Final Thesis

FU JEN CATHOLIC UNIVERSITY
MBA Program in International Management
Advisor: Chao-Ching Chang Ph.D
A Study of Social Progress Imperative Conditions and
Total Early Stage Entrepreneurial Activities: A Fuzzy-Set
Qualitative Comparative Analysis
社會進步水準與整體早期創業活動關聯性之研究：模
糊組合質性比較分析法之應用
Thesis Student: Fenny Anggraini Prastiyo (俞肇鳯)
Date: 2016/07/11

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Thesis Title: A Study of Social Progress Imperative Conditions and Total Early Stage
Entrepreneurial Activities: A Fuzzy-Set Qualitative Comparative Analysis
Name of Institute: MBA in International Management, Fu Jen Catholic University
Print name of thesis student: Fenny Anggraini Prastiyo (俞肇鳯)
Print name of thesis advisor: Chao-Ching Chang Ph.D
Total page: 110 pages
Abstract
Total early-stage entrepreneurial activity is one of the measurements to assess the level
entrepreneurship. Hence, many scholars try to understand what the causal factors that can lead to
total early-stage entrepreneurial activities are. Some scholars stated that total early-stage
entrepreneurial activity is not just a phenomenon that is caused by causal factors independently.
In fact, those factors might be in the form of combination of causal factors that work together to
produce the phenomenon or what we so called as causal complexity. Although those scholars
have agreed that total early-stage entrepreneurial activity is caused by a number of causal factors,
there is divided thought about which factors that empirically influence the phenomenon. One
area of causal factors is related with social progress. This area has not been explored much
because the difficulties to measure the social progress in global scale, yet there are some
significant findings that social factors do affect entrepreneurial activities. With the newly
launched Social Progress Index, now it is possible to measure social progress in global scale.
Therefore, in this paper I will investigate what combination of social progress that lead to early-
stage entrepreneurial activities are. The analysis covers 89 countries worldwide from 2014 to
2015. To get some findings, I am using Fuzzy-set: Qualitative Comparative Analysis (QCA).
The findings can give insight to governments in formulating their policy, and give new
contribution in entrepreneurship research.
Keywords: Social progress, entrepreneurship, causal combination, fuzzy-set method,
Qualitative Comparative Analysis (QCA)

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Table of Contents
Chapter I. INTRODUCTION ..................................................1
1.1 The Background..................................................................................................1
1.2 Limitation and Dissent in Prior Research ...........................................................3
1.3 Research Proposal...............................................................................................3
Chapter II. LITERATURE REVIEW......................................6
2.1 Theory of Entrepreneur Development ................................................................6
2.1.1 Family Orientation Theory........................................................................6
2.1.2 Education Incubation Theory....................................................................6
2.1.3 Knowledge Spillover Theory....................................................................6
2.1.4 Displacement Theory................................................................................7
2.2 Emergence of Entrepreneur ................................................................................7
2.2.1 Entrepreneurial Motivation.......................................................................7
2.2.2 Factor that Affects the Development of Entrepreneurs ............................8
2.3 Type of Entrepreneur ........................................................................................12
2.3.1 Opportunity-driven and Necessity-driven Entrepreneurs.......................12
2.3.2 High-growth and Low-growth Entrepreneurs.........................................13
2.4 Total Entrepreneurial Activities (TEA) ............................................................15
2.5 Social Progress Index (SPI) ..............................................................................18
2.5.1 Social Progress Index Dimensions..........................................................20
2.5.2 Social Progress Index Components ........................................................20
2.5.3 Current Social Progress Index Status......................................................30
2.6 Influence of Social Progress to Total Entrepreneurial Activities .....................43

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2.7 Complex Causality: Subset Relation ................................................................49
2.8 Conceptual Framework.....................................................................................52
Chapter III. METHODOLOGY............................................. 53
3.1 Qualitative Comparative Analysis (QCA)........................................................53
3.2 Fuzzy Set...........................................................................................................55
3.2.1 Calibration...............................................................................................55
3.2.2 Types of Fuzzy Set..................................................................................55
3.3 Fuzzy Set/Qualitative Comparative Analysis (fs/QCA)...................................57
3.4 Variable Definition ...........................................................................................59
3.5 Data Collection Method....................................................................................62
3.6 Data Analysis Method.......................................................................................62
3.7 Data Analysis using fs/QCA Software .............................................................70
Chapter IV. ANALYSIS........................................................ 78
4.1 Analysis Result in Dimension Level.................................................................78
4.2 Result Assessment using Empirical Evidence ..................................................81
4.3 The Findings .....................................................................................................81
4.4 Exploratory in Component Level......................................................................81
Chapter V. CONCLUSION................................................... 97
5.1 Theoretical Implication.....................................................................................98
5.2 Managerial Implication.....................................................................................99
5.3 Limitations ........................................................................................................99
References ............................................................................100

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List of Tables
Table 2.1 Comparison of High-growth and Low-growth Entrepreneurs.....................14
Table 2.2 Political Terror Scale....................................................................................23
Table 2.3 Summary of Social Progress Index ..............................................................29
Table 3.1 Variable Name Coding.................................................................................61
Table 3.2 Calibration of Total early-stage Entrepreneurial Activity............................64
Table 3.3 Calibration of Social Progress Index............................................................64
Table 3.4 Fuzzy-set Membership Scores for Outcomes...............................................65
Table 3.5 Fuzzy-set Membership Scores for Causal Factors .......................................67
Table 4.1 Combinations in Component Level..............................................................92
Table 4.2 Combinations in Each Country ....................................................................94

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List of Figures
Figure 2.1 Entrepreneurship Development System......................................................11
Figure 2.2: Total Entrepreneurial Activities in Factor-driven, Efficient-driven, and
Innovation-driven Economies ......................................................................................17
Figure 2.3: Social Progress Index 2015........................................................................19
Figure 2.4: Mapping of Social Progress Index 2015....................................................30
Figure 2.5: Comparison of SPI 2014 and SPI 2015 in Very High Social Progress
Countries.......................................................................................................................32
Figure 2.6: Comparison of SPI 2014 and SPI 2015 in High Social Progress
Countries.......................................................................................................................34
Figure 2.7: Comparison of SPI 2014 and SPI 2015 in Upper Middle Social Progress
Countries.......................................................................................................................36
Figure 2.8: Comparison of SPI 2014 and SPI 2015 in Lower Middle Social Progress
Countries.......................................................................................................................38
Figure 2.9: Comparison of SPI 2014 and SPI 2015 in Low Social Progress
Countries.......................................................................................................................40
Figure 2.10: Comparison of SPI 2014 and SPI 2015 in Very Low Social Progress
Countries.......................................................................................................................42
Figure 2.11: Venn Diagram Visualization of Subset Relation.....................................50
Figure 2.12: Conceptual Framework............................................................................52
Figure 3.1: Research Process Flow of QCA.................................................................54
Figure 3.2: Types of Fuzzy Set (Ragin, 2008) .............................................................56
Figure 3.3: Screenshot after Opening the Data ............................................................71
Figure 3.4: Screenshot to Select the Variables.............................................................73
Figure 3.5: Screenshot after Selecting the Variables ...................................................75
Figure 3.6: Screenshot of the Truth Table....................................................................77
Figure 4.1: Analysis Result in Dimension Level..........................................................79
Figure 4.2: Analysis Result in Component Level ........................................................89

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List of Appendix
Appendix 2.1: Factor Analysis Weights
Appendix 2.2: List of Countries based on Social Progress Status
Appendix 3.1: Country Code

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Chapter I. INTRODUCTION
1.1 The Background
1.1.1 The Importance of Entrepreneurs
Entrepreneurship is one of the best solutions in solving many economic
and social problems (Thornton et al., 2011). Entrepreneurs create new
technologies, new products, process innovation, and new markets (Audretsch,
2002). In society with significant number of entrepreneurs, the competition
among business is intensified. Thus, it will create greater product variety, lower
the price, boost productivity, and push the established firms to step up their game
(Kritikos, 2014). In long-term, entrepreneurs also accelerate the market structure
evolution. With the fierce competition, all established firms need to keep
innovating and keep changing so that they can survive. For firms who are not
willing to change, by time they will disappear through the process of “creative
destruction” (Schumpeter, 1934). When all the players in industry keep changing,
altogether the industry will also keep changing for the better (Kritikos, 2014).
In macroeconomic level, entrepreneurs boost economic growth by
introducing innovative products, services, and technologies (Thurik and Carree,
2002). When the economic condition is good, the process of innovation happens
in a fast pace, then followed by higher economic growth. In contrast, when
economic condition is bad, entrepreneurs can also be the one who revitalize the
economy back (Kritikos, 2014). For instance, with the launching of new products
or services, the competition will be intensified, thus the winner firms can boost
their demand, then create new job opportunities and reduce the unemployment
rate. In the long run, entrepreneurs are crucial to keep the competitiveness of the
economy or countries competitiveness.
In spite of economic leverage, entrepreneurs also have a prominent role
in building societies and solving social problems. The first direct impact is
entrepreneurs provide new jobs both in short and long run. The local
communities where the businesses located may reap the benefit of the corporate
social responsibilities program, such as education, environmental protection,
health support, and soon. Moreover, most non-profit organizations are supported
by the charities of businesses. As we know, non-profit organization is one of the
main gears in the social progress. But to be able to operate sustainably, non-profit
organization needs the charities from business. Hence, indirectly businesses also
play a role in social progress.
Last but not least, through the business network, the connections among
business will create an enormous business ecosystem. The connection between
businesses is getting stronger in recent times because of our major development

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in telecommunication and transportation. When societies support this business
network, firms can operate more flexible. The greater the flexibility, the greater
impact entrepreneurs may give to economy and society.
It can be seen clearly how remarkable entrepreneurs’ role in our
wellbeing. Because of that, it’s not surprising that many governments try to
encourage entrepreneurship in their policies. Yet, Mills et al. (2008) stated that
government efforts only focus on inputs rather than outputs which in result only
give gradual impact. Moreover, most of government funds are allocated to
individual business, research and development, or financial and technical
assistance. Their argument questions the effectiveness of government policies.
1.1.2 Entrepreneurship is A Complex Phenomenon
Furthermore, government policies in stimulating entrepreneurship only
focus in economic factors (Uhlaner and Thurik, 2003). Yet, more and more
evidence prove that entrepreneurship is not only influenced by economic factors
(e.g. factor markets) but also social factors and psychological factors. Align with
that, Koch (2013) stated that based on scientific literature the emergence of
entrepreneurs is highly influenced by personality and behaviour. Moreover, the
psychological factor itself is also influenced by social factor (Triandis and Suh,
2002). To create better policies, governments clearly need an aggregate
understanding about what factors that can stimulate the total entrepreneurial
activities.
Shane et al. (2012) stated that entrepreneurship is a process that occurs
over certain period of time rather than one-time event when a person decides to
be an entrepreneur. It is formed by the situation and experience that has
happened before, including experience in the family and peers, working
experience, and so on (Fletcher, 2004). There are several stages on the process,
start from the opportunity recognition, idea development to grab the opportunity,
turning the idea into new product or service, and execution of the required
activities in order to reap the profit. In the realization, motivational traits,
cognitive factors, the entrepreneurial opportunities, the environmental conditions,
competitive strategies, and certain non-motivational individual differences play a
crucial role (Gutterman, 2015).
Many researchers from economics, psychology, and sociology have
investigated entrepreneurial elements on various degrees (Shapero and Sokol,
1982; Shane et al, 2012; Friedman, 2011). From here we can see that
entrepreneurial activity is a complex phenomenon that is caused by complex
factors including economic factors, social factors, and psychology factors. Most
likely those factors don’t affect entrepreneurial activities independently, but
altogether in complex causal factor combinations.

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Based on Global Entrepreneurship Monitor (GEM) 2009 Global Report,
there is diverse variation of early-stage entrepreneurial activity among countries
(Bosma & Levie, 2009). From the result, GEM found that countries’ unique
economic and social status influence the entrepreneurial activity. Moreover,
many scholars believe that entrepreneurial phenomenon can be better understood
if we incorporate social factors into our analysis to give a rounded picture on our
understanding regarding factors that influence entrepreneurial emergence
(Shapero and Sokol, 1982; Berger, 1991; Steyaert, 2007). By getting more
rounded understanding, the change makers including government, non-profit
organization, and business can strive for the correct direction.
1.2 Limitation and Dissent in Prior Research
Although some scholars have agreed that the emerging of entrepreneurs
is combination of a number of motivational factors or conditions. Yet, there is a
dissent among those scholars about which factors that empirically affects the
emerging of entrepreneurs (Akhter and Sumi, 2014). This inconsistency might be
caused by different research sample or the ignorance of causal complexity. Prior
investigations have been conducted to find out the impact of social factors on
entrepreneurial activities. Still, the amount of finding is still quite limited and
remains understudy. Most of the previous researches have limitation in their
scope of research. For example, Akhter and Sumi (2014) who only cover
Bangladesh, Akpor-Robaro (2012) who only covers Nigeria, Khan (2014) who
only covers India, and Thornton et al. (2011) who only covers 5 countries
including Denmark, Spain, China, Singapore, and United States.
The understudy on this area might be caused by the difficulties to
measure the influence of social factors to entrepreneurship quantitatively because
most social and wellbeing index always incorporate GDP or other economic
measure into the index. So, it’s challenging to understand the social influence
apart from economic influence. But recently, there is a new social index which is
able to measure social progress independently from economic factors. This index
is called Social Progress Index which is developed by a famous economist,
Michael E. Porter.
1.3 Research Proposal
1.3.1 Research Purpose
Because of the availability of data that can measure social progress, now
it is possible to investigate cross-country analysis on the impact of combination
of social progress to entrepreneurial activities. Hence, in this paper I want to
investigate what combinations of social progress that can foster the growth of

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entrepreneurial activities from the angle of complex social phenomenon. I will
focus on the combination of causal factors because most social phenomenon is a
result of a combination of causal factors. Furthermore, different combinations of
causal factors can lead to the same phenomenon or what we called as equifinality,
and those factors can give different degree of impact on different situation
(Lieberson and Lynn, 2002; Ragin, 2008). Besides, broad coverage of causal
interactions may affect individual’s decision to become an entrepreneur (Aldrich
and Zimmer, 1986; Birley, 1985).
1.3.2 Research Benefit
If we can find out the combination of social progress which can lead to
the growth of entrepreneurial activities, this result can be used as an insight for
government, non-profit organization, and business to decide which social
progress to be their focal point and pour out their efforts to cultivate those factors
in encouraging entrepreneurial activities. In macro level, the result of this
research can also guide countries to know which social progress they should
cultivate first when they want to enhance their entrepreneurial activities.
In term of academic, this paper can give new insight on what
combination of social progress that may lead to entrepreneurial activity growth.
Because most of the prior research has limitation in terms of population coverage,
this paper can give new evidence in a more globalized coverage. Moreover, if
there is a new significant combination or social progress that hasn’t been
investigated before, it can give a basis for further research on this potentially new
finding.
1.3.3 Research Methodology
Based on prior researches’ findings in this area, we have decided to
analyze the entrepreneurial activities from the complex causality perspective. In
complex causality perspective, we can analyze the causal factor combinations
(conditions) in a more meticulous approach based on their necessary relationship
or sufficient relationship towards the phenomena (outcome). Necessary
relationship means that certain causal factor combination is compulsory for the
existence of the outcome, without this causal factor combination there won’t be
phenomena (outcome) either. Yet, this causal factor combination alone doesn’t
generate the outcome, other causal factor combinations are needed to produce the
outcome conjointly. In contrast, sufficient condition means that certain causal
factor combinations will always lead to the existence of particular outcome.
There is no other outcome possibility for this causal factor combination (Fiss,
2007).

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The analytic technique in this research is fuzzy sets/Qualitative
Comparative Analysis (fs/QCA). We choose this analytic technique because
QCA can analyze complex causality and logical relationship between the causal
factors and the outcome in the most systematic way (Schneider and Wagemann,
2007). The main goal of QCA is to identify combinations of causal factors that
can lead to necessary or sufficient outcome (Legewie, 2013). Because
theoretically QCA is conceptualized as sets, we have to calibrate the data to
determine the set membership.
1.3.4 Research Data
The causal factors are social progress, while the outcome is the total
entrepreneurial activities. To represent social progress, we will use the dimension
of Social Progress Index from 2014 to 2015. In total there are 3 social progress
dimensions under Social Progress Index. Those dimensions are Basic Human
Needs, Foundations of Wellbeing, and Opportunities. On the other hand, to
represent the outcome which is the entrepreneurial activity, we will use Total
early-stage Entrepreneurs Activities (TEA) from 2014 to 2015 that is published
by Global Entrepreneurship Monitor (GEM).

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Chapter II. LITERATURE REVIEW
2.1 Theory of Entrepreneur Development
As we know, total early-stage entrepreneurial activities are determined
by the entrepreneur emergence rate. So, we need to understand how
entrepreneurs are nurtured. There are some theories which explain the
entrepreneur development. In this paper, 4 theories will be elaborated as shown
below:
2.1.1 Family Orientation Theory
This theory views that family background and orientation shapes the
character of entrepreneurs, then it will lead to the emergence of entrepreneurs.
This theory is also supported by Kuratko and Hodgetts (1989) who believes that
family plays a crucial role in nurturing the entrepreneurial character or
personality. Since individual values are dominantly formed by their family
background, therefore family background will also become a determinant factor
whether certain individual will become an entrepreneur or not. The implication
of this theory is if we can develop entrepreneurial character from early phase in
life, it means we can boost the emergence of entrepreneurs by creating a
favorable family condition.
2.1.2 Educational Incubation Theory
This theory views that education supports the emergence of
entrepreneurs by stimulating the awareness of entrepreneurship and equip
individual with new orientation and knowledge. It believes that society with
higher education level will yield more entrepreneurs than society with lower
education level.
2.1.3 Knowledge Spillover Theory
This theory views that people are inspired to become an entrepreneur
after they receive new knowledge that leads to opportunity recognition. They see
that they can exploit that opportunity to gain profit. Since new knowledge
sharing often to be asymmetry, uncertain, and costly for each person, the impact
of the new knowledge sharing to the generation of new business can be quite
diverse.
Knowledge spillover is not only related with opportunity recognition,
but also related with companies’ ability to keep innovative. Through knowledge
capital, small firms are the major contributor of industry’s innovation (Audretsch,
1995). Firms can serve as the knowledge spillover agent in sharing the new
knowledge from one company to others.

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2.1.4 Displacement Theory
This theory views that certain displacement trigger the emergence of
entrepreneurs. Ronstadt (1984) mentions there are two types of socio-cultural
displacements which are cultural displacement and economic displacement.
Cultural displacement happens when certain individual is excluded from certain
job or professional field because of their ethnic background, religion, race, and
sex. These discriminations will force those individuals to choose other alternative
for their survival such as being an entrepreneur.
Economic displacement is related to the dynamic of macroeconomic
situation including recession and depression (Kuratko and Hodgetts, 1989). This
economic displacement meant for the negative effect on the economy. As a result
of this displacement, individuals may lose their job, shrinkage of capital, or new
market situation that may be favorable in supporting new business. Altogether it
can be a foundation block for entrepreneurial emergence.
2.2 Emergence of Entrepreneur
To understand what factors are involved in the creation of new
enterprise, Kantis (2005) breaks down the “entrepreneurial process model” into
three stages. The first stage is the inception of entrepreneurial intention. This
stage starts from the bud of entrepreneurial motivation, followed by the
opportunity identification, and formulation of business plan. After that, the
second stage is the final decision to execute the business plan which involves the
gathering of needed resources and establishment of the new enterprise. At last,
the third stage is the early phase of the new enterprise. It comprises the
turbulence and challenges during the first couple of years after its establishment.
2.2.1 Entrepreneurial Motivation
One factor that has direct and significant impact on entrepreneurial
motivation is prior entrepreneurial experiences (Mai & Nguyen, 2016). Prior
entrepreneurial experiences can come from various sources such as
entrepreneurship training programs, family business, part-time jobs, summer
internship, or start-up project.
Shane et al. (2012) stated that entrepreneurial motivation is affected by
individual’s perception of risk and opportunity. Consequently, when there are
many opportunities identified, the higher the entrepreneurial motivation, then it
cause higher rate of new entrepreneurs and concurrent higher entrepreneurial
activities. Besides, entrepreneurial motivation is also affected by external

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environment such as political factors (e.g. political stability), market forces (e.g.
technology regime), and resources (e.g. labor market including skill availability).
There are two types of factors that influence entrepreneurial motivation.
First, pull factors provide positive or favorable factors in motivating
entrepreneurs to set up their business. Entrepreneurs who are motivated by this
pull factors tend to be self-oriented and the ability to fulfill personal ambitions
with overlook on solely financial gain. They want to prove their personal
capabilities, get self-independence, and be their own boss (Boer et, al, 1997). On
the opposite side, push factors provide negative situation that push individuals to
be an entrepreneurs as a way of survival. These factors can be in term of
unemployment, low income level, or dependence nature of salary employment.
2.2.2 Factors that Affects the Development of Entrepreneurs
Having defined the “entrepreneurial process model”, Kantis (2005) also
introduced 7 factors that affect the development of entrepreneurs and
entrepreneurial firms which described as follows:
1. Social and Economic conditions
Social economic conditions influence the characteristic of the
domestic environment where the potential entrepreneurs live. For example,
when the degree of social fragmentation is high, it is likely that certain
size of the population is unable to access education. Without education,
potential entrepreneurs cannot equip themselves with the skills needed to
manage a business. Moreover, with basic income level, it is unlikely the
potential entrepreneurs are able to accumulate some financial resources to
establish their business.
On the other side, interconnected societies may enhance the
exchange of information between persons. If the information is relevant to
entrepreneurial activity, it will speed up the interaction and the learning
among the entrepreneurial persons. Income levels also positively influence
entrepreneurship. A high per capita income will support the volume and
diversity of goods and service, therefore broaden the scope of
opportunities for the potential entrepreneurs to jump into the market.
Stable economic condition will also reduce the perceived risk associated
with the establishment of new enterprise. When the economic condition is
stable, potential entrepreneurs expect that they will have a favorable
external factor that supports their new enterprise. In contrast, stable
economy may also discourage entrepreneurial intention. It’s because
stable economy eliminate the push factor that views entrepreneurship as
the only way of survival (Kritikos, 2014).

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Another scholar, Akhter and Sumi (2014), also expressed that
many literature supports views the possibility of enhancing entrepreneurial
emergence through mentoring, behavior modification and conditioning,
learning and value orientation. Hence, since social environment is the
source of these conditions, we can infer that social environment is one of
direct determinant factor of entrepreneurial emergence.
2. Culture
Cultural factors have an impact on the development of
entrepreneurial spirit (Wennekers et al., 2002; McGratch et al., 1992). One
of the examples is how culture affects the potential entrepreneurs’
attitudes toward risk of failure. In a culture that favors entrepreneurship, it
is more likely that people consider entrepreneurship as a favored career
path to gain social recognition, to be self-sufficient, or to follow their
admired entrepreneur predecessor. The cultural factors itself may consist
of the family background, educational system, and media communications.
In addition, Koe and Majid (2014) also claimed that there is
significant empirical evidence about the influence of social norms to the
establishment of sustainable entrepreneurship.
3. Productive Structure and Dynamism
This factor implies the characteristic and the size of existing
enterprises and institutions. Most of entrepreneurs gain work experience to
develop their entrepreneurial skills and understanding on how business
works before they become entrepreneurs. Consequently, the degree and
the type of entrepreneurial skills they will develop depend on the
characteristic of the existing enterprises. For instance, in Mason’s study
(as cites in Kantis, 2005) said that small and medium size firms are a
favorable place to acquire broader understanding of business functions
rather than large size firms. Moreover, the industry characteristic, the
degree entry barrier to be more exact, will definitely influence the
opportunities to start a new enterprise.
4. Personal Aspects
This factor implies to individual personal traits of potential
entrepreneurs, such as risk tolerance, perseverance, managerial capability,
and creativity. Those individual traits are highly influenced by the family,
education, and work environments. In fact, the core factor that is
compulsory on entrepreneurs is this individual personal trait such as
creativity, high tolerance of uncertainty, willingness to bear risks,
openness to experience, belief in their ability, and extraversion (Caliendo,
Fossen, & Kritikos, 2011).

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5. The Entrepreneur’s Network
The entrepreneur’s networks may drive the entrepreneurial
process. These networks may include social network (e.g. family and
friends), institutional network (e.g. business associations, government
agencies, or institutions of higher learning), and commercial network (e.g.
suppliers and customers). Through those networks potential entrepreneurs
may sharpen their entrepreneurial skills. For the new entrepreneurs, the
network may act as the business partners who will play crucial roles in
supporting their business.
The entrepreneur’s network itself is influenced by two factors.
The first factor is the socioeconomic condition. If the social structure is
highly unequal it will hinder the communication between various degrees
of social groups. The second factor is the ability to build the relationship
with others. This ability is a part of personal trait which is also highly
influenced by potential entrepreneurs’ domestic environment.
6. Factor Markets
The availability of factor markets, including access to financial
resources, the supply of skilled labor and/or professional workers, and
suppliers of input and equipment, highly influence the whole business
process. If the market is in favorable condition, it will make the
establishment of new firms become easier. For instance, Kortum and
Lerner (2000) found that venture capitalists are notably effective in
funding innovative startups.
7. Regulations and Policies
This factor implies all regulations and policies that influence the
establishment and survival of new enterprises. It may include taxes,
procedural and bureaucracy in formation of new enterprise, and incentive
and initiative program to develop entrepreneurship. For example, since
most entrepreneurs face the barrier to financial capital, government grants
and subsidies can stimulate the establishment of new enterprise (Hall and
Sobel, 2006).
Kantis (2005) claimed that all of the factors above influence entrepreneurial
emergence in a conceptual framework as figure below:

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Figure 2.1: Entrepreneurship Development System
Source: Developing entrepreneurship: Experience in Latin America and Worldwide (p. 23), by Hugo Kantis, Washington
D. C.: Inter-American Development Bank

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This conceptual framework is developed through specialized literature
review and qualitative interviews with key informants and entrepreneurs from
various countries (Kantis et al., 2002). As in figure 2.1, we can see there’s a
systematic approach in the creation of entrepreneurs which is divided into three
chronological stages. The first stage is called as “Inception of the Entrepreneurial
Venture.” It starts with how individual cultivates entrepreneurial motivation,
entrepreneurial skills, opportunity identification, and business planning. Then,
the second stage is “Company Start-up.” This stage consists of the final decision
to start a business and its preparation in accumulating all the needed resources to
launch the business. Finally, the last stage is “Early Development of the Firm.”
This stage starts after the business launching and associated with the early-years
management of the newly established business.
The entrepreneurship development is triggered by social economic
conditions first. Then it will shape the individual characteristics and individual
intention to become an entrepreneur. Not only individual characteristics are
important in early budding of entrepreneurs but also during business
establishment and its development. In fact, most individual characteristics are
formed by social factors. Bandura (1999) affirms it by concluded that “the
qualities that are cultivated and the life paths that realistically become open to
them are partly determined by the nature of the societal systems to which their
development is entrusted” (Bandura, 1999, p. 65). Bandura (1999) also pointed
out that social factors are in form of a societal system or what we called as
society.
2.3 Type of Entrepreneur
2.3.1 Opportunity-driven and Necessity-driven Entrepreneurs
2.3.1.1 Opportunity-driven Entrepreneurs
Opportunity-driven entrepreneur is a type of entrepreneurs that start a
business as an additional source of income or recognition of business opportunity
that can be exploited to get profits. This entrepreneur usually has several working
or employment options.
2.3.1.1 Necessity-driven Entrepreneurs
Opportunity-driven entrepreneur is a type of entrepreneurs that start a
business because they don’t have other option for employment besides
entrepreneurship. In other words, entrepreneurship is their only way to survive.
This entrepreneur is highly influenced by the environment and economy
condition. For instance, in society where there are no enough job opportunities,

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the working population can’t get any employment in both private and public
sector. Hence, they are cornered to become an entrepreneur in order to sustain
their life.
2.3.2 High-growth and Low-growth Entrepreneurs
2.3.2.1 High-growth Entrepreneurs
High-growth entrepreneur is a terminology to address entrepreneurs that
establish a business with revenue growth of 20% or more per year and give
significant impact on communities. Based on GEM survey in from 2006 to 2010,
although high-growth entrepreneurs only count for 4% of the total entrepreneurs,
but it generates 38% of the total jobs generated by all entrepreneurs (Morris,
2011). In term of number, their number is really small, but their impact is really
significant. In comparison to developing countries, developed countries have
more number of high-growth entrepreneurs. To name a few, North America,
highly developed Asia, the European Union, and Oceania generally have
significant number of high-growth entrepreneurs. Yet, it doesn’t mean that all
developed countries have significant number of high-growth entrepreneurs. In
Greece for instance, although it’s a developed countries, it doesn’t have many
high-growth entrepreneurs.
2.3.2.2 Low-growth Entrepreneurs
Low-growth entrepreneur is a terminology to address entrepreneurs that
establish a business with revenue growth less than 5% per year and low new job
creation rate. Majority of entrepreneurs fall into this type of entrepreneurs. Based
on GEM survey from 2006 to 2010, almost 90% of the entrepreneurs are low-
growth entrepreneur. Despite the ample number of entrepreneurs, this type of
entrepreneur only generates around 30% of total new job creation (Morris, 2011).
Because its growth rate is relatively small, the business is unable to give
significant impact on economies. In comparison to developed countries,
developing countries have more number of low-growth entrepreneurs. To name a
few, Sub Saharan Africa and South America generally have significant number
of low-growth entrepreneurs. Those entrepreneurs most likely establish micro-
size or small-size businesses.
2.3.2.3 Comparison of High-growth and Low-growth Entrepreneurs

14
Table 2.1 Comparison of High-growth and Low-growth Entrepreneurs
High-growth
Entrepreneurs
Low-growth
Entrepreneurs
Motivation Opportunity-driven Necessity-driven;
Opportunity-driven
Education High education level Low education level
Business Formation Partnership Sole proprietorship
Product/Service Innovative No differentiation
Market Orientation Global-oriented Local-oriented
Impact Create lots of new jobs Doesn’t create or create a
few new jobs

15
From Table 2.1 above, we can see that high-growth entrepreneurs are
motivated by opportunity recognition or willingness to get additional source of
income. In other side, low-growth entrepreneurs may also be encouraged by
opportunity recognition because they have positive attitude towards
entrepreneurship. But, they are not only motivated by opportunity, but also
necessity. They see entrepreneurship as the only way to sustain their life. In term
of education, high-growth entrepreneurs generally hold high level of education
such as undergraduate degree or graduate degree. In contrast, low-growth
entrepreneurs generally hold low level of education that equips them with basic
education. The difference in education level influences entrepreneur skills and
abilities to grow the business. It also indicates that Access to Advanced
Education is important for high-growth entrepreneurs, but not important for low-
growth entrepreneurs.
Based on GEM survey, the majority of high-growth entrepreneurs work in
partnership, while the majority of low-growth entrepreneurs work as sole
proprietorship (Morris, 2011). The difference business form may also influence
the business growth potential. High-growth entrepreneurs also tend to produce
innovative product/service, while low-growth entrepreneurs tend to produce
same product/service without any differentiation. High-growth entrepreneurs
have international market orientation which is represented by significant number
of international customers. On the contrary, low-growth entrepreneurs more
focus on local market. Hence, the majority of their customers are local customers.
Because of the difference of growth rate, those two types of entrepreneur also
have different impact on economy. High-growth entrepreneurs generally create
lots of new jobs, while low-growth entrepreneurs generally only employ the
owner or 1 to 5 employees.
2.4 Total Entrepreneur Activities (TEA)
Schumpeter (1934) defines entrepreneur as an innovator who brings a
change within markets through new things such as the introduction of new
products or new quality, the introduction of new method or system, the
expansion of new market, the finding of new source of new materials supply, and
the establishment of new organization. Hence, entrepreneurial activity is all
activities that are involved to objectify the new change into markets.
Entrepreneurial activity is based on the significance of the activity rather than
intentions or attitudes (Ahmad & Seymour, 2008). Therefore, more or less
entrepreneurial activity gives real impact on the markets.
Some scholars use entrepreneurial activity as an indicator to measure the
level of entrepreneurship (e.g., Stel, Carree, and Thurik, 2005; Bowen and Clercq,
2008; Friedman, 2011). Because I want to find out what social progress that able
to stimulate the emergence of entrepreneur, I will use Total Early-stage

16
Entrepreneurial Activity (TEA) which is published by The Global
Entrepreneurship Monitor (GEM) to represent entrepreneurial activity. GEM
defines Total early-stage Entrepreneurial Activity (TEA) as the percentage of
population whose age is 18 to 64 years old and about to start a business or have
started the business that is not more than 42 months.
Autio (2007) found that the general pattern of TEA varies based on
country development status. High-income countries generally have lower early-
stage entrepreneurial activities compares to other countries with lower income.
Among all world regions, Africa and South America have the highest total early-
stage entrepreneurial activity rate but those activities have low impact on new job
creation. In contrast, more developed regions such as North America, some parts
of Asia, the European Union, and Oceania shows the highest impact on new job
creation.
Based on countries stage of growth, countries can be grouped into three
stages. Stage 1 is the factor-driven countries, stage 2 is efficient-driven countries,
and stage 3 is innovation-driven countries. These stages are sequential stages
which start from stage 1 and finish in stage 3. Most developed countries are
categorized as innovation-driven countries, while most developing countries are
categorized as factor-driven countries. In term of these stages, the highest
average TEA rates in 2015 are found in factor-driven countries (21%), followed
by efficient-driven countries (15%), and innovation-driven countries (8%)
(Kelley, D., Singer, S., & Herrington, M, 2015).

17
Figure 2.2: Total Entrepreneurial Activities in Factor-driven, Efficient-
driven, and Innovation-driven Economies
Source: http://www.gemconsortium.org/
Innovation-driven Economies
India
Kazakhstan
Iran
Vietnam
Philippines
Cameroon
BurkinaFaso
Botswana
Senegal
Malaysia
Bulgaria
Morocco
Macedonia
Egypt
Croatia
Hungary
Poland
SouthAfrica
Tunisia
Romania
China
Panama
Thailand
Latvia
Uruguay
Argentina
Guatemala
Indonesia
Barbados
Factor-driven Economies Efficiency-driven Economies
Brazil
UnitedKingdom
Mexico
Peru
Colombia
Chile
Lebanon
Ecuador
Germany
Italy
Norway
Spain
Slovenia
Belgium
Finland
Greece
Netherlands
Sweden
Switzerland
Taiwan
PuertoRico
Ireland
Korea
Portugal
Slovakia
Luxembourg
Israel
USA
Australia
Estonia
Canada

18
As you can see in figure 2.2, there are more diversity of TEA rates in
factor-driven countries and efficiency-driven countries. In factor-driven countries
the TEA range is from 11% in India to 39% in Senegal. While in efficiency-
driven countries the TEA range is from 3% in Malaysia to 34% in Ecuador.
Despite this diversity, from GEM survey in 2013, 2014, and 2014, there is an
ascending trend of TEA among all countries (Kelley, D., Singer, S., &
Herrington, M, 2015).
2.5 Social Progress Index (SPI)
Social progress is the capacity of a society to fulfill the basic human
needs of its resident, form the foundation for its resident to improve and sustain
their quality of life, and set up the favorable conditions to nurture all individuals
in reaching their full potential. This social progress can be measured with Social
Progress Index which has been developed by Michael E. Porter. The first
publication of Social Progress Index was published in 2013. Year by year the
countries coverage is getting broader. In 2015 the social progress index has fully
covered 133 countries (94% of world’s population) and partially covered 28
countries. Hence, this brings to a total 161 countries (99% of world’s population).
Yet, Social Progress Index application is not only limited to country level, it also
can be applied to subnational level. On this index, social progress is measured
under three dimensions which are segregated into twelve components as shown
in figure 2.3 below.

19
Figure 2.3: Social Progress Index 2015
Source: http://www.socialprogressimperative.org/

20
2.5.1 Social Progress Index Dimensions
Three dimensions in Social Progress Index are Basic Human Needs,
Foundations of Wellbeing, and Opportunity. For each dimension there are 4
components.
1. Basic Human Needs
This dimension is related with the fulfillment of the very basic human
needs. Basic Human Needs is disintegrated into 4 components which are
Nutrition and Basic Medical Care, Water and Sanitation, Shelter, and Personal
Safety. This dimension score is the average of its four components.
2. Foundations of Wellbeing
This dimension is related with the foundation of human wellbeing that
can improve and sustain our quality of life. Foundations of Wellbeing is
disintegrated into 4 components which are Access to Basic Knowledge, Access
to Information and Communications, Health and Wellness, and Ecosystem
Sustainability. This dimension score is the average of its four components.
3. Opportunity
This dimension shows how society can support individuals’ freedom and
independence, including pursuing their own dreams and move forward to achieve
those dreams. Opportunity is disintegrated into 4 components which are Personal
Rights, Personal Freedom and Choice, Tolerance and Inclusion, and Access to
Advanced Education. Personal Rights and Access to Advanced Education are
related with individuals’ ability in pursuing their own dream with their best
capability. While Personal Freedom & Choice and Tolerance & Inclusion are
related with the existence of various aspects that may limit individuals’ action.
This dimension score is the average of its four components.
2.5.2 Social Progress Index Components
Below 3 dimensions of Social Progress Index there are 12 components. In more
detail, each component also has 3 to 5 indicators.
1. Nutrition and Basic Medical Care
This component measures how well a country can provide basic
nutrition and medical care for its resident. Nutrition and Basic Medical Care has
5 indicators such as Undernourishment, Depth of Food Deficit, Maternal
Mortality Rate, Child Mortality Rate, and Deaths from Infectious Disease. This
component score is calculated by summing the weighted score of the indicators.

21
The weight is set through factor analysis. The detail of the factor analysis weight
can be seen in Appendix 2.1.
i. Undernourishment (% of population): The percentage of population whose
food intake continuously insufficient to meet the dietary requirement.
ii. Depth of food deficit (calories/undernourished person): The number of
calories needed to lift the undernourishment to the sufficient required
dietary level when all other factors being constant.
iii. Maternal mortality rate (death/100,000 live births): The annual number of
female death during pregnancy, childbirth, and within 42 days after the
childbirth per 100,000 live births.
iv. Child mortality rate (deaths/1,000 live births): The number of child born
on specific year dying before reaching age of five per 1,000 live births.
v. Deaths from infectious disease (deaths/100,000 people): Age-standardized
death rate caused by infectious diseases, including tuberculosis, sexually
transmitted diseases, HIV/AIDS, diarrhea, pertussis, polio, measles,
tetanus, meningitis, hepatitis B, hepatitis C, malaria, trypanosomiasis,
Chagas disease, schistosomiasis, leishmaniasis, lymphatic filariasis,
onchocerciasis, leprosy, dengue, Japanese encephaltitis, trachoma,
intestinal infections, and other infectious diseases per 100,000 people.
2. Water and Sanitation
This component measures how well a country can provide access to safe
drinking water for its resident. Water and Sanitation has 3 indicators such as
Access to Piped Water, Rural Access to Improved Water Source, and Access to
Improved Sanitation Facilities. This component score is calculated by summing
the weighted score of the indicators. The weight is set through factor analysis.
The detail of the factor analysis weight can be seen in Appendix 2.1.
i. Access to piped water (% of population): The percentage of the population
who has water service pipe in one or more taps that are connected to in-
house plumbing, yard, or plot outside the house.
ii. Rural access to improved water source (absolute difference between % of
population): The percentage of rural population with access to piped water
into residential area, piped water to yard/plot, public tap or standpipe,
tubewell or borehole, protected dug well, protected spring, or rainwater.
iii. Access to improved sanitation facilities (% of population): The percentage
population with refined sanitation, including flush toilets, piped sewer
systems, septic tanks, flush/pour flush to pit latrine, ventilated improved
pit latrines (VIP), pit latrine with slab, and composting toilets.
3. Shelter
This component measures how well a country can provide a proper
housing with its basic utilities for its resident. Shelter has 4 indicators such as

22
Availability of Affordable Housing, Access to Electricity, Quality of Electricity,
and Indoor Air Pollution Attributable Deaths. This component score is calculated
by summing the weighted score of the indicators. The weight is set through
factor analysis. The detail of the factor analysis weight can be seen in Appendix
2.1.
i. Availability of affordable housing (% satisfied): The percentage of
respondents stated satisfied with this question, “In your city or area where
you live, are you satisfied or dissatisfied with the availability or good,
affordable housing?”
ii. Access to electricity (% of population): The percentage of population who
has access to electricity.
iii. Quality of electricity (1=low; 7=high): Average response of the
respondents to this question, “In your country, how would you assess the
reliability of the electricity supply (lack of interruptions and lack of
voltage fluctuations)?” (1=not reliable at all; 7=extremely reliable)
iv. Indoor air pollution attributable deaths (deaths/100,000 people): Age-
standardized deaths because of indoor air pollution, including indoor air
pollution-derived cases of influenza, pneumococcal pneumonia, H
influenza type B pneumonia, respiratory syncytial virus pneumonia, other
low respiratory infections, trachea, bronchus, and lung cancers, ischemic
heart disease, ischemic stroke, hemorrhagic and other non-ischemic stroke,
chronic obstructive pulmonary disease, and cataracts per 100,000 people.
4. Personal Safety
This component measures how safe and secure are the condition of a
country for the resident to live in that country. Personal Safety has 5 indicators
such as Homicide Rate, Level of Violent Crime, Perceived Criminality, Political
Terror, and Traffic Deaths. This component score is calculated by summing the
weighted score of the indicators. The weight is set through factor analysis. The
detail of the factor analysis weight can be seen in Appendix 2.1.
i. Homicide rate (deaths/100,000 people): The number of purposeful
murders conducted by another person per 100,000 persons.
ii. Level of violent crime (1=low; 5=high): Evaluation based on the question,
“Is violent crime likely to pose a significant problem for government
and/or business over the next two years?”
iii. Perceived criminality (1=low; 5=high): Evaluation of the security level in
domestic area and the degree whether other residents can be trusted or not.
iv. Political terror (1=low; 5=high): The level of political violence and terror
based on 5-level “terror scale” as shown in Table 2.1 below:

23
Table 2.2 Political Terror Scale
Level Explanation
1 Countries under a secure rule of law, people are not imprisoned for their views, and torture is rare or
exceptional. Political murders are extremely rare.
2 There is a limited amount of imprisonment for nonviolent political activity. However few persons are
affected; torture and beatings are exceptional. Political murder is rare.
3 There is extensive political imprisonment or a recent history of such imprisonment. Execution or other
political murders and brutality may be common. Unlimited detention, with or without a trial, for
political views is accepted.
4 Civil and political rights violations have expanded to large numbers of the population. Murders,
disappearances, and torture are a common part of life. In spite of its generality, on this level terror
affects those who interest themselves in politics or ideas.
5 Terror has expanded to the whole population. The leaders of these societies place no limits on the
means or thoroughness with which they pursue personal or ideological goals.

24
v. Traffic deaths (deaths/100,000 people): Estimation road traffic fatal injury
deaths per 100,000 people.
5. Access to Basic Knowledge
This component measures how well a country can provide an access to
basic knowledge for its resident. Access to Basic Knowledge has 5 indicators
such as Adult Literacy Rate, Primary School Enrollment, Lower Secondary
School Enrollment, Upper Secondary School Enrollment, and Gender Parity in
Secondary Enrollment. This component score is calculated by summing the
weighted score of the indicators. The weight is set through factor analysis. The
detail of the factor analysis weight can be seen in Appendix 2.1.
i. Adult literacy rate (% of population with age 15+): The percentage
population aged 15 years old or more who can read and write a short and
simple statement with understanding on their daily life. Moreover, their
literacy level is also covers numerical ability to make simple arithmetic
calculation.
ii. Primary school enrollment (% of children): The percentage of children in
primary school age who is enrolled in primary school compares to the
total population of children in primary school age.
iii. Lower secondary school enrollment (% of children): The percentage of
children who is enrolled in low secondary education without considering
the age compares to the total population of the children in lower secondary
education age. Because age factor is not considered here, hence the
percentage can be more than 100%. But in the SPI model, the data is
limited at 100.
iv. Upper secondary school enrollment (% of children): The percentage of
children who is enrolled in upper secondary education without considering
the age compares to the total population of the children in upper secondary
education age. Because age factor is not considered here, hence the
percentage can be more than 100%. But in the SPI model, the data is
limited at 100.
v. Gender parity in secondary enrollment (girls/boys ratio): The ratio of girls
to boys who is enrolled at secondary education both in public and public
school. But in the SPI model, the data is limited at 1.
6. Access to Information and Communications
This component measures how well a country can provide access to
information for its resident both from inside the country and outside the country.
Access to Information and Communications has 3 indicators such as Mobile
Telephone Subscriptions, Internet Users, and Press Freedom Index. This

25
i. Mobile telephone subscriptions (subscriptions/100 people): The number of
subscriptions on public mobile telephone provider who is using cellular
technology, combine with the number of pre-paid SIM cards whose active
within the last three months. But in the SPI model, the data is limited at
100 mobile phones per 100 people.
ii. Internet users (% of population): The percentage estimation of population
who is using internet from any device, including mobile phone, within the
last 12 months.
iii. Press Freedom Index (0=most free; 100=least free): The degree of
freedom that is enjoyed by the journalists, news organization, and internet
users related to press, combine with the efforts made by the authorities to
honor and insure this freedom.
7. Health and Wellness
This component measures how well a country can provide a favorable
condition for its resident to live a healthy life. Health and Wellness has 5
indicators such as Life Expectancy, Premature Deaths from Non-communicable
Diseases, Obesity Rate, Outdoor Air Pollution Attributable Deaths, and Suicide
Rate. This component score is calculated by summing the weighted score of the
indicators. The weight is set through factor analysis. The detail of the factor
analysis weight can be seen in Appendix 2.1.
i. Life expectancy (years): The number of years a newborn baby would live
if general pattern of life mortality happens throughout its life.
ii. Premature deaths from non-communicable diseases (probability of dying):
The probability of dying caused by cardiovascular disease, cancer,
diabetes, or chronic respiratory disease on the people age 30 to 70 years
old.
iii. Obesity rate (% of population): The percentage of population with Body
Mass Index (BMI) 30 kg/m2
or higher (age-standardized estimation).
iv. Outdoor air pollution attributable deaths (deaths/100,000 people): The
number of deaths per 100,000 people caused by the emissions from
industrial activity, households, cars and trucks.
v. Suicide rate (deaths/100,000 people): The number of deaths caused by
intentional motivation of taking oneself life per 100,000 people (age-
adjusted).
8. Ecosystem Sustainability
This component measures how well a country protects and sustains its
natural environment such as air, water, and land, which highly related with the
health and wellness of current and future wellbeing. Ecosystem Sustainability has

26
3 indicators such as Greenhouse Gas Emissions, Water Withdrawals as a
Percentage of Resources, and Biodiversity and Habitat. This component score is
calculated by summing the weighted score of the indicators. The weight is set
through factor analysis. The detail of the factor analysis weight can be seen in
Appendix 2.1.
i. Greenhouse gas emissions (CO2 equivalents per GDP): The amount of
emissions from carbon dioxide (CO2), methane (CH4), nitrous oxide
(N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur
hexafluoride (SF6) expressed in CO2 equivalents with 100 year global
warming potentials found in the Intergovernmental Panel on Climate
Change Second Assessment Report per GDP-PPP.
ii. Water withdrawals as a percentage of resources: The ratio of total annual
water withdrawal compares to total available renewable water supply
annually.
iii. Biodiversity and habitat (0=no protection; 100=high protection): The
protection of terrestrial and marine areas with its threatened or endangered
species, covering Critical Habitat Protection, Terrestrial Protected Areas
(National Biome Weight), Terrestrial Protected Areas (Global Biome
Weight), and Marine Protected Areas.
9. Personal Rights
This component measures the degree of how a country’s resident can
have freedom to uphold their own rights. Personal Rights has 5 indicators such as
Political Rights, Freedom of Speech, Freedom of Assembly/Association,
Freedom of Movement, and Private Property Rights. This component score is
calculated by summing the weighted score of the indicators. The weight is set
through factor analysis. The detail of the factor analysis weight can be seen in
Appendix 2.1.
i. Political rights (1=full right; 7=no right): An appraisal of three
subcategories of political rights: electoral process, political pluralism and
participation, and functioning of government.
ii. Freedom of speech (0=low; 2=high): The extent of freedom in speech and
press, along with ownership of media outlets in opposition to government
censorship, which are measured on scale of 0 (complete censor in all
media by government within a particular year) to 2 (no censor in all media
by government within a particular year).
iii. Freedom of assembly/association (0=low; 2=high): The extent of freedom
in assembly and association in opposition to government limitations or
restriction (legal protections), which are measured on scale of 0 (severe
strict restriction to all citizens) to 2 (no restriction to all citizens).
iv. Freedom of movement (0=low; 4=high): An appraisal of two
subcategories of freedom of movement: Freedom of Foreign Movement

27
which represents freedom to leave and return to their home country and
Freedom of Domestic Movement which represents freedom to travel
within their home country. Scale of 0 means the freedom is severely
restricted, while 2 means the freedom is freely enjoyed by all citizens.
v. Private property rights (0=none; 100=full): The extent of how a country’s
law protects private property rights along with its law enforcement.
Measured by scale of 0 (private property right is not allowed, all property
owns by the state) to 2 (private property is protected by the law along with
the full enforcement of that law).
10.Personal Freedom and Choice
This component measures the degree of how a country’s resident can
have a freedom to make their own personal decisions. Personal Freedom and
Choice has 5 indicators such as Freedom over Life Choices, Freedom of Religion,
Early Marriage, Satisfied Demand for Contraception, and Corruption. This
i. Freedom over life choices (% satisfied): The percentage of respondents
whose response is satisfied to following question, “Are you satisfied or
dissatisfied with your freedom to choose what you do with your life?”
ii. Freedom of religion (1=low; 4=high): An aggregate appraisal of 20 types
of religion and faith restrictions, including government effort to prohibit
particular religion/faith, prohibit conversion, limit preaching, give
preferential treatment to one or more religion/faith.
iii. Early marriage (% of population): The percentage of women married in
age 15-19 years.
iv. Satisfied demand for contraception (% of women age 15 to 49): The
percentage of total demand of contraception on married or in-union
women aged 15 to 49 years old who satisfied with the modern methods.
v. Corruption (0=high; 100=low): The perceived degree of public sector
corruption based on expert opinion.
11.Tolerance and Inclusion
This component measures the degree of how a country treats its resident
without any prejudice and hostility that can hinders them from reaching their full
potential. Tolerance and Inclusion has 5 indicators such as Tolerance for
Immigrants, Tolerance for Homosexuals, Discrimination and Violence against
Minorities, Religious Tolerance, and Community Safety Net. This component
score is calculated by summing the weighted score of the indicators. The weight
is set through factor analysis. The detail of the factor analysis weight can be seen
in Appendix 2.1.

28
i. Tolerance for immigrants (0=low; 100=high): The percentage of
respondents whose response is yes to the following question “Is the city or
area where you live a good place or not a good place to live for
immigrants from other countries?”
ii. Tolerance for homosexuals (0=low; 100=high): The percentage of
respondents whose response is yes to the following question “Is the city or
area where you live a good place or not a good place to live for gay or
lesbian people?”
iii. Discrimination and violence against minorities (0=low; 10=high): Group
Grievance Indicator, including discrimination, powerlessness, ethnic
violence, communal violence, sectarian violence, and religious violence.
iv. Religious tolerance (1=low; 4=high): An appraisal of 13 types of religious
hostility by private individuals, organizations or groups in society, along
with religion-related armed conflict or terrorism, mob or sectarian
violence, harassment over attire for religious reasons or other religion-
related intimation or abuse.
v. Community safety net (0=low; 100=high): The percentage of respondents
whose response is yes to the following question, “If you were in trouble,
do you have relatives or friends you can count on to help you whenever
you need them, or not?”
12.Access to Advanced Education
This component measures how well a country can provide personal
access to its entire resident who wishes to pursue further education. Access to
Advanced Education has 4 indicators such as Years of Tertiary Schooling,
Women’s Average Years in School, Value Lost Due to Inequality in Education,
and Number of World Class Universities. This component score is calculated by
summing the weighted score of the indicators. The weight is set through factor
analysis. The detail of the factor analysis weight can be seen in Appendix 2.1.
i. Years of tertiary schooling (years): The average years needed to complete
tertiary education among people aged older than 25 years old.
ii. Women’s average years in school (years): The average number of years
spent by women between 25 to 34 years old to attend school, including
primary, secondary, and tertiary education.
iii. Value lost due to inequality in education (0=low; 1=high): The percentage
difference between the Human Development Index (expected years of
schooling), Education Index (average years of schooling) and the
Inequality-adjusted Education Index.
iv. Number of world class universities (0=none; 5=more than 50): The
number of universities which are ranked on three most widely used global
university rankings.

29
Table 2.3 Summary of Social Progress Index
Dimensions Components
Basic Human Needs
Nutrition and Basic Medical Care
Water and Sanitation
Shelter
Personal Safety
Foundations of Wellbeing
Access to Basic Knowledge
Access to Information and
Communications
Health and Wellness
Ecosystem Sustainability
Opportunity
Personal Rights
Personal Freedom and Choice
Tolerance and Inclusion
Access to Advanced Education

30
2.5.3 Current Social Progress Index Status
Figure 2.4: Mapping of Social Progress Index 2015
Source: http://www.socialprogressimperative.org/

31
From the figure 2.4 above we can see that developed countries relatively
have high social progress score, including Canada, North America, Western
European countries, Chile, Australia, Japan, and so on. On the other hand,
emerging countries relatively have medium social progress score, including
South East Asian countries, Russia, some Eastern European countries, and so on.
Finally, developing countries relatively have lower social progress score,
including some countries in Africa and Asia. This mapping shows that there is a
relationship between social progress and GDP. Yet, it doesn’t mean that
countries with highest GDP are also countries with highest social progress
(Porter et al., 2014). The social progress status will be categorized into 6 social
progress status as shown below:

32
1. Very High Social Progress Countries
Figure 2.5: Comparison of SPI 2014 and SPI 2015
in Very High Social Progress Countries
Notes:
NOR=Norway; SWE=Sweden; CHE=Switzerland; ISL=Iceland; NZL=New Zealand; CAN=Canada; FIN=Finland;
DNK=Denmark; NLD=Netherlands; AUS=Australia
84.5
85
85.5
86
86.5
87
87.5
88
88.5
NOR SWE
CHE
ISL
NZL
CAN
FIN
DNK
NLD
AUS
SPI 2014
SPI 2015

33
Figure 2.5 above shows list of countries with very high social progress.
Top ten countries with the highest social progress are classified as countries with
very high social progress. The countries from the highest to the lowest social
progress in this group are Norway, Sweden, Switzerland, Iceland, New Zealand,
Canada, Finland, Denmark, Netherlands, and Australia. There is only slight
difference from the highest (Norway) to the lowest (Australia) with only 1.94
points. Despite this slight difference, there is a diversity of strengths and
weaknesses in term of components. From 2014 to 2015 there is an improvement
in all of the countries in this group.
Countries in this group show strong performance in all three dimensions.
In this group, the average Basic Human Needs is 94.77, the average of
Foundations of Wellbeing is 83.85, and the average of Opportunity is 83.07. In
term of component, this group generally shows strong performance in Personal
Freedom & Choice and Tolerance & Inclusion. Align with most high-income
countries, this group also shows the worst performance on Ecosystem
Sustainability with average score for only 66.08. Moreover, almost all of the
countries in this group are relatively small countries, with Canada as the only
exception.

34
2. High Social Progress Countries
in High Social Progress Countries
Notes:
GBR= United Kingdom; IRL=Ireland; AUT=Austria; DEU=Germany; JPN=Japan; USA=United States; BEL=Belgium;
PRT=Portugal; SVN=Slovenia; ESP=Spain; FRA=France; CZE=Czech Republic; EST=Estonia; URY=Uruguay;
SVK=Slovakia; CHL=Chile; POL=Poland; CRI=Costa Rica; KOR=Republic of Korea; CYP=Cyprus; ITA=Italy
72
74
76
78
80
82
84
86
GBR IRL AUTDEU JPN USA BEL PRT SVN ESP FRA CZE EST URY SVK CHL POL CRI KOR CYP ITA
SPI 2014
SPI 2015

35
Figure 2.6 above shows list of countries with high social progress. There
are 21 countries in this group from United Kingdom (84.68) to Italy (77.38). The
full list of countries in this group can be seen in the Appendix 2.2. This group
consists of some high-income countries and high-performing emerging countries.
Across three dimensions the average score of Basic Human Needs is 90.86,
average score of Foundations of Wellbeing is 77.83, and average of Opportunity
is 73.82. In term of overall social progress index this group has relatively high
score, but generally each country has significantly lower score in its one or more
components. In term of component, this group performs worst in Ecosystem
Sustainability.
From this group we can see that although some countries might have
strong performance in their economic development, there is significant variation
in their social progress performance. Those variations might not only relate with
their cultural differences but also policy and investment choices. For instance, in
some European countries, Japan, and high-performing Latin American countries
the extensive social safety net may contribute to its high social progress score. In
general, there is an improvement from social progress in 2014 to social progress
in 2015, except United Kingdom, France, and South Korea who have
diminishing social progress.

36
3. Upper Middle Social Progress Countries
in Upper Middle Social Progress Countries
Notes:
HUN=Hungary; LVA=Latvia; GRC=Greece; LTU=Lithuania; MUS=Mauritius; HRV=Croatia; ARG=Argentina; ARE=United
Arab Emirates; ISR=Israel; PAN=Panama; BRA=Brazil; BGR=Bulgaria; JAM=Jamaica; SRB=Serbia; MYS=Malaysia;
KWT=Kuwait; MNE=Montenegro; COL=Colombia; ROU=Romania; ECU=Ecuador; ALB=Albania; MKD=Macedonia;
MEX=Mexico; PER=Peru; PRY=Paraguay
60
65
70
75
SPI 2014
SPI 2015

37
Figure 2.7 above shows list of countries with upper middle social
progress. This group consists of 25 countries from various economic
developments ranging from Kuwait that has GDP per capita $82,358 to Paraguay
that has GDP per capita $7,833. The full list of countries in this group can be
seen in the Appendix 2.2. This group affirms that GDP is not the only factor that
determines social progress. The highest scores in this group is held by Hungary
with score 74.80, while the lowest score is held by Paraguay with score 67.10.
Countries in this group generally perform good levels of social progress with
average Basic Human Needs is 80.66, average Foundations of Wellbeing is 73.52,
and average Opportunity is 57.73. Moreover, almost all countries show
improvement in their social progress from 2014 to 2015, except Hungary,
Panama, and Brazil.
One characteristic in this country groups is the Opportunity significantly
lower compares to Basic Human Needs and Foundations of Wellbeing. United
Arab Emirates and Kuwait especially represent this characteristic the most.
Those two countries do well with the social progress indicators that are related
with GDP per capita, but relatively not doing well on other indicators. Yet, not
all countries in this group follow that characteristic. Jamaica, Brazil, and Mexico
for instance, there is relatively no big difference among their three social
progress dimensions.

38
4. Lower Middle Social Progress Countries
in Lower Middle Social Progress Countries
Notes:
THA=Thailand; BIH=Bosnia and Herzegovina; ARM=Armenia; ZAF=South Africa; BWA=Botswana; TUN=Tunisia;
SAU=Saudi Arabia; RUS=Russian Federation; BOL=Bolivia; NAM=Namibia; DOM=Dominica; GTM=Guatemala;
MNG=Mongolia; KAZ=Kazakhstan; DZA=Algeria; GUY=Guyana; EGY=Egypt; MAR=Morocco; KGZ=Kyrgyzstan;
IRN=Iran; SEN=Senegal
0
10
20
30
40
50
60
70
SPI 2014
SPI 2015

39
Figure 2.8 above shows list of countries with lower middle social
progress. This group is the largest group with 42 countries ranging from Thailand
(with SPI score 66.34) to Nepal (with SPI score 55.33). The full list of countries
in this group can be seen in the Appendix 2.2. No countries in this group shows
Basic Human Needs score lower than 55.50, nor countries shows Opportunity
higher than 62.38. In this group, the average Basic Human Needs is 72.34, the
average Foundations of Wellbeing is 66.90, the average Opportunity is 47.14. In
term of its social progress score, the countries in this group have really tight
scores. Nevertheless, they have a wide diversity of strengths and weaknesses in
their indicator level.
From 2014 to 2015, all countries in this group generally experience
improvement in the social progress. However, there are several countries
declines in their social progress, including Botswana, El Salvador, Jordan,
Nicaragua, Kazakhstan, Cuba, Guyana, and Egypt.

40
5. Low Social Progress Countries
in Low Social Progress Countries
Notes:
KHM=Cambodia; BGD=Bangladesh; IND=Indonesia; LAO=Republic of Lao; LSO=Lesotho; KEN=Kenya; ZMB=Zambia;
RWA=Rwanda; SWZ=Swaziland; BEN=Benin; COG=Congo; UGA=Uganda; MWI=Malawi; BFA=Burkina Faso; IRQ=Iraq;
CMR=Cameroon; DJI=Djibouti; TZA=Tanzania; TGO=Togo; MLI=Mali; MMR=Myanmar; MOZ=Mozambique;
MRT=Mauritania; PAK=Pakistan; LBR=Liberia; MDG=Madagascar; NGA=Nigeria
0
10
20
30
40
50
60
SPI 2014
SPI 2015

41
Figure 2.9 above shows list of countries with low social progress. This
group consists of 27 countries with social progress index range from 53.96
(Cambodia) to 43.31 (Nigeria). The full list of countries in this group can be seen
in the Appendix 2.2. Certain characteristic in this group is that almost all
countries have considerably low GDP per capita (below $6,500) with Iraq as an
exception. In average, this group Basic Human Needs is 50.03, Foundations of
Wellbeing is 58.01, and Opportunity is 38.35. Note that in this group the Basic
Human Needs starts to be lower than its Foundations of Wellbeing. This implies
that the countries in this group have not reached enough economic development
that strong enough to enhance their Basic Human Needs. Most of the countries in
this group show improvement in their social progress from 2014 to 2015. Still,
Congo and Liberia show a small decrease of social progress from its previous
year.
Across the three social progress dimensions, countries in this group
perform significantly difference, especially among the Sub-Saharan African
countries. For example, Djibouti has 10 point higher in term of Basic Human
Needs compares to other countries in its region. Concurrent, Djibouti is also the
worst performer in terms of Foundations of Wellbeing compares to other
countries in its region. This contradictory finding is caused by low scores in
Access to Basic Knowledge, Access to Information and Communications, and
Ecosystem Sustainability. Again, although Iraq has relatively high capacity in
providing Nutrition and Basic Medical Care, Water and Sanitation, and Shelter,
but the overall Basic Human Needs score is cut off greatly because of the
ongoing conflict that leads to poor Personal Safety (21.91). Furthermore, this
conflict also leads to poor Opportunity (26.67). In short, countries in this group
have weighty development challenges in some areas.

42
6. Very Low Social Progress Countries
in Very Low Social Progress Countries
Notes:
ETH=Ethiopia; NER=Niger; YEM=Yemen; AGO=Angola; GIN=Guinea; AFG=Afghanistan; TCD=Chad; CAF=Central
African Republic
0
5
10
15
20
25
30
35
40
45
ETH
NER
YEM
AGO
GIN
AFG
TCD
CAF
SPI 2014
SPI 2015

43
Figure 2.10 above shows list of countries with very low social progress.
This group consists of 8 countries with the lowest social progress score from
Ethiopia (41.04) to Central African Republic (31.42). The full list of countries in
this group can be seen in the Appendix 2.2. The average Basic Human Needs is
38.46, Foundations of Wellbeing is 48.55, and Opportunity is 26.05. From here
we can see that those countries perform best in Foundations of Wellbeing. This is
caused by their high score of Health and Wellness and Ecosystem Sustainability.
All countries in this group show improvement of social progress from 2014 to
2015.
This group affirms that very low social progress is not merely caused by
extreme poverty. The reason is because only half of the countries in this group
that are considered as the poorest countries in the world. For instance, Ethiopia
and Niger show relatively higher social progress score compares to some middle
income countries like Yemen and Angola. In case of Yemen and Angola, their
social progress deteriorates by past conflict (Porter et al., 2015).
2.6 Influence of Social Progress to Total Entrepreneurial Activities
After we understand the concept of entrepreneurial emergence, we can
see that components of social progress also influence entrepreneurial activities on
various degrees. In this paper 17 relationships between social progress and
entrepreneurial activities will be elaborated.
2.6.1 Basic Nutrition Fulfillment Affects Entrepreneurial Activity
The fulfillment of basic human needs is definitely affects entrepreneurial
activities. During the International Conference on Nutrition in 1992, World
Declaration and Plan of Action for Nutrition stated that well-nourished people is
essential for the sustainable development of society. When the majority of the
population is in good nutritional status and health, they can participate and
contribute their productivity for national social and economic development.
Furthermore, nutrition is also essential for the quality of human resource. For
example, deficiency of nutrient may lead to malnutrition which can alter
individual’s physical and mental state, followed by poor health and poor work
performance. In other case, malnourished and hungry children can have mild to
severe learning disabilities, therefore cannot equip the children with necessary
knowledge and skills to nurture them to become high quality human resource.
Hence, the unavailability of high quality human resource supply will definitely
affects the entrepreneurial activities.
2.6.2 Water and Sanitation Affects Entrepreneurial Activity
Water and sanitation also plays a crucial role in maintaining
population’s health. In fact in 2012, 600,000 children died because of diarrheal
diseases which are highly related with poor water quality, poor sanitation and
hygiene. Moreover, according to an investigation by Edmonds et al. (2013), they

44
discovered that individual can be more focus after he or she has drank enough
water. On this comparative research, people who drink enough water can perform
14% faster than people who don’t drink enough water. Overall, we can see that
nutritional status, basic medical care, water, and sanitation are essential in
developing healthy population. Healthy population also contributes to economic
development because healthy population can live longer, contribute productively,
therefore can generate more monetary value (WHO, n.a.).
2.6.3 Poverty Affects Entrepreneurial Activity
Poverty is also highly correlated with the fulfillment of basic nutrition
needs, basic medical care, water, and sanitation (WHO, n.a.). Poverty often
becomes the major cause why the population cannot afford the basic nutrition
needs, basic medical care, and adequate water and sanitation. We can understand
the impact of these basic human needs to entrepreneurial activities through
poverty perspective. From poverty perspective, Akpor-Robaro (2012) has
founded that in Nigeria poverty has both positive and negative effects on
entrepreneurial emergence. However the positive effects exceed the negative
effects. Some individuals are pushed into entrepreneurship as the only way to
escape from poverty. Yet, for those who becomes entrepreneur, the size and the
nature of their business is still limited due to financial constraint. As we know,
poverty is also highly connected with life dissatisfaction. There is an interesting
finding by Wennekers et al. (2002) which implies positive correlation between
life dissatisfaction and self-employment. Moreover, the existence of social
problems may also become the source of entrepreneurial emergence.
2.6.4 Private Property Rights Affect Entrepreneurial Activity
It is crucial for society to protect property rights if they want to sustain
their economic growth and investment (Knack & Keefer, 1995). Property rights
have positive effect on entrepreneurial emergence. Strong property rights can
encourage investors to invest in new ventures with longer payback period and/or
lower expected of return (Crum and Nelson, 2015). Hence, it will be easier for
entrepreneurs to get access to funding with lower interest rate and longer
payback period compares to society with weaker property rights. Another
argument from De Soto (as cited in Manders, 2004) also support this argument
by saying that a lack of formal property right can constraint individuals ability to
get funding access in starting or expanding their business. When there is no clear
registration of property, investor would be less willing to lend money using that
property as collateral. Hence, this potential capital cannot be utilized as an
alternative of funding. In short, property right is one of essential factors that
influence the budding of new business and the expansion of business.

45
2.6.5 Electricity Quality Affects Entrepreneurial Activity
Proper property quality involves electricity quality. Scott et al. (2014)
stated that electricity instability may cause power outages and voltage fluctuation
which leads to energy constraint for many small-medium businesses. Many other
scholars also agree that electricity stability can enhance productivity of firms and
nations (Grimm et al., 2011; Kirubi et al., 2009; Fedderke & Bogetic, 2006).
2.6.6 Violent Crime Affects Entrepreneurial Activity
Violent crime has negative influence on the domestic and foreign
investment (CEM, 2003). In Jamaica, the weak enforcement of law forces the
business to utilize different forms of security system. Thus, it leads to higher cost
in operating business. For potential foreign investor higher cost is a signal that
discourages them to invest in that particular country. Besides, lower crime rate
also extend the utilization of many different transportation method which in turn
will increase the mobilization of business activities.
2.6.7 Political Terror Affects Entrepreneurial Activity
Political terror destroys entrepreneurial motivation. During the brutal
and enduring war in Vietnam, people are faced with life and death decision. As a
result, they can’t carry out the major feature of entrepreneurship as a driver of
economic growth, but just merely as a way to keep alive for their daily living
(Hoang & Dung, 2009). Of course this safety issue will also hinder lots of
entrepreneurial activities.
2.6.8 Early-stage Education Affects Entrepreneurial Activity
Several scholars believe that certain entrepreneurial qualities can be
developed through early-stage education (Kourilsky & Walstad, 1998; Rushing,
1990; Chell, Haworth, & Brearley, 1991). Kuip et al. (2003) conclude that
entrepreneurial qualities should be developed in early age because some
entrepreneurial qualities refer to personal traits which are developed during
early-stage of life. In addition, O’Connor (2012) claimed early life education
shapes the development of creativity. He said that creativity is both personal trait
and skill that is developed during childhood and refined during prime age.
Aligned with O’Connor (2012), Donahoe and Gaynor (2007) agree that activities
that trigger imagination and creativity encourage children to embrace diverse
way of thinking which in turn will make them become innovative through the
brainstorming of unique thinking and experience. Hence, during that stage basic
education plays a prominent role in the development of entrepreneurial qualities.
2.6.9 Access to Information Affects Entrepreneurial Activity
Access to information is another important factor in the business. Yet,
this factor is often neglected. In fact, lack of information access to the end

46
customer in South America is the main reason why businesses failed to develop
commodity markets into high-value-added markets (Fairbanks and Lindsay,
1997). Lindh et al. (2008) said one of the benefits of advanced information
technology is the ability to share data to be copied and delivered to vast number
of receivers who are geographically dispersed. For instance, with Electronic Data
Interchange (EDI) technology the process of product order, delivery, and
payment can be accommodated entirely through digital information flows
(Angeles & Nath, 2000). Therefore, it will substantially reduce the cost of
business operational. Access to information is not only limited in the business
operational network, but also in social network as well. With the advancement in
internet service and telephone service, the flows of information among people
can be intensified. Variety of social network is substantial in the decision to
become an entrepreneur (Reynolds, 1991), development of business idea (Shane,
2000), and collecting the resources to start new business (Shane and Cable, 2002).
2.6.10 Health and Wellness Affects Entrepreneurial Activity
For well-developed society, health and wellness has become priority in
maintaining high productivity and sufficient human resource supply. Healthy
personnel are necessary to keep high level of productivity, develop the capacity
through continuous learning, thus crucial to keep company to be innovative
(Zwetsloot & Pot, 2004).
2.6.11 Ecosystem Sustainability Affects Entrepreneurial Activity
Ecosystem and business are also highly related in two ways. First,
business makes use of ecosystem. Second, business contributes to the change of
ecosystem. World Business Council for Sustainable Development also stated that
“Business cannot function if ecosystems and the services they deliver─like water,
biodiversity, fiber, food, and climate─are degraded or out of balance” (MEA, p.
2). The degradation of ecosystem will influence the groundwork condition where
businesses operating, including customer preferences, employee well-being,
governmental policies, and so on.
2.6.12 Unequal Rights Affect Entrepreneurial Activity
When there are unequal rights to entrepreneurial resource among
different ethnic group or different geographical area (e.g. developing countries),
it will hinder certain individuals in pursuing their entrepreneurial intention
(Akhter and Sumi, 2014). Unequal right can also be found between different
genders. Achtenhagen and Welter (2003) found that in society where women is
prejudice not qualified to become an entrepreneur, women’s self-perceptions and
attitude may constraint them to establish new firms. Contrary, in society where
gender equality is upheld, there is higher level of female entrepreneurship
activity (Baughn et al., 2006).

47
2.6.13 Freedom of Assembly/Association Affect Entrepreneurial Activity
Workplace peers have significant influence on entrepreneurial
emergence. Individuals that work on certain industry will be most likely to start
their own business in that particular industry. There is empirical evidence in
Bangladesh regarding this influence. It’s not rare that business launching may
start from informal conversations with workplace peers. Peer is the most
influential factors for individual who doesn’t have entrepreneurial family
background. For some individuals, workplace peers may become the first
exposure to become an entrepreneur. So, when people has freedom to choose
where they want to work, it may affect and shape their thinking to be an
entrepreneur.
2.6.14 Freedom of Movement Affects Entrepreneurial Activity
Freedom of movement facilitates the knowledge spillover among firms
in a certain area (Almeida & Kogut, 1999). Furthermore, international mobility
can facilitate transfer of material resources (Portes, Guarnizo, & Haller, 2002)
and financial resources (Ketkar & Ratha, 2001) from advanced technological
countries. For example, to develop IT industry in Ghana, the entrepreneurs need
to go to a more advanced technological countries to get the technology (Taylor,
2015).
2.6.15 Religion Affects Entrepreneurial Activity
Max Weber (as cited in Parsons, 1965) pointed out that religion is an
element of culture which has direct impact on individual behavior to become an
entrepreneur. Concurrent with Max Weber, Akhter and Sumi (2014) also stated
that religion can influence entrepreneurship in several ways. First, religion can
drive human behavior. In Islamic religion for instance, this religious encourage
hard work and commercial activities. In contrast, Islamic religion also detests
interest on loan. Since bank plays a crucial role in business, this situation may
disclose opportunity to set up Islamic banking. On the other hand, sometime
religion may also hinder the development of some business area. For example in
Bangladesh, fishing, saloon, leather business, alcohol, and some drugs are not yet
developed because it is prohibited by the religions. Moreover, in tourism industry
alcohol consumption has positive correlation with the duration of play and
chance to participate in gambling (Markham et al., 2012). With the restriction of
alcohol consumption and gambling in Islamic countries, it makes the
entrepreneurs losing the opportunities to develop the tourism industry (Akhter
and Sumi, 2014).
2.6.16 Community Safety Net Affects Entrepreneurial Activity
Public spending (e.g. payment of subsidies, grants, and social benefits)
is negatively correlated with the emergence of social enterprise (Ferri, 2011).
With great quality of community safety net, it discourage individuals to be

48
involved in social entrepreneurial activity, concurrent decrease the
entrepreneurial potential (Ferri, 2011).
2.6.17 Advanced Education Affects Entrepreneurial Activity
Arasti et al. (2012) stated that education can conceive the awareness to
choose entrepreneurship as alternative of career choice. Concurrent, it also
extends the perspective of individuals, prepare them with necessary knowledge,
and sharpen their ability to recognize and develop the opportunities. On the
recent observation in Bangladesh, there is an improvement of education level on
some societies. In spite of it, the business volume and ownership rate in relation
to total population are decreased. This phenomenon implies that higher education
is negatively correlated with entrepreneurial emergence (Akhter and Sumi, 2014).
Besides Bangladesh the same phenomenon has also occur in Nigeria (Akpor-
Robaro, 2012).
It is presumed that people with high education background prefer to
work on existing industries, rather than taking the risk in establishing their own
business. Highly educated people tends to be too rational in their way of thinking,
thus they don’t feel comfortable in facing risk. Besides, highly educated people
may also be conscious with their social status. Choosing to work in well-known
company seems to be a better choice rather than facing the uncertainty of new
established business. Moreover, highly educated people have more choices in
their career path, for them entrepreneurship is not the only way for survival
(Uhlaner and Thurik, 2003). Other research by Verheul et al. (2002) supports the
negative correlation between education and low entrepreneurial emergence rate
through the negative correlation of education and unemployment rate. The higher
the education level resulted in lower unemployment rate. Thus, less
unemployment people, the less impact of push factor towards entrepreneurship
(Thurik, 2003).
In contrast, Shapero (1975) had contradictory argument regarding the
influence of education to entrepreneurial activities. Shapero (1975) argued that
education may nurture creative thinking and challenge the nature of
entrepreneurship. This argument is supported by Lange et al. (2011) with
significant evidence that students who have taken two or more entrepreneurship
elective courses will become entrepreneurs on time of graduation or long after
that. Counter argument comes from Kantis et al. (2002) who stated that education
only play a very limited role in the nurturing of entrepreneurial motivation and
skills. Some of the entrepreneurs they have interviewed didn’t utilize much
educational resource to solve their problems when they launch and manage their
business.

49
2.7 Complex Causality: Subset Relation
Since I’d like investigate from complex causal perspective, it will be
better for us to understand what complex causality is. Complex causality is the
situation when combination of causal factors leads to the existence of an event or
phenomenon (Young & Park, 2013). Different causal factor combinations may
lead to the existence of the same type of event or phenomenon. Moreover, those
combination of causal factors may also give opposite effects depends on the
context or situation (Mahoney & Goertz, 2005; Wagemann & Schneider, 2010).
2.7.1 Necessary & Sufficient Casual Factors
The key conceptual relation on causal complexity is the subset relation
(Ragin, 2007). There are two types of subset relation, including necessary causal
factors and sufficient causal factors. To understand the difference of those two,
let’s first define the combinations of causal factors as “condition A” and the
outcome as “outcome Y.”
Condition A is necessary for outcome Y if outcome Y is caused by the
presence of condition A. If condition A doesn’t appear, there won’t be outcome
Y either. Yet, condition A alone is not enough to produce Y. In other words, in
all situations where the outcome Y exists, there is also the existence of condition
A. In fuzzy set terminology we called that outcome Y is a subset of condition A.
Hence, the degree of membership in outcome Y must be smaller or equal to
condition A (Y≤A).
On the other hand, condition A is sufficient for outcome Y if condition A
will always lead to outcome Y, yet outcome Y might also be caused by other
conditions beside condition A. In other words, in all situations where condition A
exists, it will always be followed by the existence of outcome Y. In fuzzy set
terminology we called that condition A is a subset of outcome Y. Hence, the
degree of membership in condition A must be smaller or equal to outcome Y
(A≤Y).
Figure 2.11 below shows the necessity and sufficiency relations in the
form of Venn Diagram.

50
Figure 2.11: Venn Diagram Visualization of Subset Relation (Ragin, 2007)

51
Although from the causal complexity we may find the subset relation,
but this relation still needs to be proven empirically based on theoretical
literature review. In spite of that, whether the relation is proved or not, causal
complexity shows the different combinations that are in some way linked to the
outcome (Ragin, 2007).

52
2.8 Conceptual Framework
Figure 2.12: Conceptual Framework

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