Description
In such a detailed description explicate early stage entrepreneurial aspirations in efficiency driven economies.
Romanian Journal of Economic Forecasting – 2/2011
5
EARLY-STAGE ENTREPRENEURIAL
ASPIRATIONS IN EFFICIENCY-DRIVEN
ECONOMIES
tefan PETE
*
Ágnes NAGY
**
Dumitru MATI
***
Lehel-Zoltán GYÖRFY
****
Annamária BENYOVSZKI
*****
Tünde Petra PETRU
******
Abstract
The aim of this article is to identify the influencing factors of early-stage
entrepreneurial aspirations in efficiency-driven economies based on Global
Entrepreneurship Monitor (GEM) Adult Population Survey (APS) database for the year
2008. Within the entrepreneurial aspirations the innovativeness of entrepreneurial
businesses and the job growth expectations were studied.
Keyword: early-stage entrepreneur, entrepreneurial aspirations, Global
Entrepreneurship Monitor.
JEL Classification: M13, J24
I. Introduction
Earlier studies proved that the results of the entrepreneurial activity can be related to
the entrepreneurial aspirations (Wiklund & Shepherd, 2003; Cassar, 2007). This fact
*
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
**
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
***
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
****
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
*****
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
******
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
1.
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Romanian Journal of Economic Forecasting – 2/2011
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reveals the importance of factors influencing the entrepreneurial aspirations. Previous
research explaining entrepreneurial aspirations and ambitions found many
determinants on different levels of analyses. In the present paper, we will focus upon
the high-growth expectation and innovation orientation of the early-stage
entrepreneurs in efficiency-driven economies.
The factors influencing individual decisions to become an innovation-oriented or high-
growth early-stage entrepreneur can be classified into individual factors, which include
demographic characteristics (gender, age), wealth, household income, current
working status, individual human capital (education, working experience), individual
perceptions towards entrepreneurship (opportunities recognition, fear of failure,
entrepreneurial skills and abilities), motivations (improvement-driven opportunity or
necessity); macroeconomic factors (venture capital availability, economic freedom
index, inflation rate, country risk).
The aim of this paper is to investigate two research questions. First, which are the
influencing factors of becoming an innovation-oriented early-stage entrepreneur in
efficiency-driven economies? Second, which are the influencing factors of becoming
an early-stage entrepreneur with high-growth expectations in these countries?
The literature regarding innovative entrepreneurship is relative poor, due to the lack of
data sources, which contain information about innovation-oriented entrepreneurs. We
contribute to the empirical literature by examining the influencing factors of becoming
an innovation oriented, respectively a high-growth expectation early-stage
entrepreneur in efficiency-driven economies in 2008 based on Global Entrepre-
neurship Monitor (GEM) Adult Population Survey (APS) data.
The paper is organized as follows. We first review the literature related to
entrepreneurial aspirations, focusing upon innovation orientation and high-growth
expectation. In the subsequent sections, we will describe the data and the research
methodology and we will present the results of our empirical analysis. Finally, we
discuss and interpret our findings and draw some conclusions.
II. Literature review
According to Amorós et al. (2011) the new entrepreneurial businesses may serve new
segments or try new methods that their rivals who have been on the scene failed to
identify or to respond due to lack of flexibility. These entrepreneurial firms help
nations’ innovation systems, allowing them to adapt to the changing conditions of
global competitiveness and provides them with the capacity to establish differences in
order to increase the value acknowledged by their markets. Entrepreneurship and
innovation processes are key factors to increase economic dynamism (Minniti et al.,
2006). Koellinger (2008) studies the factors, which explain why nascent entrepreneurs
may choose innovative entrepreneurship over imitation using GEM data. The results
suggest that innovative entrepreneurs are likely to be male, educated, unemployed,
confident in their entrepreneurial skills, to be opportunity-motivated and likely to live in
a developed country. He pointed out that there is no statistically significant effect of
risk aversion, social network, or the share of population with tertiary education.
Early-stage entrepreneurial aspirations in efficiency-driven economie
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A number of studies relate motives to aspirations, also referred to as ambitions,
growth intentions or growth attitudes (Kolvereid, 1992; Amit et al., 2001; Morris et al.,
2006; Cassar, 2007). For necessity-motivated entrepreneurs their daily economic
survival will depend strongly on the survival of their business, which may negatively
affect the aspirations they have with their firm (Hessels et al., 2008).
Sanditov & Verspagen (2011) study the influence of macroeconomic and individual
level variables upon the probability of entering innovative early-stage entrepreneur-
ship. They find that individual factors have similar effects on the probability of entering
innovative and imitative entrepreneurship. Older entrepreneurs are less innovative,
more interested in their status quo and more risk averse (Terjesen & Szerb, 2008).
Previous research at the microlevel suggests that independence is a prime entre-
preneurial motive for creating innovative ventures (Corman et al. 1988).
Regarding a country’s level of growth, it can be expected that a higher rate of
economic growth will provide entrepreneurial opportunities and therefore entrepreneu-
rial aspirations are positively related to economic growth (Thurik et al. 2008).
Autio (2007) finds that entrepreneurial activities and attitudes are significantly
associated with high-expectation and high-growth entrepreneurship. Autio (2007) also
points out that high-expectation and high-growth entrepreneurs are more likely to
exhibit entrepreneurial attitudes and activities than other entrepreneurs and the
general population, with a few exceptions. According to Autio (2007) and Terjesen &
Szerb (2008), recent personal acquaintance with an entrepreneur and the ability to
see good business opportunities is positively and significantly related to business
growth. Autio (2007), Cassar (2007), Verheul & van Mil (2008) and Autio & Acs (2009)
find that entrepreneurs who are less risk averse are more likely to have an ambition to
grow the firm.
Davidsson (1989) shows that expectations of increased independence are positively
related to ambitions to grow. Cassar (2007) shows that income motivation is the most
important factor that affects the entrepreneurial growth preferences. Hessels et al.
(2008) conclude also on results, which support the view that for entrepreneurs
primarily motivated to increase wealth, job growth and export orientation are needed
to achieve the financial gains that they desire. They confirm that entrepreneurs mainly
motivated by independence do not have a strong focus on growth, respectively there
is a positive relationship between increase-wealth-motivated entrepreneurs and the
high-job-growth. Teruel & de Wit (2011) find financial motives to be related to growth
ambitions, too.
To understand the determinants of entrepreneurial aspirations, many researchers
have studied entrepreneurs’ personal characteristics. According to Kjeldsen et al.
(2004), Schøtt & Bager (2004), Autio (2005, 2007), Menzies et al. (2006), Tominc &
Rebernik (2006), Terjesen & Szerb (2008), Verheul & van Mil (2008), Karedeniz &
Özçam (2010), female entrepreneurs rarely become growth entrepreneurs. In the
GEM data, age and gender are statistically significantly associated with high-growth
aspirations, with younger individuals and men typically indicating higher growth
aspirations than older individuals and women (Autio, 2007).
Acs et al. (2008) underline the relationship between nascent entrepreneurship and
country risk. They find a strong and significant relationship with the composite risk
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index, individuals are more likely to choose and succeed in joining the formal sector if
the political, economic and financial risks are low. Nystrom (2008) examines the
relationship between economic freedom and entrepreneurship. She finds that a
smaller size of government, better legal structure and security of property rights, and
less regulation of credit, labour and business all increase rates of entrepreneurship.
Sobel et al. (2007), Bjornskov & Foss (2008) and Powell & Rodet (2010) examine the
impact of economic freedom upon the entrepreneurship rate. According to Powell &
Rodet (2010) new entrepreneurs are likely to be most affected by economic freedom.
The empirical literature on the role of institutions of economic freedom in promoting
entrepreneurship is relatively new (Powell & Rodet, 2010). Bygrave et al. (2003) state
that informal venture capital is the primary source of external equity finance for new
businesses. Burke et al. (2008) point out that economic freedom is an indicator for the
availability of exit opportunities for early stage informal investors, too. Venture capital
per capita has a positive effect in most of their models. Freytag & Thurik (2007) report
also on the influence of economic freedom for entrepreneurship.
Starting from these remarks, our study aims to emphasize the individual and country
level factors influencing the innovation-oriented early-stage entrepreneurial activity as
well as high-growth expectation early-stage entrepreneurial activity in efficiency-driven
economies, based on 2008 GEM APS data.
III. Methodology and data
GEM is a large scale research program launched in 1997 by leading researchers in
the field of entrepreneurship at London Business School and Babson College. The
first research was published in 1999 and it included 10 countries. Since then the
project has been extended to include 43 in 2008. The main aim of GEM research is to
study the complex relationship between entrepreneurship and economic growth, to
measure the level of entrepreneurial activity between countries, to uncover the
determinant factors and to identify policies which may stimulate the level of
entrepreneurial activity, admitting that entrepreneurship contributes to economic
growth (Baumol, 2002; Acs et al., 2004; Wennekers et al., 2005; Acs et al., 2008;
Hessels & van Stel, 2009).
In each country, a survey company conducts a telephone survey or face-to-face
interview of the adult population
1
. This survey was carried out to measure the
entrepreneurial behaviour and the attitudes of adult population on country-level,
allowing international comparison and global view on entrepreneurship.
The Global Entrepreneurship Monitor Global Reports (Bosma et al., 2009, p.4; Bosma
& Levie, 2010, p.5) classify the participating countries in three groups which are
considered to be relevant to entrepreneurship in relation to economic development, on
the basis of the Global Competitiveness Reports. In the first stage, the economy is
factor-driven and countries compete based on their factor endowments: primarily
unskilled labour and natural resources. Companies compete on the basis of price and
sell basic products or commodities, with their low productivity reflected in low wages.
1
Aged between 18-64 years.
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Maintaining competitiveness at this stage of development hinges primarily on well-
functioning public and private institutions, well-developed infrastructure, a stable
macroeconomic framework, and a healthy and literate workforce. As wages rise with
advancing development, countries move into the efficiency-driven stage of
development, when they must begin to develop more efficient production processes
and increase product quality. At this point, competitiveness is increasingly driven by
higher education and training, efficient goods markets, well-functioning labour
markets, sophisticated financial markets, a large domestic and/or foreign market, and
the ability to harness the benefits of existing technologies. Finally, as countries move
into the innovation-driven stage, they are able to sustain higher wages and the
associated standard of living only if their businesses are able to compete with new
and unique products. At this stage, companies must compete through innovation,
producing new and different goods using the most sophisticated production processes
(Schwab, 2009, pp. 7-8). Our analysis focuses on the entrepreneurial aspirations
which characterise the efficiency-driven economies
2,3
, based on 2008 GEM Adult
Population Survey data. Our sample contains 2973 observations identified as early-
stage entrepreneurs
4
.
Entrepreneurial activity is seen as a process. GEM measures entrepreneurial
intentions, nascent, new and established business activity and business
discontinuation activity (Bosma & Levie, 2010, p. 61). In the present study among
these concepts we used the following terms:
Nascent entrepreneurs are those individuals aged between 18-64 years who are
actively planning a new venture. These entrepreneurs have done something
during the previous 12 months to help start a new business, that he or she will at
least partly own. Activities such as organizing the start-up team, looking for
equipment, saving money for the start-up or writing a business plan would all be
considered as active commitments to starting a business. This business has not
paid salaries, wages or any other payments to the owners for more than three
months.
Young business entrepreneurs are those entrepreneurs who at least partly own
and manage a new business that is between 4 and 42 months old and have not
paid salaries for longer than this period. These new ventures are in the first 42
month after the new venture has been set up.
Early-stage entrepreneurs refer to the early-stage entrepreneurial activity among
the adult population aged between 18-64 years, identified as nascent or young
business entrepreneurs. In those cases when the respondent is involved both as
2
In 2008 the GEM countries with efficiency-driven economies both in 2008 and in 2009 were:
Argentina, Brazil, Chile, Croatia, Hungary, Latvia, FYR of Macedonia, Mexico, Peru, Romania,
Russia, Serbia, South-Africa, Turkey, Uruguay.
3
The GEM countries participating in 2008 classified as factor-driven economies in transition to
efficiency driven economies in 2008 and becoming efficiency-driven economies in 2009 are
included: Bosnia and Herzegovina, Colombia, Ecuador and Iran.
4
From the initial sample were excluded those early-stage entrepreneurs who responded don’t
know, refused to answer or gave an answer which couldn’t be coded at least at one of the
questions regarding the variables analyzed in this study.
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nascent and young business entrepreneur then the respondent is counted only
once as a nascent entrepreneur.
Entrepreneurial aspirations reflect the qualitative nature of entrepreneurial activity.
They can significantly affect the economic impact of entrepreneurial activities. The
studied entrepreneurial aspirations are the followings:
High-growth expectation early-stage entrepreneurs 1 – are either a nascent
entrepreneur or owner-manager of a new business and expect to employ at least
19 employees five years from now.
High-growth expectation early-stage entrepreneurs 2 – are those early-stage
entrepreneurs who indicate that they expect at least ten jobs growth and job
increase with at least 50%.
New technology oriented entrepreneurs- those early-stage entrepreneurs who
indicate that the novelty of the technology they use is high, at most one year old.
New product - market oriented early-stage entrepreneurs – are early-stage
entrepreneurs who indicate that their product or service is new to at least some
customers and indicate that not many businesses offer the same product or
service.
We used the above-mentioned aspiration expressing variables as dependent
variables in our empirical analyses.
The influencing factors of the entrepreneurial aspirations were estimated with the use
of logistic regression. The logistic regression was used to examine the relationship
between the dependent and the independent variables. According to Hosmer and
Lemeshow (2000, p. 31), logistic regression is multiple regression but with an
outcome variable that is a categorical dichotomy and predictor variables that are
continuous or categorical. The multiple logistic regressions for this study take the
form:
,
where: is the conditional probability that the outcome is present,
Y is the dependent variable,
X is the vector of the independent variables ,
is the linear combination of the independent
variables, where are real regression coefficients.
The analysed variables were individual-level variables (entrepreneurial attitudes,
entrepreneurial perceptions, motivations, socio-demographic variables) and country-
level variables (GDP per capita, country risk, economic freedom, firm-level technology
absorption rate, the share of R&D expenses in GDP, venture capital availability rate
and inflation rate). The explanatory variables are shown below, in Table 1.
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Table 1
Explanatory variables in the models
Notation Name Description Values
Individual-level variables
OPPORT Opportunity
perception
The questioned persons answered
if they see good business
opportunities for the next six
months.
0=No
1=Yes
FEARFAIL Perception of
fear of failure
The questioned persons answered
if they consider that fear of failure
stops them in starting a business.
0=No
1=Yes
IDO Improvement-
driven early-
stage
entrepreneur
The respondent claim to be driven
by opportunity as opposed to
finding no other option for work and
who indicate that the main driver
for being involved in this
opportunity is being independent or
increasing their income, rather than
just maintaining their income.
0=No
1=Yes
STAGE Stage of activity The respondent is nascent
entrepreneur or young business
owner-manager.
1=Nascent
entrepreneur
2=Young busi-
ness owner-
manager
GENDER Gender The gender of the questioned
person.
1=Male
2=Female
AGE Exact age The age of the questioned person
at the time of the interview.
from 18 to 64
years
Country-level variables
COUNTRY_RISK Country risk Country risk rating by COFACE
2008 in a 7 point Likert scale
A1-7, D-1
VENTCAP Venture capital
availability
Venture capital availability,
entrepreneurs can find VC easily 0-
7 Likert scale, (World Economic
Forum)
0-7
INFLATION Inflation rate Inflation rate, annual % change,
2008 (World dataBank)
ECFREE Economic
freedom index
Index of economic freedom score,
100 = the most free, 2008
0-100
Source: GEM APS, 2008, GEM Cross National Data, 2008, Schwab, K. ed. (2009), Heritage
Foundation (2010), World Bank (2010).
The overview on the dependent variables of the study by analysed economies in 2008
emphasizes the territorial differences regarding the four variables in this group of
efficiency-driven countries. One should keep in mind that such an assessment of
innovativeness and growth expectations is context-specific and that what is innovative
in one country is not necessarily regarded as innovative in another (Minniti et al. 2006,
Hessels et al., 2008). Table 1 shows the values of dependent variables for the
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countries in our sample. The highest high-growth expectation rate can be found in
Colombia (4.31% of working age adult population), Argentina (2.28%) and the lowest
in Mexico (0.21%) and Hungary (0.25%). Mexico and Hungary present also the lowest
results in this group of countries regarding high job expectation rate, with 4.67%,
respectively 5.19% of early-stage entrepreneurship. The highest rates can be
identified in Chile (30.62%) and in Colombia (30.62%). Brazil (3.76% of early-stage
entrepreneurs) and Hungary (4.55%) has the lowest, Chile (37.10%) and Peru
(37.03%) have the highest new product-market combination rate in this group of
countries. Hungary (0.47% of early-stage entrepreneurs) and Brazil (1.69%) are also
ranked last regarding the new technology rate ranking among efficiency-driven GEM
countries in 2008. The highest value of this rate can be emphasized in Chile (33.55%),
followed by Macedonia (24.99%).
Table 2
Entrepreneurial aspirations in efficiency-driven economies, 2008
High-growth
expectation
early-stage
entrepreneurial
rate
(% of population
aged between
18-64 years)
High job
expectation
rate
(% of early-
stage
entrepreneurs)
New product-
market
combination
rate
(% of early-
stage
entrepreneurs)
New technology
rate
(% of early-
stage
entrepreneurs)
Argentina 2.28 24.11 30.00 6.24
Bosnia and
Herzegovina
0.70 15.33 8.49 16.47
Brazil 0.75 8.81 3.76 1.69
Chile 2.21 33.07 37.10 33.55
Colombia 4.31 30.62 19.45 18.19
Croatia 0.89 19.67 9.07 20.95
Ecuador 0.60 11.04 14.49 8.35
Hungary 0.25 5.19 4.55 0.47
Iran 0.87 14.93 9.64 2.15
Latvia 1.10 25.23 24.43 9.25
FYR of Macedonia 1.20 18.04 12.95 24.99
Mexico 0.21 4.67 25.73 8.20
Peru 2.16 17.62 37.03 12.60
Romania 0.52 20.45 15.72 6.35
Russia 0.65 13.03 11.49 9.37
Serbia 0.54 20.24 12.37 18.34
South-Africa 1.04 20.51 23.49 24.75
Turkey 1.06 26.58 18.13 7.09
Uruguay 1.22 19.89 35.74 13.70
Source: GEM Master Dataset, 2008.
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IV. Empirical results
Analysing the early-stage entrepreneurial aspirations four logit models has been
estimated in order to determine the factors which influence significantly the
innovativeness and the high-growth expectations of an early-stage entrepreneur in an
efficiency-driven economy as Table 3 indicates it.
In efficiency-driven economies, the probability of becoming an early-stage
entrepreneur who uses new technology is influenced significantly and positively by the
venture capital availability in the country. This probability is negatively influenced by
age, gender, inflation rate, economic freedom index and the status of the early-stage
entrepreneur. According to this, the early-stage entrepreneurs tend to use less new
technology as they advance in age, and male early-stage entrepreneurs are more
likely to use new technology. The index of economic freedom has an unexpected sign,
indicating that further increase of the economic freedom in case of efficiency-driven
economies might influence negatively the new technology-oriented entrepreneurship.
Nascent entrepreneurs are more new technology-oriented. Lower inflation and more
venture capital availability of the country might cause more new technology-oriented
entrepreneurial activity.
GEM combines two measures of innovation in index (new product market
combination): product novelty and degree of competition. The probability of becoming
an early-stage entrepreneur in an efficiency-driven economy that enters to a new
market with a new product is significantly increased by business opportunity
identification in the next six months, by improvement-driven entrepreneurial motivation
and by venture capital availability. The status of early-stage entrepreneurs have also a
significant influence, nascent entrepreneurs being more likely to enter new markets
with new products. The fear of failure and the inflation rate decrease the probability to
become an innovation-oriented early-stage entrepreneur.
The probability of becoming an entrepreneur with expectation of more than 19 jobs in
5 years is significantly influenced by venture capital availability and country risk, with
positive sign. Age, gender, fear of failure and economic freedom index of the country
are significant variables with negative sign. Younger early-stage entrepreneurs, those
who doesn’t consider that fear of failure would prevent them from starting a new
business and male early-stage entrepreneurs are more likely to have high growth
expectations. Among these variables, the only variable with unexpected sign is the
index of economic freedom, since we initially considered that more economic freedom
leads to higher entrepreneurial growth expectation. Our findings regarding the impact
of economic freedom upon high-growth expectation entrepreneurship confirm the
results of Powell & Rodet (2010). Bjornskov and Foss (2006) have shown that only
certain components of the economic freedom index explain variance in
entrepreneurship, which likely explains this initial result.
Fear of failure, early-stage entrepreneurial status, age and gender have a negative
sign, while venture capital availability has a positive influence upon the probability of
becoming an early-stage entrepreneur with high job growth expectation, with over 10
jobs and more 50% job increase.
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Table 3
Influencing factors of early-stage entrepreneurial aspirations in
efficiency-driven economies
New technology
New product
market
combination
Expects more
than 19 jobs in 5
years
Job growth >=10
persons and >=
50%
Coeff. Sig. VIF Coeff. Sig. VIF Coeff. Sig. VIF Coeff. Sig. VIF
OPPORT 0.320 0.001 1.024
FEARFAIL -0.279 0.016 1.017 -0.283 0.048 1.005 -0.312 0.006 1.006
STAGE -0.342 0.001 1.008 -2.36 0.000 1.013 -0.872 0.000 1.008
IDO 0.263 0.005 1.010
AGE -0.018 0.000 1.012 -0.018 0.001 1.010 -0.017 0.000 1.005
GENDER -0.290 0.007 1.013 -0.571 0.000 1.012 -0.564 0.000 1.003
INFLATION -0.090 0.000 1.473 -0.032 0.003 1.044
VENTCAP 1.320 0.000 2.311 0.584 0.000 1.038 0.754 0.000 2.321 0.437 0.000 1.007
ECFREE -0.055 0.000 2.964 -0.052 0.000 2.981
COUNTRY_RISK 0.120 0.035 2.718
Cox & Snell R
2
0.440 0.389 0.495 0.341
Nagelkerke R
2
0.586 0.519 0.660 0.454
Hosmer and
Lemeshow Test
p value=0.334
(Chi-square(8)
=9.103)
p value=0.310
(Chi-square(8)
=9.399)
p value=0.119
(Chi-square(8)
=12.802)
p value=0.176
(Chi-square(8)
=11.475)
Correctly
classified rate
85.5% 77.4% 88.4% 79.2%
Number of
observations
2973 2973 2973 2973
Source: Own calculations based on GEM APS Database, 2008.
The estimated regression suggests that the models correctly classify between 77.4%-
88.4% of the early-stage entrepreneurs in our samples. Table 3 also shows that the
values of Cox & Snell R
2
and Nagelkerke R
2
are between 0.341-0.495, respectively
between 0.454-0.660. Hosmer and Lemeshow tests also indicate the goodness-of-fit
of the models with p-value>0.05. The values of VIF (Variance Inflation Factors) show
that there is no multicollinearity between the explanatory variables in the estimated
models. Therefore, the model adequately describes the data.
V. Conclusions
Our study aimed to identify the influencing factors of early-stage entrepreneurial
aspirations in efficiency-driven economies. Four models were estimated with
individual-level (socio-demographical, perceptional variables) and country-level
explanatory variables. In case of the early-stage entrepreneurial innovativeness two
models were estimated, both confirming that nascent entrepreneurs are more likely to
become innovation oriented and that venture capital availability of the country
increases, while the inflation rate decreases the probability of becoming an innovative-
oriented early-stage entrepreneur in an efficiency-driven economy. Our results confirm
Early-stage entrepreneurial aspirations in efficiency-driven economie
Romanian Journal of Economic Forecasting – 2/2011
15
the findings of Koellinger (2008) and Terjesen & Szerb (2008), male and young
entrepreneurs are more likely innovative, respectively those entrepreneurs who
recognize opportunity enters with greater probability to a new market with a new
product. In addition to Koellinger’s (2008) results, we found a negative significant
relationship between the risk aversion and the probability of becoming an
entrepreneur whose products are new on a new market.
Two other models were estimated in order to identify the factors, which significantly
influence the probability of becoming an early-stage entrepreneur with high-growth
expectation in an efficiency-driven economy. According to both models and confirming
the results of Autio (2007), Cassar (2007), Verheul & van Mil (2008) and Autio & Acs
(2009), those who consider that fear of failure would prevent them from starting a
business are less likely to have high-growth expectations. Age and gender are also
significantly influencing factors in favour of young and male early-stage entrepreneurs
in both models, in accordance to the findings of Kjeldsen et al. (2004), Schøtt & Bager
(2004), Autio (2005, 2007), Menzies et al. (2006), Tominc & Rebernik (2006),
Terjesen & Szerb (2008), Verheul & van Mil (2008), Karedeniz & Özçam (2010). The
venture capital availability of the country has a positive influence in case of both
models, as Bygrave et al. (2003) and Burke et al. (2008) also pointed out.
The only variable with an unexpected influence was the economic freedom index,
which can be explained by the fact that the main components of the economic
freedom index (the size of government, access to sound money, the overall rule of
law, regulation of international trade, and regulation of credit, labour and business)
have different influence upon early-stage entrepreneurial aspirations.
Future empirical research may include other institutional elements in investigation of
the influencing factors of entrepreneurial aspirations in efficiency-driven economies. It
would be interesting to study the high-growth expectations, innovation and
international orientation of the established entrepreneurs, in addition to nascent and
new business owner-managers entrepreneurs. Regarding the unexpected influence of
the economic freedom index, it would be indicated to analyze which components have
the most important impact upon the entrepreneurial aspirations.
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doc_202711547.pdf
In such a detailed description explicate early stage entrepreneurial aspirations in efficiency driven economies.
Romanian Journal of Economic Forecasting – 2/2011
5
EARLY-STAGE ENTREPRENEURIAL
ASPIRATIONS IN EFFICIENCY-DRIVEN
ECONOMIES
tefan PETE
*
Ágnes NAGY
**
Dumitru MATI
***
Lehel-Zoltán GYÖRFY
****
Annamária BENYOVSZKI
*****
Tünde Petra PETRU
******
Abstract
The aim of this article is to identify the influencing factors of early-stage
entrepreneurial aspirations in efficiency-driven economies based on Global
Entrepreneurship Monitor (GEM) Adult Population Survey (APS) database for the year
2008. Within the entrepreneurial aspirations the innovativeness of entrepreneurial
businesses and the job growth expectations were studied.
Keyword: early-stage entrepreneur, entrepreneurial aspirations, Global
Entrepreneurship Monitor.
JEL Classification: M13, J24
I. Introduction
Earlier studies proved that the results of the entrepreneurial activity can be related to
the entrepreneurial aspirations (Wiklund & Shepherd, 2003; Cassar, 2007). This fact
*
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
**
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
***
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
****
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
*****
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
******
Babe-Bolyai University, Faculty of Economics and Business Administration, Email:
[email protected]
1.
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Romanian Journal of Economic Forecasting – 2/2011
6
reveals the importance of factors influencing the entrepreneurial aspirations. Previous
research explaining entrepreneurial aspirations and ambitions found many
determinants on different levels of analyses. In the present paper, we will focus upon
the high-growth expectation and innovation orientation of the early-stage
entrepreneurs in efficiency-driven economies.
The factors influencing individual decisions to become an innovation-oriented or high-
growth early-stage entrepreneur can be classified into individual factors, which include
demographic characteristics (gender, age), wealth, household income, current
working status, individual human capital (education, working experience), individual
perceptions towards entrepreneurship (opportunities recognition, fear of failure,
entrepreneurial skills and abilities), motivations (improvement-driven opportunity or
necessity); macroeconomic factors (venture capital availability, economic freedom
index, inflation rate, country risk).
The aim of this paper is to investigate two research questions. First, which are the
influencing factors of becoming an innovation-oriented early-stage entrepreneur in
efficiency-driven economies? Second, which are the influencing factors of becoming
an early-stage entrepreneur with high-growth expectations in these countries?
The literature regarding innovative entrepreneurship is relative poor, due to the lack of
data sources, which contain information about innovation-oriented entrepreneurs. We
contribute to the empirical literature by examining the influencing factors of becoming
an innovation oriented, respectively a high-growth expectation early-stage
entrepreneur in efficiency-driven economies in 2008 based on Global Entrepre-
neurship Monitor (GEM) Adult Population Survey (APS) data.
The paper is organized as follows. We first review the literature related to
entrepreneurial aspirations, focusing upon innovation orientation and high-growth
expectation. In the subsequent sections, we will describe the data and the research
methodology and we will present the results of our empirical analysis. Finally, we
discuss and interpret our findings and draw some conclusions.
II. Literature review
According to Amorós et al. (2011) the new entrepreneurial businesses may serve new
segments or try new methods that their rivals who have been on the scene failed to
identify or to respond due to lack of flexibility. These entrepreneurial firms help
nations’ innovation systems, allowing them to adapt to the changing conditions of
global competitiveness and provides them with the capacity to establish differences in
order to increase the value acknowledged by their markets. Entrepreneurship and
innovation processes are key factors to increase economic dynamism (Minniti et al.,
2006). Koellinger (2008) studies the factors, which explain why nascent entrepreneurs
may choose innovative entrepreneurship over imitation using GEM data. The results
suggest that innovative entrepreneurs are likely to be male, educated, unemployed,
confident in their entrepreneurial skills, to be opportunity-motivated and likely to live in
a developed country. He pointed out that there is no statistically significant effect of
risk aversion, social network, or the share of population with tertiary education.
Early-stage entrepreneurial aspirations in efficiency-driven economie
Romanian Journal of Economic Forecasting – 2/2011
7
A number of studies relate motives to aspirations, also referred to as ambitions,
growth intentions or growth attitudes (Kolvereid, 1992; Amit et al., 2001; Morris et al.,
2006; Cassar, 2007). For necessity-motivated entrepreneurs their daily economic
survival will depend strongly on the survival of their business, which may negatively
affect the aspirations they have with their firm (Hessels et al., 2008).
Sanditov & Verspagen (2011) study the influence of macroeconomic and individual
level variables upon the probability of entering innovative early-stage entrepreneur-
ship. They find that individual factors have similar effects on the probability of entering
innovative and imitative entrepreneurship. Older entrepreneurs are less innovative,
more interested in their status quo and more risk averse (Terjesen & Szerb, 2008).
Previous research at the microlevel suggests that independence is a prime entre-
preneurial motive for creating innovative ventures (Corman et al. 1988).
Regarding a country’s level of growth, it can be expected that a higher rate of
economic growth will provide entrepreneurial opportunities and therefore entrepreneu-
rial aspirations are positively related to economic growth (Thurik et al. 2008).
Autio (2007) finds that entrepreneurial activities and attitudes are significantly
associated with high-expectation and high-growth entrepreneurship. Autio (2007) also
points out that high-expectation and high-growth entrepreneurs are more likely to
exhibit entrepreneurial attitudes and activities than other entrepreneurs and the
general population, with a few exceptions. According to Autio (2007) and Terjesen &
Szerb (2008), recent personal acquaintance with an entrepreneur and the ability to
see good business opportunities is positively and significantly related to business
growth. Autio (2007), Cassar (2007), Verheul & van Mil (2008) and Autio & Acs (2009)
find that entrepreneurs who are less risk averse are more likely to have an ambition to
grow the firm.
Davidsson (1989) shows that expectations of increased independence are positively
related to ambitions to grow. Cassar (2007) shows that income motivation is the most
important factor that affects the entrepreneurial growth preferences. Hessels et al.
(2008) conclude also on results, which support the view that for entrepreneurs
primarily motivated to increase wealth, job growth and export orientation are needed
to achieve the financial gains that they desire. They confirm that entrepreneurs mainly
motivated by independence do not have a strong focus on growth, respectively there
is a positive relationship between increase-wealth-motivated entrepreneurs and the
high-job-growth. Teruel & de Wit (2011) find financial motives to be related to growth
ambitions, too.
To understand the determinants of entrepreneurial aspirations, many researchers
have studied entrepreneurs’ personal characteristics. According to Kjeldsen et al.
(2004), Schøtt & Bager (2004), Autio (2005, 2007), Menzies et al. (2006), Tominc &
Rebernik (2006), Terjesen & Szerb (2008), Verheul & van Mil (2008), Karedeniz &
Özçam (2010), female entrepreneurs rarely become growth entrepreneurs. In the
GEM data, age and gender are statistically significantly associated with high-growth
aspirations, with younger individuals and men typically indicating higher growth
aspirations than older individuals and women (Autio, 2007).
Acs et al. (2008) underline the relationship between nascent entrepreneurship and
country risk. They find a strong and significant relationship with the composite risk
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Romanian Journal of Economic Forecasting – 2/2011
8
index, individuals are more likely to choose and succeed in joining the formal sector if
the political, economic and financial risks are low. Nystrom (2008) examines the
relationship between economic freedom and entrepreneurship. She finds that a
smaller size of government, better legal structure and security of property rights, and
less regulation of credit, labour and business all increase rates of entrepreneurship.
Sobel et al. (2007), Bjornskov & Foss (2008) and Powell & Rodet (2010) examine the
impact of economic freedom upon the entrepreneurship rate. According to Powell &
Rodet (2010) new entrepreneurs are likely to be most affected by economic freedom.
The empirical literature on the role of institutions of economic freedom in promoting
entrepreneurship is relatively new (Powell & Rodet, 2010). Bygrave et al. (2003) state
that informal venture capital is the primary source of external equity finance for new
businesses. Burke et al. (2008) point out that economic freedom is an indicator for the
availability of exit opportunities for early stage informal investors, too. Venture capital
per capita has a positive effect in most of their models. Freytag & Thurik (2007) report
also on the influence of economic freedom for entrepreneurship.
Starting from these remarks, our study aims to emphasize the individual and country
level factors influencing the innovation-oriented early-stage entrepreneurial activity as
well as high-growth expectation early-stage entrepreneurial activity in efficiency-driven
economies, based on 2008 GEM APS data.
III. Methodology and data
GEM is a large scale research program launched in 1997 by leading researchers in
the field of entrepreneurship at London Business School and Babson College. The
first research was published in 1999 and it included 10 countries. Since then the
project has been extended to include 43 in 2008. The main aim of GEM research is to
study the complex relationship between entrepreneurship and economic growth, to
measure the level of entrepreneurial activity between countries, to uncover the
determinant factors and to identify policies which may stimulate the level of
entrepreneurial activity, admitting that entrepreneurship contributes to economic
growth (Baumol, 2002; Acs et al., 2004; Wennekers et al., 2005; Acs et al., 2008;
Hessels & van Stel, 2009).
In each country, a survey company conducts a telephone survey or face-to-face
interview of the adult population
1
. This survey was carried out to measure the
entrepreneurial behaviour and the attitudes of adult population on country-level,
allowing international comparison and global view on entrepreneurship.
The Global Entrepreneurship Monitor Global Reports (Bosma et al., 2009, p.4; Bosma
& Levie, 2010, p.5) classify the participating countries in three groups which are
considered to be relevant to entrepreneurship in relation to economic development, on
the basis of the Global Competitiveness Reports. In the first stage, the economy is
factor-driven and countries compete based on their factor endowments: primarily
unskilled labour and natural resources. Companies compete on the basis of price and
sell basic products or commodities, with their low productivity reflected in low wages.
1
Aged between 18-64 years.
Early-stage entrepreneurial aspirations in efficiency-driven economie
Romanian Journal of Economic Forecasting – 2/2011
9
Maintaining competitiveness at this stage of development hinges primarily on well-
functioning public and private institutions, well-developed infrastructure, a stable
macroeconomic framework, and a healthy and literate workforce. As wages rise with
advancing development, countries move into the efficiency-driven stage of
development, when they must begin to develop more efficient production processes
and increase product quality. At this point, competitiveness is increasingly driven by
higher education and training, efficient goods markets, well-functioning labour
markets, sophisticated financial markets, a large domestic and/or foreign market, and
the ability to harness the benefits of existing technologies. Finally, as countries move
into the innovation-driven stage, they are able to sustain higher wages and the
associated standard of living only if their businesses are able to compete with new
and unique products. At this stage, companies must compete through innovation,
producing new and different goods using the most sophisticated production processes
(Schwab, 2009, pp. 7-8). Our analysis focuses on the entrepreneurial aspirations
which characterise the efficiency-driven economies
2,3
, based on 2008 GEM Adult
Population Survey data. Our sample contains 2973 observations identified as early-
stage entrepreneurs
4
.
Entrepreneurial activity is seen as a process. GEM measures entrepreneurial
intentions, nascent, new and established business activity and business
discontinuation activity (Bosma & Levie, 2010, p. 61). In the present study among
these concepts we used the following terms:
Nascent entrepreneurs are those individuals aged between 18-64 years who are
actively planning a new venture. These entrepreneurs have done something
during the previous 12 months to help start a new business, that he or she will at
least partly own. Activities such as organizing the start-up team, looking for
equipment, saving money for the start-up or writing a business plan would all be
considered as active commitments to starting a business. This business has not
paid salaries, wages or any other payments to the owners for more than three
months.
Young business entrepreneurs are those entrepreneurs who at least partly own
and manage a new business that is between 4 and 42 months old and have not
paid salaries for longer than this period. These new ventures are in the first 42
month after the new venture has been set up.
Early-stage entrepreneurs refer to the early-stage entrepreneurial activity among
the adult population aged between 18-64 years, identified as nascent or young
business entrepreneurs. In those cases when the respondent is involved both as
2
In 2008 the GEM countries with efficiency-driven economies both in 2008 and in 2009 were:
Argentina, Brazil, Chile, Croatia, Hungary, Latvia, FYR of Macedonia, Mexico, Peru, Romania,
Russia, Serbia, South-Africa, Turkey, Uruguay.
3
The GEM countries participating in 2008 classified as factor-driven economies in transition to
efficiency driven economies in 2008 and becoming efficiency-driven economies in 2009 are
included: Bosnia and Herzegovina, Colombia, Ecuador and Iran.
4
From the initial sample were excluded those early-stage entrepreneurs who responded don’t
know, refused to answer or gave an answer which couldn’t be coded at least at one of the
questions regarding the variables analyzed in this study.
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Romanian Journal of Economic Forecasting – 2/2011
10
nascent and young business entrepreneur then the respondent is counted only
once as a nascent entrepreneur.
Entrepreneurial aspirations reflect the qualitative nature of entrepreneurial activity.
They can significantly affect the economic impact of entrepreneurial activities. The
studied entrepreneurial aspirations are the followings:
High-growth expectation early-stage entrepreneurs 1 – are either a nascent
entrepreneur or owner-manager of a new business and expect to employ at least
19 employees five years from now.
High-growth expectation early-stage entrepreneurs 2 – are those early-stage
entrepreneurs who indicate that they expect at least ten jobs growth and job
increase with at least 50%.
New technology oriented entrepreneurs- those early-stage entrepreneurs who
indicate that the novelty of the technology they use is high, at most one year old.
New product - market oriented early-stage entrepreneurs – are early-stage
entrepreneurs who indicate that their product or service is new to at least some
customers and indicate that not many businesses offer the same product or
service.
We used the above-mentioned aspiration expressing variables as dependent
variables in our empirical analyses.
The influencing factors of the entrepreneurial aspirations were estimated with the use
of logistic regression. The logistic regression was used to examine the relationship
between the dependent and the independent variables. According to Hosmer and
Lemeshow (2000, p. 31), logistic regression is multiple regression but with an
outcome variable that is a categorical dichotomy and predictor variables that are
continuous or categorical. The multiple logistic regressions for this study take the
form:
,
where: is the conditional probability that the outcome is present,
Y is the dependent variable,
X is the vector of the independent variables ,
is the linear combination of the independent
variables, where are real regression coefficients.
The analysed variables were individual-level variables (entrepreneurial attitudes,
entrepreneurial perceptions, motivations, socio-demographic variables) and country-
level variables (GDP per capita, country risk, economic freedom, firm-level technology
absorption rate, the share of R&D expenses in GDP, venture capital availability rate
and inflation rate). The explanatory variables are shown below, in Table 1.
Early-stage entrepreneurial aspirations in efficiency-driven economie
Romanian Journal of Economic Forecasting – 2/2011
11
Table 1
Explanatory variables in the models
Notation Name Description Values
Individual-level variables
OPPORT Opportunity
perception
The questioned persons answered
if they see good business
opportunities for the next six
months.
0=No
1=Yes
FEARFAIL Perception of
fear of failure
The questioned persons answered
if they consider that fear of failure
stops them in starting a business.
0=No
1=Yes
IDO Improvement-
driven early-
stage
entrepreneur
The respondent claim to be driven
by opportunity as opposed to
finding no other option for work and
who indicate that the main driver
for being involved in this
opportunity is being independent or
increasing their income, rather than
just maintaining their income.
0=No
1=Yes
STAGE Stage of activity The respondent is nascent
entrepreneur or young business
owner-manager.
1=Nascent
entrepreneur
2=Young busi-
ness owner-
manager
GENDER Gender The gender of the questioned
person.
1=Male
2=Female
AGE Exact age The age of the questioned person
at the time of the interview.
from 18 to 64
years
Country-level variables
COUNTRY_RISK Country risk Country risk rating by COFACE
2008 in a 7 point Likert scale
A1-7, D-1
VENTCAP Venture capital
availability
Venture capital availability,
entrepreneurs can find VC easily 0-
7 Likert scale, (World Economic
Forum)
0-7
INFLATION Inflation rate Inflation rate, annual % change,
2008 (World dataBank)
ECFREE Economic
freedom index
Index of economic freedom score,
100 = the most free, 2008
0-100
Source: GEM APS, 2008, GEM Cross National Data, 2008, Schwab, K. ed. (2009), Heritage
Foundation (2010), World Bank (2010).
The overview on the dependent variables of the study by analysed economies in 2008
emphasizes the territorial differences regarding the four variables in this group of
efficiency-driven countries. One should keep in mind that such an assessment of
innovativeness and growth expectations is context-specific and that what is innovative
in one country is not necessarily regarded as innovative in another (Minniti et al. 2006,
Hessels et al., 2008). Table 1 shows the values of dependent variables for the
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Romanian Journal of Economic Forecasting – 2/2011
12
countries in our sample. The highest high-growth expectation rate can be found in
Colombia (4.31% of working age adult population), Argentina (2.28%) and the lowest
in Mexico (0.21%) and Hungary (0.25%). Mexico and Hungary present also the lowest
results in this group of countries regarding high job expectation rate, with 4.67%,
respectively 5.19% of early-stage entrepreneurship. The highest rates can be
identified in Chile (30.62%) and in Colombia (30.62%). Brazil (3.76% of early-stage
entrepreneurs) and Hungary (4.55%) has the lowest, Chile (37.10%) and Peru
(37.03%) have the highest new product-market combination rate in this group of
countries. Hungary (0.47% of early-stage entrepreneurs) and Brazil (1.69%) are also
ranked last regarding the new technology rate ranking among efficiency-driven GEM
countries in 2008. The highest value of this rate can be emphasized in Chile (33.55%),
followed by Macedonia (24.99%).
Table 2
Entrepreneurial aspirations in efficiency-driven economies, 2008
High-growth
expectation
early-stage
entrepreneurial
rate
(% of population
aged between
18-64 years)
High job
expectation
rate
(% of early-
stage
entrepreneurs)
New product-
market
combination
rate
(% of early-
stage
entrepreneurs)
New technology
rate
(% of early-
stage
entrepreneurs)
Argentina 2.28 24.11 30.00 6.24
Bosnia and
Herzegovina
0.70 15.33 8.49 16.47
Brazil 0.75 8.81 3.76 1.69
Chile 2.21 33.07 37.10 33.55
Colombia 4.31 30.62 19.45 18.19
Croatia 0.89 19.67 9.07 20.95
Ecuador 0.60 11.04 14.49 8.35
Hungary 0.25 5.19 4.55 0.47
Iran 0.87 14.93 9.64 2.15
Latvia 1.10 25.23 24.43 9.25
FYR of Macedonia 1.20 18.04 12.95 24.99
Mexico 0.21 4.67 25.73 8.20
Peru 2.16 17.62 37.03 12.60
Romania 0.52 20.45 15.72 6.35
Russia 0.65 13.03 11.49 9.37
Serbia 0.54 20.24 12.37 18.34
South-Africa 1.04 20.51 23.49 24.75
Turkey 1.06 26.58 18.13 7.09
Uruguay 1.22 19.89 35.74 13.70
Source: GEM Master Dataset, 2008.
Early-stage entrepreneurial aspirations in efficiency-driven economie
Romanian Journal of Economic Forecasting – 2/2011
13
IV. Empirical results
Analysing the early-stage entrepreneurial aspirations four logit models has been
estimated in order to determine the factors which influence significantly the
innovativeness and the high-growth expectations of an early-stage entrepreneur in an
efficiency-driven economy as Table 3 indicates it.
In efficiency-driven economies, the probability of becoming an early-stage
entrepreneur who uses new technology is influenced significantly and positively by the
venture capital availability in the country. This probability is negatively influenced by
age, gender, inflation rate, economic freedom index and the status of the early-stage
entrepreneur. According to this, the early-stage entrepreneurs tend to use less new
technology as they advance in age, and male early-stage entrepreneurs are more
likely to use new technology. The index of economic freedom has an unexpected sign,
indicating that further increase of the economic freedom in case of efficiency-driven
economies might influence negatively the new technology-oriented entrepreneurship.
Nascent entrepreneurs are more new technology-oriented. Lower inflation and more
venture capital availability of the country might cause more new technology-oriented
entrepreneurial activity.
GEM combines two measures of innovation in index (new product market
combination): product novelty and degree of competition. The probability of becoming
an early-stage entrepreneur in an efficiency-driven economy that enters to a new
market with a new product is significantly increased by business opportunity
identification in the next six months, by improvement-driven entrepreneurial motivation
and by venture capital availability. The status of early-stage entrepreneurs have also a
significant influence, nascent entrepreneurs being more likely to enter new markets
with new products. The fear of failure and the inflation rate decrease the probability to
become an innovation-oriented early-stage entrepreneur.
The probability of becoming an entrepreneur with expectation of more than 19 jobs in
5 years is significantly influenced by venture capital availability and country risk, with
positive sign. Age, gender, fear of failure and economic freedom index of the country
are significant variables with negative sign. Younger early-stage entrepreneurs, those
who doesn’t consider that fear of failure would prevent them from starting a new
business and male early-stage entrepreneurs are more likely to have high growth
expectations. Among these variables, the only variable with unexpected sign is the
index of economic freedom, since we initially considered that more economic freedom
leads to higher entrepreneurial growth expectation. Our findings regarding the impact
of economic freedom upon high-growth expectation entrepreneurship confirm the
results of Powell & Rodet (2010). Bjornskov and Foss (2006) have shown that only
certain components of the economic freedom index explain variance in
entrepreneurship, which likely explains this initial result.
Fear of failure, early-stage entrepreneurial status, age and gender have a negative
sign, while venture capital availability has a positive influence upon the probability of
becoming an early-stage entrepreneur with high job growth expectation, with over 10
jobs and more 50% job increase.
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Table 3
Influencing factors of early-stage entrepreneurial aspirations in
efficiency-driven economies
New technology
New product
market
combination
Expects more
than 19 jobs in 5
years
Job growth >=10
persons and >=
50%
Coeff. Sig. VIF Coeff. Sig. VIF Coeff. Sig. VIF Coeff. Sig. VIF
OPPORT 0.320 0.001 1.024
FEARFAIL -0.279 0.016 1.017 -0.283 0.048 1.005 -0.312 0.006 1.006
STAGE -0.342 0.001 1.008 -2.36 0.000 1.013 -0.872 0.000 1.008
IDO 0.263 0.005 1.010
AGE -0.018 0.000 1.012 -0.018 0.001 1.010 -0.017 0.000 1.005
GENDER -0.290 0.007 1.013 -0.571 0.000 1.012 -0.564 0.000 1.003
INFLATION -0.090 0.000 1.473 -0.032 0.003 1.044
VENTCAP 1.320 0.000 2.311 0.584 0.000 1.038 0.754 0.000 2.321 0.437 0.000 1.007
ECFREE -0.055 0.000 2.964 -0.052 0.000 2.981
COUNTRY_RISK 0.120 0.035 2.718
Cox & Snell R
2
0.440 0.389 0.495 0.341
Nagelkerke R
2
0.586 0.519 0.660 0.454
Hosmer and
Lemeshow Test
p value=0.334
(Chi-square(8)
=9.103)
p value=0.310
(Chi-square(8)
=9.399)
p value=0.119
(Chi-square(8)
=12.802)
p value=0.176
(Chi-square(8)
=11.475)
Correctly
classified rate
85.5% 77.4% 88.4% 79.2%
Number of
observations
2973 2973 2973 2973
Source: Own calculations based on GEM APS Database, 2008.
The estimated regression suggests that the models correctly classify between 77.4%-
88.4% of the early-stage entrepreneurs in our samples. Table 3 also shows that the
values of Cox & Snell R
2
and Nagelkerke R
2
are between 0.341-0.495, respectively
between 0.454-0.660. Hosmer and Lemeshow tests also indicate the goodness-of-fit
of the models with p-value>0.05. The values of VIF (Variance Inflation Factors) show
that there is no multicollinearity between the explanatory variables in the estimated
models. Therefore, the model adequately describes the data.
V. Conclusions
Our study aimed to identify the influencing factors of early-stage entrepreneurial
aspirations in efficiency-driven economies. Four models were estimated with
individual-level (socio-demographical, perceptional variables) and country-level
explanatory variables. In case of the early-stage entrepreneurial innovativeness two
models were estimated, both confirming that nascent entrepreneurs are more likely to
become innovation oriented and that venture capital availability of the country
increases, while the inflation rate decreases the probability of becoming an innovative-
oriented early-stage entrepreneur in an efficiency-driven economy. Our results confirm
Early-stage entrepreneurial aspirations in efficiency-driven economie
Romanian Journal of Economic Forecasting – 2/2011
15
the findings of Koellinger (2008) and Terjesen & Szerb (2008), male and young
entrepreneurs are more likely innovative, respectively those entrepreneurs who
recognize opportunity enters with greater probability to a new market with a new
product. In addition to Koellinger’s (2008) results, we found a negative significant
relationship between the risk aversion and the probability of becoming an
entrepreneur whose products are new on a new market.
Two other models were estimated in order to identify the factors, which significantly
influence the probability of becoming an early-stage entrepreneur with high-growth
expectation in an efficiency-driven economy. According to both models and confirming
the results of Autio (2007), Cassar (2007), Verheul & van Mil (2008) and Autio & Acs
(2009), those who consider that fear of failure would prevent them from starting a
business are less likely to have high-growth expectations. Age and gender are also
significantly influencing factors in favour of young and male early-stage entrepreneurs
in both models, in accordance to the findings of Kjeldsen et al. (2004), Schøtt & Bager
(2004), Autio (2005, 2007), Menzies et al. (2006), Tominc & Rebernik (2006),
Terjesen & Szerb (2008), Verheul & van Mil (2008), Karedeniz & Özçam (2010). The
venture capital availability of the country has a positive influence in case of both
models, as Bygrave et al. (2003) and Burke et al. (2008) also pointed out.
The only variable with an unexpected influence was the economic freedom index,
which can be explained by the fact that the main components of the economic
freedom index (the size of government, access to sound money, the overall rule of
law, regulation of international trade, and regulation of credit, labour and business)
have different influence upon early-stage entrepreneurial aspirations.
Future empirical research may include other institutional elements in investigation of
the influencing factors of entrepreneurial aspirations in efficiency-driven economies. It
would be interesting to study the high-growth expectations, innovation and
international orientation of the established entrepreneurs, in addition to nascent and
new business owner-managers entrepreneurs. Regarding the unexpected influence of
the economic freedom index, it would be indicated to analyze which components have
the most important impact upon the entrepreneurial aspirations.
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