Entreprenuerial Success- Scale Development

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Dej, D., Gorgievski, M., Augustin, A., Wegge, J. (2009).

Paper presented at 14th European Congress of Work and Organizational Psychology

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Entreprenuerial Success- Scale Development

  1. 1. Fakultät Mathematik und Naturwissenschaften Entrepreneurial Success as Defined by Entrepreneurs: Development of a Measurement Instrument Symposium: Entrepreneurial success and innovation Santiago de Compostela, 15 May 2009
  2. 2. Measurement of Entrepreneurial Success Multidimensional approach to entrepreneurial success • objective economic success criteria (e.g. profit, turnover, employee growth, innovation, ) (e.g. Schenk, 1998, Murphy, 1996; Chandler & Hanks, 1993) • subjective success criteria (e.g. satisfaction, achievement of personal goals and company goals) (e.g. Schenk, 1998, Kurtko, 1997; Orser, 2005, 2006) they may be better predictors of subsequent entrepreneurial decisions and behaviors than objective economic and business criteria (e.g. Cooper & Artz, 1995) 2
  3. 3. Why a new measure? Limitations of current success measures • objective data is rarely available (e.g. Fiorito & LaForge, 1986) and difficult to compare due to sample heterogeneity (e.g. industry related factors, enormous and erratic growth rates, small starting base) (e.g. Chandler & Hanks, 1993) • subjective success measurements are not all encompassing and focus on limited number of general aspects, often single item measures e.g. My company is in general very successful. I am satisfied with my income. Instrument to measure success criteria that entrepreneurs themselves regard as relevant 3
  4. 4. Which Success Criteria? Authors Items developed Chandler & Hanks Satisfaction with performance (growth, return on investment, (1993) return on assets, profit), Growth, Concurrence Extrinsic rewards (income growth, personal good life, security) Independence (being own boss, personal freedom) Kuratko et al. Intrinsic rewards (challenge, personal growth, social recognition) (1997) Family security (company succession, family security, possibility to retire early, social recognition) Professional (intellectual activities, Work-Life-Balance, autonomy, relations to community, income, raise of personal goods, income) Subjective non financial (product and service quality, market Orser et al. (2005) acceptance, company performance, relations to clients) Objective financial (profitability, income, raise of personal goods, company performance) Personal (remaining personal networks, Work-Life-Balance) Person oriented (personal satisfaction, balance between work Gorgievski & Ascalon and free time, profit generation) (2005) Company oriented (continuity, innovation, profit generation) 4
  5. 5. Which Success Criteria? Own qualitative study among 240 entrepreneurs from Germany and Poland (2006) WHAT IS ENTREPRENEURIAL SUCCESS? Authors Success criteria Entrepreneur: Goals and challenge, Satisfaction, Wealth, Creativity and innovation, Free time and health, Firm continuity Enterprise: Any kind of growth, Stability, Reputation, Dej, Stephan, Richter Market position, Survival (2007) Employees and co-owners: Satisfaction of employees and co-owners, employee security Customer satisfaction and loyalty 5
  6. 6. Conceptualization of Entrepreneurial Success Rentability (e.g. profitable firm) Growth (employee, revenue, profit) company succes Innovation Being better compared with competition Contributing back to the society social success Social responsibility for employees Creating new working places Professional reputation Entrepreneurial success Positive relations with clients employee & Employee satisfaction and loyalty customer Positive & supportive working climate relations Personal income enhancement personal financial To afford a good life success Personal financial & family security Work-life balance & time flexibility personal non Making decisions, challenge financial success Personal development 6
  7. 7. Success Scale Construction Success = achievement of goals A Importance of success criteria Scale consists of 36 Items B Achievement of success criteria A B Not Very Not im- Very achie- well portant impor- ved achie- at all tant at all ved 1. Employee growth 1 2 3 4 5 1 2 3 4 5 2. Social recognition 1 2 3 4 5 1 2 3 4 5 3. Employee satisfaction 1 2 3 4 5 1 2 3 4 5 4. Personal income 1 2 3 4 5 1 2 3 4 5 5. Work-life balance 1 2 3 4 5 1 2 3 4 5 7
  8. 8. Hypotheses 1. The proposed structure of the Subjective Entrepreneurial Success Scale (SESS) will be empirically supported. 2. Convergent and criterion validity can be established. 8
  9. 9. Study & Sample Sample • Total N=184 • age 45.39 (SD= 9.90), 25 % (N= 46) females, 97 % Germans • number of employees: 22 (SD= 43), company age: 23.42 (SD= 30.52) • Respondents sampled using business directories, the yellow pages, business associations and internet communities • Rejection rate = 95.51% • Established companies (N= 116) > 7 employees, at least 3.5 years on the market (Reynolds et al., 2005), entrepreneur = owner and CEO (cf. Definition of entrepreneurs, Rauch & Frese, 2000) • Not established companies (N= 68) Violated at least one criteria 9
  10. 10. Study & Sample Measures • 126 Item questionnaire (60 minutes) • Subjective Entrepreneurial Success Scale (SESS) • subjective financial success • satisfaction with life & satisfaction work (adapted Bellach, 1995) • reported objective success (c.f. Combs et al., Venkatraman & Ramanujam, 1986) • creativity (adapted Baer & Oldham, 2006 and Zhou & George, 2001) • innovation (Bruce, 1994) • Avem Scale ‚Experienced Professional Success (Schaarschmidt & Fischer, 1996) • Maastricht Questionnaire for Vital Exhaustion (Kopp et al.1998) • demographics 10
  11. 11. Results: Hypothesis 1 Results of exploratory factor analysis and analyses of reliabilities Scale B Achievement 5 first–order factors •explained 61.02% of variance •Cronbach‘s alpha between .71- .90 •29 items •differ from assumed theoretical factors 1 second-order factor •explained 64.64% of the variance •entrepreneurial success (Cronbach‘s alpha at .90) 11
  12. 12. Structure of developed scale B Achievement .70 General financial success .62 Employees & working climate Entrepreneurial .78 success Social success Achievement of .83 success Development/ criteria scale B growth .60 Work- life balance 12
  13. 13. Results: Hypothesis 2 Development of nomological net to establish scale validity (Cronbach and Meehl, 1955) Achievement of success criteria i.e. scores on 5 factors: 1. General financial success 2. Employees & working climate 3. Social success 4. Development/growth 5. Work-life balance should reveal plausible relationships to related constructs Achievement of success criteria should go along with good health, life and work satisfaction etc. should correlate positively with objective performance measures 13
  14. 14. Results: Hypothesis 2 Convergent and criterion validity for Scale B: Achievement of success criteria • work satisfaction (income, financial situation, work in general) .69** 1. General financial success • experienced success in professional life .36** 2. Employees & working • satisfaction at work .30** Climate 3. Societal success • satisfaction at work .31** • creativity .36** 4. Development/growth • innovation .35** • life satisfaction .59** 5. Balance • vital exhaustion .46** 14
  15. 15. Results: Hypothesis 2 Establishing concurrent criterion validity of the scale B- Achievement of Success Criteria • Employee growth .337** • Profit growth 2006/07 .307** 1. General financial success • Pre tax profit 2007 .441** • Turnover growth .198** • Personal net income .414** 2. Employees & working • Employee growth .166** climate • Employee absenteeism -.138* • Employee growth .293* 3. Societal success • Turnover 2007 .164* • Turnover 2007/08 .144* • Profit 2007/08 .154* • Employee growth .152* 4. Development/growth • Pre tax profit .221** • Employee absenteeism -.182* 5. Balance • Working hours .24** 15
  16. 16. Conclusions & Implications Subjective Entrepreneurial Success Scale is a measure that… • has good psychometric properties • shows good validity • has relatively clear factorial structure Moreover it … • is a multidimensional measure including individual perspective of an entrepreneur • Helps to gain a broader understanding of entrepreneurial success 16
  17. 17. THANK YOU ! Dominika Dej dominikadej@psychologie.tu-dresden.de 17

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