UNITED NATIONS - Entrepreneurship and new business creation are important for economic growth, but new studies released yesterday to a group of international leaders at the United Nations show that many countries overlook key measures to spur entrepreneurial activity and could inadvertently be encouraging policies that hinder such activity.

The series of research reports, which explore the social, financial, educational and demographic underpinnings for creating and supporting a national entrepreneurial environment, are being presented at the Entrepreneurial Advantage of Nations symposium - the first-ever U.N. event focused on global entrepreneurship research and policy. The symposium is hosted by the Kauffman Foundation of Kansas City and the Business Council for the United Nations.

The research suggests that rapidly growing, high-potential entrepreneurial firms - which represent only a small percentage of all new business start-ups - contribute the most to economic growth and prosperity. The findings further show that targeted policy measures would likely be effective at encouraging greater levels of high-potential entrepreneurship.

"Governments can either fuel entrepreneurs or stop them in their tracks," says Carl J. Schramm, president and chief executive officer of the Kauffman Foundation. "When you consider that these entrepreneurs create jobs and wealth for their communities, develop innovations that make people's lives better and contribute to national economic growth, you understand the importance of developing policies that make the ground fertile for entrepreneurship to thrive."

The research findings are based on data from the 2002 Global Entrepreneurship Monitor (GEM), a study of entrepreneurship and economic growth that spans 37 countries - both developed and developing - and touches every continent except Antarctica. Sponsored by the Kauffman Foundation and conducted by Babson College and London Business School, the GEM study involves scientific surveys and interviews with about 113,000 individuals, including active entrepreneurs and recognized experts in entrepreneurship.

According to GEM, an estimated 286 million individuals in the 37 countries analyzed were involved in new business start-up activity in 2002. However, about one-third of these individuals reported they were involved in entrepreneurial start-up activity out of necessity because they had no better choices for work. These so-called "necessity" entrepreneurs are largely self-employed and are predominant in developing countries.

Conversely, the remaining two-thirds of individuals interviewed sought to launch a new business based on an opportunity to develop a new product or service. Of these "opportunity" entrepreneurs, about 10 percent are considered owners of "high-potential" businesses that provide the bulk of new jobs and economic contribution.

According to the report, High-Potential Entrepreneurship, by Erkko Autio, a professor at Helsinki University of Technology, these high-potential entrepreneurs are typically young, well-educated, high-income males who are currently employed and who pursue a business opportunity in manufacturing, wholesale or business services. Their businesses are characterized by a growing employee base, foreign market expansion and the use of new technologies.

While understanding the link between entrepreneurial activity and economic growth remains an issue for further study, researchers presenting at the U.N. symposium offered ambassadors and economic development leaders insights into policies that could further promote entrepreneurial activity. Among them:

-- Increasing the number of women involved in starting new businesses. A report on women's entrepreneurship by Maria Minniti, a professor of economics at Babson College, concludes that, despite the growth of women in professional and managerial jobs, the gender gap in entrepreneurship remains significant. On average, men are about 50 percent more likely than women to become entrepreneurs; 13.9 percent of men become entrepreneurs while only 8.9 percent of women do. However, she points out, the number of educated women starting high-potential businesses is growing from year to year.

Dr. Minniti recommends that the first step for many countries to promote women's start-up activities would be a focus on policies that create and guarantee the existence of underlying conditions favorable to an entrepreneurial environment, such as literacy and equal opportunities.

-- Countries seeking to support entrepreneurial new business activity by duplicating a U.S.-style venture capital industry may actually hinder new economic development. A report on financing entrepreneurship by Bill Bygrave, a professor at Babson College, indicates that most investment in support of new business formation comes from informal investors, including family and friends, rather than through venture capital. Instead of spending energy to support a formal venture capital industry, Bygrave advises a focus on efforts to encourage informal investments, such as tax reduction initiatives.

-- Promoting corporate and academic spin-offs and intellectual property rights. Dr. Autio's report concludes that nearly all (95 percent) of the high-potential firms studied were founded by individuals who had other full-time employment. He suggests that policies focusing on those individuals already employed, as well as encouraging corporate and academic spin-offs, could spur high-potential start-ups.

Dr. Autio also reinforces recommendations by other presenters that called for creation of strong protections on intellectual property rights and adjustments to existing educational systems to build entrepreneurial competence skills.

"Fostering creative business environments and encouraging entrepreneurs to assume risk are key components for achieving the U.N.'s bold millennium development goals," says William P. Underwood, executive director of the Business Council for the United Nations. "The research presented at this symposium and the resulting dialogue is of utmost importance to the U.N. community - to both the representative Member States and the U.N. development agencies that work to promote entrepreneurship."

Copies of the new research reports - Women in Entrepreneurship, High-Potential Entrepreneurship, Financing Entrepreneurs and Their Businesses, and Family-Sponsored Ventures - are available to view and download at www.kauffman.org.

The Ewing Marion Kauffman Foundation of Kansas City works with partners to advance entrepreneurship in America and improve the education of children and youth. The Kauffman Foundation was established in the mid-1960s by the late entrepreneur and philanthropist Ewing Marion Kauffman. More information about the Kauffman Foundation is available at www.kauffman.org.

The Business Council for the United Nations (BCUN) is a catalyst for action, understanding and innovative business opportunities between member companies and the United Nations. Through a network of partnerships in economic development, health, education, and technology, BCUN advances the common interest of the U.N. and business in a more prosperous and peaceful world. BCUN is a division of the United Nations Association of the U.S.A., a 501(c)(3) nonprofit organization.

Babson College in Wellesley, Mass., is recognized internationally as a leader in entrepreneurial management education. Babson grants BS degrees through its innovative undergraduate program (recipient of the 2002 Theodore M. Hesburgh Award). It grants MBA and custom MS and MBA degrees through the F.W. Olin Graduate School of Business at Babson College (currently celebrating 50 years of Babson MBAs). Babson's School of Executive Education offers executive development programs to experienced managers worldwide. Babson Interactive LLC develops distance learning programs and business simulations for executives and graduate students.

London Business School is the graduate school of business at the University of London. Founded in 1965, the School graduated 682 MBAs, MScs, Masters in Finance and PhDs from 69 countries last year. With 80 percent of students and 70 percent of faculty from outside the UK, London Business School is the most international institution of higher education in the United Kingdom. Each year executive education serves 5,000 executives on its programmes. Both the full time MBA and Executive MBA programmes are consistently ranked among the worlds best. For more information, visit www.london.edu.

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