes a while for good framework conditions to result in a higher percentage of high-growth start-ups. Statutory amendments, for instance, should not only be capable of influencing new enterprises but after an amendment has been adopted, it takes up to five years from the establishment of an enterprise before it can be included in the high-growth start-up statistics. In other words, there is a time lag from the time the framework conditions are changed until this affects entrepreneurial performance.

Who are the entrepreneurs?

A new feature of this year’s index is the introduction of a statistical portrayal of new Danish enterprises. The portrayal shows that a typical entrepreneur has a vocational education and at least five years of professional experience. He is 38 years old, married, comes from an ethnic Danish background, is leaving a salaried position and does not have first-hand experience in the sector in which he is starting an enterprise.

International comparison of high-growth enterprises

A special theme of this year’s Index takes an in-depth look at international comparisons of the importance of high-growth enterprises to the economy. These analyses show that the 10% of Danish enterprises with more than 10 employees and which grew fastest from 2002 to 2005 contributed more than 50% of the total number of jobs created in the same period. But they also show that the corresponding contribution to job creation was even greater in other countries like Italy, the Netherlands, Spain and the US.

At the same time, the analysis shows that 3–6% of the enterprises in Italy, Spain, the Netherlands, Austria, Canada, the US and Denmark are high-growth, a figure which is highest in the US and lowest in Austria. There were a total of 601 high-growth enterprises in Denmark from 2002 to 2005. This equates to 4% of all Danish enterprises with more than 10 employees.

In order for Denmark to reach the same level as the US, the number of high-growth enterprises must increase by 290 enterprises. Yet as Denmark’s high-growth enterprises also grow less than in the best-performing countries, each high-growth enterprise would have to increase its (employment) growth by 47% on average to bring Denmark up to the same level as the US.

1.1. Report structure

Chapter 2 presents the latest data which also cover the crisis – including the newly developed indicators from Statistics Denmark for start-up trends and high-growth start-up trends respectively. The number of start-ups is updated all the way to Q2 2009. High-growth start-up data are updated to 2008. The chapter also presents leading indicators for start-ups in a number of OECD countries, with data up to mid 2009.

A new feature of the Entrepreneurship Index is a statistical portrait (Chapter 3) of entrepreneurs and new enterprises – nationwide and broken down by region. The analysis is based on statistics from 2001 to 2006.

Chapter 4 compares Denmark’s entrepreneurial activities with a number of countries. The comparison is based on new OECD/Eurostat data.

Chapter 5 widens the focus from entrepreneurs to high-growth enterprises to illustrate some of Denmark’s challenges in generating growth and creating jobs.

Chapter 6 compares Denmark’s framework conditions for entrepreneur-ship with the top four countries – the US, South Korea, Canada and Ireland.

Appendix 1 explains how data are normalised to enable the measurement of the combined framework conditions and performance indicators.

Appendix 2 reviews all the policy areas in the new model for framework conditions for entrepreneurship.

Appendix 3 describes the design of Statistics Denmark’s new indicators.

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2. The Impact of the Financial Crisis on Entrepreneurship

Denmark and the rest of the world are currently in the midst of a financial crisis which has caused the deepest recession in decades. Denmark’s business community is affected by the decline in international and national demand, which means layoffs, negative economic growth and, as a consequence, falling prosperity.

This year’s Entrepreneurship Index examines the impact of the economic crisis on the willingness of Danes to start their own business. The analysis is based on brand-new data collated by Statistics Denmark, including new quarterly data for the number of new enterprises and new yearly data for the number of high-growth start-ups. The new statistics make it possible to follow the influx of new enterprises all the way up to Q2 2009 and the number of high-growth start-ups up to and including 2008.

The new statistics show that the decline in newly established enterprises started already in Q4 2007 – after several years of substantial increase in the number of new enterprises. The decline occurred at a time when unemployment was still at a record-setting low level – and before the negative GDP growth rates. – yet it also occurred as the property market was reversing – in terms of property prices and equity values – and the interest rate increased from early 2006.

The decline in the number of new enterprises is dispersed almost equally over the five regions. Only Region Zealand is slightly harder hit than the other regions.

A similar trend is seen in other countries. The OECD has collected early indicators for start-ups from a number of countries. A decline is seen in every country starting in 2007. The decline in other countries does not appear to be quite as dramatic as Denmark’s, however.

The crisis has not affected the percentage of high-growth start-ups to the same extent. The number of high-growth start-ups has not fallen appreciably, but the number of jobs they create has declined by one-third.

2.1. New enterprises in Denmark, 2001–2009

The annual statistics for the influx of new enterprises show that increasing numbers of entrepreneurs have started their own enterprise since the beginning of this millennium (see Figure 2.1). In addition to a decline caused by the bursting of the “IT bubble” in 2002, equating to an 8% decline compared to the year before, the influx of newly-started enterprises steadily increased up to Q3 2007.

This was followed by a sustained decline in the influx of new enterprises in the remaining period up to Q2 2009. The decline worsened after the impact of the financial crisis was felt in earnest in Q3 2008.

The number of new enterprises declined by 42% between Q2 2008 and Q2 2009. This is almost 50% less compared to Q2 2007. The number of startups in mid-2009 is still the lowest since 1994.

Note: The figure contains two data interruptions. The data for 1994 to 2001 were calculated on the basis of the old entrepreneurship database. The data were linked to the new entrepreneurship database in 2001. Data from 2001 to 2006 are based on the specification of new enterprises in the annual Business Demography, where 2006 equals index 100. New quarterly statistics (see Appendix 3 for specification method) are also included. In the graph, the quarterly average for 2006 represents index 100.
Source: Statistics Denmark

2.2. Impact of the crisis on the influx of new enterprises

The new quarterly statistics for number of start-ups make it possible to assess the extent to which the recession has affected the establishment of new enterprises in Denmark.

Economic growth stagnated in 2007, measured in terms of the gross domestic product (GDP), compared to the previous period of 2004 to 2006, typified by relatively high growth. The first major decline in GDP took place in Q1 2008. Rather striking negative GDP growth is seen from Q2.

Comparing this GDP trend with the trend in number of newly started enterprises shows that the trend for entrepreneurial activity in Denmark correlates with the financial trends. This correlation is also manifested in previous analyses (The Danish Economic Council: Danish Economy, Spring 2003). In other words, the number of newly-started enterprises increases in times of favourable economic trends and declines in periods of stagnation and recession. By contrast, the level of start-ups is determined by the framework conditions for entrepreneurship.

Note: The gross domestic product is adjusted for seasonal variations and calculated in 2000 prices, linked values. Entrepreneur statistics contain two data interruptions. The data for 1994–2001 were calculated on the basis of the old entrepreneurship database. The data were linked to the new entrepreneurship database in 2001. Data for 2001–2006 are based on the specification of new enterprises in the annual Business Demography. 2006 equals index 100. New quarterly statistics (see Appendix 3 for specification method) are also included. In the graph, the quarterly average for 2006 represents index 100. It is not possible to seasonally adjust the new leading indicator for number of start-ups, whereas the quarterly GDP growth has been adjusted for seasonal variations.
Source: Statistics Denmark

The decline in number of start-ups takes place earlier than negative GDP growth, which first occurred in the course of 2008.

There are several possible explanations for this. One could be the initial drop in equity value for owner-occupied flats which occurred in Q3 2006 and for single-family houses in Q2 2007. As entrepreneurs often raise loans for establishing new enterprises based on the economic potential of their personal finances (Statistics Denmark, 2003), the housing market decline and rising interest rates from mid-2006 could help to explain the early decline in the number of new enterprises.

Another possible explanation is prospective entrepreneurs’ expectations of economic trends – e.g. expressed as consumer expectations – which are assumed to play a part in the desire to start a new enterprise. To the extent the signs of negative financial forecasts spread before the actual decline, this would also help to explain the earlier decline.

A third explanation is the sharp fall in consumer spending after Q2 2008, where the general financial decline also made itself felt. This helps to explain the further decline in prospective entrepreneurs’ desire to start their own business (see Figure 2.3).

Note: Consumer spending is adjusted for seasonal variations and calculated in 2000 prices, linked values.
Source: Statistics Denmark

2.3. New enterprises in other countries

The financial crisis is worldwide. Therefore the impact of the financial crisis is also reflected in other countries’ key figures, including the number of new entrepreneurs. This is also true of the countries which most closely resemble us.

International specifications of start-up rates are not available after 2006. Nevertheless, the OECD has compiled previous start-up indicators for selected countries (OECD, Measuring Entrepreneurship, 2009). The statistics are not as comparable as those in Chapter 4, but do indicate the impact of the crisis. The figures show that the decline in newly established enterprises in the US and Germany started in 2006, but did not begin in the other countries until 2007. The statistics also show that the decline in newly established enterprises in Denmark in 2008 and especially the first half year of 2009 is much sharper than observed in several of the other countries where statistics are available. It is remarkable, however, that the US ended up at almost the same low level as Denmark in the first half year of 2009.

Note: Definitions are not the same in these countries. Denmark’s statistics are based on new entries at the Danish Commerce and Companies Agency.
Source: OECD, Measuring Entrepreneurship, 2009

2.4. New enterprises broken down by sector

Most Danish newly started enterprises in 2006 – i.e. before the economic crisis – were within Retail, Transport, etc. (29%), a sector which includes wholesale trade, retail trade and transport. Almost a quarter of the entrepreneurs were employed in Business Services (24%), whereas the Construction sector and Information and Communication sector accounted for 19% and 7% respectively of all newly-started enterprises.

For the purpose of understanding the impact of the economic crisis on entrepreneurship, the new enterprises’ sector breakdown must be analysed, as susceptibility to market fluctuations varies greatly among the sectors.

The trend for Construction, an extremely cyclical sector, departs from the overall picture (see Figure 4). In late 2007, the influx of new enterprises in Construction was already below the 2006 level. This was followed by a sustained decline in the number of new enterprises in the sector. The decline continued in both Q1 and Q2 of 2009.

The number of new enterprises in Information and Communication and in Business Services also declined in the course of 2008, but the number did not fall below the 2006 level in these sectors until Q4 2008. The number is lower in both Q1 and Q2 of 2009, compared to the same quarters of previous years. This decline is relatively less than the decline in the influx of new enterprises in Construction, however.

From Q4 2007, a decline also occurred in Retail, Transport, etc., the sector responsible for almost a third of newly-started enterprises during the entire period. This decline intensified throughout 2008. The impact of the crisis is manifested in the fact that the number of new enterprises within Retail and Transport was 61% lower in Q2 2009 than in Q2 2008.

Note: The quarterly average for 2006 represents index 100. See Appendix 3 for a more detailed explanation of the data.
Source: Statistics Denmark

2.5. New enterprises in the regions

The vast majority of new enterprises were started in the Capital Region of Denmark. In 2006 – i.e. before the economic crisis – more than 37% of all new enterprises were established in the Capital Region of Denmark, whereas 20% were established in the Central Denmark Region and 19% in the Region of Southern Denmark. Newly started enterprises in Region Zealand and the North Denmark Region accounted for 15% and 10% respectively of the total.

The new quarterly statistics show that in the first three quarters of 2007 the number of enterprises established in all the regions was better than the 2006 average (see Figure 2.8). A striking increase in the number of newly created enterprises took place in the Central Denmark Region in particular. In the North Denmark Region, the increase in the first three quarters of 2007 was more moderate compared to the 2006 level than in the other regions.

In the course of 2008 and part of 2009, the number of new enterprises declined in every region. Region Zealand was the hardest hit in Q2 2009. The number of new enterprises in this region declined by 53% compared to Q2 2008. The decline was similarly striking (40%) in the North Denmark and Central Denmark regions. The influx in the Region of Southern Denmark fell by 33% in Q2 2009, compared to the same quarter of the previous year.

Even in the Capital Region of Denmark, which as mentioned was home to more new enterprises than any other region, the influx of new enterprises drastically declined throughout 2008 and in early 2009. Thus, 44% fewer enterprises were established in the Capital Region of Denmark in Q2 2009, compared to the same quarter the previous year.

Note: The quarterly average for 2006 represents index 100. See Appendix 3 for a more detailed explanation of the data.
Source: Statistics Denmark

2.6. New enterprises broken down by sector and region

The Construction sector is prone to cyclical fluctuations (see Figure 2.6). A closer look at regional trends in Construction reveals two regions that set themselves apart. One is the Central Denmark Region, where the number of new enterprises grew by more than the nationwide rate in the first three quarters of 2007 (see Figure 2.9). The other is the Capital Region of Denmark where the number of new enterprises in the sector fell already during Q2 2007, compared to the same quarter the previous year.

The trend in the Central Denmark Region did not reverse until Q4 2007. From Q2 2008 and up to and including Q1 2009, the decline in the number of new enterprises in the region was much sharper than the nationwide decline. In the Capital Region of Denmark, on the other hand, the number of new enterprises declined less than the national average in this period.

The trend in Q2 2009 differs from previous quarters (see Figure 2.9). Whereas the number of new enterprises in both the regions and Denmark on the whole was strikingly lower than the level for Q2 2008, the decline in the Central Denmark Region was less than the national average. In the Capital Region of Denmark, the influx of new enterprises in the Construction sector declined by all of 55% compared to Q2 2008.

Note: The quarterly average for 2006 represents index 100. See Appendix 3 for a more detailed explanation of the data.
Source: Statistics Denmark

The regions also show regional trends in the Business Services sector. In the Central Denmark Region, the number of new enterprises continued to increase all the way up to 2008, when a relatively drastic decline took place (see Figure 2.10). This trend is markedly different from the Capital Region of Denmark.

Note: The quarterly average for 2006 represents index 100. See Appendix 3 for a more detailed explanation of the data.
Source: Statistics Denmark

2.7. High-growth start-ups

Statistics Denmark has developed a new early indicator for the number of high-growth start-ups. As a result, data now apply up to and including 2008. This makes it possible to follow the trend in the number of high-growth start-ups with less of a time lag than has been the case with the annual Entrepreneur Database. In this context, high-growth start-ups are defined as one to two-year-old enterprises with five or more employees at the time the enterprise is founded. Over a three-year period the number of employees must grow by an average of 20% a year.

Even if trends in the number of high-growth start-ups should also be expected to be somewhat prone to cyclical fluctuations, the crisis has yet to make a striking impact on them. After steadily increasing up to 2007, a minor 4% decline occurred from 2007 to 2008. At the same time, the number of high-growth start-ups more than doubled in 2008, compared to 2005.

Note: The calculation of high-growth start-ups in 2005 and 2006 is based on an annual calculation related to structural data, whereas the calculations made in 2007 and 2008 are projected calculations based on the ATP employment statistics. See Appendix 3 for a more detailed explanation of the data.
Source: Statistics Denmark

The most striking trend was seen in Retail, Hotels and Restaurants, which tripled the number of high-growth start-ups in the early years and subsequently experienced a 16% decline in 2008. At the same time, Finance and Business Services experienced a 13% increase in 2008 (see Figure 2.12).

Note: 2005 equals index 100. The calculations are based on both structural data and new data for 2007 and 2008 respectively, based on the ATP employment statistics. See Appendix 3 for a more detailed explanation of the data.
Source: Statistics Denmark

High-growth start-ups were still creating new jobs and growth in Denmark in 2008, although to a lesser extent than previously. Overall, the 340 high-growth start-ups in 2007 created more than 7,100 additional new jobs from 2004 to 2007. In 2008, this figure declined, with high-growth start-ups creating one-third fewer new jobs, i.e. 4,600, from 2005 to 2008. Most of the jobs were created in Finance and Business Services from 2004 to 2007, where the 108 high-growth start-ups created almost 2,500 additional jobs (see Figure 2.13). It is worth noting, however, that the definition of growth is partly retrospective as the growth is calculated over a three-year period. As a result the figures for high-growth start-ups for 2008 also reflect the positive market trends from 2005 to 2007.

Note: The green colour shows new jobs created by high-growth start-ups from 2004 to 2007, whereas the red colour shows the same specification for 2005–2008. See Appendix 3 for a more detailed explanation of the data.
Source: Statistics Denmark

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3. New Enterprises in Denmark, 2001–2006

From 2001 to 2006, between 16,000 and 24,000 new enterprises were started each year in Denmark. The number of newly-established enterprises increased 40% nationwide, from the lowest number in 2002 to the highest in 2006, when the boom peaked.

The vast majority of new enterprises established in 2006 were sole proprietorships in the Construction sector in the Capital Region of Denmark.

Most were started by men in their late thirties. A typical entrepreneur is characterised as having a vocational education and at least five years of professional experience. He is 38 years old, married, comes from an ethnic Danish background, leaves a salaried position and does not have first-hand experience in the sector in which he is starting an enterprise. The same characteristics apply to women entrepreneurs, except that there are fewer of them.

The number of entrepreneurs with a long-cycle higher education has increased, especially among entrepreneurs over 40.

Entrepreneurs, and high-growth start-ups in particular, are important for getting Denmark back on the growth track, because they create many new jobs every year. Calculations show that new enterprises create 86,000 jobs a year or almost a third of all new jobs created during the course of a year. The small group of high-growth start-ups are especially important. On average, a high-growth start-up creates almost 10 times as many jobs in the first five years of its existence as other entrepreneurs.

3.1. 2001 to 2006

This chapter presents a series of key figures for entrepreneurship and new enterprises in Denmark from 2001 to 2006. In this period, the number of new enterprises increased to its highest level so far in 2006. The trend is shown in Figure 2.1 in Chapter 2.

The purpose is to profile the new entrepreneurs in order to contribute new knowledge relevant to the players in society working with entrepreneurial policy. The key figures are based on large administrative databases which have a long production time. This explains why the latest statistics date from 2006. Accordingly, they do not take account of the current economic crisis.

3.2. Ownership in the new enterprises

Most new enterprises in 2006 are sole proprietorships, approximately 60% in 2006, which is due to the advantages associated with starting a sole proprietorship. – The statutory costs for starting an enterprise as a company also play a part. Many entrepreneurs start their enterprises as a sole proprietorship and convert it into a company (i.e. a private or public limited company) later on.

Analyses show that enterprises established as companies generate more revenue and have more employees, a higher rate of survival and more growth (Danish Enterprise and Construction Authority, 2006; Statistics Denmark, 2003).

Up through the 1990s and from 2001 to 2006, a relatively greater number of enterprises tended to start out as companies (Danish Enterprise and Construction Authority, 2003). In the latter six-year period, the percentage of new sole proprietorships and partnerships declined slightly, by 4.1%. The decline was counteracted by a slight increase (4.2%) in the number of new private and public limited companies.

Source: Own calculations based on data from Statistics Denmark.

3.3. The new enterprises’ sectors

Most new enterprises are started within Finance and Business Service, but entrepreneurs in Retail, Hotels and Restaurants and in Construction also constitute a high percentage.

The number of new enterprises in Retail, Hotels and Restaurants increased only slightly (2%) from 2001 to 2006.

Figure 3.2 shows the trends within six sector categories since 2001. As the figure shows, Construction experienced the sharpest increase in the number of entrepreneurs of any sector. The Energy and Water Utility sector experienced a dramatic decline (37%) in the number of entrepreneurs in the period indicated, i.e. from 2001 to 2006. As the Electricity sector was deregulated as of 1 January 2003, this prompted a number of municipalities to divest their municipally owned power utilities (Sørensen and Larsen, 2006). The decline in the number of newly established companies is presumably related to the fact that the new enterprises were created in the period leading up to the deregulation.

Source: Own calculations based on data from Statistics Denmark.

Table 3.1 shows the start-up rates of nine sector categories. As is shown, most start-ups – relatively speaking – took place in Construction as well as in Finance and Business Services. The start-up rates amount to 14% and 12% respectively in 2006. During these six years, the number of entrepreneurs in Construction increased dramatically.

Source: Own calculations based on data from Statistics Denmark.

3.4. Geographic location of the new enterprises

The vast majority of new enterprises in 2006 were established in the Capital Region of Denmark (37.5%), followed by the Central Denmark Region, the Region of Southern Denmark and Region Zealand. The North Denmark Region had the lowest number of newly started enterprises.

The number of start-ups corresponds to the population base to some extent. This applies both to the population on the whole and when focusing on people aged 16 to 66, the age cohort responsible for most of the startups.

Almost a third (30%) of the Danish population resided in the Capital Region of Denmark in 2006. This region is followed by the Central Denmark Region and the Region of Southern Denmark, which are roughly the same size with 22% of the population residing in both regions. The North Denmark Region and Region Zealand have the lowest population.

However, by comparing the number of start-ups with the 16-66 age cohort, Region Zealand’s start-up frequency is greater than that of the North Denmark Region. Similarly, the Capital Region of Denmark is clearly higher than the other regions. The nationwide average is 6.5 new enterprises per 1,000 inhabitants between the ages of 16 and 66.

Note: The figure does not take account of regional business structures.
Source: Own calculations based on data from Statistics Denmark, National Survey and Cadastre.

The breakdown of the combined mass of enterprises in Denmark corresponds to the dispersion of the Danish population. The regions with the most enterprises are the Capital Region of Denmark, the Central Denmark Region and the Region of Southern Denmark. Yet, rather surprisingly, Region Zealand has more enterprises than the North Denmark Region, which is therefore ranked lowest.

By comparing the number of start-ups to the combined mass of enterprises in the regions (the “start-up rate”), Region Zealand moves up to second place – after the Capital Region of Denmark, which is somewhat higher than the rest of Denmark (see Figure 3.4).

Number of new enterprises as a percentage of the total number of enterprises, %.
Source: Own calculations based on data from Statistics Denmark, National Survey and Cadastre.

From 2001 to 2006, Region Zealand also showed the greatest increase in number of start-ups with a more than 40% increase. The Capital Region of Denmark’s increase was only 15%.

Note: New enterprises are defined as all new enterprises established during the year.
Source: Own calculations based on data from Statistics Denmark’s entrepreneurial database.

The municipal breakdown emphasises that the vast majority of start-ups take place in the major cities, i.e. Copenhagen, Aarhus, Aalborg and Odense. Copenhagen’s neighbouring municipalities – Frederiksberg and Gentofte – are close behind. Out of the four major cities – Copenhagen, Aarhus, Aal-borg and Odense – Aarhus saw the greatest increase in the number of entrepreneurs from 2001 to 2006, with a 35% increase. Aarhus was followed by Odense and Aalborg with increases of 28% and 23% respectively. Copenhagen is somewhat below them with a 12% increase.

Nationwide, the top performers were the municipalities of Sorø and Fanø, which saw the number of new enterprises double during the period. It is worth noting, however, that small communities usually have relatively few entrepreneurs. This means that even small numerical fluctuations equate to large percentage increases. Hvidovre and Albertslund – in the west area of Greater Copenhagen – saw the number of entrepreneurs decline from 2001 to 2006. The six lowest ranked municipalities in absolute figures are the island communities of Christiansø, Læsø, Fanø, Samsø, Ærø and Langeland.

Source: Own calculations based on data from Statistics Denmark, National Survey and Cadastre.

3.5. Entrepreneurs’ gender

It is statistically possible to identify the vast majority of people – entrepreneurs – who have established the new enterprises. Out of the 23,578 new enterprises in 2006, the entrepreneurs can be identified in 19,100 instances, making it possible to profile who starts enterprises in Denmark.

Most new enterprises are started by men. Male entrepreneurs were responsible for almost 75% of the new enterprises throughout the period. As Figure 3.7 shows, men were also primarily responsible for the increase in number of new enterprises from 2002 to 2006 (Danish Enterprise and Construction Authority, 2008b).

Note: It was not possible to identify the person who established the enterprise in 4,000 of the new enterprise cases.
Source: Own calculations based on data from Statistics Denmark.

3.6. Entrepreneurs’ age

The vast majority of entrepreneurs are aged 30 to 49, the same age cohort which experienced the largest absolute growth in the period. The number of people over 60 who establish new enterprises rose by more than 75% in the period, but this age cohort accounts for only a small percentage of the total population of entrepreneurs (see Figure 3.8). The average age of an entrepreneur is 38.

Source: Own calculations based on data from Statistics Denmark.

3.7. Entrepreneurs’ civil status

Most entrepreneurs are either married or cohabitating when they establish their enterprise. This percentage is around 70% of the entrepreneur population and is quite stable over the years. In the population as a whole, 65% of the 16 to 66 age cohort are married or cohabitating and 35% live alone. In other words, a larger percentage of entrepreneurs are married or cohabitating than in the population in general.

3.8. Entrepreneurs’ ethnicity

The vast majority of entrepreneurs from 2001 to 2006 were ethnic Danes. The percentage of immigrant entrepreneurs who started their own enterprise declined during the period, from 13% to 10% (Danish Enterprise and Construction Authority, 2009). Immigrants aged 16 to 66 constitute only 8% of the population. This shows that immigrants have a slightly higher tendency to become entrepreneurs than ethnic Danes. For some immigrants this could be due to a stronger entrepreneurial culture in their home country. But the explanation could also be difficulties finding employment in Denmark.

The number of entrepreneurs with a non-Danish background did not increase to the same degree as the number of entrepreneurs with a Danish background. This could also be because the booming market improved opportunities for immigrants and their descendants to gain a toehold on the labour market.

Note: The data do not consider the age composition of the three groups. The population figures are from 2006.
Source: Own calculations based on data from Statistics Denmark.

3.9. Entrepreneurs’ educational background

Entrepreneurs’ educational background is significant for the type of enterprise started. Entrepreneurs with vocational educations, e.g. tradesmen and hair stylists, usually establish enterprises closely related to their educational background. In keeping with this, there is a longstanding entrepreneurial tradition in vocational study programmes, and many entrepreneurs (42%) have a vocational education (see Figure 3.10).

Some analyses indicate that entrepreneurs with a long-cycle higher education are more likely to start an enterprise which enters a sound growth process (Ernst & Young, 2009).

The largest increase in the period occurred among the group of entrepreneurs with vocational and higher educations respectively, whereas entrepreneurs without a qualifying vocational education grew the least. Entrepreneurs are better educated than the population in general. Among entrepreneurs, 70% have a qualifying vocational education, whereas this is true of only 58% of the population aged 16 to 66.

Note: The data do not take account of age composition or gender. Population statistics: 2006.
Source: Own calculations based on data from Statistics Denmark.

In particular, the number of entrepreneurs with a bachelor’s degree increased by 56.4% from 2001 to 2006. The number of entrepreneurs with a higher education increased, broken down as short cycle: 49.7%; long cycle:
42.2%; and medium cycle: 41.5%. The number of entrepreneurs with vocational educations increased by 39% and the number of entrepreneurs with a PhD degree increased by 34.5%.

The number of entrepreneurs in the two groups for whom no education is indicated (Other), or who have not completed an actual qualifying vocational education increased by 13.9% and 3.2% respectively (see Table 3.2).

Source: Own calculations based on data from Statistics Denmark.

3.10. Entrepreneurs’ sector familiarity

Analyses show that if entrepreneurs start an enterprise in a sector they are familiar with beforehand – e.g. because they have previously been employed in the sector – they do better (Danish Enterprise and Construction Authority, 2003). The vast majority of people (70%) who start a sole proprietor-ship, however, do so in a sector in which they do not have first-hand experience (see Figure 3.11).

Note: The figure covers only people responsible for sole proprietorships, i.e. 60% of entrepreneurs.
Source: Own calculations based on data from Statistics Denmark.

3.11. Entrepreneurs’ business experience

Starting an enterprise poses many challenges. Analyses show that it is beneficial to have business experience from one or more enterprises before going into business for oneself (Danish Enterprise and Construction Authority, 2003). Two-thirds of all entrepreneurs had more than five years’ experience in 2001. By 2006, this percentage had risen to 72%. Thus the number of entrepreneurs with occupational experience increased slightly (see Figure 3.12).

Source: Own calculations based on data from Statistics Denmark.

The entrepreneur’s position before founding the enterprise influences the type of occupational experience possessed by the entrepreneur. Compared to the population as a whole, a generally large percentage of entrepreneurs were managers or self-employed with another enterprise in the year before the start-up.

The vast majority of entrepreneurs have been employed – especially in salaried positions. Compared to the breakdown of the population as a whole, relatively few entrepreneurs established an enterprise after being unemployed or “outside the labour force”, e.g. directly after completing a programme of education (see Figure 3.13).

Note: Population statistics: 2006.
Source: Own calculations based on data from Statistics Denmark.

3.12. Entrepreneurs’ contribution to the national economy

Each year, many new jobs are created and many jobs are discontinued. In other words there is a relatively large gross shift of positions – and this shift primarily takes place from closed or older enterprises to new enterprises. The dynamic created by this job rotation could help to encourage innovation and the general competitiveness of the enterprises.

New enterprises make a positive contribution to the national economy by creating a large share of the new jobs which arise. Thus, almost a third of the new jobs created in the private-sector enterprises are created in enterprises which are less than two years old, a proportion which is largely unchanged from 2001 to 2006, during which the overall job creation levels fluctuated somewhat (see Figure 3.14). From 2003 to 2006, entrepreneurs created 86,000 jobs a year on average.

Note: The figure shows the number of jobs created at an enterprise level, i.e. the employment increase year by year at enterprises which have increased their employment (November employment). This records-based specification does not take account of employees who hold more than one job. Entrepreneurs are enterprises less than two years old and operating within market-related sectors. As the delimitation is based on the business registration (CVR) number, a number of the enterprises will actually be branches of existing enterprises, which is why enterprises with more than 50 employees in the year of establishment are not categorised as start-ups.
Source: Own calculations based on data from Statistics Denmark.

There are also entrepreneurs, however, who close their enterprise. The net contribution by entrepreneurs is 71,000 jobs a year on average. Entrepreneurs’ performance the first year varies greatly. Whereas the number of employees employed by most entrepreneurs declines, the number of employees in high-growth start-up enterprises increases. An average high-growth start-up creates almost ten times as many jobs during the first five years of its existence as other entrepreneurs and are collectively responsible for some 15% of all jobs created by entrepreneurs over a five-year period (see Table 3.3). See also Chapter 2 for the latest data on high-growth start-ups and their job-creation performance.

Note: High-growth start-ups are enterprises which had at least five FTEs in 2003 and whose employment rate grew by an average of 20% a year from 2003 to 2006.
Source: Own calculations based on the Company Database.

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4. Entrepreneurial Activity

The Danish Government has set two goals for entrepreneurship: Denmark must continue to be one of the countries in Europe with the largest number of new start-up enterprises and must be one of the top countries in the world for number of high-growth start-ups by 2015.

Chapter 2 shows that the number of new enterprises in Denmark increased up to 2007, after which it declined. By contrast, the number of high-growth start-ups is still at a high level after a marginal decline in 2008. This chapter compares Denmark to the other OECD countries to provide an update on the current situation regarding the Danish Government’s goals.

In recent years, a major effort has been made to create better indicators for the measurements. This year will be the first time the Index implements the latest OECD/Eurostat statistics to measure level of high-growth start-ups and the percentage of new employers in various countries as supplements to the start-up rate. The new data are far more comparable across the countries than the data previously used, but unfortunately the newest statistics date from 2006. This means that the international data available are not sufficiently up to date to capture the impact of the economic crisis. Efforts will be made in the years ahead to further improve these basic data.

The statistics in this chapter show that before the crisis Denmark’s start-up rate put the country among the top countries. Chapter 2 shows that the number of newly-established enterprises sharply declined in Denmark, even slightly more than in most other OECD countries. Even so, Denmark’s high point of departure should be sufficient to ensure that Denmark is still well placed compared to other countries in terms of new enterprise startups.

The new high-growth start-up data in this chapter show that Denmark is in the median range. Yet the data cover only two years and only a limited number of countries, and the countries’ business structure also affects the ranking of the countries in relation to one another. For the purpose of making the best assessment possible of the Danish Government’s goals, these data will be supplemented with an international comparison of high-growth enterprises. Although it is obvious that the countries’ ranking in terms of number of high-growth enterprises is not directly applicable in assessing the countries’ ranking in terms of high-growth start-ups, the percentage of high-growth enterprises can serve as an indication because high-growth start-ups are a genuine subcategory of high-growth enterprises.

The comparison of high-growth enterprises shows that Denmark lags somewhat behind the top countries, which corroborates the conclusion from the measurement of high-growth start-ups. Overall, therefore, Denmark appears to have quite a gap to close to achieve the Danish Government’s goal of being one of the countries in the world with the largest number of high-growth start-ups.

4.1. International comparisons of new start-up enterprises

It is good when people have the opportunity to realise their ideas and dreams by starting their own enterprise. Entrepreneurship also has a positive impact on the national economy. Analyses indicate that the net influx of enterprises contributes almost 17% of the annual average productivity growth (Jensen and Treppendahl, 2003). New enterprises challenge existing ones, thereby stimulating competition and growth. New enterprises create new jobs, which replace discontinued jobs. This is even more important during a crisis, when many enterprises are forced to lay off employees and an extraordinarily large number of enterprises close. A number of studies also indicate that entrepreneurs help to pull national economies out of crises through this very same ability to create jobs (Koellinger and Thurik, 2009).

Denmark is ranked second behind Portugal in terms of start-up rate, defined as the percentage of new enterprises out of the total number of active enterprises in a given year (see Figure 4.1). This means that the Danish Government has achieved its goal of Denmark continuing to be one of the top European countries for largest number of new enterprises start-ups.

Note: Number of new enterprises as a percentage of all enterprises. New enterprises have been active for less than one year. Active enterprises are characterised by having either employees or a minimum turnover. The data for the Netherlands, Slovakia and Finland are from 2005.
Source: Eurostat and Statistics Denmark.

Denmark is one of the top western European countries for start-up rates. A comparison of the trend from 2002 to 2006 shows that Denmark is among the countries which saw the greatest increase (see Figure 4.2).

Note: Number of new enterprises as a percentage of all enterprises. New enterprises have been active for less than one year. Active enterprises are characterised as having either employees or a minimum turnover.
Source: Eurostat.

Start-up rates are based on a method developed by Eurostat. Countries outside the EU do not use the same method, but comparisons with these countries are enabled by looking at the percentage of new employers. Denmark is ranked third among countries which calculate statistics for the percentage of new employers (see Figure 4.3). Denmark’s position in this context shows that Denmark is not only performing well in a broad European field, but also in relation to the US, Canada and New Zealand. The table also explodes the myth that many more enterprises are started in North America than in Europe (see Box 4.1 for an explanation of the entrepreneurial activity measurements).

Note: New employers include new enterprises which in the year of establishment had at least one employee in 2006, as well as enterprises which hired their first employee in 2006 – as a percentage of the total number of employers. The data for the Netherlands and the Czech Republic are from 2005. Source: OECD and Eurostat.

There are a number of countries that score differently on measurements of start-up rates and percentage of new employers. The most striking example is Italy, which is ranked first with regard to the percentage of new employers, but next to last in terms of the percentage of new enterprises. This is because Italy, compared to countries like Denmark, has a very large number of sole proprietorships without employees. Italy has three times as many sole proprietorships without employees as employers, whereas Denmark has only twice as many sole proprietorships without employees.

Denmark’s percentage of new employers (11–12%) was relatively stable from 2003 to 2005. This higher degree of stability compared to the start-up rate could be because the percentage of new employers is measurement of enterprises taken later in the entrepreneurial process. Denmark is on a par with Canada and the US – also measured over time (see Figure 4.4).

Note: New employers include new enterprises which in the year of establishment had at least one employee in 2006 as well as enterprises which hired their first employee in 2006 – as a percentage of the total number of employers. Data are lacking for Denmark in 2002 and for the US in 2005.
Source: OECD.

Both excessive and insufficient start-up rates can be interpreted as a problem. A certain level is required for maintaining the population of enterprises and for generating competition and innovation. But a very high level can be socioeconomically detrimental, as assets are lost whenever enterprises close[¹]. When Denmark is compared with countries like those in Western Europe with roughly the same level of development, a high start-up rate is positive.

4.2. International comparison of high-growth start-ups

A relatively large percentage of the enterprises which enter a sound growth process are new, i.e. high-growth start-ups[²]. Many high-growth start-ups perform better than other enterprises because they differentiate their activities in terms of products, services or processes. In other words, they are innovative.

To generate internationally comparable data, the OECD and Eurostat, with the support of Denmark and others, have developed a definition of high-growth start-ups and collected data from a number of countries (see Box
4.2 relating to the international definition of high-growth start-ups).

Measurements of high-growth start-ups are constantly being developed and improved. Eurostat’s present definition is not particularly suited for assessing the Danish Government’s goal, but it is the only one that allows for international comparisons. The definition inadequately explains how new enterprises contribute to the growth of the national economy. It should rather be seen as a means of comparing entrepreneurial performance in the OECD countries. A more realistic picture could be obtained by measuring the value added by new enterprises in the respective countries, for instance.

Internationally, Denmark is ranked within the median range in comparisons of the percentage of high-growth start-ups by growth in number of employees in the countries for which OECD and Eurostat have collected data (see Figure 4.5).

Note: The figure shows the number of new enterprises with 10 or more employees in 2002 with an average annual growth in number of employees of more than 20% from 2003 to 2006, in proportion to all enterprises with 10 or more employees (see Box 4.2). The data for the Czech Republic and the Netherlands are from 2005, and the data from New Zealand are from 2007. The US’s percentage has declined by half since 2005, when it was 0.4.
Source: OECD and Eurostat.

In recent years, the Entrepreneurship Index has shown that the US is the best entrepreneurial country based on its high percentage of high-growth start-ups. The US does not perform particularly well in the new OECD statistics, where it is actually ranked below Denmark.

The explanation of the US’s low percentage is found in the OECD’s definition. High-growth start-ups are defined as being at most two years old at the start of the growth period and are seen in relation to the overall population of enterprises with more than ten employees. This definition results in a lower percentage of high-growth start-ups in countries like the US, which has a large number of enterprises with more than ten employees.

By comparing the number of high-growth start-ups to the total population of enterprises with at least ten employees, countries like the US score poorly due to a relatively large number of large enterprises.

This lopsidedness can be compensated for in two ways: either by increasing the age category of the high-growth start-ups at the start of the growth period, as this will include a number of the entrepreneurs which actually have ten employees and achieve growth; or by viewing high-growth start-ups in relation to the number of enterprises less than two years old with at least ten employees. This would compensate for the high number of existing enterprises with more than ten employees. None of these sets of data is available today.

4.3. International comparison of high-growth start-ups

Basically, the Entrepreneurship Index measures high-growth start-ups. But as explained in the above, the new OECD/Eurostat data give an imprecise depiction of the current status of the Danish Government’s goal for high-growth start-ups. Therefore, this section compares Denmark’s percentage of high-growth start-ups, i.e. both old and new, with a number of OECD countries. These definitions are better developed, which should help to put the data on high-growth start-ups into perspective. Compared with the high-growth start-up data, Denmark appears to have some way to go before it reaches the same level as the top countries.

High-growth enterprises – and especially high-growth start-ups which is a genuine subcategory of high-growth enterprises – make substantial contributions to growth and job creation (Acts et al., 2008). These are the same enterprises which create many of the jobs lost elsewhere in the economy when enterprises cut back or close.

Slightly more than 4% of Denmark’s service enterprises with more than ten employees in 2003 experienced average annual growth of at least 20% a year, in terms of the number of employees up to 2006. The same was true for about 3% of the manufacturing enterprises. This is a somewhat lower percentage than in many other countries (see Figure 4.6).

Note: The percentage of high-growth enterprises in Construction (ISIC code 45), Manufacturing (ISIC code10-41) and Services (ISIC code 50-74), out of the combined number of enterprises with more than 10 employees in the respective sectors. Czech Republic: 2005 data; Construction data for Denmark and Finland: 2005 data; Manufacturing and Construction for Canada: 2005 data. Italy has shifted greatly from 2005 to 2006. Italy’s percentage of high-growth enterprises was between 2% and 4% in 2005.
Source: OECD and Eurostat.

Measured in terms of turnover growth, about 12% of Denmark’s service enterprises with more than ten employees experienced high growth from 2003 to 2006. The same was true of a similar percentage of manufacturing enterprises. Denmark is ranked slightly higher compared to the other countries in terms of turnover growth than it is in terms of the growth in the number of employees (see Figure 4.7).

Note: The percentage of high-growth enterprises in Construction (ISIC code 45), Manufacturing (ISIC code10-41) and Services (ISIC code 50-74), out of the combined number of enterprises with more than 10 employees in the respective sectors. The Netherlands, Czech Republic and Canada: 2005 data. Construction data for Denmark and Finland: 2005 data. Fewer countries are included in this figure because not all countries collect data about enterprise turnover.
Source: OECD.

There are several explanations of why the percentage of high-growth enterprises measured in terms of turnover is somewhat higher than the percentage measured in terms of growth in the number of employees. Turnover can be increased in Retail and Services by increasing prices, etc., or by switching to more expensive products. Manufacturing enterprises can increase turnover by using machinery without hiring new employees.

4.4. Summary

In order to achieve the Danish Government’s goal for high-growth startups, Denmark needs to increase its percentage of high-growth start-ups. Based on high-growth start-up data – supplemented with data on high-growth enterprises – it is assessed that Denmark still has a fairly wide gap with the top countries.

The economic crisis will probably cause the number of high-growth enterprises and high-growth start-ups to decline in just about every country. It is unlikely this will alter the challenge of achieving the Danish Government’s goal, however, as the other countries will probably maintain the same ranking in relation to one another. At the same time, the economic crisis intensifies the need for additional growth generated by new and smaller enterprises, as historically they have made substantial contributions to the creation of jobs – and even jobs with wages above the average levels in the business community. In other words, increasing the number of high-growth start-ups is one strategy for getting over the crisis.

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[1] For a discussion of the optimal level for – and economic gains of – enterprise start-ups, see sources like Growth Statement 07; Entrepreneurship, job creation and wage growth, Malchow-Møller, Schjerning and Sørensen (2009); and The Link Between Firm Births and Job Creation: Is there a Upas Tree Effect?, Van Stel and Storey (2004).

[2]Analyses indicate that up to a third of all high-growth start-ups are young enterprises (see the 2008 Entrepreneurship Index and Chapter 5 of this year’s Entrepreneurship Index).

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5. Enterprise Growth

The 10% of Denmark’s enterprises with more than ten employees which grew the fastest from 2002 to 2005 contributed more than 50% of the gross job creation in this period. The contribution to job creation by corresponding enterprises in Italy, the Netherlands, Spain and the US was even higher[³].

This demonstrates the importance of growth enterprises and explains why, for the second year in a row, the Entrepreneurship Index includes a chapter which not only discusses entrepreneurs and high-growth start-ups, but also focuses on high-growth enterprises. In this way, the chapter puts the other chapters’ analyses of entrepreneurs and high-growth start-ups into perspective by looking at all high-growth enterprises – regardless of their age.

In addition to the fastest growing enterprises’ contribution to job creation, the chapter shows that 3–6% of the enterprises in Italy, Spain, the Netherlands, Austria, Canada, the US and Denmark are high growth. The US distinguishes itself by having the largest number, whereas Austria has the lowest among the countries included.

There were a total of 601 growth enterprises in Denmark from 2002 to 2005. This equates to 4% of Denmark’s enterprises with more than 10 employees. In order for Denmark to reach the same level as the US, the number of high-growth enterprises must increase by 290. Besides constituting a lower percentage, the growth in Denmark’s high-growth enterprises is also less than this same growth in the top-performing countries. In order for Denmark to reach the same level as the US, the individual high-growth enterprise's average growth in number of employees must increase by 47%.

Last, but not least, the chapter analyses the age of high-growth enterprises. It shows that roughly a third of the high-growth enterprises are new enterprises. In addition, the age of the largest enterprises in California and Denmark are compared. The review shows that there are thirteen times as many large enterprises in California less than 30 years old as there are among the largest in Denmark. This illustrates that Denmark not only has the challenge of establishing high-growth start-ups, but also of creating new enterprises which can be counted among the absolute elite.

The chapter is based on brand-new, internationally-comparable data for the breakdown of enterprise growth in employment. The international data are compared to the Danish data for the purpose of studying the opportunities and challenges related to increasing the number of high-growth enterprises in Denmark. The basic data were produced in cooperation with the International Consortium on Entrepreneurship (ICE) and the British analysis institute NESTA^[4].

5.1. Fastest growing enterprises

The Entrepreneurship Index specifies high-growth start-ups and high-growth enterprises as enterprises which fulfil a given growth requirement in a given period (see Box 5.1). An alternative specification method is to look at the fastest growing enterprises and their contribution to job creation growth. In Denmark the top 10% of the fastest growing enterprises contributed more than half (55%) of the gross job creation from 2002 to 2005. These statistics are even higher in the Netherlands and Italy, where they contribute more than 60% of the jobs created (see Figure 5.1).

Source: ICE, FORA and NESTA, 2009.

The top 10% of the fastest growing enterprises in Denmark experienced at least 10% employment growth a year from 2002 to 2005. This same is true of the other countries in the comparison.

5.2. High-growth enterprises and their importance for job creation

A high-growth enterprise is any enterprise which has average annual growth of 20% over a three-year period. This group of enterprises is smaller than those in the upper tenth percentile with the highest growth. Analyses show that enterprises which grow the most have a big impact on job creation (Acs, Parsons and Tracy, 2008; Danish Enterprise and Construction Authority, 2008; Ministry of Economic and Business Affairs, 2007).

High-growth enterprises comprise 3–6% of the total number of enterprises with more than 10 employees in the countries included in the analysis. The countries can be broken down into three general categories: the US and Spain stand out by having almost 6% high-growth enterprises. The middle category comprises Canada, Italy and Denmark, all around 4%. The Netherlands and Austria are the lowest with slightly more than 3%, or roughly half as many as the best-performing countries (see Figure 5.2).

Note: The percentage is calculated as high-growth enterprises out of the combined growth of enterprises with more than 10 employees.
Source: ICE, FORA and NESTA, 2009.

To illustrate the importance of the high-growth enterprises, high-growth start-up data are compared to low-growth and medium-growth enterprises. In all the countries included in the study, low and medium-growth enterprises comprise a larger percentage of the enterprise population than the high-growth enterprises (see Figure 5.3).

Note: The interval of medium-growth enterprises (enterprises with 5–20% growth) is wider than the low-growth-enterprise interval (enterprises with 1–5% growth).
Source: ICE, FORA and NESTA, 2009.

So, although the high-growth enterprises comprise the smallest group of enterprises by far, they are appreciably more important to job creation than enterprises with low or moderate growth. In the US, Spain, Italy and Canada, the high-growth enterprises contributed more than 40% of the jobs created by enterprises with at least 10 employees from 2002 to 2005. In this context, Denmark is on a par with the Netherlands where the high-growth enterprises’ job creation comprises about 37%. Austria stands out by having only a quarter of its jobs created by high-growth enterprises (see Table 5.1).

Source: ICE, FORA and NESTA, 2009.

For enterprises with lower growth rates, the scenario looks somewhat different. In Austria, Denmark, Canada and the Netherlands, the medium-growth enterprises make a relatively bigger contribution to gross job creation than do high-growth enterprises.

Low-growth enterprises experienced an average annual growth in the number of employees of only 1–5%, which also results in a modest effect on the gross job creation in these countries. The relative significance of low growth is greatest in the Netherlands and Austria.

Denmark has relatively few high-growth enterprises compared to countries like the US and Spain. At the same time, their importance to gross job creation is less than in most other countries. This could suggest that Denmark’s high-growth enterprises grow too slowly compared with the other countries.

A comparison of the average growth per high-growth enterprise across the countries shows that a US high-growth enterprise contributes an average of 87 new employees from 2002 to 2005. The corresponding figure for Denmark is 59. The only country whose high-growth enterprises contribute fewer new employees than Denmark is Austria.

Source: ICE, FORA and NESTA, 2009.

5.3. Size of high-growth enterprises

A direct explanation of the high-growth enterprises' greater contribution to job creation in the leading countries is that there are a large number of high-growth enterprises with more than 250 employees. The breakdown among small, medium-sized and large high-growth enterprises is fairly uniform across all the countries, however (see Table 5.2). In other words there are not relatively more high-growth enterprises in the US, Spain or Italy.

Source: ICE, FORA and NESTA, 2009.

The difference becomes clearer by calculating the average number of jobs created within the three size categories (small, medium-sized and large enterprises). The growth per high-growth enterprise in the large enterprise category (i.e. 250 or more employees) is strikingly higher for enterprises in Italy, the US and Spain than in Denmark, Austria and the Netherlands (see Table 5.3).

In the US, the large high-growth enterprises each contribute an average of 1,416 employees during the period, whereas the figure for Denmark is 463. The difference between the individual enterprises’ contribution starts to grow already in the category of medium-sized enterprises. Medium-sized enterprises perform better in the US, as they contribute 196 new jobs compared to 154 in Denmark, whereas the small high-growth enterprises contribute the same number per enterprise in Denmark, the US and Spain, i.e. 33 new employees per enterprise from 2002 to 2005.

Thus, the large high-growth enterprises explain the difference between the high-growth enterprises’ average contribution to growth in the countries. The leading countries do not have relatively more large high-growth enterprises. The difference, on the other hand, is explained by the fact that the large high-growth enterprises have appreciably higher growth in the number of employees.

Source: ICE, FORA and NESTA, 2009.

The much larger number of jobs created in the large high-growth enterprises in Italy, the US and Spain can presumably be explained on the basis of the size of the respective countries’ markets. In many sectors there is simply not room for such high growth in the number of jobs created in smaller markets like Denmark, the Netherlands or Austria. For instance, in recent years the Danish enterprise Jysk has expanded in Denmark, Sweden and Norway and in several other countries, so the jobs created by Jysk are not only in Denmark but are dispersed across a large number of countries. If Jysk had been a US enterprise, it could have performed this same expansion within its domestic market and thus contributed more jobs. In other words, it is possible to explain the lower job-creation statistics by the high degree of internationalisation and outsourcing among Denmark’s large high-growth enterprises (Statistics Denmark, 2008). That said, there are also enterprises with many employees concentrated in a small geographic area of the US, such as Google Inc.

5.4. How far behind the US is Denmark?

In order for Denmark to reach the same level as the US, Denmark’s percentage of high-growth enterprises must increase from 4% to 6%. This means that Denmark must increase the number of high-growth enterprises from 601 to 891, i.e. Denmark must have 290 additional high-growth enterprises a year.

US high-growth enterprises contributed an average of 89 new employees from 2002 to 2005, whereas the corresponding figure for Denmark is only
59. In order for Danish high-growth enterprises to reach the same level as the average high-growth enterprise in the US, the number of new employees must increase by 47%.

The chapter shows that it is especially the largest high-growth enterprises,
i.e. those with more than 250 employees, which make a striking contribution to growth. The large-enterprise category covers many enterprises, however, By subdividing the category of large high-growth enterprises and comparing the very largest high-growth enterprises (those with more than 500 employees), big differences emerge.

The US has more than 391 high-growth enterprises with more than 500 employees, equating to almost 1% of all high-growth enterprises. These large high-growth enterprises contributed about a million new jobs from 2002 to 2005, which equates to 12.6% of the gross job creation created by enterprises with at least 10 employees.

In Denmark, 0.5% of the high-growth enterprises are large enterprises with more than 500 employees. They contributed some 1,900 new jobs, equating to 2% of the combined gross job creation.

This could indicate that Denmark is lagging behind in terms of the contribution from the very largest high-growth enterprises. To reach the same level as the US in terms of large enterprises, Denmark must create 5 additional high-growth enterprises with at least 500 employees each. As mentioned above, this is unlikely to be achieved due to the size of the Danish market. On the other hand, the statistics reveal a need for a larger number of small and medium-sized high-growth enterprises which must grow correspondingly more to contribute just as much as the US high-growth enterprises.

5.5. Age of high-growth enterprises

The Danish Government’s goal is for Denmark, by 2015, to be among the world’s leading countries in terms of the number of high-growth start-ups. This goal is based on the fact that new enterprises which enter a sound growth process contribute a lot to growth and innovation. The analysis of high-growth enterprises confirms that this group is essential, as a large percentage of high-growth enterprises are relatively young: 56% of Denmark’s high-growth enterprises are less than 10 years old, for instance (see Figure
5.5).

The age breakdown is almost the same across the countries, so there are no big differences in the age of the high-growth enterprises in the countries studied. High-growth enterprises are predominantly young: 50–60% of the countries’ high-growth enterprises are less than 10 years old (see Figure
5.5).

Note: The data include mergers and acquisitions during the period. Unfortunately data for the age of the enterprises could not be obtained for the US, Spain or Canada, which explains why these countries are not included in the analysis.
Source: FORA and NESTA, 2009.

It has not been possible to compare the percentage of high-growth start-ups in the overall group of high-growth enterprises using the OECD’s new definition. Instead, the comparison is rendered possible by applying the definition previously used in the Entrepreneurship Index – where enterprises may be up to five years old at the start of the growth period. On this basis, Denmark’s percentage of high-growth start-ups out of the number of high-growth enterprises is 37%. This is somewhat lower than in the Netherlands where the percentage of high-growth start-ups constitutes almost 46% of the high-growth enterprises (see Table 5.4).

Note: High-growth start-ups are defined as enterprises with at least 10 employees and which were not more than 5 years old in 2002. It is not possible to make similar specifications for enterprises with at least 10 employees and which were not more than 2 years old in 2002.
Source: ICE, FORA and NESTA, 2009.

5.6. Percentage of young enterprises among the biggest 100 enterprises

In previous years the Entrepreneurship Index has shown that Denmark faces a challenge of having to create larger numbers of high-growth startups. This chapter presents another challenge, in that Denmark’s high-growth enterprises are not growing at a sufficient rate. These challenges can be illustrated by comparing the age of the biggest enterprises in Denmark and California.

Out of the 100 biggest enterprises in California, 39 were founded within the past 30 years. This includes world-famous enterprises like Google and eBay (see Table 5.5). Successful enterprises like these contribute just as many jobs as many small enterprises in their start-up phase. This means that if relatively few young enterprises achieve this degree of success, this could counteract the fact that fewer new enterprises enter a sound growth process.

Compared to California, however, not many of the biggest Danish enterprises are young. In Denmark, 3 of the 100 biggest enterprises are less than 30 years old. In this calculation, the number of successful high-growth start-ups in California is thirteen times greater than in Denmark.

The three enterprises among the 100 biggest enterprises less than 30 years old are Jysk (founded by Lars Larsen in 1979), and two wind turbine manufacturers, Bonus Energi A/S (founded by Palle Nørgaard in 1981) and Vestas, which shifted its focus from the manufacture of farm machinery to wind turbines in 1987. Bonus Energi has since been purchased by Siemens and is now named Siemens Wind Power.

The counting of enterprises established within the past 30 years is based on the annual index of the largest Danish enterprises published by the Danish business daily Børsen and on Fortune500 for California. In Denmark, enterprises are counted according to net turnover, whereas in the US they are counted according to level of revenue.

The figures are subject to some uncertainty, as ideally Denmark should be compared to each individual region of the US, including the weaker entrepreneurial regions. Undoubtedly, California’s Silicon Valley boosts the number of young enterprises as the area attracts talented entrepreneurs from all over the world, which means that comparing Denmark with California does not present a true picture. On the other hand, it is easier for a young enterprise to become one of the 100 biggest enterprises in a small country like Denmark than it is in California.

Note: The numbers in parentheses show the enterprise’s ranking in 2009. Vestas was established in 1898 as a smithy. After suspending payments in 1987, Vestas was re-established and subsequently focused its efforts solely on manufacturing wind turbines. This marked the start of a long period of growth and explains why Vestas is defined as a new enterprise.

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[3] Subject to uncertainty for the effects of differences in the countries’ market trends.

[4] National Endowment for Science, Technology and the Arts.

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6. Framework Conditions for Entrepreneurship

The Danish Government’s goal is that, by 2015, Denmark is to be one of the world’s leading countries in terms of the number of high-growth start-ups. The results from Chapter 4 show that even though a relatively large number of new enterprises are started, Denmark remains in the median range measured in terms of high-growth start-ups. At the same time, new statistics (see Chapter 2) show that the current economic crisis has hampered the inclination of Danes to start a new enterprise.

The Entrepreneurship Indexes of previous years show that the countries with the very best entrepreneurial results are the same countries which have managed to establish the best conditions for entrepreneurs. Easy access to capital, sensibly structured government regulation and access to qualified consulting services are just some of the factors which promote a country’s performance. These conditions can be collectively described as a country’s framework conditions. This chapter assesses Denmark’s framework conditions for entrepreneurship. In particular, the chapter compares Denmark to the countries which have achieved the best entrepreneurial performance in recent years. The assessment is carried out on the basis of a new and improved framework-condition model. In collaboration with the OECD, in recent years Denmark has endeavoured to establish new quality-certified indicators for measuring the framework conditions for entrepreneurship (Ahmad and Hoffmann, 2008; OECD, 2008a), the results of which are now available. Accordingly, this year’s Index includes 31 new indicators and a number of new policy areas.

This year, Denmark is ranked sixth in the OECD, measured in terms of framework conditions, or three positions higher than last year. The countries are so closely ranked, however, that even small improvements in the framework conditions change the countries’ ranking in relation to one another. This minor improvement in Denmark’s framework conditions is therefore primarily attributable to the new policy area “technology absorption”, where Denmark is a leader in the OECD, cf. investments in ICT technology measured in terms of the percentage of GDP.

The improved new framework-conditions model also shows that Denmark has only marginally improved its framework conditions since 2008. This is not surprising considering that Denmark, like many other countries, has primarily concentrated its efforts over the past year on mitigating the effects of the current economic crisis.

On the other hand, Denmark has strikingly improved its framework conditions for entrepreneurship since the first edition of the Entrepreneurship Index was published in 2004. The leading entrepreneurial countries have also improved their level over time, however, and are still some distance ahead of Denmark.

6.1. Factors affecting entrepreneurship

A country’s entrepreneurial activity depends on a variety of factors: the availability of capital; the amount of focus brought to bear on building up entrepreneurial skills in the country’s educational programmes; the general thrust of a country’s bankruptcy laws; the administrative burdens imposed on new enterprises by the state; and whether research environments are capable of converting new inventions into saleable products.

New data now make it possible to present a more qualified picture of the framework conditions. The results of these efforts show that a total of six overarching factors affect a country’s entrepreneurial performance: “regulation”; “market conditions”; “access to financing”; “creation and diffusion of knowledge”; “entrepreneurial skills”; and “entrepreneurial culture” (see Figure 6.1).

Note: Further details: OECD (2008a) and Hoffmann & Ahmad (2008).

These factors establish an overview of the many elements which collectively affect entrepreneurs’ prospects for start-up and growth. The common denominator is that they are a combination of entrepreneurs’ opportunities, skills and accessible resources (Hoffmann and Ahmad, 2008). The following is true of the individual factors:

• Regulation covers areas which governments can affect directly by means of legislation. In this respect, the level of taxation, the number of public regulations and institutional circumstances affect entrepreneurial activity.
• Market conditions affect entrepreneurs’ opportunities for starting their own business. For instance, marketing options are determined by the access to non-Danish markets.
• Access to financing directly affects entrepreneurs’ resources. For instance, a high level of entrepreneurial activity is influenced by the availability of venture capital and by having efficient stock markets.
• Creation and Diffusion of Knowledge includes the dissemination of R&D knowledge as well as the accessibility of the latest technologies on the market.
• Entrepreneurial skills covers entrepreneurs’ ability to generate value through new products, processes and markets. This is determined by factors like access to the right educational programmes and qualified consultancy.
• Entrepreneurial culture identifies personal and societal perceptions of entrepreneurs and of the possibility of starting one’s own enterprise.

6.2. Policy areas important to entrepreneurial activity

The six overarching factors (see Figure 6.1) can be divided into a number of policy areas where a government or other body can intervene to improve the framework conditions and, thus, entrepreneurial performance.

This year’s Index employs a total of 29 policy areas, such as “administrative burdens”, “income tax”, “availability of loan capital” and “R&D activities”. Obviously, the list is not exhaustive. New knowledge and new data might make it possible to incorporate new policy areas or to change the structure of the existing ones. Nor are all areas equally important to entrepreneurship.

Not all policy areas can be directly affected by political initiatives. Some are determined by cultural circumstances and can therefore only be influenced indirectly. For instance, it is only possible to exert indirect influence on data for the “entrepreneurial mindset” policy area and reflect new governmental initiatives in the long term, such as entrepreneur campaigns and competitions for prizes. Entrepreneurs’ motivation to start their own business is thus conditional on a number of different factors that cannot be unambiguously isolated to one specific cause-and-effect relationship.

Other policy areas can be directly influenced and are predominantly related to the “regulation” factor. For the “labour market regulation” policy area, increased flexibility relating to hiring and dismissing staff, for instance, will directly make enterprises more adaptable and enable enterprises to assume greater risks through new investments.

The amount of time it takes for policy-area changes to affect the countries’ entrepreneurial performance also differs. For instance, taxation changes are quickly felt by the enterprises, whereas it usually takes longer for educational-system changes to affect enterprises. At the same time, changes will often have a faster impact on start-up rates than on the number of high-growth start-ups, because high-growth start-ups are first measured five years after start-up. Analyses have previously shown that four-year-old framework conditions explain a larger segment of performance variations than the framework conditions in the year in which the performance is measured (Danish Enterprise and Construction Authority, 2008).

Note: A discussion of each policy area is found in Hoffmann and Ahmad (2008) and Gabr and Hoff-mann (2006). See also Appendix 2 for a detailed description of each policy area and indicator.

A number of policy areas, highlighted in red in the figure, still lack quality-certified indicators (FORA, 2008). Indicators exist for the yellow policy areas, but they are so few and of such dubious quality that, for methodological reasons, these policy areas are not included in the Entrepreneurship Index’s combined assessment of the countries’ framework conditions. The remaining 18 policy areas are included, however, and are highlighted in green in the figure. All policy areas and their underlying indicators are described in detail in Appendix 2.

6.3. Changes in the new framework-condition model

This year’s Entrepreneurship Index includes new policy areas and more indicators and, at the same time, adds a brand-new impact factor: the creation and diffusion of knowledge.

In a society with strong technological and scientific developments, it is crucial that the latest knowledge is readily available to many enterprises. For entrepreneurs, it is crucial that the knowledge available is efficiently disseminated throughout society, as this lays the groundwork for developing innovative new solutions. “Creation and Diffusion of Knowledge” includes the following policy areas: “R&D activities”, “knowledge transfer”, “cooperation between enterprises”, and “technological absorption”.

Box 6.1 outlines new, phased-out and preserved indicators, all of which are specified in terms of the factors used in the 2008 Entrepreneurship Index, and the new classification of factors, as it appears in this year’s Index.

Note: Box 6.1 contains a detailed description of changes to indicators for each factor. The column on the right shows last year’s factors. Creation and Diffusion of Knowledge is a new factor in this year’s Index and was thus not included in the 2008 Entrepreneurship Index.

As Box 6.1 shows, this year’s framework-conditions model comprises a total of 76 indicators. Thirty-one are brand new, whereas 45 were also used last year. Seven have been omitted entirely, as they could not be updated.

To compare the framework conditions for the individual countries over time, all indicators have been updated with retrospective effect. The replacement of indicators and the addition of brand-new ones mean that the results of this year’s Index are not directly comparable with the 2008 Entrepreneurship Index. To ensure that the methodological changes to this year’s Index do not appreciably affect this year’s ranking, last year’s indicators and policy areas were recalculated, but using updated data. The calculation shows that the new indicators generally result in lower scores among the countries and a considerable equalisation of the differences among the group of top ten countries. The equalisation gives Denmark a minor benefit by boosting the country two positions in this year’s overall ranking.

The various indicators are not directly comparable, however. Some indicators are specified in Danish currency (kroner) and some in percentages, while others are specified in terms of time. For this reason, the indicators have been translated into index values to make it possible to compare the individual indicators and policy areas (see Appendix 1).

6.4. Denmark’s overall ranking in 2009

This year, Denmark is ranked sixth overall. Compared with last year, Denmark has advanced three positions in terms of the combined framework conditions. In other words, Denmark is ahead of Finland, Switzerland, Australia and South Korea, all of which were ranked above Denmark in last year’s specification.

Denmark’s good position in terms of the combined framework conditions is primarily due to a high score on one of the Index’s new policy areas: technology absorption. Here, Denmark is one of the best countries in the OECD, measured in terms of the proliferation of information and communication technology. This is emphasised by things like a top ranking in the use of e-business, which indicates that Danish enterprises actively use the internet for gaining new market areas in Denmark and abroad.

In reality, however, Denmark has only advanced four positions, compared to last year. This year, New Zealand is introduced as a brand-new country in the Index. New Zealand is ranked fourth overall. This puts the country ahead of Denmark, thus pushing Denmark one position down (see Figure
6.3).

Note: The figure shows the average normalised framework conditions for each country, specified according to the latest measurement of the 76 indicators. The national scores for the 76 indicators used for measuring the framework conditions have been normalised on a scale from 0 to 100. For each indicator, the best countries received 100 points and the poorest 0 points. A country’s score is calculated as the average countries’ scores for the 18 policy areas which have been possible to quantify. Each policy area’s value is a simple average of the indicators measuring the area.
Source: Own calculations.

The combined measurement of the framework conditions shows the emergence of three categories of countries, positioned at the top, middle and bottom of the normalised scale.

This year, Denmark moved into the upper half of the top eight OECD countries. Again this year, the US is solidly in first place and performs markedly better than the other countries. This year, Germany and the Netherlands have lost ground and are in the middle group of countries. The countries at the bottom of the scale have not changed appreciably since last year’s Index. The gap with the middle group has widened considerably, however.

It is worth noting that the differences among the countries in Denmark’s group are marginal (see Box 6.2). For this reason, even minor changes in the underlying indicators can cause the countries to change places from one year to another.

At the same time, this year’s specification of framework conditions should be seen in the light of the fact that a large group of companies have experienced setbacks. Thus, only eight countries have improved their level compared to last year, including Denmark. The other 19 OECD countries have all experienced a decline. This trend is partly attributable to the financial crisis, which has led to a general decline in economic prosperity, a national deficit and limited access to capital. Overall, this has lessened entrepreneurs’ prospects of establishing and running a new enterprise.

6.5. Denmark’s overall position compared to the top four countries

In keeping with the Entrepreneurship Indexes of previous years, Denmark’s position is compared to the countries which have performed the best in terms of the percentage of high-growth start-ups and the start-up of new enterprises. Box 6.4 explains the methodological approach on which the selection of the four top countries is based.

The figure below presents a more qualified picture of Denmark’s level, visà-vis the top four countries (see Figures 6.5 and 6.6). Due to the addition of the new indicators, the measurement of the framework conditions is not directly comparable with corresponding figures in the 2008 Entrepreneur-ship Index.

Denmark’s improved ranking among the OECD countries is also manifested in a marginal increase in the level of the framework conditions (see Figure 6.5). On a scale of 0 to 100, Denmark has advanced from 61.2 to 61.7 points. The top four countries, on the other hand, experienced a decline in their framework conditions. Thus, Denmark has gained ground in relation to the top four countries since last year.

Note: The national scores for the 76 indicators used for measuring the framework conditions are normalised on a scale from 0 to 100. For each indicator, the best country receives 100 points and the poorest country 0 points. A country’s combined score is calculated as an average of the countries’ scores for the 18 policy areas which have been possible to quantify. Each policy area’s value is a simple average of the indicators measuring the area. The top four countries’ values were arrived at by calculating the average of their total scores. 2008 has been re-calculated using the 2009 model’s indicators.
Source: Own calculations.

The framework conditions trend is not surprising. For most OECD countries, the focus during the course of the year was on implementing instruments for handling the financial crisis (see Box 6.5). The same was true in Denmark, where the Danish Government’s primary focus was on mitigating the effects of the current crisis. In addition, entrepreneurial activities launched in recent years either targeted the “infrastructure” policy area and were not included in the overall measurement or were of such a nature that their effects would only be felt in the longer term. An example of the latter is the Danish Government’s tax reform which first takes effect from 2010.

In addition, several of the indicators included in this year’s Index are influenced by the downward market trends. For instance, data show that the market value of newly issued shares fell in every OECD country. In other words, the share value of new enterprises declined significantly, which must be attributable to the financial crisis. In spite of the general decline in the cyclical indicators, Denmark’s level this year is largely unchanged, because other policy areas, such as “technology absorption”, offset the negative trend.

It is also possible to compare Denmark with the top four countries over a prolonged period. Below are the trends for Denmark and the top four countries from 2004, when the first Entrepreneurship Index was published, up to the present. 2004 has been recalculated based on the 2009 model and associated indicators, so it is possible to make comparisons over the years.

Note: The figure shows overall change of Denmark and the average of the top four in framework conditions since the first measurement in 2004 and the most recent measurement in 2009. To render data comparable they are normalised for each indicator across the years. Only indicators that are kept reasonably up to date are included and, in some instances outliers, which render normalisation difficult, have been removed. For this reason and due to the normalisation of 2004 data, the figure is not completely comparable with Figure 6.5.
Source: Own calculations.

Since the first specification in the 2004 Entrepreneurship Index, Denmark has substantially improved its framework conditions and thus has advanced by 5 points from 55.4 points to 60.5 points (see Figure 6.5). In this same period, the top four countries have improved their framework conditions by slightly less than 3 points and are now at 63.4 points.

Thus, the tendency from last year’s Index looks set to continue. Denmark has narrowed the gap with the top countries since the records began in the first Entrepreneurship Index. Out of the top ten countries in the OECD, Denmark has improved its framework conditions the most since 2004. The top four countries have also improved their framework conditions over time, however. Thus, Denmark needs to make a targeted effort to create the best framework conditions for entrepreneurship and thus be able to achieve the Danish Government’s 2015 goal in the area of entrepreneurship.

6.6. Denmark compared to the Nordic countries and the UK

Comparisons provide the most accurate results if the comparison involves countries whose parameters resemble one another. This is the case for the Nordic countries, for instance, which in many ways have the same socioeconomic characteristics. In addition, it is relevant to take a closer look at the United Kingdom, which has good entrepreneurial framework conditions and performance, but – out of consideration for comparability with previous years’ Indexes – is not included in the top four countries.

Note: The figure shows the Nordic countries’ and the UK’s changes in framework conditions since the first measurement in 2004. To render data comparable they are normalised for each indicator across the years. Some indicators have not been updated over all five years, due to reasons such as changes in specification methods. These indicators have been updated as far back in time as possible. Some outliers, which render normalisation difficult, have been removed. For this reason and due to the normalisation of 2004 data, the figure is not completely comparable with Figure 6.2. Like last year, the calculation method used for the OMX stock markets has been changed so that Denmark, Sweden and Finland have the same values for this indicator in 2009. This an advantage for Denmark compared to Sweden.
Source: Own calculations.

The development of framework conditions in Norway and Sweden is almost status quo. Norway has improved the availability of venture capital to enterprises. The change is marginal in an overall perspective, however. Overall, the UK declined throughout the period. This is primarily due to a decline in the policy areas “access to foreign markets” and “patent standards and legislation”. As a result of the world-wide financial crisis, the UK launched a great many initiatives in 2009 to boost SMEs’ possibilities on global markets (see Box 6.5). Finland still has the best framework conditions of any Nordic country (see Box 6.6).

On the other hand, Denmark has improved more than any other country since 2004. In the first Entrepreneurship Index, Denmark lagged behind Norway, Sweden, Finland and the UK. This situation has changed today. Denmark is not only ranked ahead of Sweden and Norway, but is also closing the gap with both Finland and the UK, where developments seem to have come to a standstill.

6.7. Denmark and the top four countries in the individual policy areas

There are striking differences between Denmark and the top four countries in the various policy areas (see Figure 6.8). Last year, Denmark had better framework conditions than the top four countries in 10 out of 19 policy areas. This year’s revised model includes a total of 18 policy areas in the overall assessment of the countries’ framework conditions. Like last year, Denmark is performing better than the top four countries in a total of 10 of the policy areas. In other words there are a total of 8 policy areas where Denmark’s performance is poorer.

Note: The green bars show where Denmark is ahead, while the red bars show where Denmark is behind. The individual areas are normalised on a scale of 0 to 100 to make the difference between Denmark and the top four countries comparable across policy areas. Note that a total of five policy areas – competition legislation; social benefits and health insurance; wealth and inheritance tax; private-sector demand; and entrepreneurial mindset – are highlighted in yellow because they are not included in the overall indexing of the countries’ framework conditions.
Source: Own calculations.

This is especially true of the policy areas “income tax”, “societal perception of entrepreneurship”, “corporate tax and capital gains tax” and “entrepreneurship education” (see Figure 6.8). On the other hand, Denmark is markedly better than the top four countries in policy areas like “patent standards and legislation”, "access to foreign markets”, "technology absorption” and “availability of loan capital”.

Denmark’s tax base vis-à-vis enterprises and citizens thus provides a contributory explanation to why Denmark’s overall level is still below that of the top four countries.

6.8. Trends in selected policy areas since 2004

Denmark has markedly improved in four policy areas since 2004 (see Figure
6.9): “bankruptcy law”; “availability of loan capital”, “technology absorption” and “entrepreneurship education”, where Denmark – compared with the top four countries – narrowed the gap by at least 10 points from 2004 to the present.

Note: The figure shows the trend for selected policy areas (green bars show improvements, while red bars show setbacks). The two policy areas showing the most striking changes since 2004 are emphasised for each of the six factors: regulation; market conditions; access to financing; creation and diffusion of knowledge; entrepreneurial skills; and entrepreneurial culture. The individual indicators and policy areas are normalised on a scale of 0 to 100 to render the differences between Denmark and the top four countries comparable across policy areas. The leftmost column shows Denmark’s trend in the updated policy areas. The middle column shows the top four countries’ trends, and the rightmost column shows Denmark’s trend compared to the trend of the top four countries, i.e. the extent to which Denmark has narrowed the gap with the top four countries since 2004. Note that two policy areas – private-sector demand and entrepreneurial mindset – are highlighted in yellow because they are not included in the overall measurement of the countries’ framework conditions.
Source: Own calculations.

On the other hand, Denmark has lost ground to the top four countries in terms of “labour market regulation", “stock markets” and "cooperation between enterprises”. In the following, a selection of the policy areas emphasised are explained in more detail, and the Danish Government’s past and present initiatives in the policy areas are presented.

Regulation: bankruptcy law and bankruptcies

Bankruptcy law is one of the policy areas where Denmark has improved the most since 2004. Throughout the period, Denmark advanced in this area by 21 points, but is still ranked slightly behind the best countries. Countries like Ireland, Finland and the UK are the top scorers in this area, but the top four countries are today only slightly ahead of Denmark. It is worth noting that in last year’s Index, Denmark was only marginally ahead of the top four countries in this policy area. This minor shift is due to changes in the indicators and does not reflect new policy initiatives in the individual countries.

Regulation of bankruptcy law is a balancing act. Consideration must be shown to both bankrupt enterprises and their creditors. On the one hand it is not expedient to keep bankrupt individuals in debt without the possibility of starting a new enterprise. On the other, the law must ensure that creditors recover the largest possible share of their outstanding debt.

In this light, Denmark’s bankruptcy law has been continuously improved throughout the period. Debt restructuring was made easier for entrepreneurs in 2005. In 2007, the law was amended to improve the case-processing time for estates in bankruptcy. Law amendments and indicator progress took place during a period of economic growth and few bankruptcies. The economic crisis changed this situation. Statistics Denmark’s specification of bankruptcies from September 2009 calculated the number of bankruptcies to be more than 500 a month in the first half of 2009. This is the highest level since Statistics Denmark started to monitor these figures, which it has been doing since 1979. The viability of Denmark’s bankruptcy laws and their administration are currently being tested.

Since 2007, enterprises experiencing economic difficulties have also been able to make use of the nationwide “early-warning scheme” which operates under the auspices of the Growth Houses. This scheme is a free offer of assistance to enterprises in a crisis and has met with rising demand in recent months. In 2008, a total of 400 enterprises received consultancy via the early warning scheme, whereas by September 2009, 475 enterprises had already contacted the organisations and received assistance.

Market conditions: private-sector demand

Denmark is also gaining a little ground in the policy area “private-sector demand”. This policy area is new to this year’s Index and measures the tendency of consumers and enterprises to let low prices be the deciding factor for the purchase of goods and services. This means that a high score expresses consumers’ demand-willingness to pay for innovative new goods and services, i.e., the willingness to pay for products often produced by entrepreneurial enterprises.

Although the area is not included in this year’s overall measurement, it is worth mentioning because every country has declined sharply here. The decline over the past year also explains much of the overall recession for the entire period from 2004 to 2009. Denmark’s recession was significantly less than that of just about every other country.

Access to financing

The financial and economic crisis has affected the availability of capital all over the world. The current situation limits the potential for growth and, not least, the availability of venture capital which is decisive for both starting and developing new enterprises.

The Danish Government has carried out a comprehensive intervention scheme to restore confidence in Denmark’s financial system. In February 2009, the Danish Government launched the credit package, aimed at loosening up the financing by banks of enterprises’ sound projects. The effects of the credit package will have an impact in earnest when the lending of banks and mortgage credit institutions has returned to a high level (Danish Government, 2009).

This does not mean that all enterprises and entrepreneurs in Denmark have regained access to the capital they need. SMEs in particular are experiencing finance problems and tighter credit terms. New ideas and business concepts in particular now have a longer route to market. In the light of this, an agreement was concluded in 2009 concerning a business package to help small and medium-sized enterprises generate new growth, increase their export potential, improve their lending options and infuse additional venture capital into new enterprises. A framework allocation of DKK 4 billion is earmarked for the business package.

Figure 6.9 above shows that since 2004, Denmark has significantly improved in the policy area “availability of loan capital”. In general, Denmark is ranked first in this policy area, ahead of countries like the UK and the Netherlands.

Creation and Diffusion of Knowledge

Overall, Denmark is in the international median range of OECD countries measured in terms of the new factor “creation and diffusion of knowledge”. Sharing of new knowledge and intensified cooperation between promising entrepreneurial enterprises is crucial to increasing Denmark’s productivity.

In this connection, the Danish Government launched a number of initiatives to increase cooperation between Danish enterprises. As part of earmarking the globalisation funds, a clean-tech partnership was established to boost the opportunities of clean-tech entrepreneurs for cooperating with larger enterprises. Partnerships involving entrepreneurs and established enterprises are entered into, and the established enterprises place a number of sector-specific competencies, knowledge and networks at the disposal of the partnership. The established enterprises must contribute to developing the most promising clean-tech entrepreneurs and must at the same time improve entrepreneurs’ ability to attract venture capital. The partnership-agreement concept is expected to be further developed in the course of 2010.

Entrepreneurial skills: education and infrastructure

The Entrepreneurship Indexes of recent years have highlighted education in entrepreneurial subjects as one of the most important, future-oriented action areas. Although this is one area in which Denmark gains a little ground compared to the top four countries (see Figure 6.9), this is due to a decline among the top four countries. Also, comparing Denmark to the rest of the OECD shows that Denmark could still make striking improvements to this policy area. Today, Denmark lags far behind the best countries, such as Finland.

The “infrastructure” policy area is not measured in this year’s Entrepreneur-ship Index. At the moment, there are no internationally comparable indicators of adequate quality. This area covers access to qualified consultancy and thus the combined selection of consulting services offered in the public and private sectors.

The Growth Houses system is the crux of public-sector business services for entrepreneurs. Their services are offered in collaboration with private-sector consultants.

In 2009, collaboration between the Growth Houses and private-sector consultants was boosted by means of a combined initiative package. This included allocating funds in the amount of DKK 30 million, through which new and smaller enterprises with growth potential could co-fund their purchase of private-sector consultancy.

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Appendix 1: Normalising Data for Framework Conditions

Comparisons of various policy areas use a number of indicators from international studies conducted by the EU, the OECD, the World Bank, etc. For instance, the “labour market regulation” policy area is measured using three indicators: “employment flexibility”, “dismissal flexibility” and “overtime flexibility”.

The various indicators are not directly comparable, however. Some indicators are monetary values, some are percentages or ratios and others are based on time. In order to compare the indicators, they must be converted into index values. Each indicator is normalised by setting the value of the best country at 100 and the poorest at 0. After normalising all the indexes in a policy area, the countries’ scores are determined for each policy area by calculating the average value of the indicators (see Box A1.1).

The Danish Enterprise and Construction Authority is continuously working to improve the indicators used for comparing the framework conditions. This year’s Index has a total of 76 indicators: 7 have been removed, 31 are brand new, and 45 are repeats from last year’s index.

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Appendix 2: Description of Framework Condition Indicators

The model for evaluating entrepreneurial framework conditions has been revised for this year’s Index. The revision is based on lessons learned in recent years and by efforts within OECD to create a model for entrepreneurial framework conditions (Ahmad and Hoffman, 2008), see figure A2.1.

Note: Figure A2.1 is identical to Figure 6.2.

The model is divided into six overarching factors which affect entrepreneurial activity. The six factors are Regulation, Market Conditions, Access to Financing, Creation and Diffusion of Knowledge, Entrepreneurial Skills and Entrepreneurial Culture.

Each factor is subdivided into a number of policy areas, which are in turn described using one or more indicators. Each policy area in the figure is assigned one of three colours: green means that the indicator’s quality is good enough for it to be used to shed light on the policy area in the model; yellow means that there are one or more fairly good indicators which can be used for making an international comparison; and red means that there are no internationally quality-certified indicators for describing the area.

Six overarching factors and 24 of the policy areas are described below. The remaining five policy areas, where no internationally quality-certified indicators exist, are omitted from this policy-area overview.

Under each policy area is an explanation of why it is appropriate to include the policy area in the index. At the same time, focus is brought to bear on the historical developments for each individual policy area. Thus, the review of the policy area covers the development of the individual indicators from 2004 up to 2009. Under each policy area, Denmark is compared to the three top countries in the policy area and with the selected top four countries accounted for in Chapters 3 and 6.

Framework Conditions: Regulation

The Regulation factor covers policy areas in which national governments can exert direct influence via lawmaking. Regulation can affect entrepreneurial activity in many ways. This is exemplified by bankruptcy law, which influences the risk associated with starting one’s own enterprise, for instance. Administrative burdens create costs for the enterprises. At the same time, they influence how appealing it is to become an entrepreneur. The Entrepreneurship Index includes a total of 10 policy areas under Regulation. They are described below.

Policy Area: Administrative Burdens

Administrative Burdens is the general designation for the time and resources spent by entrepreneurs on understanding regulations and on collecting, processing and reporting information to public authorities. Administrative burdens are a cost for entrepreneurs and can also be perceived as a barrier which reduces salaried workers’ motivation to start their own business. Administrative burdens are measured to identify instances where administrative action by public authorities unintentionally obstructs the start-up and operation of an enterprise.

Administrative burdens are specified in terms of the number of procedures, the amount of time spent on the individual procedures and the scope of the direct economic costs. The basic premise of all indicators is that the fewer the burdens imposed on the entrepreneur, the greater the likelihood that more entrepreneurs will start and run successful enterprises.

The combined target for administrative burdens comprises a simple average of eight indicators (see Box A2.1).

Denmark has long been one of the countries with the fewest administrative burdens for entrepreneurs. In 2004, Denmark was ranked sixth and this year it is ranked fourth. Overall, from 2004 to 2009, Denmark saw a slight 0.8% increase in the administrative burdens involved in establishing a new enterprise. The Danish increase is primarily due to a negative trend in the procedures, time and costs involved in the construction of storage facilities. Other indicators have not changed appreciably insofar as Denmark is concerned. The same trend affected two of the three top countries in this policy area: Canada and Australia. New Zealand has improved its level by more than 4%, however. The performance of the top four countries improved by 2 points from 2004 to 2009 (see Figure A2.2). The improvement of the top four countries is primarily because South Korea has improved in every indicator under this policy area.

Measured in terms of the policy-areas indicators – number of start-up procedures and start-up costs, and the time it takes to prepare and pay corporate tax, VAT and other social benefits – Denmark’s framework conditions have not changed in the past five years. For instance, Denmark is still the only country in the OECD where establishing an enterprise is free of charge. For this reason, Denmark is still at the top compared to the other OECD countries.

Measured in terms of the average amount of time spent on start-up procedures, Denmark has gone from four to six days. This is still far below 25.4 days, which is the average for all OECD countries. As a result of an ongoing programme aimed at reducing administrative burdens which Danish enterprises encounter in their contacts with the public sector, Denmark has introduced “one-stop shops”. This means that entrepreneurs now have only a single point of contact for registering their enterprise. The increase in the average time usage is due to a change in the how the indicator is specified. As a result, it is now estimated to take three workdays to register with the Danish tax authorities.

Measured in terms of start-up costs for starting a new enterprise, Denmark is still well positioned. The capital requirement of DKK 125,000 for establishing a limited liability company has not changed. A slight improvement has taken place in this area, however, primarily due to the fact that the required capital is measured as a percentage of GNP. This has the consequence that when the general income in society increases, the entrepreneur’s possibility of providing a bank guarantee does too.

It is worth noting that the Netherlands has reduced the time required to prepare and pay corporate tax, VAT and other social contributions by all of 75%. In Spain the amount of time required by enterprises to pay corporate tax, VAT, etc., has quadrupled. By comparison, this indicator has not changed in Denmark.

Policy Area: Bankruptcy Legislation

The policy area Bankruptcy Legislation – which includes regulatory measures governing the enforced closure of enterprises and the possibility of re-starting and reorganising an enterprise – is a central area of entrepreneurship. This is due to the great effect this area has on the riskiness of starting an enterprise. At the same time, it is crucial that entrepreneurs whose enterprise has gone bankrupt have the possibility of starting again.

Bankruptcy legislation must strike an expedient balance between two considerations: on the one hand, the law must ensure that a lender has reasonable possibilities of getting his/her money back; on the other, the law must consider the borrower, as it is not in the interests of society for a bankrupt entrepreneur to suffer economically for the rest of his/her life. This would prevent enterprising entrepreneurs from starting an enterprise again, for instance.

There are a number of possibilities for reducing the costs associated with bankruptcy, including debt discharge, debt restructuring and postponement of the repayment of debt. Debt relief affects both the uncertainty and the costs relating to bankruptcy. Restructuring as well as postponement and reduction of the repayment of debt often take place before a bankruptcy is carried out. This could help to save viable, but insolvent, enterprises, thus reducing the risk of bankruptcy.

Bankruptcy legislation is measured using three indicators provided by the World Bank (see Box A2.2). The length of time it takes for an enterprise to complete bankruptcy proceedings and the direct costs relating to this are measured. The percentage of capital owed to creditors and which it has been possible for them to extract from the enterprise in connection with the petition for bankruptcy is also measured. It is assumed that the faster and more efficiently an entrepreneur’s case can be processed, the more likely it is that the entrepreneur will start a new enterprise.

The World Bank’s data are collected through respondents’ replies concerning a fictitious bankruptcy case. The method has been developed and continuously improved by the World Bank in collaboration with a number of international experts. The World Bank’s basic data concerning Denmark are based on the replies of one lawyer. In other words, the Danish court system did not participate as a respondent in this survey. This means that the survey’s results are somewhat uncertain as regards Denmark’s bankruptcy laws.

The UK, Ireland and Finland are the countries with the best scores for the bankruptcy indicator. Denmark has seen a striking improvement in its bankruptcy legislation over the past five years and is now only 4 points below the top four countries. The top four countries improved by a single point from 2004 to 2009 (see Figure A2.3).

Due to Denmark’s improvement by slightly more than 20 points, Denmark advanced more than any OECD country. Measured in terms of costs relating to the closure of an enterprise, Denmark has managed to reduce these costs by 50 points over the past five years. The costs in this context are specified as a percentage of the property value. Similarly, the indicator shows the time spent on closing an enterprise: whereas it took an average of 3.4 years to close an enterprise in 2004, this can now be done in only 1.1 years on average. In addition, the repayment rate has improved slightly as well. This means that creditors are more likely to recover the amount owed to them. This also has a positive effect on the creditors’ willingness to take risks in relation to new entrepreneurs.

The Danish Government amended bankruptcy legislation both in 2005, when it became easier for insolvent entrepreneurs to be granted debt relief, and in 2007, when legislative amendments aimed at ensuring speedier administration of estates in bankruptcy were implemented. Finally, in late 2007, an early-warning scheme was established under the auspices of the Growth Houses (Væksthuse). The scheme is an offer of consultancy to enterprises experiencing financial difficulty, and helps to explain some of Denmark’s progress.

Policy Area: Labour Market Regulations

The policy area of Labour Market Regulations is central to entrepreneurs who enter into a growth process where they have to hire employees. Labour market legislation which stipulates high minimum wages as well as limitations and costs relating to the dismissal of employees has consequences for new and smaller enterprises, which typically have a limited number of employees.

Flexibility in the employing and dismissing of staff enables enterprises to take bigger risks. Rigid labour-market regulations can reduce the incentive to be a sole proprietor as they increase the challenges related to generating growth in the enterprise. The wider the gap between the average wage on the labour market and the minimum wage, the more flexibility an entrepreneur’s enterprise will have in setting wages. At the same time, increased flexibility makes the entrepreneurial enterprise more adaptable, thus increasing the enterprise’s market competitiveness.

Labour market regulations are measured using four indicators (see Box A2.3).

Both Denmark and the top three countries have improved their labour market regulations. In general, all countries have improved by 16.9 points on average. Austria, France, Norway and Sweden are the only countries to worsen in this area measured over the past five years. Denmark’s 18.6-point improvement is close to the average. Denmark’s improvement is especially due to improved employment flexibility, where Denmark shares first place with the US, Austria and Japan in 2009. This is the same indicator where most countries’ marked improvement is seen. Both Denmark and the top four countries experienced noticeable improvement in labour market regulations. The top four countries’ 23.3-point improvement was far greater than Denmark’s 18.6 points, however (see Figure A2.4).

Denmark’s labour market is regulated by law to a very low degree and is regulated instead by voluntary collective agreements between management and labour. Employment flexibility includes the possibility of using temporary contracts, minimum wages, etc. In Denmark, there are no restrictions on the mandatory length of temporary contracts or on the number of times they may be renewed. There are instances, however, where the court has ruled temporary contracts invalid because they were used to staff permanent positions. This is at variance with current legal practice.

Salaried employment is the most common type. The rules for the dismissal of salaried employees are laid down in the Salaried Employees Act. The precise costs of dismissing an employee depend on the salaried employee’s length of employment. Generally speaking, however, no major costs are connected to dismissing a salaried employee.

Most Danes have a 37-hour working week and receive an extra payment of 50–100% for overtime. No law restricts the number of weekly working days or the maximum number of hours. The law does stipulate, however, that an employee must have 11 hours of time off before having to report to work again, and the maximum average number of weekly working hours over a three-month period is 48.

The low level of statutory regulations also means that changes in this area will occur if labour and management agree to make it easier to dismiss and hire employees.

Policy Area: the Legal System

Legal rights are essential for a well-functioning market economy. A well-functioning legal system reduces the risks run by enterprises every time they enter into a contract with a supplier or customer. The Legal System policy area focuses on the efficiency of the legal system as it relates to resolving breaches of commercial contracts. An efficient legal system cannot be achieved solely by having the laws protect the partner. It is also necessary for the courts to function efficiently and to be capable of processing cases quickly – without incurring high costs on the enterprises as a result.

The Legal System policy area comprises three indicators (see Box A2.4).

Denmark has advanced slightly in this policy area. In general, the legal system is a very stable policy area. Denmark has well-developed structures for legal practice, which is a prerequisite for maintaining a stable market economy.

Denmark scores around 57 points in this policy area. This is somewhat behind the US, Finland and Austria which score between 78 and 80 points. Denmark is especially lagging behind the leading countries in the areas of “contract enforcement, costs” (37.4 points on average), and “contract enforcement, number of procedures” (20.6 points on average). The average for the top four countries (68.5 points) is also somewhat better than Denmark. Denmark saw a 1.4 point improvement from 2004 to 2009. The top four countries’ 0.4 point improvement is due solely to the US’s progress in “contract enforcement, number of procedures” (see Figure A2.5).

In the structure comprising the indicators used by the World Bank, the point of departure is a standardised case which makes it possible to compare the countries’ legal systems. The actual study is based on collected data about the legal system and on interviews with local lawyers.

According to the World Bank, it takes 380 days to enforce a contract in Denmark. This indicator measures the time from when legal proceedings begin until compensation has been paid. This includes both the days when the case is processed by the legal system and the period of waiting before and afterwards.

Measured in terms of the number of procedures associated with the payment of compensation, 34 procedures have been identified in the Danish legal system. This is also calculated from the time when legal proceedings are presented to the court until compensation is paid.

Measured in terms of costs relating to contract enforcement, both Denmark and Finland have advanced slightly. This is because costs have been reduced by 0.5–1% for both countries. The latest statistics from 2009 show that costs for Danish enterprises comprised 23.3%, whereas costs for enterprises in Finland comprised only 10.4%.

Policy Area: Competition Legislation

Removing access barriers by means of privatisation and deregulation and by reducing public-sector activities generates new business opportunities for existing and new enterprises alike. A well-functioning market depends on having a high degree of market competition. It is not expedient for entrepreneurs if an existing law contributes to obstructing the access of new enterprises to certain sectors, or if it is not possible for new private-sector enterprises to compete on equal terms with public-sector enterprises.

The indicator under the Competition Legislation policy area is shown below in Box A2.5.

Note: Data are available for only one year for this policy area, which is why the figure has not been updated over time. This also explains why the policy area is not included in the combined measurement of the framework conditions..

The “competition barriers” indicator measures competition factors on the national market. The indicator identifies the extent to which there are limits to the number of enterprises that may operate in a number of selected sectors. This particularly focuses on whether the sectors are protected by the state, either to protect the private-sector enterprises already operating in the market or to protect state-owned enterprises. The indicator’s topical relevance is somewhat uncertain as it uses data from 2003 and thus does not include a wide range of deregulatory measures adopted by the Danish Government from 2003 to the present. This includes deregulatory measures affecting the telecom market which led to the establishment of many promising Danish enterprises.

Due to the indicator’s shortage of current data, the policy area is not included in the combined weighing of the framework conditions.

Policy Area: Social Benefits and Health Insurance

The social safety net influences the motivation for starting one’s own enterprise. An unequivocal determination of how this affects entrepreneurial activity is not possible. For instance, low unemployment benefits could prompt more people to try to start their own business instead of remaining unemployed. This type of activity is called “entrepreneurs by necessity”. GEM’s international comparisons of “entrepreneurs by necessity” indicates that this category is virtually non-existent in Denmark (Shøtt, Thomas, 2009). This is presumably due to Denmark’s finely meshed social system. On the other hand, high unemployment benefits can also have the effect that salaried workers will be more willing to run the risk of setting up their own enterprise as they are ensured a minimum income if the entrepreneurial project fails. A finely meshed safety net thus reduces the risks of the opportunity-driven entrepreneur.

Similarly, access to public health insurance does not have unequivocal positive or negative consequences for entrepreneurial motivation. In terms of the motivation to start an enterprise, an attractive private health insurance policy can be a good argument for staying in a salaried position, instead of becoming self-employed, if public health insurance does not provide adequate cover or if taking out an equivalent private insurance policy is very costly. The Kauffman Foundation, a US think tank, points out that the lack of public health insurance in the US is one of the biggest problems facing entrepreneurship in the US.

The economic consequences for entrepreneurs at the time of hiring employees are that the entrepreneurial enterprise can be forced to offer the same health insurance scheme as established enterprises to keep up with the competition in the struggle to attract the cleverest employees. Because entrepreneurs will have fewer employees, it will be difficult for them to achieve the same discounts as established enterprises. For this reason, entrepreneurial enterprises will benefit from having their employees covered by a public healthcare plan. In so doing, society helps to defray direct expenses for the entrepreneurial enterprise (OECD, 2008b).

The indicators under the Social Benefits and Health Insurance policy area are shown below in Box A2.6.

Denmark is ranked third in this area, after Greece and the Netherlands. Both Denmark and the top four countries have improved in this policy area. Denmark improved slightly more than the top four countries, however, i.e. by 3.1 points, and the top four countries by 2.8 points. The top four countries’ improvement is primarily because public health insurance coverage of the US population has increased. The US is also the only country out of the top four countries which does not have universal public health care (see Figure A2.7).

Note: This policy area is not included in the combined measurement of the framework conditions.

The “public-sector spending on unemployment benefits” indicator shows how much public institutions spend on unemployment benefits, administrative costs and other public expenditure relating to unemployment benefits. Due to Denmark's “flexicurity” system, this is an indicator where Denmark is highly ranked. Even so, the Netherlands has more expenses per unemployed person, as the most recent report from 2007 shows. In 2006, Denmark was ranked ahead of the Netherlands. Yet, whereas Denmark reduced its expenditure in 2007, there was a corresponding increase in expenditure in the Netherlands.

Public health insurance coverage of the population is also included under the policy area. Most European countries have a longstanding tradition for a public healthcare sector which covers all or large segments of the population. For this reason, there is a difference between the European countries and the rest of the OECD in terms of this indicator.

Policy Area: Income Tax

All other factors being equal, a high income tax will affect a society’s growth potential. It is primarily the difference between income tax and corporate tax which is the decisive motivation for starting an enterprise. If the corporate tax is lower than the income tax, this will give entrepreneurs a greater incentive to keep their money in the enterprise and thus boost the enterprise’s growth potential.

A few countries have organised tax discounts or lower tax levels for entrepreneurs or small enterprises. This means that the economic incentive for starting one’s own enterprise increases in the same manner as a restructuring of income taxation would change the motivation to become an entrepreneur.

The indicator under the Income Tax policy area is shown below in Box A2.7.

It is a well-known fact that income tax is high in Denmark. Therefore it is not surprising that Denmark is far behind the highest ranking countries in this policy area. Denmark has lowered its income tax rate slightly in recent years, which led to an improvement from 6.3 points to 6.4 points. This is still far behind South Korea, for instance, which is ranked first in this policy area with a score of 94.4 points on the normalised index. It is only natural that income taxation is higher in a society with a well-developed welfare state as in Denmark. This also explains why Denmark comes in last when calculating the level of income taxation among the OECD countries.

The situation is the same when comparing Denmark with the top four countries. The top four countries experienced a 3-point improvement, primarily occurring within the highest margin income tax and labour-market contribution (see Figure A2.8).

Major reductions of income taxation are costly and it is not possible to lower the tax for the top three countries in this policy area without negatively affecting social schemes, like those around which Denmark’s welfare model is built. For this reason, among others, a number of countries, like the UK, South Korea and the Netherlands, have designed tax incentives to support entrepreneurs by means of favourable taxation of share options, investments in new enterprises, etc.

Policy Area: Wealth and Inheritance Tax

Wealth taxation reduces the volume of possible investment capital for new enterprises and lessens the incentive to amass wealth via entrepreneurial activities. High taxes on gifts and inheritance do not in themselves deter entrepreneurial activities. But in keeping with wealth taxes, they reduce the volume of investment capital. In addition, high inheritance taxes affect the possibility of transferring enterprises from one generation to another (OECD, 2008b).

The indicators under the Wealth and Inheritance Tax policy area are shown below in Box A2.8.

Together with a number of other countries, Denmark tops this measurement of wealth and inheritance tax, as both have been abolished in Denmark. The top four countries improved slightly in this area, primarily because they improved more under “wealth tax revenue” than they declined under “inheritance tax revenue”. Canada is especially responsible for this shift among the top four countries. Canada achieved the same level for wealth tax as the other top four countries (see Figure A2.9).

Note: This policy area is not included in the combined measurement of the framework conditions.

For a long time Denmark has been at the pinnacle of this policy area for wealth and inheritance tax, because Denmark has not taxed wealth for a number of years. Wealth taxation has also been abolished in many other OECD countries, however. Thus, only 5 out of 30 countries in the OECD still have taxation in this area. The same trend is seen in terms of inheritance taxation. In this respect, Denmark is no longer among the countries with the lowest level of taxation, however. The ranking of the various countries in terms of inheritance taxation has changed marginally. Accordingly there are no major fluctuations to speak of in this policy area. Denmark and the best three OECD countries have not changed position in the specification of wealth and inheritance tax.

With many countries without wealth and inheritance tax and with only a few countries with this type of taxation, the normalisation results show wide fluctuation. This is also why this policy area is not included in the combined measurement of the framework conditions. The quality of the individual indicators is deemed adequate, however.

Policy Area: Corporate Tax and Capital Gains Tax

Whereas corporate tax has little effect on small new enterprises, whose turnover is usually limited, it has a big impact on the profits of enterprises which are capable of developing into high-growth enterprises. Furthermore, increased globalisation will be of central importance in terms of the geographical location chosen by new high-growth enterprises. For an entrepreneur competing on a global market, the geographical location of his/ her office buildings is of minor importance, whereas the corporate taxation rate is crucial.

Similarly, a high tax on capital gains, share options and dividends affects private investors’ incentive for placing their capital at the disposal of enterprises, including high-growth enterprises. Also, a heavy tax on share options can negatively affect high-growth start-ups’ possibilities of attracting the best-qualified employees.

The indicators under the Corporate Tax and Capital Gains Tax policy area are shown below in Box A2.9.

In Denmark, company and capital taxes were significantly higher throughout the period than in the three top countries, which this year are Poland, Portugal and the UK. Denmark experienced a slight (1.9-point) improvement in the area. Similarly, the top four countries saw a 1.3-point decline. The greatest fluctuations primarily occur under the SME tax rate. Out of the top four countries, the US in particular negatively affects the trend due to its 19.7-point decline. Most of the top four countries are generally stable. The negative trend is due to the US, which had a combined decline of 6.1 points (see Figure A2.10).

Denmark has improved its framework conditions for the taxation of SMEs. As a result, Denmark advanced by 18.9 points under the SME tax rate indicator, compared to the first report in the 2004 Entrepreneurship Index. Similarly, the UK saw a slight 3.8-point decline under the same indicator. The picture is the same for Portugal which, in spite of improvements throughout the policy area, declined in terms of the SME tax rate. This was offset, however, by a 36-point improvement under dividend taxation.

Poland is still the top performer in this policy area, but declined by 2.3 points. Poland’s decline is especially due to a worsening of the framework conditions for dividend taxation and for corporate tax revenue. Denmark declined by 7.8 points under the last-mentioned indicator. A similar trend is seen in the specification of dividend tax, taxation of personal capital gains and taxation of share options, where Denmark has also lost ground. This is due to the fluctuations shown in Figure A2.10 whereby small indicator fluctuations have relatively big consequences for the countries’ ranking within the policy area.

Policy Area: Patent Standards and Legislation

Effective safeguarding of intellectual property rights is essential for entrepreneurs starting out with an innovative product, which has been invented or acquired by the entrepreneur. Intellectual property rights are based on the principle that the creator of an idea has the right to exert a certain amount of control over all the physical forms in which the person’s idea is realised. It is assumed that the higher the protection of the personal right of ownership, including financial activities and protecting intellectual property rights, existing in a society, the greater the incentive to be innovative.

A consequence of increased globalisation is that increasingly greater focus is brought to bear on sustained innovation and change. This requires the proper legal framework to be in place to reduce the risks run by the entrepreneur.

The indicators under the Patent Standards and Legislation policy area are shown below in Box A2.10

Despite a 1.4-point decline since 2004, Denmark still shares second place with Austria. Austria’s striking improvements since 2004 are primarily due to the implementation of an EU “IPR Directive” in Austria in 2004 and 2005, as well as marginal improvements in the protection of property rights.

There is a some uncertainty as to whether both indicators under this policy area are based on a quantitative expert survey carried out by the World Economic Forum. For this reason, the results are expected to vary, even if actual law amendments have not been implemented.

The top four countries experienced a 3.8-point improvement. Their improvement is primarily due to Ireland’s improvements in terms of IPR, whereas Denmark declined by 2.8 points. At the same time, Canada improved its property right protection whereas Denmark remained unchanged (see Figure A2.11).

Framework Conditions: Market Conditions

Market Conditions measures entrepreneurs’ general market access, including the quality of the demand from both the private and public sectors. Market Conditions includes the following four policy areas: access to foreign markets; extent of public-sector involvement; private-sector demand and public-sector demand.

Policy Area: Access to Foreign Markets

Removing trade barriers and increasing economic trade have made it possible for all types of enterprises – including entrepreneurs – to exploit global market opportunities. In order to have a large number of successful entrepreneurs, it must be easy for new enterprises to import and export goods. This means, among other things, that administrative burdens related to import and export should be limited and that easy, low-cost trade is supported by schemes that provide advice to enterprises concerning internationalisation and the prospects in foreign markets. This policy area is measured using two indicators which focus on the import and export burdens enterprises must incur to trade on foreign markets.

At present, Denmark is the top performer under this policy area with a total score of 84.2 points, even though Denmark has strikingly declined in terms of the export burdens indicator. However, Denmark’s 3.5-point decline is less than the 4.8-point decline of the top four countries during the same period (see Figure A2.12).

The trend in access to foreign markets was generally negative from 2004 to 2009. This is true of the three top-scoring countries on the normalised scale for this policy area, but is also the case for the top four countries, all of which experienced a negative trend under the export burdens indicator. The negative trend is due to the general increase in container freight costs.

Finland is the only country which declined under both indicators. Finland declined by 7 points under this policy area and is now ranked below Sweden. Despite the decline, Finland is still among the top OECD countries under this policy area. Sweden improved appreciably under this policy area, due to a significant improvement in the possibility of importing goods. During the period Sweden improved the indicator by 19 points and is now ranked second under the policy area with a total score of 78.8 points.

Policy Area: Extent of Public-sector Involvement

In most instances, free competition improves the possibility of starting and growing an enterprise. This is because public-sector market intervention can make it more difficult for new enterprises to compete if there are price controls, for instance, or if publicly-owned companies are not competing on market terms. Needless to say, public-sector intervention can benefit some enterprises, but this can be at the expense of others at the same time.

Four indicators are involved in the policy area, which together measure the extent to which the public sector is involved in the market mechanisms. This means that the indicators identify entrepreneurs’ scope within which to run an enterprise.

Denmark and the top three best countries are all over 89 points and rank significantly higher than the top four countries which average 78.1 points (see Figure A2.13).

Denmark and the three best countries under this policy area have the best framework conditions possible in terms of public-sector enterprises and investments and bank ownership. These countries (except for Finland) have maintained their positions since the beginning of the period. As a result, the indicators did not affect the overall ranking under this policy area. Finland’s first place is due to a noteworthy improvement in the first-mentioned indicator. Denmark and the three top countries under this policy area largely use private-sector companies for the production of goods and services, and the countries also have a deregulated banking sector. The reason for the low ranking of the top four countries is a lower score for public-sector companies and investment, as well as price controls.

Under the price controls indicator, Denmark advanced from 50 points to
62.5 points. The improvement is primarily explained by the decline in the other OECD countries. In terms of licensing restrictions, there is a slight improvement among the countries, except for Finland, however, which saw its situation worsen.

Policy Area: Private-sector Demand

The success of new enterprises depends on whether they can sell their goods and services. Their possibility of success in a market thus depends on the demand. Private-sector demand consists of enterprises’ and consumers’ buying power and willingness to buy entrepreneurs’ products. New enterprises can seek to compete with existing enterprises in terms of a number of parameters, such as price, quality and CSR. All these parameters affect whether the products in question are differentiated from the existing selection of products on the market.

When enterprises compete in terms of product price, there are different ways of gaining an advantage over the competition. It is frequently diffi-cult for new enterprises to assert themselves in markets where price is the most important parameter. These markets are often characterised as being unsophisticated. If enterprise competition is based on quality, on the other hand, the market is more sophisticated. A market where enterprises compete in terms of quality instead of price will typically be expected to be more dynamic. At the same time, consumers will experience greater product innovation. It will typically be easier for new enterprises to compete in a sophisticated market. In fact, in the opinion of US economist Amar Bhide, one of the reasons for the US’s great success as an entrepreneurial nation is that US consumers and enterprises are very willing to buy innovative products. Therefore, buyer sophistication is included in assessments of private-sector demand.

Denmark is ranked third under this indicator, even though it has fallen back by almost 20 points. Many other countries, including the top four, have experienced even sharper drops (see Figure A2.14).

Note: This policy area is not included in the combined measurement of the framework conditions.

All countries have declined under this policy area. This is attributable to the financial crisis, which has led to declining wealth and rising uncertainty for many consumers. This could explain why many consumers look at price instead of quality when buying.

The reason the decline seems dramatic is largely due to the methodical approach for the normalisation. The indicator is calculated on a scale from 1 to 7 points. By normalising the basic data from 0 to 100, a slight decline in an indicator will result in a relatively sharp drop on the normalised scale. In addition, indicator statements should be regarded as somewhat uncertain as the data are based on a questionnaire survey which seeks to identify consumer behaviour. This can result in wide fluctuations from one year to the next which are significant for the continuity of the Entrepreneurship Index’s basic data. Because of the indicator’s quality and because only one indicator is included under this policy area, the policy area is not part of the combined calculation of framework conditions.

Policy Area: Public-sector Demand

The size of the public sector is appreciable in many OECD countries, making it an important factor for overall demand. When public-sector institutions engage in procurement, they must consider the price but at the same time the procurement process must be safeguarded against corruption. Denmark’s public sector procures goods and services to an increasing extent via public procedures and the SKI agreements. It can prove difficult for new and smaller enterprises to assert themselves within these agreements.

No sound indicator exists for comparing public procurement across the OECD countries.

Framework Conditions: Access to Financing

Capital is required for starting a new enterprise. The capital can be obtained by means of personal savings, a bank loan or by investing venture capital in the enterprise. This is why the overarching framework condition Access to Financing is included in the Index. The policy areas assessed under this framework condition include access to loan capital, venture capital, share markets, business angels and other types of capital.

Policy Area: Loan Capital

The availability of loan capital is important to entrepreneurs’ prospects of starting and investing in their own enterprise. Without a large, efficient loan market for supporting new ideas and enterprises, many entrepreneurs will face great financial barriers in their efforts to start an enterprise.

The state can improve domestic financial markets by means of initiatives which improve the availability of loan capital. For entrepreneurs in particular, the state can issue bank guarantees to increase banks’ motivation to grant loans to entrepreneurs. For quite some time, Denmark has placed “getting started” loans and growth collateral at the disposal of Danish entrepreneurs.

There are a number of indicators available for measuring the size and efficiency of already existing loan-capital markets (see Box A2.14).

Denmark is ranked first in this policy area. From 2004 to 2009, Denmark improved by 21 points, due to improvements in every indicator (see Figure A2.15).

Most of the change in Denmark’s ranking is due to a reduced interest-rate spread. A low interest-rate spread makes it easy and inexpensive to borrow money. It promotes the terms for entrepreneurs when they need to raise capital for the enterprise in the start-up or expansion phase. When it comes to the “availability of loans” indicator, Denmark shares first place with Finland. These measurements have not yet captured the full impact of the effects of the financial crisis, which has made it considerably more difficult for enterprises to raise bank loans.

The “private-sector credit” indicator is very cyclical. The latest data were calculated for 2007, which means they do not include the recent difficulties on the credit markets caused by the financial crisis. Denmark experienced a modest improvement in the “national creditworthiness” indicator. Denmark’s ranking is basically unchanged, due to the country’s high ranking to begin with.

Denmark is ahead of the top four countries in every indicator for the policy area. The improvement of the top four countries in the period is primarily due to the growth of the “private-sector credit” indicator. Substantial changes should be expected in the specification of loan financing in next year’s Entrepreneurship Index once the full impact of the financial crisis is reflected in the statistics.

Policy Area: Venture Capital

Venture capital is an important source of financing for new enterprises with very high growth and for enterprises with a prolonged development phase for bringing a product to market – because these enterprises cannot finance their growth via sales. Only a tiny segment of new Danish enterprises need venture capital, yet they are some of the new enterprises with the greatest potential.

To expand the availability of venture capital, countries can take initiatives for developing national venture-capital funds or improving the regulation of the venture-capital market so that existing funds can be developed. These initiatives could include direct investments into the funds, financial guarantees for the funds or relaxing statutory restrictions which would make it more attractive for pension funds or insurance companies, for instance, to invest in venture funds.

There are a number of indicators for measuring venture capital, including the selection of capital during both the start-up and expansion phases. The combined targets for venture capital are shown in Box A2.15.

Denmark and the other Nordic countries have high scores when it comes to venture capital, and all Nordic countries are above the average score of the top four countries (see Figure A2.16).

The OECD has reclassified the various venture capital phases. As a result, comparable data are only available for two years. Norway’s advance is primarily due to an improvement in the availability of venture capital (expansion phase). Here, Denmark’s score is unchanged at 61 points, which is still marginally higher than in Norway. Denmark declines in terms of availability of venture capital, but still scores high. Some degree of fluctuation must be expected under this indicator as it is based on a questionnaire survey of a number of enterprise managers. The level reflects the fact that Danish enterprises feel they have good possibilities of obtaining venture capital in Denmark, which corresponds with the decent scores for the other indicators.

In Denmark, Vaekstfonden and the innovation environments contribute appreciable investments in the early phases, which partly explains Denmark’s relatively large market for venture capital in the early phases. Thus, a total of around 61% of investments in 2006 were carried out by the public sector (Vaekstfonden, 2008).

The top four countries do not perform nearly as well as the Nordic countries, whose lead is reflected in all three indicators. The gap is widest for the availability of venture capital (start-up phase), however. In spite of a well-developed US market for venture capital, it is not sufficient to consolidate the level of the top four countries.

Policy Area: Stock Markets

Efficient capital markets include well-functioning stock markets which are capable of assisting young enterprises to obtain funds when they become listed. The issuing of shares is a significant prerequisite for enabling enterprises to expand substantially without being completely dependent on loan funding. Moreover, an efficient stock market is required for having an efficient venture-capital market, as the stock market is one of the exit options for venture investors for getting their money back.

Thus, well-functioning stock markets are an important motivating factor, both for entrepreneurs who wish to expand their enterprise and for prospective new entrepreneurs. On the other hand, poor stock markets can be a barrier to new enterprises by making it easier for existing listed enterprises to maintain their strength compared to small unlisted companies.

Denmark’s score is 35 points, which is somewhat below the best-performing and top four countries (see Figure A2.17).

It is difficult to draw unequivocal conclusions based on stock-market data, as they vary according to stock-market fluctuations. For this reason, the quality of the data for the individual indicators in this policy area is somewhat uncertain. In addition, stock markets have become internationalised in that an enterprise can become listed beyond a country’s borders and in the form of stock-market mergers. This is also exemplified by OMX’s takeover of the Copenhagen Stock Market, which makes it difficult to collect national data. For this reason, Iceland, Sweden, Finland and Denmark score the same for this indicator.

Denmark’s improvement is due to factors such as the increase in market value of issued shares from 13 to 36 points. The financial crisis made a slight impact on the statistics but this cannot be seen in the extended specification from 2004 to 2009. On the other hand, there is a decline compared to last year.

The indicator “protection of investors” indicates the efficiency of the stock markets. Denmark is in the median range with an unchanged score of 49 points, whereas the three leading countries under this policy area are all somewhat higher. The top four countries also achieve high scores in terms of protection of investors, in spite of the fact that South Korea lowers the average significantly.

Policy Area: Business Angels

Business angels are private investors who invest in promising new enterprises. Business angels often contribute capital and skills to new enterprises. There are no comparable indicators for business-angel activities in the respective countries, which is why this policy area is not included in the index. However, studies carried out by Statistics Denmark show that only 7% of Denmark’s high-growth start-ups receive capital from a business angel. Similarly, it is estimated that business angels are responsible for 90% of the external capital invested in innovative newly founded enterprises in the US (FORA, 2009).

A number of public-sector initiatives have been carried out for the purpose of increasing this number and the level of activity among business angels. For instance, it has become easier in Denmark to invest annuity pension and capital pension funds in unlisted shares. The public sector has also supported private investment networks, and in 2007 Vaekstfonden launched a “Partner Capital” business area where Vaekstfonden invests together with business angels.

Policy Area: Other Types of Capital

An oft-repeated phrase is that entrepreneurs are funded by “fools, friends and family”. In other words, entrepreneurs often circumvent classic finance markets and obtain their investment capital out of their own pocket or as a loan from family or friends. Many Danes have invested a large share of their assets in their homes, and because of the decline in housing prices, it will be more difficult for many people to obtain the initial capital previously available from this source.

At present, there are no indicators for this policy area, which also explains why the area is not included in the calculations of the year’s measurements.

Framework Conditions: Creation and Diffusion of Knowledge

The biggest innovation in the revised model for entrepreneurial framework conditions is the increased focus on the creation and diffusion of knowledge. In a society with great technological and scientific developments, it is crucial for enterprises to have easy access to the latest knowledge. This is also crucial for many of the very promising entrepreneurial enterprises established on the basis of R&D carried out at institutions of higher learning. Creation and diffusion of knowledge includes the following policy areas: R&D activities; knowledge transfer; cooperation between enterprises; and technology absorption.

Policy Area: R&D Activities

Investments in knowledge are crucial to growth in a globalised world. The business community’s R&D expenditures are decisive for the development of new products and manufacturing methods. At the same time, it is necessary to have public-sector investments in basic research, where the road to commercialisation is often longer.

Small and large enterprises alike play an important part in the countries’ innovation results and share of R&D. The effect of increasing the focus on R&D among small and medium-sized enterprises is generally greater in smaller economies compared to large economies. According to researchers like David Audretsch, entrepreneurs play a special part in commercialising research funded by both the public and private sectors.

For a high-growth enterprise which wishes to operate in more than one market, cooperating with other enterprises internationally could be a good way of establishing the requisite market access and gaining knowledge about new innovation methods. In connection with patent applications, it is not certain that the patent will create the most growth in the country in which it is invented: it could generate higher growth and more jobs in the country where it is developed and sold (Bhide, Amar, 2008). In other words, it is not entirely clear that a high level of R&D activities leads to a large number of innovative enterprises and, thus, growth. It is equally dependent on whether there are entrepreneurs who are willing to bring the innovations to market.

The indicators under the R&D Activities policy area are shown below in Box A2.17.

Throughout the period, Denmark has had a low ranking compared to other OECD countries. Nor is there any sign that this will improve in the future, due to a 0.9-point decline from 39.8 to 38.9. Finland, the leading country in 2009, has remained stable since 2004, because both public-sector and private-sector investments in research were stable throughout the period. Similarly, both the US and Sweden declined much more sharply than Denmark, but due to Denmark’s point of departure, they are still ahead of Denmark.

R&D generates opportunities for entrepreneurs and encompasses a wide variety of activities which increase the availability of new knowledge in society. The costs of R&D activities are usually divided into two categories: R&D staff and R&D expenditure. These activities are jointly referred to as R&D input.

Under the R&D Activities policy area, the indicators are as follows: the state’s expenditure for R&D; R&D expenditure of institutions of higher learning; and the business community’s R&D expenditure as a percentage of GDP. The reason for this is that R&D is only socially useful if it increases the value creation of the production process. R&D is a policy area where Denmark is generally ranked low compared to other OECD countries. This is true of R&D funded by both the public sector and the private sector. Denmark experienced a slight decline of 0.6 points for total public-sector R&D expenditure. The situation for total private-sector R&D expenditure is worse, however, as Denmark declined from 64.1 points in 2003 to 0.1 points in 2007.

Another aspect of the proliferation of R&D is international cooperation between among various patent offices. The purpose of these agreements is to ease the proliferation and penetration of the research which lays the groundwork for new products. For this reason, international collaboration is measured via the proliferation of the patent collaboration treaty (PCT). Denmark improved its level from 17th place in 2003 to 14th in 2007, based on the proliferation of the PCT.

Policy Area: Knowledge Transfer

Efficient technology transfer of public-sector research to the business community means that society profits from the research as new products in existing enterprises and new enterprises based on research create jobs, new products and tougher competition.

This commercialisation process can be ensured by embedding university ownership of knowledge and patents deriving from public-sector research. Letting the universities assist the founding of enterprises based on available knowledge results in efficient technology transfer from universities to the market. For this purpose, new research funds, exemplified by Denmark’s science centres, help to promote strategic cooperation between new enterprises and universities.

The indicators under the Knowledge Transfer policy area are shown below in Box A2.18.

Throughout the period, Denmark has been ranked low compared to other OECD countries. Even so, Denmark experienced a 7.4-point increase, from
31.3 to 38.1. This should be seen in light of the fact that the two leading countries experienced a decline in the very same period. On the other hand, the top four countries have experienced a noticeable 5-point improvement since 2004 (see Figure A2.19).

As regards the development of the indicators under this area, Denmark and the top four countries are experiencing the same tendency. However, the overall increase is primarily the result of enterprises collaborating with universities and other public-sector research organisations and the number of patent applications submitted on behalf of the universities.

For instance, the statutory framework can generate incentives to encourage universities or other institutions to aim their efforts at creating new business ventures, spinoffs or other types of technology transfer based on basic public-sector research. This could be done by securing university ownership of the knowledge and patents spun off from public-sector research (exemplified by the US’s Bayh-Dole Act, which has been adapted to Danish conditions and implemented in Denmark) or the introduction of technology-transfer offices to promote strategic cooperation between enterprises and universities. Since its introduction, the transfer of technology has steadily increased in Denmark (Danish Agency for Science, Technology and Innovation, 2009).

Although Denmark has advanced overall by slightly more than 7 points, its overall ranking is still 17th. This is primarily because Denmark scores low in the indicator “enterprises collaborating with universities and other public-sector research institutions”. The validity of this indicator is somewhat uncertain, however.

The recent improvement is explained by the fact that Denmark has improved in the indicators “R&D collaboration between universities and the business community” and “number of patent applications submitted on behalf of universities”. This improvement is attributable to the fact that universities have increased their focus on the commercialisation of their research efforts. This increased focus on commercialisation is due to factors such as the ten science parks which have now gained a toehold in relation to universities and enterprises. At the same time, the effects of patent-law amendments in 2002 are now reflected in the statistics.

Sweden’s decline is because the country had fewer public-sector research projects funded by private-sector enterprises during the period. Sweden declined by 11.5 points under the indicator “R&D activities of institutions of higher learning funded by the business community”. Canada declined because fewer patents were issued to universities and other public-sector institutions. Canada fell by 20.2 points under the indicator “number of patent applications submitted on behalf of universities”.

Policy Area: Cooperation between Enterprises

Strategic cooperation is not limited to only involving enterprises and public-sector institutions. Cooperation between private-sector enterprises is also crucial for society’s general level of knowledge. Cooperation between two private-sector enterprises can lead to the sharing of high-tech knowhow, the dissemination of best practices within specific manufacturing areas, etc.

Cooperation between two private-sector enterprises will typically benefit both enterprises, as they will each receive new knowledge that can be implemented in their respective product development processes. The knowledge sharing can take place in every link of an enterprise’s value chain. A prerequisite for this, however, is that the proper legal and economic framework has been established beforehand.

If the parties agree to the financial incentives and the requisite legal safeguards are in place, the enterprises will be better positioned for complying with a cooperation agreement. This reduces the costs associated with the cooperation and at the same time increases the potential economic gains for both enterprises.

Collaborating with major established enterprises can be beneficial for entrepreneurs, as they can potentially draw on all the knowledge and expertise available in the large enterprises. The collaboration process will also benefit large enterprises as entrepreneurs are often quicker to act and more flexible than large enterprises, which enables the large enterprises to use the new enterprises to stay at or come to the cutting edge of developments.

The indicators under the Cooperation between Enterprises policy area are shown below in Box A2.19.

Denmark declined by 17.8 points. Ireland is the only top-four country included in the survey and made a decent improvement (see Figure A2.20).

Note: This policy area is not included in the combined measurement of the framework conditions. Data are not available for the US, South Korea or Canada under this policy area.

There are many indications that cooperating with other enterprises affects entrepreneurial innovation. This is especially true of small enterprises that do not necessarily have the resources to manage the requisite innovation process by themselves. From being a leading country in this area in 2004, Denmark fell to the median group among the OECD countries. The other countries at the top – such as Finland, Sweden and Poland – maintained their position, however. Denmark is expected to improve its position in future studies once business development programmes, like user-driven innovation, are reflected in the statistics.

This policy area is not included in the overall weighing. This is due to two factors, the first being that the indicator “cooperating with other enterprises” is based on data collected via questionnaire surveys or personal interviews (Summary Methodology, Fourth Community Innovation Survey, 2006). This allows for wide fluctuations which are probably not a realistic reflection of reality. The second is that the indicator includes only one of the top four countries.

Policy Area: Technology Absorption

The proliferation of ICT indicates the extent to which a technology has been adopted and accordingly must be deemed to constitute a social standard. The indicators under this policy area focus on the following areas: proliferation of e-business, proliferation of e-government as well as information and communication technology (ICT). Overall, the areas help to reduce enterprises’ administrative costs.

Regardless of the type or size of an enterprise, communication and administration are crucial for its productivity. Accordingly, this policy area also measures investments in ICT.

The indicators under the Technology Absorption policy area are shown below in Box A2.20.

Denmark is ranked third in this policy area. Denmark improved by 24.3 points in the period measured. Similarly, Japan, ranked first, has improved by only 1.5 points. Sweden, on the other hand, improved its performance by 5.3 points. Sweden was ranked higher than Denmark at the start of the period but has now been overtaken by Denmark. The top four countries experienced a 3-point decline, primarily due a decline for the US and Ireland under the indicator “enterprise resources spent on IT” (see Figure A2.21).

Note: Data are not available for South Korea or Canada under this policy area.

The improvement of both Denmark and Sweden is due to the fact that these countries both experienced a striking growth in the percentage of enterprises using e-government.

Denmark also saw striking improvement under the indicator “e-business as a percentage of total turnover”. Denmark improved by 81.8 points, or from 2% to 11%. This should be seen as an indication that internet business has become more widespread in Denmark. At the same time, Danish enterprises have managed to use the internet to set up businesses in foreign markets.

Denmark saw a marginal decline in relation to enterprise resources spent on IT (3.9 points) and enterprise resources spent on communication (5.9 points). The consequences are relatively few, however, as this does not affect the overall results for this policy area. At the same time, these indicators are somewhat uncertain as they are calculated as a percentage of the GDP. This means that any fluctuations can also be caused by changes in consumption.

Framework Conditions: Entrepreneurial Skills

The start-up and growth of new enterprises require entrepreneurial skills. Thus, a central framework condition for good entrepreneurial performance is Entrepreneurial Skills. Under this heading, the Index seeks to assess the ability of the individual countries to qualify its citizens to become dynamic entrepreneurs. If the population has a high level of entrepreneurial skills, they will also be more motivated to start their own business and their new enterprises will be more successful. An entrepreneur will never be able to personally manage every factor if the enterprise is to grow, however. For this reason, the index also includes policy areas such as access to qualified foreign labour and entrepreneurial infrastructure, which describe the access to additional expertise in this category. Entrepreneurial skills include the following policy areas: entrepreneurship education; attracting qualified labour; entrepreneurial training and experience; and, entrepreneurial infrastructure.

Policy Area: Entrepreneurship Education

Entrepreneurial skills can be developed in many ways. One is by teaching young people how to start an enterprise and make it grow. This should contribute to a situation where young people regard entrepreneurship as a career option and obtain the skills required to start a new enterprise.

Traditional business studies programmes at business colleges and similar institutions offer courses in subjects such as book-keeping, finance, etc. There are relatively big differences in the scope and quality of traditional business studies programmes, however. Business-college programmes are not only important because their graduates start new enterprises but also in view of the fact that other entrepreneurs will often need to employ business-college graduates. This makes it important for business-college graduates to be familiar with how to make enterprises grow and not only how to ensure proper operations in a big enterprise.

To improve the scope of entrepreneurial skills, the scope of study programmes, subjects and courses must be expanded all the way from lower secondary school to the university. Activities which go beyond traditional education – such as traineeships, establishing actual entrepreneurial centres, teaching entrepreneurship consultants, as well as teachers and professors – are prerequisites for success. The same is true of the introduction of entrepreneurship education in connection with supplementary study programmes and skills enhancement courses.

Entrepreneurship education is measured using three indicators which measure the instruction offered in starting and running one’s own enterprise and the effect of the instruction on the urge to start one’s own enterprise (see Box A2.21).

Denmark’s 40 points are somewhat behind the best-performing countries and the top four countries (see Figure A2.22). It is worth emphasising, however, that the data do not include Denmark’s many recent initiatives for promoting entrepreneurship in the education system. These initiatives are expected to boost Denmark’s score in the long term.

Note: Only one indicator under this policy area is included for several of the OECD countries.

Due to insufficient data for a number of OECD countries concerning the indicators included, the countries’ ranking is subject to some uncertainty.

Denmark’s score increased slightly from 2004 to 2009 due to developments within the “business college quality” indicator. By contrast, Denmark scored relatively low for the indicators measuring the amount of instruction received by Danish pupils – both during and after school – in starting one’s own enterprise. Finland is first in the specification of entrepreneurship education after school. This helps to consolidate Finland’s overall first place for this policy area.

As regards the top four countries, data for all three indicators are only available for Ireland and South Korea. In other words, the decline is subject to some uncertainty. Generally speaking, the top four countries – like Denmark – declined under the indicator “business college quality”.

Policy Area: Attracting Qualified Labour

Attracting qualified foreign labour is important to many Danish enterprises. It is especially important to knowledge-intensive enterprises which need to stay at the cutting edge of developments. This is true of new and existing enterprises alike. Leading entrepreneurial regions like Silicon Valley attract an enormous number of highly qualified foreign entrepreneurs. Analyses show that these immigrants were CEOs or R&D executives in one out of four newly established technology and engineering enterprises in the US from 1995 to 2005 – and at half of the newly started enterprises in Silicon Valley. These enterprises had 450,000 employees and generated turnover in the amount of USD 52 billion in 2006 (Wadhwa et al., 2009).

Looking at immigrants already living in Denmark, they have an increasing tendency to start their own business. Thus, this segment of the population has more enterprises per capita than the rest of the population (Danish Enterprise and Construction Authority, 2009).

The policy area also includes data for immigrants with a higher education. The grounds for doing this are that the higher the level of education, the greater the chances prospective entrepreneurs with an immigrant background have of surviving. In this context, immigrants with a higher education often have a higher level of specialisation, and their enterprises outperform other enterprises in competitive situations.

New Zealand has the highest score in this policy area and experienced a massive increase in foreign labour during the period. Improvement in this policy area is more modest for Denmark, Canada and Switzerland (see Figure A2.23).

Note: South Korea is not included in the top four.

From 2004 to 2009, Denmark and the three leading OECD countries in this policy area achieved a better score for the influx of foreign labour. Denmark had the lowest score of the countries singled out, however.

The indicator “immigrants with a higher education” has not been updated and therefore does not affect the countries’ shifts in this policy area. Two of the top four countries – Ireland and Canada – are the top performers for this indicator.

The top four countries declined slightly. This is primarily due to a decline in the influx and population of foreign labour, especially in Ireland which experienced a sharp drop from 2003 to 2006.

Policy Area: Entrepreneurial Training and Experience

Entrepreneurial skills can be developed by trying out what it is like to be an entrepreneur or by practising this in a more hands-on manner than is possible in the classroom. This type of experience and training will often give potential entrepreneurs a better understanding of what it means to start one’s own enterprise.

At present, there is a shortage of adequately satisfactory indicators which can be used for comparing this across the countries.

Policy Area: Entrepreneurial Infrastructure

Entrepreneurial Infrastructure covers the selection and creation of networks among the players who directly or indirectly advise and provide new knowledge to new and small enterprises. This area is difficult to measure. The annual reports from the Global Entrepreneurship Monitor (GEM) help to illustrate the public-sector aspect of the entrepreneurial infrastructure.

Just as the public-sector effort is significant for entrepreneurs’ possibilities of entering a sound growth process, the quality of private-sector consultancy is also important. There are no international measurements of this area, however. Growth Houses systematically refer people to private-sector consultants. This is expected to strengthen the market, thus making it more attractive for private-sector consulting firms to specialise in entrepreneurial problems.

Framework Conditions: Entrepreneurial Culture

The framework condition Entrepreneurial Culture measures the societal and individual attitude to entrepreneurship and to their own possibilities of becoming an entrepreneur. The framework condition Entrepreneurial Culture can be seen as the result of the other framework conditions, because if they are good, this is expected to affect the social culture which in turn will have a cumulative effect. In other words, changing society’s fundamental institutions and incentive structures will also create a more entrepreneurial culture.

Policy Area: Societal Attitude to Entrepreneurship

In addition to an efficient statutory framework, the societal attitude to entrepreneurship is a key element affecting whether newly founded enterprises will be successful. For instance, it is decisive whether starting and growing an enterprise is associated with high or low social status. If the population takes a favourable view of entrepreneurship, this will probably lead to a natural growth in entrepreneurial activity. A positive entrepreneurial culture is more likely to motivate individual entrepreneurs to start their own business.

For years the Danish Government has been working to enhance this motivation by means of entrepreneurship campaigns and entrepreneurship awards which support entrepreneurs’ motivation and willingness to risk starting an enterprise. Box A2.23 presents an overview of the indicators included under this policy area.

Denmark scores 46 points in this policy area, which is somewhat below the best-performing countries and the top four countries (see Figure A2.24).

Note: Data are lacking for a number of non-European countries.

Denmark’s score declined under the indicators “preference for becoming self-employed within five years” and “entrepreneurs among leaders” by 11.4 and 18 points respectively. The figures are subject to uncertainty, however, as the indicators are based on surveys involving 500 respondents (in the former case) and a number of business executives (in the latter).

Denmark is third in terms of the indicator “entrepreneurs among leaders”. This indicates a relatively widespread aspiration among Danes in managerial positions to become entrepreneurs. As entrepreneurs’ chances of survival largely depend on education and experience, it is a good sign that a large proportion of managers are willing to become self-employed. Under this indicator, Denmark is ahead of the three best-performing countries in the policy area on the whole. Denmark is also ahead of the top four countries.

As data are not available for all top four countries, the data are subject to some uncertainty.

Policy Area: Entrepreneurial Mindset

An entrepreneurial mindset is characterised by focusing on opportunities, innovative problem-solving and an optimistic approach to trial-and-error and risk-taking. This type of mindset is useful for large enterprises and public-sector positions and for people who wish to start their own businesses.

Measuring entrepreneurial mindset is very difficult. Instead, the index includes an indicator which measures the preference for becoming self-employed. This is not a perfect substitute, but provides a good idea of how attractive self-employment is considered to be, thus measuring the part of entrepreneurial mindset which deals with starting an enterprise. Box A2.24 presents an overview of the indicators included under this policy area.

Denmark is ranked far below the top four countries, with a score of 23.7 points. Greece experienced a sharp increase, whereas Portugal declined sharply after having the best framework conditions under the first measurement in 2004. The US is first and tops the list with 86 points. This makes the US the country whose inhabitants express the greatest desire to become self-employed (see Figure A2.25).

Note: The data cover the EU Member States, the US, Norway and Iceland only.

This policy area is measured using a single indicator. The indicator is based on a survey of 500 respondents. The basic data have not been adequately assessed to an extent that would enable this policy area to be included in the overall assessment of entrepreneurial framework conditions.

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Appendix 3: Description of New Entrepreneurship Indicators

A3.1. Quarterly and annual statistics for the influx of new enterprises

These statistical data were developed by Statistics Denmark to shed light on the quarterly influx of new enterprises. The statistics supplement the annual statistics for the influx of new enterprises, familiar from the annual Business Demography. As the quarterly statistics are issued earlier, they must be generated on grounds different from those in the annual statistics.

But the methodological point of departure for the quarterly statistics corresponds to the internationally standardised method for generating annual business-demographic statistics where enterprises’ identities are monitored over time. Several factors are included as criteria in connection with the quarterly statistics: starting date, demographic relationships and lower threshold limit.

Starting date

The quarterly statistics solely include units with an actual starting date in the quarter in which they are counted. The delimitation is based on knowledge of the economic units’ start-up and ending date in Statistics Denmark’s Statistical Business Register. If a unit has not existed or has been closed for two years prior to the most recently known starting date in the Statistical Business Register, the actual starting date will be identical to this. If the unit existed previously and has been closed for less than two years prior to the most recently known starting date, the actual starting date will be identical to the starting date for the previously closed unit, and the unit will be classified as a continuation.

Demographic relationships

The quarterly statistics include actual new enterprises only, i.e. enterprises where it cannot be proven by means of the Statistical Business Register that they have a demographic relationship – e.g. a takeover or a continuation of an existing enterprise’s activities – to enterprises already existing. If this type of relationship can be proven, the unit is not considered as being a genuine new enterprise and therefore will not be included in the statistics.

The quarterly statistics are generated by means of the information about the enterprises’ payments of VAT, ATP (Danish labour-market pension scheme), pay-as-you-earn and wage-sum taxes available at the time of calculating the statistics. These data are available for all businesses under an obligation to pay VAT and for employers which pay into ATP, making it a good indicator of economic activity. As this information is only available at the time of calculating the statistics, the quarterly statistics apply stricter rules than the annual statistics for whether a demographic relationship exists between two units. In addition, the determination of identity over time in the annual statistics depends on the volume of economic activity exchanged between the units, whereas it is interpreted as a correlation in the quarterly statistics if only one exchange occurs.

In addition, the annual statistics use employment information to identify demographic relationships between enterprises. This is not possible in the quarterly statistics, as employment data for new enterprises are retrieved from the employers’ combined quarterly ATP report; from this, it is not possible to identify individuals and thus identify whether groups of employees are moving from one enterprise to another, thereby forming a demographic relationship between them.

Lower threshold limit

The quarterly statistics only include enterprises with a certain minimum economic activity in the start-up quarter. New enterprises in the quarterly statistics are ultimately determined on the basis of their volume of economic activity. In order to be defined as new, an enterprise – in addition to meeting the terms described above – must also have risen above the lower threshold limit for economic activity in the start-up quarter.

In other words, the utilisation of the lower threshold limit for economic activity differs in the annual and quarterly statistics; the criteria for the last-mentioned are that enterprises must have risen above the lower threshold limit for economic activity already in the start-up quarter, whereas the annual Business Demography accepts enterprises that have risen above the lower threshold limit within their first year of existence. In return, the lower threshold limit is set lower in connection with the quarterly statistics.

A3.2. Expedited statistics covering high-growth start-ups

High-growth start-ups created on the basis of data in the quarterly ATP report

By means of the annual Business Demography, a population of genuine new enterprises is created in years t-1 and t-2. This population is delimited by means of the Business Statistics for year “t”, in which the units must have a level of activity which equates to at least five FTEs. After this, data for the annual number of ATP FTEs (all quarterly reports for the year divided by the number of quarters for which the enterprise has submitted ATP contributions) in t and t+3 are associated with this population. Enterprises whose growth in terms of ATP full-time employment exceeds 72.8% are designated “high-growth start-ups”.

Special information about the ATP employment indicator

The ATP report is generated on the basis of employers’ ATP reports linked to the enterprises’ business registration (CVR) number. By contrast, the Business Demography and the General Business Statistics use the CVR number as the counting unit, which is why deviations may occur between the results of the normal method for calculating high-growth start-ups and the ATP method.

Furthermore, the statistics do not allow for the possibility of assessing the trend in number of people employed. This is because the payments are converted into FTEs and a wide range of working people – sole proprietors, assisting spouses and salaried employees working less than 9 hours a week – are not included in the ATP report.

Secondly, the basic data comprise employers’ combined payments for full-time and part-time employees and as the ATP rates for full-time and part-time employees differ, the data do not allow for calculating the number of salaried employees. The employment statistics are used for dividing the total ATP payments by the contribution for one full-time employee and thus express the total scope of employment, i.e. the number of full-time employees which the amount paid equates to.

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Colophon

Title:
2009 Entrepreneurship Index

Subtitle:
Entrepreneurship Conditions in Denmark

Summary:
The 2009 Entrepreneurship Index presents a comprehensive mapping and evaluation of entrepreneurship in Denmark.

The Entrepreneurship Index is based on data for a number of OECD countries and identifies Denmark’s strengths and weaknesses as an entrepreneurial country.

In addition, the Index makes it possible to monitor on an ongoing basis whether Denmark’s framework conditions for entrepreneurs and their performance have improved to an extent that will enable the Danish Government to achieve its entrepreneurship goals. These goals state that Denmark must continue to be part of the European entrepreneurial elite in terms of start-up activity; and Denmark must be one of the countries in the world that has the highest percentage of high-growth start-ups by 2015.

Subject:

Publisher:
The Danish Enterprise and Construction Authority

Creator affiliation:
The Danish Enterprise and Construction Authority

Creator:
The Danish Enterprise and Construction Authority

Contributors:
Rosendahls - Schultz Grafisk (Digital edition, design and print)

Language:
English

ISBN:
978-87-92518-36-1

Digital ISBN:
978-87-92518-37-8

Version:
1.0

Date:
2010-03-08

Publication standard no.:
2.0

Dataformater:
html, jpg, gif, pdf, css

Publisher category:
state

Copyright:
The Danish Enterprise and Construction Authority

This page forms part of the publication "2009 Entrepreneurship Index" as the entire publication
Version no. 1.0, 2010-03-08
© The Danish Enterprise and Construction Authority.
Published by The Danish Enterprise and Construction Authority, www.deaca.dk