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

Explaining Entrepreneurial Performance of Solo Self-Employed from a Motivational Perspective.

Nardo de Vries (Panteia/EIM)Werner Liebregts (Tilburg University and Panteia/EIM)

OECD-DBA International workshopSkills Development for SMEs and Entrepreneurship - November 28th 2012

OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012

• Introduction• Motivational approach: opportunity vs. necessity• Research design• Data• Methodology• Results• Conclusions and discussion

Outline

2


Introduction

3

OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 4

Introduction

Increase of self-employment:• Structural change (outsourcing and services), individualism, improved

reputation• Entrepreneurship Policy (Van Es and Van Vuuren 2011, Stam 2012)• Supposed to lead to economic growth• Natural or ‘equilibrium’ rate of solo self-employment (Van Stel, Scholman &

Wennekers 2012)

Not just the quantity, but also quality of entrepreneurship (Baumol 1990)• Productive entrepreneurship and economic performance• Motives for entrepreneurship are considered influential • Opportunity vs. Necessity (Reynolds 2002)


Introduction

Research question(s):• Does the economic performance of opportunity solo self-employed differ from

the economic performance of necessity solo self-employed? • If so, to what extent?• What factors are influential?


Motivational approach

6



Theoretical background• Introduced by Global Entrepreneurship Monitor (Reynolds et al. 2002)• Human capital theory (argued by Block and Sandner 2009)

• Formal education• Experience• Practical learning e.g. active (Ericson and Pakes 1995) and

passive learning (Jovanovic 1982)• Entrepreneurial talent and skills

• Opportunity entrepreneurs are assumed to have higher human capital endowment



Literature:• Much research is done in the field of explaining the prevalence

of opportunity and necessity motives.• No consensus on ‘necessity’-measures• Most studies focus on macro-level relationships. • There are very few micro-level studies that actually connect

start-up motivation and economic performance on the individual level.

• General focus on entrepreneurship, no focus on solo self-employed


Prevalence

Opportunity entrepreneurship, Innovation driven economies, GEM 2011

73% 72% 71% 71%68% 67%

64% 64% 62% 61% 59% 59% 58% 57% 57% 55%53% 51% 50%

46%

39%37% 37% 36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Austra

lia

Belgium

Fran

ce

Norway

Swed

en

Unite

d Ar

ab E

mira

tes

Denmar

k

Japa

n

Neth

erland

s

Switz

erland

Finlan

d

Unite

d St

ates

Portu

gal

Unweig

thed

Ave

rage

Czec

h Re

public

German

y

Sing

apor

e

Slov

enia

Taiw

an

Unite

d King

dom

Spain

Ireland

Greec

e

Repu

blic

of K

orea

Denmark


Prevalence

Necessity entrepreneurship, Innovation driven economies, GEM 2011

42%

30% 27% 26% 25% 25%21% 19% 18% 18% 18% 18% 17% 16% 15% 15% 14% 12% 11% 10% 9% 7% 6% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Repu

blic

of K

orea

Ireland

Czec

h Re

public

Spain

Greec

e

Japa

n

Unite

d St

ates

German

y

Finlan

d

Portu

gal

Unweig

thed

Ave

rage

Taiw

an

Unite

d King

dom

Sing

apor

e

Austra

lia

Fran

ce

Unite

d Ar

ab Emira

tes

Slov

enia

Switz

erland

Belgium

Nethe

rland

s

Denmar

k

Swed

en

Norw

ay

Denmark


Prevalence

Trends in Prevalence Rates in the Netherlands 2001-2011, GEM 2011

6%11% 11%

14%

7% 6%12% 10% 10% 8% 9%

84%87%

83% 84%89% 91%

66%71%

57%

64% 62%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Necessity-Driven Entrepreneurial Activity Opportunity-Driven Entrepreneurial Activity

Control for “mixed motives”


This study

• Individual economic performance.• Longitudinal data • Targeting solo self-employed (zzp’ers in Dutch)• Robustness for necessity motives (multiple indicators)• Controls for socio-demographic, firm and organizational

characteristics


Data

13


Data

Explanatory variables:• Three indicators for necessity motives

1. Unemployed (entitled to benefits)2. Self-proclaimed necessity3. Author-classified necessity


Data

• The entrepreneurial performance of solo self-employed is measured in terms of their annual turnover

• turnover is a categorical dependent variable

• There appears to be a statistically significant relationship between annual turnover and type of solo self-employed in case of all three type dummies


Data

Cumulative frequencies of all types of necessity SSE

Annual turnover Unemployed Self-proclaimed (necessity 1)

Author classified (necessity 2)

< €10K 28,3% 12,6% 14,0%

€10K - €25K 56,6% 39,7% 41,8%

€25K - €50K 82,8% 66,8% 68,2%

€50K - €100K 93,0% 87,1% 88,8%

€100K - €200K 98,9% 96,5% 97,9%

> €200K 100,0% 100,0% 100,1%

n 187 597 515


Methodology

17


Methodology

• Regression models:• Dependent variable = annual turnover (7 categories)• Explanatory variables = necessity motives (3 type dummies)• Control variables =

• personal charact. (including Human Capital)• firm charact.• organisational charact.

• Method:• Quasi Fixed Effects model • Pooled ordered probit estimators (panel corrected

standard errors)


Results

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Results

• All three types of necessity solo self-employed have a statistically significant negative effect on annual turnover.

• Human Capital Endownment:• Educational level has no mediating effect• Firm age has a small mediating effect.


Results

Marginal effects:the probability of generating an annual turnover of more than

50,000 euro decreases with• 10,1% for unemployed;• 7,4% for self-proclaimed necessity;• 5,5% for author-classified necessity.


Conclusions and Discussion

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• Necessity solo self-employed show a lower probability of having a high annual turnover

• A large set of socio-demographic, firm and organisational characteristics cannot explain the observed differences

• Some aspects of human capital do not explain the observed differences between opportunity and necessity (e.g. education and firm age)

• Non-observed aspects of human capital can still explain the observed differences (e.g. entrepreneurial talent and skills or intrinsic motivation)



(Policy) implications:• Economic growth vs. subsistence motives for policy• Still a substantial number of necessity solo self-employed

generates substantial turnover• Efficiency of entrepreneurship policy schemes can benefit if

they are less generic and take into account that several aspects of human capital might influence economic performance of solo self-employed

• Aspects that in our opinion might play a role are entrepreneurial talent and skills, and also intrinsic motivation.



Further research might focus on:• whether the observed differences in economic performance

are truly due to the proposed aspects;• Other performance indicators (e.g. innovation).


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

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