The impact of personal and environmental factors on entrepreneurship

School of Management, George Mason University, Fairfax
Fachbereich Wirtschaftswissenschaften, Fachhochschule Aachen

Thesis Paper

The Impact of Personal and Environmental Factors on Entrepreneurship

Submitted by

Markus Fischer

Spring 2005

Abstract
In dependence on the definition of entrepreneurship as the “creation of a new enterprise” as suggested by Low & MacMillan (1988: 141), this paper focuses on factors influencing the individual, or a group of individuals to start a new company. An extensive review of the literature suggests that the decision to create a new venture is influenced by a number of variables that are examined in this paper. First, the role of the individual in the venture creation process will be portrayed. It is found that personal factors are directly related to the venture creation decision. Second, as the individual faces several unforeseen challenges when deciding to start up a new business, environmental support plays a crucial role in compensating for the inherent risks of starting a new business. Thirdly, the role of culture will be appraised by showing that culture can have both a direct and a moderating effect on the individual’s role in the creation decision process.

The final part of the paper will integrate these three described factors into a new theoretical framework. It will be shown that the creation to start a new business depends on the individual, environmental support and the overarching culture. In addition, this new framework will introduce an individual’s self-efficacy, motivation, and networking activities as necessary and critical components of the venture creation process. Based on empirical evidence from prior research it will be illustrated that networking plays a fundamental part in the venture creation decision process and that it follows a similar pattern across different cultures.

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Table of Contents

Abstract ... 2
Table of Contents ... 4
Table of Figures ... 5

1 Literature Review ... 6

2 Challenges of Defining Entrepreneurship ... 7
2.1 Different Approaches of Entrepreneurial Research ... 7
2.2 An Attempt to Define Entrepreneurship ... 10

3 The Impact of Personal Factors in the Venture Creation Process ... 12
3.1 Personal Traits of Entrepreneurship ... 13
3.2 Individual Situational Variables ... 17
3.3 The Role of Experience in the Venture Creation Process ... 21
3.4 The Role of Gender Differences in the Venture Creation Process ... 25

4 The Impact of Culture on the Individual in the Venture Creation Process ... 26
4.1 The Four Primary Cultural Dimensions of Hofstede ... 27
4.2 Application of Hofstede’s Cultural Dimensions in Entrepreneurial Research ... 29

5 The Meaning of Environmental Support ... 33
5.1 Six Sources of Environmental Support ... 34

6 The Venture Creation Process ... 40
6.1 Components of the Venture Creation Process ... 41
6.2 The Individual in the Venture Creation Process ... 42
6.3 The Role of Networking in the Venture Creation Process ... 49
6.4 The Impact of Culture on Environmental Support ... 53

7 Conclusion ... 55

Appendix A ... 57

Works cited ... 62

1 Literature Review
In order to develop a conceptual framework aimed at explaining the venture creation process I first studied 300 abstracts from management journals including the International Small Business Journal, Entrepreneurship: Theory and Practice, the Journal of Management, the Journal of Small Business Management, Journal of Development Studies, the Academy of Management Journal, and the Journal of International Business Studies. These 300 abstracts were selected solely on the basis of entrepreneurial content. As my primary goal was to examine various factors that are of importance in the venture creation process, I selected pertinent journal articles to study the impact of individual and environmental factors on the creation of a new venture.

Some of these articles refer back to the works Hofstede (1980) who examined how values in the workplace are influenced by culture. In order to explain the role of culture in the venture creation process, I integrated the works of Hofstede (1980) in this thesis paper, too.

Appendix A includes a chart with a short description of the references cited in this thesis paper. When referring to one of these references I will briefly describe the research question and focus on those findings that are of relevance to the conceptual framework introduced in my thesis paper.

2 Challenges of Defining Entrepreneurship
This thesis paper is aimed at describing and evaluating the impact of various factors on entrepreneurship. However, before evaluating these factors the term entrepreneurship has to be defined in the first place. It is generally suggested that despite great interest and intensive research in the field of entrepreneurship, a common definition of entrepreneurship has not been reached (Davidsson, Low & Wright, 2001; Low, 2001). Davidsson et al. (2001) argue that research will remain vulnerable if entrepreneurial research continues to cover an extremely broad range of issues referred to as a “potpourri”. Also, knowledge about entrepreneurship will grow faster only if carried out within a clear and distinctive domain. The authors require that journal editors and conference organizers agree on a set of determined standards in order to avoid the misuse of the term entrepreneurship. Yet, given the current variety of professional journals and articles on entrepreneurship it is very unlikely to achieve agreement among journal editors on a single definition of entrepreneurship.
As no common definition has been reached yet, I now turn to a discussion by Low (2001), who approached the field of entrepreneurship from four different perspectives. I am referring to these four perspectives mainly for the following reason. In sum, these four perspectives portray the full range of entrepreneurship research allowing me to select a suitable definition of entrepreneurship for the purpose of this paper in a second step.

2.1 Different Approaches of Entrepreneurial Research
One approach, strongly influenced by the fact that Low (2001) is the founder of the Entrepreneurship Program at Columbia Business School, greatly emphasizes the fact that entrepreneurship research is primarily aimed at facilitating new ventures instead of explaining them. If entrepreneurship research is to facilitate new ventures then its major concern is to support potential entrepreneurship by providing “practical concepts, tools, and advice on important topics such as business plans, intellectual property, financing, human resources, networking, advisory boards, new technologies, etc.” (19). Educational institutions are to offer educational programs that help to develop skills necessary for starting a new venture.

The second approach of entrepreneurship research deals with the question of defining the field of entrepreneurship so that it becomes a distinctive domain. This approach complies with the demand of critics for a more narrow definition of entrepreneurship as mentioned earlier. Proponents of this approach believe that creating a distinctive domain would result in improved progress in research efforts. In order to become a distinctive domain, the field of entrepreneurship has to explain phenomena not explained by any other disciplines. However, given the current state of affairs where a clear definition has not been reached, this approach is not likely to be accomplished in the nearby future. With regard to the studies I examined for this thesis paper it does not seem appropriate to artificially narrow the definition given the variety and inconsistency within entrepreneurship research.

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