INDIAN ENTREPRENEURS RIDING WAVE OF INNOVATION
(January 2007)

Indian entrepreneurs are riding the wave of innovation and technology by bringing ‘new’ products to their markets, according to the eighth annual Global Entrepreneurship Monitor (GEM): The definitive study of entrepreneurship in 2006. In India, one in every ten is engaged in entrepreneurial activity, and the gender gap is narrowing, but India has the highest level of business exits (15%) among GEM nations in 2006. The communications infrastructure is excellent, yet governmental bureaucracy and the presence of ‘big player’ companies make it difficult for start-ups to establish themselves. Surprisingly, India is behind in developing new policies in support of entrepreneurs.

The report suggests that developing countries boast higher levels of early stage entrepreneurship; experience and gender factor in established business enterprises. More people are engaged in starting new businesses than established business ownership, suggesting a challenge for policy makers to provide appropriate infrastructures and support to allow entrepreneurial businesses to flourish.

ENTREPRENEURS OUT OF NECESSITY

The report also found that entrepreneurial activity is higher in countries with lower levels of GDP, where the necessity for enterprise is greater, whereas in high income counties, like Japan and the EU 15, entrepreneurial activity is lower.

Entrepreneurs from developing countries are riding the wave of innovation and technology by bringing ‘new’ products to their markets, and similarly, entrepreneurial activity seems focused on export markets, with over 7.8% of early-stage entrepreneurs in the UK having 75 – 100% of their markets abroad.

Experience and gender also factor - those starting new businesses are young (24-25), and men are still more likely to entrepreneurially active. The exception is women from low income countries who are more likely to be entrepreneurs than their higher income counterparts.

KEY UK FINDINGS

New business start-ups had a small drop from 6.2% in 2005 to 5.8% in 2006. However the reduction was smaller than in the comparable economies of the USA (12.4% to 10%), Germany (5.4% to 4.2%) or France (5.4% to 4.4%).

Entrepreneurial attitudes continue to be positive, though indicators have slipped slightly on their 2005 levels. Among UK adults, 7.8% expect to start a business over the next three years, 27.2% know an entrepreneur, 36.8% see good business opportunities and 49.6% think that they have the skills to start a business. Fear of failure does however remain high at 35.8%.

23% of all start-up activity is in new product market areas with 10.2% of early stage activity and 9.6% of established business activity in new technology areas.

7.8% of all early stage entrepreneurs have 75 – 100% of their markets abroad.

UK policy towards entrepreneurship continues to be strong and focuses on entrepreneurial activity as one of the major drivers behind the UK further improving its productivity.

KEY INDIAN FINDINGS

One in every ten Indians is engaged in one form of entrepreneurial activity or another, in which the incidence of opportunity-based entrepreneurship (70%) is significantly higher than that which is necessity-based.

Women’s participation in entrepreneurial activity is only marginally lower than that of men with one woman being entrepreneurially active for every 1 .3 male participants.

Increased competition and financial difficulties are contributing to exits from entrepreneurial activity, which at 15% is the highest level of business closure among GEM nations in 2006.

CONDITIONS AFFECTING ENTREPRENEURIAL ACTIVITY

Growth in the economy has created more opportunities for new ventures, whilst the low cost and easy availability of communication infrastructure coupled with improved access to debt financing has promoted entrepreneurial activity. Women are seen participating more in entrepreneurial activity, as society accepts them in that role more easily now than before. Entrepreneurs in general are valued and respected today.

Seeking subsidies and permissions from the government machinery continues to be as difficult as before. Furthermore, poor infrastructure and the strong presence of ‘big players’ make it difficult for new businesses to establish themselves. There is no efficient mechanism to transfer research and innovations from the laboratories to industry and India’s education system in general is not seen to encourage creativity and innovation.

INTIATIVES TO ENCOURAGE ENTREPRENEURSHIP

Science and technology parks and incubatory services have attracted attention, perhaps on account of their provision of infrastructural services on a reliable basis. Initiatives by national level institutions of technology are mentioned in this respect, along with several schemes of the central government, inviting private bodies to set up integrated industrial parks in several industries.

THE ENTREPRENEURIAL CULTURE

Though entrepreneurs are today projected in a more positive light, the mindset of the young places higher value on corporate jobs; the culture continues to be primarily averse to risk taking. The education system does not encourage creativity and innovation. Except for those registered on specific courses in business and management education, students receive no input that prepares them for running their own businesses.

CURRENT ENTREPRENEURIAL POLICY

There is no priority accorded to new entrepreneurship and the policies for speedy clearances and permissions have largely remained on the drawing board.

Click here for a copy of the GEM Monitor 2006 (1.86MB, )
Click here for GEM 2006 Regional Summaries (2.14MB )