Business Creation, Early Stage Development and Business Closure

Title. Understanding moderating role of resilience in serial entrepreneurial processes and practices in least developing economic system

Abstract

Entrepreneurial resilience has considerable impact on serial entrepreneurial processes and practices in adverse condition in particular in least developing economies systems where weak entrepreneurial ecosystems tend to be not so supportive to individual serial processes and practices. To date the impact of resilience on serial entrepreneurial sequential processes and practices in least developing economic systems have largely been investigated in isolation. As a consequence little is known about the intimate connection between resilience and entrepreneurship in developing economies. Given that in many least developing countries many serial entrepreneurs struggle or fail to bounce back after business failure, this study employed environmental munificence and carry capacity models as a framework to critically explore the moderating role of resilience in serial entrepreneurship in least developing economic system. The central purpose is to enhance our understanding of the intimate connection between entrepreneurial resilience and individual serial entrepreneurship.in adverse conditions in least developing economic system.  The main thesis of this study is that, resilience is a core entrepreneurial psychological trait which serves as a driving force behind successful individual serial entrepreneurship in adverse conditions in least developing economies. This study makes theoretical contribution to serial entrepreneurship body of knowledge in the literature by enhancing our understanding of the critical role resilience plays in serial entrepreneurship in adverse conditions. In addition this study provides new direction for serial entrepreneurship research and contributes to the advancement of the serial entrepreneurship knowledge base in the literature 

Keywords; Resilience, individual serial entrepreneur, entrepreneurship, adverse condition, least developing economies

Introduction

Entrepreneurial resilience is a core entrepreneurial psychological trait which serves as a driving force behind successful individual serial entrepreneurship in adverse conditions in least developing economies. We are in an era of creative destruction. (Brock and Evans, 1989; Acs, 1992) There are increasingly shifts from traditional socio-economic dependence on lager firms to smaller and medium size (SMEs) firms for social economic development due to dynamic advancement of industrial technologies and information, communication technologies (ICT) which require more flexible structural systems, processes and adaptation to the trends business environments. Serial entrepreneurial processes and practices plays important role in socio-economic development (Starr and Bygrave, 1991; Ucbasaran, et, al. 2003, 2008; Baumol and Strom, 2007). As Amaral et al. (2009) asserted, new venture creation is experiential in nature and so these  structural shifts and adaptation  requirements are increasingly posing challenges as well as negatively affecting serial entrepreneurial sequential venture creation  in both developing and developed economic. In particular in least developing economic system where serial entrepreneurs face adverse entrepreneurial environments compared to emerging and developed economic systems. According to Van de Ven, (1993) institutional arrangements, resource endowments and proprietary functions are three core multilevel infrastructure of successful entrepreneurship.

Least developing economic systems are more extremely challenging entrepreneurial contexts within which to practice sequential new creation. The main constraints and hindrances which hampers and discourage serial entrepreneurship in least developing economies in particular sub-Sahara Africa economies, includes lack of clear government entrepreneurial policy, weak institutions and entrepreneurial ecosystems, lack of supportive entrepreneurial infrastructure, limited access to finance, supports services for new technology learning and marketing development. (Hinton et al. 2006; Sentsho et al 2007) These issues and challenges tend to have adverse impact on many individual serial entrepreneurs’ willingness to bounds back after venture failure in least developing world. Baron (1998) suggests that given the contexts of new venture creation and development is apprehensive with environmental challenges and adversity, to be successful individual serial entrepreneurs must process higher level of mental hardiness in order to persist and make optimal strategic decisions over time. Cusack and Malmstrom (2011) pointed out that despite all this problems new ventures constantly emerges and entrepreneurs are willing to risk their assets, wealth and even their life in explore and exploit new beneficial business opportunities the yield supernormal profit. This paper explores how resilience drives individual serial entrepreneurial processes and practices in adverse entrepreneurial environment on least developing economic system.

 Serial entrepreneurial phenomenon is multi-dimensional consisting of individual, corporate and institutional levels. This study focuses on individual serial entrepreneur. Individual serial entrepreneur refers to an experience entrepreneur who disown existing venture and over time rebounds back to sequentially create new venture (Low and MacMillan, 1988; Wright et. al.1998; Sarasvathy and Venkataraman, 2011; and Shepherd and Patzelt, 2011)

According to Deakins (1999) in general there are three main sources which contribute to the current understanding of entrepreneurship and characteristic of entrepreneur. The first approach come employment of economic theory to the role of entrepreneurship in economic development, the second approach is related to the use of personality characteristic based psychological trait and the third is social behavioural approach which emphasised the influence of social environment as well as entrepreneur personality trait. These traditional entrepreneurship theories focus on the actions and outcomes as a means of defining entrepreneur and entrepreneurship. Kuratko and Hodgetts (2001) argues that deeper understanding of entrepreneurial behaviour not only call for understanding of entrepreneurial innovative behaviour but also the ways in which entrepreneurs perceived and cope with adverse environments and venture failures. This means that taking into consideration the socio-economic systems within which individual serial entrepreneurial processes and practices operate. The behavioural and cognitive approach is increasingly becoming the dominant approach to research and the study of entrepreneurship in general and in particular serial entrepreneurship (Aldrich and Martinez 2001; and Davidson et al. 2001).

Entrepreneurship entails exploration and exploitation of commercial opportunities by individual or group of individuals to bring about socio-economic development (Rindova, et al. 2009; Shane and Venkataraman, 2000; Baumol, 2000). Unfavourable environmental conditions in least developing economies such as weak entrepreneurial ecosystem and the current contemporary development such as digitization, systematic nature of modern products and services, globalisation and constant economic shocks pose challenges for individual serial entrepreneur’s intentions. Entrepreneurs tend to possess greater internal than external locus of control thus tends to attributes entrepreneurial success and failure to their own action. (Rotter, 1966; and McClelland, 1961) In relation to this study suggests that despite the extreme adverse conditions under which serial entrepreneurial processes and practices occurs in least developing economies, serial entrepreneurs tend to attribute success as well as failure to their own skills, abilities and actions. Naude (2010) noted that vast majority of entrepreneurs in developing economies involves in small and medium enterprise (SMEs), yet only a small number of new ventures survive for a long term. The majority of the new ventures fail within the first two years of operation. Individual serial entrepreneurs in least developing often experience unexpected shocks which potentially threaten their sequential venture creation processes and practices. Serial entrepreneurs in least developing economies need to persevere in light of higher risk and resource constrained conditions relative to serial entrepreneurship in emerging and developed economies. Wortman (1987) asserted that studying the process based entrepreneur characteristics such as resilience would be valuable in advancing entrepreneurship knowledge based in the literature. Ability to bounce back from adversity is critical to understanding entrepreneurship in least developing economic system (Markman, et al. 2005). Entrepreneurship case studies from least developing countries such as Afghanistan, Burundi, Columbia, Iraq, Rwanda, Sierra Leone, and Liberia detailed the terrible toll that adverse condition impacts on entrepreneurial processes and practices Yet despite these adverse conditions, the case studies also indicate that entrepreneurs are unusually tenacious and highly resilient (Naude, 2010). Jessen and Luthans, (2006) explained that social capital describes who the entrepreneurs know, human capital describes what the entrepreneurs know and psychological capital describes who the entrepreneurs are. According to Luthans and Youssef, (2004) the mixture of resilience, self-efficacy, hope and optimism operate synergistically to build and developed psychological capital within individual’s entrepreneurs. Hmieleski and Carr (2008) asserted that recent entrepreneurial research investigating the link between new venture creations and psychological capital of entrepreneurs found that psychological capital is useful in explaining significant number of difference in new venture creation and performance relative to measures of financial capital, human capital and social capital. Environmental dynamism enhance individual psychological capital in such a way that there is positive relationship when environmental dynamism is high and low when dynamism is low. In this study high environmental dynamism refers to least developing countries economic systems and low environmental dynamism refers to developed countries economic systems. Majority of individual serial entrepreneur in least developing countries exhibits resilience because they show successful coping regardless of contexts within which entrepreneurial processes and practices takes place are favourable or unfavourable. Given the unfavourable entrepreneurial contexts within which successful or unsuccessful individual serial entrepreneurs processes and practices occurs in least developing economic systems, the more surprising is that research on entrepreneurship in adverse and stressful environments are relatively scarce (Abdelnour, 2010; Bullough, et al. 2014) There is a lack of entrepreneurship research investigation resilience in the context of venture failures and success (Gabrielsson, 2009; Cope, 2011; Politis and Singh, 2016). As a consequence there is limited knowledge and deeper understanding about individual serial entrepreneurship in least developing economies. This has resulted in knowledge gap in the entrepreneurship literature. Against this backdrop the purpose of this study is to explore the extent to which resilience drives individual serial entrepreneurial processes and practices in adverse entrepreneurial conditions. The central aim of this paper therefore is to enhance our understanding of why some individual serial entrepreneurs are able to create and operate new venture, and at a certain stage of the business lifecycle disown the business and over time bounce back to create new venture in the same or different industry under adverse entrepreneurial conditions.

Entrepreneurial resilience 

The level of entrepreneurial resilience in particular economic system may relate to it social norm. Resilience level tends to be higher among individual serial entrepreneurs in under developed economic system where the entrepreneurial eco-systems are weak.. In this study I argue that weak entrepreneurial economic system promote higher level entrepreneurial resilience due to weak entrepreneurship eco-systems and generate more necessity-based individual serial entrepreneurs, whereas strong entrepreneurial economic systems where the individual serial entrepreneurs benefits from adequate supportive entrepreneurial eco-system   tends to promote lower level of entrepreneurial resilience and generates more opportunity-based individual serial entrepreneurs. In addition the risk level associated with new venture creation tends to be calculated risk in supportive entrepreneurial environment. Hence lower level of entrepreneurial resilience. Entrepreneurial risk level tends to be extremely higher in adverse entrepreneurial environments with weak entrepreneurial ecosystem. Entrepreneurial resilience as a moderator refers means the mediation role resilience plays in serial entrepreneurial processes and practices in adverse conditions. Entrepreneurial resilience refers to surviving innate condition that allows entrepreneurs to better cope with setbacks, challenges and potential crises (Ayala and Manzano, 2014; Hmieleski, et al. 2015) 

Conceptual framework employed to guide this study

This study employs Environmental Munificence (EM) and Carrying Capacity (CC) models to guide this study. Environmental munificence relates to scarcity or abundance of critical resources needed to operate ventures within an environment (Castrogiovanni, (1991; Specht, 1993).  EM and CC models consider ventures as embedded in social environments. (Wooley and Rottner, 2008) The higher the quantity of resources in an environment the more likely new ventures can be created and perform better (Okeyo, 2014). Organisational ecology perspective suggests that socio-economic condition determine environment carrying capacity (CC) (Wooley and Rottner 2008). Thus individual serial entrepreneur’s ability to explore and exploit of new opportunity depends on the level of EM and (CC).

Contribution, Conclusion and recommendation for future study

Future study is encouraged to explore moderating role of resilience in serial entrepreneurship from multi-level and longitudinal perspective. This study contributes theory by enhancing our understanding that, entrepreneurial resilience moderates and negative mind set and effects of adverse entrepreneurial conditions in entrepreneurship and promote adaptation. Higher level resilient entrepreneurs are better able to cope with challenging entrepreneurial contexts and are able make more risky decisions in the face of uncertainty to sequentially create new ventures. Policy makers may use this paper to boost serial entrepreneurship by promoting resilience building in particular in least developing world

Topic

Adopting a process view of entrepreneurship, this research provides an in-depth case study to explore the role of space and place in relation to a microbiology start-up at a science park in the north west of England. The paper shows how integrating the physical and human aspects of space and place not only inform new venture location, but are also integral to the entrepreneurial journey.

Prior research has noted that science based start-up is different in terms of: decision making processes (Villani et al., 2018; Miozzo and Divito, 2016; Maine et al., 2013); and venture location requirements (Sorenson, 2018, Grohn et al., 2015; Vlachau and Iakovidou, 2015; Ferreira et al. 2016); and, as a consequence, the use of assistive spaces such as science parks (Breznitz et al., 2018; Diez-Vial and Montoto-Sanchez, 2017; Mian et al., 2016; McAdam and McAdam, 2008). 

It is suggested that entrepreneurial journeys are thought to consist of decisions (Sarasvathy, 2008; Sarasvathy et al., 2008), emerging artefacts (Seldon and Fletcher, 2015), events and a plethora of variables relating to intentions, processes and outcomes (Garud et al., 2018; McMullen and Dimov, 2013;); however, space and place and the ‘whereness’ of entrepreneurship are rarely considered in the entrepreneurial journey (Korsgaard et al., 2014). Rather ‘where’ is typically implied in terms of ‘who’ referring to proximity and participation in networks (Anderson et al., 2010) and markets, as well as ‘what’ with reference to events and actions (Garud et al. 2018), as well as resources. Specifically, the impact of built spaces receives little attention, thus rendering the ‘entrepreneurial journey’ as a conceptualisation of a process as opposed to a map of venture creation depicting the motion and flow of entrepreneurial becoming.

‘Space’ then refers to the continuous variables of environment (Shearmur, 2010; Mazur, 1983) that have been created for the purpose of business support. Such spaces are not void of human expectation, rather they reflect the perceptions of those who seek to influence business start-up through the built environment (in this case a science park). ‘Place’ refers to the interests, expectations and actions of those who engage with spaces (Tuan, 1979), in this case the entrepreneur of the micro biology venture. Their experiences give meaning to designed spaces through the emergence of the business venture. 

Applicability to the conference theme (space – exploring new frontiers and entrepreneurial places)

In detailing the emergence of a new venture, the case explores how science based innovation is achieved through commercialisation, at a micro level. It looks at how the creation of the new venture emerges in association with moving into - and through - an assistive space. In using entrepreneurial journey as the unit of analysis, the study integrates space and place into the entrepreneurial process. Finally, the method is empathetic to space and place in employing participant led walking interviews to locate and position aspects of the built environment in the entrepreneurial journey and in doing so trigger reflective discussion of the temporal and relational emergence of the venture.

Aim

To inform the theory and practice of science-based start-up, by exploring the relationship between space and place and the entrepreneurial journey. 

The objectives are to:

Theoretical

• represent the entrepreneurial journey and provide understanding of how space and place are integrated into relational, spatial and temporal emergence, from both the perspective of the entrepreneur and entrepreneurial new venture;
• make sense of re-location (migration) of the firm and to understand the degree of spatial and temporal fixity of the entrepreneurial venture; 
• develop a conceptual framework that integrates consideration of space and place in relation to the entrepreneurial journey.

Practical

• identify the challenges and drivers for science-based start-ups in the UK and consider the role of assistive start-up spaces and places; 
• provide nuanced advice at different stages of venture development.

Methodology 

This qualitative case study analyses the emergence of a microbiology laboratory testing service over a 7 year period. Para-ethnography (Islam, 2015) supports the co-determination of the entrepreneurial journey between researcher and the entrepreneur. Using participant led walking interviews (Jones et al., 2008; Pierce and Lawhorn, 2015), data is drawn from conversations with the entrepreneur and from their referral to other people who were deemed part of the entrepreneurial journey. Case study integrates photographic artefacts of spaces within the science park and uses a temporal bracketing strategy (Langley, 1999) in order to gain an in-depth understanding of critical movements and locations.  

Contribution

Little is known about how space and place impact on the entrepreneurial journey for science based start-ups and the implications for new venture location in assistive spaces, at the micro level (Mian et al., 2016). This study contributes an understanding of the entrepreneurial journey from a spatial perspective in recounting the journey as movements in space and time. It presents these movements into - and through - the science park as case vignettes, detailing how different locations constitute places for business and venture creation. It informs the micro theory of start-up (both in terms of decision making and location choices) and maps the changing relationship between science park facility, entrepreneur and the entrepreneurial journey. 

This research highlights the importance of built facilitates in terms of: organisation formation and presentation; networking and relationship building with client organisations; the creation and validation of innovative processes and the entrepreneur’s ability to conceptualise and plan for growth. 

Implications for policy

Science parks are built environments designed to fulfill policy intentions for business support (Mian, 2016). Therefore, this study presents a case of policy in practice, and people in context, revealing how a science park is conceptualised and utilised by the entrepreneur, as the new venture emerges, locates, grows and migrates. It alludes to changing place-based expectations throughout the entrepreneurial journey (Kibler et al., 2015) 

Implications for practice

The entrepreneurial journey is presented as a meaningful unit of analysis in terms of understanding science-based entrepreneurship, as a process. This study brings the role of space and place into the discussion and representation of the entrepreneurial journey, arguing that the entrepreneur uses know “where” (in conjunction with know what and know how) to inform innovation and the emergence and development of the entrepreneurial venture.

References

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Breznitz, SM., Clayton, PA., Defazio D. and Isett, KR. (2018). Have you been served? The impact of university entrepreneurial support on start-ups’ network formation. Journal of Technology Transfer, 43(2): 343-367.

Ferreira, JM., Fernandes, CI., Raposo, ML., Thurik, R. and Faria, JR. (2016). Entrepreneur location decisions across industries. International Entrepreneurship Management Journal, 12(4): 985-1006.

Garud, R., Gehman, J.and Tharchen, T. (2018). Performativity as ongoing journeys: implications for strategies, entrepreneurship and innovation. Long Range Planning, 51(3):500-509.

Grohn et al. (2015). Case study: Lean Start Up: a case study in the establishment of affordable laboratory infrastructure and emerging biotechnology business models. Journal of Commercial Biotechnology, 21(2): 60-68.

Islam, G. (2015). Practitioners as theorists: para-ethnography and the collaborative study of contemporary organisations. Organizational Research Methods, 18(2): 231-251.

Jones, P., Bunce, G., Evans, J., Gibbs, H., Ricketts Hein, J. (2008) Exploring space and place with walking interviews. Journal of Research Practice 4(2).

Kibler, E., Fink, M. Lang, R. and Munoz, P. (2015). Place attachment and social legitimacy: revisiting he sustainable entrepreneurship journey. Journal of Business Venturing Insights, 3: 24-29.

Korsgaard, S., Muller, S. and Tanvig, H.W. (2014). Rural entrepreneurship or the entrepreneurship of the rural – between space and place. International Journal of Entrepreneurial Behavior & Research, 21(1): 5-26.

Langley, A. (1999) Strategies for theorising from Process Data. The Academy of Management Review, 24(4): 691-710.

Maine, E., Lubik,S. and Garnsey, E. (2013). Value creation strategies for science based business: a study of advanced materials ventures. Innovation: Management, policy & practice, 15(1): 35-51.

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McAdam, M. and McAdam, R. (2008). High tech-start ups in University Science Park Incubators: the relationship between the start up’s life cycle progression and the use of the incubator’s resources. Technovation, 28(5): 277-290.

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Business Dynamism, Job Reallocation Rates and the UK Productivity Puzzle, 1998-2018

Aim

The intention here is to present an analysis of how the business stock in the private sector in the UK has changed over 20 years from 1998 to 2018 with a specific focus on the key dynamics of job creation and destruction.  Using an established international analytical framework for job creation and destruction we observe that just over a quarter of all jobs in the private sector were either destroyed or created over a typical 12 month period – a remarkable level of turbulence in the UK labour market which provides a more granular analysis of the recent so-called ‘employment miracle’.   Despite the rise in employment since the Great Recession, there has been a slight fall in the measure of business dynamism which is a cause for concern given its importance to the overall level of productivity in the economy. 

Introduction

There is a clear connection between ‘business dynamism’ and the growth in productivity at the national level.  Unpacking what this means in the context of the UK will drive the nature and intensity of local industrial strategies and future business support interventions and policies. Such analytical framework on the most up-to-date data has not been done and the richness of the data used makes sectorial and regional level job creation and destruction estimates possible. The importance of the number of jobs produced from start-ups and expanding firms and those lost from contracting and closed firms makes this study applicable to the “Business Creation, Early Stage Development and Business Closure” conference theme. 

The analysis in this paper is based on a simple accounting framework which has been used in many previous studies (Davis et al (2008); Goldschlag, N., & Tabarrok, A. (2018)), which sets out the level of turbulence in jobs and identifies the type of firms (i.e., size) which most contribute to job creation/destruction in the UK. We do this by using employee data for all employer enterprises in the UK private sector and create the average annual job creation and destruction rates between 1998 and 2018, as well as entry and exit rates, and disaggregated both these by sector, size and region.

Data and Methodology

The data used in this analysis has been compiled by the Office for National Statistics (ONS) and is called the Business Structure Database (BSD) and is accessible through the ONS Virtual Micro-Data Lab (VML).   Virtually all UK firms with employees are covered by the BSD (which contains all VAT and/or PAYE registered enterprises). The data does not distinguish between part-time and full-time workers nor provide a breakdown between skill levels or functions (management, office workers or operatives).  In brief, the analysis simply treats a job as an employee in the business irrespective of their role and skill level[1].  

We use our longitudinal firm-level BSD dataset covering the 20 years 1998 to 2018 to provide a summary of average annual rates of job creation and destruction, entry, exit and reallocation rates in the UK disaggregated by region and firm size (employment).

The job creation and destruction rates presented below are defined in a conventional way:

• Job Creation – employment changes summed over all businesses that expand or start up in a given year. 
• Job Destruction – employment changes summed over all businesses that contract or exit in a year

These job creation and destruction figures are expressed as rates by dividing by employment averaged over the current and previous year (businesses with no change in employment do not contribute to either job creation or job destruction).  So the change in employment between two years – often referred to as the net employment change – is equal to the difference between job creation and job destruction over the period and the net employment rate equals the job creation rate less the job destruction rate

The sum of the job creation rate and the job destruction rate is referred to as the job reallocation rate. It summarises the overall volume of change and represents the ‘reshuffling of job opportunities across locations’ (Davis et al., 1996). Tracking the job reallocation rate allows us to arrive at a measure of business dynamism for the economy. This is done for different sectors at the 1-digit SIC level and regions using Government Office Regions (GOR).

Contribution

The results of this analytical framework will also prove crucial to policy-makers. In recent years, headlines show a decrease in unemployment levels and an increase in job growth in the UK despite virtually stagnate productivity and Brexit turbulence, the latter of which could result in eventual job losses. However, the quality of these jobs, especially during a rise in the ‘gig’ economy, should be taken with caution. This cycle of job losses and gains are usual for businesses but the scale of which this happens is fundamental for policy-makers to know to shape practice accordingly. 

Summary

This is an initial analysis of the job creation and destruction accounts for the UK since 1998 and further research looking at the breakdown of this at the sector and regional level is currently underway. The regional and sector breakdowns will help shape future business support and programmes at different levels and contributes to current literature by quantifying job reallocation rates in the UK for the 20 year period. For future studies, the next step is to understand the role of firm size, firm age, region, multi-plant status and country of ownership which are the variables readily available in the BSD.  By tracking reallocation rates over time as a measure of business dynamism and hence productivity we can then establish which subsets of firms are contributing to increases in overall productivity as resources (i.e., labour) shifts, or reallocates, from low-productivity to high-productivity firms and thus driving economic efficiency and growth. 

Note:

This abstract contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. The analysis upon which this report is based uses research datasets which may not exactly reproduce National Statistics aggregates.

References 

Davis, S., Haltiwanger, J., & Schuh, S. (1996). Job creation and destruction.

Davis, S. J., Haltiwanger, J., & Jarmin, R. S. (2008). Turmoil and growth: Young businesses, economic churning, and productivity gains. Economic Churning, and Productivity Gains (June 5, 2008).

Goldschlag, N., & Tabarrok, A. (2018). Is regulation to blame for the decline in American entrepreneurship?. Economic Policy, 33(93), 5-44.

Office for National Statistics (2017) Business Structure Database, 1997-2017: Secure Access [Data collection]. 9^th Edition.  UK Data Service. SN: 6697, http://doi.org/10.5255/UKDA-SN-6697-9