Why do young Dutch want to become entrepreneurs and start a new business? : a research about their internal and external motivational factors

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Master Thesis

Why do young Dutch want

to become entrepreneurs

and start a new business?:

A research about their

internal and external

motivational factors

Supervisor: Prof. Roel van der Voort

Student: Jair Azaña Garcia (10824391) jair.azanagarcia@student.uva.nl

MSc. in Business Administration Track: Entrepreneurship & Innovation

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Statement of originality

This document is written by MSc. Student: Jair Alexander Azaña Garcia, 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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Abstract

The purpose of this research is to study the motivational factors that influence young Dutch entrepreneurs in 2 decisions: first, in the decision to become entrepreneurs and second, in the decision to found their own Startups. The research applied a Grounded Theory Strategy that uses semi-structured interviews as a data collection method. The patterns in the findings suggest that there are 2 types of young Dutch entrepreneurs: the Status-Quo Breakers and the Achievement Seekers. The former type becomes entrepreneur because is not comfortable with his current environment while the latter becomes entrepreneur because he/she has a goal and use entrepreneurship to achieve it. This differentiation in the typology of the entrepreneur would lead to different internal and external motivational factors in both stages of decision.

Most of the past research in The Netherlands has focused in studying the attitudes and perception towards entrepreneurship as an explanation of entrepreneurial intentions of young Dutch students by using the Theory of Planned Behavior of Icek Ajzen (1991). However, they haven´t focused on the motivational drivers of young Dutch entrepreneurs that influence their decisions for becoming entrepreneurs and founding their Startups. The relevance of this Thesis can be considered as complementary to past research in the Netherlands. Moreover, it has several implications for the public and private institutions that have the objective to boost the generation of high impact entrepreneurship by young citizens.

Keywords: Motivational Factors, Stages of decision, Typology of the entrepreneur, Status-Quo Breaker, Achievement Seeker, Netherlands, Young Dutch Entrepreneurs.

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Acknowledgements

I came to the Netherlands to learn as much as possible about the Entrepreneurship and the Innovation fields. As an international student representing my home country Peru, I would describe my experience doing a research in the Netherlands as challenging, rewarding and insightful. Researching about the motivational factors that encourage young Dutch to become entrepreneurs and start their own business, gave me a broader perspective about the entrepreneurship in the Netherlands. It allowed me to expand my knowledge beyond the Master classes and gain insights from individuals that are completely involved and engaged in the entrepreneurial world. This Thesis Project not only helped me to become a better professional but also a better person.

I am more than glad with all the support received during the period of my Thesis Project. I would like to express my gratitude to my Thesis Supervisor: Dr. Roel van der Voort. It was an honor for me to have had the supervision of a professional with such a great experience in the field of entrepreneurship. I enjoyed our meetings to discuss the progress of my Thesis and appreciate all his advice and support. It helped me to raise the quality of my Research. I also want to express my gratitude to Team Academy, their coaches and the entrepreneurs who helped me by participating in my research. Team Academy’s mission inspired me to pursue my career goals. I admire all the people that belong to this organization. My best wishes for their upcoming projects. I truly believe that their entrepreneurial mindset is an important factor for the society to move forward.

Last but not least, I would like to dedicate this Thesis to my parents, sister and girlfriend. Their support from the beginning of the Master is invaluable. Thanks to all of them for their constant motivation and patience. After all this work, it is time to reunite.

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Introduction

Many authors agree that entrepreneurs have a different nature that distinguishes them from other actors of society. Some of them have tried to explain the involvement of entrepreneurs in entrepreneurial activity by studying their personal characteristics, others by studying their environment. One important question that arises when the academic literature seems fragmented is: what is the starting point to comprehend why some people engage in entrepreneurship?

This Thesis attempts to provide a new theoretical framework that explains why young Dutch want to become entrepreneurs and start a new business by identifying, categorizing and analyzing their intrinsic and extrinsic motivational factors. Furthermore, this Thesis considers it relevant to study the phenomenon of Nascent Entrepreneurship based on a specific location, the Netherlands, because it allows finding differences among entrepreneurs and the role that their environment plays. Examples of this kind of studies are done by the Global Entrepreneurship Monitor (GEM). For instance, according to the GEM, the Netherlands present the following indicator in 2012 referred to attitudes toward entrepreneurship: 79% of Dutch Adults (18-64 years old) view Entrepreneurship as a desirable career choice higher than the 55% average of all innovation-driven economies. Furthermore, 10.1% of the same population had intentions to start a business compared to the 12.7% average of all innovation-driven economies. These results reveal that there are interesting differences among countries regarding entrepreneurial attitudes and intentions. The approach that this Thesis takes by studying the drivers of young Dutch

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entrepreneurs to engage in entrepreneurial activity has several positive implications for different groups; such as institutions and organizations that incentivize entrepreneurship, both private and public.

1.1 Problem definition

One of the most important theories used to explain Nascent Entrepreneurship is the Theory of Planned Behavior. This theory was developed by Icek Ajzen (1991) to present a framework which states that the immediate antecedent to behavior is the intention. Furthermore, it states that 3 factors influence intentions: attitude toward behavior, perceived social pressure and perception about the degree of difficulty of the behavior.

This Thesis goes one step behind by exploring insights about what drivers, both internal and external, shape the attitudes and perceptions towards entrepreneurship of young Dutch Entrepreneurs and consequently, its intentions to engage in entrepreneurial activities. Therefore, the research question that this Thesis attempts to answer is:

Why do young Dutch want to become entrepreneurs and start a new business?

The general research objective is to identify, categorize and analyze the intrinsic and extrinsic drivers that influence young Dutch entrepreneurs in two crucial decisions: first in their decision to become entrepreneurs; and second, in their decision to start their new venture or Startup.

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To answer the research question and to accomplish the mentioned objective, this Thesis will apply a Grounded Theory Methodology that uses primary data collected from semi-structured interviews to young Dutch entrepreneurs ranging from 18 to 28 years old.

Sub-questions and specific objectives are also developed:

Sub-questions Specific Research Objectives

Why do these young

entrepreneurs decided to pursue a career as entrepreneurs?

To determine the factors associated with the selection of entrepreneurship as a career path.

Do intrinsic drivers such as: personality, experience and skills; influenced their decisions to become nascent entrepreneurs?

To identify if intrinsic drivers play an important role by influencing young Dutch citizens in their process to become nascent entrepreneurs.

Do extrinsic drivers incentivize the generation of startups by young entrepreneurs?

To explore the significance of different external actors in the decision to become entrepreneur and new venture creation by young Dutch entrepreneurs.

What type of drivers plays a more important role in the process of nascent entrepreneurship?

To explore which type of drivers possess a higher relevance in the process of nascent entrepreneurship by young Dutch entrepreneurs.

1.2. Structure of the Thesis

The Thesis will begin by developing a critical literature review. It means that several topics will be presented and discussed by integrating supporting and opposing views of different authors. These topics are: Theory of Planned Behavior, Attitudes, Nascent Entrepreneurship and Intrinsic and Extrinsic Drivers. Furthermore, an introduction of the current situation in the Netherlands and a Concept Model is presented. Subsequently, the

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Research Design Section includes the presentation of the Grounded Theory as a Research Strategy. The Analysis Section contains the findings of the research. Finally, the Discussion section contains a comparison with previous studies and suggestions for further research.

2.

Liter

ature Review

In this section, several theories that studied influential factors of entrepreneurial intentions are explained. Some authors rely in the use of Attitudes toward entrepreneurship as an important antecedent to entrepreneurial intentions and decisions. Other authors are more focused in studying a wider set of internal characteristics of the entrepreneur or the external factors that affect nascent entrepreneurship.

2.1. Theory of Planned Behavior (TPB)

The Theory of Planned Behavior (TPB) is a theory developed by Icek Ajzen and presented in many academic research articles in the psychology field and used beyond the psychology field. The article titled as the same name as the theory is published in 1991. It provides a conceptual framework using terminology of social and behavioral science. The aim of this theory is to predict and explain human behavior in specific contexts.

According to Ajzen, there are 3 components that forge our intentions toward a behavior: Attitude toward behavior, Subjective Norms and Perceived Behavioral Control. Below, a brief explanation of them (Ajzen, 1991, page 188):

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9  Attitude toward a behavior: the favorable or unfavorable evaluations that a person

assigns to a specific behavior.

 Subjective Norm: is the perceived social pressure that approves to do or not to do the behavior.

 Perceived Behavioral Control: is the perceived level of difficulty or ease to perform the behavior. Moreover, it considers past experience and anticipated obstacles.

Subsequently, Ajzen argues that Beliefs are the predominant determinants to explain people’s intentions and actions. Below, a brief explanation of them (Ajzen, 1991):

 Behavioral beliefs: This type of belief is the one that influence attitudes. People construct their beliefs by associating an object to certain attributes. In this case, the object is the behavior. Since these attributes are valued either positively or negatively beforehand; our attitudes toward a behavior could become favorable or unfavorable.

 Normative beliefs: This type of belief is the determinant of subjective norms. It refers to the presumption that an important individual or a group of people would approve a particular behavior or not.

 Control Beliefs: This type of belief provides a foundation for perceptions of behavioral control. The availability of resources and opportunities, and personal past experience or experiences of colleagues and friends, shape this type of beliefs.

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The following figure is a development of Ajzen to describe the link between the 3 main components of TPB described above, Intentions and Behavior:

Figure 1. Theory of Planned Behavior. Ajzen (1991)

This theory is applied in the entrepreneurship research field and presented in several academic articles. For instance, van Gelderen et al (2008) made an empirical research of the entrepreneurial intentions of Dutch Students by employing the TPB. In their research they applied a quantitative methodology using a sample of business students coming from 4 different Dutch universities. Their results indicate that the two most important factors to explain entrepreneurial intentions are: entrepreneurial alertness related to Perceived Behavioral Control and the need for financial security related to Attitudes toward Behavior. Iakovleva et al (2011) used the TPB to compare entrepreneurial intentions of students from developed and developing countries. Their findings indicate that students from developing countries scored higher in entrepreneurial

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intentions and in its antecedents (attitudes and perceptions) than developed countries (including Netherlands).

Furthermore, institutions like the Erasmus Student Centre applied the TPB to elaborate their theoretical framework for the 2013-2014 GUESS Report in the Netherlands. Moreover, they added 4 additional factors that may impact intentions through attitudes, subjective norms and perceived behavioral control, those factors are: University Context, Family Context, Personal Motives and Sociocultural Context.

2.2. Attitudes in Entrepreneurship

Robinson et al (1991, page 17) defines Attitude as: “the predisposition to respond in a favorable or unfavorable manner with respect to the object of the attitude”. The Entrepreneurial Attitude Orientation (EAO), developed by the same authors, aims to explain how attitudes play an important role in entrepreneurship. The foundation of this theory is the TPB of Ajzen and the multidimensional approach. This multidimensional approach states that attitudes are formed by the combination of 3 types of reaction: affection (positive or negative feelings about the object), cognition (beliefs and thoughts that someone has about an attitude object) and conation (behavioral intentions and predisposition to behave in a certain way toward the object). The multidimensional approach does not contradict the uni-dimensional model of Ajzen, but rather, integrates it.

Robinson et al (1991) developed a set of 4 subcategories of attitudes based on research that sought for characteristics that distinguish entrepreneurs. After their study

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analysis, they concluded that entrepreneurs and non-entrepreneurs differ significantly in the following subcategories:

 Achievement in business: need for achievement related to concrete results in the creation and growth of the startup.

 Innovation in business: related to perceiving entrepreneurial activity as making business activities in new and different ways.

 Perceived control of business outcomes (locus of control): perception of influence over his or her entrepreneurial business.

 Perceived self-esteem in business: perception about the competitiveness of the entrepreneur in relation to his or her business activities, and self-confidence.

2.3. Nascent Entrepreneurship

Several activities and influential factors are involved in the process to start a business (Carter et al, 1996). According to Carter´s et al research, there are 3 types of Nascent Entrepreneurs: (a) those who started a business (b) those who gave up and (c) those who still trying. Entrepreneurs of the first group are the ones who do more activities in an ongoing basis. Some of their activities are: investing their own money or asking for funding, organizing teams, hiring employees and renting facilities and equipment. In words of the same authors, Nascent Entrepreneurs are: “individuals who were identified as taking steps to found a new business but who had not yet succeeded in making the transition to new business ownership” (Carter et al, 1996, page 151)

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Carter et al (1996) indicate that several factors are expected to have a significant influence in the activities of entrepreneurs. Some examples they mentioned related to the factors that distinguish entrepreneurs are: previous experience and background of the entrepreneur. In addition, other factors are more related to the new venture strategy such as perceived differentiation of the venture; or to the industry such as growth rates, barriers to entry, competition, among others.

From the economic perspective, entrepreneurship is an employment choice. For instance: education, wealth, age, work status and household income are demographic and economic factors to study entrepreneurship (Arenius & Minniti, 2005). Arenius & Minniti (2005) indicated that perceptual variables should also be included in the economic model. In this matter, they refer by perceptual variables to those sociological or psychological factors that entrepreneurs consider when they are evaluating to engage in entrepreneurial activity. Those factors such as the presence of role models, confidence in one’s skills and abilities, risk propensity and alertness to unexploited opportunities shape the entrepreneur’s perception about entrepreneurship.

In contrast, Robinson et al (1991) argue that the use of the demographic variables to predict entrepreneurship is not efficient because specific reactions to certain circumstances and stable personality characteristics are the ones that determine entrepreneurship. Moreover, they argue that some demographic variables such as birth, education level and parental heritage cannot help to predict entrepreneurship.

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14 2.4. Intrinsic Drivers

The importance to consider beliefs as an influential component (Ajzen, 1991) and perceptual variables (Arenius & Minniti, 2005) provides an indicator that there are intrinsic drivers that play an important role in human behavior. However, there are other components presented by other researchers that should be considered for explaining entrepreneurial activity and particularly nascent entrepreneurship.

One of the dimensions to study and to explain new venture creation is the Characteristics of the Individual (W. Gartner, 1985). Some of those are related to psychology (Brockhaus, 1982; W. Gartner, 1985): Need for Achievement, locus of control, risk taking propensity. Others are related to the background, experiences and attitudes (W. Gartner, 1985): job satisfaction, previous work experience, entrepreneurial parents, age and education.

In the same line with the Gartner´s theory, Shane et al (2003) believe that entrepreneurial theory should include the motivations of entrepreneurs. In this regard, a wide set of Entrepreneurial motivations are presented: Need for Achievement, Risk Taking, Tolerance for Ambiguity, Locus of Control, Self-Efficacy, Goal Setting Independence, Drive and Egoistic Passion. It is important to state that some of them coincide with some of the Gartner´s individual characteristics presented above. This relationship occurs because both authors have gathered previous research to construct their theoretical models. Furthermore, Shane et al (2003) present a framework to categorize motivations and cognitive factors. The following figure shows the relationship between the entrepreneurial motivation and the entrepreneurship process.

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Subsequently, a brief explanation of its components is presented.

Figure 2. Model of Entrepreneurial motivation and the entrepreneurship process. Shane et al (2003)

As stated in Figure 2, there are 2 macro categories of motivators that are inherent to the entrepreneur: entrepreneurial motivations and cognitive factors. The category of Entrepreneurial Motivations is divided in 2 groups: General and Task-Specific.

The group of General Motivations has the following elements:

 Need for Achievement: one of the pioneers in the study of the effect of Need for Achievement (nAch) in Entrepreneurship is David McClelland. This researcher states that a young individual with high need for achievement seeks to attain an entrepreneurial position because it could provide more satisfactions than other kind of positions. Aligned with McClelland theory, Collins et al (2009) found in their study results that people with high level of nAch tend to engage in activities that offer high degree of control over outcomes, personal responsibility, feedback on performance and moderate degree of risk.

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16  Internal Locus of Control: Is the belief in which individuals consider that their actions or personal characteristics have a direct influence in the outcomes of an event (Shane et al, 2002).

 Desire for independence: Shane et al (2002) associate this factor with taking responsibility for one’s life rather than living off the effort of others. Moreover, it entails independence on the judgement. Researchers suggest that entrepreneurs present higher degree of independence than other individuals and that desire for independence is one motivational factor to start a new venture.

 Passion: this factor implies to love the work. Shane et al (2002) describe it as egoistic passion since they assume that individuals are motivated to do what is necessary in their own interests.

 Drive: related to the willingness to put additional effort of thinking and effort in converting the ideas into reality (Shane et al, 2002). They identify 4 aspects of drive that have a relationship between them: ambition, goals, energy and stamina. For instance, ambition is translated into setting a high goal for oneself and others. To achieve those goals, it requires high amount of energy and stamina.

The group of Task-Specific Motivations is formed by the following entrepreneurial motivations:

 Self-Efficacy: is the belief in which individuals trust in their abilities to manage the right composition of resources and skills in order to attain a certain degree of achievement in a specific task.

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17  Goal Setting: a goal is the aim of an action usually within a specific time frame (Locke & Latham, 2002). According to the Theory of Goal-Setting of Locke & Latham (2002), a goal varies in its level of specificity and difficulty and can affect performance through 4 mechanisms. First, they direct the effort toward the goal-relevant activities. Second, they have an energizing function because higher goals lead to more effort than lower goals. Third, goals influence persistence and fourth, it affects the action by combining cognition and motivation.

These two last concepts have a relationship between them. Locke & Latham (2002) state that people with high self-efficacy tend to set higher goals. Furthermore, they argue that this type of people is more committed to the goals, find and use more strategies to accomplish the goal and respond more positively to criticism than people with low self-efficacy.

Shane et al (2002) indicate that they assume that all human action is the result of motivation and cognitive factors. The category of cognitive factors is formed by: Knowledge, Skills and Abilities.

Other authors such as Zhao & Seibert (2006) consider that personality could play a meaningful role in the development of career intentions. In their study’s results they discovered that entrepreneurs have higher degree of Conscientiousness and Openness to Experience. The first refers to the level of tenacity, dedication and motivation in the search for goal accomplishment. The latter, refers to the personality that identifies someone as curious and seeker of novel experiences and ideas.

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18 2.5. Extrinsic Drivers

Entrepreneurs do not work in isolation. To the contrary, they respond to their environment (W. Gartner, 1985). Aldrich (1990) and Shane et al (2003) consider that the study of personal attributes of entrepreneurs and their environmental conditions are complementary. Two different perspectives about the environment have been used in the entrepreneurship theory. One perspective view the environment as an outside set of conditions to which the organization must adapt. The other perspective states that environment is the reality that organizations create through their own perceptions (W. Gartner, 1985).

Several theories have tried to explain the influence of the environment into entrepreneurship. The ecological perspective of Aldrich (1990) states that the founding of new organizations are highly dependent on 3 variables: (a) Intra-population Processes such as Organizational Death Rates, Organizational Birth Rates and Organizational Density which create the structure of the environment in which new ventures are born. (b) Inter-population Processes related to the type of relations between organizational Inter-populations, such as the level of competition between organizations influenced by sources of capital that affect the distribution of resources in the environment. Finally, (c) Institutional Process which are those that shape the macro-context: Politics and government policies, spatial location, culture and educational institutions.

A more recent theory is the one that considers the environment as an ecosystem where several elements that play an important role for entrepreneurship. For instance, Isenberg (2010) affirms that in order to boost venture creation, governments needs to

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create an ecosystem that assist entrepreneurs. As part of his theory, the author mentions that the elements necessary to build a strong ecosystem are: Public Leadership, Government Institutions that support entrepreneurship, Culture that respect entrepreneurship as a worthy occupation, Success stories, Human Capital, Financial Capital, Industry Associations, Educational Institutions that promote entrepreneurship, Public Infrastructure, Geographic Clusters, Networks, Support Services such as the ones offered from lawyers and accountants; and last but not least, Customers.

Gnyawali & Fogel (1994) argue that the theory about the influence of environment in entrepreneurship is fragmented. They found that the literature about entrepreneurial environments was divided in 3 broad streams: (a) general environmental conditions for entrepreneurship (b) descriptive environmental conditions for entrepreneurship in certain regions or countries and (c) the role of public policy that form entrepreneurial environments. Consequently, they developed an integrated framework to explain the environmental conditions that influence the entrepreneurship development. Through their framework they attempt to link the needs of entrepreneurs with the ways in which environments can fulfill those needs, boost their desire to engage in entrepreneurial activity and promote the process of nascent entrepreneurship. The five dimensions that shape the framework of environmental conditions of Gnyawali & Fogel (1994) are:

(a) Government Policies and Procedures: related to the mechanisms that the government applies to enable an entrepreneurial culture. One of those mechanisms is the reduction of market imperfections and administrative rigidness.

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This is an important dimension because entrepreneurs could be discouraged to start a business if they have to follow excessive bureaucratic procedures.

(b) Socioeconomic Conditions: this dimension depends on the perception and attitudes of the society towards entrepreneurship. A favorable attitude and support from the society would lead to the increase of motivation for entrepreneurs to start a new venture. For instance, the presence of experienced and successful entrepreneurs contributes with the message to the potential entrepreneurs that entrepreneurship is a viable career option.

(c) Entrepreneurial and Business Skills: this dimension considers the availability of training programs. Educational services play a more important role in emerging markets because entrepreneurs in these markets could lack of some business skills such as: planning, decision making, negotiation, pricing, management of the workforce, management of cash flow, among others.

(d) Financial Assistance: Entrepreneurs need of financial assistance to diversify the startup risk, to accumulate capital for investment and to finance growth and expansion when necessary. In this dimension, several members in the environment such as venture capitalists play an important role.

(e) Non-Financial Assistance: Entrepreneurs need complementary support and guidance in the execution of market research, business plans and how to get financial support. Therefore, in this case, organizations such as incubators play an important role. One advantage of incubators is the availability of office spaces that facilitate communication with other entrepreneurs.

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The importance of these categories are that each of them provides a proposition that is related to intrinsic drivers like cognitive factors (e.g.: skills and abilities) and to additional external drivers such as opportunities. For instance, two of the six propositions provided by Gnyawali & Fogel (1994) are:

 The more favorable socioeconomic factors, the greater the ability to enterprise.

 The more favorable the government policies and procedures, the higher the opportunity to enterprise.

The complete list of environmental drivers of Gnyawali & Fogel (1994) is presented in the following table:

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Additional elements that should be considered as drivers that motivate the entrepreneur to engage in entrepreneurial activities are the Opportunities in the Environment. Gnyawali & Fogel (1994), consider the relevance of opportunities as a basic element in their integrative Model of Entrepreneurial Environments. In the same line, as was mentioned previously in Figure 2, Shane et al (2003) add Entrepreneurial Opportunities and Opportunity Recognition in their model because they state that the entrepreneurial process occurs when people act of pursuing opportunities.

Eckhardt & Shane (2003) explain that opportunities can be categorized in different forms. They state that Opportunities evidenced themselves in three different ways. First, they mentioned that the locus of change generate the opportunity. In this case, they used the Schumpeter (1934) theory as a reference, mentioning that new products, new raw materials, new methods of production, new geographical markets and new ways of organizing are the locus of changes that influence in the discovery of opportunities by entrepreneurs. Second, they argue that opportunities vary by its source. To mention some of them, opportunities can arise if there are asymmetries in information between market participants or as a cause of exogenous shocks of new information. Moreover, changes in supply and demand also can be a source of opportunities. Third, the initiator of the change can be a factor that influences opportunity recognition, such as government or universities.

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The Literature Review presents different frameworks from different authors to explain what factors influence the entrepreneurial intentions and consequently the decisions of entrepreneurs. The theory is fragmented because there is no unique framework to explain the reasons to become entrepreneurs or to start a new venture. In the entrepreneurial field, there are different academic efforts as the one of Gartner (1985) or Shane et al (2002) that have tried to build broad frameworks to explain a wide set of intrinsic and extrinsic factors that influence entrepreneurial decisions. Other studies have been more specialized by focusing in certain type of influential factors, such as the personality that differentiate entrepreneurs (Zhao & Seibert, 2006). In addition, authors such as van Gelderen et al (2008) have used theoretical models from the psychological field. The most widely used and tested in specific countries was the Theory of Planned Behavior (TPB) to explain entrepreneurial intentions.

Despite the availability of multiple theoretical frameworks and approaches to study the reasons of entrepreneurial decisions, there is no consensus about what should be the influential factors to study. Moreover, there is no framework that explains the current condition in the Netherlands about the internal and external factors that motivates young Dutch in their decision to become entrepreneurs and start a new venture. This Thesis will use the Grounded Theory as a Research Strategy to construct a framework that study motivational factors as antecedents of entrepreneurial decisions. Before explaining in more detail the Research Design, this Thesis will introduce a general description of the entrepreneurial environment in the Netherlands and a Concept Model that summarizes the focus of this study.

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3.

Entrepreneurship in the Netherlands

By using the following framework, S. Wennekers (2014) present a macro-perspective about the current situation of Entrepreneurship in the Netherlands. The author states that economic growth can be accelerated by innovation. Subsequently, innovation can be induced by two entities: startups and existing firms. Several factors influence the innovative performance of these entities, such as Education and R&D.

Figure 3. Conceptual Framework of Entrepreneurship in the Netherlands in international perspective. Panteia 2014

After the analysis, Wennekers (2014) concludes that there is a high prevalence rate of entrepreneurial employees in incumbent firms in the Netherlands, while also; the innovative performance of early-stage independent entrepreneurs in the Netherlands is average in comparison to similar economies. However, aside of the innovative performance of independent entrepreneurs, this author mentioned that the Netherlands has grown considerably since 2008 in the percentage of early-stage entrepreneurship. This information is based on the Global Entrepreneurship Monitor (GEM) indicators. In 2012,

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the Netherlands was the most entrepreneurial country in the European Union (Wennekers, 2014). Additionally, this author supports the current policy emphasis that stimulates innovative entrepreneurship and considers important the Education and R&D as elements to boost it.

In the National Report 2013 of GEM about the Netherlands and published by Panteia, some indicators are important to emphasize. The TEA, which is the Total Early-Stage of Entrepreneurial Activity and GEM’s primary measure of entrepreneurship, indicates that the Netherlands is still at historically high level and relatively high compared to peer-economies with a 9.3%. It means that 9.3% of the whole population between 18 to 64 years old can be considered part of the TEA. The Netherlands rank 6 out of 26 innovation-driven economies. Among the subset of European Union, the Netherlands hast the highest TEA rate. Moreover, it is important to mention that TEA integrates both, nascent entrepreneurs and new entrepreneurs. The former refers to adults between 18 and 64 years old who are trying to start a new business, while the latter refers to adults between 18 and 64 years old who currently own and manage a business for less than 3.5 years.

The following tables explain the TEA of the Netherlands in 2013. The table 2 indicates an evolution of the TEA of the Netherlands, while table 3 presents a comparison of the same indicator with other economies. If we analyze separately the two categories of entrepreneurs that belong to TEA, Nascent Entrepreneurs have increased their participation in the whole population compared with the diminished of New Entrepreneurs.

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Table 2. Evolution of TEA of the Netherlands. GEM National Report 2013

Factor-driven economies Efficiency-driven economies Innovation-driven economies OECD EU Netherlands TEA 21.1 14.4 7.9 8.5 8 9.3 Nascent Entrepreneurship 9.4 8.4 4.7 5.2 4.8 4.7 New Entrepreneurship 12 6.4 3.3 3.4 3.3 4.8

Table 3. TEA of the Netherlands and other economies. GEM National Report 2013

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 TEA 4.9 4.6 3.6 5.1 4.4 5.4 5.2 5.2 7.2 7.2 8.2 10.3 9.3 Nascent Entrepreneurship 2.3 2.6 1.7 3 2.5 3.6 2.7 2.1 3.1 4 4.3 4.1 4.7 New Entrepreneurship 2.8 2.1 1.9 2.2 1.9 1.9 2.6 3.2 4.1 3.4 4.1 6.3 4.8

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4.

Concept Model

From the Literature Review section, one can imply that attitudes toward entrepreneurship are influenced by personal characteristics of the entrepreneur and the context in which this entrepreneur is operating. Also, there is a relationship between intrinsic drivers and extrinsic drivers that shape the general motivation of entrepreneurs to engage in entrepreneurial activity.

The following Concept Model indicates the complementarity of this research with previous studies that use the TPB. Moreover, this Concept Model offers a clear overview of the influential elements that allow the existence of Entrepreneurial Activity, specifically Nascent Entrepreneurship, and the topics that were detailed in the Literature Review.

Figure 3. Focus of the Research and the TPB

It is important to explain how these components interact between them. Entrepreneurial activity, specifically nascent entrepreneurship can be explained by different factors that have a relationship between them. This Thesis argues that intrinsic

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motivational factors are inherent and dependent to the individual; and has a relationship with his/her attitudes toward entrepreneurship. In the same way, Environmental factors formed by Extrinsic Drivers are another set of motivational factors that may shape the attitudes and perceptions toward entrepreneurship of the individual. We suggest that those two set of motivational factors work in combination to form the Attitudes and Perceptions toward entrepreneurship of different types of young Dutch entrepreneurs: the Status Quo Breakers and the Achievement Seekers. This suggestion is based on patterns that were found in the data and explained in the Analysis section of this Thesis.

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5.

Methodology

This research uses a Grounded Theory as a Research Strategy because it provides several advantages to collect, code and analyze the motivational factors of young Dutch in their decisions to become entrepreneur and found their own business. In general, the selection of this research strategy and the use of a qualitative data collection method have the strength to provide insights that a quantitative methodology could not possibly offer. Moreover, it is aligned with an inductive approach to construct theory and answer the Research Question. The advantages of Grounded Theory are explained in the following section.

5.1. Research Design

The research question of the Thesis is: Why do young Dutch want to become entrepreneurs and start their own business? In order to answer this question, this Thesis developed a Grounded Theory based on primary data collected from semi-structured interviews to young Dutch entrepreneurs ranging from 18 to 28 years old.

Different reasons justify the use of Grounded Theory. First, there is no consensus about what theory should be used to find motivational factors as reasons for entrepreneurial decisions. Studies with related topics, some of them presented in the Literature Review, have used a deductive approach and quantitative methods to test or verify different theories. Most of them uses the Theory of Planned Behavior of Ajzen (1991) because is one of the most suggested theories to explain entrepreneurial intentions based on attitudes and perceptions; and because it allows them to compare

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their results with other studies (van Gelderen et al, 2008; Iakovleva et al 2011). Nevertheless, this Thesis uses an inductive approach to construct theory based on data that is focused on motivational factors and not only in attitudes and perceptions. Glasser & Strauss (1967), known as founders of the Grounded Theory, stated that generating theory is independent of the kind of data used, but their research strategy is mainly focused on qualitative data because the relevant elements of sociological theory such as patterns, are found best in a qualitative methodology.

Second, this Thesis focuses in a current situation that involves a specific demographic area (Netherlands) and specific participants (young Dutch entrepreneurs). The data that these participants provided is the main source to construct the theory. As Glasser & Strauss (1967, page 29-30) mentioned: ‘’whether or not there is a previous speculative theory, discovery gives us a theory that fits or works in a substantive or formal area since the theory has been deducted from data, not from logical assumption’’. Suddaby (2006) states that Grounded Theory is more appropriate for Research Questions that encourage making knowledge claims about how individuals interpret reality. Furthermore, Suddaby (2006) explains that a grounded theory is: “a practical method for conducting research that focuses on the interpretative process by analyzing the actual production of meanings and concepts used by social actors in real settings”. These parameters (location and type of individuals) are references to generate theory. In further studies, it would be useful to assess the generated theory of this research with quantitative methodologies. Furthermore, this study could be considered as a reference to apply a similar research approach in other countries in order to compare the

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motivational factors of young entrepreneurs. Authors specialized in entrepreneurship, such as Shaver et al (2001) mentioned that the advantage of the use of a Grounded Theory Methodology is that entrepreneurs could provide their way of thinking and insights through their responses about reasons to engage in entrepreneurship that previous theories may not covered.

Third, Grounded Theory use Comparative Analysis as a strategic method for generating theory. For Glasser and Strauss (1967) if a researcher generated another theoretical property or category, it means he/she has only proposed another comparative data. It does not mean he/she has debunked or disproved previous work of other researchers. In the same way, the aim of this Thesis is not to debunk or disprove theoretical frameworks that other researchers has previously presented. To the contrary, the aim of this Thesis is to generate alternative categories based on evidence of the data. Suddaby (2006), in addition explains that Grounded Theory is not an excuse to ignore previous literature. In that way, this Thesis has presented the Literature Review section with the purpose to show what authors, types of research, frameworks and literature gaps exist in previous research.

Fourth, Grounded Theory use Theoretical Sampling as a process of data collection for generating theory (Glasser and Strauss, 1967). The advantage of this method is that the researcher can collect, code and analyze the data while deciding what data is necessary to collect next as the theory emerges (Glasser and Strauss, 1967).

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Last but not least, qualitative methods are more appropriate for finding reasons and responding to the question why (Saunders & Levis 2012). Therefore, the use of a qualitative methodology to collect data and answer the Research Question is useful and necessary.

5.2. Participant Recruitment and Selection

The target of this research project is Dutch entrepreneurs ranging from 18 to 28 years old who are considered nascent entrepreneurs and/or entrepreneurs who recently founded their Startups. Nascent entrepreneurs are: “individuals who were identified as taking steps to found a new business but who had not yet succeeded in making the transition to new business ownership” (N. Carter et al, 1996). The reason to choose this target is due to the fact that these participants have entrepreneurial experience by engaging in entrepreneurial activities. Their experience is their main advantage in comparison to regular students who come from a diverse set of academic fields and had not entrepreneurial experience. This latter type of participants, were selected in past research to study their entrepreneurial intentions.

The first step to recruit participants was the identification of organizations that gather the mentioned type of entrepreneurs in the Netherlands. These organizations are accelerators, incubators, co-working spaces, schools for entrepreneurs or universities. Second, representatives of these organizations were contacted through e-mail in order to ask for permission and contact information of the entrepreneurs that have the required age for this study (18 to 28), Dutch citizenship and belong to their organization. The

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sampling rationale for selecting the interview participants is Typical (Saunders & Lewis, 2012) because the chosen participants should have a profile representative of the research target. The selected institution was Team Academy, which provided the majority of the participants. These participants are entrepreneurial students, which means they are enrolled in a Study Programme related to Entrepreneurship but are also entrepreneurs in charge of their own startups.

5.3. Data collection a. Interviews

Ten semi-structured interviews were made until obtaining data saturation. This number of interviews includes the pilot interview that tested: the structure of the questions, the time required for each interview and possible additional questions that are valuable for the research.

Participants were interviewed in 2 locations: Team Academy offices and in the Science Park Building of the University of Amsterdam. The duration of the interviews was 45 minutes in average. The list of questions is based on the Interview Protocol presented in the Appendix section. The interview protocol began with an introduction of the interviewer (the author of this Thesis), explanation of the topic of the research and the signing of the Consent Form. The first group of questions was a confirmation of the entrepreneur profile (age, place of birth and current startup situation). The following set of questions was open-questions that covered different themes to construct a new theoretical categorization and respond the research question and sub-questions: Nascent Entrepreneurship, Attitudes toward entrepreneurship and Internal and External Drivers.

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Finally, the interview finished by asking some recommendations to the participants and assuring anonymity.

A group of eight entrepreneurs came from Team Academy. Team Academy is a prestigious school for entrepreneurship located in Amsterdam which gathers entrepreneurs from all across the Netherlands. Their aim is to develop professional entrepreneurs with hard skills and soft skills so they are able to start and operate their own business from their first year of education. The entrepreneurial students are enrolled in a 4 year bachelor program aiming for a BBA degree in Entrepreneurship. The remaining two participants are entrepreneurs studying the Master of Entrepreneurship and Innovation at the University of Amsterdam.

The semi-structured interviews allowed to collect qualitative data that provided insights and explanations about the relationship of the Motivational Factors (Internal and External Drivers) and entrepreneurial decisions. Despite there were predetermined questions that covered the topics explained in the Literature Review Section, the interview gave more relevance to the Drivers section in order to explore new insights. Moreover, some questions were tackled more in-depth while others could have been eliminated depending in the answers of the participants.

5.4. Data analysis

Generating theory by comparative analysis is often used in sociology and anthropology. The comparative analysis involves elements of the theory, which are: a) categories and

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their conceptual properties and b) relations between categories or properties. (Glasser & Strauss, 1967).

By using Grounded Theory as a research strategy, it was necessary to make constant comparisons among the data. This allowed the theory to evolve throughout the process of data collection. The aim was to find patterns in the data and develop theory. As suggested by Saunders & Lewis (2012), in order to build theory by looking for patterns, this research followed 3 steps:

1. Develop categories or codes to describe the data.

2. Decide which units of data are relevant to attach to the mentioned categories and appropriate for analysis.

3. Attach categories to the units of data

The units of analysis were Intrinsic Drivers, Extrinsic Drivers and Attitudes of young Dutch Entrepreneurs. Several categories and subcategories emerged from the data. This will be shown in the Findings section.

5.5. Strengths and Limitations

The richness of in-depth information derived from semi-structured interviews is one the strengths of this study. This qualitative data collection method provides insights that are difficult to produce with quantitative research (Gephart, 2004). In addition, the study is complementary to other studies made in the Netherlands. For instance, the data derived from this study focuses on the motivational factors that were crucial for young Dutch in

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their decisions to become entrepreneurs and to start a business, while the ECE GUESS Report is focused on the “entrepreneurial intentions” of students.

The limitations of the research design is that it will be difficult to verify participant’s answers by means of using other sources that help to reduce the possibility of participant´s bias. The reason is that motivational drivers are a type of variable that is provided from the participant point of view. However it can be minimized by assuring the anonymity of the respondents. Furthermore, one critic that could arise to the Thesis methodology is that it cannot build “generalizability”. Although, this Thesis could not provide statistical generalizability, it is an important reference to build analytical generalizability which is the generalization from empirical observations to theory (Gibbert & Ruigrok, 2010).

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6.

Research Analysis

6.1. Findings

The interview-transcripts are the basic source of data to begin with the data analysis. They were first reviewed manually; afterwards, all the transcripts were uploaded in the software QSR NVivo 10. It was used as a tool to find patterns, develop categories and add units of data to each category.

The following section contains the main findings of the semi-structured interviews. The main categories of this Research are the “Attitudes toward entrepreneurship”, the “Intrinsic drivers” and the “Extrinsic drivers”.

Attitudes toward entrepreneurship are referred to Robinson´s et al (1991) definition: “the predisposition to respond in a favorable or unfavorable manner with respect to the object of the attitude” In the case of this Research, the object of the attitude is the Entrepreneurial Activity.

By intrinsic drivers, this Thesis refers to those internal factors that motivate young Dutch entrepreneurs to found their own Startups, such as their personality traits or beliefs. On the other side, extrinsic drivers are those external motivational factors that influenced in their decision to become entrepreneurs, such as actors of their environment: friends, family and society.

After the iterative review of the transcripts, patterns in the data allowed the division of these categories into subcategories that will be furthered explained. There was one common pattern and one characteristic that differentiated the entrepreneurs. Most

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interviews suggest that young Dutch entrepreneurs consider the Entrepreneurship as a lifestyle. It means that they are engaged in entrepreneurship not just for the merely reason to own a business, but to develop themselves as persons and their career as entrepreneurial professionals. On the other hand, the data analysis derived from the interview responses reveals that there are some basic differences among the entrepreneurs, which lead to make a differentiation among them in their intrinsic and extrinsic drivers. This Research found 2 profiles of Young Dutch entrepreneurs who were named as “Achievement Seeker” and “Status Quo Breaker”.

The Status Quo Breaker is the one that is not comfortable with its current position and condition; they want to make a change for themselves and others. In their case, they consider most important to look for a better working environment and a career path that fits with their personality. Moreover, they value more the social impact on others, whether others are: co-workers, clients or society. For instance, one Status Quo Breaker said:

The moment when I was getting in a normal company with quite ok salary I though this is not everything, this is not my max capacity, I can do more.

Other entrepreneur of this type mentioned:

It means that you really can do the things you like. Also to challenge existing models or existing companies. To break the status quo is also to build something with other people. Involve people in

a project so in a co-creative way you can build something together. There are a lot of things to be challenged. And I think there are a lot of entrepreneurs that not only wants to build something for

themselves but also for the community, for other people.

On the other hand, the Achievement Seeker entrepreneur is the one that has a vision or a goal in mind and use entrepreneurship to achieve it. For this type of

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entrepreneur, having a new product or service is not enough to consider an achievement because they pursue more ambitious goals. He or she values more the future condition translated in been successful and having a good quality of life. One Achievement Seeker affirms:

One of my goals was to set my business and my future plan is to make my business grow and sell it and just start other things. Generate ideas, create new opportunities, everywhere are opportunities…I think you have more control over your destiny, you are the captain of your sheep,

you can stir wherever you want to go, that’s another story if you are working with a boss. Other Achievement Seeker mentioned:

I want to become really successful with my own entrepreneurship projects. Successful in a way that I can pay my rent, food and go on a vacation for once a year… That is my biggest motivation, to

become successful before an older age.

As we can see, the basic difference between both profiles is the time-frame focus, while the Status-Quo breaker is more concerned about his/her present condition, the Achievement Seeker is more focused on his/her success in the future.

Moreover, this Research project differentiates 2 stages. The participants were asked for their motivational factors in each stage. The first stage takes place when the entrepreneur took the decision to become entrepreneur and to follow the path of entrepreneurship as a career. The second stage is related with the decision to start their Startup project. The findings reveal that both, the intrinsic drivers and extrinsic drivers; vary in each stage.

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These two basic differentiation criteria based on the profile of the young Dutch entrepreneur and the time stage in which he/she takes decisions would play an influential role in the typology of their motivational drivers.

6.1.1 Findings about Attitudes toward Entrepreneurship

In order to know more about their attitudes toward entrepreneurship, all the participants were asked: what does it mean to them to be an entrepreneur and if they think that more young Dutch entrepreneurs should engage in entrepreneurship. This last question resulted to be more insightful based on the amount of information and the reduction of biases. Since these are open questions, findings are diverse. Some of them coincide with past theory like the Entrepreneurial Attitude Orientation theory which provided 4 subcategories of attitudes that differentiated entrepreneurs than non-entrepreneurs. However, the interview responses of this research provided data to develop more categories of attitudes based on patterns in the responses. The following are a list of categories of attitudes toward entrepreneurship. Some of them are focused on the task of being an entrepreneur and others are focused in the effect that entrepreneurship has on the individual.

a. Attitudes based on the Task of Entrepreneurship

The Status Quo Breaker is the one who wants to challenge existing models to build new ones. They consider that there are many aspects to be challenged when engaging in entrepreneurship, for instance: the way of working in a team, a project or organization. However, they realize that it involves hard work based on the allocation of high amount of

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time the entrepreneur assign to a project. They affirm that entrepreneurship is about taking risks that involve the management of the resources of a project.

For Status Quo Breakers, entrepreneurship can be considered as inspirational in the way that it can become a creative activity that bring up a new product or service to benefit society. Therefore, they consider that is also an opportunity to innovate and create value for others.

For the Achievement Seeker the task of entrepreneurship represents a challenge because if an entrepreneur has a vision, he/she must engage in hard work to achieve what they desire. Hard work for achievement seekers means dedicating high amount of time in order to achieve a higher goal. As one entrepreneur mentioned:

The idea is 1% and 99% is sweat. You need to work it out, for me I am really hard with myself. I couldn´t be happy with what I achieved if it´s only a physical product. But, if I walk around and see

that somebody is using my product its better.

Furthermore, Achievement Seekers consider the task of entrepreneurship as an opportunity to innovate and to employ their skills and abilities. Finally, they recognize that entrepreneurship involves constant problem-solving.

b. Attitudes based on the effect on the individual who engage in entrepreneurship

Status Quo breakers view entrepreneurship as an “eye opener” for young people because it represents a different way of working and learning in comparison with the ways of conventional “9 to 5” jobs and theoretical educational institutions. Moreover, because it is an opportunity to network and meet different people. They consider that an

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entrepreneurial mindset is related to taking risks, learning by doing and challenge yourself to work hard in order to achieve a higher goal. In addition, they consider that entrepreneurship is about the freedom the individual has in order to engage in a project he/she prefers to do. However, it it also carries a responsibility to organize himself or herself in their daily activities. All of these reasons integrate the personal development of the entrepreneur, which is considered as much as important as founding a startup because entrepreneurship can be a tool of self-recognition and an identity shaper.

Achievement seekers consider that entrepreneurship is an opportunity to achieve in life. If they do not engage in an entrepreneurial activity, they would consider it as a failure because it was part of their vision since they were younger. They consider that the role of an entrepreneur fits with their personality in the way that they are more practical, creative, extrovert and/or risky. Furthermore, they think that entrepreneurship can influence individuals in their personal development by allowing them to discover and develop new skills. However, they believe that entrepreneurship is not for everybody because some people lack of the skills or the personality to assume that role. Finally, they believe that being an entrepreneur is about developing an entrepreneurial mindset and having a high perceptional control. The former is related to constantly developing new ideas and networking, while the latter is about the amount of perception that the individual has about his/her influence on his/her Startup project.

The following table summarizes the list of attitudes of young Dutch entrepreneurs toward entrepreneurship.

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Task Effect on the Individual

Status Quo Breaker

 Challenge existing models  Entrepreneurial Mindset

 Hard Work  Eye-Opener

 Inspirational  Freedom

 Innovation  Personal Development

 Take Risks

 Create value for others

Achievement Seeker

 Employing skills  Achievement in life

 Challenge  Fit with Personality

 Innovation  Personal Development

 Problem Solving  Entrepreneurial Mindset

 Hard Work  Perceptional Control

Table 4. Attitudes toward entrepreneurship of young Dutch entrepreneurs 6.1.2. Intrinsic Drivers of young Dutch Entrepreneurs

The following intrinsic drivers are selected if they comply with the pattern criteria. For this specific research, it means that if the same internal driver is repeated at least 2 times by 2 different entrepreneurs it could be considered as relevant. Due to the open questions, we got a broad set of intrinsic drivers. Therefore, it means that one entrepreneur gave more than one intrinsic driver as a reason to become entrepreneur (1st stage) or to start his/her project (2nd stage). The following categories of intrinsic drivers are:

a. Intrinsic Drivers of young Dutch entrepreneurs in the decision to become entrepreneurs

Status Quo Breakers took into consideration 3 internal motivational factors in their decision to become entrepreneur: Freedom, their own personality and the desire to give back to society. Entrepreneurs associate freedom with desire for independence. This desire for independence involves developing their own career as entrepreneurs and be

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able to create a stable economic situation without being involved in regular jobs with standardized norms and influence of external authorities. Freedom as a driver is relevant because it is born from a personal desire but based on the influence of the environment. For instance, one entrepreneur mentions:

My motivational factors were related to do something by myself, to challenge the status quo. But also the independence you have as an entrepreneur: to choose your own goals and to learn. Then,

earn your own money. It would be really nice to do something for others that you build up for yourself and create your own income.

Furthermore, they consider that their personality was also influential. Personality traits such as being creative or practical were mentioned. By practical they refer to learn by practice and not by theory. Moreover, they consider relevant their desire to give something back to society in terms of making a new creation which raises the quality of life of the society.

Giving something back to society. Find a way how I can do it. Been creative was one of the most important things. I liked to create things, do whatever I like and not someone, like a boss, to tell

you have to do this, this and this. That is how I ended up in entrepreneurship.

In the case of Achievement seekers, they considered 5 motivational factors in their decision to become entrepreneurs: Freedom, Goal, Hobbies, Personality and Urgency of control.

Freedom for Achievement Seekers is also about desire for independence and been responsible about their expenses, their time management and the outcomes of their decisions. But what most differentiates Achievement Seekers is their focus on their Goal. Their decision to become entrepreneurs was based on their future projection for

Why do young Dutch want to become entrepreneurs and start a new business? : a research about their internal and external motivational factors

Master Thesis