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Page 1: [IEEE 2009 IITA International Conference on Services Science, Management and Engineering (SSME) - Zhangjiajie, China (2009.07.11-2009.07.12)] 2009 IITA International Conference on

Notice of Retraction

After careful and considered review of the content of this paper by a duly constituted expert committee, this paper has been found to be in violation of IEEE's Publication Principles. We hereby retract the content of this paper. Reasonable effort should be made to remove all past references to this paper.

The presenting author of this paper has the option to appeal this decision by contacting [email protected].

Page 2: [IEEE 2009 IITA International Conference on Services Science, Management and Engineering (SSME) - Zhangjiajie, China (2009.07.11-2009.07.12)] 2009 IITA International Conference on

Resource Acquisition Self-Efficacy, New Venture Creation Activities and Entrepreneurial Success: an Empirical study

MA Hongjia Center for Entrepreneurship

Jilin University Changchun, P. R. China [email protected]

DONG Baobao School of Management

Jilin University Changchun, P. R. China

[email protected]

Abstract—More than half of all attempts to start a business fail. In a quest to help explain the variance in this phenomenon, we develop and test hypotheses related to the role that the resource acquisition self-efficacy, entrepreneurial activities, and start-up success in the new venture creation process. Utilizing data from the three areas of China, we find that resource acquisition self-efficacy is significantly associated with start-up activity. Further, we found that a higher number of start-up activities increased the likelihood of successful new venture creation. Finally, limitation and implications are discussed.

Keywords- Resource acquisition self-efficacy; New venture creation activities; Entrepreneurial success; Entrepreneurship

I. INTRODUCTION Approximately 17 percent of the Chinese population took

some action to start a new business in 2005 and 60 million individuals are engaged in entrepreneurial activity at any given time [1]. Even though entrepreneurial activity is relatively prevalent and leads to job creation, innovation, and overall economic welfare, prior research suggests that only half of entrepreneurial attempts will likely lead to the starting of a new venture [2]. Why is it that some nascent entrepreneurs succeed in creating new ventures while others do not? The extant literature offers a number of useful insights, but it is complex to give a detailed explanation on new venture creation activities and the success.

First, the prior research suggests a number of reasons for entrepreneurial success or failure, including characteristics of the entrepreneur, firm, environment, or some combination, but the assumptions and findings differ greatly from each other [3-4]. Second, although every kind of resources have been recognized as limiting and directing firm behavior and growth [5], research has typically focused on how firms can acquire these resources, seldom focused on their effects on new venture activities. The few studies that have focused on self-efficacy have primarily looked at the resource acquisition self-efficacy of entrepreneurs, and its influence on new venture activities and entrepreneurial success. Finally, such studies of entrepreneurial dynamics are few in Chinese context and as a main developing countries China needs the empirical study on the model shown in figure 1. The present paper addresses these gaps by asking the question: how do resource acquisition self-efficacy influences venture creation activities, which, in turn, affects start-up success?

Figure 1. The conceptual model of the paper.

II. THEORY AND HYPOTHESES

A. Resource acquisition self-efficacy The availability of capital has been found to be positively

related to firm formation [6] and to firm growth [7]. Furthermore, the firm's range of strategic options is broader if resources are available [8]. By having access to resources, a firm's ability to take risks for innovation and its pro-activeness is enhanced. As a result, resource acquisition in the dynamic environment would seem to have an impact on the firm's entrepreneurial activities and its formation. So, resource acquisition is obviously crucial for firms, especially for small firm and new ventures. Perception of resource availability should also be related to the extent to which small business owners or entrepreneurs believe they can acquire the resources [9]. This "belief-in-self" can be termed self-efficacy [10]. Self-efficacy is the self-perception an individual has about his or her ability to accomplish a specific task. Given that resources are important to firm survival and growth [11], self-efficacy, with respect to acquiring resources, should be important to the entrepreneurial activity of the firm. Therefore, a firm's entrepreneurial activity should be determined by the decision-makers: what can be called resource acquisition self-efficacy [12].

B. Hypotheses development Although there are many roles and tasks at which a small

business owners or entrepreneurs should be proficient, if they desire to engage in entrepreneurial activities, his or her ability to acquire the required resources becomes vital. Part of the entrepreneurial process involves evaluating opportunities given the resources required and organizing a start-up team and even purchasing raw materials or inventory, purchasing or leasing property or equipment [13]. These decisions are not only based on the resources he currently has, but are also based on whether or not he or she has a high level of self-efficacy with respect to his or her ability to acquire the required resources. We call this self-belief or perception about a person's ability to raise or gather the

2009 IITA International Conference on Services Science, Management and Engineering

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DOI 10.1109/SSME.2009.76

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2009 IITA International Conference on Services Science, Management and Engineering

978-0-7695-3729-0/09 $25.00 © 2009 IEEE

DOI 10.1109/SSME.2009.76

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2009 IITA International Conference on Services Science, Management and Engineering

978-0-7695-3729-0/09 $25.00 © 2009 IEEE

DOI 10.1109/SSME.2009.76

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2009 IITA International Conference on Services Science, Management and Engineering

978-0-7695-3729-0/09 $25.00 © 2009 IEEE

DOI 10.1109/SSME.2009.76

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required resources or "RAS-E"(for a more detailed discussion see, Brown, 1996) [12].

Furthermore, resource acquisition self-efficacy is the process by which people weigh, integrate and evaluate information resource about their capabilities and then regulate their choice and behavior accordingly, such as hiring employees and saving money to invest in the business [14]. The information considered by the small business owner or entrepreneur comes directly from their self-efficacy for acquiring resources. As a result, the small business owner's or entrepreneur's resource acquisition self-efficacy should be related to his or her activities for venture creation. More specifically, the more the small business owner or entrepreneur believes that resources are abundant and available in the dynamic environment, the more they will use their ability to acquire resources, then the more activities for venture creation they will exert. Therefore, it should be expected that:

H1 Nascent entrepreneur’s resource acquisition self-efficacy will be positively associated with his or her new venture activities.

Certain behaviors must cause certain outcomes. Venture creation activities, such as preparing a business plan, organizing a start-up team, purchasing raw materials or inventory, purchasing or leasing property or equipment, asking other people for funds, working full-time on the business, submitting an application for patent or trademark, hiring employees, and saving money to invest in the business, can, to a certain extent, facilitate the entrepreneurial success [15]. The continuous start-up activities, on the other hand, can affect each other and enhance the entrepreneurial success [3-4], and posits that innovative collective action occurs when actors who perceive opportunities are able to use either existing resources or appropriate other resources to engage in acts of contention [15]. In both these approaches, the key appears to be the actual combination of resources through these start-up activities to reinforce the start-up success [16]. This link between activity and outcome is also demonstrated in Thomas, Clark, and Gioia’s (1993) study of strategic actions and firm performance [17]; they found that the integration of these activities had positive effects on venture formation and performance.

In the context of venture creation, the creation activities can make the firm operation easily and successfully. When combined with the finding that entrepreneurs make specific activities to form new firm [18], we would expect nascent entrepreneurs to be able to transform the potential behaviors for firm creation into a successful new venture only if they are able to acquire resources and activate other related activities related to start-up [19-20]. This is consistent with Carter, Gartner, and Reynolds’ (1996) view that successful nascent entrepreneurs tend to undertake more activities to make their business tangible than nascent entrepreneurs who are not successful in starting a new venture [21]. Therefore, we believe that:

Hypothesis 2 The more venture creation activities the nascent entrepreneur engages in, the greater the likelihood of start-up success.

III. DATA AND MEASURES

A. Data collection The data utilized for the current investigation were drawn

from the phone and questionnaires of nascent entrepreneurs in the ongoing National Panel Study of Entrepreneurial Dynamics (PSED) (see Reynolds, 2000 for detailed methodology and background [22]). We then collected data from three Chinese areas: the north of China (Jilin Province), the middle of China (Henan Province) and the south of China (Guangdong Province). The target ventures are within 42 months after their founding [1]. 600 questionnaires are issued with approximately 1/3 for each region. After screening the survey data, eliminating those with missing data, we yielded a dataset of 193 (response rate is 32.17%) nascent entrepreneurs spanning a wide range of industries, primarily in high-tech and service sectors.

B. Measures Given the exploratory nature of this study, construct

operationalization and measurement were achieved in two ways: (1) for those variables employed in previous studies, the measures were adopted as long as they could provide acceptable measurement quality with minor modifications in wording to increase their applicability to the Chinese context; (2) for variables that were not measured in previous studies, this study developed operational measures based on previous conceptual studies and assessed content validity via interviews with five hi-tech entrepreneurs and three scholars.

Resource acquisition self-efficacy. RAS-E was operationalized using an instrument based on the work of Lee and Bobko (1994) [23] and Scherer, et.al (1982) [24]. The instrument was developed, tested and validated in Brown (1996) [12]. The instrument measures the magnitude and strength of the each respondent's self-efficacy with respect to his/her ability to raise financial resources from fourteen different financial sources. Factor scores for these questions were at the .57 level or above with a Cronbach’s alpha of .713.

Entrepreneurial activities. The PSED dataset includes information on whether or not the nascent entrepreneurs engaged in a variety of start-up activities. We identified and summed a set of activities to obtain our measure of how many activities the entrepreneur was engaged in. Following Carter, Gartner and Reynolds’ (1996) [21], we included the following activities: preparing a business plan, organizing a start-up team, purchasing raw materials or inventory, purchasing or leasing property or equipment, asking other people for funds, working full-time on the business, submitting an application for patent or trademark, hiring employees, and saving money to invest in the business. Factor scores for these questions were at the .61 level or above with a Cronbach’s alpha of .727.

Entrepreneurial success. Based on the work of Carter, Gartner and Reynolds’ (1996) [21], four items are used to measure start-up success and they are developing vision, core competitiveness, growth speed and financial condition. The respondents were asked to judge the following questions like this “comparing with your main competitors in your

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industry, your firm’s developing vision is good” using a five point Likert scale response measure. Factor scores for these questions were at the .65 level or above with a Cronbach’s alpha of .786.

IV. ANALYSIS AND RESULTS In order to test the direct causal relationships

hypothesized by the models, linear structure equations were used. AMOS, which estimates parameters of hypothesized causal models, was used to analyze the data and to test hypotheses. Causal analysis is a method for studying patterns of causation among a set of variables. Although causal analysis has been done in the past using ordinary least squared (OLS) regression, AMOS has been found to be a more robust and flexible analytical technique. A descriptive analysis is needed before testing the model, and the result is shown in Table 1. And Table 2 presents our structural equation model results.

TABLE I. DESCRIPTIVE STATISTICS AND CORRELATION MATRIX

Variables 1 2 3 1.RAS-E 1

2. Entrepreneurial activities .184 1 3. Entrepreneurial success .192 -.008 1

Mean 3.422 2.985 2.448Std Dev 0.446 0.679 0.346

significant at level of 0.05; significant at level of 0.1

A coefficient alpha test was performed to examine the internal consistency of the scales of RAS-E(0.713), entrepreneurial activities (0.727), and Entrepreneurial success (0.786).All scales were well above the 0.7 the cut-off. Four strategies for determining a measure’s validity are provided as: 1) face validity and 2) content validity which rely on the internal logic of the measure; and 3) criterion validity and 4) construct validity which is less subjective and more

empirical. All three constructs (network, resources acquisition, and firm performance) were considered to have both face and content validities. To assess discriminant validity of network, we use principal component factor method with varimax rotation to find out how the items of these two scales loaded. The items were clearly loaded on the two separate constructs as anticipated, indicating that network had discriminant validity. Furthermore, five items of resources acquisition, twelve items of firm performance scale were also factor analyzed, and all three construct scales were proved to have discriminant validity.

Hypothesis 1 expects that nascent entrepreneur’s resource acquisition self-efficacy will be positively associated with his or her new venture activities. The result shown in table 1 indicates that H1 is supported (r=0.31, p<0.05); hypothesis 2 argues that the more venture creation activities the nascent entrepreneur engages in, the greater the likelihood of start-up success. The result shown in table 1 indicates that H2 is supported (r=0.15, p<0.1). Therefore, H1 and 2 are all supported. The chi-square is not significant ( 2

= 135.87, p=0.12), indicating that the model fits the data. Also the other goodness-of-fit statistics satisfy the recommendations for model fit. The chi-square divided by the degrees of freedom is 1.74, which is under the suggested ratio of two [29]. The model’s goodness of fit (GFI) is 0.98, indicating a good fit with the data. The comparative fit index (CFI) is 0.93, well above the .90 acceptable level. The normed fit index (NFI) is 0.97, well above the .90 acceptable level. The root mean square error of approximation is a very acceptable 0.057, indicating a low difference between the observed and model-implied covariance. In all, all the indexes are all acceptable, indicating the model fits the data very well.

TABLE II. STRUCTURAL EQUATION MODEL RESULTS: PATH ESTIMATES AND MODEL STATISTICS

Path Coefficients (r) H1: resource acquisition

self-efficacy to new venture activities

0.31**

H2: new venture activities toentrepreneurial success 0.15*

Model statistics Recommended value (Hair, et. al, 1995) True value 2 135.87

Degree of freedom 78 2/d.f 2.0 1.74 P 0.05 0.12

GFI 0.90 0.98 CFI 0.90 0.93 NFI 0.90 0.97

RMSEA 0.08 0.057 *p<0.1, **p<0.05

V. DISCUSSION AND IMPLICATIONS Hypothesis 1 was developed to test whether or not

nascent entrepreneur’s resource acquisition self-efficacy will

be positively associated with his or her new venture activities and hypothesis 2 was developed to test whether or not more venture creation activities the nascent entrepreneur engages in can facilitate the likelihood of start-up success. The hypotheses are confirmed at the 0.05 and 0.10 level of

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statistical significant respectively suggesting that resource acquisition self-efficacy does have a positive impact on creation activities and the latter has effect on start-up success. The possible reasons are as follows: first, as mentioned above, entrepreneurs are the survey target and when they begin to start the business they will evaluate their ability to acquire resources and then they will exert these venture creation activities. Second, many creation activities rely on entrepreneurs self-efficacy, that is the ability to combine and integrate the activities into the integrated behavior, which then enhance the entrepreneurial success.

Resource acquisition may be more critical to new ventures than to established businesses. In the established firm, the owners likely have established relationships with some institutions and can easily get needed resources so they don’t pay attention to these resources, to some extent. But in new ventures, entrepreneurs must focus on key resources for firm growth and development, so they depend on their self-efficacy to finish these works. In all, entrepreneur’s resource acquisition self-efficacy influences new venture creation activities and the latter has effect on start-up success.

The research reported here demonstrates that the entrepreneur’s perception of resource availability affects her or his entrepreneurial activities and subsequently, the firm's start-up success.

The authors hope that this article could provide an important first step for further examinations of key antecedents and consequences of venture creation activities and entrepreneurial success and could promote future studies in this important area.

ACKNOWLEDGMENT The authors would like to thank the National Natural

Science Foundation of China for financially supporting this research under the grants of 70672025 and 70732005.

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[17] Thomas, J.B., Clark, S.M., Gioia, D.A. Strategic sense-making and organizational performance: Linkages among scanning, interpretation, actions, and outcomes. Academy of Management Journal, 1993, 36(2), pp239-270.

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