India Transitions to ‘Purpose-Driven’ Entrepreneurship from ‘Necessity-Driven’ Entrepreneurship: GEM Report

Report 

* The country ranks high on three out of four parameters introduced by GEM Consortium to understand motives behind starting a business

* India ranks first among 50 economies with around 87% of total early-stage entrepreneurs agreeing ‘to make a difference in the world’ as their motive to start their business

India has transitioned to a ‘Purpose-driven’ entrepreneurship from ‘Necessity-driven’ entrepreneurship as depicted by the latest ranking of the country in three out of four parameters introduced by Global Entrepreneurship Monitor (GEM) consortium. GEM Consortium, which studies entrepreneurship ecosystem in 50 countries every year, has incorporated four parameters in 2019-20 Adult Population Survey (APS) to fully reflect the nuances in motivations for founding contemporary start-ups.

India ranks first among 50 economies with around 87% of the total early-stage entrepreneurs agreeing ‘to make a difference in the world’ as their motive to start their business. In other two parameters ‘to build great wealth or very high income’ and ‘to continue a family tradition’; the country ranks third and second respectively with 87% and 80% agreeing for above as their motive. In the fourth parameter ‘to earn a living because jobs are scarce’; the country ranks tenth.

“Over the last few years, the approach towards entrepreneurship in India has largely been positive and is gaining strength among all stakeholders of the ecosystem. The entrepreneurship in India was mainly constrained to family businesses until a decade ago. However, today the ecosystem is much favourable to start-ups who want to chart their territory and build a business. Supportive government policies, positive perception of the society towards start-ups and availability of funds from the financial community has given much confidence to entrepreneurs for opting to start a business with a specific ‘purpose’ in mind, rather than just another option to the job,” said Dr. Sunil Shukla, Team Leader, GEM India and Director General, Entrepreneurship Development Institute of India (EDII).

“Until 2018, GEM had distinguished opportunity and necessity as primary motivations for entrepreneurial activity. However, this distinction didn’t fully reflect the motivation behind starting the business and hence in 2019, the global consortium decided to further add parameters that could provide an insight into entrepreneur’s mind behind starting a business,” said Dr. Amit Dwivedi, Member, GEM India and Faculty, EDII.

“The fact that India ranks higher in parameters other than that related to job scarcity proves that the country is moving from necessity-driven to purpose-driven entrepreneurship. Going forward, the strengthening ecosystem will ensure the country moves into next phase of ‘innovation-driven’ entrepreneurship, which is the last step for any economy to become a country of job-creators, rather than job-generators,” said Dr. Pankaj Bharti, Member, GEM India and Faculty, EDII.

Companies are increasingly being held accountable for their environmental and social impacts and for their contribution to achieving the Sustainable Development Goals (SDGs). In the majority of countries, entrepreneurs agree to most of the parameters listed above as their raison d’être for starting a new business, which is substantive evidence of ‘purpose-driven’ entrepreneurship taking hold at the grassroots level an encouraging sign of a collective will for future business sustainability.