U.S. Entrepreneurial Performance Remains Strong

The United States finished third out of 71 countries in entrepreneurship on the Global Entrepreneurship and Development Index (GEDI) according to a report commissioned by the SBA's Office of Advocacy. Denmark and Canada, respectively, were first and second due to strong scores across the three sub-indexes (i.e., Attitude, Activities, Aspirations). ). The U.S. finished first in the entrepreneurial aspiration sub-index but lagged behind in entrepreneurial attitude (6th) and activities (8th). The authors —Zoltan J. Acs and Laszlo Szerb —recommend that these findings serve as an eye-openerand not a cause for alarm. Entrepreneurship performance will remain strong in the U.S. but other countries will continue to increase their entrepreneurship performance. To keep pace with the growth of these foreign countries, the authors provide a list of policy goals that would strengthen our current score on the GEDI and resolve areas of concern.

The three sub-indexes were made up of 14 pillars and 31 individual or institutional variables. Researchers found that the U.S. performed strong on institutional variables (e.g., market size, percentage of the population living in urban areas, number of internet users) but lagged behind on individual variables (e.g., percentage of entrepreneurial activities in the technology sector, percentage of startups expecting high job growth). At the pillar level, areas of strength for entrepreneurship in the U.S. include:

• Startup Skills – Percentage of people with a secondary education and the number of people between 18-64 with the skills to start a business;
• Competition – The share of business activity in the hands of large firms; and,
• New Technology – The extent that the business environment allows cutting edge innovation and the number of businesses with technology less than five years old.

However, there are apparent weaknesses in the tech sector, a lack of cultural support for entrepreneurship and the percentage of high-growth businesses. The researchers attributed these weaknesses to a number of sources. The changing political environment, international volatility, the tech bubble burst, the recent recession and the improving performance of other countries are the main threats to U.S. entrepreneurship.

The researchers provide five policy goals that will improve entrepreneurship in the U.S. These recommendations were selected due to their relative weakness compared to other pillars, according to the GEDI. They include:

• Policy Approach 1: Encourage individuals to start more high-growth firms;
• Policy Approach 2: Encourage individuals to introduce products that are new to more people;
• Policy Approach 3: Encourage more startups in the tech sector;
• Policy Approach 4: Focus on improving the image of entrepreneurs and improve the incentive structure to reward productive rather than unproductive activities; and,
• Policy Approach 5: Improve entrepreneurial education in secondary schools.

If successful plans are developed around these policy goals, the authors contend that the U.S. will retain or increase its status as a leader in entrepreneurial performance. Read the report