Australian Graduate School of Entrepreneurship, Swinburne University of Technology
Entrepreneurship, Commercialisation, and Innovation Centre, The University of Adelaide
| The GEM Australia project is based on annual research – principally the annual GEM Australia national adult population survey – that presents its results using a matrix approach developed in: Hindle, Kevin 2006. A Measurement Framework for International Entrepreneurship Policy Research: from Impossible Index to Malleable Matrix. International Journal of Entrepreneurship and Small Business, Vol. 3, No. 2, 139-182. This approach breaks total entrepreneurial activity into six components (participation, motivation, innovation, growth, finance and entrepreneurial capacity). Each component is discussed in its own Data Report with respect to three stages of owner-operated business: start-ups (businesses actively starting and no more than three months old); young firms (from four to 42 months old) and established firms (owner operated businesses greater than 42 months old).[1]
Accordingly this data report is one of six that, together, comprise a portrait of entrepreneurial activity in Australia in the calendar year 2006. It is best read in conjunction with the other five data reports and the wide range of other documents and materials, which comprise the multi-faceted GEM project, available at www.gemaustralia.com.au.
The full and correct academic citation for this paper is:
Hancock, Gary, Klyver, Kim, Lindsay, Noel and Hindle, Kevin 2007 Entrepreneurial Motivation in Australia in 2006: A Summary of Salient Data from the 2006 GEM Australia National Adult Population Survey. AustralianGraduateSchool of Entrepreneurship Research Report Series, Vol. 4, No. 2. Melbourne: Swinburne University of Technology. ISSN 1448-7128
At an international level, the GEM Global Executive Report provides the global context for the Australian research by presenting key findings of differences found in comparing the entrepreneurial activity of nations taking part in the GEM project. This year, 42 nations were represented. A full description of the GEM Global Research Methodology can be found in the How GEM Works section of the GEM Australia website. |
Key Words: Motivation, Opportunity, Necessity,
Independence
Aim of this paper: To explore the factors motivating various aspects of Australian business ownership and entrepreneurship within the limits prescribed by the data available in the 2006 GEM Australia national population survey.
 MOTIVATION
RATES
The motivation driving business ownership is broadly categorised as necessity and opportunity based. They have been compared using the GEM Australia national survey for a number of years. ‘Necessity’ describes those who opt for business ownership due to a need for income and the lack of alternative sources of work. Business owners motivated by opportunity, on the other hand, are those who do not have to start a business due to lack of alternate employment opportunities. They start the business because they perceive an opportunity that they believe can be exploited for economic or other advantage.
Like all other developed countries, Australia has always reported a high proportion of opportunity motivated business ownership compared to the proportion of necessity motivated business ownership. 2006 was no exception. Figure 1 shows the split between necessity and opportunity motivated participants in each of the three stages captured by the GEM survey.
Figure 1 –Comparisons of Necessity and Opportunity Motivations
Figure 1 reveals that the relative proportion of opportunity motivated business ownership is highest in the start-up stage. People engaged in the start-up stage are more likely – by a factor of 8.1 (6.5 divided by 0.8) – to report opportunity motivation rather than necessity. The factors for young businesses and established businesses are 4.7 and 3.4 respectively. Evidently, as businesses become older, the less likely they are to be opportunity motivated. This might suggest some kind of a dependency path. As soon as a business is started and resources are committed, it becomes difficult to ‘get out’ of the business without losses. Consequently, people operating in later stages might more often report a necessity motivation.
Figure 2 illustrates the trends, since the 2002 data year, on the opportunity and necessity measures for early-stage participation (people engaged in start-up or young business activities). The ratio of opportunity to necessity occurring in each year is also shown.
Figure 2 – Longitudinal Trends in Opportunity and
Necessity Motivations
The increasing trend from 2004 to 2005 in the ratio of opportunity to necessity motivated business ownership participation has continued in 2006. It has increased from a ratio of 7.2 in 2005 to a ratio of 8.2 in 2006. This is the highest level since Australia commenced participation in the GEM study.
This is a positive a trend. All things being equal, opportunity motivated businesses are to be preferred to necessity motivated businesses in a developed economy. The likelihood for businesses to be innovative, and oriented towards growth and export (see the following reports) is higher when people recognise and take advantage of an opportunity rather than start an enterprise because of no better option.
In the survey, respondents engaged in business ownership motivated by opportunity were asked what was more important for their personal motivation to start a business. Was it: greater independence; an increase in personal income; or maintenance of their income? Figure 3 reports the results.
Figure 3 – Type of Motivations in Stages of Business
Figure 3 clearly reveals that ‘need for greater independence’ is the most frequent motivating factor among those engaged in opportunity motivated business ownership in Australia. The second most frequent motivation is ‘to increase income’, whereas the motivation ‘to maintain income’ was reported as the least frequent motivational factor. These results suggest that participation in business ownership is motivated by personal desire for independence rather than simply financial factors.
[1] Readers should be aware
that the Global Executive team and other countries use different
terms to describe these business stages in their respective reports.
Please refer to GEM Global Research
Methodology section for a description of these differences.
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