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The research purpose is to explore the factors affecting the growth of startups. It highlights
attributes which directly affect the growth in the number of startups in a country. Entrepreneurial
intentions too have been dealt with. A range of issues and themes have been examined through
secondary research. The overview includes data from salient published articles that empirically
assessed the effects of key variables, both from internal/external/environmental context on
entrepreneurship. The primary research includes a survey being conducted over a sample size of
101 respondents among which 21 entrepreneurs across the country, the findings and results will be
used by other researchers, business support agencies in this field and government strategists to
design the policies according to that.
Research Questions
a. What are the reasons for the increased rate of growth of startups?
b. Which factors are most sensitive?
c. How closely increasing startups is related to demographics?
Introduction
Definitions of entrepreneurship
To understand entrepreneurship, it is important to view the definitions from earlier research on the
subject. In the early 20th century, Schumpeter, J., insisted that entrepreneurship was far too
important a part of capitalism to be ignored. He proposed that innovation or the use of an invention
to create a new product or service was the driving force behind the creation of new demand for
goods and services. The market was, therefore, not perfect but chaotic because of the regular
occurrence of entrepreneurs entering the market with new innovations. This process of “creative
destruction” destroyed the static market described by the neoclassicists and created a dynamic
market which had continuous changes in buyer and supplier behavior. It was these entrepreneurs
who developed innovations to create new demand that was the mechanism of wealth creation and
distribution.
Kirzner, I, (1973), influenced by the Austrian school, made a further contribution to
entrepreneurship theory. He defined entrepreneurs as individuals who grasp opportunities for pure
entrepreneurial profit and they did this by uncovering unnoticed profit opportunities by being alert
to them. Whereas (Stevenson, 2006) in his definition included the following factors, pursuit of
opportunity; rapid commitment and change; multi-stage decision making; using other peoples’
resources, managing through networks and relationships and compensating for value created
.Entrepreneurship, a much debated topic, has been defined by (Collins and Moore, 1970) in the for-
profit literature as “the catalytic agent in society which sets into motion new enterprises, new
combinations of production and exchange.”
Low and MacMillan (1988) define entrepreneurship as "creation of new enterprise". According to
Shane and Venkataraman (2000), entrepreneurship is a field of business, that seeks to understand
how opportunities, create something new (new products or services, new markets, new production
processes, new ways of organizing) and are discovered or created by individuals (entrepreneurs)
and how various means are used to exploit or develop these opportunities into business ventures. To
put it simply, entrepreneurship involves recognizing an opportunity to create a new business
venture (Eckhardt& Shane, 2003). Entrepreneurship has been considered as the engine of economic
growth (Schumpeter, 1942) and has gained importance over the years.
Who is an Entrepreneur?
There exists the need for an in-depth study which will help understand the growth of entrepreneurs.
The objective of the researchers has been an attempt through the exploratory study to establish the
factors that influence entrepreneurship. The success of venture creation depends on the individual,
environment, economic and financial factors.
An assessment of factors influencing entrepreneurship would ensure that the right eco system for
breeding successful entrepreneurs exists. Once entrepreneurial motivating factors, challenges in
setting up ventures and the external conditions are identified, the entrepreneurs can work towards
overcoming these challenges. Knowing aspects of entrepreneurial success will be a value addition
to the upcoming entrepreneurs.
Literature Review
Understanding the earlier literature on the factors impacting formation of a new venture builds
credibility. Many scholars have worked on this construct. Young, E.C., Welsch, H.P. (1993)
suggest through their study that the factors affecting entrepreneurship are financial independence,
zeal to supplement family income, family encouragement and other encouraging support groups,
need of new lifestyle, extension of credit from suppliers & discriminatory practices. Business
regulation factors like government regulations, lack of working capital, lack of financial
information which influence entrepreneurship. The negative factors are business obstacles like
obtaining a loan, finding good location, lack of counsel or knowledge and individual obstacles like
lack of encouragement, lack of confidence in customers and risk of startup.
Startienė, G., &Remeikienė, R (2008) suggest through their study that there are various factor
groups affecting gender gap in entrepreneurship such as demographic factors like Age, Education,
Gender Experience in related field; economic factors like Initial Investment Easiness of Financing;
institutional and government factors like capital availability; organizational factors; social and
psychological factors; and cultural factors. Whereas Gaddam, S. (2007) proposes, two factors
influencing entrepreneurship, external and internal. The external factors can be broadly classified
into economic factors like trade policies, taxation levels, government intervention, regulations and
monetary policies and per capita income. The internal factors can be classified into the need for
achievement, locus of control and risk bearing capacity. Other factors are demographic factors like
age, experience, education; environmental factors; cultural factors like the recognition that is given
to venture creators, the prevailing attitudes towards success and failure and the degree to which
people regard the pursuit of opportunities as socially legitimate; social factors like lifestyle, tastes
and preference. Other factors stated are socio personal such as resistance from family, indifferent
attitude of society, male dominance, limited liberty given to women; motivational factors such as
run the business successfully, setting up another enterprise, expansion, socio economic needs;
location factors such as power supply, industrial environment, credit facility, availability of raw
material, skilled man power. The discouraging factors are discouragement from family,
competition, inadequacy of credit and difficulty in getting technical know-how (service sector).
Regulative component contains factors like government support towards entrepreneurship, strong
rules of law and enforcement mechanism. Normative component contains factors like societal
perception of entrepreneurs and societal expectation from entrepreneurs. Cognitive component
deals with factors like assessment of entrepreneurship as an occupation and relationship between
culture and entrepreneurship.
Lewis, Prestin; Lu, Wei; Yin Hao; Li, Yong; Vaccaro, Louis C, (2013) suggest through their study
that there are three major forces that govern entrepreneurship environment- culture, economics and
policy. Culture is determined by number of hours worked, likeliness to become an entrepreneur and
social network (level of trust and strength). Economic environment is determined by chances that
the venture will succeed and funding opportunities whereas different policies that affect
entrepreneurship are taxation policy, legal approval to start a business and government sponsored
programs to start a business.
We conducted an Exploratory research regarding factor that influence the growth of startups in
India. In our Exploratory research, we conducted a focus group analysis that discussed on factors
that are most important of all. After a long discussion, we selected few factors which were
highlighted by group as most significant for research.
Combining the above-mentioned factors with literature review, we made our questionnaire and
asked for inputs from our target audience.
Reason of Research
Entrepreneurs have been on a rapid growth phase over the past decade. With an increase in numbers
comes greater competition and quest for perfection. Resources available to most entrepreneurs are
scarce and limited. In India 38.8% entrepreneurs are necessity entrepreneurs, while around 35.9%
fall under the opportunity entrepreneurs’ category (Global Entrepreneurship Monitor, Global report
2013).
There exists the need for an in-depth study which will help understand the growth of entrepreneurs.
The objective of the researchers has been an attempt through the exploratory study to establish the
factors that influence entrepreneurship in India. The success of venture creation depends on the
individual, environment, economic and financial factors. An assessment of factors influencing
entrepreneurship would ensure that the right eco system for breeding successful entrepreneurs
exists. Entrepreneurs do not have the luxury of time or resources when starting up, hence awareness
of the relevant aspects that support growth would prove useful. Once entrepreneurial motivating
factors, challenges in setting up ventures and the external conditions are identified, the
entrepreneurs can work towards overcoming these challenges. Knowing aspects of entrepreneurial
success will be a value addition to the upcoming entrepreneurs.
Secondary research for theoretical comprehension and primary for current practices being
undertaken was attempted through quantitative research. The survey questionnaire was adapted &
modified from, (Cohoon. J. M., Wadhwa M & Mitchell M, 2010), “The anatomy of an
entrepreneur, are successful women entrepreneurs different from men”. Prior to administering the
modified questionnaire inputs were drawn from six academicians in entrepreneurship. They
contributed in providing critique in constructing the modified questionnaire. Empirical, conceptual
and works of practitioners were chosen for concept understanding from databases of Ebsco,
Proquest and the internet. Entrepreneurship is a vast area and hence the study has been limited to
only the factors influencing entrepreneurship. Unfortunately, no reliable database of entrepreneurs
from which to draw exists. Existing lists of entrepreneurs are limited in their scope, tend to contain
many inaccuracies and require considerable purging and correcting.
Methodology & Research design
The sampling methodology used was convenience or snowball sampling because it is difficult to
identify the established and budding entrepreneurs. The sample consisted of student entrepreneurs,
owners of successful startups who had visited a business school campus, entrepreneurial friends &
acquaintances. Permission for data collection was obtained from the respondent, later an online
form through the administering of a structured questionnaire with forty questions was used to
obtain data.
We got one hundred and one responses. Many reminders too were also sent. No response was found
erroneous and was discarded. Organizations like Brunchcare, Topper’s Notes, Easy Spotlight,
Innov8 Apps and Pioneer Solution that support entrepreneurship were also sent the questionnaires
to forward to their networks.
Inferential statistics has been the method used where statistics gathered from a sample has been
used to reach conclusions regarding the population. The responses were then coded and later the
data was tabulated in MS Excel. The data analysis was then carried out using statistical software
SPSS. The following methods of analysis were used, frequency distribution, t test, testing of
hypothesis, ANOVA. All hypotheses were tested at 5% level of significance. Participants were
informed that the study was being conducted to complete an academic paper and that their
responses would be kept confidential and their participation was voluntary. It was assumed that the
respondents are truthful when responding to questions on the survey and that entrepreneurship is
critical to them.
The respondents were given a set of parameters and asked to determine their perception towards it.
A five-point rating scale was used to judge the responses, where (1) = Not at all important, (2) =
slightly Important, (3) = important (4) = Fairly Important and (5) = very important. Similarly,
challenges were rated, where (1) indicates not a challenge, (2) indicates small challenge, (3)
indicates moderate challenge (4) represents big challenge (5) indicates extremely big challenge.
On conducting a frequency distribution for the demographics of the entrepreneur like gender, age
groups, city, education, Family Income, Employment Status and Inheritance of Business, following
results can be obtained.
Hypothesis
H0: µ ≤ 3, respective factor is un-important for the growth of start-ups in India
H1: µ > 3, respective factor is very important for the growth of start-ups in India
Below mentioned is the table of people involved in a startup and who wish to have their startup. It
is showing the P-value with respective factors depicting decision to accept or reject the null
hypothesis, thus inferring whether the given factor is very important to affect the growth of startups
or not.
Table 1: One-Sample Test of Entrepreneurs and aspiring Entrepreneurs
One-Sample Test
Test Value = 3
Internal Factors
Economic factors
Easiness of P < α; H0 is
7.644 100 .000 .743 .55 .94
Financing rejected
Break Even Period 7.575 100 .000 .762 .56 .96 P < α; H0 is
rejected
Demographics
- P < α; H0 is
Age 100 .000 -.990 -1.19 -.79
10.001 rejected
Experience in P < α; H0 is
3.668 100 .000 .386 .18 .60
related field rejected
Environment
Supplier's
Availability and 10.462 100 .000 .941 .76 1.12 P < α; H0 is
rejected
relations
Availability of P < α; H0 is
8.116 100 .000 .752 .57 .94
labor rejected
Customer
perception of 10.222 100 .000 .911 .73 1.09 P < α; H0 is
rejected
Industry
Entrepreneurial P > α; H0 is
1.732 100 .086 .198 -.03 .42
training education accepted
Business factors
Bureaucratic P < α; H0 is
3.857 100 .000 .436 .21 .66
Procedures rejected
Import/export P < α; H0 is
3.092 100 .003 .347 .12 .57
policies rejected
One-Sample Test
Test Value = 3
Lower Upper
Challenges
Family or financial 4.213 100 .000 .446 .24 .66 P < α; H0 is rejected
pressures to keep a
traditional, steady
job
Amount of time and 7.935 100 .000 .792 .59 .99 P < α; H0 is rejected
effort required
Lack of industry 8.574 100 .000 .822 .63 1.01 P < α; H0 is rejected
knowledge
Lack of available 6.365 100 .000 .614 .42 .81 P < α; H0 is rejected
mentors or advisors
Lack of prior 4.140 100 .000 .446 .23 .66 P < α; H0 is rejected
experience in
running a business
As compare to the response from those who already have startups differs from the consensus. The
tacit knowledge of working in the startup and leading the startup firm makes the responses to be
skewed.
Only Entrepreneurs
Below mentioned is the table of people already involved in a startup and it is showing the P-value
with respective factors depicting decision to accept or reject the null hypothesis, thus inferring
whether the given factor is very important to affect the growth of startups or not.
One-Sample Test
Test Value = 3
95% Confidence
Sig. Mean Interval of the Hypothesis Testing
t df (2- Differe Difference
tailed) nce
Lower Upper
Internal Factors
Team Motivation 8.315 20 .000 1.476 1.11 1.85 P < α; H0 is rejected
Risk bearing
5.876 20 .000 1.190 .77 1.61 P < α; H0 is rejected
Capacity
Ownership (Locus
4.264 20 .000 .952 .49 1.42 P < α; H0 is rejected
of control)
Economic factors
Easiness of
1.985 20 .061 .524 -.03 1.07 P < α; H0 is rejected
Financing
Break Even
3.005 20 .007 .667 .20 1.13 P < α; H0 is rejected
Period
ROI (return on
3.101 20 .006 .714 .23 1.19 P < α; H0 is rejected
investment)
Demographics
-
Gender 14.98 20 .000 -1.762 -2.01 -1.52 P < α; H0 is rejected
1
Experience in
.152 20 .880 .048 -.60 .70 P > α; H0 is accepted
related field
Environment
Supplier's
Availability and 5.319 20 .000 1.095 .67 1.52 P < α; H0 is rejected
relations
Availability of
3.516 20 .002 .905 .37 1.44 P < α; H0 is rejected
labor
Customer
perception of 4.583 20 .000 1.000 .54 1.46 P < α; H0 is rejected
Industry
Awareness of the
4.932 20 .000 1.048 .60 1.49 P < α; H0 is rejected
relevant aspects
Support from
Family & 2.444 20 .024 .619 .09 1.15 P < α; H0 is rejected
Relatives
Entrepreneurial
-.894 20 .382 -.238 -.79 .32 P > α; H0 is accepted
training education
Business factors
Bureaucratic
.000 20 1.000 .000 -.50 .50 P < α; H0 is rejected
Procedures
Import/export
.000 20 1.000 .000 -.56 .56 P < α; H0 is rejected
policies
Ease in Winding
.346 20 .733 .095 -.48 .67 P > α; H0 is accepted
Up
One-Sample Test
Test Value = 3
Challenges
Internal factors include- Team Motivation, Innovation of Idea, Risk Bearing Capacity, Locus of
Control. The P-value of these internal factors is less than 0.05 thus the null hypothesis is rejected.
Given factors thus were very important for the growth of startups. The given effect is due to the
mean being skewed towards right to wards very important.
In External factors, economic factors including- initial investment, easiness of financing, break
even period, ROI (rate of return). The P-value of these economic factors, except initial investment,
are less than 0.05 thus the null hypothesis of easiness of financing, break even period, ROI (rate of
return) factors are rejected. Initial investment in economic factors is not much important, and rest
factors are very important for any startup to grow. The responses in the economic factors are
skewed to the very important.
Demographics section in the external factors includes- age, education, gender, experience in
relevant field. The P-value of the demographic factors except experience in relevant field is less
than 0.05 thus the null hypothesis of age, education, gender is rejected and for rest null hypothesis
is not rejected. Age, education and gender produce significant effect in the growth of startup but the
experience in relevant doesn’t have significant effect in the growth. The responses in the
demographics section are spread across the ends thus having mean near to neutral with deviation.
Business factor of the industry includes-bureaucratic procedure, import/export policies, tax policies,
ease in winding up. The P-value of bureaucratic procedure, import/export policies is more than the
0.95 critical significant value thus null for these is rejected but for other two tax policies and ease of
winding up doesn’t have significant effect in the growth factor of startup.
Table 5: Statistics
Statistics
Missing 0 0 0 0 0 0
From the statistical analysis we see that the following factors are considered significantly
important; Internal factors (includes Team Motivation, Innovative Idea, Risk bearing Capacity &
Locus of Control) is considered most important among all factors with mean of 4.0965 and
Demographics (Age, Education, Gender and Experience) is considered least important with mean
of 2.4480 by the entrepreneurs. We can interpret that starting a venture will not depend on the age,
gender, experience and education of entrepreneurs. Environmental factor (Competition, Suppliers,
Labor and Customer perception) is also considered important with mean of 3.8168.
CHALLENGES
Table 6: One-Sample Statistics of Challenges
One-Sample Test
Test Value = 3
Lower Upper
ANOVA
Hypothesis 1
H0: There is no significant difference in the various economic factors across the level of family
income
H1: There is significant difference in the various economic factors across the level of family
income
The family income has been divided into four groups; (1) Upton 5 Lacs (2) 5-10 Lacs
(3) 10-15 Lacs (4) 15 above
ANOVA
ANOVA
investment)
Within 83.949 97 .865
Groups
Interpretation
Here, µ1 represents population mean of economic factors for entrepreneurs with family income-
Upton 5 Lacs; µ2 represents that of 5-10 Lacs; µ3 represents that of 10-15 Lacs; µ4 represents that
of 15 Lacs above.
At a significance level of 0.05, it is observed that there is no significant difference in the various
economic factors across the level of family income.
Hypothesis 2
H0: There is no significant difference in the various internal factors because of business
background
H1: There is significant difference in the various internal factors because of business background
The business background has groups; (1) Yes (2) No
ANOVA
Table 8: ANOVA Hypothesis1
ANOVA
control)
Within 96.210 99 .972
Groups
Interpretation
Here, µ1 represents population mean of internal factors for entrepreneurs having business
background; µ1 represents population mean of internal factors for entrepreneurs not having
business background
At a significance level of 0.05, it is observed that there is no significant difference in the various
internal factors because of business background.
Conclusion
As revealed by this study it is obvious that there exists a plethora of factors which impact the issue
of ‘wanting to be an entrepreneur’ which in turn does not permit gross generalization. However,
factors like economic, business and financial background besides educational background of
parents, parents who have grown rich during their lifetime, role and extent of government
involvement besides availability of capital have a pronounced impact in driving entrepreneurship.