Entrepreneurship barriers and entrepreneurial inclination among Malaysian postgraduate students

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  • Entrepreneurship barriers andentrepreneurial inclination

    among Malaysian postgraduatestudents

    Manjit Singh SandhuSchool of Business and Economics, Monash University Sunway Campus,

    Bandar Sunway, Malaysia

    Shaufique Fahmi SidiqueInstitute of Agricultural and Food Policy Studies, Putra Infoport,

    Universiti Putra, Selangor, Malaysia, and

    Shoaib RiazSZABIST Dubai Campus, Dubai International Academic City, Dubai,

    United Arab Emirates

    Abstract

    Purpose Postgraduate students who are more mature and have greater job experience are morelikely to be inclined towards entrepreneurship. However, postgraduate students face various barrierssuch as lack of funds, fear of failure and lack of social networking that may hinder theirentrepreneurial inclination. The barriers faced by these postgraduate students may also exhibitdifferent dimensions compared with barriers faced by existing entrepreneurs. This study aims toexamine the relationship between perceived barriers to entrepreneurship and entrepreneurialinclination.

    Design/methodology/approach Based on a survey-based methodology, data were collected from asample of 267 postgraduate students from various Malaysian universities. Respondents perceptiontowards five barriers to entrepreneurship (aversion to risk, fear of failure, lack of resources, lack of socialnetworking, and aversion to stress and hard work) and their entrepreneurial inclination were assessed.

    Findings The model R-squared indicated that 31.5 percent of the variation in the entrepreneurialinclination is explained by the five perceived barriers. The highest ranked barrier to entrepreneurshipwas lack of social networking followed by lack of resources and aversion to risk.

    Research limitations/implications The findings in this study cannot be generalized tonon-student populations since it covers only postgraduate students. The quantitative approach usedwas unable to uncover in-depth information on the various barriers. A qualitative approach may bemore appropriate to obtain further details.

    Originality/value This research provides interesting insights into the entrepreneurship barriersfaced by postgraduate students from a developing nation where such research is lacking.

    Keywords Entrepreneurialism, Postgraduates, Malaysia

    Paper type Research paper

    IntroductionEntrepreneurship is receiving more attention in the area of business research (Davidssonand Wiklund, 2000; Low, 2001; Shane and Vekataraman, 2000; Venkataraman, 1997).

    The current issue and full text archive of this journal is available at

    www.emeraldinsight.com/1355-2554.htm

    IJEBR17,4

    428

    Received November 2010Accepted November 2010

    International Journal ofEntrepreneurial Behaviour &ResearchVol. 17 No. 4, 2011pp. 428-449q Emerald Group Publishing Limited1355-2554DOI 10.1108/13552551111139656

  • It is one of the driving forces for the achievement of economic development and jobcreation (Gorman et al., 1997 and Brockhaus, 1991). Policymakers, academics, andresearchers agree that entrepreneurship is a vital route to economic advancement forboth developed and developing economies (Zelealem et al., 2004). Todays smallbusinesses, particularly the new ones, are the main vehicle for entrepreneurship,contributing not just to employment, social and political stability, but also toinnovative and competitive power (Thurik and Wennekers, 2004).

    In Malaysia, the development of entrepreneurship, in both concept and activity, isalso becoming more important. The importance of entrepreneurship to the growth ofMalaysian economy is evident by the number of supporting mechanisms and policiesthat exist for entrepreneurs; including funding, physical infrastructure, and businessadvisory services. The establishment of a special ministry for entrepreneurs (Ministryof Entrepreneur Development Malaysia) in 1995 highlights the priority the governmentplaces on entrepreneurship and entrepreneurs development. The establishment of theministry is also timely considering the change in employment landscape in Malaysia.Graduate unemployment is becoming a major problem in Malaysia and it was reportedthat the number of unemployed graduates is approximately 36,669 in 2005 (ClarenceNgui, 2005). The data also suggest that economic growth is now creating fewer jobsthan it used to and this makes it more difficult for people to compete for jobs.

    One of the solutions to the graduate unemployment problem is to enterself-employment or establish their own businesses. Studies have shown thatpermanence and employment longevity is no longer a significant feature of careerpaths (Fallows and Steven, 2000) and the changing nature of career prospects in largeorganizations has resulted in graduates becoming more interested in starting their ownbusiness. However, difficulty in finding stable employment is not a strong enoughfactor that will lead to graduates becoming entrepreneurs. Research on entrepreneurialbehaviors indicates that there are specific personality characteristics that distinguishentrepreneurs from non-entrepreneurs. There are also many barriers faced bygraduates in order to become entrepreneurs. Thus, in order to formulate effectivepolicies to curb graduate unemployment, we need to have a thorough understanding ofthe factors influencing entrepreneurial inclination and also the barriers toentrepreneurship. Understanding these barriers to entrepreneurship will also assistpolicymakers in formulating strategies to mitigate or remove these barriers in order toincrease entrepreneurial activities.

    Research problemDespite a vast amount of studies on the attitude towards entrepreneurship, findingsremain inconclusive (Kim, 2008). Most studies examining students attitude orperception towards entrepreneurship and barriers are focusing on developed countries(Krueger et al., 2000 (USA); Guerrero et al., 2008 (Spain); Koh, 1995 (Hong Kong); Koh,1996 (Hong Kong); Tan et al., 1996 (Singapore); Audet, 2002 (Canada); Crant, 1996(USA); Kolvereid, 1996 (Norway); Tkachev and Kolvereid, 1999 (Russia); Gnoth, 2006(New Zealand); Wang and Wong, 2004 (Singapore); Robertson, 2001 (UK) and Vecianaet al., 2005 (Puerto Rico and Catalonia)). Out of these studies only one focused onpostgraduate students (Koh, 1996) and the study was not comprehensive since itcovered a single university and was conducted in a developed nation. Very few studieswere found in Malaysia (Ramayah and Harun, 2005; Mohar et al., 2006) and these only

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  • focused on undergraduate students and collected the entire data in individualuniversities. Furthermore, these studies did not examine barriers but factorsinfluencing entrepreneurial intentions.

    There are limited entrepreneurship studies covering developing countries. Barriersfaced by budding entrepreneurs from developing countries may differ from those indeveloped countries. This is because developed countries may have more institutionalsupport and an education system that is more advanced thus reducing potentialbarriers. According to the recent Global Entrepreneurship Monitor Report 2007, theproportion of early stage entrepreneurs who will engage in full time business aremostly from developed countries (Bosma et al., 2007). All the countries that scoredmore than 80 percent were developed nations such as Italy, Puerto Rico, Greece, Spainand Slovenia with the exception of China and Romania (Bosma et al., 2007). Malaysiawas not included in this study. So, this suggests that there might be more barriers toentrepreneurship in the developing countries as compared to the developed countries.

    Studies that examine budding entrepreneurs should also focus more onpostgraduate students since they might be more inclined towards entrepreneurship.Most postgraduate students are more mature and have greater experience and forsome, the purpose of enrolling in a postgraduate program is to prepare them to ventureinto business. However, postgraduate students with stable and good paying jobs mayalso be reluctant to change their status. This is among the many barriers that willinhibit them from venturing into business. Undergraduate students on the other handare young and may not have the experience and are more reluctant to take risk. So,there is a need to conduct more research on intentions of postgraduate students andthis research is an attempt to close this gap by providing further insights andinformation on barriers faced by postgraduate students in a developing country.

    Research objectivesThe main objectives of this study are:

    . To determine postgraduate students overall perception of their entrepreneurialinclination.

    . To determine the impact of perceived barriers to entrepreneurship onentrepreneurial inclination.

    . To determine the relationship between selected demographic and personalfactors and entrepreneurial inclination.

    Literature reviewThere is no formal definition of entrepreneurship due to lack of consensus on it (Zhao,2005). Kim (2008) stated that defining entrepreneurship and entrepreneur is a difficultand intractable task. However, we have identified several definitions that we feel haveaptly describe entrepreneurship in the literature and are applicable to our study. Onestream of literature looks at entrepreneurship from the strategic managementperspective. For example, Miller (1983) defined entrepreneurship as an organizationallevel phenomenon that focuses on innovation, risk-taking and proactiveness. Earlierdefinitions of entrepreneurship also focus on the willingness of entrepreneurs toengage in calculated business-related risks (Brockhaus, 1980). This implies that lack ofwillingness to undertake risk can be seen as a barrier to entrepreneurship.

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  • Another stream looks at entrepreneurship from the perspective of individuals whereit tends to focus on the orientation, attitude and behavior of entrepreneurs (Miles et al.,1993). Inclination towards entrepreneurship which is a central issue in our study canalso be viewed as the intention to venture into business (Low and MacMillan, 1988; DePillis and Reardon, 2007). Ronstadt (1984, p. 28) defined entrepreneurshipas:NORMALthe dynamic process of creating incremental wealth. This wealth iscreated by individuals who assume the major risks in terms of equity, time, and carriercommitment of providing value for some product or service. The product or serviceitself may or may not be new or unique but value must somehow be infused by theentrepreneur by securing and allocating the necessary skills and resources.Thedefinition highlights the importance of skills and resources and these factors arecrucial to this study as its absence can be considered as barriers towardsentrepreneurship.

    Theories and past studies on entrepreneurshipThere are various theories that have been identified in the literature that explainfactors influencing entrepreneurial intention and barriers to entrepreneurship.However, there still exists very little consensus on which theory is the mostcomprehensive since each focuses on different areas and attributes. The psychologicalschool of thought focuses on personality traits such as need for achievement, locus ofcontrol, risk taking ability etc. (McClelland, 1987; Dyer, 1994; Rotter, 1966). The Theoryof Planned Behaviour (TPB) (Ajzen, 1987; Ajzen, 1991) has been used by numerousauthors to explain intentions to become entrepreneur (Krueger et al., 2000; Audet, 2002;Kolvereid, 1996; Tkachev and Kolvereid, 1999; Engle et al., 2010). According to TPB,entrepreneurship behavior is intentional or in other words peoples intention mayinfluence behavior towards becoming an entrepreneur. Shaperos (1982) EntrepreneurEvent Model is another intentional based model but based on the perception of thedesirability and feasibility to act upon opportunities (Shapero, 1982). People who havehigh levels of desire to become entrepreneurs may ultimately not act upon theirintentions due to certain barriers that may exist. It is important to clearly identify suchbarriers. Institutional economic theory is another theory that explainsentrepreneurship motives and focus on informal factors such as attitudes, norms ofbehavior (Krueger and Brazeal, 1994) and formal factors such as policies, laws,regulations, government assistance, culture etc. (North, 1990). Then there is the socialnetworking theory that argues that entrepreneurship can thrive when people haveaccess to business networks (Singh et al., 1999; Singh, 2000). Through socialnetworking, entrepreneurs can obtain resources, information, business contacts whichare vital for their success and sustainability (Neergaard et al., 2005; Granovetter, 1992;Burt, 1997). In some countries, social networks are initiated by the government and aretherefore formal units facilitating collaboration between entrepreneurs (Farr-Whartonand Brunetto, 2007). However, these social networks may or may not exist amongbudding entrepreneurs such as postgraduate students.

    Numerous other background factors related to social factors such as previousemployment (Storey, 1982), family background (Scott and Twomey, 1988; Matthewsand Moser, 1995) gender (Buttner and Rosen, 1989; Kolvereid et al., 1993) education(Storey, 1992) ethnic membership (Aldrich, 1980), and religion (Weber, 1930) have alsobeen discussed in the literature on entrepreneurship. Altogether, the combination of

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  • psychological traits and specific background factors make some individuals morelikely entrepreneurial candidates than others. Some researchers have specificallystudied student populations and found that there are certain factors such as educationthat affect students more than others (Wang et al., 2001; Scott and Twomey, 1988).According to Turnbull et al. (2001), the major motivational factors for students tobecome entrepreneurs are opportunity to take risks, freedom, financial gain, andsecurity of employment and control.

    In summary, some of the common barriers faced by entrepreneurs are psychologicalin nature such as: aversion to risk, fear of failure, aversion to stress and hard work.Then there are also the institutional barriers from the institutional school of thoughtsuch lack of resources and lack of government assistance. Lack of social networking isalso another barrier faced by entrepreneurs based from the social networking theory(Taormina and Lao, 2007; Luo, 1997). We argue that barriers faced by actualentrepreneurs may be different from barriers faced by budding entrepreneurs. Pastresearch shows that, barriers faced by actual entrepreneurs are mostly confined toinstitutional barriers such as lack of government assistance, lack of funds,infrastructure issues, lack of training, poor contract and property laws andcorruption (Kiggundu, 2002; Chu et al., 2007; Ivy, 1997; Benzing et al., 2009). On theother hand, barriers faced by budding entrepreneurs are mostly psychological(Taormina and Lao, 2007). The barriers selected for this study are from thepsychological school of thought, institutional and social networking theor...

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