Page 36 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Entrepreneurship as Rural Economic Development Policy 25

The other distinction made by GEM is between early-stage entrepreneurs
who are either opportunity or necessity entrepreneurs. Opportunity entre-
preneurs are those who start businesses because they recognize an oppor-
tunity which they think they can turn into a business venture; necessity en-
trepreneurs, on the other hand, start businesses because of a lack of better
job alternatives—similar to the survival entrepreneurs referred to earlier.
GEM is especially useful in providing an indication of how the United
States compares with other countries, and the key measure here is entrepre-
neurial activity, expressed as a percentage of the population, ages 18 to 64
who are engaged in early stage entrepreneurship and established business
ownership (Minitti 2006). The argument is made that there is a systematic
relationship between the per capita GDP of a country, its economic growth,
and its level and type of entrepreneurial activity.
The United States ranks sixth in entrepreneurial activity in early-stage en-
trepreneurship with 12.4 percent of the population engaged—the average
across the 35 countries is 8.4 percent. For established business ownership,
the United States drops to 26th (4.7 percent), well below the average rate of
6.6 percent. The critical dynamic measurement is the survival rate expressed
as the ratio of established businesses to early-stage enterprises, however:
here, the United States ranks 31st of 35. Another important ratio is the one
that shows the proportion of opportunity entrepreneurs to necessity entre-
preneurs. The average ratio across the 35 countries is 5.9 to 1; the ratio for
the United States is 7.2 to 1, giving it a ranking of 8th.
The position of the United States with high levels of early-stage entrepre-
neurship and a low survival rate can perhaps be explained by two factors.
First, the United States’s opportunity-oriented culture and high incomes
spur entrepreneurship even if chances of success are relatively poor. This is
helped by the fact that failure is less stigmatized than in many countries.
Second, poorer regions across the United States have higher levels of ne-
cessity entrepreneurship—people without many viable alternatives start
businesses even though long-term prospects may not be too favorable.
From an entrepreneurship policy viewpoint, it seems clear that the issue is
less about encouraging more people to consider entrepreneurship, al-
though this undoubtedly has critical importance in certain parts of the
country, and more about how to increase the survival rate of businesses that
are created.
The comparative entrepreneurial performance of the United States has in-
creased relevance in considering the impacts of global competition.
Thomas Friedman’s (2005) recent book, The World Is Flat, based largely on
visits to India and China, provided his assessment that the world has
changed almost beyond recognition in the past decade and that the days of
the United States having global economic supremacy are numbered. His