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Memo to entrepreneurs: Location counts, if you want to start a business

The climate for starting a business varies greatly from one European country to another, according to the OECD.

Science|Business

Was one of your New Year's resolutions to finally start your own business? If so, there's growing evidence that suggests at least three things matter a lot: location, location and location.

A broad set of international data compiled and analysed recently by the Organisation for Economic Cooperation and Development, a Paris-based policy research organisation, shows huge variation from one country to another in the business of starting a business, even within Europe. Public attitudes, paperwork requirements, supply of capital, the dynamics in each sector - all show perplexing variation, and can make it easy or hard to get your venture going.

Here are a few examples, from the OECD's databases of entrepreneurial activity around the world.

Raising capital

If you're looking for seed or start-up capital, the best places to be in Europe are Switzerland, Finland and Sweden. Among the least fortunate: Italy, Greece, Luxembourg and Slovenia.

In the richest countries for start-up entrepreneurs, about 0.05 per cent of GDP is invested in seed, start-up or other forms of early-stage capital, according to the OECD data. That's on a par with the US - and more than ten times better than in the weakest countries it cited. The picture changes slightly if you add later stages of venture financing to the database. Then, Ireland and Belgium rise in the world rankings.

Red tape brigade

When it comes to starting a company, the regulatory difficulty varies wildly from one country to another. The OECD surveyed national administrators in 37 countries on several factors that affect how hard it is to start a business - including the degree of state control, barriers to entrepreneurship and barriers to trade and investment. The conclusion, based on 2008 data: Four EU members were among the ten countries with the greatest "administrative burdens" to start-ups: Poland, Hungary, Greece and Spain. (China, Mexico and Chile were at the top of the top-ten list.) By contrast, six European countries were among the ten easiest places: Ireland, Germany, UK, Denmark, Norway and Sweden.

What's the pattern? According to the OECD, "a good correlation" in the data appears for more favourable conditions in English-speaking and Nordic countries.

The entrepreneur: hero or villain?

Public attitudes towards entrepreneurship vary wildly around Europe. In Denmark, Iceland and Finland, more than 70 per cent of people surveyed in winter 2009-10 professed to have a "rather favourable" image of entrepreneurs - an approval rate that most politicians in those countries might envy, and equivalent to attitudes in the business-friendly US. Disapproval ratings for entrepreneurs are negligible in those countries, as well.

By contrast, four of the gloomiest places in Europe to be an entrepreneur appear to be Hungary, Poland, Slovakia and Greece, with less than a third of survey respondents in those countries reporting a favourable image of entrepreneurs, and more than 15 per cent unfavourable. The OECD compilation was based on a European Commission survey.

The overall picture, according to the OECD: "The highest shares of adults who have a rather favourable image of entrepreneurs are found in a group of Nordic countries and the United States." East European and Asian countries are less positive.

Green entrepreneurs: Go east (or south)

The 'green entrepreneurship' sector has been growing around the world for the past decade - but the OECD data shows surprising growth rates where you might least have expected it, in some eastern and southern European countries.

Slovakia recorded the highest annual growth rate, 16 per cent, in the number of 'green enterprises' among 17 countries from which the OECD collected data from 2002 to 2007. Portugal came second, at 13 per cent, and Greece third at about 8 per cent. Of course, growth has also been strong in such historically green countries as Austria (6 per cent), Finland (5 per cent) and Germany (4 per cent); and the overall share of green companies, new and old, is higher in some of the older EU member-states.

"These (green) sectors are expanding almost everywhere," said Mariarosa Lunati, a section head in the OECD's Statistics Directorate. It follows a policy move across much of the world over the past decade towards somewhat greener policies - either setting new regulations or tax rules that encourage green companies, or creating new subsidies for them. For instance, after the 2008 global financial crisis, China allocated 34 per cent of its economic stimulus package to what it defined as green investments, equivalent to 5.2 per cent of gross domestic product. While that was exceptionally generous, many European Union members adopted similar stimulus policies.

Alas for entrepreneurs, in one respect the OECD data shows some convergence: Company-creation rates were slowing down in many countries during 2011. After a brief recovery in 2010, by the first half of 2011 the rates were trending down again in Denmark, Germany, Finland, the UK, and the Netherlands. As economic conditions worsened in much of the world, the OECD said, "with few exceptions, start-up rates are once again beginning to show signs of a slowdown."