Entrepreneurial activity in Spain grew by 4.11% in 2007, as shown by the results of the GEM (Global Entrepreneurship Monitor) Report, the leading international observatory on entrepreneurial activity worldwide.
Experts from IE Business School lead the Spanish arm of the project, sponsored by the Department for SMEs at the Spanish Ministry of Industry, Banesto and the Incyde Foundation. The presentation of the new edition of the GEM Report took place on Thursday, February 28, 2008 at IE Business Schoolâ??s Madrid campus, and was attended by Spainâ??s General Secretary for Industry Joan TrullÃ©n, the Spanish Director General of Policy for SMEs, MarÃa CallejÃ³n, and other key players from the field of entrepreneurship.
One of the main conclusions of the report is that there was moderate growth of entrepreneurial activity in Spain 2007. The TEA (Total Entrepreneurial Activity), an index used to measure the number of business start-ups, stands at 7.6% for 2007 in comparison with 7.3% for the previous year. This rate of growth places Spain in 4th position among EU countries and 8th among the OCDE countries analyzed by the GEM Report. Moreover, the â??death rateâ? of business start-ups in Spain has dropped by 16.6%, pointing to higher rates of consolidation. In the words of Ignacio de la Vega, Director of the GEM Report in Spain and Professor at IE Business School, â??2007 was a good year for entrepreneurial activity as a whole. In addition to an increase with regard to 2006, which saw spectacular rates of growth, business start-ups are growing in quality and dimension, and are based on increasingly solid business models which translate directly into a marked drop in business death ratesâ?.Immigrant Entrepreneurs
The growth of Spainâ??s immigrant population is playing an increasingly important role in the countryâ??s entrepreneurial prowess. The number of foreign entrepreneurs continues to rise steadily and has grown by 9.4% in comparison to 2006. 12.8% of all business start-ups in 2007 corresponded to business projects implemented by foreigners, which is double the 5.7% figure for 2005 and 11.7% higher than 2006. The GEM Report states that the immigrant population in Spain is proportionally more entrepreneurial than the Spanish population, and within the immigrant community, those immigrants from outside the EU are more entrepreneurial than those from EU member countries. Foreign entrepreneurs are younger than their Spanish counterparts, particularly those from outside the EU, given that the average age of EU immigrants is higher than that of the Spanish population.
Ecuador was the country of origin of the greatest number of non-EU immigrants in 2007, replacing Argentina which held first position in 2005 and 2006. The number of immigrants from Ecuador, Colombia, Venezuela and Romania have climbed several positions during 2006 and 2007.
France is the country of origin of the largest number of EU immigrant entrepreneurs in Spain during the period under analysis. Moreover the diversity of origins grows greater each year.
Profile of an entrepreneur
The profile of the average Spanish entrepreneur is relatively stable. It comprises a man of 37.9 years of age, who has undergone higher education, has a good income level, and works full-time on his business project.
The greater part of business start-ups were micro-firms and, as in previous years, most commonly took the form of self-employment. Growth forecasts are more tentative than in the previous edition of the report, which reflects a certian level of caution among entrepreneurs given the uncertain situation and slight deceleration of western eocnomies.
The rate of entrepreneurial activity among women dropped by 8.1%, placing Spain in fourth position worldwide, down from second position last year. The percentage of women that partake in part-time entrepreneurial activity (13.6%) is higher than that of men (7.6%). Causes include the fact that women entrepreneurs still have less confidence in their entrepreneurial skills than men, they fear failure more and believe they have fewer chances of obtaining funding.
The figures provided by the report confirm womenâ??s less favourable position in terms of integration into social networks that could bring support when it comes to creating and developing a successful business.
Changes in funding
The average amount of capital need to set up a business in 2007 was 79,000 Euros, 19.6% more than in 2006. 50% (average) of start-ups invested up to 45,000 Euros, and the rest invested this amount or more, which constitutes an increase of 12.5% with respect to the previous year. The most popular figure was 30,000â?¬, similar to that of 2006.
The percentage of funds provided by the actual entrepreneur went down from 71.2% to 69.2% on average and the percentage of entrepreneurs that provided 100% of the capital rose slightly to 42.6% from 40.6% in 2006.
Loans from a financial institution continued to be the most popular source of capital for entrepreneurs in Spain. 28.2% stated that they had received or expected to receive funds from a finance institution, a very similar percentage to the previous year (28.4%). Informal investment by family and friends dropped from 29.8% to 21.2%. Governmental aid still plays an important role in funding buisness projects, although it had dropped from the previous year. Finally, the GEM Report highlights the slow progress of private funding through professional business angels or venture capital, which still play a meager role in funding start-ups in comparison with other sources of funding.
The percentage of firms that use innovative technologies went up from 18% in 2006 to 27% in 2007. The greater part of business start-ups continue to be micro-firms, but in 2007 there was a larger number than usual of start-ups with employees. There was also a marked improvement in market share gained, given that 8% had plans for expansion in their sector, up from 0% in the previous year.
There was also a steep increase in entrepreneurial activity in existing firms. The percentage of firms that generated new projects was 6% in 2007, whereas in the previous year only 1.2% of consolidated companies launched new projects.
The map of Spain in 2007 showed some interesting changes in levels of intensity of entrepreneurial activity in different regions, as compared to 2006. The Canary Islands took over the first position in levels of entrepreneurial activity. Entrepreneurial activity fell sharply in Aragon and increased significantly in Navarre, Galicia, La Rioja and Asturias. It is important to point out, however, that using the rate or percentage of business start-ups (which are companies that have been operating for between 0 and 24 months) in a region is very different from estimating the absolute number of start-ups in each region. In terms of absolute numbers, Catalonia, AndalucÃa and Madrid, in that order, are the regions with the largest number of business start-ups in 2007. Larger populations translate directly into more start-ups in a region, whereas percentages or levels of entrepreneurial activity bear no relation to population size.
The GEM EspaÃ±a Observatory comprised 15 regional teams which presented region-specific reports in Andalucia, Asturias, Canary Islands, Castilla La Mancha, Castilla y LeÃ³n, Catalonia, Comunidad Valenciana, Extremadura, Galicia, Madrid, Murcia, Navarre, the Basque Country and the Spanish enclaves of Ceuta and Melilla. These reports were developed every bit as fully as the national report, providing invaluable information on the entrepreneurial activity in each region.
What the experts say
The authors of the GEM Report, headed by Alicia Coduras of IE Business School, used a sample of 27,880 people of between 18 and 64 years of age. A total of 564 experts from 9 spheres related to the world of entrepreneurship (including finance, politics, education, R&D), were interviewed. Questions covered opportunities for entrepreneurship, skills needed to start up a company, and which were the main issues that furthered or hindered the entrepreneurial phenomenon. Experts felt that the main obstacles for entrepreneurship in 2007 were centred around financial support, social and cultural norms, government policies and a failure of the educational system to promote the spirit of entrepreneurship. The Spanish economic climate also underwent considerable change, dropping from the No. 10 position to No. 7, which shows that in July 2007 there was growing concern about the macro-environment.
With regard to recommendation, the general issues that emerged in expertsâ?? comments were related to education and helping to foster the entrepreneurial spirit, a theme that has featured constantly in the report since the GEM EspaÃ±a Observatory was created, and which is improving but at a very slow rate. Government policies are highly diverse, but there are also common concerns: financial support, continuity and expansion of governmental programs, and measures to help shape the mind-set of society with regard to the key role of entrepreneurs in the economy.