The State of Entrepreneurship

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The State of
Entrepreneurship
The Global Entrepreneurship Week
Policy Survey

Copyright © 2012 by Monitor Company Group, L.P. November 2012
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КОНФИДЕНЦИАЛЬНАЯ ИНФОРМАЦИЯ

Vibrant entrepreneurship is an important component of a successful
advanced economy

 Generate high and rising standard
The Challenge of living, by boosting productivity
and innovation

 Needfor greater flexibility and
The Context innovation given speed and
demands of global competition

 Entrepreneurship as a way to
The Entrepreneurship
“Solution” cultivate
“economic agility”

GEW2012 Results Russia-Nov2012-SG Copyright © 2012 Monitor Company Group, L.P. — Confidential 2

The Entrepreneurship Benchmarking Survey was launched in multiple countries
to measure differences in attitudes towards various policies
Web-based survey was launched with the help of the leading institutions for collaboration in each
participating country
Monitor creates a Web-based survey and
Completed survey returned 5 1 includes Web link in the letter signed by
Results for
and analyzed
4 key leaders
benchmarked vs.
13 nations Dear [First Name]:
We are writing to ask for your help in completing a short Monitor Group
survey on the competitiveness of the Massachusetts economy. This is
part of an effort to gain a better understanding of the economic and
Financing Strategies innovation performance, composition, and strengths and weaknesses of a
number of industry clusters in the Commonwealth. Ultimately, this work
100% will inform policy makers in the public and private sectors as they work to
improve the competitive position of Massachusetts.
80% Your insights will enable us to develop a deeper understanding of the
Massachusetts economy, identify the sources of our current success, and
Skills 60%
Credits / help us build for our future.
Thank you in advance for your participation in this important initiative. If
Development 40% Incentives you have any questions, or if we can be of help in any way, please
50%
contact Pedro Arboleda at Monitor Group (617-252-2668; email
42%
20% Pedro_Arboleda@Monitor.com).
36% Sincerely yours,
0%
Mitchell Adams Michael E Porter Lawrence Summers Charles Vest
49%
42% Mass Tech Collab Harvard University Harvard University MIT

48%
Attitudes Please click on this link to go to survey:

Towards
Legitimacy Income Tax
http://www.zoomerang.com/survey.zgi?970XV9GEXRFLDCSWJ8Y2BKRH

Letter with Web-link to survey is 3 Individualist
forwarded by institutions for Culture 2 Letter sent to institutions for collaboration
collaboration to their members to fill out
Cluster Regional Business
Organizations Councils Associations

University
Chambers of Government
Alumni
Commerce Agencies
Organizations
Research Civic
Institutes Organizations

Regional Groups and Associations

Our Objective: Measure Policies Aimed at High-Impact Entrepreneurs and
find out which policies matter most to them

High Impact
Entrepreneurs

Revenue
CAGR

Traditional
Entrepreneurship

Net Operating Profits


2003–2012 Entrepreneurship Benchmarking Initiative is an effort to
benchmark entrepreneurship policies in countries and regions
Participating Countries, Regions, and Sponsors


A dynamic Entrepreneurship Model was developed to measure key aspects
of entrepreneurship policy

Entrepreneurship Policy Drivers

Entrepreneur- Business Policy
Motivations
ship Assets Assistance Accelerators

Skills and Support Admin.
Financing Infrastructure Legislation Mindset
Talent Services Burdens

Training Entrepre. Business Entrepre. Tech
Equity Debt Infra- Taxes / Competi- Transac-tion Culture &
and Mngt. Advisory Develop. Commer-
Financing Financ-ing structure Incentives tion Costs Attitudes
Education Capacity Services Programs cialization

Supply of Skills Compe- Supply of Market Govt.
Supply of Physical Govt. Access to Credits /
Equity Develop- tency / Business Openness Regula- Legitimacy
Debt Capital Infra. Programs Tech. Incentives
Capital ment Experien. Services tions

Access to Afforda- Network-ing Afforda- Corporate/
Access to Prepara- Govt. Individual-ist
Equity bility of Bus. Orga- bility of Business
Debt Capital tion Impact Culture
Capital Svcs. nizations Tech. Taxes

Financing Stock Attitudes
Quality of Option
Strategies Bus. Svcs. Incubators Spin-outs towards
Rules Income Tax

Exit Attitudes
Strategies towards
Bankruptcy

Attitudes
towards
 Each Sixth-level composite indicator has an Stock Opt.

average of 3-5 questions that measure
various aspects of entrepreneurship First-Level Composite Indicator
assigned to it
Second-Level Composite Indicator Fourth-Level Composite Indicator

Source: Monitor Group, FORA, A.R.T. analysis
Third-Level Composite Indicator Fifth-Level Composite Indicator


This model and the corresponding survey tool identifies key strengths,
weaknesses, and priority areas for investment and upgrading
Russia Results 2005
5
Survey Average

Russia Average

Admin.
Financing Skills and Support Services Legislation Burdens Mindset
4
Talent

Strengths

3
Survey
Index Average:
2.80

2

Weaknesses
1
1: 3: 5: 7: 9: 11: 13: 15: 17: 19: 21: 23:
Supply of Financing Supply of Competency / Quality of Incubators Affordability Credits / Stock Option Government Individualist Attitudes
Equity Strategies Debt Capital Experience Business of Technology Incentives Rules Impact Culture Towards
Capital Services Bankruptcy

2: 4: 6: 8: 10: 12: 14: 16: 18: 20: 22: 24:
Access to Exit Skills Supply of Government Access to Spin-outs Corporate / Government Legitimacy Attitudes Attitudes
Equity Capital Strategies Development Business Programs Technology Business Taxes Regulations Towards Towards
Services Income Tax Stock Options

Source Monitor Entrepreneurship Index Survey, 2003–2005; 2005 Russia Entrepreneurship Survey


Participating Countries in 2012 Survey

134 countries 35 included in analysis based
invited to participate on number of responses


Russia has been rated in the middle of participating countries

Rank Country
1 China
2 India
Survey set-up:
:
5 USA • Participating start-ups were selected by country
: partner organizations (Entrepreneurship Center in
15 Kazakhstan Russia)
:
• 21 most important questions selected based on
21 Russia
entrepreneurship success
:
24 Germany • More than 3.000 responses worldwide,
: 151 responses in Russia
27 Belarus
: • Results indicate opinions of participants

32 Ukraine
• Results are presented worldwide during GEW
:
34 Greece


Survey Results for Russia:
Challenge on start-up financing despite available capital

Supply of Capital Agreement Global Russia Russia,
Rank China Kazakhstan
(n=34) India Belarus
Ukraine

There are adequate sources of capital 43% 7 3 1

Access to Equity Capital Agreement Global Russia Russia,
Ukraine

Most entrepreneurs personally know investors 23% 21 3 2

Financing Strategies Agreement Global Russia Russia,
Ukraine

Growing firms regularly use Initial Public Offerings 9% 26 3 1

Stock markets for growing firms are well functioning 3% 33 3 3

Exit Strategies Agreement Global Russia Russia,
Ukraine

Legislation does not restrict company buy-out 40% 20 3 1


Room for improvement in education and incentives for start-ups

Skills Development Agreement Global Russia Russia,
Ukraine

Primary/secondary education teach entrepreneurship 5% 21 3 1

Colleges and Universities educate entrepreneurship 4% 33 3 3

Spin-offs Agreement Global Russia Russia,
Ukraine

Businesses regularly spin-off new firms 25% 18 3 1

Credits / Incentives Agreement Global Russia Russia,
Ukraine

Tax incentives for commercialization of R&D 10% 27 3 2

Special tax incentives for new and growing firms 13% 26 3 3


A positive culture for entrepreneurship but lack of frame conditions

Government Regulations Agreement Global Russia Russia,
Ukraine

Government regulations apply consistently 6% 29 3 1

Legitimacy Agreement Global Russia Russia,
Ukraine

Creation of firms is an appropriate way for wealth 64% 9 3 2

Entrepreneur is a desirable career choice 58% 8 2 3

Entrepreneur has higher status than manager 41% 21 3 2

Media publishes stories on successful start-ups 35% 27 3 1


Positive environment but challenges for innovation and risk-taking

Individualist Culture Agreement Global Russia Russia,
Ukraine

Support for individualist culture to succeed 77% 3 2 2

Risk-taking is encouraged 19% 23 3 4

Innovativeness is encouraged for career success 30% 26 3 4

Mentors, Interactions with Other Agreement Global Russia Russia,
Entrepreneurs, and Environment (n=34) India Belarus
Ukraine

It is easy to find a mentor about entrepreneurship 25% 18 3 1

There are opportunities to meet other entrepreneurs 54% 11 3 1

The environment for start-ups is highly favorable 40% 11 3 2

The environment for growing firms is highly favorable 38% 9 3 2


Results for Russia 2005 vs. 2012 (1/2)
Supply of Access to Exit
Financing Strategies
Capital Equity Capital Strategies
2005
2012 3.2 3.3
3.0 2.9
2.4 2.5
2.0 2.1 2.0 2.1

There are adequate sources Most entrepreneurs Growing firms regularly Stock markets for growing Legislation does not
of capital to help launch personally know one or more use Initial Public firms to raise capital are restrict company buy-outs
or finance the growth of private individual investors Offerings to raise capital well functioning
your firm

Skills Development Spin-Offs Credits / Incentives

2005
2.8 2.7
2012
2.4
2.2
1.9 1.8 1.9 2.0
1.8 1.8

Primary and secondary Colleges and universities Businesses regularly spin-off The government has New and growing firms are
education devote enough of time offer a sufficient amount of new firms from their R&D efforts developed tax incentives given special tax incentives
to teaching entrepreneurship teaching on entrepreneurship for the commercialization of for commercializing
and new firm creation and new firm creation research and development research and development


Results for Russia 2005 vs. 2012 (1/2)
Government
Legitimacy
Regulations
2005
3.5 3.4 3.5 3.4 3.6
2012
3.0 3.0
2.8
2.0 2.1

Government regulations apply The creation of new firms is Most people consider People who successfully The media often publishes
consistently and uniformly considered an appropriate becoming an entrepreneur start new firms have a stories about people who
across all industries sectors way to become wealthy a desirable career choice higher level of status and successfully start new firms
respect than a manager of
a medium-sized company

Individualist Culture

2005
2012 3.7
3.1
2.6 2.8 2.6 2.7

People strongly support People encourage risk- People encourage
individual efforts to taking in one’s career innovativeness for
succeed professionally career success


Several high-level findings emerged from the global study

1. Culture and
 Legitimacy of entrepreneurship as a career choice, individualist culture,
attitudes have
attitudes toward income tax, bankruptcy, and stock options were found
disproportionate affect
on performance to have the strongest effect on entrepreneurship performance

2. Taxes and
 Lowering income taxes and providing the right incentives for
incentives offer
commercialization of R&D were found to be disproportionally
high impact
policy levers important and have short-term benefits

3. These same policy  Commercialization of technology involves multiple actors and complex
levers are often interactions
among the hardest  IPOs, stock markets, bankruptcy are difficult to make progress on given
to implement changes in legislation and national-level political discourse

 Resources should be focused on incentives for innovation, ease of
4. Focus of resources entry and exit, and on changing a country’s risk/reward equation
and debunking
of myths  Incubators, VC funding, easing administrative burdens matter
relatively less

Source: Monitor Analysis


Monitor’s Contact Information

If you require additional information or have
any questions our contact details are:

Fred Ledbetter
Senior Advisor
fred_ledbetter@monitor.com

Steffen Gackstatter
Head of Innovation Europe and Russia/CIS
steffen_gackstatter@monitor.com Tel.: +7 495 777 78 87
Fax: +7 495 733 95 35

Komsomolsky Prospect., 19A
Moscow, 119146, Russia
www.monitorgroup.ru


Survey Questions (1/2)
For each statement below, respondents are asked to rate how strongly they agree with it
exactly as it is written on a scale: 1 – Strongly Disagree, 5 – Strongly Agree

Supply of Capital Skills Development

1. There are adequate sources of capital (outside of your 1. Primary and secondary education devotes enough time
own) to help launch or finance the growth of your firm to teaching entrepreneurship and new firm creation

Access to Equity Capital 2. Colleges and universities offer a sufficient amount of
teaching on entrepreneurship and new firm creation
1. Most entrepreneurs personally know one or more
private individual investors (i.e., “angels”) Spin-Offs

Financing Strategies 1. Businesses regularly spin-off (i.e., an independent
company created from an existing part of another
1. Growing firms regularly use Initial Public Offerings company through a divestiture, such as a sale or
(i.e., the first sale of stock by a company to the public) distribution of new shares) new firms from their
to raise capital R&D efforts
2. Stock markets for growing firms to raise capital are well Credits / Incentives
functioning
1. The government has developed tax incentives for the
Exit Strategies commercialization of research and development
1. Legislation does not restrict company buy-outs 2. New and growing firms are given special tax incentives
for commercializing research and development


Survey Questions (2/2)
For each statement below, respondents are asked to rate how strongly they agree with it
exactly as it is written on a scale: 1 – Strongly Disagree, 5 – Strongly Agree

Government Regulations Attitudes towards Income Taxes
1. Government regulations apply consistently 1. The level of income taxes discourages people from
and uniformly across all industries sectors starting new firms
Legitimacy 2. The level of income taxes effectively stops people from
growing firms
1. The creation of new firms is considered an appropriate
way to become wealthy 3. The level of income taxes deters people from seeking to
become rich
2. Most people consider becoming an entrepreneur a
desirable career choice
3. People who successfully start new firms have a higher Mentors, Interactions with Other
level of status and respect than a manager of a Entrepreneurs, and Environment
medium-sized company
1. It is easy to find a mentor / advisor about
4. The media often publishes stories about people who entrepreneurship in my region
successfully start new firms
2. There are many opportunities to meet other
Individualist Culture entrepreneurs to network and learn in my region
1. People strongly support individual efforts to succeed 3. The overall environment for start-ups is highly favorable
professionally in my region
2. People encourage risk-taking in one’s career 4. The overall environment for growing firms is highly
favorable in my region
3. People encourage innovativeness for
career success


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