It’s official. Youth have more get up and go than do adults. According to a new report, ‘Future Potential – a GEM perspective on youth entrepreneurship 2015’ released last month by the Global Entrepreneurship Monitor (GEM), youth, as a group, show significantly higher levels of entrepreneurial intention than adults. Across five world regions, youth are 1.6 times more likely to want to start a business than adults are.
And youth in Sub-Saharan Africa are the most entrepreneurial of youth in all five regions surveyed.
The report analysed data collected from 2012 to 2014 and shines a much-needed light on what drives young entrepreneurs and what impacts on their success – or failure – in five regions: sub-Saharan Africa (SSA); Middle East and North Africa (MENA); South and East Asia (S&EA); Latin America and the Caribbean (LAC) and the European culture countries (ECC).
Mike Herrington, Executive Director of GEM, explains the reasons for the report’s focus on youth: “A shortage of employment opportunities, especially amongst the youth, is a major problem in the world. This has been exacerbated by the financial crisis and global economic downturn. Fostering effective entrepreneurial activity among the youth is seen as a critical development strategy in order to integrate them into the labour market and harness their potential to contribute to sustainable economic development,” he says.
However, a major obstacle for youth entrepreneurship development has been a lack of reliable and up-to-date data and related analysis. The GEM report plugs this gap, providing insight into entrepreneurial practices in youth, defined as people between 18 to 34 years of age, considering three main variables: inter-generational differences, gender differences and regional differences.
Characteristics of youth entrepreneurs
According to Thomas Schøtt, Professor in the Department of Entrepreneurship and Relationship Management at the University of Southern Denmark and lead author of the report, while youth in all regions are typically more active in starting new business than adults, the research found that not all youth businesses are likely to generate significant numbers of jobs (73% of business run by youth under 24 years are one-person businesses). Youth are also less likely to be running businesses that have survived beyond their first three-and-a-half years, while adults over 34 years are 1.7 times more likely than youth to be running mature businesses.
Young men are 1.3 times more likely than young women to start businesses and 1.6 times more likely to be running mature businesses. They are also twice as likely to provide jobs for more than five people, compared to businesses run by young females.
The report also shows significant variations in entrepreneurial intention and activity between regions with youth in SSA much more likely to express an intention to start a business (52%) and much more likely to actually get one started (28%) compared to youth in the ECC region. Just 19% of youth in that region express entrepreneurial intentions and only 8% are actually engaged in entrepreneurial activity (measured as a percentage of the adult population).
Schøtt says that finding ways to make youth businesses more sustainable and also to identify and support high potential, high job-creating businesses in different contexts is a central message of the GEM research.
“We need to find ways to capitalise on the motivation of young people who are eager to start businesses but may lack the skills and networks to do so successfully.”
What helps and hinders youth entrepreneurs?
Over the past 16 years GEM research has played a crucial role in advancing the understanding of the diversity of entrepreneurship around the world and helping to identify appropriate strategies to support and enable entrepreneurs in different contexts.
One of the consistent findings has been that there is a strong link between general education and training in starting a business and entrepreneurial behaviour. It is positive therefore that this research is showing that youth in all regions are now more likely than adults to be educated. Entrepreneurship specific training in schools has also more than doubled from one generation to the next.
However, the report concludes that much more needs to be done to create an enabling environment for young entrepreneurs globally, specifically with regards to access to finance and IT infrastructure. The data show that, for example, that with the exception of the ECC region and to some extent the MENA region, the internet as a trading space is underutilised, with just 16% of youth in SSA using selling products or services online.
“Appropriate entrepreneurship support policies and programmes will help actualise the intentions of the youth, who are currently bearing the brunt of a sluggish global economy,” concludes Herrington.