Research on Entrepreneurship Kun Fu Presentation at Swedish Jobs and Society Annual conference 20 th May 2014 London 1

Outline Entry into nascent entrepreneurship Transition from nascent to new entrepreneurship Other aspects of entrepreneurship – Informal entrepreneurship – Hybrid entrepreneurship 2

Entry rate into Nascent Entrepreneurship ( 2013 GEM) Individual-level - Age, gender, education, Income - Skill and knowledge, experience - Know other entrepreneurs - Intention and attitude -… Country-level -Economic -Political -Institutional -Cultural -… 3

Nascent Entrepreneurship Rate (United States VS. Sweden) % 211%

Public sector is much larger in Sweden Smaller income dispersion in Sweden US women were more active; Young Americans aged ( years) were specially active compared to Swedes in the same age category Delmar, F. & P. Davidsson, 2000 Possible reasons… 5

Know other entrepreneurs See opportunities What’s missing? 6

Informal Investors Rate 7

Social Influence on Entry into Nascent Entrepreneurship Wennberg, Autio and Kun (2014) 8

Conceptual Model Social Group-level (Level-2) Individual (Level-1) Entrepreneurial Behavior Entry into nascent entrepreneurship Individual’s attributes Self-efficacy Knowledge of entrepreneurs Good career choice Status attribution Group-level predictors Self-efficacy (group average) Knowledge of other entrepreneurs (group average) Entrepreneurship: good career choice (group average) Status attribution to entrepreneurship (group average) Wennberg, Autio and Kun (2014) 9

Individual-level predictors Self-efficacy: skills to start a business3.465***3.5 times more likely Good career choice0.995 Entrepreneurial familiarity ties1.767*** Status attribution to entrepreneurship0.981 Group-level predictors Groups’ efficacy5.446*** Groups’ good career choice1.439** Groups entrepreneurial familiarity ties1.923*** Groups’ Status attribution0.830 Cross-level interaction terms Groups’ good career choice * Self-efficacy0.438** 10

Perceived knowledge and skill (2013 GEM) 11

Transition from Nascent to New Business 12 Entrepreneurial initiatives Operating business

A case from USA Still tryingOperatingGave UpTotal 159 (47%)112 (33%)69 (20%)340 (100.0%) years of experience in the industry (more likely to start solo); savers who provide more self-finance; non-white established credit with suppliers; Received money from nascent operations; sole venture (team venture are half as likely to realize their start- ups) * Home owners; involvement in government/ university/ business- funded business assistance program;" white; invested no money of their own; have no hired workers; lack a posthigh school degree no significant differences by gender or wealth, nor by region or industry Parker and Belghitar (2006) 13 PSED, random sample, follow up 12 months

A case from the Netherlands longitudinal study, 330 nascent entrepreneurs were followed over a one-year period: – 47% started a business Industry experience /Manufacturing sector /using own money – 27% was still organizing Females/ Starting part-time – 26% gave up third party loan other/better job Gelderen, Bosma, Thurik (2001) 14

A case from Sweden 380 Swedish nascent entrepreneurs were followed for 18 months occurrence of a first sale during this period indicates the transition of nascent firm to new business owner 62% made the transition, – being member of a business network (e.g. member of the Chamber of Commerce) – having close friends or neighbors in business Davidsson and Honig (2003) 15

Lack of comparability among the empirical studies for different countries different time spans, different definitions and measures … USA (2006) Netherlands (2001) Sweden (2003) Operating33%47%62% Still trying47%27%- Gave Up20%26%- Total340 (100.0%)330 (100.0%)380(%) 16

Bergmann and Stephan (2013) Country (48) GEM-based transition rate (average ) Australia0.49 Canada0.33 Germany0.38 The Netherlands0.47 UK0.54 USA0.37 Finland0.36 Denmark0.54 Norway0.55 Sweden0.62 Variation in the transition ratio at the country level Low transition rate High unemployment rate 17

The successes VS. The intentioned failures Nascent entrepreneurs receive new information about the new venture constantly, revise or reaffirm their intention consequently. “The key is to fail early, fail cheaply, and don’t make the same mistake twice”. - A. G. Lafley, the former CEO of P&G, BusinessWeek, Dimov (2010) 18

Other aspects of entrepreneurship 19

IE/FE ratios India: 177:1 USA:4:1 Sweden: 1:1 *********************** African countries: 50:1 Latin American & Caribbean countries: 10:1 Asia Pacific countries: 5:1 OECD countries:1:1 Autio and Kun (2014) Informal Entrepreneurship VS. Formal Entrepreneurship 20

Informal VS. Formal entrepreneurship IE absorbs a major allocation of entrepreneurial effort Unfair competition for formal firms, as tax avoidance, evade social security, employee welfare … 15,871 TAE entrepreneurs GEM

IE influence growth potential 22 Autio and Kun (2014)

Hybrid Entrepreneurship - a intermediate strategy of entrepreneurial entry 23

particularly attractive to individuals – high switching or opportunity costs, – target uncertain opportunities, – risk-averse/ less confident Hybrids are 12 times more likely to enter into self-employment than non-hybrids. Folta, Delmar, and Wennberg (2010) 24

Prevalence of Hybrid Entrepreneurship in selected countries Countries HE among Nascent entrepreneurs (average GEM ) Sweden28% Norway48% United States51% UK62% Finland67% The Netherlands72% Denmark74% 25

Q&A Thank you very much ! 26