Measuring Entrepreneurship

Transcription

1 Entrepreneurship Measuring Entrepreneurship A Collection of Indicators 29 Edition OECD-Eurostat Entrepreneurship Indicators Programme OECD Statistics Directorate

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3 MEASURING ENTREPRENEURSHIP A Collection of Indicators 29 Edition OECD-Eurostat Entrepreneurship Indicators Programme

4 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 3 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries.

5 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 3 Foreword Entrepreneurship is even higher on the policy agenda today than in the past, as governments look for remedies and ways out of the economic crisis. The economic dynamism inherent in entrepreneurship is believed to be an important way to safeguard the long-run viability and competitiveness of national economies. While entrepreneurship has attracted greater attention, measurement of entrepreneurship has long been a problem, and remains so. There have been numerous initiatives at the local, regional or national level, and even a few at the international level, but internationally comparable data are scarce. The OECD has addressed entrepreneurship in the past through various analytical studies and reports, but no systematic effort has been made to establish an ongoing database specifically devoted to entrepreneurship across OECD countries. In 26 the joint OECD-Eurostat Entrepreneurship Indicators Programme (EIP) was started. Its objective is to develop internationally comparable data on entrepreneurship and to make international comparisons possible and meaningful. Last year saw the publication of the first results of the EIP and the initiative attracted a good deal of attention from policy makers, researchers and journalists. Encouraged by this, further efforts have been undertaken to develop the EIP programme. The results of these efforts appear in this publication. First, the geographical coverage has been considerably extended from 18 countries in 28 to 23 countries in the 29 publication. Important, too, is the fact that it has been possible to extend the scope of the EIP to emerging countries such as Brazil, which is included in this year s results. Equally important, this publication also presents data at the regional level; for instance, it is very rewarding to see that the region of Andalucia in Spain has applied EIP definitions at the regional level. Second, this year s publication extends the range of indicators significantly not only by calculating more detailed indicators (by industry and by size class), but also by presenting several indicators of entrepreneurial determinants. This allows countries to benchmark their entrepreneurial performance and entrepreneurial determinants and policies. Third, this year s entrepreneurship data are more timely. The EIP s close co-operation with national statistical offices had resulted in the collection of high-quality data, but sometimes at the expense of the timeliness. Following the economic crisis, many requests for more recent empirical evidence were received. This publication therefore presents a first set of timely indicators for a subset of countries and the EIP plans further research on this topic. This report has been prepared by Benoit Arnaud and Koen De Backer of the Structural Economic Statistics Division of the OECD Statistics Directorate. It should be stressed, however, that the EIP is a strong collaborative effort with Eurostat and its achievements are due to a willing commitment by many national statistics offices to harmonise methods and produce results. The continuing financial and intellectual support of the Kauffman Foundation has allowed the EIP to advance the data collection and indicator development work.

6 4 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS In addition, the Entrepreneurship Indicators Steering Group plays an important role in the EIP. It discusses the work programme and explores new directions for further research. The input from national delegates, as members of this group, along with representatives from international organisations such as Eurostat, the World Bank and the OECD, is invaluable. A list of their names and affiliations can be found at the end of this report. We look forward to further developing the EIP in the years to come by engaging more countries, producing more indicators and doing more analytical research. Measuring entrepreneurship has become an integral part of the statistical activities of the OECD. Data and indicators, publications and working papers, and other background information can be found at The OECD will continue its work on measuring entrepreneurship and welcomes the participation of all countries and regions in this important project. Paul Schreyer Acting Chief Statistician and Director of the Statistics Directorate

7 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 5 The Importance of Entrepreneurship It is abundantly clear that entrepreneurship is important for economic growth, productivity, innovation and employment, and many OECD countries have made entrepreneurship an explicit policy priority. As globalisation reshapes the international economic landscape and technological change creates greater uncertainty in the world economy, entrepreneurship is believed to offer ways to help to meet new economic, social and environmental challenges. Entrepreneurship has gained additional attention in the current economic crisis, as it is widely viewed as a key aspect of economic dynamism. Economic crises are historically times of industrial renewal, or creative destruction, as less efficient firms fail while more efficient ones emerge and expand. New business models and new technologies, particularly those leading to cost reductions, often emerge in downturns. Hence, policy makers look at entrepreneurship in combination with innovation to return to a period of sustained economic growth. Both entrepreneurship and innovation are associated with doing something new and policies, if designed appropriately, can be mutually reinforcing in (re-)creating economic dynamism. The dynamic process of new firm creation introduces and disperses innovative products, processes and organisational structures throughout the economy. Policy makers need to understand the determinants of and obstacles to entrepreneurship because they must analyse the effectiveness of different policy approaches. Ultimately, policy making must be guided, as far as possible, by evidence and facts. The lack of internationally comparable empirical evidence has constrained the understanding of entrepreneurship and many questions remain unanswered. Of course, entrepreneurship objectives and policies differ considerably among countries, owing to different policy needs and diverse perspectives on what is meant by entrepreneurship. In some countries, entrepreneurship is linked to regional development programmes, and the creation of new firms is stimulated to boost employment and output in depressed regions. In others, entrepreneurship is a key element of strategies designed to facilitate the participation of certain target groups, such as women or minorities, in the economy. Some countries simply seek to increase firm creation as such, while others set out to support high-growth firms. The OECD aims to provide policy makers and governments with internationally comparable indicators on entrepreneurship, but remaining mindful of the different policy contexts across countries. Different indicators are proposed, each of which represents one element of the broad and complex entrepreneurship phenomenon. As such, the OECD, in association with Eurostat and many others, has developed a new, and more robust, international knowledge base on entrepreneurship.

8 6 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS The OECD-Eurostat Entrepreneurship Indicator Programme (EIP) Over the past ten years, the OECD has addressed entrepreneurship issues in various analyses and reports. While these studies compiled relevant data to support specific research or policy tasks, no effort was made to establish an ongoing database of entrepreneurship across OECD countries. In 24, the 2 nd OECD Ministerial Conference on SMEs in Istanbul, Promoting Entrepreneurship and Innovative SMEs in a Global Economy, concluded that the statistical base for entrepreneurship research was weak and urged the OECD to develop a robust and comparable statistical base on which SME policy can be developed. The OECD launched the Entrepreneurship Indicators Programme (EIP) in 26 in order to build internationally comparable statistics on entrepreneurship and its determinants. In 27, Eurostat joined forces with the OECD to create a joint OECD- Eurostat EIP, and work began with the development of standard definitions and concepts as a basis for the collection of empirical data. Entrepreneurship is a multifaceted concept that manifests itself in many different ways, with the result that various definitions have emerged and no single definition has been generally agreed upon. Several definitions have an essentially theoretical basis and are not concerned with measurement. Another strand of research has largely bypassed the question of definition by defining entrepreneurship in terms of a specific empirical measure, such as self-employment or the number of small firms. Not surprisingly, these are measures that are readily available. The OECD-Eurostat approach has tried to combine the more conceptual definitions of entrepreneurship with (available) empirical indicators. Building on the theoretical contributions of Richard Cantillon, Adam Smith, Jean Baptiste Say, Alfred Marshall, Joseph Schumpeter, Israel Kirzner and Frank Knight, among others, 1 the following definitions were established: Entrepreneurs are those persons (business owners) who seek to generate value through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets. Entrepreneurial activity is enterprising human action in pursuit of the generation of value through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets. Entrepreneurship is the phenomenon associated with entrepreneurial activity. Given the multifaceted nature of entrepreneurship and the myriad factors that may affect it, establishing a realistic yet relevant set of measures to be produced as core entrepreneurship indicators was a major challenge. Inspired by a number of previous scholarly and policy-oriented studies, a simple entrepreneurship model was proposed 1. For an overview, see N. Ahmad and R. Seymour (28), Defining Entrepreneurial Activity: Defining Supporting Frameworks for Data Collection, OECD Statistics Working Paper.

9 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 7 as a first step towards establishing a framework for the development of empirical indicators that are both relevant and available. 2 The first stage of this model (Figure 1) comprises various determinants which policy can affect and which in turn influence entrepreneurial performance, or the amount and type of entrepreneurship that takes place. The final stage is the impact of entrepreneurship on higher-level goals such as economic growth, job creation or poverty reduction. Within each of the three main stages of this model, several subcategories are identified to flesh out the overall framework and guide the selection of indicators. While the entrepreneurship framework is presented here in a linear fashion, it was explicitly recognised that there are complex relationships among the different main components and subcomponents. Figure 1.Topic categories for entrepreneurship indicators Determinants Entrepreneurial performance Impact Regulatory framework R&D and technology Entrepreneurial capabilities Firm-based indicators Job creation Culture Access to finance Market conditions Employment-based indicators Economic growth Other indicators of entrepreneurial performance Poverty reduction The goal of the Entrepreneurship Indicators Programme was to establish a framework of relevant indicators for the study of entrepreneurship and to encourage countries to use the definitions, methodologies and classifications of the framework as much as possible when producing the data. Because the 25 Feasibility Study on Entrepreneurship Indicators revealed that no OECD country national statistics office (NSO) explicitly included entrepreneurship statistics within its programme, the EIP sought to change this by involving the NSOs in designing the specifications for the relevant variables and by involving them in the production of data. As a result, NSOs from several countries have participated in the collection of data. Given the multifaceted nature of entrepreneurship, the EIP does not propose any single measure as a key to understanding and comparing the amount and type of entrepreneurship that takes place across countries. Since entrepreneurship is a very broad phenomenon which encompasses, for example, virtually all new firm creation, it is extremely important for policy analysts to be able to understand and distinguish different types of entrepreneurial performance. The rationale for developing entrepreneurship indicators is to help policy makers to understand how the policies they put in place or adjust will affect entrepreneurship and, eventually, higher-level objectives for the economy and society. For countries to benefit from the experience of others, it is also essential that the entrepreneurship indicators allow for comparisons across countries by type of entrepreneurship. 2. N. Ahmad and A. Hoffmann (28), A Framework for Addressing and Measuring Entrepreneurship, OECD Statistics Working Paper.

10 8 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS Results of the Second Round of Empirical Data Collected under the EIP This publication contains the results of the second round of data collection under the EIP and presents, like last year s publication, different indicators of entrepreneurial performance. Indicators of firm births, deaths, high-growth firms, gazelles, etc., all capture different aspects of entrepreneurship and different types of entrepreneurs. For example, high priority is placed on measuring the creation of firms with employees, the number of high-growth firms, and the number of young, high-growth firms (gazelles). One might view these indicators as reflecting the evolution of entrepreneurship on a scale of economic importance: high-growth firms require the creation of a firm, typically with employees, and many firms with employees started out initially as individual traders. The EIP works closely with national statistical offices on developing these indicators of entrepreneurial performance. Indicators are typically calculated on the basis of business registers, with a clear focus on employer enterprises (i.e. enterprises with positive employment), in order to safeguard international comparability. When countries business registers use different definitions, and especially different thresholds, international comparisons of these data are endangered (especially for enterprises with employees). Table 1 (page 11) presents an overview of the availability of indicators on entrepreneurial performance in different countries. Compared to last year s publication, this year s is more extensive. This reflects the increasing importance accorded to the EIP. First, the geographical coverage has increased significantly, as indicators are collected for 23 geographical units, including one emerging country (Brazil) and one region (Andalucia, Spain). In addition (some) indicators of entrepreneurial performance are calculated at a more detailed level (e.g. size class and industry). Second, given the growing demand for more timely indicators (notably as a consequence of the economic crisis), this year s edition makes a first attempt to produce more recent empirical evidence. While business registers allow for the development of solid, internationally comparable indicators, they are not very timely. This edition therefore presents some first results based on different data sources (e.g. administrative data) to analyse more recent trends in entrepreneurship. In the coming years, the EIP will analyse this issue in more detail. Third, the number of indicators presented has increased significantly, as indicators of entrepreneurial determinants are also included. In filling out this aspect of the EIP framework, various data sources have been used to address this very broad and diverse group of determinants. Survey data are presented in addition to hard data for some indicators, as these are the only available data. Four indicators for each of the six entrepreneurial determinants are presented, but many more could have been included. This represents another area for future EIP work: to collect all possible indicators of entrepreneurial determinants and to analyse them in terms of availability, relevance, international comparability, etc.

11 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 9 In this edition, the definition and comparability of the most important indicators are discussed together with the main observations. In order to facilitate the discussion, the indicators have been grouped into sections. Section A, Structural indicators on enterprise population, sketches out the importance of different size classes in terms of enterprises, employment, value added and exports. These indicators can be considered the result of past entrepreneurship, but they also determine the opportunities and boundaries of present and future entrepreneurship. A.1. A.2. A.3. A.4. Number of enterprises by size class Employment by size class Value added by size class Exports by size class Section B, Entrepreneurial performance, presents different performance measures of entrepreneurship such as birth, death and survival rates of employer firms, high-growth firms and gazelles. B.1. Employer enterprise birth rates (manufacturing and services by industry, by size class) B.2. Employer enterprise death rates (manufacturing and services, by industry, by size class) B.3. One- and two-year survival rates (manufacturing and services) B.4. Share of one- and two-year-old employer enterprises in the population (manufacturing and services) B.5. Share of high-growth firms (employment) B.6. Share of high-growth firms (turnover) B.7. Share of gazelles (employment) B.8. Share of gazelles (turnover) B.9. Employment creation by enterprise births B.1 Employment creation by enterprise deaths Section C, Timely indicators of entrepreneurship shows the first results of using other data sources to develop insights on recent trends in entrepreneurship. Data are presented for a subset of countries, but as already mentioned, more countries are to be included in the future. C.1. C.2. Timely indicators on enterprise entries for selected countries Timely indicators on enterprise exits for selected countries

12 1 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS Section D, Entrepreneurial determinants presents different indicators for the six groups of entrepreneurial determinants within the EIP framework. The choice of indicators is based on their availability and the possibility to update them on a regular basis. Information on the quality of the indicators (comparability in terms of accuracy and availability) is also discussed. D.1. D.2. D.3. D.4. D.5. D.6. Knowledge creation and diffusion D.1.a. Business R&D intensity, by size class of firms D.1.b. Firms with new-to-market innovations, by size D.1.c. Firms collaborating on innovation, by size D.1.d Turnover from e-commerce Access to finance D.2.a Ease of access to loans D.2.b. Business angels (networks) D.2.c. Venture capital investments D.2.d. Share of high-technology sectors in total venture capital Entrepreneurial capabilities D.3.a. Population with tertiary education D.3.b. Self-employment by place of birth D.3.c. International students in tertiary education D.3.d. Population aged with training in starting a business Regulatory framework D.4.a. Ease of doing business D.4.b. Barriers to entrepreneurship D.4.c. Top statutory personal income tax rate D.4.d. Top statutory corporate income tax rate Market conditions D.5.a./b. Competition law and policy indicator (main components) D.5.c. Import burden D.5.d. Export burden Entrepreneurial culture D.6.a. Preference for self-employment D.6.b. Entrepreneurial perceptions D.6.c. Positive image of entrepreneurship and entrepreneurs D.6.d. Negative image of entrepreneurship and entrepreneurs The graphs in the following pages present the indicators of entrepreneurship performance and determinants across countries. They give interesting information but should not be understood to rank individual countries in terms of their level of entrepreneurship. Indeed, one of the main observations arising from the empirical evidence is the difference in countries entrepreneurial regimes and thus the need for a differentiated analysis, while controlling for differences among countries, industries and enterprises.

13 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 11 Table 1. Availability of indicators across countries OECD Countries Employer enterprise population by size class Total firm population by size class Net employer enterprise population growth rates Net total firm population growth rates Employer enterprise birth rates Employer enterprise death rates Employer enterprise churn rates 1-year survival rates (employer enterprises) 2-year survival rates (employer enterprises) 3-year survival rates (employer enterprises) 4-yearsurvival rates (employer enterprises) 5-year survival rates (employer enterprises) Share of 1-year-old emp. enterprises in population Share of 2-year-old emp. enterprises in population Share of 3-year-old emp. enterprises in population Share of 4-year-old emp. enterprises in population Share of 5-year-old emp. enterprises in population High-growth firm rates by employment Gazelle rates by employment Employment in the population of births Employment in the population of deaths Employment in 1-year-old enterprises Employment in 2-year-old enterprises Employment in 3-year-old enterprises Employment in 4-year-old enterprises Employment in 5-year-old enterprises Average firm size (employment) after 1 year Average firm size (employment) after 2 years Average firm size (employment) after 3 years Average firm size (employment) after 4 years Average firm size (employment) after 5 years High-growth firm rates by turnover Gazelle rates by turnover Value added by small enterprises Share of exports accounted for by small enterprises Australia x x x Austria x x x x x x x x x x x x x x x x x x x Belgium x x x x Canada x x x x x x x x x x x x x x x x x x Czech Republic x x x x x x x x x x x x x x x x Denmark x x x x x x x x x x x x x x x x x x x Finland x x x x x x x x x x x x x x x x x x x x x x x France x x x x Germany x x x Greece x x x Hungary x x x x x x x x x x x x x x x x x x x x x x x Iceland x x x Ireland x x x

14 12 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS Employer enterprise population by size class Total firm population by size class Net employer enterprise population growth rates Net total firm population growth rates Employer enterprise birth rates Employer enterprise death rates Employer enterprise churn rates 1-year survival rates (employer enterprises) 2-year survival rates (employer enterprises) 3-year survival rates (employer enterprises) 4-yearsurvival rates (employer enterprises) 5-year survival rates (employer enterprises) Share of 1-year-old emp. enterprises in population Share of 2-year-old emp. enterprises in population Share of 3-year-old emp. enterprises in population Share of 4-year-old emp. enterprises in population Share of 5-year-old emp. enterprises in population High-growth firm rates by employment Gazelle rates by employment Employment in the population of births Employment in the population of deaths Employment in 1-year-old enterprises Employment in 2-year-old enterprises Employment in 3-year-old enterprises Employment in 4-year-old enterprises Employment in 5-year-old enterprises Average firm size (employment) after 1 year Average firm size (employment) after 2 years Average firm size (employment) after 3 years Average firm size (employment) after 4 years Average firm size (employment) after 5 years High-growth firm rates by turnover Gazelle rates by turnover Value added by small enterprises Share of exports accounted for by small enterprises Italy x x x x x x x x x x x x x x x x x x x x x x x Japan x x x Korea x x x Luxembourg x x x x x x x x x x x x x x x x x x x x x x x Mexico x x x Netherlands x x x x x x x x x x x x x x x New Zealand x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x Norway x x x x x x x x x x x x x x x x x x x Poland x x x x Portugal x x x x x x x x x x x x x x x Slovak Republic x x x x x x x x x x x x x x x x x x x x x x x Spain x x x x x x x x x x x x x x x x x x x x Switzerland x x Sweden x x x x x x x x x x x Turkey x x x United Kingdom x x x United States x x x x x x x x x x x x x x x x

15 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 13 Non OECD Countries Employer enterprise population by size class Total firm population by size class Net employer enterprise population growth rates Net total firm population growth rates Employer enterprise birth rates Employer enterprise death rates Employer enterprise churn rates 1-year survival rates (employer enterprises) 2-year survival rates (employer enterprises) 3-year survival rates (employer enterprises) 4-yearsurvival rates (employer enterprises) 5-year survival rates (employer enterprises) Share of 1-year-old emp. enterprises in population Share of 2-year-old emp. enterprises in population Share of 3-year-old emp. enterprises in population Share of 4-year-old emp. enterprises in population Share of 5-year-old emp. enterprises in population High-growth firm rates by employment Gazelle rates by employment Employment in the population of births Employment in the population of deaths Employment in 1-year-old enterprises Employment in 2-year-old enterprises Employment in 3-year-old enterprises Employment in 4-year-old enterprises Employment in 5-year-old enterprises Average firm size (employment) after 1 year Average firm size (employment) after 2 years Average firm size (employment) after 3 years Average firm size (employment) after 4 years Average firm size (employment) after 5 years High-growth firm rates by turnover Gazelle rates by turnover Value added by small enterprises Share of exports accounted for by small enterprises Bulgaria x x x x x x x x x x x x x x x x x x x x x Brazil x x x x x x x x Estonia x x x x x x x x x x x x x x x x x x x x x x x Israel x x x x x x x x x Lithuania x x x x x x x x x x x x x x x x x x x x x x x Latvia x x x x x x x x x x x x x Romania x x x x x x x x x x x x x x x x x x x x x Slovenia x x x x x x x x x x x x Andalucia x x x x x x x x x

16 14 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS A. STRUCTURAL INDICATORS ON ENTERPRISE POPULATION Definitions An enterprise is a legal entity possessing the right to conduct business on its own, for example to enter into contracts, own property, incur liabilities for debts and establish bank accounts. It may consist of one or more local units or establishments corresponding to different production units situated in a geographically separate place and in which one or more persons work for the enterprise to which they belong. The total number of persons engaged is defined as the total number of persons who worked in or for the concerned unit during the reference year. Total employment excludes directors of incorporated enterprises and members of shareholders committees who are paid solely for their attendance at meetings, labour force made available to the concerned unit by other units and charged for, persons carrying out repair and maintenance work in the unit on the behalf of other units, and home workers. It also excludes persons on indefinite leave, military leave or those whose only remuneration from the enterprise is by way of a pension. Comparability All countries present information using the enterprise as the statistical unit except Japan, Korea and Mexico, which use establishments. This may create some lack of comparability but, because most enterprises are also establishments, this is not expected to be significant. An area, in which considerable differences do arise, however, is the coverage of data on enterprises or establishments. In many countries, this information is based on business registers, economic censuses or surveys that may have a size-class cut-off. Indeed, all countries have thresholds of one sort or another, depending, often, on the tax legislation and permissible business burdens in place across countries. For Ireland, only enterprises with three or more persons engaged are covered, while the data for Japan and Korea do not include establishments with fewer than four and five persons engaged, respectively (for information, see OECD SDBS database). Enterprises that operate purely in the underground economy will naturally be very difficult, if not impossible, to capture, and these are most likely to be small. However, despite these differences, it is possible to make sensible comparisons across countries. The size-class breakdown used provides for the best comparability given the varying data collection practices across countries. Some countries use slightly different conventions. Data shown for 2-49 actually refer to 2-99 for the United States; data shown for actually refer to for Australia and Korea, 5-99 for New Zealand and for the United States; data shown for 25+ actually refer to 2+ for Australia and Korea, 1+ for New Zealand and 5+ for the United States. Data typically refer to the total market economy excluding financial intermediation (ISIC 65-67), but for the Number of enterprises it also excludes Mining and Electricity, gas and water supply for Belgium, Greece and Hungary, while for Employment, it also excludes Mining and Electricity, gas and water supply for Austria, Belgium, Estonia, Finland, Greece, Hungary, the Netherlands, Portugal and Slovenia. Data for Ireland, Japan, Korea, Luxembourg and the Slovak Republic refer to manufacturing only. Overview Since the presented indicators reflect structural characteristics of the business sector across countries, observations do not change much from one year to the next. Hence, they are in line with the observations made last year. The large majority of enterprises are so-called microfirms: firms with fewer than ten employees represent three-quarters or more of the employer firm population in most countries. Their importance is somewhat smaller in a couple of countries but this seems due to differences in data collection and coverage (Ireland, Korea, Japan, Luxembourg and the Slovak Republic). In the United States micro-firms are less prominent. The importance of micro-firms is much smaller in terms of employment with a share below 4% in all countries. In most countries micro-firms are responsible for between 2% and 3% of total employment in the economy. The employment share of large firms averages between 3% and 4% across countries. The employment share of the middle size classes of firms, especially firms with 1-5 employees, is significantly lower in all countries. This largely reflects the claim made in empirical research that young entrepreneurial firms face difficulties for attaining higher growth after their first years of existence. Source OECD Structural and Demographic Business Statistics (SDBS) Database. For further reading Statistical publication OECD (forthcoming), Structural and Demographic Business Statistics 2-27, OECD, Paris.

17 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 15 A.1-A.2 Number of enterprises and employment by size class Number of enterprises 1,2 By size class, % 9% 8% 7% 6% 5% 4% 3% 2% 1% % 1. Market economy, excluding financial intermediation. Manufacturing sectors only for Ireland, Japan, Korea, Luxembourg and the Slovak Republic. 2. Number of establishments for Korea, Japan and Mexico for Iceland, 24 for the United States, 23 for Mexico. 4. Enterprises with 3 or more persons engaged. 5. Establishments with 5 or more persons engaged. 6. Establishments with 4 or more persons engaged. 7. Data are based on the Establishments& Business Frame of the Regional Statistical Institute of Andalucia (IEA). The data refer to establishments and enterprises with 4 or more persons engaged in an economic activity in Andalucia; they contain active enterprises with headquarters in Andalucia as well as active establishments with headquarters outside Andalucia. Employment 1,2 Number of persons engaged, by size class, % 9% 8% 7% 6% 5% 4% 3% 2% 1% % 1. Market economy, excluding financial intermediation. Manufacturing sectors only for Ireland, Japan, Korea, Luxembourg and the Slovak Republic. 2. Number of employees for New Zealand and the United States for the United States, 23 for Mexico. 4. Enterprises with 3 or more persons engaged. 5. Establishments with 4 or more persons engaged. 6. Establishments with 5 or more persons engaged. 7. Data are based on the Establishments& Business Frame of the Regional Statistical Institute of Andalucia (IEA). The data refer to establishments and enterprises with 4 or more persons engaged in an economic activity in Andalucia; they contain active enterprises with headquarters in Andalucia as well as active establishments with headquarters outside Andalucia.

18 16 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS A. STRUCTURAL INDICATORS ON ENTERPRISE POPULATION Definitions Value added Value added corresponds to the difference between production and any intermediate consumption; the definition used here for intermediate consumption varies, depending on the valuation used for value added. The valuation of value added can be made according to any of the following: factor costs, basic prices, market prices and producers prices, depending on the treatment applied to indirect taxes and subsidies. Trade Export data are compiled according to the EU harmonised concept (special trade), including processing. Exports by size classes describe the contribution of enterprises of different sizes to total exports. This allows for analysing the impact of trade on employment. Comparability Value added Data refer to value added at factor costs in the EU countries and value added at basic prices for Australia, Japan and Korea. All countries present information using the enterprise as the statistical unit except Japan, Korea and Mexico, which use establishments. For Ireland, only enterprises with three or more persons engaged are covered, while the data for Japan and Korea do not include establishments with fewer than four and five persons engaged, respectively. The size class breakdown used provides for the best comparability across countries given the varying data collection practices across countries. Some countries use slightly different conventions. Data shown for actually refer to for Australia, and Korea; data shown for 25+ actually refer to 2+ for Australia and Korea. Data typically refer to the total market economy excluding financial intermediation (ISIC 65-67), but for a certain number of countries, they also exclude Mining and Electricity, gas and water supply. Data for Japan, Korea, Luxembourg, the Netherlands and the Slovak Republic refer to Manufacturing only. Trade Data on intra-eu and extra-eu exports are treated separately, owing to different data collection systems and thresholds. Total exports are compiled by adding intra- EU and extra-eu exports. Since the data refer to years before the recent EU enlargement, exports between the pre-enlargement EU countries and the new EU countries are treated as extra-eu exports. Overview The importance of large firms, i.e. firms with more than 25 employees, is more pronounced in terms of value added and exports. In the majority of countries large firms account for close to 5% of value added. In countries such as Italy and Greece, however, firms in smaller size classes are responsible for more than 4% of the value added created in the country. The group of smallest firms (i.e. micro-firms) accounts for a major share of the creation of value added in these countries. Because of the importance of scale economies and fixed costs in exporting, micro (1-9 employees) and small (1-49 employees) firms represent only a small share of total exports. Large firms are responsible for the majority of exports in most countries. Previous research has shown that multinational enterprises play a major role, as they often localise production and exporting facilities in one country to service not only that country s market but also markets in neighbouring countries. Source Eurostat (29), External Trade by Enterprise Characteristics OECD Structural and Demographic Business Statistics (SDBS) Database. For further reading Eurostat (26), External Trade by Enterprise Characteristics, Methodologies and Working Papers (trade data). OECD (forthcoming), Structural and Demographic Business Statistics 2-27, OECD, Paris OECD (28), Linking Trade with Structural Business Statistics: OECD Progress Report, paper prepared for the Working Party on International Trade in Goods and Trade in Services Statistics, OECD, Paris.

19 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 17 A.3-A.4 Value added and exports by size class Value added 1 1% By size class, % 8% 7% 6% 5% 4% 3% 2% 1% % 1. Market economy, excluding financial intermediation. Manufacturing sectors only for Ireland, Japan, Korea, Luxembourg, Netherlands and the Slovak Republic for Mexico. 3. Enterprises with 3 or more persons engaged. 4. Establishments with 4 or more persons engaged. 5. Establishments with 5 or more persons engaged. Exports 1 23, as a percentage of total value 1% Unknown 9% 8% 7% 6% 5% 4% 3% 2% 1% % 1. Total economy. Source: OECD Trade by Enterprise Characteristics (TEC) Database.

20 18 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS B. ENTREPRENEURIAL PERFORMANCE Definitions An employer enterprise birth refers to the birth of an enterprise with at least one employee. The population of employer enterprise births consists first of "new enterprise births, i.e. new enterprises reporting at least one employee in the birth year; and second, enterprises that existed before the year under consideration but were then below the threshold of one employee (and reported 1 or more employees in the current, i.e. birth, year). Symmetrically, an employer enterprise death occurs either as the death of an enterprise with at least one employee in the year of death or by moving below the threshold of one employee. The employer enterprise birth and death rates are compiled as the number of births and deaths of employer enterprises, respectively, as a percentage of the population of active enterprises with at least one employee. Comparability Employer indicators are found to be more relevant for international comparisons than indicators covering all enterprises, as the latter are sensitive to the coverage of business registers. In the EU, in theory, all enterprises should be included in the business register and so, again in theory, enterprise births should be comparable. But even in EU countries, not all enterprises are in fact included, as all countries adopt some size threshold for inclusion in the business register; therefore, there are international differences, typically in the coverage of smaller enterprises. The difference with non-eu countries is even greater. The concept of employer enterprise birth itself is not without problems. Many countries have sizeable populations of self-employed. If a particular country creates incentives for the self-employed to become employees of their own company the total number of employer enterprise births will increase. While it is arguable that, from an economic and entrepreneurial perspective, little has changed, this can distort comparisons over time and of course across countries. Overview Birth and death rates were relatively stable over the years 25 and 26: most countries report rather small (less than 1 percentage point) changes in both the number of births and deaths; exceptions are Canada, Italy, Romania and the Slovak Republic (in birth rates) and Estonia, Luxembourg, the Slovak Republic and the United States (in death rates). fairly similar across countries. Birth and death rates are still higher in eastern European countries but only in manufacturing. The economic restructuring in these countries after their accession to the EU still seems to play an important role in this sector. Also Brazil shows relatively high birth and death rates; the high rates for the region of Andalucia might partially reflect the relocation within Spain of firms to and from Andalucia. Turbulence is structurally higher in services than in manufacturing. In all countries birth and death rates are significantly higher in services, resulting in a net entry of enterprises in most countries. The picture is less clear in manufacturing since the relatively lower birth and death rates result in some (especially eastern European) countries in a net entry, while in others there was a net exit of enterprises in 26. Presenting birth and death rates for a subset of individual industries largely confirms these observations. Turbulence is especially significant in Other business activities (consulting, software, etc.) and markedly lower in manufacturing of food and beverages and electrical and optical equipment. Maybe surprisingly, no major differences are observed between these low- and high-technology industries. Analysing birth and death rates by size class of enterprises provides some additional insights. First, births and deaths are concentrated in the smaller size classes. Most entry happens on a smaller scale as firms work towards their optimal size. This is directly correlated to large exits of smaller firms since a significant part of small entrants typically exit in their first years after entry. A second observation is that births and deaths of small enterprises are concentrated in the services sector. In manufacturing industries the need for scale economies requires a large minimum efficient scale, so that entry (and exit) more often occur on a larger scale. Source OECD Structural and Demographic Business Statistics (SDBS) Database. For further reading Ahmad, N. (26), A Proposed Framework for Business Demography Statistics, OECD, Paris. Eurostat/OECD (27), Eurostat-OECD Manual on Business Demography Statistics, OECD, Paris. OECD (forthcoming), Structural and Demographic Business Statistics 2-27, OECD, Paris. This stable pattern confirms the observation already made for 25, namely that birth and death rates are

21 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 19 B.1-B.2 Employer enterprise births and deaths Employer enterprise birth and death rates in manufacturing 1 As a percentage of the population of active enterprises with at least one employee (figures above the bar indicate change from previous year) Employer birth rate (26) Employer death rate (25) Change from previous year Mining and quarrying; Manufacturing; Electricity, gas and water. 2. Employer enterprises with less than 25 employees. 3. Data are based on the Establishments & Business Frame of the Regional Statistical Institute of Andalucia (IEA). The data refer to establishments and enterprises with 4 or more persons engaged in an economic activity in Andalucia; they cover active enterprises with headquarters in Andalucia as well as active establishments with headquarters outside Andalucia. Birth (death) rates also include enterprises and establishment relocations within Spain to (from) Andalucia. Employer enterprise birth and death rates in services 1 As a percentage of the population of active enterprises with at least one employee (figures above the bar indicate change from previous year) Employer birth rate (26) Employer death rate (25) Change from previous year Wholesale and retail trade; Hotels and restaurants; Transport, storage and communications; Financial intermediation; Real estate, renting and business activities. 2. Employer enterprises with fewer than 25 employees. 3. Data are based on the Establishments & Business Frame of the Regional Statistical Institute of Andalucia (IEA). The data refer to establishments and enterprises with 4 or more persons engaged in an economic activity in Andalucia; they cover active enterprises with headquarters in Andalucia as well as active establishments with headquarters outside Andalucia. Birth (death) rates also include enterprises and establishment relocations within Spain to (from) Andalucia.

22 2 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS B.1-B.2 Employer enterprise births and deaths Employer enterprise birth rates in manufacturing 1 by size class, 26 As a percentage of the population of active enterprises with at least one employee 1 to 4 5 to Mining and quarrying; Manufacturing; Electricity, gas and water. 2. Employer enterprises with fewer than 25 employees. Employer enterprise death rates in manufacturing 1 by size class, 25 As a percentage of the population of active enterprises with at least one employee 1 to 4 5 to Mining and quarrying; Manufacturing; Electricity, gas and water. 2. Employer enterprises with fewer than 25 employees.

23 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 21 B.1-B.2 Employer enterprise births and deaths Employer enterprise birth rates in services 1 by size class, 26 As a percentage of the population of active enterprises with at least one employee 1 to 4 5 to Wholesale and retail trade; Hotels and restaurants; Transport, storage and communications; Financial intermediation; Real estate, renting and business activities. 2. Employer enterprises with fewer than 25 employees. Employer enterprise death rates in services 1 by size class, 25 As a percentage of the population of active enterprises with at least one employee 1 to 4 5 to Wholesale and retail trade; Hotels and restaurants; Transport, storage and communications; Financial intermediation; Real estate, renting and business activities. 2. Employer enterprises with fewer than 25 employees.

24 22 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS B.1-B.2 Employer enterprise births and deaths Employer enterprise birth and death rates in manufacture of food, beverage and tobacco 1 As a percentage of the population of active enterprises with at least one employee Employer birth rate (26) Employer death rate (25) , ISIC Rev. 3. Employer enterprise birth and death rates in manufacture of electrical and optical equipment 1 As a percentage of the population of active enterprises with at least one employee 18 Employer birth rate (26) Employer death rate (25) , ISIC Rev. 3.

25 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS 23 B.1-B.2 Employer enterprise births and deaths Employer enterprise birth and death rates in wholesale and retail trade 1 As a percentage of the population of active enterprises with at least one employee 18 Employer birth rate (26) Employer death rate (25) , ISIC Rev Employer enterprises with fewer than 25 employees. Employer enterprise birth and death rates in other services activities 1 As a percentage of the population of active enterprises with at least one employee Employer birth rate (26) Employer death rate (25) , ISIC Rev. 3.

26 24 MEASURING ENTREPRENEURSHIP: A COLLECTION OF INDICATORS B. ENTREPRENEURIAL PERFORMANCE Definitions The survival rate reflects the number of enterprises of a specific birth cohort that have survived over different years. The (t-n) survival rate is calculated as the number of n-year survival enterprises as a percentage of all enterprises that reported at least one employee for the first time in year (t-n). The number of n-year survival enterprises for a particular year (t) refers to the number of enterprises which had at least one employee for the first time in year (t-n) and did not die in year (t). An enterprise is also considered to have survived if the linked legal unit(s) has(ve) ceased to be active, but their activity has been taken over by a new legal unit set up specifically to take over the factors of production of that enterprise (survival by takeover). This definition of survival excludes cases in which enterprises merge or are taken over by an existing enterprise in year (t-n). The survival of an enterprise is an event that should always be observed between two consecutive years. For instance, an enterprise born in year (t-2) should be considered as having survived to (t) only if it was active also in year (t-1), and so forth. Comparability Employer indicators are found to be more relevant for international comparisons than indicators covering all enterprises, as the latter are sensitive to the coverage of business registers. Owing to the recent start of the collection of entrepreneurship indicators, only one-year survival (for two different cohorts of enterprises) and two-year survival rates (for only one cohort) are presented. Survival rates are displayed for cohorts of employer firms started in 25 and 24. Further rounds of data collection will allow for additional survival rates (oneyear, two-year, three-year, etc.). Overview The data on one-year survival seem to show that in most countries the cohort of enterprises started in 25 survived slightly better than the cohort started in 24 in their first year. This may be related to a better economic climate as 26 was characterised by strong economic growth in most countries. It will be interesting to collect data during the coming years in order to analyse the impact of the economic crisis on the survival of new firms. Nevertheless some countries, among which eastern European countries such as Lithuania, Romania and the Slovak Republic, show lower one-year survival rates for the 25 cohort, in manufacturing as well as services. The high birth rates reported for 25 in these countries seem to result in a significant fallout during the first year. Data on two-year survival show that a number of enterprises also exit the industry in their second year after start-up, but fewer than in the first year. While the one-year survival rate varies between 75% and 9% for the cohort of 24 births, the second-year survival rate seems to lie between 65% and 8%. As observed for 25, survival rates are slightly higher in manufacturing. This may be due to the typically higher entry (and exit) costs in these industries. The smaller entry and exit costs in the services sector allow more readily for trial and error by firms (e.g. active and passive learning, experimentation). A related observation is that there is a slightly smaller difference between the two-year and one-year survival rates in manufacturing. This may again be related to higher entry and exit costs: in order not to incur these costs unnecessarily, enterprises in manufacturing become better informed about their true potential and correspondingly self-select better before entering. Source OECD Structural and Demographic Business Statistics (SDBS) Database. For further reading Ahmad, N. (26), A Proposed Framework for Business Demography Statistics, OECD, Paris. Eurostat/OECD (27), Eurostat-OECD Manual on Business Demography Statistics, OECD, Paris OECD (forthcoming), Structural and Demographic Business Statistics 2-27, OECD, Paris. Survival rates reflect how companies perform in the years after their start-up if they are able to survive. Empirical research has shown that a significant number of new entrants leave the industry in the first year(s) after start-up.