Dirk Pilat, Deputy Director Science, Technology and Industry at OECD, iMinds The Conference Track 1: Fostering Successful Entrepreneurship in Europe

1. iMinds the Conference, 5 December, Brussels
Entrepreneurship in Europe - Enabling
Innovation and Experimentation
Dirk Pilat, Deputy Director
Directorate for Science, Technology and Industry
dirk.pilat@oecd.org

2. Outline
– The role of young, entrepreneurial firms
– Growth dynamics and the policies that matter
– Conclusions and some policy recommendations

3. Start-up rates in Europe are not the problem …
(Employer enterprise birth and death rates, services, 2010)
As a percentage of the population of active enterprises with at least one employee
%
Birth
Death
24
20
16
12
8
4
0
Source: OECD (2013), Entrepreneurship at a Glance.
http://dx.doi.org/10.1787/888932892879
3

4. … as barriers to entrepreneurship have fallen
Scale of 0 to 6 from least to most restrictive
Index
Administrative burdens on start-ups
Regulatory and administrative opacity
Barriers to competition
Barriers to entrepreneurship in 1998
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Source: OECD, Product Market Regulation Database, www.oecd.org/economy/pmr, June 2013
4

5. Where are the new opportunities? In
young firms …
The contribution of firms to job creation, average over 15 countries, 2001-2011
Young firms (5 years old or less)
Old firms (6 years old or more)
Total
%
6
4
2
0
-2
-4
-6
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Source: OECD Science, Technology and Industry Scoreboard 2013.
http://dx.doi.org/10.1787/888932889383
2008-09
2009-10
2010-11
5

6. … independent of their size …
Average over 15 countries, 2001-2011
%
%
45
Employment
Employment
Job destruction
Job destruction
Job creation
Job creation
45
40
40
35
35
30
30
25
25
20
20
15
15
10
5
10
0
5
Small young
Small old
Medium young
Medium old
Large young
Large old
Small young
Small old
Medium young
Medium old
Large young
Large old
0
Source: OECD Science, Technology and Industry Scoreboard 2013.
http://dx.doi.org/10.1787/888932889402
6

7. … and across most countries
Employment, job creation and job destruction in young firms, 2001-11
Percentage shares, non-financial business sector (firms of 5 years old or less)
Employment
Job destruction
%
80
70
60
50
40
30
20
10
0
Source: OECD Science, Technology and Industry Scoreboard 2013.
http://dx.doi.org/10.1787/888932892917
Job creation

8. But growth of young firms is a challenge …
Average size of firms less than 3 years old and 11 years old or more, 2001-2010
11 years old or more
Less tha n 3 ye ars old
Em ployees
100
80
Manufacturing Services
60
40
20
0
Source: OECD Science, Technology and Industry Scoreboard 2013.
http://dx.doi.org/10.1787/888932904279

9. … and some regions have a more dynamic
business sector than others …
(distribution of firm employment growth, 2002-2005)
Source: Bravo-Biosca (2010) based on national business register data.

10. … and stronger investment in risk capital
(Venture capital investment, 2012, as a percentage of GDP)
Later stage
Early stage
Breakdown not available
%
0.40
0.035
0.35
0.30
0.030
0.025
0.020
0.25
0.20
0.015
0.010
0.005
0.15
0.000
0.10
0.05
0.00
Source: OECD, Entrepreneurship at a Glance 2013, http://dx.doi.org/10.1787/888932892993
Magnified

11. Some countries are better at channelling resources
to more innovative firms than others …
Change in firm inputs associated with a 10% change in patent stock;
selected OECD countries (2002-2010)
Percen tag e change in capital
sto ck
5%
4%
3%
2%
1%
0%
-1%
-2%
Source: Andrews, Criscuolo and Menon (2013)

12. … and have R&D support policies that are designed
to support young innovative firms
Implied tax subsidy on R&D expenditure
Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

13. Policies influence reallocation to innovative firms
Change in firm capital associated with a 10% change in the patent stock Selected OECD countries;
2002-2010
Source: Andrews, Criscuolo and Menon (2013)

14. Key findings
1.
Net job creation does not come from small, but from young firms.
2. Growth of young innovative firms means “up” or “out”;
entrepreneurs need flexibility to experiment with business models.
3. Growth dynamics of firms differs across countries; in some countries,
firms hardly scale after entry.
4. Policy matters, and has impacts on the scope for experimentation, and
for the allocation of resources to the more innovative firms.
14

15. Five policy recommendations for Europe
1. Allow for experimentation: Reduce barriers to the entry (e.g. red
tape), growth (e.g. size-specific regulations), and exit/failure of firms (e.g.
penalising bankruptcy legislation).
2. Finalise the internal market – so firms can scale more easily.
3. Level the playing field for new and innovative firms: Some
policies favour incumbents and MNEs (e.g. R&D tax credits), that also
have a greater voice in policy development.
4. Strengthen the innovation system for young and innovative
firms, e.g. through enhanced access to (risk) capital, network
development, mentoring of entrepreneurs, skills development, etc.
5. Celebrate entrepreneurship.
15

16. Thank you
Contact:
dirk.pilat@oecd.org
For more data:
www.oecd.org/sti/scoreboard
16