Global Entrepreneurship Monitor: Australia records 6% start-up rate

Australia is classified as an innovation-driven economy, according to a new global report, with a business start-up rate of 6%, compared to 8.7% in the United States.

Last year, the Global Entrepreneurship Monitor conducted its 13^th annual survey of the rate and profile of entrepreneurial activity around the globe.

Based on a survey of more than 140,000 adults in 54 countries, GEM estimated that 388 million entrepreneurs were actively engaged in starting and running new businesses in 2011.

This included an estimated 163 million early stage entrepreneurs who are female, and 165 million early stage entrepreneurs aged 18-35.

GEM also offered insight into the multiple phases of entrepreneurship, starting with potential entrepreneurs – those who see opportunities in their area and believe they have the capabilities to start a business.

“The cycle continues: intent to start a business is followed by nascent activity, defined as entrepreneurs who are in the first three months of running a new business,” the report said.

“New business owners are former nascent entrepreneurs; they have been in business more than three months, but less than three and a half years.”

“Together, nascent and new entrepreneurs compose total early stage entrepreneurial activity (TEA).”

“Additional phases include established business ownership as well as business discontinuation, which can supply society with experienced entrepreneurs who may go on to start another business or to use their expertise and resources to benefit entrepreneurs in some way.”

According to the report, Australia is an innovation-driven economy, which means it has a higher proportion of business services compared to factor-driven or efficiency-driven economies.

In 2011, Australia had a nascent entrepreneurship rate of 6% and a new business ownership rate of 4.7%, the report said.

In comparison, the United States recorded an 8.3% nascent entrepreneurship rate in 2011, but a new business ownership rate of only 4.3%, indicating fewer start-ups survived the first three months.

“The 20 innovation-driven economies that participated in both [2010 and 2011] showed, on average, a nearly 22% increase in 2011,” the report said.

“TEA rates in Australia and the United States both increased substantially from above-average TEA rates in 2010.”

“A rise in nascent entrepreneurship (an increase of nearly 36%, as opposed to 8% for new business owners) explains most of this increase in TEA in the innovation-driven economies.”

In addition to TEA, the GEM selected entrepreneurial employee activity (EEA) as a special topic for 2011.

“The focus is on people who play a leading role in creating and developing new business activities for the organisations they work for,” the report said.

According to the report, entrepreneurial employee activity is most prevalent in innovation-driven economies, including Australia.

“The three innovation-driven economies with the highest TEA rates – the United States, Australian and the Netherlands – also have high EEA, indicating that entrepreneurial activity may thrive in both forms,” the report said.