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Research on Entrepreneurship

Kun Fuk.fu@imperial.ac.uk

Presentation at Swedish Jobs and Society Annual conference20th May 2014

London

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Outline

• Entry into nascent entrepreneurship

• Transition from nascent to new entrepreneurship

• Other aspects of entrepreneurship

– Informal entrepreneurship

– Hybrid entrepreneurship

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Entry rate into Nascent Entrepreneurship ( 2013 GEM)

9.25.9

4.73.6 2.9 2.7

http://www.gemconsortium.org/visualizations

Individual-level- Age, gender, education, Income- Skill and knowledge, experience- Know other entrepreneurs- Intention and attitude - …

Country-level- Economic- Political- Institutional - Cultural- …

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Nascent Entrepreneurship Rate (United States VS. Sweden)

http://www.gemconsortium.org/visualizations

8.1

1.9

9.2

5.9

14%

211%

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• Public sector is much larger in Sweden • Smaller income dispersion in Sweden • US women were more active;• Young Americans aged (25 - 34 years) were specially

active compared to Swedes in the same age category

Delmar, F. & P. Davidsson, 2000

Possible reasons…

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Know other entrepreneurs

See opportunities What’s missing?

http://www.gemconsortium.org/visualizations

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Informal Investors Rate

http://www.gemconsortium.org/visualizations

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Social Influence onEntry into Nascent Entrepreneurship

Wennberg, Autio and Kun (2014)

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Conceptual Model

Social Group-level (Level-2)

Individual (Level-1)

Entrepreneurial BehaviorEntry into nascent entrepreneurship

 

Individual’s attributesSelf-efficacyKnowledge of entrepreneursGood career choiceStatus attribution

 

Group-level predictorsSelf-efficacy (group average)Knowledge of other entrepreneurs (group average)Entrepreneurship: good career choice (group average)Status attribution to entrepreneurship (group average) 

Wennberg, Autio and Kun (2014)

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Individual-level predictorsSelf-efficacy: skills to start a business 3.465*** 3.5 times more likelyGood career choice 0.995 Entrepreneurial familiarity ties 1.767*** Status attribution to entrepreneurship 0.981

Group-level predictorsGroups’ efficacy 5.446*** Groups’ good career choice 1.439** Groups entrepreneurial familiarity ties 1.923*** Groups’ Status attribution 0.830

Cross-level interaction terms Groups’ good career choice * Self-efficacy 0.438**

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Perceived knowledge and skill (2013 GEM)

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Transition from Nascent to New Business

Entrepreneurialinitiatives

Operating business

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A case from USA

Still trying Operating Gave Up Total

159 (47%) 112 (33%) 69 (20%) 340 (100.0%) • years of experience

in the industry (more likely to start solo);

• savers who provide more self-finance;

• non-white

• established credit with suppliers;

• Received money from nascent operations;

• sole venture (team venture are half as likely to realize their start-ups)*

• Home owners;

• involvement in government/ university/ business- funded business assistance program;"

• white;

• invested no money of their own;

• have no hired workers;

• lack a posthigh school degree

no significant differences by gender or wealth, nor by region or industry

Parker and Belghitar (2006)

PSED, random sample, follow up 12 months

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A case from the Netherlands

• longitudinal study, 330 nascent entrepreneurs were followed over a one-year period:– 47% started a business

• Industry experience /Manufacturing sector /using own money

– 27% was still organizing• Females/ Starting part-time

– 26% gave up• third party loan• other/better job

Gelderen, Bosma, Thurik (2001)

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A case from Sweden• 380 Swedish nascent entrepreneurs were followed for 18

months

• occurrence of a first sale during this period indicates the transition of nascent firm to new business owner

• 62% made the transition, – being member of a business network (e.g. member of the

Chamber of Commerce)– having close friends or neighbors in business

Davidsson and Honig (2003)

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Lack of comparability among the empirical studies for different countries• different time spans, • different definitions and measures• …

USA (2006)

Netherlands (2001)

Sweden (2003)

Operating 33% 47% 62%Still trying 47% 27% -Gave Up 20% 26% -Total 340 (100.0%) 330 (100.0%) 380(%)

17Bergmann and Stephan (2013)

Country (48)GEM-based

transition rate (average 2001-2008)

Australia 0.49Canada 0.33

Germany 0.38The Netherlands 0.47

UK 0.54USA 0.37

Finland 0.36Denmark 0.54Norway 0.55Sweden 0.62

Variation in the transition ratio at the country level

Low transition rate

High unemployment rate

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The successes VS. The intentioned failures

Nascent entrepreneurs receive new information about the new venture constantly, revise or reaffirm their intention consequently.

“The key is to fail early, fail cheaply, and don’t make the

same mistake twice”.

- A. G. Lafley, the former CEO of P&G , BusinessWeek, 2009.

Dimov (2010)

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Other aspects of entrepreneurship

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IE/FE ratios

India: 177:1

USA: 4:1

Sweden: 1:1

***********************African countries: 50:1

Latin American & Caribbean countries:

10:1

Asia Pacific countries: 5:1

OECD countries: 1:1

Autio and Kun (2014)

Informal EntrepreneurshipVS.

Formal Entrepreneurship

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Informal VS. Formal entrepreneurship

IE absorbs a major allocation of entrepreneurial effort

Unfair competition for formal firms, as tax avoidance, evade social security, employee welfare …

1

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

For-mal

4,377 (28%)

In-for-mal 10,997

(69%)

no resp (3%)

15,871 TAE entrepreneursGEM 2012

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IE influence growth potential

Autio and Kun (2014)

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Hybrid Entrepreneurship - a intermediate strategy of entrepreneurial entry

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• particularly attractive to individuals – high switching or opportunity costs, – target uncertain opportunities, – risk-averse/ less confident

• Hybrids are 12 times more likely to enter into self-employment than non-hybrids.

Folta, Delmar, and Wennberg (2010)

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Prevalence of Hybrid Entrepreneurship in selected countries

CountriesHE among Nascent entrepreneurs

(average GEM 2001-2010)Sweden 28%Norway 48%

United States 51%UK 62%

Finland 67%The Netherlands 72%

Denmark 74%

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Q&A

Thank you very much !