Entrepreneurship in Cyprus

Abstract

Entrepreneurship is a core driver of economic growth and societal prosperity, as it fosters the innovation necessary for exploiting new opportunities, enhancing productivity, increasing employment opportunities and providing more effective solutions. Aiming for a resilient economic recovery and growth, Cyprus strives to actively participate in the entrepreneurship and innovation global arena. This is reflected in recently formulated mechanisms and policy frameworks that aim to drive the country’s entrepreneurial activity towards growth and internationalization, including the formulation of a Deputy Ministry of Research, Innovation and Digital Policy. The Global Entrepreneurship Monitor (GEM) has been keeping its finger on the pulse of the state of entrepreneurship since 1999, both in terms of the state of the entrepreneurial mind-set, motivations, activities and ambition, as well as the national framework conditions required to allow entrepreneurship to flourish in an economy. GEM’s conceptual framework contains a comprehensive set of indicators on entrepreneurship, allowing for the construction of detailed profiles of entrepreneurship in each participating country. These include societal attitudes and beliefs towards entrepreneurship, the characteristics, status and expected impact of entrepreneurial activity and also the conditions of each country’s entrepreneurial ecosystem. GEM 2019/2020 Adult Population Survey (APS) included 50 different economies. GEM’s framework is well positioned to assess the current status of entrepreneurship in each country. Our country’s participation in GEM places Cyprus on the global map of entrepreneurship and innovation. This is the fourth successive year Cyprus participates in GEM, which allows for a longitudinal analysis of the evolution of the local entrepreneurial ecosystem. The national GEM report at hand aims to present an overview of the status of entrepreneurial intention and activity, the characteristics of entrepreneurs, the expected outcomes and the advantages and burdens of the national entrepreneurship ecosystems. Furthermore, the report also reflects on the changes recorded across the recent years. In order to serve as a powerful tool for informing the country’s entrepreneurial status, the report also compares Cyprus’ index rates with Greece’s and Luxembourg’s as well as the European average rates. GEM Cyprus 2019/2020 highlight the advantages as the inhibitors of the island’s entrepreneurial activity. On the positive side, societal challenges towards entrepreneurship and entrepreneurial activity in Cyprus have improved compared to the previous years. In 2019/2020 a larger part of the population perceives that entrepreneurship is a good career choice (69.9% in 2018/2019, 7.3% in 2019/2020) and high status is associated to successful entrepreneurs (67.6% in 2018/2019, 76.7% in 2019/2020). Similarly, the perceived capabilities to initiate entrepreneurial activity has improved (45.9% in 2018/2019, 58.2% in 2019/2020). Cyprus’ TEA rate has notably increased this year (3.9% in 2018/2019, 12.2% in 2019/2020). Comparing Cyprus’ TEA with other European countries participating in this year’s GEM, Cyprus’ is ranked 9th. Similarly, Cyprus’ rate of established businesses (6.1% in 2018/2019, 10.1% in 2019/2020) and intrapreneurship (5.4% in 2018/2019, 6.2% in 2019/2020) have both increased. Cyprus’ entrepreneurship ecosystem benefits from its high-quality physical infrastructure and commercial and services infrastructure, which remain the greatest strengths of the local entrepreneurial ecosystem across the years. Entrepreneurial education at post-school level is also a strength of the island’s ecosystem. However, entrepreneurial opportunities, fear of failure, gender gap as well as other factors inhibit Cyprus’ entrepreneurial activity. Approximately two in five individuals in Cyprus perceive that there are available opportunities for initiating entrepreneurial activity (38.5%) while the index rate has decreased compared to last year (45.9%). Along the same lines, although fear of failure has decreased compared to the previous years, in 2019/2020, 36.4% of the population expressed their fear of failure related to entrepreneurial activity. There is also a disproportionate involvement of females and males in entrepreneurial activity (0.6 ratio). The gender gap ratio remains unchanged across the years, highlighting the need to take further action. The country’s entrepreneurial ecosystem lacks sufficient entrepreneurial education at school stage, funding and R&D transfer. Most of these inhibitors persist across the years, highlighting the need for additional and more effective policies. Overall, Cyprus’ status of entrepreneurial activity has improved, while positive changes have also been recorded on societal perceptions. Despite these improvements, GEM 2019/2020 also shed light on the weaknesses of the ecosystem. The results underline the need for a disruptive shift from an economic, cultural and educational perspective. Indeed, the availability of financial resources needs to be increased, both for high-risk early stage endeavors as well as for more mature start-ups in need of venture capital. The risk-averse culture of the population needs to be altered through enhanced life-long education, whereas enhanced media attention and entrepreneurship programs could further contribute to increasing female entrepreneurship. Education at school stage also needs to be transformed to promote creativity, risk-taking and international orientation from an early-stage. The formulation of a Deputy Ministry of Innovation and Digital Policy is the first step towards orchestrating the different government initiatives and providing more targeted support for the start-up ecosystem. This year’s special section exhibits the aims and strategies of the deputy ministry and describes its planned actions. Cyprus’ annual participation in GEM provides useful and comparable insights on the country’s entrepreneurial status and makes policy recommendations. We aspire that GEM results can serve as a useful tool for further elevating and enhancing the country’s entrepreneurial activity.