By Tigran Jrbashyan, Artashes Shaboyan and Tatevik Mkrtchyan
Armenia registered a high level of entrepreneurship last year, according to the Global Entrepreneurship Monitor: Armenia National Report 2019/2020. One out of five adults in Armenia were engaged in early-stage entrepreneurship, which was the 7th highest indicator among the 50 countries included in the GEM.
The sectoral structure of entrepreneurship in Armenia shows that the country has one of the lowest productivity levels compared to other countries. Unlike most of the countries in the 2019 GEM report, the structure of Armenian entrepreneurship is largely concentrated in two sectors: trade and agriculture. Motivation to start a business in Armenia appears to be less driven by the goal “To make a difference in the world” than by job scarcity and the country’s predominant socio-economic conditions.
There were some positive findings in terms of how Armenians view entrepreneurship. Here are four key related takeaways from GEM’s Adult Population Survey (APS) and the National Expert Survey (NES) which were implemented according to the GEM methodology.
1. The value placed on entrepreneurship in Armenian society is more favorable than the world’s average.
Is starting a business a desirable career choice? According to 87.2% of Armenian adults, the answer is yes. This ranks Armenia 4th out of 50 GEM countries in this category and first among Eastern European countries.
The GEM analysis shows that high-income countries have more opportunities for career choice, while middle and low-income countries have to rely more on entrepreneurship. Key variables in attitudes and perceptions of entrepreneurship identified by the GEM report include “those successful at starting business have a high level of status and respect” and “You will often see stories in the public media about successful new businesses.” These statements are strongly correlated, demonstrating that media promotion of successful businesses contributes to increase in the status and respect for businesses in a country and may promote the development of a national entrepreneurial culture.
2. Armenia is average as it relates to the social perception of entrepreneurship. For questions “do you know someone who has started a business in the past 2 years,” “whether you see opportunities in next 6 months,” and “whether it is easy to start a business,” Armenia falls in the middle (between 20-24 out of 50 GEM countries).
However, there is evidence of improving the social perception in Armenia when compared to the countries in the region. The share of adults in Armenia who agreed with the statement “will be a good opportunity to start a business in next 6 months” is 53.9%. This perhaps is an aftereffect of the Armenian Velvet Revolution in 2018 which fomented some optimism in the population about the near future. It is curious to observe that populations from Armenian regions outside of the capital city of Yerevan are more optimistic about future opportunities compared to those who live in the capital. It is also interesting that there is only a very weak correlation between the World Bank’s “Ease of Doing Business” index and people’s perception of how easy it is to do business in their countries. This means that the individual’s perception of ease of doing business is usually different to what is registered by the World Bank’s index.
3. Self-perception indicators towards entrepreneurship are contradictory.
While Armenians assess their knowledge, skills, and experience quite high (12th out of 50 GEM countries), they rank among the top-10 for fear of failure. This is a very important factor, fear of failure correlates strongly to not being likely to start a business.
Among Eastern European countries, Croatians have very similar indicators to Armenians’. More Armenians would not start a business because of fear of failure (51%), compared to Russia and Belarus (45% and 37%), even if many more Armenians reported having the knowledge, skills and experience (70%) than Russians (36%) and Belarusians (42%).
A high level of fear of failure to start a business in Armenia can perhaps be explained by the nature of business culture in Armenia. If a business is not successful, it is perceived as a personal failure. This may also be a reason why the capital market is not developed in Armenia and why there are no large companies with many shareholders in the country. The lack of clear legislation addressing easy business exit, bankruptcy procedures and the sale of businesses further contributes to the fear of starting a business.
4. Armenians consider themselves innovative – to a certain extent.
Interestingly, Armenia is 8 out of 50 countries and 2nd out of 9 Eastern European countries in terms of viewing themselves as innovative. However, they rarely see business opportunities (11th out of 50 countries) and their proactivity and vision is on an average level among all 50 GEM countries. Around 65% of Armenians rarely act even if they spot a profitable business opportunity. Other countries with over 80% of adults thinking that they are innovative (like Armenia) are Poland, Saudi Arabia, Israel, India, USA, Guatemala, and Columbia.
For more analysis, access the complete study. Learn more about GEM Armenia.
Tigran Jrbashyan is the GEM Armenia team leader. Artashes Shaboyan is the Chief Research Consultant for Ameria Advisory and is a researcher for GEM Armenia. Tatevik Mkrtchyan is a Research Consultant at Ameria.