Comparative Study Of The Determinants And Performance Of Opportunity And Necessity Entrepreneurship

The global financial crisis, took place in U.S. on September 15,2008, has triggered a serious slowdown in world economic growth and society. To stimulate economic growth and job creation, encouraging entrepreneurship therefore becomes the "last straws" in many countries. On September 26,2008, Chinese Ministry of Human Resources and Social Security with other 10 ministries jointly issued the "Turnbull Guidance on employment promotion through entrepreneurship". Some local governments take it as "national entrepreneurship" and write into policy files. A few scholars and officials claimed that "national entrepreneurship" should be upgraded to the national strategy. On May 20,2009, U.S. Congress passed the "Job Creation through Entrepreneurship Act of 2009". However, Shane (2009) who is the 2009 Winner of the Global Award for Entrepreneurship Research pointed out that encouraging more and more people to start businesses is bad public policy, which won't enhance economic growth or create a lot of jobs because start-ups, in general, aren't the source of our economic vitality and job creation. His argument may indicate that the policy makers need to "stop spreading the peanut butter so thin".For the same reason, Global Entrepreneurship Monitor research program, which involves exploration of the role of entrepreneurship in national economic growth, has clearly distinguished between opportunity and necessity entrepreneurship since 2001. The so-called opportunity entrepreneurship is that individuals involved in entrepreneurial activities are to take advantage of a business opportunity; while necessity entrepreneurship is that individuals involved in entrepreneurial activities are not satisfied with the current job or because of no better choices for work. GEM related research shows opportunity entrepreneurship contributes greater to economic growth and job creation than necessity entrepreneurship (Wennekers et al.,2005; Wong et al.,2005), wherefore, the higher the opportunity entrepreneurship rate, the better; while the lower the necessity entrepreneurship rates, the better (Acs et al.,2005; Acs & Varga,2005). However, GEM's research and conclusions has been questioned in recent years.Under this context, to overcome above controversy, and to achieve reliable and robust conclusions, this thesis utilizes the latest developed methodology in modern econometrics to conduct a comprehensive empirical investigation into the following four questions:(1) Are GEM's entrepreneurial model (GEM model for short) suitable for both opportunity and necessity entrepreneurship? (2)From macro and micro perspectives, does opportunity entrepreneurship performs better than the necessity entrepreneurship? (3) If the opportunity entrepreneurship does perform better, is it adequate to justify the public policy supporting it is correct? (4) If opportunity entrepreneurship does deserve more support, how to identify and encourage it? In other words, what are the macro and micro determinants of opportunity entrepreneurship? What's the difference between opportunity and necessity entrepreneurial determinants?The whole thesis is structured as six chapters, main contents and corresponding conclusions in each chapter are summarized as follows:Chapter 1 is an introduction. Introducing background and significance of this research, according to literature review, this chapter finds that domestic and international scholars did little empirical study on opportunity and necessity entrepreneurship, research contents, research methods and sample selection in this field are worthy of further study and exploration. Finally, this chapter presents the research framework, contents and methods.Chapter 2 offers the theoretical framework of opportunity and necessity entrepreneurship. Reviewing the concepts and elements of entrepreneurial environment, introducing five classic entrepreneurial models based on environmental perspective; this chapter compares the five models from four dimensions, such as environment, opportunities, resources, ability or motivation. According to the model's explanatory power, complexity and verifiability etc., this thesis takes GEM model as the theoretical framework, based on the planned behavior theory and the entrepreneurial motivation model, this thesis augments it from macro and micro perspectives, and presents the corresponding hypothesis.Chapters 3 studies the macro-mechanisms and macro-effects of opportunity and necessity entrepreneurship. Firstly, based on the country level data of GEM 2005, this chapter compares the differences in entrepreneurial environment between opportunity and necessity entrepreneurship, and then investigates if the GEM model fits to necessity entrepreneurship. Finally, utilizing Ordinary Least Squares (OLS) and Structural Equation Modeling (SEM), this chapter compares the contributions of opportunity and necessity entrepreneurship to economic growth. All finding described as environmental conditions on which opportunity and necessity entrepreneurship depends are significantly different, necessity entrepreneurship is more sensitive to environmental conditions. GEM entrepreneurial model is on whole suitable for both opportunity and necessity entrepreneurship. Good entrepreneurial environment increase opportunity entrepreneurship, but reduces necessity entrepreneurship. Opportunity entrepreneurship has significantly positive effects on economic growth, but necessity entrepreneurship doesn't significantly affect economic growth. This result shows that the marginal effect of government spending to stimulate economic growth through opportunity entrepreneurship promotion is larger, and therefore deserves supporting and encouraging.Chapter 4 investigates the micro-determinants of opportunity and necessity entrepreneurship. After reviewing literature on perspective and determinants of entrepreneurship, definition and measurement methods of risk attitudes, this chapter then uses Heteroscedastic Probit (Hprobit) model, Based on 5631 entrepreneurs-level data from thirty GEM countries in 2005, and further compares the difference in individual characterisics, micro-determinants to samples from different countries and entrepreneurial stages. Hprobit regression to all samples demonstrates that risk attitudes not only affect entrepreneurial motivation, but also affect entrepreneurs' recognition of entrepreneurial motivation. Hprobit regression to the sub-samples of different entrepreneurial stages, first to the sample of start-up stage, finds that risk attitudes affect both entrepreneurial motivation and entrepreneur's recognition of entrepreneurial motivation. When it comes to the sub-sample of post start-up stage, risk attitudes neither affect entrepreneurial motivation nor affect entrepreneur's cognitive variance of entrepreneurial motivation. Further analysis on Opportunity entrepreneur's deep-seated entrepreneurial motivation, this chapter finds that 60% of Chinese opportunity entrepreneurs are economic-driven,52% of opportunity entrepreneurs from other GEM countries are achievement-driven. In the entrepreneurial process, for samples of all GEM countries,57% of the opportunity entrepreneur claimed "Business desire came first, and business idea came later", for the Chinese opportunity entrepreneurs; it is nearly 7 percentages higher, which indicate that Chinese opportunity entrepreneurs are economic-driven and form business desire first.Chapter 5 is a comparative study on opportunity and necessity entrepreneurial performance. Based on the definition and evaluating dimensions of entrepreneurial performance, combining its determinants, this chapter uses Heteroscedastic Ordered Probit (HOprobit) model to compare the group differences in Growth aspirations, innovation and its determinants on condition that entrepreneurial motivation is exogenous and endogenous respectively. Whether entrepreneurial motivation is endogenous or exogenous; it has significant impact on entrepreneurial performance, which indicates opportunity entrepreneurship has a stronger innovation ability and growth aspirations than necessity entrepreneurship. Moreover, Heteroscedastic Ordered Probit (HOprobit) analysis shows that there is systematic difference between opportunity and necessity entrepreneurs in cognitive innovation ability, while the former's cognitive variance of novelty products & services is smaller. When entrepreneurial motivation is exogenous, the systematic difference between opportunity and necessity entrepreneurs in terms of cognitive growth aspirations is not yet significant. When entrepreneurial motivation is endogenous, HOprobit analysis indicates that opportunity entrepreneurs' cognitive variance of growth aspirations is larger. In addition, this chapter also finds that risk attitudes have no direct impact on entrepreneurial performance, but it indirectly affect entrepreneurial performance through the role of entrepreneurial motivation.Chapter 6 provides summation and prospects. This chapter presents conclusions, innovative points, policy implications to Chinese entrepreneurial practice, research limitations and prospects of this study. From a historical perspective, Chinese entrepreneurial activity has switched to the opportunity entrepreneurship. From a global perspective, Chinese entrepreneurial activity is marked by "three high" and "two low". The former denotes high total entrepreneurial activity index, high future start-up rate and high shut down rate; the later denotes low ratio of opportunity to necessity entrepreneurial activity index, low entrepreneurial growth potential. These features reflect and determine China's unique entrepreneurial support system, that is, Chinese government should support opportunity entrepreneurship but shouldn't ignore necessity entrepreneurship, which means that China's entrepreneurial policy should be evaluated by double standards--- "economic evaluation" and "political evaluation" instead of catching one but losing another.Theoretically, China's current entrepreneurial policies are of both "economic efficiency" and "political efficiency". However, their practical effeteness needs to be further evaluated.This thesis contributes to entrepreneurship theory in three aspects:(1)Using a combination of macro and micro analysis, based on the knowledge of economics, management, sociology, psychology and behavioral science and other fields, this thesis initially augments and tests GEM model, which would facilitate to improve and perfect the model. In macro analysis, OLS and SEM methods were used to achieve consist and persuasive conclusions. Moreover, this thesis pointed out limitations that GEM model should be improved. (2)More importantly, this thesis adopting Hprobit and HOprobit not only corrects the estimation bias due to heteroscedasticity when using Probit and Oprobit model in entrepreneurial motivation and entrepreneurial performance, but also identifies the source of heteroscedasticity,that is, risk attitudes have a significant impact on the cognitive variance of entrepreneurial motivation, while the entrepreneurial motivation significantly affect cognitive variance of entrepreneurial performance, which demonstrates that different groups of entrepreneurs are heterogeneous. (3) This thesis not only augments the study object on risk attitudes, but also augments the study perspective of opportunities and necessity entrepreneurship. Furthermore, this thesis initially and systematically studies the impact of risk attitudes on entrepreneurial motivation, of entrepreneurial motivation on entrepreneurial performance, as well as the impact of risk attitudes on entrepreneurial performance. In addition, it also confirms some conclusion of planned behavior theory and the entrepreneurial motivation by GEM data.