5. Results of the Global 2000 Study — comparing Denmark and the
other participating countries
5.1 Levels of Entrepreneurial Activity
5.1.1 Overall Entrepreneurial Activity
As reported in section 3.30 of this report, entrepreneurial activity varies
between countries. In mid-2000 total entrepreneurial activity ranged from
16.04% of the population in Brazil to 1.25% of the population in Ireland.
The level of overall entrepreneurial activity in Denmark ranked 13th of
the 21 GEM nations with 4.51% (or 1 in every 22) of the population being
involved in some way. The analysis of total entrepreneurial activity allows
the 21 GEM nations to be placed in 3 distinct categories of entrepreneurial
activity:
|
Table 5.1 Classification of GEM nations
by Total Entrepreneurial Activity among the “Alpha Group”
|
 |
It should be noted that due to the method of analysis used, the results
given as percentages are in fact intervals (rather than points on a scale).
Therefore, the results, as shown above, represent the sample average (or
midpoint) between the highest and lowest levels of activity within which
the sample averages would fall 95% of the time if the survey were undertaken
again (i.e. the 95 percent confidence level).
When the above results are further analysed to distinguish between the
participation of men and women in entrepreneurial activity, we find a
male to female ratio for start-ups of 2.2:1. In other words whilst 1 in
24 of Danish men are currently starting a new business, only 1 in 54 women
are doing so. This ratio places Denmark 8th out of the 21 GEM nations
in terms of gender balance in business start-up rates. This ratio is generally
in line with the overall GEM pattern, where men are twice as likely to
be involved in entrepreneurial activity as women. In 18 of the 21 na-tions
the differences are statistically significant. Discounting the results
for Japan (where the sample size was too small to be trusted), France
recorded the lowest level of female participation with a ratio of 1:12,
whilst Canada recorded a prevalence rate of 6.9% for women compared to
9% for men (a ratio of 1.3:1), and in Spain 4.2% of the female population
was involved in entrepreneurial activity which virtually puts them on
a par with the 4.9% of Spanish men who reported involvement. Figure 5.1
shows participation in entrepreneurship by gender. Countries are presented
in rank order by their male participation rate.
|
Figure 5.1 Entrepreneurial Activity by
Country & Gender
|
|
5.1.2 Start-up rates of New Business
The measure of total entrepreneurial activity was established through
an adult population survey of approximately 2000 people in each country.
These interviews included questions designed to establish whether interviewees
were currently active in starting a business of some kind. Positive responses
to the questions were then classified according to whether the individual:
a) was currently trying to start a new business for themselves
b) was currently trying to start a new business or venture with their
employer
c) had already begun a business which paid full-time wages to one
or more employees (including the entrepreneur), for more than 3 months
and
d) had, in the last 3 years, personally provided funds for someone
else to start a business (not including buying publicly traded shares
or mutual funds).
These categories allow for an understanding of the types of involvement
in entrepreneurial activity in each country.
Figure 5.2 below, shows that in Denmark, 2.99% (1 in every 33) of the
adult population were actively involved in setting up a new business venture
(nascent firm) of their own. Of these 2.12% (1 in 23) were starting businesses
as autonomous entrepreneurs, whilst the remaining 0.87% (1 in 10) were
starting businesses or new ventures with their current employers, as part
of their normal work and with personal investment in the new venture.
These figures place Denmark 13th of the 21 countries in terms of autonomous
start-ups, but 6th in terms of start-ups within the workplace. This demonstrates
that Intrapreneurship is a significant aspect of new business creation
in the country.
|
Figure 5.2 Business Start-up rates
|
|
5.1.3 Survival Rates of New Businesses
In some of the countries studied there was a marked difference in the
rate of actually starting businesses and the number of young surviving
firms (up to 42 months old). In Brazil, which registered the highest num-ber
of start-ups in 2000 (12.26% or 1 in 8 of the population), only 4.44%
of firms started since 1996 had survived. In the USA (9.81% or 1 in 10
of the population starting a business in 2000) the survival rate for the
preceding 42 months was slightly better at 4.68%. In Denmark, with a start-up
rate of 2.99% (1 in 33 of the population), the 42 month survival rate
measured 2.11%. The ratio of "Baby" businesses to start-ups
provides a rough measure of the sustainability of new businesses in a
country. For Brazil, this ratio measured 36.21 and for the USA it was
47.65, but for Denmark it was 70.57, placing Denmark 9th out of the 21
nations in terms of new business survival with Brazil and the USA in 17th
and 13th places respectively (Note: these figures are only valid as a
cross-country comparison within the GEM project and use only GEM collected
data. They should not be seen as accurate portrayals of the survival rates
of each or any country). A high ratio can be interpreted as meaning that
greater amounts of pre start-up planning, adequate capitalisation and
capability in managing small businesses are present in those countries.
A high ratio can also be interpreted as demonstrating the degree of risk
aversion present in a country and a social pressure to succeed. This last
point is not however borne out in the case of Denmark where those who
would be prevented from starting a business through fear of failure measured
only 29% (only the USA, Canada and Norway recorded lower figures); in
Japan some 60% of the population claimed such a fear to be responsible
for lack of entrepreneurial activity. The most obvious conclusion to draw
from these results is that the Danes tend to be careful rather than fearful
in terms of business start-up.
Although the male to female ratio for starting new ventures is reported
in the previous section at 2.2:1, the gender balance changes considerably
when we look at firms which, according to the adult population survey,
have been started since 1996. Here the ratio is 1.41:1. The figures show
that only 1 in 41 Danish men are currently the owner/manager of a young
surviving firm (13th of the 21 GEM nations), whilst for women the figure
is 1 in 56 (placing Denmark 9th in the GEM rankings). Although the figures
should be treated with some caution, a very clear picture arises if one
compares the likelihood of survival between firms started by men and those
started by women. 4.1% of Danish men started businesses in 2000, but only
2.4% of Danish men were still running businesses that they have started
between 1996 and 2000 — a reduction rate of some 41%. For women,
with a more modest start-up rate of 1.9%, those running businesses that
they started between 1996 and 2000 are estimated at 1.8% — a reduction
of only 5%. As there is no evidence to suggest that more women were starting
businesses in the years prior to 2000 we can conclude that, in terms of
survival, female entrepreneurs are achieving a higher success rate than
their male counterparts. This result places Denmark 4th (after Spain,
Canada and the UK) in respect of the gender balance of surviving entrepreneurial
ventures. In Spain and Canada there are more women than men running young,
surviving firms.
5.1.4 Growth Expectations of New Businesses
Beyond survival of a new enterprise, we must consider possibilities of
growth. Two sets of figures were collected; the first concerning the expectations
of new start-ups (nascent firms) and the second the expectations of new
firms more than 3 months old, but yet to pay wages or salaries (both autonomously
started and those sponsored by an existing business). In each case interviewees
were asked about the number of employees they expected their firm to have
within the next 5 years.
|
Table 5.2 Growth Expectations of Nascent
& New Firms in Denmark
|
 |
The results for both categories of enterprise follow the same pattern
with more firms confident of employing small numbers than large numbers
of personnel and with firms which have already got underway approximately
three times more confident of their future growth than nascent firms at
each level.
At each of the employment growth levels, Danish firms express increa-sing
confidence in comparison with other GEM nations. So, whilst the nascent
firms of 18 GEM nations have a greater belief in their chances of employing
between two and five personnel in the next five years, only 2 (Sweden
and Finland) have a higher level of confidence in being able to achieve
a workforce of fifty or more. The predictions of firms that have already
existed for 3 months or more (without paying wages) are more conservative
at the top end, but the trend is the same.
5.1.5 Informal Investment — Business Angel
Activity
The extent of informal (personal) investment in new business ventures
provides an additional, if indirect, measure of entrepreneurial activity.
Interviewees were asked if, during the past 3 years, they had personally
provided funds for a new business started by someone else (not including
publicly traded shares or mutual funds). Figure 5.3 shows Denmark as having
a relatively high prevalence for informal investment with 1 out of every
24 adults in the country investing in a business started up by others.
Given that there is only a moderate correlation between these rates and
start-up activity, it may be that financial support of this nature reflects
a combination of influences, including the level of entrepreneurial activity
and social/cultural norms in respect of traditional networks of family
support.
|
Table 5.3 Business Angel Activity (Informal
Investment) – from Adult Population Survey
|
 |
This idea of funding being distributed through multiple social networks
is confirmed as a general state of affairs across all GEM nations. Exactly
half (50%) of the eight hundred informal investors who took part in the
21 country adult population survey had provided funding for family members
or other relatives. The second most popular recipient for funding (at
37%) were work colleagues, friends or neighbours. Strangers and others
received only 13% of total informal investment.
A possible explanation for the high level of informal investment in Denmark
may lie in the difficulties associated with access to formal sources of
capital (see Section 6.24 concerning debt, equity and venture capital).
According to the 2000 GEM Global Report, the ratio of informal investments
to formal venture capital investments was far higher in Denmark than in
all but one (Korea) of the 13 GEM nations for which reliable data could
be collected and estimates calculated. Table 5.4 shows, an estimated 94%
of all investment capital in Denmark, for new business start-ups and firms
less than 42 months old, came from informal sources in 1999.
|
Table 5.4 Levels of Formal & Informal
Investments
|
 |
Udgivet af EFS i februar 2001
Elektronisk version ved Hans Due Design AS
|
