Entrepreneurship Data, Research and Policy - The Danish Case Anders Hoffmann, Ph.D. Creative Director, FORA – Centre for Economic and Business Research

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Data, Reseach and policy >“Es ist nicht genug zu wissen, man muss es auch anwenden; es ist nicht genug zu wollen, man muss es auch tun.” Johann Wolfgang von Goethe, (Knowing is not enough, one should also use it; Wanting is not enough, one should also do it)

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Data, Reseach and policy >Without data you are just another guy with an opinion ICE, 2004

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Our political motivation >The Danish Government Platform, 2005 >“The Government will, therefore, draw up an ambitious, holistic and multi-year strategy to make Denmark a leading growth, knowledge and entrepreneurial society”. >“Our goal is for Denmark, by 2015, to be one of the societies in the world where most growth enterprises are launched”.

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Our analytical objective >The objective is to provide policy makers with an overview of which policy areas that should be an essential part of a country’s overall strategy to promoting entrepreneurship. >The analysis is based on a cross-country comparison of indicators measuring both performance and the underlying business environment for entrepreneurship.

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - The Danish Approach Research Data Policy

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - What is Entrepreneurship? >No single definition exists of entrepreneurship simply because entrepreneurship cannot be seen as a single event. General population Want-to-be 30% Entry 1% Survival 70% Exit 25% Growth 5% GEM Eurostat

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Research >Entrepreneurship is defined as >entry and exit of firms and >creation of high growth firms, …as analyses link these two stages in the entrepreneurship process directly to productivity growth (Audretsch and Thurik, 2000; Scarpetta et. al. 2002, OECD 2003, Brandt, 2004).

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Research >The number of new firms and new high-growth firms created each year depends on a myriad of underlying factors coupled with the personal attributes of entrepreneurs >Hoffmann (2007) summarizes these in: >skills >opportunities >capital >incentives >motivation

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø -

Data Our Quality Manual >The objective is to collect and evaluate all avaliable indicators of entrepreneurship >Quality is defined as “fitness for use” in terms of user needs (Relevance, accuracy and availability). >Four main categories: >Performance indicators >Business environment indicators >Attribute indicators >Context indicators

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Quality manual – an example Assessment of Accuracy (1 dimension) Data Collection Method Very goodGoodAcceptable MarkABC >Very good: the indicator originates from national statistical offices or international government institutions; or the indicator stems from a fact-based survey. >Good: the indicator comes from an action-based survey. >Acceptable: the indicator comes from an opinion-based survey.

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Quality manual – an example Overall Evaluation Name of indicator GoodAcceptableQuestionable MarkABC >Good (A): at least 5 As and no Cs >Acceptable (B): at least 3 As and no Cs >Questionable (C): less than 3 As or one or more Cs.

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø -

Data What’s Missing? – a prioritised list >Performance indicators are missing for both start-up rates and growth rates! >Abilities are badly measured (both education and advice services) >Capital markets (business angles, exit possibilities, loans)

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Data ICE >Our consortium was founded in 2004 >8 countries are full members >We have a yearly budget of € >Vision: A critical demander of data and analyses

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Policy The Danish Entrepreneurship Index

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Main findings >Entrepreneurship activity >A high level of start ups in Denmark >Limited share of Danish companies experience high growth rates >Framework conditions >Compared to the top-3 countries, DK: does well on administrative burdens, wealth and bequest tax, and public guidance >Four areas in particular need of improvement: entrepreneurship education, access to professional counselling, bankruptcy legislation and taxes.

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Basic idea – a 7 steps approach >Define good performance and select performance indicators (3 indicators) >Identify top-performing countries (check robustness) >Define relevant policy areas and select indicators (58 indicators - check robustness) >Test for correlation between performance and policies

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Basic idea – a 7 steps approach >The critical areas of the framework conditions are identified >Weak points in national framework conditions are identified >Improve weak points by using peer review to learn from policies in best performers

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Distance between Denmark and the top- performing countries

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - An overview Comparing the Business environment Denmark is catching-up DK Top

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Danmark foranDanmark bagud -100 Overførsel af ny viden Adgangsbarrierer Adgang til udenlandske markeder Lånekapital Gennemsnitlig afstand i rammevilkår Venturekapital Aktiemarkeder Formue og arveskat Genstartsmuligheder Iværksætteruddannelse Kapitalskat Traditionelle merkantile uddannelser Iværksætterinfrastruktur Efterspørgselsmuligheder Udbud af kapital Udbud af Kompetencer Indkomstskat Administrative byrder-opstart Motivation for iværksætteri Iværksætterkultur Incitamenter Konkurslovgivning Selskabsskat Administrative byrder-drift Arbejdsmarkedsregulering (Ikke opdateret) * * * *

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Difference between Denmark and top Income taxes Administrative burdens start-up Incentives Bankruptcy Business taxes Administrative burdens - operation Labour market regulation

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - DK vinder terræn DK mister terræn DK forbedrer rammevilkår DK forværrer rammevilkår 20 Udvikling DK–T4 Rammevilkår i alt Udvikling T4 T4 forbedrer rammevilkår T4 forværrer rammevilkår Videnoverførsel Adgangsbarrierer Adgang til udenlandske markeder Lånekapital Venturekapital Aktiemarkeder Formue og arveskat Genstartsmuligheder Iværksætteruddannelse Kapitalskat Iværksætterinfrastruktur Efterspørgselsmuligheder Udbud af kapital Udbud af kompetencer Indkomstskat Administrative byrder - opstart Motivation foriværksætteri Iværksætterkultur Incitamenter Konkurslovgivning Administrative byrder - drift Arbejdsmarkedsregulering Selskabsskat Traditionelle merkantile uddannelser (Ikke opdateret) * * * * 010 Udvikling DK

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø Change DK Change DK–T4 Change T Incentives Income taxes Administrative burdens start-up Bankruptcy Business taxes Administrative burdens - operation Labour market regulation

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Critical Policy Areas

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - Top 3 DK Bankruptcy Index DK 0,00 2,5 0 CAN FIN FRA GER ITA KOR NED NOR ESP SWE SUI GBR USA Performance Framework Conditions DK

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - However, we still lack internationally comparable data

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø types of indicators >Indicators based on register data equal or close to the policy instrument in question. Time to close a business

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø types of indicators >Indicators based on “hard”, which provide an indirect measure of the policy area in question. Barriers to competition

Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø types of indicators >Indicators based on survey data that describes the quality of the policy area. Entrepreneurship education