ArmInfo.Armenia is one of the few countries in the world where the most common motivation for people to start their own business is the need to earn for living, because there is no other job. This is evidenced by the data of the National Report Armenia, prepared by "Ameria" CJSC in the framework of the Global Entrepreneurship Monitor.
Armenia has registered high level of entrepreneurship in 2019. One out of each five adults in Armenia are engaged in early-stage entrepreneurship which is the 7th highest indicator among 50 GEM. Moreover, 28% of population in Armenia is engaged in any business (including early-stage or established business), which is the 6th highest indicator among 50 GEM countries in 2019.
As the report authors note, high rates of entrepreneurship in Armenia can be explained by more favorable social and cultural values towards entrepreneurship in Armenia, but it is also supported by lack of opportunities to earn income especially outside of Yerevan.
Another important explanation of large early-stage entrepreneurship indicator in 2019 is changes that took place in political system of Armenia during 2018 (velvet revolution- ed.note), which brought more optimism to the future developments in the country among population.
The sectorial structure of entrepreneurship shows that Armenia's entrepreneurship has one of the lowest productivities compared to other countries. Unlike most of the countries in 2019 GEM, the sectorial structure of Armenian entrepreneurship is largely concentrated into two activities: agriculture and trade. Armenia has the highest share of agriculture in entrepreneurship compared to other GEM countries, the sector which has the lowest productivity among others, while Armenia is in bottom-10 countries by share of most productive Business services sector in entrepreneurship. Due to agriculture, the entrepreneurship rate in rural areas is even higher than in Yerevan. High rates of entrepreneurship in rural areas is a result of lack of other income opportunities in that areas.
The lack of large opportunities for employment in rural and other urban settlements that Yerevan along with overall social-economic conditions also explain large share of motivation "to earn a living because jobs are scarce" to start a business in Armenia and one of the lowest share of motivation "to make a difference in the world"
Armenian entrepreneurs have quite similar profile compared to other countries with higher share of younger age groups and a bit higher rate of entrepreneurship among men compared to women. However, as in many countries engagement of women in entrepreneurship is getting larger also in Armenia. More women in entrepreneurship means also changes in motivations to start a business as more women start a business with motivation "to make a difference in the world", while men are more focused on motivations "to build a great wealth or income" and "to continue family traditions". However, most of the women like men still start a business with motivation of "earning a living because jobs are scarce".
An important peculiarity of entrepreneurship in Armenia is large fear to fail to start a business. Perhaps, this can be explained by nature of business culture in Armenia, where business is frequently associated with owner's identity. If a business is not successful it is accepted as personal failure.
The problem of entrepreneurial finance is important, but it is partially solved by large share of informal investments done, by close relatives and friends. While the experts noticed improvements in Government policy: taxes, bureaucracy component after "velvet revolution" (which was considered to be the main obstacle for development of entrepreneurship in Armenia for decades), there is a need for targeted government programs to support entrepreneurship as well as development and introduction of measures to provide entrepreneurial education to the population.
Value system towards entrepreneurship in Armenia is more favorable compared to the world's average perception. Armenia is 4th out of 50 GEM countries and the leader among Eastern European region with the share of population who agreed to the statements on "starting a business is a desirable 16 career choice" (87.2% of adults), which is a good point for the country to develop entrepreneurship. Unlike value system indicators, Armenia is in average positions with indicators on social perception toward entrepreneurship. Anyway, there is an evidence of improving Social perception in Armenia when comparing 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%. Self-perception indicators towards entrepreneurship are contradictory. While Armenians assess their knowledge, skills and experience quite high (12th out of 50 GEM countries), they are in top-10 with fear to fail. Fear from fail to start a business is very important factor as these people would not start a business. Among Eastern European countries Croatians have very similar indicators with Armenians. More Armenians would not start a business because of fear to fail (51%), compared to Russia and Belarus (45% and 37%), even if they much more of them reported on having knowledge, skills and experience (70%) that Russians (36%) and Belarusians (42%). High level of fear to fail to start a business in Armenia, perhaps, can be explained by nature of business culture in Armenia.
If a business is not successful it is accepted as personal failure. This may be also a reason why capital market is not developed in Armenia and why we don't have large companies with many shareholders. The lack of clear legislation for easy business exit, bankruptcy procedures, sale of businesses are also supporting fear to start a business.
Armenian early-stage entrepreneurs are more export orientated, than Established Businesses. The share of businesses expecting more over 25% of revenues from abroad is correspondingly 20.3% vs 17.1%). This difference perhaps shows that new business owners expect to use market opportunities in EAEU. Armenia is in the middle level between 50 GEM countries with the share of product innovation in TEAs (27th out of 50 countries), while is below average with the share of process/technology innovation in TEAs (36th out of 50 countries). Lower technology/process innovation is explained by low opportunities for investments.
