Sole proprietorships are growing in 19 countries, according to a new global report.
Of the 32 economies surveyed by the Global Entrepreneurship Monitor on this topic between 2019 and 2022, 19 countries saw an increase in the proportion of people who started or ran a new business but did not expect to add someone to the list within five years wages.
The leaders of this solopreneur trend, the most widespread in Europe but also taking place in other countries, were Slovakia (increase from 40% in 2019 to 71% in 2022), Germany (increase from 41% to 69%) and Oman (increase from 48% to 71%)
However, the rate of sole proprietorship decreased in 13 countries, with the largest decreases recorded in Poland (from 40% in 2019 to 15% in 2022), Brazil (54% to 31%) and the Republic of Korea (38% to 20%) ). This is not necessarily a negative trend: it may be because entrepreneurs in these countries are planning to hire workers.
Global Entrepreneurship Monitor is 24 years oldp offers perhaps the world’s broadest view of entrepreneurship, covering 51 economies that represent about two-thirds of the world’s population. It started as a joint project between Babson College and the London Business School. Babson is its global sponsor, and a consortium of academic experts from over 300 research institutions contributes to the report.
The researchers surveyed a random sample of at least 2,000 adults in each participating economy, for a total of 173,000 people. It also includes a survey of 36 national experts in 51 economies to provide context.
The report, written by lead author Stephen Hill, a professor at the Cleveland State University School of Business, portrays entrepreneurs as a key solution for countries around the world coping with a “new normal” shaped by climate change, rising poverty, market shifts, gaps in the chains supply, disrupted retail and distribution systems, and a rapidly changing global and economic system.
“Entrepreneurship is undoubtedly – and always has been – an important part of the solution to repair damaged economies and societies,” GEM Executive Director Aileen Ionescu-Somers and José Ernesto Amorós Espinosa wrote in the report.
The report is organized by three groups of economies: Tier A, with a GDP per capita above $40,000 (countries such as the United States, United Kingdom, Switzerland, Canada and Japan); Tier B, with a GDP per capita between $20,000 and $40,000 (countries such as Argentina, Chile, Greece and Poland); and Tier C, with a GDP per capita below $20,000 (including Brazil, China and India).
One of the key findings is that many citizens around the world are suffering financially from the pandemic, with many of those least able to afford it reporting a decline in household income. Among the highest-income Tier A countries, the decline averaged 32%. For level B it was 62%. For level C it was 72%. Togo was the hardest hit country, with 90% of adults reporting a decline in household income.
In this context, people around the world cited four main reasons for starting a business: to build great wealth, to make a living because jobs are scarce, to make a change and to continue the family tradition. The first two were the most common. Motivations to build great wealth and make changes were not related to income levels; however, the willingness to find replacement work was higher among those with lower incomes.
There have been many other findings that give a snapshot of where entrepreneurship is spreading around the world – and where support will be needed to ignite or revive it.
The report defines people as entrepreneurs if they have taken the steps to start a business or are already running one – as opposed to someone who is considering starting a business.
Here are some finds that stood out:
- The percentage of adults starting and running new businesses is highest in five countries: Colombia, Chile, Guatemala, Panama and Uruguay, followed by Uruguay and Togo.
- The United Arab Emirates (UAR) ranks first in the list of 12 countries where entrepreneurial activity has increased by 12%. It was followed by Colombia and Iran (both +6%).
- Significant decreases in total entrepreneurial activity were recorded in 16 countries. The largest decreases were in Chile (down 10%), Morocco (down 7%) and Israel (down 4%).
- The United Arab Emirates scored the highest on starting and growing a business for the second year in a row out of the 51 economies that experts assessed in the National Entrepreneurial Context Index. The index measures entrepreneurial ecosystems by country based on factors such as access to capital, access to entrepreneurship education and government policy
- The next nine countries in order are Saudi Arabia, Taiwan, India, the Netherlands, Lithuania, Indonesia, Switzerland, the Republic of Korea and Qatar. The United States was ranked fourteenth with Norway. At the bottom of the list is Venezuela, which is experiencing double-digit inflation and a recession in its main industry, oil.
- More than half of adults in Brazil, Panama, Tunisia and Togo planned to start a business within the next six months.
- Job creation is increasing in some countries. In two economies – the United Arab Emirates and Panama – the proportion of adult start-ups who expected to employ six or more people was four times higher than their counterparts who intentionally set up one-person businesses.
- The most popular industries to start a business are consumer and business services. Companies from this sector accounted for over 2/3 of new startups in 40 out of 49 countries.
- Entrepreneurs in Latin American and Gulf economies are adopting digital technologies in their small businesses to a greater extent than in other parts of the world, which ensures their success.
- The highest rates of churn for “positive” reasons, such as selling a business or taking advantage of a business opportunity, were in Saudi Arabia (5%), the United Arab Emirates, Canada and the United States (all 3%).
- Saudi Arabia has the highest percentage of adults (nearly 9/10) who believe there will be a good opportunity to start a business locally in the next six months. Indonesia followed closely behind. Japan was the lowest.
- Saudi Arabia also has the highest percentage of adults who think starting a business is easy (nearly 90%), followed by the Netherlands and Norway. Israel had the lowest percentage.
- Saudi Arabia ranks first in the percentage of people who believe they have the skills and confidence to start a business (nearly 90%), followed by Togo. This percentage is the lowest in Japan.
- In 37 of the 49 participating economies, more than 40% of respondents who saw good opportunities expressed fear that failure would hold them back. Saudi Arabia has the highest percentage of people who see an opportunity but say they would be put off by fear of failure (nearly two-thirds). The Republic of Korea has the lowest percentage of adults slowed down by fear of failure (one in five).
- Chile had the highest percentage of adults (22%) who invested in someone else’s business in the past three years, followed by Guatemala (14%).
- Men were more likely to start a business, with the exception of four countries — Indonesia, Poland, Qatar and Togo.
- Younger people are most likely to start a business worldwide, with the total entrepreneurial activity of those aged 18 to 34 being greater than that of those aged 35 to 64 in the 37 countries measured.
“Our aspiration at GEM is clear: to provide transparency to decision makers so they can make better decisions to truly promote entrepreneurship, understand specific national circumstances, and see the impact of their decisions over time,” said Professor José Ernesto Amorós, Chairman of the Board of GEM- GERA and a member of the GEM Mexico team, said in a statement.
Overall, the data provide powerful food for thought for policy makers who believe that entrepreneurship can be a valuable way to build a better economic future.