Entrepreneurial attitudes as key factors in enhancing the opportunity recognition skills of employees

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Entrepreneurial Attitudes as Key Factors in

Enhancing the Opportunity Recognition Skills of

Employees

Author: Marcu Andreea-Maria Student Number: 11400412

23rd June, 2017

MASTER THESIS

MSc Business Studies: Entrepreneurship & Innovation University of Amsterdam

Thesis Supervisor: dr. Balazs Szatmari Co-Reader: Ph.D. candidate Liang Zhao

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Statement of originality

This document is written by Student Marcu Andreea-Maria, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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1

The aim of this study is to analyze the extent to which entrepreneurial attitudes of employees affect their process of opportunity recognition and whether entrepreneurial alertness can mediate this relationship. This study investigates the mechanism through which the employees’ size of social networks helps them activate their entrepreneurial alertness and facilitate the process of opportunity recognition. Moreover, the study aims to analyze the role of education in adopting an entrepreneurial attitude. In order to answer the research question, a survey has been conducted within a financial institution, called Raiffeisen Bank, in two main cities of Romania: Bucharest and Constanta. By using a sample of 390 employees, the current findings reveal significantly higher chances to recognize opportunities for employees who have greater entrepreneurial attitudes. It has been demonstrated that the opportunity recognition process is enhanced by the employees’ entrepreneurial alertness and that social networks do not contribute to this process. Furthermore, the results have shown that highly educated employees would not choose the path of entrepreneurship, as self-employment is unstable and involves numerous risks. Practitioners and high-level executives should focus their attention on corporate entrepreneurship and the encouragement of entrepreneurial attitudes among employees if they want to assure their companies a long-term survival in the market and face competition.

Key words: entrepreneurial attitudes, opportunity recognition, alertness, social networks, education, corporate entrepreneurship, service innovation.

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3 1. Introduction

Since 2008, when the worldwide economic downturn happened, most companies and organizations have been put in a situation in which they had to change their strategy, operational systems and action plans in order to survive in the market. The times have changed, as the market conditions started to be unpredictable and the resources became limited (Huang & Wang, 2011). This situation has been perceived as a big challenge to existing companies, especially to financial institutions (Pagano, 2016).

It seems that after 9 years, banks are still struggling with the lasting effects of the financial crisis and are trying to overcome the competition coming from FinTech companies, which are more fast-growing and innovative than ever (McKinsey, 2016). So far, banking has been considered an industry where the degree of flexibility in services is low and where employees’ initiatives are lower than in other industries (Lovelock, 1996). A McKinsey study (2016) showed that “twice as many firms failed in 1995 compared to 1975, just 20 years earlier” mainly because they did not put enough efforts for assuring their survival in the financial sector (Hausman & Johnston, 2014, p.2721). So the question would be: what did those companies do wrong?

Van Opstal (2009) assumed that an important point from where all companies should start in order to assure their survival under conditions of fierce competition would be the quality of services they deliver. In this sense, authors like Kuratko, Hornsby, & Hayton (2015) claim that companies should promote and develop an entrepreneurial mindset among their employees, in order to motivate them to take initiative, be innovative, and continuously look for opportunities. By encouraging employees to have an entrepreneurial behavior, companies could form a “long-term perspective of value creation” and gain competitive advantage in the industries they operate (Hitt, M. A. et al., 2011).

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4 Wonglimpiyarat (2005) saw this competition as a positive dynamic in the business world, as this phenomenon is pushing businesses to rethink their existing strategies and introduce features and practices that could help them being competitive. So competition should not be considered a threat, but an incentive to have a better performance and be successful in the market.

As competition can be faced by an entrepreneurial mindset of employees, one thing managers could do is to look for employees that have entrepreneurial potential or train them for becoming aware of the opportunities existing in the business environment. By exploring and exploiting ideas, they could improve the organization’s profitability and strengthen its position in the market (Kuratko et al., 2015; Morris, Kuratko, & Covin, 2011).

Speaking about the employees’ entrepreneurial attitudes, authors like Lee et al. (2006), Calvo & Wellisz (1980), Baron (2007) and Gaglio & Katz (2001) claimed that the entrepreneurial attitude could be the result of the individuals’ prior knowledge. In the same time, scholars have identified a strong relationship between the employees’ entrepreneurial attitudes and the process of opportunity recognition (Robinson et al., 1991). Authors like Kirzner (1997), O’Connor & Rice (2001), Shane (2000) and Tang et al. (2012) emphasized that individuals could be able to discover more opportunities if they demonstrated an entrepreneurial alertness and that the higher the degree of entrepreneurial alertness, the more chances to discover opportunities are. However, the whole process of discovering opportunities is not easy and it highly depends on several factors, such as the individuals’ traits, prior knowledge and their size of social networks (Ardichvili et al., 2003).

As the opportunity identification process is affected by so many factors, it is important to understand which are the ones affecting this process the most. Therefore, the research question of this study is formulated:

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How do employees’ entrepreneurial attitudes influence the opportunity recognition process and what is the impact of social networks and entrepreneurial alertness on this relationship?

In order to answer this question, a questionnaire has been distributed among the employees of a financial institution called Raiffeisen Bank, in Romania. The study will measure the employees’ entrepreneurial attitude. The aim of this study is to see how education influences the employees’ entrepreneurial attitude and how this attitude affects the process of opportunity recognition, by also taking into account the effect of entrepreneurial alertness and employees’ size of social networks.

This paper will start with a review of the literature about the process of opportunity recognition and will continue with the extent to which it is affected by the employees’ entrepreneurial attitudes and their prior knowledge. The mediation effect of entrepreneurial alertness on the main relationship will be emphasized, together with the moderation effect of social networks. The study will end with the methodology, a description of the results and the final discussion.

2. Literature review

The concept of entrepreneurship has been largely discussed by numerous scholars and presented as a very important dynamic for the economic development (Knudsen & Swedberg, 2009; Schumpeter, 1934; Shane & Venkataraman, 2000). Having such an important role in the society, the concept is considered as being a key factor in creating and discovering opportunities, in promoting innovation and success achievement. Shane & Venkataraman (2000, p. 218)

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6 claimed that entrepreneurship is the process of “discovery, evaluation and exploitation of opportunities”, taken together with the “set of individuals, who discover, evaluate and exploit these opportunities”. Therefore, entrepreneurship is not only about the act of discovering opportunities and launching innovation, but also about the individuals who, armed with a set of traits and characteristics, can make this process happen. Schumpeter (1934) claimed that entrepreneurs have the power to create new market niches, through different combination of resources or services, thus, their main focus being on delivering new solutions to customers and contributing to the prosperity and growth of the entire economy.

Ardichvili et al. (2003) and Shane (2000) argued that in order to be able to contribute to the society’s welfare through entrepreneurship, individuals need to be able to identify business opportunities. The opportunity recognition process has been given a lot of attention by numerous researchers due to its importance in the field of entrepreneurship. Hayek (1945) has described this process as being a function of the unequal distribution of information within the society, reason for which the individuals’ personal traits and characteristics, together with several external factors are influencing who and what type of opportunity is discovered. O’Connor & Rice (2001, p. 95) presented this element as the “bridge that connects a breakthrough idea to the initial innovation evaluation process”, which can lead to a final effort, the one of the idea commercialization.

However, due to its complexity, the opportunity identification process might not be visible to all individuals because it is highly affected by both internal and external factors (Baron, 2007; Shane & Venkataraman, 2000). In order to get a better understanding of this phenomenon, Ardichvili et al. (2003) have tried to explain the most important factors which help an individual identify and develop opportunities. By doing so, the authors have introduced a theory called

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7 “Entrepreneurial opportunity identification and development”, which was built on the existing theoretical and empirical background of several studies in the area of opportunity identification and development. The authors have put the pillars for this theory by using Dubin's (1978) theory building framework. The main elements affecting the process of opportunity recognition were presented as being: entrepreneurial alertness, social networks, information asymmetry and prior knowledge, personality traits and discovery versus purposeful search (Ardichvili et al., 2003). Numerous authors have introduced theories based on the opportunity recognition process. On one side, psychologists have come up with theories which emphasize the fact that individuals’ choices to choose the path of entrepreneurship depends on their personal traits, such as: need for achievement, proactiveness, self-efficacy and locus of control (Begley & Boyd, 1987; McClelland, 1961).

On the other side, the Austrian theory says that individuals are able to recognize opportunities due to the information they process and dispose of, as a consequence of their searching techniques and scanning behaviors (Shaver & Scott, 1991).

According to Ardichvili et al. (2003), opportunity recognition is affected by both the individuals’ traits and external factors, such as social networks and information asymmetry. By largely explaining both sides of the opportunity recognition process, Ardichvili’s (2003) theory remains one of the most comprehensive theoretical frameworks in this sector.

As mentioned before, the process of opportunity identification has been treated by numerous scholars in the field of entrepreneurship. However, as the phenomenon of entrepreneurship has the power to improve the economic development and face fierce competition in a particular segment of the market, corporations started thinking of ways to implement an entrepreneurial behavior among their employees (Kuratko et al., 2015). Previous research has shown that

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8 companies which have a more entrepreneurial mindset and strategic orientation, usually perform better than the average companies (Zahra et al., 1999). As this study will focus on the employees’ capacity to recognize opportunities within a financial institution, it is important to differentiate entrepreneurship from the corporate entrepreneurship.

Corporate entrepreneurship refers to the act of encouraging the flow of the employees’ new ideas and the opportunity recognition process within a business (Kuratko et al., 2015). By doing so, the chances to improve the organization’s profitability and maintain a competitive position in the market are higher (Kuratko et al., 2015). Hornsby et al. (1993) and Lumpkin & Lichtenstein (2005) argued that organizational entrepreneurship can be described as a whole process of innovation, change, renewal and improvement of previous or new products and services. However, in order to be able to implement such changes, high-level executives and practitioners need to focus on their most important asset of their companies: the employees (Pfeffer & Veiga, 1999) In this sense, research has shown that the employees’ orientations towards entrepreneurship are actively searched by today’s employers due to their capacity to improve the overall performance of a firm (Beugelsdijk & Noorderhaven, 2004; Rausch & Wiklund, 2009). Given the fact that the employees are such important players in a company’s innovation process of products and services, the attention should be given to their capacity of recognizing opportunities (Burgelman, 1983). Ardichvili’s (2003) study has emphasized that the most important factors affecting the process of opportunity identification are: entrepreneurial alertness, social networks, information asymmetry and prior knowledge, personality traits and discovery versus purposeful search, reason for which these variables will be given more attention and the vast majority of them will be further analyzed in this study.

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9 This paper will utilize Ardichvili’s (2003) theoretical framework, by focusing on the sector of corporate entrepreneurship. Thus, the main focus of the study will be on how employees affect the process of opportunity recognition by making use of their personal traits, prior knowledge, size of social networks and entrepreneurial alertness.

2.1. Hypotheses

2.1.1. Entrepreneurial attitudes

The theory of “Entrepreneurial opportunity identification and development” introduced by Ardichvili et al. (2003) stated that personality traits highly affect the individuals’ capacity of recognizing opportunities. However, as the actual context of this study is focused on corporate entrepreneurship, it will be assumed that personality traits of employees, such as : sense of

achievement, innovation, perceived personal control and perceived self-esteem are forming an entrepreneurial attitude (Robinson et al., 1991), which will be further analyzed in this study

under this name.

The roots of entrepreneurial orientation research has started with the work of Mintzberg (1973), who stated that entrepreneurial attitudes would lead individuals to facing uncertainty and actively searching for new opportunities, in order to change existing strategies. Covin & Slevin (1989) contributed to the definition of entrepreneurial attitude amongst employees by saying that employees who do not demonstrate entrepreneurial attitudes are more likely to be conservative, risk-averse and passive. On the other hand, Lumpkin & Dess (1996) described the entrepreneurial employees as acting independently, of having a desire to innovate, being proactive, avoiding procrastination and taking risks. Moreover, it has been shown that the entrepreneurial orientation can be seen as a positive trigger in the employees’ capacities to take

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10 advantage of the existing competition and transform it into their advantage (Avlonitis & Salavou, 2007).

Going through the above-mentioned studies, it can be observed that employees ’attitudes towards entrepreneurship cover a changing strategy of the organization they are working for, through innovation, active looking for opportunities, risk taking and proactiveness.

Robinson et al. (1991) developed in their study a scale for entrepreneurial attitudes, including the most important characteristics of an attitude associated with entrepreneurship: sense of

achievement, innovation, perceived personal control and perceived self-esteem.

The sense of achievement refers to the concrete results of the employees after putting their

efforts in the activities and projects they are involved in. It is a trait which confers them the faith that their efforts are appreciated and rewarded.

Innovation in business represents the degree of innovativeness adopted by the company’s employees. Innovation represents the willingness of companies to come up with new ideas and creative processes that can lead to the creation of new products and services (Miller & Friesen, 1982). Chadwick et al. (2008) added that the innovation performance of an individual is contributing to the whole organizational innovation performance, which means that the companies should perceive them as an important and valuable asset, which adds value to the company’s outcomes (Pfeffer & Veiga, 1999).

Perceived personal control refers to the individuals’ perception of the control and the degree of influence they have over the whole business activity. This trait makes, therefore, reference to the employees’ capacity to evaluate their forces and skills in the overall business performance. The last trait described by Robinson et al. (1991) is the perceived self-esteem in businesses. This trait describes the degree to which individuals are self-confident and trust their

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11 competencies. The trait treats the capacity of employees to have a certainty of their acts and trust their skills and personal traits when they need to act and perform their jobs.

Following Robinson’s (1991) study on entrepreneurial attitude, Fischer (2011) put a big emphasis on innovation in his study. The author argued that corporate entrepreneurial activities performed by employees are the driving force in the service innovation process. Consequently, the term “opportunity recognition” is given a lot of attention, as the realization of service innovation can be the result of the opportunity recognition process (Gardner et al., 2008; Sundbo & Gallouj, 2000; Ardichvili et al., 2003).

Consequently, as entrepreneurial attitudes are considered to be one of the most important factors that influence the process of opportunity recognition (Ardichvili et al., 2003), the first hypothesis can be stated:

H1: There is a direct and positive relationship between the employees’ entrepreneurial

attitudes and their ability to recognize opportunities.

2.1.2. Entrepreneurial alertness

Entrepreneurial alertness is another important aspect that influences the process of opportunity recognition (Ardichvili et al., 2003; Baron, 2007). The first person using the term “alertness” in explaining the process of opportunity recognition was Kirzner (1997). The author described alertness as being the process that helps people to be more aware of the business environment changes, shifts, opportunities and possibilities (Kirzner, 1997).

Tang et al. (2012) highlighted that alertness is a factor which adds value to people’s understanding of how new ideas are initiated and pursued, making the process of opportunity

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12 recognition easier. An important feature of alertness is considered to be the individuals’ judgment on the evaluation of changes and available information, together with their ability to decide whether these ones would be a potential opportunity that they can leverage (Tang et al., 2012). In other words, people who are more alert have “an antenna”, that allows them to recognize “gaps with limited clues” (Kirzner, 1979). By trying to define how people respond and process the new flows of information clues, Kaish & Gilad (1991) described individuals as being uniquely prepared for the “opportunities hunting” in their constant environment scanning.

McMullen & Shepherd (2006) introduced the expression of “connecting the dots” between unrelated trends or events and identifying emerging opportunities for transforming them into viable and valuable solutions when speaking about people’s entrepreneurial alertness. Going through the previously mentioned definitions of entrepreneurial alertness, one can observe that the concept is not only facilitating peoples’ efforts of identifying opportunities, but also demonstrating that it is a trigger in the whole opportunity discovery process.

However, being alert means that people need to go through a few steps until having identified the best opportunities. The scholars have identified three main elements that alertness consists of:

scanning and research for news and information, associating and connecting previous

information and evaluating the existence of potential profitable business opportunities (Tang et al., 2012).

Scanning and search make individuals unconventional in their investigation of new ideas

(Busenitz, 1996). This first step in the alertness process is about gathering large amounts of data and relevant information in order to improve individuals’ know-how and make them more sensitive to the most relevant data. Scanning and searching the most relevant information is beneficial because it helps individuals reach expert performance and get answers to a specific

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13 question (Kirzner, 1979; Tang et al., 2012). However, for being able to reach this information, several skills are required from employees, such as creativity or intelligence (McMullen & Shepherd, 2006).

Association and connection is related to how the received information is associated to previously cumulated information and how these two fields are connected in order to reach a consensus. Association makes individuals considering numerous options when realizing unique connections. Connecting the dots allows people to be creative and think “outside the box”, by linking recent events with unrelated events, which together can create sense to them (Tang et al., 2012). When the dots are connected, the environment needs to be scanned again for a further clarification of the picture or for a fully understanding and exploration of “the usefulness of the newly-connected information” (Tang et al., 2012, p. 80). Therefore, the authors suggest that scanning and research represent a step which needs to be done before people actually start associating and connecting the obtained data, because it increases the chances to get additional data and ideas.

Evaluation and judgment is probably the most important step in the alertness process, as it implies the capacity of individuals to assess potential opportunities (McMullen & Shepherd, 2006). This is the point where people make evaluations about their newly-acquired information and whether they are good enough for representing an opportunity (Baron, 2006). An evaluation might help individuals to the point where they obtain additional hints through their research, permitting them to adjust the unrelated information and keep the most relevant one. By having a range of alternatives, they can make more accurate and valuable evaluations that could bring the company benefits. Kirzner (1997) stated that judgment make entrepreneurs “sense

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14 opportunities”, so it is an advantage to have the ability of developing insights and ideas into valuable information that other might overlook (Tang et al., 2012).

Tang et al. (2012) highlighted the importance of getting through all the three steps mentioned above for demonstrating an alertness capability, which leads to the discovery of valuable opportunities. Ardichvili et al. (2003) mentioned in their study that personality characteristics have the power to foster the individuals’ entrepreneurial alertness. In the same time, the authors have determined that “the notion of higher alertness increases the likelihood of an opportunity being recognized” (Ardichvili et al., 2003, p. 114). As alertness is perceived as being directly affected by the employees’ entrepreneurial attitudes and affecting in the same time the opportunity recognition process, the second hypothesis of this study can be formulated:

H2: The positive relationship between the employees’ entrepreneurial attitudes and their ability to recognize opportunities is mediated by entrepreneurial alertness.

2.1.3. Education degree

Ardichvili et al. (2003) emphasized that people tend to assimilate the information they get

with the information they already know. With this regard, the authors have claimed that even the opportunities discovered by individuals are related to their prior knowledge. One element which could show the level of prior knowledge people have, is represented by their level of education. Education has been often considered as one of the most important factors influencing an individual’s entrepreneurial behavior, reason for which it has been included in many analyses by researchers (Davidsson, 1995). Being one of the biggest and most important investments people can make for themselves, education is helping out not only to the point of offering knowledge

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15 and development opportunities, but also to the point where people get chances to improve their quality of life and expectations (Angrist & Krueger, 1999).

Given the fact that this study is focusing on the corporate entrepreneurship field, it will be assumed that the level of education is affecting the employees’ entrepreneurial attitudes, in order to test whether a high degree of education influences them on choosing the normal employment path or the self-employment one.

Previous studies have shown that by attaining high degrees of education, people are more likely to have high earnings and be successful when being employed (Kangasharju & Pekkala, 2002; van der Sluis et al., 2008). Speaking about how a high degree of education would affect individuals in having or not an entrepreneurial attitude, researchers have shown that education is the easiest entrepreneurship trigger to be influenced by individuals (van der Sluis et al., 2008). Completing this statement, it has been demonstrated that entrepreneurs are highly affected by education, because it represents a major player in building the idea of entrepreneurship and the sense of achievement in their mind. Therefore, an entrepreneurial attitude is cultivated during the lifetime of an individual (Lee et al., 2006).

Van der Sluis et al. (2008, p.799) argued that “signaling productive potential through education has value only for employees”. In other words, employees tend to leverage their education degree by obtaining better positions and higher wages in the companies they are working for (Howard, 1986; Trusty, 2004). It can be argued, thus, that highly educated people are less likely to choose self-employment, especially due to the risks that come along with it. By explaining why highly educated people would not choose self-employment, Kangasharju & Pekkala (2002) came up with two reasons: first, because highly-educated people earn more as employees than they would earn as entrepreneurs and second, because as being self-employed,

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16 the revenue is less secure than for an employee. So, compared to the large firms and public sectors, small firms take more risk and self-employed individuals do not have stable revenues, the degree of predictability for earnings being low.

Higher levels of educations usually generate more options, like “lucrative wage employment and better working conditions” (van der Sluis et al., 2008, p. 798). The authors have claimed that due to the benefits of normal employment, the likelihood of choosing entrepreneurship is low for highly educated individuals (van der Sluis et al., 2008). Given the fact that previous research has shown a negative relationship between the employees’ levels of education and their choices to choose entrepreneurship, the third hypothesis can be drawn:

H3: Education degree has a negative impact on the employees’ entrepreneurial attitudes.

2.1.4. Size of social networks

The last factor of Arichvili’s (2003) theory as affecting the opportunity recognition process is represented by the individuals’ capacity to interact with each other and have access to a social network.

The concept of “social networks” has been discussed during the past decades by many scholars, highlighting its contribution and effects in the organization’s life. Wasserman & Faust (1994) considered that an appropriate starting point for the social network analysis would be the focus on relational connections of individuals, rather than on their personal capabilities and attributions, perceiving it as an organizational asset, as a very important resource that companies should make use of.

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17 A few years later, Baker (2000) suggested that social networks should be considered as a forming part of people’s social capital. The author claimed that the available resources coming from business and personal networks are part of social capital. In his study, it was highlighted that most of the students and clients who were asked about their source of personal achievements, used their personal traits and characteristics as answers, instead of thinking of the networks they had. At the end of his study, Baker (2000) contributed to the literature with an important statement, the one that social networks should be perceived as sources of new ideas, information and business opportunities, that can help both individuals and companies’ outcomes. Borgatti (2009), Freeman (2004) and Hollenbeck (2015) focused on the individuals’ performance, stating that social networks are an asset that they should leverage for a better performance in the company. For being able to reach that performance, employees need to collect the most relevant data. Thus, the “information channels” under the form of social networks save employees a lot of time and offer sometimes valuable information (Coleman, 1988). Time and information are two important resources companies need to take care of when merging them together. So, the bigger the size of the networks, the more sources of information an individual has and the less time is spent on gathering data.

Making reference to the importance of social networks, Cross & Sproull (2004) argued that in an environment that requires a knowledge-intensive work, like the service sector, people must usually solve complex issues in a relatively short time. In such a case, time might be perceived as an obstacle when looking for good solutions. So having a wide range of contacts, people can make use of their networks and solve these issues easier and faster.

De Koning (1999) introduced a framework which could help individuals reach greater degrees of identifying opportunities. The framework in question includes three steps: first, data

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18 collection, secondly, thinking while interacting and finally, a resource assessment. Ardichvili et al. (2003, p. 115) claims that all these steps are necessary while “interacting with an extensive network of people”, especially in the service sector. The above-mentioned network may include people with whom individuals have long-term relationships, people that are directly chosen by them for future interests, partners in business or people coming from weak ties, who can only provide general information. All these people can deliver valuable information when individuals take into consideration the three steps previously mentioned. By doing so, opportunities are easier to be discovered, because new sources of information emerge (Ardichvili et al., 2003). Going on the same principle, the one that social networks are beneficial for both the company’s outcome and individuals’ results, Hills et al. (1997) confirmed that entrepreneurs who have extended networks are able to identify significantly more opportunities than the ones who do not have access to extensive ties. In the same time, the author sustained that the individuals’ size of social networks can also positively affect alertness and personal traits in enhancing the opportunity recognition process (Ardichvili et al., 2003).

Following this statement, the final hypothesis of this study is as follows:

H4: The relationship between the employees’ entrepreneurial attitudes and their ability to recognize opportunities is positively moderated by their size of social networks.

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19 Table 1: Hypotheses overview

H1: There is a direct and positive relationship between the employees’ entrepreneurial attitudes and their ability to recognize opportunities.

H2: The positive relationship between the employees’ entrepreneurial attitudes and their ability to recognize opportunities is mediated by entrepreneurial alertness.

H3: Education degree has a negative impact on the employees’ entrepreneurial attitude. H4: The relationship between the employees’ entrepreneurial attitudes and their ability to recognize opportunities is positively moderated by their size of social networks.

2.2. Research model

In the previous chapter, four hypotheses have been established. The first hypothesis represents the main model of the study and forms the basis for the other sets of hypotheses. The first model refers to the direct relationship between the employees’ entrepreneurial attitudes and their ability to recognize opportunities. The second hypothesis represents the mediation of the main relationship: the effect of entrepreneurial alertness on the relationship of employees’ entrepreneurial attitudes and their ability to recognize opportunities. The third hypothesis highlights the direct relationship between education and entrepreneurial attitudes, and the last one shows the moderation effect of social networks on the main relationship of this study.

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20 Figure 1: Conceptual model

H2 a1 b1 H3 H1 c’1 H4 3. Methodology

This chapter represents the beginning of the empirical part of this study. First, a brief explanation of the data collection process will be given. Afterwards, a description of the variables and the quality of the measurements are discussed. Finally, the statistical approach of this study is highlighted, for testing the expected relationships mentioned in the previous chapter. The complete questionnaire can be seen in Appendix 1.

Education degree Entrepreneurial

alertness Entrepreneurial attitude Opportunity recognition Size of Social Networks

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3.1 .Design

The study relies on a quantitative method, taking the form of a questionnaire, having an explanatory approach which determines the relationship between the variables (Saunders, Lewis, & Thornhill, 2007) (see Appendix 1). The questionnaire has been built up using Qualtrics and has been administered online, via email. The questions of the survey have been translated to Romanian for increasing the answer rate.

The research has been conducted in a financial institution in Romania, called Raiffeisen Bank. The bank in question is an Austrian institution, which has started its activity in Romania in 1994, transforming Raiffeisen Bank Romania into one of the institution’s main subsidiaries. The institution’s main objective is to continuously develop a strong relationship between the bank and its clients, doing its best in answering its clients’ questions and delivering the easiest and the most accessible solutions (Raiffeisen Bank International, 2016).

The survey has been sent only once and due to the high response rate, no reminders were needed.

3.2. Sample

The research was conducted in Romania’s capital city, Bucharest and Constanta, one of the largest cities of the country. Bucharest’s total number of retail agencies is 35, having 250 employees, while Constanta registers a number of 28 agencies, with a total number of 140 employees. Therefore, the total sample used for this research is 390. The questionnaire has been administered to all employees of the retail agencies of the two cities, with no respect to their gender, age or position in the company or working department, for the reason that there is no difference at the employees working in different departments, as long as they have the capacity to discover opportunities.

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22 Finally, the assessment of entrepreneurial attitudes and opportunity recognition was collected from 374 employees of the institution in question, representing a response rate of 95.9%.

The majority of respondents were females, representing a total of 77.55% of the sample size and the average age of respondents was included in the interval of 35-45 years old.

3.3. Measures

3.3.1. Entrepreneurial attitude

Entrepreneurial attitude was measured by the extent to which employees behaved in an innovative way, had a good level of personal control, achievement and self-esteem. In this research, it represents both a dependent and an independent variable, for conducting the tests from the Results section. The scale which has been used to measure this variable was adapted from Robinson et al. (1991) and comprises of 12 items, using a 5-point Likert scale. (1-strongly disagree, 5-strongly agree). The measurement scale was adapted from 75 items to 12 items due to the big length and similarity between questions and also having the aim to reduce the survey completion time. In order to maintain consistency, the original 10-points Likert scale was modified to 5-points Likert scale (see Appendix 2). Cronbach’s α for this measure obtained in this study was 0.72, representing a good level of internal consistency (Table 2).

3.3.2. Opportunity recognition

Opportunity recognition is a dependent variable and represents to what extent an individual is creative, converts ideas into new ways of doing activities and recognizes opportunities. To measure this item, an adapted version of 5-item 5-point scale developed by Shane et al. (2010) was used (1-strongly disagree, 5-strongly agree). The adapted version has 4-items, because 2 items were similar and there is a modification in the questions in order to fit the study’s target

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23 group (employees). Therefore, new ventures idea is replaced with new ideas of working style and

delivered services (see Appendix 3). Cronbach’s α for opportunity recognition was 0.537 in this

study, representing a low level of internal consistency, but still a value which could be used for the further analysis (Field, 2009).

However, due to the small length of the scale items and the relevance of the research results, the initial value of Cronbach’s Alpha was used (0.537) and all the four items were kept. The study has been continued due to the fact that the scale was validated by Shane et al. (2010) and there are sufficient studies confirming that a Cronbach’s Alpha which is greater than 0.5 can be used in the analysis (Field, 2009).

Field (2009) argued that the value of α depends on the number of items on the scale, so the less items are used, the lower the value of α is. Also, another reason that might contribute to the low level of α is the use of a counter-indicative item, which has a negative impact on the other items, because the covariance between the item and the other ones is negative. Due to this negative value to the sum of covariance, the Cronbach’s α is reduced.

3.3.3. Entrepreneurial alertness

Entrepreneurial alertness is the mediator used in this study, so the variable that is directly affected by entrepreneurial attitude and directly affects the opportunity recognition process. This variable is used to measure the ability of individuals to associate events, to connect dots, to search, scan and evaluate opportunities, even though they do not actively look for them (Ardichvili et al., 2003). The original scale was developed by Tang et al. (2012) and comprises of 24 items. An adapted version of 6-item 5-point scale (1-strongly disagree, 5-strongly agree) was used, in order to avoid the redundancy of the similar questions and shorten the length of the

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24 questionnaire for increasing the answer rate (see Appendix 4). Cronbach’s α obtained in this study was 0.77, representing a high level of internal consistency (Table 2).

3.3.4. Size of social networks

The size of social networks is used as an independent variable in the research model, having the aim to measure how big the employees’ social networks are and whether or not they affect the main relationship of this study. In order to measure this variable, a question was addressed at the end of the questionnaire, asking the number of clients/colleagues the employees interact with, on average, on a daily basis. The variable was measured using a ratio scale, such that respondents were given the possibility to write down the exact number of social networks they have, without having any constraint and limited number of choices.

3.3.5. Education degree

Education degree is also an independent variable, having the objective to measure to what extent it influences the entrepreneurial attitude. Previous studies have demonstrated that highly educated people would not choose self-employment (Harmon et al., 2003; Kangasharju & Pekkala, 2002). This variable was measured by asking the respondents their education degree level, by using an ordinal scale. The order of the possible answers was: a) None; b) Primary school; c) High-school degree; d) Bachelor’s degree; e) Master’s degree; f) Phd.

3.4. Controls

Age has proven to have an effect on entrepreneurial attitudes, reason for which it has been included as a control variable (Morris & Venkatesh, 2000). Similarly, this study has controlled for gender, given that this variable has been shown by the academic literature as representing a

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25 greater entrepreneurial attitude for men, rather than women (Cañizares & García, 2010; Wilson et al., 2007).

4. Results

All variables used in the model have been checked. The amount of missing data was 0, because all the questions in the questionnaire were set up as having forced answers. Two out of the 26 items used in the survey (1 from the Entrepreneurial attitude scale, 1 from the

Opportunity recognition scale) had a counter-indicative value and have been recoded.

Scale means have been computed for entrepreneurial attitude, entrepreneurial alertness and

opportunity recognition, resulting in three new variables, ready to use for the hypothesis testing.

Table 2 displays the inter-correlations of the study variables.

Table 2: Means, Standard deviations, Correlations

Variables Means SD 1 2 3 4 5 6 7 1. Entrepreneurial attitude 4.3641 .34549 (0.72) 2.Entrepreneurial alertness 4.3690 .40190 0.528** (0.77) 3.Opportunity Recognition 3.8610 .58927 0.453** 0.531** (0.53) 4. Size of social networks 25.78 22.660 -.026 -.049 -.017 1 5. Education degree 4.45 .568 -.020 -.033 .006 -.173** 1 6. Age 3.41 .967 .045 -.063 -.003 .018 -.179** 1 7. Gender 1.78 .418 .093 .117* .061 .048 .006 -.109* 1

**.Correlation is significant at the 0.01 level (2-tailed) *.Correlation is significant at the 0.05 level (2 tailed)

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26 For testing the first Hypothesis, a hierarchical regression analysis was used to examine the relationship between the independent variable (Entrepreneurial Attitude) and the dependent one (Opportunity Recognition). This test was used to research the ability of entrepreneurial attitudes to predict the process of opportunity recognition, after controlling for age and gender.

In the first phase, two predictors have been introduced: age and gender. This model was not statistically significant F (2, 371) = 0.688; p>0.05 and explained 0.4% of variance in the process of opportunity recognition, as it can be seen in Table 3. Going to step 2 and extending the analysis with entrepreneurial attitude, the total variance explained by the model as a whole was 20,2% ,F(3, 370)= 32.02, p<0.001 (Table 4). In the final model, only one of the two predictor variables was statistically significant, with entrepreneurial attitudes recording a Beta value β = 0.45, p<0.001. Otherwise being said, if entrepreneurial attitude increases by one, the employees’ ability to recognize opportunities will increase for 0.20 (Table 3).

Therefore, there is a positive relationship between the independent and dependent variable, in which entrepreneurial attitude can explain 20,2% of the total variance in the dependent variable,

opportunity recognition.

Table 3: Hierarchical Regression Model of Opportunity recognition

R R² R² Change B SE β t Sig. Step 1 0.061 0.004 0.004 Gender 0.086 0.074 0.061 1.172 .242 Age 0.002 0.032 0.004 0.075 .941 Step 2 0.454 0.206 0.202 Gender 0.023 0.066 0.016 0.348 .728 Age -0.013 0.028 -0.021 -0.457 .648 Entrepreneurial attitude 0.772 0.079 0.453 9.714 .000

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Table 4: Statistical significance ANOVA Output Model Degree of freedom F Sig. Step 1 Regression ₂ _.688 _0.503 Residual 371 Total 373 Step 2 Regression ₃ _32.027 _0.000 Residual 370 Total 373

Hypothesis 2 and 3 have been tested by running a mediated moderation, using the 5th model of PROCESS, function developed by Hayes & Darlington (2016) in SPSS.

The model has the aim to show to what extent the employees’ opportunity recognition abilities are explained by their entrepreneurial attitudes, entrepreneurial alertness and size of social networks.

In table 5 it can be observed that the proportion of variance of opportunity recognition explained by the overall model is 32,79%, having a statistical significance with p<0.01.

It can be noticed that the effect of entrepreneurial attitudes on opportunity recognition through the size of social networks is not statistically significant, having the value of p >0.01. This means that the effect of entrepreneurial attitudes on opportunity recognition does not depend on the employees’ size of social networks. With one unit increase in employees’ entrepreneurial attitudes, their ability to recognize opportunities through the use of social networks and alertness increases only by 0.07%. In other words, employees are able to recognize opportunities without making use of their social networks. Thus, the third hypothesis is not supported.

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28 On the other hand, there can be seen that the effect of entrepreneurial attitude of employees on their entrepreneurial alertness is a1= 0.6188 units, which means that two employees who differ by one unit on having an entrepreneurial attitude, are estimated to differ by 0.6188 units in being alert. The sign of a is positive, meaning that those who have a higher entrepreneurial attitude are estimated to have a more active entrepreneurial alertness. This effect is statistically different from 0, t= 11.93, having a significance level of p<0.01.

The effect b1 equals 0.5992 and indicates that two employees who experience the same entrepreneurial attitude but differ by one unit in their entrepreneurial alertness, are estimated to differ by 0.5992 units in recognizing opportunities. The sign of b is positive, meaning that those having a high entrepreneurial alertness are estimated to be more active in the process of opportunity recognition (p<0.01).

Finally, the direct effect c'1 of entrepreneurial attitudes (c’1=0.3996) is the estimated difference in the opportunity recognition process of two employees who experience the same level of alertness, but who differ by one unit on having an entrepreneurial attitude. In other words, an employee who has a more entrepreneurial attitude is estimated to be by 0.3996 units better in recognizing opportunities.

Therefore, it can be said that the second hypothesis is supported, the relationship between the employees’ entrepreneurial attitudes and their ability to recognize opportunities being mediated by entrepreneurial alertness.

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Table 5: Moderated Mediation analysis

Consequent

Entrepreneurial alertness (M) Opportunity recognition (Y)

Antecedent Coeff. SE p Coeff. SE p

Entrepreneurial attitudes (X) a1 0.6188 0.0519 .0000 c'1 0.3996 0.1243 0.0014

Entrepreneurial alertness (M) - - - b1 0.5992 0.0754 0.0000

Size of social networks (W) - - - c'2

-0.0029 0.0129 0.8247 Entrepreneurial attitudes x Size of

social networks (XW) c'3 0.0007 0.003 0.8092 Constant i1 1.6704 0.227 .0000 i2 -0.5043 0.5248 0.3372 R2= 0.2812 R2=0.3279 _{F(1,364)= 142.3654, p=.0000} _{F(4,361)=44.0235, p=.0000}

Size of social networks

Unstandardized

boot effects Boot SE Boot LLCI Boot ULCI

Conditional indirect effect at Opportunity

recognition for the size of Social networks

Social networks 0.3708 0.0572 0.261 0.4852

In order to test the last hypothesis, a hierarchical regression has been conducted. The aim of this regression was to examine the relationship between the independent variable (Education

degree) and the dependent one (Entrepreneurial attitude). In Table 6, it can be observed the

ability of education degree to predict the entrepreneurial attitude of employees, after controlling for age and gender.

As in the previous regression, two predictors have been introduced: age and gender. This model was not statistically significant F (2, 371) =2.193, with p> 0.001 and explained 1.2% of variance in the employees’ entrepreneurial attitudes (Table 7). However, gender seems to have a significance level relatively close to the significance limit, p=.058 compared to age, which has the level of p equal to .284. This means that gender is a greater contributor to entrepreneurial attitudes than age (Table 6).

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30 After having entered the education degree at Step 2, the total variance explained by the entire model had the same value of 1.2%, having F (3, 370)=1.473 (p>0.001) (Table 7). There was no additional variance in the entrepreneurial attitudes after having added the variable of education degree, meaning that the education degree does not affect the employees’ entrepreneurial attitudes.

In the final model, none of the three predictor variables were statistically significant, with education degree recording a Beta value (β= -.011, p > 0.01), gender (β= .099, p>0.01) and age (β=

.

054, p> 0.01). In other words, if education degree of employees increases by one, their entrepreneurial attitudes will decrease by 0.011. Therefore, the fourth hypothesis is supported.

Table 6: Hierarchical Regression Model of Entrepreneurial attitude

R R² R² Change B SE β t Sig. Step 1 0.108 .012 .012 Age .020 .019 .056 1.073 .284 Gender .082 .043 .099 1.905 .058 Step 2 0.109 .012 .000 Age .019 .019 .054 1.016 .310 Gender .082 .043 .099 1.899 .058 Education degree -.007 .032 -.011 -.209 .835

Table 7: Statistical significance ANOVA Output Model Degree of freedom F Sig. Step 1 Regression ₂ _2.193 _.113 Residual ₃₇₁ Total ₃₇₃ Step 2 Regression ₃ _1.473 _.221 Residual ₃₇₀ Total ₃₇₃

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31 5. Discussion

The purpose of this study was to determine the effect of employees’ entrepreneurial attitudes on the process of opportunity recognition, by using Ardichvili’s (2003) theory of entrepreneurial opportunity identification and development as a conceptual framing. The study had the intention to enhance the currently limited understanding of corporate executives of the value provided by entrepreneurial employees, who are able to recognize opportunities and have an active alertness to environmental and technological changes. By collecting the data from a population of selected employees, the main hypothesis of this study, namely the fact that entrepreneurial attitudes of employees enhance the process of opportunity recognition has been confirmed.

5.1. Theoretical contribution and implications

The current findings contribute to the existent literature in four ways. First of all, this study confirms the main body of literature emphasizing entrepreneurial attitudes as a positive influence in employees’ process of opportunity recognition (Ardichvili et al., 2003; Robinson et al., 1991) and fuels the voices stating that employees’ entrepreneurial attitudes are a key factor in identifying opportunities. The four sub-scaled developed by Robinson et al. (1991) proved to be significant, as all the four traits describing an entrepreneurial attitude led to a better opportunity identification. Thus, innovation, self-esteem, personal control and sense of achievement had a well-defined role in explaining the employees’ attitudes within the financial institution in question, offering them a boost in recognizing opportunities.

Second of all, the effect of education on employees’ entrepreneurial attitudes proved to be negative (Kangasharju & Pekkala, 2002; van der Sluis et al., 2008), meaning that highly

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32 educated people will not choose the path of entrepreneurship because they are risk-averse and go for a “lucrative wage employment and better working conditions” (van der Sluis et al., 2008, p.798). The results of the analysis do not mean that employees would not adopt an entrepreneurial behavior, being innovative and improving the quality of services they deliver to their clients. In other words, highly educated people would rather avoid having an unstable revenue and a less secure job as they would have if they were self-employed.

Thirdly, this study makes a valuable contribution by addressing the impact of entrepreneurial alertness on the process of opportunity recognition, being directly affected in the same time by the employees’ attitudes toward entrepreneurship (Ardichvili et al., 2003). Scanning and search, association and connection and evaluation and judgment are formally known as good triggers for gathering information, which lead employees to their opportunity recognition process (Ardichvili et al., 2003; Tang et al., 2012). One can safely assume that recognizing opportunities can be easier for the employees that prove an entrepreneurial attitude and have an active entrepreneurial alertness. However, such statistical effects need to be analyzed in further studies, together with the extent to which they result in an increased level of opportunity recognition.

Finally, this study contradicts the main literature body emphasizing social networks as a positive influence in employees’ process of opportunity recognition. Although a positive effect of social networks on the relationship between entrepreneurial attitudes and employees’ ability to recognize opportunities was expected, the negative impact of this theory-based variable (Ardichvili et al., 2003; Baron, 2007; Gaglio & Katz, 2001) came as a surprise. This case was an interesting finding because even though there have been previous calls of finding this moderator relevant in the clarification of entrepreneurial opportunities, the relationship addressed in this

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33 study was so well explained by entrepreneurial alertness, that the moderator analysis has proven to be insignificant.

5.2. Practical implications

As the aim of this study has been directed towards a better understanding of the effects of entrepreneurial attitudes of employees on their process of opportunity recognition, it provides valuable insights for practitioners and high-level executives.

In the case of high-level executives, there could be two solutions for reaching a better performance of employees, which could lead to a better outcome of the company.

First of all, high-level executives and recruiters could focus on actively looking for employees who prove high levels of education and entrepreneurial-oriented personal traits, such as self-esteem, personal control, sense of achievement and innovation (Robinson et al., 1991).

The second solution which is proposed is strictly related to the ability of practitioners and high-level executives to master very well the link between the market shifts and the company’s strategy and vision (Burgelman, 1983). The second proposition might involve a more complex process, as the persons in question need to directly engage in internal activities in order to connect the employees looking for opportunities to internal and external sources of networks and information (O’Connor & Rice, 2001). This method would mean a simplification of recognizing opportunities and might help employees identify them by consequent trainings and workshops. Consequently, both of the above-mentioned practices can be a valuable insight for improving an organization’s performance, through its most important and valuable asset, its employees (Buller & McEvoy, 2012; Pfeffer & Veiga, 1999).

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5.3. Limitations & Future research

Due to the complexity of the opportunity recognition process and the field of corporate entrepreneurship, this study is subject to limitations. First of all, the accuracy of the concept of entrepreneurial attitudes to predict the process of opportunity recognition is limited. Despite the fact that there is enough academic literature predicting the process of opportunity recognition through an entrepreneurial behavior and an active alertness (Kirzner, 1979; Mintzberg, 1973; Robinson et al., 1991; Shane, 2000; Tang et al., 2012), it may happen that external factors, such as lack of resources, creativity, lack of interest or weak ties to disrupt the employees’ entrepreneurial attitudes, therefore, their exactitude in predicting opportunity recognition. This is the reason for which this study was addressed to all types of employees, with no regards whether they were occupying high or low level positions. By sending out the survey to all types of employees, this paper tried to overcome this barrier and reveal the exact types of employees’ attitudes. A useful insight for future research would be to evaluate the employees’ attitudes by establishing 360 degrees feedback sessions and encourage them work in groups. This kind of practices are very common among today’s organizations, because they significantly improve the interactions among companies’ members, they fuel the act of sharing ideas and increase “the likelihood of innovations being implemented” (West, 2002 p. 371).

Secondly, the study’s sample is limited to a specific financial institution, Raiffeisen Bank, in two main cities of Romania: Bucharest and Constanta. Even though the results are convincing for this particular context, they cannot be generalized, as studies in more financial institutions are necessary in order to have a generalization of results. An interesting direction for further research can be to conduct a similar study not only in more financial institutions, but also in different countries. Individuals’ traits and characteristics highly depend on culture (Hofstede et al., 2010)

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35 and sometimes it may happen that people having the same attributes to differ in their degree of entrepreneurial attitude only because they have different cultural backgrounds.

Furthermore, the measurement scales that were used have been adapted from the original scales developed by Robinson et al. (1991), Shane (2000) and Tang et al. (2012) due to the similarity between questions and the adaptation to the specific context of this study. Thus, the results might be constrained from this point of view and not show a high degree of consistency. However, in order to assure a high reliability of the scales, factor-analysis tests have been conducted, revealing the most relevant questions to be used. Future research could try to further develop the above-mentioned scales, by adapting them to different sectors, such as the Financial Industry, as it was the case for this study.

Finally, the study may be prone to limitations, because the data comes from individuals’ self-reports. There can be a chance to have a self-enhancement bias in the results, due to the employees’ inclination to assess themselves as acting better than they might actually act (Krueger, 1998). However, even if the use of self-reports may lead to the emergence of common-method variance, this data collection common-method is considered to be the most appropriate one, as most of the variables can only get answers from the employees themselves. For reducing the potential effects of common-method bias, the survey which has been sent out has addressed to its respondents the importance of the current research and the highly appreciation of openness, sincerity and fairness. Given the fact that the sample has been composed of middle-age individuals (35-45 years old), the above-mentioned requirements are probable to have taken place. Future research should focus on finding the right incentives to which respondents could react by being honest in the process of self-assessment. Moreover, employees could be given the task to complete the survey for their colleagues, resulting in an indirect report, which could limit

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36 the extent to which employees rate themselves as being better than they actually are (Krueger, 1998).

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Entrepreneurial attitudes as key factors in enhancing the opportunity recognition skills of employees