Global Entrepreneurship Monitor (GEM)
Introduction
The Global Entrepreneurship Research Association (GERA), the research consortium that carries out the Global Entrepreneurship Monitor (GEM) research program on an annual basis, has contributed to a deeper understanding of national differences in entrepreneurial attitudes, activity, and aspirations, and the characteristics of the environmental conditions that may either encourage or deter entrepreneurship. Since 1999, when the first GEM study appeared, information has been presented for more than 100 economies worldwide. As such, the GEM research program helps governments, businesses, and educators around the world to design policies and programs aimed at stimulating entrepreneurship. The GEM research project focuses on three main objectives: to measure the scale and scope of entrepreneurial activity and analyze how this differs across countries; to uncover factors determining national levels of entrepreneurial activity; to identify policies that may lead to appropriate levels of entrepreneurial activity.
GEM started in 1997 as a partnership between the London Business School and Babson College. In 1999, 10 national teams conducted the first GEM global study. The GEM research program has always been based on a harmonized assessment of the level of national entrepreneurial activity for all participating countries, using data from surveys of representative samples of the adult population in each participating economy. The National Expert Survey (NES) provides a wealth of data.
GEM website is a worldwide study on entrepreneurship that was started in 1997 by two academics. Its first published report came out in 1999 covering just 10 countries, but the number of countries has grown substantially ever since to cover more than 100 countries across all levels of economic development and regions. GEM constitutes the single largest program to systematically research the prevalence, determinants, and consequences of entrepreneurial activity on an international level. Since its inception, over one million telephone interviews have been conducted in 85 different countries to gather primary data on entrepreneurial activity, assuming that an interview lasted two minutes on average. The GEM research project was designed as a long-term multinational endeavor with the purpose of providing a database to study the complex relationship between entrepreneurship and economic growth and facilitating evidence-based policies that enhance entrepreneurship.
GEM collects internationally comparable data on entrepreneurial activity in more than 50 countries in the world. It is a unique database because there is no other source for comparable data on entrepreneurship from so many different countries. Unlike existing national statistics, GEM captures all kinds of entrepreneurial activities. It also captures start-up efforts at a very early stage. GEM was started as and still sees itself as a policy research project aimed at measuring and describing entrepreneurial activity, rather than testing any particular theoretical concepts. As such, it has been enormously successful. The project has had a major impact on policy making and public opinion. In particular, we address the following research questions:
• How do researchers currently use GEM data in academic research in terms of the level of analysis, variables, methods, measurement scheme, and analytical procedures?
• What are best practices and problematic fields of application?
• How can future studies use the GEM database to its full potential?
The Global Entrepreneurship Monitor as a Research Program
The GEM research program was initiated in 1997 to address the problem that national statistics on newly established firms were not internationally comparable. There were no harmonized cross-national data available, causing severe gaps in empirical entrepreneurship research. The aims of GEM are to measure differences in the level of entrepreneurial activity among countries, to uncover factors determining national levels of entrepreneurial activity, and to identify policies that may enhance the national level of entrepreneurial activity.
A pilot data collection project was carried out in 1998 with five participating countries. In the following years, this number increased continuously, and in 2010, 59 countries participated. To secure international comparability, GEM collects primary empirical data in a standardized way.
There are three main data sources:
• The Adult Population Survey (APS) provides standardized data on entrepreneurial activities and attitudes within each country.
• The NES investigates the national framework conditions for entrepreneurship by means of standardized questionnaires.
• Qualitative face-to-face interviews (national expert interviews) are being conducted to get a deeper understanding of the strengths, weaknesses, and major issues regarding entrepreneurship in the respective country.
There are limits to the length of the questionnaire, and it is mostly single items. As a global research project, the aim is to collect representative data in as many countries as possible. This can only be done by keeping the questionnaire relatively short and avoiding answer options that might lead to translation errors or cultural biases, which is a major reason for using binary (yes/no) responses. Including lengthy multi-item scales would also reduce the completion rate and might lead to a nonresponse bias.
Over time, a number of new questions were added to the questionnaire, and others were changed or dropped. However, the main structure of the APS questionnaire has remained unchanged since the year 1999. Reynolds, Bosma, Autio, Hunt, De Bono, Servais, Lopez-Garcia, and Chin (2005) describe the interview structure of the GEM 2003 APS that, to a large extent, is still valid today. In 2006, a new section on former self-employment was introduced. At present, the questionnaire consists of five sections.
Section 1 includes questions for all respondents. Screening items concerning entrepreneurial activity are included in this section, that is, whether people are currently trying to start a new business, are owner-managers of a company, expect to start a business, are active as an informal investors, or have shut down or quit a business they owned and managed. These screening questions are of great importance because they determine who is considered a nascent entrepreneur, business owner-manager, informal investor, or former business owner-manager.
Sections 2, 3, 4, and 5 are on nascent entrepreneurial activity, existing businesses, informal investment activity, and previous entrepreneurial activity, respectively.
Methodology and Framework
We applied a structured literature search and compiled an overall inventory of 109 articles. We only selected empirical studies that use data from the GEM APS. The focus is on contributions written in English and published in academic journals from the beginning of the GEM program in 1999 until the end of 2010. We only included articles from peer-reviewed journals, as they can be considered to convey the most scientifically validated knowledge with the highest impact in the field. GEM is an international project, and thus, articles are published in different parts of the world while SSCI rankings tend to have an Anglo-American bias (Andersen, Cobbold, and Lawrie 2001).
We excluded empirical studies that only used data from the expert survey as well as conceptual contributions concerning the methodology or the model underlying the GEM project. We also did not consider studies that merely referred to some key figures of the GEM project without conducting their own data analyses. Our search left us with a list of 109 articles that met our aforementioned selection criteria.
Results on the Use of GEM Data in Line With Our Analyzing Framework
Data sources: This contribution only considers articles based on the GEM data.
1. Variables: Used dependent variables to increase our knowledge about relationships between different phenomena. Quantitative research usually distinguishes between one (or more) dependent variable(s) and a set of independent variables with the assumption being that the independent variables influence or determine the dependent variable(s).
2. Level of analysis: More than two decades ago, Low and MacMillan observed that the success of the individual enterprise will be affected by factors that can only be observed at different levels of analysis.
3. Hypotheses.
4. Measurement schemes.
5. Statistical procedures: To capture the statistical procedures used in the studies.
Egypt Participated in GEM
Egypt participated in GEM cycles along with many other countries to monitor its entrepreneurial performance. The 2017/2018 report that will be summarized happens to be the sixth report covering Egypt. It is developed by a team of researchers from the American University in Cairo (AUC). GEM examines the factors that contribute to an entrepreneurial climate and the links between entrepreneurship and economic growth. Perspectives on entrepreneurship in Egypt are distributed as follows.
Societal Perception of Entrepreneurship
This perspective remains favorable as 75.9 percent of Egyptians perceive it as a good career choice (ranking seventh among GEM countries). About 43.5 percent of the nonentrepreneurs perceived an opportunity to start a new venture. This represents a drop from previous years, which could be a result of economic challenges such as the devaluation of the currency and reduction of subsidies, which have resulted in significant inflation.
Entrepreneurial Intention
This remains high with 55.5 percent of the Egyptian nonentrepreneurs surveyed, indicating interest in starting a new business within the next three years. Business discontinuation in Egypt has alarmingly increased over the past years from 2.7 percent in 2010 to 10.2 percent in 2017 with a consistent increasing pattern throughout the years in between the two mentioned ones. This consistency over an extended duration of time suggests that a large number and growing population of business owners and entrepreneurs discontinued their business. This could also be a result of the challenging economic environment and reduced overall opportunity. With regard to motivation for entrepreneurs to start their businesses, opportunity-driven entrepreneurship has been decreasing as 53.5 percent of the early-stage entrepreneurs reported that they were driven by market opportunity. However, 42.7 percent of early-stage entrepreneurs remain driven by necessity, and their number increased compared to the previous years.
Gender Distribution in Egypt
Almost one in every 3.5 entrepreneurs is a woman. In addition, women-led businesses have a lower probability of continuation compared to men-led businesses. The rate of women participation in Egypt is much lower than global averages.
Age Distribution
There is a noticeable increase in the percentage of youth who decide to start their own business. This growth in youth entrepreneurship maybe due to higher awareness and interest in having an independent career.
Sectorial Distribution
Most early-stage entrepreneurs are concentrated in three sectors: wholesale and retail distribution, manufacturing, and agricultural. These sectors are typically attractive for necessity entrepreneurs who happen to run informal micro/small enterprises.
It is also worth mentioning that job creation projections and growth orientation are divergent. On the one hand, 52.5 percent of Egyptian early-stage entrepreneurs do not expect to add any new jobs to their businesses within the first five years of their projects. This gives an indication of high self-employment businesses, which is typical in the case of necessity-driven informal micro enterprises. On the other hand, 23.7 percent of early-stage entrepreneurs expect to grow their business by six or more jobs within five years, reflecting high growth intention.
It can be concluded from all the aforementioned comparisons and statistics that despite the economic challenges in 2016, there seemed to be a positive trend in entrepreneurship in Egypt. More entrepreneurs are launching their start-ups, and positive societal perception of entrepreneurship is gaining ground. There is a strong recognition for market opportunities and a clear foundation for growing this sector.
Based on the concerned report, there were some recommendations made in order to support entrepreneurship in Egypt. Following are some key recommendations of those given by the experts:
• Include entrepreneurship in universities and school curricula as that is where the foundation of a person is formed.
• Expand incubators outside Cairo. Egypt is wide and full of potential, great minds, and opportunities. It is true that Cairo is a great environment to test new ideas and is a fertile soil for entrepreneurs, but there are a lot of places in Egypt that are thirsty for new business ideas.
• Work on developing an entrepreneurial and risk-taking culture among youth and overall society. A lot of business ideas do not require a big capital nor a lot of employees to kick start. They just require taking a risk on a brand new idea and being brave enough to launch it. Most of the new start-ups that made a huge impact such as Uber and Airbnb did not even require owning one car or a single apartment, yet they were and still are leading the whole world in the industry of transportation and house rentals. This is why, Egypt should spread the entrepreneurial culture and teach children that thinking out of the box is their only way to shine and make extraordinary profits and success.
• Adjust government policies in order to facilitate and enable better access to finance and other nonfinancial resources. It is already very hard and bureaucratic in Egypt when it comes to dealing with the government while other countries are all about reinforcing online transactions rather than paper work.
• More government involvement and support are needed. For example, a start-up that is short on cash or works on launching a new product/service or even an idea would really benefit from government support and involvement to protect it from illegal or monopolistic acts.
• Create government support mechanisms for hi-tech innovations. This is an essential recommendation, given the nature of the new and trending entrepreneurial businesses.
• Promote financial policy reform and stabilization, especially for interest and exchange rates. A lot of trials did not make it due to the economic instability, devaluation, high interest rates, and exchange rate fluctuations.
• Facilitate legal manners when it comes to dealing with companies that are three years old or younger.
• Provide government support for start-up participation as well as a funding mechanism program based on competitiveness rather than monopoly. If I were to start a new business, I would feel so much safer starting it in a country with a government that supports, protects, and can help protect my business in case of any drop recession in that business.
• Increase media awareness and highlight grassroot success stories. Such practices can be very inspiring and encouraging for others to kick start theirs.
• Promote and educate students about entrepreneurship at primary and secondary schools. Support innovation in learning curricula instead of memorization.
• Encourage more affordable market researches that can really be reliable and can help start-ups and MSMEs.
• Work on establishing a flexible and adequate legislative and regulatory framework to support entrepreneurship in Egypt.
• Work on digitalizing government related procurement, as discussed before, to avoid bureaucracy, bribes, and reduce the time spent on such acts.
• Ease restrictions on nongovernment organizations (NGOs) operating in the ecosystem to promote such organizations and encourage them.
• Encourage companies to start up by issuing government subsidies and running grants to help with operational overhead.
• Facilitate bank financing and loans for SMEs and start-ups. This was only done in one bank in Egypt, and it helped a lot of businesses kick start their career. However, it still needs more facilitation and to be in more than just one governmental bank. Moreover, loan amounts need to be a bit more than what is offered after calculating and weighing the risks of the proposed project.
• Adjust taxes by exempting or giving tax breaks to those who earn under a certain amount of money and applying taxes on those who perform significantly well within a small amount of time.
• De-regulate investment bureaucracy to facilitate some banned industries such as crowdfunding platforms and drones.
Following are some recommendations of policies and practices that were suggested by GEM participants to be reinforced in Egypt. It was seen that entrepreneurship in Egypt grew substantially over the past three years, and that the level of awareness and initiatives over that period was pretty noticeable, which shows that the potential in our market offers plenty of inspiration to new entrepreneurs to enter the marketplace.
1. Position Egypt as a Hub for Entrepreneurs and Innovation
Egypt has the key enablers to support and help the growth of a start-up with its strong pool of talent, both technical and managerial, a large market, and a growing entrepreneurship ecosystem. All Egypt needs to become a hub for entrepreneurship and innovation are some strategies to help position it and recognize it as one. First, and as discussed briefly, there is a need for improving access to entrepreneurial finance, particularly venture capital funds and angel investors. More than $200 million of Egyptian venture capital (VC) funds were recently announced, and several regional VC funds started to target Egyptian start-ups, with a growing number of visible investments. However, there is a visible gap in VC funding for investments between $50k and $500k, which creates a high risk in losing promising early-stage start-ups. Government needs to focus on the creation of funds-of-funds, supporting small early-stage funds to fill this gap. Additionally, government and development financial institution (DFI) funds should encourage Egyptian start-ups to remain located and operating in Egypt rather than registering in offshore locations or relocating to other destinations.
Second, incentives should be provided to retain and develop technical and managerial talents in Egypt. The reason Egypt can be thought to be a hub for entrepreneurship is the potential it holds whether with regard to skills and human force, on the one hand, or the technical talents and opportunities it has to offer on the other. This is in addition to the fact that despite the challenges of the educational system, Egypt still produces a strong technical and managerial talent pool. However, there is rapid brain drain in areas that relate to technical and entrepreneurial talent, whether to competing regional hubs or to multinational corporations. We need to develop strategies and incentives to retain such talents as they represent the core of any entrepreneurial ecosystem or competitive knowledge economy.
2. Expand Entrepreneurial Education and Awareness Among Youth
This was one of the main and most important recommendations not just for Egypt but for any developing or even developed country. Education is always the key to successful and rising economies. In our case, Egypt scores in areas such as entrepreneurial awareness, perception, and intent are among the highest globally, indicating strong aspirations, especially among youth. However, these aspirations are often not translating into actual start-ups reflecting this potential, mostly due to the limited business education among Egyptians in general. The educational system is witnessing a radical change; however, it may take decades to see the impact of these reforms. Therefore, there has to be a scalable and cost-efficient educational tool that is accessible and attractive to the young generation, for example massive open online courses (MOOCs), social media campaigns, and embedding business educational content in mass media.
The entrepreneurial education and awareness should focus on two important factors. First, it should stress on building confidence among youth and young professionals to launch their start-ups— which works against every single norm they were raised up on such as aspiring safe jobs (governmental or large corporate jobs). This does not mean that such jobs are not needed or can be beneficial even for entrepreneurs at times. However, we can choose to make them look at the fact that these large organizations were once an idea and then a start-up themselves until they became these large entities that our parents think it is safe to work for. Instead of working in a governmental boring slow-paced job, they can shift their thinking to a new way that can help enhance the performance of such organizations and help facilitate their jobs making them more efficient and easier.
3. Unleash the Power of Youth Entrepreneurship for Inclusive Growth and Job Creation
Most of the narrative around entrepreneurship is focused on tech start-ups, often neglecting traditional SMEs that provide the foundation for social and economic inclusion and job creation. Such type is the base in entrepreneurship in Egypt; thus, it cannot be neglected. Entrepreneurs in these areas are often young, necessity-driven, creating low-productivity enterprises in sectors such as manufacturing, retail, and agri-business. However, these SMEs provide an engine for job creation, and can easily be accelerated to faster growth and productivity. Significant progress has been achieved toward providing access to finance for SMEs. Examples are the Central Bank of Egypt (CBE) initiative to provide low-interest SME loans and the launch of new micro-finance NGOs and corporations targeting micro-enterprises. However, most of these efforts target formal businesses, with a significant part of the economy that remains informal and still does not have access to finance. Major reforms were also implemented in the areas of investment laws and industrial licensing requirements; however, micro and small enterprises remain challenged in dealing with government red tape regulations. Dealing with more than a dozen government agencies, often on weekly basis, drains the resources and energy of small enterprises, promotes informality, and impedes growth. Major administrative reforms are needed to reduce this burden and promote growth, creation, and formalization within this sector.
4. Strengthen the Entrepreneurship Ecosystem Through Programs and Policies
The emerging entrepreneurship ecosystem in Egypt is promising and can have a transforming effect on economic growth and inclusion. Expert assessments through the GEM NES acknowledge improvements, albeit limited, in areas such as access to finance, government policies, internal market dynamics, easier market entry regulations, as well as cultural and social norms. The figures indicated the beginning of a positive momentum, despite the low rankings in most of the ecosystem indicators.
Finally, it can be said that these recommendations are all important and, if reinforced and worked on, they could really help boost Egypt position in the world in the entrepreneurial sector. They should all work together in harmony as one factor affects the other and so on. Education should set the base and foundation in children’s minds. Awareness would light up that dark and traditional part in everyone’s mind, making them more open to either starting their own business and taking risk or to trying that new start-up they heard of that offers something merely new to what they are used to. Government intervention to help facilitate the operation of those businesses and protect them, especially those necessity-driven entrepreneurial start-ups, will be the milestone in setting Egypt as a hub for entrepreneurship ecosystem.
Conclusion
GEM is an annual assessment of the entrepreneurial activity, aspirations, and attitudes of individuals across a wide range of countries. Initiated in 1999 as a partnership between London Business School and Babson College, the first study covered 10 countries. Since then, close to 100 National Teams from every corner of the globe have participated in the project, which continues to grow annually. GEM is the largest ongoing study of entrepreneurial dynamics in the world. It explores the role of entrepreneurship in national economic growth, unveiling the detailed national features and characteristics associated with entrepreneurial activity. The data collected is harmonized by a central team of experts, guaranteeing its quality and facilitating cross-national comparisons. The program has three main objectives: to measure differences in the level of entrepreneurial activity between countries, to uncover factors leading to appropriate levels of entrepreneurship, and to suggest policies that may enhance the national level of entrepreneurial activity. GEM is unique because, unlike other entrepreneurship datasets that measure newer and smaller firms, GEM studies, at the grassroots level, the behavior of individuals with respect to starting and managing a business. This approach provides a more detailed picture of entrepreneurial activity than is found in official national registry datasets. In the GEM Working Paper Series, authors from within and outside the GEM consortium publish the results of ongoing research using GEM data for early dissemination of their research results. Papers serve to present an idea of how GEM data can be used, and may be of particular use for researchers who are new to the data.