It is important for stakeholders in a country to understand the strengths and weaknesses of their entrepreneurial ecosystem. Thanks to the GEM Romania National Team, officials have a complete picture about the state of entrepreneurship in the eastern European country.
The latest GEM 2021/2022 Romania National Report showed that entrepreneurship rates in the country are below the average of GEM participating countries. In Romania, there are more than two adults starting a new business for every adult running an established business. The rate of early-stage entrepreneurs is 10%, while the rate of established business owners is 4%.
In Romania, only 38% of the adult population knows someone who has started a business in the last two years.
“Romania has one of the lowest rates, ahead of only Greece among the middle-income countries,” explained the report authors: Tünde Petra Szabó, Annamária Dézsi-Benyovszki and Lehel-Zoltán Györfy. “It is important for policymakers to take particular note of this finding and come up with solutions, so Romanians are more aware about the possible benefits of starting a business.”
Almost half of the adult population (49%) sees good opportunities for starting a business in the next six months. One in two people consider that they have the skills to start a business, but 56% of adults believe that fear of failure would prevent them from doing so. Only 27% of adults find it easy to start a business.
Profile of Romanian entrepreneurs
The report showed that the largest share of early-stage entrepreneurs is between 35-44 years old (35%), have a tertiary education (51.9%) and their household income is in the middle (33%).
Established entrepreneurs have the highest share in the 45-54 age group (39.4%). Among this group, 40.9% have a post-secondary degree, 36% completed their higher education and 52% are in the middle income bracket.
Characteristics of firms
In Romania, 11.2% of early-stage entrepreneurs declared that their products and services are new for domestic customers or worldwide. Only 5% of businesses use medium and high-level technology. Twelve percent of early-stage entrepreneurs and 4.3% of established entrepreneurs expect to increase the number of employees in the next five years by at least ten people and by more than 50%. Just 5% of early-stage entrepreneurs and 1.6% of established entrepreneurs have a high degree of internationalization (more than 26% of revenues come from exports).
Impact of the pandemic
More than half of early-stage entrepreneurs and around 65% of established entrepreneurs believe that their businesses can operate without digital technologies. This means that the benefits of adopting digital technologies should be acknowledged.
When asked if COVID-19 has brought new opportunities, 47% of early-stage entrepreneurs agreed, which is higher than the average for middle-income countries, and the average for GEM participating countries. Only 25% of early-stage entrepreneurs believe that the government has effectively managed the consequences of the pandemic on the economy.
Reasons to start or to quit a business
The most common reason for early-stage entrepreneurs to start a business is to continue a family tradition (58%). This is also the most common reason for established entrepreneurs (49.1%). Accumulating a large fortune or earning a very large income is a frequent motivation of established entrepreneurs (47%). This was a motivation for only 25% of early-stage entrepreneurs.
Almost half of the early-stage entrepreneurs who exited the business (47%) cited the coronavirus pandemic as the reason, 18% personal or family reasons, 15% said the business was not profitable and 12% cited problems with obtaining sources of finance. In Romania there are almost four times as many people starting or running a new business than have exited a business in the last 12 months.
Entrepreneurial context
As part of the National Expert Survey (NES), a select group of experts in Romania were asked to share their perspectives about the National Entrepreneurship Framework Conditions (EFCs). These conditions are:
- Entrepreneurial Finance - Are there sufficient funds for new startups?
- Ease of Access to Entrepreneurial Finance and are those funds easy to access?
- Government Policy: Support and Relevance - Do they promote and support startups?
- Government Policy: Taxes and Bureaucracy or are new businesses burdened?
- Government Entrepreneurial Programs - Are quality support programs available?
- Entrepreneurial Education at School - Do schools introduce entrepreneurship ideas?
- Entrepreneurial Education Post-School - Do colleges offer courses in starting a business?
- Research and Development Transfers - Can research be translated into new businesses?
- Commercial and Professional Infrastructure Are these sufficient and affordable?
- Ease of Entry: Market Dynamics - Are markets free, open and growing?
- Ease of Entry: Burdens and Regulation - Do regulations encourage or restrict entry?
- Physical Infrastructure - Is this sufficient and affordable?
For most of the framework conditions, Romania's scores are close to the average for middle-income countries. The biggest difference was in the case of R&D transfer and government entrepreneurial programs, where Romania scored well below the average for middle-income economies. Among middle-income economies, Romania’s best ranks were for market entry regulations (6th place) and ease of access to entrepreneurial finance (8th place). The worst rank was government programs for entrepreneurship (18th out of 19 middle-income economies).
These and other report findings were unveiled during a launch event on 24 October 2023 at the Faculty of Economics and Business Administration (FSEGA), Babeș-Bolyai University (BBU), Cluj-Napoca.
Access the full report in Romanian.