Entrepreneurial franchisees?
The effect of entrepreneurship on individual franchisee performance
Master thesis, MscBA, specialization Small Business & Entrepreneurship University of Groningen, Faculty of Economics and Business
Summary
In this study the concepts entrepreneurship and small business performance are subject to research in a franchise context. The thesis will contribute to a theoretical framework which has hardly been attended to and the target group consist of franchisors who will be provided with insights concerning the desirability of entrepreneurial franchisees in relation to individual franchisee performance. These franchisors can use the outcomes in order to decide whether entrepreneurship within their franchisees as well as their organization is required.
Therefore, this study tries to find out whether entrepreneurial franchisees, who possess entrepreneurial characteristics (traits) and/or show entrepreneurial behaviour, perform better than franchisees which are less entrepreneurial and/or show less entrepreneurial behaviour. In sum, this means that the focus of this study is on the effect of entrepreneurship on franchisee performance. The accompanying research question and sub-questions are formulated as follows:
What is the effect of entrepreneurship at the level of franchisees on franchisee performance?
a) What is entrepreneurship and how does it influence small firm performance according to the literature?
b) What is entrepreneurship in a franchise context and how does it influence the performance of franchisees according to the literature?
c) What is the effect of entrepreneurship on franchisee performance in an empirical setting?
The first two questions concern entrepreneurship and how it influences small firm and franchisee performance according to literature. In this thesis entrepreneurship was defined as running a business through entrepreneurial actions, which consist of the accumulation and assembling of external resources. The trait-approach, which focuses on entrepreneurial traits, and the behavioural approach, which focuses especially on entrepreneurial behaviour, are the most important approaches which this study builds up on. Entrepreneurial traits and entrepreneurial behaviour were used to measure entrepreneurship within the franchisees. The entrepreneurial traits that are distinguished on the basis of existing literature are need for achievement, need for autonomy, need for power, social orientation, internal locus of control, determination, market orientation, creativity and innovation, risk-taking propensity and flexibility. Entrepreneurial behaviour is divided into three separate entrepreneurial actions which are introducing new products, introducing new methods of production/operation and the opening up of new markets.
The empirical study was conducted within the Kubus system, which comprises of offices that can provide businesses with accountancy, taxes and business advice. The franchisees as well as the franchisor were subjected to a questionnaire. The franchisor answered questions regarding the level of standardization of the franchise relationship and the franchisee answered questions concerning his or her entrepreneurial traits, entrepreneurial behaviour and individual performance. The Kubus system comprises of 64 franchise units in the Netherlands from which 34 franchisees filled in the questionnaire. That is a response of 54%, which is relatively high.
It can be concluded that the traits determination, creativity and social orientation seem to be important traits that have a positive effect on objective as well as subjective performance, and especially on performance related to growth. Overall, it can be stated that entrepreneurial traits seem to have a positive effect on especially subjective performance and that there are certain traits that stand out with regard to their influence on performance.
Table of contents__________________________________________________
1. Introduction ... 5
2. Theoretical framework ... 8
2.1 Entrepreneurship and (small) firm performance ... 8
2.1.1 Entrepreneurship ... 8
2.1.2 (Small) firm performance... 14
2.1.3 Influence of entrepreneurial traits on (small) firm performance ... 15
2.2 Entrepreneurship and franchisee performance ... 16
2.2.1 Entrepreneurship in a franchise context ... 16
2.2.2 Levels of franchisee performance ... 17
2.2.3 Influence of entrepreneurial traits on franchisee performance... 18
2.3 Conceptual model... 19
3. Methodology ... 22
3.1 General description of the methodology ... 22
3.1.1 Empirical setting ... 22
3.1.2 Research method ... 22
3.1.3 Business research ethics ... 23
3.2 Measuring the level of standardization of the franchise system ... 23
3.3 Measuring entrepreneurship ... 24
3.3.1 Measuring entrepreneurial traits... 24
3.3.2 Measuring entrepreneurial behaviour... 25
3.4 Measuring franchisee performance ... 25
3.4.1 Measuring objective franchisee performance ... 25
3.4.2 Measuring subjective franchisee performance ... 25
4. Results ... 27
4.1 Descriptives and frequencies of data... 27
4.1.1 General description of the population ... 27
4.1.2 Entrepreneurial traits ... 27
4.1.3 Entrepreneurial behaviour ... 28
4.1.4 Turnover, number of customers and turnover/customer ... 29
4.1.5 Personal and business goals ... 29
4.2 Relationship between entrepreneurship and franchisee performance ... 30
4.2.2 Relations between entrepreneurial traits and subjective performance ... 32
4.2.3 Relating results concerning entrepreneurial traits/performance to hypotheses... 33
4.2.4 Relations between entrepreneurial behaviour and objective franchisee performance ... 33
4.2.5 Relations between entrepreneurial behaviour and subjective franchisee performance... 33
4.2.6 Relating results concerning entrepreneurial behaviour/performance to hypotheses34 5. Conclusion... 35
6. Limitations, suggestions for further research and recommendations... 37
References ... 38
Appendices ... 41
Appendix I Questionnaire ... 42
Appendix II Dataset questionnaire E-Scan (Driessen & Zwart, 2005) ... 49
Appendix III Descriptives and frequencies age, sex, education and experience ... 51
Appendix IV Descriptives and frequencies entrepreneurial behaviour... 54
Appendix V Descriptives and frequencies turnover, number of customers & turnover/customer... 55
Appendix VI Descriptives and frequencies business and personal goals ... 56
Appendix VII Pearson correlation SPSS test results... 59
1. Introduction
The interest in entrepreneurship has increased considerably over the years and a growing number of people take on a positive attitude towards it (Wennekers, 2006). There is generally no accepted definition or model of what entrepreneurship is. The literature abounds with criteria ranging from creativity and innovation to personal traits such as appearance and style. The term “entrepreneur” has often been applied to the founder of a new business by assembling resources (Gartner, 1985). In this view, anyone who inherits, or buys an existing enterprise or manages a turnaround as an employee is by definition not an entrepreneur. Others reserve the term to apply only to the creative activity of the innovator (Schumpeter, 1934). With this last definition, the majority of those pursuing entrepreneurial and business activities would be excluded. Yet, others refer to the identification and exploitation of an opportunity as entrepreneurial (Peterson, 1985).
Because of the lack of an existing generally accepted definition of entrepreneurship, a thesis definition is constructed on the basis of the terms mentioned above. Therefore, in this thesis entrepreneurship is defined as running a business through entrepreneurial actions, which consist of the accumulating and assembling of resources.
Franchising has become a significant form of business ownership in many economies (Dada, Watson & Kriby, 2007). Within franchising a distinction can be made between product-trade name franchising or business format franchising. Product-trade name franchising, which is prevalent in automobile sales, retail gasoline, and soft-drink distribution, uses franchisees to distribute a product under a franchisor's trademark. Business format franchising is designed to have the franchisee replicate, in different locations, the entire franchisor's business concept including the marketing strategy and plan, the operating manuals and standards, and quality control. Restaurants, personal and business services, rental services, and non-food retailing are examples of the business segments where this package concept is in use (Preble and Hoffman, 1995). In this thesis the definition of business format franchising is referred to when discussing franchising.
The franchisee perspective has received little attention in the academic franchising literature (Grunhagen and Mittelstaedt, 2001). In this study the concepts entrepreneurship and small business performance are subject to research in a franchise context. Therefore, this thesis will contribute to a theoretical framework which has hardly been attended to and the target group consist of franchisors which will be provided with insights concerning the desirability of entrepreneurial franchisees in relation to individual franchisee performance. These franchisors can use the outcomes in order to decide whether entrepreneurship within their franchisees as well as their organization is required. When discussing franchising, there is an apparent paradox regarding the usage of a prescribed business format on the one hand and the need for adaptation to the local environment on the other hand (Kaufmann & Eroglu, 1999).They state that the delicate balance between the large-scale economies derived from system standardization and the advantages derived from a fit with the local market is at issue. The pursuit of quality control, cost minimization, and image uniformity through standardization comes with hidden costs to the system. Differences in the nature of local demand result in franchisee requests for local adaptation in various aspects of the business. Moreover, as the system matures, resistance from experienced franchisees may grow and their adaptation demands become more pronounced. Although such adaptation demands by franchisees may be detrimental to system-wide standardization efforts, they may also serve as instigators and incubators of essential changes to the maturing system. In other words, it is frequently the franchisees who, through their local adaptation attempts, develop new offerings, modify existing ones, and find solutions to system wide problems. Excluding franchisees from the process of innovation can introduce a serious inertia into the system, which may well destroy its ability to function in a changing environment. Therefore, the franchisor must resolve the constant, yet evolving, tension between the two strategic imperatives of standardization and adaptation.
provide evidence that the exploitation of a proven template for doing business by large-scale replication will be more successful when that template is copied precisely. They find that franchise outlets that do not accurately replicate the business model of their franchisor by deviating from the franchisor recommended product mix or deriving a greater percentage of their revenue from non-standard products put themselves at a significantly higher risk of failure.
The results of Winter et al (2007) are inconsistent with the notion that local adaptation is needed (Kaufmann & Eroglu, 1999) and that growth by replication is maximally effective when business models are adapted to fit the salient characteristics of new environments. Kaufmann & Eroglu (1999) state that there is not a perfect local fit if decisions regarding local market response are made centrally. On the other hand, economies of scale are not realized if decisions regarding system coordination are made locally. They find that large-scale economies in franchising require standardization of all elements of the format components. They mention that, to be effectively franchised, the format elements must be fully formulated, documented, and uniformly executed across all franchised outlets. However, they state that as the industry, the franchised system, and the individual franchisees mature, conditions favouring adaptation of format elements begin to emerge. They mention that a healthy format is one that evolves over time with the shifts in market demand and conditions. Changes in the market, technology, and law cannot be ignored, nor can ideas on how to respond. Differences in tastes, income, media habits, and so forth reduce the benefits of extensive standardization and justify local adaptation, which causes a fit with the local markets. They conclude that finding this balance between standardization of the core elements and permitted local market adaptation of the peripheral elements remains one of the greatest challenges facing franchisors.
Finally, Cox & Mason (2007) also state that there is a tension in business format franchising between, on the one hand, standardisation and uniformity and, on the other hand, geographical variations in market conditions and resource availability. They state that research has demonstrated in the case of independent small firms that local geographical conditions influence business strategy. Local variations in the business environment do create a conflict with the need to maintain the uniformity of the franchise format. They find that adaptation is restricted to peripheral format components. No changes are made to the core format components. Furthermore, they state that most franchisors recognise that their franchisees are an important source of innovation.
The freedom of franchisees to adapt to the local environment provides opportunities for entrepreneurship to arise. Because of the different advantages and disadvantages that are presented above, this study tries to find out whether entrepreneurial franchisees, which possess entrepreneurial characteristics (traits) and/or show entrepreneurial behaviour, perform better than franchisees which are less entrepreneurial and/or show less entrepreneurial behaviour. In sum, this means that the focus of this study is on the effect of entrepreneurship on franchisee performance. To be able to conduct a proper research the following research question is formulated:
What is the effect of entrepreneurship at the level of franchisees on franchisee performance?
In order to answer this research question, it must be divided into several sub-questions which will largely determine the structure of this thesis. Therefore, the following sub-questions are formulated: a) What is entrepreneurship and how does it influence small firm performance according to the literature?
b) What is entrepreneurship in a franchise context and how does it influence the performance of franchisees according to the literature?
c) What is the effect of entrepreneurship on franchisee performance in an empirical setting?
questions need to be tested in an empirical setting in order to come up with valuable conclusions that contribute to a theoretical framework which has hardly been attended to in the past.
In chapter 2 the theoretical framework is presented, which this study is built on. It consists of theories concerning entrepreneurship and small firm/franchisee performance. It concludes with a conceptual model in which the research variables and their relationships are presented and described.
2. Theoretical framework
In this chapter, the theoretical framework is presented. It consists of an overview of existing literature concerning the research variables, which are entrepreneurship and (small firm/franchisee) performance. The first paragraph deals with the first sub-question of this research, which relates to entrepreneurship and small firm performance. The second paragraph relates to the second sub-questions of this research, which deals with entrepreneurship in a franchise context and its relationship with franchisee performance. The chapter concludes with a conceptual model in which the research variables are presented and their relationships are described.
2.1 Entrepreneurship and (small) firm performance
As, mentioned above, this paragraph deals with entrepreneurship and small firm performance and their link in literature. First entrepreneurship is dealt with in general. Existing perspectives are described and an own classification of these perspectives is presented. Furthermore, small firm performance and the influence of entrepreneurship are described.
2.1.1 Entrepreneurship
A lot has been written about entrepreneurship in the past years and many theories have been developed to describe and clarify it. The term entrepreneurship has a wider application than the creation of an enterprise. It was first used in the 17th century and it is derived from the French verb entreprendre, which means to undertake a project or an activity (Leitão da Silva Martins, 2007). Schumpeter (1947) defined entrepreneurship as a force of ‘creative destruction’ by which the established ways of doing things were destroyed by the creation of new and better ways that created more economic wealth. He stated that an entrepreneur is an innovator who implements change in markets through the implementation of new combinations. These combinations consist of the introduction of new materials or new production methods, the opening of a new market, the search for new resources or new materials and the development of organizational innovation in industry.
This paragraph consists of the most important theories concerning entrepreneurship and describes which theory will be used in this thesis. Moreover, two different elements of entrepreneurship will be discussed. These are entrepreneurial traits and entrepreneurial behaviour. This distinction is not always made in literature. However, it is evident that entrepreneurial traits are not the same as entrepreneurial behaviour. Traits reflect the individuals’ potential and urge to act in a certain way. However, these traits do not ensure that an individual will act as might be expected on the basis of these particular traits. The actions of a person also depend on the characteristics of the particular situations he or she finds itself in. Therefore, a distinction is made between the traits linked to entrepreneurship and entrepreneurial behaviour.
2.1.1.1 Perspectives on entrepreneurship
When examining the existing literature concerning entrepreneurship (Scherjon et al, 1998; Bridge et al, 2003), it appears that there exist several points of view from which entrepreneurship is approached. Scherjon et al (1998) distinguish three disciplines from which entrepreneurship is studied which are the economic, the sociological and the psychological discipline. First, the economic discipline refers to the function of entrepreneurship in an economy. Second, the sociological discipline concerns the influence of social structures on enterprising behaviour and, third, the psychological discipline deals with the personality characteristics of enterprising individuals.
In addition to the individual, the organisation, the process and the environment are taken into account. There are no hierarchical relationships and they mutual influence each other.
The contingency approach to entrepreneurship is a holistic approach. It focuses on the individual, the organisation, the environment and their influence on the success of the enterprise. This is in a way a similar approach as the process- or behavioural approach, except that in the contingency approach especially the environment plays the largest part. The enterprise constantly interacts with the environment and enterprises can act in different environments. However, each environment demands a different type of entrepreneur.
The main focus of the trait-approach is on personality characteristics (traits) of the entrepreneur. The entrepreneur is seen as a specific personality type which can be distinguished by defining his personality. Each of the approaches focuses on another element. The trait-approach emphasizes the personality characteristics, but it ignores the process and the environment in which the entrepreneur acts. Opposite to this, the contingency approach emphasizes the environment. And finally, the process- or behavioural approach does recognize all elements and has a special focus on the entrepreneur who influences success through his behaviour. This perspective on entrepreneurship of Scherjon et al (1998) is presented in figure 2.1.
Figure 2.1 Scherjon et al (1998) entrepreneurial disciplines and approaches
Bridge et al (2003) use another classification of theories concerning entrepreneurship. This shows many similarities with the classification of Scherjon et al (1998). Bridge et al (2003) distinguish between personality theories, economic, sociological, cognitive and behavioural approaches. Personality theories consider that it is the personality of individuals that explains their actions. The simplest theory states that the possession of traits predisposes individuals to enterprising behaviour. These personality theories obviously correspond with Scherjon’s (1998) psychological discipline from which entrepreneurship is studied and the trait-approach he mentions.
Bridge et al (2003) state that the economical approach is concerned with entrepreneurship and its function in an economy. They see the entrepreneurs as a seeker of opportunities and the innovative coordinator of resources in the pursuit of profit. Clearly, this economical approach is also the same as the one mentioned by Scherjon et al (1998).
The sociological approach considers that individuals are seriously constrained in making choices. They argue that choices are limited by the experience and expectations that individuals face in their social world. It is stated that opportunity structures, related to education and employment, dictate individual careers. These opportunity structures vary from person to person and therefore different
structures will lead to similar individuals towards the development of differing levels of knowledge, skill and drive. Again, this approach is also taken into account by Scherjon et al (1998).
The cognitive approach, which also recognizes personality characteristics as an important variable of entrepreneurship, is an approach which considers more elements that influence whether or not an individual will act entrepreneurial. It is stated that the decision-making process by which individuals choose to act entrepreneurial is very important. It is suggested that decisions are not made on the basis of reality, but on the basis of perceived reality and entrepreneurs perceive things differently. The amount of opportunities and chances an individual sees will be decisive to whether or not an individual becomes an entrepreneur. The perceived reality relates to three subjects: specific abilities, environmental possibilities and social support. It can be concluded that the cognitive approach takes several elements, mentioned in other approaches, into account, which are: personality characteristics, the environment and social structures. It can be seen as a mix of the contingency approach, the trait-approach and the psychological discipline and sociological discipline of Scherjon et al (1998).
Finally, the behavioural approach views an enterprising act in the context in which it happens, a context that is often complex. This approach focuses on behaviours individuals display in a context, rather than on what they themselves are. This behavioural approach corresponds with the process or behavioural approach of Scherjon et al (1998). The perspectives on entrepreneurship described by Bridge et al (2003) are presented in figure 2.2.
Figure 2.2 Bridge et al (2003) perspectives on entrepreneurship
On the basis of the two classifications of perspectives on entrepreneurship of Scherjon et al (1998) and Bridge et al (2003), I come to the following arrangement of approaches (see figure 2.3): trait-approach (entrepreneurial traits), sociological approach (social structures), behavioural approach (entrepreneurial behaviour), and an economical approach (economic motives). Besides these approaches which focus on one specific element related to entrepreneurship, an integrative framework can be constructed that consists of the individuals personality characteristics, social environment, economic environment and their influence on individual behaviour. In consequence this individual behaviour influences the organisation and its success.
Figure 2.3 My classification of perspectives on entrepreneurship
As stated in the main research question, this study focuses on the effect of entrepreneurship on franchisee performance. As will be discussed further on in this thesis, entrepreneurship must be measured in relation to the franchisees. This measurement can be done on the basis of the personality characteristics related to entrepreneurship (entrepreneurial traits), which show an individual’s chance and likeliness to be entrepreneurial. Entrepreneurship can also be measured on the basis of enterprising acts of individuals. This is related to as entrepreneurial behaviour. Therefore, the trait-approach, which focuses on entrepreneurial traits, and the behavioural approach, which focuses especially on entrepreneurial behaviour, are the most important approaches which this study is built on. In addition, the trait-approach is often used in literature in relation to success. This success element is referred to in the organisation element in the figure. In conclusion, the focus of this study is indicated in the figure. Entrepreneurial traits and behaviour are attended to in the two following subparagraphs.
2.1.1.2 Entrepreneurial traits
As mentioned in the previous paragraph, the trait approach attends to personal characteristics with which an enterprising personality can be identified. A few traits that are often proposed were mentioned. However, there are more traits that can be linked to an enterprising individual. Several studies have examined which traits can be linked to entrepreneurs or predict entrepreneurial intention. These studies use personality theories to identify why some individuals are more enterprising than others (Bridge et al., 2003). Table 2.1 shows an overview of the traits that are described in literature concerning entrepreneurship. These sources consist of original sources, textbooks and so-called repeaters but the important thing is that those traits are mentioned frequently by different authors and can therefore be classified as the most important traits. By using the references in literature the table below is constructed. Driessen & Zwart (2006) provided the basis from which we started to make an overview of the most important traits. They distinguish between need for achievement, need for autonomy, need for power, social orientation, internal locus of control, determination, market orientation, creativity, flexibility and social desirability.
Table 2.1 Traits of entrepreneurs
Year Author Trait(s)
1947 Schumpeter Innovative; initiative
1961 McClelland Risk taking; need for achievement, power Integrative Framework
Focus of this study
1971 Palmer Risk measurement
1971 Hornaday & Aboud Need for achievement, autonomy, power, recognition; innovative/creative
1972 Komives Need for achievement
1985 Gartner Dealing with change and ambiguity
1985 Ahmed Need for achievement
1987 Begley & Boyd Risk taking; tolerance of ambiguity
1993 Caird Determination
1990 Vesper Need for autonomy
2000 Thomas & Mueller Risk taking; internal locus of control; innovative/creative 2001 Lee & Tsang Internal locus of control
2003 Bridge et al Need for achievement; risk-taking propensity; internal locus of control; need for autonomy; determination; initiative, proactive; creativity; self-confidence
2006 Driessen & Zwart Market orientation; social orientation, social desirability 2009 Timmons & Spinelli Commitment; determination; courage; tolerance of risk;
ambiguity, uncertainty; creativity; self-reliance; adaptability/flexibility; motivation to excel
When comparing the characteristics mentioned by the different authors, I formed eleven traits that are linked to entrepreneurship in existing literature. These eleven traits cover all of the traits mentioned by the different authors. The traits are need for achievement, need for autonomy, need for power, social orientation, internal locus of control, determination, market orientation, creativity and innovation, risk-taking propensity, flexibility and social desirability. Some of these traits are linked to small firm and franchisee performance in literature. This will be dealt with further on in this theoretical framework. Need for achievement
McClelland (1961) has written a lot about this trait or need and there are a lot of studies which relate need for achievement to entrepreneurship (e.g. McClelland, 1965; Komives, 1972; Ahmed, 1985). Bridge et al. (2003) also state that enterprising people have a strong need for achievement, which stimulates them into action. When they accomplish something they consider to be worthwhile, their self-esteem is enhanced and they are encouraged to seek other demanding assignments. In conclusion, enterprising people are constantly on the lookout for challenges and they want to distinguish themselves which is an intrinsic motivation. Non-entrepreneurs do not have this need for achievement and they are satisfied with less.
Need for autonomy
A couple of researchers attended to this trait in relation to entrepreneurship (Hornaday & Aboud, 1971). Bridge et al. (2003) state that need for autonomy refers to independence from other people, which means that you are in control of your own destiny. Moreover, they state that enterprising people have a strong desire to do things alone and control their own lives.
Need for power
Several authors mentioned need for power as a characteristic of entrepreneurship (McClelland, 1961; Hornaday & Aboud, 1971) McClelland (1961) defines the need for power as an urge of individuals to control others and to be able to influence them and make them do things which perhaps they would not have done if left to themselves. Along with this they accumulate the symbols and status of power and the prestige they consider to go along with it.
Social orientation
their ideas. They easily make contact with others and they are led by businesslike considerations when socializing. They are able to put aside their social desires and focus on their business. Non-entrepreneurs are more reserved in relation to making contact to others.
Internal locus of control
Locus of control refers to the question of where the control of events resides (Thomas & Mueller, 2000; Lee & Tsang, 2001). Bridge et al. (2003) state that enterprising people believe that they personally make things happen in a given situation, and underplay the importance of luck and fate. These individuals have an internal locus of control. Furthermore, Bridge et al. state that enterprising people have a lot of self believe and trust. They state that with regard to the ongoing seek for demanding challenges, it is most unlikely that those people lack self-confidence and trust. Davids (1963) and Timmons & Spinelli confirm that entrepreneurs are very self-confident and that they believe that they make things happen. Concluding enterprising individuals have an internal locus of control and are self-confident.
Determination
Determination is also an important trait which is linked to entrepreneurs (Caird, 1993; Timmons & Spinelli, 2009). Bridge et al. (2003) state that enterprising people complete projects and a degree of endurance is necessary to be able to achieve. If individuals want to reach their goals they will need to explore alternatives, overcome difficulties and make their plans work.
Market orientation
Market orientation is a business approach or philosophy that focuses on identifying and meeting the stated or hidden needs or wants of the customers, through its own or acquired products. Driessen & Zwart (2006) state that market orientation is the ability to sympathize with the customers and to be able to use that in their conduct of business. Entrepreneurs adapt to the specific needs of a clear defined target group. They are also able to describe how and what their competitors do. Non-entrepreneurs are less able to sympathize with their customers and they only focus on their product and do not have a clear defined target group.
Creativity and innovation
Enterprising individuals are creative and are a source of innovation (Schumpeter, 1934; Hornaday & Aboud, 1971; Thomas & Mueller, 2000; Timmons & Spinelli, 2009). Bridge et al. (2003) state that the enterprising individual is often concerned with developing new products, processes or markets. Furthermore, they argue that this ability to bring something new into being is not equally distributed within the population. Creative people tend to have more originality than others and they are able to come up with solutions that are new and pioneering. Furthermore, they are also inclined to be more adaptable and are prepared to consider a range of alternative approaches.
Risk-taking propensity
A lot has been written about risk which seems to be an unavoidable subject in relation to entrepreneurship (Mill, 1848; McClelland, 1961; Palmer, 1971; Casson, 1982; Begley & Boyd, 1987; Thomas & Mueller, 2000, Thomas & Spinelli, 2009). Bridge et al. (2003) argue that proactive achievers, which entrepreneurs are, break new ground and they state that there are considerable risks in that behaviour. There are many failures that can cause disaster for an organization or career. The outcomes of enterprising events are less certain than those of conservative ones. Therefore, enterprising individuals will need to have the capacity to tolerate risks. They must have the psychological make-up and resources to cope with any failure. However, enterprising people are not high-risk takers. Research has shown that effective entrepreneurs are moderate risk-takers or that they take calculated risks (Driessen & Zwart, 2006).
Flexibility
customers or new competitors. They interpret chances and treats and adjust their plans (Gartner, 1985). Non-entrepreneurs are less able to adjust to these circumstances and they offer resistance and can be very obstinate.
Social desirability
Driessen &^Zwart (2005) state that social desirability is a general dimension which is important with regard to doing business. Reliability is the most important subject within social desirability. It is related to social acceptance, social approval, popularity, social status, leadership qualities, or any quality making him a socially desirable companion.
As mentioned before, these traits are linked to enterprising individuals. A person can possess one or several traits and different individuals have different levels of for example creativity or need for autonomy. The traits will be used to measure entrepreneurship within the franchisees, which will be described in the methodology chapter. To some extent studies have been conducted concerning the influence of individual traits on small business performance. This will be dealt with further on in this chapter. Hypotheses will be built upon those findings in order to be able to conduct a proper research.
2.1.1.3 Entrepreneurial behaviour
Entrepreneurial traits are not the same as entrepreneurial behaviour. Traits reflect the individuals’ potential and urge to act in a certain way. However, these traits do not ensure that an individual will act as might be expected on the basis of these particular traits. The actions of a person also depend on the characteristics of the particular situations he or she finds itself in. Therefore, a distinction is made between the traits linked to entrepreneurship and entrepreneurial behaviour. The latter is attended to as actions of an entrepreneurial nature within the space that is available regarding the level of standardization of the franchise system. These entrepreneurial actions are reactions on the needs of the local market. Dada, Watson & Kirby (2007) distinguish clearly between traits and behaviour. They distinguish the following entrepreneurial behaviours of a franchisee in a franchise context: introducing new products, methods of production/operation, new sources of supply and the opening up of new markets.
2.1.2 (Small) firm performance
Small business performance is not an unambiguously defined concept. According to Walker & Brown (2004), small business performance can be defined by financial and non-financial criteria. They state that traditional descriptors of business performance have been based on employee numbers or financial criteria, such as profit, turnover and return on investment. The economic measures of performance are popular due to the ease with which they can be administered and applied since they are very much hard measures. These measures are referred to as objective performance. Table 2.2 provides an overview of measures for objective performance mentioned in recent literature.
Table 2.2 Objective measures for objective franchisee performance
Author(s) Measures
Besanko et al. (2007) Turnover
Maxham, Netemeyer & Lichtenstein (2008) Turnover growth
Chandler & Jansen (1992) Profitability (sales/earnings)
Besanko et al. (2007) Gross margin
Maxham, Netemeyer & Lichtenstein (2008) Average buying-in value per client
Besanko et al. (2007) Labour costs
their research between lifestyle criteria, financial criteria and social responsibility. In addition Runyan, Droge & Swinney (2008) define performance as overall performance perceived and evaluated by the small business owner. In relation to non-financial lifestyle criteria measures that can be used to determine small business performance are autonomy, job satisfaction, flexibility, personal satisfaction and personal achievement (Walker & Brown, 2004).
2.1.3 Influence of entrepreneurial traits on (small) firm performance
Many authors discuss several traits in their research which they link to successful entrepreneurship and small firm performance. In these studies entrepreneurial traits are automatically linked with entrepreneurial behaviour. They presume that if individuals possess entrepreneurial traits, they will act entrepreneurial in relation to those traits. Traits that are often linked to small firm performance are need for achievement and risk-taking propensity (see table 2.2). Small firm performance is measured as successful entrepreneurship in this research. Successful entrepreneurship is related to the performance measures mentioned in the previous paragraph. This means that it can relate to as well financial as non-financial criteria.
Need for achievement is most discussed in literature in relation with small firm performance. McClelland (1961) was one of the first and most important authors attending to this trait. A lot of studies support the hypothesis that successful entrepreneurs have a high need for achievement (Komives, 1972; Ahmed, 1985; Sambasivan, 2009).
Concerning risk-taking propensity, Drucker (1985) argues that successful entrepreneurs try to define the risks they have to take and to minimise them as much as possible. They search for opportunities, give them serious consideration and if promising, capitalise on them. Drucker (1985) goes so far to say that successful entrepreneurs tend to be cautious and are opportunity-focused, as opposed to risk-focused. For them defending yesterday rather than making tomorrow is really risky. In addition, Timmons & Spinelli (2009) argue that small firm performance is positively influenced by tolerating risk, ambiguity and uncertainty. They state that successful entrepreneurs manage paradoxes and contradictions. However, they mention that they are not gamblers, but they take calculated risks. Adding to the theories which link traits to small firm performance, Runyan, Droge & Swinney (2008) argue that innovativeness, pro-activeness and risk taking are strongly related to high performance in a small business context. By performance they mean overall performance as perceived and evaluated by the small business owner.
the existence of a relation between the traits and performance and not the direction of that relationship. The table shows that there are several traits that are related to performance. These traits are need for achievement, need for power, risk-taking propensity, internal locus of control, determination and creativity/innovative. The other traits that were distinguished in paragraph 2.1.1.2 (need for autonomy, social orientation, market orientation and flexibility) are in literature not (yet) related to performance. Table 2.3 Traits with a positive relation with performance
Year Author Trait(s)
1961 McClelland Need for achievement
1969 Warner Need for achievement; need for power
1972 Komives Need for achievement
1985 Drucker Risk-taking propensity
1985 Ahmed Need for achievement
1987 Begley Risk-taking propensity
1993 Hood & Young Need for achievement; internal locus of control; risk-taking propensity; determination
2003 Bridge et al Internal locus of control; determination 2008 Runyan, Droge &
Swinney
Innovativeness; pro-activeness; risk taking 2009 Timmons & Spinelli Risk taking propensity
2009 Sambasivan Creativity; risk taking propensity; need for achievement; innovative; internal locus of control; need for autonomy
2.2 Entrepreneurship and franchisee performance
As mentioned, in the beginning of this chapter, this paragraph focuses on entrepreneurship in a franchise context and its relationship with franchisee performance. First, entrepreneurship in a franchise context is dealt with in detail after which different levels of franchisee performance are presented. Finally, the influence of entrepreneurship on franchisee performance, withdrawn from literature is subject of the final sub-paragraph.
2.2.1 Entrepreneurship in a franchise context
Dada, Watson & Kirby (2007) conducted a study which focused on entrepreneurial tendencies of franchisors and franchisees. The franchisor’s sampling frame comprised the attendees of a major British Franchise Association’s (BFA) event, the October 2005, Annual National Franchise Exhibition in Birmingham, U.K. The BFA is the only independent accreditation body for franchising in the U.K. It is “the home of ethical franchising with a membership base of 257 franchise brands covering 13 industry sectors. During the franchisors’ survey, when they were asked to indicate on their completed questionnaires if they would be prepared for their franchisees to be surveyed too, they stated that their franchisees would be prepared to cooperate.
Dada, Watson & Kirby (2007) found that franchisors and franchisees both have above-average entrepreneurial tendencies compared to other individuals in general. They conclude that there are several traits, linked to entrepreneurship, which franchisors and franchisees possess. These traits are need for achievement, need for autonomy, creativity and internal locus of control.
According to Dada, Watson & Kirby (2007), both franchisors and franchisees have a fairly high need for achievement, which signifies a high tendency to set challenging goals and a high planning orientation for success.
Concerning creativity, both franchisors as franchisees obtained high scores within the study of Dada, Watson & Kirby (2007). This suggests that they have an imaginative and innovative orientation, a preference for novelty, intuition and sensitivity to opportunity.
Furthermore, they state that both franchise partners tend to show calculated risk-taking, which indicated that they both have the ability to make decisions in uncertain situations and that they are capable of judging if a risk is worth taking when the consequence of failure does not outweigh the chance and value of success.
In addition, Dada, Watson & Kirby (2007) argue that franchisors and franchisees have an internal locus of control. This means that they believe that they are able to control the events in their own lives and do not believe in such factors as chance or fate. This suggests that they are proactive, self-reliant, self-determined, self-confident and that they believe that achievement is due to ability and effort. As mentioned before, the internal locus of control is strengthened by good performance.
Overall, Dada, Watson & Kirby (2007) conclude that there are no statistically significant differences between franchisors and franchisees. This implies that both should be regarded as entrepreneurs. They also found that franchisors seek to recruit franchisees that possess entrepreneurial qualities. They look for ambitious, independent, creative, risk-taking people who like to be in control. Dada, Watson & Kirby (2007) state that many franchisors utilize a standard selection system (such as psychometric tests and interview techniques), during the franchisee selection process, to identify whether or not a prospective franchisee is entrepreneurial. Consistent with this statement, is that they found that a large percentage of the franchisors allow their franchisees to undertake entrepreneurial actions such as introducing new products, services, methods of production or operation and the opening up of new markets. They state that an even larger part of the franchisees confirm that their franchisors allow them to undertake entrepreneurial actions.
2.2.2 Levels of franchisee performance
Franchisee performance is a form of small firm performance, which is discussed in paragraph 2.1.2. The measures discussed in that paragraph can be applied in a franchise context. Four different levels of performance can be distinguished when assessing performance concerning franchise chains. Figure 2.4 shows an example that explains the difference and relationships between the several levels. The first performance level concerns the holding, which is Ahold in this example. The second level concerns the franchise companies Albert Heijn, Albert and ICA. And the third level concerns the different brands within Albert Heijn, which are for example Albert Heijn, Etos and Gall & Gall. Finally, the fourth level concerns the individual franchised companies, which are the local stores of Albert Heijn, Etos and Gall & Gall (source: www.Ahold.com). As made clear before, this thesis focuses on the performance of these individual franchised companies. Obviously, the financial performance of the individual Albert Heijn often directly influences the financial performance of Albert Heijn as a whole. Figure 2.4 Different levels of franchise performance
AHOLD
Albert Heijn
Albert Heijn/Etos/Gall & Gall
Individual Albert Heijn/Etos/ Gall & Gall
Albert ICA
2.2.3 Influence of entrepreneurial traits on franchisee performance
In addition to the influence of entrepreneurial traits on small firm performance, there is also some literature on the influence of entrepreneurial traits on franchisee performance. Again, no clear distinction is made between entrepreneurial traits and entrepreneurial behaviour. As explained before, in this research we distinguish between these two variables. Hypotheses will be formulated with regard to entrepreneurial traits and franchisee performance. However, no research has been done in relation to the effect of entrepreneurial behaviour and performance. Therefore, no hypotheses will be formulated here.
Different factors can be observed that influence franchisee performance. There are franchise relationship characteristics (Cochet, Dormann & Ehrmann, 2008; Nathan et al, 2008; Floyd & Fenwick, 1999), franchise unit characteristics (Cochet, Dormann & Ehrmann, 2008; Chandler & Hanks, 1994) and personal franchisee characteristics (Nathan et al, 2008; Fenwick & Strombom, 1998; Bridge et al, 2003).
Franchise relationship characteristics concern the age of the relationship and the quantity and quality of franchisor support (Cochet, Dormann & Ehrmann, 2008; Nathan et al, 2008; Floyd & Fenwick, 1999). The franchise unit characteristics consist of geographic distance between the franchise unit and the head office, the level of intra-chain competition, market attractiveness and resource-based capabilities (Cochet, Dormann & Ehrmann, 2008; Chandler & Hanks, 1994). It can be concluded that both groups of characteristics are not relevant in relation to measuring the effect of entrepreneurship on franchisee performance. These factors measure characteristics of the business instead of the franchisee. Therefore, the third group, which consist of personal characteristics of the franchisee, is interesting for this research. The personal characteristics refer to the traits, which are discussed in the previous paragraph. In literature some is written about the relation between traits and performance. In this paragraph these relations are discussed and used to formulate hypotheses.
Fenwick & Strombom (1998) state that traits linked to entrepreneurship do not positively influence franchisee performance. Their research showed that entrepreneurial franchisees and thosewith prior experience in managerial roles that were similarin terms of required knowledge, skills and abilities, and interms of managerial duties and tasks performed, tend to perform relativelypoorly.
However, Morrison (1997) shows that entrepreneurial traits do influence franchisee performance in a positive way. She conducted research regarding the relationship between traits and performance in a franchise context. A distinction is made between so-called Type A and Type B individuals. Type A’s are individuals characterized as job-involved, ambitious, mentally alert, hard-driving, aggressive, time-urgent and competitive which also have the ability to handle a number of projects simultaneously. Type B’s on the other hand, are characterized as far more laid back and relaxed, which must be interpreted as the opposite of Type A’s. Prior studies had concluded that these Type A’s behaviour pattern seemed to have value with respect to organizational performance, society’s interpretation of success and personal satisfaction. Some research found that Type A’s perform better than Type B’s on uncomplicated tasks (Burnam, Pennebaker & Glass, 1975), tend to put forth more effort (Jamal, 1985), accept and remain committed to more difficult goals (Racicot, Day & Lord, 1991) and work more productively when under challenge and with a high degree of perceived control (Lee, Ashford & Bobko, 1990; Lee, Earley & Hanson, 1988). Furthermore, a study of executives of small independent business firms by Boyd (1984) found that firms run by Type A’s had a higher return on investment and five-year growth in sales than firms run by Type B’s. Morrison (1997) concluded that these findings concerning Type A’s behaviour was also significantly related to the performance measures mentioned above, in a franchise context. In the same research, Morrison (1997) studied the dimensions conscientiousness, agreeableness and extraversion, which were related to performance by Barrcik & Mount (1991) and Tett, Jackson & Rothstein (1991). Morrison found that conscientiousness and agreeableness do not correlate with performance. However, she did confirm that extraversion correlates with performance.
traits that are clearly linked to performance in literature. These traits are need for achievement, need for power, risk-taking propensity, internal locus of control, determination and creativity/innovative. The other traits that were distinguished in paragraph 2.1.1.2 (need for autonomy, social orientation, market orientation and flexibility) are in literature not (yet) related to performance. However, because we do not only want to confirm what is already concluded in other studies and because we stated that it is expected that entrepreneurship in general has a positive influence on performance, hypotheses for the other traits are formulated as well. With this we want to be able to come up with new results and conclusions. We choose to leave social desirability out because we think that this trait is not related especially to entrepreneurship but to running a business. And that is not what we want to measure because that is a much broader construct.
In addition, even though there are no clear results shown in recent literature concerning the relationship between entrepreneurial behaviour and performance, we do expect that entrepreneurial behaviour influences performance positively. Therefore, the following hypothesis can be formulated for this research:
H1: Successful franchisees have a high need for achievement H2: Successful franchisees have a high need for power H3: Successful franchisees have a high risk-taking propensity H4: Successful franchisees have an internal locus of control H5: Successful franchisees have a high determination H6: Successful franchisees are creative and innovative H7: Successful franchisees have a social orientation H8: Successful franchisees have a market orientation H9: Successful franchisees have a high need for autonomy H10: Successful franchisees are flexible
H11: Successful franchisees show entrepreneurial behaviour
2.3 Conceptual model
The conceptual model presents an overview of the variables which are attended to in this research. It consists of the three main variables which are subject of research. These are the entrepreneurial traits, entrepreneurial behaviour and franchisee performance. The entrepreneurial traits and behaviour variables together form the entrepreneurship part of the main research question. The variable franchisee performance forms the other dependent main variable of the research question. These variables form the specific conceptual model of this thesis and it is presented in figure 2.5.
Figure 2.5 The specific conceptual model for this thesis
Figure 2.6 Conceptual model consisting of all elements mentioned
Franchisee performance
• Objective performance • Subjective performance
Entrepreneurial traits
• Need for achievement • Need for autonomy • Need for power • Social orientation • Internal locus of control • Determination • Market orientation • Creativity • Risk-taking propensity • Flexibility • Social desirability Entrepreneurial behaviour • Introducing new products/services • Introducing new methods
of production/operation • Introducing new sources
of supply • Opening up of new markets Level of standardization franchise system Franchisee performance Entrepreneurial traits
Economic and sociological environment Entrepreneurial behaviour
Franchisee selection
The relationship between the three main variables relate to the main research question. As mentioned above, the entrepreneurial traits and the entrepreneurial behaviour variables together form the measurements of entrepreneurship within this thesis.
There is a direct relationship between entrepreneurial traits and franchisee performance. As concluded before in this chapter, on the basis of existing literature, it is expected that certain traits can be directly linked to franchisee performance. As stated in the hypotheses, we distinguish between ten traits that we try to link to franchisee performance.
As mentioned in the introduction, authors present different advantages and disadvantages regarding local adaptation (Winter et al., 2007; Cox & Mason, 2007; Kaufmann & Eroglu, 1999). It was stated that finding the balance between standardization and permitted local market adaptation remains one of the greatest challenges facing franchisors. However, it is expected that if franchisors can find this balance and provide the franchisee with considerable space to show entrepreneurial behaviour in relation to peripheral elements which are linked to local market needs, the franchisee performance will rise.
Several sources in literature (Cox & Mason, 2007 and Dada, Watson & Kirby, 2007) state that franchisors seek to recruit franchisees that possess entrepreneurial qualities. As mentioned before they look for ambitious, independent, creative, risk-taking people who like to be in control. Therefore, with regard to the relationship between franchisee selection and entrepreneurial traits of the franchisee, it is expected that franchisors will hire franchisees which possess entrepreneurial traits.
As mentioned before, the level of standardization of the franchise system provides a certain space for the franchisee to show entrepreneurial behaviour. It seems logical that when a large part of the format is standardized, there is little room for entrepreneurial behaviour and vice versa. Franchisees who possess entrepreneurial traits and who work in a franchise system with a low level of standardization, are expected to show entrepreneurial behaviour. However, those same franchisees are not expected to show a lot of entrepreneurial behaviour when the level of standardization in the franchise system is high. This means that the level of standardization is expected to be a major factor in whether or not franchisees who possess entrepreneurial traits and capabilities will show entrepreneurial behaviour. This level of standardization of the franchise system is not taken into account in the first conceptual model of this thesis, because it is considered the same for each franchisee. However, as will be explained in the next chapter, we measure the level of standardization of the franchise system to validate that the franchise system, in which the franchisees surveyed work, meets the needs of which is seen as necessary to be able to come up with valuable results in relation to, especially, entrepreneurial behaviour.
The two last variables concern environmental variables which have an important influence and those cannot be kept out. The economic and sociological environment, which were dealt with in the beginning of this chapter, influence entrepreneurial behaviour. The economic rewards and achievements determine entrepreneurial behaviour. The entrepreneur is a seeker for opportunities and the innovative coordinator of resources in the pursuit of profit. The sociological environment attends to what is socially and psychologically necessary for the existing of entrepreneurship. Demographical and environmental factors which lead to the establishing of a new business play an important role. Social structures determine the entrepreneurial intention that an individual has. In conclusion, the environmental factors are important variables which influence whether or not an individual shows entrepreneurial behaviour. However, these variables are not the subject of the research and are considered the same for all the franchisees and are therefore not dealt with in more detailed.
3. Methodology
In this chapter, the methodology used in this study is described. First, a general description of the methodology is given after which subjects regarding the measurement of the research variables are presented.
3.1 General description of the methodology
This paragraph consists of a general description of the methodology that is used to conduct the research. First, the empirical setting is discussed, in which conditions related to the franchise system and motives for choosing the system are given. Second, the research method, a questionnaire, is described, including advantages and the usage of the method. Finally, the paragraph ends with a description of business research ethics, which must be taken into account.
3.1.1 Empirical setting
To be able to conduct a proper research, it is evident that the selected franchise system meets the need of certain criteria and that the obtained results are expected to be valuable. First of all, it is decided that only one franchise system is used in this research. This is necessary because the respondents must be faced with the same regulations and variables, such as the level of standardization of the franchise system, which can influence their actions and thoughts in relation to entrepreneurial traits and behaviour. Especially the last variable is important because if for example a very entrepreneurial franchisee is not allowed to show entrepreneurial behaviour in franchise system X, and another, less entrepreneurial franchisee, is in franchise system Y, the outcomes regarding entrepreneurial behaviour and its effect on performance cannot be compared. Therefore, it is necessary that the respondents are faced with a similar space in which they can show their entrepreneurial traits and behaviour. A second criterion, which can be linked to the first, is that the franchisees must be able to show entrepreneurial behaviour and therefore certain elements of the system must not be standardized.
A very suitable franchise system is found. The Kubus system, which comprises of offices that provide business clients with accountancy, taxes and business advice, meets the need of this last important criterion. The franchise system comprises of 64 individual franchise units in the Netherlands. When discussing the influence of the franchisees on important decisions regarding the organization and its functioning, eight elements can be distinguished (Windsperger, 2004). These elements refer to the level of standardization of the franchise formula. In paragraph 3.2 those decisions are dealt with and the influence of franchisees within the Kubus system is described.
3.1.2 Research method
In this research a questionnaire is used to collect the data needed. There are a couple of advantages when comparing a questionnaire to a personal interview. Reasons for using a questionnaire are that a considerable number of franchisees and one franchisor need to be surveyed and that the results need to be compared to come up with conclusions that can be generalized for a certain population. A questionnaire enables a researcher to keep the participant focused on the goal of the research and it is therefore the most efficient and effective tool to gather data in this particular situation. The franchisees and franchisors are surveyed by means of an electronic questionnaire distributed by e-mail. The questionnaire is presented in Appendix I. To be able to gain a proper response two reminders were mailed as well. This eventually resulted in a response of 54%, which is relatively high.
With regard to demonstrating relationships between the research variables, SPSS is used. To be able to show relationships between variables, correlations must be found. These correlations can be tested with the Pearson correlation coefficient (bivariate correlations). Also the Kendall’s tau and the Spearman correlation coefficient can be used when the assumptions of the Pearson correlation coefficient are not met (Huizingh, 2006). When, for some reason, these tests fail to deliver results, the Chi-square test is used to determine if two nominal variables are independent from each other. If this is not the case, our hypothesis could be confirmed because this means that variables are dependent. 3.1.3 Business research ethics
As in all researches, all parties should exhibit ethical behaviour (Cooper & Schindler, 2006). Ethics are norms or standards of behaviour that guide moral choices about our behaviour and our relationships with others. The goal of this ethical behaviour is to ensure that no one is harmed or suffers adverse consequences from the research activities. This matter is very important with regard to research in a franchise context. When collecting data through as well the franchisee as the franchisor, their relationship can be easily harmed when discussing the other party and ventilating their opinions. Therefore, ethical behaviour is an important condition to be able to conduct a good research and obtain valuable data. To be able to treat the participants ethical, three guidelines need to be followed. First, the context of the research should be explained in an introductory announcement. This should consist of the name of the researcher, the name of the organization he or she is representing and a brief description of the purpose and benefit of the research. These matters are written down in the introductory section of the questionnaire that is used in this research. This introductory section is also presented in Appendix I. Second, the participants’ rights and protections need to be explained. The participants should be told the truth and no affairs can be hidden in an attempt to improve response rates or quality. Third, securing informed consent from participants is a matter of fully disclosing the procedures of the proposed research design before requesting permission to proceed with the research. Finally, the anonymity of the participants and the ethical treatment of the obtained data are secured (Cooper & Schindler, 2006).
3.2 Measuring the level of standardization of the franchise system
As mentioned in the previous paragraph, a questionnaire is used to obtain the data needed for this research. With regard to the standardization vs. local adaptation problem in a franchise context, questions regarding the level of standardization in a franchise contract are formulated. This level of standardization provides a degree of freedom for the franchisee to show entrepreneurial behaviour. In relation to the conceptual model, we stated that this variable is not taken into account because it is considered the same for each franchisee. However, we measure the level of standardization of the franchise system to validate that the Kubus franchise system meets the described needs mentioned in paragraph 3.1.1.
decisions are almost fully standardized. In conclusion, with an average score of 4,25, the Kubus system provides the franchisees enough space to be able to show entrepreneurial behaviour.
Table 3.1 Franchisee influence on organizational decisions within the Kubus system
Decisions Level of influence (1 = very little 7 =
very much) Procurement 5 Product 3 Accounting systems 2 Resale prices 2 Advertising 3 Employees’ training 5 Investment/financing 7 Recruiting 7
3.3 Measuring entrepreneurship
Entrepreneurship is the most important construct in this thesis and, as mentioned before, it is measured through entrepreneurial traits and entrepreneurial behaviour in this study. In this paragraph the methodology concerning both variables is described.
3.3.1 Measuring entrepreneurial traits
In the previous chapter eleven traits were discussed. Now it is the question how we can measure those traits within the franchisees. Driessen & Zwart (2005) developed an objective tool for self-reflection for entrepreneurs and those who wish to start a business of their own, which is called the E-scan. The E-scan provides insight into the necessary traits that are related to entrepreneurship. They distinguish between ten traits, which are called dimensions (see table 3.2). The E-scan comprises of statements related to the traits and comes up with an individual score per trait and a total score related to the level of entrepreneurship within the individual.
Table 3.2 Dimensions of the E-scan and sources the constructs are based on (Driessen & Zwart, 2005)
Dimensions Source
Need for achievement Edwards Personal Preference Schedule (EPPS) (Founder: Murray, 1983) Need for autonomy Edwards Personal Preference Schedule (EPPS) (Founder: Murray, 1983) Need for power Edwards Personal Preference Schedule (EPPS) (Founder: Murray, 1983) Social orientation Edwards Personal Preference Schedule (EPPS) (Founder: Murray, 1983) Internal locus of control Paulhus (1983)
Determination Edwards Personal Preference Schedule (EPPS) (Founder: Murray, 1983) Market orientation Quinn (1988) & Lorrain and Dussault (1988)
Creativity Quinn (1988) & Lorrain and Dussault (1988)/Edwards Personal Preference Schedule (EPPS) (Founder: Murray, 1983)
Flexibility Quinn (1988) & Lorrain and Dussault (1988) Social desirability -
What stands out, in comparison with the traits that we distinguished in the previous chapter, is that Driessen & Zwart (2006) do not have a separate dimension for risk-taking propensity. They attached this trait to creativity and fused it into one dimension. In this thesis both traits are kept apart, because it is obvious that they cover different subjects. As mentioned earlier, creativity is about coming up with new ideas and bringing them into being and risk-taking-propensity is about tolerating and dealing with risk.
