Necessity-driven Entrepreneurs Research Articles

The more the merrier? Economic freedom and entrepreneurial activity

The current research addresses the question of how policy makers might design specific components of economic freedom (EF) to most effectively encourage high levels of entrepreneurial activity (EA). Given that entrepreneurship is a multifaceted phenomenon, the study analyzes the effects of four components of EF on EA and relies on fuzzy-set qualitative comparative analysis (fsQCA) to do so. The research collates data from 63 different countries and analyzes EA as it applies to factor-driven, efficiency-driven, and innovation-driven economies. The current research also differentiates between opportunity-driven entrepreneurship and necessity-driven entrepreneurship. The results suggest that the effects of EF vary according to the developmental stage of an economy and the type of EA in question. The results reveal that simplistic explanations implying that high levels of EF trigger high levels of EA regardless of a country's developmental stage are inadequate.

The impact of government support programs for the development of businesses in Chile

Purpose – The purpose of this paper is to analyze the impact on businesses in Chile of the Seed Capital Program (SCP) implemented by Chile’s Technical Cooperation Services. Design/methodology/approach – In order to analyze the impact of this SCP, a counter-factual scenario was used that entailed a combination of the propensity score matching with difference in difference methods. A total of 682 businesses were surveyed (378 in the treatment group and the rest in the control group), 164 of which gave complete responses to the surveys, 89 belonging to the treatment group and 75 to the control group. Findings – The results are mixed. On the one hand, the impact of sales is positive but its statistical significance depends on the model used. With regard to the number of employees, however, the results are positive and statistically significant regardless of the model used. The results also show that participating in the program has no incidence on the probability of later obtaining financing. Research limitations/implications – This study highlights the importance of differentiating between opportunity-driven entrepreneurship programs and necessity-driven entrepreneurship programs. Practical implications – It also suggests improvements in public policy to develop entrepreneurship in small businesses in Chile. These suggestions may also be interesting for other countries facing similar challenges in terms of developing private entrepreneurship as a vehicle to generate economic development. Originality/value – This exploratory work may be interesting to those in charge of designing, implementing and evaluating public programs in support of small- and mid-sized enterprise development.

Exploring the role of FDI in enhancing the entrepreneurial activity in Europe: a panel data analysis

This paper explores the impact of foreign direct investment (FDI) on the entrepreneurial activity in 16 European countries. By using Global Entrepreneurship Monitor (GEM) data, which enables the distinction necessity-driven vs. opportunity-driven entrepreneurs, we assess the influence of both inward and outward FDI on the entrepreneurial activity during the time span 2005–2012. We resort to a static, as well as to a dynamic panel data analysis. Our findings highlight the fact that the FDI has no clear influence on the total entrepreneurial activity, or on the established business ownership rate. Nevertheless, our results clearly state that both inward and outward FDI positively influences the necessity-driven entrepreneurs, while having a negative impact on the opportunity-driven entrepreneurs. The results prove to be robust regarding the use of a fixed and random effects panel model, two stages least square (2SLS) model, as well as the use of a system-Generalized Method of Moments (system-GMM) approach.

Institutional environment and entrepreneurship: An empirical study across countries

Drawing on institutional theory, we synthesize previous literature that examined the impact of the regulatory, normative, and cognitive dimension of local institutional environment on entrepreneurship. We then test and replicate the link between the institutional environment and two types of entrepreneurial activities—opportunity-driven and necessity-driven entrepreneurship—using recent data on 43 countries. Consistent with prior literature, we find that countries characterized by less market openness, greater power distance, and collectivism tend to have higher levels of necessity-driven entrepreneurship and regulatory quality, and uncertainty avoidance do not seem to have a profound impact on this type of activity. On the other hand, countries with less market openness and regulatory quality, and smaller power distance are associated with opportunity-driven entrepreneurship.

Exploring Entrepreneurs’ Motivation: Comparison of Croatia, European Post-socialist and Developed Countries

This article explores the entrepreneurial profiles of Croatian entrepreneurs and compares them with the profiles of entrepreneurs of post-socialist and developed European countries. Specifically, logistic regression analysis was used to find the best descriptors of the opportunity and necessity-driven entrepreneurs in Croatia, post-socialist and developed European countries. Results indicate that chances for engaging in opportunity-driven entrepreneurship in Croatia are increasing for men and those who perceive their income level and competencies for running a business as high. The likelihood of engagement in opportunity-driven entrepreneurial activity in the post-socialist context has been related to the age rather than gender and innovations in the product/market matrix or higher export expectations. The developed countries’ datasets reveal that opportunity-driven entrepreneurs have been related to higher expectations of growth through new job openings.

The Impact of FDI on Entrepreneurship in the European Countries

This paper considers the impact of foreign direct investments (FDI) on the entrepreneurial activity in 16 European countries. Data for the early-stage entrepreneurial activity are provided by the Global Entrepreneurship Monitor (GEM), which made also a distinction between necessity- and opportunity-driven entrepreneurs. We assess the role of both inwards and outwards FDI for the period 2005-2011. Our results show that the inwards FDI positively influence the opportunity-driven entrepreneurs while the outwards FDI have a positive influence on the necessity-driven entrepreneurs and a negative impact on the other category of entrepreneurs. The results regarding the FDI impact on the opportunity-driven entrepreneurs are strongly robust in terms of panel data expansion and control variables. Our findings show also that the opportunity entrepreneurship is associated with more developed, innovation-driven economies, while the necessity entrepreneurship characterizes the European efficiency-driven economies.

Is Informal Sector Entrepreneurship Necessity- or Opportunity-driven? Some Lessons from Urban Brazil

The aim of this paper is to evaluate critically the widely-held assumption that entrepreneurs operating in the informal sector in developing nations are largely necessity-driven entrepreneurs, pushed into this entrepreneurial endeavour as a survival strategy in the absence of alternatives. Reporting an extensive 2003 survey conducted in Brazilian urban areas of informal sector entrepreneurs operating small businesses with less then five employees, the finding is that under half of the surveyed entrepreneurs are driven out of necessity into entrepreneurial endeavour in the informal economy. The outcome is a call to recognize the prevalence of opportunity-drivers amongst entrepreneurs operating in the informal economy and to reposition informal sector entrepreneurs more centre-stage in discussions of entrepreneurship and enterprise development.

EVALUATING THE GENDER VARIATIONS IN INFORMAL SECTOR ENTREPRENEURSHIP: SOME LESSONS FROM BRAZIL

The aim of this paper is to evaluate critically the gender variations in informal sector entrepreneurship. Until now, a widely-held belief has been that entrepreneurs operating in the informal sector in developing nations are lowly paid, poorly educated, marginalized populations doing so out of necessity as a survival strategy in the absence of alternatives. Reporting an extensive 2003 survey conducted in urban Brazil of informal sector entrepreneurs operating micro-enterprises with five or less employees, the finding is that although less than half of these entrepreneurs are driven out of necessity into entrepreneurial endeavor in the informal economy, women are more commonly necessity-driven entrepreneurs and receive lower incomes from their entrepreneurial endeavor than men despite being better educated. The outcome is a call to recognize how the gender disparities in the wider labor market are mirrored and reinforced by the participation of men and women in the realm of informal sector entrepreneurship.

Does Microfinance Promote Entrepreneurship and Innovation? A Macro Analysis

Innovative entrepreneurs in Africa experience a lack of financial support and underdeveloped financial systems. Microfinance could offer a solution to this complex issue. In this respect, this research paper studies the contribution of microfinance to the innovation process through entrepreneurship. The study first reviews the effect of microfinance on opportunity-driven entrepreneurship and necessity-driven entrepreneurship. Second, it investigates the relationship between entrepreneurship and innovation. According to the literature, opportunity-driven entrepreneurship is more associated with different forms of innovation than necessity-driven entrepreneurship. Using pooled ordinary least squares (OLS) and random effects techniques on an unbalanced panel of 45 countries, our analysis supports the hypothesis that microfinance has a negative effect on necessity entrepreneurship. However, its effect on opportunity entrepreneurship depends on the socio-economic conditions of the countries. Regarding regional differences, there is strong evidence of an entrepreneurial shift from necessity to opportunity motivations in the Middle East and North Africa region and weak evidence in Sub-Saharan Africa.

Beyond necessity and opportunity entrepreneurship: motivations and aspirations of young entrepreneurs in Uganda

Enhancing the private sector, and especially entrepreneurship, has become a key feature of development policy in recent years. In many African countries, entrepreneurship is promoted as a way to solve the youth unemployment crisis, but little is known about the experiences of young entrepreneurs. This paper examines the motivations and aspirations of young business owners in Uganda. Drawing on qualitative data collected in Kampala, the paper shows the diversity and complexity of factors underpinning the decision to set up a business and the variety of future aspirations. The paper questions the common representation of entrepreneurs as either necessity- or opportunity-driven and discusses the widespread assumption that necessity-driven entrepreneurs in developing countries are unlikely to have growth aspirations. Adopting the notion of social embeddedness, this paper shows how entrepreneurship motivations and aspirations are closely intertwined with changes in the socio-economic environment, social networ...

Social capital configurations for necessity-driven versus opportunity-driven entrepreneurs

There is growing literature suggesting the importance of networking and even arguing that social capital may be the most significant source of knowledge for entrepreneurs. This article uses the classification of necessity-driven versus opportunity-driven entrepreneurs, which has been found to differ systematically in terms of venture growth and job creation, and also reflects the schism between the informal and formal sectors. Having unpacked the construct of networking as embedded in the theory of social capital, hypotheses are formulated which allow for statistical testing. The results add to the ongoing debate on this dualistic typology of entrepreneurs, where in several instances significant differences are detected across networking variables.

Education and entrepreneurial activity: A comparison of White and South Asian Men

Although a large body of literature exists on ethnic entrepreneurship and the relationship between education and entrepreneurial activity, comparatively little work has been undertaken to study the impact that university-level education has upon entrepreneurship within different ethnic minority groups. This article examines the entrepreneurial activity rates for graduates and non-graduates of three differing ethnic groups in the UK and shows that university education has differing influences across ethnic groups. While Pakistani graduate respondents were more likely to be involved in entrepreneurial activities as compared to non-graduates, education appeared to have less impact on increasing the interest in entrepreneurship of Indian adults. This is likely to be a reflection of the differing forces that have traditionally driven individuals from these communities into entrepreneurship, as indicated by a large Pakistani move from necessity-driven entrepreneurship to opportunity-driven entrepreneurship. Therefore, the relationship between entrepreneurship and education varies by ethnic minority group, and policy initiatives to increase entrepreneurship within these groups needs to be adjusted accordingly to be effective.

The effect of entrepreneurs' motivation and the local economic environment on young venture performance

In this study, we examine the effect of entrepreneurs' motivation and the local economic environment on young venture performance. Field data was collected from entrepreneurs of two different regions, South America and Europe. Our findings suggest that the degree of entrepreneurial motivation at firm creation (i.e., necessity-driven versus opportunity-driven motivation) determine subsequent venture performance during firm infancy (i.e., three to four initial years from inception). Results show that the human capital profile of necessity-driven entrepreneurs at the moment of firm start-up is weaker than that of opportunity-driven entrepreneurs in both regions. When we compare the profile of necessity-driven entrepreneurs for each region, noticeable differences arise.

Improvement of signal-to-noise ratio in elastography: Ignacio Cespedes and Jonathan Ophir, Ultrasonics Laboratory, Department of Radiology, The University of Texas Medical School, Houston, TX 77030

This paper extends prior studies on sustainable entrepreneurship by proving how the impact of entrepreneurial activity on achieving sustainable development depends on the behaviors and motivations of entrepreneurs. More precisely, we examine the influence of opportunity and necessity driven entrepreneurs on the economic, social, and environmental dimensions of sustainable development, which are constructed based on the 17 sustainable development goals (SDGs). Using data for twenty developing countries, we find from the long-run estimates that opportunity entrepreneurship has a positive impact on the three dimensions of sustainable development, whereas necessity entrepreneurship has a negative effect on the environmental sustainability dimension. We also find from the short and long-run causality analyses that opportunity-driven entrepreneurs granger cause the three dimensions in the short and long-run, whereas necessity-driven entrepreneurs do not have any effect on these dimensions. Finally, the authors make some suggestions for further research in this area.