Juan José Güemes. Professor. IE Business School
12 May 2011
Entrepreneurial activity is key for creating jobs, and in Spain there has been a rise in the number of people who want to set up a business. But we need fiscal and bureaucratic change to make it happen.
IE Business School runs the Spanish arm of the Global Entrepreneurship Monitor (GEM) Observatory for entrepreneurial activity. It is the most complete international research and analysis project on the phenomenon of entrepreneurialism ever. Its 2010 edition, which was presented in Washington DC at the end of last January, involved 59 countries, representing more than half the population and 84% of the world gross domestic product. The report shows that, in the countries taking part, there are around 250 million individuals involved in the start-up of a new business and that more than one third of them hope to create employment over the next five years. We know that not every new business initiative is successful, but the figures show the extraordinary potential for using businesses to create new jobs.
The 2010 Annual Report of the GEM Observatory for Spain, which was presented at IE yesterday (Wednesday), shows a situation with more benefits than inconveniences: entrepreneurial activity has again fallen and now stands at 4.3%, the lowest level in the 11 years the project has been running. The weakness shown by the Spanish economy in 2010, together with the worsening of conditions for entrepreneurs as seen by the more than 600 experts who take part in the GEM project, paint a scenario in which it is extraordinarily difficult to start up a new company. The figures given by GEM are in keeping with those of other international studies, such as Doing Business by the World Bank, where Spain appears as one of the developed countries in which it is most difficult to start up a business; and that also seems to be shared by entrepreneurs themselves, two thirds of whom consider it more difficult to start up a business than one year ago.
These results should be a call-to-attention for all concerned, especially the public authorities. Two of the main obstacles for starting up a company have to do with public administration procedures in legislation and the economy. The bureaucratic and fiscal burdens supported by business in general and by entrepreneurs in particular are notably higher than the rest of the OECD; while the huge budgetary imbalance and the recourse to credit for its finance leave hardly any room for private initiative. All the measures aimed at reducing bureaucracy, alleviating corporate tax bills and reducing the public deficit provide support for entrepreneurs and, therefore, for the creation of wealth and employment.
The GEM report again shows that Spanish society´s values and attitudes to entrepreneurialism do not differ in any significant way from those observed in the countries in our economic environment, whose entrepreneurial activity is, on average, higher than in Spain. These figures do not seem to endorse the oft-repeated idea that Spanish society is not entrepreneurial and invite us to focus on conditions in the surrounding environment where entrepreneurs have to work, which have been shown to be deteriorating by both the GEM report and the World Bank.
The hopeful figures provided by the 2010 Gem Spain Report point to the significant growth in the potential entrepreneurialism rate, which refers to the population that says it would like to become involved in an entrepreneurial activity in the near future, even though it is not involved at the present time. Almost 7% point to the intention of entrepreneurialism, despite recognising the difficulties they will encounter in a complex economic situation with worsening conditions. Let´s hope that the next edition of GEM can show that their intentions have become a reality. That depends on the possibilities of growth and employment in Spain.