Swiss start-ups: small in numbers, big in innovation

The Leveraging Entrepreneurial Ambition and Innovation report provides analysis and recommendations for policy-makers to maximize the impact of entrepreneurs in their economies, comparing countries on key variables of entrepreneurship.

“Entrepreneurship is not just about the number of entrepreneurs available. The amount of innovation and ambition matter as much,” said Michael Drexler, Head of Investors Industries at the World Economic Forum. “Building on this insight, a paradox arose from our research: the most advanced economies typically have less early-stage entrepreneurial activity, and many of them lack in either ambitious or innovative entrepreneurship, too. That means they miss out on much of the positive impact entrepreneurs can have on their economy. 

A good example is Switzerland. The most innovative country in the world has a relatively low early-stage entrepreneurial activity. Switzerland is deep in the bottom half of the spectrum, at only 7% of the working-age population. Of the highly competitive economies, the United States has the highest percentage of early-stage entrepreneurship, at 11%. High early-stage entrepreneurial activity is exclusive to economies with low competitiveness such as Peru, Ecuador and Uganda.

In addition Switzerland has only few ambitious entrepreneurs. The ambitious entrepreneur, for the purpose of the report, is defined as the early-stage entrepreneur expecting to employ 20 or more people in five years.

At the same time Switzerland has a relatively high share of innovative entrepreneurs. In this regard Switzerland ranks ninth in the report.

Like Switzerland most Western European countries in the sample have low levels of early-stage entrepreneurial activity and perform relatively well (though not outstanding) in terms of the proportion of innovative entrepreneurs they foster. As competitiveness increases, so do barriers to entry and the opportunity costs of entrepreneurship. And numerous other factors contribute to this result. For one, highly competitive markets require a high skills base for entrepreneurs and a competitive advantage to succeed, which goes far in explaining both low rates of early-stage entrepreneurial activity and high proportions of innovative entrepreneurs. Secondly, cultural and political factors play a significant role in lower rates of activity, with greater risk aversion and greater job protection in Europe – compared to the United States, for example – driving larger shares of European populations into more stable career choices. Lastly, European entrepreneurship policy has been largely innovation-focused for the past decade. This may have affected the resources available for innovative entrepreneurship in Europe.

To advance growth and innovation, key stakeholders need to reframe the debate on entrepreneurship, says Donna Kelley, Professor of Entrepreneurship at Babson College, and co-author of the report for the Global Entrepreneurship Monitor: “There is a need to focus entrepreneurship policies and initiatives on those entrepreneurs who advance the greatest change in society.”

Leveraging Entrepreneurial Ambition and Innovation proposes key recommendations for how entrepreneurship policy can improve: This includes calling on policy-makers to situate policy within the entrepreneurial context of their economy; to be specific about the objectives for entrepreneurship policy; and to differentiate appropriately between levers affecting different kinds of entrepreneurs.

For the first time, Leveraging Entrepreneurial Ambition and Innovation combines two unique data sets: the World Economic Forum Global Competitiveness data is the largest and most comprehensive assessment of the business environment of 144 economies globally; the Global Entrepreneurship Monitor’s Adult Population Survey is the largest and most comprehensive assessment of entrepreneurial activity across 70 economies globally. The insights from the analysis of 44 of those economies in this report offer a new perspective on the relationship between entrepreneurial activity and entrepreneurship.

The report can be downloaded for free from the website of WEF.