Entrepreneurship: The Critical Factor for Australia’s Development

Entrepreneurship is the backbone of a thriving economy. The Government of Australia is in the process of developing policies to provide a boost to the entrepreneurial capabilities within the country. Development of entrepreneurship is critical to the development of the Australian economy. However, there are some hindrances that inhibit the development of entrepreneurial capabilities within the country.

Entrepreneurship: The Critical Factor for Australia’s Development
Entrepreneurship is the backbone of a thriving economy. The Government of Australia is in the process
of developing policies to provide a boost to the entrepreneurial capabilities within the country. (Office of
Chief Scientist, Australian Government, 2015) Development of entrepreneurship is critical to the
development of the Australian economy. However, there are some hindrances that inhibit the
development of entrepreneurial capabilities within the country.
Small businesses are the primary driving force of growth in Australia.. (Bakhtiari, 2017) 80% of
employment in Australia is provided by Australian forms. Growth in the small business sector is an
important factor in gaining a high level of employment growth in the Australian economy. According to
Connolly, Cava, & Read, (2015), small businesses provided for 43% of the total employment in the non-
banking sectors of Australia. Entrepreneurship can help increase the demand for labour and
consequently, an increase in wages.
The productivity levels of labour in Australia have peaked and have not been growing in the past to
desired levels few years. The OECD Economic Survey for Australia has strongly recommended a focus on
increasing the productivity of workers, in order to increase the wages of the workers. (Organization for
Economic Co-operation and Development, 2017)Wages in Australia have peaked in the recent past and
increasing the productivity levels of the workers is important in order to push the overall wages higher.
According to DeVera, (2016) entrepreneurship is a critical factor in increasing the average productivity of
labour in Australia. This is particularly true of knowledge and creativity based enterprises.
One of the crucial functions of entrepreneurship is to create capacities. When an entrepreneur seeks to
manufacture any product or a service provider seeks to provide a service, they must bind together all
other factors of production such as land, labour and capital (or technology). As result, the resources of a
country are put to productive use. Thus, entrepreneurship is a thread that binds the various other parts
of an economy. Thus, entrepreneurship leads to what is known as “capital formation” or the formation
of productive capacity. In this process, the factor markets or the markets for factors of production
receive a boost. This may also have spill-over effects in the form of development of human capital.
“Human Capital” is described as the inherent capacity of labour which is more than just the physical
measurement of the output generated by labour. It refers to the intangible assets of labour such as
creativity, knowledge, skills etc. (Samuelson & Nordhaus, 2006)
Australia is a developed nation. Yet, there are regional imbalances that are widespread, with inequality
increasing even further. The Aboriginal and Torres Strait tribes do not have the opportunities available
as a citizen from one of the well developed parts of the country such as the ACT region. (Organization
for Economic Co-operation and Development, 2017) It is natural for entrepreneurs to seek alternatives
that are most efficient. For example, a wine producer would seek to produce products at the lower rates
than imported wine to survive in the domestic markets. Hence, they would naturally diversify the
industry in areas where the cost of land is cheaper and where the grapes are available at the cheapest.

Hence, it is likely that the enterprise would be located in an under developed area of Australia. Thus, the
factor endowments of any region can be fully exploited, only by way of promoting entrepreneurship.
A majority of the big business of Australia were established over a 100 years ago. DeVera, (2016) There
is little evidence of a major corporation originating from Australia in the last century. This is due to
several hindrances within the Australian Economy. Some of these include:
Shortage of Financial Resources
An increasing number of bankruptcy cases since 1987. This trend is explained by.. as a diversion of funds
from small business to larger companies in the resources sector of Australia. Funds from the banking
and non-banking financial Companies get diverted towards the resources sector, reducing the amount
of funds available for businesses, especially small businesses (Bakhtiari, 2017) . A solution to this
problem is to attract greater investment from abroad, especially, Foreign Institutional Investors who
must be provided incentives to invest in home grown start-ups in Australia. It is important to develop
the capital markets even further and offer incentives, in terms of returns and stability, to institutional
investors in order to gain more investment. (Genberg, 2015)
Globalization
Globalization makes it increasingly difficult for firms to compete with the cheaper imports from other
firms like Australia. It has been observed that the share of new manufacturing industries or
manufacturing enterprises is on the decline. This maybe due to competition in manufacturing from
other countries that have larger manufacturing capacities and large endowments of labour resources
such as China and Thailand. There is evidence for this phenomenon from USA where failure of
businesses were in greater numbers in those industries that traditionally import goods from countries
such as China. (Bakhtiari, 2017). Similarly, although services and technical enterprises seem to have a
larger share among new enterprises in Australia, they face tough competition from countries like India
which is well endowed with labour resources. (Bakhtiari, 2017) It is important to make Australian
industries more competitive through means of innovation without imposing trade barriers which might
start trade wars.
Growth in Innovation
Australia placed 72nd in Innovation Efficiency, in spite of being one of the Top 10 countries in the world
by GDP. In a post Artificial Intelligence and automation world with an emerging robot economy
worldwide, most unskilled jobs are expected to be automated, highly skilled and creative jobs are
needed, in order to increase employment opportunities. (Borland & Coelli, 2017) The role of innovation
and skills in such an environment is especially important. Tertiary education, vocational education, soft
skills and creative thinking are important from this standpoint. In such an environment schools and
colleges have an increased role in helping students build their skills as well as help them in learning
means to translate their knowledge into practical applications. (Office of Chief Scientist, Australian
Government, 2015) However, it is also important to ensure that the cost of gaining education does not
increase as result of a policy push to improve the education system so that access to education is not
limited. Opening Australia to highly skilled workers may also be a key to solving the problem of

innovation. As countries improve seek policies to improve their human capital, the competitive
advantage that countries in the developed world have, in terms of better knowledge and intellectual
property will be eroded. (Rajan, 2018)
Conclusion
The Australian government must provide incentives to develop entrepreneurship as it is critical for the
development of a knowledge based economy that will be able to fully exploit the human capital of the
country. In order to do so the availability of financial resources, limited barriers of access to natural
resources and knowledge resources is crucial, along with the development of policies that help support
this new approach to development.
Bibliography
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