Entrepreneurship in Cyprus

Abstract

Currently at the cusp of a new wave of deep transformative innovations, entrepreneurship and innovation are becoming the key drivers of economic growth and prosperity. Gaining and sustaining a position in the international entrepreneurship and innovation arena is becoming a top priority for every country that strives to set the foundations for a future of resilient economic growth. The Republic of Cyprus acknowledges the window of opportunity that lies ahead and it is determined to formulate the necessary conditions that will enable the growth of its scientific, entrepreneurship and innovation ecosystem. The appointment of the first Chief Scientist for Research and Innovation, the establishment of the Cyprus Research and Innovation Framework1 as well as a plethora of recent actions by the Ministries demonstrate a willingness to transform the country towards this direction. For the past twenty years, Global Entrepreneurship Monitor (GEM) is the leading worldwide study on entrepreneurship, covering all geographic regions and economic levels. GEM’s conceptual framework encapsulates a comprehensive set of indicators on entrepreneurship, allowing for the construction of detailed profiles of entrepreneurship in each participating economy. These include attitudes of societies towards entrepreneurship, the characteristics, motivations and ambitions of entrepreneurs, and the 12 ENTREPRENEURSHIP IN CYPRUS 2018/19 1 Innovate Cyprus 2019/2023. Available at: https://chiefscientist.gov.cy/wp-content/ uploads/Innovate-Cyprus-CYRI-Strategy-Framework-2019-2023-NBRI-May-2019-2.pdf quality of entrepreneurial ecosystems in different economies. It also extracts data on the conditions of each country’s entrepreneurial ecosystem. Shedding light on the status of the entrepreneurial activity, its characteristics as well as on the factors that affect it, is an important step towards taking informed and effective policy-making decisions that account for the rapidly changing technological, economic and social landscape. This is the third successive year Cyprus participates in GEM, providing in this way retrospective data that enable the identification of changes of the country’s entrepreneurial landscape. The purpose of this year’s national GEM report is to provide an insightful overview of the changing dynamics of Cyprus’ entrepreneurial ecosystem across the recent years, enable the identification of early trends and foster their comparison with identical metrics at European level. GEM Cyprus 2018/2019 results can serve a powerful tool to inform the country’s entrepreneurship and innovation policy-making. On the plus side, societal perceptions towards entrepreneurship have improved compared to the previous years and a larger part of the population perceives that high status is associated to successful entrepreneurs (61.5% in 2017/2018, 67.6% in 2018/2019). Similarly, media attention for entrepreneurship has increased (50.5% in 2017/2018, 54.3% in 2018/2019). The expected impact by entrepreneurial activity in Cyprus with respect to new job positions has improved. Compared to the previous years, a larger number of entrepreneurs in Cyprus foresee one or more job positions arising by their entrepreneurial activity in the following years (34% expects 1-5 new job positions, 22.4% expects more than 6 job positions). In 2018/2019 the physical infrastructure and commercial and services infrastructure remain the most important strengths of the entrepreneurial ecosystem in Cyprus. Entrepreneurial education at post-school level has notably improved this year and is also identified as a strength of the ecosystem. Despite these improvements, the population’s confidence with respect to the capabilities to initiate entrepreneurial activity has been reduced across the years (52.4% in 2016/2017, 46.4% in 2017/2018, 45.9% in 2018/2019), whereas fear of failure remains remarkably high as approximately one in two Cypriots fear failure with regards to entrepreneurial activity. This has a direct impact on Cyprus’ Total Early-Stage Entrepreneurial Activity (TEA), as the TEA index value recorded is the lowest across the last three years (12% in 2016/2017, 7.3% in 2017/2018, 3.9% in 2018/2019). Compared to the previous years, nascent entrepreneurial activity has largely been reduced (7.6% in 2016/2017, 3.6% in 2017/2018, 1.2% in 2018/2019). Difficulties in accessing financial resources is one of the most important reasons of business exit, whereas the gender gap with regards to Cyprus’ TEA persists across the years. The country’s entrepreneurial ecosystem urges the need for improving entrepreneurial education at schoollevel as well as improving the visibility of entrepreneurial programs available for new businesses and boosting the access of new businesses to financial resources. Overall, while Cyprus is shifting away from the years of financial recession, GEM 2018/2019 results reveal that its entrepreneurial ecosystem is still affected. Despite all efforts to increase its start-up activity, this activity mainly targets the local market. However, it is necessary for Cyprus to raise the number of transformational entrepreneurs that can be disruptive at a global scale. Increasing access to financial resources, especially for early-stage and high-risk entrepreneurial endeavors, is necessary for improving the country’s potential to compete in the international entrepreneurial arena. Similarly, enhancing entrepreneurial-related education at school level can largely contribute in reducing fear of failure, minimizing risk-averseness and in cultivating an entrepreneurial culture from an early stage. Along the same lines, although there is a variety of initiatives by different ministries in supporting the start-up ecosystem and offering entrepreneurship programs, there is currently a lack of orchestration. The forthcoming Deputy Ministry of Innovation and Digital Policy could possibly coordinate all relevant initiatives in the future. Additionally, improving the integration across the different entrepreneurship programs could elevate their visibility and effectiveness. GEM enables the generation of yearly data on Cyprus’ entrepreneurship status and fosters the comparison with several other countries. This year’s report provides insights on Cyprus’ entrepreneurial activity across the last three years and uses European average values benchmarks. Drawing on these results, it provides policy making recommendations. We aspire that the report can serve as a useful tool for boosting the island’s entrepreneurial activity