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Home Alone:Innovation and sales growth intentions among the solo self-emplyed

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ERC Presentation by Stephen Roper at the 40th ISBE Conference. November 9th 2017

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Home Alone:Innovation and sales growth intentions among the solo self-emplyed

  1. 1. Home Alone: Innovation and sales growth intentions among the solo self- employed Areti Gkypali and Stephen Roper Enterprise Research Centre and Warwick Business School, University of Warwick, Coventry, CV4 7AL. Areti.gkypali@wbs.ac.uk Stephen.roper@wbs.ac.uk
  2. 2. Proportion of the self-employed who are ‘solo’ 93.4 83.3 82.6 79.7 79.3 78.9 78.7 78.0 77.3 75.5 74.9 73.6 71.7 71.4 70.7 70.5 70.1 69.5 69.4 68.3 67.9 67.5 67.4 63.5 61.4 61.4 60.2 59.9 59.8 58.7 56.9 54.7 52.1 51.4 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Romania United Kingdom Cyprus Slovakia Lithuania Czech Republic Poland Turkey Greece Macadonia Netherlands Norway Italy EU28 Spain Slovenia Ireland Iceland Belgium Bulgaria Finland Portugal Malta Latvia Sweden France Croatia Estonia Austria Luxembourg Denmark Germany Switzerland Hungary Source: Eurostat labour market statistics database, 2015.
  3. 3. Distribution of sales per employee by sizeband (£000pa, 2015) Solo SE Micro Small Medium £000 pa £000 pa £000 pa £000 pa 1% 7.00 8.33 6.67 6.92 5% 10.00 16.00 10.67 10.00 10% 15.00 21.43 15.00 14.00 25% 30.00 40.00 28.57 25.00 50% 50.00 75.00 60.00 53.33 75% 100.00 130.00 106.38 107.42 90% 160.00 200.00 180.00 187.50 95% 250.00 250.00 250.00 240.00 99% 300.00 350.00 333.33 347.83 Source: LSBS 2015
  4. 4. Background • For the solo self employed (who intend to remain solo) growth can only come through increased sales (or reduced costs). But how do they chase growth? What shapes their strategies for innovation? • Only one prior study of innovation by the solo self-employed of which we are aware: de Vries and Kosters 2014 who studied innovation among 1,400 solo self- employed in the Netherlands in 2010 – Locational factors proved relatively unimportant for product/service innovation but were more significant in terms of process changes. – In terms of the business, the type of work being undertaken, and co-operation for innovation were also significant influences. – At the individual level, education and ambition were strongly related to innovation propensity with age, gender and intrinsic motivation having little significant influence. • Here, we use data from the first wave (2015) of the Longitudinal Small Business Survey to: – Explore what shapes the growth strategies of solo self-employed – Test a version of the theory of planned behaviour augmented with adaptive expectations
  5. 5. Theory and key hypotheses • The theory of planned behaviour suggests a link between beliefs or aspirations and future actions • -> H1: The solo self-employed with stronger growth aspirations will have stronger future innovation intentions. • But argue here too that individual’s prior experience or success will also shape their future intentions. This leads to: • H2a: Positive experience in innovation will increase individuals’ sales growth intentions • H2b: Prior experience of a growth episode will increase individuals’ sales growth intentions
  6. 6. Data and methods • LSBS survey data for around 4,000 solo self-employed. Cross-sectional analysis but some lag data in the survey • Sales growth intention (cts) asks individuals ‘by approximately what percentage do you aim to have grown your sales in three years’ time?’. • Innovation intentions (binary) ‘Does your business plan to Develop and launch new products/services over the next three years’ • Models are for IIt and GIt • Probit: 𝑰𝑰 𝒕 = 𝜶 𝟎 + 𝜶 𝟏 𝑮𝑰 𝒕 + 𝜶 𝟐 𝑰𝑰 𝒕−𝟏 + 𝜶 𝟑 𝑿𝑳 𝒕 + 𝜶 𝟒 𝑪𝒐𝒏𝒕𝒓𝒐𝒍𝒔 𝒕 + 𝜺 𝟎 • Regression: 𝑮𝑰 𝒕 = 𝜷 𝟎 + 𝜷 𝟏 𝑮𝑰 𝒕−𝟏 + 𝜷 𝟐 𝑰𝑰 𝒕−𝟏 + 𝜷 𝟑 𝑪𝒐𝒏𝒕𝒓𝒐𝒍𝒔 𝒕 + 𝜺 𝟏 • Hypothesis tests are essentially: – H1: 𝛼1 > 0 ; 𝐻2𝑎: 𝛽2 > 0 ; H2b: 𝛽1 > 0.
  7. 7. Illustrative probits for innovation intention (marginals) H1
  8. 8. Illustrative (regression) models for growth intention H2a H2b
  9. 9. Key findings • Key empirical results: (1) Growth and innovation intentions of solo self-employed strongly linked to past experience (2) Growth intentions negatively related to maturity of business (3) Growth intentions positively related to social and network connectivity • In conceptual terms (2), (3) are consistent with TPB. (1) suggests the potential for a dynamic TPB which allows for learning and the impact of prior experience on planned behaviours (or is this a different model!) • In policy terms, finding (3) is interesting. Encouraging networking among the solo self-employed may be one way to boost innovation and growth intentions and increase productivity.

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