Increasing Australia's economic productivity by creating an entrepreneurial economy

By Almira De Vera

Almira attended the 2016 World Bank and IMF Annual Meetings in Washington D.C. She is studying a Bachelor of Laws and a Bachelor of Commerce at the University of South Australia.

Abstract

In order for Australia to maintain its economic prosperity, it is imperative to find new ways to stimulate productivity and encourage entrepreneurship and start-ups. Entrepreneurship propels innovation, job creation and competition which are integral for productivity growth. The Australian government is currently pursuing a number of entrepreneurial and innovative policies. To ensure the efficacy of these policy changes, an entrepreneurial mindset must be instilled in Australian culture. Introducing school programs and training into curriculum's is vital in motivating entrepreneurial initiatives. Creating a supportive and collaborative ecosystem involves working with the private sector, universities, industries, professional bodies and other start-ups. Sharing and recognising success can change the attitudes and perceptions of Australians starting their own business.

Recommendations

  1. Introduce programs at all educational levels with the aim to promote entrepreneurial ways of thinking and to nurture the next generation of entrepreneurs.
  2. Engage the private sector, universities and schools, entrepreneurs and financing firms to create networks linking young and new start-up owners to learning opportunities.
  3. Celebrate and share the success stories of Australian innovators.

Introduction

Australia plays a vital role in achieving the goals of the World Bank and IMF aimed at improving the global shared prosperity. The country can increase its economic productivity by building an entrepreneurial economy. Entrepreneurship is the mindset and process of creating and developing economic activity through risk-taking, creativity and innovation (Commission of the European Communities, 2003). Entrepreneurs identify and pursue opportunities which lead to production of economic productivity. To sustain Australia’s prosperity and to achieve sustainable economic growth, the government must focus on establishing an economy that encourages enterprising and innovative initiatives. The Australian government must work with industries, schools and universities, professional organisations and financiers to build an effective and sustainable entrepreneurial ecosystem (Isenberg, 2010). The Federal government could negotiate with the Australian State and Territory governments to determine the types of programs and industries that would benefit from targeted support (Dana, 1988).

Rwanda provides an excellent example of the positive economic impact of embracing entrepreneurship. The country was transformed from a war-torn nation to a developing economy with a per capita GDP that has almost quadrupled since 1995 (Isenberg, 2010). The country implemented complex policy reforms with a view to improve its private sector, and it involved communications with entrepreneurs and other stakeholders, consolidation of the processes in starting, operating and closing a business, and making international trades faster and more simple (Doing Business, 2013). Other international policies that can benefit Australia are considered in the following.

Policy context

Entrepreneurial programs in schools and universities

Building an entrepreneurial economy in Australia requires a change in Australians’ perception on starting businesses. One way of attaining development is by inspiring the next generation to start planning their own initiatives and through promoting entrepreneurial thinking in schools and universities. Programs that support this development are to be implemented in addition to business subjects in the current curriculums. 

According to Ignatius Chow, the co-founder and managing partner of The Entrepreneur Story in South Australia, the main differences between a business person and an entrepreneur are their mindset and priorities (personal communication, 1 September 2016). Business people prioritise revenue making and consider profit in all their strategic decisions, while entrepreneurs view revenue as a by-product of providing solutions to current issues or pursuing existing opportunities (I. Chow, personal communication, 1 September 2016). Exposing the next generation to programs that promote entrepreneurial mindset will motivate them to pursue their own initiatives and to have the skills to identify innovative opportunities.

Singaporean universities offer entrepreneurship centres and summer schools, student start-up accelerators, and overseas immersion trips to start-up hubs in cities including Silicon Valley and Tel Aviv (Spike Innovation, 2015). The Korean Creative Economy Initiative aims to engage all Koreans in entrepreneurial thinking and expose students to the concept of entrepreneurship by providing free innovation training and funding student internships within growing start-ups (Spike Innovation, 2015). Providing internship and mentorship opportunities with start-up owners in Australian schools would also fulfil the objective of inspiring the next generation to pursue entrepreneurship. In Sivitanidios Technical School in Greece, students run virtual enterprises while undertaking the traditional theoretical courses in their degrees (Commission of the European Communities, 2003). Similar programs in Australia would be highly beneficial.

At the university level, such opportunities and courses should be available to different disciplines, not just to business students, with a key area of growth in Science, Technology, Engineering and Mathematics (STEM). To foster high-growth start-ups and training that encourages innovation and creative thinking, must be included in the curriculum of STEM university degrees. These programs will develop them to be innovative, creative and enterprising which are skills transferable to any career if they choose to pursue a different pathway.

A supportive entrepreneurial ecosystem in Australian states and territories

An entrepreneurial ecosystem consists of various stakeholders driven by different objectives and expectations, but collectively they promote entrepreneurship (Suresh & Ramraj, 2012). Having a supportive ecosystem motivates and assists individuals to initiate their own start-up journey (Suresh & Ramraj, 2012). In creating such environment, the Australian government needs the support of the private sector (Isenberg, 2010). Establishing a sustainable ecosystem involves initiating collaboration with universities, various industries, and new and established start-up owners. One of the key qualities of Silicon Valley is its open collaborative environment where there are constant interactions and engagement between entrepreneurs, universities, government and non-profit organisations (Lee, Miller, Hancock, & Rowen, 2000). If the Australian government can facilitate the building of relationships between entities in Australia and encourage them to commit in helping create an entrepreneurial economy, economic growth generated from this space would be inevitable. This is achievable by convening universities, entrepreneurs, banks, private equity firms, other members of the private sectors to have constructive discussion and to convey the importance of supportive ecosystems to Australia’s economic well-being. The EU Member States have the European Regional Innovation Scoreboard (RIS) which monitors the level of collaboration between innovative companies and other organisations, and the number of public-private co-publications (Diaconu & Dutu, 2015; European Commission, 2016). Implementing collaborative arrangements similar to the RIS can encourage Australian states and territories to have a culture that is more entrepreneurial and innovative. They can also help determine the areas that require further policy attention and improve the current business conditions in Australia.

Universities and other tertiary institutions are important part of the entrepreneurial ecosystem due to the education-innovation-research relationships that exist in their campuses (Diaconu & Dutu, 2015). They can establish programs that foster young entrepreneurs by linking them to industries and other organisations that can assist their initiatives. Universities can create a collaborative ecosystem structures themselves on campuses through the establishment of research centres, business incubators, and technology transfer offices (Diaconu & Dutu, 2015). STEM is an important area of growth. Australia is ranked in the world’s top 1% globally for STEM research, but placed 72nd for innovation efficiency in the 2015 Global Innovation Index (Spike Innovation, 2015). Elliot Smith, the co-founder of HSK Instruments was a beneficiary of various entrepreneurship programs at the University of Queensland while studying Electrical Engineering. Smith commented that ‘universities need to be vocal in their support of start-ups…[and that they] train people not only to work in industry but to help expand it with business of their own’ (Spike Innovation, 2015). The EXIST Programme was established by the Federal Ministry for Economic Affairs and Energy in Germany. Its aim is to bring key players from the business sector and research institutions together to promote entrepreneurial spirit in universities and technical colleges (Commission of the European Communities, 2003; Federal Ministry for Economic Affairs and Energy, 2016). Establishing university initiatives similar to the EXIST Programme and promoting it widely in universities will open the minds of students to other possibilities and create an entrepreneurial spirit in university grounds.

Experienced entrepreneurs can make significant differences in the survival of an emerging business. The 2014 Start-Up Muster Survey found that 58% of Australian start-up owners are new to the space and possess limited knowledge on the fundamentals of managing a business (Startup Muster, 2014). Building a culture where collaboration and mentorship are the norm is vital in creating an entrepreneurial economy. Learning from those who have gone through the struggles and successes of entrepreneurial journey can motivate and inspire budding entrepreneurs. The government can make this possible by supporting networking events, conferences and seminars for entrepreneurs and start-ups. These functions are highly beneficial in establishing a supportive entrepreneurial ecosystem because this is where relationships are formed and maintained, technical and market information is exchanged, connections are established, and new initiatives are conceived (Audretsch & Thurik, 2004).

Celebrating and sharing the journey of successful Australian entrepreneurs

Australia is a country that has an uncertainty-avoidance-culture, so raising awareness about the reality of entrepreneurship can assist in changing the perception of the Australian society and its tolerance of failure (Baughn & Neupert, 2003). The Head of Operations of Sydney’s Blackbird Ventures and the co-founder of a start-up company called CapacityHQ, Samantha Wong was asked to make a comparison between the entrepreneurial scene in Australia and in start-up hot spots like the Silicon Valley. She noted that the Australian entrepreneurial culture can improve through mindset change and by Australians being more risk-tolerant (S. Wong, personal communication, 23 September 2016). Encouraging Australians to pursue entrepreneurship would mean that they need to realise that it is possible to fail and regroup to try again (Isenberg, 2010). Entrepreneurs see failures as learning experience (Lee et al., 2000). According to Wong, one way of changing the community mindset is through story-telling (personal communication, 23 September 2016). When Australians hear from entrepreneurs who went through the struggles but persisted and attained success, they will realise that taking risks and persevering in the entrepreneurial space can be rewarding.

Entrepreneurial success can stimulate a supportive and collaborative ecosystem by igniting the imagination and boosting the morale of the public (Isenberg, 2010). The worldwide success of China’s Baidu Incorporation has inspired a generation of new entrepreneurs; the sub-Saharan Africa’s mobile provider, Celtel Telecommunication Company stirred the region’s pride; and the success of the Irish Elan Corporation and Iona Technologies served as a guide to a generation of budding entrepreneurs (Isenberg, 2010). In China where the majority aspire to establish a career in finance or government, the success of Jack Ma of Alibaba and Robin Li of Baidu has changed the societal perception on pursuing entrepreneurship in the tech industry which is now viewed as a desirable career path (Lauder Institute, 2014). Australia has its share of successful entrepreneurs who have made significant contributions to the society and whose stories should be shared to inspire the public. These Australian successful entrepreneurs include the founders of ResMed, Cochlear, Pharmaxis and SEEK (Spike Innovation, 2015). ResMed was established in 1989 in collaboration with the Baxter Centre for Medical Research and it offered the first successful non-invasive treatment for obstructive sleep apnea (ResMed, 2016). Today, it has 4000 employees, operates in 100 countries and earns a revenue of approximately $1.6billion (ResMed, 2016). It is this kind of stories that can ignite the entrepreneurial spirit in Australia.

The government support for campaigns that promote success stories, that provide role models and showcase the benefits innovation brings to the society will assist in improving the community’s attitude and perception (Commission of the European Communities, 2003). Recognising and honouring the success of Australian start-up owners would improve the entrepreneurial spirit in the country (Dana, 1988). The media can have significant impact on the perception of the Society, therefore, the Australian media can assist in changing the attitude towards entrepreneurship by featuring the struggles and success stories of Australian entrepreneurs through documentaries and TV programs like the Shark Tank. The private entities that were interviewed for this research, the Entrepreneur Story and Blackbird Venture have been including the community and informing them of the concepts of entrepreneurship through conferences and expos that present successful innovators in South Australia and New South Wales (S. Wong, personal communication, 23 September 2016; I. Chow (personal communication, 1 September 2016). Initiatives like these should be further supported by the government and more organisations should be encouraged to take part in them. Getting entrepreneurs to come to schools and universities, and to do a talk about their journey can motivate the next generation to start thinking about taking their own entrepreneurial journey.

Conclusion

Australia has to implement actions to ensure the country’s prosperity and to increase the nation’s economic productivity. This paper proposes to build an entrepreneurial economy as a solution. Entrepreneurial activities drive job creation, competition and innovation which are the ingredients of a sustainable economic growth. The recommendations presented in this paper would assist Australia in creating an economy that is entrepreneurial. This is in the agenda of many nations, therefore, Australia’s inaction would significantly disadvantage its economic productivity and competitiveness in the global scale.

Creating an entrepreneurial economy in Australia is a national agenda that requires every entity’s understanding, contribution and involvement. Entrepreneurship leads to innovation, and innovation advances many industry including health, environment, education and agriculture. Therefore, entrepreneurial mindset must be instilled in Australia’s next generation, a sustainable ecosystem must be established in every Australian state and territory, and a society that understands and celebrates the journey of successful entrepreneurs must be created. Changing culture and societal attitude is a long-term goal, so it does not only require dedication of resources in a tangible sense but also time commitment. With these implementations, Australia will not only be a lucky country, but one that is entrepreneurial and innovative.

References

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