Entrepreneurship and Innovation in Australia

Entrepreneurship and Innovation in

Australia: outlook, policies, and trends

Dr Marcello Tonelli (School of Business)

Venerdi – 13 Gennaio, 2012

www.qut.edu.au/business/ace

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Entrepreneurship Innovation

GEM Study

CAUSEE Study

Australia


Economic Development

Starting a business

Being self-employed

Undertake an effort to transform innovations into economic goods

The catalyst to growth

Creating new opportunities

Any activity that adds value to a business, an organization, supply chain, value chain, .... anything where there is commerce... or not

Value, success: TBL

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Entrepreneurship is...

High growth entrepreneurship

Social entrepreneurship: organize, create and manage a venture with the emphasis towards social change.

Corporate entrepreneurship: the process whereby an individual or a group of individuals, in association with an existing organisation, create a new organisation or instigate renewal or innovation within that organisation (Sharma and Chrisman 1999)

Indigenous entrepreneurship

Women entrepreneurship

Immigrant entrepreneurship

Technopreneurship: university spinouts

Youth entrepreneurship

Necessity/survival entrepreneurship

Entrepreneurship education/training

Family business

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The Field of Entrepreneurship

Remote Environment

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Entrepreneurship Nexus

Close Environment

CREATOR(S) CREATING PROCESS NEW VALUE CREATION

Individuals

Teams

Organizations

Opportunity discovery and assessment

Exploitation decisions

Resource accumulation and gestation

New venture creation (and subsequent development)

Innovations

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Entrepreneurship

Australia


Innovation

CAUSEE Study


GEM Study

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Entrepreneurship & Innovation

Creative destruction: economic change revolves around innovation (Schumpeter 1942) The essence of entrepreneurship is innovation (Drucker, 1985) leading to ‘value’ creation (Khandwalla, 1987). Entrepreneurship is about new value creation in the form of innovation (Gartner 1985; Zahra et al. 1999).

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What Is Innovation?

Innovation is not invention in that innovation refers to the use of a new idea or method, whereas invention refers more directly to the creation of the idea or method itself. Innovation is the creation of better or more effective products, processes, services, or ideas [technologies] that are accepted by users [desirability], and proposed at the right time according to governments and society [viability].

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Innovation

What is viable in the marketplace

What is possible with technology

What is desirable to

users

Innovation

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Entrepreneurship

Australia


Innovation

CAUSEE Study

GEM Study


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It is widely acknowledged that entrepreneurship is a key driver for economic development. New

businesses often introduce innovations into the market, create jobs and help to secure the

competitiveness of the national economy (Acs & Szerb, 2009).

Entrepreneurship & Economic Development

Entrepreneurship Economic

Development

Job Creation

Innovation

Productivity Growth


Entrepreneurship (attitudes, activity and aspirations) is affected by national conditions.

Entrepreneurs with high aspirations materialize better in countries with a stable economic and

political climate and well-developed institutions (in fact they may migrate to other countries to

pursue their ideas).

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Factor-Driven Economies Algeria*, Guatemala*, Jamaica*, Lebanon*, Morocco, Saudi Arabia*, Syria*, Kingdom of Tonga, Uganda, Venezuela*, West Bank and Gaza Strip, Yemen. Efficiency-Driven Economies Argentina, Bosnia and Herzegovina, Brazil, Chile*, China, Colombia, Croatia*, Dominican Republic, Ecuador, Hungary*, Iran, Jordan, Latvia*, Malaysia, Panama, Peru, Romania*, Russia*, Serbia, South Africa, Tunisia, Uruguay*. Innovation-Driven Economies Australia, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Israel, Italy, Japan, Republic of Korea, Netherlands, Norway, Slovenia, Spain, Switzerland, United Kingdom, United Arab Emirates, United States.

*Country in transition to a more advanced stage

Importance of Different Types of National Conditions for



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As an economy matures and its wealth increases, one may expect the emphasis in industrial activity to gradually shift toward an expanding service sector that caters to the needs of an increasingly affluent population and supplies the services normally expected of a high-income society.

The industrial sector evolves and experiences improvements in variety and sophistication. Such a development would be typically associated with increasing research & development and knowledge intensity, as knowledge-generating institutions in the economy gain momentum.

This development opens the way for the advance of innovative, opportunity-seeking entrepreneurial activity that is not afraid to challenge established incumbents in the economy. Often, small and innovative entrepreneurial firms enjoy an innovation productivity advantage over large incumbents, enabling them to operate as „agents of creative destruction.‟

To the extent that the economic and financial institutions created during the scale-intensive phase of the economy are able to accommodate and support opportunity-seeking entrepreneurial activity, innovative entrepreneurial firms may emerge as significant drivers of economic growth and wealth creation.

In innovation-driven economies, the proportion of opportunity-driven versus necessity-driven entrepreneurship is expected to be higher than in factor- and efficiency-driven economies.

Entrepreneurship in Innovation-Driven Economies


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Given entrepreneurship's potential to support economic growth, it is the policy goal of many governments to develop a culture of entrepreneurial thinking. This can be done in a number of ways: by integrating entrepreneurship into education systems, legislating to encourage risk-taking, and national campaigns.

Government Strategies


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Entrepreneurship

Australia


Innovation

GEM Study


CAUSEE Study

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ACE is the Australian partner for the Global Entrepreneurship Monitor

(GEM) which measures entrepreneurial activity in more than 80 countries.

Each national team conducts a survey of at least 2,000 adult individuals (a

representative sample) annually using a proven methodology (see

http://www.gemconsortium.org). The main indicator of entrepreneurship is

the Total Early-Stage Entrepreneurial Activity rate (TEA) which measures

the propensity of a country to be entrepreneurial. (Reynolds 1998)

The GEM STUDY

(Global Entrepreneurship Monitor)


http://www.gemconsortium.org/







1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009

54 APS: Data Sets per Year

Total

180,297

1,233,500

2008

But where does Australia rank

in entrepreneurship when

compared with other major

innovation-driven

economies?

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With 7.8% of the adult population involved in setting up a new business or owning a newly

founded business (TEA rate), Australia ranks second only to Iceland among the innovation-driven

(developed) economies – GEM Global Report 2010.

Entrepreneurship is alive and well in Australia

0%

2%

4%

6%

8%

10%

12%

Italy

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Belg

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Den

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Germ

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Sp

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Po

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Slo

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Gre

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Isra

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Un

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Sta

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Innovation-driven economies

Perc

en

tag

e o

f ad

ult

po

pu

lati

on

betw

een

18–64

95% Confidence

Intervals

Point Estimates


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The GEM data clearly show that Australia also compares well with other major economies in

terms of the “quality” of entrepreneurial activities being pursued. Indeed, not only the quantity of

entrepreneurs but also their aspiration and business goals are important drivers for economic

growth.

On average for each business started in Australia out of the necessity to earn a living due to a

lack of alternatives, there are three businesses where the founders want to take advantage of a

lucrative business opportunity in order to increase their personal income or enjoy greater

independence.

With respect to job growth expectations, a respectable 10% of the entrepreneurs aim to grow

their businesses larger than 20 employees in the next five years.

Both these indicators are higher than the average for innovation-driven economies.

Slightly below average is the international orientation of Australian entrepreneurs. Most likely due

to the large distances from international markets just 10% aim at a substantial share of

customers from international markets.

Quality of entrepreneurial activities


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So what are the drivers for this high quantity and quality of entrepreneurship in Australia? The

data point to a combination of both business opportunities and entrepreneurial skills.

Approximately 50% of the Australian population perceive opportunities to start-up and state that

they have the necessary skills to start a business.

Furthermore a large majority of the Australian population report high media attention for

entrepreneurship in Australia providing successful role models for prospective entrepreneurs.

As a result 8.7% of our respondents have the intention to start a business within the next three

years. These numbers are all well above average when compared to the other major economies.

Drivers of entrepreneurial activity


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We also find a very high proportion of female entrepreneurs. Australia is the only

major country where men and women participate equally in this important economic

activity. This paints a healthy picture of access to entrepreneurial opportunities for

Australian women.

Female entrepreneurship is thriving in Australia

Percentage of Female Entrepreneurs in 2010 in Innovation-Driven Economies: Source GEM Global Report 2010 0%

10%

20%

30%

40%

50%

Kore

a

Japan

Norw

ay

Irela

nd

Isra

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Denm

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Slo

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Port

ugal

Icela

nd

Fin

land

United K

ingdom

Germ

any

Sw

eden

Gre

ece

Spain

Neth

erla

nds

Fra

nce

Italy

Sw

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nd

Belg

ium

United S

tate

s

Au

str

alia

% o

f F

em

ale

Entr

epre

neurs


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Entrepreneurship

Australia


Innovation

GEM Study

CAUSEE Study


The CAUSEE Study

(Comprehensive Australian Study of Entrepreneurial Emergence)

• Funded by

• Largest study ever of business start-up processes in Australia

• 4-year, concurrent study of on-going start-up development

• 3rd year data collection now completed

• Two different samples:

o Random sample of nascent firms, NF (625)

o Random sample of established young firms, YF (561)

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• Interview one of the founders every 12 months (40-60 min.)

• Interviewing conducted by external survey vendor

• Partly harmonised with international, counterpart studies

• Considerable unique contents – CAUSEE is cutting edge

• Launched practice-orientated reports on new business start-ups:

1. The role of family

2. Learning and adaptation

3. International perceptions and aspirations

4. ...

Research Approach

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How do you get hold of a large,

random sample of not-yet-

existing businesses???

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http://images.google.com.au/imgres?imgurl=http://www.meted.ucar.edu/hurrican/strike/text/images/p4_carla.jpg&imgrefurl=http://www.meted.ucar.edu/hurrican/strike/text/p4_desc.htm&usg=__KHgYKrxBaZmI2FxUfUiPBKOYO80=&h=352&w=315&sz=71&hl=en&start=30&um=1&tbnid=rhN1rrTp5C2KeM:&tbnh=120&tbnw=107&prev=/images?q=on+the+phone&ndsp=18&hl=en&rlz=1T4GFRC_enAU215AU215&sa=N&start=18&um=1

http://images.google.com.au/imgres?imgurl=http://www.meted.ucar.edu/hurrican/strike/text/images/p5_cam.jpg&imgrefurl=http://www.meted.ucar.edu/hurrican/strike/text/p5_desc.htm&usg=__X94Fy2fE8q6omFOGel1yqweRY9U=&h=299&w=400&sz=29&hl=en&start=37&um=1&tbnid=ekNPIeqcEaHPXM:&tbnh=93&tbnw=124&prev=/images?q=on+the+phone&ndsp=18&hl=en&rlz=1T4GFRC_enAU215AU215&sa=N&start=36&um=1

http://images.google.com.au/imgres?imgurl=http://users.ox.ac.uk/~qehwemc/Images/old woman and phone.jpg&imgrefurl=http://users.ox.ac.uk/~qehwemc/Research Methodology.html&usg=__CqIp_QhATLba_gcyH9Wpb1J3K2U=&h=1280&w=1707&sz=287&hl=en&start=38&um=1&tbnid=nA0EmajG20PqEM:&tbnh=112&tbnw=150&prev=/images?q=on+the+phone&ndsp=18&hl=en&rlz=1T4GFRC_enAU215AU215&sa=N&start=36&um=1

From where was the data obtained?

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How do nascent and young

firms change the way

they view themselves?

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1. Growth Aspirations

23.2%

11.5%

76.4%

87.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Wave 1 Wave2 Wave 3 Wave 1 Wave 2 Wave 3

Nascent Firms Young Firms

Maximum growth

Manageable size

Undecided

0.5% 0.7%

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2. Expectations of Geographic Market

70.8%

60.5% 63.1%

54.4% 54.8% 52.7%

42.6% 33.3% 37.9%

25.4% 24.4% 22.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Wave 1 Wave 2 Wave 3

Aspirations for NFs to have national sales in 5 yrs

Aspirations for YFs to have national sales in 5 yrs

Aspirations for NFs to have international sales in 5 yrs

Aspirations for YFs to have international sales in 5 yrs

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3. Self-Assessed Novelty

0.62 0.51

0.33

1.35

1.19 1.10

0.43 0.41

1.34 1.27

1.05

0

0.5

1

1.5

2

2.5

3


Nascent Firms

0.29 0.26 0.22

0.89 0.71

0.65

0.23 0.17 0.16

0.92 0.97

0.89


Young Firms

Promotion/Selling

Product/service

Production/sourcing

Market/customers

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4. Perceived Strength of Competitive Advantages

44.9%

52.2% 51.8%

41.9% 40.4%

36.4%


Young Firms

Easy to copy

Diffcult to copy 44.9% 46.1% 42.1%

47.7% 47.4%

40.9%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%


Nascent Firms

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5. Hi-Tech Perceptions

32.3% 31.3%

29.4%

26.5%

24.1% 23.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%


Nascent Firms

Young Firms

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6. Survival Confidence Over Time

85.6%

81.6%

78.7%

82.9%

84.2%

82.4%

75.0%

77.0%

79.0%

81.0%

83.0%

85.0%

87.0%

89.0%

Wave 1 Wave 2 Wave3

Nascent Firms

Young Firms

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What concrete changes

do they undertake?

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I. The founder-owner team

92.7% 88.3% 74.5%

98.0% 92.9%

72.3%

7.3% 11.7% 25.5%

2.0% 7.1%

27.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Solo Spouse team Other team Solo Spouse team Other team


No Change Change

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39.4% 40.9%

35.9% 32.4%

30.6%

25.4%

13.8%

23.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%


Product/Service Customer/Market Promotion/Selling Production/Sourcing

II. Changes of the business concept

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III. Changes in business concept – Why?

42.1% 42.6%

27.7% 30.8% 30.3% 29.4% 29.7%

21.4% 19.0%

21.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%


Success with a customer refocussed the effort Customer requested changes

Internal interest in a new innovation led to changes Market research suggested it

Failure with a customer refocussed the effort

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IV. Business planning emphasis

3.37

2.47 2.82

1.95

3.77

2.98

2.58

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

WAVE 1 WAVE 2 WAVE 3 WAVE 1 WAVE 2 WAVE 3


Action plan to follow step-by-step

Means of attracting external finance

Means of thinking things through to avoid mistakes

Facilitation of internal communication

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Summing up

By comparison to many other parts of the world, aspiring

entrepreneurs should look favorably to setting up new

businesses in Australia.

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Powering Ideas: An Innovation Agenda for the 21st Century (12 May 2009): pure research, networking, entrepreneurial innovation.

Current Policies


Objectives Initiatives

25 per cent increase in businesses engaging in innovation over the next decade

Enterprise Connect, Clean Business Australia, Clean Energy Initiative ($4.5 billion)

Increase the number of businesses investing in R&D over time

R&D Tax Credit; lift the base tax incentive for R&D by larger firms

Innovative responses to climate change Clean Business Australia, the Green Car Innovation Fund, the Clean Energy Initiative, the Global Carbon Capture and Storage Institute, and the Climate Change Action Fund

Improve innovation skills and workplace capabilities Enterprise Connect and the Education Revolution

Get ideas to market Climate Ready, the Green Car Innovation Fund, the Commonwealth Commercialisation Institute

Work with the private sector to increase the supply of venture capital

Policies aimed at maintaining stability and liquidity in the Australian financial system; the Innovation Investment Follow-on Fund

Maintain a continuous dialogue with industry about how we can maximise business innovation

Enterprise Connect, Industry Innovation Councils, and industry-specific working groups (e.g. pharmaceuticals).

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This said, the Australian government needs to continue supporting entrepreneurship (Ernst and Young – Nov 2011).

In particular:

• 64% of Australian entrepreneurs think the Government should help facilitate access to funding

• 70% of Australian entrepreneurs say there aren’t enough tax incentives for starting a new business

• 70% are not impressed by the current level of coordination between the various support providers, government associations and educational institutions

Where To From Here?


Thanks for your attention!


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Entrepreneurship and Innovation in Australia

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