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Entrepreneurial ecosystems and the role of regulation and infrastructure

entrepreneurial ecosystem

This is the second article on the topic of entrepreneurial ecosystems that build on a series of white papers developed by the Small Enterprise Association of Australia and New Zealand Ltd (SEAANZ). The first was published here in “The Conversation” in December 2014 and addressed the issues of what an entrepreneurial ecosystem is, and what role government policy can play in helping to foster their emergence and growth.

He we look at the second White Paper, which focuses on the role of regulation, infrastructure and financing. However, in this article I will examine the first two of these issues and devote a later article to financing.

The motivation for this work was the G20 Summit hosted by Australia last year. In particular the special G20 SME conference that was held at the Victorian Parliament House on 20 June 2014. That meeting was convened by the Australian Minister for Small Business Bruce Billson; and organised by the Australian Treasury, Australian Chamber of Commerce and Industry, the ANZ Bank, Australian Bankers’ Association and the Organisation for Economic Co-operation and Development (OECD).

The role of regulation in entrepreneurial ecosystems

As explained in the first article in this series, an entrepreneurial ecosystem is a conceptualisation of an environment in which the right combinations of elements help to foster economic growth through enterprise and innovation. One of these elements is the regulatory framework in which this entrepreneurial activity is able to take place.

The following diagram illustrates the main regulatory issues that impact on a business throughout its lifecycle. It commences with how easy it is to start-up a new business venture and also how easily the new owners can employ workers. Other key issues relate to the compliance costs of securing premises and having all the necessary utilities and licences secured.

Regulations impacting the business throughout its lifecycle World Bank (2013)

In many cases local, state and federal government regulations can impact here. The other major issues relate to getting financing, paying taxes and other fees and charges, plus how well the legal system protects small business owners and shareholders, and deals with insolvency.

Government regulation encompasses many things but the World Economic Forum (WEF) has suggested that there are at least three key issues likely to impact on an entrepreneurial ecosystem. These are the ease of doing business, promoting “business friendly” legislation and policies and taxation policy, particularly for small to medium enterprises (SMEs).

Ease of doing business

The first of these issues – “ease of doing business” – is related to what is popularly termed “red tape”, or the amount of compliance costs and bureaucratic encumbrances placed on businesses. A useful global guide to this is the World Bank’s “Doing Business” study that compares 189 nations against a set of measures of how easy or hard it is to do business there.

Some of the key criteria used are the ease of starting up a new business, securing construction permits, registering property, getting electricity connected, paying taxes and trading across borders. At a global level New Zealand is the easiest country in the world in which to start-up a new business, ranking first out of 189 nations. Australia, by comparison was ranked 4th in the world with Singapore just ahead in 3rd place.

As shown in the diagram below, Australia and New Zealand rank quite well in comparison with the OECD average across most indicators of ease of doing business. However, they are generally well behind Singapore, which in 2014 was ranked number 1 out of all countries surveyed by the World Bank.

Doing Business - Complexity and Cost of Regulations World Bank (2013)

New Zealand generally out performs Australia on the “ease of doing business” indicators. In 2014 it ranked 3rd in the world after Singapore and Hong Kong. In an area like ease of starting up a new business, it was found to take only one step, half a day and cost little or nothing in fees to get this done in New Zealand.

By comparison the average across the OECD was 7 separate procedures, 25 days and costs of around 32% of the firm’s annual income. Australia’s performance on starting up a new business suggested that it took at least three separate procedures, around two and a half days and about 0.7% of annual income in fees.

Business friendly regulations and policies

However, the act of starting up the new business is perhaps of less importance than the ability of the new owners to secure power, water, building approvals and the necessary licences to undertake the operations required to run the business. Here the worst performing areas for Australia were the compliance cost of trading across borders, paying taxes and registering property. For New Zealand it was getting electricity supply connected.

According to the World Bank it was taking an average of 5 separate procedures, 75 days and a cost of around NZD $45,721.50 to get a new electricity connection made in the city of Auckland. In Australia this process was found to take the same number of procedures and days, although at a lower cost of AUD $5,152.90. By comparison Singapore was able to connect electricity in about 38 days at a cost approximately 40% of that charged in New Zealand.

Australia’s compliance costs for trading across borders were found to be worse than the OECD average. The World Bank study found that to secure export permits it was requiring Australian firms to complete at least five separate documents and for imports seven documents. The average cost per container shipped from Australia was around US $1,150, and US $1,170 per container for imports. This compared to US $440 per container in Singapore and US $870 (export) and US $$825 (import) for New Zealand.

The time taken to export or import goods to and from Australia was around 8 to 9 days. This compared to only four days for Singapore. All of this highlights the importance of ensuring that government regulations are efficient and do not impose unnecessary compliance burdens or costs on business.

What is needed is not the removal of any regulation or “red tape” on businesses, particularly small firms, but “smarter” regulations. As the SEAANZ White Paper argues:

While the cutting of ‘red tape’ is often used as a mantra by those seeking to lift the regulatory burden off the shoulders of SMEs, there are frequently few successful campaigns to cut red tape. This is because government regulation and compliance is typically put in place to protect the community, the workforce, consumers, the environment or other businesses. Some industries are more heavily regulated than others due to high potential for risk (e.g. air transport, construction, medical services and pharmaceuticals).

The World Bank suggests that business regulations should be streamlined, meaningful, adaptable, relevant and transparent. This forms the concept of “smart” regulations as shown in the following diagram.

SMART Regulations World Bank (2013)

In other words it is not a matter of making government and bureaucracy smaller so as to get it out of the way, but to ensure that it is more efficient, and more responsive to the needs of the public and industry. Streamlining local, state and national government policies to reduce duplication, and shifting engagement with government online via “one-stop-shop” portals is one way that this might be achieved.

Taxation policy

Of all the areas of government regulation and compliance that raise the most discussion it is taxation policy. Yet it is important to recognise that while nobody likes to pay tax, without a well-managed taxation system the viability of the nation state is in serious jeopardy. Key considerations for tax policy in entrepreneurial ecosystems are how equitable are the taxes, do they provide incentives for new businesses to form, and do they disadvantage small firms?

According to KPMG the average corporate taxation rate for Australia and New Zealand over the period 2009-2014 has been around 30% which compares to 25.6% for the OECD, 22% for the European Union, 40% for the United States and 17% for Singapore over the same time period. This suggests that while Australia and New Zealand company tax rates are not the highest in the world, they are generally higher than the OECD and EU average.

The World Bank’s analysis of taxation compliance found that Australian businesses were paying around 47% of annual profit in taxes and making an average of 11 separate payments. This included company income tax, superannuation guarantee levy, state payroll tax, worker’s compensation, fringe benefits tax (FBT), land tax, municipal tax, vehicle tax, fuel excise, GST and taxes on insurance contracts. It was also estimated that this taxation compliance was taking an average of 105 hours per year for businesses to complete.

By comparison, in New Zealand companies were making only 8 payments. These included company income tax, the employer paid Accident Compensation Corporation (ACC) levy, road user charges, interest tax, FBT, property tax, tax on cheque transactions, fuel tax, and GST (VAT). The average rate of company tax in New Zealand was estimated at 34.6% of annual profit, and it was taking around 152 hours per year to complete the compliance paperwork.

This compares to Singapore where only 5 taxes are paid each year and the time taken is estimated to be around 82 hours per annum. Overall, this suggests that countries such as Australia and New Zealand could improve their taxation systems with a view to reducing the amount of taxes that have to be paid, the rate of taxation and the time taken to complete the necessary paperwork.

It is particularly important to note that small businesses on average pay a much higher rate of company tax than their larger counterparts. This was a point raised by Dr Sergio Arzeni, Director of the OECD’s Centre for Entrepreneurship, SMEs and Local Development at the G20 SME Conference last year. He told the conference that while compliance costs or “red tape” hit small firms around 10 to 30 times more than larger firms, the rates of tax paid were also unequal.

For example, he stated that while the average rate of taxation paid by SMEs across the OECD was around 30%, that for large firms was between 2% and 5%. This suggests that government policy could do much more to ensure that large firms are paying their fair share of tax rather than leaving the burden to fall disproportionately on the small business sector.

The importance of infrastructure

In addition to regulation and taxation policy the vibrancy of an entrepreneurial ecosystem is also dependent on the quality of infrastructure available within a country or region. According to the WEF, the main infrastructure critical to the growth of these ecosystems are transport (e.g. road, rail, sea and air), telecommunications (particularly broadband access), and utilities (e.g. electricity, gas, water, sewerage).

There is little doubt that the ability for business to perform at a globally competitive level is contingent on the quality of this infrastructure. This is something I wrote about in another article in “The Conversation” back in 2012. That article pointed to Australia’s ranking of 20th out of 142 nations as measured by the WEF’s Global Competitiveness Report, which noted that our infrastructure was lagging behind world’s best practice.

The latest Global Competitiveness Report ranks Australia in 22nd place and notes that the country’s position has been steadily worsening since 2009. Key areas of concern are labour market and wage setting “rigidities”, although it has excellent financial services, a sound banking system, excellent higher education and training sectors and the fourth lowest public debt-to-GDP ratio in the OECD. The report also points to concerns over Australia’s tax rates and regulations, government regulations efficiencies and infrastructure.

It scores Australia’s overall infrastructure in 35th place, which is behind New Zealand in 32nd the United States in 12th place, or Switzerland and Singapore in 1st and 2nd places respectively. Further, while the adoption rate of internet services is high, the internet bandwidth in the country is poor. Australia’s ranking in relation to international internet bandwidth (kb/s) per user is 39 out of 144 countries. This places us ahead of New Zealand (57th place), but well behind the majority of European Union (EU) states plus Hong Kong (ranked 2nd) and Singapore (ranked 4th).

It is critical to Australia’s long term economic growth and our ability to foster the next generation of globally focused, innovative and competitive industries to have world’s best practice infrastructure. Any failure by government to provide or facilitate such infrastructure will impede the emergence, growth and development of business.

This is particularly the case for high speed broadband services. The ability for young and growing small firms to remain competitive in the global economy is heavily dependent on their being able to access high speed broadband infrastructure. Increasing use of online services for e-commerce, e-business (e.g. supply chain management), e-tendering and e-marketing have made it imperative for SMEs to engage with the digital economy.

In the EU a target has been set for all Europeans to be able to access the internet with broadband speeds of more than 30 Mbps by 2020. The EU also plans to provide the majority of users with speeds of over 100 Mbps by the same date. This will be critical for SMEs engaging online business and marketing activities where a minimum requirement will be 100 Mbps for both uploading and downloading digital data.

Australia’s business community cannot afford to be left behind in relation to broadband infrastructure. It is a shame that the National Broadband Network (NBN) has been turned into a political issue rather than a significant investment for the future competitiveness of the national economy.

Key recommendations

The SEAANZ White Paper recommends that all government agencies and regulatory authorities should move towards a “digital by default” model of dealing with business online. Such online systems should also aim to achieve a “one-stop-shop” model for compliance issues. All efforts should also be made to achieve a “joined-up-government” approach, linking local, state and federal government agencies to reduce duplication and compliance costs.

Regulation of SMEs should be dealt with on “risked-based” model in which employees of regulatory authorities are empowered to adopt flexible and reasonable approaches to how they deal with small firms. This should follow an “educate and inform” approach, rather than treating all firms as posing the same threat. They should see their role as providing services not enforcement. This is consistent with the recommendations from the 2013 Productivity Commission Report into how regulators should deal with small business.

Conclusions

In order to foster a healthy and growing entrepreneurial economy it is necessary for government to ensure that they maintain efficient, effective, and easy to use services, and that compliance costs and regulations are managed intelligently. While regulation and taxation are necessary evils they should be designed to avoid unnecessary costs, inefficiency and duplication.

Infrastructure is also critical to business competitiveness. If road, rail, sea and air transportation systems are inefficient, congested or poorly maintained the net effect will be to strangle the ability of business to operate competitively. If telecommunications services, broadband, power and water infrastructure are unduly expensive, slow or ineffective, this will also impede the competitiveness of business.

If we take an ecosystem’s perspective, the ability of businesses to start-up, grow, employ people and generate economic growth, will be enhanced if the macro-conditions within their environment are appropriately configured. Poor infrastructure and excessive regulation and compliance costs will impede economic growth and stifle long term prosperity.

For more reading see:

Mazzarol, T. (2014) Growing and sustaining entrepreneurial ecosystems: The role of regulation, infrastructure and financing, White Paper WP02-2014, Small Enterprise Association of Australia and New Zealand (SEAANZ).

Note: Tim Mazzarol is President of the Small Enterprise Association of Australia and New Zealand Ltd (SEAANZ). SEAANZ Ltd is a not-for-profit organisation founded in 1987. It is dedicated to the advancement of research, education, policy and practice in small to medium enterprises.

Entrepreneurial ecosystems and the role of government policy

Entrepreneurial ecosystem ongroup.wordpress.com

The final communique of the 2014 G20 Leaders’ Summit called for enhanced economic growth that could be achieved by the “promotion of competition, entrepreneurship and innovation”. There was also a call for strategies to reduce unemployment, particularly amongst youth, through the “encouragement of entrepreneurship”.

This desire to stimulate economic and job growth via the application of entrepreneurship and innovation has been a common theme in government policy since at least the 1970s. The origins of this interest can be traced back to the report produced by Professor David Birch of MIT “The Job Generation Process” that was published in 1979.

A key finding from this work was that job creation in the United States was not coming from large companies, but small independently owned businesses. It recommended that government policy should target indirect rather than direct strategies with a greater focus on the role of small firms.

Fostering the growth of entrepreneurial ecosystems

Over the past 35 years the level of government interest in entrepreneurship and small business development as potential solutions to flagging economic growth and rising unemployment has increased. It helped to spawn a new field of academic study and research.

This trend was boosted by the success the iconic “technopreneurs”. Technology entrepreneurs such as Steve Jobs of Apple, Bill Gates of Microsoft, Jeff Bezos of Amazon, or Larry Page and Sergey Brin of Google have become the “poster children” of the entrepreneurship movement.

One of the best known centres of high-tech entrepreneurial activity has been California’s Silicon Valley. Although it is not the only place in which innovation and enterprise have flourished, it has served as a role model for many governments seeking to stimulate economic growth.

Today “science” or “technology” parks can be found scattered around the world. They usually follow a similar format, with universities and R&D centres co-located with the park, and venture financiers hovering nearby looking for deals. Most have been supported by government policy.

What governments want is to replicate Silicon Valley and the formation and growth of what have been described as “entrepreneurial ecosystems”. However, despite significant investments by governments into such initiatives, their overall success rate is mixed.

So what are “entrepreneurial ecosystems” and what role can government policy play in their formation and growth? This was a question addressed by the first White Paper in a series produced by the Small Enterprise Association of Australia and New Zealand (SEAANZ). The purpose of these papers is to help enhance understanding of what entrepreneurial ecosystems are, and to generate a more informed debate about their role in the stimulation economic growth and job creation.

What is an entrepreneurial ecosystem?

The concept of the “entrepreneurial ecosystem” can be traced back to the study of industry clustering and the development of National Innovation Systems that took place in the 1990s. However, the term was being used by management writers during the mid-2000s to describe the conditions that helped to bring people together and foster economic prosperity and wealth creation.

In 2010 Professor Daniel Isenberg from Babson College published an article in the Harvard Business Review that helped to boost the awareness of the concept. The diagram below shows the nine major elements that are considered important to the generation of an entrepreneurial ecosystem. The focus of this first SEAANZ White Paper is on the role of government policy. Future White Papers will deal with the other eight elements.

Entrepreneurial Ecosystem Mazzarol 2014

Isenberg outlined several “prescriptions” for the creation of an entrepreneurial ecosystem.

The first prescription was to stop emulating Silicon Valley. Despite its success the Valley was formed by a unique set of circumstances and any attempt to replicate it in other places were unlikely to succeed. This led to a second prescription, which was to build the ecosystem on local conditions. Grow existing industries and build on their foundations, skills and capabilities rather than attempting to launch high-tech industries from scratch.

The third prescription was the importance of engaging the private sector from the start. Here the role of government is indirect and one of a facilitator not a manager. In trying to shape the growth of such ecosystems attention should be given to the support of firms with high growth potential that can help to generate a “big win” early on. This is the opportunity for local success stories to become role models for others.

However, care must be taken by governments not to try to pick winners or over engineer the system. High growth firms by nature are inherently risky and highly innovative firms are typically unique. As such there is no magic formula for their success. Helping such firms to succeed is more about removing obstacles to their growth such as anti-competitive cultures, unfair taxation on small firms, unnecessary “red tape” or lack of access to markets, skilled employees or investment capital.

In seeking to help stimulate entrepreneurial high growth firms it is important, according to Isenberg, to avoid flooding the system with too much “easy money”. This can take the form of government grants and venture capital funds that are too easily obtained.

What is important is to grow firms with strong root systems that can sustain their own growth as much as possible before seeking additional funding. Such firms should be financially sound; profitable and well managed, or their likely success rates will be low.

The focus should be on encouraging sustainable, growth oriented and innovative firms not simply fostering more start-ups. Starting a new business is the easy part, successfully growing it is the challenge.

What can government do to stimulate entrepreneurial ecosystems?

The challenge for government policy is to develop policies that work, but avoid the temptation to try to effect change via direct intervention. A 2014 study of entrepreneurial ecosystems undertaken by Colin Mason from the University of Glasgow and Ross Brown from the University of St Andrews for the OECD, developed a set of general principles for government policy in the relation to these ecosystems.

They contrast “traditional” versus “growth-oriented” policy approaches to enterprise development. The first of these approaches tends to focus on trying to grow the total number of firms via business start-up programs, venture capital financing and investment in R&D or technology transfer.

This is a “pick the winner model” and can also include business or technology incubators, grants, tax incentives and support programs. Such programs are essentially transactional in nature. It is not that they are of no value, but they cannot guarantee success via such direct intervention.

A “growth oriented” approach is more relational in nature. This focuses on the entrepreneurial leadership of these growth firms. It seeks to understand their networks and how to foster the expansion of such networks at the local, national and international level.

The most important thing is the strategic intent of the team running the business. Firms seeking to grow need to be given help in linking up with customers, suppliers and other “actors” within the ecosystem who can provide resources.

Government ministers can play a critical role in fostering enterprise and innovation. Their role is to direct the government departments and agencies to focus on the problem and develop effective policies.

A minister who has a good understanding of what entrepreneurial ecosystems are, how they form and the role and limitations of government policy is well-placed to generate more effective outcomes.

Key recommendations for government policy

In summary, key recommendations for government policy in the fostering of entrepreneurial ecosystems are:

  1. Make the formation of entrepreneurial activity a government priority - The formulation of effective policy for entrepreneurial ecosystems requires the active involvement of Government Ministers working with senior public servants who act as ‘institutional entrepreneurs’ to shape and empower policies and programs.

  2. Ensure that government policy is broadly focused - Policy should be developed that is holistic and encompasses all components of the ecosystem rather than seeking to ‘cherry pick’ areas of special interest.

  3. Allow for natural growth not top-down solutions - Build from existing industries that have formed naturally within the region or country rather than seeking to generate new industries from green field sites.

  4. Ensure all industry sectors are considered not just high-tech - Encourage growth across all industry sectors including low, mid and high-tech firms.

  5. Provide leadership but delegate responsibility and ownership - Adopt a ‘top-down’ and ‘bottom-up’ approach devolving responsibility to local and regional authorities.

  6. Develop policy that addresses the needs of both the business and its management team - Recognise that small business policy is ‘transactional’ while entrepreneurship policy is ‘relational’ in nature.

For more reading see:

Mazzarol, T. (2014) Growing and sustaining entrepreneurial ecosystems: What they are and the role of government policy, White Paper WP01-2014, Small Enterprise Association of Australia and New Zealand (SEAANZ).

Note: Tim Mazzarol is President of the Small Enterprise Association of Australia and New Zealand Ltd (SEAANZ). SEAANZ Ltd. is a not-for-profit organisation founded in 1987. It is dedicated to the advancement of research, education, policy and practice in small to medium enterprises.

Australia’s co-operative and mutual enterprises deserve greater recognition

cooperate and achieve Microsoft clipart

As the 2014 G20 Leaders’ Summit wound up over the weekend the final communique outlined a range of goals. These encompassed enhancing economic growth, reducing unemployment and poverty, boosting trade and investment, and tackling climate change.

Outlined in the communique were calls for the strengthening of global food security and the raising of productivity to expand food supply while increasing farm incomes and employment. An important mechanism that can assist in the achievement of these goals is the co-operative and mutual enterprise (CME).

In the G20 Food Security and Nutrition Framework report there was a specific acknowledgment of the role of agricultural co-operatives and small to medium enterprise (SMEs) in strengthening the global food supply. This was echoed by the Report to the G20 Development Working Group by the Food and Agriculture Organisation (FAO) and the OECD which stated:

“Smallholders can benefit either directly, for example through contract farming, or indirectly as employees in larger enterprises. Helping farmers to organise through farm associations and cooperatives can help them reap economies of scale and bargain more effectively.”

The role of agricultural co-operatives as a mechanism for enhancing the farm sector has also been acknowledged in the recently released Agricultural Competitiveness Green Paper. This initiative from the Australian Government aims to generate a White Paper on how to enhance Australia’s agriculture sector and help sustain rural and regional economies.

In the Green Paper the role of co-operatives in strengthening Australia’s farm businesses was discussed with suggestions for the adoption of the Co-operatives National Law to help foster the creation of such businesses. As stated in the paper:

“Improved coordination between farm businesses through the establishment of cooperatives were identified by some stakeholders as a good way for farm businesses to achieve greater economies of scale and improved profitability without losing individual control of their operations. State and Territory governments, which regulate cooperatives, have agreed to implement the Co-operatives National Law (CNL), which replaces an ageing and fragmented legislative system.”

The BCCM Leaders’ Summit and the Top 100 list of CME

While the G20 Leaders’ Summit wound up in Brisbane, the Business Council of Co-operatives and Mutuals (BCCM) were launching their own Leaders’ Summit in Sydney on 17-18 November. This was specifically timed to follow the G20 summit. A key focus of the BCCM event is the role of CMEs in the broader economy and the challenges confronting such businesses.

One of the events at the BCCM Leaders’ Summit is the launch of the Top 100 largest Australian CME. This was a project that was undertaken by the University of Western Australia’s Co-operative Enterprise Research Unit (CERU). The BCCM Top 100 league table is based on a research paper authored by me and my co-authors Dr Elena Mamouni Limnios, Professor Geoffrey Soutar and Johannes Kresling.

The aim of our research is to develop a better understanding of the size and structure of the Australian CME sector. In 2012 it was estimated that there were around 1,700 such firms operating across the country and within most industry sectors. However, reliable statistics are difficult to access. The study that generated the Top 100 list is part of a broader research project designed to generate an Australian Co-operative and Mutual Index (ACMI) that can provide more reliable data on this important sector.

A snapshot of the findings

Some of the key findings from the study are worth consideration. For example, the combined annual turnover of the Top 100 CME for the period FY2012-2013 was over $25 billion and their combined assets were more than $108 billion. If the Top 10 member-owned Superannuation funds are included in this pool, these figures rise to over $104 billion in annual turnover and $282 billion in assets.

These firms are located across all states and territories although 44% are headquartered in NSW. They are also found in a wide range of industry sectors as shown in the diagram below.

Australia’s Top 100 CME by industry sector T. Mazzarol (2014)

A detailed survey of 36 of these Top 100 CMEs found that all were governed using a “one-member-one-vote” principle that is the foundation of co-operative businesses. The majority (94%) indicated that whatever their industry or incorporation under the Co-operatives or Corporations Acts, their governance was based on “sharing, democracy and delegation for the benefit of their members”.

The majority (61%) distributed financial dividends or distributions to their member shareholders from surplus capital. A high proportion (81%) also allowed non-members to trade with them. However, only one of these businesses permitted non-members to hold share capital.

As many as 39% of these firms operated across state or territory borders and 14% were engaged in exporting. In terms of financial performance the combined annual turnover for these 36 CMEs for the period FY2012-2013 was $6.12 billion with combined assets of $14.5 billion. These firms also had a combined membership of 4.6 million people and a combined employment (full and part-time) of 6,205 employees.

When asked about the impact of market competition over the previous 12 months 64% reported that it had increased significantly. The majority (61%) also expressed negative views over government economic policy as being helpful for their businesses. Furthermore, only 11% of these firms felt government regulation had had a significant, positive impact on them.

An important sector that deserves more recognition

The 2014 World Co-operative Monitor surveyed 1,926 CMEs across 65 countries and a wide range of industry sectors. These firms had a combined annual turnover in 2012 of US $2.6 trillion. Australia’s co-operative and mutual enterprise (CME) sector is small by world standards. Yet it forms part of this global community of similar businesses.

As the results of our survey of just 36 CMEs indicate, these firms impact on the lives of a large number of people and also small business owners and primary producers. They provide such small players a greater level of bargaining power within increasingly competitive markets. Without their presence many farmers, fishermen, builders and small business retailers would be forced into being little more than price takers.

Interestingly Australia’s first co-operative business was founded in Brisbane in 1859 at time before Queensland had become a state. As the world’s leaders gathered in that city to discuss options for economic growth, alleviating poverty and unemployment, the role of the co-operative was once more of relevance.

The co-operative is not the only business model that can provide support to the ‘little guy’ and help to alleviate poverty, unemployment and boost economic growth. However, it has stood the test of time and deserves more recognition as a mechanism for solving market failures and giving greater opportunities for economic and social capital development.