GEM 2012 Report: Entrepreneurship in Austria
Austria took part in the Global Entrepreneurship Monitor (GEM), the biggest survey of its kind, for the first time since 2007 last year. The global 2012 report of 69 participating countries (out of which two, India and Jamaica, were disqualified for providing insufficient data) was presented in Kuala Lumpur in January (see our previous feature). Last week, a more detailed Austrian country report was published and its main findings were showcased at a launch conference hosted by the Austrian Economic Chambers, WKO, on 15 May.
From last to 5th rank in five years
The report has “everything you ever wanted to know about entrepreneurship in Austria but were afraid to ask,” according to Christoph Schneider, head of the WKO’s economic policy department, who moderated the conference. Indeed, there seems to have been a certain fear concerning the truth on entrepreneurial demographics, attitudes, perceptions and expectations in Austria over the last years, as the extensive survey struggled to find financing after leading to less than favourable results in 2007. In 2007, Austria made the global last place among the countries surveyed with a Total Early Stage Entrepreneurial Activity (TEA; for businesses that have been operating for up to 3,5 years) rate of 2,4 % among 18 and 54 year olds in 2007. This was a rather tragic outcome, in particular when considering that Austria is the theoretical homeland of entrepreneurship, with the Austrian School of economics having placed the entrepreneur at the centre of its theories, as Schneider pointed out.
In 2012, things appear to have been better in Austria. With a TEA rate of 9,6 % among Austrians between 18 and 64 years of age, the country was placed at 5th rank within the global “innovation-based countries” (24 industrialised countries of a comparable status, categorised according to per capita income and the World Economic Forum’s Global Competitiveness Index) behind the US, Singapore, the Netherlands and Slovakia, and at 3rd rank among the European innovation-based countries, following the Netherlands and Slovakia. Within Austria, Vienna and Carinthia had the highest shares of TEA in 2012 with 12,7% and 10,4% respectively; while Burgenland (5,8%) and Vorarlberg (6%) had the lowest. Apart from the TEA as the main indicator for entrepreneurial activity, the rate of established entrepreneurs (operating for 3,5 years and above) rose to a lesser extent, to 7,6% in 2012 from 6% in 2007. This results to a total entrepreneurial activity of 17,2% among the Austrian adult population in 2012, an increase of 8,8% since 2007 (8,4%).
Survey author Thomas Schmalzer from the University of Applied Sciences FH Joanneum in Graz noted that the GEM report’s results are not 1:1 comparable to the WKO’s statistical data on entreprises, because GEM primarily measures perceptions and differentiates between established and early-stage businesses, also considering pre-founders. This explains why the WKO’s latest data from 2012 indicated that the age of Austrian entrepreneurs is increasing, while it’s the opposite in the GEM report’s findings.
Entrepreneurs’ age, sex, education and motives
Overall, entrepreneurs have gotten younger since 2007, as the survey found. In 2007, the majority of TEA were between 45 and 54 years of age (35%), while in 2012 the biggest share was between 35 and 44 years (29,7%), followed by those between 25 and 34 years (26,4% as compared to only 16% in 2007). The most frequented business sector by TEA was that of consumer oriented services in 2012 (46,8%) followed by business services (40,1%); while for established entrepreneurs it was the other way round with business services (39,5%) followed by consumer oriented services (33,9%).
Concerning the male to female ratio, there has been a rise of female entrepreneurs to 42,4% in 2012 from 38,1% in 2007. Within Austria, the imbalance is particularly high in the federal state of Carinthia, where only 29% of TEA are female; while the ratio is 50:50 in Salzburg. Half of Austrian entrepreneurs have a high-school diploma (“Matura”; TEA: 50%, established entrepreneurs: 54,2%), while about a third also have a university degree (31,2% for both TEA and established entrepreneurs). As for the motives for company foundation, the majority of Austrian entrepreneurs (81,4%) consider starting their own company as an opportunity – to enjoy greater freedom (51% of TEA), to improve their income (26,7% of TEA), to keep their income stable (7,9%) or for other, not-specified reasons (14,3%). Only 10,8% become entrepreneurs out of (financial) necessity.
Perceptions of entrepreneurship
On the basis of over 4.000 interviews that the GEM team at the University of Applied Sciences FH Joanneum conducted in its Adult Population Survey (APS), perceptions regarding entrepreneurship in Austria were measured. As for the possibilities for founding a company, Austria was at 4th rank among the innovation-based countries after Sweden, Norway and Finland. 49,2% of Austrians perceive the possibilities to start a company in their region as good in the course of the next six months. The federal state of Vorarlberg has the best rate of perceived opportunities (61,4%) while Carinthia has the lowest rate (34,2%). Furthermore, a total of 49,6% of Austrians consider themselves as having enough competencies to found a company (6th rank after the US, Slovenia, Spain, Greece and Slovakia). At a rate of 56,3% people from Burgenland are particularly confident of their skills, while Vorarlberg natives are least so (38,3%).
A survey of 36 Austrian experts investigated perceptions of the framework conditions for entrepreneurship in Austria in more detail. According to this survey, Austria is at the forefront when it comes to public funding and physical infrastructure. Although Austria is recently seeing an increase in entrepreneurial university programmes (see these articles), there is a lot of catching-up to do as regards primary education on entrepreneurship. Further room for improvement was detected in regard to Austria’s rigid tax laws, certain socio-cultural norms (risk aversion, stigmata of insolvencies) as well as the lack of “modern forms of financing” (VC, crowdfunding) were seen asobstacles.
Clouds on the horizon
While the overall results of the 2012 GEM report were on the positive side, also reflecting the fact that with an employment and export record in the last year, Austrian economy is not doing too badly altogether; there are some “clouds on the horizon”, as Schmalzer put it. As far as the rate for competitiveness and innovation is concerned, Austria holds the good 7th rank. However, when looking at the data in more detail, a decrease in product novelties developed by Austrian TEA can be detected since 2007 (from 17% of TEA with new products in 2007, to 8,1% in 2012). According to Schmalzer, the decrease of enterprises in niche markets is “an indicator that Austria might be facing a problem as far as its international competitiveness and innovation are concerned in the future.” Moreover, there has been a decline in the usage of the newest technologies by Austrian TEA (from 14,1% in 2007 to 5,6% in 2012). These developments this could have serious implications on the Austrian economy as a whole, which relies heavily on innovation and its external trade linkages. As Hans-Jörg Schelling, vice-president of the WKO said in his opening address: “We will never win the cost and price competition, we can only win the one for quality and innovation.”
A further less favourable finding is related to the Austrians’ perceptions of entrepreneurship. “We are ‘blessed’ with a certain risk aversion in Austria,” Schmalzer stated a well-known fact, which was also supported by empirical data from the survey. As for its “fear of failure”, Austria is in the middle range on an international comparison among the innovation-based countries. 43,5% of Austrians are scared of failing. Unsurprisingly considering the economic situations in these countries, this rate was highest for the Greek (72,4%) and Italians (56,6%), while it was lowest for the Swiss (32,2%) and Norwegians (35,6%).
Another more sobering result concerns the perception of entrepreneurship as a desirable career option. Here, Austria was at the 16th or 5th last rank (46,4% of the Austrians surveyed consider entrepreneurship a desirable career option) among the innovation-based countries, with the Netherlands (79%) and Taiwan (70,3%) at the higher, and Switzerland (44,2%) and Japan (29,7%) at the lower ends. Within Austria, Vorarlberg has the highest rating (58,8%), while Vienna had the lowest (35,5%). As for the social status of entrepreneurs, the statistic was somewhat more positive: 75,8% of Austrians attest entrepreneurs a high social status, a rate that was highest in Finland (83,4%) and lowest in Japan (54,8%) among the innovation-based countries. Austrian founders themselves consider their status slightly less positive, however, at a rate of 73,6%.
Following the presentation of the report was a podium discussion, in which the panellists (also including entrepreneur Markus Kainer of IM Polymer GmbH, Doris Kiendl-Wendner, vice-president of FH Joanneum, and Stefan Buchinger from the Austrian Ministry of Economy) agreed that Austria needs to start fostering entrepreneurship through primary and secondary education and that obstacles for entrepreneurship should be dismantled. As for ways to change the prevailing Austrian socio-cultural norms, in particular the lack of a failure culture, Schmalzer believes that besides education, initiatives like the GEM survey, awards and other image campaigns showcasing entrepreneurship as a viable career option, as well as legal changes like the GmbH Neu or Light scheduled to come into power in July this year could bring results in the long run.
The full German, 96-page GEM Austria can be downloaded at: http://gem.fh-joanneum.at/downloads/GEM2012_WEB.pdf
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