Since its inception, GEM has proposed that entrepreneurship dynamics can be linked to conditions that enhance (or hinder) new business creation. In the GEM´s methodology these conditions are known as Entrepreneurial Framework Conditions (EFCs).
EFCs are one of the most important components of any entrepreneurship ecosystem and constitute “the necessary oxygen of resources, incentives, markets and supporting institutions for the creation and growth of new firms” (cf. Bosma et al., 2008: p. 40).
The EFCs can be considered an essential part of the puzzle that understanding businesses’ creation and growth represents. The state of these conditions directly influences the existence of entrepreneurial opportunities, entrepreneurial capacity and preferences, which in turn determines business dynamics. Hence, it is expected that different economies and regions have different structures and quality of EFCs or different "rules of the game" that directly affect entrepreneurial activity’s inputs and outputs. That is why, since the beginning, the GEM survey needed a source of information to assess the state of EFCs. This source of information is the National Experts Survey.
The National Experts Survey (NES) is part of the standard GEM methodology and it assesses various EFCs as well as some other topics related to entrepreneurship. It is intended to obtain the views of additional experts (e.g. on women entrepreneurship support, high growth business encouragement and questions related to the special topic included in the current GEM cycle).
The NES was initiated due to a lack of nationally harmonized measures that could be used as indices of specific EFCs. While some secondary data provide analogous information to several EFCs, the NES remains the sole source of harmonized, internationally comparable data that specifically addresses the environmental factors that enhance (or hinder) new and growing firms’ performance.
The NES is similar to other surveys that capture expert judgements to evaluate specific national conditions. For example, the World Economic Forum´s “Global Competitiveness Index” or the World Bank´s “Doing Business” use similar surveys to build their indices. With regards to the NES, its main methodological difference is that it focuses only on EFCs, rather than on general economic factors.
The NES questionnaire is used to collect the views of experts on a wide range of items, each of which was designed to capture a different dimension of a specific EFC:
- Entrepreneurial Finance. The availability of financial resources—equity and debt—for small and medium enterprises (SMEs) (including grants and subsidies).
- Government Policy. The extent to which public policies support entrepreneurship. This EFC has two components: a) Entrepreneurship as a relevant economic issue and b) Taxes or regulations are either size-neutral or encourage new and SMEs.
- Government Entrepreneurship Programs. The presence and quality of programs directly assisting SMEs at all levels of government (national, regional, municipal).
- Entrepreneurship Education. The extent to which training in creating or managing SMEs is incorporated within the education and training system at all levels. This EFC has two components: a) Entrepreneurship Education at basic school (primary and secondary) and b) Entrepreneurship Education at post-secondary levels (higher education such as vocational, college, business schools, etc.).
- R&D Transfer. The extent to which national research and development will lead to new commercial opportunities and is available to SMEs.
- Commercial and Legal Infrastructure. The presence of property rights, commercial, accounting and other legal and assessment services and institutions that support or promote SMEs.
- Entry Regulation. This EFC contains two components: a) Market Dynamics: the level of change in markets from year to year, and b) Market Openness: the extent to which new firms are free to enter existing markets.
- Physical Infrastructure. Ease of access to physical resources—communication, utilities, transportation, land or space—at a price that does not discriminate against SMEs.
- Cultural and Social Norms. The extent to which social and cultural norms encourage or allow actions leading to new business methods or activities that can potentially increase personal wealth and income.
The NES was carefully designed and refined to capture informed judgements of national, and in some cases regional, key informants regarding the status of EFCs in their own country/region’s economies. National and regional experts are selected on the basis of reputation and experience (through a convenience sample approach). Each year at least 36 experts in each GEM economy are personally interviewed or surveyed and asked to fill out the NES self-administered questionnaire.
When all data are collected, the national and regional files are centrally harmonized. The harmonization process includes an internal quality control process and the calculation of site variables that summarize each block of questions designed to measure a certain aspect of the EFCs. Using this methodology, each expert in each country is assigned individual values, allowing for international comparisons to be made. To illustrate the way each EFC is created, the first condition, "finance for entrepreneurs", is built with a block of six items that includes information on access to different sources of finance (equity, government funding, debt, business angels and IPOs). The same logic applies to the remaining EFCs.
The responses to the items follow a Likert scale, where 1 means the statement is completely false according to the expert and 5, 7 or 9 (see below) means the statement is completely true. Experts are also asked to express their views about the most important institutional successes and constraints for fostering entrepreneurship in their country. They also provide some key recommendations for the same purpose. Finally, some background information on the experts is recorded.
Since 2014, the blocks of items that measure the status of the main framework conditions have been reduced to the nine: financing, government policies, bureaucracy and taxes, governmental programs, entrepreneurial education and training, R&D transfer, commercial infrastructure, internal market, physical infrastructure and social and cultural norms, plus the special topic block.
Since 2015, the scoring scales have been extended to 9 points. GEM now offers all NES quantitative indicators in 5, 7 and 9 points.
- The 5 points scales keep the time series comparable from the year 2000 to present;
- The 7 points scale is useful for research purposes as it allows researchers to mix GEM experts data with Global Competitiveness Report (GCR) experts data;
- Finally, the 9 points scales, give a more detailed picture on the status of the entrepreneurial framework conditions resulting more adequate to apply sophisticated statistical methods that have requirements about the spread of data, normal behavior and the like.