The role of VET in the entrepreneurial ecosystem

Description

The role of VET in developing entrepreneurship has experienced increasing attention internationally. This research draws together international literature on teaching and learning for entrepreneurialism with the goal of informing potential Australian developments in this area. It also provides a case study of the Australian Capital Territory, an entrepreneurial ecosystem, to explore the extent to which the VET system has contributed to the development of skills used by entrepreneurs in the early stages of forming new ventures.

A research overview is also available.

Summary

About the research

How the vocational education and training (VET) sector can respond to changes in the economy to ensure development of the required skills for a contemporary labour market is a perennial topic of interest. The role of VET in developing entrepreneurship — an important element of the Australian economy — has recently attracted an increased focus internationally. However, there has been limited research in Australia on how the VET sector might play a larger role in the development of entrepreneurship and, more specifically, on how the sector might better position itself in an entrepreneurial ecosystem, defined as the formal and informal institutions and relationships that facilitate access to entrepreneurship-relevant resources such as information, finance, reputation and specific knowledge.

This research draws together international literature on teaching and learning for entrepreneurialism, with the goal of informing potential Australian developments in this area. The report also provides an Australian case study of the Australian Capital Territory, as an entrepreneurial ecosystem, to explore the extent to which the VET system has contributed to the development of the skills used by entrepreneurs in the early stages of forming new ventures. The ventures of interest were those that had been started in the past 25 years with the aim of expansion and high growth.

Key messages

• The literature shows that the case for initiatives to promote and support the development of entrepreneurship skills is widely accepted internationally, particularly across Europe. However, many of the initiatives in place are experimental and person-driven, rather than strategic or systemic.
• The ACT case study showed that either the company founder, or a member of the founding team, had a VET qualification in about 20% of the 97 start-up organisations identified. In most cases this person also had a university degree or considerable professional experience following graduation. Aside from some recent start-ups in the digital games market, that were supported by a specific and targeted VET program, none of the interviewed VET-qualified founders considered that their VET course had provided them with entrepreneurship skills.
• The increasing importance of entrepreneurial skills in the Australian economy provides an argument for the development of these skills in at least some VET qualifications, perhaps particularly those in information technology. Examples of how a program for entrepreneurship can work in the digital games market were uncovered in the ACT case study.
• Should a broad fostering of entrepreneurial skills be seen as necessary, a more strategic response would be required. The strong regional dimension of entrepreneurship could be used to shape the development of such a strategy, engaging regional VET organisations and systems. Of course, such a strategy will need to address how entrepreneurship skills should be taught, by whom, and for whom.

Dr Craig Fowler
Managing Director, NCVER

Executive summary

In the context of ongoing globalisation and faster technological change, economies are becoming more entrepreneurial and more knowledge-intensive. Entrepreneurial economies and societies require institutions, organisations, regulations and relationships different from those of the industrial societies of the late twentieth century. Consequently, the skills associated with entrepreneurialism are becoming more important for the development of the economy and society, which means that the acquisition of these skills is also becoming a more important objective for education and training.

This report explores the concept of entrepreneurialism in the twenty-first century, noting particularly the challenges implicit in the implementation of entrepreneurial practices, including teaching and learning for entrepreneurship, specifically for the vocational education and training (VET) system. One of the objectives of this project was to gain an international overview of the current state of entrepreneurship and education for entrepreneurship, to provide a backdrop with the potential to inform and assess Australian developments and policy in this area.

This research project uses two components to explore the entrepreneurial ecosystem: a review of the current research and an Australian case study — of the Australian Capital Territory. An ‘entrepreneurial ecosystem’ is defined as the formal and informal institutions and relationships that facilitate access to such entrepreneurship-relevant resources as information, finance, reputation and specific knowledge, including education. The research is guided by the following research questions:

• What is the significance, and what are the components, of entrepreneurial ecosystems?
• To what extent are Organisation for Economic Co-operation and Development (OECD) countries introducing elements of entrepreneurship skill development into VET programs and developing initiatives to link to the wider development of entrepreneurial activity?
• To what extent do, or could, VET organisations, staff, programs and graduates play significant roles in entrepreneurial ecosystems?
• To what extent does the VET system in the ACT contribute to the development of skills used by entrepreneurs in the early stages of forming new entrepreneurial ventures?

The literature review and the associated analysis highlight the rising levels of entrepreneurship (and enterprise) internationally and note that education and training systems must play a more effective role in addressing this important development. The literature reveals the growing importance of entrepreneurship and identifies the reasons for this growth, which generally are economic, technological and social.

The review examines the literature on the initiatives being introduced by comparable countries to develop entrepreneurial and enterprise skills. Recognising the increasing importance of entrepreneurship (and enterprise) in knowledge-based economies, the last two decades have seen an increased emphasis on the development of entrepreneurial skills, with elements of entrepreneurship incorporated into all levels of education. The review finds that numerous studies and reports aim to identify key entrepreneurship skills and attitudes and to understand how they are acquired. Several countries have introduced significant new initiatives in their various VET systems, although across the OECD the current situation is uneven, with these initiatives taking place in a context of ongoing experiment and assessment. This overview of initiatives relating to entrepreneurship education offers a useful insight for Australia, despite significant differences in the structure of the VET system across countries.

The review reveals that there is a general consensus that strengthening ‘enterprise skills’ —problem-solving, self-reliance, initiative, risk taking, flexibility, creativity — is essential and is strongly supported by business. Many see ‘entrepreneurship’ skills — those required for forming a new enterprise — as a necessary part of the initiatives. That leads onto such questions as how these skills are developed. A diverse range of approaches have been introduced in VET in different countries: student enterprises as part of the course, simulations, mentoring, business plan competitions etc. One issue that has emerged as central is the importance of real-world contexts for learning entrepreneurial skills, and the role of business and industry in supporting these approaches.

In the context of rapid entrepreneurship growth, the review investigated the significant role of entrepreneurial ecosystems. Some regions have emerged as ‘hot spots’ of entrepreneurial activity, for example, Silicon Valley, in the United States, and the review examines the background of these entrepreneurship-intensive areas, specifically to identify the role of education and training providers, as they are participants in these developing ecosystems. It is found that these ecosystems are not created through government policy, but evolve over time through bottom-up activity, and with the addition of supportive government policy and funding. In many cases, universities, research centres and other higher education organisations are important actors in entrepreneurial ecosystems and have evolved to support, and benefit from, growing resources and from deepening interaction with other actors in the ecosystem.

The case study on the Australian Capital Territory sought to identify all significant start-ups in the ACT over the past 25 years in order to identify the founders and to explore their backgrounds. The firms of interest to this study were those ventures formed with the ambition of addressing a market (national and international) beyond the ACT. The ACT has an increasing level of entrepreneurship and a rich entrepreneurial ecosystem, which includes several entrepreneurship support organisations. For those firms where VET graduates were involved in their establishment, the study sought to understand the main features of the firm-formation process, while the role of the local VET providers in supporting entrepreneurship was explored. The survey of start-ups in the ACT over the past 25 years found that, in about one in five of the ACT start-ups, the founder or a member of the founding team had a VET qualification, although these VET graduates considered that their experience of education and training through VET played little role in preparing them for entrepreneurship.

Implications of the review and case study for the Australian context

The emergence of a more entrepreneurial economy has unavoidable implications for the VET system in Australia, particularly given that Australia currently has no coherent national policy on entrepreneurship or education for entrepreneurship (although there has been support for start-ups and commercialisation). The key issues arising from the review and the case study could be incorporated into a national strategy on entrepreneurship for Australia, one that takes account of the educational requirements for entrepreneurship and necessarily involves the tertiary education sector, which includes the VET system. The following represent the main implications of this review and are identified as relevant to the formulation of a national strategy:

Strategy development

• The significance of the growth of entrepreneurship internationally and in Australia suggests a need for Australia to develop a comprehensive entrepreneurship strategy, one which also encompasses education for entrepreneurship. While there have been programs to support entrepreneurial start-ups, an overall strategy to pull together the various elements of entrepreneurship in Australia would be of benefit.
• The strategy should be developed with reference to international and local experience and be guided by broadly based advisory bodies. Noting the evolutionary nature of successful entrepreneurial activities, an approach that strategically supports bottom-up initiatives and experiments is likely to be the most effective, although broad directional policies will be required to clarify the scope and objectives of initiatives and to set clear goals with measurable performance indicators. National programs should also encompass support for local area initiatives (program experiments, business plan competitions and co-working spaces).

Entrepreneurship teaching

• There is strong evidence that enterprise and entrepreneurial skills are becoming more important for career success in the knowledge-intensive economies of the twenty-first century. This offers a compelling case for ensuring that enterprise skills are a key component of most VET courses and for including entrepreneurship skills and knowledge in at least some vocational education programs, perhaps particularly those in IT.
• The approach to developing entrepreneurial skills must emphasise practice-based learning; it will also be essential to involve experienced entrepreneurs in entrepreneurship-development activities and it will be important for VET institutions to build links with the existing entrepreneurship support organisations in their region and to ensure that VET students are aware of these support resources.

Entrepreneurship learning

• Developing the entrepreneurial knowledge and skill of VET educators will require sustained investment and involve their ongoing exposure to current entrepreneurial activity to ensure they remain up to date in the field; it will be crucial for these educators to interact with other regional and national entrepreneurship development programs.
• VET providers will need to build links with the existing entrepreneurship support organisations in their region, including incubators, business service providers, networks, mentoring bodies, and to ensure that VET students are aware of these support resources.
• Developing cooperative links with business organisations and associations in their region will be important to VET providers, as these relationships facilitate the use of real-world experiences for developing staff and students. Also important will be recognition of the fact that for many smaller firms the transaction costs of interaction are likely to be a major impediment to collaboration in any form. It may be feasible for VET organisations, with support from local government (and perhaps business associations), to develop or strengthen the services to small firms, enabling them to link to VET providers.

Regional partnerships

• The importance of the regional dimension of entrepreneurship suggests that regional strategy development processes and regional entrepreneurship ecosystems will be critical, including for shaping the development of strategy at the level of regional VET organisations and systems.