NEO Working Paper Series
25th May 2007
Downloadable PDF papers from the NEO Working Paper Series
No. 10
“ENTREPRENEURIAL ATTITUDES, INTENTIONS AND ACTIVITIES – A COMPARISON OF URBAN AND RURAL AREAS IN WALES”
Dylan Jones-Evans, David Brooksbank, Piers Thompson, Robbie Williams
Previous literature has investigated the differences between urban and rural firms in the context of competitiveness (Smallbone and Major, 2003), innovation, technology and growth (North and Smallbone, 2000), networking (Cosh and Hughes, 1998) as well as issues such as firm size, performance, R&D, age, structure and skills (Keeble et al. 1992a). There is very little research however, which has examined the phenomenon of entrepreneurship at an individual level. This paper therefore investigates the important distinctions between different influences on non-agricultural entrepreneurial activity by individual adults within rural and urban environments in Wales and investigates the ensuing implications for policy-makers in ensuring enterprise support delivery.
To investigate the individual differences between urban and rural entrepreneurs, the paper will utilise the 2005 Global Entrepreneurship Monitor data. The survey is a random selection from the population of each economic area, with questions orientated towards the individual (entrepreneur) rather than SMEs per se (Reynolds et al. 2005). In Wales, there were 8,088 respondents which were classified into rural/urban wards using the Office for National Statistics (ONS, 2004) and the Welsh Assembly definition of rurality.
Therefore, this study is the first to combine the GEM Data with the new urban/rural definition developed by the Office for National Statistics and the Welsh Assembly where ward outputs are classified in Urban (over 10,000 inhabitants) and Rural (town, village and dispersed hamlets and isolated dwellings). This gives an estimation of not only the differences in rural and urban non-agricultural entrepreneurial prevalence in Wales, but also the differing attitudes and aspirations relating to entrepreneurship.
It is found that attitudes towards entrepreneurship for the rural and urban populations differ, with greater confidence in enterprise skills, found in the rural population, but interestingly the urban population shows a slightly higher regard for enterprise as a career. It is understandable that entrepreneurial aspirations are found to be similar for the areas, but given the above this is likely to be due to quite different reasons. Actual entrepreneurial activity in rural areas of Wales is found to exceed the entrepreneurial prevalence in urban areas at all stages of business ownership, although the ratio of activity levels is more equal for earlier stage activities, suggesting that this gap may begin to close in the future. The lower regard for enterprise in rural Wales may be explained partially by the finding that a greater proportion of start-ups are necessity driven compared to those in urban areas.
Rural areas of Wales have a history of higher entrepreneurial activity than urban areas, reflected in the confidence reported in business start-up skills, however, this lead appears to be diminishing with the gap in early stage activities closing, and near equal entrepreneurial aspirations, suggesting this will only continue in the future. This suggests that even for a small country like Wales, there are substantial and unique differences between urban and rural environments in relation to not only establishing and enhancing entrepreneurship levels and attitudes, but also maintaining an interest in entrepreneurship in areas historically displaying high levels of enterprise. This, in turn, will affect the manner of small business support and implementation of small business and enterprise policies by the Welsh Assembly Government i.e. one size doesn’t fit all in the Welsh context.
Keywords: Entrepreneurship, Rural / Urban characteristics and Policy-making.
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No. 9
“THE STATE OF GRADUATE ENTREPRENEURSHIP IN THE UK – PRELIMINARY POLICY PAPER BASED ON GEM 2005 DATA”
Caleb Kwong, Dylan Jones-Evans, David Brooksbank
This paper analyses the differences in entrepreneurial activity between graduates and non-graduates within the UK, using the data obtained from the adult sample of the Global entrepreneurship Monitoring (GEM) dataset in 2005. The study looks at four aspects of graduate entrepreneurship in particular. First, the “typical” profile of the “graduate entrepreneur” within the UK. Second, their sourcing of financing. Third, the differences in attitude between graduate and non-graduates towards entrepreneurship; and finally, the effect of enterprise training on entrepreneurial attitudes and their affect on start-ups. The results suggest that graduate entrepreneurs are quite different from non-graduate entrepreneurs, both in terms of sectors in which they are based as well as the initial choice of start-up funding for the business. In terms of entrepreneurial characteristics, the results show that entrepreneurial rates amongst graduates are higher than that of non-graduates. Furthermore, UK graduates are largely opportunity-led and start a new venture to exploit a perceived business opportunity. There are also a higher proportion of male graduates involved in entrepreneurship compared to female graduates, which reflects the general trend across the UK as regards entrepreneurial profiles.
Graduates also hold a more positive attitude towards their ability to start a business. There are a higher proportion of graduates that know an entrepreneur personally, to consider that there are greater start-up opportunities for new business in the next six months, and have the skills to establish a new business within the next three years. However, graduates have a lower opinion of entrepreneurship as a good career choice as well as possessing more negative attitudes towards the status of entrepreneurship in society. The study found that enterprise training at university has positive effects on graduates’ attitudes towards entrepreneurship and their likelihood to participate, measured by our nascent, baby business, and total early-stage entrepreneurship (ESE) participation indexes.
In terms of financing, graduates are more likely to involve equity and external investors than non-graduates although the result is not conclusive. In terms of financing other peoples’ projects, graduates are more likely to be investors in other businesses than non-graduates.
Keywords: Enterprise education, entrepreneurship, graduates
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No. 8
“AN EXPLORATION OF EARLY STAGE ENTREPRENEURIAL ACTIVITY WITHIN DIFFERENT FEMALE ETHNIC MINORITY GROUPS”
David Brooksbank, Natalie Cryer, Dylan Jones-Evans, Caleb Kwong, Piers Thompson
Whilst ethnic minority entrepreneurs and female entrepreneurs have, individually, received considerable attention in recent years, female ethnic minority entrepreneurs remain a largely under-researched group. The few studies that have examined specific groups of female ethnic minority entrepreneurs have not undertaken comparative work which examines entrepreneurial behaviour amongst women from various ethnic groups. This study therefore examines the prevalence of new business starts, as well as the attitudes towards entrepreneurship, as displayed by different female ethnic minority groups in the UK. The findings indicate that there are considerable differences amongst different ethnic groups in the level of entrepreneurial activity by women and their attitudes towards entrepreneurship. This suggests that policy makers should take such differences into account when developing bespoke development policies designed to alleviate the barriers faced by ethnic groups.
Keywords: Ethnic entrepreneurs; female entrepreneurship; entrepreneurial attitudes; start-up firms; government programmes
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No. 7
“PUBLIC SUPPORT PROGRAMMES FOR HIGH GROWTH BUSINESSES IN THE UK: AN EXPLORATORY STUDY”
Dylan Jones-Evans, David Brooksbank, Elin Aaron
This paper aims to provide an exploratory overview of the current business support programmes within the UK that are specifically targeting high growth businesses at a regional level. Numerous studies have analysed the disproportionate employment created by a small percentage of the fastest growing businesses and have called for greater public sector support to be focused on supporting these high growth firms. Other studies have evaluated how best to encourage more businesses to achieve this growth, and have highlighted the effectiveness of various programmes that promote mentoring, access to finance and networking. Seven semi-structured interviews were conducted with policy makers in the first stage of this exploratory research. These policy makers included individuals from the DTI, SBS and Treasury. Policy makers were asked to address the importance placed on high growth firms in the UK. In the second stage of this research, programmes specifically targeting high growth firms were identified in various Regional Development Agencies (RDAs). The directors of these programmes were asked to complete a detailed questionnaire on the programme’s history, funding, resources for assisting participating firms and any lessons that had been learnt in the development and administration of the programme. Whilst the seven programmes identified in the various UK regions seemed, at first, to be very different from each other, they were essentially offering the same services and support, and had learnt the same lessons as they were developed and implemented. For example, whilst one programme might be marketed as assistance to raise finance but would essentially advise the firm on managerial skills to make it more attractive for investors; another one-stop-shop programme would advise the firm on managerial skills, but this time in order to achieve set growth targets. This exploratory research demonstrates that there are numerous programmes across the UK that are fundamentally offering the same services, with limited or no interaction between the programmes even though previous research emphasises the benefit of such interaction. Given this, the SBS needs to encourage more collaboration between RDAs when it comes to supporting high growth businesses.
Keywords: High growth Businesses, Business Support Policies
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No. 6
“THE ASSIMILATION OF UK ETHNIC ENTREPRENEURS INTO THE MAINSTREAM LABOUR MARKET”
David Brooksbank, Dylan Jones-Evans, Farid Ullah, Piers Thompson
Although previous studies have examined the changing employment patterns of immigrant cohorts as they assimilate into the host country’s labour force, less work has been undertaken to examine the changes across generations of ethnic minority groups. This paper attempts to fill some of this gap in examining the entrepreneurial activity levels and attitudes of two large ethnic minority groups in the UK, Indians and Pakistanis. Using data from the Global Entrepreneurship Monitor (GEM) for 2005 these groups are subdivided in an attempt to identify 1st and 2nd generations to ascertain the patterns in the entrepreneurial activity of these groups. Large differences are found in the changing attitudes of these two groups, with the younger generation of Indians becoming more positively orientated towards entrepreneurship, whilst interest appears to be diminishing in the Pakistani population. This implies that policies should be tailored towards individual ethnic groups rather than relying too heavily on one-size fits all approaches towards ethnic entrepreneurship.
Keywords: Entrepreneurship, ethnic minorities, small business, self-employment, assimilation
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No. 5
“FEMALE ENTREPRENEURSHIP: ARE ATTITUDES THE INTERNAL BARRIER WHICH POSE THE GREATEST HURDLE?”
Piers Thompson, David Brooksbank, Dylan Jones-Evans
Female participation rates in entrepreneurial activity have long been recorded as below that of their male counterparts. According to the UK Government, if this disparity didn’t exist, it would result in 150,000 additional businesses being formed annually in the UK. This means that any insight into the reasons for this low female entrepreneurship prevalence rate, and the reparatory policies that this would suggest, are highly desirable. This paper attempts to identify the internal barriers which could partially explain the female inhibition towards entrepreneurship. The decision to start a new business is framed loosely within Ajken’s (1991) theory of planned behaviour. Using the GEM UK 2005 data, responses to attitudinal questions relating to entrepreneurship are utilised to model intentions towards starting a business. A binary logistic approach finds that entrepreneurial intentions are strongly related to personal attitudes and perceived behavioural control towards entrepreneurship, but not subjective norms. At the regional level, a panel approach finds that only personal attitudes have a significant effect upon entrepreneurship.
Keywords: Female Entrepreneurship; Attitudes
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No. 4
“INFORMAL INVESTMENTS: DIFFERENCES DUE TO RELATIONSHIP BETWEEN INVESTOR AND RECIPIENT OF INVESTMENT ”
Piers Thompson, David Brooksbank, Dylan Jones-Evans
The secretive nature of business angels and their investments has inhibited the ability of policy makers to encourage further availability and use of this source of finance. This paper attempts to advance the understanding of various informal investor groups and their expectations relating to their investments. Following Maula et al. (2005) the informal investors are grouped according to their relationship with the investee into ‘close family’ and ‘non-family’ business angels. The former are likely to be driven by more altruistic motives, the latter by economic reasons as governed by the household portfolio theory. Professional informal investors who identified themselves as business angels are classified here as an additional group, ‘self confessed’ business angels. Using the GEM UK 2005 data set, which includes data on 298 informal investors, multi-nominal logistic regressions are utilised to identify the driving forces of micro angel investments to provide a comparison with Maula at al.’s Finnish findings. Analysis is made of informal investors’ investment levels, expectations of returns, and payback periods, to identify the differing types of outlook they have in relation to their investments. This makes it possible to establish whether the assumed altruistic nature of ‘close-family’ business angels influences the expectations that the angels have in relation to their investments when compared to the more economically orientated business angels. Analysis of business angel investments finds, unsurprisingly, that the average investments of ‘self-confessed’ business angels are greater than ‘close family’ and ‘non-family’ angels. However, ‘close-family’ investments are higher than ‘non-family’ investments. The ‘close family’ angels are also found to be more patient and expect lower returns than the ‘non-family’ angels. Interestingly, the ‘self-confessed’ business angels appear to have expectations of returns which are more akin to the ‘close family’ angels than those of the ‘non-family’ angels. The findings suggest that ‘non-family’ business angels do not fulfil the role of providing medium term finance, on the basis of realistic returns, in a manner similar to professional ‘self confessed’ business angels. Future government policies and programmes should attempt to encourage potential ‘non-family’ business angels to supply funds with realistic expectations and demands in relation to returns.
Keywords: Business angels; investment returns; informal investments
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No. 3
“INFORMAL INVESTMENT, REGIONAL PROSPERITY AND ENTREPRENEURIAL ACTIVITY”
Piers Thompson, David Brooksbank, Dylan Jones-Evans
Given that both informal investors and conventional venture capital funds show a preference for investing near to their bases, it is possible that some regions may be less well served than others in terms of early stage equity provision. This study attempts to determine the level of equity funds available in each UK region, and the reliance placed upon each source of equity funding. It is found that informal investments, like conventional venture capital funds, are concentrated heavily in London and the South East regions, but the higher levels of conventional venture capital funds available in London and the South East, ensure that informal investment makes a larger relative contribution to early stage and expansion equity capital utilised in other regions. It appears, however, that some regions still have a low level of equity finance available and that policy makers may still need to target the creation of business angel networks and similar organisations in these regions to stimulate growth.
Keywords: Informal investments; business angels; venture capital
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No. 2
“ENTERPRISE TRAINING AND ENTREPRENEURIAL ACTIVITY - EVIDENCE FROM WALES AND THE UNITED KINGDOM”
Dylan Jones-Evans, Piers Thompson, David Brooksbank, Caleb Kwong
This paper considers the relationship between enterprise training and involvement in entrepreneurial activity in Wales and the UK as a whole. It examines the influence of different types of enterprise education on the probability that individuals will become involved in entrepreneurial activity in the next three years, the actual initiation of a start-up and the continuing management of a new venture. Analysis of the effect of enterprise education is undertaken using binary logistic estimation in order to account for differences in individual characteristics that could have significant effects upon the propensity to be entrepreneurially active. The results indicate that in the UK enterprise education increases the expectation of starting a business in the near future and of becoming a nascent entrepreneur. However, only enterprise training undertaken at a tertiary educational level and through participation in government funded enterprise schemes are significant in increasing the probability of running a new business beyond start-up. Worryingly for policy makers in Wales, enterprise education appears to have less impact on entrepreneurial activity within the principality, than over the UK as a whole. A result which could find Wales and other regions in similar positions falling behind the most dynamic regions of the UK.
Keywords: nascent entrepreneurs; start-up; enterprise education; government programmes
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No. 1
“FEMALE ENTREPRENEURSHIP: AN EXPLORATION OF ACTIVITY AND ATTITUDES IN WALES AND THE UK)”
Caleb Kwong, Piers Thompson, David Brooksbank, Dylan Jones-Evans
Recognition of the value of female owned businesses and their input towards a dynamic economy is now widely accepted. Despite this, it appears that women still lag behind men considerably in terms of entrepreneurial participation. Whilst female participation rates have increased in the last twenty years, it seems that this increase is not making inroads to closing the gender gap in entrepreneurial activity. This paper looks at data detailing the activities and attitudes of both male and female entrepreneurs operating in the UK and aims to provide an over arching analysis of some of the differences that exist and offer possible explanations for such difference by drawing on empirical and theoretical knowledge bases. Although there is a vast literature surrounding gender and enterprise, some authors assert that female entrepreneurship still remains a neglected area. This study uses the GEM UK 2005 dataset of 27,000 adult respondents to specifically examine a plethora of information on entrepreneurial activity and attitudes. By examining female entrepreneurial activity levels at a number of different stages of business start ups and business ownership, it is possible to develop a regional analysis of female entrepreneurship in the UK. Comparisons are then made between entrepreneurial prevalence rates for sub-groups of women, analysed by age, education etc. Differences in these prevalence rates are examined in more depth through an analysis of attitudes towards entrepreneurship to explain the differences in activity levels that may exist. One of the more notable findings of the study seems to suggest that women, whilst holding an entrepreneurial career in high esteem, have lower individual assessments of their own abilities to start up a business. Women seemed notably less optimistic about start up opportunities, seemed less ‘connected’ than men in terms of entrepreneurial contacts and also display a greater fear of failure in business than their male counterparts. This paper will highlight, for those policy makers concerned with women and enterprise, the need to alleviate this high level of fear of failure displayed by respondents and also to induce further confidence in female entrepreneurs by addressing issues like skill acquirement and networks. This may enhance participation levels and help to break down the barriers highlighted by the findings of this paper.
Keywords: Gender; Enterprise; Attitudes
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