How can we foster a culture of entrepreneurship and innovation for all Australians?
What’s the problem?
Innovation and innovative entrepreneurship are seen as crucial to growing the Australian economy. New businesses create new jobs and innovative businesses even more so. At its simplest level, entrepreneurship is the act of starting any kind of new business. Australia has relatively high start-up activity but this activity has been declining. The employment generated per start-up is low compared with other OECD countries.
Part of the problem is that many would-be entrepreneurs lack of financial support and insufficient information on how to run a business or enterprise. Most small businesses start and forever remain small. Of the 2 million small businesses in Australia, around two thirds have no employees. And only 16 per cent of Australian businesses have what could be classed as a high performance innovation culture. Even fewer take new products and services to market.
The good news is that leadership for generating employment opportunities is coming from new places, with social entrepreneurs and others creating different ways to start up high-value initiatives and take them to scale. Some employees are becoming employers as their skill sets, autonomy and networks develop.
Seven things you need to know
The Global Innovation Index ranks Australia 17th in the world. Not bad, but we fall behind others in our region including Singapore, Korea and China.
In 2011, 10.5 per cent of the Australian adult population were estimated to be actively engaged in starting and running a business (a rate second only to the United States among developed countries).
Senior entrepreneurs (55-64 years) are Australia’s fastest-growing segment of entrepreneurs, now leading 34% of all new businesses. In the United States, nearly a quarter of new ventures in 2013 were started by those aged 55 to 64.
As firms age they contribute less to job creation and more to job destruction. Although employing a small fraction of the Australian workforce (15 per cent), young SMEs (firms aged 0–5 years) generated the largest share of total job creation (40 per cent) in the economy.
Although innovating firms accounted for only 36.6 per cent of businesses in 2012–13,10 they accounted for over 60 per cent of employment and sales in the whole economy.
In 2012–13, 24.1 per cent of Australian businesses aged under one year (with 0-199 employees) invested in new or significantly improved goods and/or services. This declined to 19 per cent for SMEs aged 10 years or more.
Australian businesses say a lack of access to additional funds is their biggest barrier to innovation. Yet the venture capital market in Australia is still weak. And only 1% of firms applying for venture capital investment were successful in getting it in 2013-14.