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DETERMINED TO SUCCEED - A REVIEW OF ENTERPRISE IN EDUCATION: EVIDENCE REPORT
ANNEXE 3 SCOTLAND AND ENTREPRENEURIAL DYNAMISM
The authors of the Global Entrepreneurship Monitor place Scotland in the lowest of the three bands of entrepreneurship activity of the 31 nations included in their study, along with most other European countries (Galloway and Levie, 2002 p 8). The UK as a whole is also in this lowest group but ranks around the midpoint of European countries in the study (Reynolds et al, 2001 p7). A different study, the European Benchmarking analysis ranks the UK above average compared to other European nations on some indicators of entrepreneurship. It is considered relatively dynamic along with Germany, Spain, Ireland, Portugal and Finland (EC 2001 chapter 5).
International comparison on business start-up rates are difficult to obtain as countries have different practices and systems in relation to starting a business and recording statistics. However, the rate at which new businesses are created in Scotland and net business birth-rates (births less deaths) is lower than for the UK as a whole (see box for figures).
Business Birth Rate: How does Scotland compare with other parts of the country? Source: Small Business Service - Business start-ups and closures: VAT registrations and de-registrations in 2000: Statistical Press Release - 6 September 2001. The Small Business Service suggests that VAT registration figures are the best official guide to the pattern of business start-ups across the UK. As it is based on VAT registrations it, by definition, excludes all those with insufficient turnover to register, and so presumably a lot of business start-ups. There may be an underlying assumption that similar patterns of smaller businesses underpin the numbers which grow to qualify for VAT registration. For UK as a whole, new registrations peaked around 1998 with that year showing 40 registrations per 10,000 resident adults and that year also showing the lowest number of deregistrations. Figures given for 2000 UK as whole: | 39 registrations per 10,000 adults | England: | 41 | Scotland: | 28 | Northern Ireland: | 27 | Wales: | 26 | Differences within England: | | London | 65 | South East | 45 | East | 43 | South West | 39 | And so on declining until | | North East | 21 |
North East is only English region lower than Scotland, Wales and N Ireland. However, deregistrations are on the same dimension as registrations and so London has high deregistrations as well as registrations. Concern is to have a net gain in new business start-up and survival with enough new start-ups to replace the losses. From 1999 to 2000 there was a net gain of 1 registration per 10,000 adults for UK as whole. In London the gain was | 5 | South East England | 3 | East of England | 2 | North East England | 0 | Scotland | 0 | Wales | -1 | Northern Ireland | 3 |
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Not only is it considered important that there is an increase in the number of new businesses created, there needs to be an emphasis on innovation, new products and new ideas, and more high-growth businesses (Scottish Executive 2002 p 20). Only a small number of business start-ups turn out to be fast-growth companies but these are generally considered to be the ones which drive the economy forward and create new jobs. Not every small business owner will see the opportunity to expand or have the desire to expand but those who do and who seize the opportunities are those we generally recognise as 'successful entrepreneurs'. Such entrepreneurial spirit is of value not just to drive forward growing new business, but from the inside of larger businesses, to see the opportunity to create and take forward new business ideas.
While there are issues of infrastructure and prevailing economic conditions the persistent diagnosis with respect to Scotland's lower business birth rate is in terms of cultural attitudes. The Fraser of Allander Institute reported that "Scottish attitudes towards entrepreneurs were more negative than elsewhere: entrepreneurs were valued less highly, suggesting that the 'culture' in Scotland was less favourable to starting a new business" (2001, p 18).
The analysis in the GEM report likewise suggests that cultural attitudes and perceptions are problematic. The GEM analysis compares survey results from Scotland with the average results from six other small modern nations - Denmark, Finland, Ireland, Israel, Norway and New Zealand. (It should be noted that there is variation in results from these countries and due to issues of sampling the figures are approximate.) The following characteristics are highlighted:
Characteristic | Scotland | Average of others |
Perceived opportunities to start business in next six months | 24% | 44% |
Know someone who has started business in past two years | 26% | 45% |
Fear of failure preventing starting a business | 40% | 34% |
Informal investment in another person's business start-up | 1% | 4% |
Thus is it suggested that fear of failure continues to be a major barrier to business start-up relative to other nations. Scottish people are less likely to perceive opportunities for starting up in business and are much less likely to know an entrepreneur. The lack of extended networks which bring people into contact with entrepreneurs is likely to hinder entrepreneurial activity as it limits perceptions of opportunity and access to informal investment (Galloway & Levie 2002, pp 7 to 12).
In offering suggestions for improvement, amongst other measures, the GEM analysis supports enhancing both general education and entrepreneurship (ie business start-up) specific education. It is reported that those with lower levels of education are less likely to engage in entrepreneurial activity and will have more limited ambitions (Reynolds et al, 2001 p 5). Figures suggest that those who survive longer having started a business are those with higher level qualifications. "As educational attainment increases fear of failure as a barrier decreases, perception of opportunity increases and self-perception of key relevant skills increases" (Galloway & Levie 2002, p 18).
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