THE DEVELOPMENT OF ENTREPRENEURIAL INTENTIONS: EXPLORING THE ROLE OF ORGANIZATIONAL ENVIRONMENT AND PRIOR EXPERIENCE

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1 THE DEVELOPMENT OF ENTREPRENEURIAL INTENTIONS: EXPLORING THE ROLE OF ORGANIZATIONAL ENVIRONMENT AND PRIOR EXPERIENCE Mark T. Schenkel Belmont University 1900 Belmont Boulevard Nashville, TN Jay A. Azriel Seton Hall University Deborah V. Brazeal California State Polytechnic University, Pomona Charles H. Matthews University of Cincinnati ABSTRACT Despite its practical importance, an ongoing mystery of entrepreneurship revolves around unraveling what leads to entrepreneurial intent. This research sought to extend previous studies by examining the influence of prior start-up experience, family business background, and current perceptions of the environment and oneself on the development of entrepreneurial intentions from short- and long-term horizon. In a field study of nascent entrepreneurs, we found that: 1) previous start-up experience predicts both immediate and long-term entrepreneurial intentions while 2) the current environment primarily increases the attractiveness of starting a business in the immediate future. Implications for theory and future research are discussed. EXECUTIVE SUMMARY Entrepreneurial intentions represent an important source of fuel for entrepreneurial action. Consequently, developing a firmer grasp of what turns dreamers into nascent entrepreneurs is critical. Despite its practical importance, previous research has made only limited inroads to discovering what types of factors trigger entrepreneurial intent. Accordingly, this study examines the role that previous start-up experience, self-efficacy, and perceived entrepreneurial environment play in the development of entrepreneurial intentions in a sample of 121 potential entrepreneurs. This study has short and long-term implications for educators and entrepreneurial program designers. For example, while we find that perceiving an entrepreneurial environment positively influences the intent to start a business in the short-term, it does not affect intentions over a longer time horizon. This suggests that if entrepreneurial education expects to influence longterm economic development, educators must work harder, to help students understand how what they are doing can enhance the potential for the individual to engage entrepreneurial career over time, as opposed to focusing on a more traditional career in a large corporate setting.

2 While our study s sample focuses on nascent entrepreneurs in an academic environment, our findings are also important for practitioners. Developing entrepreneurial values are critical to maintaining a competitive edge in an increasingly dynamic global economy. Thus, companies must avoid seeking to maintain their competitive position in the same way as their predecessors. This research provides an important reference point for future studies that consider how explicit and implicit knowledge influences entrepreneurial intentions. For example, a critical task for future research will be to consider the temporal aspects of entrepreneurial intentions. The present research may act as a springboard for beginning this process of developing a more robust understanding of the various entrepreneurial paths that can lead to strategic effectiveness. INTRODUCTION Over the past decade, researchers have increasingly focused on the role intentionality plays in new venture growth (e.g., Krueger Jr. Reilly, 2000; Wiklund & Shepherd, 2001). Studies have also begun to focus on identifying antecedents generally associated with entrepreneurial intentions, including: age and sex (Stein & Nurul, 2004), self-efficacy (Boyd & Vozikis, 1994; Drnovsek & Glas, 2002), education (Kristiansen & Indarti, 2004; Peterman & Kennedy, 2003) and prior entrepreneurial exposure (Krueger Jr., 1993). Despite the contributions, the majority of these studies have presumed that such factors play an equally influential role across individuals, as well as across time, and attempts to exam this process in a prospective fashion are relatively new (Reitan, 1997). Consequently, the notion that entrepreneurial intentions may evolve along different paths across individuals remains less than fully explored (Krueger Jr. & Kickul, 2006). Our study seeks to deepen this line of investigation further by examining how, personal experience, personal aspirations, and perceptions of one s situation and self relate to the development of entrepreneurial intentions across men and women. We also consider these differences across individuals who have a family business background and those who do not. Specifically, we investigate three research questions. First, what factors influence the development of entrepreneurial intentions? Second, do males and females differ with regard to the levels of intention they develop? Third, do males and females with different family backgrounds in entrepreneurial ventures differ with regard to the levels of intention they develop? If so, do the antecedent factors contribute differently in degree or in kind? THEORETICAL BACKGROUND Entrepreneurship involves forming expectations about future economic conditions and the feasibility for new business ventures (Casson, 2003; Baron, 1998). Capital theorists postulate that the formation of such expectations is based, at least in part, on the stocks of information and knowledge individuals accumulate through experience over time (Becker, 1993; Coleman, 1988, 1990). While the notion that access to certain fundamental elements of information is necessary to generating entrepreneurial activity is intuitive, researchers have noted that access to information alone is unlikely sufficient in achieving a full understanding of nascent information processes. Information related to the potential for economic ventures rarely presents itself in fully developed form, is rarely costless to obtain, and the desirability associated with potential

3 outcomes can substantively influence the meaning attributed to individual elements of economic information in the context of preexisting knowledge structures (Krueger, 1993). Consequently, this suggests entrepreneurs may also be distinguished by the distinct cognitive properties for effectively assigning meaning to, and evaluating information elements associated with economic opportunity (Kirzner, 1979; Shane, 2000). Factors Affecting Entrepreneurial Intentions Entrepreneurial intent is a construct that reflects future entrepreneurial potential. It originates from the idea that the decision to become an entrepreneur may be plausibly considered as voluntary and conscious (Krueger Jr. & Reilly, 2000). Although research has shown the relationship may not be fully one-to-one, it does generally suggest that intention is a strong positive predictor of subsequent entrepreneurial activity (Krueger Jr., 2003). Thus, it appears to be a reasonable construct for analyzing the entrepreneurial decision-making process. The lack of a perfect one-to-one relationship likely reflects the complex and temporal nature of entrepreneurial opportunity, as well as the intuitive notion that individuals are likely to accumulate potentially valuable resources at different rates and to different degrees. Consequently, it comes as no surprise that the perception of opportunity alone may not always be enough to move foster the shift from intention to action (Ardichvili, Cardozo, & Ray, 2003). Extant research suggests that individuals accumulate knowledge-based resources that will demonstrate direct relationships to the development of entrepreneurial intent. Polanyi (1966) has argued knowledge occurs in two forms. Explicit knowledge is the first form, referring to the readily codified aspects of knowledge typically conveyed through formal education and training, which is presumed to provide useful skills for to those interested in engaging in entrepreneurial activity. Working under this presumption, organizations and business colleges alike are increasingly investing in resources in order to build training and support systems designed to enhance the ability of members to recognize and exploit un- or underserved markets. For example, Franke and Luthje (2004) recently found that entrepreneurial education and university support of entrepreneurship had a positive impact on entrepreneurial intentions. Stated formally, Hypothesis 1: Perceptions of organizational resources commitments to entrepreneurship will be positively related to the development of entrepreneurial intentions. Alternatively, an individual s immediate environment can also be a source of tacit knowledge, or know how, which can also serve as an important catalyst to entrepreneurial intentions. Polanyi (1966) noted that tacit knowledge is often context-specific, more challenging to articulate and often lacks agreed upon language. Thus, it tends to be acquired through experience over time, as opposed to formal training. Tacit knowledge yields a qualitatively different sense of absorptive capacity (Cohen & Levinthal, 1990) by providing individuals with a greater depth of understanding and range of conceptualizing entrepreneurial possibilities. Therefore, Hypothesis 2: Prior start-up experience will be positively related to the development of entrepreneurial intentions.

4 Self-efficacy refers to the extent to which individuals believe they are capable of organizing and effectively executing actions to produce attainments (Bandura, 1997). Socio-cognitive theory (Bandura, 1986) postulates that individuals develop a sense of self efficacy that subsequently influences the types of activities, goals and level of persistence individuals are likely to choose. Previous research suggests that self-efficacy can act as internally based source of information, or reference point from which individuals draw as they develop future expectations (Krueger Jr., 2003). Therefore, Hypothesis 3: Self-efficacy will be positively related to the development of entrepreneurial intentions. Shane, Locke and Collins (2003) recently pointed out that little research has considered the role of motivational aspects of nascent entrepreneurial processes. There is some evidence suggesting that individuals in the context of organizations are likely to find value in entrepreneurial behaviors to the degree that they are interested in innovation (Russell & Russell, 1992). Patchen (1965) labeled this tendency interest in work innovation. Therefore, Hypothesis 4: Possessing a desire for innovation will be positively related to the development of entrepreneurial intentions. Hisrich and Peters (1998) point out that early studies have tended to suggest female entrepreneurs possess a tendency toward taking less risk than their male counterparts. Research also suggests that females may be more likely to choose a non-entrepreneurial route to accomplish different goals such as balancing work and family (Brush, 1992). Therefore, Hypothesis 5: In general, males will express stronger entrepreneurial intent than females. Hypothesis 6: Males with a family background in entrepreneurship are more likely to report entrepreneurial intentions than females with a family background in entrepreneurship. Data and Sample METHODOLOGY Data for this study were obtained by randomly sampling more than 750 students attending an international entrepreneurship conference. We selected this particular conference for data collection, in part, because we wanted to enhance the generalizability of the findings. Students attending this conference frequently report being in the nascent stages of new venture creation and represent a wide range of schools domestically and abroad. Only three students refused to participate, resulting in a final sample size of 126 subjects. Measures Entrepreneurial Intentions. Entrepreneurial intentions was measured by through a 3-item scale (Krueger Jr. & Reilly, 2000). Respondents were asked To what extent have you considered starting your own business? ; To what extent have you prepared to start your own business? ;

5 and How likely is it that you are going to start your own business in the next five years? All three items were coded individually on a 5-point Likert scale ranging from 1 ( Not at All ) to 5 ( A Great Deal ). Perceived Entrepreneurial Environment. Perceived entrepreneurial environment was measured through a 6-item Likert-type scale (Franke & Luthje, 2004). A sample item is The university provides a strong network of outside business people. Responses were coded on a 5-point scale ranging from 1 ( Not at all Accurately ) to 5 ( Very Accurately ). The reliability for this scale, as measured by Cronbach s alpha, was.89. Prior Start-up Experience. Prior start-up experience was measured through a single item Likerttype scale. Students were asked Do you have any prior experience in starting up your own business? Responses were coded as 0 (none) to 4 or more. Self-efficacy. Entrepreneurial self-efficacy was measured through a 20-item Likert-type scale (De Noble, Jung, & Ehrlich, 1999). This measure consists of six subscales and was adopted because it has been tailored to the venture creation process. A sample item is I can see new market opportunities for new products and services. Responses were coded on a 5-point scale ranging from 1 ( Strongly disagree ) to 5 ( Strongly agree ). The reliability for this scale, as measured by Cronbach s alpha, was.83. Desire for Innovation. Desire for innovation was measured through a 4-item Likert-type scale. Respondents were asked to select the answer that best describes them. A sample item is I have a desire to initiate innovative activities. Responses were coded on a 7-point scale ranging from 1 ( Strongly disagree ) to 5 ( Strongly agree ). The reliability for this scale, as measured by Cronbach s alpha, was.88. Family Business Background. Family business background was measured through a single item scale. Respondents were asked, Have your parents ever started a business? Responses were coded as 0 (No) and 1 (Yes). Sex. Sex was coded as 0 for females and 1 males. DATA ANALYSIS AND RESULTS In order to test the hypotheses, multivariate analysis of variance (MANOVA) was employed. The three entrepreneurial intentions measures are highly correlated suggesting that MANOVA is the appropriate method for testing hypotheses. Hypotheses 1 through 4 state that perceptions of organizational resources commitments to entrepreneurship (H1), prior start-up experience (H2), self-efficacy (H3) and possessing a desire for innovation will be positively related to the development of entrepreneurial intentions. Each of these hypothesized variables was entered as independent variables and the three entrepreneurial intentions measures as dependent variables into a MANOVA equation. The main effects suggest limited and positive support for the relationship between perceptions of organizational resource commitments to entrepreneurship and entrepreneurial intentions in the short run (H1), but no relationship to entrepreneurial intentions in the longer term. Similarly, limited and positive support for the relationship between

6 entrepreneurial self-efficacy and entrepreneurial intentions in the short run (H3), but no relationship in the longer term. Previous start up experience (H2), by contrast, demonstrates a strong relationship with entrepreneurial intentions in both the short and longer term, whereas the desire for innovation (H4) is unrelated for all three measures of entrepreneurial intention. Hypothesis 5 states that in general, males will express stronger entrepreneurial intent than females. This hypothesis was tested using a MANOVA analysis like that used in testing H1, focusing on the sex of the individual as an independent variable and the three entrepreneurial intentions variables as dependent variables. This effect was significant at the MANOVA level for the extent an individual has considered starting his or her own business (F(3,117) = , p <.01) and for the likelihood of starting a business in the next five years (F = 9.465, p <.01). In addition, the univariate main effects for sex were significant at the each of these times (p <.05). To investigate these results further, the three measures of entrepreneurial intentions by sex and means were calculated across these three measures. The data show that male college students consistently report significantly higher entrepreneurial intentions than females. Thus, the results provide support for hypothesis 5. Hypothesis 6 states that males with a family background in entrepreneurship are more likely to report entrepreneurial intentions than females with a family background in entrepreneurship. This hypothesis was tested through a MANOVA analysis including only those respondents with a family business background. Sex was entered as the independent variable and the three entrepreneurial intentions variables as dependent variables. The MANOVA effect for sex was significant, (F(3,63) = 3.541, p <.05). In addition, the univariate main effects for sex were significant for the extent the individual has considered starting his or her own business (F(3,63) = , p <.01), as well as for their intentions to do so in the next five years (F(3,117) = , p <.01). To investigate these results further, we re-ran the MANOVA adding in the four main independent variables from earlier analyses. We found that male college students consistently report significantly higher entrepreneurial intentions than females, even when both have a family business background. Thus, the results provide support for hypothesis 6. DISCUSSION: SO WHAT? This study deepens the entrepreneurial intentions by examining how personal experience, personal aspirations, and perceptions of one s situation and self collectively relate to the development of entrepreneurial intentions across men and women. Our preliminary findings suggest first that previous start up experience is vital to the process of developing entrepreneurial intentions, regardless of family background or duration of intent. As the strongest antecedent of entrepreneurial intent, this finding underscores the importance of including start up experience knowledge-based factor into general theoretical models of entrepreneurial intent. It also suggests that educators, managers, and entrepreneurs alike carefully consider how they can design exercises and activities that expose those who we want to be more entrepreneurial. A second suggestion drawn from our preliminary findings revolves around underscoring the critical need for theorist and practitioners to be cognizant of the fact that entrepreneurial intent

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