5.    The hindrances

Global Entrepreneurship Monitor is a systematic study undertaken to investigate the relationship between Economic Growth and Entrepreneurial activity in different countries of the world.  London Business School and Babson College, US initiated this global survey in 1999 with 10 countries and the latest round covered 42 countries.  The survey consists of two parts: an Adult Population Survey and Interviews with Experts.  Thus GEM provides both quantitative trends and an attempt to explain and clarify the underlying reasons.

"GEM focuses on three main objectives:

• To measure differences in the level of entrepreneurial activity between countries
• To uncover factors determining the levels of entrepreneurial activity.

The 2006 Survey has the following highlights:

1. Early-stage entrepreneurial activity (TEA rate) is generally higher in those countries that have a lower per capita GDP.  The BRIC countries post a TEA rate upwards of 10%, except Russia which posts a little below 5%.  But their per capita GDP is less than $10,000.  In contrast, countries like France, UK, Germany and Netherlands have a per capita GDP of $30,000 and post TEA of around 5%.
2. Countries with the highest per capita GDP of $40,000 like US and Norway show a rise in TEA around 10%.  This indicates a surge in these countries of opportunity-based entrepreneurial activity.
3. The incidence of necessity-based entrepreneurial activity is generally higher in Middle Income (MI) countries than in High Income (HI) countries.  In MI countries necessity based activity forms 20% or more of the TEA, while in HI countries it forms 15% or less of TEA in most cases.
4. In both MI and HI countries a little over half of all early-stage entrepreneurs [ESE] did not consider their products to be new to their customers.  Perhaps as a consequence, about half of all early stage entrepreneurs expect many competitors to keep them on their toes.
5. The choice of sectors for TEA in both groups of countries shows an interesting pattern.  Both early stage entrepreneurs and established business owners [EBO] in MI countries show a preference for Consumer oriented and Manufacturing businesses.  Business Services figure low in their preference. In HI countries the preference of entrepreneurs - both early stage and established - spreads from Consumer oriented businesses through Services to Manufacturing.  Thus early stage entrepreneurs in HI countries are more likely to be found in business services sector than those in MI countries.
6. Early stage entrepreneurial activity is most prevalent in the age group of 25-34 years and least prevalent in the 55-64 years.
7. There is a clear gender gap in both early stage enterprise activity and established business owners.   Men are significantly more likely to start a business than women in both country groups.

Indian Scene

India is a peculiar case of an economy with a large size and a high rate of economic growth, but a low per capita income.  Thus it is still not a member of the HI Group of countries.  It belongs to MI group of countries.  In the BRIC group India is last on per capita income and third on TEA rate.

Entrepreneurship is defined for the study as a new business activity undertaken by established business organizations or by start-up firms.  It is further classified as an opportunity-driven activity and necessity-driven.

The positives

According to the Experts participating in GEM from India, a number of positive developments have taken place in recent years.

1. Debt financing, and IPO funding for new and growing firms have improved distinctly while private financing and venture capital are available to some and not to others.  Availability of equity funding and government subsidies has not become easier at all, in the experts' opinion.
2. Taxes are not burdensome and there is less inconsistency in applying taxes to new firms.  
3. Experts show greater optimism in science parks and business incubators being able to support new and growing firms.
4. Business and Management education, to the experts, seem to provide somewhat adequate preparation for start-ups and growth firms.
5. Experts believe that in select areas, our current science and technology base does support creation of world class technology firms.  They also aver that for new and growing firms affording the cost of technology is not a big issue.  Support for engineers and scientists to commercialize their ideas is also seen to be available, though there is room for more
6. Experts are quite satisfied with the availability, quality and cost of services rendered by subcontractors, legal professionals, consultants and bankers to new and growing firms.
7. Experts are quite satisfied with the low cost of communication network and the speedy access to its availability.
8. There is broad agreement that individual success achieved by own efforts is positively valued in our culture today than it was at the start of our industrialization half a century ago.
9. Reflecting the upbeat mood, experts unanimously hold that good opportunities for new and growing firms have increased considerably in the last 5 years.  This is the right time not only to start new firms but also to create truly high-growth firms, according to them. 
10. In the experts' view, the capacity to set up small-scale businesses is quite widespread in India, though only some have the capacity to set up and manage high growth businesses. 
11. Experts are agreed that the Indian society sees entrepreneurs as competent and resourceful people and the media has helped this perception by publishing success stories of entrepreneurs.  Consequently, entrepreneurs enjoy status and respect, and starting an enterprise is considered an acceptable way of acquiring wealth.

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The hindrances

As always it is the Soft factors that drive the hard factors on the ground.  Perceptions, beliefs, tendencies and habits are some ingredients of the Software or Mindware that drives the Entrepreneurial activity. Let's see what the Experts have to say here.

1. Availability of equity funding and government subsidies has not become easier at all, in the experts' opinion.
2. Experts do not see government policies consistently favouring new firms nor do they feel support for new and growing firms is a priority for national policy.  Coping with Government bureaucracy with its regulations and requirements continues to be unduly difficult. Getting permits and licences speedily is a distant dream, in their opinion.
3. Experts do not feel government programs for supporting new and growing firms are effective.  Access to information about Government programs is difficult, though there are a number of such programs.  Staff in Government support agencies is not seen as competent and effective.  Obtaining government assistance through the much-talked about single window clearance is not at all a reality in the present situation.
4. Experts come down heavily on primary and secondary education for its poor record in encouraging creativity and initiative and for its inadequate attention to entrepreneurship and market principles.  They are not happy either with vocational and professional education systems or college and university systems as they do not prepare students to start new activities.
5. When it comes to access to the latest research, new and growing firms suffer on two counts: established firms have a better access and secondly, universities and research institutions are not known for proactively and efficiently transferring new research and technology to industry.
6. It is neither easy nor affordable for new and growing firms to enter new markets.  A partial explanation is that new firms' entry into market can be unfairly blocked by established firms and the anti-trust legislation is not effectively enforced.
7. Experts decry the kind of support new and growing firms receive in terms of physical infrastructure.  If anything, it is becoming more difficult and expensive by the day.
8. Experts feel that the national culture does not encourage individual responsibility and entrepreneurial risk taking.  With the growing shortage of trained manpower, salaries and benefits have improved considerably.  There are tremendous opportunities for the young in India to grow both in India and abroad.  The incentives for employment growth seem hard to resist, unless the inner call for entrepreneurship is very strong.  As a career choice, entrepreneurship does not receive the same measure of support from the society
9. Not many (outside the business communities?) can quickly respond to market opportunities and organize the necessary resources.  Perhaps the reason is that the experience of setting up and running a business is not widespread.  A large number of would-be entrepreneurs remain just that, not taking the last step into a start-up.
10. Experts believe, violation of Intellectual Property Rights in India (e.g. sale of pirated products) is likely to be extensive.  They also believe the relevant legislation - not seen as comprehensive - is not efficiently enforced, though there is a growing recognition that patents and copyrights should be respected.  Consequently, new and growing firms cannot take it for granted that their innovations falling under IPR would be respected in the market out there.
11. Though it is now socially acceptable for women to go into business, they do not receive active encouragement nor do they have the same exposure to business as the men do.  As a result, experts hold, their ability as women to start a new firm is not equal to that of men.