Which G7 country has the highest rate of entrepreneurship?
While many might assume the United States, the correct answer is Canada! The 2018 GEM Canada Report also revealed that the country has highest rate of female entrepreneurship among the G7 – women start businesses at almost 85% of the men’s rate. Remarkably, the rate of entrepreneurship has increased by over 50% since 2013. A big part of the rise has been due to the increasing rate of women’s entrepreneurship. Other countries have also seen a rise in entrepreneurship – for example the US rate has increased by about a quarter since 2013. But none have increased as much as Canada.
We are not exactly sure what has driven this increase, but speculate that it is connected with the rise of the gig economy. More people are working part-time and in contract and temporary roles and therefore identify as entrepreneurs.
The Perception of Entrepreneurship
The Canadian public is very supportive of entrepreneurship:
- 75% see entrepreneurs as having high status
- 64% see entrepreneurship as a good career choice
- 75% see good media coverage for entrepreneurs
About a quarter of the public say they have an intention to start a business in the next three years, but almost half express fear of failure in a new venture. While 63% of the public see opportunities for creating a new business (a higher rate than all other G7 countries apart from the US), only 56% believe they have the capabilities to do so. This suggests that there are number of potential entrepreneurs in need of education or training about entrepreneurship.
Entrepreneurs tend to be young and well educated. The highest rate of entrepreneurship is among the 25-34 age group, where almost 30% are engaged in some way in starting a new business. This was followed by the 35-44 age group. In our latest National Report, we saw a marked rise in entrepreneurship in the 18-24 age group. This overall picture is in line with the 54 other countries in the GEM study, which shows that the most prevalent age groups for starting a business are 25-34 and 35-44. Over a quarter of entrepreneurs have some graduate experience, by far the highest rate among the G7 countries (20% have a graduate degree, while 20% have only some secondary education, also the highest level in the G7 countries).
Canada has a similar distribution of business areas for startups as other G7 countries. Most new businesses are in consumer services (about half of all new businesses), followed by business oriented services, manufacturing and extractive industries (such as agriculture and oil and gas and mining).
The owners of established businesses (those in business for three and a half years or more) have a different profile than startup owners. Established business owners are most prevalent in the 45-54 and 55-64 age groups and tend to be more male. Women own established businesses at only 68% of the men’s rate, compared with 85% for startups. However this rate for women’s ownership is the highest among the G7 countries. Some countries have much lower rates of women ownership. In Italy, for example, women own established business at only 38% of the men’s rate. This is very likely a reflection of Canada’s more egalitarian society compared with some other countries, as well as the availability of resources specifically for women entrepreneurs.
Opportunities for Improvement
Canada has a reasonable support system for entrepreneurs. It is ranked third among the G7 countries, but there isn’t a huge amount of difference among the G7 countries. The 2018 GEM Canada National Report rates nine separate factors that can impact entrepreneurs. The strongest areas (which are also rated the most important) are physical infrastructure and access to professional and commercial infrastructure. The weakest areas include government policies, bureaucracy and taxes (which are not rated as being that important), government programs and education for entrepreneurs, at both the K-12 and post-secondary levels.
The entrepreneurship story is not entirely rosy in Canada. Despite all the positive aspects mentioned above, Canada has the highest rate of “necessity” based entrepreneurship in the G7. Necessity based entrepreneurship (as opposed to opportunity based entrepreneurship) is defined as when the entrepreneur has no better choice for work. Canada’s rate of necessity-based entrepreneurship is twice the US rate: 14% of all entrepreneurs in Canada become entrepreneurs because they have no other way to make a living. This metric suggests that there are many people in Canada unable to find a job and turn to entrepreneurship because of a lack of other alternatives. It is possible that as the economy improves and more jobs are created this number will fall.
Canada also has the highest rate of discontinuance and exits among the G7 countries. If you combine this with the very high rate of entrepreneurship in Canada, this metric suggests that the country probably has too many startups, and many fail due to the lack of education, knowledge and experience of the entrepreneur.
Peter Josty is the Executive Director of The Centre for Innovation Studies and the leader of the GEM Canada National Team. Access the full study.