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1 – 10 of over 33000How do informal lending institutions affect entrepreneurship? This paper aims to investigates the role of formal and informal credit market institutions in the decision to become…
Abstract
Purpose
How do informal lending institutions affect entrepreneurship? This paper aims to investigates the role of formal and informal credit market institutions in the decision to become an entrepreneur over the life cycle.
Design/methodology/approach
The author developed a dynamic Roy model in which a decision to become an entrepreneur depends on the access to formal and informal credit markets, nonpecuniary benefits of entrepreneurship, career-specific entry costs, prior work experience, education, unobserved abilities and other labor market opportunities (salaried employment and nonemployment). Using detailed Russian panel microdata (the Russia longitudinal monitoring survey) and estimating a structural model of labor market decisions and borrowing options, the author assesses the impact of the development of informal and formal credit institutions.
Findings
The expansion of traditional (formal) credit market institutions positively impacts all workers’ categories, reduces the share of entrepreneurs who borrow from informal sources and incentivizes low-type entrepreneurs to switch to salaried employment. The development of the informal credit market reduces the percentage of high-type entrepreneurs who borrow from formal sources. In the case of default, a higher value of the social network or higher costs of losing social ties demotivate low-type entrepreneurs to borrow from informal sources. The author highlights the practical implications of estimates by evaluating policies designed to promote entrepreneurship, such as subsidies and accessibility regulations in credit market institutions.
Originality/value
This study contributes to the literature in several ways. Unlike other studies that focus on individual characteristics in the selection for self-employment [Humphries (2017), Hincapíe (2020), Gendron-Carrier (2021), Dillon and Stanton (2017)], the paper models labor and borrowing decisions jointly. Previous studies discuss transitions between salaried employment and self-employment, taking into account entrepreneurial earnings, wealth, education and age, but do not consider the availability of financial institutions as a driving factor for the selection into self-employment. To the best of the author’s knowledge, this paper shows for the first time that the transition from salaried employment to self-employment is standard and consistent with changes in access to financial institutions. Another feature of this study is incorporating both types of credit markets – formal and informal. The survey by the European Central Bank on the Access to Finance of Enterprises (2018) shows 18% of small and medium enterprise in EU pointed funds from family or friends. Therefore, the exclusion from consideration of informal credit markets may distort the understanding of the role of the accessibility of credit markets.
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Matthew Wood, Chris Welter, Kendall Artz and Steven W. Bradley
Entrepreneurship research has paid little attention to variance in entrepreneurial opportunities, instead choosing to treat them as homogenous. Thus, the field has failed to…
Abstract
Entrepreneurship research has paid little attention to variance in entrepreneurial opportunities, instead choosing to treat them as homogenous. Thus, the field has failed to acknowledge that there are significant variations in means–ends conceptualizations giving rise to different types of opportunities. Further, researchers and educators have not fully considered that the type of opportunity being pursued has implications for which entrepreneurial actions are required to realize a successful outcome. We address these issues in this chapter by distinguishing means–ends combinations such that four types of opportunities – replication, reinterpretation, revelation, and revolution – are introduced. This matrix leads to propositions regarding differing actions that would be emphasized as a function of the type opportunity under consideration (e.g., legitimacy building, knowledge assimilation, market demand, and resource acquisition). The net effect is an improved understanding of how variations in means–ends conceptualizations influence how entrepreneurs interpret their particular opportunity, which in turn drives the actions they take as they attempt to turn their vision into reality. This improved understanding has important implications for entrepreneurship education and we suggests a number of possible changes to pedagogy that flow from our framework. We believe that these changes will bring added richness and value to the classroom.
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Care Elwood Williams and Eliza C.Y. Tse
Proposes primarily to test empirically Smith′s entrepreneurialtypology and Miles and Snow′s typology of strategy in the restaurantsector, and then to establish whether or not…
Abstract
Proposes primarily to test empirically Smith′s entrepreneurial typology and Miles and Snow′s typology of strategy in the restaurant sector, and then to establish whether or not there is a relationship between type of entrepreneur and type of strategy. Evidence suggests that Smith′s two entrepreneurial types may not be mutually exclusive and that a third group of entrepreneurs exists combining characteristics from both Smith′s craftsmen and opportunistic types. Finds support for Miles and Snow′s four generic strategies of defender, prospector, analyser and reactor. Through the use of discriminant analysis, it was possible to demonstrate a relationship between type of entrepreneur and type of strategy.
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Ramana Nanda and Matthew Rhodes-Kropf
Past work has shown that failure tolerance by principals has the potential to stimulate innovation, but has not examined how this affects which projects principals will start. We…
Abstract
Past work has shown that failure tolerance by principals has the potential to stimulate innovation, but has not examined how this affects which projects principals will start. We demonstrate that failure tolerance has an equilibrium price – in terms of an investor’s required share of equity – that increases in the level of radical innovation. Financiers with investment strategies that tolerate early failure will endogenously choose to fund less radical innovations, while the most radical innovations (for whom the price of failure tolerance is too high) can only be started by investors who are not failure tolerant. Since policies to stimulate innovation must often be set before specific investments in innovative projects are made, this creates a trade-off between a policy that encourages experimentation ex post and the one that funds experimental projects ex ante. In equilibrium, it is possible that all competing financiers choose to offer failure tolerant contracts to attract entrepreneurs, leaving no capital to fund the most radical, experimental projects in the economy. The impact of different innovation policies can help to explain who finances radical innovations, and when and where radical innovation occurs.
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Ben Toscher, Yngve Dahle and Martin Steinert
This study aims to explore the motivations and business ideation processes of 776 entrepreneurs from three diverse cohorts of technology, youth and arts entrepreneurs.
Abstract
Purpose
This study aims to explore the motivations and business ideation processes of 776 entrepreneurs from three diverse cohorts of technology, youth and arts entrepreneurs.
Design/methodology/approach
Using an inductive approach inspired by grounded theory, observations resultant from the use of a Web-based digital test environment are openly coded, in which 776 individual entrepreneurs have stated their objectives for engaging in entrepreneurship and performed a business ideation process.
Findings
The study inductively derives a typology of objectives types – “GET GIVE MAKE LIVE” – and finds that beyond the pursuit of profitable opportunities, there is considerable variation, complexity and combinations to the reasons why individuals engage in entrepreneurship. A total of 76 percent of the population in this study have more than one objective, with 48% having more than one type of objective. While the arts entrepreneurs tended to engage in entrepreneurship to “LIVE” and the tech entrepreneurs were more inclined to “GET,” the most frequently observed objective type in all cohorts was to “MAKE.” A total of 74 percent of the entrepreneurs took an effectual approach and began defining their business idea with their core competency, yet technology entrepreneurs were the most likely to start by defining their key market.
Practical implications
Entrepreneurship educators, trainers and helpers should refrain from a standardized approach which assumes that entrepreneurs share the same set of singular motivations. Interventions might benefit from a student-centered program which promotes reflection and articulation of the entrepreneurs’ objectives and their diversity.
Originality/value
This study answers the call for research to embrace entrepreneurial diversity and compliment previous explorations of entrepreneurs’ motivations through an empirically grounded study of three diverse cohorts of entrepreneurs.
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Vartuhi Tonoyan and Robert Strohmeyer
Existing entrepreneurship literature has provided mixed evidence as to whether resource providers discriminate against female-led innovative start-up ventures in their resource…
Abstract
Purpose
Existing entrepreneurship literature has provided mixed evidence as to whether resource providers discriminate against female-led innovative start-up ventures in their resource commitment decisions either in terms of the likelihood or conditions of resource provision. While some studies revealed evidence indicative of negative discrimination against female entrepreneurs, others have provided evidence suggestive of positive discrimination. In light of these divergent findings, the purpose of this paper is to develop a more nuanced and integrative approach to studying gender biases in entrepreneurial resource provision with greater attention paid to both moderating contingency factors and mediating mechanisms.
Design/methodology/approach
The authors develop a conceptual model and empirically testable propositions describing whether, how and when entrepreneurial resource providers are likely to under-, over- and equivalue female-led innovative start-up ventures relative to equivalent male-led start-up ventures. The model applies not only to institutional or private investors as providers of financial capital to start-up ventures as discussed extensively in extant entrepreneurship literature but also to prospective employees as providers of human capital and prospective consumers as providers of money in exchange for an entrepreneurial product or service. The authors discuss the gender-typing of the entrepreneur's core product/service offering as a key contingency factor likely to moderate the proposed relation. The authors further delineate the importance of what they refer to as the “first”- and “second-order” mediating mechanisms underlying the hypothesized relation between resource provider evaluations of the male versus female founder-CEO, the attractiveness of his/her start-up venture and the (conditions of) resource provision to their start-ups.
Findings
Building on social-psychological theories of descriptive and prescriptive gender stereotypes and extant entrepreneurship literature, the authors establish that gender biases are likely to occur because of resource providers' perceptions of women entrepreneurs at the helm of male-typed start-up ventures to be less competent and agentic, as well as less warm and other-oriented than equivalent male entrepreneurs leading male-typed start-up ventures. The authors discuss the implications of such gender-biased evaluations for the application of stricter performance standards to female-led-male-typed start-up ventures and the likelihood and conditions of resource provision to their companies. The authors further discuss why and when female founder-CEOs of a female-typed (gender-neutral) start-up venture are likely to be overvalued (equivalued) compared to equivalent male founder-CEOs. The authors also develop propositions on additional contingency factors and mediators of the gendered evaluations of founder-CEOs and their start-up ventures, including resource providers' “second-order” gender beliefs, the high-cost versus low-cost resource commitment, individual differences in gender stereotyping and the perceived entrepreneurial commitment of the founder-CEO. The authors conclude by suggesting some practical implications for how to mitigate gender biases and discrimination by prospective resource providers.
Originality/value
Discussing the implications of descriptive and prescriptive gender stereotypes on evaluative decisions of entrepreneurial resources providers, this study advances not only the women's entrepreneurship literature but also the more-established scholarship on the role of gender stereotypes for women's advancement opportunities in the corporate world that has traditionally viewed entrepreneurship as the solution for women fleeing the gender-stereotype-based discrimination in the corporate setting to advance their careers.
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Dave Valliere and Charlene L. Nicholls-Nixon
Although business incubators are a widely recognized form of entrepreneurial support, this paper aims to challenge the assumption that incubation is necessarily beneficial for…
Abstract
Purpose
Although business incubators are a widely recognized form of entrepreneurial support, this paper aims to challenge the assumption that incubation is necessarily beneficial for early-stage entrepreneurs, and considers cases where, due to variability in the motives and behaviours of entrepreneurs, incubation may be unwarranted or even undesireable.
Design/methodology/approach
This study presents a theoretically derived typology of incubated entrepreneurs, based on their entrepreneurial competence and capacity for learning, which asserts that incubation may be unwarranted or even undesireable for three of the four proposed entrepreneur types. Qualitative data from interviews with entrepreneurs and managing directors from 10 business incubators is used to illustrate the existence of these types.
Findings
The data provides evidence of entrepreneurial types whose incubation may be counterproductive to the goals and objectives of their host incubators.
Practical implications
Implications for incubator management (intake screening and ongoing monitoring of portfolio) are developed and aimed at improving the outcomes of business incubation for stakeholders.
Originality/value
The paper contributes to the incubation typology literature by challenging a widely held assumption that entrepreneurs have the potential to benefit from incubation and by reconceptualizing incubators as “crucibles” that perform a critical function in distinguishing high-potential entrepreneurs.
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Margaret Cowell, Sarah Lyon-Hill and Scott Tate
This paper aims to explore the dynamics of entrepreneurial ecosystems with both rural and urban features, as well as the varied system requirements of differing types of…
Abstract
Purpose
This paper aims to explore the dynamics of entrepreneurial ecosystems with both rural and urban features, as well as the varied system requirements of differing types of entrepreneurs within such an ecosystem.
Design/methodology/approach
Using a mixed-methods case study approach, the study examined the Roanoke–Blacksburg region in western Virginia. Researchers conducted quantitative analysis of entrepreneurial metrics and network relationships, as well as qualitative analysis of data collected through entrepreneur surveys and stakeholder interviews.
Findings
Findings suggest entrepreneurs of different types faced disparate challenges and uneven access to resources and networks. Innovation-driven “gazelle” enterprises (IDEs) had numerous growth-related resource needs, including angel, venture and scale-up funding; prototyping equipment and facilities; and translational research by local universities. Small- and medium-sized enterprises (SMEs) required more entrepreneurial education programming, subsidized main street office space and clearer pathways through the government regulatory system. A key finding was also concerned with the different ways by which IDEs and SMEs accessed key resources within the ecosystem, illustrated through social network analysis, and supported through qualitative feedback.
Research limitations/implications
Study findings were limited by a relatively low survey response rate from some entrepreneur demographic segments, particularly minorities.
Originality/value
The study represents an in-depth, multi-methods approach that offers insight into two under-researched areas in the ecosystem literature: the dynamics of urban – rural ecosystems and the varied system requirements of different entrepreneur types. The paper includes three overarching recommendations for policy and practice: improved collection and sharing of regional metrics; differentiated approaches to entrepreneurial support based on entrepreneur type; and enhanced efforts to advance inclusive entrepreneurship.
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Helene Ahl, Karin Berglund, Katarina Pettersson and Malin Tillmar
Policy for women's entrepreneurship is designed to promote economic growth, not least in depleted rural areas, but very little is known about the contributions of rural women…
Abstract
Purpose
Policy for women's entrepreneurship is designed to promote economic growth, not least in depleted rural areas, but very little is known about the contributions of rural women entrepreneurs, their needs or how the existing policy is received by them. Using a theoretical framework developed by Korsgaard et al. (2015), the authors analyse how rural women entrepreneurs contribute to rural development and discuss the implications for entrepreneurship policy. This paper aims to focus on the aforementioned objectives.
Design/methodology/approach
The authors interviewed 32 women entrepreneurs in rural Sweden representing the variety of businesses in which rural Swedish women are engaged. The authors analysed their contributions to rural development by analysing their motives, strategies and outcomes using Korsgaard et al.’s framework of “entrepreneurship in the rural” and “rural entrepreneurship” as a heuristic, interpretative device.
Findings
Irrespective of industry, the respondents were deeply embedded in family and local social structures. Their contributions were substantial, multidimensional and indispensable for rural viability, but the policy tended to bypass most women-owned businesses. Support in terms of business training, counselling and financing are important, but programmes especially for women tend to miss the mark, and so does rural development policy. More important for rural women entrepreneurs in Sweden is the provision of good public services, including for example, schools and social care, that make rural life possible.
Research limitations/implications
Theoretically, the findings question the individualist and a-contextual focus of much entrepreneurship research, as well as the taken-for-granted work–family divide. How gender and how the public and the private are configured varies greatly between contexts and needs contextual assessment. Moreover, the results call for theorising place as an entrepreneurial actor.
Practical implications
Based on the findings, the authors advise future policymakers to gender mainstream entrepreneurship policy and to integrate entrepreneurship and rural development policy with family and welfare state policy.
Originality/value
The paper highlights how rural women respond to policy, and the results are contextualised, making it possible to compare them to other contexts. The authors widen the discussion on contributions beyond economic growth, and the authors show that policy for public and commercial services and infrastructure is indeed also policy for entrepreneurship.
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Reed E. Nelson, Anderson Santana and Matthew S. Wood
Entrepreneurship involves complex interactions between individuals and environments but there is little research on these dynamics. We address this gap by conducting an inductive…
Abstract
Entrepreneurship involves complex interactions between individuals and environments but there is little research on these dynamics. We address this gap by conducting an inductive qualitative study of entrepreneurs in the exclusive tourist destination of Tiradentes, Brazil. Tiradentes has a unique architectural, cultural, and economic heritage that serves as a unique sociocultural backdrop that influences entrepreneurs’ models of start-up thinking and action. Specifically, our investigation revealed that entrepreneurs’ backgrounds (native vs. nonnative) and social identities come together with the sociocultural fabric of the community in a way that moved them towards a “Joia” or “Bijuteria” orientation, each of which were associated with a distinct mindset. This diversity had implications for entrepreneurs’ conceptualizations of start-up models possible within the backdrop of Tiradentes sociocultural fabric and this influenced the actions entrepreneurs took such as the geographic location chosen for the business and the business practices used. We discovered that entrepreneurs favoring one orientation over another tended to occupy predictable physical and social positions in the community while also espousing similar values and perspectives. These results are used to elaborate the theory on the link between the external and internal explanation for entrepreneurial thinking and action. The net effect is new understanding regarding ways models of start-up thinking and action can be investigated.
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