Ireland tops the European Union in a new study of entrepreneurial activity but still lags behind the US. Some 7.1 per cent of the population is categorised as an entrepreneur, behind the United States (11.9 per cent) and Iceland (11.2 per cent) but ahead of the rest of the EU.

The figures for the Republic are even stronger when compared to the North, with 250,000 or 80 per cent of the island's entrepreneurs operating south of the Border.

Northern Ireland languishes at mid-table with a 5.2 per cent rating. This places it behind Britain (6.4 per cent) but equal with Germany (5.2 per cent) and ahead of France (1.2 per cent), the Netherlands (3.6 per cent) and Sweden (4.1 per cent). The Republic stands at 8.1 per cent.

An entrepreneur is defined in the study as a person who takes action to create a new business and expects to share in the ownership of that business.

The study's authors, Global Entrepreneurship Monitor (GEM), identified a divide in support for new business in the Republic and the North. It found that "cultural and social norms are not supportive of entrepreneurial activity in Northern Ireland, while being strongly supportive in [the Republic\]".

However, it states that the proportion of the population involved in entrepreneurial activity is growing in the North while declining in the Republic.

Fear of failure remains a big stumbling block, being twice as prevalent in Ireland as the US, according to the report. Entrepreneurship in the US is 30 per cent ahead of Ireland while the activity of business angels - experienced entrepreneurs who come on board to advise fledgling companies - is just a fraction of that in the US.

The Tánaiste, Ms Harney, said the results showed it was vital the Republic continued to build on its economic progress.

She said: "The challenge of fostering a fully dynamic entrepreneurial environment will require us to build on our own success, to focus on those areas in which we must improve, to learn from each other's experience and from the success of initiatives which have been proven elsewhere."

Dr Eileen McGloin, of Intertrade Ireland and a co-author of the report, said: "It is clear that future prosperity will rest upon our ability to encourage and foster and entrepreneurial attitude in society."

The report argues for an all-Ireland entrepreneurship strategy, including networks of entrepreneurs and investors and a co-ordinated approach to R&D.