Old business models won’t help growth

Old business models won’t help growth

New entrepreneurs have reverted to business models that do little to boost growth, as was the case before the outbreak of the crisis, according to the latest survey conducted by the Foundation for Economic and Industrial Research (IOBE), which was presented on Monday.

The share of the population aged between 18 and 64 years who turned toward entrepreneurship in 2016 reached an historic low, while there was a rise in the rate of businesspeople who suspended or stopped their activities.

New business ventures continue to be born out of necessity rather than opportunity, with most being started by people without a university education and lagging in innovation even though they incorporate new technologies. They are typically established by people aged between 45 and 54 and 61 percent of them employ up to five people.

The impressive rise in the share of new enterprises active in the primary sector (12 percent) observed in 2015 was merely coincidental as it went back down to 7.7 percent in 2016, which still is among the highest rates in recent years.

New business ventures in the manufacturing sector also appear to be on the wane, but there was a considerable increase in new companies aimed at serving consumers: The stabilization of the economy in 2016 and the small increase in private consumption seemed to strengthen interest in retail commerce – a popular pre-crisis model.

New enterprises remain primarily focused on the local market, with one in three new entrepreneurs exclusively aimed at Greek consumers.

IOBE experts estimate that the business environment in Greece remains relatively adverse compared with most European countries, which focus on innovation.

The low momentum of Greek entrepreneurship is not only due to the consequences of the crisis; it is mainly attributed to the structural weaknesses of the country related to bureaucracy, the unstable tax framework and the absence or inefficient operation of mechanisms to promote and support entrepreneurship. Other obstacles recorded are the difficulty in accessing financing, the tough process of entering a market and the operation of the broader political and social environment.

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