2 National Policy Statement on Entrepreneurship in Ireland 2014 National Policy Statement on Entrepreneurship in Ireland 1

3 Contents Foreword by An Taoiseach, Enda Kenny TD 4 Foreword by the Minister for Jobs, Enterprise and Innovation, Richard Bruton TD 5 Introduction Vision for Ireland 6 Entrepreneurship Environment Key Elements 8 Strategic Objectives 12 Entrepreneurship in Ireland 14 Measuring Irish Entrepreneurship International Benchmarks 15 Entrepreneurship Index 16 GEDI 2014 16 Basic characteristics Ireland 17 National System of Entrepreneurship 18 Key Actions: Benchmarking/Measuring Entrepreneurship in Ireland 19 1. Culture, Human Capital & Education 20 1.1 Culture 20 1.2 Human Capital 20 1.3 Education 22 Key Actions: Culture, Human Capital & Education 23 2. Business Environment & Supports 24 2.1 Taxation 26 2.1.1 Startup Company Relief 26 2.1.2 Start Your Own Business 26 2.1.3 Share Based Remuneration in Private Companies 27 2.1.4 Seed Capital Scheme & Employment and Investment Incentive 27 2.1.5 Capital Gains Tax 27 2.2 Business Registration 27 2.3 Reducing Administrative Burdens 28 2.4 Supports 28 2.5 Local Enterprise Offices (LEOs) 30 2.6 North/South 30 Key Actions: Business Environment & Supports 32 3. Innovation 34 3.1 Innovation Supports 34 3.2 High Potential Startups 35 3.3 Innovation in Services & Business Processes 35 3.4 Science, Technology & Innovation 36 3.5 Horizon 2020 36 3.6 Intellectual Property Contractual Issues 36 3.7 Increasing Inward Entrepreneurship 37 Key Actions: Innovation 38 2 National Policy Statement on Entrepreneurship in Ireland

4 4. Access to Finance 40 4.1 Access to bank lending 40 4.2 Alternative and innovative sources of financing 41 4.3 Microfinance Ireland & Credit Guarantee Scheme 41 4.4 Venture Capital 41 4.5 Access to Finance Priorities under the APJ 42 4.6 EU Initiatives 42 Key Actions: Access to Finance 43 5. Entrepreneurial Networks & Mentoring 44 5.1 Networks 44 5.2 Evaluation of Mentoring in Ireland 45 5.3 Approach to Partnership 46 Key Actions: Entrepreneurial Networks & Mentoring 49 6. Access to Markets 50 6.1 First-time Exporters 50 6.2 Clustering Programme 51 6.3 Public Procurement 51 6.4 Private Sector support 52 6.5 Global Sourcing Project 52 6.6 Online Trading 53 6.7 North/South 53 Key Actions: Access to Markets 54 Implementation & Monitoring Progress 55 Tracking Action Delivery 55 Benchmarking/Measuring Entrepreneurship 55 Culture, Human Capital & Education 56 Business Environment & Supports 57 Innovation 58 Access to Finance 59 Entrepreneurial Networks & Mentoring 60 Access to Markets 60 APPENDICES 61 Appendix 1 - Enterprise Ireland Entrepreneurship Supports 62 Appendix 2 - Local Enterprise Offices Entrepreneurship Supports 65 Appendix 3 - Global Entrepreneurship Development Index Structure 67 National Policy Statement on Entrepreneurship in Ireland 3

5 Foreword by An Taoiseach, Enda Kenny TD As we move into a period of economic growth following one of the darkest periods in the history of the State, entrepreneurship has never been more important to the country, its people and its future. Home-grown business ideas that display innovation and creativity will enable us to grow jobs, challenge for market share and demonstrate our capability to adapt in an ever more challenging global economic climate. We have to depend on our entrepreneurs to provide innovative products, processes and knowledge based solutions that will enable us to preserve our hard earned progress, build our international reputation, improve our living standards and our employment creation. This Government will continue to concentrate efforts on employment retention and creation, and a reinvigoration of entrepreneurial spirit will play a strong role in driving this agenda. Entrepreneurial initiatives, mind-sets and skills have been fostered in all areas of the economy, and played no small part in building our economic recovery. This policy statement clearly identifies the actions we need to take to consolidate our achievements over the last three years. It is not, however, a look backwards. It is a forward looking document with a clear list of actions that can and will be delivered to ensure we are seen as among the most entrepreneurial nations in the world and acknowledged as a world class environment in which to start and grow a business. The Statement is the fruit of an amount of collaborative work undertaken by academia, practitioners, agencies, individual citizens and government Ministers and Departments and I would like to publicly thank all concerned for their input in this work. The challenge is now to deliver and I am sure that under the direction of my colleague Richard Bruton TD Minister for Jobs, Enterprise and Innovation this segment of economic activity will continue to make a significant contribution to our wellbeing in the future. Enda Kenny TD Taoiseach September 2014 4 National Policy Statement on Entrepreneurship in Ireland

6 Foreword by the Minister for Jobs, Enterprise and Innovation, Richard Bruton TD To build on the recovery we have started to see recently, Ireland needs more entrepreneurs starting high quality new businesses that will develop innovative products, conquer new markets and create more jobs. In the Action Plan for Jobs 2014, we placed a strong emphasis on entrepreneurship. We set out our ambition for Ireland to be among the most entrepreneurial nations in the world and acknowledged as a world class environment in which to start and grow a business. Growing the number of successful entrepreneurs and startups is, and will continue to be, hugely important for Ireland s economic development and wellbeing. This Policy Statement is key to delivering on that ambition. Building on the work done by Sean O Sullivan and the Entrepreneurship Forum, this Policy Statement presents the six overarching elements I believe are essential drivers of entrepreneurial success. Crucially, it also sets out the approach that we are taking across Government to improve them. There has been wide stakeholder engagement over the last two years to support the development of this Policy Statement through public consultation, the work of the Entrepreneurship Forum and direct contact with academics and entrepreneurs. The Statement details some of the immediate key actions which we will take to support our ambition and confirms our commitment to continue to identify new approaches which will enhance and strengthen the entrepreneurial ecosystem and ultimately create jobs. Essentially, the objectives are centred around three distinct aims: 1. Building the pipeline - Increase the numbers of entrepreneurs, who will actively engage in creating high quality business startups and jobs across the country; 2. Building entrepreneurial capability - Develop entrepreneurial skills among the general population and nurture entrepreneurial thinking and talent, and; 3. Building the right conditions - Ensure survival and growth of entrepreneurial startups. The actions set out in the Policy Statement will be delivered and overseen through the Action Plan for Jobs process and the Department of Jobs, Enterprise and Innovation (DJEI) will monitor progress against key performance indicators to ensure delivery. Our challenge now is to ensure that entrepreneurs of all backgrounds and all ages are encouraged and supported in their efforts to establish high quality businesses that are sustainable and can compete with the best in the world both on home and export markets. That is the only basis on which they can grow and create much needed employment. Previously I have said that Ireland is a country with great entrepreneurs but that we just don t have enough of them. This Policy Statement will help ensure that as well as having great entrepreneurs Ireland becomes a country with a great number of entrepreneurs. Richard Bruton Minister for Jobs, Enterprise and Innovation September 2014 National Policy Statement on Entrepreneurship in Ireland 5

7 Introduction - Vision for Ireland Entrepreneurship 1 is a key element in the health and wellbeing of any thriving economy and will be central to Ireland s continuing recovery. Historically, two thirds of new jobs in Ireland have been created by companies in their first five years 2. This is because new businesses drive change and are the source of creative ideas and new technologies. They are the quickest to adapt to new opportunities and to the shifts that disrupt markets and business models. The purpose of this policy statement is to clearly identify the framework needed to make Ireland one of the most entrepreneurial nations in the world, acknowledged as a world-class environment in which to start and grow a business. Embracing and implementing the approach set out in this statement will result in Ireland having excellent support networks at local and national level and strong policy frameworks within which businesses can be born and flourish. Ireland, in turn, will gain a global reputation as a location for smart capital and as an entrepreneurial hub. It will become recognised as a place where good ideas can be transformed into excellent businesses and new jobs will be created as international investors and mobile entrepreneurs seek Ireland out as a location of choice. Ireland can double the jobs impact of startups on our economy if we: 1. Increase the number of startups by 25% (3,000 more startups per annum) 2. Increase the survival rate in the first five years by 25% (1,800 more survivors per annum) 3. Improve the capacity of startups to grow to scale by 25%. This is a challenging but realistic ambition for the next five years. The Entrepreneurship Forum, established by the Minister for Jobs, Enterprise and Innovation in May 2013 to examine the ecosystem from the perspective of entrepreneurs and to make recommendations to support entrepreneurship, has described what a strong startup community in Ireland could look like. It emphasises that the creation of a strong start up ecosystem requires entrepreneurial leadership at a grassroots level, with continuous activities and events designed to engage entrepreneurs. The Entrepreneurship Forum has highlighted some excellent examples of this. Activate Dublin, Startup Ireland, Startupweekend, Bizworld, Startups.ie, IT@Cork and Smallbusinessadvice.ie all involve citizens and entrepreneurs working together to create an environment in which startups can truly thrive. 1 Defined as an individual s creative capacity to identify an opportunity and pursue it in order to produce new value or economic success. 2 Research published by the Central Bank of Ireland in 2013 concludes that 67% of new job creation comes from companies within their first five years. Research from the Kaufmann Institute in the United States also indicates that new and young businesses are the primary drivers of net job creation. 6 National Policy Statement on Entrepreneurship in Ireland

8 The Entrepreneurship Forum has also urged that existing entrepreneurs and industry leaders should help drive the entrepreneurship agenda through mentoring, networking, electronic interaction and dissemination of information. It has argued that Ireland must leverage its existing talent base and entrepreneurial networks if it really wants to promote and stimulate a strong culture of high quality entrepreneurship. Private sector engagement must be the driver and catalyst for entrepreneurial excellence, building on existing frameworks and initiatives. In its report, however, the Entrepreneurship Forum is emphatic that the Government s role in this should be one of facilitation, not leadership. Government should primarily focus on removing obstacles, implementing required solutions and maintaining a business environment that is fit for purpose. The Entrepreneurship Forum has noted that the Government has a key role to play in facilitating a supportive policy framework conducive to entrepreneurial success. A wide range of public support programmes are already available to entrepreneurs and startups in Ireland 3. What is needed now, the Entrepreneurship Forum has suggested, is an overall vision of how the State can best support the startup community. This Policy statement sets out the Government s strategic objectives in its role as a facilitator within the Irish entrepreneurship ecosystem, covering all the key areas that affect entrepreneurs and startups. It also signposts the focus of public policy in the coming years. A clear programme of specific actions for each year, delivered through the Government s Action Plan for Jobs, will ensure delivery of these strategic objectives. The Department of Jobs, Enterprise and Innovation (DJEI) will carefully monitor progress against key performance indicators and work with its partners in enterprise to achieve this ambition. 3 Entrepreneurship in Ireland - Strengthening the Startup Community, 2014, http://www.djei.ie/enterprise/smes/ EntrepreneurshipForumReport2014.pdf National Policy Statement on Entrepreneurship in Ireland 7

9 Entrepreneurship Environment Key Elements Entrepreneurship requires a range of skills and attitudes, aspirations, activities, supports and networks. To achieve the ambition set out in this Entrepreneurship Policy Statement, we must benchmark ourselves against the best in each area and promote improvement across the system. This Entrepreneurship Statement sets out how this can be done. It will require working across Government Departments. But more than this, it will involve challenging and encouraging others to engage and become actively involved. As the Entrepreneurship Forum highlighted, Government alone cannot develop the many varied intertwining elements that are necessary for success. Many different parts of our society will have a role to play in this initiative. The key elements that make up an ecosystem for entrepreneurship in Ireland are 4 : 1. Culture, human capital and education 2. Business environment and supports 3. Innovation 4. Access to finance 5. Entrepreneurial networks and mentoring 6. Access to markets 4 Following consideration of the various models from the OECD, World Economic Forum, Babson College, Massachusetts and the Report of the Entrepreneurship Forum. 8 National Policy Statement on Entrepreneurship in Ireland

10 6 1 Culture, human capital and education 2 Access to markets 5 Ecosystem for Entrepreneurship Business environment and supports 3 Entrepreneurial networks and mentoring 4 Access to finance Innovation National Policy Statement on Entrepreneurship in Ireland 9

11 For the entrepreneurship environment to be truly effective, these elements must be mutually reinforcing, forming a coherent whole and supporting entrepreneurs throughout the entrepreneurship lifecycle. Looking at the broader picture, the first influence on the lifecycle of an entrepreneur is the attitude of society towards enterprise and the cultural values and emphasis on entrepreneurship in the education system. Society s culture and attitude directly influences the individual s capacity for creative thinking and attitude to risk. The business environment has a similar role, affecting both the obstacles the entrepreneur may encounter and the rewards they hope to achieve. Taxation, business regulation and the difficulties encountered in starting a business and in exiting, should it fail to achieve its anticipated progression, also influence the decisions of both established and potential entrepreneurs. The quality of supports available from public institutions is also a critical factor in whether potential entrepreneurs will proceed and is an influence on the potential outcomes if they do. Public bodies can provide financial support in the difficult startup phase and offer advice and expertise to avoid pitfalls. For many high potential entrepreneurs the accessibility of the innovation system to help drive forward fledgling ideas is crucial. Often the need for access to finance goes well beyond the capacities of those involved in a startup. For some entrepreneurs this may be because unemployment or debt has drained their resources or negatively affected their credit ratings. For others, potential funding institutions may be risk averse. That is why the provision of a broad spectrum of finance options, matching the different stages of an enterprise s development, is essential. However, the role and influence of the State should not be over emphasised. The support networks formed between entrepreneurs and between entrepreneurs and investors can be equally important, arguably even more important, sources of essential support for startups. Business networks, angels, mentors, entrepreneurship hubs and hotspots all provide sources of practical experience and advice, contacts and interaction, helping entrepreneurs to avoid or overcome difficulties and to realise their potential. Finally, young companies need access to markets, to clients and customers, to suppliers and distribution channels. Identifying potential customers in both the public and private sectors at an early stage is crucial to strengthening and building out the sales footprint. First time exporters also need support to develop the skills and resources they need to compete in global markets and to achieve ambitious revenue targets along the way. 10 National Policy Statement on Entrepreneurship in Ireland

12 Strategic Objectives This Entrepreneurship Policy Statement sets out a number of strategic objectives that are based on a careful evaluation of Ireland s existing position and an assessment of international best practice. They address each of the elements that make up the framework for entrepreneurs and are specifically designed to help them grow and flourish. 6 Access to markets 5 Entrepreneurial networks and mentoring 1 Culture, human capital and education Ecosystem for Entrepreneurship 4 Access to finance 2 Business environment and supports 3 Innovation Key performance indicators and actions have been identified for each of the strategic objectives and these will be reviewed and further developed as part of a process of continuous improvement, working with all the potential participants and influencers in the public and private sectors and the broader society. Crucially, this Entrepreneurship Policy Statement is designed to translate our ambition in the area of entrepreneurship into a clear direction for policy in future years. National Policy Statement on Entrepreneurship in Ireland 11

13 Strategic Objectives 1 Culture, Human Capital and Education Make entrepreneurship an integral part of our ambition as a nation. Support its development in our education system, in our communities and in corporate behaviour. Celebrate and reward successful entrepreneurs. Ensure that greater numbers of people, particularly in underrepresented cohorts such as females, youths, migrants and older persons start and run their own business. Improve the quality and range of ICT professionals domestically to make Ireland a hub for technology startups. 2 Business Environment and Supports Create a business environment in Ireland where it is easy to start up and grow a new business in terms of Company Law; Tax; Regulation; Licensing and where it is one of the most attractive environments in Europe. Promote best in class standards across the network of Enterprise Ireland and Local Enterprise Offices which fully exploit the enterprise assets of their community and foster new thinking in the enterprise area. Stimulate and support high levels of quality entrepreneurial ventures with high growth, export, wealth and job creation potential. 3 Innovation Make Ireland a location of choice for high quality international startups. Develop the best infrastructure to support technology transfer into commercialisation as a new business opportunity (Knowledge Transfer Ireland; Campus Incubators; Commercialisation Fund; Technology Centres). Develop a support framework where innovative startups can reach their full potential. 12 National Policy Statement on Entrepreneurship in Ireland

14 4 Access to Finance Expand the range of access to finance instruments to match our ambition as a startup hub so that all viable businesses have the opportunity to access sufficient finance to meet their needs. Attract more angel and international venture capital investors and continue to develop the domestic venture capital sector. Ensure that the banks develop the skills and focus necessary to deliver appropriate financial instruments to startups and early stage entrepreneurs. 5 Entrepreneurial Networks and Mentoring Improve the impact of mentoring as a tool to support entrepreneurship. Increase the levels of peer networks for mentoring, angel finance and problem solving that sustain entrepreneurship. Build world class entrepreneurial hubs and achieve greater regional spread of such hubs, facilitating entrepreneurial leadership. 6 Access to Markets Encourage local and national private enterprises to commit to offer opportunities for fledgling businesses to find a market. Encourage public local and national authorities to commit to offer opportunities for fledgling businesses to find a market. Ensure startups have clearly identified customer/market segments and clearly developed value propositions and where appropriate are export oriented in their thinking early in their development. National Policy Statement on Entrepreneurship in Ireland 13

15 Entrepreneurship in Ireland CSO data indicates that in 2011 there were almost 190,000 trading enterprises in Ireland. In the same year there were fewer than 12,000 startups. Dominated by microenterprises, over 90% of all startups were in the services, distribution and construction sectors. In 2011 startups represented a little over 5% of the existing population in construction and distribution but in services and financial services the startup rate was just over 7%. 4 Startups 2011 Number % of Existing Enterprises in Sector Industry 725 5.2 Construction 1,976 5.3 Distribution 2,335 5.4 Services 6,429 7.1 Finance & Tourism 372 6.8 Total 11,847 6.2 Source: CSO Business Demography 2011 Enterprise startup activity was severely dampened by the recession. According to the CSO, enterprise births fell by a third between 2006 and 2010, from 16,700 in 2006 new enterprises to 11,200 in 2010. The attrition rate over this five year period was high. Of those started in 2006, only 51% survived five years. Enterprises starting business after 2006 have experienced even poorer survival rates at each yearly milestone. Of the 13,461 enterprises birthed in 2007, just 6,513 or 48.4% survived to 2012 5. Not surprisingly, construction has experienced the greatest fall off in startups and the greatest attrition rates. Despite the economic difficulties, enterprises that had started in the five years up to 2011 employed 93,000 people by 2011. This was a substantial employment gain over a period in which longer established enterprises had shed 400,000 jobs. Even in that very difficult time for enterprise, therefore, startups were a dynamic source of opportunity and drivers of economic revival. The Global Entrepreneurship Monitor (GEM), which provides useful international comparative information on entrepreneurship, reflects the difficulties for entrepreneurship which Ireland has experienced in recent years. The GEM measure of total early-stage entrepreneurial activity 6 (TEA) peaked at 9.8% in 2005 but had fallen back to 6.1% by 2012. Over this period Ireland fell from midway in the European TEA League table to close to bottom. There was, however, a significant recovery in 2013, when the TEA rate in Ireland rose to 9.2% the highest level since 2005. Ireland was ranked second across the EU-15 and ninth across the EU-28 for TEA by GEM in its 2013 report. This means that almost one in 11 of the adult population in Ireland had started or is in the process of starting a new business within the preceding 42 months. The 2013 GEM report also revealed a significant improvement in attitudes towards entrepreneurship. It showed that 50% of Irish adults considered entrepreneurship to be a good career choice, compared to 45% in 2012. 5 CSO, Business Demography 2012, 18 June 2014. 6 Total early stage entrepreneurial activity refers to the total rate of early stage entrepreneurial activity among the adult population aged 18-64 years inclusive. It includes individuals in the process of starting a business and those running new businesses less than 3 1 2 years old. 14 National Policy Statement on Entrepreneurship in Ireland

16 As might have been expected, diminishing perceptions of opportunity, increasing fear of failure and the dwindling number of successful role models were all characteristics of the recession years, combining to undermine entrepreneurship activity. Early indications of recovery are characterised by very high necessity driven entrepreneurship people seek to start a business because they have reduced employment options. However, there is also a very encouraging upturn in the number of people indicating they want to start a business within the next three years (up over 80%). A higher percentage of migrants (5.4%) have recently started a business compared to the non-immigrant population (3.4%). More immigrant early stage entrepreneurs are motivated by necessity (32%), than is the case for non-immigrant entrepreneurs (17%). Furthermore, a higher proportion of Irish early stage entrepreneurs expect to become employers (85%) than their counterparts in Europe as a whole (72%) and those in all OECD countries (71%). Aspiring to growth is not the same as achieving it, but it is a good place to start. One in five of these entrepreneurs expect to grow their new business beyond a micro enterprise and to employ at least 10 people. According to GEM 2013, Irish men are 1.9 times more likely than Irish women to be an early stage entrepreneur, with rates of early stage entrepreneurs at 12.1% for men and 6.4% for women. This has been steadily improving and although now level with the EU- 28 average of 1.9:1 and slightly higher than the OECD average of 1.7:1, it still shows untapped potential amongst female entrepreneurs in Ireland. Rates of entrepreneurial activity are also influenced by age. Entrepreneurial activity is highest amongst those aged 35 44 years (12.6%); 25 34 (10%) and 45 54 (9%). It is lowest amongst those aged 18 24 (7.6%) and 55 64 (4.6%). This data suggests there is perhaps untapped potential amongst females, youth, seniors and migrants and that they should be encouraged to consider an entrepreneurial career. Entrepreneurial activity amongst those aged 18 24 in the U.S. is at 12.3%, and is 9.2% in Israel. Measuring Irish Entrepreneurship International Benchmarks Measuring a country s entrepreneurial profile is not a straightforward exercise. Even at the individual level, there is no clear consensus on whether the definition of entrepreneurship should include selfemployment and intrapreneurship (the creation of new corporate subsidiaries). The picture is even more complex at a national level due to the inherent complexity of economic systems. Despite these difficulties, it is only by measuring entrepreneurship activity, no matter how imperfectly, that we can begin to see where entrepreneurship is working and where it is not, and begin to understand the reasons for these differences. That understanding can then be applied to reducing the cultural, economic and institutional barriers that stand in the way of entrepreneurs. Benchmarks are required to measure the impact of entrepreneurship and compare performance across a number of variables and between comparator countries. To date there has been no acceptance of a dominant variable or index to measure entrepreneurship internationally. However, Ireland is performing well against a number of international benchmarks on various business environment indicators. The IMD World Competitiveness Yearbook 2013 ranked Ireland third for availability of skilled labour and first for flexibility and adaptability of workforce, attitudes to globalisation and investment incentives. Ireland took first place in the 2013 Forbes annual ranking of the Best Countries for Business. It was the only nation ranked among the top 15% of countries in each of the 11 metrics used by Forbes. The European Commission Innovation Union Scoreboard 2013 ranked Ireland first in Europe for the economic impact of innovation. Ireland ranked 19th overall and 13th in the regional ranking in the 2014 Global Entrepreneurship Development Index (GEDI), another positive indicator of Ireland s performance on the international stage. IRELAND GEDI Benchmark or Indicator Reference Point Size of population (million) 4,588,252 Per capita GDP Euro (PPP, World Bank) 40,375 Rank in Doing Business Index 2013 15 Rank in Global Competitiveness Index 2014 28 Rank in Economic Freedom Index 2014 9 GEDI 2014 19 National Policy Statement on Entrepreneurship in Ireland 15

17 However, while Ireland is clearly performing well, more detailed analysis provides insight into the strengths and weaknesses of the national entrepreneurship ecosystem and a better understanding of how it is performing relative to its most direct competitor countries in Europe and North America, using the Nordic states, the United States and Canada as exemplars. Entrepreneurship Index Existing entrepreneurship indices are limited in their value because they either focus primarily on quantity or on quality. In the development of this Entrepreneurship Policy Statement considerable attention has been given to investigating the contextual nature of entrepreneurship in order to incorporate an element of quality. The Global Entrepreneurship & Development Index (GEDI) is useful because it was created to provide a more complete understanding of economic development by capturing the contextual nature of business formation, expansion, and growth. It is based on analysis of comprehensive data sets from more than 120 countries that marshal information about the 3As of development: entrepreneurial attitudes, aspirations, and activity. 1. Entrepreneurial attitudes (ATT) are believed to be influenced by the crucial institutional factors of market size, education, the riskiness of a country in general, the usage rate of the internet in population, and culture. 2. The entrepreneurial activity (ACT) sub-index is principally concerned with measuring high growth potential startup activity. This high growth potential is approached by quality measures, including opportunity startup motives, belonging to a technology intensive sector, the level of education as well as the uniqueness of the offered product/service. The institutional variables used include the ease of doing business, the availability of the latest technology, the level of human development, and the freedom of business operation. 3. The entrepreneurial aspiration (ASP) sub-index refers to the distinctive, qualitative, strategy related nature of entrepreneurial activity. The newness of the product and of technology, internationalization, high growth ambitions and finance variables are included in this subindex. The institutional variables measure the R&D potential, the sophistication of business and of innovation, the level of globalization, and the availability of venture capital. GEDI addresses many of the deficiencies of previous measures by combining some of the basic requirements. The index is sufficiently complex to capture the multidimensional nature of entrepreneurship and distinguishes between the qualitative and quantitative aspects of entrepreneurial activity by incorporating both individual-level and institutional variables. Altogether, the index construction integrates 31 variables, 16 from GEM and 15 from other data sources, into 14 pillars and three sub-indexes. This index analyses such information as the amount of money available to finance new businesses, the level of risk-averseness in individuals and the proportion of new businesses started by women. The indicators are the basic building blocks of the sub-index, Entrepreneurial Attitudes, Entrepreneurial Activity and Entrepreneurial Aspirations. The Global Entrepreneurship Development Index, is the average of the three sub-indexes. (The 31 variables are listed in Appendix 3 of this Statement.) The GEDI model suggests that attitudes, activity and aspiration interact; if they are out of balance, entrepreneurship is inhibited. The Index uses a Penalty for Bottleneck (PFB) methodology, thus improving the score of the weakest indicator will have a greater effect on the index than improving the score of stronger indicators. GEDI 2014 The 2014 GEDI identifies America as the most enterprising large economy. The EU comes second, with the rest of the world, including India and China, lagging well behind. There are some unusual features of the index spots. Three of the five Nordic countries are in the top ten. This suggests that it is possible to combine enterprise with a big welfare state. 16 National Policy Statement on Entrepreneurship in Ireland