Entrepreneurship2.3 Business Growth
2.3.1 High-growth firms measured by turnover
Evidence suggests that business growth is associated with certain types of innovation.[57] However, exceptional growth is not some innate business characteristic, but rather a phase that some businesses go through during their life cycle. Between 2008 and 2012, Australia’s proportion of high-growth firms (HGFs) as measured by turnover was consistently above the median for all countries for which data are available. This was despite the decline of Australia’s HGF proportion since 2008. However, by 2013 the all-country median had lifted dramatically to reach 10.5 per cent, while Australia’s HGF proportion continued its decline to 9.3 per cent in 2012–13. The most recent available estimate of Australia’s proportion of HGFs is 9.6 per cent for 2016–17, whilst the all-country median has now reached 19.6 per cent for 2017. Further investigation may be warranted into the underlying drivers of these trends.[58][59]
2.3.2 High-growth firms measured by employment
Australian HGFs make a disproportionate economic contribution compared to other businesses. Between 2004–05 and 2011–12, businesses with high-growth in employment represented only 9 per cent of all businesses with five or more employees but they contributed around 46 per cent of net positive employment growth. This means that the effect of job gains outweighed job losses. Further, 23.5 per cent of net positive employment growth came from large HGFs (as measured by employment), which represented only 0.4 per cent of businesses. HGFs are difficult to identify, largely because of their lack of growth persistence and difficulties in predicting which businesses will grow.[60] Since 2007–08, Australia’s proportion of HGFs as measured by employment has steadily fallen from 7.2 per cent to 5.2 per cent in 2016–17.[61]
2.3.3 Businesses changing turnover range
Business-growth patterns can be illustrated by the number of businesses moving from smaller turnover ranges to larger ones over a given period. Of the 644,833 businesses that started with an annual turnover in the range $50k to less than $200k in the year to June 2020, some 88,065 businesses (13.7 per cent) increased their revenue to a higher range in the following year. Of these, 230 businesses moved into the $5m to less than $10m range and a further 165 businesses increased their annual turnover to $10m or more.[62] All of these 88,065 businesses could potentially meet the OECD definition of a high-growth enterprise — if they remain in their higher turnover range for another two years.[63]
2.3.4 Businesses changing employment range
Business-growth patterns can be illustrated by the number of businesses moving from smaller employment ranges to larger ones over a given period. Of the 558,464 businesses identified as micro businesses (1–4 employees) at June 2020, some 36,673 grew to become small businesses (5–19 employees) by June 2021. A further 1,665 grew to become medium-sized businesses (20–199 employees) and 69 businesses recorded truly exceptional growth by becoming large businesses (200+ employees). A total of 38,407 micro-businesses — 6.9 per cent of all employing micro businesses — increased their employment range during the year.[64] All of these businesses could potentially meet the OECD definition of a high-growth enterprise — if they remain in their new size range for another two years.[65]
Footnotes
[57] Department of Industry, Innovation and Science (2017) Australian Innovation System Report 2017, Office of the Chief Economist
[58] OECD (2017) Entrepreneurship at a Glance 2017, OECD Publishing
[59] Customised ABS data commissioned by the Department of Industry, Innovation and Science
[60] Department of Industry, Innovation and Science (2017) Australian Innovation System Report 2017, Office of the Chief Economist
[61] Customised ABS data commissioned by the Department of Industry, Innovation and Science
[62] ABS, Counts of Australian Businesses, including Entries and Exits, Cat. No. 8165.0
[63] Audretsch D B (2012) Determinants of High-Growth Entrepreneurship, OECD and Danish Business Authority
[64] ABS, Counts of Australian Businesses, including Entries and Exits, Cat. No. 8165.0
[65] Audretsch D B (2012) Determinants of High-Growth Entrepreneurship, OECD and Danish Business Authority