N
EW VENTURE GROWTH AND THE ROLE OF TIES WITH SERVICE
INTERMEDIARIES
;
ANALYSIS IN THE EMERGING E
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RETAIL
INDUSTRY
Master Thesis
Economics and Business Faculty
Strategy Track Business Administration Author: Jonathan van Soest
E-mail: jonathanvansoest@gmail.com Student Number: 5947421
Supervisor: Dr. A. Alexiev
Submission date: 29rd of June 2015
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Table of Contents
Statement of originality
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Abstract
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1.
Introduction
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Research 5 Sub questions 7 Expected contributions 82.
Literature Review
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New ventures 9 Stage theories 10 E-retail industry 12 Service intermediaries 153. Theoretical Framework & Hypotheses
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Hypothesis 1
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New venture growth 18
Roles of Service intermediaries 19
Hypothesis 2
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Hypothesis 3
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4. Research Design
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Method & Procedure
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Measurement
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Dependent variable 34 Predictors 34 Control variables 395.
Data Analysis
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Missing values 40Recoding and computing variables 40
Computing scale means 42
6.
Results
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Additional tests 46
7.
Discussion & Conclusion
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Contributions to academic literature 53
Contribution to management 55
Limitations 56
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Statement of Originality
This document is written by Student Jonathan van Soest who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is 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
In this study, the relationship between ties with service intermediaries and new venture growth is investigated. Service intermediaries can provide useful knowledge and resources for new ventures in order to grow. New ventures mostly have restricted (financial) resources and may consider to switch to using service intermediaries. As a consequence, a positive relationship between ties with service intermediaries and new venture growth is expected. The research has been done in the context of the emerging e-retail industry. The e-retail industry develops nowadays exponentially, nevertheless, academic literature does not pay a lot of attention to this particular industry. After an extensive literature review, data is collected from e-retail ventures in the Dutch market. In addition, moderating roles of perceived industry growth and personal network of an entrepreneur were examined. As a result, there has been found evidence to support the positive relationship between ties with service intermediaries and new venture growth.
1. Introduction
New ventures are always struggling to achieve a sustainable position in the market at a particular moment. A lot of new ventures fail when they have just started and are silently abandoned from the market. The rest survived and has gone successfully through the first stages of start up and growth during the company’s life cycle.
Current study focuses on the growth phase in the e-retail industry and the role of service intermediaries inside that industry. The retail industry has changed a lot because of the emergence of e-commerce (Griffith, 2002). This development results in the fact that the way of doing business has changed and the focus has moved to different functions. E-retail is a relatively young industry, moreover, the industry contains a lot of new start ups. At the moment, there is no particular general business plan to start up and develop a new venture in the e-retail industry. A bunch of variables does influence the process of starting up and developing new ventures, for example the industry growth rate, the cognitive ability and
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network of the people inside the organization and the financial resources of an organization. Kinder et al. (2002) mention 5 aspects of strategy which are elementary for ventures in the e-retail, those aspects are technology, human resources, financial resources, organizational and marketing strategy. The value of all these aspects depends on the knowledge and information the venture possesses. Knowledge and information can be developed internally. In addition, it could also be derived from service intermediaries. This study will elaborate about the service intermediary dimension in the process. According to Zhang and Li (2010), service
intermediaries are “professional service organizations that provide firms with supporting
services in areas such as accounting and finance, talent search, law, and technology services”.
The emphasis of this study lies in the period between the start up and the
maturity stage of new ventures. In the start-up and maturity phases other knowledge is needed in comparison with the new venture growth phase. Later on, I will provide additional
information concerning the stages of (e-retail) ventures’ life cycle.
Research
To summarize, new ventures can use service intermediaries many times and go through different stages during the first years of existence. Because the e-retail industry is a relatively young industry, little knowledge is available about the stages during the start up and
development of new ventures (Ashworth et al., 2006). Service intermediaries can support the growth of new ventures because of the knowledge, resources and services they possess. One dominant limitation often mentioned in the literature is that of causality (Zhang and Li, 2010; Robson and Bennet, 2000). Zhang and Li (2010) discuss the point of doubt whether the firm innovativeness results from the use of service intermediaries or the probability that service intermediaries are used by firms which innovate well. Innovativeness and new venture growth
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are quite related and cohesive, in their research Zhang and Li (2010) have also new ventures as a target group. Robson and Bennet (2000) elaborate about the complex uncertainty whether firm growth is the result of acquiring external business advice or growing firms make more use of external advice. They conclude that it is not completely clear what is the cause and what the effect. Another shortcoming in literature, mentioned by Ashworth (2012), is the remaining lack of knowledge about the development and growth of small and medium e-businesses nowadays. Current study will contribute to fill in these gaps by examining the use of intermediaries in the growth stage of new ventures. By doing research at a particular moment of the company’s lifecycle the gap of causality will be further unravelled. The ability to grow is very important in the dynamic fast-moving e-retail industry. To survive, firms have to take the next step successfully after they have started their business. The next step
implicates the stage of growth. In some way, e-retailers must perform more efficient than their competitors. Concerning the e-retail industry other functions are important in comparison with for example the traditional retail industry. In the e-retail business functions like
information management, transportation and other supporting functions become increasingly important (Griffith, 2002). For instance, each of these function could be supported by service intermediaries. A lot of research about service intermediaries has been done in the technology sector, current study is about the fast growing e-retail industry and gathers information about an important phase in the ventures’ life cycle.
This results in the research question:
To what extent are service intermediaries influencing the growth phase of new
ventures in the e-retail-industry?
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Sub questions
In order to study this it is necessary to divide the question into different pieces. Previously to the hypotheses analysis I will perform an extensive literature search, this will be done in the context of the already stated research question. After the literature review, a theoretical framework and hypotheses will be created in order to reach the statistical analysis. The literature search, creation of hypotheses and statistical analysis will provide information that contributes to answer the following sub questions:
What kinds of resources and knowledge are needed for new ventures in order to survive and grow?
At what manner are stages of new ventures’ lifecycle demarcated? And how is this specifically demarcated in e-retail industry?
How do e-retail industry and e-retail ventures develop?
What are the possible roles of service intermediaries in new venture development? And what are those roles specifically in e-retail industry?
What is the role of perceived industry growth of an entrepreneur?
What is the role of the personal network of an entrepreneur?
As mentioned above, I will further elaborate about these questions in my literature review and hypotheses development sections. The expectation is that I cannot formulate complete
answers solely out of my literature research and hypotheses. Therefore, the data collection and analysis will provide extra information in order to supplement the literature. The remaining answers and open ends will be provided in the results, discussion and conclusion sections.
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Expected contributions
To start, a distinction can be made between the expected contributions to academic theories and to managerial practice. Firstly, concerning academic literature, this study provides a further step in unravelling the general gap in the literature, which contains the problem of causality. The literature review will extensively elaborate about new ventures specifically, stage theories and ties with service intermediaries. In addition, data collection is emphasized on other aspects than has been done before. By using different theories and shed light on different aspects information will be provided which supports the process of unravelling the gap of causality. Furthermore, this study provides additional information concerning the growth phase of new ventures in general. It should be noted that there is little knowledge about new venture development and growth in specifically the e-retail industry. To
emphasize, nowadays that particular industry develops in high pace and is full of dynamics. As a consequence, it is quite welcome to deliver a contribution to academic research in e-retail industry.
Additional knowledge about new venture growth in e-retail industry will also have its consequences for managerial practices. Current study could allow new venture managers to make a distinction between the priorities of their ventures during the growth stage, concerning service intermediaries in the e-retail business. The managers would be able to recognize whether or not they must invest in service intermediaries to reinforce new venture development. Current study will examine whether an external orientation of the entrepreneur is rewarded or internal development is preferred. Additionally, other variables that come into play during new venture growth are examined. Possibly, the provided knowledge could also be used for research and managerial practices in other industries.
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2. Literature review
New ventures
In comparison with incumbent firms, new ventures have to acquire other knowledge and resources. West and Noel (2003) argue that knowledge about the industry, type of the company-business and about specifically starting up new ventures is crucial for start-ups. According to West and Noel (2003), every start-up is unique and needs different sets of resources and knowledge. There are some conditions which declare whether or not knowledge or resources deliver value to a company. If the knowledge or resources are valuable, rare, inimitable and non-substitutable (Barney, 1991) than it has a positive impact on business performance. The three types of knowledge mentioned above, can be acquired in different ways, some of those ways -like personal network and professional service intermediaries- will be the main threads in this research. In order to achieve growth and competitive advantage it is important to understand the market possibilities and industry developments, thus the
collection of a sufficient amount of industry and business related knowledge is recommended. Noticeable from the article of West & Noel (2013) is that knowledge about the start-up process of a business in a particular industry is mostly applicable for business in other
industries. As a result, companies that possess specific knowledge about starting-up and developing new ventures can distribute that knowledge in several industries. Start-ups can acquire that knowledge from service intermediaries, because they are at the intersect of knowledge distribution in between industries (Zhang & Li, 2010). Alternatively to service intermediaries, Forbes (2005) mentions the existence of previous start-up experience. Previous experiences in starting up new ventures or work experience inside the industry can preclude companies to contact service intermediaries because the required knowledge is already acquired.
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On the basics of Penrose (1959) and Alvarez and Busenitz (2001), West and Noel (2007) elaborate about entrepreneurial capabilities and knowledge. Entrepreneurial knowledge includes the notions of where and how to obtain knowledge needed to start up successfully. Furthermore, according to West and Noel (2007), entrepreneurial capabilities regulate the process of matching this knowledge with the capability to manage the context of the company. The context implies for example the industry where the company is in.
In the early phases of venture development start ups do not have the full package of resources to become successful in the industry, this implies that resources must be developed and acquired during the start up and growth phase of the company. Knowledge is needed to develop the company and allow it to move into the right direction.
Stage theories
It is probably clear that e-retail start-ups can arrive in stages of growth and maturity soon. In order to demarcate the growth phase of new ventures it is necessary to explain ventures’ stage theories in depth. Those stage theories are derived from academic literature. To start,
Galbraith (1982) provides a stage theory especially for new ventures. This theory proposes five stages, which contain prototype, model, start-up, growth and strategic manoeuvring. The first two stages are about inventing and testing, after this stage the business will begin in the start-up phase. At this moment the product will be produced and distributed and specialist are recommended (Galbraith, 1982). The fourth stage of natural growth is the beginning of a period of consolidation and stabilizing. The purpose of strategic manoeuvring is to achieve competitive advantage and outperform competitors by finding niches, according to Galbraith (1982). Kazanjian (1988) derives another stage theory for new ventures from the existing theories. He proposes a system of development and conception, commercialization, growth and stability. Kazanjian includes four instead of five stages. The two theories mentioned
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above are quite comparable with each other. The first stage of Kanzanjian is similar to the first two stages of Galbraith. The second stage of Kazanjian is quite similar to the start-up phase of Galbraith, Kazanjian’s third stage with Galbraith’s fourth and both last stages are particular similar. Admittedly, the theories of Kazanjian and Galbraith are quite old-fashioned and intended for new ventures in general. To match the dominant theories of growth with the e-retail industry it is necessary to describe a couple of theories about that industry
specifically.
Lee et al. (2004) propose four stages of e-retail business which are reasonably comprehensive with the already mentioned theories. According to Lee et al. (2004), the first stage is that of exploration, the second is the breakeven-stage, the third is the growth stage and the final stage is that of maturity. The exploration stage is the first development part of the firm, at that moment investments take place in teams, platforms, partnerships,
advertisement, system development and infrastructures. The breakeven-stage is the stage in which failing ventures get out of the market and winning businesses stabilize their growth. In the growth stage the growth will be continued and further developed by the firm (Lee et al, 2004). And in the final stage, that of maturity, the possibility of growth will be limited, according to Lee et al. (2004). Furthermore, Ashworth et al. (2006) develop on the basis of case studies a stage-model for starting e-retailers. The development goes from basically web presence towards maximizing value, in between Ashworth et al. (2006) emphasize that firms must collect information, integrate value and reconfigure their business. In each stage high levels of knowledge are recommended.
To conclude, all stage-theories propose the growth phase as a significant part of organizational success and survival in the context of new ventures. After the start up, which contains the primary development and conceptualization, a shake-out will take place. Firms with an insufficient business plan and concept get out of the market. Under pressure of stable
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and large incumbent firms it is for the other firms increasingly important to become profitable and sustainable (Ashworth et al., 2006). During the development from start up to a profitable company new ventures have to collect knowledge and may attain some services and resources to reach their goals. Service intermediaries can deliver the knowledge, resources and services in that particular period of development. As a consequence, this study will take a closer look at the growth stage in examining the value of service intermediaries.
E-retail industry
The scope of the study is narrowed on the pure e-retail business. Pure e-retail business is defined by Lee et al. (2004) as “online retailers without physical stores”, possibly, some of the online retailers has physical stores with a commercial purpose. However, the main business operations occur online. The e-retail business is one of the few industries that nowadays constantly grows, in contrary to the conventional retail industry and the whole economy (rapport ABN AMRO, 2013). That makes the e-retail industry an interesting industry to investigate which variables influence the development of the firms inside the industry. The last decades the e-retail industry is an upcoming business and the largest growing sector of the service industry (Forbes et al., 2005). E-retail firms can grow very fast because they do not need to built up factories and appoint store personnel, moreover, they could efficiently
manage their inventories. At the other hand, e-retailers can easily fail too, common reasons of failure are a lack of respond to service delivery or product failure and to respond to customer needs and requests (Forbes et al., 2005).
During the start up of new ventures in the e-retail industry the barriers to enter differ from the conventional retailers, actually, especially for pure e-retailers they were negligible (Thornton and Marche, 2003). For example, instead of investing in physical stores by traditional retailers, online retailers have to invest in technology and distribution. Setting
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up an e-retail business is a cost effective manner to create awareness for your products (Ashworth et al., 2006). Products are more easily promoted and recognized online than literally on the streets. Especially nowadays, people get easier, faster and more frequently connected online. As a consequence of the open nature of e-retail industry, the level of innovation in industry increases exponentially (Barua et al., 2000). Barua et al. (2000) emphasize that the whole internet economy develops very fast. In addition, e-business relies more on knowledge than traditional retailers (Marr et al., 2002) because they are even more service based and provide more intangible products and services. Thornton and Marche (2003) argue that e-retailers have some additional characteristics in comparison with retailers, like rapid growth, market position and customer service. Besides that there are a lot of similar characteristics.
Because of the growth potential there is a lot of entrepreneurial activity in the e-retail industry (Table 1; Figure 1 and Figure 2). That gives new ventures a playfield to enter the market. Knowledge is crucial to grow and survive inside the industry. Firms that obtain sufficient knowledge and use it in an effective way may grow towards a sustainable and profitable company. That particular knowledge in e-retail industry could be derived from service intermediaries.
Table 1.: % Revenue development in Dutch industries, in comparison with previous year.
Dutch industry 2014 2013
January December november 4th quarter Year
Retail 0,8 -2,4 -0,8 -1,5 -2,1
e-retail 7,2 20,2 7,4 12,7 10,3
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Figure 1.: Number of online shops growth in %.
Source: Shopping 2020, McKinsey and Company, January 2014.
Figure 2.: Total (expected) growth of consumer expenses in Dutch market*.
*Legend: Dark line= Total expenses; Bright line= offline expenses; Blue line= online expenses
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Service intermediaries
As already mentioned, knowledge is very important in e-retail business. For example, the common reasons of failure mentioned by Forbes et al. (2005) could be prevented or improved with the acquisition of sufficient knowledge. New e-retailers could derive knowledge from service intermediaries. Howells (2006) declares that intermediaries have in some studies the role of information provider and in other studies that of technology transferor. Those different roles implicate that service intermediaries can be used in several elements of the
entrepreneurial process. This results in the assumption that intermediaries have a proactive and sophisticated role in the innovation process. Additionally, the roles of intermediaries can go much further, according to Howells (2006), intermediaries could also have the function to develop and implement business and innovation strategies. It might be argued that the
influence of service intermediaries could be significant in the new venture development process. What must be taken into account is the fact that the research of Howells (2006) and Zhang and Li (2010) was done in technology sector. In other sense, the technology sector is quite parallel to the e-retail industry. Technology in both industries develops subsequently in high pace and innovation is many times more radical than in other industries like the
traditional retail industry. In case of innovation service intermediaries are positively related to product innovation in new ventures (Zhang and Li, 2010).
Zhang and Li (2010) mention four dominant service intermediaries, those include technology service firms, accounting and financial service firms, law firms and talent search firms. Other service intermediaries often mentioned in literature are marketing and other consultancy firms (Gilbert et al., 2006; Johnson et al., 2007). Those service
intermediaries support the new ventures by broadening the scope of innovation and reducing the search costs. Broadening the scope of innovation implies that service intermediaries enlarge the amount of knowledge and provide more opportunities to solve problems,
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according to Zhang and Li (2010). The combination of knowledge and broadening the scope could lead to an increase of new products (Katila and Ahuja, 2002). The reduction of search costs can lead to the use of more resources for innovation or other investments and it may increase the speed of the process (Zhang and Li, 2010). Common reasons to acquire external advice are to increase turnover or employment and reduce costs (Bennett and Robson, 2005). The mentioned examples of service intermediaries can play a role in both start up and more mature firms.
Besides the professional service intermediaries, there are a few alternatives to collect similar content of knowledge and resources. That particular service providers could be governmental organizations or other non-commercial services. Those service providers could be summarized as business incubators (Grimaldi and Grandi, 2005). Business incubators are for example easier accessible for companies with little financial resources because they do not need to make profit.
3. Theoretical framework & Hypotheses
From the prior and more general literature search the research question has been derived and existing theories are amplified. In this chapter, the collected knowledge will be aligned in order to answer the research and sub questions. Furthermore, expectations will be stated in the form of hypotheses. First of all, the literature which is describing the relationship between new venture growth and the ties with service intermediaries will be discussed, this results in the first hypothesis which is related to the relationship examined by the research question. Furthermore, two other hypotheses will be added. Those implicate the role of some moderator
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variables found in literature. The two dominant variables which were found and are expected to moderate the relationship between ties with service intermediaries and new venture growth, are respectively the perceived industry growth and the personal network of an entrepreneur.
The research of Zhang and Li (2010) acknowledge perceived industry growth as a moderator variable of the relationship between ties with service intermediaries and product innovation. Perceived industry growth is described as an alternative source of innovation search, as a consequence, start-ups rely less on service intermediaries, according to Zhang and Li (2010). If entrepreneurs expect high industry growth, the amount of opportunities that appears is in the view of the entrepreneur relatively high. The entrepreneur may think that is not clearly necessary to use service intermediaries to develop the new venture towards a profitable company. Thus, perceived industry growth also affects the relation between ties with service intermediaries and new venture growth. As argued by Zhang and Li (2010), the entrepreneur recognizes a bigger decision making freedom. In high growth industries resources are easier accessible, so service intermediaries are less involved in the resource acquiring process of new ventures.
As argued by Ostgaard and Birley (1996) and quoted by Zhao and Aram (1995), the personal network of an entrepreneur is fundamental in starting and developing new ventures. Zhao and Aram (1995) add the notion of “asset parsimony” in the context of new venture survival and growth. A lot of start-ups do not have deep pockets or great storages of
resources, they have to obtain their business goals with a minimum of assets. To collect that particular minimum of assets an entrepreneur can possibly use his network. In case of a sufficient personal network, service intermediaries may be redundant, perhaps an
entrepreneur’s personal network can be a substitute for service intermediaries. Zhao and Aram (1995) mention important benefits like the improvement of image by building up a social
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network and the possibility to obtain resources below market prices. Easier channel and information access are other benefits of a well formed personal network, according to Larson (1991).In the hypothesis 3 section will be elaborated some more about the utility of personal network.
Hypothesis 1
To start, a lot of literature has been written about new venture growth and ties with service intermediaries. The dominant articles in literature are those from Zhang and Li (2010) and Robson and Bennet (2000). In this section, the notion of new venture growth and the roles of service intermediaries are distinguished in order to get a clear overview. Finally, the expected relationship will be declared.
New venture growth
The internal knowledge space of new ventures is limited, that’s the reason why they add their knowledge externally (Larraneta et al, 2011). Robson and Bennett (2000) investigate the relationship between the growth of small and medium enterprises and the acquisition of external business advice. Commercial new ventures have logically the ambition to grow, become stable and thus profitable. To attain these goals it is necessary to grow and thus gather larger sales numbers. As a consequence of their ambition to grow sales, it is oftentimes
needed to hire extra workers. Sales and employment are measures of growth, according to Fukuda (2013). In addition, Robson and Bennet (2000) add the notion of profitability as a measure of growth. In the early years of venture development there are no normal routes to follow. The company must be built up entirely and resources and knowledge must be
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collected and acquired. The purpose of start-ups is mostly to obtain the highest possible rate of growth, but the way to get there is novel. Some resources and knowledge are already possessed by the entrepreneur, but a lot of them must be obtained. There are a few alternatives to gather those, one of them is the overture of service intermediaries.
The way how new venture growth is specifically measured in depth can be found in the research design part.
Roles of Service intermediaries
Zhang and Li (2010) describe in their article four generally used service intermediaries. Besides those foursome, two other intermediaries are expected to contribute to new venture growth in the e-retail industry. Roughly, those additional intermediaries are distinguished in marketing/promotion services and other consultancy firms. Firstly, the emerging
intermediaries will be described, subsequently (dis)advantages and examples are provided and in addition, their possible roles in the start-up process will be mentioned.
During the start up a company has to meet the legal requirements. In case the entrepreneur or the entrepreneurial team does not have sufficient knowledge, the missing knowledge could be provided by jurists or legal firms (Zhang and Li, 2010; Johnson et al., 2007). The description of a venture’s terms and conditions is an example of a legal service which could be delivered.Law firms support the venture in the general business but also during the improvement of structure, they may also create new ideas for inventions, best practices and competing (Zhang and Li, 2010).
Secondly, the success rate of e-retailers highly depends of the quality of their websites. New ventures can optimize their website quality by outsourcing it to professional website builders, so technology firms can act as service intermediary for new ventures (Zhang and Li, 2010). Technology service firms may provide better practices and design for start-ups,
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also technical issues beyond the website could be solved or improved by those intermediaries. Nevertheless, the website built-up appears to be the most important issue. For many start-ups the outsourcing of their website built-up is an expensive matter, which withholds a number of entrepreneurs by doing so. It is quite interesting to unravel the probability for start-ups
whether or not outsourcing has new venture survival and/or growth as a consequence. However, information technology investments may have an positive impact on firm growth (Barua et al., 2000).
Another possible alternative of service intermediation is the use of financial (Johnson et al., 2007) and accounting firms, according to Zhang and Li (2010). Accounting firms provide services which are particularly the same for new ventures in all industries.
Nevertheless, services of financial firms for e-retailers could possibly be industry specific. An outstanding example is the payment system necessary to purchase products online.
Furthermore, firms with sufficient financial resources do attain significantly higher growth (Gilbert et al., 2006), the resources could be increased by financial intermediation. At the other hand, external financial fund raising may result in cash-flow difficulties (Johnson et al., 2007). Especially during the start-up and growth phase of a company, it is recommended to use the scarce financial resources in an appropriate manner.
The fourth general service intermediary mentioned by Zhang and Li (2010) are talent search firms. Talent search firms recruit personnel for the firms and supplement management teams, this will enlarge the network size and the amount of knowledge of the firm, according to Zhang and Li (2010). To gather new workers in order to grow is one of the struggles new ventures has to deal with. To attract the most suited workers is a complicated job and could be outsourced to specialized recruitment firms for better results. Gilbert et al. (2006) conclude in their research that human capital is elementary to achieve new venture growth. Also Barua et al. (2000) suggest that investments in human capital may have an even bigger impact on
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retailers performance than technological investments.
Not mentioned by Zhang and Li (2010) but expected to be relevant are some other service intermediaries. The first emerging intermediary are marketing and promotion firms. Marr et al. (2002) have done a case study about the acquisition of knowledge in e-business. In their cases, marketing knowledge is developed internally by marketing teams or acquired externally from marketing agencies. It is an interesting subject, whether or not promotion and marketing activities should be implemented by internal or external parties. Actually, inside the organisation of new ventures there is a better vision which goals they would like to attain and how to commercialize the company. Nevertheless, new ventures are probably not well-known in the industry and the entrepreneur has not enough knowledge to market and promote their company in a high-levelled manner (Thornton and Marche, 2003), so the intermediation of a professional marketing/promotion firm would be a good choice. What must be taken into account is that, in comparison with industries of previous research like the technology
industry (Zhang and Li, 2010), online businesses marketing tools such as Search Engine Optimization are crucial for competing in the e-retail industry. According to Marr et al. (2002), online marketing creates awareness and results in new venture development. Outsourcing could possibly be the solution to optimize awareness and recognition.
Finally, there are remaining service intermediaries, including for instance strategic and management consultancy firms (Johnson et al., 2007). It seems to be presumable that the last category is not used many times because of the relative costliness for small and medium sized new ventures. Nonetheless, already in 2000 Barua et al. assume that the whole internet
economy is based on consulting, training and integration services, besides the technological part of networking and applications. In addition, Johnson et al. (2007) argue that firms seeking for growth intends to make more use of external services like management and strategy consulting. Because of the newness and occurring ignorance it may be recommended
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to gather some managerial or strategic advice.
As expected by Robson and Bennet (2000), firms with an aptitude for growth make more use of external business advice. Generally, business advice can be collected from service
intermediaries. To increase the business’ novelty and diversity it is recommended to collect knowledge from external sources (Larraneta et al., 2011). An external orientation of the entrepreneur in terms of knowledge, resources and services will result in higher new venture growth.
To conclude, an positive relationship between new venture growth and ties with service intermediaries is expected, which results in the following hypothesis:
Hypothesis 1: Ties with service intermediaries will be positively related to new ventures’ growth.
Figure 3.: visual representation of Hypothesis 1.
+
Hypothesis 2
From hypothesis 1 could be derived that new venture growth is positively related with service intermediaries. Anyway, in literature there is no clear consensus about that particular
Ties with service intermediaries (Hypothesis 1)
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relationship. There are some variables mentioned in literature which could be not excluded from analysis. Those variables can substitute or supplement ties with service intermediaries as a source of new venture growth, or they play at least a moderating role in that specific
relationship.
The dominant article in service intermediary research of Zhang and Li (2010) proposes that perceived industry growth has a moderating effect on the previously mentioned
relationship. Perceived industry growth deserves a clearer description. In case of the e-retail industry it should be noticed that the whole industry is growing, despite the fact that the world economy suffers an economic decline as a consequence of the credit crises.
Zimmerman and Zeitz (2002) add the notion of legitimacy in order to new venture survival. Legitimacy could be described shortly as the widely acceptance of the new venture in the industry. There are a few things which reinforces the legitimacy of a new venture. Firstly, proposed by Zimmerman and Zeitz (2002) is the conformation to widely accepted standards and norms stated by powerful governments/organizations, secondly they can endorse and implement those standards and norms, finally they can familiarize and practice them. New venture legitimacy could also be derived from industry legitimacy. An interesting theory is proposed by Zimmerman and Zeitz (2002) regarding the industry the company is competing in. The e-retail industry is quite novice and young (started in late 90’s) and provides a lot of opportunities (Barua et al., 2000). According to Zimmerman and Zeitz (2002) new industries, like the e-retail industry, generally have low legitimacy. Nevertheless, the legitimacy of relatively new industries like e-retail can grow quickly and may become widely accepted as “Wave of the future” (Zimmerman and Zeitz, 2002). Already in 2005 Forbes et al. recognize that e-commerce grows constantly and is increasingly accepted by customers. In comparison with the conventional retail industry the e-commerce establishes significantly higher growth in the Netherlands (CBS, 2014). Nowadays, strengthened by
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increasing online purchases with smart devices like tablets and smartphones (Shopping 2020 and McKinsey & Company, 2014), the legitimacy of the e-retail industry has grown to the maximum level. In alignment with this theory it is logical that the new ventures enter the market and believe in their chances of survival and growth. Traditional retailers are getting more and more outperformed by e-retail companies and the online marketplace becomes habitual to customers.
As a result, comprehensive with the arguments of Zhang and Li (2010), the higher perceived industry growth may result in greater opportunities for decision making freedom. Secondly, the perception results in the believe that resources are easier available and
entrepreneurs become less dependent from service intermediaries. An alternative for service intermediaries will be discussed in the next chapter. As argued by McDougall et al. (1994), firms that enter high growth industries tend to produce on larger scale and give more attention to new product development.
Primarily based on the researched of Zhang and Li (2010), the expectation is that perceived industry growth has an negative moderating effect on the relationship described in hypothesis 1.New ventures may enter a market because they recover feasible opportunities in that particular industry. In other words, they expect industry growth (Zhang and Li, 2010).
Anyway, other theories should be taken into account too. New ventures and their entrepreneurs could also be convinced, with the legitimacy principle in mind, that a perceived industry growth can be an inducement to invest more in ties with service intermediaries. For instance, an entrepreneur may assume the expected industry growth would lead to an
increasing venture growth and as a consequence to deeper pockets, probably used for appointing service intermediaries. However, this theory is not in line with the hypothesis stated by Zhang and Li (2010) but it is a possible outcome in my data analyses.
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As a result, the following hypothesis is expected:
Hypothesis 2: The positive relationships between ties with service intermediaries and new ventures’ growth will be weaker as perceived industry growth is higher.
Figure 4.: visual representation of the Hypothesis 2.
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Hypothesis 3
Beforehand, in starting up new ventures the personal network of an entrepreneur seems to be the most logical alternative to collect resources. To elaborate, the network of an entrepreneur may have a bit broad understanding, elements like size, content, globalization, maintenance, delegation, diversity and intensity have to be taken into account (Ostgaard and Birley, 1996). Current study puts emphasis on specific elements in order to optimize relevancy and
contextual fit. In the research design part will be elaborated some more about the specific relevant parts of network theory for my hypotheses testing. Corresponding with Ostgaard and Birley (1996), the dominant article in social network theory, current study will focus on primary personal network and contacts. For example, entrepreneurs could be a member of a young entrepreneurs trade organization, which is primary social but could subsequently
Perceived industry growth (Hypothesis 2)
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evolve to professional business contacts. Ostgaard and Birley (1996) have found a positive relationship between personal network size of the entrepreneur and new venture growth. In addition, Zhao and Aram (1995) pointed out that high growth firms do have a greater
networking range. In the context of my research it could be considered that personal network is an alternative source for acquiring resources and knowledge during the start-up of a e-retail company. Personal network could either supplement or substitute the ties with service
intermediaries.
However, there is also the possibility that personal network leads to formal ties with service intermediaries. By collecting data and doing statistical analysis the specific role personal network will be declared.
During the start up of the new venture a big personal network could lead to an easier identification of opportunities which emerge in the market (Zhang and Li, 2010). As argued by Morse et al. (2007), social capital is the first source for new firms in order to obtain resources needed to survive and grow. In addition, the personal contacts have the function of a safety net for entrepreneurs, which supports the entrepreneurs to overcome the thresholds of risk-taking during the start up (Zhao and Aram, 1995). Nevertheless, Morse et al. (2007) point out that in case of further development and more complex situations social networks are not sufficient and professional sources may come into play. Interesting about this argument is the moment when transition is asked from personal to professional intermediation. Is it during the start-up, growth or maturation stage of new ventures?
Because of financial scarcity and a lack of legitimacy and consequential a lot of uncertainty, entrepreneurs of new ventures may choose for utilizing their social network instead of appointing professional service intermediaries. Forthcoming, this results in a negative moderation of the relationship between the ties with service intermediaries and new venture growth. Entrepreneurs with a small social network will rather choose for using service
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intermediaries, on the contrary, entrepreneurs with a great social network prefer to make use of their personal contacts primarily.
This results in the following hypothesis:
Hypothesis 3: The positive relationship between ties with service intermediaries and new ventures’ growth will be weaker as the personal network of the entrepreneur is bigger.
Figure 5.: visual representation of the Hypothesis 3.
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Expected Contributions
To the best of my knowledge, this is the first study that examines this relationship between ties with service intermediaries and new venture growth combined with the emerging moderators. As argued in the introduction section, the whole research contributes to the academic literature in specifically the e-retail industry. In comparison with the dominant articles in literature a couple of elements are added. For example, the ties with service intermediaries mentioned by Zhang and Li (2010), are added by two other service
intermediaries which are particularly relevant for this research. Those service intermediaries are marketing/promotion firms and the remaining intermediaries like management and strategic consultancy. As a consequence, the construct of Zhang and Li (2010) is more
Personal Network (Hypothesis 3)
Ties with service intermediaries
28
encompassing and thorough. Furthermore, the construct of ties with service intermediaries is used in relation to new venture growth, instead of product innovation as the dependent variable used by Zhang and Li (2010). It is quite a novelty, that new venture growth is examined by this specifically measured construct of ties with service intermediaries. In addition, concerning hypothesis 2 which is also based on theories of Zhang and Li (2010), the legitimacy view is added. Taken into consideration the e-retail industry, the notion of
legitimacy appears in the perception of the entrepreneur. A couple of years ago, the e-retail industry had not the level of legitimacy to expect stable industry growth and fully secure new venture growth. Nowadays, the level of legitimacy reaches high peaks and is still evolving. Specifically concerning e-retail industry, the circumstances have been changed which
subsequently results in the fact that academic research has to deal with this new reality. The e-retail industry grows towards already accepted industries in academic literature like traditional retail and technology industries. Finally, this study elaborates about the role of personal network as a possible substitute or supplement of service intermediaries. In academic
literature, personal network is mostly used as independent variable instead of ties with service intermediaries in this research (Ostgaard and Birley, 1996).
For managerial practises, the theoretical framework and hypotheses provides useful information. Firstly, this study provides a sort of guidance to entrepreneurs which service intermediaries could be used during new venture growth in e-retail industry. The expected relationship will have an impact on the decision of the entrepreneur to be external oriented in the process of resource and knowledge development. Furthermore, concerning perceived industry growth entrepreneurs have to be conscious of the fact that the industry has an increased level of legitimacy. Kindly interesting is to analyse the subsequence of the
increased legitimacy in terms of perceived industry growth. Finally, entrepreneurs also have to deal with the decision to acquire knowledge and resources informally by personal network
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or formally by ties with service intermediaries. However, both could also be supplements in order to achieve the highest possible new venture growth.
Figure 6.: visual representation of the whole research.
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4. Research design
Method and procedure
As mentioned above, the research population consists of e-retail ventures in the Netherlands. The e-retail ventures have no physical stores (or only for commercial purposes) and their dominant activities occur online. The sample I would like to reach to make my research valid will contain about 100 e-retail ventures as a minimum. It is requisite that the firms are active on the web and also sell their products or services online.
To select an appropriate and representative bunch of respondents it is recommended that the companies have a certification mark as a common acknowledged store in e-retail industry. The participating ventures have mostly certification marks of “thuiswinkel
Personal Network (hypothesis 3) Perceived industry growth
(hypothesis 2)
Ties with service intermediaries (hypothesis 1)
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waarborg” (trade organization thuiswinkel.org) and “webwinkeloverzicht keurmerk” (webwinkeloverzicht.nl). The questionnaire has been sent to members of those trade organizations.
A lot of ventures decide to join the trade organization and apply for a certification mark when they exist longer than one year. As a matter of fact and already mentioned, the e-retail industry is quite young and I expect that a big amount of the responding ventures are less than 5 years old. If companies getting older it becomes more difficult to provide the correct and relevant information, so the ideal target group would consist out of companies between 3 and 5 years old. Even though, companies that are bit younger or older can provide useful information too. There is a high diversity range concerning the market segments in the e-retail industry in which the approached ventures are operating. Furthermore, the approached ventures are relatively small in terms of the number of workers et cetera. Later on, there will be elaborated about which kinds of new ventures have raised as respondents.
As mentioned above, this specific kind of research is quite new in academic literature. There are a lot of articles, existing databases and information the questionnaire can be build on, but it should be noticed that those do not perfectly fit current research. However, to optimize the relevancy and adequacy of the data collection it is likely to get more insights from the industry. That particular insights were derived from industry reports and experts. I spoke with three industry experts with different backgrounds to gather inside information from different perspectives in industry.
31 Table 2.: the interviewed industry experts.
Interviewees Function Additional Information
Martijn Peeters
CEO/Founder Deelit.nl
Owner/CEO of 2 subsidiary companies studieboekendelen.nl & camptoo.nl
Bert Nagelvoort
Senior Researcher
thuiswinkel.org* Senior data and business analyst, E-commerce Foundation Jesse Weltevreden Lector HvA**
Chairman of Centre for Applied Research on Economic Management
*. Dominant trade organization in Dutch e-retail industry **. College of Higher Education Amsterdam
The three entitled industry experts gave me a lot of insights about various dimensions that came into play during the data collection. As well about substantive and technical subjects, in order to attain the highest possible response rate and quality level.
Before I started the distribution of the real questionnaire three pilot questionnaires were executed in order to receive double-loop feedback. The pilot tests did not result in rough changes regarding the final version of the questionnaire. The sole change as a subsequence of respondents feedback has been done due to the technical presentation of some answer scales, substantively there were no changes.
The goal was to send the questionnaire to the CEO of the firm. Hereby the response rate was expected to be relatively high, because I contacted relatively small and medium enterprises and my expectation was that they have less commercial interests than bigger firms. Furthermore, in exchange for filling in the questionnaire I promised to send the participating companies an executive summary of my research results, which they can use in practice because I assume the respondents are interested in it (Fan and Yan, 2010). The self-administered questionnaires were sent by e-mail to the potential respondents, in case my response rate was too low I have done follow-up e-mails and calls. The advantages of a web
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survey are that it is time efficient and have low costs. To increase my response rate I mentioned that my research is supported by the University of Amsterdam (Fan and Yan, 2010). Another reason my response rate has gone upwards is that my questionnaire was not too long, the questions are on Likert-skale and around 4 or 5 questions per measure construct. Zhang and Li (2010) had an response rate of 40,4 percent, I expected similar numbers.
In setting up my questionnaire I have used Qualtrics to make it attractive and user friendly. In the personalized e-mail I gave an explanation of my research and the
questionnaire. I emphasized that the data they can provide is very valuable and necessary for my research (Fan and Yan, 2010). Because the respondents are e-retail venture CEO’s I doubtlessly expected the respondents can handle the technique.
After sending the questionnaire it was opened 138 times and completely filled in 91 times, which implies there is big amount of drop outs. The formally 47 drop outs may result from several reasons, which I will elaborate about below. Around 500 potential respondents have received an e-mail with a request to fill in the questionnaire. As a result, the response rate lays around 20%, which is lower than expected. Moreover, I have done a lot (around 150) of follow-up calls in order to achieve a maximum of respondents. At first, the potential
respondents have received an e-mail with a small introduction of my research and a hyperlink that redirect the respondent to the questionnaire. At that moment, the respondents are
provided with extra information and it becomes furthermore clear what the research is about. The amount of dropouts seems to be relatively high, but I can make a clear distinction between “real” drop outs and the remaining appearing drop outs.
There are 12 drop outs between 10% and 100% fulfillment of the questionnaire. They quitted the questionnaire at different moments, it is not completely clear why they do. I have
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tried to contact them and ask whether they like to fulfill the questionnaire. Besides one respondent, I do not receive any feedback or reaction why they have quitted. The only
respondent who does, says to me she quitted due to technical reasons. The remaining bunch of drop outs does not even came to the regular questions, they may only have read the additional introduction and after that stopped.
Before I will go to my data processing and analysis I would like to give some general statistics derived from my data collection. The entire population, which consisted for 70% out of males, fulfilled at least secondary school as level of education. From the participating companies 72,5% has one single owner and 36,7% of the respondents already has previous entrepreneurial experience. About 65% of the ventures who provides start up information is founded after 2009. A great majority (89%) of the ventures does not earn more than 20% of their total income from foreign countries, which implies that they are generally focused on the Dutch market. A small bit above half of the companies has only the ventures’ owner
employed and 44% of the participating ventures has a revenue above €20000,- during the first year. Furthermore, 89% of the companies stated that they are at least average growth oriented, which implies that 11% does not have the ambition to grow as a primary goal.
Measurement
The measurement of the variables will be for a big part based on existing articles and are partly already mentioned. For example, Zhang and Li (2010) provide constructs for ties with service intermediaries and perceived industry growth, Fukuda (2013) provides a construct for new venture growth and Ostgaard and Birley (1996) for social network theory. To look at the internal consistency of the used constructs Cronbach’s alpha is used (Nunnally, 1978). Finally, each construct will be assessed on validity by Kurtosis and Skewness tests in SPSS.
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Dependent variable
The dependent variable “new venture growth” is based on the measurement of Fukuda (2013). He measures new venture growth by growth of employment, sales and market share. Besides market share, I will use the remaining two variables for my measurement. The growth is measured by a scale of 1 (high decline) to 14 (high growth). Information of growth in both the second and third year of new venture existence is collected.
` The reliability of the dependent variable is established by the Cronbach’s alpha. New venture growth has 4 items and a total Cronbach’s alpha of 0,755, which is above the
minimum requirements to act as a construct. Moreover, all the items fit the construct very well and correlates almost at the same level with each other. This is in accordance with my expectations and enhances the idea that the new venture growth construct is reliable and ready to use.
Besides the means of each construct, Skewness and Kurtosis of the construct variables will be determined in order to analyze the normality of distribution and the validity. The average growth of new ventures is in between 6% and 30%. The Skewness is 0,27, so the variable is normally distributed and the Kurtosis below 3 implies that there are no extreme values.
Predictors
The ties with the four different service intermediaries mentioned by Zhang and Li (2010) will be measured similar to Zhang and Li (2010), they examined the combined measure of ties and each tie separately. Because of the relevancy and appearing fit with the researched industry, two other service intermediaries were added which will be measured in the same manner. Zhang and Li (2010) asked the respondent to indicate the extent of close relationship with the
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four service intermediaries and finally averaged it. Items are rated by a scale of 1 (weak tie) to 5 (strong tie). First the respondents are asked whether or not they used each separate service intermediary, if they used it the follow-up question will concern the extent of close
relationship. The whole construct will consist out of the rate of use of each service intermediary and the averaged importance of the used ones.
The most complex construct used in this study is that of the ties with service
intermediaries. To give some insights about the thresholds discovered I have also considered the Cronbach’s alpha for both the use and the importance dimension of service intermediaries. What must be taken into account, in contrary to the new venture growth construct, I do not expect a lot correlations between the items of the use of service intermediaries construct. This assumption implies that it is not evident that new ventures which make use of for example a technology intermediary also intend to make use of other intermediaries like marketing and promotion intermediation. As a result, high internal consistency is not expected. But what does matter for the intended construct, is the number of intermediaries used and the regularity of using them. That is the reason why I do not average them to one “average variable of use” and keep them separate, otherwise I should exclude those important aspects.
The second dimension occurs as the importance of service intermediaries during the start up. What must be noticed is that the respondents only have to answer the question about importance when they minimally have used that particular intermediary once. Sequentially, there is quite a big amount of missing values concerning the importance of each service intermediary. To make the collected data valuable, with the intention and goal of the research in mind, it is a logical consequence to average the importance of intermediaries to the firm. For example, if a new venture rates the use of a recruitment company as a 1 (worthless) and the use of a technology firm as a 5 (indispensable) and they do not make use of any other intermediary, than the total importance variable is a 3 (average).
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To go on, I have derived a Cronbach’s alpha for the construct of ties with service
intermediaries, taken into consideration that there is no high internal consistency. The Cronbach’s alpha is 0,535, which is slightly above the bare minimum of requirements. Furthermore, the validity of the construct of ties with service intermediaries has to be taken into consideration. The ties with service intermediaries have a normal distribution with a Skewness of 0,079. The average ties with service intermediaries are valued between 2 and 3 on a scale of 1 to 5. The height of Kurtosis implies that there are no extreme values to deal with.
The first moderator variable “perceived industry growth” is measured by Zhang and Li (2010) by an indication of the perception of the respondent whether there is high growth in industry, whether there are attractive opportunities to future growth and the abundance of opportunities. Items are rated by a scale of 1 (low perceived industry growth) to 5 (high perceived industry growth). The measurement of the perceived industry growth construct as a control variable is based on existing literature.
Corresponding with the reliability analysis done by Zhang and Li (2010) there is in this research also internal consistency. The Cronbach’s alpha of the perceived industry growth is 0,772.
To proceed, the distribution of the perceived industry growth is also normal and slightly negative skewed with a Skewness of -0,116. The mean of the variable (3,09) implies a slightly above average perceived industry growth and also in this case extreme values does not appear. To conclude, the validity of perceived industry growth meets the requirements.
The next moderator is based on social network theory and is measured for a big part by
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research. The personal network is measured by the number of memberships in social
organizations and the number of discussions about the present organization during the last six months. The number of memberships and discussions will be measured in absolute terms. Basically, the construct consists out of 4 separate items. Thereof 3 items are about the number of organizations (trade, professional and social) the entrepreneur has joined. The other item concerns the number of persons the entrepreneur spoke within business context. In preliminary tests and descriptive statistics I already recognized a complete lack of coherence between each item. What really counts is the total number of memberships of organizations and the fourth item as an single entity. So the three items are summed up and computed to one variable. Quite surprising is that there is also no correlation and internal consistency between the total number of memberships and the number of contacted persons. As a result, I will test them separately to assess hypothesis 3. So personal network is not reliable as a complete construct and I will analyze both mentioned variables separately.
Furthermore, it is notable to analyze the descriptive statistics of the two variables of personal network theory, because those do not have an answer scale from 1 to 5. The respondents are on average member of 3 to 4 different trade, professional or social organizations and they spoke recently with about 9 persons in relation to their business. Worth mentioning, but not surprising, the distribution of both variables is not completely normal. Concerning the number of memberships the Skewness is 1,041 and thus within an ace of not normal. This is reinforced by the fact that the Kurtosis is below 3, so there are no extreme values. In contrary to the number of persons the entrepreneur spoke with, that particular variable has a Kurtosis of 23,336 and this implies a high rate of extreme values. This is also in accordance with the not normal distribution of 4.258 Skewness. As a result, both variables of personal network theory are not meeting the minimum of validity
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To conclude, my variables will be all (partly) imitated from existing constructs. The
measurement is more reliable because it is based on existing constructs. What must be taken into consideration is that the constructs are used in another industry, I will analyze the effects of it in the results and discussion sections. Especially the variables used for the construct of personal network theory can be discussed. In terms of validity, both variables do not meet the requirements. As a consequence, I must be cautious to derive compelling conclusions out of the statistical analysis of this construct.
Table 3.: assessment of reliability.
Construct Cronbach's alpha
New Venture Growth 0,76 Ties with Service
Intermediaries 0,54
Perceived Industry Growth 0,77 Personal network 0,071*
*. Cronbach's alpha of personal network is below requirements, items will be tested separately.
Table 4.: assessment of validity.
Variables/Constructs Skewness Kurtosis Implications
New Venture Growth ,270 -,602
Positively skewed, normal distribution, no extreme values
Ties with Service
Intermediaries ,079 ,063
Positively skewed, normal distribution, no extreme values
Perceived Industry Growth -,116 ,655
Negatively skewed, normal distribution, no extreme values
Number of networks 1,041 1,293
Positively skewed, no normal distribution, no extreme values
Number of contacts 4,258 23,336
Positively skewed, no normal distribution, extreme values
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Control variables
It is quite interesting which control variables are emerging in the earlier described relationship. Of course, there will be a great variety of variables that direct or indirectly influences the growth of new ventures. Based on relevant literature, some variables that are feasible to test and do have sufficient contextual fit are selected. Gilbert et al. (2006) have done a literature search about new venture growth and all the noticeable factors that come into play. The control variables most likely to test are all mentioned by Gilbert et al. (2006). First, the entrepreneurs are asked to indicate their highest level of education, which is also used as control variable by Zhang and Li (2010). Second, the number of years of experience in industry (Zhang and Li, 2010; Lee and Tsang, 2001) could be from significant influence. As final control variable, entrepreneurial experience is added, which is fully based on the analysis of Gilbert et al. (2006).
Each control variable is an one-item-construct. As a consequence, reliability tests with Cronbach’s alpha are not necessary.
To continue, the Kurtosis and Skewness values of the three control variables are added in table 5. It can be concluded that they meet the validity requirements.
Table 5.: Assessment of validity.
Variables Skewness Kurtosis Implications
Education ,270 -,602
Positively skewed, normal distribution, no extreme values
Industrial experience ,079 ,063
Positively skewed, normal distribution, no extreme values
Entrepreneurial experience -,116 ,655
Negatively skewed, normal distribution, no extreme values
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5. Data Analysis
Missing values
In order to improve validity and reliability during the questionnaire any question connected with the researched variables is compulsory for the respondents to fill in. This results in no missing values for the statistical analysis.
Because of difficulties to previously segment companies which are not older than 3 years old and because of the relevant information they can provide, it is also possible to fill in the questionnaire for younger companies. I must deal with that group during my data analysis, they specifically do not provide complete information about new venture growth, in turn for the other variables they do.
Recoding and computing variables
Furthermore, the composition of the questionnaire has as a consequence that it is not
necessary to recode any variables due to reversed answer scales. For the data analysis it was necessary to recode some variables because of other reasons. As already argued, it was possible to fill in the questionnaire for companies that do not exist longer than 2 or 3 years. There are some questions in the questionnaire which require specific data only companies older than 2 or 3 years can provide. Four of them are related to the hypotheses and the respondents has been given the possibility to answer those questions with the options “The company does not longer exist than 2 years” or “The company does not longer exist than 3 years”. In contrary to the service intermediary questions, a skip logic has not been added, so the value labels had to be changed and the turnover and employment variables had to be recoded.
