The GEM Report: How Kiwi entrepreneurs rate

By ADAM JONES

There is definitely something in our water. Even before Sir William Hamilton went down to the shed and came back with a jet boat engine we were a "give it a go" nation.

Our national psyche has always included a place for entrepreneurial endeavour. The Global Entrepreneurship Monitor confirms this, identifying New Zealand as one of the most entrepreneurial countries in the world.

The Kiwi "can do" is up there with the "Aussie battler" attitude, leading the world in a number of entrepreneurial aspects. Apart from New Zealand being in the top five entrepreneurial countries, Gem has made a number of astounding findings.

The most exciting results include Maori rating higher in total percentage than any other ethnicity. Female and senior entrepreneurship rates were also very high, rating third and first in the world respectively.

Overall, the findings show mostly positive entrepreneurial indicators.

What is Gem?

Gem is the world's most comprehensive study of entrepreneurship.

Twenty-nine countries are releasing a 2001 Global Entrepreneurship Monitor. The New Zealand report is carried out by the Unitec New Zealand Centre for Innovation and Entrepreneurship. The principal author is the director of the centre, Dr Howard Frederick.

The London Business School and Babson Business College (Boston USA) are simultaneously releasing the global Gem.

In New Zealand, Gem surveyed 2000 adult New Zealanders between the ages of 18 and 64 and compared this study with the 28 other countries. Also 40 "key informants" - Kiwi experts, entrepreneurs, educators, politicians and business people - were given in-depth "entrepreneurial assessment" interviews. The Gem report took 10 months to complete.

Although this is the first New Zealand Gem report, the methodology has been proven overseas over the past four years.

The key results

In all, we have around 420,000 people, or 18.2 per cent of the adult population, involved in entrepreneurial activity. This rate is higher than in the United States. Only Mexico, in fact, out-rates us in overall entrepreneurial activity.

In the main, New Zealanders choose to become entrepreneurs - our 15 per cent "opportunity" entrepreneurship rate is the highest in the world. Opportunity entrepreneurs follow hot business opportunities.

Conversely, "necessity" entrepreneurs are entrepreneurs who find themselves in this position due to redundancy or job loss. We only have a moderate 2.8 per cent of entrepreneurs in this position. This compares to a world average of 2.49 per cent.

New Zealand has the highest rate of business angel activity. In fact, 6.2 per cent of the population has given an average of $20,000 to start-up businesses in the past two years. Behind South Korea, we also have the highest informal investment for business start-ups. Business angel activity is often an important factor in the growth of business.

New Zealand women are highly entrepreneurial. Women in their mid-20s and early 30s outrank men in entrepreneurship. Overall, New Zealand women are the most entrepreneurial per-capita in the world.

One of the most important findings is that Maori and Pacific Islanders are as entrepreneurial as the Pakeha population. Statistically, Maori are the most enterprising ethnicity in New Zealand for total entrepreneurial activity.

The report points to cultural and historical possibilities for this finding.

Gem also says that Maori entrepreneurship can be seen in early European settlement of New Zealand.

Another interesting finding is that New Zealand has the highest proportion of senior (35-65 years) entrepreneurs. In the 45 to 54-year-old bracket, the New Zealand average is over 15 per cent, compared to the world average of 6 per cent. The report finds "the global trend is for entrepreneurs to be in the 24 to 45-year range".

Overall, key informants rated the past 15 years of "liberalisation, free trade, government policies and de-regulation" as a success. The experts rated these as most important in the success and growth of business ventures.

Areas of concern

Generally, the Gem report has found positive conditions in New Zealand for business start-ups and business growth. But in some areas, we need further work.

For one, New Zealanders still view entrepreneurs as slightly dodgy. Del Boy, Arfur Daily and Billy T James' "Cunning, eh?" character are still ingrained in the nation's mindset. This was one of the major areas of concern for the interviewed experts. Put simply, it is a hard path for an entrepreneur if your peers and family don't understand where you are coming from and are slightly suspicious of your undertaking.

Another concern highlighted by the report is that New Zealand favourite, the tall poppy syndrome. We've all heard of it and know what it means - enough said.

New Zealand has a low rate of classic venture capital investment. Typically, Kiwi start-ups struggle and they find money from friends and family, acquaintances, work colleagues, even from their employers. According to Gem, 11 per cent of entrepreneurs get funding from their employers.

We rate poorly in venture capital available to business.

Principal author Dr Frederick says: "How can a Kiwi company with $20,000 informal investment, or even with $1.4 million venture capital, pretend to compete with a company in the United States where the company has 10 to 20 times more investment?"

Another issue is the type of enterprise common in our environment.

Gem identifies the typical Kiwi entrepreneur as inward-looking, Auckland-based and in the service industry. This type of entrepreneur aspires to employ six people. If they realised this dream, our current entrepreneurs would employ an extra 2.5 million people.

In order to have a strong economy, a far more international focus needs to be developed.

Gem recognises that entrepreneurs need to be educated toward opportunities in global markets. It goes further to say that educational facilities are failing to do this.

Recommendations

The Gem report raises many questions and opens the door to research in a number of areas. Why are we so entrepreneurial? Why do women feature so highly? Why are Maori so entrepreneurial yet under-represented in the business world?

Importantly, the "how" questions also need to be addressed. How do we improve our business horizons? How do we improve education for entrepreneurs and how do we get our talented entrepreneurs competing on the world stage? The Gem report recommends further study into these areas.

Overall, recommendations are minimal, as there needs to be further study on key areas and confirmation of findings in subsequent reports.

The report says, "As this is only the first Gem New Zealand study, these recommendations must be tentative and broadly expressed. Until we have a longer run of data, and can probe our initial findings further, we have been cautious in our recommendations."

The Gem report makes several suggestions. Briefly, these are:

* The moderate rate of business success for entrepreneurial start-ups needs to be addressed.

* Business partnerships with government should be encouraged in the provision of support service for new and growing firms

* Further provision and strengthening of entrepreneurship teaching, research and education at all levels of the education system.

* Education should provide more emphasis on teaching initiative, self-sufficiency and entrepreneurial-driven thinking.

* Use of entrepreneurial mentors and role models in the educational system.

* Tertiary staff incentives to start businesses.

* A study of social welfare to see where we can improve the success rate of self-employed and entrepreneurs.

* A thorough study of tax schemes for research and development expenditures, education and development for Maori that is beneficial and respectful of the tribe and community.

All in all, as a nation we are pretty entrepreneurial and Gem confirms this. But in order to compete internationally, we have to put some key structures in place to take advantage of our current position.

The romantic notion of an entrepreneurial business started in the garden shed needs to be followed up with well-defined business structure, education and access to appropriate capital investment.

With these key structures in place, our knowledge economy is poised for success.

* The Buzzy Bee symbol is used with permission of Buzzy Bee Licensing Ltd.

GEM Special Report