Youth I.D.E.A.S. 05

Employment and Economic Development

Enhancing the Conditions for Technology Start-ups

30 December, 2015

 

The number of technology business start-ups has recently seen an upsurge in Hong Kong as the start-up ecosystem has experienced continuous growth.  According to a recent survey by Invest Hong Kong,[1] there were 1,912 start-up founders in 2015, a 71% increase from 2014, while the number of start-ups had risen to 1,558, a 46% increase from the previous year.  Technology start-ups such as information technology businesses and e-commerce businesses in particular are very common.

 

However, Hong Kong ranked 11th in The Global Innovation Index 2015,[2] and has fallen for two consecutive years.  The knowledge and technology outputs sub-index of Hong Kong ranked as low as 31st, indicating that the innovation performance of Hong Kong is relatively inferior.  Hong Kong is also inactive in the implementation and commercialisation of research and development (R&D) output into products with commercial value.  Business expenditure on technology and innovation (TI) activities has gone backwards in recent years, from HK$18.1 billion in 2004 to HK$16.1 billion in 2013.[3]

 

Though technology start-ups continue to appear, Hong Kong’s innovation achievement remains insignificant.  It is therefore questionable whether the conditions are sufficiently favourable for the development of technology start-ups.  In the midst of intense global competition, we need to take a close look at the conditions for technology start-ups in order to explore business and employment opportunities and to improve the overall competitiveness of Hong Kong.

 

Therefore, this Study looks at ways to enhance the conditions for technology start-ups.  On the one hand, it examines the conditions for starting a business in Hong Kong.  On the other, it tries to understand the problems in and obstacles to the development of technology start-ups by looking at the difficulties encountered by entrepreneurs.

 

This Study used an online survey and case interviews to understand the difficulties encountered by entrepreneurs and their views on starting technology businesses.  In addition, experts and scholars were interviewed and gave their assessment of the conditions for technology start-ups as well as the relevant policy impact in Hong Kong.

 

Based on the findings of this Study, Youth I.D.E.A.S. puts forward five recommendations which focus on strengthening the ecosystem of the Hong Kong technology industry and enhancing entrepreneurship education.

 

Discussion

  1. The resources put into R&D are too limited in Hong Kong.  The practical technical knowledge of talents is not up to standard.  These factors mean that product technology is not sufficiently advanced, which may weaken business competitiveness.
  2. Entrepreneurs are unable to equip themselves with the knowledge necessary to starting a business at an early stage.  They are unable to make good assessments of product quality and market demand in order to improve their business models and increase their chances of success.
  3. Investors’ attitudes towards technology start-ups in Hong Kong are not positive at present due to their lack of interest in businesses with little potential to expand outside of Hong Kong.  Besides which, there is little merger and acquisition activity, so that there is no effective exit strategy for invested funds, which may further reduce the desire to invest.
  4. The Hong Kong market is too small to realise the benefits of the internet economy.  Nearly half of the respondents are planning to start a business in other regions, especially on the Mainland.  But they hesitate to take action because they are unfamiliar with local regulations and markets.
  5. Applied technology culture is not popular in Hong Kong.  The electronic transactions system is underdeveloped.  Hong Kong also lacks an open data policy.  The overall social environment is unfavourable for the growth of technology start-ups.

 

Recommendation

  1. The government should introduce world-class leading technology enterprises to set up product R&D centres in Hong Kong, which would strengthen the ecosystem of the technology industry and thus drive the development of the industry chain.
  2. The government should rebate a portion of the tuition fees for entrepreneurship courses as venture capital in order to encourage potential entrepreneurs to take such courses before they start their businesses. The rebate could be made with a fixed amount to compensate for the expenses necessary to start a business.
  3. The government and/or relevant public bodies should actively introduce high-quality business incubators and accelerators from all over the world (including the Mainland) so as to open up more training opportunities for Hong Kong entrepreneurs.
  4. University technology and engineering departments should be in closer contact with the industrial sector and strengthen the practical knowledge offered by programmes so as to raise the level of their graduates.
  5. The government should consider setting up a platform for start-ups’ small-scale public fundraising activities in order to solve the problem of lack of resources.
  6. The government should formulate policy to open up public data and enhance the delivery of electronic public services in order to nurture a culture of applying technology in daily life.
  7. The authorities should facilitate the development of peer-to-peer electronic payment systems in order to reduce the costs of electronic transactions and to drive the development of e-commerce and online money flows.

 

 

 

[1] Invest HK. (2015). “Hong Kong: A promising startup ecosystem.” Retrieved from http://www.startmeup.hk.

[2] Cornell University, INSEAD, and WIPO. (2015). The global innovation index 2015: Effective innovation policies for development. Fontainebleau, Ithaca, and Geneva.

[3] Census and Statistics Department. (2015). Hong Kong as a knowledge-based economy – A statistical perspective 2015.