Entrepreneurship in Australia returns to pre-financial crisis levels: Report

Australia is among a small group of countries in which entrepreneurship has recovered to pre-global financial crisis levels, according to data from the Organisation for Economic Co-operation and Development.

While the OECD’s Entrepreneurship at a Glance report for 2014, released in July, found levels of entrepreneurship remain below pre-financial crisis levels in most European countries, Australia, Portugal, Sweden and the UK have bounced back from the global crisis and are now showing positive trends.

The research found barriers to entrepreneurship have fallen at a progressive rate over the past 10 years, with low barrier countries such as Australia tending to have higher percentages of “opportunity entrepreneurs”.

According to the research, more than 90% of Australian enterprises are classified as micro, that is, they employ fewer than 10 employees, with almost 98% of enterprises in the construction industry and 95% of businesses in the services sector employing less than 10 employees.

But overall these enterprises created the most jobs for the Australian economy.

In 2011, 2.58 million people in Australia were employed by micro enterprise, compared to 1.66 million employed by firms with between 20 and 49 employees, and 2.36 million workers employed by large firms with more than 250 employees.

In most countries analysed, a lack of funding and the high perceived costs of innovating were the two factors most cited as hampering innovation in the sector.

But the data shows large enterprises in Australia were more likely to receive some form of government support for innovation, with more than 50% of government-financed research and development in the business sector going to large enterprises in 2011. Micro and small businesses received just below 40%, while mid-sized firms received less than 10% of government support.

While more than 85% of government funding for research and development in Eastern European countries such as the Slovak Republic, Estonia and Hungary went to SMEs, in Japan, Luxembourg, the US and Sweden, more than 80% of government support goes to large firms.

Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany it is the “classic 80/20 rule”.

“Eighty percent of the money goes to those doing 20% of the innovating,” says Strong.

Strong says it is smaller firms and entrepreneurs who are usually the most innovative, but it can often be easier for government departments to work with larger organisations which have staff dedicated to securing funding.

While Strong says Australia often does well when compared internationally, he says for many business owners, they are “living within our own economy” and for some, it feels like the economy has not yet fully recovered from the financial crisis.