Teaching Strategies 4

Proceedings of

Association for

Small Business and Entrepreneurship

34th Annual Conference

Albuquerque, New Mexico

October 8-10, 2008

ASBE 34th Annual Conference

Albuquerque, New Mexico October 8-10, 2008

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Proceedings of the 34th Annual Conference of the

Association for Small Business & Entrepreneurship

Kathleen Liang, Vice President of Programs University of Vermont

Paul Dunn, Editor

University of Louisiana at Monroe

Hong M. Lee, Associate Editor University of Louisiana at Monroe

The referred annual proceedings sponsored by the Association for Small Business & Entrepreneurship Authors retain copyright for their manuscripts. Any omissions or errors are the sole responsibility of the individual authors. The Publishers accept final manuscripts in digital form and make adjustments solely for the purposes of consistency in formatting, pagination and organization.



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ASBE Association for Small Business & Entrepreneurship Officers 2008 President Martin Bressler Houston Baptist University 7502 Fondren Road Houston, TX 77074 (281) 649-3448 (281) 649-3436 fax [email protected] President Elect Kitty Campbell Southeast Oklahoma State University 1405 North St. Durant, OK 74701 580-745-2000 [email protected] Vice President-Programs

Kathleen Liang University of Vermont (892) 665-0754 [email protected]

Vice President-Membership

Stephen Jones Arkansas Tech University (479) 968-0673 [email protected]

Secretary/Treasurer Raydel Tullous

University of Texas at San Antonio (210) 458-5381

(210)458-6350 [email protected]

Greetings and Welcome to our 34th Conference! On behalf of the Association for Small Business and Entrepreneurship, I would like to welcome you to the Fall 2008 annual meeting! I would also like to take this opportunity to recognize the work of Kathleen Liang, Vice-President Programs, who has worked hard to put together an excellent program for this conference. Many others have assisted us in keeping ASBE a vibrant organization advancing knowledge and best practices in the field of entrepreneurship. Paul Dunn took on the challenge of helping us to create a great new website. Kitty Campbell, Leslie Toombs and many others have served our organization with tireless effort. Jane Licata and the editorial staff of Journal of Business and Entrepreneurship continue to provide us with a high quality academic publication. I understand how busy you all are, and offer my sincere thanks to all our members who remain loyal to the organization. Our membership is our lifeblood and I know that we all appreciate the time and energy you continue to invest in ASBE. We are continuing to explore the possibility of meeting with another organization to take advantage of the benefits of sharing facilities and potentially attracting new members. In addition, recommendations have been proposed for updating our by-laws. Please feel free to share any ideas you might have to help ASBE continue to grow and become an even better organization. Enjoy the conference and your time in Albuquerque! I look forward to seeing you again next year. Sincerely, Martin S. Bressler President, ASBE

mailto:[email protected]�







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ASBE Current Officers President Dr. Martin Bressler Houston Baptist University President Elect Kitty Campbell Southeastern Oklahoma State University Vice President of Programs Dr. Kathleen Liang University of Vermont Vice President of Membership Dr. Stephen Jones Arkansas Tech University Secretary/Treasurer Dr. Raydel Tullous University of Texas at San Antonio Immediate Past President Dr. Leslie Toombs University of Texas at Permian Basin



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ASOCIATION FOR SMALL BUSINESS & ENTREPRENEURSHIP

PAST PRESIDENTS 1975-76 Robert W. Smith, North Texas State University 1977 Ann Hughes, University of Texas, Arlington 1978 Don Altman, Abilene Christian University 1979 Paul Dunn, Northeast Louisiana University 1980 Charles Neil, Texas Tech University 1981 R. Dean Lewis, Sam Houston State University 1982 John Todd, University of Arkansas 1983 Robin Peterson, New Mexico State University 1984 Ray Robbins, University of Arkansas, Little Rock 1985 Gwen F. Fontenot, North Texas State University 1986 Jude Valdez, University of Texas, San Antonio 1987 Homer L. Saunders, University of Central Arkansas 1988 Clyde Spruell, University of Science & Arts of Oklahoma 1989 Don B. Bradley III, University of Central Arkansas 1990 Walter E. Greene, University of Texas, Pan American 1991 Geralyn M. Franklin, Stephen F. Austin State University 1992 Norton E. Marks, California State University, San Bernardino 1993 Herb Lawrence, Gateway Technical College 1994 Buddy Gaster, East Central University 1995 William T. Jackson, Stephen F. Austin State University 1996 Alicia B. Gresham, Stephan F. Austin State University 1997 Louis D. Ponthieu, University of North Texas 1998 Robert D. Gulbro, Athens State University 1999-2001 Don B. Bradley III, University of Central Arkansas 2002 William T. Jackson, University of Texas of the Permian Basin 2003 Patti L. Wilber, Northwestern Oklahoma State University 2004 Patti Wilber, Northwestern Oklahoma State University 2005 Kitty Campbell, Southeastern Oklahoma State University 2006 Leslie A. Toombs, University of Texas, Permian Basis 2007 Leslie A. Toombs, University of Texas, Permian Basis 2008 Marty Bressler, Houston Baptist University



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ASBE Fellows The highest award given to ASBE members is that of being selected as a "Fellow" of the organization. These selections are made based upon significant contributions to the organization, as well as contributions in general to the field of small business and entrepreneurship. Robert W. Smith Donald M. Altman Sam Bruno-- Stuart Devlin-- Paul Dunn--1992 Charles Neil--1992 Gwen Fontenot--1993 Homer Saunders--1993 Don Bradley, III--1994 Walt E. Greene--1994 Norton E. Marks--1995 Roger Scow--1995 Geralyn M. Franklin--1997

Walter (Buddy) Gaster--1997 Alicia Gresham--1999 William T. Jackson--1999 Louis D. Ponthieu--2000 Jude Valdez--2000 Bob Gulbro--2001 Ken Lacho--2001 Jim Carland--2004 JoAnn Carland--2004 Robin Peterson--2006 Corbett Gaulden--2007 R. Dean Lewis--2007 Ray Robbins--2007



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ASBE Reviewers Don Bradley Walter Green Martin Bressler Kitty Campbell Raydel Tullous William T. Jackson Joan Brumm Dennis Dzansi Gonzales Lawrence Silver Betsy Hays

Paul Dunn Stephen Jones Thomas Box Larry Short Robin Peterson Sam Bruno Stevenson Joe Leonard Michelle McEacharn Particia Borstorff Densil Williams

ASBE Session Chairs Thomas Box, Pittsburg State University, Kansas Don Bradley, University of Central Arkansas Marty Bressler, Houston Baptist University Kitty Campbell, Southeastern Oklahoma State University Walter Green, Texas A & M University Betsy Hays, California State University, Fresno Bill Jackson, University of South Florida, St. Petersburg Jane Licata, Southeastern Oklahoma State University C. William McConkey, University of Louisiana at Monroe Michelle McEacharn, University of Louisiana at Monroe Larry Short, Northwestern State University, Louisiana Leslie Toombs, University of Texas at Permian Basin Robin Peterson, New Mexico State University



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Table of Contents Message from the ASBE President ·················································································· ii ASBE Officers, 2008 ········································································································· iii ASBE Past Presidents ······································································································· iv ASBE Fellows ···················································································································· v ASBE Reviewers and Session Chairs··············································································· vi Competitive Papers OODA LOOP DECISION MAKING: AN ADAPTIVE SMALL FIRM STRATEGY DEVELOPMENT FOR TURBULENT TIMES ································································· 1 Kent Byus, Texas A&M University - Corpus Christi Thomas Box, Pittsburg State University PUBLIC RELATIONS ENTREPRENEURS: SATISFACTION, MOTIVATION AND CHALLENGES········································································································· 12 Betsy Hays, California State University, Fresno

Shannon Ritchey-Escobedo, California State University, Fresno REALISM AND OPTIMISM IN BUSINESS ENTREPRENEURS VERSUS PRE BUSINESS ENTREPRENEURS················································································ 24 Kathleen Liang, University of Vermont Paul Dunn, University of Louisiana at Monroe A SOCIAL-COGNITIVE MODEL OF ENTREPRENEURSHIP FAILURE: THE INFLUENCE OF LAY THEORY ······················································································ 42 Lawrence Silver, Southeastern Oklahoma State University DIFFERENCES IN ENTREPRENEURSHIP AND OTHER BUSINESS PROFESSORS' CRITERIA FOR TEXTBOOK ADOPTION ············································ 50 Robert E. Stevens, Southeastern Oklahoma State University

Ken E. Clow, University of Louisiana at Monroe C. William McConkey, University at Louisiana at Monroe Lawrence Silver, Southeastern Oklahoma State University Papers OPPORTUNITY IDENTIFICATION/RECOGNITION····················································· 61 Jim Bell, Texas State University



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ANALYSIS OF US SBA LOAN PROGRAMS·································································· 68 Don Bradley, University of Central Arkansas

Veronica Kirtley, United States Small Business Administration, Little Rock ROAD TO SUCCESS – KNOWLEDGE NEEDS ASSESSMENT OF PRE-BUSINESS ENTREPRENEURS AND IN BUSINESS ENTREPRENEURS············ 81 Paul Dunn, University of Louisiana at Monroe Larry Short, Northwestern State University, Louisiana Kathleen Liang, University of Vermont AN EXAMINATION OF THE RELATIONSHIP BETWEEN PERSONALITY AND ENTREPRENEURIAL ATTITUDES AMONG US COLLEGE STUDENTS ········· 93 Shanan Gibson, East Carolina University Michael Harris, East Carolina University Todd Mick, Metropolitan Community College of Kansas City ROLES AND INTENTIONS OF FUTURE MANAGERS AND ENTREPRENEURS: ROMANIA AND THE U.S ································································································ 107 Daniel Glaser-Segura, Texas A & M University – Kingsville at San Antonio

Stephen Jones, Arkansas Tech University WEB-BASED ELECTRONIC COMMERCE USAGE BY RURAL MICRO ENTERPRISES FOR INTERNATIONAL MARKET EXPANSION ································ 124 Sammy “Scott” Goble, Chief Accounting Offices, Alliance Flooring, Chattanooga

Patrica Borstorff, Jacksonville State University, Alabama

ENCOURAGING SMES TO EXPORT·············································································· 136 Sara Jackson, University of the Incarnate Word Raydel Tullous, University of Texas at San Antonio THE CONTINUING ISSUE OF WORKPLACE VIOLENCE··········································· 147 Bryan Kennedy, Athens State University

Sam Campbell, Athens State University Brenda Harper, Athens State University Susan Herring, Athens State University William Whitley, Athens State University

UNDERSTANDING COMMUNICATION AND PERSONALITY TYPE— A MEANS OF EMPOWERMENT····················································································· 155 Bryan Kennedy, Athens State University

Denver Betts, Athens State University Sam Campbell, Athens State University Michael Essary, Athens State University Brenda Harper, Athens State University Susan Herring, Athens State University Linda Shonesy, Athens State University



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A PROGRAM FOR INNOVATION EVALUATION························································ 161 Tami Knotts, Missouri State University Stephen Jones, Arkansas Tech University Gerald Udell, Missouri State University TEACHING A 10-DAY WORKSHOP WITH THE MIAMI NATION OF OKLAHOMA ···················································································································· 168 Joe Leonard, Miami University, Ohio CROSS BORDER ENTREPRENEURSHIP AND FOREIGN DIRECT INVESTMENT IN NIGERIA AN EXPLORATORY STUDY OF THE LEBANESE································· 172

Charles Mambula, Langston University, Oklahoma OH WOULD SOMEONE GIVE US THE GIFT TO SEE OURSELVES ·························· 190 Patricia Roshto, University of Louisiana at Monroe Paul Dunn, University of Louisiana at Monroe THE BUSINESS OF THE BIBLE······················································································ 203 Lawrence Ruddell, Houston Baptist University Marty Bressler, Houston Baptist University STRATEGIES FOR SCALING UP AND/OR ACCELERATION OF MICROFINANCE 205 Warner Woodworth, Brigham Young University Cases DELTA DENTAL OF ARKANSAS ·················································································· 206 Larry Davis, Texas A & M University - Texarkana Joan Brumm, Texas A & M University - Texarkana Edward Bashaw, Texas A & M University - Texarkana Workshops PEDAGOGY FOR ENTREPRENEURSHIP AND SMALL BUSINESS EDUCATION ···················································································································· 207

Don Bradley, University of Central Arkansas Bill Jackson, University of South Florida, St. Petersburg XLRB ································································································································· 208

Michelle McEacharn, University of Louisiana at Monroe



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GETTING PUBLISHED ···································································································· 211 Robin Peterson, New Mexico State University Don Bradley, University of Central Arkansas Jane Licata, Southeastern Oklahoma State University HUMAN RESOURCE MANAGEMENT IN SMALL BUSINESSES······························· 212 Larry Short, Northwestern State University, Louisiana Paul Dunn, University of Louisiana at Monroe Kathleen Liang, University of Vermont



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OODA LOOP DECISION MAKING: AN ADAPTIVE SMALL FIRM STRATEGY DEVELOPMENT FOR TURBULENT TIMES Kent Byus, Texas A&M University - Corpus Christi Thomas Box, Pittsburg State University

Abstract

Very Small Businesses (VSBs) – those firms employing fewer than 100 employees have a difficult job formulating and implementing an effective strategy. And this is particularly true in what the authors describe as “turbulent times.” Since the decade of the 70s, economic, political and legislative changes have impacted all firms – particularly very small businesses. The strategy process for VSBs begins with the understanding that in most cases the only effective generic strategy is focused differentiation. Beyond that firms must create significant competitive advantages – what Jack Welch calls the “big AHA”. In striving to be “better, faster and cheaper” than heir larger rivals, the VSBs (we believe) should employ fast cycle decision making (John Boyd’s OODA loops) and Jack Stack’s Open Book Management.

Introduction

One definition of strategy is “A plan of action resulting from strategy or intended to accomplish a specific goal” (American Heritage, 1993). This general definition alludes to an important point and that is that the purpose of strategy is to accomplish an important goal or goals. The word “strategy” has as its root the Greek word “strategos” and that word is loosely translated in English (from Greek) as “the art of the generals”. One of the first books describing the formulation and implementation of strategy was Sun Tzu’s classic “The Art of Strategy” published some time during the Warring States Period (480-221 BC) (Wing, 1998). It is difficult to estimate how many books, articles and monographs have been published about strategy over the last 2500 years, but it is safe to say that the number is well into the thousands. In “Strategy Safari”, written by Mintzberg, Allstrand and Lampel in 1998, the authors comment that they reviewed more than 2000 published studies on strategic management.

Most of the published work on strategic management address the strategy problems (opportunities?) facing larger organizations. This is appropriate from a pedagogical perspective but it is not always helpful to the very small organizations that populate the business landscape. The reasons for this limitation are varied; many neo-Schumpeterian theorists suggest that the nature of the firm’s capabilities and how the capability evolves is more easily identified in larger firms where production and organizational activities are more standardized: small firms are less homogeneous and therefore more theoretically complex. Levinthal (2006) asserts that “…if in fact production knowledge is not a commonly understood set of production techniques readily available to all enterprises that choose to acquire the appropriate input bundle, the the possibility emerges that firms may vary in their capabilities.” This reality is especially true for small, entrepreneurial firms. It is our contention that strategy, as commonly understood, requires some standard set of procedures and metrics, and such procedures and metrics are less, if at all, in small business.



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It is clear that we are now in an era of political and economic turbulence that began during the 1970s (Drucker, 1980). The world-wide recession of 1973-1974 coupled with the oil shocks of 1973 and 1979 quadrupled the price of gasoline in less than a decade. General Motors lost roughly 25% of its market share during the decade of the 80s (Peters, 1987). We have seen recently the rise of economic power in China and India. Outsourcing has become a “way of life” – not just in manufacturing but in services as well. The dot-com bubble of 2000 and the housing bubble of 2008 tipped financial markets into chaos. Old philosophies of employment, customer relationship marketing, capital market stability and many others are in desperate need of rethinking.

During this age of turbulence or “Age of Chaos” according to Peters (1987), the impacts on very small businesses (VSBs) are and will continue to be profound. These organizations have very limited organizational slack. That is, they lack the resources necessary to experiment with strategy and operational decisions. They need to make the “right” decisions more quickly and with fewer mistakes than their larger competitors.

According to the Bureau of the Census, in 2002 more than 97% of all business firms in

the United States had fewer than 100 employees. It is to the leaders and employees of these VSBs that this paper is addressed. Although some would argue that very small firms (fewer than 100 employees) don’t really need to concern themselves with strategy as normally understood, we disagree – strongly. If one “buys” our fundamental assumption that there is an important relationship between strategy and firm performance, then it’s obvious that small firms need some form of strategic management just as do large firms: the globalization of commerce is no longer limited to large multinational enterprise. Starting Point

When assessing the impact or applicability of strategy within a firm or category of firms, requires that two fundamental platform issues be considered if not resolved. First is the nature of the firm, that is how does the firm differ given the set of available organizational choices; and second, what strategic imperatives exist within these available organizational choices for the firm or category of firms. While much progress has been made in addressing these two issues, these questions remain an empirical as well as a theoretical challenge. It is reasonable to assert that an analytical dilemma emerges from an inability to capture a comprehensive understanding of organizational decision making structures.

Strategic management, in its most general sense, is visualized as a series of decision rules that are used to create plans to be implemented in order to achieve organizational goals. However, as suggested by Levinthal (2006) there is not a common set of techniques, and because the capabilities of firms are not formally specified, then there exists an “unintentional drift” in strategy creation, development and implementation. For the Darwinian theorist, the drift is tantamount to mutation, which is both central to adaptive evolution and destructive to stability: economic or organizational equilibrium. Strategy, to be effective must be both adaptive and standard…the push-me-pull-you of successful management. For VSBs, the drift is dramatic, and the affect of the mutation can be disastrous in the face of environmental turbulence.



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In an effort to create strategic stability in the face of turbulence, theorists suggest the codification of organizationally unifying foci; vision statements. Other such codifications, related to vision include the idea of a mission statement. Strategically, the vision statement is intended to establish a nearly limitless horizon for opportunity, while the mission harnesses the firm’s competence in a manageable set of prioritized outcomes. Vision set the direction for the future while mission is an articulation of what the company does currently in terms of products and services, markets and customers served. Some authors (and experts) see the vision and mission statements as “two sides of the same coin” and others see the vision and mission as distinct and quite different. Within the adaptability reality, the distinction is fairly unimportant from the VSB perspective.

We ascribe to a slightly different viewpoint regarding our prescriptions about how to “do” strategy in a small organization. Jack Welch, in his recent book “Winning”, talks about starting strategic management with a very careful decision about what he calls the “Big Aha” – a smart, realistic, relatively fast way to gain a competitive advantage (Welch, 2005). There are two fundamentally important considerations in this straightforward recommendation – the time dimension and something called competitive advantage. The time dimension is important and becoming more so all the time. Consider that Tom Peters in his groundbreaking book – “Thriving on Chaos” – back in 1987 talked about the critical importance of hustle. Successful firms tend to “out hustle” less successful firms in their industries by considerable margins. And this doesn’t mean just compressing the delivery cycle. It means substantively shortening the time required to perform most operations – order placement, conflict resolution, billing, customer responses and new product development. Levinthal (1997) adds to the discussion the notion of market context; the changes in the environmental conditions that force rapid adaptation. Context has both direct, first-order effects, and consequential interaction effects which may buoy some firms and sink others: hence the necessity not to treat strategy as a one-size-fits-all concept, especially for the SME.

Context also impacts strategic competitive advantage. A competitive advantage means, essentially, what the label suggests – valuable and rare core competencies (Hamel, 2000, Parnell, 2008). Core competencies that lead to significant competitive advantage are valuable, rare, difficult to imitate essentially non substitutable. They are the things that WE do that other firms with whom we compete are unable or unwilling to do. Competitive advantages differ appreciably by industry sector, geographic region, resource concentration, and market dynamics. The creation and nurturing of a sustainable strategic competitive advantage is acknowledged as why VSBs can thrive in highly competitive markets. Simply stated well managed VSBs are better, faster or cheaper than rivals.

The caveat in the development of sustainable strategic advantage is less simple; large firm strategic advantages may not be available for VSB use. Historically, the development of a competitive advantage, according to Porter (1980), has meant deciding to compete on the basis of low cost or differentiation. A low cost strategy is generally associated with economies of scale and or scope (larger facilities, longer product runs, tighter operational controls, high degrees of automation, and the major “focus” of the firm is to achieve the lowest costs in the industry in which it participates). An example of a low cost leadership strategy in retailing is



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obviously Wal-Mart. Toyota is an example of a manufacturing firm that achieves a low cost strategy by employing the Toyota Production System (Womack & Jones, 1996).

Differentiation is, in some ways, may be considered as the opposite of low cost leadership. Differentiators carefully study their customers and potential customers to identify what special features, options and alternatives people are willing to pay competitive prices for (the focus is on providing unique bundles of attributes, complementary products, and/or services which are generally sold at higher margins). It is our position that the appropriate generic strategy for VSBs is, almost always, focused differentiation: often referred to as niche or boutique. VSBs lack sufficient resources – money, people or facilities – to compete on the basis of a low cost leadership strategy. As Tom Peters has said, “Don’t try to compete with Wal-Mart on price or China on cost. (Peters, 2007). The Competitive Response Model We recognize the difficulties in “doing” strategy in small firms – particularly in the current turbulent technological, political, social, and economic climate. Often times the leadership group in a small firm may be only two or three people who have a wide variety of duties and very limited free time. High-priced organizational behavior or operations consultants are most often not the answer for these firms. This does not mean that these firms should not carefully consider strategy. What it does mean is that they need a process for strategy formulation and implementation that is simpler, more straight-forward, and easier to implement and communicate to the employees of the firm. We offer the following model refer to Figure 1.



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The ability to reduce the decision making sequence effectively requires that the reduction process be considered within a more robust information gathering, analytical, feed-forward decision model. We suggest the OODA Loop model.

OODA is an acronym for O-bservation, O-rientation, D-ecision, and A-ction. This

sequence of individual and/or organizational cognitive processes is also referred to as the “Boyd Cycle” because it is attributed to the late Colonel John R. Boyd, a pioneering jet fighter pilot and strategic theorist with the U.S. Air Force. It was Colonel Boyd’s practiced belief that combat fighter aircraft operate and successfully achieve specific mission essential outcomes in an ultra-dynamic continuously evolving set of environments, and that critical to the success of the individual pilot and the entirety of the organization was the ability of the pilot to make accurate, appropriate, and strategically responsive decisions (Boyd, 1997).

The OODA Loop model fits highly dynamic competitive decision methods wherein the

“…decision maker intuitively maps operational flows, seeks ways of reducing critical path implementation time of competitive activity, and closely monitors progress” (Dickson, 1992). SME owners and managers enter new competitive encounters employing the mind-time-space relationship of variety, rapidity, harmony, and initiative to attain a specific objective (Spitaletta, 2003). Refer to Figure 2.

Figure 2: Boyd’s OODA Loop Model

Decomposition of the OODA Loop procedure within general theories of strategy, entrepreneurship and market competition may provide valuable insight into the decision-making specifications associated within VSBs. The OODA Loop is an interactive (decision maker with environment) asynchronous, non-sequential process that provides remarkable stability in making



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critical decisions in environments that are constantly changing, modifying, and morphing in largely unpredictable ways. Boyd’s OODA Loop is consistent with the centuries-old strategy philosophy of Sun Tsu updated for the 21st Century, “Work to defeat the enemy’s plan, rather than the enemy’s forces” (Griffith, 1963).

When considering the appropriateness of the OODA Loop process within the VSB

strategy development, one must recognize that Boyd believed that “…the business of life is life itself, which cannot be accomplished without survival and is more effective if prosperous.” (Spitaletta, 2003). Accordingly, the first and most important priority is the survival of the firm followed closely by the ability of the firm to independently sustain and prosper. In a practical sense, for the process to be operational, the critical elements of the OODA Loop must first undergo scrutiny to assess the viability within business contexts. From Boyd’s theory of maneuver warfare, small, more entrepreneurial enterprise can adopt the concepts of shaping the environment, adapting to the changing form of competition, coping with uncertainty, using time as an ally, and degrading the competitor’s ability to cope (Hammond, 2001). Decomposition of the model illustrates this compatibility.

The observe component is the 360-degree lens wherein real-time data enters the sensory awareness of the decision maker. These raw, untransformed bits are ubiquitous, without specific form, and do not, at this early stage, provide any substantive decision specific information. The usability of these various phenomena is at best speculative. These data enter the decision maker’s cognitive sensors as a set of otherwise unpredictable and therefore uncontrollable circumstances and unrecognized, externally generated, “stuff”. These are rapid, various, successive, foreign and potentially threatening to the survival if left unrecognized, unattended, and unresolved. This “rush” of data stresses the ability to make critical decisions unless the decision maker possesses a well-trained or highly intuitive guidance ability to maintain for-the-moment, and a process that can be exploited to create productive survival in the face of otherwise threatening events. This requires a well-formed observation ability that integrates and catalogs incoming data at a rapid yet manageable rate, preparing the data for information processing in a coherent prioritized manner. These data include 1) outside information, 2) unfolding circumstances, 3) unfolding interactions with the environment and 4) the components of an implicit guidance control.

Perhaps the most critical of the model components is “Orientation”. While observation provides the data, it is orientation that shapes and filters the data into usable decision sensitive information. This shaping function provides adaptive context, urgency or currency, and dimensionality to the phenomena. The decision maker’s ability to perform this filtering and prioritization activity flows from the set of interdependent attributes that may be available at any given moment. When faced with a decision situation, the combined effects of genetics, culture, tradition, heritage, expertise, experience, analytical skills, and synthesis engage to formulate a “plan of action”. While intuitively obvious that during the heat of battle, it is none-the-less requisite for the entrepreneur to engage this process quickly or risk a loss of innovative leadership.

Feeding forward from the orientation component the decision maker must determine possible courses of action, evaluate possible consequences, make critical selections, and decide. Strategic decision making can be enhanced through experience, training, schooling, and innate ability (Schultz, 1980). Accordingly, decision heuristics are the result of the orientation



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associated with the individual or organizational elements responsible for making decisions: implicit and explicit.

Implicit decisions emerge as the workings of the unconscious mind, leading to actions based on feelings and tacit knowledge running under a form of automation, guided by hidden beliefs, internalized values or perhaps strongly established habits. Some are explicit and others are implicit. Explicit business decisions are more classical to the strategy formulation process. These include decisions regarding investment in a production plant, increase in personnel, price changes, product positioning, etc. IN formal strategic planning and decision models, explicit decisions gain access to available process resources meaning management time, process/approval framework, analytical support, risk assessment, cost/benefit calculation, sensitivity deliberations, etc. This OODA loop model serves the implicit decision with similar methodological purpose because it relies on the innate as well as the formal: explicit decisions tend to be influenced more by orientation and reorientation process and implicit decisions tend to rely on culture, heritage, and experience. Regardless, decisions made require action to be taken.

VSBs decide to pursue, or not pursue a course of action based on the incentives or consequences that are perceived as associated with the investment of skills and resources (Rosen, 1983). Actions that are predicated primarily on harvesting incentives provide opportunity, while actions that are tied to avoiding adverse consequences are generally considered to be defensive. Actions taken are on one hand the end of one loop and on the other hand the beginning of another related loop, because the effect of the actions taken produce outcomes, predictable and unpredictable, that produce new observations and require different orientations which require new or adjusted decisions which again require action. The OODA loop closes and reopens simultaneously. This opening and simultaneous closing tends, over time, to make the OODA loop resemble more a spiral that draws closer with each sequential pass. This tightening reduces decision cycle time, improves the predictability of successive decisions, and provides the organization with the ability to drive-down the decision making to the most beneficial level: hence the integration of the competitive responsiveness reduction model and the OODA Loop strategic development model. Refer to Figure 3.



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Figure 3: The Combined OODA Loop and Competitive Responsiveness Model

Many strategy experts advocate that the strategic decision-making process should be deliberate and methodical (Andrews, 1971). This suggests that strategic business decision-making in the 21st Century can continue to depend on management models that ignore globalization and its impact on VSBs. In this regard, Mintzberg (1994) suggests that there is a distinct difference between strategy formation and strategic planning, just as there is in the heat of battle a distinct difference between engagement and doctrine. Small business activities in a highly dynamic and competitive global setting require decision making models that allow strategy to emerge spontaneously at least as often as it is deliberately planned.

Discussion

The model herein described to accommodate both the spontaneous and the pre-planned is the OODA loop, or Boyd Cycle. This four step process, repeated and repeated again, provides the decision maker with the ability to make more specific decisions, in a more rapid period of time. While Boyd did not specifically set out to reduce cycle time, he quickly acknowledged that the process provided the framework for such reductions. Additionally, an integrated use of this process provides the decision-maker with the highly desirable ability to get “inside” the competition’s OODA Loop. This counteractive ability is especially useful when business specifically targets a competitor as illustrated when Proctor & Gamble encouraged complaints against Amway, or when Voices for Choices targeted SBC as a greedy and unethical corporation



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(Bocji, 2002). If the competitive reactions are predictable then the counter-measures are even more devastating.

OODA loops can describe how VSBs deploy strategy, and then by the iterative process inherent in the loop or cycle can adjust the strategy to meet the changing conditions surrounding the decision. Further, when needs arise, the OODA loop can be circumvented by performing the orientation and decision steps first. This would provide the enterprise with the ability to pre-determine courses of action when circumstances are observed. These types of tight cycles are found today in automated stock trading programs (Nichols et al, 2000).

As globalization and world politics continue to expand opportunities there is also an expansion of the competitive pressures that require more agile strategy development and more efficient, effective, and accountable decision making. The enterprise that is able to shrink the decision cycle can expand opportunities while reducing threats to survival and growth. The decision that emerges from this process is ready for implementation.

Implementation is the sine qua non of successful strategy. Implementation is “where the rubber meets the road.” Great strategies poorly implemented yield less than satisfactory results. Implementation means taking the “Big Aha” – the competitive advantage – to the right people in the organization and encouraging them to drive the idea forward. It also means relentlessly seeking out best practices to achieve your big aha and adapting them as required (Welch, 2005).

The right people in the organization mean those capable of getting excited about the strategy and doing what it takes to implement well. It presumes that we know something about the capabilities of all organizational members and what their performance has been historically. It means further that we have created a high level of trust in the organization, that we communicate effectively and that employees are fairly compensated. Understanding capabilities and measuring prior performance means that we have an effective appraisal system. This does not have to be a large paperwork system but the appraisal process needs to be done regularly and carefully. Basics include a brief description of job duties and regular communications with employees about their performance. They must understand what is expected of them and how their performance will be measured.

A particularly useful philosophy in seeing to it that the right people in the organization are truly focused on strategy implementation is Jack Stack’s Open Book Management (OBM). In early 1983, Jack Stack and a small group of managers bought what came to be known as Springfield Remanufacturing (SRC) from International Harvester. Their initial debt to equity ratio was 81:1 (Stack, 1992). Realizing that traditional management practices would not suffice, SRC first built a corporate culture of trust. Then they trained every member of this 113-person organization to read, understand and interpret financial documents. Weekly meetings were held to discuss operational results and how they impacted the financial documents. Complete information was shared with all employees. Hourly workers quickly came to understand how their individual performance contributed to the survival and success of SRC. The results were breathtaking. From a first-year loss of $60,488 in FY 1984, the firm grew to an impressive $1.3 million in after tax profits on revenues of $66 million in 1991. These results have continued to



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the present day and SRC has trained managers and executives from hundreds of other firms into utilize OBM to achieve similar results.

We believe that fast-cycle decision making (utilizing John Boyd’s OODA loop) coupled with OBM can yield impressive financial results. But there are a couple of caveats: the firm must employ focused differentiation as a generic strategy, they must emphasize the big AHA (source of competitive advantage and they must have a culture of trust.

References

American Heritage (1993). College Dictionary. Boston, MA: Houghton-Mifflin Andrews, K.R. (1971). The concept of corporate strategy. Homewood IL: Richard D. Irwin. Bocji, P. (2002). Corporate cyber stalking: An invitation to build theory. First Monday, 7:11. Dickson, M. (1992). GM’s revolution turns into a race against time. Financial Times. 15

October. Drucker, P.F. (1980). Managing in turbulent times. New York: Harper & Row. Hamel, G. (2000). Leading the revolution. Cambridge, MA: Harvard Business School Press. Hammond. G. T. (2001) The mind of war: John Boyd and American security. Washington:

Smithsonian Institution Press. Levinson, J.C. (2007). Guerrilla marketing. New York: Houghton Mifflin. Levinthal (1997). The neo-Schumpeterian theory of the firm and the strategy field. Industrial

and Corporate Change. 15(2), 391-394. Levinthal (2006) Adoption on rugged landscapes. Management Science. 43, 934-950. Mintzberg, H. (1994). The rise and fall of corporate strategy. New York: Free Press. Mintzberg, H., Ahlstrand, B., and Lampel, J. (1998). Strategy safari. New York: Free Press. Nichols, R.K., Bryan, D.J. Ryan J.J.C.H. (2000). Defending your digital assets against hackers,

crackers, spies and thieves. New York: McGraw-Hill. Parnell, J. (2008), Strategic management (3rd edition). Mason, OH: Atomic Dog. Peters, T. (1987). Thriving on chaos. New York: Harper Collins.



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Peters, T. (2007) Everything you need to know about strategy: A baker’s dozen eternal verities. Unpublished manuscript available at TomPeters.com.

Porter, M. (1980) Competitive strategy. New York: The Free Press. Rosen, S. (1983). Economics and Entrepreneurs. Entrepreneurship. Lexington, MA: Lexington

Books. Schultz, T.W. (1980). Investment in entrepreneurial ability. Scandinavian Journal of Economics.

82(4). Spitaletta, J. (2003). Transformation battlefield: Achieving organizational change with corporate

physics. Industrial Engineer. January. Stack, J. (1992). The great game of business. New York: Doubleday. Stalk. G. &Lachenauer (2004). Hardball. Boston: Harvard Business School Press. Thompson, A., Strickland, A. & Gamble, J. (2007). Crafting and executing strategy (15th

edition). New York: McGraw Hill. U.S. Department of Commerce (2006). Statistical abstract of the United States: 2006. Wing, R.L. (1988). The art of strategy. New York: Doubleday. Womack, J.P & Jones, D.T. (1996). Lean thinking. New York: Simon & Schuster.



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PUBLIC RELATIONS ENTREPRENEURS: SATISFACTION, MOTIVATION AND CHALLENGES Betsy Hays, California State University, Fresno

Shannon Ritchey-Escobedo, California State University, Fresno

Abstract

To further explore the areas of satisfaction, motivations, and challenges among public relations entrepreneurs, 21 students in a public relations entrepreneurship course at California State University, Fresno conducted 75 in-depth interviews with public relations entrepreneurs with 25 or fewer employees throughout the United States. Those surveyed were largely satisfied with their entrepreneurial ventures and with the size of their firms. Greatest achievements cited were successfully running their firms, representing major clients, and being a good employer. Motivations for pursing entrepreneurship included a yearning for freedom, flexibility, and a long-held desire to be their own boss. Challenges noted were time management, managing employees, and finances (billing, rate setting, and collections). An overwhelming majority (94%) indicated that they would become public relations entrepreneurs all over again, though 48% believe they have no balance between their personal and professional lives.

Introduction

An entrepreneur has been described as “one who organizes, manages, and assumes the risks of a business or enterprise” (Woolf, H.B., 1980, p.378). The public relations field is full of entrepreneurs – solo practitioners and others running public relations firms. The U.S. Census Bureau lists the number of public relations agencies (firms) as 6,563 (U.S. Department of Commerce, 2006). Those currently practicing in the field – close to 400,000 according to some researchers (Falconi, 2006) – could be considered potential entrepreneurs, as the typical path for public relations practitioners includes some time in the field working for someone else before to becoming one’s own boss.

While public relations entrepreneurship is not new, as public relations firms have been around since the early 1900s, the study of public relations entrepreneurship appears to be, as few studies can be found, and those found are recent. Hazelton and Rayburn (2005, 2007), for example, are among those that have conducted studies; theirs relate to solo public relations practitioners. The growing interest in studying public relations entrepreneurship from an academic perspective could partially be due to a shift in mindset of the public relations entrepreneurs themselves. Croft has suggested that “This new breed of entrepreneurs are more serious about the business of the business than were their predecessors. They are in business to make money and they want to see their hard work rewarded” (p. xiv). Increased interest in studying public relations entrepreneurship could also be related to the boon in entrepreneurship education in general and its burgeoning body of research.

Public relations entrepreneurs who are not solo practitioners, especially those with firms that have 25 or fewer employees, have been largely ignored by existing research. Little is known about their levels of professional satisfaction, motivations, and challenges. This study begins to explore the world of public relations entrepreneurship in an effort to create knowledge helpful to those who are already public relations entrepreneurs, as well as those looking to embark on the



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adventure. This study, along with others, will provide a body of knowledge useful to current and future public relations entrepreneurs, strengthening the industry and leading to increased success.

Literature Review Several studies have been conducted regarding employee satisfaction, motivations, and

challenges in general, and in fields other than public relations. Hertzberg and his colleagues’ (1959) work on the duality theory of motivators and hygiene factors is among the most oft-cited research. They identified six factors, called “motivators,” that can increase job satisfaction – achievement, recognition, the work itself, responsibility, advancement, and growth. They also identified six challenges, called “hygiene factors,” that can decrease job satisfaction. These include company policy and administration, supervision, relationship with supervisor, work conditions, salary, relationships with peers, personal life, relations with subordinates, status, and security (Hertzberg, 1959).

Smerek and Peterson’s conceptual model suggests that job satisfaction is contingent upon three factors: “(1) whether a job meets expectations, (2) is close to an ideal job, and (3) how satisfied a person is with their job” (p. 234). Among the conclusions that emerged from their study of non-academic university employees, variables related to perceived work environment are more important than personal characteristics or job characteristics in predicting job satisfaction. The work itself was found to have the most powerful and signification predictor of job satisfaction, and opportunity for advancement and responsibility were also significant predictors (Smerek and Peterson, 2007). In their study of licensed social workers, Cole, Panchanadeswaran and Daining (2004) found that perceived quality of supervision and perceived workload were predictive of job satisfaction. A study of the hospitality industry found that the work itself, supervision, and promotion determine the level of overall job satisfaction (Tutuncu and Kozak, 2007).

Regarding motivation, Skemp-Arlt and Toupence (2007) describe motivation as the mechanism that reduces the distance between a person’s actual state and desired state of being. Motivation includes “concepts such as need, incentive, reward, reinforcement, goal setting, and expectancy” (pg. 28). Maslow’s view of motivation is based on his established hierarchy of needs: basic physiological, safety, and security; social affiliation/belonging, esteem, and self-actualization (Maslow, 1943). His theory contends that when lower-level needs are met, higher-level needs emerge. Hartog and Belschak’s 2007 work found a correlation between commitment to the organization and personal initiative, and team and organizational commitment are also relevant.

Specific to entrepreneurship, researchers have identified several motivators for embarking on one’s own business enterprise. These include the desire for the freedom that comes from self-management and potential monetary rewards (Kemelgor, 1985). Environmental alertness (the ability to recognize and exploit opportunities) is among the motivators uncovered by Das and Bing-Sheng (1997). Other factors they discovered include “need for achievement,” “tolerance of ambiguity,” “internal locus of control,” and “risk propensity” (pg. 70). Other research has found that many entrepreneurs have entrepreneurial parents (Dyer 1994), that entrepreneurship can be a response to a life event, such as a layoff or dissatisfaction with a current work environment due to downsizing (Miner, 1997 and Ennico, 2003), and that, among women, the desire to balance work and family often leads to entrepreneurship (Demartino and Barbato, 2003). A qualitative study of ethnic minority entrepreneurs in the United Kingdom found that a lack of satisfaction in working for others, the need to be one’s own boss and achieve more, and the prospect of higher earnings



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were the main motivators for their entrepreneurial ventures (Hussain, et. al, 2007). This research also found that graduates from non-business disciplines were more likely to engage in entrepreneurship.

Regarding challenges, Reynolds and Whigham-Desir (1995) established case studies that suggest solutions to four identified challenges to growing a small business. The challenges they identified include keeping a marketing strategy current, rapid expansion, partner disagreements, and breaking in to new markets.

According to Dedhia (1995), other challenges to entrepreneurship arise from changes in the political, social, economic, cultural, and business environments. Such changes include “customer demand and satisfaction, corporate image an culture, quality level of product and service, profitability and satisfying shareholders/stakeholders, management of change, global market and competition, government rules and regulations, environmental impact, communication, new technology, workforce diversification, and information management” (pg. 266).

While the existing body of research is useful, none of it relates specifically to public relations entrepreneurs. Looking at these areas with a specific industry in mind provides a more finely-tuned perspective that becomes more valuable to those who are practicing in or looking to practice in the field. Specifically, as university courses in public relations entrepreneurship continue to emerge, research specific to public relations entrepreneurs will provide faculty with a solid base of date from which to teach. As such, this study attempts to broaden knowledge in this area through attempting to answer the following research questions, which encourage current public relations entrepreneurs to reflect on their thoughts regarding the path of their business (satisfaction), explore why they became their own boss and how they chose the size of their business (motivations), and discuss challenges and ways to overcome them (including the oft-discussed work/life balance challenge):

RQ1: How satisfied are public relations entrepreneurs with the sizes of their companies? RQ2: What do public relations entrepreneurs believe are their favorite parts of running their business? RQ3: What do public relations entrepreneurs believe are their greatest accomplishments? RQ4: Knowing what they know now, would public relations entrepreneurs do anything differently with respect to their firm? RQ5: Why do people become public relations entrepreneurs? RQ6: How do public relations entrepreneurs decide on the size of their companies? RQ7: What do public relations entrepreneurs believe to be the most challenging aspects of running their own business? RQ8: What do public relations entrepreneurs believe are their greatest mistakes? RQ9: How do public relations entrepreneurs overcome professional disappointment? RQ10: How do public relations entrepreneurs achieve work/life balance?

Methods

Sample A total of 75 public relations entrepreneurs were interviewed for this study, with 48%

being male, 49.3% being female, and 2.7% not answering the question. Two-thirds (66.7%) were married, 32% were unmarried, and 1.3% of the respondents did not provide this information. Regarding children, 57.3% of respondents had at least one child and 41.3% did not, with 1.3% missing data. About a third (32%) worked for a public relations agency prior to going out on their own, 18.7% worked “in-house” for one organization, and 34.7% worked both in-house and



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for an agency, with 13.3% missing data. More than 8 in 10 (81.3%) say they will never work for anyone else again and 12% said they would, with 1.3% missing data. Regarding the size of their business, 62.7% are satisfied with the size of their business and 28% are not, with 9.3% missing data. Of respondents, 41.3% are sole proprietorships, 28% are corporations, 22.7% are classified as limited liability companies (LLCs), and 6.7% are partnerships, with 1.3% missing data. Almost half (49.3%) are members of the Public Relations Society of America and 48% are not, with 2.7% missing data. Just about two-thirds (65.3%), have a mentor and 34.7% do not, with no missing data. Respondents work an average of 49.77 hours per week. They average 6 employees, with a range from 0 to 25. They had an average of 13 clients, with a range from 2 to 42. Table 1 provides additional information about the respondents. Table 1

Length of time respondents worked in public relations before opening up own firm

Response total Years Worked in Public Relations Response % (N = 75) 0-5 Years 30.7 23 6-10 Years 30.7 23 11-15 Years 18.7 14 16-20 Years 9.3 7 21-25 Years 2.7 2 26+ Years 5.3 4 Missing 2.7 2

Procedures In-depth interview questions were developed by the professor and students in a public

relations entrepreneurship class at California State University, Fresno during the spring 2008 semester. Each of the 21 students was assigned a city, state, or region, and charged with conducting in-depth interviews with public relations entrepreneurs with 25 or fewer employees. The following states were represented in the study: Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Ohio, Oregon, Pennsylvania, Nevada, New York, Tennessee, Texas, Wisconsin, and Washington. Public relations entrepreneurs in each area were located through online searches. In total, 75 interviews were conducted between March and April 2008. Most interviews were conducted by phone, with a few in person, and a few via email. Participation in the study was voluntary and individual responses were kept confidential. Measures

The question set was created using a compilation of questions the students developed based on what knowledge they wanted to acquire from public relations entrepreneurs. The questions were pre-tested on local public relations entrepreneurs. The survey was comprised of 41 questions, 16 of which were intended to generate quantitative responses and 25 of which



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elicited more in-depth, qualitative answers. Each researcher followed the same script, in accordance with the regulations of the Human Subjects Review Board at California State University, Fresno. Basic demographic information was collected. Open-ended, in-depth questions followed the demographic questions. These items focused on the respondents’ motives for being public relations entrepreneurs, motives for the size of their firms, and keys to their success as business owners. Information was also sought regarding how they market their firm, advice for future public relations entrepreneurs, and how they achieve balance between their personal and professional lives. Each interview took approximately 35 minutes to complete. Notes on each in-depth interview were transcribed for analysis.

Results

Satisfaction with Public Relations Entrepreneurship

In exploring research question 1, how satisfied are public relations entrepreneurs with the sizes of their companies, it was found that a majority of the public relations entrepreneurs interviewed were satisfied with the size of their businesses. Thirty-nine of those interviewed said they were completely satisfied with the size of their company, while 27 entrepreneurs said they were satisfied with the current size of their business but would like to see their firms grow in the future. As one entrepreneur voiced, “Grow or die; that’s the rule.” Only four public relations entrepreneurs were not satisfied with the size of their companies. Two of them wanted to shrink their businesses, while the other two wanted to grow their firms.

Of the public relations entrepreneurs that were satisfied but would like to see future growth,

several explained that they wanted their companies to grow to meet the current market demands: “We have grown as the client base has grown. I never envisioned we would be this large, and we are still growing.” Others felt they could grow because their businesses were more established and that they had a better understanding of how to manage a firm. A few mentioned that future growth was dependent on revenue and/or the continuance of individual contact with clients.

Several common themes developed in looking at research question 2, which explores

what public relations entrepreneurs believe are their favorite parts of running their business. Public relations entrepreneurs across the board enjoyed being independent and the freedom to be one’s own boss, including having creative control over business decisions, being directly rewarded for business successes, and having the ability to run their firms as they see fit: “I’m an independent person and I like doing things my own way.”

Respondents also noted flexibility as a favorite element in running their own businesses,

especially in terms of the ability to set working hours around their busy schedules or time with their families. Many public relations entrepreneurs also enjoyed the challenge and variety of their jobs, helping others, and working with people, as did this respondent: “[My favorite parts are] the flexibility and variety of work. I am never bored, my clients are first class, and I feel like I add value to others’ day and/or company. I get paid according to how hard I work, and love meeting new people in the industry.”



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Several common threads were found while exploring research question 3, what public relations entrepreneurs believe are their greatest accomplishments. Several noted that starting and managing their own successful business was the best thing they’re ever done as a public relations entrepreneur; others mentioned serving major clients, being a good employer, making good business decisions, and helping in the community. Sixteen people cited major clients as the best thing they did as a public relations entrepreneur. A majority of these clients were celebrities or well-known firms – one interviewee even had the opportunity to represent a Pope – but some business owners noted that simply keeping their clients happy was their biggest accomplishment.

Another popular answer was developing great employees and providing jobs for people.

Comments included, “The best thing I’ve done is develop professional employees. Every one of my former employees will tell you that this was the best, most rewarding job they ever had,” and “I love watching the team grow in skills and experience whether they are currently employed with [my business] or have moved on for bigger and better opportunities. My relationships have been long-lasting and I am proud to play a small role in the development of such talented individuals.”

Some of the business decisions that were noted as great accomplishments were in regard

to financial decisions, hiring and firing of employees, and making changes to the company’s size. One noted that they needed to shrink their number of employees to keep their business more manageable; others felt they needed extra help running their firm and took on more employees.

Entrepreneurs who felt that helping out in their communities was their biggest

accomplishments often served non-profit organizations or charities, “We help organizations that really need help. They have a story to tell, but don’t know what to do to call attention to their work.” Others helped clients with marketing or internal issues: “[I] helped a client get out of some serious internal problems and get them back to being a respectful company.” Some interviewees also noted they enjoy helping startup companies grow to meet their goals.

In answering research question 4, knowing what they know now, would public relations

entrepreneurs do anything differently with respect to their firm, 94% of those interviewed indicated that they would do it all again. While most public relations entrepreneurs said that they would not have changed anything with respect to their firms, four themes emerged from those who would have championed change. Ten percent said that they would have started networking earlier to build a larger client base. Another 10% felt that they would have benefited by working at their agency longer before becoming public relations entrepreneurs. The reverse was also true; another 10% of respondents felt they should have started their business sooner. Finally, 10% of those interviewed mentioned that they should have “listened to their gut feelings more” with respect to their companies, instead of relying on the advice of others.

Public Relations Entrepreneur Motivations

In exploring research question 5, why people become public relations entrepreneurs,

several factors emerged. First, many entrepreneurs had wanted to be their own boss for a long time; it had been their dream to own their own businesses. Second, many entrepreneurs



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mentioned that they had started their own businesses because it had been a shrewd business decision at the time. Third, several public relations entrepreneurs started their own businesses because they had been laid off from their previous place of employment and preferred starting their own business to finding a new job.

Twenty-six of those interviewed had always wanted to be an entrepreneur. Several of these respondents had friends or family members who had been or still are entrepreneurs, which influenced their decision to start their businesses. “My family is full of entrepreneurs and I always knew I wanted to be one as well, I just had to decide what line of work I wanted to do,” said one respondent, “Once I got into PR, I knew it was for me, because I wanted to be around my interests and this was a great way to do that.” Another respondent had similar feelings. “I always wanted to be self-employed. It was during an economic recession and it was hard to find a job. I always wanted flexibility and autonomy.”

Twenty-five respondents said they became public relations entrepreneurs because it was a

smart business decision and the timing had been favorable. “[I] decided that if I was doing it for someone else and wasn’t getting paid well, why not just do it for myself and not get paid for a while, but start to build something,” said one respondent. Eight people started their business after their employment had been terminated at their previous job.

Several public relations entrepreneurs said they were frustrated working for someone else

because they had little or no creative control and were not given proper credit for their efforts. One respondent noted, “I wanted to get into the business for myself, and I hated having to take directions and do everything without all the rewards.” Fifteen people said they became entrepreneurs because they wanted to be in charge. Another 13 said they wanted the challenge of running their own business. Other reasons cited by respondents for becoming public relations entrepreneurs included wanting to do a better job or make more money, being compelled to fill a niche or market demand, having a love for the business, and desiring more freedom, flexibility, and independence. Respondents also said they enjoyed being able to choose their own clients and help people. One entrepreneur simply stated, “I wanted to explore my own desires and dreams.”

In regards to question 6, several themes developed in terms of what determines the size of

public relations entrepreneurial businesses. The most common response, with about 1/3 of the respondents (22 individuals) was that market demand is ultimately what determines business size. Additionally, several business owners noted that owning a small business was the best because fewer employees and clients are easier to manage. Comments included, “I didn’t decide it, the market did, based on clients,” and “partly the market… it’s easier to manage with fewer employees. I can make as much money personally without the overhead liabilities.” Another said, “Supply and demand. It depends on what is needed. We don’t want to be huge because we are more able to manage things better the way we are now.” Others said that staying small allowed them to continue being “hands-on” and personally involved with their clients. A few mentioned that they preferred to keep their businesses smaller so that they would not have to lay off any employees. Flexibility was also a factor. Another commented, “We didn’t want to be responsible for employees and their livelihood. We wanted to benefit from the income. We both had young kids at the beginning and wanted to have flexibility in our jobs.”



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Challenges for Public Relations Entrepreneurs For research question 6, what do public relations entrepreneurs believe to be the most

challenging aspects of running their own business, three categories were found: time management, employee management/hiring, and financial challenges. Very few entrepreneurs mentioned being alone and not under a corporate umbrella as a business challenge, though a few mentioned that keeping up with changing technology was an issue. Financial challenges included collecting fees, charging enough, and paying taxes. Others also mentioned that the inconsistency of paychecks was a financial challenge. Also, managing the financial aspects of a public relations business seemed a relatively common problem.

While the vast majority of public relations entrepreneurs agreed that being one’s own

boss is a great experience, it often means you are also the boss of others. Hiring and firing of employees was cited as a business challenge, along with various administrative managerial tasks, such as taking care of employees and scheduling employee time off. For many public relations professionals, finding a loyal and reliable staff was the biggest challenge. As one respondent said, "Managing people [is a challenge]. I love my job; I just don't love the business."

The final major challenge to public relations entrepreneurs was time management. It is

difficult for many public relations professionals, especially those who work long hours and have many clients, to juggle business scheduling and also set aside time to be with their families. According to one entrepreneur, "Managing my time on a day-to-day basis is the toughest part.”

Three themes emerged in examining research question 8, what do public relations

entrepreneurs believe are their greatest mistakes – those involving employees or partners, those involving clients, and those involving finances. Mistakes involving employees was a common answer when it came to mistakes. Many entrepreneurs commented that they did not go with instinct when hiring or kept an employee on for too long. “[A mistake] early on: not being decisive in changing some staff and firing people, following instinct.” Another issue with employees was letting friendships get in the way of business. Taking on a partner also fell into this category; as entrepreneurs expressed that a partner was not good for them or their firm.

Issues involving clients was also a common thread in the answers for this question.

Many said that they took on a client that they disliked or were not passionate for and that hindered their work and the relationship. “[My biggest mistake is] continuing to work with people who I don’t like and who lack a moral compass.” Usually, the public relations entrepreneurs took on these clients as an opportunity for publicity or more money, but soon ended up regretting their decisions. “[My biggest mistake was] taking a client I hated because it was a big chance for me to get big press and it turned bad fast.” Others expressed remorse for passing a client on or referring them to another firm that did not satisfy the client’s needs.

Eleven people reported financial mistakes. The most common financial mistake was

charging too little for services. Many entrepreneurs felt they had underestimated themselves and not charged an adequate amount for their assistance. In addition, one entrepreneur said that their biggest mistake was not hiring an accountant soon enough.



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Research question 9 explored how public relations entrepreneurs overcome professional disappointment. During the course of this study, it was found that the most common answer (from 41% of those interviewed) was that entrepreneurs bounce back from a professional disappointment by learning from the mistakes made and moving on. Several mentioned that they remember not to take the professional disappointment personally. Also, although the interviewees analyze what might have gone wrong, they prefer to focus less on their failures and more on their successes and future prospects. Illustrative comments included, “I just remember what I have achieved and put into prospective that you can’t win them all,” and “I analyze why we failed and how we failed and I try to make sure that we don’t make the same mistake again next time. I usually don’t like to focus on failures too long though. It brings down our morale. I’d rather celebrate success stories.”

Several respondents also mentioned that they try to relax, talk to a friend, spouse, or

family member, schedule time off from work, exercise, or participate in a game or a sport to get their mind off their disappointment. Others felt the need to jump immediately into the next project. As one respondent said, “[I] cover up for lost ground, and do so in a hurry! [I] prove I can do excellent work ASAP, and put in an extra effort.”

In exploring research question 10, how public relations entrepreneurs achieve balance between their personal and professional lives, it was found that almost half of those interviewed (48%) felt that they had no balance. This is largely due to hectic schedules and long work weeks. The average number of hours worked per week was 49.77, with the range from 5 to 100. Males tended to work more hours per week than females, approximately 53 hours per week as opposed to approximately 46 hours per week. An independent samples t-test was conducted and found differences approaching significance in how many hours males (M= 53.22, SD= 16.73) and females (M= 46.46, SD= 12.79) work per week in their public relations businesses, t (71), 1.94, p= .056.

While the public relations entrepreneurs who felt they had a balance between their personal and professional lives noted it was “with great difficulty,” most attributed this balance to compartmentalization and scheduling, as indicated by this respondent’s comment: “When you are at work, be fully at work. When you’re with your family, be fully with your family. And keep commitments to your family as religiously as you do meetings with your clients. Maintain a detailed schedule to allow all this to happen.” Separating “work time” and “family time” was considered important to achieving balance. As one interviewee pointed out, people have only one family and many clients. The flexibility of choosing one’s own hours also helped public relations entrepreneurs achieve balance, especially those with children. As one respondent indicated, “Family always comes first. My clients understand that I’m a mom and I need to take my kids to school and appointments. Other than that, my clients sometimes come before me, especially when it comes to my fun.”

Several of those interviewed mentioned that scheduling regular vacations, leaving the

country, or being away from technology were good ways to achieve balance. Respondents said things like, “Leaving the country where phones and computers do not work is the best way. Or I have to have my husband force the phone away.” Other interviewees noted that exercise, yoga, or being involved with sports helped, “I work out a lot. You need to be in good shape to work



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many hours and survive in this crazy business.” Some public relations professionals mentioned that young businesses required more time than established ones to get off the ground, but that one must guard against “burn-outs.” Another answered, “There is no down time when you own your own business.”

Study Limitations and Areas of Further Research

While the study points to some themes and provides insight into the satisfaction,

motivations, and challenges of public relations entrepreneurs, because it was a qualitative study one may not extrapolate the findings to the entire population. In addition, not all states and major population centers were represented, and further research should try and cover the geographic areas not researched in this study. A further limitation was using students as the research surveyors. While trained extensively, it was the first time many of the students had conducted this type of research. As such, there were pieces of missing data (i.e. not all interviewees answered all of the questions).

As far as future research, additional analysis of the other data gathered in this study would be of value, especially those questions regarding keys to success in public relations entrepreneurship. In addition, further and more deeply probing research questions of public relations entrepreneurs with firms of different sizes would add to the growing body of knowledge regarding public relations entrepreneurship.

Conclusion

Of those surveyed, public relations entrepreneurs are largely satisfied with the size of their businesses, with many looking toward future growth. Areas of satisfaction included the flexibility, independence and freedom to be one’s own boss, having creative control over business decisions, being directly rewarded for business successes, and having the ability to run their firms as they see fit. Other areas that bring satisfaction included the challenge and variety of their client-base and helping their clients succeed. Major accomplishments included starting and managing their own successful business, serving major clients, being a good employer, making good business decisions, and helping in the community. Motivations for being a public relations entrepreneur included a long-time desire to be their own boss, taking advantage of a good business opportunity, and the preference of starting their own firm after being laid off rather than finding another employer. Challenges cited were time management, employee management, and the financial side of running a business. Work/life balance was also an issue, as 48% of those interviewed felt they did not have balance. The vast majority (94%) of respondents indicated they would become public relations entrepreneurs all over again, although many would do things a little differently. Future public relations entrepreneurs can use the advice and comments gleaned from this study to better prepare themselves for starting their own businesses. Through analyzing challenges and successes, and learning from mistakes, business owners can better serve their clients, become better employers, and achieve greater job satisfaction.



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REALISM AND OPTIMISM IN BUSINESS ENTREPRENEURS VERSUS PRE BUSINESS ENTREPRENEURS Kathleen Liang, University of Vermont Paul Dunn, University of Louisiana at Monroe

Abstract The literature suggests that entrepreneurs are optimistic and perhaps realistic. This study was designed to determine if and to what extent pre business and in business entrepreneurs are optimistic and realistic. We have tested both characteristics and have discovered that both pre business and in business entrepreneurs are optimistic and realistic, but have significantly different expectations. Pre business entrepreneurs have significantly higher expectations from their business than in business entrepreneurs.

Introduction

Optimism is an often mentioned characteristic of entrepreneurs. Few scholars have

actually attempted to identify levels of optimism among entrepreneurs utilizing specific concepts. Psychologists, on the other hand, have talked about, defined and developed measures of optimism in clinical trials and therapy treatments. Psychology researchers generally agree that optimism implies “a general disposition to expect the best in all things“. The authors have been searching for a reasonable scientific approach to understand the linkage between “entrepreneurial optimism” and “entrepreneurial thinking”. Inspired by the literature and research methods in psychology, this study applies Life Orientation Test-Revised (LOT-R) (Scheier, Carver and Bridges, 1994) to measure levels of optimism for both in business entrepreneurs and pre business entrepreneurs.

Are all entrepreneurs optimistic? Is it possible for some entrepreneurs to be realistic and

optimistic at the same time depending on different stages in their career? “Realism” and “optimistic realism” have been mentioned and studied in psychological field, yet not very well known to entrepreneurship scholars. Dictionary.com Unabridged (v 1.1) (2008) defines realism as …“Interest in or concern for the actual or real, as distinguished from the abstract, speculative and the tendency to view or represent things as they really are” or “a tendency to face facts and be practical rather than imaginative or visionary.” The American Heritage (2000) defines realism as “An inclination toward literal truth and pragmatism.” We think these definitions provide a sufficient base for this research to explore realism and its relationship with optimism. More (1998) discussed the possibility that people are both optimistic and realistic – those of us who think of ourselves as rational, clear headed, may say “I am neither an optimist nor a pessimist, I am a realist.” He thought that individuals intend to express a commitment to truth, sound judgment and rationality in making this statement and that the nature of the world meant that to be realistic one normally had to be optimistic. Unfortunately no attempt, that we could find, has been made to develop a tool to measure realism among entrepreneurs. There has been some speculation that optimism and realism may change over time. For that reason, we wanted to see if and to what extent pre business entrepreneurs and in business entrepreneurs might show differences in optimism, realism and expectations.

http://dictionary.reference.com/help/luna.html�



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This article presents some of the first empirical evidence to test some assumptions about in business and pre business entrepreneurs: (1) are entrepreneurs optimistic or realistic, (2) do different levels of optimism and realism exist among entrepreneurs at different stages, (3) do realism and optimism relate to each other and (4) are expectations among entrepreneurs different? This study is among the first to (1) adopt the Life Orientation Test – Revised (LOT-R, a tool commonly used in psychological research) to study entrepreneurial optimism; (2) create a new tool to explore realism, (3) create a bridge between a conceptualized framework in entrepreneurship and psychology to examine human nature; and (4) analyze the relationship, if one exists, between optimism/realism and other variables associated with entrepreneurial behavior.

This study is an exploratory study and we do not intend to generalize the results at this point. We think that there has been a major gap in entrepreneurship theory to establish a systematic approach that could explain who entrepreneurs are and how their traits relate to new venture decisions. Many assumptions remain untested. We also acknowledge that new venture creation is a process that may change from time to time as a result of changes in the social, political or economic environment.

Literature Review

General profiles of entrepreneurs often include optimism and other entrepreneurial

characteristics such as self confidence, high expectations, willingness to accept risks, etc. Some empirical studies have examined how entrepreneurial characteristics impact on certain entrepreneurial decisions in investment, new venture creation, work/life choices, or success/failure of entrepreneurial actions. Researchers in psychology have investigated optimism as an attribute of individuals who link positive thinking, better outcomes, personal control, personal well-being, coping strategy, self-esteem, or interactions between individuals in different cultures and environments. Interestingly the authors could find no research or experimental findings directly related to realism. Realism is often linked to optimism given the terms realistic optimism or unrealistic optimism. There has been no discussion about how to synthesize optimism and realism in either psychology or entrepreneurship. Optimism and Realism in Entrepreneurship Literature

Characteristics of entrepreneurs usually include high achievement drive, action oriented,

internal locus of control, tolerance for ambiguity, moderate risk taking, commitment, opportunistic, initiative, independence, commitment/tenacity, and optimism (Liang and Dunn, 2003; Malach-Pines, Ayala, Arik Sadeh, Dov Dvir, and Orenya Yafe-Yanai, 2002; Crane and Sohl, 2004). These researchers seem to agree that optimism is an entrepreneurial characteristic.

Optimism is sometimes characterized as a negative factor in entrepreneurship.

Entrepreneurs over-estimate the odds they will succeed (Baron and Shane, 2005). Optimists often deluded themselves into becoming entrepreneurs with high risks of failure (De Meza and Southey, 1996). An experiment conducted by Coelho and De Meza (2006) discovered that irrational expectations (also interpreted as unrealistic optimism) led entrepreneurs to behave in ways that are contrary to their interest and resulted in a loss of well being. Optimism and overconfidence in the behavioral finance literature is a cause of the failure rates of new ventures



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in the initiation stage (Brocas and Carrillo, 2004). Puri and Robinson (2004), in a large scale study, linked optimism to significant work/life choices and entrepreneurship. Puri and Robinson (2004) also found that entrepreneurs were more optimistic than non-entrepreneurs and were more risk tolerant than non-entrepreneurs. Hey (1984), with mixed feelings, suggests that optimism leads entrepreneurs to over-estimate (underestimate) the likelihood of favorable (unfavorable) outcomes.”(Hey, 1984) Optimistic cognitive biases may lead entrepreneurs to overestimate demand, underestimate competitive reaction, and misjudge the need for complementary assets, and, finally to decide whether or not to pioneer. (Simon and Houghton, 2002) Optimism has been linked to the risk tolerance and high expectations. (Petrakis, 2005)

Optimism is also associated with positive outcomes in entrepreneurs, their success, and

their contributions to the economies in which they operate. Kuratko and Hodgetts suggest that optimism among entrepreneurs, even in bad times, is an important factor in their drive toward success. (Kuratko and Hodgetts, 2004) Several researchers have found that unrealistic optimism had both positive and negative impacts on entrepreneurs’ well being. Unrealistic optimism (or overestimated optimism) can lead to a misallocation of resources and a reduction in welfare (Manove, 2000). But unrealistic optimism can also stimulate saving and investment and provide added incentives for hard work (Manove, 2000). Manove is among one of the first researchers to demonstrate the coexistence of optimists and realists. He explored the interaction between the optimists and realists regarding their self evaluated productivity and competitiveness. Fraser and Greene (2006) developed an occupational choice model in which entrepreneurs learn from experience. As a result of their study, both optimistic biases in talent beliefs and uncertainty diminish with experience – the more entrepreneurs learn, the more realistic they become. However, none of these researchers provided tool to measure either optimism or realism. Optimism and Realism from the Psychological/Clinical Perspectives

A review of the psychology literature contains a great deal of information on optimism

and its relationship to expectations. Optimism was found in many positive psychology discussions… “An optimist is widely thought of as someone who sees the silver lining in every cloud and views the world through rose-tinted spectacles (or a glass that’s always half full).” (Centre for Confidence and Well-Being, 2006). The optimism discussed in the entrepreneurship literature is similar to “dispositional optimism” in psychology. Dispositional optimism is the bias to, across time and situations hold positive expectations. Individuals who are dispositionally optimistic believe that, in general, their life goals will be met (Sujan, 1999). “Thus, dispositional optimism is a very general tendency, a disposition that reflects expectations across a wide variety of life domains.” (Wrosch and Scheier, 2003) Chang (2001) suggests that dispositional optimism results in expectations that good things will happen and pessimism results in expectations that bad things will happen. Haugen, Ommundsen, and Lund (2004) suggested that the concept of general expectancy was a fruitful concept in central personality dispositions, encompassing both positive and negative expectations associated with optimism and pessimism.

Psychology literature suggests that optimists feel in control of their activities and that

those activities would give them more satisfaction, that they have a significant role in initiating projects, have adequate control and time to carry them out, have made more progress toward their goal, and have relatively heightened expectations that the outcomes of their projects will be



27

successful (Jackson, Todd, Weiss, Lundquist, and Soderlind, 2002). Optimists rated their personal projects as more congruent with and fulfilling of their values and identities, which also reflected positively on their sense of self and other goals (Jackson, Todd, Weiss, Lundquist, and Soderlind, 2002).

Psychologists have also discovered that optimism is related to psychological well-being

and coping behaviors. Optimism results in a sense of subjective well being as it “…fosters self-esteem, relationship harmony, and positive perceptions of financial conditions.” (Leung, Moneta and McBrice-Chang, 2005) Psychologists have also suggested that optimists believe in good luck which was associated with better psychological well being (Day and Maltby, 2003). Wrosch and Sheier (2003) concluded that optimists, compared with pessimists, more frequently use active coping tactics when confronted with aversive situations and adaptive emotion-focused coping tactics when important life goals are blocked. People who are able to disengage from unattainable goals and re-engage elsewhere seem able to avoid accumulated failure experiences so as to achieve higher quality of life. Optimists also use a strategy of acceptance/ resignation, but they do so only in the very circumstance in which the strategy seems entirely adaptive (Scheier and Carver, 1987).

Other psychologists suggest, as have entrepreneurial researchers, that “Excessive

optimism at the wrong time and in the wrong situation can blind us to the costly consequences of certain actions.”(Schulman, 1999) Strong optimism is helpful in that it encourages people to expect success and focus on the activities needed to achieve that success, but there may be negative consequences when things do not go as expected (Niven, 2000).

Optimism may go much deeper than we have believed and link many different concepts

between entrepreneurship and psychological theories. Barbera (2004) indicated that over the long haul, “one needs to recognize that persistent optimism, the signature characteristic of American entrepreneurs, provides the dynamism that delivers growth for the U. S. economy.” While many entrepreneurship researchers have discussed optimism and have indicated that optimism generates both positive and negative impacts that influence personal and business development, the authors could find no literature in which an attempt was made to measure entrepreneurial optimism or realism.

The assumed relationship between optimism, realism and business decisions have

become the foundation of this study - to determine if pre business and in business entrepreneurs are optimistic or realistic, if and how optimism and/or realism are related to expectations. To do that, we followed Baron’s suggestion that “…from both a scientific and a practical perspective, applying the principles and findings of psychology to the study of entrepreneurs seems to hold great promise.” (Baron, 2000) Several research questions were generated for this study based on literature review: (1) Are pre business and in business entrepreneurs optimistic or realistic? (2) Are pre business and in business entrepreneurs different? (3) Does entrepreneurial optimism or realism relate to expectations? And (4) Is there a relationship between optimism and realism for entrepreneurs in different stages?



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Research Methodology

Questionnaire Design The first step of conducting this research was to design a questionnaire. The target of this research is entrepreneurs who are already in business and those who have not started their ventures. There were five sections in the survey: 1. demographics and characteristics, 2. optimism assessment, 3. realism assessment, and 4. expectations from the venture. Demographics included gender, age, ethnicity, family composition, education, type of business, location of the business. Characteristics included whether entrepreneurs wanted to be independent, wanted control, believed they were creative and risk acceptance. The answers were on a Likert scale as Strongly Agree (1), Agree (2), Disagree (3), and Strongly Disagree (4). We avoided the “Neither Agree Nor Disagree” level and hoped to impose more specific choices from entrepreneurs. Statements for optimism assessment were adopted from the Life Orientation Test- three positive statements, three negative statements, and four non-scored items as filler statements. Three positive statements were: “In uncertain times, I usually expect the best”, “I am always optimistic about my future”, “Overall I always expect more good things happen to me than bad”. Three negative statements were: “If something can go wrong for me, it will”, “I hardly ever expect things to go my way”, and “I rarely count on good things happening to me”. Carver (2008) indicates that… “The LOT-R has good internal consistency (Cronbach’s alpha runs in the high .70s to low .80s) and is quite stable over time.” The LOT-R procedure has been recognized and used by many psychologists as a sufficient and robust tool to measure optimism. Psychologists have conducted research using the LOT-R to explore personal control in sports, to investigate the relationship between optimism and depression/coping/anger, to analyze effects of optimism on career choice and well-being, and to examine the impact of optimism on changes of environment and circumstantial situations (Burke, et. al. 2006; Burke, Joyner, Czech and Wilson, 2000; Puskar, Sereika, Lamb, Tusaie-Mumford and Mcguinness, 1999; Creed, Patton and Bartrum, 2002; Perczek, Carver, Price and Pozo-Kaderman, 2000; Sydney, et. al. 2005). Clinical researchers have also utilized the LOT-R to explore how optimism affects patients in dealing with various health problems and treatments (Walker, Nail, Larsen, Magill and Schwartz, 1996). The LOT-R is available on-line and it is free for researchers to use (Centre for Confidence and Well-being, 2006). The responses to the optimism statements have 5 levels of choices as indicated in the original LOT-R test, which are I Agree a Lot (1), I Agree a Little (2), I Neither Agree Nor Disagree (3), I Disagree a Little (4), and I Disagree a Lot (5). A measure for realism could not be found in any literature. After conducting a thorough literature review in psychological research, and extensive discussions and consultations with entrepreneurs and entrepreneurship educators, we created a series of statements designed to capture the essence of realism. There are seven statements for realism: “I usually set achievable goals”, “I usually look before I leap”, “When planning, I usually consider both negative and positive outcomes”, “I am always realistic about my future”, “I try to be reasonably certain about the situation I face when starting an important activity”, and “I usually weigh the risks and rewards when making decisions”. Entrepreneurs responded based on a five-point Likert scale



29

ranging from “I agree a lot” to “I disagree a lot”, which was the same scale used in testing optimism statements. Using the reliability test on the responses received from our sample entrepreneurs, Cronbach’s Alpha statistic showed a much higher confidence level for the realism statements, 0.756, compared with the optimism statements, 0.602, (Table 1).

Table 1. Reliability of Tests Used Realism Variables Optimism Variables

Reliability Statistics Number Reliability Statistics Number Cronbach's Alpha Variables Cronbach's Alpha Variables

0.756 7 0.602 6 Administration of the Survey

After the questionnaire was designed and pre-tested, in business entrepreneurs were

contacted by a research contact person and asked to complete the questionnaire. After permission was granted, the entrepreneur was given the questionnaire and allowed to complete it in private. After completion, the questionnaire was returned to the research contact person. The collection was during business hours; however it was sometimes necessary to administer the questionnaire while the business was closed or at a convenient time that met the business owners’ schedules. The questionnaire was administered to a convenience sample of business owners in the Mississippi River Delta region between 2007 and 2009. There was no direct personal relationship (family members) between the interviewers and the respondents. However, it is possible that the interviewers were acquainted with the respondents through other connections.

The pre business respondents were participants in a “Starting And Financing/Expanding

Your Own Business Workshop” conducted by a Small Business Development Center in North Louisiana between 2007 and 2009. These respondents were asked to complete the questionnaire before the workshop. Participants in the workshop who were already in business were excluded from this analysis. Two hundred sixty-four (264) in business questionnaires and 123 pre business questionnaires were completed and usable.

Cross tabulation analysis was used in the analysis. Chi square and gamma statistics and

P-values of significant statistics were calculated.

Findings Of The Study In our sample, most of the in business entrepreneurs were male, white, with at least high school education, married with children and above 30 years of age (Table 2). There were more female in pre business stage, and more pre business entrepreneurs were African American. Significantly more pre business entrepreneurs were female, single or single with children, younger, and fewer were minority. Significantly more of the pre business entrepreneurs, 84.6 percent, indicated that they were going to start a service business. Education levels were not significantly different. While not significant, experience in the line of business tended to be higher for in business respondents. These results were not surprising.



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Table 2. Demographics of In Business and Pre Business Entrepreneurs Sex*** Marital situation In Business Pre Business In Business Pre Business Female 37.1 67.5 Single 15.9 24.1 Male 62.9 32.5 Single/children 14.8 20.4 Total 100.0 100.0 Married/children 63.6 51.9 N 264 123 Married wo children 5.7 3.7 Chi-Square 0.000 Total 100.0 100.0 Gamma 0.000 N 264 108 Race*** Chi-Square 0.085 White 77.6 43.0 Gamma 0.013 African American 17.5 57.0 Age*** Asian 2.7 0.0 under 30 years old 17.3 21.0 Hispanic 1.9 0.0 30-50 years old 47.3 66.7 American Indian 0.4 0.0 Over 50 35.4 12.4 Total 100.0 100.0 Total 100.0 100.0 N 263 121 N 260 105 Chi-Square 0.000 Chi-Square 0.000 Gamma 0.000 Gamma 0.000 Education Level Experience in the Line of Business <High School 4.1 7.0 Yes 63.6 52.0 High School 29.8 20.9 No 36.4 48.0 Some College 29.4 40.0 Total 100.0 100.0 College Degree 28.0 21.7 N 258 50 Graduate Degree 8.7 10.4 Chi-Square 0.085 Total 100.0 100.0 Gamma 0.137 N 218 115 Chi-Square 0.117 Gamma 0.913 ***Significant at .01 level.

Several personal characteristics have been commonly mentioned in entrepreneurship

literature, such as wanting to be independent, desire to take control, being creative, and willingness to take calculated risks. Table 3 indicates that there was not a significant difference between independence and risk acceptance. Interestingly, pre business respondents seemed to be significantly higher in creativity and lower in control.



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Table 3. Characteristics of In Business and Pre Business Entrepreneurs Independence In Business Pre Business Creative** In Business Pre Business Agree 95.5 95.8 Agree 91.3 96.7 Disagree 4.5 4.2 Disagree 8.7 3.3 Total 100.0 100.0 Total 100.0 100.0 N 264 119 N 263 121 Chi-Square 0.559 Chi-Square 0.037 Gamma 0.878 Gamma 0.023 Control* Risk Acceptance Agree 95.8 91.0 Agree 96.9 95.0 Disagree 4.2 9.0 Disagree 3.1 5.0 Total 100.0 100.0 Total 100.0 100.0 N 262 122 N 262 119 Chi-Square Tests 0.052 Chi-Square 0.248 Gamma 0.094 Gamma 0.381 **Significant at .05 level, *Significant at .10 level.

Note: Agree category included “Strongly Agree” and “Agree”. Disagree category included “Strongly Disagree” and “Disagree”.

Table 4 compares the optimism measures between in business and pre business entrepreneurs. The two groups were almost the same with the exception of “hardly ever expect things to go my way” where in business entrepreneurs (65.1 percent) were clearly more optimistic (less pessimistic) than pre business entrepreneurs (50.4 percent). Optimism measures were very similar for both groups with “usually expect the best”, 75.1 percent in business and 78.0 percent pre business entrepreneurs agreeing; “if something can go wrong, it will”, 45.4 percent in business and 43.1 percent pre business disagreeing; “always optimistic about my future”, 82.6 percent in business and 86.0 percent pre business agreeing; “rarely count on good things”, 60.9 percent in business and 53.3 percent pre business disagreeing; and “expect more good than bad”, 85.7 percent in business and 87.9 percent pre business agreeing. These findings support the definition of optimism which includes the idea that optimism persists through time and circumstances. In addition, these findings suggest that while a majority of entrepreneurs are optimistic, they are not all equally optimistic.

Table 4. Optimism Among In Business and Pre Business Entrepreneurs

In Business Pre Business In Business Pre Business Always Optimistic Don't Expect Things to Go My Way** Agree 82.6 86.0 Agree 19.2 27.7 Neither Agree or Disagree 9.3 8.3 Neither Agree or Disagree 15.7 21.8 Disagree 8.1 5.8 Disagree 65.1 50.4 Total 100.0 100.0 Total 100.0 100.0 N 259 121 N 261 119 Chi-Square 0.668 Chi-Square 0.024 20.9 Gamma 0.380 Gamma 0.009 16.9



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Table 4 continued Expect the Best Rarely Count on Good Things Agree 75.1 78.0 Agree 22.6 32.5 Neither Agree or Disagree 13.0 14.4 Neither Agree or Disagree 16.5 14.2 Disagree 11.9 7.6 Disagree 60.9 53.3 Total 100.0 100.0 Total 100.0 100.0 N 261 118 N 261 120 Chi-Square 0.451 Chi-Square 0.112 Gamma 0.440 Gamma 0.090 Go Wrong Expect More Good Than Bad Agree 29.8 26.7 Agree 85.7 87.9 Neither Agree or Disagree 24.8 30.2 Neither Agree or Disagree 8.9 7.8 Disagree 45.4 43.1 Disagree 5.4 4.3 Total 100.0 100.0 Total 100.0 100.0 N 262 116 N 258 116 Chi-Square 0.541 Chi-Square 0.832 Gamma 0.995 Gamma 0.537 **Significant at .05 level.

Note: Agree category included “I agree a lot” and “I agree a little”. Disagree category included “I disagree a lot” and “I disagree a little”.

One of the pioneer approaches of this study is attempting to identify “realism” among pre

business and in business entrepreneurs. Table 5 shows the extent of realism, as measured by our instrument, among entrepreneurs. There were no significant differences between two groups. Most of our respondents agreed to “set achievable goals”, 92.4 percent in business and pre business; “look before I leap”, 81.3 percent in business and 85.7 percent pre business; “consider both negative and positive outcomes”, 85.1 percent in business and 88.4 percent pre business; “try to find information”, 87.7 percent in business and 89.8 percent pre business; “always be realistic about the future”, 87.0 percent in business and 81.8 percent pre business; “weigh risks and rewards”, 87.6 percent in business and 87.3 percent pre business; and “try to be reasonably certain about the situation”, 88.9 percent in business and 95.8 percent pre business . On some measures pre business entrepreneurs were slightly more realistic. This



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Table 5. Realism Among In Business and Pre Business Entrepreneurs Set Achievable Goals Always Realistic In Business Pre Business In Business Pre Business Agree 92.4 92.4 Agree 87.0 81.8 Neither Agree or Disagree 3.8 4.2 Neither Agree or Disagree 7.3 10.7 Disagree 3.8 3.4 Disagree 5.7 7.4 Total 100.0 100.0 Total 100.0 100.0 N 263 119 N 262 121 Chi-Square 0.962 Chi-Square 0.395 Gamma 0.980 Gamma 0.209 Look Before I Leap Weigh Risks and Rewards in Deciding Agree 81.3 85.7 Agree 87.6 87.3 Neither Agree or Disagree 7.3 7.6 Neither Agree or Disagree 7.7 11.0 Disagree 11.5 6.7 Disagree 4.6 1.7 Total 100.0 100.0 Total 100.0 100.0 N 262 119 N 259 118 Chi-Square 0.361 Chi-Square 0.236 Gamma 0.230 Gamma 0.995 Consider Both Negative and Positive Outcomes Try to be Reasonably Certain about Situation* Agree 85.1 88.4 Agree 88.9 95.8 Neither Agree or Disagree 7.3 5.0 Neither Agree or Disagree 7.3 2.5 Disagree 7.6 6.6 Disagree 3.8 1.7 Total 100.0 100.0 Total 100.0 100.0 N 262 121 n 261 120 Chi-Square 0.641 Chi-Square Tests 0.086 Gamma 0.381 Gamma 0.010 Find as Much Information Before Deciding Agree 87.7 89.8 Neither Agree or Disagree 6.1 6.8 Disagree 6.1 3.4 Total 100.0 100.0 N 261 118 Chi-Square 0.535 Gamma 0.502 * Significant at .10 level.

Note: Agree category included “I agree a lot” and “I agree a little”. Disagree category included “I disagree a lot” and “I disagree a little”. outcome could relate to the pre business population studied. All pre business respondents attended the “Starting and Financing/Expanding Your Own Business” workshop which indicated that they were interested in finding out more about starting a new venture before starting.

Existing literature provides limited information about the expectations of entrepreneurs.

Table 6 shows the measures of expectations among in business and pre business entrepreneurs. The results clearly indicate that pre business entrepreneurs had much higher expectations than in business entrepreneurs. In business entrepreneurs had lower expectations about personal happiness, 68.2 percent, compared to 91.7 percent for pre business entrepreneurs; 65.0 percent in



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business and 89.2 percent pre business expected their family to be happier; 73.1 percent in business and 90.8 percent pre business expected to be financially better off; and 67.9 percent in business and 85.6 percent pre business indicated that their families expected to be financially

Table 6. Expectations Among In Business and Pre Business Entrepreneurs Expected I would be happier*** Expected to be financially better off*** In Business Pre Business In Business Pre Business Agree 68.2 91.7 agree 73.1 90.8 Disagree 31.8 8.3 disagree 26.9 9.2 Total 100.0 100.0 Total 100.0 100.0 N 264 120 n 264 119 Chi-Square 0.000 Chi-Square 0.000 Gamma 0.000 Gamma 0.000 Expected family to be happier*** Family expect to be better off*** Agree 65.0 89.2 agree 67.9 85.6 Disagree 35.0 10.8 disagree 32.1 14.4 Total 100.0 100.0 Total 100.0 100.0 N 254 111 252 111 Chi-Square 0.000 Chi-Square 0.000 Gamma 0.000 Gamma 0.000 ***Significant at .01 level.

Note: Agree category included “Strongly Agree” and “Agree”. Disagree category included “Strongly Disagree” and “Disagree”. better off as a result of starting a new venture. Clearly pre business entrepreneurs, while not substantially more optimistic or realistic, had significantly higher expectations for themselves and felt their families had higher expectation about the proposed new venture than the in business entrepreneurs.

One concept has never been fully explored in entrepreneurship literature is “realistic optimism”. Even in psychology literature, there is not much empirical data to demonstrate if realistic optimism could be measured and how it could be measures. Our study used both optimism statements and realism statements to explore if realistic optimism exists among entrepreneurs. Table 7 shows the number of pre business respondents choosing optimism levels cross-compared to realism levels. Table 8 shows the number of in business respondents choosing optimism levels cross-compared to realism levels. It is interesting to see both pre business entrepreneurs and in business entrepreneurs in our sample tended to be “realistic optimism”. If we compare the percentage of the pre business respondents to the percentage of the in business respondents, it seems that more pre business respondents are realistically optimistic. However it is not appropriate to reach any conclusion due to the limitation of the sample size and the nature of the sample.



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Table 7. Pre Business Optimism Realism Matrix (A, Agree; N, Neutral; D, Disagree; n, total observation in each category) Optimism Measures

Realism Measures

Expe

ct th

e B

est

Wha

teve

r C

an G

o W

rong

Alw

ays

Opt

imis

tic

Don

't Ex

pect

Th

ings

to

Go

My

Way

Rar

ely

Cou

nt o

n G

ood

Thin

gs

Expe

ct

Mor

e G

ood

Than

Bad

A N D n A N D n A N D n A N D n A N D n A N D n A* 87 16 4 107 28 31 47 106 99 7 4 110 33 24 51 108 36 14 59 109 95 8 2 105 N* 3 1 1 5 1 3 1 5 3 2 0 5 0 2 3 5 1 3 1 5 3 1 1 5

Set Achievable Goals

D* 1 0 3 4 2 0 2 4 1 0 3 4 0 0 4 4 2 0 2 4 2 0 2 4 n 91 17 8 116 31 34 50 115 103 9 7 119 33 26 58 117 39 17 62 118 100 9 5 114

A 83 11 7 101 28 28 42 98 93 6 3 102 31 19 50 100 34 13 55 102 90 7 2 99 N 4 3 2 9 3 2 4 9 6 1 2 9 2 3 4 9 4 2 3 9 6 1 2 9

Look Before I Leap

D 5 2 0 7 0 5 2 7 5 3 0 8 0 4 4 8 1 2 5 8 5 1 1 7 n 92 16 9 117 31 35 48 114 104 10 5 119 33 26 58 117 39 17 63 119 101 9 5 115

A 87 11 6 104 27 30 45 102 97 7 3 107 31 24 50 105 33 14 59 106 91 8 3 102 N 3 2 1 6 3 2 1 6 4 1 1 6 2 1 3 6 3 2 1 6 5 0 1 6

Consider Negative and Positive Outcomes D 2 4 2 8 1 3 4 8 3 2 3 8 0 1 7 8 3 1 4 8 6 1 1 8 n 92 17 9 118 31 35 50 116 104 10 7 121 33 26 60 119 39 17 64 120 102 9 5 116

A 84 13 6 103 26 30 45 101 95 8 3 106 31 24 50 105 35 13 57 105 93 6 2 101 N 6 1 1 8 2 4 2 8 6 1 1 8 2 1 4 7 1 2 5 8 5 2 1 8

Find Information Before Deciding D 1 3 0 4 1 1 2 4 2 1 1 4 0 1 3 4 1 2 1 4 2 1 1 4 n 91 17 7 115 29 35 49 113 103 10 5 118 33 26 57 116 37 17 63 117 100 9 4 113

A 83 11 4 98 25 26 43 94 91 6 2 99 32 19 47 98 32 11 56 99 87 7 2 96 N 7 4 1 12 2 6 5 13 9 3 1 13 1 5 7 13 3 6 3 12 9 2 1 12

Always Realistic

D 2 2 4 8 4 3 2 9 4 1 4 9 0 2 6 8 4 0 5 9 6 0 2 8 n 92 17 9 118 31 35 50 116 104 10 7 121 33 26 60 119 39 17 64 120 102 9 5 116

A 82 12 7 101 26 28 45 99 93 6 4 103 32 19 51 102 34 12 57 103 91 7 1 99 N 8 4 1 13 3 6 3 12 9 3 1 13 1 6 5 12 4 5 4 13 8 2 3 13

Weigh Risks and Rewards in Deciding D 0 1 1 2 1 1 0 2 0 1 1 2 0 1 1 2 1 0 1 2 1 0 1 2 n 90 17 9 116 30 35 48 113 102 10 6 118 33 26 57 116 39 17 62 118 100 9 5 114

A 90 16 7 113 28 33 49 110 102 9 4 115 31 25 57 113 37 14 64 115 101 8 2 111 N 2 0 1 3 2 1 0 3 2 0 1 3 2 0 1 3 1 2 0 3 1 1 1 3

Try to be Reasonably Certain about Situation D 0 1 1 2 1 1 0 2 0 1 1 2 0 1 1 2 1 1 0 2 0 0 2 2 n 92 17 9 118 31 35 49 115 104 10 6 120 33 26 59 118 39 17 64 120 102 9 5 116

Note: Agree category included “I agree a lot” and “I agree a little”. Disagree category included “I disagree a lot” and “I disagree a little”.



36

Table 8. In Business Optimism Realism Measures (A, Agree; N, Neutral; D, Disagree; n, total observation in each category) Optimism Measures

Realism Measures

Expe

ct th

e B

est

Wha

teve

r Can

Go

Wro

ng

Alw

ays

Opt

imis

tic

Don

't Ex

pect

Go

My

Way

Rar

ely

Cou

nt o

n G

ood

Thin

gs

Expe

ct M

ore

Goo

d Th

an B

ad

A N D n A N D n A N D n A N D n A N D n A N D n A* 166 25 20 211 70 60 111 241 205 21 13 239 44 36 161 241 51 40 149 240 210 19 8 237 N* 9 7 2 18 2 3 5 10 6 1 2 9 1 4 5 10 4 1 5 10 6 4 0 10

Set Achievable Goals D* 20 2 8 30 6 2 2 10 2 2 6 10 5 1 3 9 4 2 4 10 4 0 6 10 n 195 34 30 259 78 65 118 261 213 24 21 258 50 41 169 260 59 43 158 260 220 23 14 257

A 170 29 21 220 64 50 98 212 205 21 13 239 42 29 141 212 49 33 129 211 184 15 9 208 N 12 2 5 19 5 5 9 19 6 1 2 9 2 6 11 19 3 7 9 19 14 5 0 19

Look Before I Leap D 13 3 4 20 9 9 12 30 2 2 6 10 5 6 18 29 7 2 21 30 23 2 5 30 n 195 34 30 259 78 64 119 261 213 24 21 258 49 41 170 260 59 42 159 260 221 22 14 257

A 179 28 19 226 64 58 100 222 190 19 10 219 42 34 146 222 49 39 133 221 194 17 8 219 N 7 5 4 16 6 4 9 19 13 3 3 19 2 6 11 19 4 4 11 19 11 5 2 18

Consider Negative and Positive Outcomes D 9 1 6 16 8 3 9 20 10 2 8 20 6 1 12 19 6 0 14 20 15 1 4 20

n 195 34 29 258 78 65 118 261 213 24 21 258 50 41 169 260 59 43 158 260 220 23 14 257 A 178 28 19 225 66 57 105 228 197 17 13 227 42 34 151 227 48 39 140 227 197 20 7 224 N 9 5 5 19 5 5 6 16 8 4 3 15 4 4 8 16 7 1 8 16 11 3 2 16

Find Information Before Deciding D 8 1 6 15 7 3 6 16 8 2 5 15 4 2 10 16 4 3 9 16 11 0 5 16 n 195 34 30 259 78 65 117 260 213 23 21 257 50 40 169 259 59 43 157 259 219 23 14 256

A 178 28 19 225 63 60 104 227 197 19 9 225 41 36 149 226 50 38 138 226 197 18 8 223 N 9 5 5 19 7 4 8 19 11 4 3 18 5 3 11 19 3 4 12 19 14 4 1 19 Always

Realistic D 8 1 6 15 8 1 6 15 5 1 9 15 4 2 9 15 6 1 8 15 9 1 5 15

n 195 34 30 259 78 65 118 261 213 24 21 258 50 41 169 260 59 43 158 260 220 23 14 257 A 177 29 18 224 67 56 103 226 194 17 13 224 42 36 148 226 51 38 136 225 199 16 7 222 N 9 4 7 20 5 6 9 20 11 5 3 19 5 5 10 20 4 4 12 20 11 7 2 20

Weigh Risks and Rewards in Deciding D 8 0 4 12 6 2 4 12 6 1 5 12 3 0 8 11 3 1 8 12 8 0 4 12 n 194 33 29 256 78 64 116 258 211 23 21 255 50 41 166 257 58 43 156 257 218 23 13 254

A 182 28 19 229 68 60 103 231 196 20 13 229 40 37 154 231 48 37 145 230 203 17 7 227 N 8 4 7 19 6 4 9 19 13 3 2 18 6 3 10 19 6 5 8 19 12 5 2 19

Try to be Reasonably Certain about Situation D 4 2 4 10 3 1 6 10 3 1 6 10 3 1 5 9 4 1 5 10 4 1 5 10 n 194 34 30 258 77 65 118 260 212 24 21 257 49 41 169 259 58 43 158 259 219 23 14 256 Note: Agree category included “I agree a lot” and “I agree a little”. Disagree category included “I disagree a lot” and “I disagree a little”.


37

Summary and Conclusions Many entrepreneurship scholars have discussed various characteristics of entrepreneurs. The literature includes optimism and other characteristics related to optimism, such as being willing to take risks, seeking for personal happiness and satisfaction in new venture creation. No research that we could find discussed the degree to which entrepreneurs are actually optimistic, and if there are other factors mixed with different levels of optimism.

Why is it important to get a better understating of entrepreneurial optimism and who cares? One critical outcome of this study is to clarify an assumption about entrepreneurs – it is not necessary true that all entrepreneurs are optimistic, the nature of entrepreneurial characteristics might change given different stages of the new venture creation, and most of the entrepreneurs actually were realistic. Many service providers who have close contact with entrepreneurs should be aware of what entrepreneurs need to do to be successful, by better understanding that they have “conditional optimism” or “realistic optimism”.

This study posed several research questions that have not been thoroughly explored

before: (1) if entrepreneurs are optimistic or realistic, (2) if different levels of optimism and realism exist among entrepreneurs in different stages, and (3) how realism and optimism relate to each other. We have found that both pre business and in business entrepreneurs are optimistic, no matter what stage they are in. We also found that both pre business entrepreneurs and in business entrepreneurs were realistic. However, we found that pre business entrepreneurs had significantly higher expectations for themselves and their families than in business entrepreneurs.

The most intriguing discovery was that both pre business entrepreneurs and in business

entrepreneurs were “realistically optimistic”. A significant majority of our sample respondents believed that they were reasonably realistic yet also optimistic, no matter what stage they are in the new venture creation process. It is probably easy to see why in business entrepreneurs are optimistic and realistic, since they have been through the process of starting and operating their own businesses. In business entrepreneurs would learn more from their experiences so as to adjust their expectations. Our sample for pre business entrepreneurs came from the group who chose to participate in the SBDC workshop. These pre business entrepreneurs were willing to learn from the experts about what creating a new venture was like, they hoped to gather more information, and they probably already had the “reality check” attitude when they signed up for the workshop. We are not surprised to learn that more pre business entrepreneurs in our sample present the characteristic of “realistic optimism” compared to in business respondents. It will be more important to extend this study and to include pre business entrepreneurs who are not attending the SBDC workshop. However there are technical difficulties to find these pre business entrepreneurs in real life.

In conclusion, the characteristics of entrepreneurs still have many hidden layers waiting

to be explored. It is a fascinating journey to walk through the path of finding who entrepreneurs are, how they think, and what they think of themselves. While many studies emphasize the environment, structures, finance, management, organizational development and decision making of entrepreneurship, the most important driving force behind entrepreneurship is “entrepreneurial


38

individuals”. Only by knowing who entrepreneurs are and how they think, we could provide better services and information to assist them.

References

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validity between two optimism/pessimism questionnaires: The Life Orientation Test-Revised and the Optimism/Pessimism Scale, Current Psychology, Vol. 19, No. 2, pp. 129-136.

Burke, K., Czech, D. R., Knight, J. L., Scott, L. A., Joyner, A. B., Benton, S. G. and Roughton,

H. K. (2006), An exploratory investigation of superstition, personal control, optimism and pessimism in NCAA Division I Intercollegiate Student-Athletes, The On-line Journal of Sport Psychology, http://www/athleticinsight.com/vol8iss2/supersition.htm

Carver, Charles, Optimism Definition and History,

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Centre for Confidence and Well-being (2006). Positive Psychology Resource, Optimism,

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Fundamental Question. Optimism and Pessimism, Washington, D.C. American Psychological Association. p. 5.

Coelho, M. and De Meza, D. (2006). Self Deception, Self Selection, Self Destruction: An

Experimental Investigation of Adverse Selection, London School of Economics, http://cebr.dk/upload/demeza-001.pdf

Crane, F. and Sohl, J. (2004), Imperatives to Venture Success, International Journal of

Entrepreneurship and Innovation, Vol. 5, No. 2, p. 99.


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Creed, P., Patton, W. and Bartrum, D. (2002). Multidimensional Properties of the LOT-R: Effects of Optimism and Pessimism on Career and Well-being Related Variables in Adolescents, Journal of Career Assessment, Vol. 10, No. 1, pp. 42-61.

Day, L. and Maltby, J. (2003). Belief in Good Luck and Psychological Well-Being: The

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De Meza, D. and Southey, C. (1996). The Borrower’s Curse: Optimism, Finance and

Entrepreneurship, The Economic Journal, 106, March, Cambridge, MA, p. 385. Dictionary.com Unabridged (v 1.1) (2008). http://dictionary.reference.com/browse/realism Fraser, S. and Greene, F. J. (2006). The Effects of Experience on Entrepreneurial Optimism and

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42

A SOCIAL-COGNITIVE MODEL OF ENTREPRENEURSHIP FAILURE: THE INFLUENCE OF LAY THEORY Lawrence Silver, Southeastern Oklahoma State University

Abstract

Research in entrepreneurship success far outweighs that of entrepreneurship failure. This imbalance deprives academics and practitioners of the valuable lessons that can be learned from failure. This paper proposes a social-cognitive model that may explain failure for entrepreneurs. Failure, for purposes of this paper is defined and the model is explained. Finally, a research agenda is outlined that can be used to test the model.

Introduction

It is generally recognized that entrepreneurs begin new ventures because they recognize opportunities that others do not recognize or fail to act upon (Ardichvili, Cardozo, & Ray, 2003). Additionally, it logically follows that the entrepreneur would not risk time, energy, and capital if he or she did not have a reasonable expectation of success. Yet, although accurate information is difficult to obtain, it is believed most new ventures cease to exist, at least in their original form, within five years (Small Business Survivor Rates).

Scholars conducting research in entrepreneurship tend to focus on what makes an entrepreneur successful while paying scant attention to failure (Minniti & Bygrave 2001; Shepherd 2003; Singh, Corner & Pavlovich, 2007). This bias toward success factors in the entrepreneurship literature deprives researchers and practitioners of valuable insights about what can be learned from failure. This lack of interest in failure is especially interesting in light of the high failure rate of new ventures.

The purpose of this paper is to propose a social-cognitive model that may be one explanation of entrepreneurship failure. Specifically, the model proposed here examines how entrepreneurs react to counterfactual information once the venture is underway. That is, assuming an expectation of success, how does the entrepreneur process information that indicates his or her assumptions about success (actual opportunity, potential market, etc.) are not what they were believed to be when the venture began. The argument is that the entrepreneur’s lay theory, or manner in which he or she cognitively interprets the situation, will affect decisions to persist or withdraw.

The paper is organized as follows: first, failure for purposes of this paper will be defined; next, the social-cognitive concept of lay theories will be explained;, third, the relationship of lay theories to inconsistent information will be presented; finally, a research proposal to test the model will be outlined.

Failure Defined

Failure has different meanings for different researchers. A simple definition of failure is to equate failure with bankruptcy or insolvency (Zacharakis, Meyer & DeCastro, 1999). An


43

expanded definition of failure as insolvency is offered by Shepherd (2003). By his definition, failure “occurs when a fall in revenues and/or a rise in expenses are of such a magnitude that the firm becomes insolvent and is unable to attract new debt or equity funding; consequently it cannot continue to operate under the current ownership and management” (p. 318). An even broader definition of failure is simply ‘business discontinuance’ adopted by Singh, et al. (2007). They preferred this broader concept because it includes not only economic factors but qualitative causes of failure as well. These include legal problems, disputes with partners or investors, and personal issues of the entrepreneur. For purposes of this paper, the definition offered by Zacharakis, et al. (1999) of bankruptcy or insolvency is adopted. There are two reasons for this decision. One is that such qualitative factors as legal problems and disputes among the firm’s principles can lead to bankruptcy. Secondly, there are degrees of failure. An entrepreneur may see the venture headed for failure and cease operations in time to salvage some of the investment. Bankruptcy, on the other hand is ultimate failure results in the least favorable situation for creditors or owners. The model proposed here deals with the concept of degree of failure. As explained below, counterfactual information presented to the entrepreneur may influence him or her to cease operations while there is something to save or to adjust to changed circumstances. Other entrepreneurs, presented with the same information, will discount it and persist to insolvency.

Lay Theories

The concept of lay theories (a/k/a implicit personality theory) has a rich history in the cognitive psychology literature beginning with Heider (1958) and Kelly (1955). More recently, the concept has been expanded by Carol Dweck and her colleagues (e.g., Dweck & Leggett, 1988; Levy & Dweck, 1998; Molden & Dweck, 2006). Lay theories have been applied in research in a variety of areas: intelligence and motivation (Dweck & Leggett, 1998); morality (Chiu, Dweck, Tong, & Fu, 1997); social judgment (Levy & Dweck 1998); stereotype formation (Levy, Stroessner & Dweck 1998); college-level academic success (Robins & Pals, 2000); older workers’ ability (Wren & Maruer, 2004); shyness (Beer, 2002); performance appraisals (Heslin, Lathan, & VandeWalle, 2005); leadership (Silver & Silver, 2006); and academic achievement (Butler, 2000). Lay theories are a mechanism used by people to make sense of the behavior and actions of others and of themselves. Thus, when a person observes someone saying something that is not true, the natural response is to be skeptical of anything else said by that individual. People with an entity lay theory will assign the trait of ‘liar’ to the person who failed to tell the truth. Further, his judgment will be made on the evidence of the one statement and is not likely to change even if future statements are deemed to be objectively true.

People with an incremental lay theory will hold off on the ‘liar’ label and wait for further evidence. They will also recognize subsequent exclamations as true and will believe that the person either changed or did not understand that the first statement was false. In either case, the trait inference of liar is not applied.


44

Thus, people with an entity theory ascribe traits to the person (entity) they observe and believe these traits to be fixed. In contrast, incremental theorists believe that traits are malleable and that people can change (Levy & Dweck, 1998). It should be noted that while most people hold lay theories in most situations, people do not necessarily hold the same lay theory in all situations (Dweck & Leggett, 1988; Levy & Dweck, 1998). For example, a person may hold an entity theory in relation to intelligence and an incremental theory concerning morality. That is, a person may believe that people cannot change their intelligence but can change their moral character. Entity theorists tend to base their judgments on initial observations. For example, children with an entity theory who face their first challenging math test decide, based on that one test, that they are not good at math (Butler, 2000). Further, adults with an entity theory have demonstrated a willingness to stereotype others based on initial and limited information (Levy, Stroessner & Dweck. 1998) and to resist changing initial trait assignments even when faced with objective evidence to the contrary (Plaks, Dweck, Stroessner, & Sherman, 2001). In contrast, incremental theorists required more than an initial observation before assigning traits and were more likely to engage in and accept stereotype-inconsistent information (Levy et al. 1998; Plaks, et al. 2001). This paper will discuss below how this willingness or unwillingness to engage in and accept information that is inconsistent with initial observations may affect the failure of the entrepreneurial venture. Lay theories and entrepreneurship As previously noted, an important step in the entrepreneurial process is opportunity recognition (Ardichvili, et al., 2003). Further, it is assumed that the entrepreneur believes there is an expectation of success sufficient to deploy the necessary resources to begin the venture. Should the venture prove successful, the entrepreneur’s beliefs about the opportunity are confirmed and the venture continues. However, often the entrepreneur is wrong about some belief related to the success of the firm. The error may be quantitative in that the entrepreneur over estimates cash flow from operations. Beliefs about success may also be qualitative. For example, two people who are social friends may find they do not work well as business partners. Once the beliefs about the success of the venture are challenged by the reality of the situation, the entrepreneur’s lay theory will influence the reaction to the new information. For example, suppose an entrepreneur believes there is an opportunity for a restaurant in a small town and secures the necessary capital to begin the venture. For illustration purposes, assume the entrepreneur over estimated the market and, subsequently, cash flow from operations. With fewer customers and revenue than expected, the belief that the restaurant was a good opportunity is challenged by the facts.


45

The entity entrepreneur will, at least initially, refuse to engage information that is inconsistent with previous beliefs about the viability of the restaurant. That is, the entity entrepreneur will ignore any information that violates the a priori assumption of success. Rather, the restaurant owner will focus on information that is consistent with prior beliefs. For example, the entrepreneur will emphasize the number of customers who do come to the restaurant and express their (uninformed) belief that it will succeed. Plaks et al. (2001) found that entity theorists will also engage in information inconsistent with prior beliefs in order to either debunk it or to reinterpret it to confirm prior beliefs. In the example of the restaurant, the entrepreneur will explain the small crowd as a core group who will ‘spread the word.’ An alternative is to reinterpret the small crowd as the kind of people he or she wants as customers. In both cases, the entity entrepreneur confronts information that is inconsistent with the a priori belief of success with strategies designed to maintain that belief. Taken to the extreme, the entity entrepreneur will resist to the point of failure (insolvency). His or her unwillingness to either engage inconsistent information or engage only to debunk or reinterpret the information leads to maintaining the venture beyond the time it should have been known it was not viable. It is important to note that the entity theorist is not living in fantasy world in the sense that he or she is ignoring reality. Lay theories are important to us because they help us interpret the world around us. In short, they give us our ‘reality.’ When these theories are challenged, the way we believe the world works is challenged leading to confusion and uncertainty (Levy & Dweck 1998; Levy et al. 1998; Plaks et al. 2001). Thus, people tend to defend their lay theories until the evidence to the contrary is overwhelming. In contrast to the entity entrepreneur in the restaurant example, the incremental entrepreneur is more likely to recognize and engage in information inconsistent with prior assumptions. The small crowds signal that the entrepreneur underestimated the market. Responses may include reducing hours to just lunch or reallocating resources to more marketing. If the restaurant appears not to be viable, the incremental entrepreneur will cease operations soon enough to recover as much of the original investment as possible, thereby avoiding the definition of failure adopted here. This example of the model proposed in this paper, then, predicts that entity and incremental entrepreneurs will react differently when confronted with information that is inconsistent with their a priori assumptions of success. Below are the research proposals designed to test this model.


46

Research Proposals

Consistent with the entrepreneurship literature (e.g., Ardichvili et al. 2003) the model assumes opportunity recognition is an integral part of the decision to begin a new venture. Further, it is logical to assume that the entrepreneur’s employment of resources in the venture is based on a reasonable expectation of success. Success may be defined as a specific return on investment or simply the desire to be one’s own boss. In either case, the venture must remain viable (solvent) to be successful in the long-term. Should information that is inconsistent with this assumption of success develop after the venture begins, the entrepreneur’s lay theory will influence the reaction. Thus, it is proposed, consistent with research done by Plaks, et al. (2001), that

P1: Entity theory entrepreneurs will ignore information inconsistent with a priori assumptions of success and focus on information consistent with a priori assumptions of success. P2: Entity theory entrepreneurs will engage information inconsistent with a priori assumptions of success only to debunk it or reinterpret it in a manner that confirms a priori assumptions of success. P3: Incremental theory entrepreneurs will engage information inconsistent with a priori assumptions of success and use this information as diagnostic informative.

In terms of failure, entity theorists will persist in an unsuccessful venture beyond what is prudent while incremental theorists will adjust to the situation based on current information. Thus,

P4: Entity theory entrepreneurs will ignore or reinterpret information inconsistent with a priori assumptions of success until the venture is insolvent. P5: Incremental theory entrepreneurs will use information inconsistent with a priori assumptions of success as diagnostic and will reallocate resources in the venture or cease operations in time to recoup as much investment as possible.

The model is graphically depicted in Figure 1.


47

EntityEntrepreneur

Incremental Entrepreneur

Inconsistent Information

Inconsistent Information

Failure

(‐)

+

+

(‐)

Figure 1

Summary

Research into entrepreneurship failure is small compared to studies concentrating on entrepreneurial success ( Zacharakis, et al.,1999). This imbalance provides a less than holistic view of the entrepreneurial process. While there are many causes for failure, some can be recognized early as information inconsistent with the original assumption of success begins to develop.

This paper proposes that the social-cognitive concept of lay theories influences the entrepreneur’s reaction to this new information. Entity theory entrepreneurs will ignore or discount the information while incremental theory entrepreneurs will accept the information as diagnostic. The model proposes that the differences in reaction will lead to different outcomes. Specifically, entity theory entrepreneurs risk insolvency while incremental theory entrepreneurs either adjust to the situation or bailout in time to recover as much of their investment as possible.

This paper is a first step in more research concerning entrepreneurial failure. Subsequent work includes empirical tests of this model and others that ma enlighten academics and practitioners alike in the causes of entrepreneurial failures.

References

Ardichvili, A., Cardozo, R. & Ray, S. (2003). A theory of entrepreneurial opportunity

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DIFFERENCES IN ENTREPRENEURSHIP AND OTHER BUSINESS PROFESSORS' CRITERIA FOR TEXTBOOK ADOPTION Robert E. Stevens, Southeastern Oklahoma State University

Ken E. Clow, University of Louisiana at Monroe C. William McConkey, University at Louisiana at Monroe Lawrence Silver, Southeastern Oklahoma State University

ABSTRACT

Textbooks are an integral component of the higher education process. This pilot study examined the differences in textbook adoption practices between entrepreneurship faculty and the faculty for other business disciplines. Also examined were the promotional methods used by publishers to influence the adoption process of the two groups. A total of 361 faculty responded to the Internet survey – 96 were entrepreneurship faculty and the remaining 265 were spread across the disciplines of marketing, management, accounting, finance and economics, quantitative methods and computer information, and general business. Several significant differences were noted in the textbook adoption habits of entrepreneurship faculty and those of other disciplines.

INTRODUCTION

Textbooks in higher education are used by instructors in varying ways. Some instructors

use the text as a supplement to other course material while other instructors teaching online may use the text as the primary source of course material. In either case, the textbook is a critical element in higher education instruction. Stein, Stuen, Carnine, and Long (2001) noted that textbooks are believed to provide 75 to 90 percent of classroom instruction. This central role of textbooks in the instructional process requires many college professors to spend a great deal of time selecting the appropriate text for their classes. Despite the effort and importance associated with textbook selection, there is little empirical research in the area of textbook adoption. (Smith and DeRidder, 1997; Stein, et al., 2001). Textbook publishing is a competitive industry. Publishers vie for adoption commitments from professors and occasionally offer inducements in violation of accepted ethical norms (Smith and Muller, 1998). For the first quarter of 2007, college textbook sales totaled $324.3 million (Educational Marketer, 2007). One cause of increased competition is that there are fewer textbook publishers due to consolidations in the publishing industry. In order to sell more books and, thus, increase profits, publishers are employing new and creative ways to market to college level instructors. Students also figure into the textbook sales equation. The price of college textbooks has increased at an annual rate of 6% since the 1987-88 academic year. While this growth is twice the rate of inflation, tuition has increased at a 7% annual rate. Textbooks and supplies are estimated to cost students between $805 and $1,229 for the 2007-08 school year (National Association of College Stores). Further, the state of Oklahoma has mandated that instructors offer more choice in textbooks, provide the least costly option without sacrificing content, and work to maximize savings to students (HB 2103).


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Students combat the high cost of textbooks with alternative strategies. A National Association of College Stores survey found that only 43% of students buy the required books for their courses (Carlson, 2005). Students either share a textbook with another student taking the same course or borrow a textbook. Additionally, some students turn to online texts which were preferred by 11% of those students surveyed. Seventy-three percent of students still prefer traditional texts, however (Carlson 2005). Another player in this picture is the used textbook wholesaler. The used textbook business thrives by purchasing used textbooks from students, college bookstores, and professors. Used texts cost between 25% and 50% below the price of a new book and are a frequent substitute for new books. In Oklahoma, however, instructors are not allowed to sell sample copies of textbooks or instructional materials received from publishers (HB 2103). The result is a distinctive competitive environment among college textbook publishers. Demand for new textbooks is depressed by the comprehensive system of buying and selling used textbooks set up by used book dealers. With less than half of students purchasing the required text, the demand for both new and used books is reduced. However, professors believe in the instructional value of textbooks and continue to assign them as required reading in courses. Further, professors make these assignments with the expectation that students will purchase the book or attain one for use during the course. Rather than reduce costs, textbook publishers have been accused of using tactics that actually increase the cost of textbooks. For example, publishers drive up the costs of new texts with extras such as CDs, workbooks, and online material. Additionally, publishers produce new editions of textbooks frequently and encourage professors to adopt the newer editions in order to combat the used textbook market. Both tactics increase the cost of texts because they require additional investments by the publishers that have to be recouped in shorter and shorter time frames. Publishers encourage professors to examine and adopt their books by marketing directly to them. Textbook publisher marketing budgets have increased along with efforts at more effective marketing. It is critical that publishers understand the criteria professors use in textbook selection so that they may target their marketing efforts more effectively and reduce the current competitive rivalry. A more efficient use of marketing dollars could result in reduced textbook costs. Two published studies that examined the textbook adoption process. These papers were by Smith and DeRidder (1997) and Smith and Muller (1998). Smith and DeRidder (1997) examined the general criteria of textbook selection and publisher incentives in the textbook adoption process. In contrast, Smith and Muller (1998) studied the adoption criteria of marketing professors only as well as the ethics of publisher incentives. While in different order, the top five selection criteria in both studies were: 1) students ability to comprehend the material; 2) timeliness of the text; 3)accuracy of the text and support material; 4) quality of support materials; 5) relevance of the text.


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Additionally, pilot studies have been conducted comparing computer information systems and other business professors’ criteria for textbook adoptions (Stevens, Clow, McConkey, & Spears, 2007), marketing and management professors’ criteria for textbook adoption (Stevens, Clow, McConkey, & Von Bergen (2007), and the selection criteria of entrepreneur professors (Silver, Stevens, Clow, & McConkey (2007). The purpose of this paper is to compare the criteria used by entrepreneurship professors in comparison with other business disciplines (marketing, management, accounting, finance and economics, quantitative methods and computer information, and general business).

THE STUDY

The study was conducted using Internet survey methodology. A sample of 2,312 e-mails was sent to business faculty throughout the United States using Hasselback directories of marketing faculty (Hasselback, 1998) and the websites of universities and colleges. Three hundred sixty- one responded yielding a response rate of 15.61%. Of those responding, 96 indicated they taught entrepreneurship and 105 indicated some other business discipline. Some of the respondents indicated teaching more than one discipline. First, the sample was asked a series of questions concerning textbook adoption criteria. These survey items included general criteria for adopting a text, the reputation and acquaintance of the text authors, importance of ancillaries to text adoption, and whether the text was a first edition. A five-point scale was used to measure the importance of each criterion.

Next professors were asked two sets of questions about textbook switching. A five-point

scale measured the reason for switching textbooks and the frequency. Finally, professors were surveyed about publisher promotion tactics and how these efforts

affected the textbook adoption process. Areas covered included how the professor learned about a new text, methods of communication from textbook reps, frequency of contact by book reps, direct mail promotions, other promotional tactics, and the effect of publisher web sites. All survey items used a five-point scale. Top criteria and differences between entrepreneur professors and other business professors are outlined below.

THE RESULTS

Table 1 provides the sample characteristics. A total of 361 usable surveys were received.

The number of faculty for each discipline is broken down as follows: Entrepreneurship, 96; Marketing 87; Management 60; Accounting, 34; Finance and Economics, 27; Quantitative Methods and Computer Information, 27; and General Business, 30.


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Entrepreneurship vs. Other Disciplines

Table 1: Teaching Area

Discipline N Percentages Entrepreneurship 96 48.7% Marketing 87 44.2% Management 60 30.5% Accounting 34 17.3% Finance and Economics 27 13.7% Quantitative Methods and Computer Information

27 13.7%

General Business 30 15.2%

The characteristics of the professors who made up the sample are reported in Table 2. Well over half of both the Entrepreneurship professors and the professors of other disciplines had over 20 years experience. Further, the sample was weighted toward professors with either associate or full professor rank. A majority of the entrepreneurship professors came from schools with fewer than 10,000 students while a majority of professors in the other disciplines came from larger institutions.

Table 2: Sample Characteristics

Demographic Variable Classification ENTR Other 0-10 years 39.7% 40.5% 11-20 years 1.7% 0%

Teaching experience More than 20 years 58.6% 59.5%

Adjunct or instructor 14.1% 16.2% Assistant professor 18.5% 21.2% Associate professor 40.2% 33.3%

Current rank

Full professor 27.2% 29.3% 0-4,999 31.5% 23.5% 5,000 to 9,999 27.2% 19.6% 10,000 to 19,999 26.1% 29.4%

Institution’s enrollment

20,000 or more 15.2% 27.5% Sample size (Total 201) N=96 N=105

Criteria for adopting a text were similar for both entrepreneurship professors and

professors in other disciplines. (See Table 3). The primary basis of selection criteria for both groups of professors was the content of the text followed by ancillary materials and cost of texts. The length and edition of the texts completed the top five criteria. There were no significant differences in the criteria for entrepreneurship professors and those of other business disciplines.


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Table 3: Criteria in Decision to Adopt a Textbook

Variable ENTR Other T-Value Significance Content of text 4.78 4.85 .685 .494 Ancillary materials 3.87 3.76 .703 .483 Cost of text 3.70 3.66 .233 .816 Length of text 3.48 3.55 .571 .569 Edition of text 3.46 3.62 .944 .347 Author(s) of text 3.19 3.09 .684 .495 Online and hard copy of text 2.56 2.33 1.270 .206 Advertising of text 2.01 2.01 .010 .992 Online text only 1.90 1.72 1.212 .227

For entrepreneurship and other business professors, the textbook authors’ reputations were more important than an acquaintance between the author and the professor. There was no significant difference between the two groups concerning reputation and acquaintance. Results are reported in Table 4.

Table 4: Reputation and Acquaintance with Author(s)

Variable ENTR Other T-Value Significance

Reputation of author(s) 3.16 3.28 .739 .461 Acquaintance with author(s) 2.09 2.14 .343 .732

Importance of the various ancillaries of the text produced some differences between entrepreneurship professors and those of other business disciplines. The most striking difference was that of video-enhanced power points. The mean for entrepreneurship professors (3.23) was significantly different from those of other business disciplines (2.74). The significance level using a T-test was .008 and the significance level required to determine a statistical difference was .05. See Table 5 for results.

The most important ancillary for both groups was the inclusion of cases in the text.

Entrepreneurship professors reported a mean of 3.88 while other disciplines had a mean of 3.61. While not as much difference was reported as that for video enhanced power points, the difference between the two groups was marginally significant at .084.


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Table 5: Importance of Various Ancillaries to Adopt a Textbook

Variable ENTR Other T-Value SignificanceCases 3.88 3.61 1.738 .084 Instructor’s Manual on CD 3.59 3.52 .375 .708 Basic PPT slides 3.58 3.27 1.537 .126 Electronic test bank 3.50 3.51 .044 .965 Hard copy of Instructor’s Manual 3.28 3.03 1.285 .200 Video-enhanced PPT 3.23 2.74 2.672 .008 Online class material 2.80 2.70 .520 .603 CD for students 2.75 2.60 .353 .725 Online student quizzes 2.70 2.59 .838 .403 Hard copy of test bank 2.69 2.83 .640 .523 Online testing 2.17 2.13 .186 .853

Entrepreneurship professors reported they were more willing to adopt a new edition of a text than professors of other business disciplines. (See Table 6). The mean for entrepreneurship professors was 1.44 as opposed to 1.63 for others with a significance of .048. Over 94% of entrepreneurship professors were “Not at all” or only “Somewhat” leery about adopting a first edition text. In contrast, 87.3% of other business discipline professors were “Not at all” or “Somewhat” leery and 12.7% reported they were “Definitely” leery about first editions. A possible explanation for this difference is the relative newness of entrepreneurship as a business discipline. As a less established course of study, there are fewer established textbooks available and publishers are turning to new authors to develop materials.

Table 6: Leery About Adopting First Edition

Are you generally leery? ENTR Other Not at all 61.3% 50.0% Somewhat 33.3% 37.3% Definitely yes 5.4% 12.7%

T-Value

Significance

Mean response 1.44 1.63 1.987 .048

Reasons for switching texts were similar for entrepreneurship and other business professors. Entrepreneur instructors did choose textbook content as the primary reason for switching texts while other business professors reported that they switched because the new textbooks better suited their teaching styles. The remaining reasons for changing textbooks were in the same order for both groups and were that the instructor was unhappy with the current text, the desire to change to a new edition of the current text, better ancillary materials with a new text, dissatisfaction with current ancillary materials, and dissatisfaction with the publisher. (See Table 7).


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Table 7: Reasons for Switching Textbooks

Reason ENTR Other New textbook better suited to my teaching style 74.0% 68.6% Content of new text 69.8% 73.3% Unhappy with current text 55.2% 54.3% New edition of current text coming out and want to change 52.1% 54.3% Better ancillary materials with new text 40.6% 31.4% Dissatisfied with ancillary materials 34.4% 27.6% Unhappy with publisher 13.5% 15.2%

Entrepreneurship professors (mean = 3.95) are also more likely to switch textbooks than other business professors (mean = 3.32). Over 34% of entrepreneurship instructors reported switching books at least every two years compared to only 19.6% of other business professors. Results of textbook switching are reported in Table 8.

Table 8: Frequency in Switching Textbooks

Frequency ENTR Other

Once a year 4.3% 1.0% Every two years 30.4% 18.6% Every three years 41.3% 41.2% Every four years 10.9% 11.8% Every five years 5.4% 5.9% Longer than five years 7.6% 21.6%

T-Value

Significance

Mean response 3.95 3.32 3.218 .002

Entrepreneurship professors are more likely to hear about new books from contact by a textbook company representative (mean = 3.87) than are instructors in other business disciplines (mean = 3.46), but entrepreneurship professors are less likely to have a book rep contact them by e-mail (mean = 3.46 vs. 3.49). The results of how entrepreneurship and other business professors learn about new books and the communication methods employed by book reps are illustrated in Tables 9 and 10, respectively.


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Table 9: Learning about New Textbook

Variable ENTR Other T-Value SignificanceExamination copy 4.73 4.74 .090 .928 Contact by book rep 3.87 3.46 2.437 .016 Direct mail 3.27 3.28 .064 .949 Booth displays (conference) 3.23 3.11 .728 .467 Publisher’s website 3.22 3.26 .296 .767 E-mail 3.10 3.01 .449 .654 Advertising in media 2.23 2.33 .739 .461 Telephone 1.82 1.76 .414 .679

Table 10: Communication Methods from Book Reps

Variable ENTR Other T-Value Significance

Personal visit 3.76 3.55 1.184 .238 E-mail contact 3.46 3.79 2.028 .044 Telephone 2.56 2.45 .637 .525

While entrepreneurship instructors are contacted by book reps slightly less frequently

than other business professors, there is no significant difference in actual and desired frequency of contact between the two groups (See Table 11). Additionally, there were no notable differences between the two groups in terms of promotional strategies employed by publishers. These marketing methods include direct mail and various promotions such as receiving an examination copy or seeing a magazine advertisement. (See Tables 12 and 13 for a summary of the results).

Table 11: Frequency of Contact by Book Rep

Current Frequency Desired Frequency

Variable ENTR Other ENTR Other Less than once a year 14.0% 5.8% 12.0% 3.9% Once a year 7.5% 11.5% 16.3% 25.5% Once a semester 37.6% 42.3% 51.1% 46.1% Two to three times a semester 30.1% 34.6% 19.6% 23.5% Four or more times a semester 5.4% 2.9% 1.1% 1.0% ENTR Other T-Value SignificanceDesired contact 2.82 2.92 .845 .399 Current contact 2.89 3.09 1.175 .241


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Table 12: Direct Mail Promotions from Publishers

Variable ENTR Other T-Value SignificanceSpecific book promotions 3.27 3.26 .022 .982 Multiple book promotions 2.87 2.81 .331 .741

Table 13: Book Promotions That Encourage Closer Look at New Test

Variable ENTR Other T-Value SignificanceExamination copy 4.75 4.80 .568 .571 Contact by book rep 3.91 3.74 1.057 .292 Direct mail 3.25 3.25 .013 .990 E-mail 3.01 3.13 .650 .517 Publisher’s website 2.76 2.85 .552 .582 Telephone 2.12 1.91 1.386 .167 Magazine 2.05 2.04 .106 .916

Finally, there were no reported differences between entrepreneurship professors and those of other business disciplines accessing the publisher’s Website when selecting a new text. Over 95% of entrepreneurship professors access the publisher’s Website every time or occasionally when they select a text compared to over 91% of instructors in other disciplines. Results are reported in Table 14.

Table 14: Accessing Publisher’s Website When Selecting Textbook

How often access? ENTR Other

Every time select a text 40.9% 48.1% Occasionally when selecting text 54.8% 43.3% Never when selecting text 4.3% 8.7%

T-Value

Significance

Mean response 1.63 1.61 .329 .742

DISCUSSION This study provides information about how entrepreneurship professors and instructors in

other business disciplines adopt textbooks. We also examined how the two groups view marketing methods used by textbook publishers.

Several significant differences between entrepreneurship professors and those of other

business disciplines were noted. One area of difference involves the ancillaries related to the text. Specifically, entrepreneurship professors were more likely to consider books with video-enhanced Power Point presentations than professors of other business disciplines. Entrepreneurship professors were also marginally more interested in the cases associated with the text than were other business instructors (p=.084).


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Another important difference between the two groups relates to the willingness to adopt

the first edition of a text. Entrepreneurship professors were much less leery of first editions than professors of other business disciplines. A possible explanation for this difference is the relative newness of the entrepreneurship discipline.

While entrepreneurship and other business discipline professors are likely to switch

textbooks, entrepreneurship professors tent to switch books in order to find a text that better suits their teaching style while other business professors switch books because of content.

Textbook company representatives appear to be more involved in how entrepreneurship

professors learn about new books than they are for other disciplines. However, the study indicates that there is less e-mail contact between book company reps and entrepreneur professors. There was no reported difference between the groups in terms of the level of desired contact by book reps and actual contact.

Other promotional methods employed by textbook publishers have the same effect on

both entrepreneurship professors and those of other business disciplines. Such promotional techniques include direct mail, examination copies, and the publisher’s Website.

The practice of sending complimentary copies of textbooks for possible adoption has

traditionally been the best way to get adoptions of new texts. However, this is a high cost promotional approach since the books are usually not returned. Additionally, they often find their way to textbook wholesalers reducing the profitability of the text for the publisher. Other options could be utilized such as sending a few unbound chapters of a text, sample cases and instructors’ notes, parts of solution manuals, online examination, or a CD of a new text. While all of these approaches, except the online examination, represent new costs of preparing and mailing, such approaches would reduce the cost of sending complete packages and reduce the risk of the text finding its way to book buyers. Since reproduction of CDs results in relatively low costs, this could be a way to get examination copies to faculty. A possible disadvantage is that a secondary market may develop for the CDs.

CONCLUSION

The practical implications of this study for textbook companies are several. First,

entrepreneurship professors carefully consider the ancillaries associated with the text, especially video-enhanced Power Points and cases. Second, entrepreneurship professors are more willing than other business professors to switch textbooks and to adopt first editions. Moreover, the decision to switch textbooks is related more to teaching style than content.

As the entrepreneurship discipline matures, habits may change and instructors will be less

likely to adopt first editions or switch books. However, until then there is an opportunity for publishers to gain the attention of entrepreneurship professors with quality textbooks.


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REFERENCES

Carlson, S. (2005, February 11). Online textbooks fail to make the grade. Chronicle of Higher Education, 51, (23), A35-A36. College publishers take hit in March. Still Ahead for the year. (2007, May 28). Educational Marketer, 38, (11), 6-7. Hasselbacks (1998). Directory of marketing faculty. HB 2103, c. 368, § 2, eff. November 1, 2007. Higher education retail market (n.d.) National Association of College Stores. Retrieved June 10, 2008, from http://www.nacs.org/common/research/faq-textbooks.pdf. Silver, Lawrence S., Robert E. Stevens, Kenneth E. Clow, and C. William McConkey

(2007),“The Entrepreneurship Textbook Adoption Process: A Pilot Study,” Proceedings of the Annual Meeting of the Association for Small Business and Entrepreneurship, (October), Austin, TX.

Smith, K. J. & DeRidder, J. J. (1997). The selection process for accounting textbooks: general criteria and publisher incentives – a survey. Issues in Accounting Education, 12, 367-385. Smith, K. J. & Muller, H. R. (1998). The ethics of publisher incentives in the marketing textbook selection decision. Journal of Marketing Education, 20, 258-268. Stein, M., Stuen, C., Carmine, D. & Long, R. (2001). Textbook evaluation and adoption. Reading & Writing Quarterly, 17, 5-23. Stevens, R., Clow, K. E., McConkey, C. W. & Spears, J. (2007). Differences in computer information systems and other business professors’ criteria for textbook adoptions: A pilot study. Conference Proceedings of the International Academy of Business and Public Administration Disciplines, 4 (3), 466-476. Stevens, R., Clow, K. E., McConkey, C. W. & VonBergen, C. W. (2007). Differences in marketing and management professors’ criteria for textbook adoptions: A pilot study. Association of Marketing Theory and Practice Conference, (CD), March, 2007.

http://www.nacs.org/common/research/faq-textbooks.pdf�


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OPPORTUNITY IDENTIFICATION/RECOGNITION Jim Bell, Texas State University

Abstract

As we know, for any business to become a reality, an entrepreneur must actually recognize/ identify the need for a business, its added value, as well as its desirability. In the past 15 years dozens of articles have been written on opportunity identification/recognition. Most studies have identified three skills (among others) that are crucial in identifying an opportunity for a business; those being: alertness, knowledge and experience, and (having) professional contacts.

A few studies have demonstrated that the “skill” can be taught (or improved) in the

classroom; but little (if anything) has been published as to “what” college students consider to be opportunities. This paper describes what happened when 193 students (30% female) submitted more than 3,000 “ideas” for starting businesses. These submissions have been entered into Excel, coded, separated, and categorized according to 16 “types” of businesses. There were significant differences. Attendees are invited to attend, listen and interact, and to share experiences.

Introduction As we know, entrepreneurship is an important part of the economic landscape, providing

opportunity and jobs for huge numbers of people. In 1995, 807,000 new small firms were established; and in 1996, small businesses created 1.6 million new jobs (Kuratko, 2005). As large businesses downsize and terminate thousands of workers, small businesses continue to be formed, expand, and employ those displaced.

Colleges and universities offering courses designed to prepare future business owners,

rose from only six in 1967 to 400 in 1990 (Solomon & Fernaid, 1991). By 2003, 1,600 different colleges and universities had begun offering courses in entrepreneurship (Katz, 2003). When two-year colleges are included in the total, the number of colleges offering at least one course in entrepreneurship is 1,992 (Gray, 2006). Clearly, universities are striving to meet the educational demands of a burgeoning type of career choice. Entrepreneurship Education Focus

Education is, after all, about instilling students with knowledge from a variety of sources

that is necessary to help them advance in their chosen field. Although unlikely that all or even most students will become successful small business owners or entrepreneurs either right after graduating from college or ever, for those who “choose the path,” entrepreneurship education cannot prevent failure but can minimize the risk of failure. Katz (2007) writes: “If the person comes into the class with an idea, and is willing to take the help offered, it is possible to help the person bring his or her business to fruition” (p. 225). In essence, entrepreneurship education is about creating entrepreneurship competencies, which include knowledge, skills, and abilities (Katz, 2007; Markman, 2007). Knowledge competency is the focus of most (perhaps all) entrepreneurship programs and can be characterized as giving access to unique information and


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experience (Marsili, 2002). This knowledge-- information and experience--includes specific objectives and goals.

Entrepreneurship Education Objectives and Goals

As teachers of entrepreneurship, we typically have several student focused objectives and

goals. A primary goal being that students actually complete the course with increased “intention” to become small business owners and entrepreneurs. Of course, this means we will introduce them to the challenges and barriers an entrepreneur faces. And to follow-up on Katz, we may have as a goal to reduce the rate of failure they may face as business owners. However, prior to opening any business, one must actually recognize/ identify the need for a business, its added value, as well as its desirability.

Opportunity Recognition/Identification Research

DeTienne & Chandler (2004) and others note that opportunity recognition/identification

is an important element of entrepreneurship scholarship (Ardichvili, Cardozo & Ray, 2003; Gaglio & Katz, 2001) Shane & Venkatararaman, (2003) propose that a fundamental question that should be studied is “why, when, and how some people, and not others, discover and exploit opportunities” (p. 218). Previous published work on OR/I has consistently identified three factors that play a key role as individuals “recognize opportunities. (Baron, 2006) Factors required to start any business include alertness, knowledge and experience, and (having) professional contacts. OR/I Factors

Alertness (to opportunities) is mostly an active search for trends and includes the capacity to recognize opportunities when they emerge or prior to their emerging. Gaglio & Katz (2001) note that alertness includes one noticing what has been overlooked as well as one who formulates a vision for the future.

Varied life and work experience to include knowledge of markets, industries, and customers is also central to identifying opportunities. Shane (2000) proposes that knowledge is so important to opportunity recognition that entrepreneurs discover opportunities related to information they already possess and that discovery is a function of the distribution of knowledge in society. In addition to being alert and knowledgeable, successful entrepreneurs use a network of acquaintances as a “sounding board” for assessing the rationality of any idea for starting a business.

All three factors lead to increased potential and skill related to identifying/recognizing opportunities. In addition, research related to pattern recognition (Solso, R. L. 1999) identifies the ability to “connect the dots” as crucial for an opportunity to become a reality.

DeTienne & Chandler (2004) note that active search for opportunities has been studied

and that most models developed include goal setting, environmental scaling, competitive


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analysis, and strategic planning as each plays a significant role in the process. (Baum, Locke, & Smaith, 2001; McDougal, Covin, Robinson, and Herron, 1994; Dess, Lumpkin, & Covin, 1997)

Other research on O.R. (Baron and Ensley, 2005) has compared “repeat” and novice

entrepreneurs and found, among other factors, that novices focus more on newness or novelty of the idea while experienced entrepreneurs focus efforts on value based upon previous knowledge of the field as well as taping their social network for information relevant to the opportunity.

College students typically lack extensive knowledge and experiences related to starting

businesses and also are limited in developing a network of professional contacts. This said, however, DeTienne & Chandler (2004) conducted an experiment where an experimental group of students were “taught or exposed” to opportunity recognition and compared to another “almost” matched group that was not. The results indicated that the experimental group generated “more” ideas for starting businesses and those ideas were superior qualitatively. Significance of the Paper

To repeat, central to starting any business is being able to recognize and identify an existing or future opportunity; but few published studies have reported what students identify and value when they search for opportunities. I was interested in evaluating what would occur when students were asked to be alert as well as to be “active” in their search for trends, changes, and business opportunities.

For one year, I have required my students to individually identify at least 14 ideas for

starting specific new businesses (new to them). Did this requirement work? Were students actually successful in identifying business opportunities? What businesses did they identify? Further, what happens when students are exposed to the successes and failures of experienced entrepreneurs?

Study Focus and Methodology

In spring 2008, 193 students attending a large university located in the southwest (U.S)

who were enrolled in an introductory Studies in Entrepreneurship class were required to “be alert,” to use the “knowledge and experience” they possessed or were learning, and to “seek advice” from acquaintances who operated businesses. Specifically, they were required to identify at least 14 opportunities to start businesses.

OR Assignment: Taken from class syllabus Extra Credit and Initiative: Opportunity Recognition and a chance for extra credit--

Out of Class Assignment:

As you know, teams prepare only “one” feasibility study. However, as aspiring entrepreneurs and successful businesspersons in your lifetime, you will have dozens of opportunities to invest in companies and dreams.


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Success belongs to those who take initiative. This semester, as you read your text and listen to practicing entrepreneurs and lectures, You are expected to “sharpen” your awareness of opportunities. Further, this semester, you are "required" to “expand” your ideas for starting businesses and services! Specifically, each week you will describe/write an approximately 50 word, two paragraph description of your idea for starting a successful business. You will briefly describe what the business is or will be; its location; its product or service; its customers; and its competition. These summaries are to be word-processed. Mechanics should be "perfect.” These “opportunity recognition (OR)” ideas will be submitted electronically via the Turn It In web site. Students will go to http://www.turnitin.com and click on a link in the upper right hand corner that says create a user profile. The student will enter in the class ID number: 2133825 when prompted. The class password is mgt3360. Instructions with screen shots of how to create an account are located here: http://www.its.(link altered to remove university name) /uploads/images/68/Turnitinstudent_1.doc After creating a user profile, you will see a list of 24 opportunity recognition assignments in your account. To turn in a written OR assignment, the student will click on the correct opportunity recognition (OR) number and follow the instructions when prompted on how to upload the document. For each (OR) please include your name, team number, date, and your e-mail address (in the event your OR is not accepted, you will be sent an e-mail). OR’s will not be returned, thus you are responsible for assessing the accuracy of the OR tally sheet. Also, keep a COPY of each OR you have turned in as you might be required to document work you have done. *Warning: Do your own work. Cheating, be it turning in another's work or submitting duplicate opportunity descriptions will result in loss of a minimum of two letter grades in the course. The Turn it in system automatically checks for plagiarism. We reserve the right to reject any document that contains plagiarized material. On the first offense, student will be given warning and asked to redo the critique assignment. A second offense will result in the loss of two letter grades in the course. Please review the “What is Plagiarism?” web page: http://www.indiana.edu/~wts/pamphlets/plagiarism.shtml **Class Requirement: If you complete 14 good ones, you will receive the grade you earned on the tests and team reports -- your class grade. Folks, that’s one O.R. each week! The task is "manageable" when you stay focused and organized. By week eight, you should have submitted eight "good" O.R’s. Plan your submissions to avoid having to “cram” your writing into the last week. Teams may track progress in the Team Notebook.

http://www.indiana.edu/%7ewts/pamphlets/plagiarism.shtml


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If you complete 10-13 "good ones," you will receive the grade you earned on the tests and projects minus one letter grade for "lack of initiative." Consider yourself part-time! If you complete 9 or < "good ones," you will receive the grade you earned on the tests and projects minus two letter grades for "lack of initiative." Consider yourself outsourced. For the truly motivated: find and take extra time to write more than 14 OR’s and you will earn one point for each OR over 14. The points will be added to your lowest individual test grade on tests one or two. You may earn "up to" 10 extra points! Example, on individual test one you scored a 74. However, because you wrote 24 O.R.’s and demonstrated exemplary initiative, ten points (24 - 14) will be added to test one individual (74 + 10) resulting in a "new" score of 84. "Initiative Counts!" My goal is for every single person to demonstrate initiative*; and earn full credit. My dream is for all of you to write 24 O.R.’s and to earn 10 points that will be used to raise your test scores!

______ Students also read a textbook, took exams, worked in small teams (9-10) and prepared and presented (in writing and orally) feasibility studies (one per team). Also as noted, each student was required to submit a minimum of 14 ideas for businesses (one idea each week). The students submitted these OR/I using Turn-it-in.com as this site uses programs to “check” for plagiarism. Weekly tallies for each student were posted on-line. In addition, students were also exposed to 15 seasoned entrepreneurs (one speaker each week of the semester) as they described their “stories” to include successes, failures, challenges, and barriers.

Videotapes were made of all speaker presentations, and “shown” over local cable

television. The speakers were varied (ages and gender) and represented big business, small business, non-profit and captive entrepreneurship (i.e. entrepreneurial activity within a business structure).

Preliminary Findings

Specifically, 193 students (30% female) submitted more than 3,000 “ideas” for starting businesses. These submissions have been entered into Excel, coded, separated, and categorized according to 16 “types” of businesses. These opportunity identifications include franchise and non-franchise operations; restaurant (dine in and take-out) and fast food; entertainment (bars, sports, music); lifestyle, fitness and wellness; beauty and cosmetic; clothing; technology (internet and fiber optic); energy and environmental; and several miscellaneous groupings. There were significant differences between the number of opportunity recognitions submitted by men and women as well as differences in the locations and target customers for the businesses. The analysis has just begun but will be ready for sharing in Albuquerque. Limitations

Using Campbell and Stanley (1963) design factors, there are several limitations in the study to include the lack of randomization, no control/comparison group (not asked/required to


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be alert, not provided information and knowledge, and not exposed to actual entrepreneurs). Also, just identifying a business opportunity is far different from starting that business.

In spite of these limitations, this research does examine something important to

entrepreneurship—that has not been published. Specifically, what do young students (under 25) and potentially aspiring entrepreneurs believe are valid opportunities for starting businesses?

Conclusion As we know, there is a big difference between identifying an opportunity for a business

and actually starting and running that business. As Gartner (1988) noted: “entrepreneurship is not about who the entrepreneur is, but what the entrepreneur does.” However, without an initial idea no business is possible. Markman (2007) wrote: At the extreme, insights, discoveries, and opportunity recognition are a costless mental exercise or a cognitive workout in wishful thinking that cannot produce—by themselves—new businesses. Still, recognizing opportunities is clearly imperative (i.e., opportunities are unlikely to be pursued in the absence of recognition).

The writer believes ASBE members will be interested in the topic/paper and that the topic

has further research implications. The writer will analyze the data collected and share it and also intends to “track” students who completed the course to assess whether or not they start and run businesses.

Bibliography

Ardichvilli, A. Cardozo, R. & Ray S. 2003. A theory of entrepreneurial opportunity identification and development. Journal of Business Venturing, 18(1): 105-123.

Baron, R. A., 2006. Opportunity recognition as pattern recognition: How entrepreneurs “connect

the dots” to identify new business opportunities, Academy of Management Perspectives, February, pp 104-119.

Baron, R.A. & Ensley, M. D. 2005. Opportunity recognition as the detection of meaningful

patterns: Evidence from the prototypes of novice and experienced entrepreneurs. Manuscript under review.

Campbell, D. T., & Stanley, J. C. 1963. Experimental and quasi-experimental designs for

research. Boston: Houghton Mifflin. DeTienne, D.R. & Chandler, G.N., 2004. Opportunity identification and its role in the

entrepreneurial classroom: A pedagogical approach and empirical test, Academy of Management Learning and Education, 3(3): pp. 242-257.

Gaglio C.M. & Katz J.A., 2001. The psychological basis of opportunity identification:

Entrepreneurial alertness, Small Business Economics, 1(2): pp 95 111. Gartner, W.B. 1988. Who is an entrepreneur? Is the wrong question. American Journal of

Small Business. 12(4): 11-32.


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Gray, P.B. 2006. Can entrepreneurship be taught? Fortune Small Business, 19(2): 34. Katz, J.A. 2003. The chronology and intellectual trajectory of American entrepreneurship

education. Journal of Business Venturing, 18(2): 283-300. Katz, J.A. 2007. Education and training in entrepreneurship. In J.R. Baum, M. Frese, and R.A.

Baron (Eds.), The psychology of entrepreneurship: 209-235. Mahway, NJ: Erlbaum. Kuratko, D.F. 2005. The emergence of entrepreneurship education: Development, trends, and

challenges, Entrepreneurship Theory and Practice, 29(15): 577-598. Markman, G.D. 2007. Entrepreneur’s competencies. In J.R. Baum, M. Frese, and R.A. Baron

(Eds.), The psychology of entrepreneurship: 209-235. Mahway, NJ: Erlbaum. Marsili, O. 2002. Technological regimes and sources of entrepreneurship. Small Business

Economics, 19(3): 217-231. Shane, S. 2000. Prior knowledge and the discovery of entrepreneurial opportunities,

Organizational Science, 11(4): pp. 448-469. Solomon G.T., & Fernaid, L. 1991. Trends in small business management and entrepreneurship

education in the United States. Entrepreneurship Theory and Practice, 15(3): 25-39. Solso, R. L. 1999. Cognitive psychology, 5th ed. Boston: Allyn & Bacon.


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ANALYSIS OF US SBA LOAN PROGRAMS Don Bradley, University of Central Arkansas

Veronica Kirtley, United States Small Business Administration, Little Rock

Abstract

A SWOT analysis on the Small Business Administration was prepared by the researchers, and from the findings the following recommendations were made. One, focusing on strengthening lender relationships; two, recruiting community banks to be SBA lenders; three, creating programs to educate small-business owners on how to deal with economic hardships; four, designing programs to recruit women, minorities, and Gen Y’ers; and five, considering eliminating ineffective programs.

Introduction The U.S. Small Business Administration (SBA) was established by Congress in 1953.

The institution was formed as a means of alleviating the economic condition known as credit rationing. In the small business industry, credit rationing is created when the majorities of loans go to larger firms because they are seen as less risky and thus offered lower interest rates. To prevent credit rationing, the SBA offers a guaranteed repayment of a certain percentage of each SBA loan made by banks to small businesses. In exchange, the lender offers lower interest rates and longer re-payment periods. This is the key feature of SBA’s most popular program, which is known as 7(a) lending. For the first time in several years, the SBA has excess capital to lend. This paper examines what the SBA can do to increase their capital lending.

The banking industry as a whole does not seem to be experiencing problems with lending capital. Most institutions report that the amount of requested loans has simply declined. Demographically speaking, more and more women and minorities are requesting small business loans. Baby boomers and members of Generation Y are also seeking independence in the small business arena.

Background The United States Small Business Administration (SBA) was founded on July 30, 1953. It was established by the United States Congress under the Small Business Act of 1953 as a way to assist small companies, particularly those serving military interests. The purpose of the Small Business Administration was to aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.1 Although it was formally established in 1953, the SBA can be traced to 1932, when President Herbert Hoover established the Reconstruction Finance Corporation to provide loans for small businesses during the Great Depression. Ten years later President Franklin D. Roosevelt created the Smaller War Plants Corporation to strengthen the ability of small companies to secure military contracts during World War II. The corporation was disbanded in 1946. It was later reinstated as the Small Defense Plants Administration during the Korean War. President Dwight D. Eisenhower and Congress then consolidated the Small 1 http://www.sba.gov/aboutsba/index.html


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Defense Plants Administration and the Reconstruction Finance Corporation into the SBA, which also took on responsibilities of the Office of Small Business in the Department of Commerce. The SBA's initial role called for keeping an inventory of businesses that could serve a military purpose in peacetime, providing disaster relief and offering loans and technical assistance. The SBA oversaw a lending program for veterans who wanted to start or expand small businesses. The Equal Opportunity Act of 1964 expanded the SBA's role. The 1964 Equal Opportunity Loan Program allowed applicants living below the poverty line who had sound business proposals to meet credit and collateral requirements. The SBA also began including programs to assist minority-owned businesses. Members of minority races, particularly immigrants, women of all races, individuals with disabilities, and veterans have usually had more difficulty securing loans and credit to further business growth. In response to these problems and to growing pressure from advocates of civil rights, President Richard M. Nixon added a minority set-aside program known as the Philadelphia Plan, which allocated a share of federal procurement contracts for minority-owned small businesses. In the 1990s, the SBA assisted businesses specializing in high technology, environmental resources, and exports. SBA’s portfolio is made up of 21.5 million companies with fewer than five hundred employees, or 99 percent of all businesses in the United States. However, it directly serves only one percent of such businesses. Small businesses accounted for all of the job growth in the nation from 1987 to 1992, and they are considered the engine for the national economy. Small businesses employ 54 percent of the workforce, and they account for half the gross national product. The SBA has its headquarters in Washington, D.C. It maintains ten regional offices and has field offices in most major U.S. cities.

Credit Rationing Credit rationing is the process of making credit less easily available or subject to high interest rates.2 This phenomenon is of particular interest in the small business industry because a lot of small firms are relatively young and have little or no credit history. Another concern is that many start-up small businesses are based on new or innovative products. Both of these characteristics increase the risk factor for investors. Therefore, while a bank might be willing to lend to them, the interest rate may be so high that the borrower cannot afford the loan payments. This leads to credit rationing in the small business industry because the majority of loans would then go to larger, more established companies that have greater cash flow. The Small Business Administration helps to alleviate this problem by offering a guarantee payment for a portion of the loan if the borrower were to default. The guarantees are for between 50 percent and 85 percent of the value of every 7(a) loan. In exchange, the lenders offer the loans to borrowers at lower rates, and they are given a longer period of time to re-pay the loan.

SBA Programs 2 http://dictionary.bnet.com/definition/credit+rationing.html


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Financial Assistance The SBA provides guaranteed loans to small businesses to help them finance plant construction, conversion, or expansion and acquire equipment, facilities, machinery, supplies, or materials. It also provides them with working capital. Since 1976 farms have been considered to be small business concerns. The SBA also provides loan guarantees to finance residential or commercial construction. The administration may finance small firms that manufacture, sell, install, service, or develop specific energy measures. In an effort to reach more businesses, the SBA provides loans and grants to private, nonprofit organizations that, in turn, make small loans and provide technical assistance to small businesses. Through its Surety Bond Guarantee Program, the SBA helps to make the contract bonding process accessible to small and emerging contractors who find bonding unavailable. A bond is posted as a guarantee that the contracted work will be performed. If the work is not performed, the money pledged in the bond will be used to cover the contractor's default. The SBA program guarantees to reimburse the issuer of the bond up to ninety percent of losses incurred under bid, payment, or performance bonds issued to small contractors on contracts valued up to $1.25 million.3 Disaster Assistance The SBA lends money to help the victims of floods, riots, or other catastrophes repair or replace most disaster-damaged property. Direct loans with subsidized interest rates are made to assist individuals, homeowners, businesses, and small agricultural cooperatives without credit elsewhere that have sustained substantial economic injury resulting from natural disasters.4 Government Contracting The SBA works closely with the purchasing agencies of the federal government and with the leading U.S. contractors in developing policies and procedures that will increase the number of contracts awarded to small businesses. The administration has a number of services that help small firms obtain and fulfill government contracts. It sets aside suitable government purchases for competitive award to small business concerns and provides an appeal procedure for a low-bidding small firm whose ability to perform a contract is questioned by the contracting officer. The SBA maintains close ties with prime contractors and refers qualified small firms to them. In addition, it works with federal agencies in setting goals for procuring prime contracts and subcontracts for small businesses, especially those owned by women and members of disadvantaged groups.5 SCORE The Service Corps of Retired Executives (SCORE) is a resource partner of the Small Business Administration that is dedicated to entrepreneur education and the formation, growth

3 http://www.sba.gov/idc/groups/public/documents/sd_sioux_falls/sd_suretybonds.pdf 4 http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_da_disastr_revcovery_plan.pdf 5 http://www.sba.gov/aboutsba/sbaprograms/gc/index.html


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and success of small businesses nationwide. SCORE has more than 10,500 volunteers in 374 chapters that operation in over 800 locations. These volunteers serve as counselors and assist small businesses with business counseling and training. SCORE also has an active online counseling program.6 8(a) and SDB Business Development The SBA administers two particular business assistance programs for small disadvantaged businesses (SDBs). These programs are the 8(a) Business Development Program and the Small Disadvantaged Business Certification Program. While the 8(a) Program offers a broad scope of assistance to socially and economically disadvantaged firms, SDB certification strictly pertains to benefits in federal procurement. 8(a) firms automatically qualify for SDB certification. Sections 7(j) and 8(a) of the Small Business Act provide for the Minority Enterprise Development Program. This program is designed to promote business ownership by socially and economically disadvantaged people. Participation is available to small businesses that are at least fifty-one percent unconditionally owned, controlled, and managed by one or more individuals determined by the SBA to be socially and economically disadvantaged. Program participants receive a wide variety of services, including management and technical assistance, loans, and federal contracts.7 Advocacy The Office of Advocacy was created within the U.S. Small Business Administration by Congress in 1976. Its main goal is to protect, strengthen, and effectively represent the nation’s small businesses. The office serves as a leading advocate within public policy councils for the more than twenty-two million small businesses in the United States. The office is headed by the chief counsel for advocacy, and it lobbies Congress, the executive branch, and state agencies concerning the interests and needs of small business. The office also is a leading source of information about the state of small business and the issues that affect small business success and growth.8

6 http://www.score.org/index.html 7 http://www.sba.gov/aboutsba/sbaprograms/8abd/index.html 8 http://www.sba.gov/advo/


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Women's Business Ownership The Office of Women's Business Ownership (OWBO) was developed by the SBA to provide assistance to the increasing number of female business owners. It is essentially meant to help them avoid the common mistakes of new business owners. This organization accomplishes that goal by acting as an advocate for female entrepreneurs in the public and private sector. It is the only office in the federal government specifically targeted to women business owners, and it assists them through technical, financial, and management information and business training, skills counseling, and research. The Office of Women's Business Ownership has established a women's business owner representative network in every district office, an Online Women's Business Center accessible through the Internet, and nearly seventy women's business centers in forty states. In addition, the OWBO has established fifty-four training centers in twenty-eight states and the District of Columbia, which provide community-based training for women at every stage of their entrepreneurial careers. The office has also created the Women's Network for Entrepreneurial Training, a one-year mentoring program linking experienced entrepreneurs with women whose businesses are poised for growth.9 Small Business Development Centers The Office of Small Business Development Centers (SBDC) is an entrepreneurial program developed by the U.S. Small Business Administration in order to provide counseling and training to existing and prospective small business owners. There are 950 SBDC centers – this figure includes at least one office in every state, as well as in Puerto Rico, the U.S. Virgin Islands, and Guam. Each center is a partner with the state government in economic development activities designed to support and assist small businesses.10 Guaranteed Business Loans through Banking The SBA does not itself grant loans (with the exception of Disaster Relief loans). Instead, the SBA guarantees against default certain portions of business loans that are made by banks and other lenders. The primary uses of the following programs are to make loans for longer repayment periods and with looser affordability requirements than normal commercial business loans.

Loan Guarantee Program: The 7(a) Loan Guarantee Programs are designed to help

small entrepreneurs start or expand their businesses. The program makes capital available to small businesses through bank and non-bank lending institutions. The 7(a) Loan Guaranty Program assists small businesses unable to secure reasonable funding terms through normal lending channels to obtain funding through private-sector lenders on loans guaranteed by the SBA.

504 Fixed Asset Financing Program: The 504 Fixed Asset Financing Program is

administered through non-profit Certified Development Companies throughout the country. This program provides funding for purchasing land or construction. Of the

9 http://www.sba.gov/aboutsba/sbaprograms/onlinewbc/index.html 10 http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html


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total project costs, a lender must provide 50 percent of the financing, a Certified Development Company provides up to 40 percent of the financing through a one hundred percent SBA guaranteed debenture, and the applicant provides approximately ten percent of the financing.

MicroLoan Program: This program offers loans that are available for up to $35,000

through non-profit, micro-loan intermediaries, to small businesses that are considered unbankable in the traditional banking industry.

8(a)-Business Development Program: This program assists in the development of

small businesses owned and operated by individuals who are socially and economically disadvantaged.

Patriot Express Loan Program: The SBA Patriot Express Loan Initiative is

available to veterans and members of the military community wanting to establish or expand a small business. The Patriot Express loans are available for up to $500,000 and qualify for their maximum guaranty of up to 85 percent for loans of $150,000 or less and up to 75 percent for loans over $150,000. The Patriot Express loan can be used for most business purposes, features SBA’s lowest interest rate, and has the fastest turnaround time for SBA loan approvals. It is available to veterans, service-disabled veterans, active-duty service members eligible for the military’s Transition Assistance Program, Reservists and National Guard members, current spouses of any of those already listed, and the widowed spouse of a service member or veteran who died during service or of a service-connected disability.

Rural Lender Advantage: This test program was launched by the SBA in

September 2007. It streamlines the application process for participating banks making 7(a) loans of less than $350,000 and promises an approval turnaround time of three to five business days for routine loans, reduced financial documentation, a simplified loan questionnaire, and specialized online assistance to guide lenders. The program was initially launched in only six states, but the SBA hopes to take it nationwide. Although it is not limited to rural banks, it is expected to appeal to them the most.

Industry Analysis

Overall Lending

The Office of Advocacy prepares an annual study on institutional lending to small firms. The report analyzes small business lending in the economy by all lenders in the United States. The most recent report is for data years 2006-2007, and it examines both larger small business loans (those under $1 million) and micro business loans—loans that are under $100,000. Some of the more significant findings are summarized below. It is important to note that the data reported are by loan size, not by business size.11

11 Small Business and Micro Business Lending in the United States, for Data Years 2006-2007, SBA Office


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The pace of borrowing and lending for the period 2006-2007 was much stronger than in the previous year for both areas.

Micro business lending was increased by 13.7 percent after being relatively flat in the previous period. Small business loans outstanding were valued at $684.6 billion for 24.5 million loans. This compares with $643 billion from 21.3 million loans in the previous year.

The micro business loan market was dominated by the largest lending firms (asset sizes of more than $10 billion).

The share of the number of larger small business loans made by multi-billion-dollar lending institutions has declined since 2005 (42 percent to 32.3 percent).

Large businesses contributed the most to total business borrowing over this period. Small business lending and borrowing are mostly local in nature. This means that

both the borrowers and the lending offices are located in the same community or nearby communities.

The “Small Business Optimism” report that appeared in the June 2008 issue of the

NFIB’s Small Business Economic Trends offered the following findings: The Index of Small Business Optimism fell below the historical average of 100.2

points to 89.3 points. This is due to the sub-par growth of the economy. 23 percent of business owners surveyed reported having higher average selling prices. 35 percent of those surveyed reported having regular borrowing activity, and there

was no real evidence of cash flow problems. Small Business/SBA Lending Roughly 6.9 percent of SBA-approved loans default each year. Table 1 summarizes data that was collected by the Census Bureau in 1992 to help determine why business fail.

Table 112 Inadequate

cash flow or low sales

Lack of access to business loans/credit

Lack of access to personal loans/credit

Other reason Not reported

All businesses 71.7 8.2 3.3 71.7 1.3 Hispanic-owned 67.1 8.8 5.8 68.3 3.2 Black-owned 63.4 15.5 8.4 69.3 4.3 Other Minority owned

67.6 6.1 6.4 75.9 2.6

Women-owned 70.2 9.3 3.3 75.8 2.8 Source: 1992 Economic Census, Characteristics of Business Owners.

This data suggests that inadequate cash flow or low sales are often major contributors to businesses failing. On the other hand, lack of access to capital seems to be only a minor contributing factor. Of Advocacy. 12 Data represent percentage of owners reporting in the designated categories.


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Table 2 summarizes demographic data given in Appendix A concerning the types of businesses that receive SBA 7(a) loans. Table 213

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 YTD

Minority 29 31 32 37 42

Rural 24 22 20 21 17

Women 21 22 25 23 23

Veterans 10 10 8 8 7

Source: U.S. Small Business Administration

According to the data given above, the amount of 7(a) loans that are granted for minorities has increased over the years while those granted to veterans has actually decreased. The percentages that were approved for women business owners have remained relatively static. For the next fiscal year, SBA’s budget gives it the authority to provide $28 billion of loan guarantees. This amount is unchanged from what it was authorized to guarantee this fiscal year. Future of Small Business

In January 2007, The Institute for the Future released the first installment of their Intuit Future of Small Business Report. This installment focused on demographic trends within the small business industry. The study found that the demographics of small business owners are rapidly changing. Traditionally, small businesses have been started by “non-corporate, middle-aged, white males”, but recent studies show that aging baby boomers, Generation Y, women and minorities are all beginning to make their mark in the small business arena.14

Baby boomers (defined in this report as those aged 45-64) make up over 25 percent of the population, and those aged 55 to 64 form small businesses at a higher rate than any other age group. Many boomers are starting businesses because they have been pushed out of corporate jobs despite their not being ready to retire. Their most viable option for employment is to start their own business. Because they have broader job skills, greater contacts than most young people, and better access to capital, they are seen as a less risky investment to lending institutions.

Generation Y members range in age from five years old to 25 years old, and they are seen as the most entrepreneurial generation ever. Generation Y is often described as a generation of critical thinkers who are distrustful of government, large organizations, and the elite. Evidence suggests that members of this group will aggressively embrace serial entrepreneurship. The report suggests that this evidence will lead many educational institutions to create entrepreneurial programs that are customized to specific entrepreneurial needs. 13 Data represent percentage of total 7(a) loans nationwide 14 The INTUIT Future of Small Business Series


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The report also found that 1,600 new businesses in the United States are started by

women every day, and that business ownership among women is growing at almost twice the rate as all businesses. Women make up 46 percent of the labor force, yet they are often under-represented at the top level of organizations. Starting their own business is a way for women to get around the “glass ceiling” that exists in corporate America. It also allows them to combine traditional employment with motherhood.

Today, immigrant entrepreneurs are the fastest growing segment of small business owners. They often start businesses to help get around the traditional barriers to entry of the workplace. Because they tend to have contacts both in their native countries and in the United States, they can often create businesses that link the markets of each area.

SWOT Analysis Strengths

SBA has made significant efforts to streamline its loan process by cutting its standard operating procedure manual from 1,000 pages to 400 pages. This was done in response to many lenders complaining that the process was too time-consuming and confusing. See Appendix B for some of the key features of the revision.

The SBAExpress program offers less paperwork for lenders because they are allowed to use their own documents and are only required to submit a one-page application.

Lending in the 504 Loan Program increased during the last fiscal year. SBA runs the website Business.gov, which just won the 2008 GCN Technology

Leadership Award. This website links potential business owners to various business resources throughout the federal government.15

Weaknesses

Many lenders have complained that it often takes months to collect on the government guarantee if a borrower defaults.

Many bankers have stopped making SBA-approved loans because the process for filing for repayment is often time-consuming and they find the purchase demand kits to be confusing.

Only a handful of banking companies dominate the 7(a) program. Most of these banks are larger lending corporations. Many smaller institutions are either unaware of the SBA guarantee program, or they do not feel that it is worth their time. It is often the smaller banks that experience the most problems with receiving the SBA guaranteed repayment.

15 http://news.cnet.com/8301-13505_3-9949265-16.html

http://www.business.gov/�


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Opportunities

Steven Preston served as the Administrator of the Small Business Administration for less than two years. During this time, he was able to implement many changes in the program and restore lenders’ confidence in allowing SBA-approved loans in their banks.

Preston recently implemented a new goal of repaying lenders within 45 days of request for repayment.

Preston also introduced a rural lending program that could help make SBA lending more appealing to smaller banks.

The SBA is hoping to implement a system that allows for online applications. Taking this step would create a more automated process for loan authorizations and for purchase demands.

The SBA could use existing programs (such as SCORE and the OWBO) to train small business owners on how to deal with economic downfalls.

Threats

A recent Federal Reserve survey of senior bank loan officers found that half of the banks reported weaker demand for loans and tightening loan requirements (Soule).

The U.S. economy only grew 0.6 percent in the first quarter of 2008. Overall SBA lending is currently down 20 percent. President Bush recently nominated Sandy Baruah to take over as Administrator of

the SBA. Steven Preston has been a popular Administrator, and he has taken many steps to reform the reputation of the Small Business Administration. Unfortunately, he was only there for a short time, so it falls to the new Administrator to carry out many of the plans that he helped to develop.

The 2008 Presidential election is impending. So far during campaign time, the word ‘small business’ has been notably absent from the candidates’ campaign speeches. This could imply less governmental backing for small businesses in the future.

Banks continue to merge, and merged banks tend to cut back on their SBA lending.

The dollar volume of 7(a) loans granted in fiscal 2007 has been below that of those granted during the last fiscal year. This is likely because most of the loans are credit scored, and many lenders have tightened credit scores on both theirs and SBA loans.

Recommendations

Because lending institutions are the single biggest contributor of SBA-approved loans,

they should continue to focus on strengthening their lender relationships. They have already made great strides by streamlining both the application process and their standard operating procedures. Taking these steps showed that they genuinely cared about and


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were listening to their lenders. The SBA must continually seek feedback from the banks and strive to alleviate common concerns described by lenders both now and in the future.

Small business owners are more apt to apply for loans through community based banks.

To expand their lending, the SBA should focus on marketing their programs to smaller banks. Once again, they are already making strides to do this with the Rural Lender Advantage program. However, they may also consider having the district offices of each state hold an informational conference that specifically targets community banks.

Much of the slowness in SBA’s lending is being attributed to the downturn of the

economy. Many of the programs offered by the Small Business Administration—such as SCORE, the SBDC, and the OWBO—are supported by a staff of experienced and knowledgeable business people. The SBA could use them as a resource for seminars that educate business owners on how to deal during times of economic hardship.

The face of small business is changing. While baby boomers may not need much help

securing financing for their start-up businesses, the other demographic groups mentioned most likely will. Again, SBA is already making strides toward helping both women and minority business-owners, but more could be done. One idea would be to create a program aimed at these two groups that is modeled after the PatriotExpress program.

Even though many Generation Y members are expected to start their own businesses,

they still plan to go to college. The Small Business Administration should consider partnering with colleges to develop a program that will both educate them on entrepreneurship and give them the opportunity to network with potential lenders.

Finally, the Small Business Administration may want to consider doing away with the

PatriotExpress program. While this program is geared toward veterans, they make up the smallest portion of participants in the 7(a) loan program. Furthermore, the percentage of loans that are granted for veterans has actually declined over the years.


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Appendix B

Key Features of SBA’s Revised Loan Processing SOP 50-1016

Developed in response to lenders’ and development companies’ requests for enhanced and more user friendly SBA loan policy guidance and includes substantial discussion and input from lenders, development companies, trade groups, and SBA field staff

Written with SBA lenders as the primary audience, which contrasts with the former SOP

whose main audience was SBA staff

Uses larger font, bullets, and other formatting to make the document more succinct and user friendly

Updates SBA’s loan processing policy and procedures and integrates numerous

policy/procedural changes that had been published as separate notices over the past decade

Incorporates policy guidance for several new SBA programs (SBAExpress,

PatriotExpress, etc.), which had previously been published as separate manuals

Reduces what had been approximately 1,000 pages of SOP, program guides, and policy notices to just under 400 pages

Incorporates for the first time SBA’s new centralized loan processing facilities into the

SOP

Will be available on the Web (http://www.sba.gov/tools/resourcelibrary/sops) and will include PDF format which facilitates searches for key sections/policies; SBA plans to enhance this feature with more robust search engines in the future

Includes hyperlinks to SBA regulations as applicable

Effective date of May 1, 2008, will follow SBA hosted training in eight cities beginning

in April (including NAGGL and NADCO conferences in May) with that training augmented by additional training by local SBA district offices

SBA will make training materials available on the Web

16 http://www.sba.gov/idc/groups/public/documents/sba_homepage/news_release_08_25_features.pdf

http://www.sba.gov/tools/resourcelibrary/sops�


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References

Craig, Ben R., William E. Jackson III, James B. Thomson. Small Firm Finance, Credit Rationing, and the Impact of SBA-Guaranteed Lending on Local Economic Growth.

Journal of Small Business Management. Milwaukee: Jan 2007. Vol. 45, Issue 1; pg. 116, 17 pgs.

Dunkelberg, William C. and Holly Wade. NFIB Small Business Economic Trends. National

Federation of Independent Business. June 2008. Heller, Michele. SBA Chief Working to Draw Lenders Back Into the Fold. American Banker.

New York, NY: Mar. 11, 2008. Vol. 173, Issue 48; pg. A.6. Kaffer, Nancy. SBA-backed Lending Slides. Crain’s Detroit Business. Detroit: Mar. 10, 2008.

Vol. 24, Issue 10; pg. 3. Kline, Alan. SBA Poised to Speed Up Guarantees. American Banker. New York, NY: Oct. 25,

2007. Vol. 172, Issue 206; pg.1. Rugy, Veronique de. Why the Small Business Administration’s Loan Programs Should be

Abolished. American Enterprise Institute for Public Policy Research. April 13, 2006. AEI Working Paper #126.

Soule, Alexander. Big Drop in Small Lending. Fairfield County Business Journal. Stamford:

May 19, 2008. Vol. 47, Issue 20; pg. 25.


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ROAD TO SUCCESS – KNOWLEDGE NEEDS ASSESSMENT OF PRE-BUSINESS ENTREPRENEURS AND IN BUSINESS ENTREPRENEURS Paul Dunn, University of Louisiana at Monroe Larry Short, Northwestern State University, Louisiana Kathleen Liang, University of Vermont

Abstract

This study was designed to determine the education needs of pre business and in business entrepreneurs in Louisiana. The education needs of pre business and in business entrepreneurs are different. The study found that pre business entrepreneurs were more interested in information needed to get started, finance and marketing. While pre business entrepreneurs were, in general, more interested in all areas of small business management, in business entrepreneurs had a more balanced interest in information about all functional areas of management. The study provides a method for SBDC programs and other small business consulting services to determine the educational needs of their clients.

Introduction

Success, the sweetest word in most entrepreneurs’ minds, represents recognition and achievement from social, personal and financial perspectives. Many studies of entrepreneurship and small business have focused on determining the causes of failure among new firms, and what entrepreneurs should do to be successful. Case studies and interviews have provided evidence to demonstrate various strategies and business models that would help entrepreneurs to conquer barriers related to environmental factors, personal issues and family situations. Different problems and challenges exist in different types of businesses and different personalities. It is always a myth when entrepreneurs look for a unique solution in one situation, while the same solution might not apply in another situation. So what exactly do entrepreneurs need to know to be successful?

To a large extent, this research was inspired by the fact that high rate of failure was due

primarily to poor management or poor planning. Our interest in this study is whether entrepreneurs who were getting ready to start new businesses and existing small business owners (who had started and been running their own businesses) were aware of what they needed to know to become successful and whether there were different knowledge needs between the two groups. Majority entrepreneurship and small business literature had discussed “success” and “failure” for business owners. There is lack of information regarding the pre-business entrepreneurs who are in the speculation and preparation stage of the new venture creation. Many service providers and consulting companies have designed a variety of training programs to help entrepreneurs and small business owners. Are these programs appropriate for entrepreneurs in different modes and stages of new venture development?

This study is a result of an effort by the Louisiana Small Business Development Center to assess the needs of their potential clients—pre-business entrepreneurs who want to start businesses and small business owners who have started and are running their own businesses—for the development of entrepreneurship and small business management education programs. In


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an attempt to determine those needs a survey was designed to assess how important different aspects of small business planning and management were to each group.

Literature Review

Pre-business entrepreneurs and existing small business owners are presumed to want

success and to avoid failure. Therefore, the research on conditions contributing to failures of small businesses should be a valuable source of information for identifying the educational needs of entrepreneurs. In an early book on small business management Baumbeck, Lawyer and Kelley (1973, p. 46) emphasized that success in small business depends on “… training, experience, and business mindedness,” but neglected to specifically identify the actual training and experience needed.

A classic study of small business failures completed by Dun and Bradstreet (1982, 1992)

suggested that managerial incompetence, lack of managerial experience, unbalanced experience and a lack of experience in the line accounted for the majority of small business failures. Hodgetts and Kuratko (1982) concurred with the Dun and Bradstreet study and emphasized that these causes remained fairly similar over time. A study conducted by Gaskill, Van Auken, and Manning in 1993 identified four major reasons for small business failures: poor management and planning, finances and working capital management, competitive environment, and growth. Carland and Carland (1998) agreed that most small businesses failed because of poor management. Perry (2001) found a significant relationship between firm failure and lack of planning. Scarborough and Zimmerer (2006) cited similar causes for business failure and extended the list to include forcing a flawed idea, under-capitalization, poor cash management, lack of strategic management, weak marketing effort, uncontrolled growth, poor location, lack of inventory control, and inability to make the entrepreneurial transition from entrepreneur to manager.

Thus, it appears that most of the research support and add details to Baumback, Lawyer

and Kelley’s (1973) original idea that training and experience are vital to small business success. The above research suggests that entrepreneurs and small business owners should know how to plan, implement and control the various aspects of the functions of the business including, finance, marketing, operations, and human resources management. The big question that remains is what type of experience and training is needed to prepare pre-business entrepreneurs and existing small business owners to succeed and avoid failure.

Most entrepreneurship and small business management texts emphasize both the

importance of business planning and special attention to the business functions of finance, marketing, operations, and human resources. (Carland and Carland, 1998; Baumbeck, Lawyer, and Kelley, 1973; Bygrave, 1997; Hisrich, Peters and Shepard, 2005; Katz and Green , 2009; Kuratko and Hodgetts, 2001; Longenecker, Moore, and Petty, 2006; Stevenson, Roberts, Grousbeck, and Bhide’,1999; and; Vesper,1996.) If knowledge of business planning and competence in the business functions are important to small business success, how do entrepreneurs and small business owners acquire these skills?


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Three avenues seem to be common for entrepreneurs to gain information. One is they can take the time to learn on their own by reading about and experiencing small business management. Although this trail and error approach can provide valuable education and experience, an accompanying result may be business failure while learning unorganized information. The second approach is to learn from other entrepreneurs, such as family members, friends and co-workers. Learning from real people usually works for specific cases, if targeting on certain type of business. However different people have different ways to plan for and to make decisions in various scenarios, and the business model will not be “one size fits all”. The third approach is by attending education programs in entrepreneurship or small business management (i.e., short courses, workshops, and seminars provided by credible sources) and seeking counseling from outside advisors. The problem with this approach is where do you go to obtain these educational programs? It is uncertain if training programs and help sessions really provide what entrepreneurs are looking for.

One common source for entrepreneurs and small business owners is a local Small

Business Development Center. The U. S. Small Business Administration established the Small Business Development Center (SBDC) program specifically to provide entrepreneurs and small business owners with education programs and advice in start up and continuing management circumstances. The SBDCs’ success in helping pre-business entrepreneurs and small business owners has been phenomenal.

The Association of Small Business Development Centers website indicates that over

500,000 businesses are assisted by SBDC programs on an annual basis; some of which are in the dynamic start-up mode, while a most are existing businesses searching for stability of planning for growth. (Retrieved March 9, 2008 from http://www.asbdc-us.org/About_Us/aboutus.html) Is the work of SBDC counselors who see thousands of entrepreneurs and small business people each year effective? In a study conducted by Chrisman and McMullan (2000, p. 37) found that entrepreneurs who sought SBDCs counseling had a higher …”rate of survival, growth, and innovation than other firms. Although the SBDC counselors are required to have certain education and experience in dealing with business issues, it is sometimes not clear if training programs really meet clients’ needs. All SBDCs are required to conduct evaluations for the training programs and help sessions, and most of evaluations are based on outcomes and impacts. The primary goal of this study is to ask entrepreneurs what they think they would need to be successful, so the local SBDC can provide more targeted and specified services for various entrepreneurs.

Purpose of Study

The purpose of this study was to ascertain the counseling and training needs of clients of the Small Business Development Centers in Louisiana. An assessment of the counseling and training needs would provide the SBDCs the information to develop, modify and enhance programs to meet the specific educational needs of their clients and to prepare consultants to conduct such programs.

Both pre-business entrepreneurs and existing small business owners (who had started and running their own businesses) were asked to identify areas of business knowledge they felt were


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important to them. Thus, this study should determine if the knowledge and skill needs of pre-business entrepreneurs and existing small business owners were the same or different. This would ensure that appropriate educational programs were developed so that each group would receive the knowledge and skills they needed. If the educational needs of each group were identical, similar programs could be developed or modified; if they were different, special training programs could be designed for each group.

Research Methodology

Questionnaire Development

Preliminary discussions were conducted with pre-business entrepreneurs and existing small business owners concerning their needs for assistance in the areas of management, finance, marketing, operations management, and human resource management. These discussions resulted in the identification of 18 specific topics of interest in five areas of management. The topics included : Management (writing a business plan); Finance (obtaining financing, understanding financial statements, improving bookkeeping or accounting, and understanding and complying with tax regulations); Marketing (obtaining customer or industry data, developing and implementing a marketing strategic plan, increasing sales, developing and improving advertising strategies, developing or improving pricing strategies, and selling to the government); Human resource management (developing or improving hiring and firing procedures, training employees, and developing compensation and benefit packages) and Operations management (managing inventory, managing facilities and equipment planning, complying with regulatory requirements, and adopting or improving E-Commerce applications). A questionnaire was designed to assess the relative importance of these 18 items to Louisiana pre-business entrepreneurs and existing small business owners. Respondents were asked to rank each item in the questionnaire on a four point scale of Very Important, Important, Somewhat Important, and Not Important. Additionally, respondents were asked if they needed assistance with that area. Only respondents who needed assistance with the area are included in this analysis. In addition to the content questions, respondents were asked to identify their gender and ethnicity. Samples

Two independent samples were used for this research. The pre-business respondents were clients of the Louisiana Small Business Development Centers who voluntarily attended an "Evaluating and/or Financing Your Small Business" workshop. Each of the nine strategically located SBDCs across the state of Louisiana has been offering the free 2-hour workshop since the spring 2005. The curriculum and materials used in teaching the workshops were identical among all SBDC units. The questionnaire designed for pre-business entrepreneurs was administered at the beginning of these workshops. Since anyone can attend the workshop, the analysis included only those individuals who were in a pre-business mode. Seven hundred and eighty six pre-business entrepreneurs provided questionnaires that were useable in this research. Only those who needed assistance in each area are included in the analysis of educational need.


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Information from existing businesses was gathered using a periodic probability sample of 1,000 small business owners in Louisiana from the 2005 BusinessInfo data base. For the purpose of this study, a small business owner was defined as any privately owned, for profit business that employed 100 employees or less. Of the 1,000 questionnaires mailed to existing small business owners in Louisiana, 165 returned useable responses. Only those who needed assistance in each area are included in the analysis of educational need.

Statistical Analysis The differences of the responses from in business entrepreneurs and pre-business entrepreneurs are compared for each variable. Chi Square tests and Gamma tests are both performed to reveal any statistical significance. Chi Square tests are commonly applied in parametric analysis, while Gamma tests are usually performed in non-parametric analysis. Since the probability distribution of the population is unknown, both Chi Square tests and Gamma tests should yield consistent results if the population distribution is approximately a normal probability distribution.

Sample Profiles

The two complete independent samples—including both those who needed assistance and

those who did not—were quite different as to gender and ethnicity. Table 1 showed the demographic composition of the complete sample including those who needed assistance and those who did not. The pre-business respondents were predominantly female, 55.9 percent, compared to 61.8 percent male for the in-business respondents. Both groups were mostly majority ethnicity, 64.4 percent pre-business and 86.7 percent in-business. A significance difference was apparent between the two samples. We believe the difference reflects the increased propensity of males and majority group members to actually start businesses rather than a bias in developing the two samples.

Table 1. Demographics Pre-business In-business Gender** Male 44.1 61.8Female 55.9 38.2Total 100.0 100.0N 786 165Chi Square 0.000 Gamma 0.000 Ethnicity** Majority 64.4 86.7Minority 35.6 13.3Total 100.0 100.0N 786 165Chi Square 0.000 Gamma 0.000 Significant at .01


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Findings

Table 2 shows that 98.1 percent of the pre-business respondents considered writing a business plan very important or important; significantly more important than in-business respondents at 65.1 percent. Probably pre-business respondents, who are trying to get started, need business plans for acquiring the necessary resources and in-business respondents do not. In-business respondents probably do planning, formal or informal, routinely.

Table 2. Writing a Business Plan**

Pre-business

In-business

Very Important 83.4 42.9Important 14.7 22.2Somewhat Important 1.6 23.8Not Important 0.3 11.1Total 100.0 100.0N 681 63Chi Square 0.000 Gamma 0.000 **Significant at .01

Table 3 confirms the pre-business respondents’ preoccupation with getting the financial

resources needed to start their venture. Almost all, 96.3 percent, considered obtaining finances very important or important compared to 77.4 percent of the in-business respondents. Table 3. Finance Issues Obtaining Finance** Understanding Financial Statements**

Pre-business

In-business

Pre-business

In-business

Very Important 85.6 54.7 Very Important 72.3 39.7Important 10.7 22.7 Important 24.0 43.1Somewhat Important 3.1 16.0 Somewhat Important 3.7 10.3Not Important 0.6 6.7 Not Important 0.0 6.9Total 100.0 100.0 Total 100.0 100.0N 653 75 n 563 14Chi Square 0.000 Chi Square 0.000 Gamma 0.000 Gamma 0.000 Improving Bookkeeping or Accounting** Tax Regulations** Very Important 71.0 56.9 Very Important 82.0 52.7Important 23.6 21.5 Important 14.8 33.8Somewhat Important 5.2 13.8 Somewhat Important 3.2 5.4Not Important 0.2 7.7 Not Important 0.0 8.1Total 100.0 100.0 Total 100.0 100.0N 576 65 n 627 74Chi Square 0.000 Chi Square 0.000 Gamma 0.012 Gamma 0.000 **Significant at .01


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Understanding financial statements was considered very important or important by 96.3 percent of the pre-business respondents compared to 82.8 percent of the in-business respondents. Bookkeeping and accounting were very important or important to 94.6 percent of the pre-business respondents compared to 78.4 percent of the in-business respondents. Complying with tax regulations was important to 96.8 percent of the pre-business respondents compared to 86.5 percent of the in-business respondents.

All financial issues were significantly more important to pre-business respondents than to

in-business respondents. This confirms a pre occupation with finances among pre-business respondents. Although financial issues are still very important or important to over 75 percent of the in-business respondents, it is possible that the in-business respondents feel more comfortable with finances than the pre-business respondents.

Marketing issues were also considered very important or important by more pre-business respondents than by in-business respondents. Obtaining customer/industry data was considered very important or important by significantly more pre-business respondents (93.9 percent) than in-business respondents (84.8 percent). Developing and implementing a marketing strategy/plan was considered significantly more very important or important to pre-business respondents (95.0 percent) than by in-business respondents (88.9 percent). Increasing sales was considered about equally important by pre-business and in-business respondents. Developing/improving advertising strategies was considered significantly more important by pre-business respondents (93.7 percent) than to in-business respondents (74.4 percent). Developing/improving pricing strategies was significantly more important to pre-business respondents, 93.1 percent, than to in-business respondents, 74.7 percent. Selling to the government was slightly more important to in-business respondents, 77.0 percent, than to pre-business respondents, 74.0 percent, but not significantly different.

Marketing seems significantly more important to pre-business respondents than to in-

business respondents with the exception of increasing sales and sales to government. Pre-business respondents seem to realize the importance of sales to the success of their firm. In-business respondents are probably more comfortable with marketing issues as a result of their experience in business.

Table 4. Marketing Issues Obtaining Customer/Industry Data** Marketing Strategy/Planning**

Pre-business

In-business

Pre-business

In-business

Very Important 68.2 47.8 Very Important 74.2 50.6Important 25.7 37.0 Important 20.8 38.3Somewhat Important 6.0 9.8 Somewhat Important 4.8 6.2Not Important 0.2 5.4 Not Important 0.2 4.9Total 100.0 100.0 Total 100.0 100.0N 584 92 n 581 81Chi Square 0.000 Chi Square 0.000 Gamma 0.000 Gamma 0.000


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Table 4 continued Increasing Sales Advertising Strategies** Very Important 78.0 77.2 Very Important 66.4 46.2Important 17.9 12.9 Important 27.3 28.2Somewhat Important 3.9 3.0 Somewhat Important 6.1 19.2Not Important 0.2 6.9 Not Important 0.2 6.4Total 100.0 100.0 Total 100.0 100.0N 569 101 n 554 78Chi Square 0.000 Chi Square 0.000 Gamma 0.627 Gamma 0.000 Pricing Strategies** Selling to the Government Very Important 64.8 47.8 Very Important 53.4 55.0Important 28.3 26.9 Important 20.6 25.0Somewhat Important 6.6 17.9 Somewhat Important 19.1 13.8Not Important 0.4 7.5 Not Important 6.9 6.3Total 100.0 100.0 Total 100.0 100.0N 534 67 n 350 80Chi Square 0.000 Chi Square 0.636 Gamma 0.003 Gamma 0.559 **Significant at .01

Table 5 indicates that the human resources issues are generally less important to pre-business respondents that either finance or marketing issues. Over 80 percent of the pre-business respondents considered developing/improving hiring and firing procedures slightly more important than in-business respondents, 80.4 percent. Training employees was slightly more important to pre-business respondents, 86.8 percent, than to in-business respondents, 84.9 percent. Developing compensation and benefit packages was slightly more important to pre-business respondents, 84.6 percent, than to in-business respondents, 84.9 percent. There were no significant differences between the two groups related to human resources issues.

Human resources issues were less important to pre-business respondents than either

finance or marketing issues. Human resources issues were about the same as finance and marketing for in-business respondents. It seems that experience has made all management issues about the same for in-business respondents.

Table 5. Human Resources Issues Hiring and Firing Procedures Training Employees

Pre-business

In-business

Pre-business

In-business

Very Important 51.1 43.1 Very Important 56.3 49.1Important 32.4 37.3 Important 30.5 35.8Somewhat Important 14.0 15.7 Somewhat Important 11.5 9.4Not Important 2.4 3.9 Not Important 1.7 5.7Total 100.0 100.0 Total 100.0 100.0N 413 51 n 407 53Chi Square 0.712 Chi Square 0.220 Gamma 0.292 Gamma 0.328


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Table 5 continued Compensation and Benefit Packages Very Important 53.6 49.1 Important 31.1 32.7 Somewhat Important 12.8 14.5 Not Important 2.5 3.6 Total 100.0 100.0 N 444 55 Chi Square 0.898 Gamma 0.490

Table 6 summarizes the importance of operations issues for both groups. Managing inventory was slightly more important to pre-business respondents, 93.4 percent, than to in-business respondents, 82.1 percent. Managing facilities and equipment was significantly more important to pre-business respondents, 93.4 percent, than to in-business respondents, 68.4 percent. Complying with regulations was more significantly important to pre-business respondents, 95.3 percent, than to in-business respondents, 85.7 percent. E-commerce applications were more slightly important to pre-business respondents, 88.4 percent, than to in-business respondents, 75.0 percent.

Table 6. Operations Issues Managing Inventory Managing Facilities and Equipment**

Pre-business

In-business

Pre-business

In-business

Very Important 68.0 58.9 Very Important 64.7 42.1Important 24.4 23.2 Important 28.7 26.3Somewhat Important 6.9 7.1 Somewhat Important 6.0 26.3Not Important 0.7 10.7 Not Important 0.7 5.3Total 100.0 100.0 Total 100.0 100.0N 434 56 n 450 38Chi Square 0.000 Chi Square 0.000 Gamma 0.108 Gamma 0.004 Comply with Regulatory Requirements** E-Commerce Applications Very Important 71.6 57.1 Very Important 54.0 48.1Important 23.7 28.6 Important 34.4 26.9Somewhat Important 4.3 9.5 Somewhat Important 10.2 17.3Not Important 0.4 4.8 Not Important 1.3 7.7Total 100.0 100.0 Total 100.0 100.0N 553 63 n 459 52Chi Square 0.000 Chi Square 0.005 Gamma 0.019 Gamma 0.158 **Significant at .01

As in human resources issues, pre-business respondents considered operations issues

more important than their in-business counter parts, but less important than finance and marketing. It is likely that the pre-business respondents consider getting started issues more important than continuing management issues. In-business respondents considered operations issues about equally important with finance, marketing, and human resources issues.


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Summary and Conclusions

Learning is enhanced by providing the education to people who have a desire and need to know. The purpose of this study was to determine the education needs of pre-business and in-business individuals in Louisiana who needed assistance with various small business management issues and to determine if there were any differences in the perceived needs of the two groups regarding those needs. We have found that pre-business respondents considered finance and marketing more important than in-business respondents. Clearly getting started is a preoccupation of pre-business respondents. While there were no significant differences between pre-business and in-business respondents’ needs related to human resources issues, pre-business respondents tended to rank those slightly more important than the in-business respondents. Pre-business respondents did differ from in-business respondents in operations issues. Managing facilities and equipment and complying with regulatory requirements were both significantly different and managing inventory and e-commerce applications tended to be more important to pre-business respondents.

The education needs of pre-business and in-business respondents are different. Programs

addressing the needs to pre-business individuals should include more information of how to start in an orderly way. The continuing education needs of in-business respondents should emphasize the orderly, balanced management of the venture. One warning, the perceived needs of individuals, pre-business and in-business, may not reflect the actual needs since their perceptions of their needs may not match the reality of their needs.

This study is useful to practitioners since is clearly shows the perceived needs for

counseling and consulting needs to pre-business and in-business respondents in Louisiana. Additionally, it provides a basis for the assignment of resources to continuing education needs of businesses in a more orderly way.

Limitations of the Study

It is not the authors’ intention to generalize the results of this study. Several technical and environmental constraints needed to be addressed, and hopefully will be improved in the future studies.

1. The sample size is limited. We need to gather more information from a wider variety of entrepreneurs and small business owners who are in different areas and types of businesses. As indicated before, different issues challenge entrepreneurs in different types of businesses and industries. It may be important to segregate the knowledge needs for both in business entrepreneurs and pre-business entrepreneurs depending on business types, industry structure, stages of business development and economic factors.

2. We need a better way to identify pre-business entrepreneurs. It is difficult to tell who

pre-business entrepreneurs really are. In our study, we collected information from those who voluntarily attended the SBDC workshops to learn about new venture creation. These people probably already had some ideas about what they were looking for, and what they wanted to learn from SBDC. There are many pre-business entrepreneurs who


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might not have any idea what they need to know prior to starting a new venture. According to the literature, sometimes there is a gap between what entrepreneurs think they need to know and what they should or aught to know. Therefore, we need to explore alternative approaches to gather more information from a variety of pre-business entrepreneurs.

3. Time changes everything. It is necessary to establish a system to keep track of a group of

entrepreneurs moving from pre-business mode to in business mode, and see if they have obtained the knowledge they are looking for in different stages of the new venture creation process.

References

Association of Small Business Development Centers, Retrieved March 10, 2008 from http://www.asbdc-us.org/About_Us/aboutus.html

Baron, R. and Shane. S (2005). Entrepreneurship: A Process Perspective, 1st Edition, Mason,

Ohio, South-Western Publishing. Barringer, B. and Ireland, R. (2006). Entrepreneurship, Upper Saddle River, N.J., Pearson

Prentice Hall. Baumbeck, C., Lawyer, K. & Kelley, P. How to Organize and Operate a Small Business, 5th

Edition, Englewood Cliffs, N.J., Prentice Hall, p. 46. Bygrave, B. The Portable MBA in Entrepreneurship, New York, John Wiley & Sons, Inc. Carland, Jim,and JoAnn Carland (1998). Small Business Management: Tools for Success,

Second Edition, Houston, TX, Dame Publications, Inc. Chrisman, J. and W.E. McMullan (2000). A preliminary assessment of outsider assistance as a

knowledge resource: The longer-term impact of new venture counseling. Entrepreneurship Theory and Practice, Spring: pp. 37-52.

Dun & Bradstreet Corporation. (1982). The Business Failure Record. New York: Dun & Bradstreet.

Gaskill, L. R., H. E. Van Auken, and R. A. Manning (1993) A Factor Analytic Study of the Perceived Causes of Small Business Failure. Journal of Small Business Management 31: 18-30.

Hisrich, R., Peters, M. and Shepard, D. (2008). Entrepreneurship, 7th Edition, New York, N.Y.

McGraw-Hill Irwin. Hodgetts, Richard M. Effective Small Business Management. New York: Academic Press, Inc.,

1982.


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Katz, J. and Green, R. (2009). Entrepreneurial Small Business, 2nd Edition, New York, N.Y.

McGraw-Hill/Irwin. Kuratko, D. and Hodgetts, R. (2001). Entrepreneurship, 5th Edition, Mason, Ohio, South-

Western. Longenecker, J., Moore, C., Petty, J. and Palich, L (2006). Small Business Management, 13th

Edition, Mason, Ohio, South-Western. Perry, S. C. (2001). The Relationship between Written Business Plans and the Failure of Small

Businesses in the U.S. Journal of Small Business Management 39: 210-208. Scarborough, Norman M. and Zimmerer, Thomas W. (2008). Essentials of Entrepreneurship and

Small Business Management, 5th Edition. New Jersey, Pearson Prentice-Hall, Inc. Stevenson, H., Grousbeck, H., Roberts, M. and Bhide, A. New Ventures and the Entrepreneur,

5th Edition, New York, N.Y. Irwin/McGraw-Hill. Vesper, Carl (1996). New Venture Experience, Revised Edition. Seattle, Vector Books.


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AN EXAMINATION OF THE RELATIONSHIP BETWEEN PERSONALITY AND ENTREPRENEURIAL ATTITUDES AMONG US COLLEGE STUDENTS Shanan Gibson, East Carolina University Michael Harris, East Carolina University Todd Mick, Metropolitan Community College of Kansas City

Abstract

The current study examined the degree to which four personality variables, locus of control, self efficacy, openness to experience and risk tolerance, were correlated with entrepreneurial attitudes in U.S. college students. The Entrepreneurial Attitude Orientation (EAO) was used to measure entrepreneurial attitudes based on the constructs of achievement, innovation, personal control and self esteem. Findings indicated that with the exception of risk avoidance, all of the personality constructs correlated with at least two of the entrepreneurial attitudes. However, patterns of correlation were not consistent across male and female students. In particular, creativity and entrepreneurial self esteem were found to significantly differ along gender lines, with males having higher creativity scores and females possessing stronger levels of entrepreneurial self esteem.

Introduction

As indicated in various reports from the Global Entrepreneurship Monitor (GEM) entrepreneurs are constantly pursuing new business ventures based on both opportunity and necessity. Specifically, entrepreneurship has long been considered a powerful source of economic growth and innovation (Reynolds & White, 1997). The current study proposes to examine the relationship between the personality constructs of creativity, self efficacy, openness to experience, and risk tolerance, and entrepreneurial attitudes. The goal is to determine not only if these personality traits are correlated with entrepreneurial attitudes, but also if any gender differences exist.

Personality, Attitudes and Entrepreneurship

Management research has made extensive use of psychological personality variables as predictors for constructs such as leadership, organizational behavior, and entrepreneurship. According to Rauch and Frese (2007a), personality variables serve an important role in the development of a consistent entrepreneurship theory. As such, they call for the inclusion of entrepreneurship as a more “active participant” in the revival of personality research (p. 44). The current study makes an effort to do that by examining the role of individual differences in relation to entrepreneurial attitudes.

Prior research has examined numerous personality constructs in the field of

entrepreneurship, and various traits have been linked to business creation and success (Rauch & Frese, 2007a). McClelland (1961) and Collins, Hanges & Locke (2004) asserted that need for achievement is an entrepreneurial trait and positively correlated with business success (Rauch & Frese, 2007b), while Gasse (1985) and Hansemark (2003) found that entrepreneurs often possess a greater internal locus of control. Research also suggests that entrepreneurs are confident (Robinson, 1987), have a high level of self esteem and self efficacy (Krueger & Brazeal, 1994;


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Erickson, 2002; Rauch & Frese, 2005; Frazier & Niehm, 2006), demonstrate greater initiative (Bateman & Grant, 1993; Stewart, Watson, Carland & Carland, 1999), and posses a more positive attitude toward risk and autonomy (Douglas & Shepherd, 2002; McMullen & Shepherd, 2006; Rauch & Frese, 2007a). In addition, creativity (Feldman & Bolino, 2000; Zampetakis & Moustakis, 2006), innovation (Rauch & Frese, 2007b) and improvisation (Hmieleski & Corbett, 2006) have been linked to entrepreneurial intentions and business success.

Obviously there are numerous personality constructs that have been shown to have

potential for predicting either entrepreneurship or entrepreneurial success. The current paper will focus on four of these.

Creativity. Creativity and innovation are often linked together and involve the willingness

to identify novel or unique ways of action (Patchen, 1965). De Bono (1996) defines creativity as the formulation of something currently not available, while Feldman, Csikszentmihalyi and Gardner (1994) believe that creative people are good at problem solving, posing new questions, and identifying new products or services. As explained by Thompson (2004), creativity underpins innovation and innovation underpins enterprise development. Early research by Schumpter (1935) included creativity and innovation as core concepts for entrepreneurship. Entrepreneurs have been noted for their ability to introduce new products or services into existing markets, as well as the identification of new markets and technologies (Rauch & Frese, 2007a).

Entrepreneurs face constant challenges, and creative thinking is often required to

overcome various obstacles (Amabile, 1983). This explains why creativity (Zampetakis & Moustakis, 2006) and improvisation (Hmieleski & Corbett, 2006) are viewed as important constructs in entrepreneurship, and both can help predict new venture creation. Similarly, Rauch & Frese (2007b) found that entrepreneurs are more innovative than the general population, and innovativeness is positively correlated with business success. While creativity and innovation are interrelated, Rauch and Frese (2007a) believe that specific measures of creativity need to be studied more in entrepreneurship research.

Self Efficacy. Bandura’s (1997) construct of self efficacy is defined as people’s

judgments of their capabilities to execute necessary behaviors to successfully achieve desired ends. It is not necessarily concerned with the skills or abilities one has, but rather with perceptions of what one can do with the skills and abilities one possesses. Self efficacy has both theoretical and practical implications for entrepreneurs because initiating a new venture requires the belief that one has the knowledge, skills, and abilities necessary to be successful. Entrepreneurial self efficacy has been found to be significantly related to both entrepreneurial intentions (Kickul & D’Intino, 2005) and new venture creation (Frazier & Niehm, 2006). Self efficacy is central to most human functioning, but because actions are based more on what people believe they can do than on what is objectively true, self-efficacy should be a strong correlate of entrepreneurial attitudes (Markman, Baron & Balkin, 2005).

Openness to Experience. Openness to experience is a personality dimension that

characterizes someone who is intellectually curious and tends to seek new experiences and explore novel ideas. Someone high on openness can be described as creative, innovative,


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imaginative, reflective, and untraditional. Zhao and Seibert (2006) contend that the relationship between openness to experience and entrepreneurship has been well accepted for many years; they cite Schumpeter (1942/1976) as having argued that the defining characteristic of the entrepreneur is his or her emphasis on innovation. Others have noted the strong desire of entrepreneurs to be creative and to create something larger than themselves (Engle, Mah & Sadri, 1997). Starting a new venture is likely to require the entrepreneur to explore new or novel ideas, use his or her creativity to solve novel problems, and take an innovative approach to products, business methods, or strategies.

Risk Avoidance. A fourth characteristic frequently associated with entrepreneurs is the

propensity for risk-taking. Risk taking, both personal and financial, is a traditional aspect of the definition of entrepreneurial activity (McClelland, 1961; entrepreneur, n.d.). Researchers have reported significant associations between risk tolerance and entrepreneurship (Chattopadhyay & Ghosh, 2002), and Stewart and Roth (2001) concluded that risk-tolerant individuals are more likely to choose entrepreneurial careers versus risk-avoidant individuals who are likely to choose traditional, organizational employment. In addition, research by Sexton and Bowman (1983, 1984) showed that a high propensity for risk-taking was a characteristic that delineated entrepreneurs and non-entrepreneurs. Stewart and Roth (2001) performed a meta-analysis of 12 studies published between 1980 and 1999, showing that the risk propensity of entrepreneurs is greater than that of managers. Based on this body of research, risk avoidance should be negatively related to individual’s entrepreneurial attitudes.

Entrepreneurial Attitudes. An attitude is “a complex mental state involving beliefs and

feelings and values and dispositions to act in certain ways” (attitude, n.d.). Attitudes tend to change across time and situations through an interactive process with the environment, and can offer a prediction about a person’s future actions (Carlson, 1985). The work of Robinson, Stimpson, Huefner, and Hunt (1991) was one of the first to use an attitudinal scale to predict entrepreneurial activity. They designed the Entrepreneurial Attitude Orientation (EAO) model to measure entrepreneurial attitudes based on the constructs of achievement, innovation, personal control and self esteem. Achievement in business refers to concrete results associated with the start of a business; personal control of business outcomes concerns one’s perception of control or influence over his or her business; innovation in business relates to acting on business activities in novel ways; and perceived self-esteem in business relates to self-confidence with regard to one’s business affairs.

The theory of planned behavior argues that intention is an antecedent to behavior (Azjen,

1991), and prior studies have shown that intentions play a crucial role in understanding the entrepreneurial process (Shapero & Sokol 1982; Krueger, 1993; Krueger & Brazeal, 1994). Shapero and Sokol (1982) argue that attitudes are linked with entrepreneurial intentions, especially in perceived venture feasibility and desirability. Additional research found that positive entrepreneurial exposure can impact intentions (Krueger, 1993), though this may vary according to individual characteristics and situations (Krueger & Brazeal, 1994).

Gender and Entrepreneurship


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According to the GEM’s 2006 Report on Women and Entrepreneurship (Allen, Langowitz & Minniti, 2007) men are twice as likely to engage in entrepreneurial activities as women on a global scale, indicating the existence of a real gender gap. Similarly, past research has suggested that women are faced with greater obstacles when engaging in entrepreneurial activities.

Some of the specific challenges women may face as they pursue business ownership

include access to fewer resources and role models (Hisrich & Brush, 1987; Carter, 2000, Thomas, 2001; Marlow & Patton, 2005), as well as less managerial experience and technical expertise (Chaganti & Parasuraman, 1996; Jones & Tullous, 2002). In addition, women often have less of a credit history (Shaw, Carter & Brierton, 2001), often causing them greater difficulty in obtaining loans (Verheul & Thurik, 2001; Coleman, 2002). Research has also indicated that women may less interested in business ownership (Matthews & Moser, 1995; Kourilsky & Walstad, 1997) and have less self efficacy for entrepreneurship (Chen, Greene & Crick, 1998). Unfortunately, these factors can cause women to not be taken as seriously and afforded the same level of respect as their male counterparts (Woldie & Adersua, 2004).

While any of these aforementioned factors may impede their progress in achieving

entrepreneurial success, entrepreneurship can be an important source of future employment for women. Perhaps a more in-depth examination of possible links between personality and attitudes can lead to a better understanding of real or perceived gender differences towards entrepreneurship.

Hypotheses

Because considerable past research has indicated a strong relationship between personality and attitudes, significant positive correlations are anticipated between three of the four personality constructs, self efficacy, creativity, and openness to experience and the four entrepreneurial attitudes measured as part of the current study; a significant negative relationship is anticipated between risk avoidance and all of the entrepreneurial attitudes. It is further anticipated that these relationships will be demonstrated for all participants; as the personality constructs in question are similarly distributed across male and female populations.

Method Participants

Participants were 307 students enrolled at multiple colleges and universities (37% males, 63% females), ranging in age from 17 to 57 years old, with an average age of 25.3 years. Procedure

During the 2007-08 academic year, faculty teaching undergraduate courses received a

letter requesting their voluntary participation. The stated purpose of the study was to examine the relationship between personality variables and entrepreneurial attitudes. Faculty members have been asked to request that their students complete an 88-item anonymous online survey. Survey completion was entirely voluntary and no identifying information was recorded. Measures


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We measured entrepreneurial attitudes with the EAO survey instrument (Robinson et al., 1991), along with additional measures of creativity, self efficacy, openness to experience, and risk tolerance (Goldberg, Johnson, Eber, Hogan, Ashton, Cloninger & Gough, 2006). The EAO is theoretically well grounded and provides a composite score based on four attitude subscales: 1) Achievement in business (Cronbach’s alpha = .84), 2) Personal control of business outcomes (Cronbach’s alpha = .70), 3) Innovation in business (Cronbach’s alpha = .90), and 4) Self-esteem in business (Cronbach’s alpha = .73). The four subscales have been shown to produce 77% accuracy in predicting entrepreneurship (Robinson et al., 1991). Analyses

The primary goal of the current study is to expand upon our understanding of the

relationship between personality and entrepreneurial attitudes among U.S. college students. Consistent with this, the variables of interest were examined utilizing correlation analyses. Because prior research has indicated some differences in the strength of entrepreneurial attitudes among male and female college students (Ede, Panigrahi & Calcich,1998; Harris & Gibson, 2008), the patterns of correlation will also be examined based upon gender.

Results

Table 1 provides the descriptive statistics for the four entrepreneurial attitudes and the

four personality variables for both male and female students, as well as the t-tests comparing male and females mean scores on the variables of interest. Only creativity and entrepreneurial self esteem were found to significantly differ along gender lines; while males had higher creativity scores, females appeared to possess stronger levels of entrepreneurial self esteem.


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Table 1. Descriptive Statistics & T-Test for Mean Differences

Mean Standard Deviation

t

Degrees of

Freedom

significance

Entrepreneurial Innovation Male Students Female Students

4.424.39

2.522.29

.118 305 .906

Entrepreneurial Achievement Male Students Female Students

6.606.33

1.361.43

1.631 305 .104

Entrepreneurial Personal Control Male Students Female Students

5.175.52

2.512.52

-1.162 305 .246

Entrepreneurial Self Esteem** Male Students Female Students

5.445.81

1.001.14

-2.909 305 .004

Self Efficacy Male Students Female Students

33.9433.64

4.554.60

.559 305 .576

Creativity** Male Students Female Students

35.3033.76

4.555.17

2.630 305 .009

Openness to Experience Male Students Female Students

28.6629.25

3.734.42

-1.204 305 .230

Risk Tolerance Male Students Female Students

25.2425.40

4.874.82

-.284 305 .777

**Significantly different at p < .05.

In order to begin to assess the degree to which these four personality constructs are related to the entrepreneurial attitudes of interest, bivariate correlations were computed for each of the attitudes with each of the personality variables for both nationalities. Table 2 shows the results of these analyses, both at the sample population level, as well as broken down by gender.


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Table 2. Correlations between Entrepreneurial Attitudes and Personality Constructs.

Self Efficacy Creativity Openness to Experience

Risk Avoidance

Entrepreneurial Innovation .14* .02 -.02 -.06 Male Students .32** .20** -.03 -.15 Female Students .03 -.08 -.01 -.01

Entrepreneurial Achievement .28** .31** .20** -.05 Male Students .12 .26** .19* -.20* Female Students .35** .32** .22** .02

Entrepreneurial Personal Control .18** .05 .02 .03 Male Students .09 -.05 -.17 -.12 Female Students .24** .12 .11 .06

Entrepreneurial Self Esteem -.21** -.31** -.14* .03 Male Students -.09 -.12 -.13 .06 Female Students -.27** -.38** -.17* .01

* Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed).

Discussion & Future Research

Contrary to expectations, all four of the personality constructs were not found to be significantly correlated with all four of the entrepreneurial attitudes of interest. However, with the exception of risk tolerance (which showed no relationship with any of the variables), all of the personality variables were found to be associated with at least two entrepreneurial attitudes. Self efficacy appears to be the personality construct with the greatest relationship to the entrepreneurial attitudes, as it was related to all four. Likewise creativity and openness to experience were both found to be significantly correlated with entrepreneurial achievement and entrepreneurial self esteem, but not with entrepreneurial innovation or entrepreneurial personal control. What is likely more interesting than the general pattern of correlations seen is here is the difference in patterns of correlation found between male and female students.

One example of said difference is in relation to self efficacy. Although self efficacy was

related to women’s entrepreneurial achievement, self control, and self esteem, it was correlated only with entrepreneurial innovation among men. If high levels of self efficacy help entrepreneurs to overcome setbacks, snags, and obstacles, and it strengthens their conviction that they can succeed (Bandura, 1997) then the relationship to achievement is especially important and should contribute to women not only entering the entrepreneurial realm, but also to their ability to survive long term.

Openness to experience was also significantly related to entrepreneurial achievement for

both males and females; but was related to entrepreneurial self esteem for females only. Entrepreneurs are often described as being broadminded and introspective; they reflect on their own thinking and ideas to determine potential problems and opportunities. While entrepreneurs must be open to new business ideas and concepts, it is through their creativity that they best develop solutions to take advantage of existing opportunities (Zhao & Seibert, 2006).


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Creativity was correlated with entrepreneurial achievement for both men and women, but with entrepreneurial innovation for males only, and with entrepreneurial self esteem for women only. Past research has linked creativity with innovation and innovation with enterprise development (Thompson, 2004), and many entrepreneurs have been lauded for their ability to improve innovation in the marketplace (Bosma & Harding, 2006). Since creativity and innovation were only correlated for male students, and male students had significantly higher creativity scores, an interesting possibility exists. Our results seem to indicate that female students, while entrepreneurial in general, may lack confidence in their creative abilities and/or be less inclined to enter into innovative ventures. This is consistent with past research that has shown women are particularly attracted to the retail and service sectors because of low entry barriers. While Robb (2002) and Marlow and Patton (2005) suggests that this type of industry segregation may result from the resource restraints of female entrepreneurs, it may also result from personal differences between men and women.

Perhaps entrepreneurship education can help bridge a real or perceived gender gap in

creativity and innovation. Sternberg (2004) suggests the amount of relevant knowledge individuals have at their disposal is one of the most important links to creativity. If the creative process involves forming novel ideas and identifying market opportunities, this serves as a potentially useful avenue for training students or nascent entrepreneurs to become more entrepreneurial in orientation. For example, teaching students to make connections among seemingly unrelated pieces of information can be a useful strategy. This is a task that students can be encouraged to perform, and which may lead to increased capability of entrepreneurial creativity. Similarly, Hmieleski and Corbett (2006) promote the use of simulations and role-playing exercises in entrepreneurship courses to help improve improvisational skills. Increased creativity can help nascent entrepreneurs learn how to adjust their business plans to better take advantage of opportunities and solve unexpected problems.

Tolerance for risk was the only variable to show a consistent correlation pattern for males

and females; as with the aggregate, it did not relate to any of the entrepreneurial attitudes. According to Stewart and Roth (2001) the role of risk tolerance in entrepreneurship has been difficult to definitively conclude because empirical studies examining the relative risk-taking propensities of entrepreneurs have produced conflicting findings. For instance, Brockhaus (1980) found no risk propensity differences between entrepreneurs and managers. More recently, Miner and Raju (2004) meta-analyzed 14 studies not previously considered by Stewart and Roth (2001), and came to a very different conclusion, that entrepreneurs are more risk-averse than are managers. They conclude that the role of risk propensity in entrepreneurship remains unresolved and is an area for further inquiry. Consistent with the Miner and Raju findings, Xu and Ruef (2004) find that entrepreneurs are significantly more risk-averse than the general population with regard to financial decisions. Our findings support what appears to be an emerging consensus that risk tolerance is not necessarily associated with entrepreneurial attitudes or actions.

In order to survive and flourish, it is imperative that entrepreneurs be ready for changing

markets, products, and technology in today’s business world. An individual’s personality is often a pre-cursor to one’s beliefs and attitudes. As such, an understanding of the relationship between personality and attitudes known to predict entrepreneurial success can provide guidance with regard to better training a population of nascent entrepreneurs. The constancy of change and the


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ever expanding role of small business in our economy will require the next generation of business professionals to utilize intellect, curiosity, and innovative thinking to develop new strategies that capitalize on under-utilized and un-named sources of revenue. Future studies should continue to explore possible links between personality and attitudes in order to develop a more complete entrepreneurial profile and better understand the new generation of emerging entrepreneurs.

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ROLES AND INTENTIONS OF FUTURE MANAGERS AND ENTREPRENEURS: ROMANIA AND THE U.S Daniel Glaser-Segura, Texas A & M University – Kingsville at San Antonio

Stephen Jones, Arkansas Tech University

Introduction

The social and economic transition of Romania and other Central and Eastern Europe (CEE) countries provides an emerging perspective regarding what soon-to-be managers and entrepreneurs perceive as their future roles. The plethora of new managerial and entrepreneurial opportunities has exposed a gap of understanding between the new leadership of Romania, a former communist economy, and the U.S., an ongoing market economy.

While much is known of managerial roles and entrepreneurial intentions in the U.S. and

other market economies, little is known of the reorientation of transition economies, such as Romania. The macroeconomic view of transition in the former communist economies provides a high level view of the change from an authoritarian rule and centrally-managed production model to a decentralized and liberal market system. The transition involves the privatization of state-owned businesses, the restructuring of supply chains, and changes in legal and governmental institutions. The transition is further stimulated by membership in the European Union, as the rewards of membership serve as key incentives.

The transition at a micro level provides greater clarity of the new reorientation of

managerial roles. Management under the previous command economies was characterized as inefficient and reflected Taylorism in which authoritarian command was the norm in hierarchical and bureaucratic organizations. Organizations were ‘directed’ using quantitative engineering and statistical decision tools to implement centrally planned five-year plans. The organizational administrators, usually headed by an ‘Economic Director,’ were trained in educational institutions that focused on theoretical and technical preparation leading to degrees in economics or engineering with strong Marxist underpinnings (Bedward Jankowicz, & Rexworthy, 2003). The study of management was relatively unknown, and the concept of entrepreneurship was forbidden.

Rewards for administrators were based on party affiliation and nepotism with efficiency

and quality as lower level priorities (Kiriazov, Sullivan, & Tu, 2000). Bedward et al. (2003) detailed common roles used in the former command economies calculated to “beat-the-system” and gain political favor or at least maintain the status quo. The administrative roles in the former command economies were created in response to political and economic orthodoxy. Adherence to ideology was a superior goal to the practical matter of creating value to satisfy market needs.

The transition of management roles in these countries involves a major shift in the

orientation of agency theory. Under the command economy, the proletariat or working class, as represented by the state, took on the role of principal and administrators were their agents. Free market practice, in contrast, assigns the role of principal to the owners of the enterprise. The role reversal of principal directly affects the basic notion of managerial roles. Managers now must reorient the way they address their tasks and resources at hand (Poirot, 2002). In addition to differing principal-agent roles, the former communist economies exercised a large degree of


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power in high-level government ministries, and little was extended to enterprise and plant level management. With the transition to market systems, power and autonomy have been retaken by enterprise and plant-level management. Indeed, the transition has transformed the breadth and scope of managerial roles and entrepreneurship as organizations adapt to the new market environment.

The transition, however, is not a unique event in time but rather is a process of

conversion over time. Although privatization in Romania began in the early 1990s, a number of large state run enterprises were still not privatized a decade later. In addition, the businesses that were purchased by Romanian entrepreneurs tended to continue managerial practices much as they had prior to the transition, whereas those acquired by foreign firms were more likely to introduce new practices. There is a wide variance of managerial practice in the CEE countries ranging from hierarchical to organic styles of management (Clark & Geppert, 2002). Further, the transition, has achieved results faster in some of the transition economies, such as Hungary and the Czech Republic, than in others such as Romania and Bulgaria. This variance may be explained by cultural change, and as Marxism has often been associated with collectivism, the underlying degree of collectivism varies from one country to another. In CEE countries, management in some has taken advantage of new opportunities faster than others (Martin, 2002).

In addition to culture, education is a prime factor of change. Many of the new managers

in transition countries are graduating from universities that renovated their business education programs to reflect the new economic orientation (The Economist, 2004). In addition to new business programs, students are also exposed to new ideas in English, French, and German as opposed to Russian under the old system. Between 54 to 88 percent of all secondary students are now studying English as a second language in CEE countries, with Romania accounting for the highest level of secondary enrollment (88 percent) in English. The second and third languages of choice in these countries are French and German, respectively (European Commission, 2002). Besides exposure to ideas from Western business languages, the advent of the Internet has also introduced a new venue for understanding changing managerial roles and entrepreneurship. Additionally, the European Union has invested in the educational programs of the transition economies expecting the new member countries to share like-minded business and economic philosophies.

The move from communist to market economics has changed the basic notions of

management and entrepreneurship in Romania. This change has been further influenced by culture and accelerated by an emerging corps of managers educated under a new paradigm. The new leaders graduating from universities have no practical experience of managing under the constraints of the former communist orientation since most of them were less than twelve years of age at the time of the Revolution of 1989. It is not known how these soon-to-be managers in Romania view their new managerial roles. The purpose of this paper is to compare the expressed managerial and entrepreneurial interests of business students in Romania and the U.S.

Managerial Roles

Managerial roles refer to the behaviors that managers devise to accomplish the tasks for

which they are responsible. Mintzberg (1971) provided a pioneering study in which he observed


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ten managerial roles and grouped these under three major task families: 1) interpersonal, 2) informational, and 3) decisional tasks (see Table 1). Mintzberg based his managerial roles on empirical data on five CEOs of medium to large companies over a week of “structured observations” for each manager. Mintzberg found that while all managers employed these roles, they employed some roles to a greater degree than others depending on different work environments, with variations influenced by the managerial job, the job incumbent, and the specific circumstances.

Table 1. Mintzberg’s managerial roles

Interpersonal

Figurehead Symbolic head; compelled to perform routine duties of a legal or social nature.

Leader Responsible for motivating subordinates; as well as staffing, training, and related duties.

Liaison Cares for self-developed network of external associates who provide favors and information.

Informational

Monitor Seeks and receives wide variety of special and timely information and emerges as informational nerve center of the extended organization.

Disseminator Transmits information received from outsiders or from other subordinates to members of the organization; some requiring interpretation by diverse value positions in organization.

Spokesperson Communicates information to outsiders on organization’s plans, policies, actions, results, etc.; serves as expert on organization’s industry.

Decisional

Entrepreneur Searches organization and its environment for opportunities and begins ‘improvement projects’ to instruct change; supervises plans of projects.

Disturbance Handler Responsible for corrective action when the organization faces important, unexpected conflicts.

Resource Allocator Responsible for allocation of all resources; makes or approval all significant organizational decisions.

Negotiator Responsible for representing the organization at major negotiations.

Adapted from: Mintzberg, H. (1971). Managerial work: Analysis from observation. Management Science, 18(2), 1971 pp.b97 – b110.

Supporting the notion that the work environment influences the importance of managerial roles, researchers have examined a variety of organizational and functional variables. For example, Paolillo (1981) found that organizational hierarchy influenced role importance. It was found that top management takes on the roles of monitor, figurehead, disseminator, spokesperson, entrepreneur, resource allocator, and negotiator. Middle and low level managers we found to predominate in leader and liaison, and disturbance handler roles. Other research streams incorporated functional job groups, such as auditors (Wolf, 1981), research and development personnel (Pavett and Lau, 1985), sports managers (Horch and Schutte, 2003), and intercollegiate athletic directors (Whisenant and Pederson, 2004) to reduce functional and industrial variance and associated spurious effects.


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Other research has extended beyond internal factors such as organizational hierarchy and

functional job groups. Gibbs (1994) studied the effect of external environmental forces on an organization’s managerial roles. Forces were defined in terms of environmental complexity and dynamism. Gibbs found that while the interplay of dynamism and complexity determined the importance of the interpersonal roles, a simple and routine external environment, on the other hand, was inversely related to the importance of informational, decisional, and interpersonal roles. Caldwell (2003) found that managerial roles and functions may change over time as organizations adapt to environmental pressures. Managerial job tasks are evolving and seem to require a higher degree of professionalism and greater importance of managerial roles than found previously.

International Studies of Managerial Roles

A growing body of recent research examines the effect of cultural environments on

Mintzberg’s roles. Mendonca and Kanungo (1996) questioned whether management theories and practices developed in the West and other industrialized countries transferred well to less-developed countries, since cultural factors may prevent the acceptance of new management ideas in different countries. As a result, innovative management theories and practices may need to be modified to fit varying cultural values. Pearson, C. & Chatterjee, S. (2002) found that fixed measures of Mintzberg’s roles do not travel well from Western to Asian organizations or from industrialized to emerging and transition economies. In fact, they found that relative importance of one managerial role over another varied from one culture to another within Asia, and culture itself was the principal explanation for the difference.

In the same manner, Pearson, Chatterjee, and Okachi (2003) broadly stated, “The role of

managers is in transition in all societies and organizations as globalism links markets, technology alters the nature of work and new organizational values emerge (p. 101).” They found that managers advocating strongly held management paradigms often do not see that management roles in different societal, industrial and work contexts differ largely due to cultural differences. On the other hand, Khandwalla (2004) suggested that research on managerial roles in Indian organizations provided better solutions for other emerging and transition economies than research from industrialized countries. Managers from the emerging and transition economies have developed solutions to deal with organizational inertia inherited from years of backward and corrupt government practices and industrial cronyism. Research results from fully-industrialized nations may not provide accurate insights useful for managers in these developing nations.

Tying these ideas of cultural factors, particularly the function of individualism and

collectivism and its effect on organizational science, Sampson (1978) underlined an intriguing problem of social theory developed in the US and other industrialized nations, particularly in English-speaking countries. He emphasized that the history of modern social science parallels the emergence and development of individualism. Social scientists working in an ahistorical nomothetic approach to theory have little understanding of theory outside of the individualist historical context (Dore, 1983; Lee, 1994). Previous studies of Mintzberg’s roles, while concluding a potentially causal role for indcol (individualism and collectivism), have not


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specifically addressed this factor in previous research. Yeung and Ready (1995) did examine a series of managerial actions in a cross-cultural study that looked at some cultural differences to separate some eight different nations. They suggest further research using indcol as a causal factor. Likewise, Khandwalla (2004) also contended that collectivism may influence managerial roles in emerging and transition economies. His study however, did not specifically measure and analyze indcol. Our comparison of managerial roles between the U.S. and Romanian students includes individualism and collectivism as a causal factor.

Individualism and Collectivism

Hofstede’s (1980) work compared various etic dimensions of cultural values in over 40

countries. The etic approach measures between-culture differences in universal traits and relies on quantitative methodologies. The emic approach, in contrast, relies on case methodologies and is used in within-population studies of culture (Adler, 1983). Hofstede’s study measured four cultural continuums: 1) masculinity-femininity, a tendency toward male-oriented or shared gender roles; 2) power distance, a measure of expected hierarchical or horizontal interpersonal relationships; 3) uncertainty avoidance, the degree to which societies are comfortable with long or short term contractual arrangements; and 4) individualism and collectivism (indcol).

The indcol cultural value focuses on the likelihood that a culture will either be individual

or group goal-oriented, a factor which demonstrates the inclination of the culture to submit to personal or organizational forces in decision making. Hofstede’s (1980) study provides an introduction to the indcol construct. While this was proposed initially as a polar continuum, others (including Triandis et al, 1988) have theorized these two extremes may act as two separate constructs, we chose to observe this construct as one continuum for this study. Future research may address this separation to study these variables on these respondents. The attributes of individualism and collectivism are presented in Table 2 and discussed below.


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Table 2 Attributes of Individualism and Collectivism

Individualism Collectivism

Values Favor independence from in-groups. Pleasure, achievement, competition, freedom,

autonomy, fair exchange.

Favor embeddedness in in-groups Security, obedience, duty, in-group harmony, hierarchy,

personalized relationships. In-groups and out-groups

Many, relationships are casual with low emotional involvement; less sacrifice for in-group.

In-group perceived as more heterogeneous than out-groups.

Debate and confrontation acceptable. Defined by similarity in achieved attributes (e.g.,

beliefs, occupation).

Few, but relationship to them is close, with much concern for their integrity.

In-group perceived as more harmonious than out-groups.

Harmony required. Defined by similarity in ascribed attributes (e.g.,

kinship, caste, race, village, tribe). Organizational structure and practices

Egalitarian- Horizontal relationships Employees chosen on personal merits Less training given to employees as these may leave

organization. Management is less attached to employees Managers concerned with employee performance.

Hierarchical- Vertical relationships Employees selected by group memberships. More training as employees are loyal and committed to

organization Paternalism is a common leadership style. Managers concerned with interpersonal relationships.

Note. Adapted from Triandis, H. (1994). Theoretical and methodological approaches to the study of collectivism and individualism. In U. Kim, H. Triandis, Ç. Kagitçibasi, S. Choi, G. Yoon (Eds.), Individualism and Collectivism: Theory, Method, and Applications (pp. 41-51). Thousand Oaks, CA: Sage and Triandis, H. (2004). The many dimensions of culture. Academy of Management Executive, 18(1), pp. 88-93.

Individualism

Individualism consists of values that give preference to individuals as the basic units of social perception and favor personal rights, pursuit of pleasure, and self-definition (Triandis, 1991). Individualists do not seek attachment to other group members and exercise less sway on the behavior and values of other individualists. Individualists comply with and anticipate equal treatment from other members of their group. Individualists tend to practice universalistic behaviors with members of other groups as well and are more likely to exercise informational roles among groups and organizations.

In the organization, individualist managers favor and reward achievement and

competition among and with subordinates and prefer an egalitarian workplace (Triandis, 2004). Individualist managers tend to get involved in more relationships with out-groups (individuals who do not share a common fate with members of an in-group [Eisenstadt & Roniger, 1984]) and find it easier to span boundaries between organizations and groups than their counterparts. Individualists are less prone to sacrifice for the organization and assume that employees will do likewise. Therefore they are less likely to engage in training and other long term human capital investment. Individualist managers have little emotional attachment to subordinates and are more concerned with employee performance than in building relations.


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Collectivism

Collectivism favors the group as the basic unit of social perception. Group members are more responsive to other in-group members than to out-groups (Marín & Triandis, 1984). Collectivists stress in-group loyalty, cooperation, and interdependence. Behaviors of out-group members are characterized as competitive and distrustful. Collectivists value cooperation, endurance, and order with other group members.

In business settings, collectivism may be manifest in a variety of ways. Nepotism is

common in the workplace, and business is largely conducted with friends and family (Triandis, McCusker, & Hui, 1990). Business and organizational relationships are characterized by a high degree of attachment and loyalty, are based on informal and non-contractual arrangements and consist of vertical power-asymmetry dyads. Hierarchy among group members is the norm, and harmony is valued over competitiveness. A Japanese aphorism, “The nail that sticks out gets hammered down” reinforces the view of in-group harmony. Leaders view employees from a benevolent and paternalistic relationship. The in-group sets normative values for group members. Generally, as economic conditions improve over time and societies become more affluent there is a tendency to change from collectivism to individualism (Triandis, 2004).

Study Methodology

The variables for this study were created using established instruments where possible,

and all items are shown in the appendix. Mintzberg’s managerial roles (1971) and Hofstede’s (1980) work on culture were the foundation of the questions posed to respondents in both cultures. Mintzberg proposed some ten work roles common to management personnel, and Hofstede discussed – among other things - the individualistic and collectivistic tendencies of cultures around the world. These theories formed the foundation of the instrument used in this study. Hofstede’s work does not appear to have been combined with Mintzberg’s roles in previous research, though Yeung and Ready (1995) did examine a series of managerial actions in a cross-cultural study that looked at some cultural differences to separate some eight different nations. While Mintzberg examined multiple managerial roles, his entrepreneurial role is the focus of this study. All of his roles, then, are viewed with respect to their relationship with the entrepreneurial function.

Initially, participants were gauged for their entrepreneurial interests by a specific

statement of intent to start their own firms (responses from very inaccurate [1] to very accurate [5]):

I plan to start my own business at some point in the future.

While this statement does not ask for a specific start date to the activity, it does address the future career interests of the study participants. For these respondents, the exact time of starting a business was not considered as important as the expressed interest in starting a firm in and of itself. Use of a general intentions item has been shown to be an effective and robust indicator of intended behavior (Allen, Van Scotter, and Otondo, 2004; d'Astous, Colbert, and Montpetit, 2005). This single item was entrepreneurial scale item one (E1) for this study.


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Participants were also asked to respond to the following statements regarding their interest in entrepreneurship as a career activity (responses from very inaccurate [1] to very accurate [5]):

Despite the risk, I would prefer to be an entrepreneur. I prefer to work for somebody else than to start my own business. There is nothing better than to create one's own small business. It is of little benefit to start one's own business. I would like to run my own firm.

These items were reverse-coded as necessary and averaged to form an entrepreneurial

interest five-point scale. The Cronbach alpha reliability analysis for this scale was calculated at 0.77. This was entrepreneurial scale item two (E2) for this study.

Participants were then asked to respond to the following statement regarding Mintzberg’s

managerial roles (responses from very inaccurate [1] to very accurate [5]): This single item was entrepreneurial scale item three (E3) for this study:

In my future professional life I see my role as an entrepreneur, who designs and initiates changes within the organization.

Participants were also asked to respond to the following statements regarding a career in

management (responses from very inaccurate [1] to very accurate [5]):

Working as a simple professional employee is better than having to get others to do their work.

Working as a manager appeals to me. There is no better job than managing a business. People look up to managers. I would like to become a manager in an organization.

As with the entrepreneurial interest items, these were reverse scored as necessary and

averaged to create a managerial interest scale item (MI). The Cronbach alpha reliability analysis for this scale was calculated at 0.70.

Mintzberg (1971) theorized that three subscales were possible using his managerial roles:

interpersonal roles (figurehead, leader and liaison), informational roles (monitor, disseminator and spokesperson) and decisional roles (entrepreneur, disturbance handler, resource allocator and negotiator). These three subscales were created for this study using his definitions, and the Cronbach alpha reliability analysis for each subscale was calculated: interpersonal (0.23), informational (0.50), and decisional (0.64). Clearly, the generally accepted minimum threshold for reliability is not met with this respondent sample, and this has been noted as a problem elsewhere in using Mintzberg’s roles in research (Guo, 2003). In fact, at least one study has rearranged the role groupings into as many as five groups (Mech, 1997). Nevertheless, we employed Mintzberg’s subscales as theorized.


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No career specific item regarding interest in a career – other than entrepreneur and manager – was asked of respondents. All respondents were students in business-related studies, and majors included management and non-management fields. Respondents were also asked a variety of demographic items regarding gender, age, family size and parental business activity. Parental entrepreneurial activity has long been asked of respondents in entrepreneurship studies (e.g., Scott & Twomey, 1988; Garnier & Gasse, 1990; Rhodes & Butler, 2004). These demographic variables were largely intended to help describe respondent characteristics, but prior research has indicated that some demographic variables correlate with various levels of entrepreneurial activity. They were used for exploratory analysis in this study.

Results and Discussion

Demographics

Respondents to this study came from students in business studies in Romania and the

United States. Mueller (2004) has suggested that comparing business students across cultures provides a sampling which reduces the demographic factors (e.g., literacy) which might confound results comparisons. Business students – across cultures – are less likely to differ significantly than average laborers or business owners or other groups. Using business students also provides a basic sample which compares respondents with similar interests and backgrounds, therefore providing a stronger case for generalization of results. In this study, there were 220 Romanian students with full participation in the study and 124 American students. Fifty-three American respondents (42.7%) were female, and 170 Romanian respondents (77.3%) were female. The average age of Romanian students was 20.2 years of age, and the average age of American respondents was 24.7. These differences in gender and age were significant at the p < 0.001 level. Family size was also significantly different between the two groups, with the average American respondent’s family at about 2.7 children per family and the average Romanian family at about 1.6 children (p < 0.001). Parental entrepreneurial and managerial activities were markedly different for each culture group. Of American respondents, exactly 50.0% (62 of 124) indicated that one or both parents either currently or previously owned a business, and 8.1% (10) indicated that neither parent had ever managed others in a work setting. Fully 67.7% (149) of Romanian respondents had one or more parents who owned a firm at one time, but the parents of 20.5% (45) had never managed other employees. These remaining demographic differences were all statistically significant at the p < 0.001 level as well. Entrepreneurial Intentions and Managerial Interest

When asked whether or not the respondent was interested in starting his/her own firm

(E1), Americans responded negatively (“very inaccurate” [1] or “inaccurate” [2]) 22.0 % (27 of 124) of the time and positively (“very accurate” [5] and “accurate” [4]) 51.3% (68) of the time. Only 8.2% (18 of 220) Romanians responded negatively while some 78.6% (173) responded that they did indeed intend to start their own firms. The average American response to this statement was 3.50 (scale = 1 to 5) while the average Romanian response was 4.23 (p<0.001). Clearly, Romanian respondents expressed a much higher intention to start a firm than did American respondents. This difference in attitude was matched by a similar difference on the entrepreneurial interest scale (E2). The average American response to these five statements was


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3.47, while the average Romanian response was 3.70 (p<0.001). Romanian respondents had a more positive view of entrepreneurship activities than did American respondents, and this was further shown in their interest in the Mintzberg entrepreneurial role (E3). The mean Romanian rating of this role was 3.93 versus the mean American rating of 3.60 (p < 0.01). Mueller and Goic (2002) have noted in a recent study that Romania is much more entrepreneurial in attitude than other Eastern European nations, and it would seem that this attitude may be appearing in this study as well. As for the alternate career interest in this study, managerial interest (MI) expressed by the two cultures was also significantly different. Romanian respondents averaged 4.02 on the managerial interest scale, and American respondents averaged 3.57 (p<0.001). On each scale, it would appear that the Romanian students showed a much stronger interest in controlling the direction of the firms they established or managed. Demographic and Cultural Determinants of Entrepreneurial Interest

Demographic data were collected from respondents largely for descriptive purposes, but prior research had noted that some demographic factors might have a significant effect on entrepreneurial interest. Differences between the samples in gender, age and family size were not found to have any significant effect on the data. However, across cultures there were significant differences in the way that students whose parents had entrepreneurial or managerial experience viewed the entrepreneurial career. Those students whose parents had owned businesses (USA and Romania combined) were more positive than those whose parents had not owned a business about Mintzberg’s entrepreneurial role (3.95 vs. 3.73, p < 0.05). Those whose parents had managed others (again across cultures) were more positive about this same role than those whose parents had not managed others (3.88 vs. 3.47, p < 0.01).

Using general linear modeling (GLM), we attempted to determine if the interaction of

culture and parental experience (entrepreneurial or managerial) had any statistically significant predictive effect on respondent plans to start a business. It did not. GLM analysis further showed that means scores on the entrepreneurial interest scale were not predicted by culture and either experience type, although family management experience interacting with culture was statistically significant in predicting respondent interest in the Mintzberg entrepreneurship role. The adjusted r-square value for this last analysis was 0.067 (p < 0.05). While statistically significant, it hardly builds a foundation for the interaction case. It would appear that Romanian student interest in an entrepreneurial career is, in and of itself, a phenomenon worth examining.

However, a conflicting argument could be made that cultural tendencies discussed by

Hofstede might be worth exploring as an entrepreneurial influence. Previous studies on the eastern bloc nations had often shown a much more collectivistic tendency for their populations than for western nations. On our individualism scale, 1 indicated a greater collectivistic tendency and 5 indicated a greater individualistic tendency. Americans averaged 2.75 on this scale, and Romanians averaged 2.85 (p<0.05). This would seem to indicate that the Romanian respondents were significantly less collectivistic than might be assumed given current wisdom. However, more recent studies have shown that Eastern European markets may be turning more individualistic, especially among younger consumers (Lascu, Manrai, and Manrai, 1996; Manrai, Lascu, and Manrai, 2001). These studies indicate that the individualism level of the country -especially among younger citizens - is increasing as Western values and opportunities are


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introduced to Romanian youth. To see if this variable then helped explain the entrepreneurial interests of respondents, individualism was correlated with each scale variable (E1, E2 and E3). As Table 1 shows, individualism had a statistically significant positive correlation with entrepreneurial interest (r = 0.114, p < 0.05). However, given that the r-value is considerably less than 0.3, the real relationship between the two variables should be questioned. As a result, this variable was not included in further analyses in this present study.

Table 3. Correlation Analysis

I pla

n to

star

t my

own

busi

ness

at s

ome

poin

t in

the

futu

re. (

E1)

Entre

pren

euria

l Int

eres

t (E2

)

In m

y fu

ture

pro

fess

iona

l life

I se

e m

y ro

le a

s an

entre

pren

eur,

who

des

igns

and

initi

ates

cha

nges

w

ithin

the

orga

niza

tion.

(E3)

Man

ager

ial I

nter

est (

MI)

Min

tzbe

rg's

Inte

rper

sona

l Rol

es

Min

tzbe

rg's

Info

rmat

iona

l Rol

es

Min

tzbe

rg's

Dec

isio

nal R

oles

r .621(**) 1 Entrepreneurial Interest (E2)

p < .000 .

r .410(**) .335(**) 1 In my future professional life I see my role as an entrepreneur, who designs and initiates changes within the organization. (E3) p < .000 .000 .

r .458(**) .409(**) .430(**) 1 Managerial Interest (MI)

p < .000 .000 .000 .

r .221(**) .262(**) .381(**) .425(**) 1 Mintzberg's Interpersonal Roles

p < .000 .000 .000 .000 .

r .089 .057 .358(**) .227(**) .564(**) 1 Mintzberg's Informational Roles

p < .101 .296 .000 .000 .000 .

r .299(**) .275(**) .704(**) .513(**) .570(**) .528(**) 1 Mintzberg's Decisional Roles

p < .000 .000 .000 .000 .000 .000 .

r .103 .110(*) .093 .105 .030 -.051 .114(*) Individualism vs Collectivism (Individualism High, Collectivism Low) p < .057 .041 .087 .052 .576 .342 .035

** Correlation at 0.01(2-tailed) * Correlation at 0.05(2-tailed)


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Attitudinal Determinants of Entrepreneurial Interest

Table 1 also shows the correlation results for the entrepreneurial scales, the management interest scale and Mintzberg’s three managerial roles. Entrepreneurial intent (E1) is strongly correlated with the entrepreneurial interest scale (E2), and Mintzberg’s entrepreneurial role seems to be significantly (though moderately) correlated with both E1 and E2. These three variables would seem to be excellent co-indicators of an entrepreneurial interest. Using the two

Table 4. Regression Analyses

Dependent Variable = Entrepreneurial Intention (E1)

USA Romania Independent Variables

R-sq Change

Std. Beta p< R-sq

Change Std. Beta p<

Entrepreneurial Interest (E2) 0.390 0.571 0.001 0.335 0.458 0.001

Mintzberg’s Entrepreneurial Role (E3) 0.024 0.176 0.05 0.024 0.234 0.001

Managerial Interest (MI) Not Significant 0.053 0.232 0.001

Age Not Significant Not Significant

Gender Not Significant Not Significant

Family Size 0.043 -0.182 0.01 Not Significant

Parent Owners Not Significant Not Significant

Parent Managers Not Significant 0.014 -0.123 0.025

Mintzberg's Interpersonal Roles Not Significant Not Significant

Mintzberg's Informational Roles Not Significant Not Significant

Mintzberg's Decisional Roles Not Significant 0.010 -0.145 0.05

Total Adjusted R-square 0.448 0.05 0.423 0.05

single-item variables and the five items for the entrepreneurial interest scale, we calculated the Cronbach alpha for the seven items. The resulting alpha of 0.84 would appear to suggest that the seven items are indeed measuring a similar concept. However, do the expressed interest items and the peripheral items (demographics, etc.) have any predictive value with the entrepreneurial intention variable (E1)? Table 4 shows the results of this analysis.


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Because respondents were from two markedly different cultures, we split the sample by

culture before regressing all independent variables against E1. The model was primarily designed to test the direct influence of the entrepreneurial items and their effect on entrepreneurship interest. However, because demographic differences were noted between the two cultures, the variables of age, gender, family size, and parental ownership and management experience were included in the model. Finally, all three of Mintzberg’s role groups (interpersonal, informational and decisional) were included to see if general management interest areas had some influence on the decision to start a firm.

The total adjusted r-square values for each model (USA and Romania) were quite similar

(0.448 and 0.423 respectively), but the independent variables which emerged as part of the models were somewhat different. For both cultures, the entrepreneurial interest scale (E2) was the most significant predictor of entrepreneurial intentions (E1), accounting for about 80% or more of the total adjusted r-square value. Mintzberg’s entrepreneurial role accounted for a significant portion of the variance in each model as well, but for American students, family size also was a significant model variable. The beta for this relationship, though, was negative, suggesting perhaps that the larger the family for an American student, the less likely he or she would be to show interest in starting a firm. While more recent theory and research would discount the role of demographic traits as explanatory variables for entrepreneurial interest, among this group of students the family dynamic seemed to have some value in explaining interest.

For Romanian students, management interest, parental management experience and

Mintzberg’s decisional roles showed significant influence on the entrepreneurial attitude of respondents. However, while managerial interest seemed to increase the respondent’s intent to start a firm, both parental managerial experience and the decisional role grouping both had a negative effect. Why might this be true? As students showed a higher interest in managing business affairs, perhaps the experience gained from watching parental experience would temper their enthusiasm. Those students with less parental background might have a higher perceived interest in starting and managing their own firm than those with some personal experience with the trials of such an exercise. The decisional role influence is harder to explain. Romanian students with higher agreement with decisional roles would seem to have less interest in entrepreneurship. Here, perhaps, the role of decision maker for a firm, rather than the “creative” role, might be an explanation. Students who expressed a higher level of interest in making day-to-day decisions about firms may be showing a higher interest in the management of the firm’s affairs rather than in the critical role of starting the firm. We do not have any evidence of this relationship to date, but it would seem that research on entrepreneurs versus managers might help. Bucar (2001) found that managers and entrepreneurs had significant differences in their perceptions of ethical dilemmas, and Hornsby, Kuratko, Naffziger, LaFollette, and Hodgetts (1994) determined that administrative decisional attitudes had an effect on the manager/entrepreneur ethical differences. Ward (1993) concluded that entrepreneurs and managers have differing attitudes regarding the strategic directions of the firms they run, with a higher internal locus of control for those who began the firms versus those who simply manage them. These studies, and many others throughout the 1980s and 1990s, would seem to suggest that there are potential differences in the way that managers and entrepreneurs look at the


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responsibilities they face in the business world. Without continuing the discussion of entrepreneurial traits and characteristics, our findings seem to indicate that the decisional role created by Mintzberg suggests a negative influence on potential entrepreneurial attitude, but this relationship bears further investigation.

Conclusion

This study attempted to determine if there were clear differences in entrepreneurial

attitudes between American and Romanian business students and what, if any, influences might seem to correlate with the entrepreneurial interests they expressed. Our study found that, indeed, Romanian students seemed to demonstrate a significantly higher interest in starting a firm along with more positive attitudes about entrepreneurial roles and careers than their American counterparts. These interests crossed demographic and cultural lines. While the students in each culture were relatively similar in various ways – and significantly different in notable others – the influences on entrepreneurial intent were very different. While expressed interest in entrepreneurship and identification with Mintzberg’s entrepreneurial role accounted for the greatest variability in intention for both groups, they differed greatly on secondary influences on this intention. The results of this study would seem to indicate a growing entrepreneurial interest in this one former Eastern Bloc nation and to highlight that the influences on that interest differ from traditional influences concluded in research on entrepreneurship in this nation over the last three decades. Further research into these influences may help explain the Romanian phenomenon and its cultural similarities to and variation from conventional wisdom.

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WEB-BASED ELECTRONIC COMMERCE USAGE BY RURAL MICROENTERPRISES FOR INTERNATIONAL MARKET EXPANSION Sammy “Scott” Goble, Chief Accounting Officer, Alliance Flooring, Chattanooga, TN Patricia C. Borstorff, Jacksonville State University

Abstract

This paper presents a review of websites published by craft producers from western North Carolina to determine the rate of e-commerce utilization and the degree of e-commerce internationalization effort among rural microenterprises. It further presents a review of e-mail usage rates to determine whether gaps in the rural communications infrastructure are retarding e-commerce development initiatives within the sample population. The research indicates that rural microenterprises are not implementing e-commerce strategies at a significant rate and that there is no effort toward internationalization. Further, the research indicates that Internet access is available to those firms who have not implemented an e-commerce strategy.

Introduction

Web-based electronic commerce (e-commerce) opens a door for small firms to global

markets once considered out of reach (Quelch & Klein, 1996). E-Commerce demonstrates its power to help firms internationalize when domestic firms find themselves receiving international recognition and orders with no effort after having implemented a purely domestic-focused website (Sheldon & Strader, 2002). Unfortunately, much of the current literature centers on small to medium size (SMEs) or large enterprises and offers little attention to microenterprises (firms with fewer than 10 employees). This silence is unfortunate, given the potential that e-commerce-driven internationalization offers to geographically isolated microenterprises located in rural regions of the United States.

In order to create a starting-point for filling this void, this paper presents research

conducted to answer three questions. First, what is the rate of web-based e-commerce adoption by rural microenterprises in the United States? Second, are rural microenterprises who utilize e-commerce taking steps to internationalize their websites? Third, are gaps in the rural communications infrastructure retarding e-commerce development initiatives? Finally, this paper presents suggestions to increase the utilization rate and effectiveness of e-commerce internationalization efforts given budget and other constraints faced by the typical microenterprise.

THE IMPORTANCE OF RURAL MICROENTERPRISES

Rural Economic Development Rural poverty has grown to become a major social issue in the United States and now

rivals that found in inner-city areas (Black & Sanders 2004; Lyons, 2002) with the added insult of anonymity. In response to this problem, rural economic development programs have traditionally followed various growth-oriented industrial recruitment strategies. Unfortunately,


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these strategies have had little success in rural areas, in no small part due to geographic isolation (Gregory, 1994; Lyons, 2002; Servon & Doshna 2000).

An alternative to industrial recruitment that has gained prominence in recent years is the

promotion of local entrepreneurial activity through programs designed to encourage the development of microenterprises (Lyons 2002; Servon & Doshna, 2000). The effectiveness of these programs has been difficult to measure since traditional indicators common to industrial recruitment programs, such as number of jobs created, do not accurately reflect the true impact of these development programs. However, traditional indicators aside, these programs have demonstrated success when measured in terms of second and third order outcomes such as economic literacy, time management, personal financial budgeting, and success in the labor market (Servon & Doshna, 2000). Further, a growing body of evidence linking economic growth through entrepreneurship and the reduction of poverty supports the use of these development programs (Lyons 2002; Peters, 2003). The Challenge of Market Creation

One criticism of rural economic development programs is their dependence on supply-

side development initiatives such as business incubation programs, rural enterprise empowerment zones, and Small Business Development Centers (Lyons 2002; Servon & Doshna, 2000). This lack of attention to demand creation by the various rural development programs may be a holdover from traditional methods of economic development. This is because manufactured items produced by large firms often have an established market (Subramanian & Cavusgil, 1990). This, however, is not necessarily the case for rural microenterprises (Lyons, 2002; Subramanian & Cavusgil, 1990). In fact, the use of supply-side development programs without parallel programs for demand creation may cause unintended harm to the target firms. This occurs because an increase in supply coupled with static demand increases competition among firms, thereby lowering the firms’ profit (Subramanian & Cavusgil, 1990). E-Commerce as a Solution for Geographic Isolation

International market expansion using e-commerce is a potential solution to the problem

of demand development faced by many rural microenterprises. The literature often gives reduced transaction cost as the primary benefit of using e-commerce as a tool for international market expansion. However, this assertion, though very popular, may be based more on assumption rather than empirical research (Moodley, 2002).

Rather than leaping into this academic quagmire, the authors assume, for the sake of

argument, that rural microenterprises are not likely to see any reduction in transaction cost from implementing an e-commerce strategy. Instead, the authors assert that the primary advantage of e-commerce for this group is that it allows them to lessen the negative effects of geographic isolation.

Rural regions of the United States are often both socially and spatially isolated (Lyons,

2002; Tickamyer & Duncan, 1990). As a result, visibility is one of the greatest problems faced by many rural microenterprises. Further, even where a local market exists, it may not be large


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enough to sustain a business (Lyons, 2002) or to sustain the number of businesses necessary to meet development goals.

E-Commerce offers a solution to this problem. Using e-commerce, a rancher in Australia

can purchase a shipment of corn directly from a farmer in Iowa at any time of day or night. A food-processing firm in rural Humboldt County, California can then purchase beef for processing from that rancher and in turn sell the processed beef directly to consumers in Japan. E-Commerce eliminates the limitations of distance (Fesenmaier & van Es, 1999; Quelch & Klein, 1996) and thus offers microenterprises the opportunity to mitigate the problem of geographic isolation.

RESEARCH METHODOLOGY The authors examined 100 Appalachian craft producers who operate in western North

Carolina. The craft industry is an excellent surrogate for this study because small craft firms have much in common with other microenterprises. These similarities include a lack of capital and managerial experience or competence (Fillis, 2002). Further, the craft industry is a major category of microenterprise. Of the microenterprises studied by Servon and Doshna in 2000, 16% were in the arts and crafts industry.

Additionally, one can uniquely apply research on the craft industry to many business sectors since, as Servon & Doshna (2000) observed, the craft industry involves manufacturing, retail, and service components in a single industry. The craft industry also compares well to high technology industries since both typically involve small entrepreneurs operating in a dynamic environment (Fillis, 2002).

Specifically, the authors selected the Appalachian craft industry of western North

Carolina because of available research regarding its nature and economic impact. A further consideration was the group’s participation in the rural development program HandMade in America. These two factors combined to create a unique opportunity to study the rural microenterprise.

Sample

The authors used the HandMade in America craft registry website to locate a suitable

sampling frame. This registry contains a listing of 304 craft producers in alphabetical order by business name. The registry includes craft producers both with and without websites. From this list, the authors generated a random sample of 100 craft producers (32.8% of sampling frame) by first sequentially numbering the list of producers and then comparing that list to a random number table without replacement. Given the importance of HandMade in America to the craft industry of the region, the authors assumed that the registry is authoritative. However, no effort was made to authenticate the data.

Although the economic impact of the craft microenterprise throughout Appalachia is

unknown, a 1995 study by Dave and Evans of Appalachian State University estimated that the impact of the firms made subject of this study on the twenty county region of western North Carolina was $122 million or 40% of the regions economy. The following are other relevant


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findings regarding full-time craft producers in this sample. Seventy percent of artists had an undergraduate or graduate degree. Seventy percent produced “one of a kind” items. Ninety percent were incorporated. Fifty-seven percent distributed their products using wholesale channels. Artist sold 60% of their products to residents of North Carolina. Artists sold 40% of crafts to residence outside North Carolina. Unfortunately, the study does not specify what, if any, are sold outside the United States. Sixty-six percent of producers had excess capacity. Twenty-five percent of artist indicated that marketing assistance was their primary need (the highest of any other need). E-Commerce Adoption Rate Framework

In order to determine the rate of e-commerce adoption, it is necessary to first define e-commerce. Unfortunately, a review of the literature frustrates this effort since one finds many definitions. The attempt is further aggravated since the term e-commerce, taken in its broadest form, is often supplanted with similar terms such as e-trade and e-business (Daniel & Grimshaw, 2002; Prashantham, 2003). For the purpose of this study, the authors considered a firm to have adopted web-based e-commerce if that firm had any web-based presence on the Internet (i.e. a website). Some may argue that this definition is too broad. The authors concede that this definition allowed the inclusion of otherwise undeserving efforts. However, given time and resource constraints, confusion in the literature regarding the definition of e-commerce, and a desire to avoid as much subjectivity as possible, the authors concluded that this is the most reasonable option. Internationalization Effort

The question of e-commerce internationalization effort is more complex to answer than the first since one must not only grapple with the definition of e-commerce but also determine what represents an internationalization effort. Fortunately, Dou, Nielsen, and Tan (2002) provide a suitable framework to start such an inquiry. Quelch and Klein (1996) note that organizations establish an international presence on the Internet using one of two broad evolutionary paths. These are information-to-transaction or transaction-to-information. Dou, Nielsen, and Tan seize on this suggestion and build their framework around the idea that websites are either communication-oriented or transaction-oriented.

In general, one can best describe a communication-oriented websites as a “brochure”

website with a primary function of providing information about an organization and its products or services. The primary function of transaction-oriented websites, on the other hand, is to facilitate transaction processing (i.e. order processing) (Dou et al., 2002). For this study, the authors considered any website that made an outward effort toward processing transactions as transaction-oriented with all others being communication-oriented.

There are six components necessary to meet the goals of a communication-oriented

website (Dou et al., 2002). The authors collected data for each of these components for both communication-oriented and transaction-oriented websites. One component is trust. This is the most subjective component considered in this study since “trust” by its nature is a subjective concept. The authors considered a website to have established trust if certain information was


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present. This included the presence of an artist’s resume, customer testimonials, and third-party verification (i.e. WebTrust).

Another component that requires explanation is domain name type. Subject matter

experts consider a separate domain name (i.e. www.yourcompany.com) more appropriate for a commercial website than an affiliate address (i.e. www.bellsouth.net/yourcompany) (Dou et al., 2002). For this study, the authors considered those websites with a separate domain name to have met the domain name component. The remaining components identified by Dou, Nielson, and Tan (2002) are the presence of product information, the availability of different language options, the availability of personalization options, and the presence of contact information.

For transaction oriented websites, Dou, Nielson, and Tan (2002) again identify six

components. These include the availability of product information, the availability of pricing information, the availability of distributor information (where to buy), the availability of online purchase assistance, the availability of online technical support, and extranet capability (to foster the firm’s relationship with suppliers). We collected data concerning these components for transaction-oriented websites only. In addition to the above components, we collected data regarding available payment options, including international payment options, and the presence of international shipping information.

Communications Infrastructure

In order to answer the question regarding gaps in the rural communications infrastructure,

the authors collected data to determine whether those firms who did not have a website had an e-mail address listed in the HandMade in America producer registry. If they did, further data was collected to determine whether that e-mail address was ISP-based (i.e. @earthlink.com, @bellsouth.net, or @comcast.net) or from another source (i.e. @yahoo.com or @hotmail.com). The logic behind this inquiry is that if a microenterprise has access to an e-mail account, it must have access to the Internet. The presence of an ISP-based e-mail account strongly implies that one has access to the Internet at their home or work since ISPs do not issue their e-mail addresses to persons other than their customers. While the presence of a non-ISP-based e-mail address implies the same, the implication is not as strong. Since Internet users can create a non-ISP e-mail address from any location (i.e. public library or school), the mere existence of such an account does not necessarily mean that the user has Internet access at home or work. However, it does strongly suggest that the user has Internet access somewhere. Data Collection

To collect data in an orderly manner, the authors created a coding sheet based on the

above framework and each was sequentially numbered from 1 to 100. A copy of the coding sheet is provided in appendix A. The authors reviewed each website. To help eliminate as much subjectivity as possible, the authors coded a ‘1’ for each component present in a particular website without judging the quality or effectiveness of the component. For example, the authors coded product information as ‘1’ even where the authors believed that the information was either hidden or so incomplete that, in the authors’ opinions, it would be ineffective in stimulating interest in website visitors. A summary of the data collected can be requested, if desired.


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In order to construct a sample proportion from this data, the authors used the formula

nXp = where p represents the sample proportion, X represents the number of successes, and n

represents the number of items sampled. Using this as the best point estimate for the unknown population proportion, the authors developed a confidence interval using the formula pzp σ±

where n

ppp

)1( −=σ again using p to represent the sample proportion and n to represent the

number of items sampled. The calculations use a z value of 1.96 corresponding to a 95% level of confidence (Lind, et al., 2003).

FINDINGS

E-Commerce Adoption Rate

With regard to the question of e-commerce adoption rate, this research shows that 53 of

100 (53%) of the sample firms had a website. Of these, 44 of 53 (83%) of the websites were communication-oriented and the remaining 9 of 53 (17%) were transaction-oriented. Based on these findings, the authors estimate that the e-commerce adoption rate among rural microenterprises is between 43% and 63%. Further, of those rural microenterprises with a website, the authors estimate those with a communication-oriented website to be between 73% and 93% and those with a transaction-oriented website to be between 7% and 27%.


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Internationalization Effort Table 1 summarizes the data relevant to the question of internationalization effort.

TABLE 1 Range Count Proportion +/- Min Max Communication Components Trust 24 .45 0.134 31% 58% Domain Name Type 41 .77 0.113 66% 88% Product Information 36 .68 0.126 55% 81% Language Option 0 0 0 0% 0% Personalization Option 0 0 0 0% 0% Contact Information 46 .87 0.091 78% 96%Transaction Components Product Information 7 .78 0.272 78% 96% Pricing Information 8 .89 0.205 51% >99% Distributor Information 0 0 0 0% 0% Purchase Assistance 0 0 0 0% 0% Technical Support 0 0 0 0% 0% Extranet Capability 0 0 0 0% 0%Other Components Payment Options 14 .26 0.118 14% 38% International Payment Options 0 0 0 0% 0% International Shipping Options 3 .06 0.064 <1% 12%

One can draw several interesting points from this data. First, even at the high side of the

range, the research shows that only 58% of the subject websites established trust. This is a key point since trust is necessary for any firm wishing to reach foreign markets (Dou et al., 2002; Peters, 2003). Though not part of the data and strictly subjective in nature, the authors observed that the design value of many of the websites was so deficient that they may serve more to diminish rather than enhance trust. For example, among the communication-oriented websites, many were poorly organized with no discernable structure. Many contained broken links. In addition, many webmasters failed to use web-safe color pallets or consider variations in screen resolutions. These failures in two of the most basic tenants of website design resulted in an amateurish appearance that reflected badly on a group who were attempting to sell artistic ability.

Moreover, several of the transaction-oriented websites, like their communication-oriented

counterparts, contained links that pointed to pages that did not exist. The transaction-oriented webmaster had further failed to configure correctly the e-commerce software for two transaction-oriented websites. As a result, a page thanking the webmaster for downloading the software and offering instructions for completing the installation process greeted website visitors. It is also interesting to note that the observed effort was so sloppy that one transaction oriented website provided no product information (the product database was empty or contained “test” items) and three gave no mention of payment options. These are the most basic components of a


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transaction-oriented website and their absence is analogous to a storeowner who hides his merchandize in a basement.

Two of the sample websites provided international shipping information and one of the

sample sites provided prices in UK₤ as well as US$. However, no website provided international payment information. Only one site from the entire sample had a reasonable chance of making an international sale. However, no website reviewed presented a successful e-commerce internationalization effort.

This lack of effort is unfortunate since craft firms are often able to internationalize

rapidly despite financial, management, and other limitations (Fillis, 2002). These firms are able to accomplish this by exploiting networks, operating in a niche market with customized or customizable products, and by being more flexible than their larger competitors are. A study of craft firms in the U.K. found that nearly one-half of firms studied had some form of international presence. This international presence represented upwards of 20% of sales (Fillis, 2002). Further, the products offered by the sample firms may be ideal for Internet export marketing. Returning to the 1995 Appalachian State University study by Dave and Evans, one finds that 70% of artists produce “one of a kind” items. As a result, these firms can avoid the price-based competition prevalent on the Internet. Further, the Appalachian State study notes that 70% had an undergraduate or graduate degree, 90% of firms operated as incorporated entities, and 57% distributed their products using a wholesale channel. These findings imply that the firms in question had the sophistication necessary to orchestrate an e-commerce-based Internationalization effort. Communications Infrastructure

The literature often cites the lack of an adequate rural communications infrastructure as a

reason for the depressed level of e-commerce development in such regions (Lyons, 2002; Oden & Strover, 2004). The purpose of question 3 is to determine if this is the cause of the lower than expected e-commerce efforts on the part of rural microenterprises.

Of the 47 microenterprises in the sample who did not have a website, 41 (87%) had an e-

mail address. Twenty-six of 41 (55%) had an ISP-based e-mail account and 15 of 41 (32%) had an e-mail account from another source. An e-mail usage rate among those without websites of 87% strongly suggests that the sample had some form of access to the Internet. This access may be at home, work, or another source such as a public library. Further, an ISP-based e-mail usage rate of 55% suggests that more than half of the entrepreneurs who did not have a website had Internet access at home or at work. Based on these findings, the authors conclude that while an inadequate communications infrastructure may impede rural e-commerce development, it was not a significant factor in this study.

RECOMMENDATIONS

Pooling Resources One potential solution for rural development programs to increase e-commerce based

international market expansion is to encourage rural microenterprises to pool their resources in a manner similar to the aggregation websites utilized by farmers. These sites, which are electronic


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version of rural cooperatives, allow farmers to pool their resources in order to reach a larger market (Rux, 2000). Since the people who live in rural regions of the United States are more risk averse than those in other parts of the United States (Lyons, 2002), pooling resources may provide an excellent solution since it allows microenterprises to spread the risk across several firms. It may also allow visitors to view a wide variety of products from an area and help promote the local identity.

Increasing E-Commerce Effectiveness

There is a lack of research regarding e-commerce internationalization and the

microenterprise. As a result, a significant gap exists between what the literature recommends and what is feasible for microenterprises. This paper offers the following suggestions to help fill this gap

. Suggestions from the Study

First, the development of trust is essential for any firm wishing to reach foreign markets.

Peters (2003) refers to trust as the biggest challenge facing firms attempting to internationalize using e-commerce. One simple and inexpensive option is to include a resume’ or customer comments as appropriate. Complete and accurate contact information also helps establish trust. Website design is also a potential trust builder. A well-designed website creates an image of permanence and professionalism. On the other hand, poor design value can damage a firm’s reputation. In addition to basic design issues like layout, those who intend to attract foreign buyers should consider the following: Be aware that icons (pictures) have different meanings in different countries. A mailbox, for example, does not look the same in Brazil as it does in the United States (Sheldon & Strader, 2002). The 800 numbers so common in the United States and Canada may not work in other countries. You should provide your local number using the ISO format. In the United States, a properly formatted international number is written as +1(XXX) YYY-ZZZZ where +1 is the country code, XXX is the area code, and YYY-ZZZZ is the firm’s local phone number (Sheldon & Strader, 2002). In the United States, we commonly write November 8, 2005 as “11-8-2005.” People in other countries may interpret this as August 11, 2005. To avoid confusion it is best to display dates clearly using formats like 8-Nov-2005 or simply November 8, 2005 (Sheldon & Strader, 2002).

Second, firms of all sizes should use their own domain name rather than an affiliate

domain name. Domain names cost less than $30 per year and not only help establish trust by providing an impression of stability but also help establish the firm’s online “brand” (Dou et al., 2002). In addition, it is very difficult to get search engines to properly index affiliate domain names. If a firm is successful in getting their website indexed using an affiliate name, the effort will be lost once the firm moves to its own name. It is much better to start with your own name.

Third, provide product and price information. If a firm’s intent is to sell product online,

then an online catalog is critical. This author recommends that small firms use one of the many packaged e-commerce applications (i.e. osCommerce). These applications normally include an online catalog and full-feature shopping cart with checkout function. Web hosting firms often provide this or similar software free or for a nominal recurring fee. If you are uncomfortable


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setting up the software, hire a consultant. A professional can setup your software in less than a day. Further, many prepackaged e-commerce applications like osCommerce are ready for international markets off the shelf with built-in features like multiple currency pricing and foreign shipping calculations. Several transaction-oriented websites reviewed for this paper appeared to be implementing a “homegrown” online catalog. The author is not aware of the circumstances surrounding these catalogs but recommends firms be cautious of practitioners who advocate writing otherwise commonly available software from scratch. This is an unnecessarily expensive option and such software is often prone to error.

Fourth, list all accepted methods of payment and consider establishing a relationship with

an online payment processor such as PayPal. One problem noted in the study was the lack of payment options. Firms should list their payment options on their website even if they do not plan to accept orders online per se. Regardless of the actual order method, having payment information available online can facilitate a transaction by giving potential buyers notice of your accepted payment methods. PayPal provides an excellent payment solution for online and traditional purchases. The service is inexpensive (comparable to credit card processing fees) and allows even the smallest firm to clear foreign payments. This service also allows firms to accept credit cards without the expense of a merchant account.

Finally, researchers suggest that to compete successfully in foreign markets entrepreneurs

must translate their website into multiple languages (Dou et al., 2002; Sheldon & Strader, 2002). Because of the expense involved, it is suggested that one avoid translation in the early stages and approach the option as needed. This is especially true if the firm does not have bilingual staff members.

CONCLUSIONS

Web-based electronic commerce is an excellent vehicle for rural microenterprises who wish to expand their markets overseas. This is not only important for the individual firm but also for society since the development rural microenterprises may be the best hope for solving the dilemma of rural poverty. This research shows that rural microenterprises are not making a serious effort toward e-commerce internationalization. Though upward of 63% have adopted e-commerce, given a very broad definition of e-commerce, almost none have made a serious effort to market their products online and fewer attempt to market to foreign buyers. Limitations and Future Research This study used a sample size of 100. Unfortunately, the unexpectedly low e-commerce utilization rate resulted in a small sub-sample of firms with websites. As a result, the range for the usage rate of the different website components is so wide that it precludes a detailed analysis. In addition, while we believe that the sample chosen closely approximates the rural microenterprise, each business is unique. Future research should use a broader cross-section of rural microenterprises and start with a much larger sample. In addition, research to determine why some rural microenterprises take advantage of the opportunity offered by e-commerce while others do not may be helpful in creating a development program to tap this underutilized resource.


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income inequality in Appalachia. Washington, DC: Appalachian Regional Commission. Daniel, Elizabeth M. & Grimshaw, David J. (2002). An exploratory comparison of electronic

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Dave, Dinesh S. & Evans, Michael R. (1995). The determination of the economic contribution of

the craft/handmade industry in Western North Carolina. Appalachian State University: Boone, NC.

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corporate websites for export marketing. Journal of Advertising Research. 42(5), 105-115.

Fesenmaier, Julie & van Es, John C. (1999, April). Rural development: communications and

computing technologies create a rapidly changing environment. Electronic Markets. 9(1/2), 81-86.

Fillis, Ian (2002, April). The internationalization process of the craft microenterprise. Journal of

Developmental Entrepreneurship. 7(1), 25-43. Gregory, Michelle (1994, March). HandMade in America. Planning. 60(3), 15. Lind, Douglas A., Marchal, William G., & Wathen, Samuel A. (2003). Basic statistics for

business and economics (4th Ed.). New York: McGraw-Hill. Lyons, Thomas S. (2002, August). Building social capital for rural microenterprise

development: the case studies in the United States. Journal of Developmental Entrepreneurship. 7(2), 193-216.

Moodley, Sagren (2002, December). Connecting global markets in the Internet age: the case of

South African wooden furniture producers. Development Southern Africa. 19(5), 641-658.

Oden, Michael & Strover, Sharon (2004, June). 2004 Update: Links to the future, the role of

information and telecommunications technology is Appalachian economic development. Washington, DC: Appalachian Regional Commission.

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development toolkit: A small part of the big picture. Journal of Developmental Entrepreneurship. 5(3), 183-209.

Sheldon, Lannette A. & Strader, Troy J. (2002, Summer). Managerial issues for expanding into

international web-based electronic commerce. SAM Advanced Management Journal. 67(3), 22-30.

Subramanian, T.S.R. & Cavusgil, S. Tamer (1990, April – June). Handicrafts. International

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ENCOURAGING SMES TO EXPORT Sara Jackson, University of the Incarnate Word Raydel Tullous, University of Texas at San Antonio

Abstract

Small and Medium-Sized Enterprises (SMEs) are the backbone of the U.S. economy.

Statistics show that they also are important in the global marketplace, but some SMEs are skeptical about entering into international trade. They hear about the obstacles they might face and are concerned that they might fail. However, many SMEs are not aware of the assistance programs that they may tap to help them in becoming a part of the growing world economies. This paper addresses some of the barriers to SMEs, but it emphasizes the benefits of joining the global market and the assistance programs available

Introduction

It is generally acknowledged that small businesses are an essential component in the

economy of the United States. The Office of Advocacy of the U.S. Small Business Administration reported there were approximately 26.4 million firms conducting business in the U.S. in 2005 (www.sba.gov/advo/research/data.html). While more than 77.3 percent of the firms were shown to be non-employers and 22.3 were designated employers with less than 100 employees, only .4 percent of the 26 million firms had more than 100 employees.

Terpstra (1987) noted that although the majority of export business was conducted by

large multinational firms, over 60 percent of the U.S. exporting firms had fewer than 100 employees. By 2006, documents from the International Trade Administration and Bureau of the Census, Foreign Trade Division showed that of the 530,185 companies exporting goods from the U.S., almost 95% were small and medium-sized enterprises (SMEs). SMEs generated over one-quarter (27 percent) of the total U. S. exports of merchandise in 2006 ($1.1 trillion). Approximately 57 percent of the U. S. exports were to the FTAA (Free Trade Area of the Americas) and NAFTA (North American Free Trade Agreement) markets (ita.doc.gov/td/industry/otea/edb/Reports/2006/table16_bysme). Additionally, more than 95 percent of the world’s population and two-thirds of the purchasing power is outside of the U.S. borders. Considering these statistics, more SMEs should be exploring whether they should become a part of the world’s marketplace and how.

Moreover, a glance at the 2007 U.S. trade data shows a high negative trade deficit of

approximately 700 billion dollars for the United States (www.census.gov/foreign-trade/statistics). Jim Morrison, president of the Small Business Exporters Association was quoted as saying that if the “Export-Import Bank could help each small exporter replicate its sales in just one more country, it would cut the nation’s $700 billion trade deficit nearly in half ” (Hammer, 2006). Small businesses going international can help alleviate the international trade deficit. Again, questions arise as to why more small businesses are not entering the global market and what can be done to encourage their participation. This paper explores some of the benefits of entering the global market, some challenges and obstacles as well as the types of assistance that are available to small business owners.

http://www.census.gov/foreign-trade/statistics�

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Going Global

Many small business owners do not think of international markets and the possible sales

opportunities that may be within their reach. This absence of global thinking is one of the first barriers that a small business owner or entrepreneur needs to overcome. Perhaps entering the global marketplace will not be as intimidating if small business owners are as aware of the benefits and assistance programs as they are of the barriers and obstacles to entry. There are many approaches for companies to engage in international trade, but the most viable option for most small businesses is exporting (Wilkinson, 2006). Thus, an examination of the benefits or advantages of exporting are highlighted in this paper. Benefits and/or Advantages of Exporting

It is interesting to note that there seems to be a consensus about the advantages of engaging in exporting. Most of the studies, textbooks, government information, and WEB sites provide a list of similar benefits. The following discussion of the benefits emphasizes small businesses and entrepreneurs.

First, since markets in other countries may be growing rapidly during periods when U.S.

markets are declining, exporting helps offset the decline in domestic markets. That is, exporting helps stabilize market fluctuations and even seasonal fluctuations. While this benefit is equally valuable for larger firms, it is particularly helpful to SMEs. For example, Toyota’s recent cutbacks on producing trucks in San Antonio, Texas, have repercussions for their vendors, many of which are SMEs. Thus, diversified markets can help reduce risk for the SMEs. Second, there is reason to believe that sales will increase initially followed by an increase in profits over the long term once export development costs have been covered. This increase in sales is more likely to occur in today’s economic times because of the rising income levels and the percentage of the population outside of the U.S. A third benefit can occur when the product life cycle of existing products is extended and international marketing rejuvenates domestic products (Eckles, 1990). Some products may have reached the maturity stage in the U.S., but they may see a revival in foreign markets. Of course, this extension also helps increase sales of those products.

Other benefits may include lower manufacturing costs, potential for company expansion,

raising quality levels, and gaining new knowledge and experience. Lowering manufacturing costs will be beneficial to firms with high levels of fixed costs, and new markets will provide the impetus for expanding production. Raising quality levels is both a benefit and a cost. Since global markets are more difficult to satisfy than those in the U.S., it is necessary to raise quality levels, which in the long run can make a firm more competitive in the domestic market. However, there is a cost in attaining certifications such as ISO 9000. Finally, gaining new knowledge and experience can help generate ideas and information about new technologies and enhance understanding of global markets and competition, and this can increase domestic and international market sales.


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Challenges/Obstacles to Exporting

While there are many challenges and obstacles that a small firm may face, some of these diminished as the international market grew and trade became more open. For example, some tariff barriers were reduced as a result of global and bilateral trade agreements. Nevertheless, many challenges still exist.

There is no doubt that extra time will be needed, and extra costs will be incurred when a

firm decides to enter the global market. Typical costs include developing new promotional materials, allocating personnel to travel, and other administrative costs associated with marketing a product in a new territory. Payback periods may be longer. More time is needed to understand and develop the markets. Some of the costs and risks can be minimized by exporting versus entering the international market through joint ventures, foreign licensing, and international franchising. However, even if the trend is toward fewer export licensing requirements, some firms will still have to obtain an export license to export their goods. Since the licensing documentation required is more involved than for domestic sales, this activity is time consuming. In addition, some modification of the firm’s products may be needed to meet a foreign country’s safety and security codes.

However, the two major challenges facing budding small exporters are financial risk and

market intelligence. Access to adequate financing is important in a successful export program. Collection cycles are usually longer than in domestic markets. For example, collection of payments from global markets using customary methods, such as open-account, prepayment, consignment, documentary collection, and letter of credit, requires more time than domestic sales, and tends to be more complicated. However, several Federal, state and private programs help in providing financing and financial advice.

Obtaining international market information also requires more time, and some of the

information may be limited. Expenditures for market research and market entry is usually a higher proportion of total expenditures for SMEs than larger firms, and frequently the smaller firms lack the resources to devote to extensive research. Today, however, there are numerous resources for assisting small business owners in learning about global markets. It is important that a certain degree of knowledge about the international market be required of some of the personnel in the SMEs, such as the owner or other members of the management team. This knowledge may be learned through some of the assistant programs discussed in the next section, or in some cases, it may be possible to hire a qualified person to implement changes to ensure a successful exporting enterprise. James Sinkula (1994) indicated that knowledge of the market was an important factor in being successful in exporting. In 2006, Jasmine Williams (2006) determined export involvement and export commitment were strongly associated with the use of export market information sources, and those factors also were moderately associated with the use of government/professional bodies. Thus, those SMEs seeking growth through export marketing should develop on-going marketing and information-gathering activities and take full advantage of government-sponsored programs.

For some small businesses the advantages of exporting may outweigh the disadvantages

and vice versa, but each firm needs to examine both carefully in light of their individual


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situation. That is, to make this type of decision, the firms must do their homework. That means they need to understand the challenges they will be required to overcome and what benefits can accrue by becoming a part of the global market. They do not need to travel down the international road alone. Both public and private assistance is available.

Assistance Programs

According to the U.S. Department of Commerce, the number of U.S. companies

exporting grew only by 8.5 percent for the period 1997-2005. In 2006, the jobs linked to manufactured exports totaled almost 6 million. Total employment in the private sector was approximately 117 million. Thus, about 5.1 percent of the employment in the private sector of the U.S. was related to manufactured exports (ita.doc.gov/td/industry/oea/jobs/Reports/2006). Since for every one billion dollars in exports an average of 14,000 domestic jobs is created (Hammer, 2006), economists believe that small exporters can help improve the U.S. trade imbalance. Because many believe that SMEs should be encouraged to enter the international market, government-sponsored programs have been introduced to assist small business owners to develop an understanding of the global market and to help them match their capabilities to the needs of those markets.

As mentioned earlier, one of the primary barriers to U.S. small businesses expanding into

global markets is fear. They do have concerns about the unknown time and expense and even where to begin. However, for every obstacle there may be one or more solutions available in the form of private and public assistance programs and resources. While some of the small business owners may not be aware of the variety of programs, others may believe that either they do not need assistance, or they believe the process is too complex and burdensome.

Assistance in exporting is available from a wide array of programs and resources. This

assistance typically comes in two forms: (1) providing information and guidance and (2) providing financial assistance. The U.S. Federal government runs more than 100 programs that support export assistance for U.S. commercial enterprises. These programs are spread among 19 Federal agencies [refer to Table 1 for a list of the agencies] that comprise the Trade Promotion Coordinating Committee. This Committee was established by the Export Enhancement Act of 1992 in an attempt to consolidate export activities and policies (Report to Congress, 2008). These agencies are involved in providing information and guidance, financial assistance, and technical assistance. However, the extent of each agency’s direct involvement in providing assistance varies by government agency.


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Table 1.Member of the Trade Promotion Coordinating Committee U.S. Government Agencies U.S. Government Agencies

1 Department of Agriculture 11 Export-Import Bank

2 Department of Commerce 12 Overseas Private Investment Corp.

3 Department of Defense 13 Small Business Administration

4 Department of Energy 14 Trade and Development Agency

5 Department of Interior 15 Office of Management & Budget

6 Department of Labor 16 Office of the U.S. Trade Representative

7 Department of State 17 Council of Economic Advisors

8 Department of Transportation 18 U.S. Information Agency

9 Department of Treasury 19 Environmental Protection Agency

10 Agency for International Development

Small Business Administration

The mission of the Small Business Administration (SBA) is “to assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.” (http://www.sba.gov/aboutsba/index.html). Under the auspices of the SBA small business owners will find professional assistance through Small Business Development Centers (SBDC), Service Corps of Retired Executives (SCORE), and International Trade Centers (ITC). The employees and volunteers in these organizations are skilled in helping small companies gather market information as well as providing training and counseling to both start-up and operating small companies. On the financial side, the SBA offers small business exporters direct loan programs such as the Export Working Capital Program (EWCP). Department of Commerce

The U.S. Department of Commerce (DOC) offers assistance through the International

Trade Administration (ITA) and the U.S. and Foreign Commercial Service (FCS) Agency. Market data are available through the DOC’s computerized databases. The FCS will conduct global searches for agents willing to represent U.S. products. The FCS trade specialists support the exporters in a variety of functions including familiarizing firms about the market’s economic climate and evaluating the firm’s products for the market. The FCS supports trade missions and sponsors trade shows. The combined export trade services of these SBA and DOC agencies may be accessed through the U.S. Export Assistance Centers (USEAC).

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U.S. Export Assistance Center The USEACs are located throughout the U.S. and have professional employees to help

small firms overcome obstacles to exporting. The specific mission of the USEACs is to facilitate exports by delivering a seamless, comprehensive array of export counseling and trade finance services to U.S. firms. Their main services focus on assisting small exporters in obtaining market information and financial aid. The major participants in the USEAC network are the Foreign Commercial Service, the SBA, and the Export-Import Bank (Ex-Im Bank). Financial assistance is available through the Foreign Credit Insurance Association (FCIA) and the Export-Import Bank. The Bank offers small exporters guarantees for a variety of loans, including short-term working capital loans, medium-term export loans, and no-deductible insurance programs. The Ex-Im Bank’s efforts to encourage participation of small business in international commerce resulted in the Bank authorizing $3.4 billion (26.7% of total authorizations) in direct support of small businesses during the 2007 fiscal year. Its approval of 2,390 transactions (85.6% of the total number of transactions) was for the direct benefit of small exporters (Report to Congress, 2008). A list of the U.S. banks participating in the working capital finance guarantee programs is provided at www.exim.gov. Export Trade Assistance Partnership The Office of International Trade of the Small Business Administration also sponsors Export Trade Assistant Partnerships (ETAP) through the USEAC. The ETAP program focuses on small groups of export-ready companies by providing them assistance in developing export markets, acquiring orders or contracts, gaining access to export finance, and preparing for trade missions. Many SBDCs are involved in the ETAP programs. The ETAP process starts by utilizing the USEACs and SBDCs service delivery network. The ETAP program consists of four distinct segments: partnership, training, counseling, and international trade shows or missions. By combining these four elements, ETAP nationwide formalizes the creation of local international trade resource teams while leveraging results that are cost-effective. A decentralized approach allows the program to remain flexible to meet the individual needs of various geographic areas around the nation while providing a consistent framework for international trade assistance for SMEs nationwide. District Export Council

District Export Council (DEC) is another government component designed to assist exporters. The DECs are comprised of volunteers who are experienced exporters and international trade service providers. The U.S. Secretary of Commerce has appointed approximately 1,600 DEC members across the United States to assist their state, regional, and local business communities in exporting. As a condition of membership, they are to provide assistance and expertise to companies trying to enter international markets. This is accomplished through sponsoring trade events, mentoring, and participating in regional and local programs such as the San Antonio Export Leaders program (http://www.us-dec.com/html/home.html).

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City of San Antonio’s Export Leaders Program Not only the Federal government provides support to SMEs wanting to join the global market, but also city and state governments promote exports to help their businesses and improve their economies. One program is the City of San Antonio’s Export Leaders Program. This program provides export training and leadership development to existing businesses in San Antonio and South Texas interested in exporting to Mexico. The program began in 1999-2000 and is responsible for approximately $48 million in new business from the 74 participants who completed the program (http://www.sanantoniotrade.org/export-leaders-details.html). This is a partnership program with the U.S. Department of Commerce’s Export Assistance Center and the South-West Texas Border SBDC’s International Trade Center. Assistance Programs Studies Over the years numerous studies have examined the benefits that smaller-sized firms can receive from export assistance programs (Cavusgil, 1983, Reid, 1984, Moini, 1998). S. Tamer Cavusgil (1983) asserted that U.S. companies need both public and private sector assistance in entering the international markets, and that the Federal government should focus on assisting the SMEs. He stated that export assistance programs offered several benefits including (1) creating a diversified economic sector, (2) generating alternatives for firms to grow, and (3) contributing to reducing the U.S. deficit. Stan Reid (1984) reported the majority of 89 small Canadian firms used a number of information sources in exploring export potential including government export information. Another study involved surveying only small business exporters regarding how important 23 different activities were to their exporting operations and how helpful export-related groups or activities were to them (Howard and Herremans, 1998). In their study, foreign distributors and trade fairs were judged the most helpful followed by the U.S. Department of Commerce and U.S. Banks.

Hamid Moini (1998) looked at the impact of government assistance programs on export

activities and performance of 111 Wisconsin SMEs. He found that the effectiveness of the export assistance programs varied according to the degree of exporting in which the firm was already involved. For example, the programs were more effective with regular exporters than with non-exporters. More recently Timothy Wilkinson (2006) examined 114 state foreign trade offices (FTOs) around the globe. Results indicated a positive, linear relationship between the expenditures of the FTOs and the state exports, and he felt that state spending could help SMEs in developing their international market potential. Assistance provided by these state FTOs help reduce the market intelligence expenditures of SMEs.

Researchers Pierre-Andre Julien and Charles Ramagalahy (2003) considered SMEs’

ability to acquire information and use sources as a limiting factor in their level of involvement in exporting. In their study, they found that the performance of the SMEs was linked to their general competitive strategy which was linked to their ability to acquire and manage foreign market information. One study suggested that the government assistance programs, in some instances, might divert the small business owner’s attention away from some of its core capabilities (Acs, Morck, and Yeung, 2001). However, to avoid any shortcomings in the government programs, Burpitt and Rondinelli (2000) stated that these assistance programs could

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be tailored to meet the specific needs of the companies with respect to information and knowledge.

Discussion

Government assistance programs are evaluated in a variety of ways. Each of the agencies

involved in assisting U.S. firms regularly conduct surveys of the participants in the programs, collect and analyze data with respect to growth in sales volume, jobs created, and other criteria, and provide reports of the programs to the Administration or Congress. Some of the programs appear to provide the expected benefits while others receive criticism for not meeting all of the desired criteria. However, that said, it would be interesting to know what would be the fallout if these assistance programs did not exist.

U.S. SMEs should be a major player in the international market, and the Federal, state, and local governments should be a force in providing them support and promoting their entry into the global marketplace. Some authors see firm size as a barrier to exporting (Mittelstaedt, Harben & Ward, 2003). They concluded that 20 employees were the minimum necessary for successfully engaging in exporting regardless of other factors such as productivity, labor, or product characteristics. They felt that size had an impact on meeting standards of industrial certification, such as ISO 9000, and that the cost of certification was a major hurdle for small firms. While certification can be an impediment, once again assistance programs can help SMEs meet the challenge.

While much of the focus of this paper has dealt with challenges such as understanding the market and acquiring financing, it should be noted that every SME has to be concerned with establishing a global vision, and the commitment of the leadership needs to be strong. Some of the agencies described herein also include training in leadership. Howard and Herremans (1988) noted that small businesses felt that first-hand information from other firms was very helpful. Many of the volunteers in the Active Corps of Executives (ACE) and Service Corps of Retired Executives (SCORE) have the experience to provide one-on-one counseling.

Each firm contemplating entering the global marketplace needs to conduct an internal company analysis (e.g., company size, domestic success, international experience, product and industry, goals, etc.) and then seek to match their international capabilities with the best international markets that would most likely respond to their product. It is necessary to develop an export plan. It also should be noted that not every SME is in a position to become an exporter. However, the employees and the volunteers of the various agencies and groups can help companies understand what their capabilities are. Although empirical studies are somewhat limited in providing the effectiveness of each of the assistance programs, anecdotal examples are abundant (Tabar, 2004, Alon, 2004).

Overall, SMEs should be aware that understanding the advantages and disadvantages of

exporting can help them make an entry into new markets. Today, powerful, affordable technology, increased access to information on conducting global business, and the growing interdependence of the world’s economies continue to make it easier for companies of all sizes to


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engage in international trade. Figure 1 provides a glimpse of some of the export assistance programs and agencies that are available to support the SMEs in their export activities.

Initial ContactInitial Contact

ScreeningProcess

ScreeningProcess

Export-ReadyExport-Ready

Export-ReadyFirms

Export-ReadyFirms

Counseling &Training

Counseling &Training

InformationOnly

InformationOnly

NeedsAssessment

NeedsAssessment

SBDC (+ISBDC)SCORE

State & Local Resources

SBDC (+ISBDC)SCORE


USEAC’S ETAP:Counseling

TrainingBusiness PlanningMarket Research

Trade FinanceTrade Logistics

USEAC’S ETAP:Counseling

TrainingBusiness PlanningMarket Research

Trade FinanceTrade Logistics

EXPORT ASSISTANCE

FIGURE 1

Trade Information CenterU.S. Export Assistance CenterSmall Business Development Center

Non Export-ReadyFirms

Non Export-ReadyFirms

USEACInternational SBDC


USEACInternational SBDC


Trade MissionsTrade Shows

Export Working CapitalMarket Analysis

Referrals to OPIC, TDA, USDA, AID,

EPA, etc

Trade MissionsTrade Shows

Export Working CapitalMarket Analysis

Referrals to OPIC, TDA, USDA, AID,

EPA, etc


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THE CONTINUING ISSUE OF WORKPLACE VIOLENCE: AN ONGOING STUDY Bryan Kennedy, Athens State University

Sam Campbell, Athens State University Brenda Harper, Athens State University Susan Herring, Athens State University William Whitley, Athens State University

Abstract

This paper presents statistical information collected on violence in the workplace from a study conducted at Athens State University during 2005-2008. The results of the ASU survey are compared to statistical data from the Bureau of Justice Statistics National Crime Victimization Survey and the Bureau of Labor Statistics.

Introduction

Violence in the workplace is a serious safety and health issue that cannot be ignored. A widespread problem that occurs in all types and sizes of organizations, workplace violence impacts employee safety and morale and costs millions of dollars in lost productivity every year. This paper focuses on the current status of research into workplace violence and compares national statistics with data from a survey on workplace violence conducted at Athens State University.

What is workplace violence? It has been defined in varying terms by several government agencies. The National Institute for Occupational Safety and Health (NIOSH), defines workplace violence as “Any physical assault, threatening behavior, or verbal abuse occurring in the work setting,” and the Bureau of Labor Statistics defines workplace violence as “violent acts directed towards a person at work or on duty” including “physical assaults, threats of assault, harassment, intimidation or bullying.” (quoted in Matchulat, 2007, p. 14). The Occupational Safety and Health Administration (OSHA), defines it as “Violence or the threat of violence against workers. It can occur at or outside the workplace and can range from threats and verbal abuse to physical assault and homicide” (OSHA Fact Sheet, 2007). The Federal Bureau of Investigation defines workplace violence as “any action that may threaten the safety of an employee, impact the employee’s physical or psychological well being or cause damage to company property” (U.S. Federal Bureau of Investigation, 2004). On the other hand, the Bureau of Justice Statistics has a much narrower definition, focusing on violent acts including “rape, sexual assault, homicide, robbery, aggravated and simple assaults” (Matchulat, 2007).

These differing definitions make it difficult to determine the full extent of workplace

violence. However, the Bureau of Labor Statistics Census of Fatal Occupational Injuries (CFOI) documents the prevalence of the most serious form of workplace violence. According to the CFOI, there were 516 workplace homicides in 2006 in the United States, out of a total of 5,703 fatal work injuries. This translates to 9% of workplace fatalities (U.S. Bureau of Labor Statistics, 2007).


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In a special Bureau of Labor Statistics report released in 2001, Duhart stated that there were an average 1.7 million incidents of non-fatal workplace violence annually between 1993 and1999. Aggravated assault accounted for approximately 325,000 (18.6%) incidents annually, while simple assault accounted for 1,311,700 (75.2%). Approximately 900 cases of homicide were reported each year, which was less than 0.1% of the total incidents. Twenty percent of workplace crimes involved a weapon. More than 75% of workplace violence victims did not physically resist their assailant. Only 12% of the victims were injured, and slightly more than one-quarter of those required medical treatment. During this time period, non-fatal workplace violence decreased by 44% while all violent crime in the U.S. decreased by 40% over the same period (Duhart, 2001).

As Muchinsky pointed out, “Prior to 1980 such terms as ‘violence in the workplace’ and

‘occupational homicide’ did not exist” (2000, p. 296). This is not to say that workplace violence or occupational homicide were non-existent prior to this point; however, the severity of the problem was not recognized by the public until 1986, when a postal worker killed 14 of his fellow co-workers in Oklahoma City. Media coverage of this incident, along with others, brought workplace violence into the forefront for the American public. From this and subsequent incidents involving postal workers and homicide, the phrase “going postal” entered the American lexicon and a myth was created (U.S. Federal Bureau of Investigation, 2004; Beck & Schouten, 2000; Temple, 2000).

This awareness brought forth a demand for research on violence in the workplace to provide the government and organizations with information to understand and prevent the problem. This demand for information and solutions continues today (Griffin & O’Leary-Kelly, 2004; U.S. Federal Bureau of Investigation, 2004; Allen, 2003; Lipscomb, Silverstein, Slavin, Cody, & Jenkins, 2002).

Some studies conclude that workplace violence is increasing in severity (Kelleher, 1996 as cited in Muchinsky, 2000). Other studies find that the increases are occurring in some sectors or areas while violence is decreasing overall (Lipscomb et al., 2002; Gilmore, 2006), and still others conclude that workplace violence is decreasing (Duhart, 2001; Beck & Schouten, 2000). The FBI, in a report titled “Workplace Violence: Issues in Response,” stated that a huge number of incidents are never reported, which means that statistical reports must be considered only a sketchy representation of the actual situation (quoted by Wade, 2004) and studies based on such reports may be inaccurate.

The research study discussed here was conducted to examine these trends by investigating the prevalence of workplace violence experience among a selected population and comparing the data gathered through this survey with data from the Bureau of Justice Statistics National Crime Victimization Survey, the Bureau of Labor Statistics, and other studies.

Study Methodology

The authors developed a short survey instrument designed to gather data on the prevalence of individual experiences of workplace violence. The survey asked participants to


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identify whether they had seen or experienced any of the following in their place of work over the past three to five years:

• violence involving a deadly weapon (knife, gun, etc.) • violence involving physical force (hitting, shoving, etc.) • verbal violence or abuse (threats, yelling, harassment, etc.) • deliberate damage to company property or equipment

Students in selected business classes at Athens State University from the 2005-2008

academic years completed the survey. The survey was distributed following a class lecture and discussion regarding workplace violence. Students were divided into groups for group/individual thought and discussion, and then asked to complete the survey form.

Statistical Findings A total of 5995 students responded to the survey. Of these, slightly over 13% had witnessed violence with a deadly weapon present. Over 25% of the respondents had witnessed instances of physical violence not involving a deadly weapon. Just over 50% had witnessed instances of harassment, threats, yelling, or other verbal abuse; and almost 20% witnessed instances of deliberate damage to company equipment. The results are summarized in Table 1.

Table 1. Athens State University Workplace Violence Survey Breakdown

Comparison with National Data

The Athens State University survey utilized a convenience sample and the questions do

not exactly replicate those of other reliable surveys, making a side-by-side comparison difficult. The wide range in definitions of workplace violence, discussed above, also makes comparison difficult.

However, the National Crime Victimization Survey (NCVS) utilizes two categories that

invite comparison. The first, aggravated assault, is defined by Duhart as “a completed or attempted attack with a weapon, regardless of whether or not an injury occurred, and an attack without a weapon in which the victim is seriously injured” (2001, p. 12). This category is comparable to the current study’s category of “violence with deadly weapons present”. The second, simple assault, is defined as “an attack without a weapon resulting in either no injury,

Total No. Total % Number of Respondents 595 100.00% Violence with Deadly Weapons Present

79 13.28%

Physical Violence (No Deadly Weapons Present)

157 26.39%

Harassment, Threats, Yelling, or other Verbal Abuse

311 52.27%

Damage to Company Property or Equipment

117 19.66%


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[or] minor injury (such as bruises, black eyes, cuts, scratches, or swelling)” (Duhart, 2001, p. 12), and is comparable to the current study’s category of “physical violence (no deadly weapons present).”

In the first comparison, 13.28% of Athens State University respondents had witnessed

violence involving a deadly weapon, as compared with 18.6% nationwide who experienced aggravated assault. Considering the category of simple assault, 26.39% of the Athens State University respondents had witnessed or experienced physical violence with no deadly weapons present. An additional 52.27% had witnessed or experienced verbal abuse. This compares with 75.2% in Duhart’s report who experienced simple assault nationwide.

An online survey conducted by Workplace Bullying Institute/Zogby in 2007 showed

more than 50% of American workers had experienced or witnessed verbal abuse or bullying in the workplace, and 37% had been bullied on the job (Cable, 2007). This compares closely with the results of the Athens State University survey, in which 52.27% had witnessed or experienced verbal abuse.

The survey category dealing with damage to company equipment or property cannot be

compared to other statistics due to a lack of available information on the subject. Other than a statement in a special report from the Federal Bureau of Investigation (2004), which states that the loss from workplace violence to U.S. businesses is in the billions, no statistical data could be found. This indicates a need for further research to establish the extent and severity of economic loss to American business and industry from the destruction of company property and equipment resulting from workplace violence.

In viewing information from the Bureau of Justice Statistics on crime victimization between 1996 and 2003, statistics indicate that the percentage of workplace victimization has decreased slightly, ranging from a high of 16.8% in 1996 to a low of 14.7% in 2003. The total number of work-related homicides has decreased more than 50% from the high of 1,080 in 1994 to 516 in 2006. This indicates an overall continued decline in the total number of workplace violence incidents. At the same time, the total number of violent crimes nationwide decreased from a high of 8.3 million in 1996 to a low of 4.9 million in 2002, followed by a slight increase to 4.95 million in 2003 (U.S. Department of Labor, Bureau of Justice Statistics, 2002-2005). The Bureau of Labor Statistics Survey of Workplace Violence Prevention showed that the percentage of workplace violence incidents increases with the size of an organization. While only 5.3% of establishments reported an incident of workplace violence in 2005, almost half (49.9%) of the establishments with more than 1000 employees reported incidents. Less than 2.5% of establishments with 10 or fewer employees reported incidents of workplace violence.

Policies, Procedures and Protection In recognizing workplace violence as a problem, many scholars, organizations, associations, and institutions state that the key to finding solutions to this problem lies in developing, implementing, and continuously improving policies and procedures for prevention of and managing workplace violence (Sem, 2007; Montgomery & Cook, 2005; Griffin & O’Leary-


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Kelly, 2004; Wade, 2004; U.S. FBI, 2004; DelBel, 2003; U.S. OSHA, 2002; Lipscomb et al., 2002; Smith, 2002; Beck & Schouten, 2000; Denenburg & Braverman, 1999; VandenBos & Bulatao, 1996). The Bureau of Labor Statistics’ 2005 Survey of Workplace Violence Prevention indicated that larger organizations were far more likely to have a workplace violence prevention policy than smaller organizations, with over 86% of organizations of more than 1,000 employees having policies, compared with just of 20% of those with less than 10 employees. The Athens State University study indicated that over three-quarters of respondents’ employers (77.31%) had written policies on workplace violence.

According to Sarah J. Smith, such policies should include “the means to identify potential for violence; procedures to prevent the occurrence of violence; and, in the event that prevention fails, plans to respond to the incident and minimize further damage” (2002, p. 36).

What can employers do to help protect their employees? According to OSHA (2007),

“the best protection employers can offer is to establish a zero-tolerance policy toward workplace violence against or by their employees.” Other OSHA guidelines for employee protection include:

• Provide safety education for employees so they know what conduct is not acceptable, what to do if they witness or are subjected to workplace violence, and how to protect themselves.

• Secure the workplace. Where appropriate to the business, install video surveillance, extra lighting, and alarm systems and minimize access by outsiders through identification badges, electronic keys, and guards.

• Provide drop safes to limit the amount of cash on hand. Keep a minimal amount of cash in registers during evenings and late night hours.

• Equip field staff with cellular phones and hand-held alarms or noise devices, and require them to prepare a daily work plan and keep a contact person informed of their location throughout the day. Keep employer-provided vehicles properly maintained.

• Instruct employees not to enter any location where they feel unsafe. Introduce a “buddy system” or provide an escort service or police assistance in potentially dangerous situations or at night.

• Develop policies and procedures covering visits by home health-care providers. Address the conduct of home visits, the presence of others in the home during visits, and the worker’s right to refuse to provide services in a clearly hazardous situation (OSHA, 2007, p. 1).

In addition, as Smith points out (2002), workplace violence policies and procedures can only be effective when they are shared with all employees and implemented consistently, fairly, and promptly.

Richard D. Sem reinforces the need for employee training, pointing out that all employees must be able to recognize the early indicators of potential violence and understand their responsibility to notify the appropriate person (Sem, 2007). A study by the American Association of Occupational Health Nurses indicated that, although almost 20% of employees had experienced or witnessed workplace violence, the majority could not identify common warning signs of violence, including mood changes, mental health issues, verbal threats, or past history of violence (Professional Safety, 2004, p. 1).


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Conclusion

The study conducted at Athens State University, in which the majority of respondents reported experiencing some level of violence in their work environment, illustrates the continuing prevalence of workplace violence. This study and the other research studies cited here also indicate the need for further research in several areas. The extent of economic loss to American businesses from the destruction of company property and equipment due to workplace violence does not appear to have been determined, but could be an important issue that warrants study. Further investigation of the effectiveness of employee training to recognize common warning signs of workplace violence is also needed.

Even though national statistics indicate a decrease in reported incidents of workplace

violence, the number of violent incidents, the cost to individuals and businesses, and threats to the health and safety of the work environment remain serious problems in businesses of all sizes and types. According to the Department of Labor, “The Occupational Health and Safety Act’s (OSH Act) General Duty Clause requires employers to provide a safe and healthful workplace for all workers covered by the OSH ACT” (U.S. OSHA, 2002). All employers should seek to provide a safe environment for their employees.

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Beck, J. C., & Schouten, R. (2000, Winter). Workplace violence and psychiatric practice.

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Denenburg, R. V., & Braverman, M. (1999). The violence prone workplace: A new approach to

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Lipscomb, J., Silverstein, B., Slavin, T. J., Cody, E., & Jenkins, L. (2002, Fall). Perspectives on

legal strategies to prevent workplace violence. Journal of Law, Medicine & Ethics, 30 (Suppl.) (3), 166-172. Retrieved July 23, 2006 from Academic Search Premier database (8679303).

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Montgomery, J. G., & Cook, E. I. (2005). Conflict management for libraries: Strategies for a

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UNDERSTANDING COMMUNICATION AND PERSONALITY TYPE—A MEANS OF EMPOWERMENT Bryan Kennedy, Athens State University

Denver Betts, Athens State University Sam Campbell, Athens State University Michael Essary, Athens State University Brenda Harper, Athens State University Susan Herring, Athens State University Linda Shonesy, Athens State University

Abstract

The Myers-Briggs Type Indicator® (MBTI®) is a personality instrument with numerous applications. The focus of this article is on its utilization in understanding and improving the communication process in organizations. While limitations exist (as they do in all psychological instruments), information gained from personality assessments has proven useful to professionals seeking to enhance and improve individual and organizational communication. No additional original research was conducted by the authors of this paper.

Introduction Extensive work identifying personality types and preferences in the early 1900s by Swiss

psychiatrist Carl G. Jung confirmed that individuals have mental or psychological preferences for performing certain tasks, just as they have physical preferences such as a dominant hand or eye. Many human mental processes are not conscious but nonetheless dictate various personal traits and choices (e.g., preferred communication patterns, study habits, modes of relaxation, stressors, etc.). Jung utilized this knowledge in dealing with patients, students, and people with whom he came in contact, and wrote and lectured extensively on his theory of personality preferences.

Two students of Jung’s work – Isabel Briggs Myers and her mother Katherine C. Briggs

– conducted research in the early 1940s on how to measure personality preferences and invited Jung to participate in their research. Jung declined to become involved in the research because of his age, other projects that consumed his time, and the geographical distance between himself and the researchers. However, Jung apparently recognized the potential that their work offered to help move his theory of type into practical applications, because he encouraged the mother-daughter pair to go forward with their research. Subsequently, as a result of their research and development, Myers and Briggs’ (1943/1976) Type Indicator (MBTI®) emerged as a personality instrument having numerous applications.

The Myers-Briggs Type Indicator®

The MBTI® (Myers & Briggs, 1943/1976) can best be described as a self-report questionnaire designed to make Jung’s theory of psychological types understandable and useful in everyday life. MBTI® results identify important differences among normal, healthy people-- differences that, if unrecognized, can result in much misunderstanding and miscommunication.


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The MBTI® can help people better understand themselves: their motivations, natural strengths, and potential for growth (Myers, 1998). Continuing research and development for over 50 years has made the current MBTI® the most widely used instrument for understanding normal personality differences. The instrument’s applications cut across many areas, including (a) self-understanding and development, (b) stress management, (c) team building, (d) organization development, (e) understanding learning styles, and (f) preferred communication styles.

Based on Jung’s premise that people have preferences, and that there are two opposing

behavioral dichotomies for each of four basic preferences (energizing, attending, deciding, living), the MBTI® identifies and measures eight mental or psychological preferences for performing certain tasks, as shown in Table 1 (Berens, 1999).

Table 1

Personality Types and Preferences

Preferred Way of Being Energized

E Extraversion Energized by interaction with others

I Introversion Energized by inner world of ideas, emotions, and impressions

Preferences for Attending

S Sensing Information from five senses, what actually exists

N Intuition Information from sixth sense, what might be rather than what actually exists

Preferences for Deciding

T Thinking Organize and structure information for logical, objective decision

F Feeling Organize and structure information to decide in a personal, value-oriented way

Preference for Living

J Judging Planned and organized life

P Perception More spontaneous and flexible life

Hirsch and Kummerow (1992) outline these types and preferences as follows:

There are two ways a person can be energized. Extraversion is the preference that relates to drawing energy from outside oneself in the external world or peers, activities, and things. Introversion is the preference that relates to drawing energy from one’s inner world of ideas, emotions, and impressions.

The two preferences for attending are Sensing and Intuition. Sensing relates to the preference for paying attention to information that is perceived directly through the five senses and for focusing on what actually exists. Intuition refers to the preference for paying attention to information that is taken in through a “sixth sense” and for noticing what might or could be, rather than what actually exists.

The deciding preferences are Thinking and Feeling. Thinking is the preference that relates to organizing and structuring information to decide in a logical and objective way. Feeling is related to the preference for organizing and structuring information to decide in a personal, value-oriented way.

Judgment and Perception are the two preferences that relate to living, or how one

likes to live one’s life. Judgment is the preference that relates to living a planned and


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organized life. Perception refers to the preference for living in a more spontaneous and flexible way. (pp. 5-6)

Even though people use all eight, only one from each of the four basic preferences is generally favored. The combination of these four preferences results in a psychological type (e.g., Introverted-Intuitive-Thinking-Judging).

Using the MBTI to Understand and Improve Communications Personality preferences exert much influence on individuals in all areas of their personal

and work life. The preferences are revealed in the way people communicate with each other. Professional team-builders and organizational consultants often utilize the MBTI or some other personality instrument as a way to raise organizational members’ levels of consciousness and make them aware that each individual has a preferred manner of communication. According to Jung’s personality theory, about 95 to 97% of personality is unconscious; as a result we are not aware of our communication preferences and patterns of communication. Therefore, effective communication presents a big challenge. Knowledge of type can help eliminate some of the communication noise and hopefully provide more satisfying and productive interactions.

Different personality types often use a somewhat different language when

communicating and there may be a need to translate what is really meant. This different language can lead to confusion and conflict in organizations. As an example, an individual with a thinking preference (when providing feedback or making an individual or team assessment) might refer to or point out “weaknesses,” or “problem areas.” In a similar situation a feeling type would likely refer to “growth opportunities” or “possible areas for improvement.” There are situations which may call for either of the two different approaches. There are also situations that may become enflamed because the desired message is not properly assimilated by one or both parties.

An awareness of personality type and the attendant preferred communication style will

enable an individual to select the communication style that will most likely produce the desired communication. An understanding of type not only will help improve each individual’s communication style but can help alert people as to what to expect from others.

According to Demarest (1997), the following communication behaviors and

characteristics are often associated with each element of type: • People who prefer extraversion are often dynamic, animated communicators, they

process externally so you know what they are thinking; they prefer to communicate directly with others.

• People who prefer introversion are reflective, low key, less demonstrative communicators; since they process internally and verbalize only the results, they provide less information and you are less likely to know how they reached their conclusions and may experience lapses in communication while they process; they are comfortable communicating indirectly via memo, electronic mail, etc.

• People who prefer sensing talk about and are interested in specific information derived from experience and offer evidence from past and present reality; they are


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drawn to usefulness (current potential), communicate unambiguously, and provide exact accounts and actual examples.

• People who prefer intuition talk about and are interested in theoretical and conceptual information; they are excited by future potential, seem to communicate circuitously (jumping around and including unrelated points), and provide general accounts, (drawing associations, attending to figurative meaning, providing few specifics).

• People who prefer thinking focus on the purpose and want to get down to business; they give the pros and cons, note deficiencies and make suggestions for improvement when others put forth ideas.

• People who prefer feeling focus first on the relationship and take time to attend to it; they appreciate the contribution of all perspectives, affirm and build on areas of commonality, and seek agreement when others put forth ideas.

• People who prefer judging focus on reaching closure, on finishing things; they readily come to the point and present opinions that make it seem as though things are already settled for them.

• People who prefer perceiving focus on gathering information and looking at options; they explore a variety of viewpoints and alternatives before coming to the point; and they present perspectives that make it seem as though things are flexible and open-ended. (Demarest, 1997, p. 44. Used with permission, Center for Applications of Psychological Type, Gainesville, FL, http://www.capt.org)

It should be kept in mind that it is possible (although unlikely) to have as many as 16

different personality types when attempting to communicate with a group of 16 or more. As Digh pointed out, it may be necessary to go beyond customary communication methods and consider alternative means of reaching those who process information differently. “Often, a message may have to be delivered in two or more ways to make sure it reaches all the various groups of recipients” (2002, p. 79).

Because of the complexity inherent in the human personality it is impossible to

adequately and completely explain the ramifications of the effect of personality preferences on the communication process. Additionally, many times the personality type of the individuals or group is unknown. However, the following research data found in Using the Myers-Briggs Type Indicator in Organizations (Hirsh,1991, p. RM 53) and Using the MBTI Tool in Organizations (Hirsh and Kise, 2001 p. RM 4-35) provide valuable insight and offer suggestions for communicating with individuals who have the following personality preferences:

• When presenting or explaining to sensing types, be factual, document successful

applications, work out details in advance, reduce risk factors and show why the solutions make sense.

• When presenting or explaining to intuitive types, give the global scene, be confident and enthusiastic, indicate challenges, and point out future benefits.

• When presenting or explaining to thinking types, be logical and state the principles involved, be well organized, list costs and benefits, and stress competent handling of issues.

• When presenting or explaining to feeling types, be personable and friendly, mention other supporters, indicate how solution is helpful, tell why it is valuable, and show how it supports personal goals (Hirsh, 1991; Hirsh & Kise, 2001).

http://www.capt.org/�


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Even when we understand and are aware of the above research, we often still wonder with which of the four types are we are communicating. There are no easy answers to this question. However, knowledge of the research data can allow us to appeal to each group. For example, if we are attempting to raise funds for a shelter for the homeless, we might include some logical arguments which might appeal to thinking types (i.e., state how it will save money in the long run because we can better attract industry to the downtown area), and also include emotional arguments that appeal to feeling types (i.e., how this is the right thing to do in order to be helpful to humankind). Organizations can utilize these types of appeals to persuade customers and prospective customers to buy their products.

Myers & Myers (1992) state that when people differ, knowledge of personality

type can help to lessen friction, ease strain, and reveal the value of those differences. No one can be or has to be good at everything. By developing individual strengths, guarding against known weaknesses, and appreciating the strengths of other types, life can be more amusing, more interesting, and more of a daily adventure than it could possibly be if everyone was alike (p. 210).

The question of whether consideration of type may hinder personal growth was ably addressed by Lawrence (1993). He stated that an understanding of personality type can free a person in several ways. It can provide confidence in one’s own direction of development and help to reveal the areas in which one can become excellent with the most ease and pleasure. It can also reduce the guilt one might feel at not being able to do everything in life equally well. Acknowledging one’s own preferences opens the possibility of finding constructive values instead of conflicts in the differences one might encounter with someone whose preferences are opposite one’s own (p. 17).

In summary, as Opt and Loffredo wrote, “The MBTI preference framework provides a

way to examine and understand connections between personality type and communication style. It also points out the need to create understanding of and tolerance for communication differences” (2003, p. 567).

For as is in one body we have many members, and all the members do not have the same function, so we, though many, are one body. Having gifts that differ according to the grace given to us, let us use them. (Romans 12:4-6, Revised Standard Version).

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Hirsh, S. K. & Kise, A. G. (2001). Using the MBTI in organizations (3rrd ed.). Palo Alto, CA:

Consulting Psychologist Press. Hirsh, S. K., & Kummerow, J. (1992). Life types. New York: Warner Books. Lawrence, G. (1993). People types and tiger stripes (3rd ed.). Gainesville, FL: Center for

Applications of Psychological Type. Myers, I. B. (1998). Introduction to type: A guide to understanding your results on the Myers-

Briggs Type Indicator (6th ed.). Gainesville, FL: Center for Applications of Psychological Type.

Myers, I. B., & Briggs, P. B. (1992). Gifts differing (2nd ed.). Palo Alto, CA: Davies-Black. Myers, I. B., & Briggs, K. C. (1976). Myers-Briggs Type Indicator. Palo Alto, CA: Consulting

Psychologists Press. (Original work published 1943) Opt, S. K., & Loffredo, D. A. (2003). Communicator image and Myers-Briggs Type Indicator

extraversion-introversion. Journal of Psychology, 137(6): 560-568.


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A PROGRAM FOR INNOVATION EVALUATION Tami Knotts, Missouri State University Stephen Jones, Arkansas Tech University Gerald Udell, Missouri State University

Abstract

A sample of more than 2300 innovations provided to an evaluation program was analyzed to determine basic information about the sample itself and the general quality of those innovations. The largest groups of innovations were categorized as home furnishings, personal consumption goods and recreational/entertainment products. While most innovators were judged as having good technical experience, they were seen to be lacking in management and marketing experience. Their innovations were positively judged for functionality but were judged negatively for marketability. Evaluators considered market preparedness and its acceptability by the marketplace to be critical in the potential success of any new innovation.

Introduction

When innovation happens, inventors are usually passionate and enthusiastic about their inventions. However, this excitement can also lead to wasted time, money, and effort on an idea that lacks commercial potential. It may solve a problem for the inventor or a few of his/her friends, but the idea may not be appealing to a broader audience. The resources invested in this failed idea could have been applied to a more feasible invention.

There is no guarantee whether an idea will be successful in the marketplace. Numerous factors such as product quality and firm strength help determine its feasibility. The number of ideas necessary for new product development in corporations varies between 50 and 500 depending on the industry. For successful inventions, the odds are even higher at 100 to 1,000 depending on the market (http://www.innovation-institute.com/). The best method for improving these odds is to determine the ideas with the most market potential through evaluation. Evaluating ideas will not eliminate the risk, but it will help inventors avoid wasting time, money, and effort on projects that have little demand potential.

Innovation Evaluation

Evaluation is normal and necessary, especially in business. From job interviews to performance appraisals to customer feedback forms, evaluation is a part of society. Evaluations, however, can make people nervous because they may lead to an undesirable outcome (Udell, Atehortua, Parker, 1995). This fear may cause some inventors to skip the evaluation step in the innovation process. If the consequences are low, avoiding evaluation may not matter. In the marketplace, however, the stakes are high and mistakes are often very costly. Therefore, skipping the evaluation step for new products can be fatal. According to Udell (2004), “at the idea stage, the odds against success can run as high as 1 in 3,000 and the costs can easily reach the $10,000 mark or higher, so it pays to evaluate.”


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Innovation evaluation should be systematic and comprehensive, but it can also be quick and inexpensive. The main purpose of innovation evaluation is to analyze the idea and determine if any further investment should be made. The second objective of innovation evaluation is to provide feedback regarding errors and to suggest a proper commercialization strategy (Udell, 2004). In this paper, we focus on the Preliminary Innovation Evaluation System (PIES) and its ability to analyze ideas and inventions before market entry.

Preliminary Innovation Evaluation System

The Preliminary Innovation Evaluation System was initially developed as part of a

National Science Foundation grant at the University of Oregon in 1974. Since that time, this structured evaluation format has been used to evaluate over 30,000 ideas, inventions and new products in the United States, Canada and elsewhere. These evaluations are designed to: 1. Identify ideas and inventions worthy of further development 2. Provide feedback 3. Identify potential errors or areas requiring special attention 4. Suggest strategies for further development or commercialization

The PIES instrument consists of 45 criteria grouped into eight different categories which address societal impact, business risk, demand analysis, market acceptance, competitive criteria, experience factors, commercialization strategies, and market structure issues (see Table 2). For each criteria, there are five or six possible responses along with the option to mark an area as “not applicable”. The minimum desirable level of compliance is the median of the responses available. An example of an item and its responses is given below:

Functional Feasibility: In terms of its intended functions, will it do what it is intended to do? This product:

A. is not sound; cannot be made to work. B. won’t work now, but might be modified. C. will work, but major changes might be needed. D. will work, but minor changes might be needed. E. will work; no changes necessary.

Currently, the PIES instrument is being used as part of the World Innovation Network

(WIN), an invention assessment program at Missouri State University. “The WIN program provides inventors, entrepreneurs, and product marketing/manufacturing enterprises with an honest and objective third-party analysis of the risks and potential of their ideas, inventions, and new products” using the Preliminary Innovation Evaluation System (http://www.innovation-institute.com). About 2300 innovations have been submitted to the WIN Program for product evaluation since 1997. This study examines the results of that program. We present descriptive statistics and results, followed by a brief discussion of critical factors in the invention evaluation process.


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Methodology and Results Participants

Participants in this program voluntarily submitted their innovation ideas to evaluators in return for a compensated, professionally developed independent analysis of the innovation and its market potential. Evaluators, in turn, thoroughly examined each innovation presented and provided both analysis and feedback which was intended to help the participants make decisions about further market and product development strategies. The balance of this study will examine basic information gathered so far about the participants and the quality of the innovations which have passed through this program.

Descriptive statistics

The results of this study are at the earliest stages of analysis. However, there are some basic descriptive analyses that can be run on the program’s participants. To date, the data on approximately 2310 innovations is available for analysis. While this represents a large sample size, it does not reflect over 2300 separate innovators but rather over 2300 innovations. A good number of participants have submitted multiple innovations to the program for evaluation. We do not yet have the data on the number of innovations submitted per person, but visual screening of the data ordered by participant has revealed that some have submitted as many as a dozen samples to the WIN Institute.

Additionally, demographic data on the innovators themselves is not yet available, but some descriptive information on the type and location of the sample group is available. Of the 2310 innovations submitted, some 2231 (96.6%) were submitted by U.S. sources. Of the 79 international innovations, 50 (63.2%) were from Canada. Other countries represented include: Australia, China, Israel, Tunisia and several Latin American, European and Arabic countries. The greatest percentage of U.S. states represented were: California (9.6%), Texas (7.6%), New York (6.9%) and Florida (6.4%). The balance of states each had 5.0% or less of the total sample.

Table 1 shows the distribution of innovations by type. The groupings represent a loose interpretation of NAICS types adapted to this program by the authors. No such grouping was done by the program administrators. As the table shows, nearly half of the innovations were identified as either home furnishings (12.5%), personal consumption goods (16.9%) and recreational/entertainment products (16.5%). About 1/6 of the sample


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Table 1. Innovation Groups

Innovation Type Number Percent Animal Products 86 3.7 Building/Construction 98 4.2 Food/Beverage 112 4.8 Home Furnishings 288 12.5 Personal Consumption Goods 391 16.9 Recreational/Entertainment 381 16.5 Safety/Security 168 7.3 Scientific/Technological 180 7.8 Textiles/Office Products 49 2.1 Transportation 171 7.4 Other 386 16.7 Total 2310 100.0

falls into the “other” category either because of difficulty in identifying an NAICS grouping or because of small category size. Evaluation Criteria Table 2 shows the specific items used in evaluating each innovation. Some innovations did not merit analysis using all criteria based upon the stage of the innovation (e.g., an idea versus a fully-prepared prototype) or the type of innovation itself. However, certain items seemed to be more commonly identified as market-ready than others across the sample. These innovations averaged (on the 1 to 5-or-6 scale) high for production feasibility (4.94), service (4.54), legality (4.54) functional feasibility (4.24), research and development (4.19), societal impact (4.08) and environmental impact (4.00), while the innovators themselves scored well on technical experience (4.38). However, the group scored poorly on average in such areas as: potential sales (2.61), promotion (2.60), product life cycle (2.45), stage of development (2.35), and product line potential (1.97). Innovators themselves scored average to below average in the experience areas of management (3.13) and marketing (2.96). Average overall market attractiveness for these innovations was a mediocre 3.01, with only 504 (21.8%) scoring an above average mark. The majority (1175, 50.9%) were found to have a market attractiveness that was “marginal – rejection by investors/licensees is likely.”


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Table 2. Innovation Evaluation Items

BUSINESS RISK CRITERIA SOCIETAL CRITERIA Functional Feasibility Legality Production Feasibility Safety Stage of Development Environmental Impact Investment Costs Societal Impact Payback Period COMPETITIVE CRITERIA Profitability Appearance Marketing Research Function Research and Development Durability DEMAND ANALYSIS CRITERIA Price Potential Market Existing Competition Potential Sales New Competition Trend of Demand Protection Stability of Demand EXPERIENCE FACTORS Product Life Cycle Marketing Experience Product Line Potential Technical Experience MARKET ACCEPTANCE CRITERIA Financial Experience Compatibility Management Experience Learning Production Experience Need COMMERCIALIZATION STRATEGIES Dependence Technology Transfer Visibility New Venture Promotion Initial Distribution Strategy Distribution MARKET STRUCTURE ISSUES Service Overall Barriers to Market Entry Overall Market Attractiveness Overall Risk Assessment Overall Expected Value

The final recommendation, based largely on the evaluator’s subjective summation of the totality of the criteria scores (but not on a mathematical average of them), came in the following form: Not Recommended (Under 30) Should Be Very Limited And Cautious (30-34) Should Be Limited And Cautious (35-40) Recommended But Need To Resolve Unknowns (40-41) Recommended For Limited Development/Commercialization (42-43) Recommended For Moderate Development/Commercialization (44-45) Recommended For Significant Development/Commercialization (46-48)

Scores above a 44 are less common simply as a result of the nature of the innovation process. Table 3 shows the frequency of each recommendation. Less than twenty percent of all innovations submitted for review were assessed as being market-ready (score of 42 or above), while almost three-fourths were deemed to have only minimal market-worthy characteristics (score between 30 and 41). This is normal according to the program administrators since most


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innovations that arrive for evaluation have good beginnings in an idea born from the innovator but have poor market acceptability.

Table 3. Evaluator’s Recommended Action Recommendation Number Percent

Not Recommended 179 7.9 Should Be Very Limited And Cautious 578 25.5 Should Be Limited And Cautious 892 39.3 Recommended But Need To Resolve Unknowns 228 10.0 Recommended For Limited Development/Commercialization 245 10.8 Recommended For Moderate Development/Commercialization 147 6.5 Recommended For Significant Development/Commercialization 0 0.0 No final recommendation given 41 1.8 Total 2269 100.0

Regression Analysis

To see which criteria seemed to be those that evaluators subjectively used most often in making the recommendations, we performed a basic stepwise linear regression of the criteria items onto the dependent variable (recommendation). As Table 4 shows, the majority of the variance is accounted for by technology transfer (licensing potential), stage of development and profitability. Market preparedness for the innovation and its acceptability by the marketplace could serve as general groupings for the remaining criteria. The total adjusted r-square value of 0.535 is high and suggests that these criteria were deemed critical by evaluators to the innovation’s potential market success.

Table 4. Regression Analysis

(dependent variable: evaluator recommendation)

Criteria Item R-Square Change

Adjusted R- Square Significance

Technology Transfer .407 .406 .001 Stage of Development .056 .461 .001 Profitability .035 .496 .001 Product Life Cycle .008 .504 .001 Distribution .006 .509 .001 Promotion .005 .514 .001 Trend of Demand .005 .519 .001 New Venture .004 .523 .001 Legality .005 .527 .001 Function .004 .531 .001 Societal Impact .002 .532 .019 Potential Sales .002 .534 .018 Service .002 .535 .027

Conclusions

While much more research on this database is needed, some critical factors do seem to be

apparent. Innovations are brought to evaluation (and possibly to potential investors) at such an early stage of development that they are not ready for full market penetration. In fact, many innovations in this sample were probably reasonably good ideas at conception, at least in the


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innovator’s mind, and were probably the result of a perceived problem that the innovator wished to solve for the market. However, evaluators judged the vast majority of these innovations as unfit or highly questionable for further development past the stage they were encountered. Does this mean that we should discourage innovation from the non-corporate individual? Not at all. Rather, the innovator should, early on, take the time to determine whether or not this innovation is both functional and marketable. While functionality is critical to an innovation’s being able to actually “fix” a problem, it is unsuitable unless the greater market is willing to accept it. The majority of these innovations had the technical know-how (e.g., production and functional feasibility), but they lacked the market-worthiness that is also important to the success of a new venture (e.g., potential sales and product line potential). Evaluators seemed to use this marketability strongly in their assessments, especially in the areas of technology transfer, stage of development and profitability.

Limitations and Future Research

This is the first step in the investigation into a new database on innovation and

innovators. As such, our conclusions are limited to this specific sample, but its size may indicate that the results are at least partially generalizable to the population. Future research will focus on the impact of gender and type of innovation, among other things, on the quality of innovations. We are also in the process of following up on the sample group to determine to what extent innovators used the information gained from evaluators and whether or not they attempted to market the innovations they had assessed.

References

The Innovation I2 Institute. http://www.innovation-institute.com/ Udell, G. (2004). Assessing the Commercial Potential of Ideas, Inventions, and Innovations: A

Balanced Approach, Innovation Institute. Udell, G., Atehortua, C. H., and R. S. Parker (1995). Support American Made: Manual of

Venture Assessment, Innovation Institute.


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NATIVE AMERICAN CONSULTING: UNDERGRADUATE BUSINESS STUDENTS’ 10-DAY ENTREPRENEURIAL WORKSHOP WITH THE MIAMI NATION OF OKLAHOMA

Joseph W. Leonard, Miami University

Introduction

Many universities offer short-term study programs for credit for undergraduate business students. Recent information indicates that there are now more than 250,000 U.S. students studying abroad each school year ( www.iie.org; www.nytimes.com/2007/11/04/, www.collegenews.org, www.cea.org), and a special commission appointed by Congress and President George W. Bush, had recommended boosting the number of American undergraduates who study abroad to one million by the year 2017 (www.collegenews.org/x5054.xml). An interesting alternative is to do another form of international study within the normally-defined borders of the United States. Since the U.S. federal governments recognizes 562 Indian nations as autonomous, sovereign nations (www.doi.gov/bia), another way students can have an international study experience is by on-site study with a Native American tribe recognized by the U.S. Department of Interior’s Bureau of Indian Affairs.

For over twenty years Miami University has offered several international business

overseas study programs during summers, mainly in Europe and Asia (muohio.fsb.edu/international). In the interim between the fall 2007 and spring 2008 semesters, Miami offered business programs in Vietnam/Cambodia and northeast Oklahoma. These two programs were designed to give undergraduate junior and senior business students an opportunity for intensive study to enhance their more-standard college coursework study. Most of the students who enrolled in these two programs graduated from Miami University in May 2008. All of the enrolled students paid tuition and fees plus the specific cost associated with the programs (defined by the university as “workshop”) including travel, lodging, meals, and other cost. Each program was coordinated and led by one full-time tenured business faculty member, who served as the administrator of the university workshop. Students applied for the program in September and October 2007, and the two leading faculty, with the assistance of the business schools international office and dean’s office, screened the applicants and accepted the well-qualified students. The vast majority of the accepted students did enroll.

This paper’s purpose is to present information about the Native-American workshop

study program with the Miami Tribe of Oklahoma’s for-profit business group, known as “Miami Nation Enterprises” (MNE), which operates as a holding company for all but one of the tribe’s business enterprises. This paper will give the description (who, what, when, where, why, and how) of the study program and offer conclusions and educations implications about the outcome. Program Description – Business

The academic workshop program included 14 students (8 men and 6 women) and one full-time tenured faculty member, all from Miami University in Oxford, Ohio. The 14 students

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included 11 seniors and 3 juniors, of various business majors. With only a couple of exceptions, the 14 students did not know each other before being enrolling into the workshop program. After the first on-campus (Ohio) meeting, the students were placed into four teams (3 or 4 members per team). Team selection was made by the faculty member, primarily making an effort to balance the teams by major and gpa. Thus, each team was represented by at least one accountancy or finance major, and with one management and organization major. All team had at least one high gpa (3.4 or higher) student, and the lower gpa students were fairly evenly spread among the teams. All but one team had a marketing major. Also, the teams were fairly well balanced by gender. Five managers of the Miami Tribe of Oklahoma met with the 14 students. The CEO of MNE was heavily involved in the course process and teaching. Additionally, the tribe’s elected leadership and other key employees participated with the students. The study program was organized as a workshop, operated by Miami University’s central administration, through the Office of Lifelong Learning and Workshops . Additionally, the Farmer School of Business’ Office of the Dean had a direct role on approving and supervising the workshop’s course content and pedagogy. The program met requirements of goals of Miami University and were similar to standard higher education workshop goals including clear objectives, qualified leadership, interactive format, opportunities to practice and demonstrate, and explicit behavioral intentions (McKeachie, 2001) and consistent with good teaching practices (Lowman, 2000).

The student recruiting process began in September 2007, students were selected in

October. Three meetings were held in November and December, and students enrolled and paid in December. The on-site (at the Miami Tribe of Oklahoma) began at 7 pm on Wednesday, January 2 and ended at 7 am on Saturday, January 12. Students completed their written assignments by noon, Tuesday, January 22 (the second week of the spring semester). The on-site study program was located in the city of Miami, Oklahoma (county seat of Ottawa County, in extreme northeastern Oklahoma). Field trips included visits around the county, to Tulsa and Claremore in Oklahoma, and just across the county borders into nearly Kansas and Missouri. The students had class and meetings in tribal offices. The students were housed in a local motel located within a few miles of most of the tribal facilities. The students also visited several tribal-owned facilities, and some land and businesses owned and operated by other tribes in the county.

The overall purpose of the program was predicated on a continuing agreement between

the Miami Tribe and Miami University (a public university in Ohio since 1809). The general theme of “partners in learning” was followed. The tribe and university have been interacting since the 1970s. Many undergraduate and a few graduate students (anthropology, environmental science, architecture, mass communications, education, journalism and linguistic) have studied at the tribe over the past two decades.

The main purpose of this January 2008 business workshop was to provide consulting

input to the tribe and equally to offer an opportunity for the undergraduate business students to experience hands-on learning about entrepreneurship, start-up, and small business. The course was ESP 490 “Special Topics in Entrepreneurship” (3 credit hours) included some lectures about theories and processes of entrepreneurship (Bygrave, 2004; Hisrich & Peters, 2006; Kuratko & Hodgetts, 2007) including planning and environmental analysis, strategic management including development a mindset of “why” and questioning other’s assumptions and assertions (David,


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2007, p. 368), and business development in Native America (Welch, 2006). Discussion, case studies, financial analysis, SWOT, stakeholder, and other strategic management analysis including environments analysis were all part of the course content and process. Business topics included HR, operations, management, marketing, and organization. There were many examples and hands-on stories told by MNE’s CEO and by the faculty member. Additionally, pro-forma financial statements, time lines, legal (tribal sovereignty), and forecasting methods were used by the students in their analysis of their assignments including student presentations, written reports, essays and position papers, and learning activities. Often, during informal time (meals, breaks, travel, etc.) students were interacting about the course and its assignments.

The course was focused on small business as related to the Miami Tribe of Oklahoma’s

strategy of seeking to continue and add to its business and economic wellbeing in order to become self- sufficient so as to not need any monetary support (such as Title VI and other program money and grants) from the U.S. federal government. Program Description – Non-Business

The study program also included a culture/history/current-status course primarily about the Miami Tribe of Oklahoma and some information about Native Americans in general, particularly about tribes headquartered in extreme northeast Oklahoma. Students received one credit hour of BUS 499 (a generic course number, senior-level business analysis). This course included an advance reading packet and some discussion during the pre-departure meetings on campus in Ohio, but the main component was presentation/lecture/discussion from the cultural preservation office of the tribe and tribal facilities/land tours, and a full-day field trip (by tribe’s bus) to museums (Tulsa and Claremore, Oklahoma) and other sites.

The students also had an opportunity to complete one additional semester hour of MGT

499 (a generic management course number) by completing written assignments (papers) of analysis from an advance reading packet given during the fall semester final exam week. Most of the readings were about organizational, cross-cultural, and leadership topics, with an emphasis on start-up and small business. Since none of the 14 students needed the extra credit hour to make it easier for them to graduate on schedule and because of expensive tuition/fees cost, only 2 of the 14 students enrolled in this optional course.

Implications and Conclusions

Based on formal and informal feedback from the students and tribe, the workshop study

program was successful. Student evaluation form ratings on questions and open-ended responses were favorable. The program supported the goals of AACSB (Association to Advance Collegiate Schools of Business; www.aacsb.edu) in business analysis by challenging students to engage in critical and creative thinking, written and oral communications, decision making, and maintaining a broad and integrative perspective and focus.

Additionally, the author will make comparisons between this student consulting

Oklahoma workshop and other workshops the author was done. In the 1980s, 1990s, and 2000s, the author was involved as a faculty member in senior/junior student summer workshops in


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Europe (Luxembourg/Switzerland) and in the Pacific Rim (China, Korea, Japan, Hawaii). Similar aspects and differences between the Oklahoma program and the international programs will be discussed and implications will be addressed.

On September 15, 2008, the author began recruiting business seniors for a program in

Oklahoma, December 28, 2008 to January 10, 2009. The Miami Tribe of Oklahoma and Miami University both support the efforts and hope the program will continue.

References

Bygrave, W.E. 2004. The Portable MBA in Entrepreneurship, third edition. New York: Wiley. David, F.R. 2007. Strategic Management Concepts and Cases, eleventh edition. Upper Saddle

River, NJ: Pearson/Prentice Hall. Hisrich, R.D. & Peters, M.P. 2006. Entrepreneurship, seventh edition. Boston: McGraw

Hill/Irwin. Kuratko, D.F. & R.M. Hodgetts. 2007. Entrepreneurship, a Contemporary Approach, sixth

edtion. Fort Worth: Dryden. Lowman, J. 2000. Mastering the Techniques of Teaching, second edition. San Francisco:

Jossey-Bass. McKeachie, W.J. 2001. Teaching Tips: Strategies, Research, and Theory for College and

University Teachers, eleventh edition. Lexington, MA: D.C. Health. Welch, D. 2006. Contemporary Native American Issues: Economic Issues and Development.

Philadelphia: Chelsea House. www.aascb.edu www.cea.org www.collegenews.org www.doi.gov/bia www.iie.org www.muohio.edu www.muohio.edu/internationaleducation www.nytimes.com/2007/11/04 Note: A copy of the syllabi, assignments, schedule, tuition/fees/cost information, and application form are available from the author.

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CROSS BORDER ENTREPRENEURSHIP AND FOREIGN DIRECT INVESTMENT IN NIGERIA: AN EXPLORATORY STUDY OF THE LEBANESE Charles Mambula, Langston University, Oklahoma

Forward:

Foreign Direct Investment (FDI) can take many forms and has grown dramatically. FDI is now considered one of the largest sources of capital inflow to developing countries (Moran, 1999). The Effect of FDI on the growing economies of India and China in the 21st century for instance is a good example. In the process however, the failure of expatriate assignments is quite high. Estimates place expatriate failure for US companies alone to be between 20-50 percent. According to Deresky (2003), one of the reasons that accounts for this high failure rate is the lack of cross cultural understanding and training. Japanese and European firms appear to do a better job of selecting international managers that can adapt well to foreign environments and as a result experience lower expected failure rate.

With proper application, FDI policies can indeed promote economic growth and general development (Moran et. al. 2005).

One of the leading foreign groups that can be observed in significant number in Nigeria is the Lebanese. It would be interesting to know how and what explains for the Lebanese attraction and ability to settle and do business in Nigeria amidst concerns of security, corruption, political instability, ethnic and religious bigotry among other reasons, which Nigeria is notorious for. Furthermore, there is growing importance of the intersection of entrepreneurship in global business (Oviatt and McDougall, 2005) and findings from this study could add something new to the role of entrepreneurship and factors that determine FDI in countries, especially in Africa where little attention has been given in research (Vaaler 2005). This study will also attempt to disprove the fallacy that investing in lesser-developed countries like sub-Saharan Africa is risky, dangerous and should be avoided. In addition, the study will show that even migrant small entrepreneurs from somewhat unstable developing countries can equally venture and become successful in Africa (Samli, 2004).


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Selected Study Findings

The combination of entrepreneurship and global business studies especially with regard to factors motivating FDI is quite recent and rare. Few studies in this area have been done and are still at the exploratory stage, especially with regards to Africa.

Kabasakal and Bodur (2002), noted that in order to understand the reasons supporting FDI between two countries, there is need to closely examine the commonalities shared between to the states involved. As it is often said, “birds of the same feather flock together”, it would also be true to say that “two cannot walk together unless they agree”. These sayings would also hold true for countries sharing bilateral relationships such as FDI. Other research studies suggest that knowing the geographical location and historical description of countries, as well as their ancient ties and cultural backgrounds can be a useful way of understanding why relationships are forming among sovereign states for cross border business (Cateora & Graham (2007). The bilateral relationships between USA and Britain, or the USA and Canada can typify this example at this point.

Again other studies have established a relationship between personality traits and behaviors and the ability to adapt to the host country’s cultural environment. What is seldom pointed out however is that communication is the mediating factor between those behaviors and the relative level of adaptation the expatriate achieves. The communication process facilitates cross-cultural adaptation through this process; expatriates learn the dominant communication patterns of the host society. Therefore we can link these personality factors shown by research to ease adaptation with those necessary for intercultural communication.

Kim (1988) consolidated the research findings of these characteristics into two categories: (1) Openness- traits such as open-mindedness, tolerance for ambiguity and extrovertedness; and (2) Resilience-traits such as having an internal locus of control, persistence with tolerance of ambiguity and resourcefulness. These personality factors, along with the expatriate’s cultural and racial identity and level of preparedness for change, compromise that person’s potential for adaptation. The manager before his or her assignment by gathering information about the host country’s verbal and non-verbal communication patterns and norms of behavior can improve the level of preparedness. Kim explains that the major variables that affect the level of communication competence achieved between the host and the expatriate are the adaptive predisposition of the expatriate and the conditions of receptivity and conformity to pressure in the host environment. The same factors affect the process of personal and social communication and ultimately the adaptation outcome. Explains Kim, “ Three aspects of strangers’ adaptive change-increased functional fitness, psychological health and intercultural identity-have been identified as direct consequences of prolonged communication-adaptation experiences in the host society.

According to Denisi and Griffin (2008) Clearly, success in foreign assignments is based

less on technical skills and cultural skills would be far more critical because the expatriate manager or this case the entrepreneur is supposed to learn from his or her experience and apply it. Some of the more common skills and abilities assumed to be necessary in this regard include adapt-ability language ability, overall physical and emotional health, human relationship,


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relatively high levels of independence and self-reliance and appropriate levels of experience and education. Overview of Nigeria in Brief

The Federal Republic of Nigeria with Abuja as capital (was Lagos previously) is a West

African coastal state on the shores of the Gulf of Guinea, with Benin to the west, Niger to the north Chad to the northeast, and Cameroon the east and southeast. All these neighbors to Nigeria are former colonies of France or what are known as francophone or French speaking countries. The climate in Nigeria is tropical in the southern coastal areas; it is dryer in the north. The national official and business language is English and the two main religions are evenly divided between Islam and Christianity. The Nigerian currency is known as the Naira.

Before 1914, before there was ever a country called "Nigeria", the people in what is known as "Nigeria" consisted of 4 different 'empires', some of them extending into parts that are not part of current-day Nigeria, like parts of current-day Ghana, and current-day Cameroon. In the 1800s, the British started to reside in parts of these kingdoms and empires. In 1914, combining the Northern and Southern Protectorates and the Colony of Lagos formed Nigeria. The British operated an efficient administrative system and introduced a form of British culture to Nigeria. They also sent many capable young Nigerians to England for education. The experience of Nigerians who lived overseas in the years preceding, during, and after World War II gave rise to a class of young, educated nationalists who agitated for independence from Great Britain. The British agreed to the Nigerians’ demands and, in 1947, instituted a ten-year economic plan toward independence. Nigeria became an independent country on October 1, 1960, and became a republic in 1963.

Today Nigeria expands over 923,768 sq km and it is the most populous country in Africa (estimated at 136,461,000 in mid-2003). It re-achieved democracy in 1999 after a sixteen-year-long interruption by corrupt and brutal series of military dictators and counter-coups. A Brief Overview of Lebanon

The Republic of Lebanon is located in western Asia, with Beirut as capital; it is bordered by Israel and the Palestinian Autonomous areas to the south, by Syria to the north and east, and by the Mediterranean Sea to the west with a coastline of approximately 135 miles.

The climate varies widely with altitude. The coastal lowlands are hot and humid in summer, becoming cool and damp in winter. In the mountains the weather is cool in summer with heavy snowfalls in winter. The official language is Arabic while French and English are widely used as second languages.

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The two main religions are Christianity (43%) and Islam (57%). Lebanon is one of the main regions of the Phoenicians, Semitic traders whose maritime

culture flourished for more than 2,000 years, roughly from 2700 to 500 BC. The region was a territory of the Roman Empire in the province of Syria and during the Middle Ages was important in the Crusades. It was then taken by the Ottoman Empire.

Following the collapse of the Ottoman Empire after World War I, the League of Nations mandated the five provinces that make up present-day Lebanon to France. Modern Lebanon's constitution, drawn up in 1926, specified a balance of political power among the major religious groups.

The country gained independence in 1943, and French troops withdrew in 1946. Lebanon's history from independence has been marked by alternating periods of political stability and turmoil (including a leadership crisis in 1958 marked by the intervention of US Marines) interspersed with prosperity built on Beirut's position as a regional center for finance and trade. Lebanon’s current territory expands over 10,452 sq kilometers and has an estimated population of 4,497,669 (mid-2003). Its currency is the Lebanese pound. Development Reforms in Nigeria

Since the start of this century there has been an emphasis on economic reforms in Africa, which make regional economies more attractive to foreign investors.

Over the past six years in Nigeria, for instance, the government has pursued a policy of trade liberalization (making the operating environment for businesses less rigid and friendlier to foreign investors); and privatization (allowing private ownership of previously government-owned operations). As a result, many opportunities for global business operators have been created in Nigeria, which is now the second largest economy in the region after South Africa. Due to the negative way the international press portrayed Nigeria, beginning from the mid 1980s through the '90s, foreign investors have been slow to take advantage of opportunities in the country.

Since 1999, however, the government of President Olusegun Obasanjo worked to erase that negative portrayal of the country. The effort is yielding results. The World Bank and other international lenders recognize improvements in Nigeria's macroeconomic performance.

The International Monetary Fund (IMF) has agreed to support more economic growth in Nigeria through its willingness to help finance infrastructure development and other improvements in the country. What all of this means is that Nigeria is ready for small and medium business investors from around in the world. Lebanese in Nigeria

While past negative media has kept Western investors away, Lebanese investors have not been afraid to invest in Nigeria and learn about the nation's business culture. Many of them have

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been in Nigeria since the early 1970s and longer. The largest Lebanese community is located in Kano. Kano is a northern Nigerian state capital bearing the same name and is predominantly Moslem. Many of the early Lebanese small and medium businesses in Nigeria started out as traders and retailers of consumer goods. Slowly they have graduated to small-scale manufacturing and food packaging for the Nigerian consumer market and for export. Example: Rofico: Maker of Milcow - a popular milk brand. The Letraco Group is a Lebanese business group that has been in Nigeria for 25 years. They specialize as importers of consumer goods and supermarket operations in Nigeria.

In 2002 Letraco set up a food packaging company at a new factory in Ikeja, Lagos. The new company, Rofico, packages powdered milk products under the brand name 'Milcow'. The powdered milk is manufactured in other countries and imported by Rofico for packaging in Nigeria.

Rofico became very successful under the economic policies of the Nigerian government. The company opened 14 warehouses in less than 18 months after startup. Their distribution network reaches 26 of Nigeria's 36 states as of February 2005. According to Raja Ezzeddine, managing director of Rofico, his company developed the Milcow package in 6 months and the product attained high market penetration with good customer patronage within a few weeks of introduction.

"When we decided to invest in Nigeria, we did a lot of feasibility studies... in the food packaging sub-sector, fast foods and restaurants. We also carried out other market studies and found out that food packaging has good business opportunities here. We did very deep and thorough marketing studies that took us about ten months before we decided on the business we would go into. After this, we used another four to six months to go to the regulatory authorities to register the company, to register the brand and then went to meet machine suppliers and milk suppliers. We had to study the whole process of the packaging industry before we were able to put the company together," Ezzeddine says. “In some countries, Locally domiciled communities—Asians in East Africa, Lebanese in Nigeria and Ghana—provide a valuable business resource because they are thoroughly at home in the local environment. At one time these immigrants provided shop and crop-buying stations in the countryside as a way of promoting cash crop farming. Most have long since moved on to more sophisticated tasks” (Stuart Corbrige, page 535).

Nowadays, there is a vast Lebanese community in Nigeria (more than 100,000 reported by the end of 2003) most of them were there for more than 20 to 30 years. They represent a rising minority with good political ties and business knowledge: “Lebanese were adept at allying themselves with Nigerian politicians” (Tom Forrest, The Advance of capital Africa, page 25). As Nigeria had bad publicity so did the Lebanese, mostly because Lebanese people directed some of the bigger illegal operations in Nigeria like the illegal smuggling of precious stones: “The most profitable part of diamond trade is not the extraction of the stone but their export to wholesale and cutting centers overseas, most probably in Belgium. This export business is dominated by foreigners, especially Lebanese…” (UN Office on Drugs and Crime, Transnational Organized Crime in the West African Region, page 27).


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Even though the Lebanese community in West Africa and especially in Nigeria has

grown, it has been increasing at a very decreasing rate. Fewer immigrants are arriving to Nigeria but those who are going there often have relatives already established. The nature of the migration has changed from poor Lebanese going to work and try to send money back to their families at home, to Lebanese investors now trying to take advantage of a network established with good political ties and a growing economy. Although the Lebanese are known to be generous and hardworking in Nigeria and also as people who have high taste for good things and maintain high quality standards and good work ethic they are also seen as very dubious people who exploit cheap labor. Another aspect of he Lebanese in Nigeria is that they don’t inter marry with other nationals and their businesses are usually family oriented. Environments For Business in Nigeria: The level of risk in host country environments is usually what determines how successful companies will perform in countries from FDI activity (Deresky, 2003).

• Natural resources:

Nigeria’s natural resources consist but are not limited to natural gas, petroleum, tin, columbite, iron ore, coal, limestone, lead, zinc, precious stones and metals and arable land.

The Lebanese that arrived in Nigeria years ago were interested in the black “gold”-petroleum. They contracted with many local and international companies to transport petroleum, engineer drilling plants, refineries and channeling.

Others went on the pursuit of the precious stones and Diamond business. The Lebanese in Nigeria seemed to be good mediators and skilled with good bargaining traits that they might have inherited form the Phoenicians when Lebanon used to be the door to the orient.

Some of Nigeria’s bigger mineral resource exporters today are Lebanese.

The interest of the Lebanese in Nigerian natural resources does not end there; it expands into mining, agriculture, and catering. However, they are not the ones to grow, produce, or build; they were keener on selling, negotiating and transporting.

• Political Environment:

Nigeria is a federal republic in which an executive presidency appoints a Federal Executive Council, comprising government ministers and ministers of state from each of Nigeria's 36 states. The executive is accountable to the bicameral National Assembly. Olusegun Obasanjo, a former military ruler who won election as Nigeria's second civilian president in May 1999, was re-elected in May 2003. The president's, People's Democratic Party (PDP) has majorities in both houses of the National Assembly. The current President is Umaru Musa Yar’Adua who was elected on the PDP platform in 2007.


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With democracy ruling Nigeria, it is now more and more possible for foreign investors to conduct business in Nigeria. All businesses are required to register with the states and need to go through an approval process. The most common business facilitator seems to be “lobbying”. In the Lebanese business environment, lobbying is very common. Very often, parties expect grease payment in order to achieve a transaction. It seems that in both Nigerian and Lebanese cultures, receiving payments in order to conduct business is actually well accepted. This practice is outlawed for American businessmen abroad and is punishable under violation of the foreign and corrupt practices act (FCPA) of 1977.

This might not be the primary reason for success, but the practice sure facilitates making negotiations much easier in Nigeria. The Lebanese have as a matter of fact been blamed for the escalating corrupt practices in Nigeria. Some Lebanese have been accused of being used as fronts to siphon money for corrupt officials out of Nigeria. Some Lebanese have been accused of being involved in other shady business deals like oil bunkering, the sell of illegal firearms and drugs and promoting gambling.

However, the political environment in Nigeria has not always been very stable, nor favorable

to the Lebanese. The Lebanese (among many other foreign groups) have been subjects of sabotage and vandalism from different activists. “…Many Lebanese who were victims of looting have packed their bags and left” (New African, May 1996, 26).

• Regional Environment:

Nigeria's relations with neighboring countries have been generally good, although there is an ongoing territorial dispute with Cameroon over the oil-endowed Bakassi Peninsula.

On a regional level, Nigeria was instrumental in the creation of the Economic Community of

West African States (ECOWAS) in 1975 (see Regional organizations). It was also the driving force behind the ECOWAS Ceasefire Monitoring Group (Ecomog), the Nigerian-dominated multinational military force formed in 1990 to help end civil war in Liberia, which later intervened in Sierra Leone (1997) and Guinea-Bissau (1998). Nigeria has never had any major economical or political dealings with Lebanon however. The relation was always apparent, and it seemed like the Lebanese were more interested in Nigeria than the other way around. Nigeria is seen as a frontier state in sub-Saharan Africa, sometimes referred to as the giant of Africa. Nigeria as a base has good prospects for the Lebanese business people than other Africa states that are economically less robust, even to Arab speaking countries like Egypt, Tunisia, Morocco, Libya or Algeria.

• Legal Environment:

The Public Enterprises (Privatization and Commercialization) Act was promulgated in May 1999. It set out the legal framework within, which government-owned enterprises may be privatized. Under the provisions of the law, the government can retain up to a 40% stake in the privatized utilities, refineries, steel, and fertilizer companies. Strategic core investors may hold up to 40% interest, and the Nigerian public may hold 20%, which will be sold through the stock exchange.


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Governments in Nigeria, including the past Obasanjo administration, have taken steps to

create an environment that encourages foreign direct investment. Along with the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act of 1995, which permits unhindered repatriation of foreign currency, the Nigerian Investment Promotion Commission (NIPC) Act of 1995 substantially eliminates discrimination against foreign investors. A provision permitting 100% foreign ownership in Nigerian entities lets existing investors build up controlling stakes.

The government plans to continue to liberalize the investment climate by removing various bottlenecks to the free flow of FDI. These plans include repealing restrictive laws, improving security, signing investment-protection treaties, providing additional fiscal incentives, privatizing utilities and fully equipping the export-processing zones. Nevertheless, poor infrastructure, political violence, and communal and religious disturbances in various parts of the country continue to discourage foreign investment.

New foreign companies must register with the Nigerian Investment Promotion Commission (NIPC), a one-stop shop for various operating permits. NIPC registration approval is supposed to take 14 working days. However, due to bureaucratic bottlenecks and poor work ethic of government personnel delays are often expected to take much longer.

Oil companies must obtain approval from the National Agency for Petroleum Investment

and Management Services to employ expatriate workers.

Foreign capital must be brought in through authorized dealers, and foreign investors should open domiciliary accounts in which to deposit the initial capital. Banks must apply for a license from the Central Bank of Nigeria and conform to the N2bn paid-up equity requirement. Petroleum and oil-service companies need a license to operate from the Ministry of Petroleum and Mineral Resources. The permit fee is US$15,000. Mining companies need a permit from the Solid Minerals Development Ministry. The licensing body for telecommunications ventures is the Nigerian Communications Commission.

Nigeria has a reputation of having very lax laws due to the high level of corruption in the country. The Transparency international rated Nigeria to be among the most corrupt countries in the world. Chances are that most of the time culprits can bribe their way out of trouble, if it is true that the Lebanese also have a reputation for being unscrupulous in some of their dealings, there would be a good match. However, Nigeria is determined to fight corruption and has set up a number of high-powered establishments to combat the problem. Among these establishments are the Economic and Financial Crimes Committee (EFCC) and the Independent Corrupt Practices and Other Related Offences Commission (ICPC).


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• Socio-Cultural Environment:

Nigeria has over 250 different languages and cultures. The three largest are the Hausa-Fulani who are predominant in the north, the Igbo who are predominant in the southeast, and the Yoruba who are predominant in the southwest. The rest of Nigeria's ethnic groups (sometimes called "micro-minorities") are found all over the country but especially in the densely populated south. The Hausa tend to be Muslim and the Ibo, Christian. Practitioners of both Christianity and Islam are found among the Yoruba. Indigenous religious practices remain important, especially in the south, and are often blended with Christian beliefs.

Nigeria is famous for its English literature and its popular music. Since the 1990s the Nigerian movie industry, sometimes called "Nollywood" has emerged as a fast-growing cultural force all over the continent.

Nigeria has a higher percentage of Muslims than any other country on the African

continent. Not surprisingly, differences in religious inclinations have become the major social division in Nigeria. This could be attributed to the colonial tendencies that brought about a regionalization of Nigeria’s religious geography.

Since the late 1990s and with the transfer of power from the military to civilian rule, Muslims in the north have ceaselessly demanded the introduction and use of the sharia’a (a set of rules and regulations as evident in Islamic law). In the heat of Christian protestation at the end of 1999, several Northern States indicated intent to join in the seemingly laudable cause, regardless of the fact that under such a law, the future of non-Muslims would be either unknown or could be jeopardized. Though proponents of Islamic law explain that the enactment of the sharia’a will not apply to Christians, citizens of Nigeria are still wary of the deplorable act of chopping off of arms and legs as punishment to erring Muslims. There are also the segregation tendencies of the law, which advocate separate taxis and buses for men and women, a ban on the sale of alcoholic drinks and separate schools for boys and girls in sharia’a practicing States.

The social changes that follow the adoption of the sharia’a in some Nigerian States are

bound to affect Christians or non-Muslims. An example was the violent and bloody riots of mid-February 2000 that erupted with the announcement by Kaduna State government that it was considering the introduction of the sharia’a in the State, which equally has a strong Christian and Muslim following. It is therefore evident that in Nigeria, people are often appointed or recommended to prominent positions in government on the basis of religious sentiments rather than on that of visible competence. This could be detrimental to citizens practicing minority religions such as the African traditional religion.

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Demographic Information Nigeria (Year 1995) UrbanPopulation: 39.3% Rural population: 60.7% Population by ethnic composition Hausa: 21.3% Yoruba: 21.3% Ibo: 18.0% Fulani: 11.2% Ibibio: 5.6% Kanuri: 4.2% Edo: 3.4% Tiv: 2.2% Ijaw: 1.8% Bura: 1.7% Nupe: 1.2% Others: 8.1% Religious affiliation Muslim: 50.0% Christian: 40.0% of which Protestant: 21.4% Roman Catholic: 9.9% African indigenous: 8.7% Other: 10.0% Source: The Robinson Rojas Archive (1998)

• Infrastructure:

Nigeria's urban infrastructure is crumbling. Water supply, sewerage, sanitation, drainage, roads, electricity, and waste disposal---all suffer from years of serious neglect. Periodic and routine maintenance, by far the most cost-effective infrastructure spending, is almost zero. Despite the fact that infrastructure facilities are inadequate in Nigeria should not discourage FDI participation. Just like Bill Gates of Microsoft was cited in Prahalad (2005) said, companies must revolutionize how they do business in developing countries if both of that economic equation is to prosper.


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Transport: 1) Railways:

There are about 3,505 km of mainly narrow-gauge railways. The two principal lines connect

Lagos with Nguru and Port Harcourt with Maiduguri. 2) Roads:

In 1999 the Nigerian road network totaled 194,394 km, including 1,194 km of motorways, 26,500 km of main roads and 32,300 km of secondary roads; some 60,068 km were paved but most of which are poorly maintained. 3) Shipping:

The principal ports are the Delta Port complex (including Warri, Koko, Burutu and Sapele ports), Port Harcourt and Calabar; other significant ports are situated at Apapa and Tin Can Island, near Lagos. The main petroleum ports are Bonny and Burutu. 4) Civil Aviation:

The principal international airports are at Lagos (Murtala Mohammed Airport), Kano, Port Harcourt and Abuja. There are also 14 airports for domestic flights. In early 1997 a two-year program to develop the airports at Lagos, Abuja, Port Harcourt and Kano was announced, which have been delayed. Recently however, in June of 2008 two Nigerian aviation ministers were arrested for being involved in corruption scandals worth billions of Naira. After corruption rocked the aviation industry in Nigeria, it was a Lebanese firm that took over the temporary management of the facility.

• Economic Environment: The Primary mineral resources in Nigeria include petroleum, coal and tin while the main

agricultural products include groundnuts, palm oil, cocoa, citrus fruits, maize, millet, cassava, yams and sugar cane.

Oil-rich Nigeria, long hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management, is undertaking some reorganization under a new reform-minded administration. The current administration announced a bold and ambitious vision of attaining a developed country status for Nigeria by the year 2020 AD and is vigorously encouraging FDI. Nigeria's former military rulers have apparently failed to diversify the economy away from its overdependence on the capital-intensive oil sector, which provides 20% of GDP, 95% of foreign exchange earnings, and about 65% of budgetary revenues. The largely subsistence agricultural sector has failed to keep up with population growth; once a large net exporter of food, now must import food. Nigeria at the moment is rated as the largest importer of rice in Africa. Following the signing of an IMF stand-by agreement in August 2000, Nigeria

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received a debt-restructuring deal from the Paris Club and a $1 billion credit from the IMF, both contingent on economic reforms.

Nigeria pulled out of its IMF program in April 2002, after failing to meet spending and

exchange rate targets, making it ineligible for additional debt forgiveness from the Paris Club. By the end of 2002 the government has begun showing the political will to implement market-oriented reforms urged by the IMF, such as to modernize the banking system, to curb inflation by blocking excessive wage demands, and to resolve regional disputes over the distribution of earnings from the oil industry. In 2003 the government began deregulating fuel prices, announced the privatization of the country's four oil refineries, and instituted the National Economic Empowerment Development Strategy (NEEDS) a domestically designed and run program modeled on the IMF's Poverty Reduction and Growth Facility for fiscal and monetary management. GDP rose strongly in 2005, based largely on increased oil exports and high global crude prices. In November 2005, Abuja won Paris Club approval for a historic debt relief deal that by March 2006 eliminated $30 billion worth of Nigeria's total $36 billion external debt. The deal first required that Nigeria repay roughly $12 billion in arrears to its bilateral creditors. Nigeria would then be allowed to buyback its remaining debt stock at a discount.

• Import-Export: Nigeria’s primary export markets are the United States, Brazil, Spain and France. Chief

import sources for the country are the US, the United Kingdom, Germany and China. Nigeria’s exports consist primarily of crude oil, whereas most of its imports consist of machinery and transport equipment, chemical products and manufactured goods, especially iron and steel. The US is Nigeria’s largest trading partner. Exports to the US rose from US$5.65bn in 2002 to US$9.20bn in 2003, an increase of 62.8%. The increase came mostly from the rise of oil purchases. Imports from the US reached US$2.31bn in 2003, up by nearly 100% when compared with the US$1.16bn in 2002.

Nigeria was a member of the Lomé IV Convention, under which 72 African, Caribbean

and Pacific (ACP) countries (mostly former colonies) were affiliated with the European Union. Under the terms of the convention, industrial exports from these countries entered the EU free of duty and quantitative restrictions if they complied with certain rules of origin. Some agricultural products remain subject to restrictions but receive most-favored-nation treatment. Lomé IV expired on February 29th 2000. Negotiations on new arrangements began in September 1998, and an interim agreement was signed at Cotonou, Benin in June 2000. This provided for the continuation of the present favorable terms for access to the EU market for another eight years. Nigeria is a member country of the Summit Level Group of Developing Countries, known as the G15. This group was established during the ninth Summit of Heads of State/Government of the Non-Aligned Movement held in Belgrade in September 1989. The group, with 16 member countries, aims to achieve effective management of defined economic goals. Nigeria has reaped dividends from participation in the group by increasing trade with other members.

Nigeria also belongs to the Economic Community of West African States (ECOWAS),

which aims to establish a common market among its members. However, the volume of formal trade between Nigeria and other ECOWAS countries is relatively small. The ECOWAS Trade


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Liberalization Scheme (ETLS) provides for four successive 25% annual reductions in customs duty on approved manufactured products. Around 50% of the 1,000 industrial products admitted under the trade scheme are manufactured in Nigeria.

To avail itself of the scheme, a company directs its application to the National Planning

Commission, which confirms the claims on local content, plant capacity and related items before forwarding the application to ECOWAS headquarters. Companies registered under the scheme include Cadbury (for confectionery and beverages), Carnaud Metal box (for packaging), UAC Foods and PZ Industries (a Nigerian-owned consumer-products company). However, companies registered under the scheme complain that they cannot take advantage of the preferential tariffs because the institutional framework to implement the scheme is not yet in place. Furthermore, few bona fide manufacturers can compete favorably with the informal sector, which operates a well-run trading system. During 2004 the government announced the approval of 28 additional companies and 63 products that qualify for the ETLS. A total of 41 companies with 91 products applied for approval during the year; 22 of these companies were approved based on local raw-materials content, and the rest were based on value-added to foreign products. The 91 products include pharmaceuticals, biscuits, mineral water, juices, mattresses, packaging materials, lotions, perfumes, sweets, syrups, malt, beer and macaroni.

The Congress of the United States passed into law the African Growth and Opportunity Act (AGOA) in mid-2000. Under this legislation, specified manufactured goods with predominantly local content and value added can be exported to the US at concessionary or zero duty rates.

In addition, Nigeria is equally playing a key role in the New Partnership for Africa’s Development (NEPAD) program. NEPAD is focused on building infrastructure facilities that would support the environment for economic and business development in Africa.


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The Lebanese in Nigeria:

Considering the plethora of opportunities that are available in Nigeria as described above in a relatively more developed environment there is no question as to why the Lebanese are attracted to settle on this fertile ground and do business rather than in other African countries. The nature of the Lebanese business in Nigeria are mostly in trading, a skill they have learned to master since the times of the Phoenicians. However they do not limit themselves to commerce anymore, they now own different types of business, like catering and construction. “…I came here to work and after some time in the fish trade business, I saw a demand for commercial boats, so I decided to start building and selling boats; my company has grown dramatically since then…” says Mr. Antoine Moudaber, a Lebanese entrepreneur who owns a very successful boat business in Nigeria.

Most Lebanese in Nigeria own their businesses; and few of them work as laborers but when they do they work only for other Lebanese. The explanation for this could be thought of as arising from the fact that the Lebanese somewhat appear to be against being told what to do by a ‘boss’ from people of a different nationality. The Lebanese seem to understand and work better with themselves. The Lebanese generally don’t like to co-mingle or form partnerships in business as can be explained by their unwillingness to intermarry with Nigerian nationals. The fact is also true that some of the Lebanese might be newcomers and often want to start off by working for someone they know or who they are related to, or yet it maybe also for cultural norms and language reasons since they would feel more comfortable to be around their own kith and kin: “when I first went there, I did not even speak a word of English, I had a cousin who owned a fish market. The economic situation in Lebanon was not very good, so I had to leave and find work someplace else to feed my family” Mustafa Hamdoun says.” “My cousin gave me a job at his fish market and there I learned whatever little English I know,” he added. At the early stages settling in a host country for business there might be no problem with this approach to inter-cultural relationship, however, the question is what are the long-term socio-cultural effects of non-interaction on social transformations? To what extent would those non-integrative, actions affect national integration (Onimode, et. al. 1983). This type of action has caused rifts in Uganda in the late 1970’s, which led the then President Idi Amin to expel all British Asians out of Uganda, leaving behind all their possessions.

Socially the Lebanese in Nigeria appear to be more relaxed only when relating with

people from their home country even though they are well known for their generosity.

“They are very family oriented people but they lack to bond together as a whole…” (AUB, Lebanese Expatriate Review); what that means is that the Lebanese have the tendency to form separate sub-groups in a society. For example successful Lebanese might appear to be good friends but they tend to get very competitive and jealous of each other’s good fortune and they eventually split and form new social groups while others assimilate with the original. This situation could very well be described as “tribal” and it does not just happen in Nigeria, it also happens in other places like the US. Divisions can be noticed within even small Lebanese communities around just like it happened in Lebanon when relating to the twenty years of war that started between Christians against Muslims and ended up with at least ten different militia groups against each other.


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Overall the Lebanese business community has been able to achieve an appreciable level

of success in the Nigerian business environment. Some of the Lebanese success in Nigeria could be linked to the way they do business, especially in their communication and management skills. They are relationship oriented and tend to be well organized and hard working, always thriving for perfection. Their management skills could be described as strict and somewhat authoritative. Lebanese are very good at networking, and especially getting political connections, which is something they learned to do in Lebanon, where in order to get something done, one had to have good political connections.

Recently however the Lebanese are among those who face several challenges in societies

outside their own, especially with the bad publicity the Middle East has been getting after 9/11, or just for the fact that they are simply foreigners.

However, many remain and permanently reside in Nigeria, and they continue to take advantage of an economy that is growing. Their tenacity and will to succeed is concomitant to the knowledge that their families back home depend on the income they provide. Their competitiveness and “street smartness”, topped by their networking and communication skills make most of them very successful in Nigeria. As the most successful foreign community in Nigeria, the Lebanese have very well mastered how to play by the rules of the game in the Nigerian business environment. Conclusion

From the foregoing article we can see that FDI is not left only for Multi National Corporations alone. The Lebanese entrepreneurs who invested in Nigeria mostly started from small beginnings in search for opportunities beyond their own country borders. They are people who were quick to spot profitable business opportunities and adapt to a new host environment while sustaining successful businesses. They seem to have a rapid learning ability of the societies they are based in (Lane et al., 2004) especially in understanding the cultural environment and communication style. Many of the Lebanese have been able to blend in the Nigerian environment and understand how to relate and do business within the social and culture parameters and yet remain and maintain their identity as Lebanese. In some respects the Lebanese in Nigeria can be said to have ‘gone native’ (Stroh and Co., 2004). Many hundred thousands of Lebanese now call Nigeria their home. There is already third generation Lebanese living in Nigeria. The Lebanese businessmen appear to be shrewd, clever and more organized in applying management skills to their businesses and in some respects more so than even their Nigerian counterparts. Lebanese entrepreneurs even win procurement contracts ahead of Nigerian entrepreneurs. Unlike most Nigerian businesses the Lebanese tend to apply business theory and concepts in a practical sense. They conduct detailed due diligence, feasibility studies, business plans and cost benefit analysis before embarking on any business transaction, which are key forerunners to any successful business venture (Shane 2005, Stutely, 2002). One striking observation about the Lebanese businessmen is how quick they are able grow and diversify their business portfolio than most Nigerians do. The length of time it takes a Lebanese business to graduate from small to medium scale and diversify into other areas is shorter than that of most Nigerians.


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Most Lebanese businesses are engaged in the trading of general merchandise than in

manufacturing activity. The Lebanese are also known to be popular in operating fast food restaurants, gambling and construction business.

On the other side however, the Lebanese are equally thought of as people who dabble into questionable deals and illicit businesses. Some Lebanese have been seen as the main culprits that have introduced fraudulent acts in the Nigerian banking industry, commonly referred to by the criminal code ‘419’. They have been known to be involved in money laundering and all kinds of scams, as well as serve as fronts for corrupt Nigerian public officials who are looking for quick and easy ways of making money. Although the Lebanese came with the intentions of settling down for doing business in Nigeria they are also seen as a two edged sword with both good and bad influences on the Nigerian society. Not all FDI is good! Some type of unwarranted business activities especially in lesser-developed communities like Nigeria’s therefore need to be checked before it destructs the society through cross border activities. Global entrepreneurship could be said to be a positive sum game but it could also have its own negative side effects if left unchecked. This study sets the ground for further research to continue on the role foreign immigrants play in the future of Nigeria and Africa’s development. Another foreign group like the Lebanese that are growing with time in Nigeria and other parts of Africa are the Chinese who are recently coming to live and invest in Nigeria in large numbers. It is important to observe the impact on development of these foreign cultures in Nigeria overtime. Only time will tell how these foreign presences would impact on the country in the long run. Proactive anticipation and constant close monitoring would be a better way to protect against any undesirable effects.

References:

1. (New African, May 1996, 26). 2. (Stuart Corbrige, Critical Concepts in the Social Science, volume II, page 535). 3. Tom Forrest, The Advance of capital Africa, page 25) 4. UN Office on Drugs and Crime, Transnational Organized Crime in the West African

Region, page 27). 5. New African, May 1996, 26). 6. The Robinson Rojas Archive (1998) 7. World Bank Reports 2006. 8. The Economist Intelligence Unit Nigeria Country Profile 2005. 9. AUB, Lebanese Expatriate Review (Undated)


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10. Stutely, R. 2002 The Definitive Business Plan, Prentice Hall, UK 11. Prahalad, C. K. (2005) The Fortune at the Bottom of The Pyramid: Eradicating Poverty

Through Profits, Enabling Dignity and Choice Through Markets, Wharton School Publishing,

12. Samli, A.C. (2004) Entering and Succeeding in Emerging Markets: Marketing to the

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Developing Countries and Economies in Transition, Institute for International Economics, Washington DC

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OH WOULD SOMEONE GIVE US THE GIFT TO SEE OURSELVES Patricia Roshto, University of Louisiana at Monroe Paul Dunn, University of Louisiana at Monroe

Abstract The purpose of this research was to determine if small business owners and accountants had different views of the service and the quality of services offered by accountants. We have discovered that there are differences in their views. The differences seem to indicate that accountants could improve either their services or the perception of their services by small business owners by improving their communication with clients. Like many professionals, accountants understand what they do, but their clients may not. This suggests that accounting educators may want to include client relations in some area of their educational efforts.

Introduction

Accounting information is important in the financial management of small businesses. Many small business owners do not want to or can not do bookkeeping and accounting. Small business owners often use accounting services for some services that they are not able or willing to perform. For example, Davis and Dunn (2005) found that about half of the respondents in their study used internal computer-based accounting systems and the other half used outside accounting services. Those who used accounting services usually used the services for external purposes and those who did their own were much more inclined to use the information for management purposes. Some who did basic accounting internally also used external accounting services for various reasons.

Since small business owners use external accounting services and often do not understand

accounting, it is important that they choose a good accountant to assist them. Choosing which accountant to use is not the easiest task and is often done haphazardly. Once chosen, changing accountants can be a problem, since most small business people have no basis on which to choose except to determine what they think they need done and asking friends or colleagues. This approach can lead to problems for both the small business person and the accountant. There is little in scholarly research about small business owners’ use and perceptions of accounting services. We were interested in how small business owners view their accountant’s services. The specific purpose of this research was to compare how accountants see their services and how small business owners who use those services see those services.

Literature Review

Since financial management is important to small business owners in the financial management of their firms, many small business advisors and teachers advise small business owners to use accountants. For example, Barringer and Ireland (2006, p. 149) suggest that “It is important for a firm to have a firm grasp on how it is doing financially.”

Small business owners are prompted to use accountants even in the planning of a new venture. Scarborough and Zimmerer (2008) suggest that accountants or consultants can be used in the preparation of the financial part of the business plan. Hisrich, Peters, and Sheppard(2008)


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indicate that entrepreneurs may need to get the support of accountants or consultants in record keeping. CPAs provide audits, reviews, compilations, tax services and management advisory services. The latter is considered the most important for small businesses by (Carland and Carland, 1998, p 65). CPAs are considered by these authors to be “…valuable assets in managing the business.” They also suggest that choosing a specific accountant who will work with the firm is more important than the name of the firm, suggesting that the relationship between the accountant and small business owner is more important than other considerations. Longenecker, Moore, Petty, and Palich (2006. p. 507) indicate that “…a firm may have its financial records kept by a certified public accountant or by a bookkeeping service or service bureau that caters to small businesses.” These firms can provide complete accounting services to small businesses at significantly lower cost than larger firms. Bygrave (1997, p. 292) says, “It is important to engage the accountant as early as possible so he can establish the information systems needed and recommend software that will get the company’s records off on the right foot.” Vesper says that accountants can set up financial reporting and control systems, evaluate financial performance, anticipate financial needs, and provide tax and audit services. Choosing an accountant is not covered well in entrepreneurship or small business texts. The internet literature provides much more insight into that issue. Gaebler Ventures (2007. p. 1) suggests that…”choosing the right accountant for your small business can mean the difference between success and failure. After all, it’s your financial numbers that make or break your business.” The website also suggests that having selected an accountant that changing can be a pain and that the costs are too high. The website also indicates that all small business accountants are not equal. The services suggested by the website include tax planning, business consulting, personal financial advice, technology know-how and networking. http://www.gaebler.com/Choosing-Accountants.htm retrieved July 18, 2008.

McCollumn (2007) provides a similar list of services and further suggests that your accountant should respect you, give you a good confident feeling, be easy to talk to on a regular basis and asking questions and discussing financial options with them. Retrieved July 18, 2008 from http://www.quickoverview.com/overviews/choosing-an-accountant-howto.html. Nagle (2008) in the New York Society of CPAs website suggests among other things that you should choose a firm that is interested and proactive toward your firm’s needs. Retrieved July 18, 2008 from http://www.nysscpa.org/sound_advice/choose.html. The Small Business Notes website suggests a similar set of services and adds that the small business owner should be comfortable and have confidence in the accountant. Retrieved July 18, 2008 from http://www.smallbusinessnotes.com/operating/finmgmt/accountant.html. On the Office Live Small Business website, Krotz suggests that women entrepreneurs are advised to choose an accountant with who they feel comfortable and who can explain everything without using technical language. Retrieved July 18, 2008 from http://office.microsoft.com/en-us/officelive/FX102672171033.aspx.

The Institute of Chartered Accountants in England and Wales website suggests that small business owners should choose an accounting firm that is similar in size to your firm, has experience with your sector and type business, has a good reputation, be acceptable to third


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parties, and is authorized to provide the service required. Additionally, they suggest the notion of comfort of fit with the small business owner. Retrieved July 18, 2008, from http://www.icaew.com/index.cfm?route=144307. Based on the literature, it is clear that choosing an accountant is important. The services provided should match the small business owner’s needs and the small business owner and accountant should be compatible.

Methodology

The purpose of the study was to determine how accountants and small business owners see the services and quality of services offered by accountants. To achieve that purpose, discussions with practicing accountants and small business owners were done to determine what services and so on were appropriate. After these discussions, two parallel questionnaires were designed and pre-tested. Questions asked included demographics on the accountants and small business owners, services and quality of services offered, and things liked best and least by clients. Responses on services and quality of services were strongly agree, agree, disagree, and strongly disagree. Liked best and least were posed as open end questions.

Revisions were made based on the pretest and the questionnaire was mailed, with a cover

letter, to a sequential probability sample of 500 accountant firms with 20 or less accountants and 500 small business owners with 50 or less employees drawn from the Businessinfo USA data base 2007. Twenty eight questionnaires from accountants and 113 from small business owners were returned as undeliverable. For the remaining questionnaires, 33 accountants and 27 small business owners were completed and returned. A follow up on those samples is in progress.

The current data set was used in this preliminary report of results. The data set was analyzed by doing a factor analysis to determine the sets of responses to be reported. The tables were arranged according to this analysis. The factors identified included professional involvement with clients, interpersonal involvement with clients, and other issues.

Findings of the Study

Table 1 shows the demographics of the accounting respondents. Most, 86.7 percent, of the accountants had owned or worked in a small business. The legal forms of accounting practice included 17.2 percent sole proprietorships, 10.3 percent partnerships, 17.2 percent LLC, and 48.3 percent were incorporated. Most had small business clients, most, 85.7 percent, had 10 or less full time accountants, all had college or advanced degrees, most, 92.8 percent had accounting or business degrees, most, 93.3 percent had more than 15 years of accounting experience, most, 86.7 percent, were 41 or older, and the majority, 76.7 percent, were male. Respondents were distributed over the country.


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Table 1. Accountant Demographics Owned or Worked in Small Business Education Level Percent Percent Yes 86.7 College 63.3 No 13.3 Advanced Degree 36.7 Total 100 Total 100 n 30 n 30 Legal Form Type Degree Proprietorship 17.2 Accounting 35.7 Partnership 10.3 Business 57.1 LLP 17.2 Other 7.1 LLC 6.9 Total 100 Corporation 48.3 n 28 Total 100 n 29 Number SB Clients Categories Years Accounting Experience 10 < 10.3 15or less 6.7 10-20 10.3 >15 93.3 >20 79.3 Total 100 Total 100 n 30 n 29 Full Time Accountants Age 10 < 85.7 Under 30 3.3 10-20 10.7 30-40 10 >20 3.6 41-50 30 Total 100 50-60 36.7 n 28 Over 60 20 State of Practice Total 100 CA 23.1 n 30 CO 3.8 Sex CT 3.8 Male 76.7 IL 3.8 Female 23.3 LA 7.7 Total 100 MN 7.7 n 30 MO 3.8 MS 3.8 OH 11.5 OR 3.8 RI 7.7 TX 3.8 UT 3.8 WA 3.8 WC 7.7 Total 100 n 26

Table 2 shows the demographics of small business respondents. Respondents were predominantly male, 72.0 percent; white, 84.0 percent; over 50, 72.0 percent; had more than a


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high school educations, had experience in the line of business, 72.0 percent; had operations experience and management experience; started the business, 72.0 percent; was their first business, 69.6 percent; were in service businesses, 53.6 percent; and were spread around the country.

Table 2. Small Business Owner Demographics and Business Characteristics Sex How Started

Percent Percent Male 72.0 Started 72.0 Female 28.0 Bought 28.0 Total 100.0 Total 100.0 n 25 n 25 Ethnicity First Business? White 84.0 Yes 69.6 Asian 8.0 No 30.4 Hispanic 8.0 Total 100.0 Total 100.0 n 23 n 25 Age How Many Businesses? 30-40 4.0 None 77.8 41-50 24.0 1 14.8 50-60 32.0 3 7.4 Over 60 40.0 Total 100.0 Total 100.0 n 27 n 25 Education Level Type Business <High School 8.0 NR 7.4 High School 20.0 Manufacturing 7.1 Some College 24.0 Retail 14.3 College 32.0 Service 53.6 Graduate Degree 16.0 Wholesale 14.3 Total 100.0 Total 100.0 n 25 n 28


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Table 2 continued Line Experience Location of Business Percent Percent Yes 72.0 NR 10.7 No 28.0 AK 4.0 Total 100.0 CA 4.0 n 25 CO 8.0 Operations Experience FL 8.0 0-5 50.0 IA 4.0 6-10 25.0 IL 8.0 11 and over 25.0 MO 16.0 Total 100.0 NC 4.0 n 12 NY 4.0 Management Experience OH 12.0 0-5 33.3 RI 8.0 6-10 50.0 SD 4.0 11 and over 16.7 TN 4.0 Total 100.0 TX 8.0 n 6 WI 4.0 Full Time Employees Total 100.0 0-5 58.3 n 25 6-10 25.0 Rural or Urban 11 and over 16.7 Rural 32.0 Total 100.0 Urban 68.0 n 24 Total 100.0 n 25

Table 3 shows the results of questions related to professional involvement of accountants with their clients. Accountants generally agreed much more with the assertions than small business owners. Significantly all accountants agree that they were acquainted with their clients industry while only 84.0 percent of the small business owners agreed. Most, 96.7 percent, of the accountants felt they went over the statements prepared for their clients, but 88.4 percent of their clients agreed, not significantly different. More accountants, 70.0 percent, agree that their clients used non accounting services compared to only 37.5 percent of small business owners, significantly different. Significantly more accountants agreed that, 96.6 percent, they offered suggestions about management compared to small business owners who felt their accountants offered such suggestions, 60.0 percent. Similarly, 93.3 percent of the accountants agreed that their client use suggestions given compared to 65.4 percent of the small business owners, significantly different.

Ninety percent of the accountants agreed that they referred client to other professionals compared to only 54.1 percent of the small business owners, significantly different. Almost all accountants, 96.7 percent, agreed that they assist their clients in interpreting accounting information compared to 80 percent of the small business owners. This is a heartening result. Over 55 percent of accountants indicated that they visit their clients more than twice a year compared to 28 percent of the small business respondents who said their accountants visit their businesses twice a year. Eighty percent of the accountants agreed that they design bookkeeping


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systems compared to only 44 percent of small business respondents whose accountants designed bookkeeping systems. While there was some agreement between accountants and small business owners related to professional involvement of CPAs with their business, there were some significant differences between accountants and small business owners.

Table 3. Professional Involvement with Clients Acquainted with Client’s Industry* Go Over Statements with Clients

Small Business Accountant Small Business Accountant SA 36.0 73.3 SA 26.9 56.7 A 48.0 26.7 A 61.5 40.0 D 12.0 0.0 D 7.7 3.3 SD 4.0 0.0 SD 3.8 0.0 Total 100.0 100.0 Total 100.0 100.0 n 25 30 n 26 30.0 Chi Square 0.020 Chi Square 0.121 Clients Use Non Accounting Services* Offer Suggestions About Management** SA 16.7 16.7 SA 28.0 27.6 A 20.8 53.3 A 32.0 69.0 D 25.0 23.3 D 32.0 3.4 SD 37.5 6.7 SD 8.0 0.0 Total 100.0 100.0 Total 100.0 100.0 n 24 30 n 25 29.0 Chi Square 0.020 Chi Square 0.006 Clients Use Suggestions* Refer Clients to Other Professionals* SA 23.1 20.0 SA 20.8 36.7 A 42.3 73.3 A 33.3 53.3 D 30.8 6.7 D 37.5 10.0 SD 3.8 0.0 SD 8.3 0.0 Total 100.0 100.0 Total 100.0 100.0 n 26 30 n 24 30 Chi Square 0.046 Chi Square 0.025 Assist Client in Interpreting Information Visit Clients More Than Twice/Year SA 36.0 50.0 SA 16.0 23.3 A 44.0 46.7 A 12.0 33.3 D 16.0 3.3 D 56.0 23.3 SD 4.0 0.0 SD 16.0 20.0 Total 100.0 100.0 Total 100.0 100.0 n 25 30 n 25 30 Chi Square 0.237 Chi Square 0.074 Design Bookkeeping Systems* SA 20.0 30.0 A 24.0 50.0 D 32.0 13.3 SD 24.0 6.7 Total 100.0 100.0 n 25 30 Chi Square 0.047 **Significant at .01, * Significant at .05


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Table 4 indicates that accountants and small business owners tended to agree that accountants were interpersonally involved with them and their businesses. All accountants agreed that they were accessible to their clients 96 percent of whom agreed. Over 96 percent of the accountants and 87.5 percent of small business owners agreed that accountants had a genuine interest in their clients’ businesses. One hundred percent of accountants and 92 percent of small business owners agreed that their accountants communicated well with their clients. Similarly, all accountants and 96.1 percent of small business owners agreed that accountants treated their clients courteously. All accountants and 84.6 percent of small business owners agreed that their accountant goes the extra mile with their clients, significantly different. Only 86.7 percent of accountants and 88.0 percent of small business owners felt that accountants get their clients timely information. This may result from procrastination on the part of clients as suggested by one accountant and one small business owner. Table 4. Interpersonal Involvement with Clients Accessible to Clients Genuine Interest in Client's Business

Small Business Accountant Small Business Accountant SA 52.0 73.3 SA 37.5 63.3 A 44.0 26.7 A 50.0 33.3 D 4.0 0.0 D 12.5 3.3 Total 100.0 100.0 Total 100.0 100.0 n 25 30 n 24 30 Chi Square 0.186 Chi Square 0.126 Communicate Well with Clients Treat Clients Courteously SA 56.0 63.3 SA 53.8 80.0 A 36.0 36.7 A 42.3 20.0 D 8.0 0.0 D 3.8 0.0 Total 100.0 100.0 Total 100.0 100.0 n 25 30 n 26 30 Chi Square 0.283 Chi Square 0.089 Go the Extra Mile with Clients* Help Clients Get Timely Information SA 42.3 73.3 SA 36.0 50.0 A 42.3 26.7 A 52.0 36.7 D 11.5 0.0 D 12.0 6.7 SD 3.8 0.0 SD 0.0 6.7 Total 100.0 100.0 Total 100.0 100.0 n 26 30 n 25 30 Chi Square 0.048 Chi Square 0.329 *Significant at .05 Accountants and small business owners were in general agreement on professionalism of accountants. One hundred percent of the accountants and 88.0 percent of small business owners indicated that accountant were timely and accurate, significantly different. All accountants and 84.0 percent of small business owners felt that accountants’ services are reasonably priced, significantly different. Most, 96.7 percent of accountants and 92.4 percent of small business owners agreed that accountants return phone call promptly. All accountants and 92.3 percent of small business owners agreed that accountants’ advice was respected.


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Table 5. Professionalism Timely and Accurate* Services are Reasonably Priced*

Small Business Accountant Small Business Accountant SA 44.0 76.7 SA 36.0 60.0 A 44.0 23.3 A 48.0 40.0 D 8.0 0.0 D 16.0 0.0 SD 4.0 0.0 Total 100.0 100.0 Total 100.0 100.0 n 25 30 n 25 30 Chi Square 0.037 Chi Square 0.052 Return Phone Calls Promptly Clients Respect Accountants Advice SA 46.2 60.0 SA 50.0 A 46.2 36.7 A 42.3 D 7.7 3.3 D 7.7 Total 100.0 100.0 Total 100.0 n 26 30 n 26 Chi Square 0.523 Chi Square 0.067 *Significant at .05 On what we have called other issues, accountants agreed on all except one assertion. All accountants and 82.3 percent of small business owners agreed that accountants were technically competent; 90.0 percent of accountants and 76.0 percent of small business owners agreed that accountants make them aware of their services; and 100.0 percent of accountants and 76.9 percent of small business owners agreed that accountants answered non accounting questions, significantly different. Evidently most accounting firms do not offer workshops. Only 20 percent of the accountants agreed that they offered workshops for their clients compared to the same percent of small business owners. Table 6. Other Issues Technically Competent Make Clients Aware of Services

Small Business Accountant Small Business Accountant SA 57.7 76.7 SA 28.0 36.7 A 34.6 23.3 A 48.0 53.3 D 7.7 0.0 D 20.0 10.0 Total 100.0 100.0 SD 4.0 0.0 n 26 30 Total 100.0 100.0 Chi Square 0.160 n 25 30 Chi Square 0.470 Provide Workshops Answer Non Accounting Questions* SA 12.0 3.3 SA 34.6 56.7 A 8.0 16.7 A 42.3 43.3 D 44.0 23.3 D 15.4 0.0 SD 36.0 56.7 SD 7.7 0.0 Total 100.0 100.0 Total 100.0 100.0 n 25 30 n 26 30 Chi Square 0.156 Chi Square 0.039 * Significant at .05


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When asked what they liked best about their accountant, small business owners often had nothing to say. However, accessibility, competence, and personal service each received 7.4 percent response. Familiarity, reliability, save taxes, timeliness, and trustworthy were sited by small business owners 3.7 percent each. Accountants, on the other hand felt that personal service, competence, accessibility, and comfortable atmosphere would be more important to their clients. These responses were significantly different.

With regard to liked least, small business owners did not like inaccessible, competence/efficient, fees, lack of knowledge, being related to their accountant, and timeliness. Accountants thought that their clients disliked fees, timeliness, answering machine, and difficult names. The responses were significantly different. On these two questions, the lack of response particularly by small business owners may be the cause of the significant difference. Additional responses may change the result.

Table 7. Like Best and Least Clients Like Best** Clients Like Least**

Small Business Accountant Small Business Accountant NR 63.0 16.7 NR 77.8 23.3 Accessibility 7.4 3.3 Accessibility 3.7 0.0 Comfortable Atmosphere 0.0 3.3 Answering Machine 0.0 3.3 Competence 7.4 16.7 Competent/Efficient 3.7 0.0 Familiarity, Reliability 3.7 0.0 Difficult Names 0.0 3.3 Personal Service 7.4 60.0 Fees 3.7 36.7 Save Taxes 3.7 0.0 Lack of knowledge 3.7 0.0 Timeliness 3.7 0.0 Related 3.7 0.0 Trustworthy 3.7 0.0 Timeliness 3.7 33.3 Total 100.0 100.0 Total 100.0 100.0 n 27 30 n 27 30 Chi Square 0.001 Chi Square 0.000 **Significant at .01

Table 8 shows the reasons small business owners and accountants see as the reason for

changing accountants. Most small business owners did not change or gave no reason for changing. Unreliable/poor service was the most commonly given, lack of knowledge was second, and accountant left the firm and fees were also given. Accountants on the other hand, felt that their fees would be a major reason followed by death, relocated, personal change and personal conflict. Accountants seem to feel that small business owners feel their fees are too high while small business owners did not seem to feel that way.


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Table 8. Why Changed Small Business Accountants NR 59.3 16.7 Accountant left business 3.7 0.0 Death 0.0 6.7 Fees 3.7 43.3 Lack of knowledge 7.4 0.0 No Problems 0.0 10.0 Personal Change 0.0 3.3 Personal Conflict 0.0 3.3 Recommendation 3.7 0.0 Relocated 0.0 6.7 Unreliable/Poor Service 22.2 10.0 Total 100 100 N 27 30 Chi Square 0.001

Summary and Conclusions

Of the topics included in “Professional Involvement with Clients”, six of the ten showed significant differences between accountants’ responses and clients’ responses. More importantly, for each topic in this category, accountants expressed a stronger opinion of the service they provided than the opinion of the clients. These results could be interpreted that although accountants offer suggestions about management or attempt to help clients understand the financial information, the method or style of communication is not well accepted or understood by the clients.

In the “Interpersonal Involvement with Clients,” only one topic showed a significant

difference between opinions of accountants and their clients. However, accountants consistently agreed more strongly that they were more involved with their clients than the clients reported. While the accountants must divide their time among numerous clients and see themselves as doing so in an equitable and professional manner, clients expect more prompt, courteous and personal attention than they receive.

In “Professionalism,” two of the topics showed statistically significant differences in the

responses. In all four of the topics the small business clients consistently expressed more disagreement with the statements than indicated by the accountants. While the accountants expressed no disagreement that their services were reasonably priced, sixteen percent of the clients disagreed with the assertion. As with Interpersonal Involvement, accountants have the opinion they are performing in a professional manner to meet the expectations of their clients, client’s expectations, however, are actually more demanding.

In other issues, the same trend among responses is present. Only one of the topics proved to be statistically different, but accountants continue to have a higher opinion of the services offered than the opinion of the clients. While only ten percent of the accountants admit disagreement that they make their clients aware of the services they offer, twenty-four percent of


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the clients indicated disagreement with the statement. Those in the professional could be making the assumption that “everyone knows about the services an accountant can provide” when, in fact, some clients may not be aware of the areas of expertise in which the accountant would be competent.

The responses to the open-ended questions posed to allow for opinions on services the

clients liked best and liked least and for the accountants to suggest opinions on what they thought clients like best and least, indicated very little consistency among respondents. However, the two groups did not agree.

Conclusions

In general accountants, as with most professionals, believe they are performing in a way to provide professional, timely, accurate, and personal service to their clients. If they did not believe so, they would make adjustments. On the other hand, the clients they are serving hold a different view. Accountants often use highly technical terms that clients are not able to process but are unwilling to admit a lack of understanding. Clients are possibly treated hastily to accommodate other appointments. Accountants believe the time allotted to the client is sufficient to meet the client’s needs, but the client feels rushed and unimportant.

These findings should filter down to the training of new accountants moving into the

profession. The successful accountant in the future must learn to communicate with clients in a clear and direct manner. As small businesses continue to comprise a large segment of the economy, accountants must understand the owners may have little or no formal business education on which to rely. The accountant is a major provider of the services that will determine if the small business owner is successful or not. The accountant must make their clients aware of the services that are available and must be willing to take the time necessary to give adequate direction to the client. If the accountant continues to operate with a high opinion of himself and his services that is not comparable to the opinion held by his clients, he may find his clientele diminishing in favor of those who hold clients in higher regard.

Small business owners also need more training in the use of accountants and accounting

information in the management of their firms. Those who provide training programs for small businesses should develop programs designed to assist small business owners in understanding accounting information and in the use of accountants and accounting services. Both accountants and small businesses can develop better relationships and both can be more successful.

Limitations

The major limitation of this study is the sample size. That is being attended too by follow up and additional sample units.

References

Barringer, Bruce and Ireland, R. Duane (2006). Entrepreneurship, Upper Saddle River, N.J.,

Pearson Prentice Hall.


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Bygrave, Bill (1997). The Portable MBA in Entrepreneurship, New York, John Wiley & Sons,

Inc. Carland, Jim,and JoAnn Carland (1998). Small Business Management: Tools for Success,

Second Edition, Houston, TX, Dame Publications, Inc. Davis, Dot and Paul Dunn (2005). You Ought to Keep Good Records and Use Them in

Management Decisions. Proceedings of the Association of Small Business and Entrepreneurship.

Gaebler Ventures (2007. p. 1). http://www.gaebler.com/Choosing-Accountants.htm retrieved

July 18, 2008. Hisrich, R., Peters, M. and Shepard, D. (2008). Entrepreneurship, 7th Edition, New York, N.Y.

McGraw-Hill Irwin.

Institute of Chartered Accountants in England and Wales, retrieved July 18, 2008, from http://www.icaew.com/index.cfm?route=144307.

Krotz, Joanna. Office Live Small Business, retrieved July 18, 2008 from http://office.microsoft.com/en-us/officelive/FX102672171033.aspx.

Longenecker, Justin, Carlos Moore, J. William Petty and Leslie Palich (2006). Small Business

Management, 13th Edition, Mason, Ohio, South-Western. McCollumn, Devon (2007). Retrieved July 18, 2008 from

http://www.quickoverview.com/overviews/choosing-an-accountant-howto.html. Nagle, Cynthia, New York Society of CPAs Retrieved July 18, 2008 from

http://www.nysscpa.org/sound_advice/choose.html. Scarborough, Norman and Thomas Zimmerer. (2008). Essentials of Entrepreneurship and Small

Business Management, 5th Edition. New Jersey, Pearson Prentice-Hall, Inc. Small Business Notes, retrieved July 18, 2008 from

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THE BUSINESS OF THE BIBLE Lawrence Ruddell, Houston Baptist University Marty Bressler, Houston Baptist University

Abstract Only

The Bible could be considered the keystone of the Christian faith. Christians around the world read the Bible to learn about their faith and to evangelize. But the Bible and other religious books are big business, accounting for hundreds of millions of dollars in sales each year. Many more Bibles are given away as “free samples” to attract new followers, often from new market segments. This paper examines the role of the Bible and other religious books from a business perspective and particularly as used to market the Christian faith.

The Bible is the best selling book of all time and often one of the top sellers every year. The Bible has been translated from its original languages of Hebrew and Greek (and some Aramaic) since the earliest of days. For example, the Septuagint (around 285 B.C.) was the translation of the Hebrew Bible into Greek. The Latin Vulgate (Jerome, around 400 A.D.) served the early Catholic Church. The Reformation (1500s and some elements were earlier) fueled by the printing press (Gutenberg’s invention) created a dramatic increase in translations based on different nationalities such as Luther’s German version and Wycliffe’s English translation. The King James Bible of the 1600s served as the standard for English for many years.

Beginning in the 1950s, other translation emerged including the New American Standard version, the Revised Standard Version and the New International Version. Also, a new approach began in the 1960s and that was to produce what were called Paraphrases. Examples included the J.B. Phillips version, Good News for Modern Man (1966), and the Living Bible by Ken Taylor. The tension was to produce something that was close to the original languages as possible while still being understandable.

Since the 1990s, the number of Bibles, Bibles has expanded even more due to the influx

of a new genre; called “niche” Bibles. Some of these versions are different paraphrases. However, others use common translations yet with different “packaging” including study notes. Study Bibles have been popular for many years in Christianity (i.e. the Geneva Study Bible used by Americans in 1600s) but the study helps of niche Bibles are different. Whereas most standard Study Bibles are looking at the Bible from a theological focus and trying to answer questions about what the Bible says about different topics such as Creation, who Jesus is, and what happens after death (topics the Bible covers); niche Bibles include a variety of statements that focus on the particular group of people the Bible is packaged for and include comments not necessarily summarizing the Bible but based on who the celebrity status of the contributor. Bible sales have always been brisk; note the traveling sales men who peddled Bibles on the American frontier. But current niche Bibles is not necessarily focused on the accuracy of the text but the amount of sales that can be generated. There are those that argue that the Bible should be more than marketing. Niche Bible marketers argue that it is “good” that more people have a copy even though they may not read it.


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In this paper, we will examine some of the different niche Bibles and their sales, look at some of the marketing approaches used, and discuss issues related to whether this is good or bad for the distribution and study of the Bible as a religious book. Fockler pinpoints the issue (2004, p. 71): “Always the book [the Bible] held the key to truth. In whatever language bound by whatever technology, the reader approached the book with awe and expectation. With niche Bibles, the book approaches the reader and neither remains the same.”


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STRATEGIES FOR SCALING UP AND/OR ACCELERATION OF MICROFINANCE Warner Woodworth, Brigham Young University

Abstract Only

This paper reports on research regarding the growth of the microfinance movement by

examining and comparing two models for extending the outreach of grassroots credit for poor women. It draws on the author’s field research over the past six years working, in the first case, with an NGO based in the United States which concentrates on microlending to the poor of Peru. How this effort fits within the larger context of economic development approaches in that South American country is explored in detail, drawing upon its work in both rural and urban areas. Field interviews with staff and clients in Peru reveal a slow but steady pattern of growth. In contrast, the second case analyses the start-up and rapid expansion of another U.S. based NGO that established a business model for rapid accelerating and scaling up microcredit services, mostly in India working among poor rural women. The paper evaluates and compares both similarities and important differences between the two microfinance methodologies, and suggests implications for other new NGOs planning to enter this innovative arena of economic empowerment in the Third World.


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DELTA DENTAL OF ARKANSAS: TAKING THE NEXT STEP Larry Davis, Texas A & M University - Texarkana Joan Brumm, Texas A & M University - Texarkana Edward Bashaw, Texas A & M University - Texarkana

Abstract Only

Delta Dental of Arkansas, an affiliate of the Delta Dental Plans Association, had been a profitable provider of dental insurance from inception in 1982 as a one product company selling group dental policies to companies in Arkansas. With the retirement of its founding CEO in 2000 after 18 years of service, its board of directors crafted a new organizational structure, hired a new CEO from the outside, restructured the board, and redirected the focus of the organization.

An external marketing firm employed by the company, following extensive research,

encouraged Delta Dental of Arkansas’ management to develop a broader and more comprehensive approach to doing business. Following the consultant’s recommendations, Delta Dentals’ new business plan focused on ideas to generate repeat business, attract new business, diversify, and introduce additions to the company’s line of services to influence company growth.


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PEDAGOGY FOR ENTREPRENEURSHIP AND SMALL BUSINESS EDUCATION Facilitators Don Bradley, University of Central Arkansas

Bill Jackson, University of South Florida, St. Petersburg This workshop is designed to allow participants to share their particular approaches to

helping students learn entrepreneurship and small business management skills and knowledge. Each participant can share with their colleagues the methods and techniques they have developed to improve student learning and understanding in each of the classes they teach.

In addition, participants can share their curriculums, where they are, how they were

developed and particular opportunities they have had to impact entrepreneurship and small business education during their career.

Our hope is that each participant will take away ideas that they can use in their programs.

If possible, a document with each of the approaches discussed can be shared at a later date.


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XLRB WORKSHOP Michelle McEacharn, University of Louisiana at Monroe

Introduction

XBRL (eXtensible Business Reporting Language) is an electronic means for reporting

financial information which works across financial software programs. Many large corporations have already incorporated XBRL, and financial reporting to the SEC using XBRL will soon be mandatory. The use of XBRL is global. Japanese companies will report financial results to its regulatory board beginning in August, 2008, and XBRL becomes mandatory in 2010 for all companies reporting Annual Accounts in the United Kingdom.

Will XBRL have an effect on small businesses? When the U.K. requirement goes into

effect, it is estimated that 85% of the Annual Accounts submitted in XBRL will be from small businesses. It is likely only a matter of time until small business in the United States face mandatory XBRL reporting for at least some minimal financial reporting (e.g., tax returns to the IRS). Additionally, as large financial institutions begin implementing and relying upon financial data that meets XBRL standards, it is reasonable to assume that small businesses will need to provide information to those financial institutions in XBRL form when seeking financing opportunities.

This workshop will introduce participants to XBRL. The workshop will begin first with

an introductory concepts discussion. The remaining part of the workshop will focus on a demonstration of XBRL reporting and practical information for implementation of XBRL in a small business. Specifically, the workshop will be organized and presented as follows: An Introduction to XBRL

The first portion of the workshop will address basic XBRL concepts. Participants will learn what XBRL is and how it was developed from XML (eXtensible Markup Language). A brief history of the development of XBRL will be provided as well as an overview of the key players in the XBRL world. A presentation on the timeline for XBRL implementation will also be made. Advantages and Disadvantages of XBRL The second portion of the workshop will focus on the general advantages (or benefits) and disadvantages (or costs) of XBRL. Commonly cited advantages of XBRL include its standardized electronic format, a reduction in financial reporting time and expense, a reduction in errors, and a greater ability for analysis and comparison. Recognized disadvantages associated with XBRL include its underlying complexity for novice technology users and the additional software and training needs. Significance and Applicability to Small Business

The third portion of the workshop will involve a brief presentation on the potential specific significance and applicability of XBRL to small business. Arguments both for and


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against the value of XBRL in small business will be presented. Open discussion among workshop participants on the pros and cons of XBRL to small business will be encouraged. XBRL Technology – Basic Concepts This section of the workshop will be more technical in nature as the discussion turns toward explaining how XBRL works in financial reporting. Information and examples about the two types of XBRL files, taxonomies and instance documents, will be provided. Links and examples for “acknowledged” taxonomies through XBRL International will also be provided to participants. This portion of the workshop will also include a description of the common (and generally free) intermediary software viewer applications that are available for reading XBRL documents and the available-by-purchase applications that serve as editors and permit greater functionality of use. XBRL Technology – A Demonstration The final portion of the workshop will center on a practical demonstration of XBRL technology. First, participants will be exposed to example financial reports that have been provided to the SEC to provide participants with a greater familiarity with the use of XBRL. Second, a demonstration of the use of XBRL with test data will be made so that workshop participants can view the live use of XBRL in financial reporting. Workshop participants will walk away from this session with a greater awareness of XBRL and its potential applicability to small business, as well as a basic working knowledge of the XBRL technology.


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GETTING PUBLISHED Facilitators

Robin Peterson, New Mexico State University Don Bradley, University of Central Arkansas Jane Licata, Southeastern Oklahoma State University

This workshop was designed to allow participants to learn how to develop and implement research agendas the will help insure their career advancement. The facilitators were chosen because of their personal experience in research and publication. Each has or is serving as the editor of an entrepreneurship and/or small business publication. Successful researcher/publishers are asked to share their particular insights into the world of research and publication. It is possible that a document outlining the approaches that have been successful for the group.


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HUMAN RESOURCE MANAGEMENT IN SMALL BUSINESSES Larry Short, Northwestern State University, Louisiana Paul Dunn, University of Louisiana at Monroe Kathleen Liang, University of Vermont

Introduction

This workshop is designed to provide participants an understanding of the basic concepts

of human resources in small business proposed by the workshop leaders. The workshop is based on a book prepared by two of the workshop leaders as a guide for small businesses. The book is “Three Secrets to Successful Management in Small Businesses.”

Origin of the book

In a study conducted of Louisiana small businesses, the authors found a surprising lack of

appreciation for the importance of human resource management among SBOs. For example, over 40 percent of SBOs employing ten or fewer employees felt that training of employees was of no importance, while only 35 percent admitted needing assistance in training. The attitude toward training was slightly more positive among SBOs employing over ten employees, where almost 80 percent believed that training of employees was important—and 60 percent of these SBOs felt they needed assistance in training employees. With this study backing up our many years of experience working with SBOs, we decided that a simple, straight forward guide to the art of managing employees was needed. Concept of the book

The underlying concept of this book is envisioned in its title, Three Secrets to Successful Management in Small Businesses. The term “Small Business” means this book is written specifically for small business owners, that is, SBOs employing less than 50 employees. The term “Management” suggests that the book covers those responsibilities dealing with the art of getting work done through the efforts of others. And the terms “Three Secrets” means that only three of the most basic and fundamental elements of the art of supervision will be covered. Thus, this is a short, concise guide to help SBOs learn what is important to know in getting maximum productivity from their employees.

In the search for training programs that would serve as the foundation for this book, one

source stood out among the many training programs developed over the past 100 years. The famous “J” programs developed by Dooley, Dietz, Kane, and Conover of the TrainingWithin Industry (TWI) Service of the War Manpower Commission during World War II were a phenomenal success! These programs had a significant impact in developing the civilian workforce that staffed the manufacturing plants throughout the USA that turned out the products necessary to win WW II. Almost 1,800,000 people were trained in over 16,000 factories. The War Production Board, in a report issued in September 1945, stated that 86 percent of the manufacturing plants using the TWI programs reported at least a 25 percent increase in production; 100 percent of the plants reported at least a 25 percent reduction in training time; and 88 percent of the plants reported at least a 25 percent saving in manpower. After the end of


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hostilities, the TWI programs were used in Japan by General MacArthur to help rebuild the Japanese industry. One of the “J” programs, The Job Methods Training program, was the pre-cursor to the kaizen programs (which roughly translates to mean continuous improvement) in Japanese management that helped develop Toyota into the largest, most efficient automobile manufacturer in the world.

The “J” programs initially concentrated on three major job responsibilities of the

supervisor. Job Instruction Training programs were designed to teach supervisors how to develop and conduct training programs that would result in less scrap, rework and rejects and fewer accidents and less tool and equipment damage. Job Methods Training programs taught supervisors a simple, practical way of making better use of employees, machines, and materials that would lead to the production of greater quantities of quality products in less time. Job Relations Training programs were designed to help supervisors develop their skills in leading employees; emphasis was placed on actual skill development and problem solving, not on supervisory theories. Two other programs were also developed – Union Job Relations and Program Development – that are usually not of interest to the owners of small businesses and, thus, will not be covered in this book.

A portion of the workshop will consider the hindrances to understanding employees.

Often assumptions small business managers make about employees causes problems to good employee relations. These hindrances will be considered.

The workshop will expose the basic notions in the book and ask that participants discuss

and suggest changes. The participants will benefit from the workshop by being exposed to and discussing the basic concepts of HRM in small business and will be asked to consider including the concepts in the book in small business management classes and training sessions. This is a practitioner oriented program. Small business management, HRM management and management professors and small business advisors will be particularly interested in the session.

Teaching Strategies 4

Documents

Transcript of Teaching Strategies 4