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The upgrading of workforce skills is key to the competitiveness of SMEs. In today’s business environment there is a premium on innovation that enables firms to develop new products and services, new production processes and new business models. This requires both in-house innovation and the ability to absorb knowledge from other firms and organisations, both of which call for a skilled labour force. Skills are also a critical but understated resource for entrepreneurship seen in the sense of business creation. Similarly to workforce skills, entrepreneurship skills will boost the competitiveness of local businesses thanks to the improved strategic and management competences of the entrepreneur.
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Explaining Entrepreneurial Performance of Solo Self-Employed from a Motivational Perspective.
Nardo de Vries (Panteia/EIM)Werner Liebregts (Tilburg University and Panteia/EIM)
OECD-DBA International workshopSkills Development for SMEs and Entrepreneurship - November 28th 2012
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012
• Introduction• Motivational approach: opportunity vs. necessity• Research design• Data• Methodology• Results• Conclusions and discussion
Outline
2
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012
Introduction
3
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 4
Introduction
Increase of self-employment:• Structural change (outsourcing and services), individualism, improved
reputation• Entrepreneurship Policy (Van Es and Van Vuuren 2011, Stam 2012)• Supposed to lead to economic growth• Natural or ‘equilibrium’ rate of solo self-employment (Van Stel, Scholman &
Wennekers 2012)
Not just the quantity, but also quality of entrepreneurship (Baumol 1990)• Productive entrepreneurship and economic performance• Motives for entrepreneurship are considered influential • Opportunity vs. Necessity (Reynolds 2002)
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 5
Introduction
Research question(s):• Does the economic performance of opportunity solo self-employed differ from
the economic performance of necessity solo self-employed? • If so, to what extent?• What factors are influential?
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012
Motivational approach
6
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 7
Motivational approach
Theoretical background• Introduced by Global Entrepreneurship Monitor (Reynolds et al. 2002)• Human capital theory (argued by Block and Sandner 2009)
• Formal education• Experience• Practical learning e.g. active (Ericson and Pakes 1995) and
passive learning (Jovanovic 1982)• Entrepreneurial talent and skills
• Opportunity entrepreneurs are assumed to have higher human capital endowment
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 8
Motivational approach
Literature:• Much research is done in the field of explaining the prevalence
of opportunity and necessity motives.• No consensus on ‘necessity’-measures• Most studies focus on macro-level relationships. • There are very few micro-level studies that actually connect
start-up motivation and economic performance on the individual level.
• General focus on entrepreneurship, no focus on solo self-employed
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 9
Prevalence
Opportunity entrepreneurship, Innovation driven economies, GEM 2011
73% 72% 71% 71%68% 67%
64% 64% 62% 61% 59% 59% 58% 57% 57% 55%53% 51% 50%
46%
39%37% 37% 36%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Austra
lia
Belgium
Fran
ce
Norway
Swed
en
Unite
d Ar
ab E
mira
tes
Denmar
k
Japa
n
Neth
erland
s
Switz
erland
Finlan
d
Unite
d St
ates
Portu
gal
Unweig
thed
Ave
rage
Czec
h Re
public
German
y
Sing
apor
e
Slov
enia
Taiw
an
Unite
d King
dom
Spain
Ireland
Greec
e
Repu
blic
of K
orea
Denmark
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 10
Prevalence
Necessity entrepreneurship, Innovation driven economies, GEM 2011
42%
30% 27% 26% 25% 25%21% 19% 18% 18% 18% 18% 17% 16% 15% 15% 14% 12% 11% 10% 9% 7% 6% 4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Repu
blic
of K
orea
Ireland
Czec
h Re
public
Spain
Greec
e
Japa
n
Unite
d St
ates
German
y
Finlan
d
Portu
gal
Unweig
thed
Ave
rage
Taiw
an
Unite
d King
dom
Sing
apor
e
Austra
lia
Fran
ce
Unite
d Ar
ab Emira
tes
Slov
enia
Switz
erland
Belgium
Nethe
rland
s
Denmar
k
Swed
en
Norw
ay
Denmark
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 11
Prevalence
Trends in Prevalence Rates in the Netherlands 2001-2011, GEM 2011
6%11% 11%
14%
7% 6%12% 10% 10% 8% 9%
84%87%
83% 84%89% 91%
66%71%
57%
64% 62%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Necessity-Driven Entrepreneurial Activity Opportunity-Driven Entrepreneurial Activity
Control for “mixed motives”
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 12
This study
• Individual economic performance.• Longitudinal data • Targeting solo self-employed (zzp’ers in Dutch)• Robustness for necessity motives (multiple indicators)• Controls for socio-demographic, firm and organizational
characteristics
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012
Data
13
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 14
Data
Explanatory variables:• Three indicators for necessity motives
1. Unemployed (entitled to benefits)2. Self-proclaimed necessity3. Author-classified necessity
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 15
Data
• The entrepreneurial performance of solo self-employed is measured in terms of their annual turnover
• turnover is a categorical dependent variable
• There appears to be a statistically significant relationship between annual turnover and type of solo self-employed in case of all three type dummies
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 16
Data
Cumulative frequencies of all types of necessity SSE
Annual turnover Unemployed Self-proclaimed (necessity 1)
Author classified (necessity 2)
< €10K 28,3% 12,6% 14,0%
€10K - €25K 56,6% 39,7% 41,8%
€25K - €50K 82,8% 66,8% 68,2%
€50K - €100K 93,0% 87,1% 88,8%
€100K - €200K 98,9% 96,5% 97,9%
> €200K 100,0% 100,0% 100,1%
n 187 597 515
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012
Methodology
17
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 18
Methodology
• Regression models:• Dependent variable = annual turnover (7 categories)• Explanatory variables = necessity motives (3 type dummies)• Control variables =
• personal charact. (including Human Capital)• firm charact.• organisational charact.
• Method:• Quasi Fixed Effects model • Pooled ordered probit estimators (panel corrected
standard errors)
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012
Results
19
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 20
Results
• All three types of necessity solo self-employed have a statistically significant negative effect on annual turnover.
• Human Capital Endownment:• Educational level has no mediating effect• Firm age has a small mediating effect.
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 21
Results
Marginal effects:the probability of generating an annual turnover of more than
50,000 euro decreases with• 10,1% for unemployed;• 7,4% for self-proclaimed necessity;• 5,5% for author-classified necessity.
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012
Conclusions and Discussion
22
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 23
Conclusions and Discussion
• Necessity solo self-employed show a lower probability of having a high annual turnover
• A large set of socio-demographic, firm and organisational characteristics cannot explain the observed differences
• Some aspects of human capital do not explain the observed differences between opportunity and necessity (e.g. education and firm age)
• Non-observed aspects of human capital can still explain the observed differences (e.g. entrepreneurial talent and skills or intrinsic motivation)
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 24
Conclusions and Discussion
(Policy) implications:• Economic growth vs. subsistence motives for policy• Still a substantial number of necessity solo self-employed
generates substantial turnover• Efficiency of entrepreneurship policy schemes can benefit if
they are less generic and take into account that several aspects of human capital might influence economic performance of solo self-employed
• Aspects that in our opinion might play a role are entrepreneurial talent and skills, and also intrinsic motivation.
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012 25
Conclusions and Discussion
Further research might focus on:• whether the observed differences in economic performance
are truly due to the proposed aspects;• Other performance indicators (e.g. innovation).
OECD-DBA workshop - Skills Development for SMEs and Entrepreneurship - November 28th 2012
THANK YOU FOR YOUR ATTENTION!