An exploratory examination of the reasons leading to new firm formation across country and gender

AN EXPLORATORY EXAMINATION OF THE REASONS LEADING TO NEW FIRM FORMATION ACROSS COUNTRY AND GENDER scQl-T SHANE The Wharton School

LARS KOLVEREID Bodo Graduate School of Business

PAUL WESTHEAD Imperial College

INTRODUCTION The formation and growth of new firms is a complex process and many factors associated with this process can only be identified by in-depth investigation at the microlevel of the new firm and the new firm founder(s). A wide range of models have been proposed to explain why businesses are formed (Cooper 1970, 1971; Shaper0 1985; Martin 1984; Greenberger and Sexton 1988). One model, presented by Gibb and Ritchie (1982), suggests that business start-ups can be understood in terms of the situations people encounter and the social groups to which the new firm founders relate. This approach stresses the differential importance of various social influences at significant points in the individual’s life cycle on the start-up process (Cooper 1981; Cooper and Dunkelberg 1986). This approach, like the trait approach, in which venture initiators are born, not made (McClelland 1961; Brockhaus 1980, 1982), the psychodynamic models (Kets de Vries 1977) associated with social marginality (Stanworth and Curt-an 1973, Scase and Goffee 1980, 1982) and the person variable approach (Chell 1985, pp. 48-51), which uses Mischels’ (1973) cognitive social learning variables, is not without its limitations (for a full discussion of these models and their limitations, see Chell 1985). But a common thread throughout these models is the importance of the reasons leading to business start-up. There has been a tendency among researchers to develop universal theories (Bacharach Address correspondence to Scott Shane, Department of Management, 2000 Steinberg Hall-Dietrich Hall, The Whar&m School of the University of Pennsylvania, Philadelphia, PA 19104-6370. We would like to thank the Sol C. Snider Entmpreneurial Center at the Wharton School of the University of Pennsylvania, The Graduate School of Business and Public Management at Victoria University of Wellington, New Zealand, and the Royal Norwegian Ministry for Industrial Affairs for the financial support that made this research possible. We would also like to thank the Society of Associated Researchers in Entrepreneurship under whose auspices the data for this study was collected and two anonymous reviewers. Journal of Business Venturing 6, 431-M 0 1991 Elsevier Science Publishing Co., Inc., 655 Avenue of the Americas, New York, NY 10010

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1989). However, many researchers believe that we must break away from this framework, particularly in studying new business formation, because of the complexity of the venture initiation process. For example, Gartner (1985), like Gibb and Ritchie (1982), argues that we should look at differences in the characteristics of the individuals who start the ventures, the organizations that they create, the environment surrounding the new venture, and the process by which the new venture is started. Carsrud et al. (1986) suggest a model that examines the interaction between psychological, personal, demographic, organizational, and situational/environmental variables on the venture creation process. Since the problems of studying business formation are exacerbated when one examines the reasons for new firm formation across national boundaries, there is further reason to employ conditional explanations. This study is the first part in a two-part series that tests the extent to which the reasons for and environmental influences on business formation are conditional on the gender and nationality of the entrepreneurs under study. Part one looks at the reasons leading to new firm formation across gender and nationality, using data from three countries: Great Britain, Norway, and New Zealand. Our basic hypothesis is that there are no universal reasons for start-up. Before beginning, one caveat is in order. The model of reasons for start-up used here is that developed by Scheinberg and MacMillan (1988). This model is not one of the psychological traits associated with new business formation, but is an examination of 23 reasons identified in the research literature as those that venture initiators have given for starting new ventures and that have been verified by a previous sample of 2278 venture initiators in 14 countries.

REASONS LEADING TO VENTURE INITIATION In the new business formation literature, a number of different reasons for business startup have been identified. Rather than present a complete literature review, we seek to present evidence that these reasons are not the same across countries and gender. If these reasons are those new venture starters have for starting up, how can they exist in varying amounts across countries, all of which have venture initiators? Is it just that there are fewer venture initiators in countries low on these scales, or are there non-American reasons for start-ups of new business formation? Ray and Turpin (1987) found that “displacing events” were not important reasons for start-up in Japan compared with in the United States. They also suggest that in Japan the web of friendship obligation is a critical reason for start-up in business start-up. Their study also suggests the greater importance of social status and the lessor importance of family tradition. There is also evidence that job dissatisfaction does not motivate new business formation in all countries. Although Cooper (1971), Brockhaus (1980), Homaday and Tieken (1983), and Shaper0 (1975) all found that job dissatisfaction motivates new business formation in the United States, Brockhaus and Dixon (1986) found that New Zealand venture initiators were significantly more satisfied than American venture initiators at their previous place of employment, but not significantly less satisfied than a sample of New Zealand carpenters. Recent work by Scheinberg and MacMillan (1988) of new business formation in 11 countries yielded six factors of reasons people start businesses in different countries, including need for approval, perceived instrumentality of wealth, degree of communitarianism, need for personal development, need for independence, and need for escape. These results suggest

REASONS

LEADING

TO NEW FIRM FORMATION

ACROSS COUNTRY

AND GENDER

433

that venture initiators in different nations appear to be motivated by different forces, explaining, in part, why American theories of the reasons for start-up have not been strong explanators outside the United States. Scheinberg and MacMillan’s (1988) findings of the different reasons for new business formation in different countries show the following reasons in the 11 nations studied: The United States scored highest in need for independence and has no belief in communitarianism as a factor in the reasons for start-up at all. Australia is most similar to the United States of the countries in their study. In contrast to the United States and Australia, Italy’s factor scores indicate that need for independence is not an important reason for start-up of venture initiators at all. Neither is their need to escape. In fact, to Italian venture initiators the only factor that is a significant reason for start-up is communitarianism. As would be expected, China scores highest on need for approval and indicated a strong interest in communitarianism. Portugal indicates the importance of communitarianism, and similar to China has a very strong need for approval. Australia, Great Britain, and the United States show a strong inclination for seeing “money as means” as a reason for start-up, while the Scandinavian countries are significantly less motivated by this factor (Scheinberg and MacMillan 1988). Another question is the extent to which the reasons for start-up of male venture initiators are applicable to female venture initiators. Money is a rather low reason for start-up for female venture initiators (Hisrich and Brush 1984; Holmquist and Sundin 1987). A tradition of starting businesses is also less likely to be a reason for start-ups of female new business formation (Knight and Gilbertson, forthcoming). Fagenson and Coleman (1987) found that female venture initiators differed from male venture initiators on the value of family security. And Hisrich and Cinneide (1986) report that in Ireland, men are significantly more likely than women to start a business because of job frustration at an old job. Given the existence of male-female and national differences in the reasons for new business formation, we wonder if there are also interactions between nationality and gender. Aldrich et al. (forthcoming) studied the role of brokers in new business formation networks among male and female venture initiators in Italy and the United States, and found that in Italy the percentages using brokers was the same for men and women, but that in the United States, the percentage of men using a broker is much lower. These results show an interaction between country or origin and gender with respect to the use of a broker. If interactions exist for the use of a broker, they may also exist for the reasons leading to start-up.

METHODOLOGY This study is part of an international research project on new business formation that was started in 1986. At that time, an international group of researchers collected data from 2278 venture initiators and 1733 non-venture initiators in 14 countries. In 1989, the research group decided to develop an abbreviated and improved version of the original questionnaire, aimed at the development of a new international database. This database was developed to look at the performance, growth, and characteristics of new ventures across national boundaries. To increase response rates from the original pilot study conducted by an international research group [for details, see Scheinberg and MacMillan (1988)], the questionnaire was dramatically reduced. The original questionnaire contained 38 items on reasons leading to venture initiation. Analyses of these items suggested that several of the items could be dropped (Scheinberg and MacMillan 1988). In the new survey, 21 of the items were kept, and two items on tax considerations were added. This study looks at the reasons for start-up section of the Society of Associated

434

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Researchers of International Entrepreneurship (SARIE) survey. It consists of 23 questions that were answered by selecting the degree of agreement (ranging from strongly disagree to strongly agree on a five-point Likert scale) with the statement provided. Appendix 1 shows this section of the survey. Data were collected from venture initiators in Great Britain, Norway, and New Zealand. The criteria for selection of the venture initiators was as follows: only independent, for-profit businesses with at least one employee in addition to the owner that had received their first orders between 1986 and 1989 were approached. This definition has been widely used in previous studies of new firm formation (Cross 1981; Storey 1982; Scheinberg and MacMillan 1988; Dubini 1989; Blaise et al., 1990). In New Zealand, the survey was mailed to 500 venture initiators who were randomly selected from government records on new ventures. Sixty-four were returned undeliverable. One hundred thirty-eight responses were received, a response rate of 28%. In Norway, the target sample of new firms was identified using the Bryde’s Trade Register (a list of all new ventures). The questionnaire was translated into Norwegian and back translated into English to ensure accuracy. It was then mailed to all new businesses started in four (out of 19) counties in Norway. Of the 1146 questionnaires mailed out, 108 were returned undelivered or insufficiently answered. After one reminder, 250 venture initiators answered the questionnaire, a response rate of 24%. In Great Britain, the target sample was abstracted from industrial trade directories. The questionnaire was mailed to 1000 venture initiators; 209 were returned completed, with a response rate of 21%. The comparison of male and female venture initiators was based on a division of the respondents into male and female subsets, and a comparison of them. Venture initiators who responded that they ran their companies as couples were excluded from the analysis. The snapshot survey methodology is not without its limitations and its critics (Mason 1989, p. 335). Despite attempts to produce a logical and thorough survey of new firm founders in each of the countries, the methodology can be questioned on several counts. First, the target sample of new firm founders was different in each of the countries studied because of the necessity of using different data sources. However, in each of the countries, only those firms satisfying criteria of independence, for profit, date of start-up, and number of employees were included. Second, better response rates could have been achieved had a direct face-to-face personal survey approach been adopted. The choice of a postal-survey approach was based on time and resource contraints and the need to begin examining crossnational trends in new business formation. Third, the surveys only gained responses from venture initiators whose firms had survived through 1990. The surveys can say nothing about the characteristics of the businesses that had not survived. But, we are only interested in comparing cross-national and gender differences among surviving firms, so this limitation is acceptable. Fourth, like many other studies, this is a retrospective study that relied upon the memory of the founders for the recall of specific circumstances, reasons for start-up, and events. When evaluating the response rates, one should bear in mind the difficulties involved in defining the sample frame, and finding accurate lists of new firms. A high proportion of businesses approached failed to be independent companies, but rather were co-ops, subsidiaries, or franchises. In addition, several businesses had a number of owners or partners, but no employees. Therefore, we suspect that many of the venture initiators who did not respond to the questionnaire chose not to because they did not fit our criteria for new firm founders. However, because of the relatively low response rates, we caution readers against extrapolation of the findings or the drawing of any generalized conclusions. The demographics of the venture initiators in our study are surprisingly similar given

REASONS

LEADING

TO NEW FIRM FORMATION

ACROSSCOUNTRYAND GENDER

435

their establishment in different countries by different founders. No statistically significant differences were found in the distribution of venture initiators across industries either by country or by gender. Similarly, there appeared to be no significant differences in employment by nationality or gender. The locations where they started are also similar. Appendix 2 shows a demographic profile of the entrepreneurs in our study.

RESULTS In many cross-cultural studies using questionnaires, significant differences are found on individual items, not because the people in the different countries differ on the degree to which they hold a belief, but because they have different interpretations of the questions. To ensure that respondents in the three countries were answering the same questions, we factor-analyzed the 23 reasons for start-up questions separately for the three countries. Since factor analysis shows the extent to which the people answering a question are likely to answer that question in the same way as they answered similar questions, if the same factors appear in all three countries, it is more likely that the interpretations of the questions are consistent across the countries. The factor analysis yielded four consistent factors across the three countries. We argue that only these questions are reliable cross-country measures of the reasons for start-up. Therefore, further analysis pertains only to the questions that loaded on one of the factors. The four factors found were: independence, recognition, learning, and roles. Table 1 shows the questions that compose these factors and their loadings. In our research, we did not develop factor scores. Since our Q priori belief was that there would be significant differences across genders as well as nationalities, we did not believe that factors created to be consistent across nationalities would necessarily be consistent across genders. This reasoning turned out to be correct. Factor analysis by gender would not have yielded the same factors as factor analysis by nationality. Therefore, in this study, the factor analysis was treated only as a means of ensuring similarity of interpretation of questions across countries. We believe that the results from the reasons for start-up section ate particularly strong, not just because the items load on the same factors across the three countries, but because the factors independence and recognition are similar to those found by previous researchers. The first factor, recognition, is identical to the first factor in Scheinberg and MacMillan’s (1988) analysis. These five items were also found to load on the first factor in the Blaise et al. (1990) study. The three items that make up the second factor, independence, and the three items that make up the third factor, learning, also formed a factor in Scheinberg and MacMillan (1988) and Blaise et al. (1990). Items that load strongest in the fourth factor, roles, were dropped in the above two studies, but were reported to load on the same factor by Dubini (1989) in her analysis of the Italian data. Therefore, we are relatively confident that we are measuring levels of the same reasons for start-up in all three countries, and that differences in means represent differences in levels of these reasons across countries.

National Differences in Reasons for Start-Up There are significant national differences on the questions that compose all of the factors except roles. Independence is a lesser reason for start-up in Norway than in New Zealand

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TABLE 1

Factor Loadings on Motivation and Norway

Items for Entrepreneurs

Recognition To achieve a higher position for myself in society To have more influence in my community To be respected by friends To achieve something and get recognition for it To increase the status and prestige of my family Independence To control my own time To have greater flexibility for my personal and family life To have considerable freedom to adapt my own approach to work

in Britain, New Zealand,

Britain

New Zealand

Norway

29 55 .79 .67 .64

.61 .51 .73 .59 .55

.80 .41 .-I4 .71 .66

.78 .78

.76 .84

.I5 .86

.81

.89

.78

.75 .I9

.I4 .58

.64 .60

.63

.58

.66

.I7

.57 .51 .69

.77 .55 .56

Learning

To develop an idea for a product To be innovative and in the forefront technology To continue learning

of new

Roles To continue a family tradition To have more influence in my community To follow the example of a person 1 admire

.38 .61

This table is based upon separate Varimax factor analyses of responses from each country. Only items that loaded on the same factor for all countries are included. Only factors to which at least three items loaded are reported.

and Great Britain. New Zealanders and Britons became venture initiators more often than Norwegians to control their own time. Moreover, New Zealanders started businesses more often than Britons to have flexibility for their personal and family lives. Britons started businesses more often than Norwegians for the same reason. However, there was no significant difference between the countries on the desire to have considerable freedom to adapt one’s own approach to work. Status is also a stronger reason for start-up in some countries than in others. Desire for recognition is stronger in New Zealand and Great Britain than in Norway. New Zealanders and Britons were more likely to start businesses to achieve a higher position for themselves in society, to achieve something and get recognition for it, and to increase the status and prestige of their families. The third factor, learning, also shows national differences. Norwegian venture initiators were more likely than New Zealand and British ones to start firms to develop an idea for a product and to continue learning. There were no significant differences between the countries on the desire to be innovative and at the forefront of technology. Also, there were no significant differences between the countries on the extent to which roles-having influence in the community, continuing a family tradition, and following the example of a person admired-were reasons for start-up. It is important to note that among the questions on which there were no significant

REASONS

TABLE 2

LEADING

Differences

TO NEW FIRM FORMATION

in Motivations

ACROSS

between Entrepreneurs

COUNTRY

437

AND GENDER

in Great Britain, New Zealand,

and Norway

Recognition To achieve a higher position for myself in society To have more influence in my community To be respected by friends To achieve something and get recognition for it To increase the status and prestige of my family Independence To control my own time To have greater flexibility for my personal and family life To have considerable freedom to adapt my own approach to work Learning To develop an idea for a product To bc innovative and in the forefront of new technology To continue learning

Britain

New Zealand

Norway

2.15

2.22

1.60

1.30

1.42

1.39

1.51 2.10

1.55 2.54

1.27 2.18

bc

1.78

1.69

1.38

bc

3.13 3.33

3.75 3.61

3.25 3.16

bc

3.88

3.12

3.69

2.22 2.17

2.09 2.11

2.62 1.96

2.83

2.98

3.24

1.27 1.30

1.32 1.42

1.32 1.38

1.36

1.35

1.22

Significance

LX

bc

ac

Roles To continue a family tradition To have more influence in my community To follow the example of a person I

admire “Significant difference (P < .05) between Britain and New Zealand. bSignificant difference (p < .05) between Britain and Norway. ‘Significant differencr (p < .05) between New Zealand and Norway.

differences between the countries, on only two was there a tendency for venture initiators to report that the item was a reason for start-up (to have freedom to have one’s own approach to work and to be innovative and at the forefront of technology). The items that made up the roles factor had such low mean scores across the countries that, although they are not significantly different for the three nations, it would be hard to consider them significant reasons. Table 2 shows these data.

Male-Female Differences in Reasons for Start-Up Between men and women, there are no significant differences on independence as a reason for start-up. Controlling time, flexibility for personal and family life, and freedom to adapt one’s own approach to their work were the same for men and women. There are, however, differences with respect to recognition. Achieving a higher position in society and increasing the status and prestige of one’s family are greater reasons

438

S. SHANE ET AL.

TABLE 3

Differences

in Motivations

Recognition To achieve a higher position for myself in society To have more influence in my community To be respected by friends To achieve something and get recognition for it To increase the status and prestige of my family Independence To control my own time To have greater flexibility for my personal and family life To have considerable freedom to adapt my own approach to work Learning To develop an idea for a product To be innovative and in the forefront of new technology To continue learning Roles To continue a family tradition To have more influence in my community To follow the example of a person 1 admire Significance level: *p i

between Male and Female Entrepreneurs Males

Females

1.98

1.66

2.13**

1.38

1.25

1.16

1.44 2.42

1.34 2.13

.92 - 1.81*

1.64

1.41

3.55 3.33

3.54 3.30

.06 .I3

3.79

3.73

.34

2.32 2.11

2.73 1.71

-2.08** 2.22**

3.02

3.22

- 1.15

1.32 1.38

1.05 1.25

2.46** 1.16

1.31

1.23

.73

I Value

1.67*

I: **p < .05.

for start-up for men than for women. By contrast, achieving something and getting recognition for it is a greater reason for start-up of women. Being respected by friends and having more influence in the community were not significantly different for men and women, nor were they significant reasons for start-up. On learning, there are two significant differences between men and women. Women are less likely to start businesses to be on the forefront of technological development, but more likely to do so to develop an idea for a product. To continue learning itself was not significantly different across the sexes. On roles, however, there were no significant differences between men and women on desire for community influence or following the example of a person admired as reasons to start businesses. However, men were more likely to start a business to continue a family tradition. Table 3 shows these data.

Gender-Nationality Interactions in Reasons for Start-Up There are a number of gender-nationality interactions. One way of looking at interactions is to compare male and female venture initiators in Norway, New Zealand, and the United Kingdom separately and look at the extent to which gender differences in reasons for start-

REASONS

LEADING

TO NEW FIRM FORMATION

ACROSS

COUNTRY

AND GENDER

439

up exist in all three countries. Examined in this way, one interaction exists for recognition. There are significant differences between male and female venture initiators in Norway and Great Britain, but not in New Zealand, on degree to which the desire to achieve something and get recognition for it is a reason for business start-up. Another interaction exists for roies. Continuing a family tradition is a significantly greater reason for start-up for men only in Norway. A final interaction exists for learning. To develop an idea for a product is a significantly greater reason for start-up only in the United Kingdom. Table 4 shows these data. Another way of looking at interactions is to compare reasons for start-up in the three countries separately for men and women and to compare the extent to which the same reasons for start-up exist across countries for both men and women. Examined this way, there are significant interactions on the recognition items. British and New Zealand men venture initiators are more likely to start businesses to achieve a higher position in society than are Norwegian men venture initiators, but this difference does not exist for female venture initiators. To be respected by friends is a more important reason for start-up for male venture initiators in New Zealand and the United Kingdom than it is for Norwegian male venture initiators. However, this difference does not exist for women venture initiators. To achieve something and get recognition for it is a more common reason for start-up for male venture initiators in Britain and New Zealand than in Norway; while it is a significantly greater reason for start-up for female venture initiators in Great Britain than in New Zealand. To increase the status and prestige of the family is a greater reason for start-up for male venture initiators in New Zealand and Great Britain than in Norway, whereas among women, national differences on this item do not exist. There are also interactions on the independence items. British and New Zealand male venture initiators are significantly more likely than Norwegian male venture initiators to become venture initiators as a way of controlling their own time. Among female venture initiators, however, these national differences do not exist. New Zealand male venture initiators are significantly more likely to start businesses to have greater flexibility for personal and family life than are British and Norwegian male venture initiators. By contrast, among women, the only significant difference between men and women on this item lies between Britain and Norway, two countries for which national differences were non-existent for men. Norwegian venture initiators are significantly more likely to start businesses to develop an idea for a product than are Britons or New Zealanders if they are male. If they are female, national differences do not exist. Interestingly, Norwegian venture initiators are more likely to become venture initiators to continue learning than are British venture initiators if they are male. However, if they are female, no such difference exists. On the roles factor, Norwegian venture initiators are significantly less likely than British and New Zealand venture initiators to become venture initiators to follow the example of a person they admire if they are male. If they are female, no such national differences exist. Tables 5 and 6 show these data. In sum, we can find only one reason for start-up that we can apply across the three countries and the two genders. This item is to have freedom to adapt one’s own approach to work. To have more influence in the community is not significantly different across gender or nationality. However, it also appears not to be a reason for start-up according to our respondents. None of the items appears to be a reason for venture initiatorship for one gender and not the other consistently across all countries. Nor are there reasons for start-up that are determined solely by nationality. The remaining 11 items show interactions of gender and nationality.

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S. SHANE ET AL.

TABLE 4

Differences New Zealand,

in Motivation

between Male and Female Entrepreneurs

Britain

Recognition To achieve a higher position for myself in society To have more influence in my community To be respected by friends To achieve something and get recognition for it To increase the status and prestige of my family Independence To control my own time To have greater flexibility for my personal and family life To have considerable freedom to adapt my own approach to work Learning To develop an idea for a product To be innovative and in the forefront of new technology To continue learning Roles To continue a family tradition To have more influence in my community To follow the example of a person I admire Significance

in Britain,

and Norway Norway

New Zealand

Males

Females

t value

Males

Females

t value

Males

Females

t value

2.17

1.88

0.95

2.30

1.93

1.11

1.64

1.41

1.31

1.30

1.25

0.29

1.47

1.21

1.14

1.40

1.28

0.74

1.52

1.38

0.65

1.61

1.36

1.00

1.27

1.31

-0.34

2.65

3.31

- 1.93*

2.62

2.33

0.80

2.10

2.62

- 2.27**

1.79

1.69

0.38

1.79

1.36

1.39

1.41

1.29

0.87

3.72

3.81

- 0.28

3.85

3.50

1.06

3.24

3.41

3.29

3.75

-

3.74

3.57

0.56

3.14

2.93

0.84

3.86

4.06

-0.67

3.81

3.60

0.67

3.70

3.62

0.37

2.20

3.00

- 2.14**

2.03

2.21

0.46

2.57

2.83

2.18

2.00

0.52

2.17

2.00

0.47

2.01

1.38

2.81

3.13

-0.90

3.05

2.93

0.35

3.20

3.40

1.29

1.06

1.16

1.38

1.07

1.17

1.31

1.03

1.87*

1.30

1.25

0.29

1.47

1.21

1.14

1.40

1.28

0.74

1.38

1.06

1.50

1.41

1.14

1.06

1.19

1.37

- 1.65

level: *p < .I; ** p i .05

1.28

-0.68

-0.88 2.56**

-0.95

REASONS

TABLE 5

LEADING

TO NEW FIRM FORMATION

Differences in Motivation and Norway

Recognition To achieve a higher position for myself in society To have more influence in my community To be respected by friends To achieve something and get recognition for it To increase the status and prestige of my family Independence To control my own time To have greater flexibility for my personal and family life To have considerable freedom to adapt my own approach to work Learning To develop an idea for a product To be innovative and in the forefront of new technology To continue learning Roles To continue a family tradition To have more influence in my community To follow the example of a person 1 admire

ACROSS

between Male Entrepreneurs

COUNTRY

441

AND GENDER

in Britain, New Zealand,

Britain

New Zealand

Norway

Significance

2.17

2.30

1.64

bc

1.30

1.47

1.40

1.52 2.64

1.61 2.62

1.27 2.10

bc bc

1.79

1.79

1.41

bc

3.72 3.30

3.85 3.74

3.24 3.14

bc ac

3.86

3.82

3.70

2.21 2.18

2.03 2.17

2.57 2.01

bc

2.81

3.05

3.20

b

1.29 1.30

1.38 1.47

1.30 1.40

1.38

1.41

1.18

bc

“Significant difference (p < .05) between Britain and New Zealand. %gnilicant difference (p < .05) between Britain and Norway. ‘Significant difference (p i .OS) between New Zealand and Norway.

CONCLUSIONS The research above shows that there are no universal reasons leading to new business formation across gender and national boundaries in the countries studied. Of 13 possible factors, we found only one-the desire for job freedom. All others (except for influence in the community, which appears not to motivate any venture initiators in our study) are determined by an interaction of gender and nationality. These results are disheartening for those who quest for a universal explanation of why venture initiators start businesses. Upon reflection, this result should not be surprising. Why should we see common reasons for starting a business? The reasons that people have for the decisions that they take are complex and unique. People live in different countries with different cultural traditions, different economic structures, and government policies. Similarly, men and women have different biological makeups and go though different socialization processes. Therefore, it is not surprising that the reasons for new business formation are influenced by an interaction of gender and nationality.

442

S. SHANE ET AL.

TABLE 6

Differences in Motivation between Female Entrepreneurs New Zealand, and Norway

Recognition To achieve a higher position for myself in society To have more influence in my community To be respected by friends To achieve something and get recognition for it To increase the status and prestige of my family Independence To control my own time To have greater flexibility for my personal and family life To have considerable freedom to adapt my own approach to work Learning To develop an idea for a product To be innovative and in the forefront of new technology To continue learning Roles To continue a family tradition To have more influence in my community To follow the example of a person I admire

in Great Britain,

Britain

New Zealand

Norway

1.87

1.93

1.41

1.25

1.21

1.28

1.37 3.31

1.36 2.33

1.31 2.62

1.69

1.36

1.29

3.81 3.75

3.50 3.57

3.41 2.93

4.06

3.60

3.62

3.00 2.00

2.21 2.00

2.83 1.38

3.12

2.93

3.40

I .06 1.25

1.07 1.21

1.03 1.28

1.06

1.14

1.37

Significance

a

b

“Significant difference (p < .05) between Britain and New Zealand %gnificant difference (p < .05) between Britain and Norway.

On the basis of the research results discussed above, we believe that there is still an urgent need for future research to explore the following issues in greater detail: (1) Further research should examine the influence of freedom as a reason for start-up across more countries to determine if it is truly a universal reason for new business formation. In particular, it would be helpful to determine if this finding is robust for Asian societies. (2) Since gender and nationality are important factors in determining reasons for new business formation, research should pursue the differences in new business formation across nations and gender. On the basis of the results presented in this study, we believe that it would be unwise to assume that the evidence from American research studies of the reasons leading to new firm formation would be applicable to settings outside the United States. The explanations of new business formation in each country lie in the unique combinations of culture, economic infrastructure, and government policies of those nations, so we must develop theories out of an analysis of the characteristics of each nation. (3) It is apparent from the evidence presented in this study that there remains a need for more detailed comparisons of contrasting

REASONS LEADING TO NEW FIRM FORMATION ACROSS COUNTRY AND GENDER

443

subgroups of new firm founders. If there are differences between founders on the basis of gender and nationality, there should be differences on the basis of age, size, industry, and type of customer, among other factors. Therefore, future research needs to further explore how these characteristics influence the new firm formation process. (4) In this study, it appears that it is nationality in interaction with gender that explains many of the differences between venture initiators. Future research should explore the interactions between the characteristics and background of the venture initiator, environmental conditions, organizational characteristics, and reasons for start-up if we are to develop a more informed and richer understanding of the business formation process. Reassuringly, these results also have implications for practitioners. It should be appreciated by policy makers that the reasons leading to venture initiation differ across countries and gender. We believe that public policies should be designed and targeted to particular subgroups of venture initiators. For example, trademark protection will be particularly useful to male British venture initiators who see developing an idea for a product to be a strong reason for start-up, whereas other public policies may discriminate against women in some countries and not others. In Norway, for example, policies to promote new business formation by funding innovations will be biased in favor of male venture initiators, whereas such a policy will not have a discriminatory effect in New Zealand or Great Britain. It therefore follows that venture capitalists in each country who wish to evaluate the potential success and performance of new firm founders should also take into account not only their reasons leading to start-up but also their gender. In short, the reasons for start-up are not as clear as we once thought. They depend on the venture initiator’s nationality, gender, and a host of other factors that remain to be explored in detail.

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REASONS LEADING TO NEW FIRM FORMATION ACROSS COUNTRY AND GENDER

APPENDIX

1

445

SECTION 2: REASONS LEADING TO START-UP: When you established your current business, to what extent were the following reasons important for you? To a

Rl R2 R3 R4 R5 R6 R7 R8 R9 RIO Rll R12 R13 R14 Rl5

R16 R17 R18 R19 R20 R21 R22 R23

To develop an idea for a product To achieve a higher position for myself in society To take advantage of an opportunity that appeared To continue a family tradition To have more influence in my community To be respected by friends To achieve something and to get recognition for it To control my own time To contribute to the welfare of my relatives To contribute to the welfare of people with the same background as me To contribute to the welfare of the community that I live in To give myself, my spouse, and children security It made sense at that time in my life As a vehicle to reduce the burden of taxes I face To be challenged by the problems and opportunities of starting and growing a new business To increase the status and prestige of my family To follow the example of the person that I admire Desire to have high earnings To be innovative and be in the forefront of technological development To continue learning To have greater flexibility for my personal and family life To have considerable freedom to adapt my own approach to my work To have access to indirect benefits such as tax exemptions

APPENDIX

2

Demographic

Profile of the Businesses

Number of respondents Male Female

To no extent

To little extent

To some extent

great extent

[ 11 [ 11 [ 11 [ 11 [ 11 1 11 1 11 [ 11 [ 11 [ 11

[ 12 [ 12 [ 12 [ 12 [ 12 [ 12 [ 12 [ 12 [ 12 [ 12

[ 13 1 13 [ 13 [ 13 [ 13 [ 13 [ 13 [ 13 1 13 [ 13

[ 14 [ 14 [ 14 [ 14 [ 14 [ 14 [ 14 [ 14 1 14 [ 14

[ 15 1 15 [ 15 1 15

[ 11

[ 12

[ 13

r 14

[ 15

[ [ [ [

[ [ r [

12 12 12 12

[ [ [ [

13 13 13 13

[ [ [ [

14 14 14 14

[ [ [ r

15 15 15 15

[ 11 [ 11 r 11 1 II

[ 12 1 12 1 12 1 12

[ [ [ [

13 13 13 13

1 [ [ 1

14 14 14 14

1 1 [ [

15 15 15 15

[ 11 1 11

[ 12 [ 12

[ 13 [ 13

[ 14 [ 14

r 15 1 15

1 11

[ 12

[ 13

[ 14

1 15

[ 11

[ 12

[ 13

[ 14

[ 15

11 11 11 11

To a

very great extent

1 15 [ 15 [ 15 [ 15 [ 15 [ 15

Surveyed

Great Britain

New Zealand

209 192 (92%) 17 (8%)

138 122 (88%) 16 (12%)

Norway 250 219 (88%) 31 (12%)

Mean number of partners at start-up Male Female

2.1 1.9

2.5 2.1

2.5 1.6

Industry sector’ Farming, fishing, and mining Male

1 (0.5%)

6 (4%)

8 (3%)

446

S. SHANE ET AL.

APPENDIX 2

Continued

Female Manufacturing Male Female Construction Male Female Services Male Female

New Zealand

0 (0%)

1 (0.7%)

1 (0.4%)

80 (38%)

11 (8%) 3 (2.1%)

31 (12%)

16 (8%)

12 (9%)

0 (0%)

0 (0%)

38 (15%) 1 (0.4%)

95 (45%) 8 (4%)

77 (56%) 12 (9%)

136 (54%) 27 (11%)

63 (30%)

12 (9%)

7 (3%)

3 (2%)

111 (44%) 21 (8%)

114 (55%)

35 (25%)

74 (30%)

9 (4%)

5 (4%)

9 (4%)

14 (7%) 1 (0.5%)

52 (38%) 6 (4%)

26 (10%) 1 (0.4%)

1 (0.5%) 0 (0%)

9 (7%) 2 (1%)

0 (0%)

2.2 1.9

2.2 1.3

2.7 2.4

42.9 41.2

40.2 43.1

38.6 38.1

68 (33%)

39 (28%) 10 (7%)

28 (11%)

79 (38%) 10 (5%)

42 (30%)

107 (43%) 20 (8%)

31 (15%)

19 (14%)

3 (1%)

2 (1%)

60 (24%) 1 (0.4%)

7 (5%) 1 (0.7%)

19 (8%) 2 (0.8%)

9 (4%)

Location of business’ Rural Male Female Minor city Male Female Major city Male Female Capital Male Female Mean number of employees Male Female Mean age of business

Great Britain

Norway

2 (1%)

1 (0.4%)

at start-up

initiator

Male Female Highest education level achieved’ Compulsory Male Female Professional Male Female University Male Female Graduate study Male Female

3 (1%)

13 (6%) 1 (0.5%)

3 (2%)

8 (3%)

‘The total number of respondents in each category may not equal the total number of respondents listed for each county because some respondents did not answer all questions.