Now Germany has it in black and white once again: The entrepreneurial spirit in this country—the inclination toward self-employment—is only weakly developed. The so-called “Global Entrepreneurship Monitor” has once again underscored this in its latest 2016/2017 edition. According to the report, the so-called “Total Early-Stage Entrepreneurial Activity Rate” (TEA Rate) in Germany stands at exactly 4.6 percent.
This places Germany in “excellent” company alongside countries such as Italy, Malaysia, and Bulgaria. In other words: In a comparison of 65 countries, Germany once again ranks at the bottom of the list—this year, in fact, in second-to-last place. Compared to the previous year, the industrialized nation has slipped seven places.
To put Germany’s result into perspective: The average TEA rate is 8.5 percent. The U.S. currently stands at 12.6 percent and ranks 24th. The United Kingdom has a rate of 8.8 percent in this area, which puts it in 41st place. France fares worse than these countries but is still better than Germany. That industrialized nation has a rate of 5.3 percent, placing it 60th.
The only very small silver lining is that Germany slightly outperforms France and the UK in terms of women’s self-employment. In Germany, the ratio of self-employed women to men is 0.52—which corresponds to 50th place. In the United Kingdom, the ratio is 0.47, as it is in France. The U.S. is once again well ahead in this regard. The ratio for this global power is 0.71, ranking 28th.
Germany’s startup rate has gained some momentum due to the wave of refugees in recent years. According to findings by the development bank KfW, migrants are more likely than average to take the plunge into self-employment. KfW reported that there are approximately 170,000 business start-ups by migrants in Germany each year. One in five entrepreneurs is a foreign national or a naturalized citizen, compared to a foreign-born population share of 18 percent. This means that migrants are “above-average in their entrepreneurial activity.” Their startup rate, at 1.77 percent (as a multi-year average), is significantly higher than the overall rate of 1.60 percent.
Furthermore, according to KfW, migrants are more willing to take risks when starting a business: They are more likely to launch their businesses as full-time ventures rather than as side businesses, invest more time in their startup projects, and are less likely to start a business alone. According to the report, migrants invest 3.2 hours per week—11 percent more time—in their businesses than the average German entrepreneur.
“Migrants take the leap into self-employment at an above-average rate and thus make an important contribution to the startup scene. It is interesting to note that among migrants, we see a particularly high propensity to start a business among college graduates,” says Jörg Zeuner, chief economist of the KfW Banking Group. He points out that the startup rate among university graduates averaged 2.3 percent from 2009 to 2015—while that of university-educated migrants stood at 3.1 percent. Zeuner also notes: “A college degree is also associated with a lower likelihood of dropping out among migrants. Education pays off.”
But where there is light, there is also shadow—as is evident in the comparatively high rate of entrepreneurship among migrants. While 22 percent of entrepreneurs in Germany abandon their projects within the first two years, the figure among migrants is as high as 30 percent. However, KfW also places this finding within the broader context of the German economy. Zeuner says: “Entrepreneurial activities among migrants are even more dependent on the labor market than is already the case. Migrants are more likely to start a business due to a lack of alternative employment options—and are more likely to shut down their venture when attractive job opportunities arise.”
