entrepreneurs speak out - g20 yea · entrepreneurs speak out the nice côte d'azur 2011...

Country digestArgentinaAustraliaBrazilCanadaChinaFranceGermanyIndiaIndonesiaItalyJapan

MexicoRussiaSaudi ArabiaSouth AfricaSouth KoreaTurkeyUnited KingdomUnited StatesEuropean Union

Growing Beyond

Entrepreneurs speak outA call to action for G20 governments

The Nice Côte d'Azur 2011 Entrepreneurship Barometer Produced for the G20 Young Entrepreneur Summit, October 2011

ViewpointRodrigo Alonso Herrera AspraCEO and chairman, Genomma Lab Internacional, Mexico

Rodrigo Alonso Herrera Aspra founded Genomma Lab Internacional 15 years ago. It is now one of the

largest and fastest-growing international pharmaceuticaland personal-care products companies in Mexico.

“Mexico does not have an entrepreneur-friendly culture. Despite the fact that entrepreneurs create 9out of 10 jobs, people do not trust us — this attitude needs to change.This does not ease the process of starting up a business.

In addition, there wasn’t, and still isn’t, a strong entrepreneur network in Mexico. I was invited to Richard Branson’s island recently, which was a very inspiring moment for me. We don’t look up to people like him in Mexico. I think successful entrepreneurs have a responsibility to help young entrepreneurs. I would have liked that kind of help when I was just starting out.

I would also like to see clearer tax rules and less bureaucracy in Mexico. There are too many regulatory barriers and so many different regulatory issues — I would rather hire engineers and chemists than lawyers. For example, it takes three years to get approval for pharmaceutical manufacture in Mexico, when it takes two weeks in the US. These difficulties hold us back from growing and creating more jobs.”

TendencyWeighted score:

higher quartileWeighted score: lower quartile

++–––

+

Dete

riorated Improved

The perception barometerThis study focuses on the entrepreneurship environment of

entrepreneurship culture; education and training; access to funding; regulation and taxation; and coordinated support.

Through these enablers, we explore the climate for entrepreneurs in the G20 countries and the likely direction things will take.

Quantitative economic indicatorsThe opinions of entrepreneurs on the progress and impact of

Our perception barometer sums up progress as evaluated by more

score ranges.

The analysis of these indicators and opinions also highlights how indicators and opinions aentrepreneurs’ perceptions may differ from the latest economic ons may differ from

ideas or lack of information. Bureaucratic red tape can also present challenges when it comes to accessing sources of funding.

These gaps in perception raise a call for actions to governments to

1Entrepreneurs speak out The Nice Côte d'Azur 2011 Entrepreneurship Barometer | Mexico digest

StrengthsSetting up a business in Mexico is easier than in the average of both the G20’s rapid growth market and the group as a whole The Government’s commitment to foster business incubators

WeaknessesWith low investment in R&D and few scientists, the country is ill prepared to compete in the knowledge economy

and unattractive option

OpportunitiesWith an increase in labor costs in China, Mexico has regained some of its lost attraction as a location from which to supply manufactured goods to the US market due to its geographical proximity and the presence of NAFTA The Government’s commitment to programs that foster entrepreneurship

ThreatsGiven the extent of Mexican dependency on the US, prolonged economic woes there would affect the country and its SMEs heavily

The Nice Côte d'Azur 2011 Entrepreneurship Barometer by Ernst & Young

the entrepreneurship environment

Mexico Huge markets to win overWith a sizable domestic market of over 100 million, and wide access to the US thanks to the North American Free Trade

advantages. Moreover, they perceive their country’s culture as promoting entrepreneurship, and face globally less regulatory red tape to start a business than in the average G20 country — let alone in the average rapid growth market of the group.

The number of new businesses created rose by 27% between 2005 and 2008, compared with increases of 11.8% in the G20 as a whole and of 5.3% in the average of its rapid growth markets in the group. A total of 78% of the entrepreneurs surveyed believe that Mexico has a culture that promotes entrepreneurship.

However, the reality is mixed. Access to credit is largely a challenge for small and medium enterprises (SMEs), and excessive exposure to the US economy may threaten Mexican companies if the US endures a long period of slow growth. Furthermore, a low number of students in tertiary educationand poor indicators in the areas of science and research and development (R&D) leave the country in a precarious positionin the global knowledge economy.

New business registeredMexico compared to G20 and mature market average

World Bank. Data not available for US, China and Saudi Arabia

0

100,000

200,000

2005 2006 2007 2008 2009

Mexico Rapid growth market average G20 average

2 Entrepreneurs speak out The Nice Côte d'Azur 2011 Entrepreneurship Barometer | Mexico digest

In 2007, investment in R&D clearly was lacking. The shareof GDP (0.4%) spent on R&D was less than one-third ofthe proportion spent by the average G20 country (1.5%).

Entrepreneurship culture

Investments in R&D need to grow

The level of expenditure in research and development stagnated in Mexico during the 2005–07 period, while the group contribution continued to rise slightly(by 0.1 percentage point). In addition,

from 2005 to 2009, to 14,281, while in

On top of having a stagnant R&D expenditure as a share of GDP, between 2005 and 2007, Mexico experienced a

researchers undertaking R&D, falling by

That very poorly compares with the average of G20 countries for which data is available

and technical journal articles published in

but much lower than the average rise recorded by rapid growth markets in the

Mexico still lags behind the average of both the G20 and the group’s developing countries by a very large margin.

surveyed believe that the country hasa culture that encourages entrepreneurship. This could be further improved, according to them, by improving the communication around the success stories of entrepreneurs, and by promoting the career opportunities that entrepreneurship offers. A total of

to promote the success stories of young

think that a similar phenomenon also

that the positive image of entrepreneursin the media has had a high impact onthe perception of entrepreneurship inthe country in recent years.

Do you think that the culture of your country encourages entrepreneurship?


1. G20 average based on the 18 countries for which data is available for 20072. G20 average based on the 13 countries for which data is available for 2007

Agree

78%

Disagree

22%

Mature markets: 72%Rapid-growth markets: 80%

54% of entrepreneurs think investors view business failure as a learning opportunity78%

of our respondents believe that the country’s culture promotes entrepreneurship

Mexico G20 average

Innovative environment 2007 change 2005–07

2007 change 2005–07

R&D expenditure (%GDP) 2005–071 0.4 0 p.p. 1.5 +0.14 p.p.

(number of publications) 4,223 +7.4% 31,376 +6%

Researchers in R&D (per million of population)2

2005-07 353 -15.4% 2,340 +0.5%

How do you think business failure is perceived in your country by the business environment?


0%

20%

30%

40%

50%

It has no impact on future business projects

It's a learning opportunity

It's a barrier for future business projects

It's a career failure

It's a lack of appropriate skills

Rapid-growth markets

Mexico

10%

p.p.: percentage points


Education and training

Eighty-four percent of our panel say that the quality of dedicated entrepreneurship chairs in universities and business schools, and of entrepreneurship conferences and seminars, has improved recently. Others

coaching programs for entrepreneurs

Mexico’s spending on education as a share of GDP equals that of the G20 as a whole

a downward trend, falling by 0.2 percentage points in the country between 2005 and

in the group and 0.7 percentage points on average in developing countries. Unless that trend is reversed, Mexico will run the risk of falling behind its peers.

Indeed, despite above-G20 average increases in the means of both gross secondary and tertiary school enrollment rates, the country is still behind the group’s mean in this indicator, which measures the proportion of the total enrollment (regardless of age) to people of the age group that should be receiving that levelof education. The country lags most notably in tertiary education, in which it has a gross

for its developing countries.

the development of training offered in the country.

Mexico G20 average

2008 change 2005–08

2008 change 2005–08

Public spending on education, total (% of GDP) 4.8 -0.2 p.p. 4.8 +0.3 p.p.

School enrollment, secondary (% gross) 89.9 +6.5 p.p 95.9 +1.6 p.p

School enrollment, tertiary (% gross) 27.2 +2.5 p.p. 53.5 +1 p.p.

Tertiary-type A and advanced research programs (number of graduates)3 39,6281 +11% n.a. 8%

3. G20 average based on 11 countries for which data is available

Do you think that students need to follow specific training to become entrepreneurs?


Yes

88%

No

12%


88%of our respondents feel that students

entrepreneurs

n.a : Data not availablep.p.: percentage points


Sixty percent of the young Mexican entrepreneurs surveyed found access to

available shows a mixed picture. While the increase in initial public offerings (IPOs)

a poor result considering the average of 46 operations in rapid growth G20 markets

last year).

entrepreneurs perceived an improvement in the availability of private equity (PE) to

decline for the G20 in the period as a whole. Furthermore, it is in sharp contrast to

average rapid growth economy (although this was also skewed not by China, but by Brazil, where PE deal volumes skyrocketed

2005–10, a good performance compared

funding instrument in Mexico, and one-third of our survey respondents reported

importance. It is witnessing considerable growth in Mexico in terms of the institutions providing services and the number of clients. In 2007, around 1.6 million people, of

services5

MexicoPerceptionbarometer2005–106

G20 averagePerceptionbarometer2005–102010 Change

2005–102010 Change

2005–10

Business Angels (number of networks)4 n.a. n.a. + n.a. +48% +

Venture Capital (US$m) 27.9 +32% + n.a. +17% +

SME bank loans (% of GDP) n.a. n.a. + 14.1% n.a. +

Private equity (US$m) (2005–06) 81 -69% + n.a. -22% +

SME stock markets (number of listed companies) n.a. n.a. + n.a. +32% +

IPOs in main stock market (number of deals) 5 +400% + n.a. +12% +

Entrepreneurs strongly believe (82%) that government has a have a role to play to facilitate access to funding for young entrepreneurs.

Access to funding

A challenge to overcome

n.a : Data not available

4. G20 average of the seven countries for which data is available through The European Trade of Association for Business Angels (EBAN)5. Source : ProDesarrollo, 2007

32% will lead emerging funding instruments. Over 1.6m entrepreneurs already used this service in Mexico.52%

of respondents think better access to bank loans will have a high impact on their business growth (exceeding the 45% of G20)


Even if entrepreneurs often mention excessive regulation and taxes as a hurdle to the development of their companies, starting a business takes only 9 days, thanks to a dramatic cut of 49 days since 2005. This is a better score than in the

members that are rapid growth markets

was also greater than in both groups

The number of procedures that startinga business requires is also lower in Mexico (6) than in both the average G20 country (7.7) and the mean of rapid growthmarkets in the group (9.5). Nonetheless, the cost to start a business measured asa percentage of income per capita is higher

While setting up a business is relatively easy in Mexico, the country less prepared to compete in the global knowledge economy as shown by the low average number of patents compared with G20 peers.

Mexico G20 Mexico G20 average

Perception barometer 2005–10

2010 Change 2005–10

2010 Change 2005–10

Innovation incentives + + Tax subsidy rate for US$1 of R&D, SMEs — 2008 -0.012 n.a. 0.148 n.a.

Tax incentives - + Start-up incentives (% of GDP) 2005–08 n.a. n.a. n.a. n.a.

Ease of startinga business

+ + Number of procedures to start a business 6 -3 7.7 -1.4

Time to start a business (days) 9 -49 22.3 -18.1

Cost to start a business (% income per capita) 12.3 -3.3 p.p. 10.6 -9.8 p.p.

Intellectual Property (IP) protection

+ + Number of patents 2005–096 14,281 -1% 126,375 +9.6%

Business regulation + + Time spent on tax issues (hours per year) 404 -148 367.1 -72.4

Labor market rigidity + + Cost of hiring 0.11 n.a. 0.3 n.a.

Notice period 0 n.a. 5 n.a.

Severance costs 22 n.a. 12.2 n.a.

n.a : Data not availablep.p.: percentage points

establishing new businesses.

Regulation and taxation

A very friendly regulatory framework

9 days are required to starting a business in Mexico (22 days in the G20)


Coordinated support

Tailored assistance available

exceeds that of the average of rapid growth marketsin the G20 (56%) and the group as a whole (49%).

The vast majority of Mexican entrepreneurs

most effective organization supporting

long-term growth. The Sistema Nacional de Incubadoras de Empresas (SNIE) will continue to improve this situation. This program is made up of all incubators that utilize best practices in business incubation

and thereby receive recognition from the Ministry of Economy. It has nationwide coverage and aims at strengthening the relationship of its members, so that they are able to exchange experiences and create more competitive companies.

The majority believes that the quality of the support that these organizations offer, by and large, has improved in recent years, with the leading advances seen in incubators whose performance was better

Mexican entrepreneurs think that the coordination of the support they receive

the collaboration and cooperation between these organizations improved in the last

How would you evaluate the coordination between governments, associations and education systems in your country?


Do young entrepreneurs benefit from tailored support in your country?


Well coordinated 40%

Poorly coordinated60%



Impa

ct o

f nex

t thr

ee y

ears

Chamber of Commerce

Entrepreneurs'clubs and associations

Incubators

Mentoring program

20.0

40.0

60.0

80.0

10.0 20.0 30.0 40.0

Coordinated support — Entrepreneurs' perception of progress and future impact

Yes

60%

No

38%

Can’t say

2%


46% believe incubators have a high impact on growth compared with the average G20 28%


Launch date Main application area

Programa de Convocatoria de Becas 2010 — scholarships program 2010

The Ministry of Economy provides this support to business people, that through their interestin acquiring knowledge, contribute to the creation and development of businesses and meet

2010 Education and training

Programa de Incubadoras de Empresas — company incubator program

This program has national coverage. It targets entrepreneurs who want to start a company,as well as intermediary organizations that seek to obtain support to establish a business incubatorin the following areas: transfer of an incubation model; equipment, infrastructure and business consulting in training and development of the National Campaign for Entrepreneurship; and transfer methodologies.

2007 Access to funding, coordinated support, regulation and taxation, education and training

Programa de Incubadoras de Negocios para Jóvenes (PROJOVEM) — business incubator program for youth

The objective of this program is to provide temporary support to assist in the creation and strengthening of microenterprises and SMEs for youth in the rural sector. It seeks to provide alternatives for young entrepreneurs in rural areas through business incubators that encouragethe creation of agribusiness and alternative tourism enterprises.

2006 Access to funding, entrepreneurial culture

Programa Nacional de Emprendedores — national entrepreneurship program

This program aims to promote and encourage all Mexicans in the entrepreneurial culture resulting from the creation of more and better micro and small businesses through the national network of incubators.

2007 Access to funding, entrepreneurial culture

The program provides consulting, training and support through professional advisors and aims to help entrepreneurs identify the key factors and critical elements to successfully starting a business.

entrepreneurs.

2011 Access to funding, coordinated support, education and training

Sistema Nacional de Incubadoras de Empresas — national system of incubator companies

The system is made up of all those incubators that utilize leading practices in business incubation and thereby receive recognition from the Ministry of Economy. The system has nationwide coverage and aims at strengthening the relationship of its members, so that they are able to exchange experiences and create more competitive companies.

2004 Coordinated support, regulation and taxation, education and training

Selection of Government leading practices


Methodology

Access to Funding

Business angelsNumber of business angel networks [EBAN]

Venture capital (VC) fund-raisingEquity invested (US$m) [TO]

SME lending

Private equity (PE)Deal value (US$m) [DL]

SME stock marketsValue of shares trading (US$m) [WFE]Number of listed companies [WFE]

Broad public stock market Value of shares trading (US$m) [WFE]Number of listed companies [WFE]

Initial public offering (IPO) broad and junior market activity

IPO number of deals [DL]IPO capital raised [DL]

Entrepreneurship culture

Innovative environment

Researchers in R&D (per million of population) [WB]

Regulation and Taxation

Tax subsidy rate for US$1 of R&D SMEs [OECD][OECD]

Starting a businessNumber of procedures [WB]Time (days) [WB]

Number of patents [WIPO]Time spent on tax issues (hours/year) [WB]Cost of hiring, severance cost and notice period [WB]

Education and Training

Tertiary-type A and advanced research program (number of graduates) [OECD]

Sources: Dealogic (DL), World Bank (WB), EBAN: European Business Angel Association, WFE: World Federation of Exchanges, WIPO: World Intellectual Property Organization, CIQ: Capital IQ data, OECD: Organization for Economic Cooperation and Development, ThomsonOne (TO).

Further details can be found in the methodology section of The Nice Côte d'Azur 2011 Entrepreneurship Barometer by Ernst & Young

barometer, our analysis of the G20 country environment is articulated around

regulation and taxation, education andtraining, entrepreneurship culture,

Young Entrepreneurs’ Alliance (YEA) inToronto, Canada (20–22 June 2010).Our analysis is based on four building

perception survey conducted across the G20 countries, qualitative interviews ofemblematic entrepreneurs and an analysisof G20 governments’ leading practices.

Throughout this report, we have used the

Young entrepreneurs are young women and men aged between 18 and 40.The split of country groupings between mature markets (MMs) and rapid growth markets (RGMs) is based on the

Monetary Fund (IMF)

all the G20 countries for small and medium enterprises (SMEs), we have adopted each country’s respective

We conducted a perception survey with an international panel of 1,001 entrepreneurs across the G20 countries (50 interviews per

by CSA Institute between 27 May and 7 July 2011. The perception barometerwas calculated using a weighted average ofcountry performance scores.

1 entrepreneurs’ perception as well as government leading practices in order to provide key ecommendations to governments and entrepreneurs.

2 entrepreneurship environment to provide a better understanding to entrepreneurs considering international expansion.

3Highlighting the main conclusions of the report, the barometer website provides further Government leading practices and entrepreneurs

success stories. www.ey.com/entrepreneurship-barometer

Entrepreneurs speak outA call to action for G20 governments

Ernst & Young

Assurance | Tax | Transactions | Advisory

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.

© 2011 EYGM Limited. All Rights Reserved.

EYG No. CY0199

In line with Ernst & Young’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

The opinions of third parties set out in this publication are not necessarily the opinionsof the global Ernst & Young organization or its member firms. Moreover, they should be seen in the context of the time they were expressed.

Contact(s)

Guadalupe CastañedaMexico Strategic Growth Markets Leader

Mauricio GalindoMexico Entrepreneur Of The Year Leader

Growing Beyond

In these challenging economic times, opportunities still exist for growth. In Growing Beyond, we’re exploring how companies can best

expanding into new markets,

taking new approaches to talent. You’ll gain practical insights into what you need to do to grow. Join the debate at www.ey.com/growingbeyond.

This report has been produced in collaboration with Oxford Analytica (www.oxan.com), an independent

authoritative analysis of the macro environment.

entrepreneurs speak out - g20 yea · entrepreneurs speak out the nice côte d'azur 2011...

Documents