Where Companies Grow: Finally, a way to measure countries' entrepreneurs

The Wall Street Journal ^ | December 3, 2008 | Enrico Giovannini and Carl Schramm

[2ndDivisionVet]

The world sorely needs an economic revival. Where will it come from? If history is any guide, entrepreneurs will help lead the way. The truly radical or disruptive technologies and business processes that drive economic prosperity -- whether in information technology so far, or in clean energy in the years to come -- are most likely to be commercialized by entrepreneurial firms.

Yet, as important as the formation and growth of new firms clearly are, there have been no officially sanctioned, internationally comparable entrepreneurship indicators. Until now.

Last month, the Organization for Economic Cooperation and Development (OECD), working with the EU's statistics agency, Eurostat, published the first set of comparable data on measures of entrepreneurial activity, such as entry and exit rates, and the rate of formation of high-growth companies. So far the data -- which the OECD and Eurostat collected this year from the business registers maintained by national statistics offices, using harmonized definitions of the variables -- cover 15 European countries, the U.S., Canada and New Zealand. They contain some interesting findings.

For one thing, there are big differences in firm birth rates by sector. On average, there is faster growth in firms delivering services than those in manufacturing. At the same time, closure rates are also higher in services -- reflecting a greater degree of experimentation in services as well as higher entry and exit costs for manufacturing companies. Not surprisingly, a high proportion of businesses fail in their first year of operation: 10%-20% across most of the reporting countries, but as high as 40% in the Netherlands. This is not necessarily bad news. Innovation in all spheres of life is a process of trial and error. Business creation is no exception.

[2ndDivisionVet]

Interesting, isn't it?

[goodnesswins]

tomorrow

[Seven plus One]

Yep. Very interesting.

[Red Boots]

Among the countries surveyed, the most rapid formation of firms with at least one employee beyond the founder is taking place in Central and Eastern Europe.

After many state-owned firms in this part of the world met their demise in the years after the Berlin Wall fell, new firms have sprung up like wild flowers.

Leading the pack in the rate of employer firm formation are countries like Romania (with 16% growth in a year), Slovakia (14%) and Estonia (13%).

One thing these countries all have in common is a flat tax income rate of 10 % or less. I think Romania's is 8 %.

[Tramonto]

I think the Romanian flat tax is double that at 16%.

[TASMANIANRED]

One of the reasons for such rapid growth behind the Iron Curtain is because they were so deprived of consumer goods.

[XHogPilot]

mark for reference.

[Cacique]

bump for later read