Explaining Entrepreneurial Performance of Solo Self-Employed from a Motivational Perspective.                   OECD-DBA I...
Outline            •   Introduction            •   Motivational approach: opportunity vs. necessity            •   Researc...
IntroductionOECD-DBA workshop - Skills Development for SMEs and                                                      3Entr...
Introduction          Increase of self-employment:               • Structural change (outsourcing and services), individua...
Introduction          Research question(s):               • Does the economic performance of opportunity solo self-employe...
Motivational approachOECD-DBA workshop - Skills Development for SMEs and                                                  ...
Motivational approach          Theoretical background             • Introduced by Global Entrepreneurship Monitor (Reynold...
Motivational approach          Literature:             • Much research is done in the field of explaining the prevalence  ...
Prevalence           Opportunity entrepreneurship, Innovation driven economies, GEM 2011               100%               ...
Prevalence            Necessity entrepreneurship, Innovation driven economies, GEM 2011                      100%         ...
Prevalence            Trends in Prevalence Rates in the Netherlands 2001-2011, GEM 2011               100%                ...
This study               •    Individual economic performance.               •    Longitudinal data               •    Tar...
DataOECD-DBA workshop - Skills Development for SMEs and                                                       13Entreprene...
Data            Explanatory variables:            • Three indicators for necessity motives              1. Unemployed (ent...
Data           • The entrepreneurial performance of solo self-employed is measured             in terms of their annual tu...
Data                                   Cumulative frequencies of all types of necessity SSE           Annual turnover     ...
MethodologyOECD-DBA workshop - Skills Development for SMEs and                                                      17Entr...
Methodology            • Regression models:              • Dependent variable = annual turnover (7 categories)            ...
ResultsOECD-DBA workshop - Skills Development for SMEs and                                                         19Entre...
Results            • All three types of necessity solo self-employed have a statistically              significant negativ...
Results            Marginal effects:            the probability of generating an annual turnover of more than             ...
Conclusions and DiscussionOECD-DBA workshop - Skills Development for SMEs and                                             ...
Conclusions and Discussion            • Necessity solo self-employed show a lower probability of having a high            ...
Conclusions and Discussion            (Policy) implications:                 • Economic growth vs. subsistence motives for...
Conclusions and Discussion            Further research might focus on:                 • whether the observed differences ...
THANK YOU FOR YOUR ATTENTION!OECD-DBA workshop - Skills Development for SMEs andEntrepreneurship - November 28th 2012
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Iii b - vries de explaining the entrepreneurial performance of self-employed

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The upgrading of workforce skills is key to the competitiveness of SMEs. In today’s business environment there is a premium on innovation that enables firms to develop new products and services, new production processes and new business models. This requires both in-house innovation and the ability to absorb knowledge from other firms and organisations, both of which call for a skilled labour force. Skills are also a critical but understated resource for entrepreneurship seen in the sense of business creation. Similarly to workforce skills, entrepreneurship skills will boost the competitiveness of local businesses thanks to the improved strategic and management competences of the entrepreneur.

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Iii b - vries de explaining the entrepreneurial performance of self-employed

  1. 1. Explaining Entrepreneurial Performance of Solo Self-Employed from a Motivational Perspective. OECD-DBA International workshop Skills Development for SMEs and Entrepreneurship - November 28th 2012Nardo de Vries (Panteia/EIM)Werner Liebregts (Tilburg University and Panteia/EIM)
  2. 2. Outline • Introduction • Motivational approach: opportunity vs. necessity • Research design • Data • Methodology • Results • Conclusions and discussionOECD-DBA workshop - Skills Development for SMEs and 2Entrepreneurship - November 28th 2012
  3. 3. IntroductionOECD-DBA workshop - Skills Development for SMEs and 3Entrepreneurship - November 28th 2012
  4. 4. Introduction Increase of self-employment: • Structural change (outsourcing and services), individualism, improved reputation • Entrepreneurship Policy (Van Es and Van Vuuren 2011, Stam 2012) • Supposed to lead to economic growth • Natural or ‘equilibrium’ rate of solo self-employment (Van Stel, Scholman & Wennekers 2012) Not just the quantity, but also quality of entrepreneurship (Baumol 1990) • Productive entrepreneurship and economic performance • Motives for entrepreneurship are considered influential • Opportunity vs. Necessity (Reynolds 2002)OECD-DBA workshop - Skills Development for SMEs and 4Entrepreneurship - November 28th 2012
  5. 5. Introduction Research question(s): • Does the economic performance of opportunity solo self-employed differ from the economic performance of necessity solo self-employed? • If so, to what extent? • What factors are influential?OECD-DBA workshop - Skills Development for SMEs and 5Entrepreneurship - November 28th 2012
  6. 6. Motivational approachOECD-DBA workshop - Skills Development for SMEs and 6Entrepreneurship - November 28th 2012
  7. 7. Motivational approach Theoretical background • Introduced by Global Entrepreneurship Monitor (Reynolds et al. 2002) • Human capital theory (argued by Block and Sandner 2009) • Formal education • Experience • Practical learning e.g. active (Ericson and Pakes 1995) and passive learning (Jovanovic 1982) • Entrepreneurial talent and skills • Opportunity entrepreneurs are assumed to have higher human capital endowmentOECD-DBA workshop - Skills Development for SMEs and 7Entrepreneurship - November 28th 2012
  8. 8. Motivational approach Literature: • Much research is done in the field of explaining the prevalence of opportunity and necessity motives. • No consensus on ‘necessity’-measures • Most studies focus on macro-level relationships. • There are very few micro-level studies that actually connect start-up motivation and economic performance on the individual level. • General focus on entrepreneurship, no focus on solo self- employedOECD-DBA workshop - Skills Development for SMEs and 8Entrepreneurship - November 28th 2012
  9. 9. Prevalence Opportunity entrepreneurship, Innovation driven economies, GEM 2011 100% 90% 80% 73% 72% 71% 71% 68% 67% 70% 64% 64% 62% 61% 59% 59% 58% 57% 57% 60% 55% 53% 51% 50% 46% 50% 39% 37% 37% 36% 40% 30% 20% 10% 0% Sw y n ce e a m an n e k Av al nd d Em en s ic d ia e y lia m es en s nd a ec or ar an ag pa te re an ai an bl ug en do iu an w at ra iw ed la Sp ap ira m Ko re pu rla Ja m er el nl lg or rt ov er St st ng Ta Fr Ir G Be Fi Denmark er ng Re Po N he Au i tz of Sl Ki d D G Si te et Sw d h ic d ab he ni ec N bl te Ar U pu Cz gt ni U ei Re d te nw ni U UOECD-DBA workshop - Skills Development for SMEs and 9Entrepreneurship - November 28th 2012
  10. 10. Prevalence Necessity entrepreneurship, Innovation driven economies, GEM 2011 100% 90% 80% 70% 60% 50% 42% 40% 30% 27% 30% 26% 25% 25% 21% 19% 18% 18% 18% 18% 17% 16% 15% 15% 14% 20% 12% 11% 10% 9% 7% 10% 6% 4% 0% ay Em ce Av a l n an en d he m Au re a li a ia ng m ic n e y Sw k d Be d es en s e es nd pa an ec an n ar ag re an ai bl ug en iu do o ab ran w at ra ed at iw la Sp ap m Ko re pu Ja rla m el er nl lg or rt ov er St ir ng st Ta Ir G F Fi er Po N Re itz of Sl Ki d D G Si te et Sw Denmark d ic h d he ni ec N bl te Ar U pu gt Cz ni U ei Re d te w Un ni UOECD-DBA workshop - Skills Development for SMEs and 10Entrepreneurship - November 28th 2012
  11. 11. Prevalence Trends in Prevalence Rates in the Netherlands 2001-2011, GEM 2011 100% 90% 91% 87% 89% 84% 83% 84% 80% 70% 71% 66% 64% 62% 60% 57% 50% 40% Control for “mixed motives” 30% 20% 14% 10% 11% 11% 12% 10% 10% 8% 9% 6% 7% 6% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Necessity-Driven Entrepreneurial Activity Opportunity-Driven Entrepreneurial ActivityOECD-DBA workshop - Skills Development for SMEs and 11Entrepreneurship - November 28th 2012
  12. 12. This study • Individual economic performance. • Longitudinal data • Targeting solo self-employed (zzp’ers in Dutch) • Robustness for necessity motives (multiple indicators) • Controls for socio-demographic, firm and organizational characteristicsOECD-DBA workshop - Skills Development for SMEs and 12Entrepreneurship - November 28th 2012
  13. 13. DataOECD-DBA workshop - Skills Development for SMEs and 13Entrepreneurship - November 28th 2012
  14. 14. Data Explanatory variables: • Three indicators for necessity motives 1. Unemployed (entitled to benefits) 2. Self-proclaimed necessity 3. Author-classified necessityOECD-DBA workshop - Skills Development for SMEs and 14Entrepreneurship - November 28th 2012
  15. 15. Data • The entrepreneurial performance of solo self-employed is measured in terms of their annual turnover • turnover is a categorical dependent variable • There appears to be a statistically significant relationship between annual turnover and type of solo self-employed in case of all three type dummiesOECD-DBA workshop - Skills Development for SMEs and 15Entrepreneurship - November 28th 2012
  16. 16. Data Cumulative frequencies of all types of necessity SSE Annual turnover Unemployed Self-proclaimed Author classified (necessity 1) (necessity 2) < €10K 28,3% 12,6% 14,0% €10K - €25K 56,6% 39,7% 41,8% €25K - €50K 82,8% 66,8% 68,2% €50K - €100K 93,0% 87,1% 88,8% €100K - €200K 98,9% 96,5% 97,9% > €200K 100,0% 100,0% 100,1% n 187 597 515OECD-DBA workshop - Skills Development for SMEs and 16Entrepreneurship - November 28th 2012
  17. 17. MethodologyOECD-DBA workshop - Skills Development for SMEs and 17Entrepreneurship - November 28th 2012
  18. 18. Methodology • Regression models: • Dependent variable = annual turnover (7 categories) • Explanatory variables = necessity motives (3 type dummies) • Control variables = • personal charact. (including Human Capital) • firm charact. • organisational charact. • Method: • Quasi Fixed Effects model • Pooled ordered probit estimators (panel corrected standard errors)OECD-DBA workshop - Skills Development for SMEs and 18Entrepreneurship - November 28th 2012
  19. 19. ResultsOECD-DBA workshop - Skills Development for SMEs and 19Entrepreneurship - November 28th 2012
  20. 20. Results • All three types of necessity solo self-employed have a statistically significant negative effect on annual turnover. • Human Capital Endownment: • Educational level has no mediating effect • Firm age has a small mediating effect.OECD-DBA workshop - Skills Development for SMEs and 20Entrepreneurship - November 28th 2012
  21. 21. Results Marginal effects: the probability of generating an annual turnover of more than 50,000 euro decreases with • 10,1% for unemployed; • 7,4% for self-proclaimed necessity; • 5,5% for author-classified necessity.OECD-DBA workshop - Skills Development for SMEs and 21Entrepreneurship - November 28th 2012
  22. 22. Conclusions and DiscussionOECD-DBA workshop - Skills Development for SMEs and 22Entrepreneurship - November 28th 2012
  23. 23. Conclusions and Discussion • Necessity solo self-employed show a lower probability of having a high annual turnover • A large set of socio-demographic, firm and organisational characteristics cannot explain the observed differences • Some aspects of human capital do not explain the observed differences between opportunity and necessity (e.g. education and firm age) • Non-observed aspects of human capital can still explain the observed differences (e.g. entrepreneurial talent and skills or intrinsic motivation)OECD-DBA workshop - Skills Development for SMEs and 23Entrepreneurship - November 28th 2012
  24. 24. Conclusions and Discussion (Policy) implications: • Economic growth vs. subsistence motives for policy • Still a substantial number of necessity solo self-employed generates substantial turnover • Efficiency of entrepreneurship policy schemes can benefit if they are less generic and take into account that several aspects of human capital might influence economic performance of solo self-employed • Aspects that in our opinion might play a role are entrepreneurial talent and skills, and also intrinsic motivation.OECD-DBA workshop - Skills Development for SMEs and 24Entrepreneurship - November 28th 2012
  25. 25. Conclusions and Discussion Further research might focus on: • whether the observed differences in economic performance are truly due to the proposed aspects; • Other performance indicators (e.g. innovation).OECD-DBA workshop - Skills Development for SMEs and 25Entrepreneurship - November 28th 2012
  26. 26. THANK YOU FOR YOUR ATTENTION!OECD-DBA workshop - Skills Development for SMEs andEntrepreneurship - November 28th 2012

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