Global Business

Down on Startups

Toy robot
Uncertainty in innovation: Germans prefer a steady job to starting their own business, a new study finds. Source: Mauritius

Germans may have a reputation for being organized and efficient and getting trains to run on time but many lack a pioneering spirit despite an abundance of capital and economic opportunity. That is a core finding of the Global Entrepreneurship Monitor, or GEM, the world’s largest survey on self-employment with data from more than 60 countries, including Germany, where around 4,000 people and 50 entrepreneurship experts were interviewed.

“In Germany, the value society places on creativity and initiative is comparatively low,” said Rolf Sternberg, a professor and head of the Institute of Economic and Human Geography at Leibniz University in Hanover, who also led the GEM’s German team. “Many people simply do not dare to go it alone.”

Formany, self-employment and self-reliance are not a viable alternative to a steady job.

According to the study, only 37.4 percent of Germans believe they have adequate skills and experience to launch their own business. That ranks the country 21 in the list of 27 surveyed industrial and emerging countries. By comparison, 45 percent of South Koreans feel they are equipped to be an entrepreneur, and as many as 48 percent of British people and 55 percent of Americans.

Germany’s lack of entrepreneurial spirit is noted in the part of the study called the total early-stage entrepreneurial activity rate. This figure shows the proportion of 18 to 64-year-olds who started a business in the previous 42 months, or who are in the process of starting one now. In Germany, that figure has been stuck at around 5 percent for years. In the most recent survey, it actually fell to 4.6 percent.

According to research by Germany’s state-owned development bank, KfW, the number of new companies in Germany fell by 13 percent in 2016. Put another way, 91,000 fewer people started their own businesses than in 2015.

Far fewer people start their own company in Germany than in most other countries, according to the GEM report. For many, self-employment and self-reliance are not a viable alternative to a steady job, the authors note. Some long-term plans are necessary in political and social realms to change this attitude.

That’s important because as Austrian economist, Joseph Schumpeter, put it, “creative destruction” is the driver of economic dynamism. The latter shakes up established markets and creates new ones.

Still, the GEM study has some good news for Germany. Thanks to the healthy economic situation, the number of floundering companies has declined. The country also receives good grades for infrastructure, consumers’ generally positive approach to new products, state protection for intellectual property and financial support for entrepreneurs. But it gets bad grades for its many regulations, a punishingly high tax regime and an inadequate level of entrepreneurial education at schools and colleges.

The GEM report also identifies a further problem: a lack of German role-models entrepreneurs. Studies have shown that an individual’s attitude can be shaped by personal relationships with an entrepreneur or someone who founded their own business. But in Germany, only 22 percent of people know anyone like that. Of the countries the GEM report surveyed, only Puerto Rico had a lower rate of contact with actual entrepreneurs.

This interview was originally published in WirtschaftsWoche, a sister publication of Handelsblatt. To contact the author: bert.losse@wiwo.de

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