Description
Within this information with regards to tapping our entrepreneurial heritage by ian hunter and marie wilson.
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Tapping our
entrepreneurial
eritage
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By Ian Hunter and Marie Wilson
R
ecent reports from government and
from local economic development
organisations, such as the Auckland
Regional Economic Development
Strategy group, have highlighted decreasing
economic performance in New Zealand.
Businesses are urged to become more
innovative and ambitious and to grow dynamic
firms that will lift the country’s export
performance and provide challenging,
rewarding jobs to stop the flow of talent from
our shores (AREDS, 2002; Glass and Choy,
2001). Do we have what it takes?
With such a high concentration of small
businesses, New Zealand must surely be an
extremely entrepreneurial place. Reports from
the 2001 and 2002 Global Entrepreneurship
Monitor (e.g. Fredericks and Carswell, 2001)
and subsequent analyses of the GEM data
suggested this. On indicators such as
opportunity entrepreneurs, business angel
activity, women entrepreneurs and general
entrepreneurial activity, New Zealand came
out significantly ahead of other countries. The
problem with the GEM report, of course, is
that everyone who is self-employed is classified
as an entrepreneur and this approach can
produce distorted results. For example, in
some studies it has meant that seasonal farm
labourers or journeymen were classified as
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entrepreneurs (Levenstein, 1995; Godley, 1996).
Historically, New Zealand has had large numbers
of workers outsi de the tradi ti onal waged
structures, but these are not the ki nd of
entrepreneurs economic development reports
have argued New Zealand needs.
Indeed, by many definitions they are not
entrepreneurs at all. Economic growth and
development requires innovators who grow
businesses beyond the small sizes that dominate in
New Zealand and reach beyond these shores. Yet
research suggests that we are one of the worst
nations at creating vibrant, growing firms (Reynolds
et al, 2002).
Why are entrepreneurs so important? Cantillon
(1931), a banker and financier, recognised that
entrepreneurs acted as a vital link between producers
and consumers in an economy. Knight (1921)
stressed that it was the entrepreneur who produced
pure profit in an economy because of the uncertainty
in speculative activity. Schumpeter (1934) added
innovation as a primary attribute of the
entrepreneur. He saw the entrepreneur as someone
who “did things differently”.
Such differences might include new firms, new
products, new methods of production or new ways
of organising – but innovation, claimed Schumpeter,
stimulated economic growth and progress.
Innovation can have other benefits. Baumol (2002)
suggested that it increased a nation’s capital stock.
It is this element of innovation that differentiates
the self-employed from the true entrepreneur and
renders the GEM report findings difficult to apply
in a policy context. Close examination of the GEM
results suggests that we are a nation of inwardly
focused contractors and small businesses that
struggle to get any bigger or add true value to the
national economy.
Has this always been the case? While we are
concerned for the future, we may gain some insights
from New Zealand’s entrepreneurial past. In
particular, we might compare the entrepreneurial
activity at the turn of the 20th century with that at
the turn of the 21st century.
NEW ZEALAND’S ENTREPRENEURIAL
PAST – A CENTURY AGO
he present study used a case analysis of 150
New Zealand entrepreneurs who were active
between 1880 and 1930. The entrepreneurs were
selected from a list of more than 500 business
people after a survey of biographical dictionaries,
Who’ s Who, newspaper reports, company
histories and biographies. This list was culled to
150 by asking two questions of each case. Firstly,
was this person an entrepreneur or a manager?
An entrepreneur was defined as someone who
had a significant ownership stake in the firm and
was actively pursuing innovative growth of the
firm during his or her lifetime. The study
excluded managers with no ownership stake,
those who were “self-employed workers”, or
those who were clearly running a firm as a
lifestyle choice, without innovative endeavour.
The second qualifier was whether the person was
active as an entrepreneur at some point in the years
1880-1930. Those who were outside this time
period were not considered for this study. The final
list included a wide range of people and activities.
Some were well known, such as baker Ernest Adams,
newspaper proprietor Henry Brett, winemaker Assid
Corban, baking powder manufacturer Thomas
Edmonds and retailer Bendix Hallenstein. Others
were not so well known, including bedding
manufacturer Arthur Ellis, florist Sarah Elsom, tent
manufacturer and dairy importer Carl Dahl and
merchant Byron Brown.
The study investigated a range of variables
including the age at which the entrepreneur started
his or her first venture, family and social
background, educational background, venture
activity, industry type, business strategy, failure rates,
sources of capital and reasons for start-up.
This article examines four of these areas and
considers the degree to which they inform the
present discussion on New Zealand’s
entrepreneurial future. The issues that emerge from
our consideration of these historical cases,
particularly the importance of commercial
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We are a nation of inwardly focused contractors
and small businesses that struggle to get any
bigger or add true value to the national economy
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experience, the experience of venture failure,
immigration and access to capital, are also issues
that speak to current and future New Zealand
entrepreneurs.
THE IMPORTANCE OF
COMMERCIAL EXPERIENCE
oes entrepreneurial success favour the young?
Certainly, some high-profile media accounts
tend to suggest this is the case. Local entrepreneur
Sarah Hunter made headlines when she sold PC
Direct to Blue Star in 1996 for an estimated $30
million, having started the firm seven years earlier
as a 22-year-old, with business partner Maurice
Bryham. Wellingtonian Steve Outtrim’s success was
even more dramatic. With just $18 to his name, he
created the web-page software Hotdog and within
18 months was a multi-millionaire. Is this the 21st-
century requirement for business success?
The results of this research suggest youth is not
enough. Historically, young entrepreneurs have
started some of our most successful long-term firms.
Edward Firth was only 20 when he joined his father
in Ironclad Products, later Firth; Josip Babich was
25 when he opened the New Era orchard and
vineyard; William Winstone was 26 when he started
his cartage business; Robert Kerridge was 28 when
he opened his first cinema; and John Kirkcaldie was
25 when he and partner Robert Stains commenced
the drapery business Kirkcaldie & Stains. But this
is not the whole picture; indeed it is too limiting
just to consider the age at which they started their
first business without considering the previous
background and experience they had that equipped
them for this activity.
Historically, New Zealand entrepreneurs did not
start a new enterprise with no previous commercial
experience. Indeed, the complete opposite was true.
The mean age they started their first business venture
was 27, with an average of 12 years of commercial
experience. They were not, as a rule, particularly
well educated; the mean school-leaving age was 15.
But it was their experience post-school that was of
interest. Thirty-five per cent received a trade
qualification in such fields as printing, drapery,
ironmongery and building. Forty-one per cent held
a management position before starting their first
venture.
The entrepreneurs’ first leap into a new venture
took several forms. Some had an opportunity to
buy the firm they were working for; others saw an
opportunity in their industry and pursued it alone;
some met partners who had complementary skills
to theirs and together they started a business; a few
went into business with an established partner with
existing capital. What was consistent was that
launching into a new business venture was typically
after a decade or more of industry experience.
Entrepreneurship researcher Patrick Liles called
this stage “readiness” (Liles, 1981). The
entrepreneurs are at the point in their lives where
they have not only achieved mastery of business
problems and skills, but also over themselves,
displaying greater self-image, self-confidence and
competence. It is during the mid-life period that
entrepreneurs have established the networks,
contacts, experience and credibility to establish a
successful business. The entrepreneurs may identify
key features of a product or service they work with
that they believe they can operate better, or deliver
at a lower cost, or with greater benefit. Or they
may discover a particular need for a product or
service no one is supplying.
The recent book Entrepreneurs at Work:
Successful New Zealand Business Ventures (Cameron
and Massey, 2002) paints a similar picture of the
contemporary New Zealand entrepreneur. Of the
22 entrepreneurs portrayed in the book, 19 had
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D
Historically, New Zealand entrepreneurs did not start
a new enterprise with no previous commercial
experience. Indeed, the complete opposite was true
extensive experience in the industry in which they
started their first venture. Ruth Pretty ran her own
restaurant for 10 years before starting Ruth Pretty
Catering; David Ellis had worked in senior capacity
at Fairydown for nine years before starting his
outdoor clothing company, Earth Sea Sky.
VENTURE FAILURE
t is claimed on occasion that up to 50 per cent
of entrepreneurs fail within the first five years. This
statistic is enough to put off some would-be
entrepreneurs for life. Fortunately, we now know
that these statistics are flawed as well. Some
researchers defined failure so broadly that any time
the entrepreneur and their start-up firm parted
(Baldwin and Gorecki, 1991; Churchill 1952), it
was seen as a failure, even when the entrepreneur
sold the business at a profit to another company.
This would make contemporary entrepreneurial
success stories such as Steve Outtrim and Sarah
Hunter failures for selling their businesses for
millions. Yet few would see this as a failure.
Have New Zealand entrepreneurs historically had
a high failure rate? The answer depends on your
definition of failure. If we consider failure as
including bankruptcy, being ejected from the
company they started, or clearly failing to make a
go of it and closing down the business to avoid
further losses, then the rate of failure in this
historical sample was 31 per cent. In other words,
one in three entrepreneurs would experience failure
at some point over their lifetime. But this is only
one part of the failure question. Indeed, the
important question is not “did they fail?” but what
happened next? Did the entrepreneurs forsake their
ambitions and resume waged work? Did they remain
in a financially strained state?
Overall, this was not the case. Eighty-nine per
cent of failed entrepreneurs restarted and again
achieved business success. In some cases they rebuilt
the business that had failed, or took on a new
partner, or pursued a completely new product/
service innovation. Whatever route was taken,
failure was not the end of the line for New Zealand
business entrepreneurs at the turn of the century.
Rather they carried on to make a renewed
contribution to economic growth through additional
new ventures.
It is also important to consider failure in terms
of the overall number of ventures that these
entrepreneurs started. Very few of the entrepreneurs
studied started only one new venture during their
lifetime. Multiple business start-ups were far more
common. This could take many forms. Some
entrepreneurs started a business that was only
marginally successful and then left it to start another
firm in a different location. Others saw a better
opportunity with a group of entrepreneurs, or they
added to their original firm, providing additional
product or process innovations. In total, business
failures as a percentage of the overall number of
businesses these entrepreneurs were active in
represented only nine per cent.
This finding has other implications, as it is
common to associate one particular business
enterprise with an entrepreneur and, as time passes,
a person becomes almost synonymous with the
business they founded. In this vein, we might
associate Robert Kerridge with Kerridge Odeon
Cinemas, or Harvey Turner with Turners and
Growers, or George Skellerup with Skellerup
Industries. But this was not the only business activity
these entrepreneurs commenced. Skellerup’s
business ventures, for instance, included the Para
Rubber Company, a rubber plantation in Papua New
Guinea, a rubber importing company, a waterproof
coat manufacturing company, a footwear company
and a saltworks.
In total numbers, the 150 entrepreneurs in this
historical sample were involved in 535 business
ventures. Of these ventures, 426 were entirely new
start-ups by the entrepreneurs. Twenty-five per cent
of the entrepreneurs in the sample were involved in
five or more business ventures over the course of
their lifetime. The highest number by a single
entrepreneur was 40. Westhead and Wright (1998)
have called these highly active entrepreneurs “serial
founders”. What this study suggests is that New
Zealand entrepreneurs have a heritage of this kind
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Very few of the entrepreneurs studied started only
one new venture during their lifetime. Multiple
business start-ups were far more common
of behaviour and in this regard, the failure of a
commercial venture by an entrepreneur, though an
unpleasant experience, is only a stepping stone to a
longer-term economic contribution.
More precise failure rates give entrepreneurs more
hope in the future. Watson and Everett (1996) claim
that the rate at which entrepreneurs close down a
venture because they cannot make a go of it is in the
region of nine to 17 per cent, depending on the
industry. This is very consistent with the historical
rate of nine per cent. Closing down due to bankruptcy
is between one and two per cent, so despite popular
ideas of risk, few entrepreneurs – historically or
currently – fail, and those who do recover, re-launch
and continue to drive the economy forward.
Yet the failure question has social implications as
well. The GEM Summary Report stated: “New
Zealanders severely punish failed entrepreneurs.
Fear of failure is listed as a major reason for not
becoming an entrepreneur” (Reynolds et al, 2002,
p.91). This was not a characteristic of any other
country in the top-seven group. Other countries had
their own unique difficulties – shortage of capital,
inflexible labour markets, lack of business skills –
but not fear of failure. The United States, for
instance, generally holds the opposite view and sees
failure as a learning experience, with entrepreneurs
often repeating their efforts to launch new
businesses. A change in our expectations of
entrepreneurs may assist our economic
development; persistence after failure produces
seasoned entrepreneurs who can move the economy
forward, as they have historically.
THE ENTREPRENEURIAL IMMIGRANT
efore the 1870s and 1880s, immigration was
New Zealand’s and Australia’s dominant source
of population increase (Gibson, 1971). Adding to
the existing Maori and Pakeha economic activity,
migrants brought capital, became consumers and
increased local demand for housing, transportation,
education, foodstuffs and retail services (Condliffe,
1930). Many began their own businesses, bringing
knowledge or expertise that were in short supply,
identifying market needs from a unique perspective,
or starting up a business as a way of entering the
local labour market. The data from the present study
reflected this trend – 75 per cent of the
entrepreneurs were immigrants. Not surprisingly,
the majority of these entrepreneurial immigrants
were from the United Kingdom – 53 entrepreneurs
(35 per cent) were from England, 17 per cent from
Scotland and seven per cent from Ireland. Others
came from a host of countries, including Lebanon,
Dalmatia and Prussia. Only 25 per cent of the sample
(37 entrepreneurs) were New Zealand-born.
Skilled labour accounted for a significant portion
of these immigrants. Thirty-four of them had gained
their trade qualifications before arriving in New
Zealand, in occupations including drapery, iron
moulding, carpentry and joinery, accounting,
brewing, printing and engineering. As such, they
were well equipped to take advantage of
opportunities in the emerging economy. For
example, William Dawson was already a fully
qualified brewer by the time he came to New
Zealand aged 21 and he quickly found employment
at Wilson’s Well Park Brewery. Three years later, in
1876, he and two other employees, James Speight
and Charles Greenslade, left the firm and took over
a redundant malt house to establish James Speight
& Company’s brewery. Within 10 years, it
dominated the local market and continued its
growth to become the largest brewery in New
Zealand.
Similarly, Richard Hudson, founder of Hudson’s
biscuit and confectionery business, was a qualified
baker when he arrived in New Zealand in 1865.
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The failure of a commercial venture by an entrepreneur,
though an unpleasant experience, is only a
stepping stone to a longer-term economic contribution
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Richard Hellaby, co-founder of meat processing firm
R. & W. Hellaby, had served his apprenticeship as a
butcher before emigrating to New Zealand in 1868.
And engineer Eben Hayes, who would found the
Hayes Engineering Company, served his
apprenticeship as a millwright in Warwickshire
before he emigrated to Otago in 1882.
Immigration has again become a contentious issue
in New Zealand, with concerns about the economic
effects of migration. Yet the Treasury working paper
Brain Drain or Brain Exchange? suggests that New
Zealand entrants are generally highly skilled (Glass
and Choy, 2001). Other research suggests that the
inability to find suitable employment leads many
immigrants to pursue self-employment or start new
ventures (Li, 2001). Simon (1989) claims that
contrary to popular notions of immigrants taking
the jobs of the existing population and being a drain
on social services, other dynamics occur. Using
examples and studies from North America,
Australia, New Zealand, Canada and Israel, he
argues that immigrants have a number of positive
effects on an economy including a higher
propensity to start new businesses than natives,
narrowed disparities in income, higher savings
rates and the creation of new jobs and lowered
unemployment. Razin and Light (1998) claim
immigrant groups often concentrate in niche
entrepreneurial activities and rather than
displacing existing business activity, they thrive
in declining niches, creating opportunities for
themselves that result in a net contribution to
the economy or widening the range of goods and
services offered. Then, as now, immigrants may
be part of the driving force in entrepreneurial
venture formation in New Zealand.
ACCESS TO CAPITAL
apital formation is an essential part of starting
and growing a business enterprise and some
writers argue that capital is a necessary precursor
to entrepreneurial activity. Access to start-up capital
is often cited as a reason that New Zealanders do
not launch more, and bigger, businesses (MED,
2002). But has it always been this way? The
entrepreneurs in this sample provided an
opportunity to examine the sources of capital used.
Eight sources of capital were identified among the
entrepreneurs and businesses in the study. The first
cluster of venture capital came from family wealth
and inheritance, the entrepreneur’s own savings, and
several partners each contributing funds. In the
ROBERT LAIDLAW fast growth
OF ALL OUR entrepreneurs, probably none experienced business growth
as fast as Robert Laidlaw and his mail order business, Laidlaw Leeds, which
gave rise to the Farmers Trading Company. In the first 12 months of trade,
Laidlaw shifted premises three times and his staff rocketed from two to
122. How did he carry this off? Firstly, four years of planning went into
his enterprise before he started. He carried out market research, pre-
planned all his business systems and had in-depth knowledge of the industry
he was working in. However, perhaps more importantly, right from the
start he had a long-term vision. Said Laidlaw in his first mail order
catalogue: “We have set out to build the greatest direct supply mail order
business in the Southern Hemisphere. You need not fear unfair competition,
no trickery or misrepresentation will be used; our policy, ‘stern, old-
fashioned, unfailing honesty’, will govern all our business transactions.”
Robert Laidlaw
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Then, as now, immigrants may be part
of the driving force in entrepreneurial
venture formation in New Zealand
current environment, entrepreneurs also rely on
themselves as well as the “three Fs” of venture
funding – friends, family and fools. In addition, the
studied firms started through the capital of a partner
with an established business; public float; private
float to a limited number of investors; money earned
from other activities such as mining or farming or
professional services. These funding mechanisms are
regarded as seed, first and second stage venture
investing. Then, as now, firms progressed through
stages of development and finance through to public
offering. Finally, entrepreneurs borrowed funds
from a bank, loan company or private financier to
start their businesses.
Twenty-three (15 per cent) of the entrepreneurs
had access to family wealth through an inheritance
or an existing family business and used this as the
source of their capital to start their first venture.
This ranged across activities including brewing,
winemaking, mercantile operations, transport and
shipbuilding. John Ilot and Arthur Ellis both took
over family businesses their fathers had commenced,
avoiding the need to raise capital. At Te Mata,
Bernard Chambers could indulge his interest in
winemaking due to several thousand acres of
inherited land.
Yet the most common source of start-up capital
was the entrepreneur’s own savings. Thirty-five per
cent of the entrepreneurs used their own savings as
the means to support their first venture. This
reflected two factors. Firstly, in some industries, the
barriers to entry were low, so opening a retail store,
small factory or printing works could be done with
a few hundred pounds or less. Secondly, large-scale
starts to new ventures were uncommon. Numerous
entrepreneurs commenced their first venture by
themselves, or with one other family member or
business associate. But this did not mean that a small
ANNIE MILLAR against adversity
IT WAS NOT Annie Millar’s choice to be a baker. Had things gone better,
she may have settled down to family life and devoted herself entirely to
raising her nine children. With her husband’s business failing, however, she
took a job as manager of the Prince of Wales Hotel in Invercargill. Her
business acumen proved far superior to that of her husband and seven years
later, in 1900, she leased a large tearoom and bakehouse. Joined by her
children, the business thrived. In 1911, Annie added another tearoom and
function room to the business. Annie was forced into breadmaking by the
actions of competitors. Faced with limited ingredients during World War
One, Annie began baking her own small tea loaf. Regarding this as a hostile
move, local breadmakers refused to supply Millars with bread for sandwiches.
Annie’s response was characteristic. She entered the breadmaking business
herself and Millars grew to be a substantial bakery. The firm Annie Millar
created is now part of Quality Bakers New Zealand Ltd.
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Annie Millar
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Thirty-five per cent of the entrepreneurs
used their own savings as the means to
support their first venture
firm begun on minimal savings was destined to
remain a small firm. Fifty entrepreneurs from the
study grew business enterprises that either had
branch operations across New Zealand (usually 40
or more chain stores) or, if in manufacturing,
construction or the like, distributed goods and
services nationwide. Of these, 19 entrepreneurs had
started from their own savings and 10 from
inheritance or family wealth.
Aldrich and Martinez (2001) distinguish between
three types of capital in the new venture process:
financial capital; social capital including family
networks and the entrepreneur’s independent
relationships; and human capital, i.e. knowledge,
training and expertise. To create a new firm,
entrepreneurs need all three, although it is clear that
social and human capital are the most important
ingredients. Aldrich and Martinez claim that most
new businesses start small, with entrepreneurs
drawing upon their own savings and personal assets.
As they develop the business, social capital provides
the entrepreneur with access to knowledge, capital,
clients and suppliers that might otherwise have been
unavailable. In this respect, networking or
mentoring activities enhance the ability to develop
a new business further as they supplement the
entrepreneur’s social capital. The rise of formal
venture capital markets from the 1950s has resulted
in greater and more formalised venture financing,
particularly in the US (Brodsky, 1995). Access to
significant venture capital is increasingly important
in launching businesses into a global marketplace.
This formalised venture capital, still relatively new
and limited in New Zealand, does provide an
accelerated pathway to growth over the historical
“bootstrapping” and more incremental capital
growth uncovered by the study. This is not to suggest
that the need for the entrepreneurs’ own social and
financial capital is any less. Venture capitalists expect
extended experience (human capital) and social
capital to be represented in the management team
and financial investments from the entrepreneur and
business angels to get the venture started.
WHAT CAN WE LEARN FROM HISTORY?
learly, New Zealanders have entrepreneurial
traits. We applaud ingenuity and inventiveness,
we have a willingness to have a go, are good at
FAMILY CONNECTION early education
HAVING PARENTS who run their own business can be an advantage for
aspiring entrepreneurs. As a child, they are exposed to the language,
problems and successes of business, they learn about commercial practice
and trade. If they choose to go into business for themselves, the social
stigma of following a non-traditional career path has already been broken
down by their parent. In the study of early New Zealand entrepreneurs,
43 per cent had a parent who had his or her own business. These included
Ernest Adams, whose father and brother both had bakeries; and Ted Firth,
who started what would become Firth Industries with his father Edward
Firth, a manufacturer and inventor. Bendix Hallenstein’s father was a
woollen cloth manufacturer; and Picton-based fisherman, Joseph Perano,
followed his father into the fishing industry. Contemporary examples
include David Levene, who spent his early boyhood years in his father’s
paint shop; and Stephen Tindall, whose father was part-owner in a hardware
store and whose mother ran a hairdressing business from home.
Bendix Hallenstein
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Networking or mentoring activities enhance the
ability to develop a new business further as they
supplement the entrepreneur’s social capital
SOMETIMES in entrepreneurial activity there is added advantage in
numbers. Not all the entrepreneurs in the study of New Zealand
entrepreneurs commenced a business on their own. In fact, partnerships
of one form or another constituted around 50 per cent of all start-ups.
Some were family partnerships such as the Logan brothers in shipbuilding,
the Walsh brothers in aviation and the Coulls brothers in printing. Others
were innovators who joined established entrepreneurs to start a new kind
of venture such as bookseller and printer John Blair, who joined existing
businessman William Lyon in his bookselling business on Lambton Quay
and developed it to become one of the largest printers and booksellers in
New Zealand. A final group were complementary partners. For example,
drapers Kirkcaldie and Stains, who met while working in the same industry
and brought together complementary skills to start a venture together.
Harbour pilot James Bradney and engineer Ernest Binns teamed up in
1884 to start shipping company Bradney and Binns. Similarly, William
Dawson, who started a jewellery firm of the same name, was one of a
group of three founders who left Wilson’s Well Park Brewery in 1876 to
launch James Speight & Company.
PARTNERSHIP safety in numbers
working across boundaries, and seem to be good
all-rounders (Campbell-Hunt, 2001). We have a
strong history of entrepreneurs who developed
large, enduring and international enterprises, both
in the period studied and subsequently. Among these
early New Zealand entrepreneurs, few commenced
their first venture with extensive capital. But they
were able to leverage the significant business
experience they had, using their knowledge of
suppliers, products, customers and markets to
develop a company. Their ventures were not always
successful, although the risks, then and now, are
often overstated. Those who did fail treated failure
as a stepping-stone rather than the end of a business
career and the majority added to our economic
wealth and development through multiple business
ventures. Many were immigrants, creating new
wealth and new jobs in their adopted home.
Certainly, some things have changed for New
Zealand entrepreneurs. Markets are increasingly
global and in contrast to last century, the 21st
century requires entrepreneurs to pursue global
opportunities to contribute to New Zealand’s
economic vitality and their own business growth.
The dual phenomena of global markets and high
technology require faster growth and greater capital
– particularly financial capital – than our historical
entrepreneurs could have imagined. These same
barriers confront both those born here and those
who immigrate, although the lack of job
opportunities may provide additional incentives for
immigrants to start new ventures. The sources of
wealth of the last century, with domestic trade and
primary production in meat and dairy, are no longer
enough to sustain us, although they may provide a
context and importance resources for our
development as a knowledge economy.
The final report of the New Zealand Science and
Innovation Advisory Council (2002) highlights a
number of points brought out in this article. It
isolated a range of factors necessary to move New
Zealand back to the top half of the OECD through
pursuing innovation-led growth. The report
identified that, as a country, we have been good at
generating ideas and knowledge, yet far less
successful at generating wealth from ideas in the
marketplace. How can we capitalise on our
entrepreneurial past and our good ideas?
Our history suggests that we recognise, but not
over-estimate, the risk of ventures. Further, when
ventures (and entrepreneurs) do falter, we should
not castigate their initiative, but look for lessons
learnt and future, better ventures from these
entrepreneurs. Even though it makes for good news
John Kirkcaldie
Robert Stains
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Cameron, A., & Massey, C. (2002). Entrepreneurs at Work: Successful New Zealand
Business Ventures. Auckland: Pearson.
Campbell-Hunt, C. (2001). World famous in New Zealand: how New Zealand’s leading
firms became world-class competitors. Auckland: Auckland University Press.
Cantillon, R. (1931). Essai sur la nature du commerce en général. H. Higgs (Eds &
Trans). London: Macmillan.
Churchill, B.C. (1952). Survival Patterns of the Postwar Business Population. Survey
of Current Business, 12-19.
Condliffe, J.B. (1930). New Zealand In the Making: A Survey of Economic and Social
Development. London: G. Allen & Unwin.
Frederick, H., & Carswell, P. (2001). Global Entrepreneurship Monitor New Zealand
2001. Auckland: New Zealand Centre for Innovation and Entrepreneurship.
Gibson, C.J. (1971). Demographic History of New Zealand. Thesis (PhD), University
of California, Berkeley.
Godley, A. (1996). Jewish soft loan societies in New York and London and immigrant
entrepreneurship, 1880-1914. Business History, 38 (3), 101-117.
Glass, H., & Choy, W.K. (2001). Treasury Working Paper 01/22: Brain Drain or
Brain Exchange? Wellington: Treasury.
Knight, F. (1921). Risk, uncertainty and profit. New York: Houghton Mifflin.
Levenstein, M. (1995). African American Entrepreneurship: The view from the 1910
Census. Business and Economic History. 24 (1), 106-122.
Li , P. (2001). I MBD Research Paper Seri es: I mmi grants’ Propensi ty to Sel f -
Employment. Canada: Citizenship and Immigration Canada.
Liles, P. (1981). Who are the entrepreneurs? In P. Gorb & P. Dowell & P. Wilson
(Eds.), Small Business Perspectives (pp.33-50). London: Armstrong.
MED (Ministry of Economic Development) 2002. Industry and Regional Assistance
Programmes. Annex D: Early Stage Financing Programmes. Wellington: Ministry of
Economic Development.
Razin, E., & Light, I. (1998). Ethnic entrepreneurs in America’s largest metropolitan
areas. Urban Affairs Review, 33(3), 332-361.
Reynolds, P.D., Camp, S.M., Bygrave, W.D., Autio, E., & Hay, M. (2002). GEM:
Global Entrepreneurship Monitor, 2001 Summary Report. London: London Business
School.
Schumpeter, J. (1934). The theory of economic development. Cambridge, MA:
Harvard University.
Science and Innovation Advisory Council (2002). New Zealanders: Innovators to the
world: Turning great ideas into great ventures, a innovation framework for New Zealand.
Wellington: SIAC.
Si mon, J. (1989). The Economi c Consequences of I mmi grati on. Oxford: Basi l
Bl ackwel l .
Watson, J., & Everett, J.E. (1996). Do small businesses have high failure rates?
Evidence from Australian retailers. Journal of Small Business Management, 34, 45-
63.
Westhead, P., & Wright, M. (1998). Novice, portfolio, and serial founders: are they
different? Journal of Business Venturing, 13 (3), 173-204.
stories and award ceremonies, we should also
recognise that entrepreneurship is not the exclusive
province of youth. Venturing requires innovative
ideas coupled with commercial expertise; new
ventures are businesses not just inventions. Finally,
we should recognise that making New Zealand
competitive may require initiatives on many fronts.
The final Science and Innovation Advisory
Council report suggests a wide range of measures
including private-sector support, government
initiatives, fiscal changes, changes to educational
curricula, business planning courses, mentoring,
venture development specialists, access to funding,
expatriate involvement and a change in prevailing
cultural attitudes toward failure. In total, more than
90 recommendations and action points were
suggested. It is a staggering list and one can’t help
but think that if even a quarter of these initiatives
Venturing requires innovative ideas coupled
with commercial expertise; new ventures
are businesses not just inventions
were put in place, they would significantly improve
our commercial and social environment for decades
and allow us to capitalise on both our innovations
and our entrepreneurial heritage.
Ian Hunter
LECTURER
Department of Management and Employment Relations
The University of Auckland Business School
Email: [email protected]
Dr Marie Wilson
ASSOCIATE PROFESSOR OF MANAGEMENT
Research Director, ICEHOUSE Business Accelerator
The University of Auckland Business School
Email: [email protected]
11
doc_948611321.pdf
Within this information with regards to tapping our entrepreneurial heritage by ian hunter and marie wilson.
H
1
Tapping our
entrepreneurial
eritage
H
By Ian Hunter and Marie Wilson
R
ecent reports from government and
from local economic development
organisations, such as the Auckland
Regional Economic Development
Strategy group, have highlighted decreasing
economic performance in New Zealand.
Businesses are urged to become more
innovative and ambitious and to grow dynamic
firms that will lift the country’s export
performance and provide challenging,
rewarding jobs to stop the flow of talent from
our shores (AREDS, 2002; Glass and Choy,
2001). Do we have what it takes?
With such a high concentration of small
businesses, New Zealand must surely be an
extremely entrepreneurial place. Reports from
the 2001 and 2002 Global Entrepreneurship
Monitor (e.g. Fredericks and Carswell, 2001)
and subsequent analyses of the GEM data
suggested this. On indicators such as
opportunity entrepreneurs, business angel
activity, women entrepreneurs and general
entrepreneurial activity, New Zealand came
out significantly ahead of other countries. The
problem with the GEM report, of course, is
that everyone who is self-employed is classified
as an entrepreneur and this approach can
produce distorted results. For example, in
some studies it has meant that seasonal farm
labourers or journeymen were classified as
?
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entrepreneurs (Levenstein, 1995; Godley, 1996).
Historically, New Zealand has had large numbers
of workers outsi de the tradi ti onal waged
structures, but these are not the ki nd of
entrepreneurs economic development reports
have argued New Zealand needs.
Indeed, by many definitions they are not
entrepreneurs at all. Economic growth and
development requires innovators who grow
businesses beyond the small sizes that dominate in
New Zealand and reach beyond these shores. Yet
research suggests that we are one of the worst
nations at creating vibrant, growing firms (Reynolds
et al, 2002).
Why are entrepreneurs so important? Cantillon
(1931), a banker and financier, recognised that
entrepreneurs acted as a vital link between producers
and consumers in an economy. Knight (1921)
stressed that it was the entrepreneur who produced
pure profit in an economy because of the uncertainty
in speculative activity. Schumpeter (1934) added
innovation as a primary attribute of the
entrepreneur. He saw the entrepreneur as someone
who “did things differently”.
Such differences might include new firms, new
products, new methods of production or new ways
of organising – but innovation, claimed Schumpeter,
stimulated economic growth and progress.
Innovation can have other benefits. Baumol (2002)
suggested that it increased a nation’s capital stock.
It is this element of innovation that differentiates
the self-employed from the true entrepreneur and
renders the GEM report findings difficult to apply
in a policy context. Close examination of the GEM
results suggests that we are a nation of inwardly
focused contractors and small businesses that
struggle to get any bigger or add true value to the
national economy.
Has this always been the case? While we are
concerned for the future, we may gain some insights
from New Zealand’s entrepreneurial past. In
particular, we might compare the entrepreneurial
activity at the turn of the 20th century with that at
the turn of the 21st century.
NEW ZEALAND’S ENTREPRENEURIAL
PAST – A CENTURY AGO
he present study used a case analysis of 150
New Zealand entrepreneurs who were active
between 1880 and 1930. The entrepreneurs were
selected from a list of more than 500 business
people after a survey of biographical dictionaries,
Who’ s Who, newspaper reports, company
histories and biographies. This list was culled to
150 by asking two questions of each case. Firstly,
was this person an entrepreneur or a manager?
An entrepreneur was defined as someone who
had a significant ownership stake in the firm and
was actively pursuing innovative growth of the
firm during his or her lifetime. The study
excluded managers with no ownership stake,
those who were “self-employed workers”, or
those who were clearly running a firm as a
lifestyle choice, without innovative endeavour.
The second qualifier was whether the person was
active as an entrepreneur at some point in the years
1880-1930. Those who were outside this time
period were not considered for this study. The final
list included a wide range of people and activities.
Some were well known, such as baker Ernest Adams,
newspaper proprietor Henry Brett, winemaker Assid
Corban, baking powder manufacturer Thomas
Edmonds and retailer Bendix Hallenstein. Others
were not so well known, including bedding
manufacturer Arthur Ellis, florist Sarah Elsom, tent
manufacturer and dairy importer Carl Dahl and
merchant Byron Brown.
The study investigated a range of variables
including the age at which the entrepreneur started
his or her first venture, family and social
background, educational background, venture
activity, industry type, business strategy, failure rates,
sources of capital and reasons for start-up.
This article examines four of these areas and
considers the degree to which they inform the
present discussion on New Zealand’s
entrepreneurial future. The issues that emerge from
our consideration of these historical cases,
particularly the importance of commercial
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We are a nation of inwardly focused contractors
and small businesses that struggle to get any
bigger or add true value to the national economy
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experience, the experience of venture failure,
immigration and access to capital, are also issues
that speak to current and future New Zealand
entrepreneurs.
THE IMPORTANCE OF
COMMERCIAL EXPERIENCE
oes entrepreneurial success favour the young?
Certainly, some high-profile media accounts
tend to suggest this is the case. Local entrepreneur
Sarah Hunter made headlines when she sold PC
Direct to Blue Star in 1996 for an estimated $30
million, having started the firm seven years earlier
as a 22-year-old, with business partner Maurice
Bryham. Wellingtonian Steve Outtrim’s success was
even more dramatic. With just $18 to his name, he
created the web-page software Hotdog and within
18 months was a multi-millionaire. Is this the 21st-
century requirement for business success?
The results of this research suggest youth is not
enough. Historically, young entrepreneurs have
started some of our most successful long-term firms.
Edward Firth was only 20 when he joined his father
in Ironclad Products, later Firth; Josip Babich was
25 when he opened the New Era orchard and
vineyard; William Winstone was 26 when he started
his cartage business; Robert Kerridge was 28 when
he opened his first cinema; and John Kirkcaldie was
25 when he and partner Robert Stains commenced
the drapery business Kirkcaldie & Stains. But this
is not the whole picture; indeed it is too limiting
just to consider the age at which they started their
first business without considering the previous
background and experience they had that equipped
them for this activity.
Historically, New Zealand entrepreneurs did not
start a new enterprise with no previous commercial
experience. Indeed, the complete opposite was true.
The mean age they started their first business venture
was 27, with an average of 12 years of commercial
experience. They were not, as a rule, particularly
well educated; the mean school-leaving age was 15.
But it was their experience post-school that was of
interest. Thirty-five per cent received a trade
qualification in such fields as printing, drapery,
ironmongery and building. Forty-one per cent held
a management position before starting their first
venture.
The entrepreneurs’ first leap into a new venture
took several forms. Some had an opportunity to
buy the firm they were working for; others saw an
opportunity in their industry and pursued it alone;
some met partners who had complementary skills
to theirs and together they started a business; a few
went into business with an established partner with
existing capital. What was consistent was that
launching into a new business venture was typically
after a decade or more of industry experience.
Entrepreneurship researcher Patrick Liles called
this stage “readiness” (Liles, 1981). The
entrepreneurs are at the point in their lives where
they have not only achieved mastery of business
problems and skills, but also over themselves,
displaying greater self-image, self-confidence and
competence. It is during the mid-life period that
entrepreneurs have established the networks,
contacts, experience and credibility to establish a
successful business. The entrepreneurs may identify
key features of a product or service they work with
that they believe they can operate better, or deliver
at a lower cost, or with greater benefit. Or they
may discover a particular need for a product or
service no one is supplying.
The recent book Entrepreneurs at Work:
Successful New Zealand Business Ventures (Cameron
and Massey, 2002) paints a similar picture of the
contemporary New Zealand entrepreneur. Of the
22 entrepreneurs portrayed in the book, 19 had
L
D
Historically, New Zealand entrepreneurs did not start
a new enterprise with no previous commercial
experience. Indeed, the complete opposite was true
extensive experience in the industry in which they
started their first venture. Ruth Pretty ran her own
restaurant for 10 years before starting Ruth Pretty
Catering; David Ellis had worked in senior capacity
at Fairydown for nine years before starting his
outdoor clothing company, Earth Sea Sky.
VENTURE FAILURE
t is claimed on occasion that up to 50 per cent
of entrepreneurs fail within the first five years. This
statistic is enough to put off some would-be
entrepreneurs for life. Fortunately, we now know
that these statistics are flawed as well. Some
researchers defined failure so broadly that any time
the entrepreneur and their start-up firm parted
(Baldwin and Gorecki, 1991; Churchill 1952), it
was seen as a failure, even when the entrepreneur
sold the business at a profit to another company.
This would make contemporary entrepreneurial
success stories such as Steve Outtrim and Sarah
Hunter failures for selling their businesses for
millions. Yet few would see this as a failure.
Have New Zealand entrepreneurs historically had
a high failure rate? The answer depends on your
definition of failure. If we consider failure as
including bankruptcy, being ejected from the
company they started, or clearly failing to make a
go of it and closing down the business to avoid
further losses, then the rate of failure in this
historical sample was 31 per cent. In other words,
one in three entrepreneurs would experience failure
at some point over their lifetime. But this is only
one part of the failure question. Indeed, the
important question is not “did they fail?” but what
happened next? Did the entrepreneurs forsake their
ambitions and resume waged work? Did they remain
in a financially strained state?
Overall, this was not the case. Eighty-nine per
cent of failed entrepreneurs restarted and again
achieved business success. In some cases they rebuilt
the business that had failed, or took on a new
partner, or pursued a completely new product/
service innovation. Whatever route was taken,
failure was not the end of the line for New Zealand
business entrepreneurs at the turn of the century.
Rather they carried on to make a renewed
contribution to economic growth through additional
new ventures.
It is also important to consider failure in terms
of the overall number of ventures that these
entrepreneurs started. Very few of the entrepreneurs
studied started only one new venture during their
lifetime. Multiple business start-ups were far more
common. This could take many forms. Some
entrepreneurs started a business that was only
marginally successful and then left it to start another
firm in a different location. Others saw a better
opportunity with a group of entrepreneurs, or they
added to their original firm, providing additional
product or process innovations. In total, business
failures as a percentage of the overall number of
businesses these entrepreneurs were active in
represented only nine per cent.
This finding has other implications, as it is
common to associate one particular business
enterprise with an entrepreneur and, as time passes,
a person becomes almost synonymous with the
business they founded. In this vein, we might
associate Robert Kerridge with Kerridge Odeon
Cinemas, or Harvey Turner with Turners and
Growers, or George Skellerup with Skellerup
Industries. But this was not the only business activity
these entrepreneurs commenced. Skellerup’s
business ventures, for instance, included the Para
Rubber Company, a rubber plantation in Papua New
Guinea, a rubber importing company, a waterproof
coat manufacturing company, a footwear company
and a saltworks.
In total numbers, the 150 entrepreneurs in this
historical sample were involved in 535 business
ventures. Of these ventures, 426 were entirely new
start-ups by the entrepreneurs. Twenty-five per cent
of the entrepreneurs in the sample were involved in
five or more business ventures over the course of
their lifetime. The highest number by a single
entrepreneur was 40. Westhead and Wright (1998)
have called these highly active entrepreneurs “serial
founders”. What this study suggests is that New
Zealand entrepreneurs have a heritage of this kind
I
5
Very few of the entrepreneurs studied started only
one new venture during their lifetime. Multiple
business start-ups were far more common
of behaviour and in this regard, the failure of a
commercial venture by an entrepreneur, though an
unpleasant experience, is only a stepping stone to a
longer-term economic contribution.
More precise failure rates give entrepreneurs more
hope in the future. Watson and Everett (1996) claim
that the rate at which entrepreneurs close down a
venture because they cannot make a go of it is in the
region of nine to 17 per cent, depending on the
industry. This is very consistent with the historical
rate of nine per cent. Closing down due to bankruptcy
is between one and two per cent, so despite popular
ideas of risk, few entrepreneurs – historically or
currently – fail, and those who do recover, re-launch
and continue to drive the economy forward.
Yet the failure question has social implications as
well. The GEM Summary Report stated: “New
Zealanders severely punish failed entrepreneurs.
Fear of failure is listed as a major reason for not
becoming an entrepreneur” (Reynolds et al, 2002,
p.91). This was not a characteristic of any other
country in the top-seven group. Other countries had
their own unique difficulties – shortage of capital,
inflexible labour markets, lack of business skills –
but not fear of failure. The United States, for
instance, generally holds the opposite view and sees
failure as a learning experience, with entrepreneurs
often repeating their efforts to launch new
businesses. A change in our expectations of
entrepreneurs may assist our economic
development; persistence after failure produces
seasoned entrepreneurs who can move the economy
forward, as they have historically.
THE ENTREPRENEURIAL IMMIGRANT
efore the 1870s and 1880s, immigration was
New Zealand’s and Australia’s dominant source
of population increase (Gibson, 1971). Adding to
the existing Maori and Pakeha economic activity,
migrants brought capital, became consumers and
increased local demand for housing, transportation,
education, foodstuffs and retail services (Condliffe,
1930). Many began their own businesses, bringing
knowledge or expertise that were in short supply,
identifying market needs from a unique perspective,
or starting up a business as a way of entering the
local labour market. The data from the present study
reflected this trend – 75 per cent of the
entrepreneurs were immigrants. Not surprisingly,
the majority of these entrepreneurial immigrants
were from the United Kingdom – 53 entrepreneurs
(35 per cent) were from England, 17 per cent from
Scotland and seven per cent from Ireland. Others
came from a host of countries, including Lebanon,
Dalmatia and Prussia. Only 25 per cent of the sample
(37 entrepreneurs) were New Zealand-born.
Skilled labour accounted for a significant portion
of these immigrants. Thirty-four of them had gained
their trade qualifications before arriving in New
Zealand, in occupations including drapery, iron
moulding, carpentry and joinery, accounting,
brewing, printing and engineering. As such, they
were well equipped to take advantage of
opportunities in the emerging economy. For
example, William Dawson was already a fully
qualified brewer by the time he came to New
Zealand aged 21 and he quickly found employment
at Wilson’s Well Park Brewery. Three years later, in
1876, he and two other employees, James Speight
and Charles Greenslade, left the firm and took over
a redundant malt house to establish James Speight
& Company’s brewery. Within 10 years, it
dominated the local market and continued its
growth to become the largest brewery in New
Zealand.
Similarly, Richard Hudson, founder of Hudson’s
biscuit and confectionery business, was a qualified
baker when he arrived in New Zealand in 1865.
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The failure of a commercial venture by an entrepreneur,
though an unpleasant experience, is only a
stepping stone to a longer-term economic contribution
C
Richard Hellaby, co-founder of meat processing firm
R. & W. Hellaby, had served his apprenticeship as a
butcher before emigrating to New Zealand in 1868.
And engineer Eben Hayes, who would found the
Hayes Engineering Company, served his
apprenticeship as a millwright in Warwickshire
before he emigrated to Otago in 1882.
Immigration has again become a contentious issue
in New Zealand, with concerns about the economic
effects of migration. Yet the Treasury working paper
Brain Drain or Brain Exchange? suggests that New
Zealand entrants are generally highly skilled (Glass
and Choy, 2001). Other research suggests that the
inability to find suitable employment leads many
immigrants to pursue self-employment or start new
ventures (Li, 2001). Simon (1989) claims that
contrary to popular notions of immigrants taking
the jobs of the existing population and being a drain
on social services, other dynamics occur. Using
examples and studies from North America,
Australia, New Zealand, Canada and Israel, he
argues that immigrants have a number of positive
effects on an economy including a higher
propensity to start new businesses than natives,
narrowed disparities in income, higher savings
rates and the creation of new jobs and lowered
unemployment. Razin and Light (1998) claim
immigrant groups often concentrate in niche
entrepreneurial activities and rather than
displacing existing business activity, they thrive
in declining niches, creating opportunities for
themselves that result in a net contribution to
the economy or widening the range of goods and
services offered. Then, as now, immigrants may
be part of the driving force in entrepreneurial
venture formation in New Zealand.
ACCESS TO CAPITAL
apital formation is an essential part of starting
and growing a business enterprise and some
writers argue that capital is a necessary precursor
to entrepreneurial activity. Access to start-up capital
is often cited as a reason that New Zealanders do
not launch more, and bigger, businesses (MED,
2002). But has it always been this way? The
entrepreneurs in this sample provided an
opportunity to examine the sources of capital used.
Eight sources of capital were identified among the
entrepreneurs and businesses in the study. The first
cluster of venture capital came from family wealth
and inheritance, the entrepreneur’s own savings, and
several partners each contributing funds. In the
ROBERT LAIDLAW fast growth
OF ALL OUR entrepreneurs, probably none experienced business growth
as fast as Robert Laidlaw and his mail order business, Laidlaw Leeds, which
gave rise to the Farmers Trading Company. In the first 12 months of trade,
Laidlaw shifted premises three times and his staff rocketed from two to
122. How did he carry this off? Firstly, four years of planning went into
his enterprise before he started. He carried out market research, pre-
planned all his business systems and had in-depth knowledge of the industry
he was working in. However, perhaps more importantly, right from the
start he had a long-term vision. Said Laidlaw in his first mail order
catalogue: “We have set out to build the greatest direct supply mail order
business in the Southern Hemisphere. You need not fear unfair competition,
no trickery or misrepresentation will be used; our policy, ‘stern, old-
fashioned, unfailing honesty’, will govern all our business transactions.”
Robert Laidlaw
7
Then, as now, immigrants may be part
of the driving force in entrepreneurial
venture formation in New Zealand
current environment, entrepreneurs also rely on
themselves as well as the “three Fs” of venture
funding – friends, family and fools. In addition, the
studied firms started through the capital of a partner
with an established business; public float; private
float to a limited number of investors; money earned
from other activities such as mining or farming or
professional services. These funding mechanisms are
regarded as seed, first and second stage venture
investing. Then, as now, firms progressed through
stages of development and finance through to public
offering. Finally, entrepreneurs borrowed funds
from a bank, loan company or private financier to
start their businesses.
Twenty-three (15 per cent) of the entrepreneurs
had access to family wealth through an inheritance
or an existing family business and used this as the
source of their capital to start their first venture.
This ranged across activities including brewing,
winemaking, mercantile operations, transport and
shipbuilding. John Ilot and Arthur Ellis both took
over family businesses their fathers had commenced,
avoiding the need to raise capital. At Te Mata,
Bernard Chambers could indulge his interest in
winemaking due to several thousand acres of
inherited land.
Yet the most common source of start-up capital
was the entrepreneur’s own savings. Thirty-five per
cent of the entrepreneurs used their own savings as
the means to support their first venture. This
reflected two factors. Firstly, in some industries, the
barriers to entry were low, so opening a retail store,
small factory or printing works could be done with
a few hundred pounds or less. Secondly, large-scale
starts to new ventures were uncommon. Numerous
entrepreneurs commenced their first venture by
themselves, or with one other family member or
business associate. But this did not mean that a small
ANNIE MILLAR against adversity
IT WAS NOT Annie Millar’s choice to be a baker. Had things gone better,
she may have settled down to family life and devoted herself entirely to
raising her nine children. With her husband’s business failing, however, she
took a job as manager of the Prince of Wales Hotel in Invercargill. Her
business acumen proved far superior to that of her husband and seven years
later, in 1900, she leased a large tearoom and bakehouse. Joined by her
children, the business thrived. In 1911, Annie added another tearoom and
function room to the business. Annie was forced into breadmaking by the
actions of competitors. Faced with limited ingredients during World War
One, Annie began baking her own small tea loaf. Regarding this as a hostile
move, local breadmakers refused to supply Millars with bread for sandwiches.
Annie’s response was characteristic. She entered the breadmaking business
herself and Millars grew to be a substantial bakery. The firm Annie Millar
created is now part of Quality Bakers New Zealand Ltd.
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Annie Millar
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Thirty-five per cent of the entrepreneurs
used their own savings as the means to
support their first venture
firm begun on minimal savings was destined to
remain a small firm. Fifty entrepreneurs from the
study grew business enterprises that either had
branch operations across New Zealand (usually 40
or more chain stores) or, if in manufacturing,
construction or the like, distributed goods and
services nationwide. Of these, 19 entrepreneurs had
started from their own savings and 10 from
inheritance or family wealth.
Aldrich and Martinez (2001) distinguish between
three types of capital in the new venture process:
financial capital; social capital including family
networks and the entrepreneur’s independent
relationships; and human capital, i.e. knowledge,
training and expertise. To create a new firm,
entrepreneurs need all three, although it is clear that
social and human capital are the most important
ingredients. Aldrich and Martinez claim that most
new businesses start small, with entrepreneurs
drawing upon their own savings and personal assets.
As they develop the business, social capital provides
the entrepreneur with access to knowledge, capital,
clients and suppliers that might otherwise have been
unavailable. In this respect, networking or
mentoring activities enhance the ability to develop
a new business further as they supplement the
entrepreneur’s social capital. The rise of formal
venture capital markets from the 1950s has resulted
in greater and more formalised venture financing,
particularly in the US (Brodsky, 1995). Access to
significant venture capital is increasingly important
in launching businesses into a global marketplace.
This formalised venture capital, still relatively new
and limited in New Zealand, does provide an
accelerated pathway to growth over the historical
“bootstrapping” and more incremental capital
growth uncovered by the study. This is not to suggest
that the need for the entrepreneurs’ own social and
financial capital is any less. Venture capitalists expect
extended experience (human capital) and social
capital to be represented in the management team
and financial investments from the entrepreneur and
business angels to get the venture started.
WHAT CAN WE LEARN FROM HISTORY?
learly, New Zealanders have entrepreneurial
traits. We applaud ingenuity and inventiveness,
we have a willingness to have a go, are good at
FAMILY CONNECTION early education
HAVING PARENTS who run their own business can be an advantage for
aspiring entrepreneurs. As a child, they are exposed to the language,
problems and successes of business, they learn about commercial practice
and trade. If they choose to go into business for themselves, the social
stigma of following a non-traditional career path has already been broken
down by their parent. In the study of early New Zealand entrepreneurs,
43 per cent had a parent who had his or her own business. These included
Ernest Adams, whose father and brother both had bakeries; and Ted Firth,
who started what would become Firth Industries with his father Edward
Firth, a manufacturer and inventor. Bendix Hallenstein’s father was a
woollen cloth manufacturer; and Picton-based fisherman, Joseph Perano,
followed his father into the fishing industry. Contemporary examples
include David Levene, who spent his early boyhood years in his father’s
paint shop; and Stephen Tindall, whose father was part-owner in a hardware
store and whose mother ran a hairdressing business from home.
Bendix Hallenstein
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Networking or mentoring activities enhance the
ability to develop a new business further as they
supplement the entrepreneur’s social capital
SOMETIMES in entrepreneurial activity there is added advantage in
numbers. Not all the entrepreneurs in the study of New Zealand
entrepreneurs commenced a business on their own. In fact, partnerships
of one form or another constituted around 50 per cent of all start-ups.
Some were family partnerships such as the Logan brothers in shipbuilding,
the Walsh brothers in aviation and the Coulls brothers in printing. Others
were innovators who joined established entrepreneurs to start a new kind
of venture such as bookseller and printer John Blair, who joined existing
businessman William Lyon in his bookselling business on Lambton Quay
and developed it to become one of the largest printers and booksellers in
New Zealand. A final group were complementary partners. For example,
drapers Kirkcaldie and Stains, who met while working in the same industry
and brought together complementary skills to start a venture together.
Harbour pilot James Bradney and engineer Ernest Binns teamed up in
1884 to start shipping company Bradney and Binns. Similarly, William
Dawson, who started a jewellery firm of the same name, was one of a
group of three founders who left Wilson’s Well Park Brewery in 1876 to
launch James Speight & Company.
PARTNERSHIP safety in numbers
working across boundaries, and seem to be good
all-rounders (Campbell-Hunt, 2001). We have a
strong history of entrepreneurs who developed
large, enduring and international enterprises, both
in the period studied and subsequently. Among these
early New Zealand entrepreneurs, few commenced
their first venture with extensive capital. But they
were able to leverage the significant business
experience they had, using their knowledge of
suppliers, products, customers and markets to
develop a company. Their ventures were not always
successful, although the risks, then and now, are
often overstated. Those who did fail treated failure
as a stepping-stone rather than the end of a business
career and the majority added to our economic
wealth and development through multiple business
ventures. Many were immigrants, creating new
wealth and new jobs in their adopted home.
Certainly, some things have changed for New
Zealand entrepreneurs. Markets are increasingly
global and in contrast to last century, the 21st
century requires entrepreneurs to pursue global
opportunities to contribute to New Zealand’s
economic vitality and their own business growth.
The dual phenomena of global markets and high
technology require faster growth and greater capital
– particularly financial capital – than our historical
entrepreneurs could have imagined. These same
barriers confront both those born here and those
who immigrate, although the lack of job
opportunities may provide additional incentives for
immigrants to start new ventures. The sources of
wealth of the last century, with domestic trade and
primary production in meat and dairy, are no longer
enough to sustain us, although they may provide a
context and importance resources for our
development as a knowledge economy.
The final report of the New Zealand Science and
Innovation Advisory Council (2002) highlights a
number of points brought out in this article. It
isolated a range of factors necessary to move New
Zealand back to the top half of the OECD through
pursuing innovation-led growth. The report
identified that, as a country, we have been good at
generating ideas and knowledge, yet far less
successful at generating wealth from ideas in the
marketplace. How can we capitalise on our
entrepreneurial past and our good ideas?
Our history suggests that we recognise, but not
over-estimate, the risk of ventures. Further, when
ventures (and entrepreneurs) do falter, we should
not castigate their initiative, but look for lessons
learnt and future, better ventures from these
entrepreneurs. Even though it makes for good news
John Kirkcaldie
Robert Stains
L
U N I V E R S I T Y O F A U C K L A N D
Business Review
V o l u m e 5 N u m b e r 1 2 0 0 3
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stories and award ceremonies, we should also
recognise that entrepreneurship is not the exclusive
province of youth. Venturing requires innovative
ideas coupled with commercial expertise; new
ventures are businesses not just inventions. Finally,
we should recognise that making New Zealand
competitive may require initiatives on many fronts.
The final Science and Innovation Advisory
Council report suggests a wide range of measures
including private-sector support, government
initiatives, fiscal changes, changes to educational
curricula, business planning courses, mentoring,
venture development specialists, access to funding,
expatriate involvement and a change in prevailing
cultural attitudes toward failure. In total, more than
90 recommendations and action points were
suggested. It is a staggering list and one can’t help
but think that if even a quarter of these initiatives
Venturing requires innovative ideas coupled
with commercial expertise; new ventures
are businesses not just inventions
were put in place, they would significantly improve
our commercial and social environment for decades
and allow us to capitalise on both our innovations
and our entrepreneurial heritage.
Ian Hunter
LECTURER
Department of Management and Employment Relations
The University of Auckland Business School
Email: [email protected]
Dr Marie Wilson
ASSOCIATE PROFESSOR OF MANAGEMENT
Research Director, ICEHOUSE Business Accelerator
The University of Auckland Business School
Email: [email protected]
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