THE EMERGING MARKET
ENTREPRENEUR
A MULTIPLE CASE STUDY OF EMERGING MARKET ENTREPRENEURS WITHIN THE FASHION INDUSTRY
Student:
Nathalie Vermeij Student number: 10626506
Program:
MSc in Business studies [Strategy Track] University:
University of Amsterdam Amsterdam Business School Plantage Muidergracht 12 1018 TV Amsterdam Supervision:
Dr. R. Bohnsack
Dr. M.L. van der Veen Date of submission:
30.06.2014 Version: Final version
PREFACE
I am glad to present my master’s thesis; the emerging market entrepreneur. This thesis has been written as part of the MSc program in Business Studies [strategy track], completed at the Amsterdam Business School - University of Amsterdam. I finished my master’s program by conducting multiple case studies on (sustainable) emerging market entrepreneurs within the fashion industry. Although I hold the full responsibility for the document at hand, it is my duty to acknowledge the generous and vital support I received from several people and organizations in accomplishing both my master’s program and thesis.
First of all, my supervisor Dr. Rene Bohnsack. It has been great working with you and I would like to thank you for your valuable feedback and support throughout my thesis writing process. You were always there to help me out and put me at ease time and again; an encouraging professor.
This thesis has been written in close collaboration with the BiD Network Foundation. I would like to thank the organization for allowing me to use their network and I would like to thank Annemarie van Mossel in particular. She has been extremely helpful in initiating contact with key individuals; EMEs. Furthermore, the expertise she has from her professional field has been of great help during idea generation sessions.
Without the generous help of all 26 fashion entrepreneurs I could not have completed this thesis. Thank you for all your patience whilst completing my rather extensive questionnaire. Even a bigger thank you to the people who have been willing to share their stories during the follow-up sessions. All the best for you and your fashion business!
Ko Koens, I would like to emphasize your help as well. You made my thesis come alive by sharing your stories about your PhD. Your passion made me even more interested in the subject I was researching. Sharing your vision and research experience has been very valuable to me. To finish, I would like to thank you for your time and interest in examining and subsequently assessing my master thesis.
Nathalie Vermeij Dordrecht, June 2014
ABSTRACT
An examination of 26 individuals who founded a fashion business within an emerging market is completed using mixed methods. An online questionnaire followed-up by interviews enabled the exploration of several factors that might influence new venture success within the context of emerging markets. The factors examined have been identified as a framework for the study, namely: personality, personal resources, environment and organizing activities, all in relation to new venture success. Numerous studies on entrepreneurship and strategies toward new venture success have been done but most of them focused on the world’s developed economies. The current body of literature assumes environments where property rights are protected, factor markets are well-developed and the entrepreneur has substantial discretion over the allocation of resources. Whether insights based on these assumptions can be extended to different institutional environments is still a question mark. More studies are needed to develop an understanding of the emerging market entrepreneur (EME) and the ecosystem in which s/he operates.
This in-depth study of fashion entrepreneurs operating within emerging markets will provide knowledge on the (success) strategies that EMEs follow and simultaneously reveals which challenges and/or opportunities they encounter along the road. Findings show that EMEs are more risk averse, they are long-term oriented and are characterized by perseverance despite the difficulties they face. They have limited access to external financing, depend heavily on close friends and family and are well-educated in general though lack some skills regarding management issues. The institutional environment plays a large role in slowing down the EMEs, formalizing the businesses takes up a very long time which makes some EMEs decide to stay away from any kind of institution in order to spend their precious time on sustaining their business. Financing, education, national mind-set and professional networking are aspects that also require improvements in order to help the EMEs in realizing new venture success. The latter is not necessarily related to making a profit, a fairly large number of EMEs aims to generate a positive impact on society. Nevertheless, sustainability seems to remain an ambiguous concept to the EMEs for now, they fight every day to sustain rather than focus on complying with the triple bottom line.
1. TABLE OF CONTENT Preface ... 2 Abstract ... 3 1.1 List of tables ... 6 1.2 List of figures ... 6 2. Introduction ... 7 3. Case context ... 9 3.1 Sustainability ... 9 3.2 Fashion industry ... 10 3.2.1 Externalities ... 11
3.3 BiD Network Foundation ... 12
4. Literature review ... 14
4.1 The entrepreneur ... 14
4.2 The emerging market entrepreneur ... 17
4. 3 Theoretical framework ... 21
5. Methods ... 24
5.1 Research questions and objectives ... 24
5.2 Research design ... 24 5.2.1 Sample ... 25 5.2.2 Data collection ... 26 5.2.3 Data analysis ... 28 6. Results ... 30 6.1 The entrepreneur ... 30
6.2 The new venture ... 31
6.3 Personality ... 33 6.4 Personal resources ... 35 6.4.1 Human capital ... 35 6.4.2 Financial composition ... 38 6.5 Environment ... 40 6.5.1 Social environment ... 40
6.5.2 Institutional environment ... 41
6.6 New venture success ... 44
6.6.1 Sustainability ... 44
6.6.2 Internationalization ... 46
6.6.3The successful EME – configuration ... 47
7. Discussion ... 49
7.1 Theoretical implications ... 49
7.2 Practical implications ... 51
7.3 Limitations of the study & future research ... 52
8. Conclusion ... 55
9. References ... 57
10. Appendices ... 61
10.1 Appendix 1 – BiD network: countries ... 61
10.2 Appendix 2 - Categories included in sample fashion entrepreneurs ... 62
10.3 Appendix 3 - Online survey extract ... 63
10.4 Appendix 4 - Rankings ease of doing business ... 74
10.5 Appendix 5 - Semi-structured interview guides ... 77
10.6 Appendix 6 - Data overview ... 80
10.7 Appendix 7 - Comparisons of personality traits between subsets ... 83
10.8 Appendix 8 - Data overview successful entrepreneurs ... 85
1.1 LIST OF TABLES
Table 5.1: Sample countries p. 25
Table 5.2: Questionnaire planning p. 26
Table 5.3: Interview planning p. 28
Table 6.1: Sample demographics p. 30
Table 6.2: Key turning points towards profitability p. 32
Table 6.3: Comparisons between successful and unsuccessful entrepreneurs p. 34
Table 6.4: Knowledge creation about fashion p. 36
Table 6.5: Role models p. 37
Table 6.6: Definition of success p. 44
1.2 LIST OF FIGURES
Figure 2.1: International partnering countries BiD network p. 12
Figure 4.1: Theoretical Framework p. 21
Figure 6.1: Theoretical Framework p. 30
Figure 6.2: Formal registration p. 31
Figure 6.3: Number of years until a profit was made p. 32
Figure 6.4: Personality word cloud p. 34
Figure 6.5: Level of education p. 35
Figure 6.6: Own funding as a percentage of total investments p. 38
Figure 6.7: Network help p. 41
Figure 6.8: Network hinder p. 41
Figure 6.9: Measures of sustainability p. 45
Figure 6.10 : Word cloud personality traits successful entrepreneurs p. 47
2. INTRODUCTION
Emerging markets are showing the world that they are the economic powerhouses of the future (BiD Network Foundation, 2011), yet little is known about small and medium-sized enterprises; the ‘motors’ of these economies. Numerous studies have subjected entrepreneurship and the entrepreneur to critical academic scrutiny, primarily via analyzing the world’s developed economies. However, “it has been shown in other domains that researchers should not assume that findings in a developed economy will be equally applicable in an emerging economy” (Bruton, Ahlstrom, & Obloj, 2008: 2). For example, the current body of literature assumes “environments where property rights are protected, factor markets are well-developed and the entrepreneur has substantial discretion over the allocation of resources” (Tan, 2008: 550). Whether insights based on these assumptions can be extended to different (institutional) environments is still a question mark. To partially fill this gap, I move the attention to the entrepreneurs who venture in emerging markets.
When little is known about a phenomenon exploratory studies are advocated for their ability to discover the underlying nature of the phenomenon in question (Strauss & Corbin, 1990). The current study explores the EME via parallel case studies, which allows for multiple sources of evidence. Using a combination of qualitative and quantitative research, I aim to extend theory on entrepreneurs; seek new insights, ask new questions and assess the topic in a new light (i.e. emerging markets) rather than provide universal generalizations. An online questionnaire containing both open-ended and closed questions is distributed among 347 fashion entrepreneurs. If necessary, further investigation followed via follow-up interviews. Together in an attempt to answer the following research question:
“How do personality, personal resources, environment and organizing activities of an emerging market entrepreneur influence new venture success?”
The objective of this study is to research the EME as an individual operating within an ecosystem or ‘configuration’ that influences his/her road towards new venture success. In this, personality, personal resources, environment and organizing activities are taken into account (Korunka, C., Frank, H., Lueger, M. & Mugler, J., 2003). Current literature does reveal some of the context in which the EME operates, yet there is little understanding of the role of the EME and the process towards new venture success. For example, it is widely acknowledged that institutional frameworks in emerging markets appear to be non-existent or of low quality which impedes entrepreneurship (Ahlstrom & Bruton, 2006; Wright, M., Filatotchev, I., Hoskisson,
R., & Peng, M. W., 2005; Tan, 2008). Nevertheless, insights into the ways in which EMEs apparently survive within these hostile environments are lacking. Simply describing the context in which one operates does not reveal how (and if) strategies towards new venture success are realized.
Theoretically this study contributes to a deeper understanding of the EMEs and their businesses, in this case specifically within the realm of fashion. It develops an understanding of the ways in which the EMEs operate and manage their businesses whilst taking influencing factors such as personality, (personal) resources and environment into account. It builds an understanding of new venture success in emerging markets and the strategies used to reach it. Challenges and opportunities are identified to provide suggestions to perfect policy strategies and/or supporting organizations.
This study is executed in close collaboration with the BiD Network Foundation, a non-profit organization that strives to contribute to sustainable economic growth in emerging markets through entrepreneurship. The data from this study helps revealing the challenges that EMEs in the fashion industry face, enabling the BiD Network Foundation to improve their services whilst enhancing academic knowledge.
The remainder of this document starts with a description of the case context covering sustainability, the fashion industry and the BiD Network Foundation. Chapter four contains the literature review subsequently discussing the entrepreneur and the EME. After identification of a gap in literature, the research question and accompanying objectives are presented. Paragraph 4.3 includes a visual representation and explanation of the underlying theoretical framework. Followed by the methods section which explains how this research was conducted. This includes the research design which discusses the sample i.e. the unit of analysis, the data collection techniques, and the data analysis techniques. Chapter six presents the results of the study, followed by chapter seven; discussion. The latter includes theoretical contributions, practical implications and limitations. This document is finalized by a conclusion, including suggestions for future research, which can be found in chapter eight, followed by the references (chapter 9) and the appendices (chapter 10).
3. CASE CONTEXT
The current study is a multiple case study looking into (sustainable) EMEs who operate within the fashion industry. The case context describes why this specific focus is of added value in answering the research question. This chapter subsequently discusses sustainability and the fashion industry. Afterwards, these two sections are put into perspective by introducing the BiD Network Foundation, hence the context-specific nature of this study.
3.1 SUSTAINABILITY
In its most simple - yet widespread – form, sustainability is defined as the ability to “meet the needs of the present without compromising the ability for future generations to meet their own needs (WCED, 1987).
From the 1970s onward, sustainability has gained acceptance and by now it has turned into a key feature of corporate strategy (Hall, J. K., Daneke, G.A. & Lenox, M.J., 2010; Parrish, 2010). It is likely to see increasing pressure regarding unsustainable practices as the collective knowledge continues to grow. Policy makers, consumer groups, environmental activists, employees and others all urge firms to do something. Most large firms have incorporated sustainability in many ways; they installed people on executive level representing functions that all share ‘sustainability’ in their title in some way. In addition, new policies are rolled out and all state to apply the so-called triple bottom line (Elkington, 1998; Hall et al., 2010). The latter relates to the claim of simultaneously monitoring environmental-, social- and economic performance. Though most (corporate) activities seem to remain of a rather incremental nature.
Universities have responded to the trend by launching new faculties and programs within the realm of sustainability. In addition, sustainability has been included as a scientific topic in mainstream management journals. However, most traditional research has solely focused on the sustainability transformation of existing businesses (Hall et al., 2010; Hockerts & Wüstenhagen, 2010; Parrish, 2010; York & Venkataraman, 2010). In this the main drivers are argued to be: governmental regulation and control, stakeholder action, ethical motivation, and competitive advantage (Brito, de, M.P., Carboneb, V., & Meunier Blanquartd, C., 2008; Caniato, F., Caridi, M., Crippa, L., & Moretto, A., 2012; Hart & Milstein, 2003; York & Venkataraman, 2010). In this line of research the debate has mostly focused on the existence of an inherent trade-off between environmental-, social- and economic objectives. In the early years of sustainable development, one was certain on the existence of a trade-off. Firms were argued unable to pursue economic growth without harming the environment (Cohen & Winn, 2007; Hall et al., 2010;
Parrish, 2010). Sustainable development was proposed as an oxymoron whereas one argues economic growth has to slow down to allow for sustainability (Hall et al., 2010). However, a very different perspective slowly gained ground. “…Sustainability, namely the balancing of economic health, social equity, and environmental resilience, serves as the integrative concept which offers long-term perspective and provides opportunities for win-win solutions” (Winn & Kircheorg, 2005; Cohen & Winn, 2007 p. 34). Firms started to recognize opportunities to create new sources of (shared) value on top of the accompanying positive impact for society – a win-win situation (Cohen & Winn, 2007; Hall et al., 2010; Hart, 1995; Porter & Kramer, 2011) focussing on both process- and product design. However, recent literature increasingly emphasizes the tensions in benefiting the bottom-line again (Hahn, Pinkse, Preuss & Figge, 2014). They depart from the instrumental perspective where social- and environmental objectives perfectly co-exist with economic growth and propose the integrative framework (Hahn et al., 2014). In this, “the decision-makers need to accept and embrace the tensions inherent in corporate sustainability and acknowledge the need to combine different desirable but seemingly incompatible sustainability aspects without emphasizing one aspect over others” (Hahn et al., 2014 p.2; Parrish, 2010). A different mind-set is required to translate sustainability tensions into strategies that manage selected tensions. Hahn et al. (2014) suggest acceptance- or resolution.
In the world’s developed economies, sustainability has grown into a well-known term that is actively pursued by entrepreneurs who are willing to make a difference. Sustainability has passed through multiple stages of development and societal acceptance. On the contrary, this study will examine the emerging market entrepreneur; individuals who operate in a context that might not be exposed to sustainability as we know it. Yet they operate within an industry that is highly subjective to sustainability, namely the fashion industry.
3.2 FASHION INDUSTRY
Complying with the triple bottom line (Elkington, 1998) is a challenge to every industry yet the paradox is perhaps largest within the fashion industry. Not surprising whilst taking into account the contradictory nature of the two terms. Fashion revolves around change and sustainability is all about preservation (Shaw, D., Hogg, G., Wilson, E., Shui, E. & Hassan, L., 2006). Nowadays more and more pressure regarding sustainability is put specifically on fashion entrepreneurs. Caniato et al. (2012) argue that environmental sustainability has become a key managerial issue. Pressure to find a balance between environmental, social and business needs seems especially high in industries with significant societal impact and high visibility within the public. In addition, the fashion industry receives much more public attention than other industries. The public
becomes increasingly aware of the social (business ethics) and environmental consequences of the fashion industry e.g. via media coverage on recent scandals at C&A, H&M, Adidas, Nike, Levi Strauss and Benetton (Brito de, et al., 2008; Caniato et al., 2012).
3.2.1 EXTERNALITIES
Nonetheless, the fashion industry is still flourishing, according to Euromonitor International the global apparel market was worth $1.7 trillion (USD) in 2012. This represents a 5.8% increase over 2011. Unfortunately, this wealth comes at a cost. Both the environment and social society are affected by the (negative) externalities of the fashion industry. The fashion industry’s externalities come in many ways though are mostly caused by large (multinational) firms. For example, to keep a competitive position (Caniato et al., 2012) these firms shift production to countries with lower wages leading to abuse of labour conditions like neglecting worker rights, long hours, low wages, child labour and health & safety issues within the production companies (Kozlowski, A., Bardecki, M. & Searcy, C., 2012). Even if it is not the organisation itself causing the harsh labour conditions, they are held responsible by its stakeholders for all activities of their suppliers and partners within the value chain. The latter is especially relevant in brand-owning companies as their name is closest to the public (Caniato et al., 2012). Moreover, the relocation of production factories leads to environmental harm due to transport-related energy consumption and (air) pollution via emissions (Caniato et al., 2012; Kozlowski et al., 2012). Quite the opposite might hold for the people who actually work in these ‘low wage countries’, those people who ‘suffer’ from the externalities generated by the large (mostly western) firms. This study examines fashion entrepreneurs operating in emerging markets in order to better understand their viewpoints. Most of them are individual owners who produce their products themselves on a fairly small scale, which possibly results in a rather different description than the aforementioned.
However, the fashion entrepreneurs from emerging markets do produce; hence generate externalities be it on a (much) smaller scale. Production processes, including the dyeing, drying and finishing of fabric, requires extensive use of chemical products and natural resources (Brito de, et al., 2008; Caniato et al., 2012; Kozlowski et al., 2012). The production of cotton and wool requires large amounts of water and pesticides. It takes about 10,000 liters of water to produce one kilogram of cotton fabric using traditional methods. Where synthetic fibres reside in non-renewable resources and consume large quantities of energy when produced.
At last, developed economies have to deal with enormous amounts of waste as a result of so-called ‘fast-fashion’ (Bruce & Daly, 2006; Kozlowski et al., 2012; Niinimäki & Hassi, 2011; Shaw et al., 2006). A quick turnaround strategy that makes fashion retailers come up with new
items before the latest trend has been fully established. Low quality garments sold at relatively cheap prices result in short-term use, frequent (premature) clothing replacement and a massive increase of textile waste (Niinimäki & Hassi, 2011). Repairing any purchased apparel is simply not worth the effort if buying a new piece of clothing is cheaper and perhaps even more important within this industry – more in line with the latest trend. Yet again, this trend might not hold when turning the attention to this study’s context; the emerging markets.
3.3 BID NETWORK FOUN DATION
All (sustainable) fashion entrepreneurs studied are connected to the BiD Network Foundation, representing developing countries (see appendix 1; figure 2.1). The BiD Network Foundation is a non-profit organization that strives to contribute to sustainable economic growth in emerging markets through entrepreneurship. The organization aims to start and grow businesses in emerging markets (5 each day by 2020), to create jobs and income as an accompanying effect, and to transfer private capital and know-how to businesses (BiD network, 2014).
Figure 2.1: International partnering countries BiD network Source: BiD Network Foundation, 2011
Originally the BiD network started to tackle three issues related to sustainable economic growth in emerging markets, namely: the missing middle, high transaction costs and the deal flow problem (BiD Network Foundation, 2011). To improve the opportunities for entrepreneurs, the BiD Network Foundation improves access to finance for small- and medium-sized enterprises (SME’s) since there are generally no incentives to formalize a business. In addition, SME’s face a harsh business environment as financiers are conducive to large companies and/or micro-entrepreneurs. One of the causes of the missing middle is in the relatively high transaction costs associated with SME’s and the accompanying ‘low’ return on investment when compared to larger companies. The BiD Network Foundation attempts to develop innovative solutions to finance SME’s. At last, they render sustainable investment opportunities visible and accessible. The latter information is generally not offered through regular information channels.
Currently, the BiD Network is comprised of 40,000 members, 10,000 entrepreneurs, 800 coaches, 115 international investors and over 100 local investors. Since their early years in 2004, the network helped starting up 490 businesses, accounting for the creation of 3,500 jobs. All of this was accomplished via 90 BiD network entrepreneurs mobilizing $12 million (BiD Network Foundation, 2011).
The BiD Network Foundation has indicated that most fashion entrepreneurs are quite successful at business competitions though they are having a hard time getting funding from investors. This note in combination with the sustainability paradox has driven the case selection. In general, the BiD Network Foundations is interested in the process towards new venture success within emerging markets. They talk about an apparent ecosystem that drives success, where the essential triggers to success are of interest. BiD’s request is backed up by a gap in academic literature which will be discussed in the next section.
4. LITERATURE REVIEW
The literature review identifies a gap in literature and ends with the research question to be addressed in the current study. The former is achieved through an overview of relevant literature concerning the entrepreneur and the EME. Both are considered on aspects such as personality, personal resources, environment and organizing activities. The section ends with the theoretical framework and an explanation of all relevant variables.
4.1 THE ENTREPRENEUR
The term ‘entrepreneur’ is derived from the French word entreprendre; to undertake. Despite its simple occurrence a solid definition of ‘the entrepreneur’ is lacking. The field of entrepreneurship is defined as the scholarly examination of how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited (Venkataraman, 1997). From the latter definition one can infer that the entrepreneur in this is the individual that discovers, evaluates and exploits opportunities to create future goods and services.
What is it that enables an individual – the entrepreneur - to discover (and exploit) opportunities in the market whilst others do not? Some simply refer back to blind luck (Barney, 1986; Shane & Venkataraman, 2000) whereas others pinpoint to a joint function of the characteristics of the opportunity at hand and the nature of the individual (Shane & Venkataraman, 2000). In addition, the social setting (e.g. resources) and the environment (e.g. different countries) in which entrepreneurial activities occur influences the kind of opportunities that arise and the decisions that an individual makes (Kets de Vries, 1977; Shane & Venkataraman, 2000).
THE TRAIT APPROACH
As a result, the entrepreneur is hard to define as a fixed state of existence (Gartner, 1988). Literature even finds that there is no such thing as the average entrepreneur; entrepreneurs constitute a highly heterogeneous group of people that cannot be explained by solely referring to traits and characteristics of certain people (Gartner, 1988; Korunka, et al., 2003; Khoe Hwee Nga & Shamuganathan, 2010; Rauch & Frese, 2007; Shane & Venkataraman, 2000). This early ‘trait-approach’ which attempts to define an entrepreneur using a set of personality traits and characteristics is regarded unfruitful (Gartner, 1988). For example, Rauch & Frese (2007) conducted a meta-analysis on the entrepreneurial personality and discovered 51 differing personality traits being studied in literature. Possible explanations for this large number of traits included in entrepreneurial studies are provided by Gartner (1988). Due to the lack of consensus with regards to the definition of ‘the entrepreneur’ studies rely on samples that are far from
homogeneous. In addition, in many studies the sample includes ‘entrepreneurs’ that have started a firm many years before (Gartner, 1988). Nevertheless, personality traits are argued to be influential (Koe Hwee Nga & Shamuganathan, 2010), though should be envisioned as supplemental variables within the ‘ecosystem’ that determines new venture success (Korunka et al., 2003; Rauch & Frese, 2007; Tan, 2008). The most commonly acknowledged personality traits of ‘the entrepreneur’ are (1) need for achievement (McClelland, 1961) (2) internal locus of control (Rotter, 1966) and (3) risk-taking propensity (Brockhaus sr., 1980) or tolerance for ambiguity (Shane & Venkataraman, 2000). A possible fourth characteristic of the entrepreneurial personality is personal initiative; proactively (Becherer & Mauer, 1999; Grant, 2000; Korunka et al.,, 2003). Personality traits are partly innate, partly developed (Koe Hwee Nga & Shamuganathan, 2010) or in other words, some personality traits are situational. The latter implies a relationship between external environments and the entrepreneur or entrepreneurship. According to Tan (2008) this relation is mediated by so-called entrepreneurial orientations such as; futurity, innovativeness, risk-taking, proactivity, competitive aggressiveness and autonomy. “Entrepreneurial orientation refers to the entrepreneurial process, namely how entrepreneurship is undertaken – the methods, practices, and decision-making styles used to act entrepreneurially” (Tan, 2008:553). Despite the context specific characteristics that partly determine ‘the entrepreneur’, a general pattern can be found when looking at different entrepreneurs.
VINCENT VAN GOGH VS. STEVE JOBS
Cornelissen (2013) reviewed the biographies of Vincent van Gogh and Steve Jobs. Whilst being miles and years apart, many (social) similarities occur. In general, society admires entrepreneurs; they represent the modern folk heroes. Despite the initial admiration, literature reveals a less heroic image of the entrepreneur. Both Vincent van Gogh and Steve Jobs comply with the following pattern where the entrepreneur is introduced as “a person with an unhappy family background, an individual who feels misplaced and seems a misfit in his particular environment” (Kets de Vries, 1977: 35). Due to this (common) background, most entrepreneurs dislike authority, they cannot function properly within the set rules and regulations of established organizations or society as a whole. The latter being an explanation for the aforementioned personality trait - internal locus of control.
The remaining two personality traits (1) need for achievement and (2) risk-taking propensity carry a more positive connotation. The fact that entrepreneurs generally feel that they cannot achieve their best form within current settings makes them usually more innovative than others (Rauch & Frese, 2007). They essentially consist “in doing things that are not generally done in the ordinary
course of business routine” (Kets de Vries, 1977:37). Moreover, they discover and exploit opportunities as a result of market imperfections, aggressively seeking new combinations that make for entrepreneurial rent (Schumpeter, 1934). In this, they dare to take risks and act in a proactive and usually innovative manner. The latter in combination with, on average, excessive optimism makes for a thin lining between success and failure of new venture creation (Shane & Venkataraman, 2000).
BEYOND PERSONALITY TRAITS, THE ENTREPRENEUR AS A CONFIGURATION
In order to overcome the limitations of the aforementioned trait approach, one needs to take into account other aspects that define a human being, especially an entrepreneur. Korunka et al. (2003) suggest this wider perspective on the entrepreneur as an individual and propose the configuration approach. They define the entrepreneur as a varying configuration comprised of personality traits, personal resources (human capital & financial composition1), environment (micro- and macro social2) and organizing activities (cognitive aspects and action3). Shane & Venkataraman (2000) agree on the influence of resources and the (social) environment on the entrepreneurial personality. They state that the possession of prior information, for example via an entrepreneurial relative or prior employment, and the cognitive properties to recognize value are particular aspects that distinguish the entrepreneur from non-entrepreneurs in opportunity discovery. During early exploitation these aspects remain valid as well, both greater financial capital (resources) and stronger social ties to resource providers (environment) are examples that enhance entrepreneurial exploitation activities. (Shane & Venkataraman, 2000). With regards to (market) environment, entrepreneurial action is most likely when expected demand is large, industry profit-margins are high, the technology life-cycle is young (Shane, 2001), the cost of capital is low (Rothaermel & Hill, 2005), uncertainty is high, no complementary assets are required or information cannot be protected (Rothaermel & Hill, 2005; Teece, 1986) and the density of competition is neither too low nor too high (Shane & Venkataraman, 2000)
In this line of thought one describes entrepreneurship, hence the entrepreneur, as “the tendency of certain people to respond to the situational cues of opportunities - not a stable characteristic that differentiates some people from others across all situations” (Shane & Venkataraman, 2000:219). Situational cues are different for each individual, people are motivated by different things in life.
1Human capital: e.g. education, previous occupational experience. Financial composition: e.g. income, financial independence, and bank backing
2 Micro-social environment: e.g. family restrictions, support. Macro-social environment: e.g. social networks based on earlier occupational experiences
Parrish (2010) argues that the entrepreneurial motive cannot be equated with the desire for profit maximization, there is more to it than the sole search for economic profit. For example Korunka et al. (2003) selected security and self-realization as personal motives on the basis of relevant research. According to Koe Hwee Nga & Shamuganathan (2010: 261) “Entrepreneurial motivation represents the blending of social interaction, technical competence and emotional zeal of the individual”.
NARROW FOCUS IN ENTREPRENEURIAL LITERATURE
Despite the acknowledgement of the heterogeneous nature of the entrepreneurial personality and the importance of differing situational cues, traditional literature still focuses on a rather homogenous group - mostly North American or European entrepreneurs. “It has been shown in other domains that researchers should not assume that findings in a developed economy will be equally applicable in an emerging economy. As a result, the setting today can be summarized as what is known from the world’s developed economies which may not readily apply to entrepreneurship in emerging economies” (Bruton et al., 2008: 2). For example, the current body of literature assumes environments where property rights are protected, factor markets are well-developed and the entrepreneur has substantial discretion over the allocation of resources” (Tan, 2008). Whether insights based on these assumptions can be extended to different institutional environments is still a question mark. To partially fill this gap, attention is now moved to the EME.
4.2 THE EMERGING MAR KET ENTREPRENEUR
The narrow focus of literature on the entrepreneur is a strong limitation in itself. Entrepreneurs operating from emerging markets face vastly different situational cues than entrepreneurs that start-up within a developed country context. S/He grows up within a different culture, different market and is exposed to different values in life, usually living with limited resources (Tan, 2008). Both one’s innate personality, orientation and entrepreneurial motivation are shaped by aspects such as the aforementioned. Therefore, one can assume that the ‘EME’ evokes a different meaning. Different from the general connotation society has with the term ‘entrepreneur’.
The context-specific nature of emerging markets is proposed to be one of the most influencing aspects when looking into the EME. Most literature highlights the uncertain institutional environment of most emerging markets in either creating entrepreneurial opportunities for local inhabitants or hindering entrepreneurial action (Tracey & Phillips, 2011). Institutions
create the rules of the game in a society, “the humanly devised constraints that shape human interaction” (North, 1990 p. 3) or as noted by Scott (1995 p. 33) “cognitive, normative, and regulative structures and activities that provide stability and meaning to social behavior.”
A LACK OF INSTITUTIONA L FRAMEWORKS
In general, formal institutional frameworks appear to be non-existent or of low quality (Ahlstrom & Bruton, 2006; Wright et al., 2005; Tan, 2008). Consequently EMEs face constraints due to the lack of a credible legal framework (e.g. property rights system), lack of stable political structures and the lack of strategic factor markets (e.g. Hoskisson, R.E., Eden, L., Lau, C.M. & Wright, M., 2000; Peng 2001; Tracey & Phillips, 2011). The aforementioned lack of institutional frameworks has in turn affected the increase of informal business practices.
As a result EMEs are supposed to rely on social-, rather than, legal contracts. Working with network-based strategies (Ahlstrom & Bruton, 2006; Peng, 2002; Wright et al., 2005). Wright et al. (2005: 11) state that network connections and relationships are “crucial value-adding resources leading to better firm performance”. However, most businesses operate within deeply embedded networks using personalized exchange, which makes it difficult for ‘outsiders’ to engage in commercial activity (Tracey & Phillips, 2011) – e.g. Japanese keiretsu networks (Peng, 2002). Whenever the EMEs social environment is not of such nature that it allows him/her access to these networks it seems rather difficult to start up a new venture. Therefore, the (institutional) context of emerging markets might make issues of prior employment knowledge and stronger social ties to resource providers more important than they are in the developed world. Still the influential aspects regarding personal resources and (social) environment are quite similar when comparing the EME with the description of the entrepreneur. However, aspects like trust, reputation and mutual understanding are of utmost importance (Peng, 2002).
In addition, access to the ‘right’ networks is important to avoid the challenges faced due to apparent corruption in most emerging markets. There is no cost in deviating from ‘accepted behavior (BiD Network Foundation, 2011; Meyer, 2001) due to the lack of formal institutional frameworks. Some governments have provided access to small loans with little success but “even if the poor were able to benefit from government support to start small businesses, their dependence on credit from local moneylenders charging usurious rates makes it impossible to succeed” (Prahalad & Hart, 2002 p. ?) As a result the informal sector
plays an important role in emerging markets as it is simply too costly to go into the formal sector (London & Hart, 2004). “In such settings, since information dispersion is so inefficient and corruption is likely to be more prevalent, network connections can be more valuable to overcome such settings” (Ahlstrom & Bruton, 2006:203).
EME STRATEGIES
Besides the difficulties caused by the institutional context of emerging markets, the market in general is not ideal. When looking at the factors that stimulate entrepreneurial action, the emerging market lacks high demand (people have little resources, most of them are self-fulfilling), the cost of capital is high and profit-margins are relatively low. In addition the density of competition is mostly too high or too low. EMEs most likely need different business models and/or strategies to incorporate the context specifics and turn them into success rather than constraints (Christensen, 1998; Hart & Milstein, 2003; Johnson & Suskewicz, 2009). One might argue that the EME’s (social) environment is more important than his/her financial position as a starting position. ‘Access’ to financial support is mostly embedded within the informal sector, relying on networks.
Different authors have looked into fruitful strategies for entrepreneurs who are operating from an emerging market. When trying to create wealth in environments traditionally hostile to entrepreneurial activities (Peng, 2001, p. 95) a fast, aggressive, guerrilla-like strategy is advised (Peng, 2001; Tracey & Phillips, 2011). The poor formal institutions create a need for urgency, intensity and impact (Peng, 2001). Tracey & Phillips (2011) pinpoint three strategies; institutional brokering (creating ventures that reduces risks for others - intermediaries), spanning institutional voids (creating ventures that solve institutional issues) and the bridging of institutional distance (helping multinationals to create legitimacy and internal consistency). Whereas Peng (2001) outlines prospecting (guerilla strategy), networking and boundary blurring between public- and private sectors as well as illegal- and legal sectors. Helping the EME seems to require two interventions; providing access to credit and increasing the earning potential through transparent, yet formal institutional frameworks.
THE EME CONFIGURATIO N
When organizing the aforementioned information using the dimensions of Korunka et al. (2003), one can detect similarities between the entrepreneur and the EME. Although not specifically provided in literature, one can think of EMEs being in high need for achievement,
taking initiative and taking control of his/her own life, resembling the top three personality traits of an entrepreneur operating in the developed world. Strong ties with the right people are important (environment) and the appropriate level of knowledge (human capital) in combination with adequate (financial) resources is necessary to become successful. However, the level of importance of certain factors might differ, possibly related to the initial reason for existence of a new venture in emerging markets.
Within emerging markets entrepreneurial motivation is perhaps even more removed from the sole search for economic profit. The initial intent to start a business probably relates more to “a person’s own quality of life aspirations” (Parrish, 2010:520). Whether or not a certain opportunity will be exploited by an individual is highly dependent on the alternatives one has. “The decision to exploit an opportunity involves weighing the value of the opportunity against the costs to generate that value and the costs to generate value in other ways” (Shane & Venkataraman, 2000: 223). Survival rather than ‘success’ in any form is more likely to be the most prominent motivator or the EME. One can make inferences from the context that is being described in literature, yet a limited amount of research has been completed on the entrepreneur outside the developed world. Simply describing the context in which one operates does not reveal how (and if) strategies toward new venture success are incorporated.
RESEARCH QUESTION
Both the literature and the BiD Network Foundation identify a gap in current knowledge. Most present research is focused on entrepreneurs operating within developed countries. Literature does reveal some of the context in which the EME operates, yet there is little understanding of the role of the EME and the process towards new venture success. The BiD Network Foundation requests insights into the drivers of success and academic literature requires an explanation of the phenomena from a new angle; the emerging market.
Consequently, this study explores the EME ultimately seeking to answer how do personality, personal resources, environment and organizing activities of emerging market entrepreneurs influence new venture success? To answer the research question, this study builds on a multiple case study on (sustainable) entrepreneurs in the fashion industry. Aiming to gain a deeper understanding of the EME as an individual and the ways in which they run their business(es) towards (new) venture success.
To achieve this aim four research objectives are identified:
1. Identify the type of ventures that EMEs found and who/what is involved in the process of (new) venture creation.
2. Identify the configuration(s) of ‘the EME’ through an investigation of personality, personal resources, environment and organizing activities.
3. Identify what constitutes new venture success for an EME and attempt to describe how success is achieved, including the role of the BiD Network Foundation.
4. Identify whether or not sustainability plays a role for EMEs. If it does, describe the ways in which EME’s deal with sustainability.
4. 3 THEORETICAL FRAMEWOR K
Figure 4.1: Theoretical Framework
This study will be of exploratory nature, based on a multiple case-study examining fashion entrepreneurs operating within an emerging market. Since most literature to date focuses on knowledge generated by studying entrepreneurs in developed countries, this research will initially create a profile of the EME and subsequently investigate his/her perspective on new venture success.
Literature suggests that solely looking at the personality traits and characteristics of entrepreneurs will turn out unfruitful, there is no such thing as the average entrepreneur in this regard (Gartner, 1988; Korunka et al., 2003; Khoe Hwee Nga & Shamuganathan, 2010;
Rauch & Frese, 2007; Shane & Venkataraman, 2000). However, personality traits remain valid to address. They are influential (Koe Hwee Nga & Shamuganathan, 2010) but should be envisioned as supplemental variables in determining new venture success (Korunka et al., 2003; Rauch & Frese, 2007). To take a wider perspective on the exploration of the EME, this study follows the configuration approach by Korunka et al. (2003) which addresses personality, personal resources, environment and organizing activities. Together forming the configuration to describe the entrepreneur as an individual and his/her strategy towards (new) venture success. Different EMEs can be profiled using all aspects of the four areas, possibly resulting in more than one configuration.
Personality addresses the four most widely acknowledged personality traits in entrepreneurial literature; need for achievement (McClelland, 1961), internal locus of control (Rotter, 1966), risk-taking propensity (Brockhaus sr, 1980) and personal initiative (Becherer & Mauer, 1999; Grant, 2000) (Korunka et al., 2003). More recent work by Tan (2008) addresses entrepreneurial orientations rather than personality traits. To allow for the latter development, competitive aggressiveness, autonomy, futurity and innovativeness are also taken into consideration. Since all of the aforementioned is mainly based on research in developed countries, the current study leaves room for the EME to differentiate from the aforementioned traits.
Personal resources cover both human capital and the entrepreneur’s financial composition. The former is comprised of education and/or previous occupational experience related to entrepreneurship, new venture creation and the specific industry; fashion. The financial composition entails income, financial independence, and bank backing.
Environment entails both the social- and institutional environment. Social environment is divided into micro-social (e.g. family restrictions/support) and macro-social environment (e.g. social networks), push (and pull) conditions and the existence of role models. Institutional environment addresses the opportunities and/or difficulties resulting from the emerging market context.
Organizing activities include both cognitive aspects (e.g. planning, decisions, failure considerations) and actions (e.g. resource acquisition), or in other words management. Whereas new venture success is mostly related to monetary aspects in developed countries, what constitutes new venture success in developing countries might differ. The reasons why
people start their business might be strongly (e.g. motivation, business orientation and goals) related to the (personal) definition of new venture success. BiD Network Foundation has indicated a specific interest in the triggers of success.
In addition, a possible relation with regards to sustainability and new venture success is highlighted. A general enquiry about sustainability is initially included to research the EMEs definition of sustainability and the subsequent importance. In addition, possible tensions (Hahn et al, 2014) to benefit economic, environmental and social objectives are investigated. Once a business starts growing, the initial sustainability character can be challenged, literature on ‘western’ entrepreneurs suggests one should either accept or resolve occurring tensions (Hahn et al, 2014). This study investigates whether or not the EME experiences ‘tensions’ in the first place.
The specific context, known as the emerging market is expected to be an overall moderator in the relation between the EME and new venture success. Both concepts are proposed to differ due to the specific context. The inclusion of this moderator contributes to the gap in literature where overall little is known on entrepreneurs (and their actions) outside the developed world (Bruton et al., 2008; Tan, 2008).
To gain an understanding of the practical context and generate some additional background information on the entrepreneurial process demographics as well as a number of questions regarding the venture are added to the questionnaire. Due to the exploratory nature of the study, this research follows a rather iterative process; new insights might lead to the addition of variables at a later phase of the research.
5. METHODS
The methods section explains how this research study was conducted by including the research question, the research objectives and the research design. The latter constitutes an explanation of the sample i.e. the unit of analysis, the data collection techniques, and the data analysis techniques.
5.1 RESEARCH QUESTIONS AND OBJECTIVES
Research question: How do personality, personal resources, environment and organizing activities of emerging market entrepreneurs influence new venture success?
Research objectives:
1. Identify the type of ventures that EMEs found and who/what is involved in the process of (new) venture creation.
2. Identify the configuration(s) of ‘the EME’ through an investigation of personality, personal resources, environment and organizing activities.
3. Identify what constitutes new venture success for an EME and attempt to describe how success is achieved, including the role of the BiD Network Foundation.
4. Identify whether or not sustainability plays a role for EMEs. If it does, describe the ways in which EME’s deal with sustainability.
5.2 RESEARCH DESIGN
Because the literature on EMEs is not yet rich enough to provide sound conceptual foundations for investigation, a mixed methods (i.e. qualitative and quantitative) study was conducted to further investigate the EME. When little is known about a phenomenon, qualitative methods are advocated for their ability to discover the underlying nature of the phenomenon in question (Strauss & Corbin, 1990). As a result, the current study aimed to extend theory on entrepreneurs; seeking new insights, ask new questions and assess the topic in a new light (i.e. emerging markets) rather than testing any prior developed theories. The aforementioned coincides with the definition of an exploratory approach. In a study of exploratory nature a case study is advised (Saunders & Lewis, 2012). The former technique allows investigating a particular topic - in this case EMEs within the fashion industry - within its real-life context, using multiple sources of evidence. The aforementioned combination of
quantitative and qualitative data is found to be particularly useful in emerging market research; “yielding novel, relevant and reliable insights” (Hoskisson et al., 2000:257).
5.2.1 SAMPLE
Research participants were identified using several steps. The research started by finding a way to get access to owners of businesses in developing countries (appendix 1) i.e. EMEs. The BiD Network Foundation, a non-profit organization that strives to contribute to sustainable economic growth in emerging markets through entrepreneurship, was put forward by my supervisor (Dr. R. Bohnsack). He has a professional contact within the organization (A. van Mossel), thus contact was established through his network.
Apart from the need to expose the entrepreneur into new light, there is an interest in looking at possible existence of tensions in complying with the triple bottom line (Elkington, 1998). For this reason, it is decided to have a look at fashion entrepreneurs, they face an apparent paradox. Fashion revolves around change and sustainability is all about preservation (Shaw et al., 2006). Purposive sampling was introduced to select the fashion entrepreneurs. Appendix 2 contains the kinds of businesses that classified to be included in the sample of fashion entrepreneurs. A sample of 347 fashion entrepreneurs, covering 21 countries (table 5.1), is taken from the database of the BiD Network Foundation. In addition, focussing on EMEs working in similar business allows comparison and case generalization.
Argentina Ecuador Kosovo Palestine Somalia
Burundi Indonesia Liberia Peru South Africa
Bolivia Jordan Mexico Philippines Suriname
Colombia Kenya Nigeria Rwanda Tanzania
Uganda Table 5.1: Sample countries
The resulting sample of 26 individuals was 76% female, aged 41 on average within a range of 24-57. On average the entrepreneurs were well-educated, 77% obtained at least a bachelor’s degree. Furthermore, 65% owned a formally registered business. 54% has recently started a business (1-5 years ago) out of which 50% made a profit. Most of the entrepreneurs lived in South-America (58%) mainly producing handbags / purses (35%) and women’s clothing (31%).
5.2.2 DATA COLLECTION
Research through case studies utilizes multiple data collection techniques: interviews, observation, documentary analysis and questionnaires (Saunders & Lewis, 2012). The current study was based on online questionnaires (email distribution), secondary data analysis and follow-up interviews.
Online questionnaire
The research will be conducted using an online questionnaire with a mix of open and closed questions. The basis of the questionnaire constructs departs from the configuration approach on the entrepreneurial personality by Korunka et al. (2003) covering personality, personal resources, environment and organizing activities. The aforementioned article highlights the fact that the entrepreneur is influenced by situational cues. This supports the notion that existing literature on entrepreneurs cannot be translated to EME literature. A gap that is addressed in the current research. To serve the additional interest on possible sustainability tensions, an initial quantitative approach was used. Constructs were derived from literature on sustainability tensions such as Hahn et al (2014) (see appendix 3 for the extract of the online questionnaire).
It is decided to make use of online questionnaires (Qualtrics) which are accompanied by a cover letter. The cover letter in combination with the type of questioning attempts to make the respondent answer elaborately, rather than simply confirming or denying certain questions. The link to the survey was sent out by the contact person from BiD, this in order to address the entrepreneurs via the organization they know. Based on information derived from previous BiD Network questionnaires, it was decided to open the online questionnaire for two weeks with a (first) reminder after one week and a final reminder two days before closure (see table 5.2).
Activity Date Number of respondents
Opening questionnaire 28.04.2014 n/a
First reminder 05.05.2014 11
Second reminder 09.05.2014 12
Closing questionnaire 12.05.2014 26
Table 5.2: Questionnaire planning
In general, interviews rather than online questionnaires are preferred in qualitative research, though the geographical distance between the interviewees and the researcher is too large to cover within the set time frame and available resources. Like aforementioned, the cover letter
and the questions are designed in such a way that detailed answering is encouraged. In addition, adequate wording is used in questions that could evoke non-response (e.g. finance related). Furthermore, difficulties in understanding terms and concepts familiar to entrepreneurs in developed markets can occur and language barriers might be present (Hoskisson et al., 2000). Addressing the limitations of this distinct research setting makes for a strong(er) thesis. Therefore, the questionnaire used relatively simple wording, yet if necessary explanations on ‘comprehensive’ terms were provided. The effectiveness of the former was tested in a pilot study among five people before actual distribution of the questionnaire. Executing a pilot study enhances both content- and construct validity. Moreover, three experts known as: dr. R. Bohnsack, MSc A. van Mossel (head of services, senior advisor BiD Network) and K. Koens (PhD. researcher on business cultures and market access strategies for small tourism businesses in the townships around Cape Town, South Africa), each possessing relevant though distinct expertise on the topic, reviewed the survey on content as well as question formulation.
Secondary data
The configuration by Korunka et al. (2003) focuses on the social aspects of ‘environment’. Since the emerging market context is included as an expected moderator in this study, geographical environment should be included next to the aspects considering the entrepreneur’s social environment. The literature review provides that especially the differences in institutional environment will display differences between developing- and developed countries. Therefore, the online questionnaire covers the perceived quality of the entrepreneur’s institutional environment on a 5-point Likert scale ranging from strongly disagree to strongly agree (My country encourages entrepreneurship - it is easy to start and maintain a business within my country).
To further support this information the website www.doingbusiness.org/rankings is consulted. In this almost all countries that are present within the sample are ranked according to the relative ‘ease of doing business’ (see appendix 4). This organization includes figures on the ease of starting a business, dealing with construction permits, getting electricity, registering property, getting credit, trading across borders, enforcing contracts and resolving insolvency. Furthermore, data is present on the protection of investors and taxes (The World Bank Group, 2014).
Follow-up interviews
After a first (qualitative + quantitative) analysis of the questionnaire data and the generation of descriptive statistics, the researcher decides whether follow-up interviews (e.g. Skype sessions)
would be of interest. If so, these will be semi-structured interviews focusing on specific aspects of interest to the researcher. These interviews will be recorded and consequently transcribed to allow for qualitative data categorization and subsequent analysis. Appendix 5 contains the customized semi-structured interview guides. Requests for follow-up interviews have been sent out to nine successful entrepreneurs and five entrepreneurs who had no financing whatsoever. Two out of this latter group were also included in the group of successful entrepreneurs. In total, five entrepreneurs have responded to the request for a follow-up interview.
Activity Weak
Identification of interview themes 20 (12.05.2014 – 18.05.2014) Contacting entrepreneurs 21 (19.05.2014 – 25-05.2-14)
First reminder 22 (26.05.2014 – 01.06.2014)
Conducting interviews 23 (02.06.2014 – 08.06.2014) Table 5.3: Interview planning
5.2.3 DATA ANALYSIS
The data analysis was completed using both quantitative- and qualitative techniques. At first, the questionnaire data was analysed followed by the analysis of the follow-up interviews.
Qualitative analysis
The qualitative data analysis involved exploration of open-ended survey responses obtained from 26 EMEs. The questions were designed in such a way that they were broad, enabling multiple viewpoints. An example question is: ‘When do you feel your business is successful? QSR NVivo software is used to analyze the raw data, i.e. attaching meaningful categories (nodes) to specific units of data with similar characteristics. The former helps in the search for recurring patterns in the data. The fact that this data is already structured per survey questions allows for meaningful and standardized comparisons across individuals.
Responses from the questionnaire helped to identify multiple themes to explore in more detail during the follow-up interviews - allowing for greater depth and individuality. Nine entrepreneurs who indicated to be successful were contacted to elaborate on their road towards success. Another set of five entrepreneurs were contacted to elaborate on their financing since they did not attempt to receive funding and they did not have any other sources to finance their business. Neither did they invest more than 20% of their own funds. The interviews will be recorded via Skype and subsequently coded using QSR NVivo
software. It should be noted that it has been decided to step away from Skype interviews. A number of the approached entrepreneurs were really happy to share their stories though they had difficulties with the English language. It has been decided to put all questions on paper and allow the entrepreneurs to answer the questions in a relaxed way and even allow for the option to answer in Spanish like some of them already did in the questionnaire as well. When the latter occurred, Ms. K. Durieux (fellow MSc student) and Mr. J. Budike (native Colombian) translated the answers to English.
Quantitative analysis
The quantitative figures were analyzed using SPSS software, mostly providing descriptive information with regards to the individuals in the sample and their businesses. The former allowed for initial insights in the set data (see appendix 6for an overview). The complete data set included all entrepreneurs, to allow for some specific insights concerning certain groups of respondents (e.g. all entrepreneurs who indicated to be successful) some subgroups were created within the sample. In this way, it was possible to look for differences between unsuccessful and successful entrepreneurs. Furthermore, some statistical tests (e.g. crosstabs) were generated to look for cohesion between variables e.g. new venture success and formal registration.
6. RESULTS
The results section is modelled according to the below theoretical framework, adapted from Korunka et al. (2003). It subsequently reports about the entrepreneur, the new venture, personality, personal resources and environment. The section ends with an overview of new venture success and the configuration of aspects that makes a successful EME.
Figure 6.1: Theoretical framework
6.1 THE ENTREPRENEUR
The resulting sample of 26 individuals was 76 % female, aged 41 on average within a range of 24-57 and mostly living in South America (68%). Underneath, one can find an overview of some basic demographics related to the sample. Most EMEs live in a single household (23%) or are in a family with two or three children (both 12%). It seems normal that multiple generations of a family are living together, several EMEs have indicated to be living with their parents and/or grandparents. Gender Male 6 (24%) Female 20 (76%) Age 24-28 1 (4%) 29-33 7 (28%) 34-38 5 (20%) 39-43 3 (12%) 44-48 2 (8%) 49-53 1 (4%) 54-58 6 (24%) Continent / Country South America 17 (68%) Argentina 3 Bolivia 1 Colombia 5 Ecuador 2 Mexico 2 Peru 4 North America 0 (0%) Africa 5 (20%) Kenya 2 Nigeria 2 South Africa 1 Uganda 1 Asia 2 (8%) Palestine 1 Philippines 1 Europe 1 (4%) Netherlands 1
6.2 THE NEW VENTURE
Most of the fashion entrepreneurs sell handbags / purses (35%) and women’s clothing (31%) and 54% of them have only recently started their business (1-5 years ago). When controlling for the outliers (respectively 15 and 22 founders) a business was started by 2 people ( 1,875) on average and the founders of 14 businesses did not hire any employees afterwards. The businesses that do have employees most frequently hired three employees within a range of 0-20. The reasons to start a business differed but most entrepreneurs either seized a market opportunity (19.2%), genuinely enjoy working with fashion (19.2%) or strived for independence by obtaining the freedom to work on own terms (19.2%). One of the entrepreneurs reported how the search for freedom played out in his life:
Interviewer: You indicated that you did not have any previous experience related to fashion, how did you come up with the idea to start designing and producing belts?
Interviewee (#3 FUI4): “The four way belt colors came up because I always wanted to have a company with no boundaries, a company that I can travel doing business with other clients oversea by exporting my goods. Managing a school for about eight years has been quite a routine for me, and I could not do business oversea with my school, that’s for say something was missing there. I was bored; I wanted to live without boundaries.”
Most of the businesses were formally registered, figure 6.2 shows the distribution of the sample regarding formal registration. However, some entrepreneurs deliberately chose not to register their business formally, they want to start small and test their products for some time before moving into the ‘hassle’ of formalization. “I think what I did so far was a pilot and it gave me good results. It’s true that on the other hand, I've moved into business informally, and I understand that to find investors I should have formalized things like my tax position, the trademark, a factory (other than my house).” (#4 FUI).
Figure 6.2: Formal registration
4
FUI = Follow-up interview; transcripts are enclosed in appendix 9 Formal registration
Yes No
