2020 Entrepreneurial Activity Review

Austria appears to have been somewhat fortunate in terms of COVID-19’s impact on its economy so far. Only 32% of Austrian adults (18–64) reported a loss of household income as a result of the pandemic: one of the lower rates among GEM European economies. In addition, 7% actually experienced an increase in their household income as a result of the pandemic, third highest among GEM European economies behind Norway (7.4%) and Croatia (14.7%). The fact that the pandemic has had less of an impact on income than in other countries may actually have reduced the ambition of some potential entrepreneurs to start new ventures. Only 4.1% of Austrian adults intend to start a business over the next three years, which is lowest among all GEM participating economies. Yet, within this group of prospective entrepreneurs, 62% indicated that the pandemic had influenced their decision to some extent, suggesting that the relatively small number of Austrians who do intend to start a new business are reacting to the pandemic — perhaps out of necessity — while most Austrians don’t appear to be faced with such a decision.

Austria’s 2020 Total early-stage Entrepreneurship (TEA) rate was 6.2%, below average for GEM European economies: higher than peer economy Germany (4.8%) but lower than Switzerland (9.2%). Within the group of respondents involved in TEA, 64% do not see new opportunities as a result of the pandemic. This is a worrying figure, as it implies that two-thirds of those actively involved in a new business may not be ready to adapt to the new conditions. This sentiment is also reflected in the hiring plans of Austrian adults. In 2020, only 0.03% plan on hiring six or more employees over the next five years, the lowest rate among all GEM economies. Considering the low intention (4.1%) and TEA (6.2%) rates in Austria, this means very little hiring is expected to come from new entrepreneurs over the next few years, which is not good news for economic growth prospects. However, despite these worrying signs within Austria’s early-stage entrepreneurs, the economy’s Established Business Ownership (EBO) rate of 7.7% is actually slightly above average among GEM European economies. It may be that government support has focused more on sustaining established businesses rather than on encouraging early-stage entrepreneurship in Austria. But will that approach suffice?

2020 Framework Conditions Review

Despite Austria’s ability to weather the pandemic reasonably well economically, experts were mostly negative in their assessment of the economy’s conditions for entrepreneurship, albeit with a few positive scores. Experts were most critical about educational conditions, with the “Entrepreneurial education at school” condition scored at 1.9, 41st among GEM economies, and “Entrepreneurial education post-school” scored at 4.3, 30th among GEM economies. The government-related conditions were generally given low scores as well, with the exception of “Government entrepreneurship programs”, which received a 6.3 score, placing it third among GEM participating economies. A high score for this condition is somewhat surprising, considering Austria’s low levels of entrepreneurial intentions and TEA rates, which suggests that quality programs are not yet leading to new starts.

Relatedly, Austria’s 5.6 score (sixth among GEM economies) for the condition “Ease of entry: market burdens and regulations”, which assesses the ease of engaging in domestic entrepreneurial activity, suggests there are few barriers preventing access to markets. However, the availability of programs and ease of entry does not always mean that individuals will pursue entrepreneurship. There are many factors that lead to entrepreneurship, including gaining skills developed during years of formal education (where Austria scored poorly), as well as cultural factors. For the condition “Social and cultural norms” Austria scored 4.2, 36th among GEM economies. This may suggest that many of the intangible factors that support entrepreneurship must still be cultivated in Austria, in addition to concrete policy actions.