Small businesses flourish, but not their revenue

OECD Observer

Since 2009 the French government launched a new “auto-entrepreneurs’’ status to help small, often one-person, businesses below a certain earnings threshold to bypass many formalities of registration, in an effort to stimulate entrepreneurial activity and jobs. By mid-2014, the number of auto-entrepreneurs reached nearly 1 million, according to a French business creation agency, APCE. However, according to the national statistics office, INSEE, most of these businesses have made little if any money at all. The crisis has hardly helped, but is there a recipe for success?

Entrepreneurship at a Glance 2014 attempts to understand the complex array of factors that have led to entrepreneurial success since the financial crisis, using 20 different indicators of performance and statistics from 30 different countries.

Whereas few economies escaped the credit crunch, divergent patterns of entrepreneurship have emerged across OECD countries since the crisis began. Large economies like Australia and the UK have returned to pre-crisis levels of start-up performance, whereas others like Denmark and Spain are struggling to recover their former traction.

As bureaucratic barriers to entrepreneurship have declined over the past decade, the largest obstacle to small business success and innovation across all 30 countries measured in the report remains the lack of funding. Government support for innovation varies from country to country, with some like Estonia and Hungary providing more than 85% of R&D support to small businesses, and others like Japan and the US investing more than 80% of funds in large firms. On the whole, more money is invested in large firms than in small enterprises. Such unequal investing can be problematic. Approximately 70-90% of all private businesses are micro-enterprises, with less than 10 employees, and sometimes only one. In crisis-hit countries such as Portugal, Italy and Greece, nearly half of the national workforce is employed by such enterprises.

The study also reveals a correlation between co-operation between firms for innovation, and diminishing levels of perceived obstacles to growth, suggesting that co-operation with larger firms can help smaller businesses grow, even as they take chances with new ideas.

OECD (2014), Entrepreneurship at a Glance 2014, OECD Publishing. http://dx.doi.org/10.178/entrepreneur_aag-2014-en

©OECD Observer No 301, Q4 2014

Useful links:

Can youth entrepreneurship work?

Tough terms for small businesses

Believing in Angels

OECD work on Entrepreneurship, SMEs and Local Development




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