Youth Entrepreneurship: Moderating Opportunity Identification towards New Venture Creation

International Journal of Review in Applied and Social Sciences Volume1, Issue 8;Aug 2015

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Youth Entrepreneurship: Moderating Opportunity Identification

towards New Venture Creation

Seun Azeez Olugbola (Corresponding author)

Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia

71800, Bandar Baru Nilai, Malaysia

Tel: +60-187-636457 E-mail: [email protected]

Kalsom Abd. Wahab

Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia

Tel: +60-16-810-1954 E-mail: [email protected]

This research paper is part of my thesis. The research is financed by USIM Research Management Centre.

Grant No. USIM/FRGS/FEM/32/51612. Special gratitude goes to USIM Research Management Centre for

providing GRA grant for making this work possible.

Abstract

Training has been used as a driving force for developing innovative ideas, identifying market gaps and

discovering environmental trends to capture market opportunities that will influence youth towards new venture

creation. The purpose of the study is to investigate the determinant factors of opportunity identification that can

influence new venture creation and establish whether trainings do moderate the relationship. If the business

fundamentals can be shaped into youth mindset through trainings, youths who are ready to face various

challenges in setting up new ventures will be influenced. The study used hypothetical deductive approach

through Structural Equation Model (SEM). Three constructs namely Personal Characteristics, Environmental

trends and Essential qualities are regressed as determinant factors of new venture creation through opportunity

identification. The study used cross sectional data. Structured data are assembled from undergraduate students

(N=418) of Universiti Sains Islam Malaysia, across the faculties. The findings revealed that opportunity

identification is positively and significantly related on readiness towards new venture creation. The results

further revealed that training does moderate the relationship. Entrepreneurship Training plays important roles

in youths’ career decisions in identifying opportunities towards venture creation after partaking in such

programs. The study provides new empirical evidence and value insight for future researchers, entrepreneurs,

investors, and policy makers to better understand the moderating effects of entrepreneurship training on

opportunity identification towards venture creation. The study serves as a reference point on job creation

opportunities among youths who have higher hope of attaining new venture success after the training.

Keywords: Entrepreneurship training, personal characteristics, Environmental trends, Essential quality

1. Introduction

The process of identifying opportunity in creating new venture has been a challenge for most youth of

nowadays. It is essential for youth to know the actual difference between an idea and an opportunity. An idea is

an impression, a thought, or a notion (Audretsch & Lehmann, 2006). The question is “what is an opportunity?”

An opportunity has the essential qualities of being attractive, durable, and timely and is anchored in a product,

service or business that creates or add values for its buyers or end users (Barringer & Ireland, 2010: 67). In the

past many new venture fail because there was no real opportunity to start with but not because the venture didn’t

put a great deal of efforts. It is very crucial to understand that before getting eager about the prospects of a

business idea, it must fill a need, solve a problem and meet the criteria of an opportunity. Therefore, opportunity


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identification process depicts whether the idea are viable, marketable in nature, meet the need of the consumer

and have impact on the growth of the economy.

Opportunity identification is the heart of entrepreneurship process. Shane & Venkataraman (2000) identifies

opportunity identification as a core attribute of entrepreneurship. Without opportunity, market niche cannot be

determined hence it will be quite difficult to create new venture. In today’s world, many new entrepreneurs are

facing difficulty from investors. More than 80 percent of business ideas in form of business proposals rejections

occur in the first few glance through; therefore after the investors have read the business plan thoroughly another

10 to 15% may likely get rejected and at the end less than 10% attracts investors interest (Timmons, 1994). It

is very essential for would-be entrepreneurs therefore to be able to evaluate whether adequate potentials exist

before investing precious time and effort on any business opportunity.

Two major research questions arise, “What factors influence opportunity identification towards new venture

creation?” Secondly, “Do trainings moderate opportunity identification towards new venture creation?”

However, developing entrepreneurial opportunity through existing market niche demands attractive business

ideas, identifying environmental trends, risk taking propensity and high professional contacts of the human

factors. Business opportunities are out there but only few youths can identify it. Introducing entrepreneurship

training may have large effects on how the students can develop a good opportunity. Previous study revealed

that most successful entrepreneurs are aware that a good idea may not necessarily be a good opportunity

(Timmons, 1994). In the process of identifying opportunity, marketable idea is one way of discovering market

niche that will influence new venture start up (Gibbs and Ritchie, 1982).

Barringer & Ireland (2010:44) stated that entrepreneurship is an attractive career option for youth for various

reasons such as understanding the attractiveness of the youth market; an ability to find low-cost labour in terms

of having access to other students; also access to resources that are available to them at their institutions and

lastly their intuitive recognition of the reality that if they fail they can easily pick up and pursue another venture

opportunity.

Despite this huge opportunities in Malaysia economy, previous studies have shown that the venture creation

among youth in Malaysia is still very low compare to other developing countries (Chan, et al., 2009 and Syed

& Siri, 2012). The researcher findings show that even though there are favourable entrepreneurial environments

in terms of physical infrastructure and financial environments; however, inadequate financial support, erratic

change in government policies, lack of entrepreneurial education at tertiary level and inadequate

entrepreneurship training are challenges that may likely affect Youth creativity in identifying opportunities than

others.

1.1 Youth Readiness towards Entrepreneurship

Due to various opportunities here and there, youth and women in the last 30 years have been imparting the

Malaysia economic activities. Their passions and drives have inspired many upcoming graduate to seize and

create opportunities towards becoming entrepreneurs especially in this modern era. Youth Entrepreneurship

Fund has been set up by government for youths that are ready, creative and can turn their business to firms that

will improve the growth of the economy. Young Entrepreneur Fund (YEF) is a special fund allocated by the

Government as part of its continuous strategy of acculturation and creation of new entrepreneurs among

Malaysian youth. The main aim of this fund is to provide alternative source of fund for young entrepreneurs.

There are many youth with ideal business opportunity in Malaysia that intend to set up business in order to

contribute to the development of the economy. However, it is very important to assess the youth entrepreneurial

readiness. It is this entrepreneurial readiness that would propel an entrepreneur to see various opportunities gap

that would change and transform his/her life towards venture creation. Various factors can influence

entrepreneurial readiness such ability to take risk, passion and few career options. Entrepreneurial readiness of

youth aspiration to own a business involves exploring the mind of the would-be graduate on how they think,

how they would recognize business opportunities and the way they would act and then transform these

opportunities into a successful venture. This provides them with a better opportunity to see the true world

entrepreneurial practices.

Carsrud & Brannback (2009) noted that entrepreneurial readiness is very essential for new entrepreneurs such


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as the graduates-to-be who would in the near future engage themselves in one entrepreneurial activity or the

other. This is very paramount because they would soon involve making business decisions in an uncertain and

volatile world. Potential entrepreneurs are more likely to have a positive mind towards entrepreneurial activities

if they perceive that they are ready and possess the ability to succeed in the entrepreneurial endeavours.

Therefore, it is this entrepreneurial readiness that produces self-confidence and then gives birth to self-efficacy

which gives the entrepreneur the capability to succeed in his/her entrepreneurial practices.

Youth of nowadays have restricted their definition of new venture to only having a suitable structure where

sales can be made to the necessary consumers. This is a misconception of the term new venture creation. For

the purpose of this study a new venture creation is defined as a medium that allows a new business set up of a

specific good or service to interact with customers in order to facilitate an exchange. A new venture definition

is consistent with market definition in economics. Business set up can be organized through internet trading

without a specific structure or having a structure or where the need are required. It is very important for new

entrepreneurs to have timely innovative idea that is attractive, durable and add value to final products. This can

be achieved by having prior experience in family business or having social and professional contacts to

networks around.

1.2 Business Investment Opportunity in Malaysia

There are various market opportunities in various sectors of the Malaysia economy. Opportunities can be

discovered through economic changes such as change in taste, change in disposable and current state of the

economy; or through technological changes such as moving from traditional to a technological based economy;

societal changes such as differences in culture and demography; or Political Changes such as changes in

transition, government policies and laws. These changes have opened various opportunity for youth in Malaysia

that are sensitive or alert to issues around the economy. Figure 1 represents the Malaysia ranking in the world

on various opportunity gap for youth for the past few years.

Figure 1. Ranking, Opportunities & Ease of Doing Business in Malaysia (Malaysia Business Advisory

site)

Malaysia is the top 6th friendliest country in identifying opportunities and doing business based on 2014 ranking.

Malaysia economy is currently enjoying improved ranking and positions with encouraging business sentiments

from both locals and foreign investors. These are huge opportunities that have not been tapped by Malaysia

youths. Since Malaysia plans to move towards knowledge based economy through doubling the economic

growth by 2020 just like Singapore, the economy is now in a very distinct position with large customer base.

Malaysia government has invested huge fund on entrepreneurship training in order to help youth to utilize the

opportunity gap in the current market. The current economy provides huge opportunities for youth right now

due to the present environmental trends. There are various investment opportunities such as investing in Internet

business (freelance writer, web designer, marketing); Food outlets (food and beverages); travel agency (open

economy run by government); tourism (build more resorts or hotels due to inflow of foreigners); micro finance

25th24th

21st23rd

21st18th

12th6th

2006

2008

2010

2012

2014

2016

0 5 10 15 20 25 30

Yea

r

Ranking

Malaysia's Overall Ranking in the World Ranking

Ease of Doing Business


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services (business needs funding) and host of other opportunities.

1.3 Rate of Business Start-ups

One misconception of new venture creation is that 9 out of 10 firms mostly created fail in their first few years

(Barringer & Ireland, 2010:29). Most of the new firms created in Malaysia for the last 10 years are still existing

till date. In reality the essence of entrepreneurial behaviour is to identify opportunities and put the business

ideas into practice (Ireland & Webb, 2007a). Existing Firms usually resist innovation due to their standard

operation procedures that cannot be changed. Due to this resistance, young entrepreneurs are left with good

business ideas and have the opportunity to utilized underserved market (Ireland & Webb, 2007b). Therefore

due to the passion for business, some graduated youth choose to resign in order to develop their business ideas

into new firms (Barringer & Ireland, 2010:34). As it is very essential to be optimistic about a specific business

ideas, it is also important to evaluate its potential risks. Therefore, most business ideas of new firms are effective

when their passion is consistent with their ability and are in line with legitimate business opportunity. Over the

past 10 years, the demographic of new venture startup has changed in Malaysia and around the world. Of the

5,634,101 in 2014, a growing number are owned by women, minorities and young people as shown in Table 1.

Table 1. Trends in Business Establishment: Company and Business Statistics for Year 2009-2015

Source: Suhuhanjaya Syakat Malaysia Companies Commission of Malaysia (SSM)

As at July, 2015, there are 1,138,573 registered companies in Malaysia based on Suhuhanjaya Syakat Malaysia

Companies Commission of Malaysia (SSM) data. The total number of businesses operating currently in

Malaysia are 5, 822,727 as at the same date. The total number of newly created business with SSM over the

past seven years is presented in Table 1. Based on the SSM statistical records 878,527 businesses have been

established up till December, 2009. After the global economic crisis the figure of new business created have

risen steadily by 10.2% between 2010 and 2014. The total new firms created by local businesses have reached

1,133,919 as at July, 2015. As at 31st December 2014, the SMEs represents 99.5% of business created and still

thriving. This is a huge opportunity for youth that have viable business ideas to start their own venture.

2. Literature Review and Theoretical Framework

2.1 Past Studies on Opportunity Identification

There has been a continuous debate on the essential nature of opportunity identification towards new venture

creation (Krueger, 2003). Shane (2003) defines opportunity identification as a situation in which individuals

can create a completely new means-ends framework by reassembling resources that they believe will yield a

profit. This definition is further supported by Mahnke et al. (2007) describing opportunity identification as the

process of perceiving the possibility of a profitable new business startup. Therefore individual must first

perceive and identify opportunity in the market niche before investing in such opportunities (Shane &

Venkataraman, 2000).

Various studies have been carried out in the past to determine whether there is positive relationship between

opportunity identification and new venture creation. The previous findings revealed that not all individuals can

Years Local Companies Grand Total

Companies

Total Business Grand Total

Business

Until 31 December,

2009

878, 527 882,843 882,843 4,090,710

2010 44,148 927,045 271,414 4,362,124

2011 45,333 972,378 316,747 4,678,871

2012 45,441 1,017,941 316,855 4,971,483

2013 46,249 1,064,262 329,895 5,301,378

2014 49, 144 1,113,465 332,723 5,634,101

Up till July,2015 25,077+ 1,138,573+ 188,626+ 5,822,727+


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identify a given entrepreneurial opportunity that can influence readiness towards venture creation given the

same set of situations and opportunities (Shane 2000; Shane & Venkataraman 2000). In order to address this

enthralling but demanding research issue as to why not all individuals are able to identify entrepreneurial

opportunities, previous studies revealed that possession of prior knowledge (through entrepreneurship

programmes or family business), social networks, and superior cognitive factors play an important role that

helps lead individuals to notice opportunities (Shane, 2000 and Mitchell et al., 2002). Therefore, it can be

inferred that the needed opportunity identification for new business start-up cannot only occur through

increasing competition but in a broader sense, can also intensify through social issues, so as to identify in

advance new tendencies in the market place (Faltin, 2001:125).

In addition, further findings revealed that entrepreneurship program will improve opportunity identification on

intention towards creating new venture (Janice & Dmitriy; 2013; Souitaris, et al., 2007). This is achievable by

providing the students with creative exercises and ideas beyond what the students have undergone in class.

Students also reads popular business press self-help books, go for industry visit and sometimes students are

turned into research assistance. This will however influence the preparation of students on how to recognize

opportunity towards new venture creation. Therefore based on the discussion, the following hypothesis is

proposed:

H1: Opportunity identification has a positive and significant effect on Readiness towards new venture creation

2.2 Theory of Entrepreneurial Opportunity

There are various factors that can influence opportunity identification towards new venture creation as discussed

narratively by Barringer & Ireland (2010:81). These factors are summarised in Table 1 and the detailed

discussions are stated in subsequent sections.

Figure 2: Theoretical Framework of the Study

Source: Adapted from Timmons (1994); Barringer & Ireland (2010: 81) & Seun (2015)

2.2.1 Entrepreneurship Training and Opportunity Identification

Entrepreneurship training is a process through which experiences are deliberately offered to trainees to enable

them to absorb some new perspective, understanding values, attitude, technique or skill (Jabnoun, 2012: 210).

These experiences acquired through training may not have been easy to get without youth passion towards

setting up new firm. Prior findings lend supports that training can develop the relationship between skills and

inclination towards new venture creation. Entrepreneurship training enables the students to acquire skills and

knowledge that are important to motivate them into venturing a new business (Lee et al., 2006).

Furthermore, entrepreneurship training provides more and better entrepreneurial opportunities as it nurtures the

ability of students which raise their inclination and attitude towards entrepreneurship (Souitaris, et al. 2007).

The findings further explained that entrepreneurship training do improve the relationship between

entrepreneurial opportunities and intention of students towards new venture creation. However, the impact of

entrepreneurship programmes on the inclination of students towards entrepreneurship has not given consistent

outcome.

Independent Variables

Opportunity Identification

Innovative ideas

Cognitive factor

Social networking

Prior experience

Environmental Trends

Essential Quality

Moderating Variable

Entrepreneurship Training

Dependent Variables

Readiness towards New

Venture Creation


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Weber et al. (2009) highlighted that the interest of students to become entrepreneurs does not necessarily relate

to exposure or participation in entrepreneurship programmes or courses during their study period. In fact the

survey by Weber et al., indicates that the students’ interest to become entrepreneurs declines when they had

gone through the entrepreneurial programme. This is due to the fact that, these students get a clearer picture

about entrepreneurships and their true capabilities in business. Therefore based on the discussion, the following

hypothesis is proposed:

H2: Entrepreneurship training moderates the relationship between opportunity identification and readiness

towards new venture creation.

2.2.2 Personal characteristics of Entrepreneurs

2.2.2.1 Innovative Ideas

Ireland et al. (2006) described innovation as the process of creating new things which is central to the

entrepreneurial process. Schumpeter (1993:125) describes an innovative entrepreneur as an individual who can

identify opportunity in order to open up new territory and turn dreams into reality. The functions of innovative

entrepreneurs are based on bringing knowledge to life in the market activities and not just inventing new things

(p.128). Therefore, Schumpeter discovered that the market was dominated by only few firms and the only way

to ensure efficient allocation of resources is to encourage new entrepreneurs to invade the market by destroying

the existing market equilibrium through innovation. The mechanism has been taken into economic discourse

by the term “creative destruction.” This implies that for opportunity to be turned into new venture creation an

entrepreneur must be innovative because investing in new products is usually better than the existing ones that

has been replaced. The creative destruction process is initiated most effectively by start-up ventures that want

to improve on what is currently available. New firms that practice these art are called “innovators” or “agents

of change” (Barringer & Ireland, 2010:45). It is this innovation that can make an entrepreneur to compete well

with the existing firms through acquired knowledge.

Zimmerer et al. (2005) also added that a good value entrepreneur is a person who can utilize an identifiable

opportunity in their business, has good attitude, and is innovative in a product development to match in a market.

As well as highlighted by previous researchers, innovativeness plays an important role in the characteristics of

an entrepreneur during the start-up phase of a firm. Faltin (2001) stated that if the proposed business idea is not

innovative, the existing firms in the market place will have a competitive edge. The existing businesses already

have customers; experience with suppliers and are well conversant with such business environment, whereas

the proposed new firms are not. The existing businesses have all the advantages, and the new business has a

corresponding number of disadvantages. Therefore, to enter the market place, it is almost a necessity to know

how to identify opportunity and have a viable idea (Barringer & Ireland, 2010:67). It is very important to note

that the innovative element of one’s business ideas is one of the most essential tools for survival.

2.2.2.2 Prior Experience

Krueger (2003) defines prior experience as the quantity and quality of prior exposure in a family business,

family involvement in a business or participation in a start-up. Several studies show that prior experience in

business makes entrepreneurs to recognise market opportunities (Wiklund & Shepherd, 2008; Markham &

Baron, 2003).). Krueger (1993) stated that prior experience has higher impact in motivating students toward

entrepreneurship. There are several explanations for these findings. By having prior experience in the family

business an individual may discover market opportunities that are underserved.

In addition, the moment an entrepreneur start a firm, new venture opportunities become obvious (Barringer &

Ireland, 2010). This opportunity is what is called the Corridor Principle, which states that once an entrepreneur

starts a firm, the “corridors” leading to new venture opportunities become obvious (Stam et al., 2008). Prior

studies investigate the relationship between entrepreneurial experience and students’ intention towards venture

creation (Keat et al., 2011 and Zahariah et al., 2010). The findings found that there is positive and significant

relationship among university students.


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2.2.2.3 Social Networks

Parker (2008) results showed that the extent of an individual’s social network have positive impacts on

opportunity identification. Social Networks can be described as the relationship between parties or an access to

people and their resources in any business activities with an orientation towards mutual gain initiated through

informal/personal or formal/professional relations (Macpherson & Holt, 2007; Street & Cameron, 2007). The

findings by Cooper and Yin (2005) revealed that people who build substantial network of social and professional

contacts will be exposed to more opportunities and ideas. Sorenson et al. (2008) agreed with the previous results

that engaging in any business activities will enable an individual to build a social network contact that in turn

may provide insights that lead to opportunities.

In order to determine the extent to which social networks affect new venture creation, previous studies results

also lend support that exposure towards more opportunities through building of social and professional contacts

can lead to new business start-up (Audretsch et al., 2008 and Davidsson & Honig, 2003). In essence, if youth

engage themselves in social networks such as entrepreneurship clubs or associations, however this could prompt

their readiness towards starting up their firms in the nearest future.

In a study by Hill et al. (1999) that examine the difference between those individuals that developed their

business on their own (solo entrepreneurs) and those that discovered the business opportunities through social

contacts (network entrepreneurs). The findings revealed that those that identified their business through social

contact identified more significant opportunity than solo entrepreneurs but were less likely to see themselves

as being alert or creative. In the modern world we live in now networking between people as well as business

entities cannot be avoided because a networking has an important role in organisation and can positively

influence the small firm performance (Tang, 2011; Elfring & Hulsink, 2007).

In Singh (2000) view, the more extensive entrepreneurs’ social networks, the more successful their new ventures

will be. In the recent time some past studies have suggested that social network contact are the source of

essential resources such as financial, human and informational that are generated by entrepreneurs (Ozgen &

Baron, 2007; Walter et al., 2006). From these discussions, social network contact are important and useful for

both would-be entrepreneurs and existing firms. The prospective entrepreneurs may be influenced through

social contacts towards new venture creation.

2.2.2.4 Cognitive factors

Cognitive factors involve creativity and alertness towards market niche. The process of creativity can be divided

into five stages for an individual level (Kao, 1989). These are: Preparation stage (the background, experience,

and knowledge that entrepreneurs acquire towards opportunity identification process); Incubation stage (a stage

a person thinks about a problem; it is the “mulling things over” phase); Insight stage (the solution to a problem

is seen or an idea is born); Evaluation stage (a stage an idea is subject to scrutiny and analyzed for its viability)

and Elaboration stage (a stage creative idea is put into a final form and this is the stage a business plan is

written). Ardichvili et al. (2003) define creativity as the process of generating a novel or useful idea. There is

an essential difference between creativity and innovation. Innovation as stated earlier refers to the successful

introduction and implementation of new outcomes by individual or firm while creativity on the other hand is

the process of generating useful ideas but does not require implementation. Hence, it may take individuals

hundred creative ideas to discover the one that ideally satisfies an opportunity (Barringer & Ireland, 2010:85).

In other to be creative, students need to be alert to the community challenges. Alertness is largely a learned

skills, and individuals who have more knowledge of an area, who can find trend in the market or are able to

discover market gap tend to be more alert to opportunities in that area than others. Therefore, most entrepreneurs

see themselves in this circumstance, as being more alert than others. Several sources had shown mixed findings

on entrepreneurial alertness (Barringer & Ireland, 2010:79).

2.2.3 General Environmental Trend Approaches used in identifying Opportunity

Based on the past studies the findings revealed that there are three general approaches (Barringer & Ireland,

2010) and Seun, 2015) entrepreneurs use to identify business opportunity:


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2.2.3.1 Observe trend:

There is need to observe trend such as economic trends, technological trends, social trends, political actions

and regulatory changes because all these factors create opportunity for entrepreneurs to pursue.

2.2.3.2 Solving a problem:

There are various problems that new entrepreneurs encounter that are yet to be solved. These problems can be

identified through taking note of the day to day activities of people in the community. In line with this point,

many new ventures have been set up by individuals who have faced some challenges in their daily lives and

later turn the challenges to a business opportunity after solving the problems.

2.2.3.3 Finding gaps in the market place

Business opportunity can also be identified through finding the gap in the market place and proffering necessary

solutions in order to meet the need of the consumers. In capitalising on environmental trends, solving a problems

or possibly utilising the market gap therefore, a new venture has to deliver on its promise. But Kirzner (1980),

in his research work believed that the difference between youth who can identify opportunity and those who

cannot depends on their relative assessments of the marketplace. In other words, individuals that intends to

create a firm, must be better than others that intend not at recognizing market opportunities, solving problems

in the society and determining trends in such market niche.

2.2.4. Essential Qualities

An opportunity has four essential qualities: it must be attractive (innovative nature of the products), durable

(exist for years), timely (meets customers’ need) and add values for its end users (Barringer & Ireland, 2010).

The timing of the entrepreneurial process is important in new venture start-up. Timely decisiveness in

identifying and utilizing the opportunity can make huge difference among individuals (Timmons & Spinelli,

2008).

It is very important for individuals not to wait to take advantage of an opportunity because there is no perfect

time. Opportunity is a moving target that must exist for years and must add values for its final consumers. Doerr

(1997:29) insists, there has never been a better time than now to start a new firm. Today, entrepreneurs invents

new business models while in the past they started the business without specific strategy. This serves as huge

difference that creates business opportunities (Timmons & Spinelli, 2008).

3. Materials and Methods

3.1. Descriptive Statistics

The profile of the respondents indicate a higher number of females (296; 70.8%) respondents than males (122,

29.2%) respectively. Majority of the respondents are between 20-25 years (93%) and between 15-19 years

(6.5%) respectively. Most of the respondents from year three to year five have 61.24% students that participated

in the entrepreneurship study. This is due to the fact that the students are preparing towards global market

challenges.

3.2. Factor Loading and Fitness Index

In order to ascertain the factor loading of this study (as shown in “Figure 3”) certain fitness indexes for the

pooled constructs for the second order does achieve the required level. Thus, no item deletion and modification

is required.


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Figure 3: Factor Loading and Fitness Index

In Figure 3, the results showed that opportunity identification construct loads well on its three sub-constructs.

The factor loading of opportunity identification on personal characteristics, environmental trends and essential

qualities are 0.90, 0.62, and 0.83 respectively. Furthermore, the R2 for all sub-constructs are high which reflect

the contribution of opportunity identification on its three constructs is good. Therefore, the theory that

opportunity identification consists of three sub-constructs is well supported. When the study examined the factor

loading, the loading for items such as personal characteristics, approaches and essential qualities are above 0.5

suggested (Zainudin, 2012). The modification index were checked to determine if there were redundancy in

first order constructs. Therefore, there was redundancy at e8 <--> e9 =16.732 which was greater than 15

threshold (Zainudin, 2012) and these two correlated measurement errors of redundant items were set as a “free

parameter” and the new measurement model was re-run. The normality assessment can be made by assessing

the measure of skewness for every item. The absolute value of skewness 1.0 or lower indicates the data is

normally distributed (Zainudin, 2012). In this study, the absolute value of skewness and kurtosis ranges from -

0.507 to 0.135 and -0.442 to 0.409 respectively which indicate the data is normally distributed.

3.3. Validity and Reliability

Table 2. CFA Results for the Measurement Model for all Main and Sub-Constructs

Model

Construct

Number of

items

Cronbach Alpha

(Above 0.7)

Composite

Reliability

(Above 0.7)

Average Variance Extracted

(AVE)

(Above 0.5)

Opportunity

identification

3 0.868 0.832 0.628

Personal

Characteristics

4 0.776 0.776 0.500

Environmental

Trends

3 0.784 0.801 0.577

Essential

Qualities

3 0.812 0.814 0.594

New Venture

Creation

4 0.793 0.809 0.521



In Table 2, the AVE of opportunity identification and new venture creation are 0.628 and 0.521 respectively.

The Cronbach’s Alpha of opportunity identification and new venture creation of 0.868 and 0.793 respectively

are above 0.7 threshold (Zainudin, 2012). The composite reliability of 0.825 and 0.801 are the reliable values

for opportunity identification and new venture creation respectively. The sub-constructs Cronbach Alpha are

greater than 0.7 threshold. It ranges from 0.776 to 0.812. The Composite reliability of the sub-constructs ranges

from 0.776 to 0.814 and are above 0.7 threshold. The AVE of the sub-constructs also ranges from 0.5 and above.

Table 3. Discriminant Validity Index Summary

Construct Opportunity identification New venture creation

Opportunity identification 0.792 0.75

New venture creation 0.75 0.721

The diagonal in bold represent the square root of AVE while the other entries represent the correlation. In Table

3, the correlation between opportunity identification and readiness towards new venture creation is 0.75 which

is less than 0.85 threshold (Zainudin, 2012).

4. Results

4.1 Hypothesis Testing and Structural Equation Model Analysis

In order to ascertain whether the hypotheses are supported, this study analyzed both direct and moderating effect

of the measurement for the pooled constructs. The result of the path analysis was shown in the regression

estimate values of both direct and moderating effects. All the conditions of the fitness index were achieved.

4.1.1 Direct Effects

The direct effect analysis regression weight that is used in testing the hypothesis are represented in Figure 4 and

Table 4 thus:

Figure 4: Unconstraint Effects (Direct Effects)



Table 4. Direct effects: Regression Weights: (Group number 1 - Default model)

Estimate S.E. C.R. P Results

New Venture

Creation

<--- Opportunity

Identification

1.383 .164 8.439 *** Significant

Personal

Characteristics

<--- Opportunity

Identification 1.375 .159 8.645 *** Significant

Environmental

Trends

<--- Opportunity

Identification 1.000 Reference point

Essential

Qualities

<--- Opportunity

Identification 1.332 .150 8.893 *** Significant

Chi-square = 213.627 Degrees of freedom = 72

H1: Opportunity Identification has a significant and direct effect on readiness towards

new venture creation.

Supported

The regression weight estimate, 1.383, has a standard error of about .164. In other words, the regression weight

estimate is 8.439 standard errors above zero. The probability of getting a critical ratio as large as 8.439 in

absolute value is less than 0.001. In other words, the regression weight for opportunity identification in the

prediction of readiness towards new venture creation is positive and significantly different from zero at the

0.001 level (two-tailed). In other words the hypothesis stated above is supported. The effect of opportunity

identification on all sub-constructs are also highly significant as depicted in Table 4.

4.1.2. Moderating Effect

In the process of confirming the moderating effects of a latent constructs there is need to get the Chi-square

difference between constrained and unconstrained regression weight (Zainudin, 2012). If the results of the chi-

square difference is greater than 3.84, the result of the moderation is significant as such the result on hypothesis

is supported. The regression weight of Figure 5 and Table 5 represent the moderating effect analysis:

Figure 5: Constraint Effect Regression Weights: (Group number 1 - Default model)



Table 5. Moderating effects: Regression Weights: (Group number 1 - Default model)

Constrained

model (Figure 3.)

Unconstrained

model (Figure 2.)

Chi-square

difference

Result of

moderation

Result on

hypothesis

Chi-square 220.806

213.627 7.179>3.84 Significant Supported

Df 73 72 1

GFI 0.929 0.932

CFI 0.940 0.943

RMSEA 0.070 0.051

CMIN/DF 3.025 2.967

The Hypothesis statement

H1a: Entrepreneurship training moderate the relationship between opportunity

Identification and readiness towards new venture creation

Supported

In Table 5, the moderation test is significant since the difference in Chi-Square value between the constrained

and unconstrained model is greater than 3.84. The difference in Chi-Square value is 7.179 (220.806 - 213.627),

while the difference in Degrees of Freedom is 73 – 72 = 1. For the test to be significant, the difference in Chi-

Square value must be higher than the value of Chi-Square with 1 degree of Freedom, which is 3.84. The test of

hypothesis for moderation that has been carried out found that the moderator variable “Entrepreneurship

training” does moderate the causal effects of opportunity identification on readiness towards new venture

creation.

5. Discussion and Conclusion

The study centered on the relationship between opportunity identification and readiness towards new venture

creation. The findings revealed that the determinant factors of opportunity identification have direct and

significant effect on new business start-up. The determinant factors of opportunity identifications such as

personal characteristics, environmental trends approaches and essential qualities have positive and significant

effects on readiness towards new venture creation. This finding is consistent with Barringer & Ireland (2010)

narrative suggestion techniques. The results further showed that entrepreneurship training do moderate the

relationship between opportunity identification and readiness towards new venture start-up. Well trained

entrepreneurs have higher propensity of discovering opportunities than those without training. This is

paramount because they have learnt how to resolve societal issues by identifying a problem or learn how to

discover market niche or also have adequate knowledge on how to observe the market trend and in turn create

a business to fill in the gap.

Considering the prior descriptive analysis, this study revealed that females show more entrepreneurial

consciousness in terms of opportunity identification than the male counterpart. The age of youth from 20-25

has higher level of opportunity consciousness than other ages. Also, youth at the final year level have career

decisions towards new venture creation than other students. This result is consistent with Barringer & Ireland

(2010) which state that the total number of young entrepreneur (ages 21 and younger) is growing.

Social networks is very important aspect of opportunity identification towards new venture creation. This study

showed that youth who are able to solve problem, identify market gap and discover trend in the market are

capable of having more ideal opportunity towards creating new firm than others. Identifying ideal opportunity

before wasting precious time should not be taken with levity in the process of setting of business.

In addition, there are many products outside the world that can be redeveloped in new ways. Entrepreneurs

should invest in such venture with market niche that has not been adequately tapped into by most entrepreneurs.

This study solely employed quantitative data and cross sectional methods. Further, research need to be carried

out using longitudinal methods in order to get richer insight of the study. And triangulation method can be used

in the future to determine the various factors that can influence opportunity identification towards new venture

creation.



In conclusion, the findings of this study extends new venture creation and opportunity identification literature

especially at individual level, of which there were minimal empirical research especially in Malaysia. It was

revealed majority of the studies discussed new venture creation at firm level. The opportunity identification

determinants had been discussed in the past whether it can be measured quantitatively, therefore this study will

serve as new empirical way of investigating the relationship between readiness of students towards new venture

creation and the opportunity identification expected of them to practice in their daily business activities. Thus

it is hoped that this study will be invaluable in providing directions for future research in this evolving fields

especially in the youth entrepreneurship.

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Youth Entrepreneurship: Moderating Opportunity Identification towards New Venture Creation

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