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Subjective perception of entrepreneurship. Differences among countries
JBR-09062; No of Pages 5 Journal of Business Research xxx (2016) xxx–xxx
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Journal of Business Research
Subjective perception of entrepreneurship. Differences among countries☆ Fernando Crecente-Romero a,⁎, Mónica Giménez-Baldazo a, Luis F. Rivera-Galicia b a b
Department of Economics and Management, University of Alcalá, Spain Department of Economics, University of Alcalá, Spain
a r t i c l e
i n f o
Article history: Received 1 February 2016 Received in revised form 1 March 2016 Accepted 1 April 2016 Available online xxxx Keywords: Entrepreneurship Behavioral economics
a b s t r a c t Entrepreneurship is a field of growing interest for economic research. Entrepreneurs contribute actively to economic growth, because they create employment and wealth. Knowledge and entrepreneurship play an important role in economic progress and they lead the from a management economy towards an entrepreneurial economy. Understanding entrepreneurial activity is essential to characterize both entrepreneurs and their businesses so that public policies that intend to promote and support the creation of companies are effective and efficient. This research proposes a new classification of countries using statistical tools, taking into account the countries present in GEM (Global Entrepreneurship Monitor) for years 2004, 2009 and 2014. This classification allows to analyze the evolution of the perception of entrepreneurial opportunities, as well as to identify the cultural patterns of entrepreneurship. The results show that entrepreneurial activity does not depend only on economic development, but also on behavioral economics. © 2016 Elsevier Inc. All rights reserved.
1. Introduction 1.1. Entrepreneurship as a regional phenomenon Entrepreneurship is another factor in production function that appears and develops in a concrete region or economy as productive resources. Some studies analyze them from a supply and demand perspective (Verheul & van Stel, 2007), as the rest of productive resources. Demographic characteristics of population, industrial needs or individual attitudes towards entrepreneurial activity and individual valuation of risk determine supply, that is, labor market. Latent opportunities in a segment or in the products/services market of the area explain demand. The bigger the diversity of consumers, technological advances and business development in a region, the bigger the demand of entrepreneurs because they create supply chain decentralization (business services development, “spin-off” creation, etc.). Fig. 1 shows that adequacy between supply and demand of entrepreneurs determines entrepreneurship rate balance in a region. However, supply and demand reach this balance only in the long term as a consequence of market adjustments, when only those entrepreneurs with an efficient management remain. Access of new entrepreneurs to areas or regions with an entrepreneurship rate above the equilibrium causes an increase of competence. One way to compete is increasing costs, so margins decrease and the probability of
☆ The authors thank contributions from two anonymous referees, for their careful reading and suggestions on revising this paper. ⁎ Corresponding author. E-mail addresses: [email protected] (F. Crecente-Romero), [email protected] (M. Giménez-Baldazo), [email protected] (L.F. Rivera-Galicia).
entrepreneurial failure then increases. Only those companies that can manage their costs efficiently will remain in the sector, and the market will eject the rest of the firms. On the other side, if entrepreneurs decide to invest using a strategic criteria in a new market niche, company survival opportunities might increase, because of the higher margin the company can get until the area reaches balance rate. Demographic conditions of regions determine the factors that facilitate business access, especially urban areas development and agglomeration economies they create, taking advantage of the networks that big cities generate (Lamotte & Colovic, 2013; Liang, Wang, & Lazear, 2014; Nijkamp, 2000). Nevertheless, developing countries don't need a deep urban development to get a dynamic entrepreneurial activity, because chances appear in the more unstable and adverse environments. Peters (2003) reaches these conclusions in his research about entrepreneurship in south India. Classical entrepreneurs have an attitude towards uncertainty and an ability to get something good from the failure, so they have entrepreneurship vision and the talent to detect opportunities, not only in the market, but also in time and in the influence area. Entrepreneurs decide to create a business because they perceive sectorial, strategic or market opportunities (Falck, 2007; Grebel, 2007). For example, remarkable market opportunities are the lack of the same kind of companies in the city, city growth expanding the market or liberalization of the market in the region. Nevertheless, entrepreneurship different from strategic aspects or need is equally significant. Personal or family issues in order to choose time and location are also important reasons. Entrepreneurs want to maximize their life quality when they locate their companies as close as possible to their home. Personal reasons condition the election of the sector: entrepreneurs can continue with a previously existing
http://dx.doi.org/10.1016/j.jbusres.2016.04.097 0148-2963/© 2016 Elsevier Inc. All rights reserved.
Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
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Fig. 1. Entrepreneurship rate balance. Source: Own elaboration based on Verhuel assumptions.
business, because of inheritance or because entrepreneurs buy the company they work for (buying participations from another partner). The main reason to choose the activity area is prior knowledge and experience they already gather, their level of studies or their skills from professional career (knowledge of customers, suppliers, production processes, etc., Landström, 2008 or Landström, Harirchi, & Aström, 2012). One of the strengths of Global Entrepreneurship Monitor (GEM) is that their reports provide data about the flow and the reasons that lead from “potential” to “nascent” entrepreneur. In most occidental economies, need reasons lead this change while opportunity reasons arise very few times. De Martino and Barbato (2003) determine that in order to know exactly the reasons that lead an entrepreneur to start and activity you need to make a comparison between groups of entrepreneurs with the same educational level. 1.2. Environmental conditions and their use Environments are all those circumstances that directly (or indirectly) condition behavior and results of any entity, and is a decisive element to succeed in any activity. For example, according to ecological population theory (Hannan & Freeman, 1977), environment is the main factor that determines the success of a company, over company's characteristics or entrepreneur skills. The environment creates opportunities that condition the demand of entrepreneurial activity in a region, through technological advances, globalization and business fabric (Acs, Morck, & Yeung, 2001; Blanchflower, Oswald, & Stulzar, 2001; Urbano & Turró, 2013; Verheul, Wennekers, Audretsch, & Thurik, 2001). Technological innovations, especially information and communication technologies innovations, improve competitiveness of small and medium businesses because they allow productive specialization due to the development of new products and services that companies offer to the rest of the world (Carree & Thurik, 2005). Globalization creates a lot of market niches, but can also have negative effects on companies, because of the decrease of survival possibilities due to the increase of international competence. Only those firms that are more competitive and more able to adapt themselves to different cultures and consumers remain. Bruner and Alarcón (2004) analyze environment as a facilitator of entrepreneurship from a structure-conditions-results perspective. They consider market variables such as technology, product characteristics, market share and market barriers (access and exit). Depending on the market structure, companies tend to move away from perfect competence conditions, using price or technology to try to get more market power and better results. But developing entrepreneurship dynamics does not need a complete stable environment: Peters (2003) shows
the ability of Indian entrepreneurs to take advantage of an adverse and unstable environment. Furthermore, economic growth and accumulation above the balance level of new companies implies a decrease in market niches and therefore a decrease in the expectative of becoming an entrepreneur (Muhammad, 2012). Urban spaces and good means of transportation and communication, both internal and external, contribute more to the huge industrial cluster and metropolitan regions design, and allow taking advantage of the existing networks (Nijkamp, 2000). Cities have a great impact in the development of entrepreneurial activity, especially those with dense population levels, high percentage of qualified workers, as well as a solid structure of small and medium companies (Audretsch & Fritsch, 1994). Besides, entrepreneurship boom takes place in these areas, especially with the outsourcing of the economy and the rise of services to companies sector, which demands more companies with low capital requirements and few access limitations. Launching a company in an economy with a balanced productive system in all the vital activity sectors contributes to generate a favorable ecosystem for business development and creativity. And also spreads the existence of a wide supplier's offer and possible collaborators to take advantage of economies of scale and improve synergies appearance, both positive and negative. On the other hand, the perception of the economic situation and the environment has a great influence when thinking about starting a new business. Therefore, in crisis moments, opportunities perception remains stable and increases the consideration of self-employment as a professional option, but the fear of failure in business development increases. When this situation takes place, to avoid possible decreases in entrepreneurship activity rate (among others because of the greater difficulties to get financial aid), public institutions increase entrepreneurship activity support, as a way to access to employment through unemployment subsidy as well as fiscal incentives that promote business creation (Crecente, 2011; Levie, Autio, Acs, & Hart, 2014). 2. Data description and methodology Multiple variables and methodologies show the impact and factors that determine entrepreneurship activity. At an international level, the main contributions to the study of entrepreneurship are: GEM's research and entrepreneurship survey; OECD's entrepreneurship indicators program; Entrepreneurship Global Survey of the World Bank; and European Commission's entrepreneurship survey (Eurobarometer). From all of them, GEM is the oldest (from 1999) and the widest in international coverage (up to 87 countries participate in their reports). GEM reports have 3 great strengths: first of all, robustness of data, concretely, GEM makes a survey in each country to more than 2.000 people from working population (among 18 and 64 years old), as well as to a panel of more than 35 local experts. Secondly, the object of analysis is the entrepreneur as an individual and the surrounding environment, not as a company. Third, they take into account all phases of the entrepreneurship dynamics, because they consider attitudes and perceptions of entrepreneurs in the different steps they make (potential, nascent, new and already stablished entrepreneur). GEM model analyzes different variables from entrepreneurship dynamic. Quantitative variables use percentages, while qualitative variables use Likert's scale with 5 values (from fully agrees to totally disagrees). The most significant variables are the following: • Total Entrepreneurial Activity Rate (TEA): this rate takes into account the kind of entrepreneurship (need versus opportunity), gender (male versus female) or the step of the process (potential, nascent, new, stablished or irregular entrepreneurs). • Entrepreneurial perceptions, attitudes, intentions and aspirations from different entrepreneur groups. • Expert perceptions about: entrepreneurial opportunities and capacity; motivation mechanisms; funding; government policies; education training; services and commercial infrastructures access; opening to
Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
F. Crecente-Romero et al. / Journal of Business Research xxx (2016) xxx–xxx Table 1 Countries selected. Geographic region
Countries
Africa Asia & Oceania Latin America & Caribbean European Union
South Africa Japan Argentina, Ecuador, Peru
North America
Belgium, Croatia, Finland, France, Germany, Greece, Hungary, Italy, Netherlands, Slovenia, Spain, United Kingdom United States
Source: Own elaboration based on GEM data.
the internal market; physical infrastructures (situation and access); social and cultural rules; laws and registration of patents and similar; entrepreneur women support; high growth potential business creation and innovation interest.
OECD and World Bank researches analyze the tools that entrepreneurs use to develop their activity, this means, the business as the economic unit of reference. Variables in these researches focus on birth and death rates, survival probability, average size of companies after five years, benefits and jobs generation. Eurobarometer provides statistics similar to GEM's. Therefore, they analyze attitudes and personal characteristics of entrepreneurs, as well as their risk perception and existing barriers when trying to begin an activity. Results take into account causes that motivate entrepreneurship, differencing between need and strategic, temporal or sectorial opportunity. 18 countries appear in the three waves of GEM of years 2004, 2009 and 2014 (Bosma & Levie, 2010; Singer, Amorós, & Moska, 2015; Zoltan, Arenius, Hay, & Minniti, 2005). Table 1 shows these countries in different geographical regions. 3. Results Table 2 shows the evolution of the aggregate variables level among the countries. In the last decade appears an increase of 5% in the positive valuation of entrepreneurship activity in most of the countries. When economies start to recover from crisis, opportunities to start a business and the entrepreneurial capacities of individuals increase. The appearance of entrepreneurs in social media grows. From the beginning of the crisis up to now, the percentage of working population that Table 2 Mean of the variables for the countries selected. Year Variable
2004
2009
2014
Suskilyy Opportyy Frfailop Futsupno Knoentyy Nbgoodyy Nbstatyy Nbmediyy Suboanyy Babybuyy Teayy Estbbuyy Teayynec_p Teayymal Teayyfem Busangyy TEAyyjg5 TEAyynwp TEAyyint
43.3 32.8 33.7 11.5 37.2 62.5 67.5 54.5 5.7 3.3 8.6 5.6 21.4 10.3 6.8 3.2 23.4 47.8 19.1
47.2 28.8 35.3 10.7 36.7 61.0 68.1 54.2 4.2 3.5 7.6 7.2 23.4 9.4 5.7 2.9 23.6 44.3 18.5
44.0 33.9 37.9 15.2 31.1 58.7 67.4 57.3 6.9 3.6 10.2 7.1 24.0 12.2 8.3 3.9 24.3 43.7 18.7
Source: Own elaboration based on GEM data.
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considers starting a business in the next 3 years increases from 11.5% to 15.2%. But, despite the increase of that consideration, fear to failure is still the main barrier that limits real growth of entrepreneurs. The percentage of working population that know somebody starting a business in the last two years decreases from 37.2% in 2004 to 31.1% at the end of 2014. Institutional and social valuation of the entrepreneur does not have a favorable evolution during those 10 years neither. Percentage of nascent entrepreneurs is barely 5.7% of working population in 2004 and 4.2% in 2009. With first signs of economic recovery, this percentage increases up to 6.9%. When considering those who stablish a business (between 3 and 42 months) this positive evolution doesn't show, remains steady in time (about 3.5% of working population). GEM's report reference variable, TEA rate (Total Entrepreneurial Activity: measures participation percentage of early age business over working population), improves significantly in the last ten years because of nascent entrepreneurs, and specially, because of progressive incorporation of women to entrepreneurship activity (in 2004 barely 6.8% of women in working age have a business while in 2014 is 8.3%). Different national and supranational policies, with labor, legal and fiscal incentives promoting entrepreneur's figure, start to have their early results (for example, measures of 2020 project from EU). These policies may become a stimulus to push those who have no other option to work. Besides, stablished entrepreneurs (more than 42 months) increase a little bit more than one percentage point (5.6% in 2004 and 7.1% in 2014), revealing the strength of entrepreneurs in an economic recession period. Finally, future expectations are that more than 24% of entrepreneurs in TEA expect to generate more than five job posts in the next five years, but they do not expect to invest in R + D, or expand their business in an international level. Furthermore, sells from new entrepreneurs that come from foreign customers reduce slightly in the past years. Since the objective of this research is to analyze the value that society gives to entrepreneurship, the first step is selecting those variables from GEM who really capture a subjective assessment of individuals (excluding those who are already in any stage of entrepreneurial process). Specifically, research variables are: suskilyy, opportyy, futsupno, nbgoodby, nbstatyy, nbmediyy and frfailop. On one hand, Table 5 in the appendix shows positive correlation that appears in the six first variables, since they refer to the subjective perception of individuals with respect to positive aspects of entrepreneurship. On the other hand, the variable frfailop, which refers to the fear of failure, has a negative correlation with the other six variables. The research computes a synthetic indicator from the six variables that represent positive aspects of entrepreneurship, using Principal Component Analysis (PCA). Thus, the first principal component accounts for about 60% of the variability of variables. This component is the general subjective perception in positive terms of entrepreneurship, both at professional outbound and recognition from society and media. Fig. 2 analyzes the component together with the Total Early-Stage Entrepreneurial Activity. Also, in order to consider all possible points of view, Fig. 2 presents the own assessment from local experts participating in the GEM study group on the phenomenon of entrepreneurship. This way, differences between the subjective evaluation of experts and the valuation of the whole society and the evolution over time show up. According to the value of TEA and the reports of the local experts, this research classifies participating countries into three categories depending on the degree of competitiveness and economic development of the country: • Group 1: natural resources economies (low level of economic development), they depend on agriculture and the exploitation of natural resources. • Group 2: efficiency economies, with a developed industrial sector as the engine of the economy. • Group 3: innovation economies, countries where the industrial sector is not as important, and services sector drives economy, through technology and innovation.
Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
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F. Crecente-Romero et al. / Journal of Business Research xxx (2016) xxx–xxx
During 2004, in world economic apogee, Latin-American countries are the ones with a better perception about conditions to begin a business and a greater TEA, because of their wealth of natural resources. Nevertheless Peru and Ecuador, have the higher TEA rates and stand out for their higher motivation to begin a business because of need. This situation may generate an excess of entrepreneurs over the balance, which implies ejection of those entrepreneurs that are less competitive. So, at the beginning of the economic crisis, TEA reduces in a little bit less than 50%, despite the positive willingness to create a business. This situation remains until now. But, the research highlights a change in the way of starting a business, from agricultural sector to industrial one. Political instability and economic situation of Argentina leads a great descend in their predisposition to begin a business in 2014. On the other hand, some countries have lower conditions to begin a business and a TEA under the average of the rest. Hungary, Croatia and Japan highlight among them. Japan has a high degree of economic development and an innovation economy, while the entrepreneurial culture of their citizens is almost no relevant. Also, Japan has the lowest TEA of the countries during the study period. In these situations, with a prone environment adopting awareness, countries need to adopt some measures of sensitization. Most of the countries of the European Union (Spain, Germany, Italy, France, Finland, Belgium, Greece and Norway) and South Africa are in an intermediate situation. Nevertheless, European Commission measures from the last decade to improve self-employment and entrepreneurship as the core of the economic development (Europe 2020) can maintain results in citizens' perceptions. When the economic crisis burst in and destroys employment, many Europeans find entrepreneurship as a way to access the labor market again, so the countries maintain the initial TEA rates, even with worst expectations than the rest of the countries of the study. The incorporation of protection improvements to different selfemploy regimes in the last legal reforms becomes another stimulus for many workers to opt for self-employment as a way to pursue their professional activity. Greek case is especially significant, where beginning a business because of need is behind the scene in this situation. USA maintains a TEA over the average in the last ten years and, despite the crisis, subjective perceptions are still the more positive ones. In this case, the powerful entrepreneurial environment of the country (easy access to funds, other entrepreneurs with wide expertise in the area, easy access to consumers and new markets, attractive life conditions) generates an appropriate climate to start a business, that society internalizes and perceives as an upside value in their culture.
4. Conclusions GEM's reports analysis of different variables show how society appraises the entrepreneur figure and entrepreneurial activity. This profile is not static along time, but involves some oscillations, already showing the entrepreneurs' flexible character, depending on environmental changing circumstances. So, the first conclusion is that economy scenario conditions the effective decision of going into an entrepreneurial dynamic or not (higher or lower TEA value) but not individual perceptions, that remain stable along time. If among cultural values of a society no entrepreneurship value appears, government measures are necessary as well as stimulus to improve entrepreneurial tendency. So perception existing in each country about entrepreneurship is a cultural issue and in order to have effects in awareness measures they have to raise this value in the long term (for example the great differences among Japan and EEUU when talking about entrepreneurship). To develop an entrepreneurial economy countries need to have a financial system and public institutions that promote this activity, facilitating financial, economic and legal resources, that are accessible in terms of monetary and opportunity cost. Fig. 2. Graphical relationship between the subjective perceptions on entrepreneurship (Factor Score) and TEA values for countries considered. Source: Own elaboration.
Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
F. Crecente-Romero et al. / Journal of Business Research xxx (2016) xxx–xxx
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Appendix A
Table 5 Data synthesized through PCA in the Factor Score. Suskilyy
Argentina Belgium Croatia Ecuador Finland France Germany Greece Hungary Italy Japan Netherlands Peru Slovenia South Africa Spain UK United States
Opportyy
Futsupno
Nbgoodyy
Nbstatyy
Nbmediyy
2004
2009
2014
2004
2009
2014
2004
2009
2014
2004
2009
2014
2004
2009
2014
2004
2009
2014
58.6 38.8 41.6 76.1 36.1 33.1 35.8 54.5 21.4 32.6 13.5 36.7 75.0 43.2 35.4 41.4 51.7 54.2
65.1 36.7 59.1 73.0 35.1 27.1 39.7 58.1 40.9 41.2 13.8 47.5 74.1 52.0 35.5 47.5 47.0 56.2
57.8 30.4 45.9 72.8 34.9 35.4 36.4 45.5 40.9 31.3 12.2 44.3 69.4 48.6 37.7 48.1 46.4 53.3
56.6 37.5 19.3 46.3 38.3 21.1 13.2 29.2 16.6 25.4 14.0 38.3 56.2 37.1 32.3 39.3 36.2 33.6
44.0 14.5 37.0 44.2 39.7 24.1 22.2 26.5 2.9 24.7 8.0 36.2 61.0 29.1 35.4 16.0 24.0 28.4
31.9 35.9 18.4 62.0 42.4 28.3 37.6 19.9 23.4 26.6 7.3 45.6 62.3 17.3 37.0 22.6 41.0 50.9
19.5 5.7 3.9 40.6 3.7 11.6 4.3 11.4 2.5 9.3 0.8 4.6 48.3 8.4 13.3 4.3 7.4 8.0
14.2 5.2 7.9 31.0 4.2 15.9 5.3 14.6 13.1 4.5 3.0 5.5 32.0 9.7 10.9 4.3 4.3 6.9
27.8 10.6 19.5 43.1 7.9 14.2 5.9 9.5 13.9 11.4 2.5 9.3 50.6 11.4 10.1 7.1 6.9 12.1
67.8 70.6 65.4 81.1 38.4 59.9 53.8 66.5 55.2 76.6 28.0 80.7 78.2 59.3 59.3 71.8 54.5 57.8
67.9 45.6 68.2 78.0 44.9 65.1 53.6 65.6 42.3 71.7 28.1 83.6 87.6 55.8 63.7 63.0 47.5 65.9
57.8 52.4 63.3 66.4 41.2 59.1 51.7 58.4 47.4 65.1 31.0 79.1 82.4 53.4 69.6 53.9 60.3 64.7
71.6 68.5 50.7 76.1 86.9 70.0 71.4 73.0 56.7 66.0 55.5 67.4 72.4 76.4 59.1 58.6 71.3 62.9
75.7 49.4 49.0 72.5 88.3 69.5 74.8 68.2 72.2 69.2 49.6 67.3 75.1 77.6 64.0 54.8 73.5 75.4
52.2 51.7 46.6 67.1 84.4 70.4 79.1 66.4 72.4 72.1 55.8 67.8 81.4 72.3 72.9 49.0 75.0 76.9
80.7 40.1 48.8 57.3 72.7 36.4 52.8 42.2 34.9 55.0 51.5 58.9 75.7 60.9 59.3 38.7 55.3 59.1
79.6 32.9 53.0 55.4 67.7 49.6 49.7 31.5 31.8 44.3 61.2 63.7 85.0 57.2 63.9 37.0 44.5 66.7
63.6 50.8 40.4 82.9 66.9 39.0 51.4 45.8 33.5 48.3 58.7 55.7 83.6 57.6 72.6 46.3 58.4 75.8
Source: GEM data.
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Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
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Journal of Business Research
Subjective perception of entrepreneurship. Differences among countries☆ Fernando Crecente-Romero a,⁎, Mónica Giménez-Baldazo a, Luis F. Rivera-Galicia b a b
Department of Economics and Management, University of Alcalá, Spain Department of Economics, University of Alcalá, Spain
a r t i c l e
i n f o
Article history: Received 1 February 2016 Received in revised form 1 March 2016 Accepted 1 April 2016 Available online xxxx Keywords: Entrepreneurship Behavioral economics
a b s t r a c t Entrepreneurship is a field of growing interest for economic research. Entrepreneurs contribute actively to economic growth, because they create employment and wealth. Knowledge and entrepreneurship play an important role in economic progress and they lead the from a management economy towards an entrepreneurial economy. Understanding entrepreneurial activity is essential to characterize both entrepreneurs and their businesses so that public policies that intend to promote and support the creation of companies are effective and efficient. This research proposes a new classification of countries using statistical tools, taking into account the countries present in GEM (Global Entrepreneurship Monitor) for years 2004, 2009 and 2014. This classification allows to analyze the evolution of the perception of entrepreneurial opportunities, as well as to identify the cultural patterns of entrepreneurship. The results show that entrepreneurial activity does not depend only on economic development, but also on behavioral economics. © 2016 Elsevier Inc. All rights reserved.
1. Introduction 1.1. Entrepreneurship as a regional phenomenon Entrepreneurship is another factor in production function that appears and develops in a concrete region or economy as productive resources. Some studies analyze them from a supply and demand perspective (Verheul & van Stel, 2007), as the rest of productive resources. Demographic characteristics of population, industrial needs or individual attitudes towards entrepreneurial activity and individual valuation of risk determine supply, that is, labor market. Latent opportunities in a segment or in the products/services market of the area explain demand. The bigger the diversity of consumers, technological advances and business development in a region, the bigger the demand of entrepreneurs because they create supply chain decentralization (business services development, “spin-off” creation, etc.). Fig. 1 shows that adequacy between supply and demand of entrepreneurs determines entrepreneurship rate balance in a region. However, supply and demand reach this balance only in the long term as a consequence of market adjustments, when only those entrepreneurs with an efficient management remain. Access of new entrepreneurs to areas or regions with an entrepreneurship rate above the equilibrium causes an increase of competence. One way to compete is increasing costs, so margins decrease and the probability of
☆ The authors thank contributions from two anonymous referees, for their careful reading and suggestions on revising this paper. ⁎ Corresponding author. E-mail addresses: [email protected] (F. Crecente-Romero), [email protected] (M. Giménez-Baldazo), [email protected] (L.F. Rivera-Galicia).
entrepreneurial failure then increases. Only those companies that can manage their costs efficiently will remain in the sector, and the market will eject the rest of the firms. On the other side, if entrepreneurs decide to invest using a strategic criteria in a new market niche, company survival opportunities might increase, because of the higher margin the company can get until the area reaches balance rate. Demographic conditions of regions determine the factors that facilitate business access, especially urban areas development and agglomeration economies they create, taking advantage of the networks that big cities generate (Lamotte & Colovic, 2013; Liang, Wang, & Lazear, 2014; Nijkamp, 2000). Nevertheless, developing countries don't need a deep urban development to get a dynamic entrepreneurial activity, because chances appear in the more unstable and adverse environments. Peters (2003) reaches these conclusions in his research about entrepreneurship in south India. Classical entrepreneurs have an attitude towards uncertainty and an ability to get something good from the failure, so they have entrepreneurship vision and the talent to detect opportunities, not only in the market, but also in time and in the influence area. Entrepreneurs decide to create a business because they perceive sectorial, strategic or market opportunities (Falck, 2007; Grebel, 2007). For example, remarkable market opportunities are the lack of the same kind of companies in the city, city growth expanding the market or liberalization of the market in the region. Nevertheless, entrepreneurship different from strategic aspects or need is equally significant. Personal or family issues in order to choose time and location are also important reasons. Entrepreneurs want to maximize their life quality when they locate their companies as close as possible to their home. Personal reasons condition the election of the sector: entrepreneurs can continue with a previously existing
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Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
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Fig. 1. Entrepreneurship rate balance. Source: Own elaboration based on Verhuel assumptions.
business, because of inheritance or because entrepreneurs buy the company they work for (buying participations from another partner). The main reason to choose the activity area is prior knowledge and experience they already gather, their level of studies or their skills from professional career (knowledge of customers, suppliers, production processes, etc., Landström, 2008 or Landström, Harirchi, & Aström, 2012). One of the strengths of Global Entrepreneurship Monitor (GEM) is that their reports provide data about the flow and the reasons that lead from “potential” to “nascent” entrepreneur. In most occidental economies, need reasons lead this change while opportunity reasons arise very few times. De Martino and Barbato (2003) determine that in order to know exactly the reasons that lead an entrepreneur to start and activity you need to make a comparison between groups of entrepreneurs with the same educational level. 1.2. Environmental conditions and their use Environments are all those circumstances that directly (or indirectly) condition behavior and results of any entity, and is a decisive element to succeed in any activity. For example, according to ecological population theory (Hannan & Freeman, 1977), environment is the main factor that determines the success of a company, over company's characteristics or entrepreneur skills. The environment creates opportunities that condition the demand of entrepreneurial activity in a region, through technological advances, globalization and business fabric (Acs, Morck, & Yeung, 2001; Blanchflower, Oswald, & Stulzar, 2001; Urbano & Turró, 2013; Verheul, Wennekers, Audretsch, & Thurik, 2001). Technological innovations, especially information and communication technologies innovations, improve competitiveness of small and medium businesses because they allow productive specialization due to the development of new products and services that companies offer to the rest of the world (Carree & Thurik, 2005). Globalization creates a lot of market niches, but can also have negative effects on companies, because of the decrease of survival possibilities due to the increase of international competence. Only those firms that are more competitive and more able to adapt themselves to different cultures and consumers remain. Bruner and Alarcón (2004) analyze environment as a facilitator of entrepreneurship from a structure-conditions-results perspective. They consider market variables such as technology, product characteristics, market share and market barriers (access and exit). Depending on the market structure, companies tend to move away from perfect competence conditions, using price or technology to try to get more market power and better results. But developing entrepreneurship dynamics does not need a complete stable environment: Peters (2003) shows
the ability of Indian entrepreneurs to take advantage of an adverse and unstable environment. Furthermore, economic growth and accumulation above the balance level of new companies implies a decrease in market niches and therefore a decrease in the expectative of becoming an entrepreneur (Muhammad, 2012). Urban spaces and good means of transportation and communication, both internal and external, contribute more to the huge industrial cluster and metropolitan regions design, and allow taking advantage of the existing networks (Nijkamp, 2000). Cities have a great impact in the development of entrepreneurial activity, especially those with dense population levels, high percentage of qualified workers, as well as a solid structure of small and medium companies (Audretsch & Fritsch, 1994). Besides, entrepreneurship boom takes place in these areas, especially with the outsourcing of the economy and the rise of services to companies sector, which demands more companies with low capital requirements and few access limitations. Launching a company in an economy with a balanced productive system in all the vital activity sectors contributes to generate a favorable ecosystem for business development and creativity. And also spreads the existence of a wide supplier's offer and possible collaborators to take advantage of economies of scale and improve synergies appearance, both positive and negative. On the other hand, the perception of the economic situation and the environment has a great influence when thinking about starting a new business. Therefore, in crisis moments, opportunities perception remains stable and increases the consideration of self-employment as a professional option, but the fear of failure in business development increases. When this situation takes place, to avoid possible decreases in entrepreneurship activity rate (among others because of the greater difficulties to get financial aid), public institutions increase entrepreneurship activity support, as a way to access to employment through unemployment subsidy as well as fiscal incentives that promote business creation (Crecente, 2011; Levie, Autio, Acs, & Hart, 2014). 2. Data description and methodology Multiple variables and methodologies show the impact and factors that determine entrepreneurship activity. At an international level, the main contributions to the study of entrepreneurship are: GEM's research and entrepreneurship survey; OECD's entrepreneurship indicators program; Entrepreneurship Global Survey of the World Bank; and European Commission's entrepreneurship survey (Eurobarometer). From all of them, GEM is the oldest (from 1999) and the widest in international coverage (up to 87 countries participate in their reports). GEM reports have 3 great strengths: first of all, robustness of data, concretely, GEM makes a survey in each country to more than 2.000 people from working population (among 18 and 64 years old), as well as to a panel of more than 35 local experts. Secondly, the object of analysis is the entrepreneur as an individual and the surrounding environment, not as a company. Third, they take into account all phases of the entrepreneurship dynamics, because they consider attitudes and perceptions of entrepreneurs in the different steps they make (potential, nascent, new and already stablished entrepreneur). GEM model analyzes different variables from entrepreneurship dynamic. Quantitative variables use percentages, while qualitative variables use Likert's scale with 5 values (from fully agrees to totally disagrees). The most significant variables are the following: • Total Entrepreneurial Activity Rate (TEA): this rate takes into account the kind of entrepreneurship (need versus opportunity), gender (male versus female) or the step of the process (potential, nascent, new, stablished or irregular entrepreneurs). • Entrepreneurial perceptions, attitudes, intentions and aspirations from different entrepreneur groups. • Expert perceptions about: entrepreneurial opportunities and capacity; motivation mechanisms; funding; government policies; education training; services and commercial infrastructures access; opening to
Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
F. Crecente-Romero et al. / Journal of Business Research xxx (2016) xxx–xxx Table 1 Countries selected. Geographic region
Countries
Africa Asia & Oceania Latin America & Caribbean European Union
South Africa Japan Argentina, Ecuador, Peru
North America
Belgium, Croatia, Finland, France, Germany, Greece, Hungary, Italy, Netherlands, Slovenia, Spain, United Kingdom United States
Source: Own elaboration based on GEM data.
the internal market; physical infrastructures (situation and access); social and cultural rules; laws and registration of patents and similar; entrepreneur women support; high growth potential business creation and innovation interest.
OECD and World Bank researches analyze the tools that entrepreneurs use to develop their activity, this means, the business as the economic unit of reference. Variables in these researches focus on birth and death rates, survival probability, average size of companies after five years, benefits and jobs generation. Eurobarometer provides statistics similar to GEM's. Therefore, they analyze attitudes and personal characteristics of entrepreneurs, as well as their risk perception and existing barriers when trying to begin an activity. Results take into account causes that motivate entrepreneurship, differencing between need and strategic, temporal or sectorial opportunity. 18 countries appear in the three waves of GEM of years 2004, 2009 and 2014 (Bosma & Levie, 2010; Singer, Amorós, & Moska, 2015; Zoltan, Arenius, Hay, & Minniti, 2005). Table 1 shows these countries in different geographical regions. 3. Results Table 2 shows the evolution of the aggregate variables level among the countries. In the last decade appears an increase of 5% in the positive valuation of entrepreneurship activity in most of the countries. When economies start to recover from crisis, opportunities to start a business and the entrepreneurial capacities of individuals increase. The appearance of entrepreneurs in social media grows. From the beginning of the crisis up to now, the percentage of working population that Table 2 Mean of the variables for the countries selected. Year Variable
2004
2009
2014
Suskilyy Opportyy Frfailop Futsupno Knoentyy Nbgoodyy Nbstatyy Nbmediyy Suboanyy Babybuyy Teayy Estbbuyy Teayynec_p Teayymal Teayyfem Busangyy TEAyyjg5 TEAyynwp TEAyyint
43.3 32.8 33.7 11.5 37.2 62.5 67.5 54.5 5.7 3.3 8.6 5.6 21.4 10.3 6.8 3.2 23.4 47.8 19.1
47.2 28.8 35.3 10.7 36.7 61.0 68.1 54.2 4.2 3.5 7.6 7.2 23.4 9.4 5.7 2.9 23.6 44.3 18.5
44.0 33.9 37.9 15.2 31.1 58.7 67.4 57.3 6.9 3.6 10.2 7.1 24.0 12.2 8.3 3.9 24.3 43.7 18.7
Source: Own elaboration based on GEM data.
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considers starting a business in the next 3 years increases from 11.5% to 15.2%. But, despite the increase of that consideration, fear to failure is still the main barrier that limits real growth of entrepreneurs. The percentage of working population that know somebody starting a business in the last two years decreases from 37.2% in 2004 to 31.1% at the end of 2014. Institutional and social valuation of the entrepreneur does not have a favorable evolution during those 10 years neither. Percentage of nascent entrepreneurs is barely 5.7% of working population in 2004 and 4.2% in 2009. With first signs of economic recovery, this percentage increases up to 6.9%. When considering those who stablish a business (between 3 and 42 months) this positive evolution doesn't show, remains steady in time (about 3.5% of working population). GEM's report reference variable, TEA rate (Total Entrepreneurial Activity: measures participation percentage of early age business over working population), improves significantly in the last ten years because of nascent entrepreneurs, and specially, because of progressive incorporation of women to entrepreneurship activity (in 2004 barely 6.8% of women in working age have a business while in 2014 is 8.3%). Different national and supranational policies, with labor, legal and fiscal incentives promoting entrepreneur's figure, start to have their early results (for example, measures of 2020 project from EU). These policies may become a stimulus to push those who have no other option to work. Besides, stablished entrepreneurs (more than 42 months) increase a little bit more than one percentage point (5.6% in 2004 and 7.1% in 2014), revealing the strength of entrepreneurs in an economic recession period. Finally, future expectations are that more than 24% of entrepreneurs in TEA expect to generate more than five job posts in the next five years, but they do not expect to invest in R + D, or expand their business in an international level. Furthermore, sells from new entrepreneurs that come from foreign customers reduce slightly in the past years. Since the objective of this research is to analyze the value that society gives to entrepreneurship, the first step is selecting those variables from GEM who really capture a subjective assessment of individuals (excluding those who are already in any stage of entrepreneurial process). Specifically, research variables are: suskilyy, opportyy, futsupno, nbgoodby, nbstatyy, nbmediyy and frfailop. On one hand, Table 5 in the appendix shows positive correlation that appears in the six first variables, since they refer to the subjective perception of individuals with respect to positive aspects of entrepreneurship. On the other hand, the variable frfailop, which refers to the fear of failure, has a negative correlation with the other six variables. The research computes a synthetic indicator from the six variables that represent positive aspects of entrepreneurship, using Principal Component Analysis (PCA). Thus, the first principal component accounts for about 60% of the variability of variables. This component is the general subjective perception in positive terms of entrepreneurship, both at professional outbound and recognition from society and media. Fig. 2 analyzes the component together with the Total Early-Stage Entrepreneurial Activity. Also, in order to consider all possible points of view, Fig. 2 presents the own assessment from local experts participating in the GEM study group on the phenomenon of entrepreneurship. This way, differences between the subjective evaluation of experts and the valuation of the whole society and the evolution over time show up. According to the value of TEA and the reports of the local experts, this research classifies participating countries into three categories depending on the degree of competitiveness and economic development of the country: • Group 1: natural resources economies (low level of economic development), they depend on agriculture and the exploitation of natural resources. • Group 2: efficiency economies, with a developed industrial sector as the engine of the economy. • Group 3: innovation economies, countries where the industrial sector is not as important, and services sector drives economy, through technology and innovation.
Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
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During 2004, in world economic apogee, Latin-American countries are the ones with a better perception about conditions to begin a business and a greater TEA, because of their wealth of natural resources. Nevertheless Peru and Ecuador, have the higher TEA rates and stand out for their higher motivation to begin a business because of need. This situation may generate an excess of entrepreneurs over the balance, which implies ejection of those entrepreneurs that are less competitive. So, at the beginning of the economic crisis, TEA reduces in a little bit less than 50%, despite the positive willingness to create a business. This situation remains until now. But, the research highlights a change in the way of starting a business, from agricultural sector to industrial one. Political instability and economic situation of Argentina leads a great descend in their predisposition to begin a business in 2014. On the other hand, some countries have lower conditions to begin a business and a TEA under the average of the rest. Hungary, Croatia and Japan highlight among them. Japan has a high degree of economic development and an innovation economy, while the entrepreneurial culture of their citizens is almost no relevant. Also, Japan has the lowest TEA of the countries during the study period. In these situations, with a prone environment adopting awareness, countries need to adopt some measures of sensitization. Most of the countries of the European Union (Spain, Germany, Italy, France, Finland, Belgium, Greece and Norway) and South Africa are in an intermediate situation. Nevertheless, European Commission measures from the last decade to improve self-employment and entrepreneurship as the core of the economic development (Europe 2020) can maintain results in citizens' perceptions. When the economic crisis burst in and destroys employment, many Europeans find entrepreneurship as a way to access the labor market again, so the countries maintain the initial TEA rates, even with worst expectations than the rest of the countries of the study. The incorporation of protection improvements to different selfemploy regimes in the last legal reforms becomes another stimulus for many workers to opt for self-employment as a way to pursue their professional activity. Greek case is especially significant, where beginning a business because of need is behind the scene in this situation. USA maintains a TEA over the average in the last ten years and, despite the crisis, subjective perceptions are still the more positive ones. In this case, the powerful entrepreneurial environment of the country (easy access to funds, other entrepreneurs with wide expertise in the area, easy access to consumers and new markets, attractive life conditions) generates an appropriate climate to start a business, that society internalizes and perceives as an upside value in their culture.
4. Conclusions GEM's reports analysis of different variables show how society appraises the entrepreneur figure and entrepreneurial activity. This profile is not static along time, but involves some oscillations, already showing the entrepreneurs' flexible character, depending on environmental changing circumstances. So, the first conclusion is that economy scenario conditions the effective decision of going into an entrepreneurial dynamic or not (higher or lower TEA value) but not individual perceptions, that remain stable along time. If among cultural values of a society no entrepreneurship value appears, government measures are necessary as well as stimulus to improve entrepreneurial tendency. So perception existing in each country about entrepreneurship is a cultural issue and in order to have effects in awareness measures they have to raise this value in the long term (for example the great differences among Japan and EEUU when talking about entrepreneurship). To develop an entrepreneurial economy countries need to have a financial system and public institutions that promote this activity, facilitating financial, economic and legal resources, that are accessible in terms of monetary and opportunity cost. Fig. 2. Graphical relationship between the subjective perceptions on entrepreneurship (Factor Score) and TEA values for countries considered. Source: Own elaboration.
Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097
F. Crecente-Romero et al. / Journal of Business Research xxx (2016) xxx–xxx
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Appendix A
Table 5 Data synthesized through PCA in the Factor Score. Suskilyy
Argentina Belgium Croatia Ecuador Finland France Germany Greece Hungary Italy Japan Netherlands Peru Slovenia South Africa Spain UK United States
Opportyy
Futsupno
Nbgoodyy
Nbstatyy
Nbmediyy
2004
2009
2014
2004
2009
2014
2004
2009
2014
2004
2009
2014
2004
2009
2014
2004
2009
2014
58.6 38.8 41.6 76.1 36.1 33.1 35.8 54.5 21.4 32.6 13.5 36.7 75.0 43.2 35.4 41.4 51.7 54.2
65.1 36.7 59.1 73.0 35.1 27.1 39.7 58.1 40.9 41.2 13.8 47.5 74.1 52.0 35.5 47.5 47.0 56.2
57.8 30.4 45.9 72.8 34.9 35.4 36.4 45.5 40.9 31.3 12.2 44.3 69.4 48.6 37.7 48.1 46.4 53.3
56.6 37.5 19.3 46.3 38.3 21.1 13.2 29.2 16.6 25.4 14.0 38.3 56.2 37.1 32.3 39.3 36.2 33.6
44.0 14.5 37.0 44.2 39.7 24.1 22.2 26.5 2.9 24.7 8.0 36.2 61.0 29.1 35.4 16.0 24.0 28.4
31.9 35.9 18.4 62.0 42.4 28.3 37.6 19.9 23.4 26.6 7.3 45.6 62.3 17.3 37.0 22.6 41.0 50.9
19.5 5.7 3.9 40.6 3.7 11.6 4.3 11.4 2.5 9.3 0.8 4.6 48.3 8.4 13.3 4.3 7.4 8.0
14.2 5.2 7.9 31.0 4.2 15.9 5.3 14.6 13.1 4.5 3.0 5.5 32.0 9.7 10.9 4.3 4.3 6.9
27.8 10.6 19.5 43.1 7.9 14.2 5.9 9.5 13.9 11.4 2.5 9.3 50.6 11.4 10.1 7.1 6.9 12.1
67.8 70.6 65.4 81.1 38.4 59.9 53.8 66.5 55.2 76.6 28.0 80.7 78.2 59.3 59.3 71.8 54.5 57.8
67.9 45.6 68.2 78.0 44.9 65.1 53.6 65.6 42.3 71.7 28.1 83.6 87.6 55.8 63.7 63.0 47.5 65.9
57.8 52.4 63.3 66.4 41.2 59.1 51.7 58.4 47.4 65.1 31.0 79.1 82.4 53.4 69.6 53.9 60.3 64.7
71.6 68.5 50.7 76.1 86.9 70.0 71.4 73.0 56.7 66.0 55.5 67.4 72.4 76.4 59.1 58.6 71.3 62.9
75.7 49.4 49.0 72.5 88.3 69.5 74.8 68.2 72.2 69.2 49.6 67.3 75.1 77.6 64.0 54.8 73.5 75.4
52.2 51.7 46.6 67.1 84.4 70.4 79.1 66.4 72.4 72.1 55.8 67.8 81.4 72.3 72.9 49.0 75.0 76.9
80.7 40.1 48.8 57.3 72.7 36.4 52.8 42.2 34.9 55.0 51.5 58.9 75.7 60.9 59.3 38.7 55.3 59.1
79.6 32.9 53.0 55.4 67.7 49.6 49.7 31.5 31.8 44.3 61.2 63.7 85.0 57.2 63.9 37.0 44.5 66.7
63.6 50.8 40.4 82.9 66.9 39.0 51.4 45.8 33.5 48.3 58.7 55.7 83.6 57.6 72.6 46.3 58.4 75.8
Source: GEM data.
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Please cite this article as: Crecente-Romero, F., et al., Subjective perception of entrepreneurship. Differences among countries, Journal of Business Research (2016), http://dx.doi.org/10.1016/j.jbusres.2016.04.097