Family, society and the individual: determinants of entrepreneurial attitudes among youth in Chennai, South India

“The education system has to be designed in a way that produces a large number of employment generators and not just employment seekers,” exhorted the visionary ex-President of India and the late, Dr. A. P. J. Abdul Kalam, when he addressed students at India’s premier college, the Indian Institute of Technology, Mumbai in 2015. With a large population, a fairly youthful profile, its fair share of intelligence and a generous share of natural resources, one would expect India to be a world-leader in the supply of entrepreneurs. However, this is not the case.

Development of the entrepreneurial spirit in modern India has been rather slow: this can be attributed in a large measure to the centuries of British occupation and the Macaulayian education system that the British introduced in India (Jaffrelot, 1996). The system aimed at producing obedient clerks to serve the interests of the British administration and did hardly anything to encourage creativity or individual enterprise. It is not an exaggeration to say that independent thinking in all fields, including the economic sphere, was actively discouraged by the British—a striking example is their successful attempt to put down with an iron hand the nascent shipping line promoted by Sri V.O. Chidambaram Pillai and rewarding him with rigorous imprisonment for having dared to display enterprise (Padmanabhan, 2001).

In contrast, the much-maligned caste system that prevailed in ancient and medieval India, (as codified by the Manu Smriti and other seminal works), provided for a specific class of people, the Vysyas, whose duty it was to engage in industry and trade. By providing that whoever was born in that caste should adopt the hereditary occupation, society ensured that entrepreneurship was in the cultural makeup of every person in that social group, leading them to imbibe, innovate and excel at enterprise. The widespread existence of industry and of youthful entrepreneurship in the eighth century and earlier too, is recorded by Azhwars (poetic saints of South India) in their works collectively known as Divya Prabandam. One such account graphically portrays smoke billowing out of cane-crushing activity in villages, the precursor of the modern sugar mills, centuries before the Industrial Revolution (Thirumangai Azhwar, circa 776). Evidence of world recognition of medieval Indian entrepreneurship is also provided by the demand for Indian muslin cloth that was used in wrapping Egyptian mummies (Manimala et al., GEM India 2001 report, p.8). It is quite ironic that it is this kind of entrepreneurial expertise that brought colonial powers (English, Dutch, Portuguese and the French) to India.

The British system of education introduced in India thus produced generations of students whose outlook was conservative and whose preference was for service (and preferably government service) as a provider of economic stability. Creative thinking and the spirit of striking out for oneself were conspicuous by their absence in the curriculum. Added to this, the post-colonial License Raj characterized by its ubiquitous webs of bureaucratic red-tape ushered in by the socialist policies of the newly independent nation placed virtually insurmountable hurdles in the path of anyone daring to display entrepreneurial ambitions. Thus, if the country continued to figure in the list of developing nations, without signs of graduating to the level of a developed one, it could well be attributed to a lack of widespread entrepreneurial effort. In the early 1990s and thereafter (popularly referred to as Jugad Raj and Invisible Raj), however, the Indian government shifted fundamentally away from socialistic policies and toward market-led economic development policies, opening up trade and investment, introducing deregulation, tax reforms, and inflation controls. Within a decade, these policies propelled India’s economic stature globally, touting historically high growth rates, with India becoming better and better known for information and communication technology. Economic reform in India began in right earnest in 1991 when the government embraced the goal of establishing a more market-oriented economy and expanded the role of private and foreign investment. Specific reform measures included the reduction in import tariffs, the deregulation of markets, tax reductions, and an increased attractiveness for foreign investment (see, e.g., Ravallion 2009).

Rates of entrepreneurship also saw corresponding increase. In 2001, the GEM India survey of about 2000 adults showed that the level of entrepreneurial activity in India was 11.2%, and that younger people were much more likely to be engaged in entrepreneurial activities than older people. Although India had pivoted significantly by this time from the notion of entrepreneurship by birth to entrepreneurship creation, substantial roadblocks to success still remain. For example, analysis of responses from experts on the same GEM survey cited above found that while India scored better than the average of 29 countries surveyed on entrepreneurial capacity and commercial and professional infrastructure, it scored below average on many of the enabling conditions for entrepreneurship such as government policies, physical infrastructure, education system, R&D transfer, and respect for entrepreneurship in the society (Manimala et al., GEM India Report 2001). These findings were largely confirmed by the second iteration of the survey a year later, although entrepreneurial activities had increased to nearly 18% (Manimala, GEM India Report 2002). The latest survey conducted in 2013 concludes that the lack of credible legal frameworks, stable political structures and strategic factor markets continue to inhibit entrepreneurial activities, that have by now dipped to about 10% (Saraf and Banerjee, GEM India Report 2013). Taken together, the GEM surveys indicate that even though great strides were made in the 1990s and 2000s with respect to entrepreneurship, so much so that 63% of Indian youth now viewed it as a desirable career choice, a much more entrepreneur-friendly environment needs to be in place through institution building efforts and more conducive government policies (Saraf and Banerjee, GEM India Report 2013).

We derive our conceptual guidance from the theory of reasoned action/planned behavior (Ajzen and Fishbein 1980; Fishbein and Ajzen, 1975; Ajzen 1991; Ajzen 2002; for an application to entrepreneurship, see Warmuth et al. 2014) that generally posits that behavioral choices are rationally made, and are preceded by intentionality toward the behavior which in turn is influenced by the individual’s attitudes (favorable or unfavorable perceptions) toward the behavior. These attitudes themselves may be determined by the different sets of values, beliefs, and personality traits that individuals may acquire through socialization, or inherit from their family (see, e.g., Carr and Sequeira 2007).

In this paper, we adopt a variant of the reasoned action framework and use the conceptual model that appears as Fig. 1. Here, we confine our interest to the formation of entrepreneurial attitudes, which are thought to be an important determinant of entrepreneurial intention, subsequently leading to engagement in entrepreneurship. This approach is necessary here because of the nature of the study sample, i.e., graduate level business students, whose entrepreneurial intentions and behaviors are yet to be observed. The literature on entrepreneurship also empirically demonstrates the link between attitudes and entrepreneurship behavior (Krueger & Carsrud, 1993; Lee, Chua and Chen, 2004; Goel, Zhang, and Arora, 2007). In addition, we posit that parental social and economic capital, youth’s values, beliefs, and personality traits, youth’s stock of social capital all directly and collectively influence the youth’s attitude toward entrepreneurship (see Warmuth et al. 2014). While we recognize that the youths’ stock of social and cultural capital in their various forms may be derived in part from their parents or the family in general, we do not model this process because of data constraints. Specifically, we do not have direct information from the parents/family that sheds light on the transmission or the transmission processes that occur when values, beliefs and other forms of capital are passed on intergenerationally.

Family capital Parental or familial capital in the form of finances and social connections have been shown to significantly influence attitudes toward entrepreneurship and actual entrepreneurship behavior. This is particularly true when considering students engaged in higher education, when career choices are foremost in their minds (Gelderen et al. 2008; Leffel and Darling, 2009). In the context of developing countries, parental financial resources become all the more important in shaping entrepreneurial attitudes of these students, since most of them partially or wholly depend on their families for educational and other needed support (Sharma, 2014). For example, the GEM 2013 survey indicates that in sub-Saharan Africa, a little over three quarters of new or nascent entrepreneurs rely primarily on their families and friends for startup funding (Kew et al., GEM India Report 2013).

The family’s social capital in its various forms are also thought to be critical in inculcating an entrepreneurial mindset. Systematically developed by scholars over the years (Lin et al., 1981; Bourdieu, 1983; Coleman, 1988; Putnam, 2000) the notion of social capital refers to the networks of relationships that individuals create that have the potential for mutual benefits; and much like economic capital, is capable of producing returns. It is therefore conceivable that youth who are exposed to family connections, especially those with some entrepreneurial content, may reap benefits from such connections and develop positive inclinations toward entrepreneurship. In India, such connections have the promise of helping negotiate a vast bureaucracy and/or procuring startup funding that are a pre-requisite for any business establishment.

Individual capital The amount of education and other related skills the youth has acquired, (human capital), their economic resources, and the network of personal connections he/she has made (social capital) can be thought to influence entrepreneurial attitudes. Since the stock of human capital can more or less be presumed to be constant in our study population (all are graduate students), and all have more or less no individual income, we focus here on the youth’s social capital. The amount of social capital acquired and accumulated by the youth is hypothesized to influence their attitude toward entrepreneurship. The ability to extract benefits from their contacts fulfils any shortfalls youth may experience in their access to information, capital or skills necessary for a business venture (Aldrich and Zimmer, 1986; Aldrich et al., 1991; Hansen, 1995). Network contacts may provide new or different ideas and world views that broaden the opportunity framework for new ventures (Aldrich and Zimmer, 1986; Aldrich et al., 1998; Freitag, 2006; Maloney and Rossteutscher, 2007; Bonaventura and Caserta, 2012). Having role models and other friends who are entrepreneurs are reported to be correlated with higher entrepreneurial inclination (Collins & Moore, 1970; Cooper & Dunkelberg, 1984; Davidsson and Honig, 2003; Mahadea et al., 2011; Sharma & Madan, 2014). An integral component of social capital is trust, which often results from mutual obligations and exchanges or a threat of censure (Coleman, 1988; Granovetter, 1985; Putnam, 1993), and forms the basis for ties that hold individuals and organizations together (Davidsson and Honig, 2003).

Personality traits such as creativity, innovativeness, leadership capability, independence, non-conformity, risk taking or fear of failure, and need for achievement, are often cited to be indicators of interest in entrepreneurial activities (McClelland, 1961; Krueger, 2009; Sorenson and Chang, 2006; Saraf and Bannerjee, 2013; Lukeš and Zouhar, 2013). Empirical support for this relationship, however, has been mixed, depending on the discipline, the particular set of traits studied, and setting of the study (Henderson & Robertson, 2000; see Sorenson and Chang, 2006 for a detailed review). An individual’s values, i.e., enduring motivations, are also thought to guide, justify, or explain attitudes and through attitudes, subsequent behaviors (e.g., Halman and de Moor, 1994; Rokeach, 1973; Schwartz, 1992; Williams, 1968).

Demographic characteristics Gender has received some attention as a possible predictor of entrepreneurial attitude and behavior (Strohmeyer and Tonoyan 2005). It is generally believed that males are significantly more inclined toward entrepreneurship, although the empirical evidence is far less settled on the issue. There appear to be nearly as many studies that find significant gender differences in entrepreneurial interest, attitudes, and behavior (Shinnar et al., 2012; Yardanova and Tarrazon, 2010; Kickul et al., 2008; El Harbi, et al., 2009; Asos et al., 2007) as those that do not (Maxfield et al., 2010; Wilson et al., 2007; Veciano et al., 2005; Kourilskva and Walstadb, 1998). Moreover, even when gender differences are found, they have been shown to be culture-sensitive (Shinnar et al., 2012; Strobl et al., 2012).

Having prior work experience can be expected to enhance an individual’s interest in entrepreneurship since it provides an opportunity to observe the workings of the labor market, to learn valuable work ethic, and to expand their network of contacts. There appears to be some empirical support for this view (Ghazali et al., 1995; Kristiansen and Indarti, 2004; Othman et al., 2006; Keat et al., 2011).

The long-entwined links between religion and the caste system in India are also thought to have economic connections, especially to entrepreneurial inclination and behavior. Economists including Adam Smith and Max Weber have pointed to this connection (Audretsch et al., 2007), where the latter argued that the caste system has a negative effect on the economy. Hindus are the religious majority in India¹ and given the proscription of material pursuits advocated by Hinduism, a clear delineation of occupations based on castes, and the perpetuation of occupational decisions over generations, it is conceivable that religion influences the propensity to become an entrepreneur. In fact, a study of 90,000 workers in India revealed that while some religions (Islam and Christianity) were conducive to entrepreneurship, others, such as Hinduism were highly inhibitive (Audretsch et al., 2007).

In a comparative study of attitudes of college students towards entrepreneurship in China and India, Goel and his colleagues found significant regional differences among Indian youth. Youth in South India were particularly more likely to report that entrepreneurship is better than working for others, is more rewarding, is deserving of societal respect, and to emphasize the necessity of entrepreneurship in making the country prosperous, than youth from other regions (Goel et al., 2007). There have been a few studies of a more descriptive nature conducted in South India, especially in Tamil Nadu, with smaller samples using correlational techniques. These studies find that family income, parental history of business ownership (Rathika, 2012; Tamizharasi and Panchanatham, 2010; Jayalakshmi and Saranya, 2015; Manivannan et al., 2013), availability of entrepreneurial opportunities (Kavitha, 2014), education, marital status, and business type (Palaniappan et al., 2012), gender (Jayalakshmi and Saranya, 2015; Sankar and Sutha, 2016), previous work experience (Khan, 2015; Jayalakshmi and Saranya, 2015), and personality traits such as risk taking, self-control, self-confidence, innovativeness, independence, achievement oriented, enthusiasm, self-motivation, and ability to influence others (Manivannan et al., 2013; Kundu and Rani, 2007; Thavaraj, 2014) are highly correlated with entrepreneurial interest and inclination.

The study sample comes from the first year MBA students from four colleges in Chennai, the capital of Tamil Nadu in South India, the fifth largest city, and the fourth largest metropolitan area in the country, and considered a ‘melting pot’ of cultures exhibiting tremendous diversity that is representative of South Indian cities. It should also be noted that the Institute for Career Studies calls Tamil Nadu as “India’s higher education hub,” boasting the highest number of universities in India (Institute for Career Studies, 2012). The Times of India, the oldest English language daily newspaper in India and the largest selling daily newspaper (English) in the world, lists Tamil Nadu as one of top 5 academic destinations for students in India (The Times of India, 2016). Our choice of college students majoring in business studies as the appropriate target of study is quite deliberate insofar as these students represent the pool from which future entrepreneurs are drawn and are often the focus of entrepreneurship education (Zeffane, 2013; Goel et al., 2007). The appropriateness of such a sample, especially of business students, also finds much justification in the extant literature (Shinnar et al., 2012; Strobl et al., 2012; Kickul et al., 2008; Yordanova and Tarrazon, 2010; Gupta et al., 2009).

A two-stage sampling plan was used to select the study participants. In the first stage, four schools (SRM University, Vellammal Engineering College, Crescent University, and Loyola Institution of Business Applications) were randomly selected using a probability proportion to size method from a pool of thirteen ranked business schools. In the second stage a complete enumeration method was adopted by contacting the first year graduates of the four selected schools. All four schools were private universities, and two schools (Loyola and Crescent) had a religious affiliation. This sampling scheme yielded a total of 209 students, who responded to an extensive survey that gleaned information on their interest and attitudes toward entrepreneurship, stocks of social and cultural capital, personality traits, values and beliefs, and general world view. The survey was pre-tested in during the summer of 2014 and was finalized in September 2014. Data were collected from students in a group setting over a 4 month period (October 2014 – January 2015). The data cleaning process yielded a useable dataset of 185 observations with non-missing values on the analysis variables.

The dichotomous nature of the dependent variable leads us to estimate probit regression models to examine the effect of various groups of variables on youth’s entrepreneurial interest. We first define a continuous latent variable I_i, that denotes an individual’s entrepreneurial interest as a function of conceptually relevant characteristics:

where i subscripts denote individuals; FC denotes a vector of variables pertaining to family or parental capital, YSC contains a vector of variables measuring youth social capital, YPTV is a vector of youth personality traits and values, DEMO includes a series of demographic variables, UNIFIX contains university fixed effects, λ₁ – λ₅ are vectors of regression coefficients, and e is an identically and independently normally distributed error term, with mean zero and variance σ² (which may be normalized to unity without loss of generality). We assume that an individual’s attitude towards entrepreneurship is positive if and only if I_i > 0. Set the binary indicator variable D_i equal to unity (zero) if the youth expresses a positive attitude (does not express a positive attitude) for individual i, then

where Z_i = λ₁ FC_i + λ₂ YSC_i + λ₃ YPTV_i + λ₃ DEMO_i + λ₃ UNIFIX.

Under the assumption that the error term e is normally distributed, the log-likelihood of a sample of individuals’ entrepreneurial attitudes is given by

where Φ() is the standard normal cumulative density function. We estimate the parameters of the model by maximizing (2) with respect to these parameters.

We follow a sequential modeling approach and estimate five models: the first model only uses family capital to predict pro-entrepreneurial attitude; Models 2, 3 and 4 incrementally add measures of youth’s social capital, personality traits and values, and demographics; and finally Model 5 includes university-specific indicator variables (fixed effects) that control for unmeasured, time-invariant differences across the four universities. For all five models, we calculate Huber-White standard errors that provide robustness against heteroscedasticity.

This research provides some suggestive, albeit preliminary insights into the relative importance of the factors which signal a proclivity to entrepreneurship. Our findings are congruent with the theoretical framework presented in Fig. 1. Our empirical analyses reveal that parental resources, youth resources, the traits and values that characterize the sample youth, and several demographic factors all have a significant role to play in influencing entrepreneurial interest. However, our most significant results indicate that both the parents’ and the youth’s stocks of social capital play a particularly crucial role in the formation of entrepreneurial attitudes and interest among youth, and this is also strengthened if the youth had previously engaged in the labor market. Personality traits and values oriented toward achievement and power rank a close second and show that they too have an important role to play in the development of entrepreneurial proclivity. A summary of significant effects appears in Table 4 ranked by the magnitude of their marginal impact on entrepreneurial mindset.

Our findings indicate that connections matter. Youth with stronger or more substantial social networks that they themselves create or those that they have access to through their parents evince stronger interest in entrepreneurship. This is not completely surprising inasmuch as it is these connections that the youth will count on to negotiate government bureaucracies for obtaining permits and the financial system for procuring start-up funding. In addition to providing non-pecuniary emotional support, such connections may also yield a qualified, supportive, and trustworthy mentors or staff for a business enterprise. The importance of social capital for a number of general developmental, economic, and social outcomes is indeed well documented (Aldrich & Zimmer, 1986; Aldrich et al., 1998; Freitag 2006; Maloney and Rossteutscher 2007). Its importance for entrepreneurial outcomes is supported by many empirical studies as well (Collins and Moore, 1970; Cooper & Dunkelberg, 1984; Davidsson and Honig, 2003; Mahadea et al., 2011; Sharma and Madan, 2014). This finding provides support for policy measures that increase an individual’s connections while still in education, such as encouragement of volunteer opportunities in the educational or professional sectors or other community service opportunities.

Prior experience in the labor market, again, not surprisingly, whets entrepreneurial interest. A host of hard and soft skills are learned through employment: in addition to general skills acquired through formal education, when youth enter the labor market, they also develop skills specific to the industry, as well as other ‘soft’ skills necessary for economic success, viz., skills that develop their ability to take constructive criticism, teamwork, dependability, trustworthiness, and grit (Heckman et al., 2006; Carneiro and Heckman, 2003).

The finding that prior labor market attachment stimulates interest in future labor force participation is hardly new, and has been noted in research on dislocated workers, welfare-to-work recipients, and high school dropouts (Riccio and Orenstein, 1996; Jagannathan and Camasso, 2005). What is new here is the finding that prior work experience can exert a positive influence on the propensity to work for oneself. One implication of this finding is for the design of work and apprenticeship policies while students are still in high school or early years of college. Such an introduction to various career training opportunities and providing a ‘taste’ for actual participation in a variety of occupations may well stimulate individual interest in entrepreneurship.

Our study shows that some personality traits and values also have a role to play in predicting entrepreneurial inclination. Using data from GEM project, Arenius and Minniti (2005) also find evidence for the importance of ‘perceptual variables’ such as having confidence in one’s own skills and ability or the propensity to take risks in predicting nascent entrepreneurship in all the 28 countries studied. These researchers make a strong case for including perceptual variables in the model, not only for their ability to improve statistical model fit, but arguing that “Entrepreneurship is, after all, about people and, not surprisingly, subjective and often biased perceptions emerge as being highly correlated to nascent entrepreneurship.” (p.243).

The data also show that while the capacity of youth to trust in benign societal entities and strangers is important in their development of pro-entrepreneurial attitudes, it is also the case that the young people in this sample believe that elected officials, the media, and the Indian political system at various levels inhibit entrepreneurial interest. Introduction by the government of innovative and transparent public management practices, as well as taking serious measures to curb corruption and perceptions of corruption will go a long way towards building trust with the young population.

Our findings indicate that a strategy that focuses on building social capital is more likely to result in the formation of the entrepreneurial attitude. Education and training that focuses on interpersonal relationships more than personal characteristics and traits would appear to offer a more promising pathway to entrepreneurship. This is not to say that personality is not important, only that it is far from sufficient, at least in the data on hand.

Our study makes an important contribution to the literature by including two principal sets of factors – stocks of youth human/social capital and personality traits – in predicting entrepreneurial proclivity of college students, and by empirically assessing their relative importance in developing this propensity. However, our study has a number of limitations. First, the fact that parents were not directly queried about their stocks of social and economic capital and that student assessments of these were used as proxy measures opens our paper to criticisms of behavioral expectation bias, social desirability bias, or social acquiescence bias. Second, the sample is confined to students from private colleges, who probably have more social capital at their disposal than other college students or non-college young adults. In addition, although we have made efforts to make the colleges studied representative of business students in Chennai, it is possible that the study sample differed in other, unobservable ways from the population of business students in Chennai or Tamil Nadu. It should also be noted⁴ that while the variables used to predict entrepreneurial proclivity in this study follow from a careful reading of the literature, it is still possible that these variables may not reflect characteristics and traits of actual entrepreneurs in Chennai. One possible way to remedy this shortcoming and to empirically validate the study variables would have been to ascertain what attitudes and values characterize actual entrepreneurs in Chennai, and what motivated them to become an entrepreneur. Based on personal interviews with 147 entrepreneurs in six major Indian cities (Chennai, Pune, Kolkata, Ahmedabad, Hyderabad, and Bangalore), the Indian National Knowledge Commission (NKC) found that these entrepreneurs possessed many of the characteristics and traits we have used in this study (e.g., social and family networks, risk tolerance, power, achievement orientation, stimulation or challenge, self-direction, work experience) (Goswami et al., 2008). However, the NKC also acknowledges that not all entrepreneurs generally conform to a particular set of traits or characteristics, citing a Harvard Business School study that avers that “if one could only discern the psychological profile of an entrepreneur and then hold an individual up against that profile, one could predict whether that individual has the potential to become an entrepreneur, or is one already. Yet none of the proposed ”profiles“ applies to all entrepreneurs, and many entrepreneurs refuse to conform to any of these profiles” (Stevenson and Amabile, 1999; Goswami et al., 2008). Finally, since it is abundantly clear in India, the United States, and elsewhere that college is not a necessary condition for engaging in entrepreneurship, and in some cases may even act as a deterrent, this study may overestimate the importance of social capital and underplay the significance of personality traits.