3 - Human capital and perceptual factors in the.pdf

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Int. J. Business Environment, Vol. 3, No. 1, 2010 15

Copyright 2010 Inderscience Enterprises Ltd.

Human capital and perceptual factors in theentrepreneurial decision: empirical analysis in theGEM framework

Jos Mara Gmez-Gras,Ignacio Mira-Solves* andJess Martnez-Mateo

Department of Economical and Financial Studies,

University Miguel Hernndez of Elche,

Avda de la Universidad s/n 03202 Elche, SpainE-mail: [email protected]

E-mail: [email protected]

E-mail: [email protected]

*Corresponding author

Abstract: This paper attempts to contribute to the understanding of theelements that influence the individual decision to involve in the act of settingup a business. In this context, we focus on the study of the factors that canbetter explain and predict the results of the entrepreneurial decision from anindividual perspective. After justifying the value of studying nascententrepreneurs, we propose a model that incorporates different elements of thehuman capital of individuals as well as perceptual variables related to theindividual and the individuals judgement of the surrounding socio-cultural and

economic environment. For testing this model, we use a logistic regression toverify the influence that the elements chosen have on the entrepreneurialdecision using data from the Survey of the Adult Population of GEM Spain.Analysis confirms the influence of elements proposed on the individualswillingness to involve in activities of firm creation.

Keywords: entrepreneurship; GEM; determinants; perceptual variables; human

capital; nascent entrepreneurs.

Reference to this paper should be made as follows: Gmez-Gras, J.M.,Mira-Solves, I. and Martnez-Mateo, J. (2010) Human capital and perceptualfactors in the entrepreneurial decision: empirical analysis in the GEMframework,Int. J. Business Environment, Vol. 3, No. 1, pp.1537.

Biographical notes: Jos Mara Gmez-Gras is the Vice-Rector of Economic

Affairs and University-Enterprise Liaisons at University Miguel Hernndez(UMH) of Elche and Co-Director of the Entrepreneurship Chair, supported byBancaja, a Spanish savings bank. He is responsible for several projects focusedon entrepreneurship, such as Embryo, GlobalStart, EQUAL-AlicanteEmprendeand Global Entrepreneurship Monitor-Valencian Community and published ininternational journals includingIndustrial Management & Data Systems, TotalQuality Management and Business Excellence and relevant Spanish journalssuch asEconoma Industrial or Revista Europea de Direccin y Economa dela Empresa. He is also involved in several networks and entities of national,regional and local entrepreneurship support, such as the Business InnovationCentre of Elche.


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16 J.M. Gomez-Gras et al.

Ignacio Mira-Solves is currently Co-Director of the UMH Entrepreneurship

Chair supported by Bancaja. He holds a Bachelors degree in IndustrialEngineering and a PhD in Economics. After more than ten years of experienceworking in the technological institute for the toy industry, as Responsiblefor the Project Coordination Department and Quality Management Director, in2000 he moved from a career in technological industry and managementconsultancy into academia at the UMH. Nowadays, his research is focused onacademic spin-offs and nascent entrepreneurs, taking part in GlobalEntrepreneurship Monitor Project at Valencian Community and in otheractivities focused on entrepreneurial awareness for students and faculty.

Jess Martnez-Mateo is a titular Professor of Management at UniversityMiguel Hernndez (UMH) and currently, the Vice-Dean for Academic Affairsof the UMH Faculty of Social and Juridical Sciences. He holds a Bachelorsdegree in Economics and a PhD in Management and Business. Nowadays, hisresearch is focused on general entrepreneurship, academic spin-offs and

nascent entrepreneurs. Furthermore, he takes part in the research group incharge of carrying out the Global Entrepreneurship Monitor Project at theValencian Community, in the research group of the UMH EntrepreneurshipChair supported by Bancaja, in several projects focused on entrepreneurshipand also in other activities focused on entrepreneurial awareness for studentsand faculty.

1 Introduction

In recent decades, there has been wide and growing agreement on the positive role of

firm creation in growth and development (Acs and Audretsch, 2003; Wagner andSternberg, 2004; Reynolds et al., 2005; Mueller, 2006; Fayolle, 2007). Numerous studies

have shown this positive influence in terms of employment, economic growth and

innovation.

Within this framework and considering the notion of entrepreneurship in terms of

creation of new firms (Gartner, 1988; Low and MacMillan, 1988), a fundamental goal

of the research given the interest in the articulation of policies and actions that support

this field is the identification of factors with significant influence on individuals

decisions to become involved in the process of firm creation. To support the creation of

new firms, it is important to understand who creates them, in what kind of situation and

for what kind of reasons (Autio et al., 1997).

In this sense, this paper seeks to contribute to understand the elements that influence

the individual decision to become involved in actions that set up a firm. We, thus, deem it

advisable to focus our research on the early stages of the entrepreneurial process,specifically on the so-called nascent stage.

More specifically, we focus on the study of elements that, from a micro-perspective,

can explain and predict to a greater extent the result of the individuals decision

whether to become involved in the activities that lead to setting up a firm. We examine

certain aspects of background of social and human capital contributed by the individual

him- or herself, as well as by the individuals perceptions of him- or herself and

of the surrounding environment related to the development of entrepreneurial

initiatives.


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Human capital and perceptual factors in the entrepreneurial decision 17

2 Firm creation, individual and environment

In general, the different perspectives used in the study of the elements that influence firm

creation have ranged from the examination of factors related to individual variables

(personal characteristics, traits) to environmental or structural variables (economic and

socio-cultural or institutional environment). However, even if the individual is the actor

in the process of setting up a firm through his or her actions, it is clear that this process

does not occur in a vacuum, but rather in a context that surrounds the individual, such

that both personal characteristics and the influence of the environment play an important

role in the entrepreneurial process. Thus, different authors in the literature, such as

Shane (2003), advocate the development and use of integrated models that take both

perspectives into account. These arguments have been developed and can be reviewed in

Gmez-Gras et al. (2010, see this special issue).

Among the different contributions that integrate these individual and environmentalperspectives, we would stress for its relevance the theoretical-conceptual model used in

the empirical GEM studies (Reynolds et al., 2005). The model cited distinguishes a series

of conditions that configure the entrepreneurial framework that determines the

opportunities for entrepreneurship and the entrepreneurial capacity of individuals, that is,

the set of preferences, abilities and resources of individuals in the population. Therefore,

a nations level of entrepreneurial activity is the result of its populations assessments of

entrepreneurial opportunities and of their entrepreneurial potential (i.e., motivations and

capacities) [Sternberg and Wennekers, (2005), p.195]. In this context, the presence and

recognition of opportunities, and the entrepreneurial potential, are influenced both by the

general conditions of the environment and by the entrepreneurial framework, both of

which are influenced in turn by different social, cultural and political factors in the

environment.

Figure 1 Theoretical-conceptual GEM model

GENERAL FRAMEWORK

CONDITIONS

ENTREPRENEURIAL

FRAMEWORK CONDITIONS

SOCIAL, CULTURALAND POLITICAL

CONTEXT

Entrepreneurial

opportunities

Entrepreneurial

potential

Capacity

Motivation

Business

(firms, jobs)Births

ExpansionDeaths

Contractions

Economic

growth

(GDP, jobs)

Source: Adapted from Reynolds et al. (2005)

The framework of the GEM study further enables us to isolate the different stages of the

entrepreneurial process (entrepreneurial intentions; nascent, new and consolidated

activities), which provide an excellent foundation for the study of elements that influence

certain individuals to decide to become involved in entrepreneurial processes, as this

study seeks to do.

3 Entrepreneurial decision and nascent entrepreneurs

Although there is already an extensive literature of empirical research on the

determinants that lead individuals to create firms, we find increasing agreement that part


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of these studies suffer from certain biases or tendencies assumed in the research (Delmar

and Davidsson, 2000; Davidsson and Honig, 2003). These tendencies suggest that itwould be advisable to reorient the empirical research to what is called the early stages of

the process.

Generally, many of the studies and papers on creators of firms are carried out

retrospectively, that is, including only surviving businesses several years after their

creation. This approach leads to two risks. The first is capturing characteristics and

influences that are more related to firm survival than to the decision to set up an

entrepreneurial initiative. The second risk is incorporating errors in the information due

to the loss of memory or reinterpretation of facts as a result of circumstances that have

occurred after the entrepreneurial event. Further, the process of firm creation does not

always succeed, and the individuals who disappear in the process do not appear in the

sources of data used, causing the loss of valuable information concerning the

characteristics, attitudes and circumstances that led these individuals to attempt theprocess (Delmar and Davidsson, 2000; Gartner et al., 2004; Johnson et al., 2006).

In this sense, as Autio et al. (1997, p.2) argue, focusing only on ex-post situations

means gathering data from firms after the entrepreneurial event. In this case, the

researchers would be assuming that traits, attitudes and beliefs do not change due to ones

own entrepreneurial experience (Gartner, 1988, 1989), a belief that Autio et al. (1997)

considers to be a strong assumption.

In the resulting situation, therefore:

1 On the one hand, most of the contemporary definitions of entrepreneurshiprevolve

around concepts of entrepreneurial emergency and creation of new firms (Gartner,

1988; Shane and Venkataraman, 2000), which should lead research to treat the early

stages of the phenomenon.

2 On the other hand, public research is dominated by studies based on samples of

already existing firms (survivors) (Davidsson and Wicklund, 2001; Davidsson and

Honig, 2003), with very few studies that focus on the early stages (Carter et al.,

1996; Davidsson and Honig, 2003), which usually revolve around the models of

entrepreneurial intentions and the subfield of nascent entrepreneurs (Autio et al.,

1997; Davidsson and Honig, 2003).

As to the two paths mentioned above, the study of the pre-firm stage constitutes an

important line of research that typically focuses on intentions () and uses samples of

individuals who have not yet entered into nascent entrepreneurial activity [Davidsson

and Honig, (2003), p.303]. However, these authors, along with Delmar and Davidsson

(2000) and Krueger (2003), warn that the use of intentions as the only dependent variable

has its risks. It faces the danger of not distinguishing between dreamers and doers, asresearch in psychology shows that the relation between intentions and behaviour is not

always as strong as that asserted by Ajzen (1991).

This paper, thus, focuses on the second path: that of nascent entrepreneurs or

individuals who are found to be taking steps to found a new business that they own but

who have not yet completed this stage of the process successfully (Carteret al., 1996).

They are, thus, subjects who are starting to spend time and resources to create a firm

(Reynolds and White, 1997; Reynolds, 2000). The GEM studies cited above allow us to

use individuals in precisely this stage of the entrepreneurial process.1


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4 Nascent entrepreneurs and determinants of entrepreneurial involvement

After adopting the proposal for the integrated framework of determinants and effects

proposed by Gmez-Gras et al. (2010, see this special issue), and given the focus on the

analysis of the influences on the decision of individuals to initiate the activities that lead

to the setting up of a firm, we have reviewed the research related to the early stages of the

entrepreneurial process. This review includes some outstanding models of entrepreneurial

intentions (it thus assumes as antecedent the development of the nascent conduct that will

follow (Ajzen, 1991; Krueger, 2003), as well as the literature related to the so-called field

of research of nascent entrepreneurship, with the goal of extracting support for a model

that will be tested empirically.

Among the diverse conditioners that have been proposed in the literature as issues

with potential influence on the decision to initiate this stage, we have selected specifically

those related to background of human and social capital contributed by the individuals,as well as certain attitudes and perceptions that the literature has shown to be relevant and

that individuals generate, both concerning themselves and concerning the environment.

Figure 2 shows the model of influences proposed, which assumes a particular abstraction

from the general model of determinants and effects proposed in Gmez-Gras et al. (2010,

this special issue).

Figure 2 Model of influences of elements of human and social capital and perceptions (P) inentrepreneurial involvement (developed by the authors)

ECONOMIC ENVIRONMENT

Existence ofopportunities

INSTITUTIONAL ENVIRONMENT

Culture and values:social norms

Psychological factors

Perceived efficacy

Attitude(desirability, fear of failure)

PERSONAL CHARACTERISTICS

Non psychological factors Education and experience

Relationships Socio-demogaphic elements

ENTREPRENEURIAL PROPENSITY

Nascent entrepreneurial activity

P

P P

The model assumes that the entrepreneurial decision includes as explanatory factors

elements that can be attributed both to the subject (objective and subjective elements) and

to the environment in which the activity is developed (Shane, 2003; Gartner and Carter,

2003).

As to the state of the environment, the individual filters (Wagner and Sternberg,

2004) real or objective information from the environment through specific mechanisms


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As to education level, in general, different studies related to GEM find positive

effects on the probability of being a nascent entrepreneur [Davidsson, (2006), p.5].Some of these results are provided, e.g., by Arenius and DeClercq (2005), Kim et al.,

(2006), Wagner and Sternberg (2004) and Mueller (2006).

Prior experience in firm creation or self-employment, which provide the abilities and

capacities to discover and exploit business opportunities, also has positive effects

(Crosaet al., 2002; Davidsson and Honig, 2003; Wagner and Sternberg, 2004;

Delmar and Davidsson, 2000; Kimet al., 2006; Mueller, 2006; Tamsy, 2006;

Wagner, 2006).

As to familiarity with entrepreneurs in ones circle of close acquaintances, the

different analyses of human capital (provide vicarious experience) or social capital

(relations or networks from which one can extract benefit) have shown that this

element is positively related to entrepreneurial involvement (Wagner, 2004; Areniusand Minnti, 2005; Mueller, 2006; Tamsy, 2006).

The importance of perceptual variables for nascent entrepreneurship has been shown

by Arenius and Minnti (2005), who define them as subjective perceptual variables that

are sometimes partial and that come from the psychological and sociological literature,

that play an important role in the decision, and that do not necessarily reflect objective

circumstances. This kind of variable has been treated in different models related to

entrepreneurial activity, primarily in the literature on models of intentions.

As to attitude toward firm creation, the perception of desirability refers to the degree

to which the individual feels attraction to a given behaviour. Shapero and Sokol

(1982) study this cognitive element and establish a positive relation between it and

the so-called entrepreneurial event. This relation is also established in differentmodels of intentions by Krueger (e.g., Krueger and Carsrud, 1993; Krueger and

Brazeal, 1994; Krueger, 2000, 2003), in which it is established as an antecedent of

the manifestation of intentionality and the resulting behaviour, which has not usually

been introduced in the study of nascent entrepreneurs.

Models of entrepreneurial intentions usually agree that this attitude makes perceived

personal conduct or convenience depend on the results expected from the behaviour,

involving all of the probable positive and negative consequences [Degeorge and

Fayolle, (2004), p.8; Zander, (2004), p.16; Brnnback et al., (2006), p.5]. The

individual, thus, not only perceives the desirability of the entrepreneurial behaviour

in itself but could also consider his or her fear of failure. In the GEMs analyses of

nascent activity, perception of fear of entrepreneurial failure is analysed, based on

whether or not it could come to represent a barrier to involvement in entrepreneurial

activity. Studies find a negative influence of this fear on the propensity to become

involved in these activities (e.g., DeClercq and Arenius, 2003; Wagner and

Sternberg, 2004; Arenius and Minnti, 2005; Lee et al., 2005; Tamsy, 2006;

Kllinger et al., 2007).

As to entrepreneurial opportunities, the contributions of Venkataraman (1997),

Shane and Venkataraman (2000) and Eckhardt and Shane (2003) have attributed a

very influential role to their existence, detection and exploitation by individuals.


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In GEM, individuals are classified as nascent entrepreneurs if they are developing

activities that lead to setting up a business in which they will own at least part of theproperty and have not paid salaries for over three months.

Table 1 Variables employed: questions, values and codification

Corresponding question in the APSsurvey

Values andcodifications

Control variables

Age Age Years

Man (1)Gender Sex

Woman (0)

Human and social cap.

None (1)

Compulsory (2)

Secondary (3)

Medium (4)

Educational level Educational level

University (5)

Yes (1)Own entrepr. activity Are you currently, alone or with others,the owner of a firm that you help todirect, that constitutes self-employment,or in which you are selling goods and/orservices?

No (0)

Yes (1)Role models Do you know anyone personally who has

set up a new business in the last twoyears? No (0)

Variables of perception

Yes (1)Personal desirability Do you consider it desirable to create orfound a new firm?

No (0)

Yes (1)Fear of failure Fear of failure would constrain you if youhad to set up a business.

No (0)

Yes (1)Social acceptability of thecareer

In your region, most people consider thatstarting a business is an attractiveprofessional option. No (0)

Yes (1)Social legitimacy In your region, a person who achieves

success in opening a new businessobtains high social position and prestige. No (0)

Yes (1)Perception of opportunities In the next six months, will there be goodopportunities for setting up newbusinesses in the area where you live? No (0)

Yes (1)Perceived self-efficacy Do you have the knowledge, abilities andexperience required to set up a newbusiness? No (0)

Source: APS GEM 2005 Spain


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In order to identify nascent entrepreneurs, all of the individuals were asked these

questions:

1 You are, alone or with others, currently trying to start a new business, including any

self-employment or selling any goods or services to others?

Those who respond in the affirmative are asked:

2 Over the past 12 months have you done anything to help start a new business, such

as looking for equipment or a location, organising a start-up team, working on a

business plan, beginning to save money, or any other activity that would help launch

a business?

3 Will you personally own all, part or none of this business?

4 Has the new business paid any salaries, wages or payments in any kind, including

your own, for more than three months?

In all of the questions, the individuals may answer using four categories: yes, no,

dont know or not answering. In the codification of subsequent variables, a person is

classified as nascent entrepreneur if he or she answered yes to question (1) and to

items (2) and (3), and no to (4).

The explanatory variables considered are presented in Table 1. In addition to the

covariables proposed for study, we use the socio-demographic variables gender, age and

immigration as control variables. The questions are formulated for the whole sample. In

addition to the possibilities for response included in the table, individuals can answer

dont know or reject the question. For the purposes of analysis, a rejection is considered

a lost value in all of the questions and the answer dont know only in the case of the

polytomic variables. For the variables with a working dichotomous answer, a positive

response takes the value one and a negative response (no or dont know) the value

zero.

For the empirical analysis of the relationships proposed in the model, we have chosen

the binomial logistic regression analysis, a generalisation from the classic linear

regression model when the scale of the variable that quantifies the outcome is

dichotomous.

6 Preliminary analysis and preparation of the sample

Given the exceptional nature of the decision to create a firm, the starting sample offersvery low frequencies of appearance based on the variable of interest used as dependent

variable. This locates us in a work context of rare events. According to King and Zeng

(2001a, 2001b) and Weiss et al. (2007), this situation generates problems of

underestimation of the probabilities of events in methods of classification of individuals

in general and in the logistical regression analysis in particular. These problems

ultimately affect all of the indicators that are calculated from these probabilities, as well

as the estimation of parameters, which can be affected by a significant bias, distorting the

results.


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One solution4to this problem, proposed by the authors cited above, consists of using

proportions of cases that are balanced relative to the event of interest (Y), includingobservations (either chosen randomly or using all available) for Y = 1 (the cases) and

performing stratified random sampling for Y = 0 (the controls), a method used in the

GEM context, e.g., by Levie (2007).

In our case, following this procedure through geographically stratified random

sampling has configured a new sample composed of 854 individuals: the 427 nascent

entrepreneurs detected in the original sample and the same number of individuals who do

not demonstrate performance of nascent activities5. In the interest of rigour, we

performed a comparative formal analysis that demonstrated that there are no significant

differences between the new subsample of individuals without nascent activity and the

original subsample.6

The new sample was subjected to a preliminary analysis in order to collate the

conditioners to use the logistic regression, and all are verified. That is, the sample size isgreater than 10(k+1), where k is the number of explanatory variables, including all

dummyvariables created; there are no zero frequencies in the boxes in the contingency

tables that cross the explanatory variables with the dependent variable; and we find no

colinearity between variables (see the correlation matrix in the Appendix).

7 Results

Table 2 shows five regression models, in which the variables are introduced in blocks to

enable us to observe the change in the resulting information based on the progressive

expansion of the model in successive steps.

The diagnostic indicators for the comparison are: deviance, which always decreases

as the number of variables increases; the Akaike Information Criteria, which penalises

deviance based on the introduction of variables, ensuring that improvement in the model

is not trivial; the likelihood ratio (or difference between two deviances), whose associated

statistic informs us whether a set of variables improves the model significantly; and the

estimation of Nagelkerkes pseudo-R2, restricted to values between 0 and 1, which offers

comparative information between models similar to that provided by deviance. As

indicators of the influence and relevance of the variables under study, we show the

odds-ratioand the significance level associated with the Wald statistic.

7.1 Diagnostic indicators of the models

The indicators in general show a positive evolution as the variables are introduced, with

the exception of the step between Blocks 3 and 4, which correspond to the introduction ofperceptions of social norms. In fact, the indicators that show whether or not the

improvements in deviance and pseudo-R2 are trivial (Akaike Information Criteria and

ratio of likelihood between successive models) detect that the variables added in Block 4

do not improve the model and in fact make it worse. In the other cases, these diagnostic

indicators show the relevance of the blocks of variables introduced.

Finally, the 5th model is the best, comparatively speaking and based on the results

indicated by testing the measurements constructed from likelihood. The Akaike

Information Criteria ensures that the improvements are real and not introduced by merely

having increased the number of covariables.


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Table 2 Logistical regression for nascent entrepreneurial activity (stepwise comparison of all of

the models


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7.2 Influence and significance of the variables proposed

Of the eleven covariables proposed, six are significant, and the following are excluded:

gender, education level, possession of personal experience, and individuals perception of

both the social acceptability of the entrepreneurial career as a valid alternative and the

social legitimacy of the entrepreneurial success.

In the block of socio-demographic variables introduced as controls, only age is

relevant, significant in the overall consideration even though we cannot determine the

sign of the relation. The relation with gender ceases to be significant with the

introduction of the variables in Block 5 (self-efficacy detected and perception of

opportunities), which would presumably explain a substantial amount of the differences

attributed to gender.

From among the variables that indicate background of human capital, only recent

knowledge of entrepreneurs and their influence on the individuals (role model, vicarious

learning) is relevant. Based on this knowledge, individuals with these characteristics

outnumber those without entrepreneurs among their acquaintances by nearly one and a

half to one in their propensity to entrepreneurial activity. Education level shows no

significance at any point, and the significance of entrepreneurial experience is diluted

when the last block is introduced, particularly the variable relative to the perception of

self-efficacy or possession of entrepreneurial capacities and abilities. This would, thus,

contribute the explanatory portion attributed initially to experience.

Regarding the subjective or perceptual variables, the two that we linked to social

norms perceived by individuals as socio-cultural pressure or support are not significant.

The rest are shown to be highly significant for understanding involvement in nascent

entrepreneurial activities. On the one hand, fear of failure influences negatively the

individuals propensity to develop entrepreneurial activities. On the other, the perception

of desirability, recognition of self-efficacy and the perception of good opportunities havea positive influence. The main influences are those exercised by the perception of

business opportunities (odds-ratio2.042), and mainly by the recognition that one has the

capacities to act to take advantage of these opportunities by setting up and managing the

business (odds-ratio4.565).

7.3 Final model and validation

Table 3 shows a final regression model estimated by incorporating only the variables that

were significant.

The validation of the model (Table 4) was performed based on the test of its validity,

specifically on its degree of calibration (Hosmer and Lemeshows test of goodness of fit)

and its capacity for discrimination (estimated by the area under the ROC curve),information complemented by the percentage of correct predictions.

According to the results of the tests, the capacity to discriminate correctly between

entrepreneurial and non-entrepreneurial individuals from all of the possible combinations

of pairs is estimated at 78.4%, close to the classification of excellent. The Hosmer and

Lemeshow C-statistic indicates the non-existence of significant differences between the

values observed and predicted and thus good fit. Further, these measures are supported by

the percentages of correct individual predictions achieved, with an overall capacity for

accuracy of 71.8%, and, more specifically for the individuals who demonstrate the event

in which we are interested (nascent activity), of 78%.


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Table 3 Final model for nascent entrepreneurial activity

Exp(B) 95% C.I.Variables B Std. error. Wald p-value

(odds ratio) Lower Upper

Constant 1.289 0.380 11.502 0.001 0.276

Block 1: Socio-demographic variables

Age (five ranges) 10.760 0.029

Age 25 to 34 0.031 0.372 0.007 0.933 0.969 0.468 2.008

Age 35 to 44 0.115 0.368 0.098 0.755 0.892 0.434 1.832

Age 45 to 54 0.271 0.376 0.521 0.471 0.762 0.365 1.593

Age 55 to 64 0.747 0.383 3.816 0.051 0.474 0.224 1.002

Block 2: Personal variables

Role models 0.408 0.163 6.298 0.012 1.504 1.093 2.068

Block 4: Personal attitude perceived

Desirability 0.409 0.170 5.798 0.016 1.506 1.079 2.101

Fear of failure 0.606 0.170 12.715 0.000 0.546 0.391 0.761

Block 6: Perceived viability

Self-efficacy 1.563 0.179 76.339 0.000 4.774 3.362 6.780

Opportunities 0.686 0.167 16.980 0.000 1.987 1.433 2.754

Table 4 Hosmer-Lemeshow Test, area under the COR curve and percentages of correctprediction

Hosmer-Lemeshow Test

Chi-square gl Significance

6.217 8 0.623

Area under the ROC curve

95% C.I.Area (std. deviation) Sig.

Lower lim. Upper lim.

0.784

(0.016)

0.000 0.753 0.814

Correct predictions

Sensitivity 78.0%

Specificity 65.6%

Global % 71.8%

Notes: Null hypothesis: true area = 0.5Sensitivity: % accurate subjects that show the event.Specificity: % accurate subjects that do not show the event.


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8 Conclusions and recommendations

The analysis performed enables us to confirm empirically the degree of influence of a

series of elements chosen from the literature, specifically those linked to the background

of human capital and individuals perceptions concerning their willingness to become

involved in firm creation activities. Our innovation in this study involves using a sample

free of certain biases usually ignored, such as those of retrospection and the status of firm

creation as a rare event. These biases have been avoided through the use of qualified

individuals such as nascent entrepreneurs and a sample balanced relative to the response

variable or event of interest.

As to the results obtained, of the control variables, only age was shown to be

significant, although only in the overall consideration. The results thus seem to point to a

lower disposition to become involved in entrepreneurial activity as age increases, but it is

not possible to confirm this relationship. The lack of significance of the variable genderoccurred when the variables related to perceived viability were introduced, suggesting

that gender differences relative to entrepreneurial involvement may originate to a large

extent in how individuals evaluate their environment in terms of opportunities and how

they evaluate their own capacities to exploit the opportunities detected.

As to background of human and social capital that individuals bring, education level

does not become significant at any point, whereas the individuals own entrepreneurial

experience shows a positive influence up to the point at which perception of self-efficacy

is introduced. This seems to indicate that it is not really disposition toward the experience

that predisposes the individual to become an entrepreneur but rather the conviction that

this experience has actually provided the abilities and capacities needed. Knowing recent

entrepreneurs in ones nearby environment is confirmed, in line with the empirical

literature described on this issue, as an element with positive influence on the willingness

to become involved in activities to set up a business, whether this influence is exercised

through a role model or vicarious experience or as social capital.

In general, the variables of perception have shown a high connection to the

entrepreneurial decision, with the exception of the perceptions that reflect the influence

of social pressure detected. The levels of significance enable a much clearer reading of

the influence of perceptions, which suggests that these variables have the most impact in

relative terms and thus shows the importance of considering this kind of variables in

research, a conclusion in line with the results obtained by Arenius and Minnti (2005),

among others.

In particular, the results lead us to think that an individual having the right attitude

toward firm creation can lead to greater entrepreneurial propensity. Viewing the decision

to become an entrepreneur as a desirable professional option is shown to be an element

with positive influence on the propensity to initiate setting-up activities. However,involvement in entrepreneurial activities, which are naturally subject to risk, can lead to

hypothetical failure as an outcome. In this sense, the results of this failure can be

interpreted by individuals as serious enough to become a barrier that inhibits their

involvement in the process. The analyses performed have enabled us to confirm

empirically that this negative perception can reduce peoples propensity to try to create

their own businesses by approximately half.

On the other hand, the results related to perceived viability show that detection of

good business opportunities is an outstanding element in the decision to create a firm,


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making those who read their environment positively in terms of opportunities double

their entrepreneurial propensity when compared with those who read their environmentnegatively. Further, the empirical study stresses the perception of self-efficacy as a

crucial factor that stands out from the rest. This indicates that those who evaluate

positively their own capacities and abilities to set up and manage a firm can increase their

entrepreneurial propensity nearly five times compared with those who do not believe that

they have such capacities.

The case of the variables proposed as perception of socio-cultural pressure leads, on

the other hand, to the reflection that the way of posing these questions in the APS

questionnaire might not have been the most appropriate for accessing the specific

concepts of social acceptability and legitimacy of the entrepreneurial figure.7None of the

studies reviewed found significant results with these variables, and Tominc and Rebernik

(2007) also make some reflections and raise doubts concerning the phrasing of these

questions in the APS survey.

8.1 Some recommendations

The influence of attitude in the development of entrepreneurial conduct leads us to

consider it reasonable to direct efforts to publicise widely the positive effects of

entrepreneurial activity in terms of growth, well-being, innovation and generation of

employment. Even if this recognition is generally acknowledged among academics and

political agents, the general populations perception may not be widespread and/or

intense enough. Indeed, the reading of the empirical evidence can be translated as the

belief that greater numbers of individuals with a positive attitude are linked to greater

quantities of individuals trying to set up firms. This indicates that focusing efforts to

make the population internalise and recognise the beneficial effects of the entrepreneurial

function should come to be seen as a relevant matter for consideration.

Further, this paper confirms empirically something that seemed a logical expectation

but that is now reinforced by empirical evidence: people should feel not only that it is

desirable to create firms but that becoming involved in this activity is something within

their reach. Thus, the recognition of good business opportunities in the individuals

immediate environment and, fundamentally, the judgement of ones background in the

resources and abilities needed to exploit and develop such opportunities in the form of a

firm have been shown to be aspects with a positive influence on the setting up of business

initiatives.

Given this positive empirical evidence, and bearing in mind, in agreement with

Shane (2003), that

1 discovering an opportunity requires first, obviously, that the opportunity exists

2 the opportunities exist independently, whether or not they are discovered by people

with the necessary background of abilities.

We think that the actions of different administrations could try to foster as much as

possible the conditions that form a good framework for facilitating both the creation of

new opportunities and access to these opportunities, as well as their discovery and

exploitation, minimising all possible obstacles. Thus, good communication policies that


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are in accord with the environment in which the social and economic activity is

developed and that put within the reach of individuals the knowledge that there areopportunities are highly desirable.

This paper confirms very clearly the impact of perceived self-efficacy on the

entrepreneurial decision. The relation found between feeling that one possesses the

abilities needed and entrepreneurial involvement is very significant. This conclusion

represents an empirical confirmation of research that advises the development of other

studies to investigate the antecedents of self-efficacy related to entrepreneurial activity.

Some studies from the field of cognitive psychology indicate that there are two main

general sources of self-efficacy: ones own experiences and vicarious experiences. Thus,

the expectations of efficacy in general are influenced respectively by:8

1 achievements in execution of these activities based on ones own experience, which

(depending on the results) affect the judgements made concerning ones own

efficacy

2 the behaviour developed by others and its consequences, the observation of which

orients the individual to his or her own capacity, such that the individual can

persuade him- or herself that if someone else can do it, I can do it too.

Thus, public administrations can see the importance of developing instruments and

educational programmes that help people gain abilities and practical experiences in the

area of management and setting up of firms. It is necessary to reinforce and expand

connections between educational institutions and entrepreneurial organisations, ensuring

however that these measures are oriented to improving personal perception of

self-efficacy rather than achieving a mere enrichment of individuals educational

curriculum. The examples of entrepreneurs and fostering the publics awareness of them

become especially important. Entrepreneurs serve as role models, provide vicarious

experience, and act directly on entrepreneurial involvement and indirectly as a source of

self-efficacy that the individual perceives.

The issues related to the overall study performed in this research influence

individuals actions that can be called spreading an entrepreneurial culture.

Administration should incorporate the following objectives in their diverse aid programs

for entrepreneurial activity: improving the availability of individuals human and social

capital, their attitude toward firm creation, their conviction that this is something within

their reach, and the perception that society values this activity sufficiently, repays those

who succeed and helps those who fail in their attempt. Administrations should expand

these programmes beyond their current scope, which is restricted to other aspects of

operating character, which are also important but very focused primarily on those who

are already entrepreneurs rather than on fostering entrepreneurship in the generalpopulation.

Acknowledgements

The authors thank the Bancaja Chair for Young Entrepreneurs-UMH for the support

received to develop the research that led to this paper.


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Notes

1 In the research context of GEM, a nascent entrepreneur is defined operatively as somebodywho is, alone or with others, currently trying to start a new business; expect to be owners orpart owners of the new firm, and have been active in trying to start the new firm in the past 12

months[Johnson et al., (2006), p.1].

2 Self-efficacy can be understood as peoples judgements of their capabilities to organise andexecute courses of action required to attain designated types of performances [Bandura,

(1986), p.391], a definition that links it to the concept of perceived control of behaviour(Ajzen, 1987; Boyd and Vozikis, 1994; Krueger and Carsrud, 1993; Krueger and Brazeal,1994).

3 See chart in the Appendix for tables.

4 Another solution is to use the Relogit technique (rare events logistic regression) developed byKing and Zeng (2001a, 2001b).

5 Described in the Appendix.

6 Tests of the equality of means of the independent variables between the two subsamples ofindividuals without nascent entrepreneurial activity and tests of independence throughcontingency tables that cross the categories composing each independent variable with theclassification variable (subsample to which the individual belongs).

7 To judge from the percentages of responses obtained in the groups of those involved and thosenot involved in entrepreneurship, we could deduce some disappointment among those who

develop entrepreneurial activities, such that these questions, as they are actually formulated,seem to record their impression of the justice with which those involved in the development ofa new business initiative are treated, rather than two components of the social norms with thecapacity to influence the individuals own perception of entrepreneurial activity.

8 The cognitive literature also mentions other sources of self-efficacy, such as verbal persuasionor persuasive messages from others to convince and help.


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Appendix

Table A1 Chart of the APS GEM 2005 Spain

Territory Spain

Universe of study 29,130,209 individuals from 18 to 64 years*

Sample 18,953 individuals from 18 to 64 years

Sample error 0.71%

Confidence level 95%

Note: *Review of municipal voting register 2005.

Source: *INE (2007)

Table A2 Table summary

N (recount) 854 427 (50%) 427 (50%)

Variable Categories Total SampleWith nascent

entrepreneurial activityRest (control)

Age 1824 5.5% 5.6% 5.4%

2534 24.5% 29.0% 19.9%

3544 27.9% 30.7% 25.1%

4554 22.1% 20.1% 24.1%

5564 20.0% 14.5% 25.5%

Gender Men 49.6% 54.8% 44.5%

Women 50.4% 45.2% 55.5%

Education level None 2.6% 0.9% 4.2%

Primary 25.1% 21.8% 28.3%

Secondary 23.7% 23.0% 24.4%

Medium 15.8% 15.9% 15.7%

Higher 32.9% 38.4% 27.4%

Entrepr. exper. Yes 15.8% 20.8% 10.8%

No 84.2% 79.2% 89.2%

Role models Yes 44.5% 55.5% 33.5%

No 55.5% 44.5% 66.5%

Desirability Yes 66.2% 73.5% 58.8%

No 33.8% 26.5% 41.2%

Fear of failure Yes 36.2% 24.4% 48.0%

No 63.8% 75.6% 52.0%

Social aceptability Yes 62.1% 61.4% 62.8%No 37.9% 38.6% 37.2%

Social legitimacy Yes 55.7% 56.9% 54.6%

No 44.3% 43.1% 45.4%

Self-efficacy Yes 64.2% 84.8% 43.6%

No 35.8% 15.2% 56.4%

Opportunities Yes 38.1% 50.1% 26.0%

No 61.9% 49.9% 74.0%

Note: Description of the sample used.


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