The GEM Model
Since its inception, GEM has sought to explore the widely accepted link between entrepreneurship and economic development. To understand this central aim, GEM defined a conceptual model that sets out key elements of the relationship between entrepreneurship and economic growth, and the way in which the elements interact. It took as its starting point the recognition that while other scholars had defined the general national framework conditions for established enterprise to thrive, a different set of “entrepreneurial framework conditions” (EFCs) in addition to both entrepreneurial capacity and entrepreneurial opportunities, were needed to enable new business activity.
THE ORIGINAL GEM MODEL
After ten years of collecting empirical evidence, and continuous improvements in the measures adopted, GEM researchers revised the GEM model to reflect the complexity of the causal relationship between entrepreneurship and economic development globally. The revised GEM model is founded on the concept that the contribution of entrepreneurs to an economy varies according to its phase of economic development, and on the realization that the Global Competitiveness Index, on which the original GEM model drew for its General National Framework Conditions, had evolved considerably since the late 1990s.
The revised model introduced a more nuanced distinction between phases of economic development, in line with Porter’s typology of “factor-driven economies”, “efficiency-driven economies” and “innovation-driven economies” (Porter et al., 2002), and recognized GEM’s unique contribution: to describe and measure, in detail, the conditions under which entrepreneurship and innovation can thrive.
The revised GEM model also has a new dynamic element in that it incorporates an understanding of how economies change as they develop, and the changing nature and contribution of entrepreneurship in this development:
In factor-driven economies, economic development is primarily driven by basic requirements: development of institutions, infrastructure, macroeconomic stability and health and primary education.
In efficiency-driven economies, government focus is (or should be) on ensuring smooth mechanisms such as a proper functioning of the market; higher education systems, goods and labor markets and technological readiness. Even though these conditions are not directly related to entrepreneurship in the Schumpeterian sense of “creative destruction”, they are indirectly related since the development of markets will also attract and enable more entrepreneurship.
In innovation-driven economies, entrepreneurial framework conditions become more important as levers of economic development than basic requirements or efficiency enhancers. The outcome of the model is national economic growth through, for example, job creation and technical innovation.
The enormous GEM data collection effort allows for an exploration of the role of entrepreneurship in national economic development. GEM’s ability to map this territory increases with each annual cycle as combined sample sizes grow and as trends over time become apparent.