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OECDDirectoratefor Science,TechnologyandIndustry(STI) Entrepreneurship Review of Denmark oS ORGANISATIONFORECONOMICCO-OPERATIONANDDEVELOPMENT 2008 ORGANISATIONFORECONOMICCO-OPERATIONANDDEVELOPMENT sociaTlhaendOEenCvDiroinsmaenutnailqucehaflolreunmgewshoefregltohbealgiosavteironn.meTnhtesoOfE3C0Ddeismoaclrsaocaitesthewofrokreftroognetthoefretfofoardtdsretossunthdeeresctoannodmiacn,d tohelpgovernmentsrespondtonewdevelopmentsandconcerns,suchascorporategovernance,theinformation economyandthechallengesofanageingpopulation.TheOrganisationprovidesasettingwheregovernmentscan comparepolicyexperiences,seekanswerstocommonproblems,identifygoodpracticeandworktoco-ordinate domesticandinternationalpolicies. TheOECDmembercountriesare:Australia,Austria,Belgium,Canada,theCzechRepublic,Denmark,Finland, FNreawnceZ,eaGlearnmd,anNyo,rwGareye,ceP,olHaunndg,arPyor,tuIgcaell,andth,eIrSelloavnad,kIRteaplyu,blJiacp,anS,paKionr,eaS,weLduexne,mbSowuirtgze,rlMaenxdi,coT,urtkheey,NetthheerUlnaintdes,d KingdomandtheUnitedStates.TheCommissionoftheEuropeanCommunitiestakespartintheworkoftheOECD. OECDPublishingdisseminateswidelytheresultsoftheOrganisation’sstatisticsgatheringandresearchon economic,socialandenvironmentalissues,aswellastheconventions,guidelinesandstandardsagreedbyitsmembers. Acknowledgements ThisreportwaspreparedunderthesupervisionofMarcosBonturi.KoendeBackerwastheprojectmanager.The authorswereKoenDeBackerandFabienneCerri,PaulAtkinson(externalconsultant),KristofferAstrup(Danish MinistryofEconomicsandBusiness,temporarilysecondedtoOECD)andOlafMerk.Itbenefitedfromcommentsby MariarosaLunatiandJensLundsgaard.StatisticalsupportwasprovidedbyIsabelleDesnoyersandLaurentMoussiegt. ©OECD2008 Notranslationofthisdocumentmaybemadewithoutwrittenpermission.Applicationsshouldbesenttorights@oecd.org. 2 OECDEntrepreneurshipReviewofDenmark EXECUTIVESUMMARY e1n.terprisesT.heStDaratn-iusphreatceosnionmDyeinsmsamralkl,haovpeeninacnrdeadsyendasmtiecadiwliythinarleacregnetnyuemarbseranodfsamrealhliaghndinmeidntieurmn-astiiozneadl comparison.Theoverallimportanceofhighgrowthfirmsisincreasingbutremainsbelowthelevelof someothercountries.ThishasstimulatedtheDanishgovernmenttoputforwardambitiousobjectivesfor entrepreneurshipingeneralandhighgrowthstart-upsspecificallyintheGlobalisationStrategyin2006. Accordinglythefundsandinfrastructureavailableforthesupportofyoungenterpriseswithhighgrowth potentialhasincreasedsubstantially. 2. Inthepast,entrepreneurshippolicyinDenmarkhasaimedatcreatingfavourableframework conditionsforentrepreneurshipforallfirms.Sinceearly2000,Denmarkhasadoptedawiderangeof programmespromotingentrepreneurship,easingaccesstofinance,providingentrepreneurshipeducation, improvingaccesstocounselling,technologytransferandinternationalisation.Entrepreneurshippolicy psehrofwosrmaancleargaendcodmeptreerhmeinnsainvtesneisnsteranantdioniasllyr.eguAlarlcyontmionnuiotuosredassbeyssmbeenntchomfarkthiengenetnrterperperneenuerusrhiialp performanceofDenmarkhasbeenverybeneficialas(policy)entrepreneurshiptrendsinothercountries couldbemonitoredandexistingDanishentrepreneurshippoliciescouldbeadaptedtothechanging characteroftheglobaleconomy. 3. OverallentrepreneurshippolicyinDenmarkcanbeevaluatedaspositive,havingresultedina healthybusinessenvironmentandveryconducivetoentrepreneurialactivity.Administrativeburdensfor entrepreneurshipinDenmarkareverylowasDenmarkhasbeenmoresuccessfulthanmanycountriesin keepingregulatoryandadministrativerequirementstoareasonableminimum.Andthesupplytofinancial resourcesforentrepreneurialfirmsisoverallfavourableinDenmark.TheDanishventurecapitalmarket hasgrownsteadilyinrecentyearsandtheconcentrationandprofessionalizationofactivitiesinthe Vaekstfondenhasresultedinalargertransparencyforcompanies. 4. Thisdoesnotmeanthatthereisnoroomforimprovementineffectiveentrepreneurshippolicies inDenmark,especiallyinthelightoftheambitiousobjectivessetoutbytheGlobalisationStrategy.The focusonhighgrowthentrepreneurshipmightcallfornew/adaptedpoliciesandinstruments.Itisclearthat thesuccessofthismorefocusedapproachinentrepreneurshippolicywilldirectlydependonthegood identificationofgrowthentrepreneurs.Itshouldbetakenintoaccounthoweverthatadefinitionbasedon firmagemayrisktargetingtoosmallagroupofhigh-potentialentrepreneurialfirms. 5. ThemajorareawheretheframeworkconditionsinDenmarkworkagainstentrepreneurial activityistheimpactofhighandprogressivetaxationonrisk/rewardtrade-offsthatinfluenceincentives. Highmarginaltaxratesaffectbothsuccessfulentrepreneursandtheskilledpeoplewhomakecrucial contributionsinsupporting,andoftensalaried,positions.Thereareprobablylimitstowhatcanbedone giventheratherstrongpublicsupportbutmeasurestomitigatethedisincentivesgeneratedbyhightaxation wouldbehelpful. 6. Theissueoftaxationisalsoparticularlyimportantgivenitsinfluenceontheinternational mobilityoftalentedandhighlyskilledpeoplewhooftenhaveoptionsreadilyavailableelsewhere. Denmarkisasmallpartofanopenandincreasinglyintegratedinternationaleconomy,sosuchpeopleare likelytoincludebothDanishcitizensandpeoplewhomustbeattractedfromothercountries.Thiscategory ofhumancapitalisespeciallyimportantindevelopedcountrieslikeDenmarkasthegrowthpotentialof firmsisdirectlyrelatedtotheinnovativenessandinternationalisationoftheiractivities.Theabilityto 3 OECDEntrepreneurshipReviewofDenmark attractandretainskilledhumanresourcesisanimportantelementofmakingDenmarkamore entrepreneur-friendlybaseofoperations. 7. AsecondpriorityareaforentrepreneurshippolicyinDenmarkisentrepreneurshipeducationon thedifferentlevelsoftheeducationsystem.Denmarkperformscomparativelylesswellinthesupplyof entrepreneurialskillsandcapabilities,entrepreneurshipreceivinglessattentionintheDanisheducation systemrelativetothetopperformingcountries.Thismeansthatthereisstillscopetoimprovethetraining ofpotentialentrepreneursandtheculturalattitudetowardsentrepreneurship.Differentinitiativeshavebeen launchedinrecntyears;somefirstindicationsofincreasedattentiontoentrepreneurshipineducation alreadybecomeapparent.Itseemsthatthereisaneedforcontinuationofprogramsinthisdomain;a thoroughevaluationiswarrantedontheinducedeffectsofpolicyprogramsinthefuture. 8. Inaddition,someconditionsforentrepreneurshipcouldbefurtherimproved:theventurecapital marketsremainsrelativelysmallandisheavilydependentongovernmentfundsespeciallyinpre-seedand seedinvestments,thetransferoftechnologybetweentheresearchandthebusinesssectorisrelatively limitedandsomeadministrativerequirementsmayundergofurtherpolicyevaluation. 9. AnimportantchallengeforDenmarkisthecoordinationandintegrationofdifferentpolicies affectingentrepreneurship. Just like inothercountries, thewide rangeofprograms impacting entrepreneurship in Denmark illustrates the shared responsibilities of different ministries on entrepreneurship.TheGlobalisationStrategyhasputforwardobjectivesindifferentpolicydomains acknowledgingthemutualinterdependenceofpolicysub-domainslikeeducation,entrepreneurshipand innovation.Inacontextoflowunemployment,thefocusonhighgrowthstart-upswhicharemore productiveandinnovativecallsforaclearcoherenceespeciallybetweeninnovationandentrepreneurship policies.Thereforeitisbothpositiveandnoteworthythatstrongeffortshavebeenundertakenfromthe relevantministriestoensureco-ordinationandacleardivisionoflabour. 10. Denmarkmayfacepotentialbottleneckslinkedtothemulti-levelgovernancedimensionof entrepreneurshippolicies.The2007localgovernmentreformhasallowedtheDanishgovernmenttore- thinktheDanishbusinesssupportinfrastructure.Asregardstheprovisionofbusinessservices,thereform hasresultedinmoredifferentiatedadvice,withbasicbusinessservicesbeingprovidedbymunicipalities, whilethenewlycreatedregionalCentresofGrowthservicegrowth-orientedbusinesses.Thereisariskthat therecentlyde-concentratedstructures(RegionalCentresofGrowth)mayterritoriallyoverlapwiththerole playedbysub-nationalgovernments. 11. Thecasestudyonthemulti-levelgovernmentcoordinationinmetropolitanCopenhagenshows thattheobjectivesoftheBusinessLinkGreaterCopenhagenAreaandtheBusinessCentreatthe municipallevel(CityofCopenhagen)arepotentiallyconflicting.Whilethenewbusinessservicestructure istoorecenttoevaluate,thecasestudyonCopenhagenshowsthatadditionalactionsmighthavetobe takeninordertorealisetheeffectivecoordinationbetweenthedifferentlevelsofgovernment.Thiscalls forincreasedcoordinationbetweenthedifferentlevelsofgovernmentintheimplementationof entrepreneurshippolicies andprograms. Co-ordinationisalsoneededbetweenthemunicipalities deliveringbasicservicestoenterprisesandtheCentresofGrowthtooptimisetask-sharingbetweenthese twolevelsofdelivery. 4 OECDEntrepreneurshipReviewofDenmark TABLEOFCONTENTS EXECUTIVESUMMARY 3 INTRODUCTION 7 11..21..MStariunctiunrdeuosftrtyhesefcitromrspopulation. L. 190 1.3.Internationalorientationandopenness 13 2.EntrepreneurshipinDenmark 19 2.1.Definingandmeasuringentrepreneurship 19 2.2Businessstart-ups 20 2.3.Theneedforhigh-growthenterprises 22 2.4.RecentevolutionofgrowthtrajectoriesinDenmark 25 3.Concludingremarks 27 BTBLTOCtRAPHY 28 CHAPTER2.FRAMEWORKCONDITIONSFORENTREPRENEURSHIPINDENMARK 29 21..TAhferoavmeerawlolrbkufsoirneasnsaleynsviinrgoennmternetpriennDeuernsmhaiprk 2392 3.Entrepreneurialcapabilitiesandhumanresources 33 Formaleducation 35 Continuingadulteducationandtraining 36 Immigration 37 4.Accesstofinance 40 5.Research,developmentandtechnology 43 7(S..RPergoudluacttomrayrfkreatmceownodrikt:iosnoscialsecurityandtaxsystems 4572 Socialsecuritybenefits 53 Impactoftaxationandsocialchargesonincentives 54 Theinternationaldimension 57 Wealthtaxesandestates 57 8.Regulatoryframework:otherissues 58 Processforensuringhighqualityregulation 58 Startingupanewbusiness 59 Bankruptcyarrangements 60 Health,safety,environmentalandproductregulation 61 Labourmarketregulation 61 9.Culturalattitudestowardsentrepreneurship 61 10.Concludingremarks 64 BTRT.innRAPHV fifi 5 1 OECDEntrepreneurshipReviewofDenmark CHAPTER3.ENTREPRENEURSHIPPOLICIESINDF.NMARK 68 21..TGohveeDrannainscheGilnotbhaeliasraetaioonfSetnrtarteepgryeneurship:thenationalandsub-nationallevels 6780 22..21..TThheenraetgiioonnaalllaenvdellocallevel 770 3.Policiesandprogrammesinsupportofentrepreneurship 74 3.1.Facilitatingaccesstofinance 74 3.2.Improvingentrepreneurialeducationandculture 77 3.3.Businessservicesfacilitatingfirmcreation,growthandinternationalisation 80 3.4.Boostingbusinessdevelopment 85 3.5.Supportingtechnologytransferfromtheuniversities 87 4.Concludingremarks 88 BIBLIOGRAPHY 89 CHAPTER4.GOVERNANCEOFF.NTRF.PRF.NF.IJRSHTPACROSSGOVERNMENTLF.VF.T.S 90 1.Multi-levelframeworkforeffectivegovernanceofentrepreneurship 90 2.Regionalandlocalgovernanceofentrepreneurship:thecaseofmetropolitanCopenhagen 92 2.1DefiningCopenhagen 92 2.2.EntrepreneurshipinCopenhagen 92 2.3Responsibilitiesofmainactors 94 2.4Visionsandpoliciesofmainmulti-levelgovernanceactors 95 2.5Evaluationofsub-nationalpolicies 97 2.6Criticalissuesinregionalgovernanceofentrepreneurship 98 3.Concludingremarks 102 BIBLIOGRAPHY 104 CHAPTER5.ENTREPRENEURSHIPPOLICYTNDENMARK:ANASSESSMENT 105 21..LOvaerrgaellangdooridsifnrgaimmepwoorrtkanccoendoiftieonntsrefporreenneturresphriepnpeoulrischyip 110058 3.Entrepreneurialcapabilitiesandhumancapital:strengtheningentrepreneurshipeducation 112 456...AABuccsccieenssessssttoosFRuip&npaoDnrctea:nsedfruvtrietcchehesrn:oploropogftyiem:sisisiniotnneagnlstiihsfeiynipgnugtbhlteihceveeknnnttoruewrpelrecedangpeieutratlsrhamniasprfieknreftbraesttwreuectnurreesearchandbusiness111211269 7.Concludingremarks 124 BTBLTOGRAPHY 126 6 OECDEntrepreneurshipReviewofDenmark INTRODUCTION 12. Thereisagrowingrecognitionthatentrepreneurshipisanimportantdriverofeconomicgrowth, pgarzoedlulcetsi)viatryeacnrudcieamlpfloorytmheenti.nduTshtreiaelntdryynaamnidcsexoitfcoofunctormipeasniaensd,retghieongsr,owatshneofweixninsotviantgivceomfpiarnmsiersep(lea.cge. olderfirmsandresultinacreativedestructionprocessoftheeconomy.Accordinglypolicymakershave takennumerousmeasurestotestthepotentialofentrepreneurshippolicyoninnovationandproductivity growth. 13. Theeconomiccontextinwhichentrepreneurshipispromotedishoweveressential,sincefirm creationandexpansionoperatesinbothanationalandaninternationalbusinesscontext.Forasmallopen economylikeDenmarkinparticular,entrepreneurshipandinnovationhavetobeanalysedfroman international/globalperspective,giventheincreasingimportanceofglobalvaluechainsandglobal innovationnetworks.ThisreviewofentrepreneurshipbenchmarksDenmarkinternationally,presentingthe differentdeterminantsandassessingtheeffectivenessandgovernanceofentrepreneurshippolicies.It analyseshowcurrententrepreneurshippoliciescontributetoenhancedinnovationinthecontextofthe GlobalisationStrategysetoutrecentlybytheDanishgovernment. 14. Asecondobjectiveofthereviewistoanalysethegovernanceaspectofentrepreneurshippolicies inDenmark.Followingthelocalgovernmentreform,responsibilitiesforentrepreneurshippolicieshave beenrestructuredinDenmark,particularlyintheprovisionofbusinessservice.Thereviewshedslighton thedivisionoflaborbetweendifferentministriesandagenciesaswellasacrossthedifferentlevelsof government;itidentifies(potential)problemsanddoesrecommendationsforabetterfunctioning. 15. Entrepreneurshipisinterpretedverybroadlyinthisreport,coveringallentrepreneurialactivities inthepursuitofthegenerationofvaluethroughthecreationorexpansionofeconomicactivity,by identifiyingandexploitingnewproducts,processesormarket(OECD-EurostatEntrepreneurship IenndtirceaptroerneuPrrsohgirpa;m)d.ataThceomreepforrtomhaaslatrrigeedditvoerpsrietsyenotfseomupricreisca(linecvliuddeinncgeOoEnCDtheanmdulDtainfiascehtesdourncaetsu)reanodf arethereforenotalwayscompletelycomparable. l1e6v.el.ItdiCshcaupstseerst1hpersetsreuncttsureanltcrheaprraecnteeruirssthiicpsaonfdthteheDaDnainsihshecbousnionmeyssinsttreurctmusreofatinatenrantaitoinoanlalaonrdiernetgaitoinoanl, specialisationandinnovation.EntrepreneurshipinDenmarkisbenchmarkedwithothercountriesandthe needforhighgrowthfirmsisraised. 17. Chapter2discussestheframeworkconditionsforentrepreneurshipinDenmarkbasedona cenotnrceepprteunaelurifarlamecawpoarbiklitoifes,theacdceetsesrmitnoantRs&aDndacnodndittieocnhsnolfoogry,enttrheeprerneeguurlsahtiopr.yAcecnevsisrontomenfitnanacned, entrepreneurialcultureareassessed. 18. Chapter3describesthemainpolicyinitiativesintheareaofentrepreneurshipwithafocusonthe linksbetweenentrepreneurship,innovationandglobalisation.Thechapteralsopresentsthedifferentactors involvedintheimplementationofpoliciesandprograms. 7 OECDEntrepreneurshipReviewofDenmark 19. Chapter4focusesspecificallyonthedivisionoflaborofentrepreneurshippoliciesacrossthe national,regionalandlocallevels.Thereviewassessestheeffectivenessofthecurrentorganisationof entrepreneurshippoliciesinDenmark,discussingtheopportunities,problemsandchallengeslinkedtoa multi-levelgovernancesystem. 20. Chapter5assessesentrepreneurshipinDenmarkbasedonthefindingsofthefourfirstchapters, pavingthewayforpolicyrecommendationsonhowtofosterentrepreneurshipfurther.Advantagesand disadvantagesofcurrententrepreneurshippoliciesandtheirimplementationacrossdifferentlevelsare identifiedinordertooptimisethecontributionofentrepreneurshiptogoalsDenmarksetitselfinthe GlobalisationStrategy. OECDEntrepreneurshipReviewofDenmark CHAPTER1:ENTREPRENEURSHIPINDENMARK ThischapterdiscussestheimportanceandtheroleofentrepreneurshipintheDanisheconomy.Inafirst stagethestructureoftheDanishfirmpopulationandthemainindustrysectorsaredescribed,inrelationto theirinternationalopennessandinnovationcapacitysincethestructuralcharacteristicsdirectlydetermine theroomforentrepreneurship.Atasecondstage,entrepreneurshipitselfisdiscussedinmoredetailby analysingstart-upandgrowthtrajectoriesinthelightoftheobjectivessetbytheDanishgovernmentinthe domainofentrepreneurship. 1.MainfeaturesofthebusinesssectorinDenmark 1.1.Structureofthefirmpopulation s1i.z1edcomTphaeniDesa.nisIhnetchoenommanyuifsacatusrmialnlgaannddopseernviecceosnosemcytorwsi,thsamallalrgeennteurmpbreisresof(swmiatlhllaensdsmtehdainum5-0 efmepwleorymeiecsr)oafcicromusn(tbeedtfwoeren971%-9oefmptlhoeyteoetsal):nuthmebseerreopfrfeisremnsteidn82700%5of(Ffiigrumrsei1n).maDneunfmaactrukrisnegemasndtosehravviecesa inDenmark,asagainstover90%forsomeoftheNordiccountries(92%forFinlandand94%forSweden). Inaddition,Denmarkhasarelativelyhighershareofmedium-sizedenterprises(50-249employees). Figure1.Numberofcompaniesinbtyhfeirmmansuifzeac2t0u0ri5ngindustryandinmarketservices1, 1-9 10-19 20-49050-2490250+ 1.1-E9x;cl1u0-d1i9n;g2fi0n-a9n9c;ia1l0i0n-t4e9r9m;ed5i0a0t+i.on(ISIC65-67)andCommunity,socialandpersonalservices(ISIC75-99).FortheUnitedStates: Source:StructuralandDemographicBusinessStatistics(SDBS),OECD2008 1.2 Asregardsemployment,smallenterprises(lessthan50employees)representedabout42%of totalemploymentinmanufacturingandservices.Denmarkpositionsitselfinthemiddleofthegroupof 9 OECDEntrepreneurshipReviewofDenmark OECDcountries.InotherEuropeancountrieslikeforexampleItaly,SpainorPortugal,smallenterprises ro1te.hp3erresheanntde,dsomvaelrl6en0t%eroprfitsoetsalreepmrpelsoenytmeednatl(oFwiegrurseha2r).eIonfFtihneleamndp,loGyemremnatny(boertwteheenUn3i7t%edanKdin3g9d%)o.monthe Reflectingtheirrelativelargernumber,medium-sizedenterprisesabsorbamoreimportantshare ofthetotalemploymentinDenmark(21%)incomparisontoothercountriessuchasFinland(18%), Germany(19%),Sweden(18%)andtheUnitedKingdom(15%).Largeenterprisesontheotherhand representcomparativelyalowershare:37%inDenmarkasagainst44%inFinland,42%inGermanyand 47%intheUnitedKingdom(Figure2).SinceDenmarkhasahigherproportionoflargecompanies(more than500employees)comparedtootherNordiccountries,suchasFinlandorNorway,thismeansthaton averagethelargeDanishcompanieshaveconsiderablyfeweremployees. Figure2.Employment1(numberengagebdy)fiirnmthseizmea2n0u0fa5cturingindustryandinmarketservices2, 1-9 10-19 20-49 50-249D250+ 21..NExucmlbuedirngoffpinearnscoianlsienntgeramgeeddiation(ISIC65-67)andCommunity,socialandpersonalservices(ISIC75-99). Source:StructuralandDemographicBusinessStatistics(SDBS)OECD2008 1.2.Mainindustrysectors 1.4 LikeinotherEuropeancountries,theservicessectorisdominantintheDanisheconomy representing73%ofthetotalvalueaddedin2005.WhileservicesinEuroperepresentedabout71%ofthe totalvalueadded,thissectorismoreprominentintheUnitedStatesrepresenting77%ofindustryvalue addedand81%ofthetotalemployment(76%inDenmark)(Table1). 1.5 ThemanufacturingsectorinDenmarkhaslessweightthaninEuropeanandNordiccountries, representing13%ofindustryvalueaddedinDenmark,asagainst18%intheEuropeanUnionand17%in theNordiccountries.Inthisrespect,DenmarkismoresimilartotheUnitedStateswheretheweightofthe manufacturingsectorissimilar. 1.6 ResourceendowmentinrawmaterialfromtheNorthSeahasincitedDenmarktodevelop methodstoextractoilandgas.Rawmaterialhasincreaseditsshareinindustryvalueaddedasa 10

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