Australia’s support for entrepreneurs does not stack up

“Entrepreneurship is an essential driver of societal health and wealth,” the GEM Consortium says.

“It is also a formidable engine of economic growth. It promotes the essential innovation required not only to exploit new opportunities, promote productivity and create employment, but to also address some of society’s greatest challenges, such as the United Nations Sustainable Development Goals (SDGs) or shocks from different global events.”

By looking beyond basic, official statistics, such as numbers of registered businesses, the GEM Monitor is able to see deeper into the health and support mechanisms within entrepreneurial business spaces in specific territories.

Entrepreneurship decreasing in Australia

The Global Entrepreneurship Monitor 2019: Australia Report, produced by the Australian Centre for Entrepreneurship Research at QUT, said Australia at the time had a “strong base of entrepreneurial activity”.

Slightly more than one in 10 Australians were engaged in entrepreneurial activity of some sort, but that overall figure was decreasing.

A part of the reason for the decrease was the fact that the perceived value of being an entrepreneur, in terms of career choice, was not overwhelmingly positive and was very gradually declining.

At the time of the study, just over 55% of Australians felt entrepreneurship was a good choice and 60% said entrepreneurs earned a high level of status and respect.

“Australians' view of entrepreneurship as a stable career choice has been steady over the past five years,” the report said.

“However, there has been a recent slight decrease in Australians feeling that entrepreneurship attracts media attention and a more marked decrease in views that entrepreneurship attracts a high level of status and respect.”

In fact, between 2016 and 2019, all major measures of entrepreneurial activity in Australia fell, including: 

• “Total early-stage entrepreneurial activity” fell from 14.5% to 10.5%
• “Nascent activity” fell from 9% to 5.8%
• “New business ownership” fell from 5.8% to 4.7%

The only relatively stable measure was of entrepreneurship within larger organisations, also known as intrapreneurship, which only dropped from 8.8% to 8.3%.

In 2019: 

Eighty per cent of 2019’s entrepreneurs in Australia expected to create jobs in the following five years. Half expected to create between one and five jobs, while 20% expected to create 20 or more.

The Australian business framework hinders entrepreneurship

Perhaps of greatest concern in the research was the relatively poor assessment of the Australian entrepreneurial framework conditions. Twelve conditions were assessed and assigned a score between 0, very inadequate, and 10, very adequate, with a score of five considered sufficient.

• Entrepreneurial finance: Is new business financing sufficient and accessible? 
• Governmental support and policies: Does public policy support entrepreneurship as a relevant economic issue?
• Taxes and bureaucracy: Are taxes or regulations size-neutral, or encouraging of startups and SMEs?
• Governmental programs: Are quality government support programs available?
• School entrepreneurial education and training: Do schools introduce entrepreneurship ideas?
• Post-school entrepreneurial education and training: Does higher education offer courses in starting a business?
• R&D transfer: Can research be translated into new businesses?
• Commercial and professional infrastructure: Are professional services and institutions sufficient and affordable?
• Internal market dynamics: Are markets free, open and growing?
• Internal market openness: Do regulations encourage or restrict entry?
• Physical and services infrastructure: Sufficient and affordable physical resources.
• Cultural and social norms: Is entrepreneurship encouraged and celebrated?

Australia scored five or above ‘sufficient’ on just four of the 12 conditions – the highest score was 6.27, for physical infrastructure.

The results pointed to:

• A continuing economic growth focus on old drivers rather than new businesses
• Barriers to skilled migration
• A lack of access to corporate governance
• A lack of a national policy approach

The general support framework for new businesses, the report said, ranked 33rd out of 54 countries and Australia’s tax and bureaucracy framework rated 23rd. 

The government programs framework ranked 21st and entrepreneurial education post-school lowly 32nd.

Importantly, the R&D transfer framework, which includes science and technology support, technology transfer from universities to start-ups and government subsidies for new business technology access, ranked 28th.

Worst of all was the internal market dynamics, including effective anti-trust legislation and ease of market entry, which ranked 47th out of 54 countries. 

What would help Australian entrepreneurs?

Outcomes from the report, in terms of identified opportunities for policy makers to improve the perception and outcomes of entrepreneurship, included:

• Better framework conditions: These included “physical infrastructure, entrepreneurial finance, government policies and programs, education and training, R&D transfer, professional infrastructure, market openness and cultural and social norms”.
• Improved regional support: Regional support could be boosted by the promotion of local entrepreneurs, a focus on local strengths and challenges, localised support networks and regional education and training.
• Utilise intrapreneurs to encourage entrepreneurs: As Australia ranks number one in intrapreneurship globally, this should be integrated within education, training, finance and policy making to leverage performance within organisations to boost performance in the start-up space.

Businesses in Australia are usually small

The Australian Small Business and Family Enterprise Ombudsman says small businesses employ over five million people, or 42% of the private sector workforce, including 63% of apprentices and trainees.

So numerous are small businesses that they make up 97% of all Australian businesses, contributing $483 billion – or about one-third – to the economy.

Any boost to the entrepreneurship space then, would also provide a boost to the economy in general.

QUT’s Australian Centre of Entrepreneurship Research, at the time of the global study, said five aspects of entrepreneurship were cause for concern:

• Female participation was considerably lower than male
• Fear of failure was relatively high
• High levels of entrepreneurship – typically among older age groups – didn’t translate to youth entrepreneurship
• Australian entrepreneurs didn’t pursue as many international opportunities as those from other territories

None of these issues were deemed impossible to overcome.