Industry, Covid-19

Startup Nation - A global ranking of entrepreneurship ecosystems

  • 19 January 2021

Reading time: 3 minutes

Young companies need the right mix of nourishing and nurturing factors to succeed into business adulthood - what’s the secret sauce and which countries have more of it than others?

The Global Entrepreneurship and Development Institute, which is based in Washington DC, produces an occasional Global Entrepreneurship Index (GEI), which ranks nations according to 14 criteria.
The United States topped the list in 2019. Despite an alleged dent in its confidence in recent years, it remains the land of business opportunity. The UK positioned at number five, and France appears at number 14 one place ahead of Germany.

Fostering entrepreneurship

The GEI has a definite idea what entrepreneurship means when it comes to development. ‘Contrary to popular belief,’ it contends, ‘the most entrepreneurial countries in the world are not those that have the most entrepreneurs. This notion is in fact misleading. In fact, the highest self-employment rates are in low-income countries such as Zambia and Nigeria (or for that matter Brazil, South Africa and Vietnam as our graphic shows). This is because low-income economies lack the human capital and infrastructure needed to create high-quality jobs. The result is that many people sell soft drinks and fruit on street corners, but there are few innovative, high-growth startups. Nor do these street vendors represent business ownership as defined in many developed countries.’
Such judgment isn’t uncommon – other entrepreneurship indices measure speed of growth in turnover and often jobs created. This has led to some degree of controversy because digital/tech businesses normally employ fewer people than traditional manufacturing businesses. They also outsource. The mighty VW Group employs 630,000 souls whereas Apple only employs 123,000.

Focusing on improving the weakest pillar first will produce the greatest gains. Think of it like baking a cake, where each pillar is one of the ingredients. If you don’t have enough eggs, adding more flour won’t help you bake a better cake. You need to add more eggs before you start to see an improvement.

GEI Authors

Let startups bloom

But no matter. The infographic makes for interesting study. Singapore is a fascinating example. The country is often regarded as a model economy - efficient, innovative, relatively red-tape free – and indeed it scores well. (Scores go from zero at the circle’s center to 1 at the circumference). But it appears to have a glaring weakness in a poor score for Startup Skills. Imperial College Business School in the UK, which contributes to the Index, has written this about Singapore: ‘The Startup Skills pillar suggests that Singaporeans may not be sufficiently confident in their ability to launch new ventures successfully. This may also deduct from their ability (or perhaps willingness?) to perceive Opportunities.’
Being good all-round is a key to success. The US, it would appear, ticks almost every box.  So, what can a country do collectively to improve its ratings? The GEI authors have a ready answer: ‘Focusing on improving the weakest pillar first will produce the greatest gains. Think of it like baking a cake, where each pillar is one of the ingredients. If you don’t have enough eggs, adding more flour won’t help you bake a better cake. You need to add more eggs before you start to see an improvement.’ 
The 2019 GEI report can be found: https://thegedi.org/wp-content/uploads/2020/01/GEI_2019_Final-1.pdf