Enterprise in Scotland: insights from the Global Entrepreneurship Monitor

The Global Entrepreneurship Monitor (GEM) aimed to assess the entrepreneurial attitudes, activity and aspirations of individuals interacting with environment to affect economic development. The research report investigated: Total early-stage Entrepreneurial Activity (TEA) in Scotland from 2000 to 2007; the strengths and weaknesses of entrepreneurship in Scotland; the determinants and barriers to entrepreneurial behaviour in Scotland; the types of entrepreneurship in Scotland; and entrepreneurship in Scotland compared with other regions in the UK and other similar small countries.

The report uses results from the GEM and draws from eight years of survey data (from 2000 to 2007), which comprises a total of around 16,000 adult respondents from Scotland (2,000 per year). GEM data is drawn from annual Adult Population surveys and National Expert surveys. GEM’s principal method of measurement of entrepreneurial activity is called the Total early-state Entrepreneurial Activity (TEA).

TEA has fluctuated around 6% in the UK and 5% in Scotland. There is no overall evidence of a long-term trend of rising or declining TEA rates in either the UK or Scotland between 2000 and 2007. TEA rates in Scotland and its sub-regions are at the expected level, given Scotland’s demographic profile and business stock. Scotland does not perform particularly badly relative to the UK, in terms of the nascent entrepreneurship rate or new business owner / manager rate. The report finds that those with any sort of entrepreneurial intention or activity are significantly more likely to be male. Regional in-migrants make a major contribution to entrepreneurial activity in Scotland. Nascent entrepreneurs and new business owners are more likely to have shut down a business in past years than other groups and most business closures are not caused primarily by financial problems. The review of trends in the GEM data has revealed significant patterns of difference in TEA across the UK and across Scotland, while demonstrating that entrepreneurial intention and activity is widely distributed across the population in demographic terms.

The report suggests that further research on the interaction between entrepreneurship and environment could reveal actionable bottlenecks to productive entrepreneurship in Scotland. Further research could be initiated to test whether start-up grants for young people have affected their perceptions of finance as a barrier. Prediction rates using individual level variables are poor and further work could investigate these rates using a more sophisticated multi-level analysis. The report suggests that it may be useful to pursue a comparative study of the effects on GEM startup data, business bank account opening data and VAT registration data at the regional (perhaps NUTS 2) level. Scotland should also welcome regional migrants because they have a high propensity to initiate start-up businesses after they arrive.