From Entrepreneurial Aspiration to Business Start-up: Evidence from British Longitudinal Data

Andrew Henley*

January 2005

Abstract

Are those who proceed successfully from entrepreneurial aspiration to new venture start-up different from unsuccessful nascent entrepreneurs? Research using longitudinal British data tracks individuals from entrepreneurial aspiration into self-employment. The analysis reveals that while aspirations towards entrepreneurship are widespread, few aspiring entrepreneurs are successful. Aspirations appear to be driven by “displacement” factors such as low satisfaction with current employment, rather than personal resources associated with educational attainment, parental background and financial status. Aspiring entrepreneurs do not appear to engage in preparatory behaviour such higher active saving in advance of launching a new venture. Apparently they prefer to rely on, for example, housing wealth or debt finance.

Author keywords: self-employment, entrepreneurship, entrepreneurial intentions, longitudinal data * School of Business and Economics, University of Wales Swansea, Singleton Park, Swansea, SA2 8PP, UK; tel +44 (0) 1792 295 296; email: a.g.henley@swansea.ac.uk

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From Entrepreneurial Aspiration to Business Start-up: Evidence from British Longitudinal Data

Executive Summary

This paper reports research on the drivers of entrepreneurial aspirations and on evidence for

transition from entrepreneurial aspiration to new venture creation. Very little previous

research has been undertaken using longitudinal data, tracking a representative sample of the

population through from the formation of entrepreneurial aspirations into possible new

ventures (as capturing by transition into self-employment).

Previous research has highlighted the heterogeneity of potential entrepreneurs, in terms of

personal characteristics, the organisation, the environment and the nature of the business.

Nascent entrepreneurs typically report multiple motivations for wanting to start a new

business. It is true by definition that entrepreneurship is an intentional activity – however this

raises important questions about the way in which and the timescale over which those

intentions are formed. The literature has highlighted the distinction between an

entrepreneurial event as a “displacement” caused by a change or deterioration in the status

quo ante, and new venture creation as the result of a process of assessing “self-efficacy” by

the potential entrepreneur. Given that transition to entrepreneurship is a dynamic process, it is

essential that any assessment be conducted using longitudinal rather than cross-sectional

information.

The present research makes use of a nationally representative longitudinal survey for Great

Britain, the British Household Panel Survey. This allows us to examine transitions from

entrepreneurial intention to venture creation without relying on recall. It also allows us to

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compare successful intending entrepreneurs with the unsuccessful as well as with those with

no entrepreneurial intention. However because we make use of a general household survey,

rather a survey dedicated specifically to the investigation of entrepreneurs, we are limited in

the extent to which we can address hypotheses about the process of new venture creation and

the precise steps which intending entrepreneurs initiate prior to new venture establishment.

The analysis reveals that while entrepreneurial aspirations are widespread few of those who

would like or would intend to start a new business venture do so. Entrepreneurial aspirations

appear to be driven by “displacement” considerations rather than any individual assessment of

“self-efficacy”. Aspiring entrepreneurs do have different demographic characteristics to non-

entrepreneurs, and they do also appear to differ in some respects in terms of financial and

other resources. Specifically dissatisfaction with hours of work and pay seems to promote

aspirations towards entrepreneurship. There is only limited evidence that aspiring

entrepreneurs are more like to have had entrepreneurial parents. Nor is entrepreneurial

aspiration strongly associated with educational background, or with the strength of financial

resources. For those we term “reluctant entrepreneurs” (individuals who expect to start a new

business but don’t particularly want to) there is stronger evidence to support “self-efficacy”.

An important conclusion is that aspiring entrepreneurs do not appear to engage in planned

behaviour such as higher active saving in advance of a new start-up. They appear more likely

to rely on the possibility that the value of their homes will provide sufficient collateral for

loan finance. Indeed aspiring entrepreneurship is associated with greater personal debt, which

may indicate a greater willingness to take on borrowing to establish a new venture, or that

entrepreneurship is seen as a potential escape route from financial difficulty.

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New venture creation is an intentional activity, in that for many those intentions are formed at

least a year in advance of new venture creation. Nevertheless the majority of actual transitions

into self-employment appear to be conceived and planned within a time scale of less than 12

months. While these hasty new venture creations do not appear to be disadvantaged in terms

of profit achieved, they are significantly less likely to have resulted in the creation of jobs for

those other than the business owner. Successful transitions from entrepreneurial aspiration to

new venture creation appear rather difficult to predict, with the exception of various

demographic factors, confirming previous research which finds that entrepreneurs are highly

heterogeneous.

So overall it seems that many new ventures are hastily conceived, and to the extent that they

follow from well-formed entrepreneurial aspirations, these aspirations are driven by

“displacement” factors such as low job satisfaction. Entrepreneurial aspiration does not

appear to be associated with intentional activity such as active saving, or correlates of

personal efficacy such as financial wealth, educational and parental background. Thus

publicly-sponsored business support services should address the issue of translating

entrepreneurial aspiration into more careful planning and preparation, in order to improve

start-up success.

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1. Introduction

This paper is concerned with the transition from nascent entrepreneurship to business

start-up. While a considerable body of previous research has examined the entrepreneurial

intentions of representative samples of individuals, there has been virtually no analysis of the

extent to which those intentions translate into actual business start-ups. This is because such

an investigation requires the analysis of an appropriate longitudinal data source, which tracks

the career decisions of sampled individuals. The present research makes use of household

panel survey data for Great Britain to track individuals from a position of entrepreneurial

aspiration particularly within paid employment through to self-employment after one or more

years. Entrepreneurial aspiration refers to a stated desire to start a new venture, or an

expectation that one will be started. The research seeks to identify key characteristics of such

nascent entrepreneurs and to investigate if those influences also affect subsequent transition

into self-employment. The central research questions motivating this study are the following:

what are the scale of entrepreneurial aspirations, and how many of those with entrepreneurial

aspirations actually start a new business; are the characteristics of those with stated

entrepreneurial aspirations different from those without; and are the characteristics of those

with stated entrepreneurial aspirations who subsequently engage in business start-up different

from those without.

The remainder of the paper is structured as follows. Section 2 discusses the

background to the paper and reviews the relevant previous literature. Section 3 provides

further details on the data source employed. Section 4 presents information on levels of

nascent entrepreneurship among those in the household survey. Section 5 describes and

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evaluates the level of transition from stated entrepreneurial aspiration to business start-up.

Section 6 presents an assessment of the results obtained and overall conclusions.

2. Background and Conceptual Issues

As Gartner (1985) points out in his widely-cited paper on the conceptual basis to new

venture creation, a major thrust of the entrepreneurship literature is that entrepreneurs are

different from non-entrepreneurs. Gartner’s thesis is that entrepreneurs themselves may be a

highly heterogeneous group with at least as much variation within them as a group as between

them and non-entrepreneurs. He proposes a four-dimensional framework focusing on the

characteristics of the individual, the organisation, the environment and the business. The

subsequent literature on new venture creation has focused broadly on cognitive issues (the

“how’s” and “why’s” behind the emergence of the business venture); on competency issues

(what skills and background resources are deployed and developed in order to bring the

venture into existence); and on the constraints and opportunities of the external environment

(access to finance, market opportunity etc.). Heterogeneity amongst entrepreneurs in the

reasons given for new venture creation is a strong theme in the work of Birley and Westhead

(1994). Indeed many owner-managers may cite multiple motivations for new venture. As an

organising framework Katz and Gartner (1988) propose, derived from McKelvey’s (1980)

work on the definition of an organisation, the following attributes for the process of forming a

new venture: the intention to create, the assembly of resources, the definition of organisational

boundary and the exchange of resources across that boundary. Each of these has in turn

attracted considerable research effort. The present research is, in particular, concerned with

intentionality, while addressing the relationship between resources and intention.

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International evidence highlights a considerable level of entrepreneurial intention in

many countries, and variation across nations and cultures (for example Scheinberg and

MacMillan, 1988; Shane et al., 1991; Reynolds et al., 1994; Delmar and Davidsson, 2000;

Blanchflower et al., 2001). Psychological research claims that intentions are a crucial

predictor of subsequent planned behaviour (Bagozzi et al. 1989). Consequently

entrepreneurial intention is an important phenomenon, and one that has attracted substantial

cognitive research. Krueger et al. (2000) begin with the presumption that any decision to form

a new business venture is planned rather than being a conditioned response. They contrast a

model of planned behaviour (Azjen, 1991), in which the potential entrepreneur’s assessment

of their own competence or self-efficacy (Bandura, 1986) predicts the initiation of a new

venture, with Shapero’s (1982) model of the “entrepreneurial event” in which an event, such

as job loss, “displaces” the inertia that dominates human behaviour and choice. Nevertheless

in both models a contrast is made between potential for entrepreneurial activity and intention.

An individual may have potential but not make the transition into entrepreneurship because of

a lack of intention. Evidence drawn from a sample of university business students supports

the entrepreneurial event model. On a different tack, Birley and Westhead (1994) find

evidence to support a range of motivations, which cover instrumental motivations (wealth),

the desire for personal development and the need for approval and esteem. Gatewood et al.

(1995), examining cognitive factors which may influence new venture creation, suggest that

external perceptions are stronger for men (perception of a market opportunity) than for

women, whereas women are more likely to cite internal explanations (such as the desire to be

one’s own boss). Support for self-efficacy (high locus of control) is not found, a conclusion

supported by the subsequent research of Krueger et al. (2000).

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A further strand of the literature has looked in detail at the sequence of events leading

to entrepreneurial start-up (Carroll and Mosakowski, 1987; Reynolds and Miller, 1992; Carter

et al., 1996). With the exception of some personal (financial) commitment from the nascent

entrepreneur, the absence of any particularly common sequence of events is a common

conclusion to emerge from this research (Reynolds, 1997). Some gestations are very quick;

others appear to take years. The reasons given for choosing entrepreneurship as a career do

not appear to be strongly different from those given by those who have chosen other

occupations. Carter et al. (2003) provide a detailed review and discussion of recent research,

including their own work.

Other research has focused more closely on the personal and environmental

characteristics influencing or associated with business venture creation. A wide-ranging

literature models self-employment as an occupational choice (see Le, 1999; Parker, 2004 for

recent surveys), identifying a range of demographic characteristics as being associated with

the choice to operate a business venture. A common theme is that new venture creation is a

male-dominated activity, although there are a variety of opinions to explain this, including

financial, institutional and psychological. Demographic characteristics may be associated with

particular choice of business activity or sector (Bates, 1995). A well-established finding is that

access to capital is a key driver (Evans and Leighton, 1989; Evans and Jovanovic, 1989);

while other work points to the positive example provided by parental entrepreneurship (for

example de Wit and van Winden, 1989; Matthews and Moser, 1995). Previous experience of

self- or family employment suggests a strong degree of inertia in self-employment as a choice

(Carroll and Mosakowski, 1989; Henley, 2004). In general while this research identifies

factors associated with self-employment or small business ownership as a state, it offers few

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clues as to what factors are associated with nascent entrepreneurship or with the transition

from nascent to actual entrepreneurship.

The move from nascent entrepreneurship to new venture creation is a dynamic

transition, and so any thorough empirical investigation must rely on the analysis of a

longitudinal study. The absence of longitudinal analysis in much previous work is a serious

limitation (a notable exception being the University of Michigan Panel Study of

Entrepreneurial Dynamics, drawn representatively from the US population – see Reynolds,

2000; Carter et al., 2003; Reynolds et al., 2004). Results from research which relies on cross-

sectional analysis of existing entrepreneurs may be contaminated by “recall” bias

(retrospection), and may provide only limited clues concerning causality in the relationship

between new venture creation and associated traits and factors. Furthermore studies of nascent

entrepreneurs, which do track through to success or otherwise in new venture creation, do not

provide an assessment against a control group of non-entrepreneurs (for example Gatewood et

al., 1995). So while such studies may be informative about differences between successful

and unsuccessful nascent entrepreneurs, such comparisons do not control for the inherent

“selection bias” that arises because nascent entrepreneurs (successful or unsuccessful) are not

a random sample of the population at large. Consequently the question of the relationship

between the determinants of entrepreneurial intent and those of entrepreneurial realisation are

not addressed.

In the present research we address these concerns by examining data drawn from a

longitudinal household survey. This allows us to examine transitions from entrepreneurial

aspiration to venture creation without relying on recall. It also allows us to compare

successful aspiring entrepreneurs with the unsuccessful as well as with those with no

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entrepreneurial aspiration. However because we make use of a general household survey,

rather a survey dedicated specifically to the investigation of entrepreneurs, we are limited in

the extent to which we can address hypotheses about the process of new venture creation and

the precise steps which intending entrepreneurs initiate prior to new venture establishment.

Taking into account the nature of the data available to us (of which further discussion in the

next section) we formulate (null) hypotheses as follows for investigation:

H1: Those with entrepreneurial aspirations share the same demographic characteristics and

other background attributes as those without aspirations.

H2: Those with entrepreneurial aspirations have the same resources, in terms of human

capital and access to finance, as those without aspirations.

As it is posited that new venture creation is an intentional activity, we would anticipate that

those aspirations are based on an assessment by the individual of their self-efficacy. This

assessment may take cognisance of background influences such as the degree of cultural

acceptance of entrepreneurship as an occupational choice, the strength of family influence on

choice of occupation, as well as an assessment of ability to access or raise sufficient financial

resources to meet start-up costs. However, as noted above, other individuals may have similar

potential to initiate a new venture but do not so because of a lack of intention. This argument

would offer a priori support for the null hypotheses, H1 and H2.

H3: Those with entrepreneurial aspirations enjoy the same experience and satisfaction in

current employment as those without.

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This proceeds from Shapero’s (1982) notion that occupational choice is inertial and that it

may take some form of displacement before an entrepreneurial event is initiated. Our

suggestion here is that dissatisfaction with recent employment may act as a catalyst to

displace individuals into initiating a new venture.

H4: Those with entrepreneurial aspirations are as equally likely to be engaged in a new

business venture after 12 months as those without.

This (null) hypothesis encapsulates the idea a new business venture is a planned activity

rather than a conditioned response (perhaps to changing circumstances). In particular planned

entrepreneurial activity, which may take cognisance of personal efficacy, is more likely to

lead to the creation of a new venture than entrepreneurial activity which is hastily conceived

and executed.

H5: Those who start a new venture on the basis of prior entrepreneurial aspiration perform

equally as well as those who start without prior, or with hastily conceived, intentions.

This (null) hypothesis reinforces the previous notion that a planned entrepreneurial event,

which may be on the basis of an assessment of self-efficacy, is more likely to be effective

than one which is misconceived or hastily conceived (meaning within a period of less than 12

months).

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3. The British Household Panel Survey data source

The empirical analysis in this paper draws on a major British social science research

resource – namely the British Household Panel Survey (BHPS). This is a nationally

representative survey funded by the UK Economic and Social Research Council. Households

are sampled according to a stratified random cluster sample drawn from the population of

British household postal addresses on the island of Great Britain, south of the Caledonian

Canal.1 The original household sample was recruited in 1991, and follow-on rules are

established to track newly forming households involving originally-enumerated household

members.2 The survey instrument is a questionnaire involving a household section, containing

among other things a schedule on housing, and sections administered to all adult household

members (including new household members at each wave). The individual section contains a

core of “modules” concerning demography and fertility, education, employment, health and

finances, along with a rotating set of questions on values and opinions. Households have been

re-interviewed annually and, at present 12 annual waves of data are available to researchers.

From Wave 8 (1998) onwards all adults who are economically active are asked about

entrepreneurial aspirations, as part of a prospective question concerning career plans. The

precise wording is as follows:

1 The far north of Scotland was excluded because of the prohibitive costs of sampling. The original survey excludes Northern Ireland, although along with booster samplers for Wales and Scotland, a subsequently recruited sample for Northern Ireland, is excluded from the analysis. Technical details are provided in Taylor et al. (2004). 2 Sample attrition rates in the BHPS are generally low and certainly comparable to those achieved in other similar household panels. As is typical with household panels the highest attrition rate of individuals was between Waves 1 and 2 (12%). Attrition between Waves 2 and 3 was 7% of the original individuals and subsequently averaged 2.4% of the original sample between waves. In common with nearly all previously published research using this data source, we treat attrition as a random event.

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“(E101) I am going to read out a list of things which you may or may not want to

happen to your current employment situation. For each one can you please tell me

whether you would like this to happen to you in the next twelve months. Would

you like to … Start up you own business (a new business)?”

A further question is also asked to enquire about unwanted but likely career events:

“(E102) (Even though you would not like this to happen) Do you think this

actually will happen in the coming twelve months? … Start up your own business

(a new business)?”

The second question in effect identifies those individuals who may not have positive

entrepreneurial aspirations, but who intend to adopt entrepreneurship as a career choice,

perhaps as a result of lay-off or changes in personal circumstances. Up to five annual

observations on the answers to these questions are available for analysis. Since the survey

records the career status of every individual, assuming that they remain in the sample from

one particular year to the next, up to four observations per individual matching

entrepreneurial aspiration or intention to actual new venture creation are available.

Table 1 summarises the proportions of respondents with entrepreneurial intentions

(“aspiring entrepreneurs”) for each of the five available survey waves from 1998 to 2002. We

restrict the sample to those between the ages of 18 and 64 years. In 1998 13.6 percent of those

in work would like to start a new business (column 1). This includes those currently self-

employed who may wish to move into a new venture. The rate declines over the following

four years to around 11 percent. Amongst those currently in employment (i.e. excluding those

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currently running one venture who would like to start a different or additional venture) the

rates of intention are lower but not much lower, from 13.0 percent in 1998 falling to 10.8

percent in 2002 (column 3). One possible explanation for the decline over the period is that

rates of sample attrition are greater amongst those with entrepreneurial aspiration – however

this seems unlikely and we can find no evidence for any systematic attrition which may have

impacted differentially on those with entrepreneurial aspirations. The period in question of

one of sustained economic growth in the British economy, and so a more plausible

explanation is that economic conditions improve (and therefore the availability and quality of

paid employment) entrepreneurial aspirations lessen.

As an indicator of nascent entrepreneurship these rates are high, but it is important to

note that the question refers to the desire to start a new business and does not solely capture

those who are actively taking steps to start a new business. So for example, when considering

the proportions who are actively taking steps towards creating a new business venture,

Delmar and Davidsson (2000) report rates between two and four percent of all individuals in

Norway, Sweden and the United States. Reynolds et al. (2004) estimate 6.2 attempted start-

ups per 100 of population in the United States (some individuals may be attempting more than

one start-up at the same time). On the other hand Blanchflower et al. (2001) report much

higher proportions in response to the question in the International Social Survey Programme

“would you prefer to be self-employed” (rather than an employee): Norway 27%; Sweden –

39%; Great Britain – 45%; USA – 71%.

Columns 2 and 4 of Table 1 report the proportions of those who expect to start a new

business venture, even though they do not want to (“reluctant entrepreneurs”). Possible

explanations for such behaviour include being obliged to consider self-employment as a result

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of impending lay-off or as result of a decision by an employer to force greater reliance on

external sub-contracting. Typically the proportion of the sample who expect to be in this

position is between three and four percent. There is no evidence for a decline in the proportion

as the level of economic activity improves towards the end of the period.

4. Nascent Entrepreneurship and Entrepreneurial Aspirations

In order to begin an investigation of hypotheses 1 and 2 a univariate analysis is

conducted to compare mean background characteristics and human and financial resources of

those who state entrepreneurial aspirations and those who do not. The sample is for pooled

observations over each survey wave between 1998 and 2002. The results of this are reported

in Tables 2 and 3. Table 2 reports comparisons for those who report that they would like to

start a new business within the coming 12 months, with those who do not. Aspiring

entrepreneurs are on average younger by over three years. They are much less likely to be

female (37% of aspiring entrepreneurs compared to 52% of others). They are nearly twice as

likely to be members of an ethnic minority (6% compared to 3% of others). They are slightly,

but statistically significantly less likely to be married. There are however no significant

differences apparent in educational attainment. All survey members are asked about the

occupation of both father and mother when they were 14 years of age, and from these

responses it is possible to identify those whose parents were entrepreneurs (self-employed)

and who were also employers of other people. However the univariate analysis in Table 2

finds no significant difference in the likelihood that an aspiring entrepreneur had an

entrepreneurial parental background.

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Although family and educational background do not seem to be associated with

entrepreneurial aspirations, a very different picture emerges for perceptions of current

employment. Aspiring entrepreneurs are more likely to report that they would like to work

both longer hours and fewer hours in their current employment. Dissatisfaction with long

hours, in particular is associated with entrepreneurial aspiration. Almost 40% of aspiring

entrepreneurs would like to work fewer hours, compared to 34% of others. Over 8% would

like to work more hours compared to 6% of others. This indicator of dissatisfaction with

current employment spills over to differences in mean values of other indicators of job

satisfaction. All those in current employment are asked to evaluate aspects of their current

employment – pay, job security, work and an overall indicator. Answers are on a centred

Likert scale from 1 (completely dissatisfied) to 7 (completely satisfied). Both aspiring

entrepreneurs and others report scores showing satisfaction (i.e. mean scores above 4).

However in all cases mean scores are significantly lower for aspiring entrepreneurs than for

others. Scores for satisfaction with pay are lower, despite average gross pay for aspiring

entrepreneurs being over £60 per month higher. The only reported aspect of current

employment which does not appear to be associated with entrepreneurial aspiration is long

journey times to work. The possibility that entrepreneurship may allow individuals to work

from home does not appear to figure here as a possible motivation.

Turning to financial resources, the table reveals some significant, but unexpected,

differences particularly for housing wealth. While previous research has commonly associated

actual entrepreneurship with higher levels of wealth and access to business collateral, these

results suggest that aspiring entrepreneurs report significantly lower levels of housing wealth,

measured either as gross or net of outstanding mortgage loans (housing equity). In fact the

difference in means is greater for housing equity (£5402) than for gross value (£2810),

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revealing that aspiring entrepreneurs are on average more indebted than others. This

difference is seen also in mean non-mortgage debt (observed only in survey wave 10 (2000)),

although here the difference is not statistically significant. Aspiring entrepreneurs appear also

significantly less motivated to save (average active saving of £69 per month compared to £76

per month for others). However they may have higher levels of financial wealth, but the

difference is not statistically significant. Aspiring entrepreneurs enjoy a less secure position in

the housing market, as seen in housing tenure – they are less likely to owners and outright

owners with no mortgage liability, and more likely to be in rental tenures.

Table 3 reports the same analysis for those we term reluctant entrepreneurs. While this

group is much smaller in number (Table 1), many of the differences revealed in Table 2 are

maintained, notably demographic differences, poorer reported job satisfaction and housing

tenure. There are some additional differences. Reluctant entrepreneurs are significantly more

likely to have had entrepreneurial parents, and generally have higher levels of educational

attainment (at age 18 and college level). They also have significantly higher levels of wealth,

both held as housing and in the form of financial wealth.

Overall these results point to rejection of null hypotheses H1 and H2. Aspiring

entrepreneurs do differ from those without entrepreneurial aspirations in several important

respects. They are younger, more likely to be male, over-representative of ethnic minorities

and more likely to be single. However for those who actively desire to start a new business

venture we observe no difference in educational or parental background. Aspiring

entrepreneurs appear to be motivated by dissatisfaction with paid employment across various

dimensions. Hypothesis H3 is therefore also rejected. We have also found that aspiring

entrepreneurs may be less well resourced to start a new venture than those with no aspirations.

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In particular aspiring entrepreneurs do not appear to prepare to start a business by engaging in

higher active saving behaviour. All this points against self-efficacy as a driving influence on

entrepreneurial intentions, and is consistent with earlier research. On the other hand

displacement may well stimulate entrepreneurial ventures – a key form of displacement being

job dissatisfaction. In some respects entrepreneurial aspirations appear to represent a triumph

of optimism over realism. However those we have termed reluctant entrepreneurs do have

stronger backgrounds (education) and parental resources on which to draw. This leaves open

the question of why they are reluctant to start new ventures, even though they anticipate a

transition into entrepreneurship. One explanation may be that they feel pressured by external

(for example, parental) expectations.

Univariate analyses ignore potential correlations amongst the various drivers

considered. The appendix reports a correlation matrix for the set of variables discussed. In

particular it reveals strong correlations between the various measures of job satisfaction, and

amongst the various indicators of financial and housing capital resource. Table 4 reports

multivariate regression (probit) models of the probability that a particular individual

observation is for an aspiring or a reluctant entrepreneur. Reported marginal effects show the

effect, other factors remaining constant, of a particular variable (a discrete change in the case

of the dichotomous variables) on the probability of entrepreneurial aspiration. Demographic

characteristics retain their strong association with entrepreneurial aspiration. So, for example,

a woman is 6 percentage points less likely to be an aspiring entrepreneur than a man.

Educational attainment is now significantly (negatively) associated with entrepreneurial

aspiration. Someone with a college degree is 2 percentage points less likely to be an aspiring

entrepreneur than someone without a degree. While the possession of a college diploma

remains significantly associated with reluctant entrepreneurship, post-compulsory schooling

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attainment at age 18 (A-levels) reduces the probability of being an aspiring entrepreneur by 2

percentage points. As observed in the univariate analysis education is positively associated

with reluctant entrepreneurship.

The multivariate results reveal that having a self-employment parent raises the

probability of entrepreneurial aspirations by 2 percentage points. The results also allow a

more precise identification of the elements of job dissatisfaction that are associated with

entrepreneurial aspiration. Hours of work remain important (both too high and too low).

Specifically it is the pay element of job dissatisfaction that correlates with entrepreneurial

aspiration, although job insecurity appears to drive reluctant entrepreneurship. However

marginal effects are small. The latter result is not surprising – anticipated job loss may be the

key displacement driver that leads to entrepreneurial intention. Gross housing wealth is

positively associated with entrepreneurial aspiration in both cases. Again marginal effects are

small – an increase in housing wealth of £10,000 is associated with an increased in the

probability of being an aspiring entrepreneur of 0.1 percentage point. However, outright

ownership of one’s home is associated with a reduction in the probability of entrepreneurial

aspiration. Higher active saving is negative associated with being an aspiring entrepreneur –

although again the marginal effect is small.

Table 5 reports further results from models which include data on stocks of non-

mortgage debt and financial wealth in the year 2000. These show that both aspiring and

reluctant entrepreneurship is associated with significantly higher levels of financial wealth

and higher levels of non-mortgage debt. Again this casts doubt on self-efficacy explanations

for entrepreneurial intentions, in that, while intending entrepreneurs may be better prepared in

terms of financial wealth (and therefore offsetting the adverse effect of lower active saving)

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they appear to have higher financial commitments from previous spending decisions. In fact

debt may be a motivating displacement factor in that some may seek new venture creation as

a instrument to increase earnings and therefore allow the repayment of debt. This would

explain why debt correlates with reluctant entrepreneurship. Paid employment may be

preferable but is not sufficiently lucrative. An alternative explanation is that higher levels of

debt may correlate with a greater willingness to accept risk.

5. Transition from Entrepreneurial Aspiration to New Venture Creation

Do those who state that they would like to start a new venture within the next 12

months actually achieve that aspiration? Table 6 reports numbers and rates of establishment of

new business ventures (as indicated by a transition into self-employment) after 12 and 24

months according to entrepreneurial aspiration, pooling data from up to four available year to

year transitions (from 1998-1999 to 2001-2002). Panel a) of the table provides information on

aspiring entrepreneurs. The vast majority (94.5%) of aspiring entrepreneurs do not succeed in

starting a new business venture after 12 months. Even allowing for some optimism in the

stated 12 month time-scale, the results show that 92.5% of aspiring entrepreneurs are not in

self-employment after 24 months (although some of these may have established a new venture

and then failed to survive). However transition rates into self-employment are even lower for

those who do not state an aspiration towards entrepreneurship – only 1.4% after 12 months,

and 2.0% after 24 months. Analysis of variance reveals that the transition rates for aspiring

entrepreneurs and those without stated aspirations are significantly different. So, although the

vast majority of aspiring entrepreneurs are unsuccessful, hypothesis H4 is rejected.

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Panel b) of table 6 reports the same analysis for reluctant entrepreneurs. Here

transition rates into new business ventures are higher (16.2% after 12 months; 20.7% after 24

months). Nevertheless the majority of those who intend, albeit with reluctance, to start a new

venture do not in fact do so. Differences between reluctant entrepreneurs and others are more

pronounced, and again ANOVA confirms rejection of hypothesis H4.

Table 7 provides a multivariate analysis of the transition from entrepreneurial

intention to new venture start-up. The approach adopted is to estimate a bivariate probit model

(Greene, 2003, pp. 710-719). This technique allows for simultaneous modelling of the two

decision processes. The estimated marginal effects of different factors on the probability of

transition into a new business venture are calculated as conditional on the possession (or not)

of entrepreneurial aspiration.3 Consequently it is possible to compute marginal effects for

each of four possible probability combinations. We can denote each conditional probability as

Pr=[intent=X, self-employed t+12=Y] where X and Y can be either zero or one, leading to

combinations [1,1] (“successful aspirers”), [0,1] (“successful non-aspirers”), [1,0]

(“unsuccessful aspirers”) and [0,0] (“non-entrepreneurs”). Marginal effects for each are

reported in columns (1) through to (4), along with indicators of statistical significance. The

positive reported value for the error correlation at the foot of the table reveals the strength of

the interrelationship between the two choices. Its estimate is strongly significant.

Turning first to associations with demographic factors the results show that the

probability of transition from aspiration to new venture declines with age. An increase in age

of one year increases the probability of being in the non-entrepreneurs cell, by 0.3 percentage

3 The analysis is only conducted for “aspiring entrepreneurs”. The small numbers of “reluctant entrepreneurs” who successfully launch a new venture render the multivariate analysis “fragile”.

18

points, and reduces the probability of being in the other cells by up to 0.3 percentage points.

Women are 6 percentage points more likely than men to be non-entrepreneurs and less likely

to be in the other cells – 5 percentage points less likely in the case of unsuccessful aspirers.

Ethnic minority members, on the other hand, are 6 percentage points more likely to be

unsuccessful aspirers and 7 percentage points less likely to be non-entrepreneurs. They are

slightly more likely than whites to be successful aspirers. Both being married and being

divorced are negatively associated with being non-entrepreneurs, and positively associated

with being in other cells, particularly unsuccessful aspirers. Educational background does not

appear to be strongly associated with successful entrepreneurial aspiration. The only

exception is for those with college diplomas (typically qualifications of a more vocational

nature), but the marginal effect is small.

These results do not suggest any particularly significant association between

transitions from entrepreneurial aspiration to new venture creation and parental background.

The only significant marginal effect suggests that there may be a very small negative

association between having a parent who was an employer and the conditional probability of

being a successful aspirer. This is a result which seems difficult to rationalise, unless in fact

the experience of parental entrepreneurship was an unhappy one (long hours, few family

holidays, etc.) and therefore unappealing.

As with the earlier analysis there is in Table 7 a strong association between

entrepreneurial intention and current employment circumstances. A desire to work fewer

hours raises the likelihood of being an unsuccessful aspirer by 1.3 percentage points, and

reduces that of being a non-entrepreneur by 1.5 percentage points. A desire to work more

hours raises the likelihood of being an unsuccessful entrepreneur by 3.6 percentage points,

19

and reduces that of being a non-entrepreneur by 3.4 percentage points. Higher job satisfaction

is also associated with an increased likelihood of being a non-entrepreneur, and a lower of

being an unsuccessful entrepreneur. The strength of any association between job satisfaction

and successful new venture start-up is weaker. However an increase of one unit in the overall

job satisfaction score is associated with a 0.1 percentage point reduction the probability of

being a successful aspirer. Higher pay in current employment is also associated with a

reduced probability of transition to self-employment but both successful aspirers and

successful non-aspirers. In fact the association is stronger for the latter group (marginal effect

0.4 percentage points).

Saving and financial status do not appear to be associated with transition to

entrepreneurship. However there is an association with housing status and wealth. Higher

gross house value, in the case of owner-occupiers, is associated with a small increase in the

likelihood of being a non-entrepreneur and a small fall in the likelihood of being an

unsuccessful aspirer. However, outright owners are 3 percentage points less likely to be

unsuccessful aspirers and 3 percentage points more likely to be non-entrepreneurs. Private or

social sector rental, rather than home-ownership status, is associated with an increased

likelihood of being a successful aspirer. For private sector renters there is an also increased

likelihood of being a successful non-aspirer, and a significantly reduced likelihood of being a

non-entrepreneur.

Overall these results confirm earlier conclusions that successful entrepreneurial

aspirations are driven more by elements of dissatisfaction with current employment (hours of

work, pay, and have less to do with parental background, educational background and the

strength of the individual’s financial status. Indeed individuals in the seemingly less secure

20

situation of being home-renters rather than home-owners are more likely to translate

entrepreneurial aspiration into start-up success.

How does the subsequent performance of new business ventures compare between

successful aspirers, successful non-aspirers and other existing ventures. Table 8 reports a

comparison of both mean incomes from self-employment (profit) and employment levels for

these three groups. The employment data is reported in the survey as a categorical variable

(see Henley, 2005 for further discussion and analysis). In terms of profit successful aspirers

report a mean figure of £983 per month, whereas successful non-aspirers report a mean of

£1103 per month. Both of these are lower than the reported mean income for existing

entrepreneurs (i.e. those whose ventures were established more than 12 months previously).

However an analysis of variance reveals no significance in these differences. In terms of

employment generated, the results show that nearly 75% of successful aspirers are operating

as sole-traders, with nearly 18% managing to create at least three jobs within the first year of

business. For successful non-aspirers a higher proportion (78%) are operating as sole-traders,

and only 9.5% managing to create at least three jobs. However by comparison with existing

entrepreneurs both groups are much more likely to be operating as sole-traders and less likely

to be employing others. Analysis of variance in this case reveals that these differences are

statistically significant. So in the case of employment we are able to reject hypothesis H5 that

those who start a new business without prior aspiration (or with hastily conceived intention)

perform equally as well as those who have stated aspirations. However H5 is accepted in the

case of income levels.

21

6. Conclusions

An investigation of longitudinal data on the transition from entrepreneurial aspiration

to new venture creation for British entrepreneurs has shed some new light on the process of

new venture creation. While entrepreneurial aspirations are widespread (at least among a

minority of the economically active population) very few of those who would like or would

intend to start a new business venture do so within a proposed time scale (in the present case

12 months). Entrepreneurial aspirations appear to be driven by displacement considerations

rather than any individual assessment of self-efficacy.

Aspiring entrepreneurs do have different demographic characteristics to non-

entrepreneurs, and they do also appear to differ in financial and other resources. We find

strongest evidence to reject the null hypothesis that aspiring entrepreneurs share the same

experience and degree of satisfaction with current employment as those without aspirations.

Specifically dissatisfaction with hours of work and pay seems to promote aspirations towards

entrepreneurship. The analysis presented finds little support for any suggestion that budding

entrepreneurs are following in the footsteps of entrepreneurial parents. Nor is entrepreneurial

aspiration strongly associated with educational background, or with the strength of financial

resources. For those we term “reluctant entrepreneurs” (individuals who expect to start a new

business but don’t particularly want to) there is stronger evidence to support self-efficacy.

For aspiring entrepreneurs one conclusion to emerge is that they do not appear to

translate aspiration into planned behaviour such as higher active saving in advance of a new

start-up. They appear more likely to rely on the possibility that the value of their homes will

provide sufficient collateral for loan finance. Indeed aspiring entrepreneurship is associated

22

with greater personal debt, which may indicate that would-be entrepreneurs might be

identified by a greater willingness to take on borrowing, in the anticipation that a transition

from paid employment to new venture creation will yield a higher income stream. Those with

entrepreneurial aspirations are significantly more likely to have started a new business venture

after 12 months, than those without. This confirms the view that new venture creation is an

intentional activity, in that those intentions are formed at reasonable time duration from the

point of new venture creation. Nevertheless sizeable numbers of transitions into self-

employment are observed from those with no previous entrepreneurial aspiration. In fact the

majority of actual transitions into self-employment appear to be conceived and planned within

a time scale of less than 12 months. While these hasty new venture creations do not appear to

be disadvantaged in terms of profit achieved, they are significantly less likely to have resulted

in the creation of jobs. Successful transitions from entrepreneurial aspiration to new venture

creation appear rather difficult to predict, with the exception of association with various

demographic factors, confirming Gartner’s (1985) suggestion that entrepreneurs are highly

heterogeneous.

Overall this research suggests that many new ventures are hastily conceived, and to

the extent that they follow from well-formed entrepreneurial aspirations, these aspirations are

driven by displacement factors such as low job satisfaction. Entrepreneurial aspiration does

not appear to be associated with intentional activity such as active saving, or correlates of

personal efficacy such as financial wealth, educational and parental background. Insofar as

many governments seek to promote the formation of entrepreneurial intentions, this research

points to the need for business support services to address important issues of translating

entrepreneurial aspiration into more intentional planning and preparation.

23

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Henley, A. 2005. Job creation by the self-employed: the roles of entrepreneurial and financial capital. Small Business Economics (forthcoming). Katz, J. and Gartner, W.B. 1988. Properties of emerging organizations, Academy of Management Review 13:429-441. Krueger, N.F., Reilly, M.D., and Carsrud, A.L. 2000. Competing models of entrepreneurial intentions. Journal of Business Venturing 15: 411-432. Le, A. 1999. Empirical studies of self-employment. Journal of Economic Surveys 13:381-416. Matthews, C.H. and Moser, S.B. 1995. Family background and gender: implications for interest in small firm ownership. Entrepreneurship and Regional Development 7: 365-377. McKelvey, B. 1980. Organizational Systematics. Berkeley: University of California Press. Parker, S.C. 2004. The Economics of Self-Employment and Entrepreneurship, Cambridge UK: Cambridge University Press. Reynolds, P.D. 1997. Who starts new firms? Preliminary explorations of firms-in-gestation. Small Business Economics 9:449-462. Reynolds, P.D. 2000. National panel study of US business start-ups: background and methodology. In Katz, J.A. (Ed.), Advances in Entrepreneurship, Firm Emergence and Growth, vol. 4, Stanford CT: JAI Press: 153-227. Reynolds, P.D., Carter, N.M., Gartner, W.B. and Greene, P.G. 2004. The prevalence of nascent entrepreneurs in the United States: Evidence from the Panel Study of Entrepreneurial Dynamics. Small Business Economics 23:263-284. Reynolds, P.D. and Miller, B. 1992. New firm gestation: conception, birth and implications for research. Journal of Business Venturing 7:405-417. Reynolds, P.D., Storey, D.J., and Westhead, P. 1994. Cross-national variations in new firm formation rates. Regional Studies 28: 443-456. Scheinberg, S. and MacMillan, I.C. 1988. An 11-country study of motivations to start a business. In Kirchoff, B.A., Long W.A., McMullan, W.E., Vesper, K.H. and Wetzel, W.E. (Eds.), Frontiers of Entrepreneurship Research, Wellesley, MA: Babson College, 669-687. Shane, S., Kolvereid, L. and Westhead, P. 1991. An exploratory examination of the reasons leading to new firm formation across country and gender, Journal of Business Venturing, 6: 431-446. Shapero, A. 1982. Social dimensions of entrepreneurship. In C. Kent, D. Sexton and K. Vesper, eds., The Encyclopaedia of Entrepreneurship. Englewood Cliffs: Prentice-Hall, 72-90.

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Taylor, M.F. with Brice, J., Buck, N. and Prentice-Lane E. 2004. British Household Panel Survey User Manual Volume A: Introduction, Technical Report and Appendices, Colchester, UK: University of Essex.

26

Table 1: Entrepreneurial Intentions Would like to

start a (new) business in the next 12 months

Do not want to start a (new) business but

think will happen anyway in next

12 months

Would like to start a (new)

business in the next 12 months

Do not want to start a (new) business but

think will happen anyway in next

12 months % All currently

working All currently

working Employees with no current own

business

Employees with no current own

business 1998 13.6 3.7 13.0 2.9 1999 12.8 3.8 12.1 2.8 2000 12.4 3.8 12.1 3.0 2001 11.0 3.3 10.5 2.6 2002 11.1 3.8 10.8 3.2 Source: author’s tabulations from BHPS Waves 8 to 12

27

Table 2: Univariate Analysis of Entrepreneurial Intentions (1) Would like to start a (new) business in

next 12 months Means Yes No difference in

means (p-value) Demographics: Age (years) Female Ethnic minority Married/Cohabiting Divorced/Separated Highest qualification: College degree College diploma or equivalent (HND) A-levels (at age 18) O-levels/GCSEs (at age 16)

35.32 0.366 0.059 0.711 0.066

0.182 0.083 0.228 0.368

38.64 0.523 0.031 0.738 0.065

0.175 0.076 0.226 0.360

<0.001 <0.001 <0.001 0.004 0.785

0.379 0.203 0.879 0.388

Background: Self-employed parent Self-employed parent who employed others

0.151 0.081

0.140 0.077

0.145 0.488

Current job quality and satisfaction: Travel to work time (minutes) Would like fewer hours Would like more hours Satisfaction score – pay Satisfaction score – job security Satisfaction score – work Satisfaction score – overall Gross monthly pay (£’s 1995 prices)

24.10 0.396 0.085 4.564 5.152 5.002 4.845 1309

23.55 0.344 0.060 4.990 5.424 5.421 5.372 1248

0.226 <0.001 <0.001 <0.001 <0.001 <0.001 <0.001 0.003

Personal wealth: Gross house value (£’s 1995 prices) Housing equity (£’s 1995 prices) Monthly active saving (£’s 1995 prices) Annual investment income (£’s 1995 prices) Financial wealth in 2000 only (£’s) Non-mortgage debt in 2000 only (£’s)

76302 41420 68.5 296 8246 1932

79112 46822 75.8 320 7285 1798

0.095 <0.001 0.040 0.456 0.479 0.685

Housing tenure status: Owner Outright owner Renter – private landlord Renter – social landlord

0.766 0.088 0.107 0.121

0.807 0.143 0.086 0.104

<0.001 <0.001 <0.001 0.009

Sample: 21,831 observations Source: author’s computations from BHPS Waves 8 to 12

28

Table 3: Univariate Analysis of Entrepreneurial Intentions (2) Do not want to start a (new) business but

think will happen anyway in next 12 months

Means Yes No difference in means (p-value)

Demographics: Age (years) Female Ethnic minority Married/Cohabiting Divorced/Separated Highest qualification: College degree College diploma or equivalent (HND) A-levels (at age 18) O-levels/GCSEs (at age 16)

36.73 0.321 0.076 0.738 0.065

0.211 0.098 0.285 0.301

38.30 0.510 0.033 0.735 0.065

0.176 0.076 0.224 0.363

<0.001 <0.001 <0.001 0.845 0.951

0.021 0.049

<0.001 0.002

Background: Self-employed parent Self-employed parent who employed others

0.177 0.099

0.140 0.077

0.008 0.038

Current job quality and satisfaction: Travel to work time (minutes) Would like fewer hours Would like more hours Satisfaction score – pay Satisfaction score – job security Satisfaction score – work Satisfaction score – overall Gross monthly pay (£’s 1995 prices)

23.68 0.393 0.083 4.676 5.040 5.046 4.824 1391

23.63 0.349 0.062 4.948 5.403 5.382 5.325 1251

0.956 0.024 0.036

<0.001 <0.001 <0.001 <0.001 <0.001

Personal wealth: Gross house value (£’s 1995 prices) Housing equity (£’s 1995 prices) Monthly active saving (£’s 1995 prices) Annual investment income (£’s 1995 prices) Financial wealth in 2000 only (£’s) Non-mortgage debt in 2000 only (£’s)

90188 53380 81.7 578

14914 2224

78482 45991 74.6 310 7150 1801

<0.001 0.005 0.300 0.456 0.002 0.505

Housing tenure status: Owner Outright owner Renter – private landlord Renter – social landlord

0.765 0.097 0.141 0.091

0.803 0.138 0.087 0.107

0.020 0.003

<0.001 0.212

Sample: 21,743 observations Source: author’s computations from BHPS Waves 8 to 12

29

Table 4: Multivariate Analysis of Entrepreneurial Intentions – Probit Models Would like to start a (new)

business in next 12 months = 1 Do not want to start a (new)

business but think will happen anyway in next 12 months = 1

Marginal Effect

p-value Marginal Effect

p-value

Age Female Ethnic minority Married/Cohabiting Divorced/Separated Highest qualification: College degree College diploma A-levels (at age 18) O-levels/GCSEs (at age 16) Self-employed parent Self-employed parent who employed others Travel to work time Would like fewer hours Would like more hours Satisfaction score – pay Satisfaction score – job security Satisfaction score – work Satisfaction score – overall Gross monthly pay £’000s Gross house value £’0000s Housing equity £’0000s Monthly active saving £’s Annual investment income £’000s Outright owner Renter – private landlord Renter – social landlord

-0.003 -0.059 0.082 0.016 0.048

-0.020 -0.009 -0.021 -0.008 0.020

-0.010

-0.0001 0.018 0.028

-0.005 -0.001 -0.004 -0.019 0.0014 0.0011

-0.0003 -0.00004

0.0010 -0.033 0.018 0.009

<0.001 <0.001 <0.001 0.009 <0.001 0.017 0.388 0.006 0.280 0.031 0.372 0.179 <0.001 0.003 0.003 0.453 0.105 <0.001 0.612 0.011 0.567 0.022 0.479 <0.001 0.036 0.248

-0.0003 -0.019 0.032 0.006 0.016

0.008 0.013 0.011 0.004 0.007

-0.004

-0.0001 0.002 0.009 0.001

-0.002 0.0003 -0.006

-0.0015 0.0003 0.0002

-0.000008 0.0014 -0.007 0.023 0.003

0.009 <0.001 <0.001 0.027 0.008 0.070 0.020 0.011 0.256 0.102 0.465 0.052 0.376 0.052 0.184 0.011 0.980 <0.001 0.336 0.051 0.258 0.278 0.002 0.030 <0.001 0.520

Sample Pseudo R-squared Correction prediction rate

19185 (5960 individuals)

0.056 88.3%

19107 (5951 individuals)

0.053 97.2%

Source: author’s computations from BHPS Waves 8 to 12 Note: Further models were estimated which exploit the longitudinal nature of the data source to incorporate individual-specific components to the regression error (“random effects”). These results were broadly consistent with those in the table above. They are available on request.

30

Table 5: Reduced sample models including financial wealth and non-mortgage debt at 2000 values as additional (non-time-varying) covariates Would like to start a (new)

business in next 12 months = 1 Do not want to start a (new)

business but think will happen anyway in next 12 months = 1

Marginal Effect

Standard error Marginal Effect

Standard error

Financial assets in 2000 £’0000s 0.00049 0.00016** 0.00015 0.00005** Non-mortgage debt in 2000 £’0000s

0.0027 0.00077** 0.00080 0.00032*

Sample Pseudo R-squared Correction prediction rate

10150 0.073 88.1%

10110 0.070 97.1%

Other covariates as in Table 4 except annual investment income dropped. Table 6: Transitions by Entrepreneurial Intention to Self-Employment a) Transitions from employment into self-employment by intention to start a (new) business, pooled observations from 1998-2002 Self-employed 12 months later Would like to start a (new) business in next 12 months

Yes No Total

Yes 107 (5.5%)

1830 (94.5%)

1937 (100.0%)

No 202 (1.4%)

14427 (98.6%)

14629 (100.0%)

Total 309 (1.9%)

16257 (98.1%)

16566 (100.0%)

ANOVA F-statistic (p-value) 162.0 (<0.001) Self-employed 24 months later Would like to start a (new) business in next 12 months

Yes No Total

Yes 106 (7.5%)

1303 (92.5%)

1409 (100.0%)

No 205 (2.0%)

10220 (98.0%)

10425 (100.0%)

Total 311 (2.6%)

11523 (97.4%)

11834 (100.0%)

ANOVA F-statistic (p-value) 151.7 (<0.001)

31

Table 6 (continued) b) Transitions from employment into self-employment by likelihood of having to start a (new) business, pooled observations 1998 to 2002 Self-employed 12 months later Do not want to start a (new) business but think will happen in next 12 months

Yes No Total

Yes 74 (16.2%)

384 (83.8%)

458 (100.0%)

No 234 (1.5%)

15791 (98.5%)

16025 (100.0%)

Total 308 (1.9%)

16175 (98.1%)

16483 (100.0%)

ANOVA F-statistic (p-value) 541.7 (<0.001) Self-employed 24 months later Do not want to start a (new) business but think will happen in next 12 months

Yes No Total

Yes 68 (20.7%)

261 (79.3%)

329 (100.0%)

No 242 (2.1%)

11180 (97.9%)

11422 (100.0%)

Total 310 (2.6%)

11441 (97.4%)

11751 (100.0%)

ANOVA F-statistic (p-value) 444.6 (<0.001) Source: author’s tabulations from BHPS Waves 8 to 12

32

Table 7: Bivariate Probit Model of Entrepreneurial Intention and Subsequent Self-employment (1) (2) (3) (4) Marginal Effects Pr(Intent =1)

& (self-employed, t+12=1)

Pr(Intent =0) & (self-

employed, t+12=1)

Pr(Intent =1) & (self-

employed, t+12=0)

Pr(Intent =0) & (self-

employed, t+12=0)

Age Female Ethnic minority Married/Cohabiting Divorced/Separated Highest qualification: College degree College diploma A-levels (at age 18) O-levels/GCSEs (at age 16) Self-employed parent Self-employed parent who employed others Travel to work time Would like fewer hours Would like more hours Satisfaction score – pay Satisfaction score – job security Satisfaction score – work Satisfaction score – overall Gross monthly pay £’000s Gross house value £’0000s Housing equity £’0000s Monthly active saving £’s Ann. investment income £’000s Outright owner Renter – private landlord Renter – social landlord

-0.00016* -0.0051** 0.0038+ 0.0020+ 0.0014

-0.0009 0.0012* -0.0016 -0.0011 0.0016

-0.0028* -0.000018

0.0010 0.0004 0.0002 -0.0006 0.0002

-0.0010** -0.0015+ 0.0001

-0.00002 -0.000003

0.0003 -0.0014

0.0060** 0.0016**

-0.00006 -0.0058**

0.0008 0.0033 -0.0019

0.00004 0.0047 -0.0017 -0.0015 0.0019

0.0075

0.00006+ 0.0008 -0.0025 0.0014* -0.0012* 0.0012 -0.0008

-0.0039** 0.00016

0.0000005 -0.000005 0.0006+ 0.0002 0.0120* 0.0026

-0.0028** -0.0508** 0.0644** 0.0132+ 0.0052**

-0.0195+ -0.0123

-0.0203* -0.0100 0.0135

-0.0041

-0.00019 0.0132* 0.0359*

-0.0078** -0.0007

-0.0075** -0.0133**

0.0042 0.0014* -0.0004

-0.00002 0.0006

-0.0300** 0.0127 0.0091

0.0030** 0.0618** -0.0691** -0.0184* -0.0518**

0.0204+ 0.0064

0.0236* 0.0126 -0.0170

-0.0062 0.0001

-0.0150* -0.0338* 0.0062** 0.0025

0.0061* 0.0151** 0.0012

-0.0017** 0.0004

0.00003 -0.0015

0.0312** -0.0307* -0.0133

Sample Log likelihood Error correlation (p-value)

10836 -4507.8

0.350 (0.000) Source: author’s computations from BHPS Waves 8 to 12 Notes: + denotes p-value <0.10, * denotes p-value <0.05, ** denotes p-value < 0.01 Due to the small cell size in column (1), reported significance levels are from a univariate probit model of the (would like to start of new business=1 and self-employed 12 months later =1) and zero otherwise.

33

Table 8: Entrepreneurial Intention and Subsequent Self-Employment Performance, pooled observations 1998-2002 Intended start-up Unintended start-

up Existing self-

employed a) Mean income (profit) £983 £1103 £1300 (observations) (115) (267) (1779) b) Employment of others Zero 74.6% 78.0% 64.1% 1-2 7.9% 9.5% 17.7% 3-9 12.3% 7.3% 11.6% 10-24 5.4% 2.2% 4.2% 25-49 - 0.4% 1.2% 50 or more - 2.6% 1.3% (observations) (114) (273) (1881) Note: ANOVA F-statistic (income) p-value=0.124; (employment) p-value=0.006

34

Appendix – Correlation Matrix

Would like to start business

Don’t want, but expect to start business Age Female

Ethnic minority

Married/ cohabit-ing

Divorced/Separ-ated

College degree

College diploma A-levels

O-levels/ GCSEs

Would like to start business 1 Don’t want, but expect to start business 0.4157 1 Age -0.0918 -0.0234 1 Female -0.1022 -0.0635 0.0113 1 Ethnic minority 0.0534 0.0449 -0.0161 -0.0049 1 Married/cohabiting -0.0198 -0.0007 0.2812 -0.0147 -0.0219 1 Divorced/Separated 0.0046 0.0051 0.1312 0.0803 0.0049 -0.4463 1 College degree 0.0058 0.0145 -0.0767 -0.03 0.0741 -0.0322 -0.031 1 College diploma 0.0056 0.0126 0.0117 -0.0404 0.0131 0.0257 -0.0133 -0.1324 1 A-levels -0.0027 0.0192 -0.1374 -0.0459 -0.0144 -0.0254 -0.0379 -0.2499 -0.1552 1 O-levels/GCSEs 0.0087 -0.0185 -0.0848 0.0788 -0.0484 -0.0236 0.0412 -0.3492 -0.2168 -0.4093 1 Self-employed parent 0.0111 0.0146 0.0309 0.0286 0.0535 0.0347 0.0267 0.0435 0.0043 -0.0017 -0.016 - who employed others 0.0032 0.0085 0.0314 0.013 0.0531 0.0283 0.0267 0.0648 0.0176 0.007 -0.0235 Travel to work time 0.0076 -0.0001 -0.0406 -0.12 0.0349 -0.014 -0.025 0.163 0.0441 0.0254 -0.0976 Would like fewer hours 0.0321 0.0117 0.1084 -0.0493 0.0209 0.0697 -0.0009 0.0606 0.0349 -0.0093 -0.0402 Would like more hours 0.0312 0.0178 -0.077 -0.0068 0.0265 -0.0683 0.0332 -0.0291 -0.0156 -0.0079 0.0305 Satisfaction - pay -0.0889 -0.0271 0.0432 0.055 -0.026 0.0822 -0.0254 0.0065 0.016 -0.016 0.0041 Satisfaction - security -0.0596 -0.0447 -0.061 0.0736 -0.0178 0.011 -0.0238 -0.0052 -0.0165 -0.0123 0.0349 Satisfaction - work -0.1019 -0.0459 0.0542 0.0444 -0.0221 0.0443 -0.0053 -0.0294 0.0085 -0.0002 0.0058 Satisfaction - overall -0.131 -0.0675 0.0212 0.0933 -0.0355 0.0431 -0.0139 -0.0473 0.0007 -0.0136 0.0257 Monthly pay 0.0188 0.0208 0.079 -0.3324 0.0083 0.0844 -0.0244 0.2872 0.1101 -0.0025 -0.16 House value -0.0126 0.0096 0.1696 -0.0168 0.0394 0.1188 -0.0706 0.1769 0.0576 0.0031 -0.0739 Housing equity -0.029 0.0067 0.2515 -0.0114 0.0387 0.0585 -0.0445 0.086 0.0477 0.0085 -0.0513 Active saving -0.0229 -0.0024 0.0453 -0.0646 0.0023 0.0237 -0.0373 0.1334 0.0405 0.0092 -0.0815 Investment income -0.0079 0.0226 0.0838 -0.0274 0.0057 0.0212 -0.0136 0.0692 0.0054 -0.0003 -0.0399 Owner -0.0323 -0.0199 0.1562 -0.0056 -0.0096 0.184 -0.073 0.0235 0.059 0.0537 -0.0149 Outright-owner -0.0543 -0.0221 0.252 -0.0054 0.02 -0.0821 0.0088 -0.0308 0.0043 -0.0314 -0.0201 Private renter 0.0262 0.0364 -0.1558 -0.0096 -0.0114 -0.1441 0.0315 0.1083 -0.0214 -0.0029 -0.0503 Social renter 0.0147 -0.0074 -0.0501 0.0164 0.0196 -0.0986 0.0646 -0.129 -0.055 -0.0671 0.0635

35

Correlation matrix (continued)

Self-employed parent

- who employed others

Travel to work time

Would like fewer hours

Would like more hours

Satis-faction - pay

Satis-faction - security

Satis-faction - work

Satis-faction - overall

Monthly pay

House value

Self-employed parent 1 - who employed others 0.7075 1 Travel to work time -0.0127 0.0062 1 Would like fewer hours 0.0052 0.0174 0.0725 1 Would like more hours -0.0105 -0.0219 -0.0271 -0.1923 1 Satisfaction - pay 0.0071 -0.0055 0.0097 -0.0813 -0.0469 1 Satisfaction - security 0.0009 -0.003 -0.0581 -0.0525 -0.0267 0.3048 1 Satisfaction - work 0.0151 0.0065 -0.0167 -0.1141 0.0042 0.3556 0.3143 1 Satisfaction - overall 0.0151 0.0041 -0.0385 -0.1794 -0.0046 0.4954 0.4444 0.7167 1 Monthly pay 0.0199 0.0309 0.2454 0.1848 -0.1108 0.1361 -0.0255 0.0151 -0.0163 1 House value 0.0497 0.066 0.1305 0.072 -0.0582 0.0559 -0.0031 0.0242 0.0131 0.3162 1 Housing equity 0.0321 0.059 0.0751 0.0375 -0.0366 0.0409 -0.0119 0.0355 0.0213 0.1883 0.7019 Active saving 0.0065 0.0146 0.0824 0.065 -0.0506 0.1128 0.0083 0.0186 0.0222 0.2897 0.1774 Investment income 0.0225 0.0393 0.0435 0.0138 -0.0251 0.0355 0.0074 0.0138 0.0127 0.1237 0.1576 Owner -0.0093 0.0139 0.0522 0.0805 -0.0713 0.047 -0.0208 0.0024 -0.0081 0.1454 0.5026 Outright-owner -0.015 0.0073 -0.012 -0.0018 -0.0219 -0.0073 -0.012 0.0022 0.0117 -0.0416 0.1674 Private renter 0.0385 0.0166 -0.0056 -0.03 0.0215 -0.0296 0.0285 -0.0039 -0.0018 -0.0367 -0.3108 Social renter -0.0217 -0.0335 -0.0637 -0.0737 0.0706 -0.0343 0 -0.0011 0.0107 -0.1508 -0.3491

Housing equity

Active saving

Invest-ment income Owner

Outright owner

Private renter

Social renter

Housing equity 1 Active saving 0.1401 1 Investment income 0.1366 0.1616 1 Owner 0.3822 0.093 0.0573 1 Outright owner 0.2065 0.0834 0.0792 0.197 1 Private renter -0.2364 -0.033 -0.0167 -0.6183 -0.1218 1 Social renter -0.2655 -0.0891 -0.0566 -0.6947 -0.1369 -0.1136 1