Australia second only to US in start-up stakes: Report

Australia has a higher start-up rate than any other developed country except the United States, new research shows, with one in ten of all Australians involved in an early stage enterprise.

The research was compiled by the Australian Centre for Entrepreneurship (ACE), located at Queensland University of Technology, in partnership with the Global Entrepreneurship Monitor (GEM).

Last year, GEM interviewed more than 140,000 adults in more than 50 countries. By surveying the adult population, GEM identifies entrepreneurs at the earliest stages of business creation.

ACE participated as the Australian GEM partner, surveying 2,000 Australian adults.

The research found 10.5% of the Australian adult population was actively engaged in starting and running new businesses in 2011. This equates to 1.48 million early stage entrepreneurs.

Among the innovation-driven economies, Australia ranks second only to the US. Compared with 2010, Australia’s total entrepreneurship activity rate (TEA) has increased by 2.7%.

According to Paul Steffens, an associate professor at ACE and QUT’s Technology Business School, this “paints a healthy picture” of Australia’s economy.

“Four out of five new businesses are starting because their founders identify opportunities and pursue them,” Steffens says.

“Only a small number set up business because of job loss or out of other necessity.”

“In this sense, Australia is even outperforming the US at the moment where necessity-driven entrepreneurship has soared with fewer alternatives available for employment.”

Of the estimated 1.48 million early stage entrepreneurs in Australia, 40% are women. This equates to 8.4% of the Australian female adult population, Steffens says.

A third of Australia’s early stage entrepreneurs expect to create at least five new jobs in the next five years, while 11% expect to create 20 or more new jobs over the same timeframe.

“These jobs will primarily be consumer-oriented (such as retail) or in business services as between them, these industries comprise 65% of new entrepreneurial activity,” Steffens says.

Australia also ranks above average for employee entrepreneurial activity in established firms.

An estimated 5% 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 the Netherlands – to rank above average for both its entrepreneurship rate and employee entrepreneurial activity.

According to the research, Australians are more confident about their ability to start and run a business than would-be entrepreneurs in most other developed countries.

“Around 50% of Australian adults believe they can identify opportunities for start-ups,” Steffens says.

“[Meanwhile,] 12% of Australians not currently involved in entrepreneurial activity intend to start a new business within the next three years.”

While 31% of established and new businesses closed over 2011, Steffens insists this is the average for developed economies and shouldn’t necessarily be interpreted as failure.

“Many businesses close due to successful business exits or are a result of their owners finding better or alternate opportunities,” he says.

“Other studies conducted by ACE have identified that Australia has very few closures that could be considered disastrous.”

This article first appeared on StartupSmart.