ACE GEM Research published as an opinion piece with CNN

 ACE’s recent Global Entrepreneurship Monitor report received media coverage with CNN last week.  Here is the opinion piece by Associate Professor Paul Steffens, deputy director of ACE:

CNN GEM

 

Essentially the report outlines Australia’s impressive recent entrepreneurial performance.  The full  report can be found here: 

GEM Report

What is GEM

In 2011, the Global Entrepreneurship Monitor (GEM) study was conducted across 54 countries. Over 140,000 adults aged between 18 and 64, including 2,000 in Australia were interviewed. GEM differs from other studies in that by surveying the adult population, it identifies entrepreneurs at the very earliest stages of new business creation.

Highlights 

  • Australia’s entrepreneurship rate is second only to the USA amongst developed countries
  • We estimate that 10.5% of the Australian adult population were actively engaged in starting and running new businesses in 2011. This equates to 1.48 million early-stage entrepreneurs
  • Of the estimated 1.48 million early-stage entrepreneurs:

      *   40% or 590,000 were women

      *   33% or 580,000 expected to creates at least 5 new jobs in the next 5 years

      *   11% or 170,000 expected to create 20 or more new jobs in the next 5 years

  • Australia also ranks above average for employee entrepreneurial activity in established firms. An estimated 5.0% of the adult population is engaged in developing or launching new products, a new business unit or subsidiary for their employer.
  • Australia was one of only three developed countries, together with the US and Netherlands, that ranked above average for both entrepreneurship rate and employee entrepreneurial activity
  • Australia outperforms most other developed economies on indicators of the quality and economic impact of its business start-ups, including growth aspirations, number of opportunity-driven start-ups and innovativeness
  • The vast majority of start-ups in Australia are founded based on a desire to take advantage of perceived opportunities with only 1 in 5 new ventures started through necessity –
  • While the global economic slowdown (GFC) clearly increased the level of necessity driven entrepreneurship in Australia, this increase is not as strong as that experienced in the USA.
  • Approximately 50% of the Australians believe that good opportunities exist for the establishment of new ventures, and that they possess the skills to start a business. This is well above international averages.
  • International orientation is below average for Australian early state entrepreneurs, most likely due to the geographic distance to international markets
  • Australian entrepreneurship is comparatively inclusive. For example, at 8.4% the female total entrepreneurial activity is second only to the USA.

 

The new venture mortality myth

Studies show that in the world’s advanced economies, new businesses do not suffer a high failure rate. Probably the most comprehensive cross-national set of new business survival rates (or more correctly, one year persistence rates) has been collected by the OECD Entrepreneurship Indicators Programme. For example, in 2005, over 80% of enterprises that entered an OECD country’s official records in one year were still recorded as persisting to the next year.  Five-year persistence rates are just over 50%, on average. Is this a high or a low failure rate? Let’s compare this to job tenure. 

Studies show that the median life of a typical new enterprise in an annual cohort, at around five years, is longer than the median tenure of a new job in Canada or the UK, and around the same as the median spell in self-employment in the US…. Read more.

Learning From Failure

The following story appeared in Brisbane’s Courier Mail Newspaper on April 2nd 2012. Written by Rob Kidd, the article was based on a seminar that Dean Shepherd presented for ACE on March 28th, and a subsequent interview.

FAILURE in some aspect of business is as inevitable as the taxman making his monthly mark on your payslip.

But, according to one expert, it needn’t be as depressing.

Dean Shepherd, an Australian who is professor of entrepreneurship at Indiana University in the US and an adjunct professor at QUT Business School, believes valuable lessons should be learned from failed ventures and even individual projects.

“Entrepreneurship is about the pursuit of opportunity. Opportunity only exists in environments of uncertainty, so if we’re pursuing opportunities there’s a high likelihood we’re going to get it wrong and fail,” he said.

“The assumption has always been that you can learn from failure and it will be automatic and instantaneous. (But) that negative emotional element impacts our ability to learn.”

Research from QUT’s The Comprehensive Australian Study of Entrepreneurial Emergence research project (CAUSEE), focusing on about 800 emerging business start-ups, found about half failed within two years.

However, only 12.9 per cent of those involved considered the failure a “negative” experience.

Mr Shepherd, whose own research was inspired by seeing his father’s family business collapse, sees failure as an “integral part of innovation”, and says people should be encouraged to have a go.

“Being wrong is just part of being an entrepreneur. You can’t be an entrepreneur or an innovative company and only hit winners,” he said.

A more extreme method companies used for analysing a failed project was holding a “funeral” or “post-mortem”, Mr Shepherd said.

“They’ll send out an invitation to the wake – it’s a chance for people to get together to say the project is dead, to reminisce about the good times, perhaps to console each other but perhaps also to send the message that it’s time to move on.”

Organisations, he said, would benefit from adopting an “anti-failure bias”.

“In other words, they pursue many projects realising that some are going to fail. But by doing that their mean performance actually increases, so the organisation as a whole performs well,” Mr Shepherd said.

“It’s not a bad thing for a society if we have a lot of failed businesses. What’s bad is if we penalise or stigmatise them so even if they’re in the best position to learn, they never try again.”

Nearly Half of Innovative U.S. Startups Are Founded by ‘User Entrepreneurs,’ According to Kauffman Foundation Study

New study is first to identify characteristics of firms started by entrepreneurs who create products for their own use, then commercialize them

The Kauffman Foundation released a report today about “user entrepreneurs” – those who have created innovative products or services for their own use, then subsequently founded firms to commercialize them. The study reveals, among other things, that user entrepreneurs have founded more than 46 percent of innovative startups that have lasted five years or more, even though this group creates only 10.7 percent of U.S. startups overall.

In the first study to quantify the prevalence and characteristics of these founders, the report identifies how the firms they start compare to other U.S. startups in terms of revenue growth, job creation, R&D investment and intellectual property. The findings draw on data from the Kauffman Firm Survey longitudinal study tracking nearly 5,000 firms founded in 2004.

Read the full report at www.kauffman.org/end-user.

Kauffman Foundation – Lighthouse Program

The Ice House Entrepreneurship Program is a unique and powerful project-based online learning program designed to inspire and engage participants in the fundamental aspects of an entrepreneurial mindset and the unlimited opportunities it can provide.

Embraced by academic and economic development organizations throughout the US, the Ice House Entrepreneurship Program now enables participants to learn directly from the first-hand experience of successful real-world entrepreneurs. Watch the video.

Learn how to implement this powerful new program in your community. From young adults to higher education and workforce training, this highly interactive and engaging program is redefining entrepreneurship education in America.

 

Brisbane News – Sept ’11 – Putting Research Into Practise

Professor Per Davisson from The Australian Centre for Entrepreneurship Research argues that we would see more successful private companies if they were to adopt research based knowledge.

Imagine a world where doctors learned their profession early in life and then stopped caring about the science of medicine. For the remainder of their career they would instead rely exclusively on fading recollections of their education, their own experience, and occasional discussions with colleagues.

Such doctors exist, but they are not necessarily the kind you would like to deliver the anaesthetic or to be holding the knife as it sends you into deep slumber. Most doctors keep up with research of direct relevance to their work.

Not so with business and management. In business, some “doctors” (managers) have never had formal, research-based training and most do not use research-based knowledge as an input into their decisions.

There are reasons for this. Many business practitioners get by pretty well most of the time without turning to research. By the way, much academic “business research” isn’t that great anyway) which is sadly true for most medical research and most business practice as well). Fair enough.

Further, the practitioner wrestles with immediate questions about firm-, industry- and situation-specific problems to which the researcher – focusing on broadly generalisable “on average” truths – cannot deliver complete answers. Researchers are rightly pressured to convince academic peers that their conclusions are valid and to publish their findings in prestigious academic outlets. Regrettably, they are not much rewarded for asking the questions practitioners are interested in, or to make sure that their findings are put to use.

Practitioners, in their turn, lack the training to find and see the relevance in research that could contribute to better decision-making. And sometimes they may even be arrogant enough to think they know all they need to know or that academe has nothing to offer.

But business research can be useful. Take the area of small firm growth. Queensland has many examples of small firms that have successfully grown larger – BMD Group, G James Group, The Coffee Club, Morris Corporation, Eagle Boys, Terry White Chemists to name a few – but we could arguably have more if research-based knowledge were put to better use.

Policy initiatives would do well starting from more realistic assumptions than that most firms have growth potential and that their owner-managers want to expand their firms. Research suggests many of them are reluctant to grow. This is often for good reasons. Growth is frequently unprofitable, and letting high profitability drive growth is usually sounder than is hoping that growth will make the firm flourish. While their concerns for loss of the “family” atmosphere are valid, managers also refrain from growth due to unsubstantiated fears that growth would make their firms more vulnerable.

Media praise the fast-growing “gazelles” and policy-makers rely on their job creation prowess. At the same time, research suggests that it is more meaningful to talk about “high firm growth” as a temporary state than of “high growth firms” as a particular species of firm. This is because few “gazelles” sustain their high growth over long periods of time. Moreover, very high rates of growth can be foolish rather than heroic.

As regards job creation, policy-makers should realise that this is a consequence rather than a goal of successful firm growth and that much of the growth of “gazelle” firms is acquisition-based and thus represents job re-shuffling rather than addition of genuinely new jobs.

This said, research suggests that while mergers and acquisitions among large corporations may be over rated – often a sound economic outcome does not materialise – acquisitions may be an under-utilised growth strategy among small firm managers. While organic (internally generated) growth can be exhausting for small firm, leading to lower growth in the next period, there is indication that acquisitions can spark a new spurt of organic growth in the following period.

The Australian Centre for Entrepreneurship at QUT (www.bus.qut.edu.au/research/ace/) arguably delivers on its mission to be nationally leading and internationally highly recognised among academics in our little specialty. We have also started to try to deliver on our second mission – to be the major hub in the country for making entrepreneurship research accessible and useful for practitioners. However, business researchers are few and the potential users are many, so delivering on this ambitious task requires time and resources.

Putting research-based knowledge in business to better use requires academics who care about practice in the ways they source their research questions and disseminate their results. That’s our job. Realistically it also requires better “distribution channels” – interested and competent journalists and consultants, well organised web sites, research-trained employees, and other means that make research accessible to business and policy decision makers.

Putting research-based knowledge in business to better use also requires curious, reflective – and demanding – practitioners. People who take their profession as serious as doctors do. Such “business doctors” appreciate that easy and certain solutions to their problems are rarely to be found anywhere. They also realise that if they make an effort, research-based knowledge can enhance the firm-, industry- and situation-specific they already have. That effort can never be provided by the researchers.

You can read it online here

Growing Profitable or Growing from Profits?

In this vignette, Professor Per Davidsson considers some of the dynamics associated with firm growth.

Praise for rapidly growing firms – the ‘gazelles’ as they are sometimes called – abound in the media and sometimes also in political rhetoric. These fast-growing firms, we are told, create the bulk of new jobs and new wealth and are therefore the heroes of the economy. And surely sometimes they are.

Several academic theories also portray firm growth as a good thing. Economies of scale, experience effects and first mover advantages are assumed to accrue to those firms that grow larger than their competitors. More recently phenomena like eBay and Facebook are clear examples of Network externalities; that the value of a product or service can increase with the number of users.

But is growth universally a good thing? We also hear horror stories about firms that grew to their own death by losing financial control and/or growth creating internal, organizational turmoil. And to achieve rapid volume growth all you need to do is buy high and sell low, and for sure customers will love you; grow in numbers, and buy more. Financially it would be sheer disaster. So when we are assessing the value of growth we also need to consider how sustainable it is, and what are its likely effects on profitability.

This is what we tried to do in the research here. We asked the question:

What firms are more likely to be able to combine high growth with high profitability? Do firms become more profitable as a result of their growth? Or is it the small, profitable firms that manage to scale up their businesses without losing their already high profitability?

Download and read the full vignette here

Supporting Survival Entrepreneurs in Developing Economies

Dr Marcello Tonelli and Associate Professor Carol Dalglish have been working on a number of projects related to entrepreneurship in developing countries. One of their current projects is an ethnographic study in Mozambique based on work which was first started by Carol Dalglish in 2004. This current project is looking specifically at the role of transport.

The data for this project is sourced from both local entrepreneurs, NGO (Non Government Organisations) staff members, community leaders and government officials.

Funding for this project is being provided from the IMRG (Infrastructure Management Research Group) – QUT Business School.

Please contact ACE for further information.

Global Entrepreneurship Monitor Project

Background of GEM

The Global Entrepreneurship Monitor (GEM) research program is an annual assessment of the national level of entrepreneurial activity. Started as a partnership between London Business School and Babson College, it was initiated in 1999 with 10 countries, expanded to 21 in the year 2000, with 29 countries in 2001 and 37 countries in 2002. GEM 2009 is set to conduct research in 56 countries. From 2010 The Australian Centre for Entrepreneurship Research has been appointed the Australian GEM partner.

The research program, based on a harmonized assessment of the level of national entrepreneurial activity for all participating countries, involves exploration of the role of entrepreneurship in national economic growth. Systematic differences continue, with few highly entrepreneurial countries reflecting low economic growth. There is a wealth of national features and characteristics associated with entrepreneurial activity.

Those new to the research program will find global comparisons, national reports, and special topic reports based on the annual data collection cycle. This material can be downloaded after a few simple items of personal background are provided. Over 120 scholars and researchers are actively participating in the GEM project; those with user names and passwords will have access to the interview schedules, data collection procedures, and other details required for systematic analysis.

In 2005 the National Teams, London Business School and Babson College as a consortium, established an independent, not-for-profit company called the Global Entrepreneurship Research Association (GERA) to oversee the operations of GEM. GERA now owns the GEM brand.

Overview

GEM is the largest survey-based study of entrepreneurship in the world. During the course of its history since 1999, over 60 countries have been involved with the research.

GEM Research has three main objectives:

  • To measure differences in the level of early stage entrepreneurial activity between countries
  • To uncover factors determining the levels of entrepreneurial activity
  • To identify policies that may enhance the level of entrepreneurial activity

The GEM approach

Every year each national team is responsible for conducting a survey of at least 2000 people within its adult population. The Adult Population Survey is a survey of attitudes towards entrepreneurship in the general population but it also asks people whether or not they are engaged in start up activity or own or run a business.

The individual national team surveys are all collected in exactly the same way and at exactly the same time of year to ensure the quality of the data. The individual national team surveys are harmonised into one master dataset that allows users to investigate entrepreneurial activity at various stages of the entrepreneurial process, as well as to study a variety of factors characterizing both entrepreneurs and their businesses in each participating nation and across countries.

Overall,  GEM’s  unique  ability  to  provide  information  on  the  entrepreneurial landscape  of   countries in a global context makes its data a necessary resource for any serious attempt to study and track entrepreneurial behaviour worldwide.
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Developments in GEM Research

Clearly, entrepreneurship is a complex phenomenon and can be found in a variety of settings and situations. Thus, no single measurement, no matter how precise, can capture the entrepreneurial landscape of a country. As a result, GEM takes a holistic approach to the study of entrepreneurship and provides a comprehensive set of measurements aimed at describing several aspects of the entrepreneurial make-up of a country. In addition to early- Stage Entrepreneurial Activity, GEM identifies  “established  business  owners.” Established   business owners are entrepreneurs who have paid salaries and wages for more than 42 months. Their businesses have survived the most risky stage of the entrepreneurial process and much can be learned from comparing early-stage and established business owners.

GEM also documents entrepreneurial motivation. Thus, business owners are classified as being either necessity-driven or opportunity-driven. In addition, GEM documents the characteristics of all entrepreneurs with respect to product novelty, intensity of competition, employment and expansion plans, and use of technology. Finally, GEM looks at the socioeconomic characteristics of populations; as well as their subjective perceptions and expectations about the entrepreneurial environment.

Australia’s  Role  in  GEM

The Australian Centre for Entrepreneurship Research has from 2010 has become the Australian partner in the GEM Consortium, responsible for both the data collection and reporting on Australian research.

ACE’s  role  in  both  GEM  and  CAUSEE,   (Comprehensive Australian Study of Entrepreneurial Emergence), allows an ideal opportunity to produce extended statistical analysis providing a deeper and broader view of Australian entrepreneurial activity.

 

 


For more information or to further discuss these opportunities further please contact:

Neil James
Executive Manager – External Relations Australian Centre for Entrepreneurship Research Queensland University of Technology (QUT) Phone: 07 3138 1971
Mobile: 0405188664
Email: rn.james@qut.edu.au