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

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

2 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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, 1749-1832 (Knowing is not enough, one should also use it; Wanting is not enough, one should also do it)

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

4 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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”.

5 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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.

6 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk The Danish Approach Research Data Policy

7 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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

8 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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).

9 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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

10 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk

11 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

12 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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.

13 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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.

14 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk

15 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)

16 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Data ICE >Our consortium was founded in 2004 >8 countries are full members >We have a yearly budget of €240.000 >Vision: A critical demander of data and analyses

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

18 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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.

19 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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

20 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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

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

22 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk An overview Comparing the Business environment Denmark is catching-up DK 2005-06 100 0 Top4 2005-06

23 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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 1020- -30-40-5030-60-70-80 Administrative byrder-drift Arbejdsmarkedsregulering (Ikke opdateret) * * * *

24 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Difference between Denmark and top-4 -100 Income taxes Administrative burdens start-up Incentives Bankruptcy Business taxes 1020-20-30-40-5030-60-70-80 Administrative burdens - operation Labour market regulation

25 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 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 20010- 20010-20-10 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 -20-10-20

26 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 100 Change DK Change DK–T4 Change T4 - 10100- 10100- 10 Incentives Income taxes Administrative burdens start-up Bankruptcy Business taxes Administrative burdens - operation Labour market regulation

27 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Critical Policy Areas

28 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk Top 3 DK 98765432109876543210 Bankruptcy Index DK 0,00 2,5 0 CAN FIN FRA GER ITA KOR NED NOR ESP SWE SUI GBR USA 0 1 2 3 4 012 Performance Framework Conditions DK

29 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk However, we still lack internationally comparable data

30 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 3 types of indicators >Indicators based on register data equal or close to the policy instrument in question. Time to close a business

31 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 3 types of indicators >Indicators based on “hard”, which provide an indirect measure of the policy area in question. Barriers to competition

32 Copyright 2006 © FORA, Langelinie Allé 17, 2100 Kbh Ø - www.foranet.dk 3 types of indicators >Indicators based on survey data that describes the quality of the policy area. Entrepreneurship education