small scale owner-managers: motivations and successes - mba thesis

8/13/2019 Small Scale Owner-Managers: Motivations and Successes - MBA Thesis

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SMALL SCALE OWNER-MANAGERS: MOTIVATIONSAND SUCCESSES

ROBERT ASMAH

This Dissertation is submitted in partial fulfilment of the requirements for thedegree of Master of Business Administration in Entrepreneurship and BusinessVenturing.

University of StirlingMay 2008


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DECLARATION

I do hereby declare that this thesis has been achieved by myself and is the result

of my own investigations. It has neither been accepted nor is being submitted for

any other degree or qualification. All sources of information have been duly

acknowledged.


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ACKNOWLEDGEMENT

I would like to express my sincere appreciation to all those whose support and

encouragement made this research possible. I specifically thank:

God for His provision and support during the period of my studies

The director of the MBA in Entrepreneurship and Business Venturing, Mr.

Frank Martin, for all his assistance, patience and guidance throughout the

thesis.

Dr. Alan Foster, my supervisor for his advice and assistance particularly

with the thesis

The small independent retail owner-managers who assisted in taking the

time to respond to the questionnaires.

My family, particularly my wife Ruby who did a lot of the proof reading and

shared her salient thoughts during the thesis, and my children Baaba,

Jude and Lois for their inspiration and support throughout my studies.


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TABLE OF CONTENTS

Declaration.............................................................................................................i

Acknowledgement................................................................................................. ii

Table of contents ................................................................................................. iii

List of tables.........................................................................................................vi

List of figures ...................................................................................................... vii

Abstract...............................................................................................................viii

Chapter 1 ..............................................................................................................1

1.0 Introduction ................................................................................................1

1.1 Purpose of the study...............................................................................11.2 What is an SME?....................................................................................41.3 Why study SMEs? ..................................................................................61.4 What is an Owner- Manager?.................................................................8

Rerefences ...........................................................................................................9

Chapter 2 ............................................................................................................11

2.0 Literature Review .....................................................................................11

2.1 Introduction...........................................................................................112.2 What is an Entrepreneur?.....................................................................112.3 Owner-managers: Character traits .......................................................14

2.3.1 What are Character traits? ............................................................142.3.2 Need for Independence .................................................................16

2.3.3 Need for Achievement ...................................................................162.3.4 Internal Locus of Control ...............................................................172.3.5 Risk Taking....................................................................................18

2.4 Owner-Managers: Antecedent Influences.............................................192.4.1 What Are Antecedent Influences? .................................................192.4.2 Age................................................................................................192.4.3 Education ......................................................................................212.4.4 Experience ....................................................................................222.4.5 Entrepreneurial History..................................................................23

2.5 The Retail Industry ...............................................................................232.5.1 The Independent Retail Sector......................................................24


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2.6 The Role of Owner-Manager Motivations .............................................252.7 Small Business Success.......................................................................262.8 Research Questions and Hypotheses ..................................................27

2.8.1 Research Questions ......................................................................272.8.2 Hypotheses ...................................................................................28

2.9 Implications of Business Context to this Study .....................................29References .........................................................................................................30

Chapter 3 ............................................................................................................39

3.0 Methodolody.............................................................................................39

3.1 Introduction...........................................................................................393.2 Research Design ..................................................................................39

3.2.1 Measurement of Character Trait and Antecedent Influences ........403.2.2 Limitations of Research .................................................................403.2.3 Participants....................................................................................403.2.4 Procedure......................................................................................40

References .........................................................................................................42

Chapter 4 ............................................................................................................44

4.0 Results and Analysis ................................................................................44

4.1 Introduction...........................................................................................44

4.1.1 Owner-Manager Characteristics....................................................444.1.2 Univariate Analysis ........................................................................44

4.2 Results..................................................................................................444.2.1 Decision of Business Growth.........................................................454.2.2 Start-Up Motivation........................................................................464.2.3 Owner-Manager Characteristics....................................................47

4.3 Analysis of Results ...............................................................................524.3.1 `Pull` and `Push` Motivations ........................................................534.3.2 Age................................................................................................544.3.3 Education ......................................................................................554.3.4 Previous Employment....................................................................57

References .........................................................................................................59

Chapter 5 ............................................................................................................60

5.0 Discussion................................................................................................60

5.1 Descriptive Results ...............................................................................605.2 Inferential Results.................................................................................61

5.2.1 Hypothesis 1..................................................................................615.2.2 Hypothesis 2.................................................................................635.2.3 Hypothesis 3.................................................................................64


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5.2.4 Hypothesis 4.................................................................................65References .........................................................................................................66

Chapter 6 ............................................................................................................67

6.0 Conclusion ...............................................................................................67

6.1 Limitations of the Study ........................................................................68Appendix 1..........................................................................................................79

Appendix 2..........................................................................................................84

Appendix 3..........................................................................................................87


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LIST OF TABLES

Table 1: Number employment in the private sector at the start of 2005 by size of

business and government office region / country..................................................7

Table 2: Business Growth Decision in Small Retail business in 2-3 years..........45

Table 3: Original dataset: Motivation for starting business..................................47

Table 4: Category defined: `Pull` and `push` factors for starting business..........47

Table 5: Original dataset: Frequency table showing ages of retail owners .........48

Table 6 Category defined: Frequency table showing ages of retail owners........48

Table 7 Original dataset - Frequency table showing education level of retail

owners ................................................................................................................49

Table 8 Category defined: Frequency table showing education level of retail

owners ................................................................................................................49

Table 9 Original dataset: Previous business.......................................................50

Table 10 Original dataset: Number of years in operation....................................50

Table 11 Category defined: Frequency table showing Number of years in

operation.............................................................................................................51

Table 12: Dataset - Number of employees in three years...................................51

Table 13 Business Growth and Motivations........................................................53

Table 14 Business Growth and Age....................................................................55

Table 15 Business Growth and Education..........................................................56

Table 16: Business Growth and Employment .....................................................57


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LIST OF FIGURES

Figure 1: A model of entrepreneur motivation.....................................................15


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ABSTRACT

Considerable evidence shows that most small business owner-managers are

motivated to start their own businesses through `pull` and `push` factors. `Pull`

factors are associated with owner-managers having a strong positive internal

desire to go into small business, examples are independence or wanting to be

ones own boss; `push` factors are linked to similar strong desires but based on

external negative reasons such as unemployment. Irrespective of how owner-

managers are motivated into business, they are also faced with the business

decision either to grow their business or not to grow the business. The aim of the

study was to investigate the motivations and business decisions made by small

independent retail owner-managers in the Forth Valley. It further investigates

whether motivations by which owner-managers start their businesses is driven by

either `pull` or `push` factors; finally it investigates how the effects of antecedent

influences of owner-managers affect their business decision making to grow their

businesses within a specified period. Data was collected via questionnaires. The

questionnaires were distributed to the target population of 44 owner-managers.

Statistical analyses involved both descriptive and inferential statistics (cross-

tabulations and the Chi-square statistic). The results revealed that there is a

significant relationship between the age of owner-managers and business

decisions, with a chi-square statistic test (x2) of 4.51 with p < 0.05. No

significances relationships were however found between motivations, education

and prior experience in relation to the business decisions made by owner-

managers. The study also demonstrated that the respondents were motivated by


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`pull` factors to start-ups than `push` factors and that age plays a significant role

in shaping especially, small business owners propensity to grow their businesses

or otherwise.


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CHAPTER 1

1.0INTRODUCTION

Running your own business is a lonely affair, without anyone tomotivate and encourage you. You must work long hours,sometimes for little reward. You therefore need to be self-motivated, committed and determined to succeed. (Paul Burns2001)

1.1 Purpose of the study

The question of why people start their own business is perhaps one of the main

questions of business motivation, and is inextricably bound up in questions such

as why some business owners choose to grow their businesses or not, how the

businesses are managed and the reasons for the kind of management pursued.

According to the Department for Business Enterprise & Regulatory Reform

(BERR 2007) there has been increase in the stock of VAT-registered enterprises

in every year since 1995, resulting in a 21 percent rise in the number of VAT-

registered businesses between the start of 1995 and the start of 2007. An ability

to predict why individuals start their businesses and the likelihood of their

businesses succeeding or failing could help direct people with business

aspirations and/or financial resources to make the right decisions, avoid

unacceptable risks, enable potential business owners to be trained in areas of

perceived weakness and assist government and policy makers to allocate

resources properly.


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Recent UK estimates (Department of Trade and Industry, 2005) for instance,

confirmed that, of the UKs 4.3 million enterprises, 99.3% employ fewer than 50

employees (with most employing fewer than 10) and only a further 0.6% have

between 50 and 249 employees. The start-up and future of a small and medium

enterprise (SME) will often depend on the motivation and business decision of

one or just a few individuals, whose personal lives are directly tied to the

ownership of the business (Burns 2001), and most commonly called owner-

managers. Whether the business survives or fails is the result of a variety of

economic, political, socio-cultural and industry factors (Kirby 2003). Whilst these

factors may be beyond the control of a single owner-manager, many small

business commentators have suggested that the driving motivations in a small

business are commonly influenced by `push` or\and `pull` factors (Burns 2001;

Hughes 2003; Brodie & Stanworth 1998)

The resulting business motivations therefore are frequently an extension of the

personality of the owner-manager and a reflection of his or her vision and flair.

The types of motivations are guided by many factors, such as the character

traits, and antecedent influences of the individuals who are involved in business

start-ups (Burns 2001: Storey 1991).

In the seminal report of the small business study, the Bolton Report (1971)

clearly highlighted the fervently guarded sense of independence, which is seen to

be a prime motivator for many small business owner-managers. Contrary to

popular belief and a great deal of economic theory, money and the pursuit of a

personal financial fortune are not as significant as the desire for personal

involvement, responsibility and the independent quality and style of life which


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many small business owner-managers strive to achieve (MORI, 2001). These

findings are to a greater degree consistent with the findings of the 1992 Barclays

Bank Surveyunder the title Motivations to start a business. In this survey 25%

of respondents stated that own boss was the prime motivator for going into

business, followed by 17% of respondents citing control of my life as their

motivation. Only 6% of respondents cited to make a lot of money as their

motivation (EC01 lecture notes). The results from the Barclays survey is

supported by the Small Business Services Survey (2003) which described a

variety of motivations for going into business amongst new businesses (those

less than four years). Some 29% of new businesses are started because their

owners want to be independent, to be their own bosses, 14.5% cited to make

money and 11.5% to improve the owners career and prospects.

Since the main interests of this study are in owner-manager character traits and

antecedent influences, and their effects on motivations and the business

decisions they undertake, the control out size and sector effects will be focused

on the small independent retail sector in the Forth Valley area in Stirlingshire.

Retail is often seen as a stepping-stone for entrepreneurs to start-up in other

business sectors.

The findings discussed above, does not incorporate the questions of possible

changes in motivations of owner-managers after the start-up years and whether

or not personal character traits and antecedent influences might be able to be

used to predict the owner-managers attitude on his changes in motivations and

business decisions over time. Another question, beyond that, is whether a

particular measure of success could be characterized by the individual owner-


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manager to be used to predict the performance of the business they own and

run.

The purpose of this study, therefore, is first to determine the importance of an

owner-managers character traits on the formation of their motivations and

business decisions; second, to determine the importance of owner-managers

antecedent influences on the formation of their business decisions over time; and

last, to determine the measure of owner-manager character traits and antecedent

influences that can be used to predict business success. To control for the

effects of the variation in any local business laws across local councils, and to

allow for limited comparison of findings, the study focuses on the small

independent retail businesses in the Forth Valley.

1.2 What is an SME?

The bulk of UK businesses are SMEs and the bulk of SMEs are small businesses

(BERR 2007). The generally known characteristics of a small business as

defined by the Bolton Committee (1971) are that, it has a relatively small share of

in its market place, and is an independently owned and operated entity. The

implication is, the owner-manager closely controls the business by making the

principal decisions about the business operations and is solely exposed to most

risks by contributing the bulk of its operating capital (Birley 1987). Usually, a

small business is the primary source of income for its owner(s), consumes the

majority of their time and efforts, and is seen as an extension of the owners

personality (Burns 2001) and does not engage in any new marketing or

innovative practices (Birley 1987).


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There has been a mixture of quantitative and qualitative definitions for small

businesses by governments and lawmakers worldwide which has often resulted

in conflicting views. In the UK different definitions of small business exist. For

example the BERR defines a small business to be one that employs fewer than

49 people, and a medium-sized business referred to as one employing 50-249

people, and a sub-category of small business, the micro business, is defined as

one employing fewer than 9 people (BERR 2006). Before the BERRs definition,

Companies Act of 1985 was enacted by the UK government, and defines a

`small` company as one with a turnover of not more than 2.8 million and a

balance sheet total of not more than 1.4 million. To complicate matters further

sections 382 and 465 of the Companies Act 2006 defines an SME for the

purpose of accounting requirements; according to their definition, a small

company is one that has a turnover of not more than 5.6 million, a balance

sheet total of not more than 2.8 million and not more than 50 employees.

Though the EU quantitative definition of a small business is consistent with the

BERRs definition, its qualitative definition of turnover of not more than 2

million and a balance sheet of not more than 2million (EU 2003) is at variance

with that of the BERR definition. In the USA, the definition of small business is

set by the Small Business Administration (SBA). Unlike the UK and the EU which

have simple definitions applied to all industries, the SBA has individual definitions

for each industry. For example in the United States, the mining and

manufacturing industries must have not more than 500 employees, and

wholesale trade industries have not more 100 employees for them to be

classified as small; retail and service industries annual receipts must also not be


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more than $6 million. These complications in the small business definitions are

further highlighted by Neck (1977) who for example identified 50 different small

business definitions used across 75 countries. These are ample evidence to

substantiate the difficulties involved in finding a widely accepted official definition

of a small business.

In an apparent attempt to clarify its official position, the UK government through

the Department for Business, Enterprise and Regulatory Reform (BERR) defines

the micro firm as one that employs not more than 9 people, and a small firm

which also includes micro businesses, as a firm that employs not more than 49

people. A medium firm is defined as one that employs more than 49 people, but

not more than 259 people.

This study adopts the definition of small business favoured by the BERR: that is

less than 49 people employed by small businesses, irrespective of industry.

1.3 Why study SMEs?

There are several ways in which small and medium sized businesses differ from

big business. For example the owner-manager is likely to be working in nine out

of ten small businesses, whereas that situation is likely in just 35% of larger

businesses (Howard 1977). Smaller businesses cannot raise capital in the same

way that a large company can, and this has major strategic implications (Burns

2001).

As indicated in Table 1, by region, at the start of 2006, the UK private sector enterprise

was responsible for employing approximately 22.4 million people. Small and medium-


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sized enterprise (SMEs) together accounted for 58.9%. Small businesses alone accounted

for 47.1% (BERR 2007).

Table 1:Number employment in the private sector at the start of 2005 by size of business and government

office region / country.

PercentSize (number of employees)

Employment (/1,000) (=100%) None 1-49 50-249 250+

United Kingdom 22.131 15.7 31.1 11.9 41.3

North East 612 13.4 35.0 15.0 36.8

North West 2,129 16.4 34.2 13.9 35.5

Yorkshire and the Humber 1,896 13.0 28.9 12.0 46.1

East Midlands 1,647 13.4 30.4 12.4 43.8

West Midlands 1,933 14.4 31.4 12.0 42.3

East of England 2,292 16.2 29.5 10.2 44.1

London 3,915 13.7 23.4 9.7 53.1

South East 3,318 18.1 30.8 11.4 39.7

South West 1,683 20.4 38.6 11.9 29.1

England 19,426 15.6 30.2 11.6 42.7

Wales 703 20.1 42.2 14.4 23.5

Scotland 1,507 14.5 32.9 13.3 39.3

Northern Ireland 495 17.8 46.3 16.8 19.0

Source: BERR 2007

At the level of public policy, it is therefore not surprising that successive UK

governments have identified increase and growth in the SME sector as a


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potential cure for unemployment (Kirby 2003). This growth in the numbers of

SMEs according to Burns (2001) has been due to two main causes; firstly the

shift from manufacturing to services and secondly structural changes within

companies, such as downsizing and contracting out. Yet in the UK, in 2000, there

were between 350,000 and 400,000 business closures, which represented 10

per cent of the total of 3.7 million operations of all sizes (small Business Service

2001), and most of these occurred in the micro-sector or consisted of proprietors

operating with few or no employees.

SME failure therefore brings with it reduced earnings for owner-managers,

suppliers and staff, and their dependents are left with no entitlements and

unemployed as well as loss of revenue to the government.

1.4 What is an Owner- Manager?

Individuals who do own the firms they manage are known as ownermanagers

(Burns 2001). This definition is also consistent with Birley (1987) who defined the

owner-manager as an individual who establishes and manages a business for

the principal purpose of furthering personal goals. Important features in these

definitions are that of ownership and control; the individual is directly involved in

the day-to-day running of the business. Birley further argues that for a small

business owner, the business must be the primary source of income and will

consume the majority of the individuals time and resources.

Therefore, for the purposes of this study, an owner-manager is any one of the

proprietor(s) of a sole proprietorship or a working manager in incorporated

business he/she owns.


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REFERENCE

BARCLAYS BANK SURVEY (1992), in EC01 Module 1, MBA in

Entrepreneurship and Business Venturing, Author: Martin, F. University of

Stirling (2005)

BIRLEY, S. (1987) The Start-Up, Forthcoming in Burns, P (2001)

Entrepreneurship and Small Business-Text and Cases, PALGRAVE

MACMILLAN Ltd, London

BOLTON, J,E, (1971) `Report on the Committee of Inquiry on Small Firms` in

Burns, P (2001) Entrepreneurship and Small Business, PALGRAVE

MACMILLAN Ltd, London, pp 7-13

BRODIE, S. & STANWORTH, C. (1998) `Independent contractors in direct

selling: Self-employed but missing from the official records` International

Small Business Journal, 16 (3)

BURNS, P (2001) Entrepreneurship and Small Business, PALGRAVE


DEPARTMENT FOR BUSINESS, ENTERPRISE AND REGULATORY

REFORM (2007) Information for Small Business Owners and Entrepreneurs,

Ministerial Correspondence Unit, LONDON


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DEPARTMENT OF TRADE AND INDUSTRY, 2005 `Department for

Business, Enterprise and Regulatory Reform London

HOWARD, J. (1997) `More Time For Business-Statement by the Prime

Minister The Hon. John Howard MP, Canberra AGPS

HUGHES, K. (2003) `Pushed or pulled? Womens entry into self-employment

and small business ownership` Gender, Work and Organisation, 10(4)

KIRBY, D, (2003) Entrepreneurship, McGraw-Hill Education Maidenhead, UK

MORI (2001), Report on the Self-Employed, Alodis, London.

NECK, P.A. (1977) `Role and Importance of Small Business` Small

Enterprise Development: Policies and Programmes P.A. Neck, GENEVA

INTERNATIONAL LABOUR OFFICE


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CHAPTER 2

2.0LITERATURE REVIEW

2.1 Introduction

This chapter reviews the available literature dealing with the character traits and

antecedent influences of entrepreneurs and examines the evidence concerning

the influence of individual character traits and antecedent influences on the way

they determine the kind of motivations and business decisions exhibited by the

entrepreneurs. Following that examination, four research questions are advanced

and four hypotheses proposed for examination.

2.2 What is an Entrepreneur?

There has been much debate over how to define entrepreneur, the word

entrepreneur is derived from the French word entreprendr; that literally means

to undertake. The German definition, unternehmer, is the person who both

owns and runs a business, the English term would be `owner manager` (Drucker,

2007). The Global Entrepreneurship Monitor (GEM) project also defines

entrepreneur as an individual, or a team of individuals who create(s) a new

business or new venture, such as self-employment, a new business organisation

or the expansion of any existing business.

In the 18th century, the Irishman living in France, Richard Cantillion explained

entrepreneurship as the specific function of uncertainty bearing (EC 01 Lecture

notes). In the 19th century, another French economist, Jean-Baptiste Say,


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described the entrepreneur as one who shifts economic resources out of an

area of lower and into an area of higher productivity and greater yield (Drucker

2007). In the early part of the 20th century Schumpeter proposed that the

entrepreneur is the one who creates new things, new businesses and in so doing

destroys the old way of doing things, and with this meaning, came the concept of

innovation. Among the most controversial was his concept that the entrepreneur

was not a risk taker (Schumpeter 1934; Carland & Hoy et al 1984). In modern

times, society appears to be fascinated by entrepreneurs who start up small

businesses and facilitate their growth and development (Beaver and Jennings

2005), while The Webster Concise Dictionary, offers a definition of one who

undertakes to start and conduct an enterprise or business, assuming full control

and risk. Due to the focus on small business motivation and business decisions

for this research, an entrepreneur who is also called the owner-manager is,

defined as a small scale business owner-manager who is actively engage in the

day to day running of his or her business.

Proponents of small business ownership have sought to explain the variety of

businesses created in terms of sub-classifications of motivation. Stanworth and

Curran (1976) delineate the craftsman whose main motivation is to ensure a

living for him/herself, from the classic owner manager who sees the

development of a profitable enterprise as the main motivation, from the manager

entrepreneur who is strongly growth oriented and seeks recognition for

managerial excellence (cited in EC01 lecture notes).Similarly, Bridge et al (2003)

segment the motivations of the small business owner into the lifestyle oriented,

comfort-zone oriented and growth oriented respectively. It is therefore the


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influence of the owner; in whatever category his or her motivations and decisions

may fall that is a major determinant of how a small business operates.

In his review of motivation and the entrepreneur, Johnson (1990) noted that it is

important to understand the motivational character traits that spurred people to

become entrepreneurs and why some are more successful than others.

Johnsons perception seemed to reinforce the entrepreneurial trait school of

thought, that development of an understanding of the individual entrepreneurs

character traits and personal goals might provide meaningful insight into his or

her future behaviour, and ultimately help with an understanding of one of the

principal determinants of business success and failure. This study has therefore

centred on the impact of the character traits and antecedent influences of owner-

managers on their business successes.

Owner-manager character traits can be divided into two groups. One group is

made up of psychological character traits and the other group consist of variables

arising from the owner-managers background. Burns (2001) identifies the former

as `personal character trait` and the latter as `antecedent influences`. The focus

of this study is primarily on both the character trait such as need for achievement

and independence and antecedent influences such as education and prior

experience (Chell 1985; Chell et al 1991).

The role of individual character traits and antecedent influences in determining

the actions of those who start and run their own business has been explored in

numerous academic literatures, and links to business successes have been

identified by a number of writers (Bridge et al 2003; Kirby 2003). The following

sections define character traits and antecedent influences and review the


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academic literature dealing with the influences of each on the subsequent

selection of their effect on the motivation, decisions and success of the owner-

manager.

2.3 Owner-managers: Character traits

2.3.1 What are Character traits?

In his review of the character traits of the small firm owner-manager, Burns

(2001) cautiously links an individual character trait to the success of a business

picking winners. Burns agues that even though it is possible to identify the

personal characteristics of owner-managers and entrepreneurs, it is not always

possible to link them directly with a particular business in which they will

succeed. This assertion is further supported by Deakins (1996) who noted a

number of methodological problems associated with attempting to measure

personality characteristics. Carsrud and Krueger (1995)suggested that this may

have been due to selecting the wrong traits for empirical investigation and

subsequent studies have examined other predictors of entrepreneurial success

such as passion and tenacity. Many character traits that have been found are

similar to those found in other successful people such as politicians and athletes

(Chell, Haworth and Brearley 1991).

Naffziger et al (1994) have proposed a model that links entrepreneurial

motivation to the achievement of certain goals. Entrepreneurs define their

experience as being successful in as much as the goals that are reached (Figure

1). An expanded view of entrepreneurship should include the entirety of the


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entrepreneurial experience including ownership and performance. As part of the

process, the entrepreneur becomes a manager and evaluates his/her set goals

that are being met (for example independence) according to their order of

importance. These evaluations form the motivational level of the entrepreneur

and the need to act more entrepreneurially. According to Naffziger et al (1994),

the primary motivational characteristic of this framework lies therein that the

entrepreneur is motivated to act more entrepreneurially as long as it is known

that this type of behaviour is instrumental in the achievement of goals.

PC = Personal Characteristics PE = Personal Environment PG = Personal Goals BE = BusinessEnvironment

Figure 1: A model of entrepreneur motivation

1

To date, four character traits need for independence, need for achievement,

internal locus of control and ability to live with uncertainty and take measured

1Source: EC01 Lecture notes


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risks have been identified in the literature. In the following sections each of these

are discussed further.

2.3.2 Need for Independence

Owner-managers have a high need for independence. This is mostly often seen

as `the need to be ones own boss` and is most often cited, and supported, by

researchers (Burns 2001). Cromie (1987) found that it was a strong motive for

entrepreneurs to set up their own businesses, and Caird (1991) showed that

entrepreneurs have a stronger need for autonomy than a lot of other

occupations. This need is influenced by internal drive for action, and the pressure

exerted by the expectations of others. It is the prospect of achievement (not

money) that motivates them. Money is only important as a measure of success

(Kirby 2003). Thus it follows that entrepreneurs are very unlikely to enjoy working

in an environment that restricts ones potential and reduces the possibility of

achieving personal satisfaction and great rewards.

2.3.3 Need for Achievement

High achievers are moderate risk-takers with a drive to succeed and excel in

what they do. Their preference is to take on a challenge and to accept the

responsibility for success or failure, rather than leaving the responsibility to

others, or to chance (McClelland 1961). One of the earliest identified

characteristics of an entrepreneur was that of the need for achievement, first

described by McClelland in 1953 as n-Ach. Burns (2001) also noted that owner-

managers typically exhibited a high need for achievement, and this achievement


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for the individual owners means different things depending on the type of

persons they are. Numerous researchers (McClelland 1965; Bosley et al 1980;

Burns 2001) have shown entrepreneurs to have higher levels of n-Ach than

others in the population and have confirmed a link between n-Ach and

entrepreneurial behaviour. There is also some empirical support for the idea that

entrepreneurs have a higher motive to achieve compared to non-entrepreneurs,

as Begley (1995) and Hornaday and Aboud (1971) consistently found that the

achievement motivation exist as a stable characteristic and is more prevalent

among entrepreneurs when compared to others.

2.3.4 Internal Locus of Control

If it is to be it is up to me! (Anon)

Locus of control . refers to the question of where the control of events resides

(Bridge et al 2003). Those with an internal locus of control have the view that

they are in control of their destiny, whilst those with an external locus view

outside forces, such as chance, as the controllers of their fate (Rotter 1966 as

cited in Bridge et al 2003). Since Rotter first described the concept of internal and

external locus various researchers have linked high internal locus of control with

entrepreneurial behaviour (Cromie 2000; Salaman1979).

Other studies by Brockhaus and Nord (1979) also found support for high locus of

control beliefs for entrepreneurs compared to managers. Brockhaus and Nord

found that entrepreneurs were more internal in their locus of control beliefs when

compared to managers. However, Hull, Bosley and Udell (1980) have challenged

the findings from Brockhaus and Nord and Rotter. The former researchers


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surveyed over 300 individuals in an attempt to distinguish between the

personalities of entrepreneurs and non-entrepreneurs. Internal locus of control

was the one factor that showed no significant difference.

Although there are conflicting evidences of the role of internal locus of control in

predicting entrepreneurs from non-entrepreneurs, this characteristic is still

important in measuring the entrepreneurial trait (Bridge et al 2003).

2.3.5 Risk TakingMcClelland posited that entrepreneurs are high in the need for achievement and

therefore prefer moderate levels of risks (EC01 lecture notes). The usual

interpretation of a risk taker is someone who in the context of a business venture

pursues a business idea when the probability of succeeding is low.

There have been a number of studies supporting the idea that risk bearing is a

prime factor in the entrepreneurial character and function. In particular, Koh

(1996, cited in Kirby 2003) found out that people who are entrepreneurially

inclined have higher risk scores than those who are not. This finding has further

been supported by (Caird 1991; Cromie and O`Donoghue 1992) who have

suggested that though the is no apparent consensus with respect to risk-taking,

the prevailing belief appears to be that entrepreneurs are more predisposed to

taking calculated risks than are other sectors of society. However some

researchers have cast doubt on the validity of risk taking propensity as an

entrepreneurial characteristic. In particular Brockhaus (1980) found no

significant statistical difference in the general risk patterns of a group of


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entrepreneurs and a group of managers; while Miner (1997) argues that a key

entrepreneurial task is that of avoiding risk all together.

2.4 Owner-Managers: Antecedent Influences

2.4.1 What Are Antecedent Influences?

The influence by the social environment that we find ourselves in, for example,

our family, ethnic group, education and so on, influences our values, attitudes

and even our behaviours. These are called antecedent influences and it has

been held that owner-managers and entrepreneurs often share common

antecedent influences which, again distinguish them from other people (Kirby

2003). An overview of the wide range of antecedent influences that have been

considered in studies of small firms and their owners motivations and business

decisions are provided by Storey (1994). A selection of the antecedent influences

included in his listing, which seem to have the potential to affect an owner-

managers tendency in business motivation, decisions and success are

discussed in this section and some taken as variables into the empirical analysis.

2.4.2 Age

Several researchers (Shapero 1971; Cooper 1973; Burns 2001 ;) have noted that

an entrepreneurial decision is mostly likely to be made between the ages of 25

and 40. Similarly, Birley (1986) suggests that entrepreneurs often reach a crisis

of identity point in their lives in their 30s. One reason for Birley argument is given

by Burns (2001), who argues that a possible reason is, later in life when children

will probably have grown up and left home, and there might be some capital


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saved that can be used for start-up. It is also suggested in the literature that

younger individuals may be more willing to assume risks and grow their

business. Following Davidssons argument, a younger individual may have a

higher need for additional income. The burden of supporting a family and

meeting mortgage payments generally declines with age. An older individual who

continues to be the owner-manager of a small firm is more likely to have reached

his/her initial aspirations. However, while younger individuals have more

motivation to expand their business they also may have fewer financial resources

and fewer networks. The limited empirical evidence suggests that the owner-

managers age tends to be negatively related to growth (Davidsson, 1991).

However these findings remain inconsistent with the work of Brockhaus (1982)

whose findings in the USA revealed that at the said ages most young Americans

underwent military service.

Self-employment appears to become increasingly inviting nearer middle age

when the potential entrepreneur can afford the start-up of a new venture (Kirby

2003), redundancy or early retirement is most likely to occur when the individual

has the experience to identify opportunities. A recent survey of 600 of Britains

most successful entrepreneurs revealed them, to have an average of 45 (Ernst &

Young, 2001). Perhaps as one gets older, the cost of failure increases; the

young can always start again. It is therefore thought likely that younger owner-

managers of SMEs will hold motivations and make business decisions that differ

from the motivations and business decisions held by older owner-managers


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2.4.3 Education

Although many researchers have tried to link level of education with

entrepreneurial potential, it remains an area of controversy. The common and

popular belief that small business owners and entrepreneurs are less educated

and lack more skills than their large business counterparts is well documented

(Deeks, 1972; Batten, 1978 cited in EC01 lecture notes). Brockhaus and Nord

(1979), for example found that the education level of entrepreneurs were

significantly lower than the education level of managers, whilst Collins and Moore

(1970) suggested that entrepreneurs commonly had trouble relating to authority

figures, seemingly as a result of having had poor relationships with their fathers.

Such relationships often led to the entrepreneur leaving school at an early age

and to a succession of jobs.

In the United States, research consistently shows a positive association between

the probability of starting-up in business and increase in educational attainment

(Evans and Leighton 1990 cited in Burns 2001). In the UK, Curran's analysis of

the General Household Survey (GHS) (Curran et al 1988,) has given small

business researchers national figures on the level of education of small business

owners and the self-employed in comparison with the total population. Only 11%

of female and 8.6% of male small business owners surveyed in the GHS

reported any further education qualifications (Curran, 1988). He found that both

male and female small business owners were less likely to have a degree than

employees, but that among the female self-employed, possession of a degree

was more common than among female employees.


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In contrast, some writers have claimed that `anecdotal evidence` suggest that too

much education can discourage entrepreneurship (Bolton and Thompson 2000).

Despite the debate of education in developing entrepreneurial potential, the

rationale for this relationship might be two-old. Firstly educational attainment

might provide the basis for better learning through life, enabling entrepreneurs to

better deal with business problems and giving them a greater openness.

Secondly it might also give them greater confidence and motivation in dealing

with customers and other business professionals.

2.4.4 Experience

Literature suggests that entrepreneurial experience, particularly start-up

experience, enables seasoned entrepreneurs to overcome traditional new

venture obstacles and to accelerate new venture development (Starr and

Bygrave, 1991; Starr, Bygrave and Tercanli, 1992 cited in EC01 lecture notes).

Therefore work experience as a determinant of entrepreneurial behaviour can be

assessed in two fold. Firstly, dissatisfaction with previous work experience has

been shown to increase the probability of entrepreneurs starting their own

venture (Naffziger and colleagues, 1994). Studies by Broackhaus and

Weinrauch, cited in Sexton and Smilor, 1986) supported this proposition.

Dissatisfaction was a major source of push from one's mainstream job to an

entrepreneurial venture (Sexton and Smilor, 1986). Secondly, previous work

experience has been shown to be very useful to entrepreneurs (Naffziger and

colleagues, 1994). Most entrepreneurs begin business in industries with which

they are already familiar from their previous work experience.


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2.4.5 Entrepreneurial History

Westhead and Wright (1999; 2004) have drawn a contrast between novice,

portfolio and serial entrepreneurs. They argue that the serial entrepreneur who is

a more experienced owner-manager might be expected to be more motivated to

exit one private business before entering a subsequent one. Reuber and

Fischers (1999) Insightful review explored issues relating to a founders

experience. They, however, did not make an explicit distinction between prior

independent business ownership experience, and other types of experience (i.e.,

relating to opportunity identification, managerial and technical experience). Also,

they failed to make a distinction between types of entrepreneurs; but Westhead

and Wright (2004) noted entrepreneurs business ownership experience may

differ according to the number of private businesses he/she has established,

inherited and / or purchased. The nature of an entrepreneurs business

ownership experience may not be homogeneous. Some novice entrepreneurs

may have no prior entrepreneurial experience as founders, inheritors or business

purchasers. Some experienced entrepreneurs may exit one private business

before entering a subsequent one (i.e., serial entrepreneurs), while others may

start / inherit / purchase and retain ownership of several private businesses

concurrently (i.e. portfolio entrepreneurs).

2.5 The Retail Industry

Retailing consists of the sale of goods or merchandise from a fixed location, such

as a department store or kiosk, or by post, in small or individual lots for direct

consumption by the purchaser (Agricultural Services, 2000). In 2005 the retail


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industry employed 2.9 million people. This equates to one in nine, or 11% of the

total UK workforce (Office for National Statistics (ONS), 2005); and over the last

five years, employment in retailing has grown by 50,402 (British Retail

Consortium)

2.5.1 The Independent Retail Sector

Across Europe the small retail sector is in decline (Euromonitor International,

2003), but shopping as an act is of immense cultural significance (Ackerman and

Tellis, 2001; Burt and Carralero-Encinas, 2000), with shops representing an

accessible and public display of a nations cultural heritage. The declining of

small retail businesses have also be noted by Byrom et al (2001) who asserts

that the small independent retail sector in the UK has been squeezed

throughout the last 30 years, by the increase of the dominance of large retailers,

price wars, reduction in supply lines and the encroachment of the large and

multiple retailers into the convenience shopping market. According to the

Scottish Federation of Small Business (2006), in the past ten years the large

supermarket operators have gained an ever increasing market share of the

convenience sector at the expense of local and independent convenience

retailers; the squeezing of small retail shops is evident in Scotland, from a

broadly stable number of shops in the late 1970s and 1980s at about 30,000 the

numbers have fallen through the 1990s to an estimated 22,500 in 2000 (The

Scottish Government Publications 2000). Thus the small independent retail


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owner-manager must rely on his/her motivations and the ability to make the right

business decisions for the business to survive.

2.6 The Role of Owner-Manager Motivations

According to Vroom (1964) cited in Analoui (2000), motivation comes from the

Latin term to move. He defined motivation as an internal force, based on an

individuals conscious and unconscious needs that drive him/her to achieve.

Most small business ownership occurs from `pull` or `push` factors or the

combination of both `pull` and `push` factors (Stanworth 1995); and combinations

of `pull` and `push` motivations that drive small business ownership is

determined largely by the owner-managers prospect of a positive change in

personal lifestyle. The most common `pull` factor cited in the literature, and

employed in this study is the need for independence which is seen in small

business owners as `wanting to be ones own boss`. Additional `pull` reasons

have been the desire to achieve job satisfaction, business opportunity, the desire

for personal challenge; a need for personal development, a need for approval

and a desire to use existing experience and knowledge have been included in

the survey questionnaire as a measure of positive motivation. Overall, financial

motives are often secondary to more personal factors for being in small business

(Mason, Pinch & Storey 1991; Rosa, Hamilton, Carter & Burns 1994)

In contrast to `pull` factors `push` factors centre on elements of frustrations for

individuals. Frustrative factors such as constraints of being in a subservient role,

perceived lack of opportunity for advancement, avoidance of low-paid

occupations (Burns 2001) are part of the questionnaire as a measure of negative


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Van der Merwe (2003) considered the ambition of the owner-manager and

defined a successful owner-manager as one who has been in business for longer

than two years, operated an enterprise with more than five employees and made

a profit and expanded in terms of infrastructure and growth

It can therefore be argued that the success or failure criteria of a small firm must

reflect the principal stakeholders perspective; and for a small business to be said

to be successful it must first survive.

2.8 Research Questions and Hypotheses

2.8.1 Research Questions

The findings of earlier research cited throughout this chapter suggest the SME

performance is affected by an owners choice of motivation, business decisions

and his/her perception of the success of the business. In turn, the owners choice

of motivation and decisions are affected by their character traits and antecedent

influences. This study cited, in particular the works of Caird (1991) and Storey

(1994), has been used to support the development of four research questions

and to answer the following:

1. To what extent is the business decision to grow the business high

for owner-managers who were `pulled` to start their business than

owner managers who were `pushed` into business?

2. To what extent do younger owner-managers exhibit different

business decisions from older owner-managers?


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3. To what extent is the difference in business decisions between

more highly educated owner-managers to that of less educated

owner-managers.?

4. To what extent are owner-managers who start their businesses

from a previous similar business tend to make different business

decisions from owner-managers from previous different business.

One set of research questions was used: A questionnaire survey designed and

titled Motivations of Small Scale Owner Managers(See Appendix 1)

2.8.2 Hypotheses

From the research questions has been the development of four hypotheses for

testing through this research.

H1 The business decision to grow a business is higher for owner-managers

who are `pulled` into business than owner-managers who are `pushed`.

H2 Younger owner-managers exhibit different business decisions from older

owner-managers.

H3 Owner-managers with a lower education qualification exhibit business

decisions that differ from business decisions held by owner-managers with a

higher education qualification.

H4 Owner-managers who start their businesses from a previous similar

business tend to make different business decisions from owner-managers from

previous different business.


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2.9 Implications of Business Context to this Study

As stated earlier, Context is essential to the formation of each owner-manager

characteristics and antecedent influences and, subsequently, to the development

and changes of their motivations that, in turn affect the choices made for the

business. Context is also important in that, at any point in time, it affects a

business and its environment and therefore acts to constrain the strategic options

available to the small business owner-manager.

To ensure that, all business owner-manager questionnaires were subject as

much as to the same contextual variables, the same environment and influences

of council regulations were controlled. To achieve that, this study has been

limited to the Forth Valley in Central Scotland, because it is where the researcher

resides. A more detailed discussion of the methodology used for this study

follows:


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CHAPTER 3

3.0METHODOLOGY

3.1 Introduction

In previous chapters, the literature concerning owner-managers, their

character traits, antecedent influences has been reviewed in relation to their

effects on business motivations, decisions and successes. This chapter

describes the research methods used in investigating the research questions.

3.2 Research Design

The research was conducted by a questionnaire survey. Weiers (1988)

postulates that the analysis of questionnaires is easy due to the structured

information in the questionnaire with minimal or no open-ended questions.The

data collection method was a closed-ended survey designed to measure

variables (e.g. need for independence, age, education, experience, etc) and

the effect they have on owner-managers motivations and business decisions

will be examined in this study. Bryman & Bell (2007) have noted that

questionnaire survey of purposive sampling method will ensure that all

respondents would be given exactly the same context of questioning, and

their responses can be aggregated, and conclusions drawn. But there are

some disadvantages as well. Response rates from questionnaire surveys are

often very low. And, questionnaires are not the best vehicles for asking for

detailed written responses, Trochim (2006).


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3.2.1 Measurement of Character Trait and Antecedent Influences

In order to measure the character trait and antecedent influences of owner-

managers, a questionnaire was adopted from relevant sections of a reviewed

questionnaire The nature of the small Firm: Understanding the Motivations of

Growth and Non-Growth Oriented Owners by Scott Holmes and Ian Zimmer

(1994) which was published in the Australian Journal of Management Vol. 19,

No. 1. (See appendix 2).

3.2.2 Limitations of Research

Ideally the data collection for this research should have covered a larger

geographical area across Scotland; this would have allowed for a larger

number of owner-managers to have participated in the questionnaire;

however due to lack of resources i.e. cost and time, the data collection was

carried out only in the Forth Valley area in Stirlingshire, and hence the

relatively smaller sample size of 24 small independent retail owner-managers.

3.2.3 Participants

The sample included n = 24 owner-managers who had established their own

businesses and were involved in the day to day running. The focused group of

owner-managers to be studied are small independent retail owners n =24.

3.2.4 Procedure

The researcher and two former postgraduate students, whom he hired,

distributed the questionnaires face-to-face at businesses in Stirling, Larbert

and Falkirk. Most of the questionnaires were left with the owners who


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completed the questionnaires at their own convenience. A convenience

sampling was used to draw the sample. Convenience sampling involves

collecting information from members of the population who are most easily

accessible and conveniently available to provide the required information

(Kerlinger, 1986). The rationale for using this method is that it is convenient,

quick and cost effective (Neuman, 1997; Terre Blanche & Durrheim, 1999).

The disadvantage however, is that the properties of the sample are likely to

under or overestimate the true population values (Terre Blanche & Durrheim,

1999). Moreover, the sample may misrepresent the population and the results

cannot easily and accurately be generalised (Neuman, 1997).

Approximately 75% of the questionnaires were filled by the owner-managers

themselves; the other questionnaires were with assistant managers. In a few

cases the assistant managers were the only viable respondents as they

reiterated that they had spoken to the owners, and had been given the

relevant information needed. .

The owner-managers were requested to respond to all the 25 questions on

the questionnaire and assured of the confidentiality of the survey. However

approximately 30% of the respondents gave their business names and post

code but not addresses. 15 more businesses received the questionnaires, but

lost it or declined to respond, and 5 questionnaires were not properly

completed. Only questionnaires that were completely answered were used in

this study.


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Prentice-Hall.


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CHAPTER 4

4.0 RESULTS AND ANALYSIS

4.1 Introduction

The aim of this study is to investigate whether or not the motivations and

business decisions of small business owners at start-ups changes over time.

Below are the results of the survey. The statistical analysis used to assess the

hypotheses is also evaluated.

4.1.1 Owner-Manager Characteristics

The characteristics (derived from antecedent influences) of the owner-managers

of the sample retail sector who participated in the study is presented in tabular

format and explained by means of frequencies and percentages

4.1.2 Univariate Analysis

Univariate analysis refers to the analysis of one variable at a time. The following

variables of retail owners are analyzed: motivations; age; education and

experience.

4.2 Results

Descriptive statistics were computed for each question from which hypotheses

had been derived. Responses from the questions were compared using crosstab

analysis and Chi-square significance tests. As is typical with crosstab analysis


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and relatively small datasets, it was necessary to re-categorize the response

data into fewer categories (Agresti, 1884). Relevant categorization strategies

were tested. After performing Chi-square tests using all relevant data points

singly or combining them into realistic ranges, it was determined that the data

ranges for start-up motivation, age, educational level and previous businesses

provided the best fit.

4.2.1 Decision of Business GrowthOver 75% of small retail owner-managers had made a business decision to grow

their businesses in the next 2 to 3 years (Table 2). This is a finding that quite

contradicts the common perception that small business owners normally do not

wish to grow their businesses. But as seen from the percentage, this was a

feature of the majority of small retail businesses in the study area. The key point

emerging from this is that there are two groups of owner-managers in relation to

the business decision of growth; those who want to grow their business and

those who do not. It is therefore important to ask how this dichotomy can be

explained.

Table 2: Business Growth Decision in Small Retail business in 2-3 years

Decision for Business GrowthNo. of respondents

%

`Yes` to business growth in 2-

3 years19 79

`No` to business growth in 2-3

years5 21

Totals 24 100

Source: Interview schedule


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4.2.2 Start-Up Motivation

Motivations for being in business for the small business owner were varied.

Available literatures have suggested two main factors, namely `pull` and `push`.

`Pull` factors are associated with owner-managers having a strong internal desire

to go into small business; and `push` factors are linked to similarly strong desire

but based on external negative reasons. From responses to the questionnaires,

both motivation factors were identified among the respondents. The `pull` factors

were favourable economic conditions, business opportunity, own boss, challenge

to innovate, and independence whiles the `push factors are no better choice for

work and job loss. None mentioned unemployment as a factor.

Results from (Tables 2 & 3) shows that the most frequently cited motivations by

the respondents were business opportunity (37.5%), followed by a desire for

independence (16.7%) and own boss (16.7%). None of the respondents started

their business because they were unemployed. Negative reasons for

respondents motivations included no better choice of work (8.3%) and job loss

(4.2%).


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Table 3: Original dataset: Motivation for starting business

Motivations No. of respondents %

Favourable economic conditions2 8.3

Business opportunity 9 37.5

No better choice of work 2 8.3

Own boss 4 16.7

Job loss 1 4.2

Challenge to innovate 2 8.3

Independence 4 16.7

Unemployment 0 0.0

Totals 24 100


Table 4: Category defined: `Pull` and `push` factors for starting business

Motivations No. of respondents %

Pull factors 21 87.5

Push factors 3 12.5

Totals 24 100

4.2.3 Owner-Manager CharacteristicsThe characteristics (derived from antecedent influences) of the owner-managers

are given below:

The ages of the respondents (N = 24) who completed the questionnaire ranged

from 18 to over 55 years. Twenty-five percent of the respondents were aged


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between 35-44 years, 25% between 18-24 years, 20.8% 55 years and older,

16.7% between 25-34 years and 12.5% between 45-54 years (Table 5).

In re-categorizing the ages of the retail owners into 18-34 for younger

respondents and older respondents 35 plus, more than a third of the owner-

managers fell within the younger owner-managers age with an average age of

33.1 years. Surprisingly, in view of the age of the owner-managers, only 17% had

owned or operated their businesses for 10 or more years, and 38% had between

2-5 years experience, 21% were novice owner-managers setting up their first

business. However, the wealth of experience should not be over-estimated as

more than half of them have been running their businesses for five years or less.

Table 5: Original dataset: Frequency table showing ages of retail owners

Age of owners (yrs) No. of respondents %

18-24 6 25

25-34 4 16.7

35-44 6 25

45-54 3 12.5

55 plus 5 20.8

Totals 24 100.0


Table 6 Category defined: Frequency table showing ages of retail owners

Ages of Owners (yrs) No. of respondents %

18-34 10 41.7

35-55 plus 14 58.3

Totals 24 100


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Table 7below shows that 50% of the respondents have had a formal secondary

school level qualification. About 33 have Higher National Diploma (HND) and

16.7% were relatively well educated with at least a first degree. This figure is

relatively high given the age groups the sample is drawn from. In re-categorizing

the educational levels of the respondents into lower education i.e. secondary and

below and higher education i.e. HND and higher, the respondents were equally

divided with each group having about 50% of respondents. Suggesting that

ownership of small retail businesses cuts across educational backgrounds

Table 7 Original dataset - Frequency table showing education level of retailowners

Educational Level No. of respondents % of total

Secondary 12 50

HND 8 33.3

Degree 4 16.7

Totals 24 100.0


Table 8 Category defined: Frequency table showing education level of retailowners

Educational Level n %

Secondary 12 50

Higher education (HND &

Degree)12 50

Totals 24 100


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Table 9 Original dataset: Previous business

Previous business No. of respondents %

Unemployed 14.2

Employed in another business 1041.7

Apprentice 14.2

Self-employed in another

business6

25.0

Attending college 14.2

Employed in a similar

business5

20.8

Totals 24100


Table 9 showed that there was no clear tendency for the owner-managers to

build on their previous experience as only about 21% were running businesses

similar to a business sector they had previously worked. However it is evident

that almost 90% of the owner-managers that were sampled were in employment

before they started their own business.

Table 10 Original dataset: Number of years in operation

No. of years in operationNo. of respondents %

0-1 5 20.8

2-5 9 37.5

6-9 6 25.0

10 plus 4 16.7

Totals 24 100


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Table 11 Category defined: Frequency table showing Number of years in operation

No. of years in operationNo. of respondents %

0-5 14 58.3

6-10 plus 10 41.7

Totals 24 100

Table 10 and Table 11show the original dataset and the categorized number of

years of operation respectively. From Table 11, the number of respondents who

started their business within 5 years or less than (58%), were more than those

who have been in business for over 5 years (41.7%).

Table 12: Dataset - Number of employees in three years

No. of employees in 3 years No. of respondents %

small scale owner-managers: motivations and successes - mba thesis

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