An independent and international academic study released this month, has delivered a reality check to widely held beliefs that western economies -- Europe and North America -- are the most conducive to  starting a business.

Not so, concludes the latest annual survey   carried out by the London (UK) headquartered  Global Entrepreneurship Monitor (GEM),   a consortium of national country teams, primarily associated with top academic institutions, that carries out survey-based research on entrepreneurship around the world.

According to the latest  (2023/24) GEM  Global report,   four of the  The United Arab Emirates (UAE) takes the number one spot for the third year in a row.  

India is ranked in second place with Saudi Arabia third, Lithuania in fourth place and Qatar fifth.

The ’Usual Suspects’ like France, US, Germany and UK do not make it to the top ten and are ranked 12th, 16th, 17th and 22nd respectively.   

To achieve the ranking, entrepreneurship experts in each of 49 participating countries were asked to provide a score across 13 GEM Entrepreneurial Framework Conditions (EFCs) like government policy, access to entrepreneurial finance,  taxation, bureaucracy, commercial, physical  and professional infrastructure etc, that can enhance or hinder new business creation.

“The ranking is characteristic of a clear eastward shift in the quality of entrepreneurship ecosystems in the past five years, closely mirroring a similar shift in the world’s economic centre of gravity”, suggests Dr  Sreevas Sahasranamam, one of  nine named co-authors of the GEM Global report who represents  GEM UK,  “Western economies have slipped during the same period.”

India-born Sahasranamam, an alumnus of the College of Engineering Trivandrum (CET) where he obtained his Bachelor's degree in Technology in 2012 and the Indian Institute of Management Kozhikode (IIM-K) where he obtained his PhD in 2017, has been in the UK for the last 6 years.

He is currently Professor at the Adam Smith Business School of the University of Glasgow, in Scotland, where  his research focuses on understanding the strategic and ecosystem enablers of innovations/start-ups tackling UN Sustainable Development Goals (UN SDGs). He was also co-chair of the G20 Startup20 task force on sustainability.

Why the shift to the East?

In a paper written by Dr Sahasranamam jointly with Aileen Ionescu-Somers, Lecturer in Entrepreneurship, Université de Lausanne and Executive Director of GEM,  for  the Australia-headquartered  global  academic journal, The Conversation  last week,  he gives a plausible reason for this ‘Shift to the East’: “The explanations for the rise of eastern countries include greater government promotion of business creation, more emphasis on entrepreneurship education and changes in how business activity is viewed culturally.”

“In the UAE, for instance, there have been initiatives… (like) priority visas for entrepreneurs and top students, particularly in areas like artificial intelligence, digital currencies and coding.”
 

“In India, there has been a lot of emphasis on innovation in the country’s New Education Policy which was introduced in 2020 to raise educational standards across the board. Many school students have also been inspired by a nationwide initiative called the Atal Tinkering Lab, which inculcates curiosity and design mindset through science projects, while the popular TV show Shark Tank (called Dragons’ Den in some countries) has fired up dinner-table discussions about things like ‘equity’ and ‘product-market fit’.”

Dr Sahasranamam explains the fairly recent decline in the business attractiveness of western Europe and the Americas: “The weaker performance of western economies has been very noticeable over the past five years. In 2019, four out of the top ten countries were Switzerland, the Netherlands, Norway and the US. All had lost ground by 2023, with Norway and the US no longer even in the top 15, while Switzerland and Netherlands dropped from being the top two countries to ninth and seventh place respectively.”

“The weakening of business conditions in these economies is potentially explained by the surge in inflation and higher interest rates that they have endured since the pandemic.”

Where the West excels
But West beats East in one aspect: “When you look at countries like Switzerland, France, Norway and Germany, over 30% of their entrepreneurs are in business services. The situation is quite different among the leading eastern nations in the GEM rankings, where most entrepreneurial activity focuses on consumer services like retail, hotels, restaurants and personal services. These represent 80% of businesses in Saudi and over 70% in India, while in the UAE the most recent figure is over 60% in 2022. In Saudi and India, business services such as IT and professional services are less than 10% of entrepreneurial activity overall, while in UAE the 2022 figure was less than 20%.”

“These low numbers matter because companies providing business services tend to have higher margins, greater potential for scaling and greater barriers to entry. So, both in the global east and also in low-income countries, there needs to be more impetus and support for encouraging business services.”

Dr Sahasranamam concludes by suggesting one area of  possible concern  for  many economies including India– education:

“Entrepreneurship education needs more attention in most countries. In 31 out of 49 economies, it was rated as the weakest of the conditions assessed in the survey. Without addressing this, many potential new businesses may never come to fruition simply because a generation of schoolchildren grew up unaware that starting a business was an important option for their futures.”

This article has appeared in New India Abroad