There has been a wave of migration to Germany in recent years. Have these newcomers to the country embraced entrepreneurship? In general, what is the entrepreneurial landscape like in Germany? What are the differences in entrepreneurial attitudes across different demographical attributes?
Such questions were addressed in the 22nd German Global Entrepreneurship Monitor (GEM) National Report, authored by researchers from Leibniz University Hannover (team leader Rolf Sternberg and Lennard Stolz) and RKW Kompetenzzentrum, Eschborn (Natalia Gorynia Pfeffer, Julia Schauer, Armin Baharian and Matthias Wallisch) and published at the end of May 2022. The report compares the findings of Germany with 46 participating countries and with the data from previous years. Between June - August 2021, 3,797 randomly selected individuals and 74 entrepreneurship experts in Germany provided their thoughts on different entrepreneurship-related topics. Here are nine key takeaways from the report.
1. Entrepreneurship rates have risen again.
Total early-stage Entrepreneurial Activity (TEA) - the percentage of the 18-64 population who are either a nascent entrepreneur or owner-manager of a new business - rose to 6.9 % in 2021, which is the second-highest level ever in Germany, approaching the peak level of 2019 (7.6 %). The start-up rate has increased by 2.1 percentage points from the previous year (2020: 4.8%).
“This may be an indicator of the overall increase in startup activity in Germany, which in 2020 was curbed by the first COVID-19 pandemic,” according to the authors.
Germany is 23rd out of 31 high-income countries that participated in GEM 2021.
2. There is a low proportion of business closures in Germany.
Compared to other countries, few people in Germany (3.2%) have sold, abandoned or closed a business in the last 12 months. This figure is significantly higher in the USA (6.4%) and Canada (11.5%). The lack of profitability and a favorable opportunity to sell the business are the most common causes of going out of business in Germany. The COVID-19 pandemic played only a minor role in business closure.
3. The number of younger entrepreneurs has increased.
In Germany, start-up activities have been shifting to the younger age groups over the last four years. In 2021, the two youngest age groups covered by GEM had high TEA rates: 8.3% among 18-24 year-olds and 10% among 25-34 year-olds. By contrast, the TEA rate for 55-64 year-olds is only 3%, meaning that the start-up rate of the youngest age group is almost three times as high as that of the oldest age group.
4. Migrants are more likely to start a business than those born in Germany.
In 2021, the TEA rate of migrants (about 14%) was more than twice as the start-up rate of the native population (approximately 7%). Migrant men and women found companies in 2021 with equal frequency. Both the TEA rate for men and women was just over 14%.
5. There is a strong positive attitude regarding entrepreneurship among older people.
The older respondents (55-64 year of age) are the least likely age group to be deterred from starting a business due to fear of failure. Additionally, they value their own skills and experiences for starting a business most positively compared to other age groups. The age group that has relatively the most TEA founders (25-34 year-olds) see the fear of failure as the greatest obstacle to starting their own business. This age group is also the least likely to think that starting a company is seen as an attractive career prospect by other Germans.
6. There is a more positive assessment of entrepreneurial opportunities.
In 2021, 48% of German respondents said that in the next six months there will be good opportunities for setting up a business in their region. In comparison, this percentage was at 36% in 2020. However, the proportion of respondents who see good start-up opportunities varies considerably between men (56%) and women (40%). Also, the proportion of TEA founders who agree with the statement that the start-up situation is much more difficult or somewhat more difficult than in the previous year (39%) is modestly better compared to 2020 (46.7%).
7. The COVID-19 pandemic led to entrepreneurial opportunities.
More than one third of the TEA founders in Germany agree with the statement that the pandemic opened up new business opportunities. In 2020, only one quarter of the TEA start-ups were based on opportunities that first arose as a result of the pandemic.
8. The strengths and weaknesses of Germany as a location for entrepreneurs has hardly changed.
The strengths and weaknesses of Germany as a start-up location have been very stable for years and are changing slowly. Positive characteristics include effective patent and trademark protection, an attractive market environment for new products and services, and a broad range of public funding programs. Inhibiting factors continue to be entrepreneurial education in schools, the priority and commitment of politicians and the labor market.
9. The gender gap narrowed during the COVID-19 pandemic.
Germany’s gender gap in start-up activity narrowed during the COVID-19 pandemic, especially among nascent entrepreneurs (3.3% for females and 5.3% for males).
You can access the complete report (in German) at the following link. The report is made possible thanks to the funding of RKW Kompetenzzentrum.