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Chapter OverviewEntrepreneurship

Entrepreneurship is an essential part of business dynamism in market economies. It provides a mechanism for economic renewal through the recycling of talent, capital and other resources displaced by competition and technological progress. The picture of Australia's entrepreneurial activity is mixed. Some evidence suggests that Australia's entrepreneurial landscape may have become less dynamic and more hazardous over the years 2002 to 2015. Relatively fewer entrepreneurs were found to be entering the market, and those that entered were more likely to exit than their counterparts that entered in earlier years. Yet, despite fewer firms entering, the average number of jobs created per entrepreneur has been steady and even increasing over the most recent years.[36]

Some short-term indicators of Australia's entrepreneurial activity defy recent deterioration in business conditions, including the most recent data on the number of people starting a business, perceptions of business opportunity, and job creation expected from new business ventures. The data show increases in the number of firms entering the market lifting the number of firms in operation and the proportion of firms surviving. There is also tentative evidence of short-term improvement in firm growth by employment size, with relatively large increases in the number of micro businesses moving to the small business category, and the number of small businesses moving to the medium size category.

Only a small fraction of Australian start-ups drive the majority of net job creation --- a pattern that is consistent across OECD economies. These high growth start-ups show superior sales and profit performance but lower labour productivity, compared to other surviving start-ups.[37] One factor potentially preventing entrepreneurship is a fear of failure, which is more commonly cited in surveys by Australians than their OECD counterparts. Another factor is access to capital, often identified as one of the main hurdles to innovation and firm growth, and evidence suggests that Australia's early-stage venture capital investments are lower than most other OECD countries.[38]