Germany is gaining ground again in terms of new business start-ups. The start-up rate in Germany rose by 0.7 percentage points to 5.28 percent in 2017 compared to the previous year. This increase is not statistically significant, but the rate is higher than in the two previous years. Nevertheless, with this figure, Germany continues to perform below average in international comparison. This is the finding of the new country report on Germany for the Global Entrepreneurship Monitor (GEM), which the RKW Competence Center presented together with the Institute for Economic and Cultural Geography at the University of Hanover. Since 1999, the GEM data has been collected annually by researchers in more than 50 countries.
According to this study, the proportion of founders, the so-called TEA rate, is around 3.5 times higher in structurally comparable countries such as Canada and Estonia than in Germany. Only Greece, Japan, Italy, and France have a lower proportion of founders. The TEA rate is calculated based on the proportion of founders between 18 and 64 years of age in the respective country.
Migrants and men are more likely to start
The frequency of business start-ups in Germany is slightly above average among migrants and men. While the start-up rate among migrants is 6.0 percent, it is as high as 6.6 percent for men. Women, on the other hand, start their own businesses less frequently. The rate is 3.9 percent of all women. This may also be due to the perception of start-up opportunities. Only 35 percent of women consider the opportunities for starting a business in Germany to be good; for men, the figure is 48 percent.
Obstacles to starting a business: fear of failure
One reason for the low start-up rate in Germany is the fear of failure. Around 42 percent of German 18- to 64-year-olds cited this as the reason preventing them from starting a business. This puts Germany in the middle of the international rankings in this statistic. The Dutch, for example, are far less afraid of entrepreneurial failure. Only around one-third of all Dutch 18- to 64-year-olds are prevented from starting a business by the fear of entrepreneurial failure.
But experts also say that the framework conditions for entrepreneurs in Germany are not optimal. In eight of the twelve countries examined, the framework conditions for start-ups in Germany received a lower rating than the average of the other 23 innovation-based countries. While public funding programs and financing options are rated as above average in this country, both in-school and out-of-school entrepreneurship training, as well as social values and norms, are rated poorly.
Fewer hurdles & more rethinking
Dr. Natalia Gorynia-Pfeffer, project manager of the RKW Competence Center, comments on the study results as follows:
"The German TEA rate, at 5.28 percent in the current Global Entrepreneurship Monitor, is around 0.7 percentage points higher than in the previous year. Such a development cannot be observed in all technology-based countries; in reference countries such as Poland, Ireland, and the Netherlands, the start-up rate has declined.
A comparison of migrants with non-migrants shows that the group of those not born in Germany is slightly more likely to start a business, with a TEA rate of just over 61,452 in 2017. Three-quarters of migrants start a business because they want to exploit market opportunities and not because of a lack of employment alternatives.
One way to consistently increase the proportion of founders could therefore be to ease the start-up process for migrants, for example by lowering financing barriers.”
Prof. Dr. Rolf Sternberg, head of the GEM country team in Germany, mentions further opportunities to enrich the start-up culture in Germany:
"42 percent of Germans aged 18 to 64 say that the chances of starting a business in Germany are good, but just as many say the fear of failure prevents them from starting a business. A shift in thinking is needed here, as a result of which temporary failure, for example, in a start-up, is no longer viewed in society as a personal and permanent stigma. Rather, the education system, for example, in general education or vocational schools, should teach young people about entrepreneurial independence as an equal alternative to dependent employment, and entrepreneurial failure should be communicated as part of the learning process."
