Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, and Patrick Kirby, Director at KPMG China on how focusing on purpose and enabling capability will help the city achieve its ambition to be a major innovation and technology hub
Hong Kong’s history boasts a rich (81 percent) were other key motivators. Kong’s start-ups are not taking full advantage tradition of entrepreneurship – from its emergence as a manufacturing and export hub in the 1950s to its development of a services-oriented economy since the 1970s. This entrepreneurial spirit has heavily influencedthe four key industries of Hong Kong: tourism, trade and logistics, professional and producer services, and financial services.
Yet, Hong Kong’s strength in these core industries is no guarantee of its future success. The unique advantage these traditional industries have enjoyed is becoming less apparent in an increasingly digitized world, and the shift from the physical transfer of products to the digital transfer of information has transformed market dynamics, making language and geographic location less relevant. As a result, revitalizing Hong Kong’s vibrant entrepreneurial spirit has never been more important to the city’s long-term development.
According to recent research conducted jointly by KPMG and the Alibaba (Hong Kong) Entrepreneurs Fund, transforming Hong Kong’s landscape requires two factors: encouraging entrepreneurs to fulfil their purpose, and improving supporting capabilities. Based on findings from key opinion leaders, 100 business founders and 300 university students, this means providing encouragement and inspiration while increasing the quality and flow of knowledge, talent, and capital.
Emphasizing purpose to drive innovation
The study shows that purpose is a major driver among would-be entrepreneurs in Hong Kong. 87 percent of student respondents cited a desire to advance their community’s development as a main reason for starting their own ventures. Playing a proactive role in changing the world (82 percent) and solving problems for people (81 percent) were other key motivators.
Despite this strong sense of purpose, only 15 percent of respondents believe the city's entrepreneurial mindset makes it more attractive compared with other global innovation hubs. The study reveals that entrepreneurs were only moderately ambitious for their business – 48 percent expected to generate revenues under HK$10 million by 2020 – and were more focused on domestic rather than global markets.
This is compounded by societal expectations to pursue more “stable” careers. Only 28 percent of students surveyed felt they had support from their family to start a business and many said they are often expected to forgo opportunities in science, technology, engineering, arts and mathematics to enter careers in financial services.
Improving capabilities to boost entrepreneurship
The commercialization of research is a key way Hong Kong can support entrepreneurs. In her 2018 Policy Address, Chief Executive Carrie Lam committed to improving upon the city’s strengths in scientific research and promoting technology transfer, by doubling funding for three relevant schemes. This is consistent with her earlier commitment to increase the city’s research and development (R&D) spending from 0.73 percent to 1.5 percent of gross domestic product within five years. China’s central government has also announced that it would support Hong Kong scientists by giving them increased access to grants. In addition, Hong Kong has introduced the Technology Talent Admission Scheme, which offers fast-track arrangements to companies in the Hong Kong Science and Technology Park and Cyberport to bring in skilled staff from the Mainland and abroad.
However, the research shows that Hong Kong's start-ups are not taking full advantage of the range of support services offered by public and private entities. For example, while entrepreneurs in other cities regard mentoring as a key growth driver, only 10 percent of Hong Kong-based founders use mentors regularly. The commercialization of R&D support was also low, at 15 percent.
Furthermore, Hong Kong is not fully capitalizing on its role as a gateway to Mainland China. Only 31 percent of entrepreneur respondents saying that the city’s start-ups are collaborating effectively with their peers in the Greater Bay Area.
Suggested next actions
To instil a strong sense of purpose and improve Hong Kong’s innovation capabilities and entrepreneurial ecosystem, the study recommended the following six key actions:
- Facilitate the free flow of academic, R&D, and business knowledge
- Strengthen, expand, and connect a network of experts across the Greater Bay Area and internationally
- Improve capability and expand access to capital and financial services
- Promote and simplify access to support services
- Increase awareness of entrepreneurship through community engagement and participation
- Enhance the development of the entrepreneurial mindset to support future jobs
Combined improvements in purpose and capability factors can rekindle Hong Kong’s entrepreneurial spirit and boost its status as a premier innovation and technology hub – ultimately bringing long-lasting economic benefits to the city and the region as a whole.