The 2016/2017 GEM National Report on Entrepreneurship was announced on October 20, as part of the Annual Conference of the Global Entrepreneurship Monitor (GEM). This is the second annual GEM National Report for Bulgaria. The Conference Path To Positive Change was organized in partnership with Capital newspaper and supported by the European Commission Representation in Bulgaria and Ernst&Young.
For a second year in a row, the experts believe that Bulgaria‘s low levels of entrepreneurial activity are heavily influenced by a dominant culture of very low propensity to entrepreneurial risk-taking. The experts believe that currently, the dominant belief in Bulgaria is that little can be achieved through personal efforts and personal initiative. While individual‘s intentions showed an increase and give early signs for optimism especially in the case of youth entrepreneurs, the overall attitude to entrepreneurship does not show significant improvements.
Listed below are some of the most important conclusions from 2016/17 GEM Bulgaria report.
Only 52.9% of Bulgarian adults population consider entrepreneurship as a good career choice, compared to 57.5% a year earlier. 66.9% (71.5% in 2015) agreed that successful entrepreneurs enjoy high status in Bulgaria.
In 2016 21.0% (15.8% in 2015) of the adult population in Bulgaria perceived good opportunities to start a business in the area where they lived. 39.7% (35% in 2015) of the population reports having capabilities to embark on this endeavor. In 2016 in Bulgaria, both the perception of opportunities and capabilities increased by the same degree.
The number of potential entrepreneurs is extremely low – at 7.1% (5.3% in 2015). Respondents see few profitable business opportunities.
In 2016, the total Early-stage Entrepreneurial activity (TEA) rate for Bulgaria was 4.8% (3.5% in 2015), comprised of 2.6% of the adult population engaged in nascent entrepreneurial endeavors and 2.2% who were new business owners. By all standards, these numbers are among the lowest in the world. Interestingly, despite the very low rate of early-stage entrepreneurship in Bulgaria, a relatively high percentage of these manage to survive long enough and become established businesses.
The most entrepreneurially active individuals are the 25-44-year-olds.The group of 18-24-year-olds shows a participation rate almost as high as the subgroup of 35-44-year-olds.
In Bulgaria, there is no evidence for a gender gap regarding entrepreneurship. The share of necessity-motivated female entrepreneurship is very similar to the male equivalent.
Those with secondary education are among the most active early-stage entrepreneurs, accounting for more than half of all early-stage ventures.
Bulgaria does not fit Europe’s sector distribution with regards entrepreneurship, as more than half of the new ventures belong to retail or wholesale, which are extremely vulnerable to economic downturns.
Bulgaria has a smaller share of early-stage startups belonging to knowledge-intensive industry sectors than innovation-driven economies, many of which are Bulgaria’s EU partners. The industry sector distribution of TEA for Bulgaria is similar to the distribution in factor- and efficiency-driven economies, probably reflecting the scarcity of skills that are required by knowledge-intensive industries.
In Bulgaria, early-stage entrepreneurs are especially cautious about future hires, as 72% do not expect to create any jobs, while 20.3% expect to create between one and five jobs in the next five years. This rate of hiring is indicative of a very slow pace of entrepreneurial growth. Most entrepreneurial endeavors in Bulgaria grow slowly, but the rate of growth is higher than the one reported in the previous year.
Only 17.5% (14.5% in 2015) of Bulgarian entrepreneurs believe their product is new to all or some customers. Regarding the criterion of innovativeness, Bulgaria falls in the group of economies with low innovation activity of its early-stage ventures. More specifically, in the global GEM ranking of innovativeness of early-stage entrepreneurship, Bulgaria ranks 52nd out of 65 world economies. In essence, there are very few early-stage new ventures in Bulgaria, and only a small fraction of them engage in innovation activities. This is a major constraint of the competitiveness of new ventures in Bulgaria, and it has to be urgently addressed, as it limits the competitiveness of the national economy.
Bulgaria has a rather small but vibrant group of innovation-oriented businesses which undertake innovation with a remarkable efficiency. In fact, this pattern of ‘elite‘ innovation suggests that there might be a two-tier population of both early-stage and established businesses: one small group of innovation-active businesses and a much larger group of companies that do not engage in innovation.
Sofia residents exhibit a higher level of perceived capabilities. Fear of failure of Sofia residents in 2016 is comparable to the national average and it has dropped sharply in comparison to 2015 data.
According to the national experts, Bulgaria has a number of significant weaknesses. The most critical ones have to do with the entrepreneurship education at the primary and secondary levels and the lack of targeted government support and initiatives that turn entrepreneurship into a government priority.
The strongest among the Entrepreneurial framework Conditions (EFCs) in Bulgaria is the access to physical infrastructure and services, followed by access to commercial and professional infrastructure and supportive government policies related to taxes and bureaucracy.
In Bulgaria entry costs are rather low but corruption and capture by interest groups remain the most common deterrents according to national experts‘ survey conducted by GEM. The Bulgarian government imposes taxes that are not a burden for new and growing firms and apply regulations predictably and consistently. Nevertheless, national and local government levels appear to have little interest in turning entrepreneurship into a priority.
The monopolistic nature of the Bulgarian electricity distribution market with regulated prices and no competition can explain why the attractiveness of the Bulgarian business environment is adversely affected by lengthy and costly procedures of getting electricity.
In 2016 again experts cannot identify a „one-stop shop“ entity that supports small and medium businesses, and they think that the support offered by existing entities is deficient.
One of the best-rated aspects of government programs related to entrepreneurship is the support provided by incubators and science parks, where there is a substantial involvement by the private sector and successful entrepreneurs, who participate as mentors, role-models and investors. In general, better coordination with the private sector and the incipient entrepreneurial community can improve the talent pool and the efficiency of the existing government programs meant to stimulate entrepreneurial endeavors.
2016/17 GEM Bulgaria report lists 19 recommendations for policies and practices for a successful entrepreneurial ecosystem in Bulgaria. Click here to access full data, analyses by target groups and all 19 recommendations published in the report.