Small business and entrepreneurship in the knowledge economy: a comparison of Australia and Sweden

Explanations of cross-national variations in the level of small business and entrepreneurial activity have typically not distinguished between different industry sectors and have tended to focus on general framework conditions affecting small business including macroeconomic variables and regulatory and cultural factors. However, sectoral patterns of small business and entrepreneurial activity also vary cross-nationally and require further explanation. This paper develops a framework for analysis of the conditions of small firms in knowledge intensive sectors that takes into account the stock of knowledge and competence in the economy, the capacity to generate and commercialise new ideas and the strength of regional systems of innovation. An analysis of the Australian and Swedish context shows that macroeconomic, regulatory and cultural factors explain a general bias in the Australian economy towards small business and entrepreneurship. However, the paper draws attention to the very different pattern that emerges with respect to small business and entrepreneurial activity in knowledge sectors. The stock of knowledge and competence, capacity to generate and commercialise ideas and strength of regional innovation systems seems to explain Sweden’s superior performance in small business and entrepreneurial activity in knowledge intensive activities.