America takes Entrepreneurship Index top spot, former Soviet bloc countries close behind

Retail software maker Shopify recently released its “Entrepreneurship Index,” a global ecosystem of entrepreneurial activity. Shopify ranks the top ten countries with economies that are most conducive to entrepreneurial success. The index gathers data on every country’s GDP, global exports, “jobs supported,” and “business activity.” It tracks financial developments among the millions of Shopify-aligned entrepreneurs in those countries. For the methodology, Shopify examines entrepreneurial performance on a per capita basis and as a whole.

An entrepreneur here is defined as someone who establishes a business, either as a sole-proprietor or joint partner, with the aim of pursuing profit. Entrepreneurs are often characterized as being bold innovators, since many introduce novel products into the market. These new products are typically cheaper and more efficient than existing alternatives, fostering positive disruptions to the equilibrium of supply and demand.

Two factors are weighted in ranking these economies for entrepreneurial success—the absolute value and the growth rate. These are, in turn, used to measure the actual economic impact of entrepreneurs. For data, the authors contracted with the consultancy Deloitte to track and analyze the impact of businesses aligned with Shopify.

The United States heads the top of Shopify’s 2022 index, as reflective of its status as the largest global economy. Currently the U.S. leads the way in producing $25.3 trillion annual in gross domestic product, followed by China at $19.9 trillion, and Japan at $4.9 trillion. By comparison, the remaining countries within the top 20 global economies only possessed GDP values ranging between $500 billion to $5 trillion. With access to the most businesses and largest range of wealth producing industries, American entrepreneurs possess the greatest propensity for success.

Silicon Valley has enabled much of the success behind America’s innovative new technologies, in addition to funding markedly successful startups. This ecosystem has also fueled America’s competition with other countries favorable to startups, including Japan, Germany, and the United Kingdom. Additionally, the U.S. Commerce Department leads the “Presidential Ambassadors for Global Entrepreneurship” program, having incorporated U.S. involvement across a number of entrepreneurial initiatives worldwide.

According to Shopify’s index, there have been 1.1 million U.S. jobs supported by entrepreneurs, generating $128.7 billion in annual GDP, an 11.4 percent increase over 2021. Additionally, the business activity spurred by entrepreneurs rose to $270.8 billion, also an 11.4 percent increase from the previous year. This activity represents the gross output that merchants sell using Shopify as supported by financial transactions in the host country’s economy. Jobs supported are those that are maintained by merchants with their suppliers, as aligned with Shopify’s platform when purchasing and producing goods/services.

Just behind the U.S. on the index is Lithuania, seen as a place of rapid financial development, freedom, and high-income households relative to surrounding countries. Formerly part of the Soviet bloc, Lithuania is now making strides toward transitioning from a centrally planned economy to a free market. It possesses the largest economy among the Baltic states and is ranked high on the Human Development Index, which measures a country relative to the average life expectancy, education, and health of its citizens.

With a much smaller population and GDP (ranked 78^th) in comparison to the United States, Lithuania has done well to provide entrepreneurs with a favorable climate to grow their businesses, having provided 4,400 new jobs and $300 million in business activity via entrepreneurial opportunities. Lithuanian entrepreneurs have also generated $87.8 million in global exports (up 10 percent from the prior year), while impacting $200 million in national GDP.

The third highest ranked country on Shopify’s index is Romania, also a former communist state in Eastern Europe. Romania is distinct from its neighbor in that it is a mixed economy. While it is more regulated, Romania does allow some measure of privatization in the marketplace. It is a financially developed country with a high-income base for its citizens and a relatively high GDP (53^rd highest in the world).

For the index, Romania matched Lithuania for the impact that entrepreneurs impose on the country’s GDP with $300 million, up 21 percent from the previous year. While Romania surpassed Lithuania’s yearly business activity by generating $500 million, it fell woefully short of matching Lithuania’s global exports, with only $51 million, and just 13,100 supported. Despite this, Romanian exports facilitated by entrepreneurial transactions are on a rapid rise, having increased 107.2 percent from the previous year. This indicates a positive direction that the country seems to be moving toward in opening its markets to free trade and private sector engagement.

Followed by Romania, the index lists a host of other developed countries that are financially well off: the United Kingdom, Czech Republic, Australia, Denmark, China, Hong Kong, and Japan. Regionally, Eastern European and Asian countries seem to possess the greatest representation on Shopify’s index.

China’s place as number eight on the list may seem surprising at first glance, given its immense economy and dominant pace of GDP development. However, China’s government imposes the most restrictive measures on their economy, ensuring that the markets are heavily regulated by the ruling class of the Communist Party. This leaves little wiggle room for purely independent entrepreneurs to have ownership for what is being produced or to benefit from the opportunities generated by the constrained market. This helps to explain why only $1.4 billion in Chinese exports via Shopify were powered by entrepreneurs, when as a whole, it exported $3.59 trillion worth of goods.

Shopify caters to countries with free economies that are most conducive to small business development. China just doesn’t fit the bill, with less than a quarter of the jobs supported by entrepreneurial work (206,000), compared to the U.S. (over 1 million), despite having more than 1.2 billion more people. China is down across every category of Shopify’s index from the previous year. China’s economy is still reeling from the COVID fallout there. Its relative lack of entrepreneurship isn’t helping matters.