Entrepreneurship2.4 International Comparison

2.4.1 Total early-stage entrepreneurial activity (TEA)

The latest Global Entrepreneurship Monitor (GEM) data paints a relatively positive picture of entrepreneurial activity in Australia. The headline indicator — TEA — estimates the share of working-age adults who are in the process of starting a business (i.e. nascent entrepreneurs) or who started a new business as owner-manager less than 42 months before the GEM survey was conducted. In 2019, around 10.5 per cent of Australia's adult population were early-stage entrepreneurs — a continuing decline from 14.6 per cent in 2016. The survey results would imply that the number of Australian adults who were either a nascent entrepreneur or the owner-manager of a new business contracted from 2.2 million in 2016 to 1.7 million in 2019. Australia performed slightly below average in terms of the TEA rate among the 25 OECD economies (11.4 per cent). Australia's performance on this metric was above the UK (9.3 per cent), but trailed the United States (17.4 per cent) and Canada (18.2 per cent) in 2018 by a considerable margin.[66]

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2.4.2 Innovative early-stage entrepreneurial activity

In addition to the headline total early-stage entrepreneurial activity (TEA) metric, the Global Entrepreneurship Monitor publishes information on the fraction of new businesses that offer new or improved products or services to the market. This indicator estimates the extent to which entrepreneurs are introducing products that are new to some or all customers, and that are offered by few or no competitors. In 2017, some 28.5 per cent of Australian adults involved in TEA (more than 513,000 entrepreneurs) indicated that their products or services were innovative, slightly below the OECD average of 31.5 per cent. Australia's estimates lag behind the United States and Canada, which have comparatively higher rates of innovative startups of 35.9 per cent and 43.2 per cent, respectively.[67] Risks associated with the COVID-19 pandemic suggest that new businesses and technologies may fail to emerge, impacting entrepreneurial activity in the medium to long term.[68]

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2.4.3 Adults perceiving start-up opportunities for new businesses

Perceptions of the abundance and quality of business opportunities play an important role in deciding whether to be entrepreneurially active. In Australia, the share of adults who saw good opportunities to start a business in the area where they lived fell from 51.4 per cent in 2017 to 45.7 per cent in 2019, while the OECD average increased from 44.5 per cent to 52.6 per cent in the same period. Canada and the United States are significantly above the OECD average at 67.1 per cent and 67.2 per cent, respectively.[69] The 2017–18 GEM Australian national report also suggests that in 2017 the share of opportunity-driven Australian entrepreneurs was almost four times higher in that year than the share of entrepreneurs that started a business out of necessity (83.2 per cent and 16.8 per cent, respectively). Similarly, Australia performed relatively well on the metric showing the extent to which new businesses are likely to create jobs. Around 28.2 per cent of new Australian businesses expect to create at least six new jobs in the next five years, performing well above the OECD average (20.6 per cent).[70]

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2.4.4 Adults prevented from starting a business by fear of failure

Despite the numerous positive features of Australia's entrepreneurship profile, the Global Entrepreneurship Monitor highlights some areas of concern. Reported fear of failure is at its highest level in Australia at 47.4 per cent in 2019 since the metric was first measured, well above the OECD average of 40.4 per cent. This metric measures the apprehension preventing prospective entrepreneurs from starting a business despite perceiving good opportunities to do so. Australia’s reported fear of failure is well above countries such as Germany (29.7 per cent) and the United States (35.1 per cent).[71] The 2019 GEM Australian national report suggests that entrepreneurs outside CBDs have a lower fear of failure, but were also less likely to perceive start-up opportunities, citing high entrepreneurial potential in regional communities.[72]

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Footnotes