Australia is in the midst of an entrepreneurial crisis.
We have the lowest rate of entrepreneurial growth of any OECD country and we have a falling rate of new business creation (there are less new businesses now than there were a decade ago, despite a larger working age population). The business entry rate has also fallen by 16% since 2003-04 and 90% of Australia’s largest companies were founded before 1925 (88% of the United States’ top 500 firms did not exist fifty years ago). There is increasing concern that we are also failing to integrate immigrant-entrepreneurs into our economy.
The construction industry has a particularly important role to play in lifting our entrepreneurial performance. Although it is often labelled as a low innovation industry, it affords entrepreneurs enormous potential to create economic prosperity, to build community well-being and to improve the environment in which we live and work. It has the largest number of businesses of any industry in Australia (16.6% of all businesses) and is Australia’s largest employer of youth (43.3% of workers aged 15 to 24 years, compared with 38.8% across all industries). Business establishment rates are higher in the construction sector than any other sector, although construction also has the highest rate of insolvency in Australia. It is clear that while entry into the construction industry is easy for potential entrepreneurs, there are many barriers to growing a sustainable business which need to be better understood.
In understanding how to improve the level of entrepreneurial activity in the construction industry, it is useful to look at the large body of entrepreneurship research which shows that there is no lack of opportunity compared to the past. The problem is that we lack ‘agency’ to take those opportunities. The term ‘agency’ refers to the combination of environmental conditions and individual attributes which are required to bring business opportunities to life and at an environmental level, a wide range of factors have been identified as important. These include observation of entrepreneurship at an early age, role models, education and work experience. Other research has shown that the best predictors of entrepreneurial capacity at a young age are family ties and social status, parental guidance, entrepreneurial competencies, academic attainment, self-efficacy, social skills, entrepreneurial intention and experiences of unemployment or workplace frustrations. While many commentators use the examples of Steve Jobs and Mark Zuckerberg as evidence to undermine the importance of formal education as a driver of entrepreneurial success, this is more related to the opportunity cost of education (in terms of the time it takes to gain a qualification) rather than the value of the skills and knowledge education imparts, which have been statistically correlated with the probability of business success.
In addition to these broad environmental determinants of entrepreneurial success, research has also pointed to a number of individual attributes which are important. These include: a risk taking personality; creativity; high motivation; a need for self-actualisation; a need for achievement; and thriving in uncertain contexts. Other studies have shown that a need to unlock personal potential, material motivations, desire for self-fulfillment, independence and financial security are important factors driving entrepreneurship. For many social and ecological entrepreneurs, motivation to start a business stems more from a deep belief in the need to bring about social and environmental change and in the value of the service, work or product they are providing, which often represents a significant element of their own personal identity and values. Other research has shown that successful entrepreneurs share several common attributes: humility; intellectual curiosity; optimism; vulnerability; authenticity; generosity and; openness. These attributes make entrepreneurs more ‘attractive’ or ‘magnetic’ to others, giving them a greater chance of being exposed to new ideas and insights from other disciplines which might create a new business opportunity. This is commonly referred to as one’s social capital.
The above insights are general in nature but are equally applicable to people who work in the construction industry. However, recent research into the lives of successful Australian construction entrepreneurs shows that there may be other factors at play for those who work in our industry. For many entrepreneurs, a major motivator is the opportunity to gain a better work-life balance and escape the inflexibility and long work hours which characterize construction work. Surprisingly, material motivations rank lowly in reasons to start a business compared to other factors such as a need for independence, opportunities for personal growth and achievement and to leave a personal legacy. Research also shows that family influences have a significant impact on a decision to start a business in construction with family business backgrounds in construction playing a prominent role in the lives of many successful construction entrepreneurs. Early exposure to the construction industry is as an important common thread in the lives of successful construction entrepreneurs– instilling a sense of loyalty, pride, identity, connection and nostalgia with the culture of the industry and its personalities. Role models in the construction industry also seem to play an important inspirational role in the intention and decision to start a business and it seems that for many construction entrepreneurs, the decision to start a business is not a sudden one but something which has been planned from an early age, sometimes consciously but at other times subconsciously through imbedded social expectations from early lives and social circles. Cultural factors also play a significant role for many construction entrepreneurs in starting their business, with many coming from a migrant background. University education is generally seen as important by those successful construction entrepreneurs which have it, in opening their minds, in building professionalism, in understanding of management processes and in opening up opportunities for progression within a business. However, while a university degree is a good general introduction to the industry, it is too often behind practice and fails to provide the networks, tacit knowledge and practical skills for starting a new business. The vast majority of construction entrepreneurs believe that their best education for starting a business is ‘on the job’, with formal university and technical education contributing little to their ability to exploit an entrepreneurial opportunity. Construction industry experience is critical in understanding the market conditions which can lead to entrepreneurial opportunities, the constraints under which entrepreneurs must work in disrupting the system, the technical aspects of construction work, the administrative capability to run a business and the social capital and networks which provide the basis for team-building and future client bases.
The above insights provide important food-for-thought for Australia’s policy makers, construction firms and educators. New policies are required to incentivise and stimulate a more conducive eco-system to support aspiring entrepreneurs in industries like construction. This is crucially important in the context of current political debates. New businesses have the greatest economic, productivity and jobs creation. They inject innovative ideas into our industries, challenge outdated methods of production, raise wages, boost employment and reduce growing levels of inequity and disadvantage in our society.