The influence of parents as role models in career choices of college students in Ecuador

University of Amsterdam

Faculty of Economics and Business

Specialization: Economics and Finance

Bachelor Thesis

The influence of parents as role models in career

choices of college students in Ecuador

Supervisor: Msc. Melvin Vooren Name: Jessica Carolina Herrera Pusda

Statement of Originality

This document is written by student Jessica Carolina Herrera Pusda 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.

Table of Contents

Abstract ... 4

1 Introduction ... 5

2 Literature Review ... 7

3 Methodology ... 10

4 Results and discussion ... 13

4.1 Descriptive statistics ... 13

4.2 Parental Experience: Entrepreneurship and self-employment ... 13

4.2 Participant’s Profile ... 14

5 Conclusion and limitations ... 16

5.1 Limitations ... 16

5.2 Conclusion ... 17

References ... 18

Abstract

Due to the cultural differences and parenting style that characterize developing countries, and the strong presence of entrepreneurs and self-employed business owners. This paper analyses the influence of parents as role models in the career choice that college students make between entrepreneurship and self-employment. This research collected data from a sample consistent of a 100 Ecuadorian college students, making use of a survey available online. For the purpose of this paper five hypothesis were tested by means of five different linear regression models using SPSS. The results of this research show that parents as role models and their experience as entrepreneurs or self-employed business owners do not significantly affect whether students feel more inclined towards one option that the other.

1 Introduction

Every decision that we make in life is shaped by who we are and what we have seen and experienced trough time, but one of the first and most consistent role models that helped with character and personality development are our parents. Naturally, it is expected to wonder how strong is their influence when choosing between the different career paths available to college students after graduation? How does their occupational experience motivate students on to take the same path?

Most of the time when we think about future career choices, we see the two most common options: a corporate job and entrepreneurship. However, these two options are not accessible to everyone in developing countries where many factors have led to the creation of voluntary and involuntary self-employment.

Self-employment differs from entrepreneurship in the sense that the individual is the sole decision maker and the business will be dissolved when the individual decides to, in terms of employees the self-employed individual does not hire them, contrary to the entrepreneur which will hire employees and share management of the business with people that share the same vision and goals, in order to create a business model that can preserve itself and grow with time (Ingram, 2017). As Margolis (2014) mentions, over fifty percent of working people in developing countries are self-employed but for most of them the lack of better job opportunities has led them to opt for the self-employment path. However, for those whose intention was to be self-employed it is unclear what influenced them to make this choice, how involved role models are before and after the individual makes a career choice? The same question arises for entrepreneurship as a career choice, which according to Ratten (2014) has not been fully analysed by researchers. As Acs, Desai, and Hessels describe, entrepreneurship plays a key part in economic development with contributions to innovation, the labour market and overall welfare (Schumpeter 1934; Acs and Audretsch 1988; Wennekers and Thurik 1999; Baumöl 2002).

Existing literatures have already analysed to some extent the influence of role models in career choices however the results were derived from data collected in developed

countries. Given the cultural differences, the constant changing markets and the important part self-employment and entrepreneurship play in the economy of developing countries by promoting innovation and economic growth (Ratten,2014), it is interesting to study what motivates and challenges college students about becoming entrepreneurs or being self-employed and how strong is the influence of parents as role models when choosing between the two.

The scope of this research will be centred on college students from Ecuador, since according to the Global Entrepreneurship Monitor by 2016 Ecuador is the country with the highest Total Early-Stage Entrepreneurial Activity (TEA) which shows the percentage of adults that have taken the first steps to become entrepreneurs and the ones that have owned a business for less than three years and a half (Lasio, Caicedo, Ordeñana, Samaniego & Zambrano, 2017). According to Lasio, Caicedo, Ordeñana, Samaniego and Zambrano (2017) in Ecuador the portion of adults starting as entrepreneurs was 22.4%, 11% had owned a business for less than three and a half years and 14.2% had been entrepreneurs for longer than three and a half years.

By delivering a survey that contains questions that aim to assess whether college students consider their parents to be role models when deciding on an occupational path, the motivations behind entrepreneurship and employment intent, the perceived level of self-efficacy and how respondents consider external factors such us the economy, politic environment and risk into making the decision.

Therefore, this research will attempt to answer to the following question: To what

extent do parents as role models influence the decision between self-employment or entrepreneurship as planned career choices of college students in Ecuador?

This paper begins with the theoretical framework in section 2 which describes previous literature and their take on how role models influence the choice between different career paths, furthermore the impact that entrepreneurship and self-employment generally have in the economy of a country. The benefits and shortcomings that both occupational options bring to developing countries and how significant they are for the Ecuadorian economy and its growth. Finally, the hypothesis that are tested for the purpose of this research will be presented. Followed by section 3 in which the methodology and the variables considered for this research are discussed, section 4 consists of the report and analysis of the

results yield by the data collected. Lastly section 5 shows the conclusions of this paper, followed by its limitations.

2 Literature Review

The social theory behind the influence and definition of role models as Krumboltz (as cited in Bosma, Hessels, Schutjens, Van Praag, & Verheul, 2012) establishes that they have a heavy impact on the career path chosen by individuals, at the same time the work from Van Aurken and Krueger (as cited in Bosma, Hessels, Schutjens, Van Praag, & Verheul, 2012) point to the positive effect of role models on how individuals feel about becoming entrepreneurs in the future. Moreover Bosma, Hessels, Schutjens, Van Praag, & Verheul (2012) also refer to Gibson’s work which states that the chance of learning new competences and see ourselves reflected in people that share the same goals and ambitions act as motivation to choose a certain career path. When looking at the results obtained by previous research focused on students, it can be concluded that a successful role model influences students in a positive way, seen as a source of inspiration and incentive to incur in entrepreneurial activities (Buunk, Peiro, & Griffioen, 2007).

According to Bosma et al. (2012) the level of education of the individual seems to have a positive impact on the relationship with role models, given that the more educated the individual is, there is a high tendency to more ambitious goals and a greater capacity to benefit from the advice and information received. As opposed to the level of knowledge and skills that the individual has gained by being involved in entrepreneurial activities before engaging in its own, which makes the presence of a role model to be considered less needed by the individual (Bosma et al., 2012). Another way in which the existence of a role model affects the individual is by providing support and reassuring them at the moment of making decisions and facing challenges (Zozimo, Jack & Hamilton, 2017).

Being the first people, we come in contact with, it is important to analyse how parents can affect occupational choices, since studies show that the closer the relationship between the entrepreneurs and their role models, the more likely it is to have an impact on their career choice (Bosma et al., 2012). As the research done by Lindquist, Sol and Van Praag (2012) concludes, being child of an entrepreneurial parent increases the possibility of taking the

occupational path of entrepreneurship by 45% and that chance is almost double when both parents have been entrepreneurs at some point in time. Although genetics are partly involved in the entrepreneurial intent, it was concluded that the child’s upbringing had far stronger impact, thus showing how parental care models the way in which we make decisions, even when thinking of future occupational options. (Lindquist, Sol and Van Praag, 2012). Hamilton’s findings (as cited in Zozimo, Jack & Hamilton, 2017) agree with the particular influence of parenting style, arguing that growing up with parents that have entrepreneurial experience will provide children with specific skills, abilities and values needed to become successful entrepreneurs.

Zalkoski and Bullock (as cited by Jiang, Hayward & Morris, 2017) argue that diversity in the family’s background like cultural differences, geographic location and socio-economic status might affect a child’s development and later experiences outside the family nucleus. Bowlby’s findings (as cited by Jiang, et al., 2017) discuss how the close relationship children develop with their parents creates affectional attachments that impact the sense of security of the child and behaviour that might lead to an increase in entrepreneurial intent. Growing up in an authoritative home gives children a higher level of self-confidence, independency, the ability to reason on their own and look at situations realistically (Jiang, Hayward & Morris, 2017). As a result of their study Jiang, Hayward & Morris (2017) concluded that children coming from family businesses are likely to be involved with the activities of the business while growing up, leading to a higher entrepreneurial intent.

Looking at the effects of entrepreneurship and self-employment on a macro level literature shows that entrepreneurial activity has positive implications in the economic and social environment of a country, motivating the destination of public and private funds to enhance training and educational programs available (Lindquist, Sol and Van Praag, 2012). Innovation is considered as one of the most enriching contributions of entrepreneurship to the economy because it will lead to more competitive and diverse markets from which the consumer will befit as his choices broaden (Olafsen & Cook, 2016).

As opposed to the many benefits that entrepreneurship and other self-employment ventures bring to developing economies, their contribution to the generation of new job opportunities is low (Lasio, et al., 2017). The same report mentions that 31% of new entrepreneurs and 47% of business owners do not think they will be able to offer any new job

opportunities. Not surprisingly economic growth in developing countries is negatively correlated to high levels of entrepreneurial and self-employment activities (Olafsen & Cook, 2016)

Been able to earn extra money additional to a wage or salary opens the way for workers to seek for the best paying job or become self-employed or entrepreneurs, on the other hand, not being able to find extra sources of income, workers will use up their savings. The lack of a salary will make self-employment the only way to avoid starvation, situation which is very common in developing countries (Margolis, 2014). Kappler and Love’s paper introduce the role of information asymmetries in the creation and growth of new businesses, arguing that the lack of transparent means of sharing information make it hard for new businesses to find external financing sources. The conditions on which the labour market operates in developing countries is affected by information asymmetry as well, being one of the reasons why some workers feel the need to be self-employed, not being able to find information regarding job vacancies and the lack of efficient transportation make available jobs seem not worth it (Margolis, 2014)

According to Lasio, et al. (2017) 21% out of the total adult population in Ecuador pursued a career as entrepreneurs driven by a new opportunity, on the other hand, 8.9% of the adult population were driven by necessity to take on the self-employment path. Distinguishing which portion of the current levels of entrepreneurship and self-employment consist of individuals that wanted to contribute to economic growth and which portion corresponds to individuals that chose them as a way to avoid starvation is important, as Shane (as cited by Olafsen and Cook, 2016) claims that high levels of entrepreneurship and self-employment do not necessarily mean that the economy of a country is performing well, since such high levels are often inflated by the large quantity of individuals driven by necessity.

Among the factors that facilitate entrepreneurial activity in Ecuador Lasio, et al. (2017) includes entrepreneurial capability to create new business ideas which is enabled by college networking opportunities. As well as infrastructure that will ensure mobility and connectivity within the country at lower costs. Moreover, the creation of government policies in Ecuador that guarantee a more equal participation of small business owners in the market (Lasio, et al., 2017). However, entrepreneurship and self-employment face obstacles like the lack of financial support, principally how current loans offered by national banks are not tailored to

meet the needs of small businesses with particularly high risk. At the same time legal restrictions for the creation of new businesses, the rigid labour laws and the uncertainty generated by the constant change in taxation policies (Lasio, et al., 2017)

Like in many other developing countries, entrepreneurs and other enterprises in Ecuador face challenges like competing with informal businesses that evade taxes and regulations. Among other problematics, corruption in public offices is a permanent factor that plays against businesses and the level of efficiency they can reach, with higher costs and risks (“The World Bank”, 2017). As an example of this, the survival rate of new businesses shows that only two thirds of this businesses will survive for more than two years, affecting the creation of jobs at the same time (Olafsen & Cook, 2016).

Given the discussed literature above the following hypothesis were formulated:

H1: Parents that have been involved in entrepreneurial activity will influence

Ecuadorian college students to take on entrepreneurship as a planned career choice.

H2: Parents that have been voluntarily self-employed will positively influence

Ecuadorian college students towards self-employment as a planned career choice.

H3: Parents that have been involuntarily self-employed will negatively influence

Ecuadorian college students towards self-employment as a planned career choice.

H4: Age, gender, study field, self-confidence, motivation, risk tolerance of the students

and economic environment are related to their intended career choice as entrepreneurs

H5: Age, gender, study field, self-confidence, motivation, risk tolerance of the students

and economic environment are related to their intended career choice as self-employed business owners.

3 Methodology

The sample consisted of 103 Ecuadorian college students from various study areas, ages and levels, who were each given a 17-question survey. The survey was available online generated by Qualtrics, the respondents were reached through posts in social media and direct email specifically aimed to the desired target group. The survey was available for almost a month translated to Spanish to accommodate every respondent, the original version in

English presented as Appendix 1 of this paper and the translated version have the same content. Out of the 103 respondents, 3 were excluded given that they did not filled the survey entirely, only giving answers to question 1 and 2.

The first two questions concern the age and gender of the participants, the data obtained will be used to analyse any influence of gender and age on career intent. The respondents were asked about their field of study including Business Administrations related fields and other options to test whether students in the field of administration have a higher entrepreneurial and self-employment intent (Franco, Haase & Lautenschlager, 2010), the options in the question were divided into Business Administration related fields and non-related to facilitate the analysis using a 0 – 1 dummy variable. The main independent variable of this study will be given by Parental business ownership (entrepreneurial experience), parental voluntary self-employment and involuntary self-employment and will help verify whether parent entrepreneurial and self-employment experience influence in a positive way career choice preferences and increase the probability of that occupational intent being realized (Verheul, Thurik, Grillo & Zwan, 2011. The dependent variable of the regression will be given by entrepreneurial and self-employment intent.

Lindquist, Sol and Van Praag (2012) concluded that having both parents involved in entrepreneurship doubled the chances of their children taking on the same occupation, to test this claim parental role model is included in the regression as well. Perceived family support for entrepreneurial and self-employment intent is included in the model to evaluate how it affects student choices using a scale from: Not at all to Total support. To measure the level of self-efficacy of the respondents’ question 13 targeted the level of confidence rated from: no confidence to complete confidence, that students felt in being able to carry on various administrative activities necessary to start as an entrepreneur and self-employed. To identify what motivates students to become entrepreneurs or self-employed in the future some of the most important benefits were listed and the individuals would rate them in a scale from: Not at all to, to a great extent, the question was modelled after a similar study realized by Franco et al. (2010).

The variables used in Verheul et al.’s (2011) paper was used as a guide to formulate questions 15, 16 and 17. To measure the internal locus of control of the students, question 15 contained internal factors like owner’s personality and management style, that affect the

success of a new business and also external factors like overall economy and political environment, that might influence its performance as perceived by the contestants. Perception of the influence of the economic scenario in the country was included in the regression, as well as risk tolerance of the contestants. Table 1 summarizes all the variables used for this research, the type of variable and the scale used in each one for the regression.

TABLE 1

Variables and scale used.

Variable Type Scale

Dependent

Entrepreneurial intent Dichotomous No = 0; Yes= 1 Self-employment intent Dichotomous No = 0; Yes= 1

Independent

Parental entrepreneurship Dichotomous No = 0; Yes= 1 Parental voluntary self-employment Dichotomous No = 0; Yes= 1 Parental involuntary self-employment Dichotomous No = 0; Yes= 1

Participant’s profile

Age range Ordinal 18-21 = 1; 22-25 = 2; 26-29 = 3; Above 29 = 4 Gender Dichotomous Female = 0; Male = 1

Study field Dichotomous Other areas = 0; Business administration related = 1

Parental role model Dichotomous Both parents = 0; Mother/Father = 1

Motivation Likert Not at all = 1; To some extent = 2; To a great extent = 3

Family support Dichotomous No = 0; Yes= 1

Self-efficacy Likert Not at all = 1; To some extent = 2; To a great extent = 3

Internal Locus of control Dichotomous No = 0; Yes= 1

Economic environment perception Likert Not at all = 1; To some extent = 2; To a great extent = 3

Risk Aversion Likert Not at all = 1; To some extent = 2; To a great extent = 3

To analyse the data collected, this paper uses descriptive statistics and linear regressions performed in the Statistical Package for the Social Sciences (SPSS). The results

yield by the testing of hypothesis H1, H2, H3, and their significance are represented in Models 1, 2 and 3 respectively. Models 4 and 5 show the test for H4 and H5.

4 Results and discussion

The descriptive statistics of the data analysed are presented in Table 2, it shows that given the sample, there is not a very large difference between students that want to become entrepreneurs and the ones that want to be self-employed (7% variation). If we look at the overall results the percentage of potential entrepreneurs (87%) and self-employed business owners (80%), which can be considered a good approximation since according to Lasio et al, (2017) Ecuador is the country with the highest TEA. Even though both occupational options are being considered by college students there is no clear distinction between voluntary and involuntary self-employment intent

TABLE 2

Descriptive statistics

Entrepreneurial intent Self-employment intent

Career intention n % n %

Yes 87 87 80 80

No 13 13 20 20

Total 100 100 100 100

4.2 Parental Experience: Entrepreneurship and self-employment

After testing the different models and hypothesis, the results of the linear regression for Entrepreneurial intent (dependent variable) obtained are shown in table 3. Model 1 shows the influence of parental entrepreneurship on entrepreneurial intent without considering any other independent variable, however the result is not significant and does not comply with the conclusions of Lindquist et al. (2012) which expressed that having parents with entrepreneurial experience will yield on almost a 50% chance for students to take on entrepreneurship. Models 2 and 3 evaluate the influence of voluntary and involuntary

self-employment as individual independent variables on self-self-employment intent. As with Model 1 there is no significance of the before mentioned influence of the independent variable. It is surprising that only 2.1% of the variation in self-employment intent can be explained by the parental involuntary self-employment and 1.5% by parental voluntary self-employment. In the case of entrepreneurial intent only 3% of its change can be related to the independent variable. Therefore, H1, H2 and H3 are not supported.

TABLE 3

Results of testing models 1, 2 and 3.

Variable Model

1 2 3

Parental entrepreneurship 0.116

Parental voluntary self-employment 0.098

Parental involuntary self-employment 0.129

Note 1. N = 100

Note 2. All p-values are above 0.05 significance level (two-tailed)

4.2 Participant’s Profile

When testing H4, Model 4 considers the impact of different factors coming from participants’ profiles, interestingly demographic profile related variables (Age, gender and study field) are not significantly related to entrepreneurial intent in college students. In regard to how the level of motivation influences occupational intent, the results of the regression showed that students are more likely to choose entrepreneurship as a career path when they feel motivated about being their own boss, β = 0.5, t = 4.408, p < 0.05, other than that, the rest of motivation sources did not influence significantly the dependent variable, the case is the same when looking at the results for self-efficacy level. On the other hand, the results showed that the economic environment as perceived by the participants influences their inclination towards becoming entrepreneurs, β = 0.262, t = 2.860, p < 0.05. Therefore, H4 is partially supported. For the regression of Model 5 the independent variables used are the same as in Model 4 except from the exclusion of the variable “Confidence in recruiting, hiring

entrepreneurial intent by their definition mentioned in the introduction. Comparing both models, the results converged to the same conclusion demographic profile and self-efficacy levels do not affect significantly self-employment intent.

TABLE 4

Results of testing models 4 and 5

Model 4 Model 5 Coefficient Coefficient

(Constant) Age range Gender (dummy) Family support (dummy)

-0.464 -0.015 -0.083 0.024 -0.267 0.008 0.070 -0.033

Confidence in financing business

Confidence in recruiting, hiring and training Confidence in identifying a new product

Confidence in determining the price of products provided Confidence in networking

Confidence in designing a business plan Motivated by been my own boss Motivated by getting higher income

Motivated by continuing with the family business Motivated by social status

Motivated by the labour market situation Motivated by developing new business ideas

Motivated by being able to manage own working hours Owner’s personality Management style Overall economy Political environment Economic environment Risk aversion 0.016 -0.055 0.013 0.060 0.033 0.066 0.277* -0.049 -0.073 -0.038 -0.089 0.109 -0;039 0.101 0.055 0.089 0.074 0.113* 0.047 0.063 --- -0.001 0.070 -0.009 -0.071 0.242* -0.039 -0.071 0.017 0.053 0.056 -0.151 0.155 0.204 0.136 0.138 0.101 0.022 Note 1. N = 100

Note 2. The reported coefficients are the unstandardized coefficients

* it’s significant at 0.05 level (2-tailed)

5 Conclusion and limitations

This study faced some limitations concerning the recollection of data, like not being able to reach a bigger sample, further research might benefit from this study’s results for which they can do a deeper analysis on this research streams and check whether different conclusions can be carried out results on a bigger sample. Moreover, as theory shows

students might find motivation and inspiration from other different sources like teachers, professors, managers and colleagues (Zozimo et al., 2017), it is recommended to evaluate their influence in career choice as well in developing countries.

This study could not analyse deeper and more complex components of career choice, since students might have considered to start as self-employed and later on

transition into entrepreneurship, in this case it would be useful to analyse what influenced and motivated this transition.

5.2 Conclusion

In this paper the influence of parents as role models on entrepreneurial and self-employment intent in Ecuadorian college students was tested. This study used a sample of 100 college students from Ecuador. Hence the following research questions was formulated: “To what extent do parents as role models influence the decision between self-employment

or entrepreneurship as planned career choices of college students in Ecuador?”

To answer the research question of this paper, five hypotheses were defined. In order to test these hypothesis, using SPSS four linear regressions were performed. The first three hypothesis concerning the direct influence of parental entrepreneurial and self-employment on career intent were not supported given the sample used, in fact results showed that only between 1.5% and 3% of the variation of the respective dependent variables is explained by the independent variables. The fourth hypothesis, that mentions the inclusion of participants’ profiles into the regression were partially supported, with only two of all the included variables, “Motivated by been my own boss and Economic

environment” showing a significant relation with the dependent variable (entrepreneurial

intent). The fifth hypothesis referred to the inclusion of participants’ profiles as well, and their relationship with self-employment intent. This hypothesis is partially supported given that the variable “Motivated by been my own boss” was the only variable with a significant relation with de dependent variable (self-employment intent).

References

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Appendix

For this survey define:

Self-employment: economic activity in which the individual works for him/herself, is the sole decision maker and ends when he decides. (business owner not employer)

Involuntarily self-employed: Developed by the lack of better job opportunities, to avoid unemployment.

Entrepreneurship: economic activity in which the individual creates a business model that can preserve itself after the individual has retired, generate economic growth. (business owner and employer)

1) How old are you? a) 18-21 b) 22-25 c) 26-29 d) >29 2) Gender? a) M b) F

3) What is your field of study?

a) Business Administration/Economics b) Finance/Accountancy

c) Engineering d) Medical Sciences e) Other areas

4) Does a parent currently own or have their ever owned a business? a) Yes

b) No

5) Is a parent currently or has ever been voluntarily self-employed? a) Yes

b) No

6) Is a parent currently or has ever been involuntarily self-employed? a) Yes

b) No

7) Do you consider one or both parents as a role model when thinking about your career choice?

b) Father c) Both parents

8) What is the highest level of education of your role model? a) Primary School

b) High school c) Bachelor’s degree d) Master/ PHD

9) Would you consider on becoming self-employed in the future? a) Yes

b) No

10) Would you consider becoming an entrepreneur in the future? a) Yes

b) No

11) Would your family support your decision of being self-employed? a) Not at all

b) To some extent c) To a great extent d) Full support

12) Would your family support your decision of becoming and entrepreneur? a) Not at all

b) To some extent c) To a great extent d) Full support

To answer the following question, use the following scale: (1= no confidence; 2= little confidence; 3= moderate confidence; 4= total confidence)

13) How much confidence do you have in your ability to:

1 2 3 4 Finance your business

Recruit, hire and train employees (entrepreneur) Identify the need for a service/new product Determine price of the product/service provided Network

Design a business plan

To answer the following question, use the following scale: (1= not at all; 2= to some extent; 3= to a great extent)

14) What would motivate you to become an entrepreneur or self-employed? 1 2 3 Being my own boss

A higher income

Continuing with family business Social status

Labour market situation

Developing new business ideas and products

Being able to manage your own working hours

15) What do you think is most likely to determine the success of a business? (max 2 answers)

a) Owner’s personality b) Management style c) Overall economy d) Political environment

16) To what extent do you consider the current economic climate in Ecuador is favourable to start a new business as an entrepreneur or self-employed? a) Not at all

b) To some extent c) To a great extent

17) To what extent do you consider the existence of risk is a good reason not to start a new business as an entrepreneur or self-employed?

a) Not at all b) To some extent c) To a great extent