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Results: Exploring entrepreneurship in a declining economy

Written by: Journal of Development Entrepreneurship

Article Overview: A confirmatory factor analysis of the "reasons leading to start-up" items was performed to ascertain if a resolute set of start-up reasons or outcome factors existed.

Results: Exploring entrepreneurship in a declining economy

A confirmatory factor analysis of the "reasons leading to start-up" items was performed to ascertain if a resolute set of start-up reasons or outcome factors existed. To be included on a factor, an item must have had at least a .50 factor loading. Five factors explaining 64.4 percent of the variance emerged from analysis (see Table 2). The resulting factors are extrinsic rewards, independence, intrinsic rewards, innovation and security. To test the reliability of the factors, alpha coefficients were computed for each of them. The resulting reliabilities of .78, .73, .81, .65 and .68 for extrinsic rewards, independence, intrinsic rewards, innovation, and security respectively, suggested that the factors were reliable. Table 2 includes the eigenvalues for each factor as well as the percentage of variance explained.

An attempt was made to identify differences in the five factors based on gender, industry, and level of education (grouped into degree holders and non-degree holders). Specifically, t-tests were computed on gender and educational qualification, and an analysis of variance (ANOVA) was conducted for industry type. Only two significant differences were found across the five factors: gender differences were identified on the independence factor, with males tending to place more importance on independence (x = 7.89) than females ( = 5.67); level of education differences were found on the innovation factor, with degree holders perceiving innovation to be more important (x = 8.12) than non-degree holders (x = 5.56).

An examination of the reasons advanced by respondents for starting businesses (see Table 2) suggests that more "entrepreneurial" factors (as opposed to factors related more to subsistence or conventional small businesses), such as developing an idea for a product, exploiting opportunities, and being innovative had the lowest factor loadings. These factors were among the fifteen which Lau and Chan ( 1994) summarized from the literature. Thus, worsening economic conditions would appear to be less associated with motivators that result in highly entrepreneurial activity and more associated with conventional small business activity. That is, an upsurge occurs in less innovative, less growth-oriented businesses as a result of "unfriendly push" from the difficult economic conditions and the consequent hardships.


Next, the impact of support programs and initiatives, and their executing agencies, on firm performance was assessed. MANOVA was used to test for these differences because the dependent variables (see methodology discussion) showed statistically significant correlation (r >0.50 atp

A comparison of the performance of supported firms and those that were not supported revealed no significant overall difference (MANOVA: F(4,65) = 2.21, p = 0.05). The result showed that, contrary to expectations and the motivations for creating such support programs, firms receiving support services did not experience significant performance advantage in terms of sales growth, employment and productivity. The univariate tests also found no significant difference in the performance variables, except for growth in employment (F(1,63) = 6.78; p = 0.01). The first hypothesis was therefore not supported. It appears that supported firms did take actions which led to expansion in their workforce, but there was no subsequent effect on their overall performance.

In examining only supported firms, no significant difference was found in the performance of firms that were moderately supported compared to those that were substantially supported (MANOVA: F(4,65) = 2.72;p = 0.01). The Univariate tests also uncovered no significant differences in the performance relationship. Thus, the hypothesis regarding performance differences based on level of support was not accepted.

Finally, differences in performance were assessed based on types of support received by the small business. The overall MANOVA results indicate that it does not appear to matter whether firms received only non-financial support, only financial support, or both financial and non-financial support (see Table 4). However, a Duncan's range test indicated greater performance in firms that received both financial and non-financial support. This finding implies that the typical small firm in Nigeria requires comprehensive support for an impact to occur.

Exploring entrepreneurship in a declining economy
Journal of Developmental Entrepreneurship, Apr 2000 by Yusuf, Attahir, Schindehutte, Minet

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Article Tags: analysis of variance, analysis of variance anova, coefficients, confirmatory factor analysis, degree holders, education, educational qualification, eigenvalues, extrinsic rewards, females, gender differences, innovation, intrinsic rewards, literature, reliability, respondents, small businesses, subsistence



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