Entrepreneurship in Northern Ireland can learn much from US
I took part last month in an educational visit to San Francisco and Silicon Valley as part of the MBA programme I am studying for at Queen's University Belfast. This part of California is widely recognised as one the world's leading hubs for innovation and entrepreneurship.
The main objective of this trip was to find out more about how firms in the Bay Area use advanced analytics to develop their business offering. However, spending some time in this part of the world also got me thinking about the level of entrepreneurial activity in our own country.
A look at the data shows that Northern Ireland lags behind the wider UK when it comes to entrepreneurship.
The business birth rate - the number of new VAT and/or PAYE-registered businesses as a proportion of the total number of businesses - has been on an upward trend in recent years. But at 11.3% in 2017, the rate in Northern Ireland was below the 13.1% recorded for the whole of the UK, making it the second lowest of the 12 UK regions.
Data published within the Enterprise Research Centre's Local Growth Dashboard shows that the number of start-ups per 10,000 people in 2017 was 27 in Northern Ireland and 50 in the UK.
The rate of total early-stage entrepreneurial activity in Northern Ireland, as measured in the Global Entrepreneurship Monitor (GEM), is also lower than in the UK. The percentage of adults engaged in early-stage entrepreneurship in Northern Ireland was 6.5% in 2017, below the 8.7% observed in the wider UK.
But it's not just with regards to actual business start-ups that Northern Ireland has room for improvement. According to the GEM, there is a smaller share of non-entrepreneurs here who believe there are good opportunities to set up a business, and that they have the skills and knowledge to establish one, than in the UK. A bigger proportion of local people also stated that fear of failure would prevent them from setting up a business than expressed that view nationally.
The draft Industrial Strategy, that the Department for the Economy published before the collapse of the devolved institutions, seemed to recognise that entrepreneurship was an area in which Northern Ireland could do better. The draft document spoke of developing a culture which supports entrepreneurship, increasing the focus on entrepreneurship within the education system, and increasing the number of businesses established here.
Boosting entrepreneurship in an economy is not easy as there are a wide range of factors which can impact the number of business start-ups. The OECD-Eurostat Entrepreneurship Indicators Programme has identified six determinants of entrepreneurial activity.
The regulatory framework includes, for example, the cost of establishing a business, tax rates and how easy it is to hire and fire workers.
Market conditions covers areas such as competition policies and the practicalities involved with exporting goods and services.
Access to finance includes how easy it is to get a loan, but also what access there is to other funding mechanisms like venture capital.
The creation and diffusion of knowledge incorporates areas such as R&D spending and the willingness of firms to invest in new technologies.
Entrepreneurial capabilities includes skills levels and access to international labour.
And entrepreneurship culture covers people's attitudes towards starting a business.
These are just some examples of the factors which sit within the six determinants, but as the breadth of areas mentioned within this short summary shows, there are a whole host of different areas that need to be considered when designing the right policy mix to spur entrepreneurship in an economy. It's also important to recognise that policy changes in these areas require the involvement of government, businesses, education providers and other societal groups, and take time to deliver results.
The good news is that work is already under way to promote entrepreneurship in Northern Ireland. For example, Young Enterprise has been giving local school pupils the chance to set up and run a small business for years. A new female entrepreneurship programme called 'Yes You Can' has been launched by the 11 local councils, Invest NI and Women in Business. There is a regional heat of the Startup World Cup held in Northern Ireland. And at Danske Bank, we have recently partnered with Catalyst to open the Catalyst Belfast Fintech Hub, a working space for relatively new technology companies, particularly those with a focus on financial services.
But Northern Ireland still has ground to make up to reach similar levels of entrepreneurship to those observed across the wider UK.
I wonder if there are other ways to incorporate entrepreneurship into the education system.
For example, could schools arrange for pupils in a Spanish language class to hear from a local entrepreneur who sells goods to Spain and regularly spends time in the country? Activities like this might inspire students and lead more young people to consider opening a business when they leave education.
Are there ways in which the success of Northern Ireland businesses could be better communicated to the wider public in an attempt to improve people's perceptions about the opportunities available locally to set up a new business and make it successful?
It's also important to think about the correct response when new start-ups fail. How do we find the right balance between supporting people to set up a business for the first time, and encouraging people with high potential as an entrepreneur whose first endeavour, perhaps, did not work out as they had planned?
The need to improve our performance in the area of entrepreneurship is recognised by policymakers and there are already a number of initiatives under way locally to support and encourage entrepreneurial activity.
But there's no room for complacency. If we want to see an increase in the number of high potential start-ups in Northern Ireland, we have to keep challenging ourselves to find new ways to support the local entrepreneurship ecosystem. There is still work to do.