2.1 Drivers of entrepreneurial aspirations
It is important to understand the role of entrepreneurial motivations when trying to understand entrepreneurial outcomes (Shane et al.
2003; Locke and Baum
2007). There are many individual-level studies on entrepreneurial motivations, defined as the motivation for founding a business, investigating variances across people in motivations. These studies are mostly within-country studies and they come in four types.
First, there are studies of reasons or motives to start a firm. Such reasons or motives can be classified as either opportunity or necessity (Reynolds et al.
2001; Acs
2006), a distinction akin to “pull” and “push”. These types of studies, being mostly conducted in developed countries where push motives are less prevalent, report mostly pull motives such as autonomy (independence, freedom), income and wealth, challenge, and recognition and status (Kolvereid
1996; Feldman and Bolino
2000; Carter et al.
2003; Wilson et al.
2004). Autonomy or independence is one of the most cited pull factors for starting a business (Shane et al.
1991; Kolvereid
1996; Carter et al.
2003; Van Gelderen and Jansen
2006). However, individuals may also be pushed into entrepreneurship (Thurik et al.
2008). Necessity motives for example occur when (a threat of) unemployment forces people into self-employment.
Second, there are cost-benefit types of studies that try to explain the decision to (intent to) start a business (Douglas and Shepherd
2002). In this type of study, material and immaterial risks and gains are brought into some decision function.
Third, there are studies of entrepreneurial motivation investigating depth-psychological motives. Examples are studies on need for achievement (nAch) (McClelland
1961) and need for power (nPower) (McClelland
1975). These types of studies suggest that there is a small, but significant, positive relation between nAch and entrepreneurship (Rauch and Frese
2007). nAch and nPower usually do not figure heavily in the first two types of studies, as actual business starters do not often list these motives as conscious reasons to start a business.
Fourth, there are multinomial logit-type investigations explaining the odds of being in a certain stage of the entrepreneurial process vis-à-vis not considering self-employment at all (Grilo and Thurik
2008). Similarly, the drivers of the odds of actually running a business vis-à-vis the nascent stage provide insight in the role of motivations for start-up. Studies of entrepreneurial intentions (Krueger et al.
2000; Van Gelderen et al.
2008a) routinely investigate motivational variables.
The individual-level studies on entrepreneurial motivation have mostly been used to explore differences between entrepreneurs, and whether and how entrepreneurs differ from the population in general or from managers. There is a need for research that considers how entrepreneurial motivations impact entrepreneurial decisions (Shane et al.
2003).
Next to individual-level studies there are between-country studies. These studies look at motives on an aggregate level and focus on variance across countries in entrepreneurial motivations. Shane et al. (
1991), comparing the UK, Norway, and New Zealand, as well as Baum et al. (
1993), comparing Israel and the USA, indeed found that prevalence rates of different motives and needs vary between countries. This type of research has also demonstrated that necessity motives play a major role in developing countries, and also in developed countries, albeit to a lesser extent (Reynolds et al.
2002; Grilo and Thurik
2006; Bhola et al.
2006). Freytag and Thurik (
2007) report on the influence of country-level variables such as economic freedom, life expectancy, and intensity of health care on the preference for entrepreneurship.
A number of previous studies have related motives to aspirations; for example, Kolvereid (
1992) finds that the achievement motive is positively related to growth ambitions. Curiously, financial motives are not included in this study. Davidsson (
1989) explains growth willingness based on differences in the expected outcomes of growth. He finds that, if business owners expect increases in financial rewards and in independence, they have more ambitions to grow. Conversely, if they fear a loss of control, or expect that employee well-being will be reduced in the case of growth, their ambitions to grow tend to be limited. Wiklund et al. (
2003) also explain growth ambitions from its expected consequences and find that concern for employee well-being is the strongest predictor: if business owners would expect employee well-being to go up in case of growth, their growth ambitions would be large, and vice versa. The authors note that the high importance attached to employee well-being may be specific to Sweden. Cassar (
2006) discovers that nascent entrepreneur opportunity costs, measured as household income, education, and managerial experience, are a positive influence on growth ambitions. Van Gelderen et al. (
2006) in the Dutch Panel Study of Entrepreneurial Dynamics (PSED) study unearth that push motivation is a fail factor for nascent entrepreneurs with high ambitions. Grilo and Irigoyen (
2006) and Grilo and Thurik (
2005) use the revealed preference for self-employment as an indicator of the entrepreneurial aspiration and establish that perception of lack of financial support has no influence, and that the level of risk tolerance has a positive influence, whereas the perception of administrative complexity has a negative effect on this preference measure. They also show that this measure of entrepreneurial drive in generally lower in European countries than in the USA.
In the present study we are interested in investigating the extent to which entrepreneurial motivations are driving entrepreneurial aspirations. We consider three types of start-up motivations: the independence motive, the increase-wealth motive, and the necessity motive. We take the country level as the unit of analysis. A comprehensive between-country study providing entrepreneurial motives and aspirations became available in 2005 when the GEM for the first time distinguished between independence and wealth attainment on the one hand (within the category of pull or opportunity motivation), and necessity entrepreneurship on the other hand. GEM also measures a range of variables with regard to ambitions of innovativeness, job growth, and export. So for the present study we have three dimensions of motivation and three of aspiration. We acknowledge that the motivation data are somewhat limited since there are more motivations to start a business than income/wealth, independence, and necessity. However, for the purpose of cross-national comparison of the relation between entrepreneurial motivations and aspirations, these are the best data available. Note that ideally we would focus our research on the individual level. However, since it takes a lag of several years for GEM microdata to become publicly available for individual countries we have decided to start by focusing on the country level.
We argue that, when trying to explain why some countries have higher prevalence rates of aspiring entrepreneurs than others, it is relevant to consider a country’s incidence of various start-up motives. We first consider independence-motivated entrepreneurship. Entrepreneurs for whom autonomy or independence is a dominant motive for becoming self-employed probably have limited growth ambitions for their business. Entrepreneurship is likely to be a vehicle to serve the freedom-related needs of the individual as it enables a lifestyle in which one can decide oneself on goals, methods, and time scheduling (Breaugh
1999). However, autonomy-driven entrepreneurs may still increase diversity in the economy just because they do things in their own way (Van Gelderen et al.
2008a). Autonomy is valued by some for its own sake (van Gelderen and Jansen
2006), and thus is an intrinsic motive. Experimental research shows that intrinsic motivation is related to creativity (Amabile
1996). Previous research at the microlevel suggests that independence is a prime entrepreneurial motive for creating innovative ventures (Corman et al.
1988). On the whole, at the country level we expect that the proportion of independence-motivated entrepreneurs does not relate to the prevalence of growth-oriented entrepreneurship and relates positively to the prevalence of innovation-oriented entrepreneurship.
Furthermore, when people start up a business with the prime motive to increase income this is likely to relate positively to their ambitions for growth and innovation. Both growth and innovation may be instrumental to achieving a higher income. Cassar (
2007), focusing on the microlevel and investigating the relationships between financial motives and a range of ambition and outcome variables, indeed found a positive relationship between financial motivations and aspirations. Regression analyses showed growth preference, risk-return preference, intended sales, and intended employment all to be explained by motivations of financial success at the
p < 0.001 level. In a sample of females, Morris et al. (
2006) present qualitative as well as quantitative data showing that financial motives positively relate to growth ambitions. Amit et al. (
2001) report a group of high-technology high-growth entrepreneurs to be primarily driven by nonfinancial motives. However, their research did not study entrepreneurs motivated by financial rewards. Overall, at the country level we expect that having a higher proportion of increase-wealth-motivated entrepreneurs will relate positively to the prevalence of aspiring entrepreneurs.
Generally, necessity-motivated entrepreneurs tend to have lower aspiration levels than opportunity-motivated entrepreneurs (Reynolds et al.
2002). Since necessity-motivated entrepreneurs are likely to depend heavily on their firm for daily economic survival this may positively affect the aspirations they have for their firm. However, as necessity-motivated entrepreneurs are more likely to be found in lower-income regions, they are likely to be constrained in their access to human capital, financial capital, technology, and other resources. Consequently, this is likely to inhibit their potential for generating innovations and job growth and for building competitive advantages needed for export. Thus, even though these types of entrepreneurs are often highly dependent on their firm, they lower their expectations for innovation and growth in terms of jobs and export as they expect or acknowledge that such ambitions may be difficult for them to realize. They may also be forced, because of their situation, to act on less promising opportunities (Morris et al.
2006). Therefore, on average we expect a neutral relationship between a country’s incidence of necessity-motivated entrepreneurship and entrepreneurial aspirations for innovation and growth.
To summarize, we expect that both the independence motive and the increase-wealth motive are drivers of entrepreneurial aspirations in terms of innovation, and also that the increase-wealth motive is a driver of job growth and export aspirations. This leads to the following hypotheses:
We also expect that, when trying to explain a country’s prevalence of entrepreneurial aspiration rates, it is relevant to take into account socioeconomic proxies, such as the level of economic development, the rate of economic growth, and the level of social security. The expected impact of economic development is not completely straightforward. On the one hand, in wealthier regions, entrepreneurs have better access to resources, knowledge, and technology, and therefore may be better able to strive for innovation and growth with their firm. On the other hand, in less wealthy regions entrepreneurs are more likely to depend on their firm for survival, which may stimulate them to strive for growth, whereas entrepreneurship is more popular as a vehicle to serve the freedom-related needs of the individual in wealthier regions. Despite these considerations, we still expect a positive relationship between aspirations and the level of wealth, because of the argument that resources, knowledge, and technology are more widely available than in less wealthy regions, which is likely to offer opportunities for innovation and growth for individual entrepreneurs.
Regarding a country’s level of growth it can be expected that a higher rate of economic growth will provide entrepreneurial opportunities and therefore we assume entrepreneurial aspirations to be positively related to economic growth (Thurik et al.
2008).
Furthermore, relying on new institutional economics that emphasizes that institutions may both enable and constrain the actions of economic agents (North
1990; Williamson
1998) it can be argued that the supply of entrepreneurship as well as its allocation across productive and unproductive activities is likely to be affected by the institutional setup of societies (Henrekson
2007). In this respect welfare state institutions may be of particular relevance. Henrekson (
2005) describes in detail how various welfare state arrangements may create disincentive effects for entrepreneurship and in particular for innovative and growth-oriented entrepreneurship. However, to date empirical efforts on the effects of the welfare state on the supply and types of entrepreneurship are still limited.
One aspect of welfare state institutions that has received some attention in recent empirical research with respect to the supply of entrepreneurship is social security arrangements. From a theoretical perspective social security arrangements, for example, in the case of illness or unemployment, may in various ways influence decisions of individuals when choosing between waged employment and self-employment. A generous social security system may lead to fewer but also to more self-employed. There may be a negative impact on self-employment as generous social security benefits for employees increase the opportunity costs of entrepreneurship. Social security in general may have a positive effect on entrepreneurial activity by creating a safety net in case of business failure. Empirical results suggest that social security negatively affects the level of entrepreneurship, providing support for the argument that social security increases the opportunity costs of entrepreneurship (Hessels et al.
2007; Wennekers et al.
2005; Parker and Robson
2004).
In this paper we extend this empirical literature by examining whether social security also affects the quality of entrepreneurship at the country level. Countries with generous social security and welfare schemes do not emphasize the responsibility of the individual for their own survival, which may hamper ambitions to strive for innovation and growth. Also, higher levels of social security often imply higher wage costs, since employers normally have to pay at least part of the social security contribution for their employees (Hessels et al.
2007). This may further limit entrepreneur’s aspirations for growth with their firm, since it may be costly for them to hire employees. Overall, it can be observed that entrepreneurs in countries with a relative lack of social security nets, such as is the case in the UK and the USA, tend to be more growth and innovation oriented than in regions where social security systems are more generous such as Sweden or The Netherlands.
In sum, we propose the following hypotheses regarding the relationship between socioeconomic proxies and entrepreneurial aspirations:
2.2 Drivers of entrepreneurial motivations
Our second research aim is to investigate the country-level correlates of entrepreneurial motivations. Necessity versus opportunity (or push versus pull) entrepreneurship is largely determined by the level of economic development in the long run and the actual state of the economy in the short run (Minniti et al.
2006; Thurik et al.
2008). Necessity entrepreneurship is more common in lower-income countries and decreases with the level of economic development (Wennekers et al.
2005). Gross domestic product (GDP) growth has no significant impact on necessity entrepreneurship and a positive impact on opportunity entrepreneurship (van Stel et al.
2007). However, the impact of these variables may also differ for different types of opportunity entrepreneurship.
When looking specifically at the prevalence of the income/wealth motive versus the independence motive within the entrepreneurial population it is obvious that many individual determinants such as experience, personality, education, and financial position play a role when explaining these motives. The nature of the opportunity will influence entrepreneurial motivation, although there may be a strong reversed causality: an entrepreneurial motivation will influence the process of opportunity recognition. The nature of the environment in terms of hostility, munificence, and dynamism will impact on entrepreneurial motivation.
Country-level determinants have been investigated to a lesser extent. With regard to national culture, some research has related entrepreneurial motivations to Hofstede’s dimensions (Hayton et al.
2002). However, as Hayton et al. note, statements of motives tend to be restatements of cultural values, e.g., independence and autonomy reflect individualism. Cultural values are based on individual-level responses, which causes this type of research to tend to fall into the tautology trap. Noorderhaven et al. (
2004) and Wennekers et al. (
2007) deal with dissatisfaction and uncertainty avoidance, respectively, but jump to the incidence of self-employment instead of its motives in their empirical part.
Another explanation involving culture is offered by Inglehart’s work on postmaterialism, applied to entrepreneurship by Uhlaner and Thurik (
2007). The postmaterialism hypothesis is based in turn on two subhypotheses, that of socialization and that of scarcity. The socialization hypothesis assumes that someone’s values reflect to a great extent the prevailing circumstances during his/her formative years. The scarcity hypothesis assumes that someone’s priorities reflect his/her socioeconomic circumstances; therefore he/she attaches the greatest value to relatively scarce goods. Thus, level of economic development should be a predictor of whether the population favors nonmaterialistic life goals (such as independence) over materialistic ones (such as income/wealth). On the other hand, the rate of economic growth might increase entrepreneurial opportunities for profits and growth and, therefore, may induce people to favor materialistic start-up goals.
Social security arrangements may be yet another correlate of whether entrepreneurs favor autonomy or wealth/income motives or are necessity motivated. A low level of social benefits means that economic survival of entrepreneurs will depend on the survival of their business, making it likely that these entrepreneurs will be motivated by the income/wealth motive or by the necessity motive. Where levels of social security are high, such as in Western Europe or Scandinavia, entrepreneurship may be very popular as a means for serving the freedom-related needs of the individual.
In sum, we expect that a country’s level of economic development and its level of social security are drivers of independence-motivated entrepreneurship. Furthermore, a country’s rate of economic growth is expected to positively affect the incidence of increase-wealth-motivated entrepreneurship, whereas its level of economic development and its level of social security are anticipated to hamper the incidence of this motive. Finally, economic development and social security are both predicted to negatively relate to the extent to which entrepreneurs start a firm out of necessity. The following hypotheses reflect our predictions: