INTERNATIONAL ENTREPRENEURSHIP AND INNOVATION SCORECARDS Examining the Data Dane Stangler and Jared Konczal

Ewing Marion Kauffman Foundation October 2013

INTERNATIONAL ENTREPRENEURSHIP AND INNOVATION SCORECARDS Examining the Data Dane Stangler and Jared Konczal
Ewing Marion Kauffman Foundation October 2013

The authors thank Yasuyuki Motoyama for his helpful comments and Arnobio Morelix for his comments and research assistance on this project.

2013 by the Ewing Marion Kauffman Foundation. All rights reserved.

INTERNATIONAL ENTREPRENEURSHIP AND INNOVATION SCORECARDS Examining the Data

INTRODUCTION The purpose of this report is to demonstrate a scorecard approach for distilling different indicators of entrepreneurship and innovation. We reviewed popular international indices and indicators in an attempt to distill a large sample of indicators into a set of those that closely complement one another. It was presumed that honing in on a smaller set of indicators might be useful for policymakers, and might also help highlight areas deserving further attention from researchers. This report lists the selected countries, discusses the selection process for indicators and scorecard approach, and presents the resulting scorecards. The methodology underpinning the final presented values represents a good faith effort to compile accurate scorecards, but relies on a number of assumptions to produce comparable data values from non-standardized sets of indicators. Thus, we present these findings as exploratory and preliminary. We strongly advise against using this report to compare reported country charts or values, but instead hope that it will serve as a platform for discussions of how to improve entrepreneurship data collection. This report, produced in parallel with efforts by the U.S. Government to support and promote entrepreneurship, coincides with the announcement of the Global Entrepreneurship Research Network (GERN), an international collaboration of organizations working to gain a better understanding of policy barriers and the right policies for fostering entrepreneurship.

Selected Countries OECD OECD OECD OECD OECD OECD OECD OECD OECD Non-OECD Non-OECD Non-OECD Non-OECD Non-OECD Non-OECD Non-OECD Non-OECD Non-OECD Non-OECD Non-OECD Non-OECD Belgium Denmark Japan Mexico Netherlands Norway Slovenia Spain United States of America Bangladesh Dominican Republic El Salvador Ghana India Indonesia Latvia Nigeria Pakistan Peru Russian Federation Zambia

Selected Indicators1 GII.Score DF.Start.Score DF.Contract.Score DF.Insolve.Score GEDI.Score GITR.Score GCI.Edu.Score GCI.Tech.Score Firm.Density.Score Global Innovation Index Distance to FrontierStarting a Business Distance to FrontierEnforcing Contracts Distance to FrontierResolving Insolvency Global Entrepreneurship and Development Institute Index Global Information Technology Report Networked Readiness Index Global Competitiveness Index 5th pillar: Higher education and training Global Competitiveness Index 9th pillar: Technological readiness World Bank New Firm Density

See the appendix for data tables. Compiled scores have been scaled to 100 as necessary. The Global Innovation Index, Global Entrepreneurship and Development Institute Index, and World Bank New Firm Density measures have been rescaled from one to 100 for our sample of countries. The Networked Readiness Index and Global Competitiveness Index are originally reported on a rating of one to seven, which we converted to a 100-point scale.

INDICATOR SELECTION PROCESS Based on a review of international statistics on entrepreneurship and innovation, we analyzed ten different assessments of innovation and entrepreneurship across a wide range of countries. Some assessments represent indexes that aggregate many different sub-indicators, and some represent standalone statistics. For example, one might focus on new firm formation, another on regulatory barriers, and another on the quality and fluidity of labor markets. Our selection of these particular indicators (see below) is a reflection of the important and insightful work done by the various organizations that compile them. They have established a strong platform for future research and, in particular, further work on data collection in entrepreneurship and innovation.2 In concert with the Global Entrepreneurship Summit, we attempted to compile something manageable for policymakers, simultaneously demonstrating the amount of work yet to be done on global entrepreneurship and innovation. These ten assessments and their sub-indicators represent seventy-one measures of entrepreneurship and innovation for anywhere from thirty-one to 186 countries.3 We performed correlation analysis for these seventy-one measures to determine which ones were most related to one another and, in particular, which ones were most related to the World Banks data on new firm density. Based on the initial sample and correlation results, we ended up with a reduced sample of forty-five countries with just nine different measures (most measures are not available for all countries). Last, we added the United States to our sample.4 COUNTRY RESULTS In addition to the United States, we randomly selected twenty of these forty-five countries to build the composite scorecards presented in this report. We elected to present results using a scorecard approach rather than a ranking. There is inherent subjectivity in producing an overall ranking; a ranking would imply that we are dictating what should matter to a particular country, and the arguments about what matters and what does not are anything but settled.5 A scorecard simply allows countries to know how they fare on each selected measure without placing a value judgment on the results, and leaves it up to policymakers as to what factors they prefer to emphasize.

See also Josh Lerner and Antoinette Schoar (eds.), International Differences in Entrepreneurship (National Bureau of Economic Research, 2010). 3 We took the most recent year of data available up to 2013. When this was not available, we computed a moving average of the most recent years of available data. 4 The United States is not included in the initial forty-five-country sample because there is no new firm density measure from the World Bank for the United States. As a substitute, we took the average of 20092011 Age zero firms (from the U.S. Census Bureaus Business Dynamics Statistics ) weighted by working-age population per 1,000 individuals (from the U.S. Bureau of Labor Statistics). 5 See Yasuyuki Motoyama and Jared Konczal, How Can I Create My Favorite State Ranking: The Hidden Pitfalls of Statistical Indexes, 10 Journal of Applied Research and Economic Development, (September 2013), http://journal.c2er.org/2013/09/how-can-i-create-my-favorite-state-ranking/.

Likewise, the purpose of the scorecard is not to facilitate country-to-country comparisons. We do not view the scorecard effort in this report as final in any sense, and is partly why we only selected twenty random countries rather than the entire sample of forty-five. We have simply found that these selected measures trend together and appear to be related, and we should like to investigate this further. This effort should serve primarily as an illustration of how to view a countrys entrepreneurship and innovation environment. Most importantly, this exercise demonstrates the need for improvements in standardized entrepreneurship data collectionboth within and across countriesas well as longitudinal studies of entrepreneurs and new businesses. Several innovative efforts at precisely this are occurring around the world, and one goal of the Global Entrepreneurship Research Network (GERN), is to support such efforts and enable policymakers to have access to sufficient data on entrepreneurship. Lastly, the data synthesis exercise in this report underscores another GERN objective: substantial gaps remain in the worlds understanding of entrepreneurship, and more research is needed to buttress the emerging entrepreneurship movement around the world.

RADAR CHARTS The following charts are not designed to provide prescriptions of what a country should or should not do. Broadly speaking, research has shown that implementing reforms on the cost and procedures required to register a business can influence new firm entry. 6 While we recognize there is demand for recommendations that individual countries should take to improve their entrepreneurship and innovation economies, this requires a depth of analysis beyond the scope of this report. We are only able to cite research that broadly demonstrates that regulatory reforms to reduce burdens can matter, and that many regulatory issues factor into the scores on the various selected indicators.
300% Percent of newly registered firms compared to pre-reform year (t-1)

250%

200% Bangladesh Chile 150% Kenya Morocco 100% Sweden Rwanda 50%

0% t-4 t-3 t-2 t-1 t t+1 Implementation of Reform t+2

Source: Belayachi, Klapper, and Randall (2012)

However, this does not mean the report can offer no value to policymakers. Because we selected indicators that trend together, the charts presented below allow for an interesting interpretation. Recall that the indicators trend together overall. If this relationship held perfectly for individual countries, all of the graphs would resemble nonagons of various sizes. But, in fact, we see some oddly shaped polygons. The further divergent the shape is from the perfect nonagon, the more variance there is between the relationship of indicators at the overall theoretical level versus the countrys individual scores. So a graph that shows a skewed or collapsed or expanded side of the polygon indicates that score for that side is out of sync.

Karim O. Belayachi, Leora Klapper, and Douglas Randall, Entrepreneurship Database 2012 Entrepreneurship in the wake of the crisis, Viewpoint Note 334.

Belgium
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Denmark
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Japan
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Mexico
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Netherlands
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Norway
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Slovenia
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Spain
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

United States
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Bangladesh
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Dominican Republic
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

El Salvador
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Ghana
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

India
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Indonesia
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Latvia
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Nigeria
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Pakistan
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Peru
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Russian Federation
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

Zambia
GII.Score 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Firm.Density.Score

DF.Start.Score

GCI.Tech.Score

DF.Contract.Score

GCI.Edu.Score

DF.Insolve.Score

GITR.Score

GEDI.Score

APPENDIX: COMPILED DATA Table 1: Compiled Scores (non-scaled values)

Distance to Frontier WB2013 Starting a Business
91.2 91.1 86.3 82.0 78.5 89.1 73.5 81.1 94.3 84.6 77.0 92.4 83.6 95.1 88.2 71.3 78.5 84.6 82.6 62.4 89.8

Country Latvia Norway Peru Japan Pakistan Netherlands Nigeria Dominican Republic Belgium Zambia Spain Denmark Russian Federation Slovenia Mexico Indonesia El Salvador Ghana Bangladesh India United States

Distance to Frontier WB2013 Enforcing Contracts

74.7 76.5 54.5 70.7 38.0 74.4 56.3 60.0 77.0 59.3 60.3 66.7 73.1 50.2 60.2 33.7 59.2 63.6 19.3 22.2 74.7

Distance to Frontier WB2013 Resolving Insolvency

63.7 96.2 30.5 98.3 39.0 94.1 30.6 10.2 94.0 32.3 81.2 92.3 46.5 53.2 71.6 15.9 34.8 29.2 27.8 28.3 86.5

GII 2013 main score

45.2 55.6 36.0 52.2 23.3 61.1 26.6 33.3 52.5 26.8 49.4 58.3 37.2 47.3 36.8 32.0 31.3 30.6 24.5 36.2 60.3

GEDI 20122013 (Index)

0.35 0.55 0.29 0.35 0.14 0.58 0.21 0.23 0.53 0.15 0.39 0.63 0.23 0.43 0.26 0.21 0.17 0.16 0.09 0.18 0.67

GITR 2013 Networked Readiness Index 2013, 17 (best)

4.43 5.66 3.39 5.24 3.35 5.81 3.27 3.62 5.10 3.19 4.51 5.58 4.13 4.53 3.93 3.84 3.53 3.51 3.22 3.88 5.57

GCI 5th pillar: Higher education and training, 17 (best)

4.78 5.61 4.05 5.28 2.99 5.79 3.31 3.69 5.81 3.07 5.02 5.59 4.59 5.20 4.11 4.17 3.45 3.40 2.88 3.97 5.72

GCI 9th pillar: Technological readiness, 17 (best)

4.73 5.78 3.57 5.70 2.90 5.98 3.08 3.68 5.57 2.96 5.29 6.17 4.13 4.96 3.80 3.56 3.26 3.13 2.74 3.36 5.84

New Firm Density*

7.89 4.41 2.27 1.07 0.03 3.13 0.79 0.74 2.66 1.06 2.46 4.41 1.81 3.98 0.88 0.23 0.47 1.06 0.08 0.08 1.70*

*New Firm Density score for the United States is computed from a three-year average of the Census Bureaus Business Dynamics Statistics. All other country scores are based on a three-year average of the World Banks New Firm Density measure.

Table 2: Compiled Scores (scaled values)

DF.Start. Score
91.2 91.1 86.3 82 78.5 89.1 73.5 81.1 94.3 84.6 77 92.4 83.6 95.1 88.2 71.3 78.5 84.6 82.6 62.4 89.8

Country Latvia Norway Peru Japan Pakistan Netherlands Nigeria Dominican Republic Belgium Zambia Spain Denmark Russian Federation Slovenia Mexico Indonesia El Salvador Ghana Bangladesh India United States

GII.Score
58.1 85.0 34.3 76.2 1.5 99.2 10.0 27.4 77.0 10.6 69.0 92.0 37.4 63.6 36.4 24.0 22.2 20.4 4.6 34.9 97.2

DF.Contract. Score
74.7 76.5 54.5 70.7 38 74.4 56.3 60 77 59.3 60.3 66.7 73.1 50.2 60.2 33.7 59.2 63.6 19.3 22.2 74.7

DF.Insolve. Score
63.7 96.2 30.5 98.3 39 94.1 30.6 10.2 94 32.3 81.2 92.3 46.5 53.2 71.6 15.9 34.8 29.2 27.8 28.3 86.5

GEDI.Score
45.4 79.5 35.1 45.4 9.5 84.6 21.5 24.9 76.1 11.2 52.2 93.2 24.9 59.0 30.0 21.5 14.7 12.9 1.0 16.4 100.0

GITR.Score
63.3 80.8 48.4 74.8 47.8 83.0 46.7 51.7 72.8 45.6 64.4 79.7 58.9 64.8 56.1 54.9 50.5 50.2 46.0 55.5 79.6

GCI.Edu. Score
68.2 80.1 57.8 75.4 42.7 82.7 47.3 52.7 83.0 43.8 71.7 79.9 65.6 74.3 58.7 59.6 49.3 48.6 41.1 56.7 81.7

GCI.Tech. Score
67.5 82.5 51.0 81.5 41.5 85.4 43.9 52.5 79.6 42.3 75.6 88.1 59.1 70.8 54.3 50.8 46.6 44.8 39.2 48.0 83.4

Firm.Density. Score*
84.8 47.6 24.9 12.1 1.0 34.1 9.1 8.5 29.0 11.9 26.9 47.7 19.9 43.1 10.0 3.1 5.7 12.0 1.6 1.5 18.7*

*New Firm Density score for the United States is computed from a three-year average of the Census Bureaus Business Dynamics Statistics. All other country scores are based on a three-year average of the World Banks New Firm Density measure.