5 Types of Economic Activity Around The World

The 5 Types of Entrepreneurial Activity Around The World

A topic that is of significant interest to the World Economic Forum is that of entrepreneurs. In January 2015 it released its report “Leveraging Entrepreneurial Ambition and Innovation: A Global Perspective on Entrepreneurship, Competitiveness and Development”. To carry out the report the World Economic Forum used its own Global Competitiveness Index Data which ranks 144 economies for their competitiveness economically as well as the Global Entrepreneurship Monitor’s assessment of entrepreneurial activity in 70 economies. In both cases, five years of data was analysed, looking at a sample of 44 economies and blocking them into five types of entrepreneurial clusters in order to gain a thorough understanding of the different types of clusters. The study also reviewed policy making to determine the types of policies that are best for different kinds of characteristics of economies.

Three Types Of Entrepreneurial Activity

Carrying out the study required examining three different types of entrepreneurial activity. These were categorised as “early stage entrepreneurial activity” which was measured as a percentage of the population of the economy that were either entrepreneurs or owner managers of new businesses, the number of entrepreneurs considered to be “ambitious” – those who were aiming to create more than 20 jobs within a five year period, and also the number of “innovative” entrepreneurs, defined as those who provide new products and services. Interestingly of all the economies studied, the only countries that scored highly on all three were Chile and Colombia. The rest of the economies were lower (average or below) on one of the three different types of entrepreneurship. Another interesting finding was that those economies that are less developed have more early stage entrepreneurship than economies that were more competitive. In the most successful competitive economies there was a higher level of ambitious and innovative entrepreneurs. Intrapreneurship, defined as entrepreneurial activity carried out by employees was also found to be higher in competitive economies.

Economies by development level and geographic region table from the WEF report

Five Types Of Economies

In studying entrepreneurship at this level of depth it was possible for the World Economic Forum to identify five different types of economies. The first was “All Rounder” economies. These were found to have high levels of all three types of entrepreneurship. The second was “High Activity” economies. These economy types were strong in the area of early stage entrepreneurial activity but did less well with either average or below levels of ambition or innovation. The third was “High Ambition” economies. These economies had high levels of ambitious entrepreneurship but did less well with early stage entrepreneurial activity or innovation. High Innovation economies unsurprisingly were those that did well at innovation but scored average or lower for levels of ambition or early stage activity. Finally the fifth grouping was Neutral economies. These were found to have average or lower rates for all three of the different types of entrepreneurial activity outlined.

Four Preconditions For Entrepreneurship

All of this led the World Economic Forum to be able to also categories preconditions for entrepreneurship into four groups. The first is entrepreneurial connections, the second is awareness of opportunities, the third inherent entrepreneurial skills and the fourth risk taking culture. The different types of economies could be slotted into these different categories, leading to a better understanding how they arose. Thirteen countries of the 44 that were included in the World Economic Forum sample were found to have all four of these entrepreneurial preconditions. Turning to High Ambition and High Innovation economies business strategy was considered to be particularly important, especially for gaining access to overseas markets. In the Neutral and High Ambition groups were found to be comprised mostly of European countries. Latin America was not found to be represented among this set. The entrepreneurial activity of employees was found to be an important driver, and interestingly the study found an inverse correction between intrapreneurship and early stage entrepreneurial activity.

In addition to this, the three different types of economic development was also found to be an indicator of the sector types where entrepreneurs were most likely to be most prolific. Indeed, the study reports that:

“Consumer services comprise the bulk of entrepreneurial activity in factor driven and most efficiency driven economies.”

Another interesting finding was that those countries that were All Rounders (Colombia and Chile) were the only countries that had “aggressive entrepreneurship policy making programs in place”. All of this led to the World Economic Forum suggesting that policy making has to consider entrepreneurial economy type when setting policy and has to have a goal for a specific entrepreneurial outcome to be achieved.

The report also provides various case studies and interviews to entrepreneurs, such as an interview to the founder of Beesline, a natural care products startup from Lebanon, Welle Tecnologia Laser , a laser cutting startup based in Brasil.