The role of social capital in French entrepreneurial networks at the pre-organisation stage

THE ROLE OF SOCIAL CAPITAL

IN

FRENCH ENTREPRENEURIAL

NETWORKS AT THE

PRE-ORGANISATION STAGE

RITA KLAPPER

Submitted in accordance with the requirements for the

degree of

DOCTOR OF PHILOSOPHY

The University of Leeds

BUSINESS SCHOOL

June 2008

The candidate continns that the work submitted is her own and that

appropriate credit has been given where reference has been made to the

work of others.

This copy has been supplied on the understanding that it is copyright

nlaterial and that no quotation fronl the thesis nlay be published without

proper acknowledgenlent.

ACKNOWLEDGEMENTS

This work has greatly benefited from the input of a number of friends and

colleagues with whom I have shared ideas, experiences of and problems

encountered in this research. These individuals have made a significant

contribution to the development of this thesis.

My teaching experience and my work with the Anciens at the ESC Rouen

have provided the inspiration for this research and I would like to express

my appreciation for the support, patience and understanding provided by

these entrepreneurs. Many thanks to Pierre and Gauthier for their

outstanding patience and willingness to cooperate over an extended period

of time.

I would also like to thank Marie-Lise Trouchu, the head of the Association

des Anciens for her support for the project. In addition, I am very grateful

to my friends Dr Jean Clarke, Dr Sven Kunze

I ,

Sue Curtis, Renate

Dockhom, David Wilson and Marc Wichert whose criticism, advice, but

also ongoing encouragement have proved invaluable for this work. Thanks

also to Professor Paula Kyro for her valuable input.

My thanks also go to my family and in particular my husband for their

ongoing support; special thanks to my best friend Jules, who has supported

me over many years. and who died before he could see the completion of

this work.

I would also like to thank Professor Richard Thorpe, my Director of

Studies, for his continuing support, his patience and his constructive

criticism. Without him this thesis would not have been possible.

2

ABSTRACT

This thesis contributes to the extant literature on entrepreneurial net\\orks and social capital through its investigation of the role of social capital in French entrepreneurial networks at the pre-organisation stage. The target of the research are former Grande Ecole graduates, Anciens, who have created their own company. This study adds to the extant literature through its three-dimensional focus on social capital: The structural dimension which investigates who are part of the entrepreneurial net\\'orks and at \\hat stage they become influential; the relational side which explores the contributions each tie brings to the entrepreneurial venture and the cognitive dimension, which explains the values the entrepreneurs have, and how these are shared between the entrepreneur and those embedded in the network. A multi-method approach was adopted in line with the objectives of the study consisting of semi-structured interviews, participant observation

and repertory grids. In particular the latter is a tool that has to date been

under-exploited in entrepreneurial network and social capital research.

There are a number of significant contributions this research makes to the extant literature on entrepreneurial networks and social capital, one of which is the development of a phases' model for entrepreneurial network dynamics at the pre-organisation stage. This study also adds to the existing knowledge by linking Bourdieu & Wacquant's (1992) definition of social capital and the concept of 'habitus' to the three dimensions of social capital. The three-dimensional investigation of social capital contributes to a unique understanding of the interrelatedness of the three dimensions of social capital. The research confirms the key role of Anciens as individuals with \\hom the entrepreneur shares an educational and a professional habitus, which arguably creates the basis for a 'pensee unique' that impacts the way entrepreneurs create and manage their networks at the pre-organisation stage. The work concludes outlining the implications of the findings for business support and education policies, suggesting a framework for the typical career path of a Grande Ecole entrepreneur.

Acknowledgements Abstract List of Figures List of Tables List of Appendices

Chapter 1: Introduction

1.1 The French context 1.2 This thesis

CONTENTS:

1.3 The contribution to knowledge

1.4 Research Subject and Organisation of the Thesis

Pages ') 12 13 14 1.+ 16 17 19

Chapter 2 Entrepreneurship - A comprehensive review in the French

context

2.1 Introduction I I

2.2 The importance of the context I I

2.3 French Entrepreneurship research 23

2.4 Definitions in French Entrepreneurship research 25

2.5 Enterprise creation: Some facts and figures 27

2.5.1 Introduction 27

2.5.2 The importance of company size 29

2.5.3 Enterprise creation in French regions 30

2.5.4 The profile of the French entrepreneur 31

2.6 Les Trentes Glorieuses, the 30 Golden Years after WWII 32

2.7 French SME and enterprise initiatives from the 1970s up to now 36

2.8 Different factors impacting enterprise creation 39

2.8.1 Introduction 39

2.8.2 Decline of large firms - a chance for entrepreneurship? 40

2.8.3 Globalisation - a chance for entrepreneurship? 41

2.8.4 The rise of the service sector - a chance for entrepreneurship? 41

2.9 Obstacles to entrepreneurship in France .+3

2.9.1 Enterprise versus employee culture 43

2.9.2 A feminine culture .+3

2.9.3 Risk averseness of French culture 44

2.9.4 The nature of the French finance sector 44

2.9.5 A lack of entrepreneurial values 45

2.9.6 Administrative hassle 46

2.9.7 An elitist education system .+6

2.9.8 Entrepreneurship education in France 47

2.9.9 Enterprise creation in Higher Education .+9

2.10 Conclusion 52

Chapter 3 - The dynamics of Entrepreneurial Network developnlent

3.1. Introduction 5.+

3.2 The importance of entrepren~urial networks

3.3 Early beginnings of the network approach 3,-l Entrepreneurship and social network theory 3.5 Five levels of interaction

5.+ 55 56 58

3.6 Network definitions and network types 60

3.7 The entrepreneurial benefits of networking 63

3.7.1 Access to resources and opportunities 63

3.7.2 Access to knowledge 64

3.7.3 Networks providing a supportive environment 64

3.7.4 Networks save time and facilitate legitimacy 65

3.7.5 Networks reduce uncertainty 65

3.7.6 Networks reduce opportunism 65

3.7.7 Networking to craft an identity 66

3.7.8 Networks to solve dependency-independency issues 66

3.7.9 Networks as loci of social exchange 67

3.7.10 Networks help to cope with failure 67

3.8 Disadvantages of entrepreneurial networking 67

3.9 The literature on entrepreneurial networks 68

3.9.1 Literature on network configuration 68

3.9.2 Literature on the impact of networks on business performance 68

3.9.3 Literature on network governance 69

3.9.4 Literature on context 70

3.9.5 Cross-national entrepreneurial networking 70

3.10 This research 70

3 .11 PART II The phases' approach to entrepreneurial networks 73

3.12 Birley's pioneering work in the 1980s 75

3.13 Focus on the pre-organisation (Hansen's work) 76

3.14 Butler & Hansen's three phase model 78

3.15 Hansen's further work on the entrepreneurial action set 81

3.16 Larson & Starr's (1993) model 82

3.17 Greve's work in Norway: focus on the pre-organisation 85

3.18 Hite & Hesterly's contribution 88

3.19 Schutjens & Starn's work in the Netherlands 93

3.20 Entrepreneurial network dynamics within an international context 96

3.21 Entrepreneurial network dynamics and recruitment practice 99

3.22 Conclusion 101

Chapter 4: Social capital in entrepreneurship research

4.1 Introduction 106

4.2 Early beginnings 106

4.3 Definitions of social capital 107

4.3.1 Focus on Bourdieu 107

4.3.2 Further definitions 109

4.4 The three dimensions of social capital and embeddedness 110

4.5 Social capital in different contexts and at different levels 113

-+.6 Elements of social capital 115

4.6.1 Weak ties versus strong ties 115

-+.6.2 Burt's structural hole theory 116

-+.6.3 Trust 117

-+.7 Advantages/disadvantages of social capital 118

-+.8 This research 120

Part II: Social capital and entrepreneurship - a revic\v of the evidence 121

-+.9 Linking social capital and entrepreneurship 121

-+.10 Nasccnt entrepreneurs, social and human capital 124

4.1 1 Three dimensions of social capital and nascent entrepreneurs in high 128

-L 12 Social capital and family firms 133 4.13 Social capital. entrepreneurship and class issues 135 4.14 Social capital, entrepreneurship, high tech, business incubation 137 4.15 Social capital in knowledge intensive entrepreneurial teams 140 4.16 The three dimensions of social capital. entrepreneurship and incubation 144 4.17 Social capital, entrepreneurial networks, finance and gender 147 4.18 The cognitive dimension of social capital and learning in a uni\ersity 151

context

4.19 Conclusion 155

Chapter 5: Research design: philosophy, methods, data analysis

5.1 Introduction

5.2 The philosophical paradigm chosen for this research 5.2.1 The beginnings of Constructionism

5.2.2 Reality derived from relationships 5.2.3 The importance of language

5.2.4 Human action as response to sense-making 5.2.5 A context specific understanding

5.2.6 The role of the reflexive researcher 5.2.7 Consideration of stakeholders

5.2.8 A non-dualist theory about the becomingness of social reality 5.2.9 Different conception of 'self

5.2.10 Focus on a small number of cases 5.2.11 Focus on process

5.2.12 Social constructionism and structure

5.2.13 Social Constructionism in entrepreneurship research 5.2.14 Problems with Social Constructionism

5.3 Constructionism versus Constructivism

5.3.1 Knowledge as result of the individual's cognitive processes 5.3.2 Socio-cultural practices shaping cognitive processes

5.3.3 Variants of Constructivism 5.3.4 Problems with Constructivism

5.35 This research: combining Social Constructionist & Constructivist perspectives

5.4 The research design: the importance of pre-understanding 5.5 The actual research process

5.6 Process Studies in Entrepreneurship 5.7 Methodology versus Methods

5.8 Case study Research 5.8.1 Introduction

5.8.2 Mixed methods approach 5.8.3 Multiple cases

5.8.4 Emphasis on Process 5.8.5 Theory building

5.8.6 Multi-perspectival analyses 5.8.7 The longitudinal dimension

5.8.8 Definition and bounding of the case 5.8.9 The importance of contextuality 5.8.10 Sampling strategy 5.8.11 Triangulation 5.8.12 Saturation 5.8.13 Access issues 158 158 160 161 162 163 163 163 164 164 165 165 166 166 166 167 168 168 168 169 169 170 172 173 175 177 178 178 178 178 179 179 180 180 180 181 181 183 183 IX4

5.9 Data collection methods 185

5.9.1 Documents 185

5.9.2 Interviews 185

5.9.3 Types of interviews 186

5.9.4 Interviews in this research 186

5.9.5 Practical aspects of the interviews 187

5.9.5.1 Period of investigation 187

5.9.5.2 Interview language and transcription 187

5.9.5.3 Follow-ups 187

5.9.5.4 Interviews with co-founders 188

5.9.5.5 The interview questionnaire 188

5.10 (Participant) observation 189

5.11 Kelly's Personal Construct theory 189

5.11.1 Introduction 189

5.11.2 The individual as scientist 190

5.11.3 Constructive altemativism 190

5.11.4 Three basic steps 191

5.11.5 The role of the researcher/experimenter 191

5.11. 6 Constructs 191

5.11.7 Elements of the grid 192

5.11.8 The RepGrid in this research 193

5.11.9 Analysis of repertory grids 194

5.12 Data Analysis 194

5.12.1 Data collection and analysis as interrelated processes 195

5.12.2 Writing a case description 196

5.12.3 Sifting process and constant comparison 196

5.12.4 Cluster development 197

5.12.5 Writing up 198

5.13 Validity and reliability 198

5.14 Computer-assisted text analysis 200

5.15 Ethical considerations 200

5.16 Issues of reciprocity 200

5.17 Limitations of the study 201

5.18 Conclusion 201

Chapter 6: The structural dimension of social capital

6.1 Introduction 203

6.2. Boundary setting 204

6.3. Classification of cases: sole founders vs. team creations 204

6.3.1 Partners out of necessity 205

6.3.2 Equal partners 205

6.3.3 Dominant partners 205

6.4 The phases model as a structure for identifying the entrepreneurial network 206

6.5 Activities in different phases 208

6.6 Different perceptions of phases in team creations 209

6.7 The question of overlap between the phases 210

6.8 Going beyond: Interorganisational networks 211

6.9 Issues of detachment: personal versus professional network 213

6.10 The model developed from this research 215

6.11 Analysis of the entrepreneurial network structure 218

6.11.1 Size of the network 219

6.11.3 Entrepreneurship as solitary phenomenon 6.11.4 Need for reflexivity and for reflection 6.11.5 Entrepreneurial self-image

6.11.6 Creation in former profession

6.11.7 Purpose-driven n~t\\ or" creation?

6.12 A systematic approach to network building 6.13 Diversity, quality and strength of ties

6.14 Quality of ties

6.15 Involvement of network members rather than frequenc) 6.16 The strength of ties

6.17 Conclusion

Chapter 7: The relational dimension of SC: family ties

7.1 Introduction

7.2 The repertory grid concepts 7.3 Kinship/family ties

7.4 The family environment: the historical and contemporary dimensions 7.5.1 The Family tie in a historical perspective

7.5.1.1 Promoting entrepreneurial characteristics/entrepreneurial values 7.5.1.2 The promotion of a certain work ethic

7.5.1.3 Family as role models: mixed evidence 7.5.2 A negative role model triggering learning 7.6 Comporary roles for the family

7.6.1 Family providing emotional support and being available 7.6.2 Family as guinea pigs, to test ideas with

7.6.3 Family ties: no need for reciprocity

7.6.4 The family (excluding the partner) providing functional support 7.6.5 Family ties as bridges over structural holes

7.7 The Role of the spouse 7.7.1 Introduction

7.7.2 Providing competences

7.7.3 The partner as emotional support facilitating reflection & learning 7.7.4 The spouse as financial security

7.7.5 The need to convince the partner 7.8 Negative aspects of Family ties

7.8.1 Family as deterrent to entrepreneurship 7.8.2 Unsuccessful parental assistance

7.9 Non-involvement of the family 7.10 Conclusion 221 222 223 224 224 227 2~O '~9 --' 239 240 241 242 242 243 247 )5~

-

Chapter 8: The relational dimension of social capital: Friendship ties

8.1 Introduction 271

8.2 The quality of ties: the historical dimension of ties 21'2

8.3 Awareness of different types of friends 272

8.4 Friends as co-founders and the effect on the entrepreneurial net\\ork 275

8.5 Friendship ties as fellow entrepreneurs and discussion partners 279

with no need for reciprocity

8.6 Friends as eiltrepreneurs to learn from 281

8.7 Friends as entreprL'neurs providing kno\\ledge and commercial 281

detachment

8.8 Friends, Anciens and/or entrepreneurs pnnide advice and task related 2S2

8.9 Friendship ties as bridges

8.1 0 l~ riends knowing the real you and being available

8.11 Conclusion

'8~

-

-,

28.+ 286

Chapter 9: The relational dimension of Social Capital: Professional ties

9.1 Introduction 288

9.1 Part I 288

9.1.2 Quality of the tie 289

9.1.3 Professional ties as co-founder and financier 291 9.1.4 Fonner colleagues/Anciens as co-founders offering

complimentarity, credibility, knowledge, professional experience 291

& emotional support

9.1.5 Fonner colleagues as triggers for the creation 296 9.1.6 Fonner colleagues as role models encouraging learning 298 9.1.7 Fonner colleagues as entrepreneurs identifying \vith

the entrepreneur 301

9.1.8 Fonner colleagues/employer as first clients and as gateway to 301

potential clients

9.1.9 Professional ties, also Anciens, acting as bridges 30.+ 9.1.10 Fonner colleagues sought after for their competences 307 9.1.10.1 Technical versus commercial 307 9.1.10.2 Offering marketing competences 310 9.1.10.3 Professional ties offering external validation 312 9.1.10.4 Professional ties/Anciens offering detachment 313 9.1.10.5 Fonner colleagues (and friends) providing feedback, advice 315

and information

9.1.11 Conclusion 316

Part II: Professional ties detached from the EHC 318

9.1 I. 1 Introduction 3 18

9.1I.2 Professional ties as financiers 318

9.11.3 Activity-dependent funding 319

9.11.4 Banks and finance 319

9.1I.5 Family and friendship ties as financiers 319

9.11.6 BSO involvement 321

9.11.6.1 Chamber providing operational assistance, knowledge & contact 321

with the outside world

9.11.6.2 Professional ties as external validation

9.11.6.3 The importance of first suppliers and first buyers as door openers and risk takers

9.11.6.4 Professional ties providing expertise

9.11.6.5 Providing services paid for

9. I I .6.6 Professional ties bringing business

9.11.6.6 Conclusion

Chapter 10: The cognitive dimension of social capital

10.2 Cognition, entrepreneurship and social capital

10.3 The key themes emerging from the repertory grids

10.4 Etre entrepreneur \'S pas 1'0tre (Entrepreneur or not)

10.5 Further themes: SOliS ,·s "OilS (us vs them) and (~/"c .·lnciL'l1 (bt'ing ESC An<:.ien)

10.6 Pm1 11: EtrL' entrepreneur ou pas 1'0tre (being an entrepreneur or not)

32.+ 326

'17

.'

10.6.1 An overview of the findings

10.6.2 Le Ve~u de la creation (having lived the creation) _-'-'

... 5

10.6.4 La vraie vie vs. milieu protege (real life vs a protected milieu) 337

10.7 Employee vs Entrepreneur status 338

10.7.1 Employe/Salarie vs createur (employee vs creator) 338 10.7.2 Prototype entrepreneur vs prototype salarie (prototype entrepreneur 339

10.8 Entrepreneurial spirit 340

10.9 Nous vs Vous 343

10.10 The importance of being Ancien 346

10.1 0.1 The historicity of the tie 346

10.10.2 Same referencing framework, intellectual quality and solidarity 347 10.11 Entrepreneurial traits/characteristics in entrepreneurial networks 349

10.11.1 Introduction 349

10.11.2 Strategic Vision 351

10.11.3 Risk-taking 353

10.11.4 'Prudence vs impulsivite (prudence vs impulsiveness) 358

10.11.5 Creative destruction and innovation 360

10.11.6 Desire for autonomy & independence 365

10.11.7 (Against) Intuition 369

10.11.8 Different types of intelligence 371

10.11.9 Complementary types of intelligence 374

10.12 Purposeful/calculative approach 375

10.13 Consequences of like-minded ness 378

10.13.1 Identification with the entrepreneur 378

10.13.2 Sharing 'Ie meme cadre referential- speaking the same language 380

10.14 Building Trust 383

10.15 Conclusion 385

Chapter 11: Conclusion

11.1 Introduction 388

11.2 Extending entrepreneurial network theory 389

11.2.1 The importance of context 389

11.2.2 Focus on the pre-organisation stage 391

11.3 Extending existing Social Capital Theory 392

11.3.1 Contributions to the structural dimension 392

11.3.2 Contributions to the relational dimension of social capital 393

11.3.2.1 The team perspective 393

11.3.2.2 Importance of the alumni network 394

11.3 .2.3 The quality of network ties 394

11.3.3 Contributions to the cognitive dimension of social capital 395

11.3.4 Methodological contributions 395

11.3.5 The interrelatedness of the different dimensions 397 11.3.6 Multi-cultural contributions: Unique point of view 398

11.3.7 Reflections on research process 398

11.4 Implications for Policy 399

11.4.1 Business support policy 399

11.4.2 Education policies 401

11.5 Limitations of the research 402

11.6 Framework for the typical career path of a Grande Ecole entrepreneur 404

LIST OF FIGURES

Figure 3.1: Five levels of interaction

Figure 3.2: Entrepreneurial network dynamics in the different phases

Figure 4.1: The literature on social capital in entrepreneurship research

Figure 4.2: The link between social capitaL entrepreneurship and net\\orks Figure 5.1: The research process

Figure 6.1: The structural dimension of social capital

Figure 7.1: The roles and different contributions of family ties Figure 8.1: The roles and different contributions of friendship ties

Figure 9.1: The roles and contributions of professional ties related to El-IC

Figure 9.2: The different roles and contributions of professional ties unrelated to the EIIC Figure 10.1: 1MB's cluster analysis

Figure 10.2: pP's cluster analysis Figure 10.3: AC's cluster analysis Figure 10.4: CB' cluster analysis Figure 10.5: YC's cluster analysis Figure 10.6: R's cluster analysis

Figure 10.7: Entrepreneurial cognition of network ties

Figure 10.8: The relationship between the entrepreneurial perception, like-mindedness and its consequences

LIST OF TABLES

Table 2.1: Enterprise Creations in France in 2006 Table 2.2: Number of creations by firm size (2006) Table 2.3: Number of creations in French regions

Table 3.1 : Themes of entrepreneurial network literature Table 6.1: Overview over the individual phases' models Table 10.1 Results from the analysis of cognitive concepts

LIST OF APPENDICES

Appendix 5.1: Description of cases Appendix 5.2: The questionnaire Appendix 5.3: Meta matrix

Appendix 5.4: InfoID1ation about interviews

Appendix 5.5: Interview transcripts: NF on 01.03.2006

Appendix 6.1: Individual phases' models. number of ties and activities

Appendix 6.2: Phases models

Appendix 6.3: Individual repertory grids Appendix 7.1: Analysis of family ties

Chapter 1: Introduction

1.1: The French context

The context for the development of small business and entrepreneurship has undergone dramatic change over the past 25 years. The growing internationalisation and globalisation of the world economy has triggered structural changes affecting national and regional economies. The removal of government-imposed barriers that segregated and protected domestic markets and recent technological advances in manufacturing, transportation and telecommunications create new opportunities for small business that are flexible, adaptable and dynamic enough to seize these opportunities (Commission of the European Communities 2005, Wright & Dana 2003). These issues have also been recognised by supranational institutions such as the World Bank, the OECD, the European Union as well as national and regional governments which has resulted in a multitude of initiatives, programmes, projects and conferences at different levels. As Gibb (2002) acknowledged, 'enterprise culture' has become the sine qua non of the political response to globalisation.

Whereas the world economy has seen a significant increase in growth throughout the period of 2004/05 European economies such as France and Germany, have lost out and in particular in France industrial production has stagnated. In 2003 French GDP was roughly the same as that of the UK (1.7'13.2 bn US$), yet it was significantly lower than that of Germany (2.377.7 bn US$). At the same time inflation averaged around 2.1% which was higher than in the UK (1.4%) and in Germany (1.1%) (Honore 2006). Factors such as a weak dollar, a very strong outside competition and an increase in Chinese exports have contributed to this situation. In fact, the Growth Competitiveness Index of the World Economic Forum placed France in 30th position compared to other 'good students' such as Finland (1 st) and Sweden (3rd) (Betbeze et a1. 2006).

Looking in more detail at the economic tissue of France we find that there are about 60 million inhabitants and there were officially 2.568,650 enterprises in France in January 2004, of which, according to INSEE (2005), 177,920 were small and medium-sized enterprises (SMEs) which represented 52 % of national value added. In 2002 one in two French companies did not have any employees and 92.5% employed less than 10 people. These very small companies represented 29% of all employment and 28% of total value added among all French companies (INSEE 2005). Only 7.3% of French

companies employed between 10 and 249 and only 0,2% more than 250 people. In fact. only 1,800 companies had more than 500 employees (INSEE 2005).

Although these figures highlight the importance of the small business sector for the French economy, there is little doubt that French groups have always had a pivotal role in the French economy and in particular since the Trente Glorieuses, the 30 years after WWII (also see Chapter 2). These big groups are well represented in car manufacturing and in the energy sector where they employ 9 in 10 people, they are slightly less important in intermediary goods and capital good industries, where they represent 7 in

10 employees (INSEE 2005)

As Fayolle (2004b) comments, interest in entrepreneurship and enterprise creation is a recent phenomenon in France and in particular entrepreneurship research is still in an embryonic phase (Carayannis, Evans & Hanson 2003, Verstraete & Fayolle 2005). As Bechard (1994), Drillon et al. (2004), Fayolle (1999a, b) and Frugier & Verzat (2005) highlight, enterprise creation by Higher Education graduates is still a very marginal phenomenon and entrepreneurial intention is not very developed among young people in France, which is different from the US (Fayolle 1999) (see Chapter 2).

Yet, change is on its way. Since Claude Allegre, former Minister of National Education and Research, launched an appeal to encourage an entrepreneurial spirit in the French education system in 1998 (Fayolle 2004), comprehensive action to encourage entrepreneurship has become increasingly recognised as vital for French post-industrial society due to its contribution to economic regeneration, regional economic development and employment generation (Fayolle 2004, Girard 2002, Martin 2002, Worms et al. 2005). In fact, a recent survey showed that 11.5 million people want to create their own company, 2.4 million of whom within the next couple of years (APCE.com 2005, accessed on 27.08.2007). Moreover, since 2003 the number of annual creations has averaged around 320,000 which represents a significant increase compared to the 1990s (see Chapter 2). Much of this change has been attributed to a range of policy measures such as 'la Loi Dutreil'(2003) (see Chapter 2).

1.2 This thesis

This thesis sets out to examine aspects of entrepreneurial network development and focuses specifically on how alumni, also later referred to as 'Anciens', from a French elite Grande Ecole gain their inspiration, knowledge and support to set up their own business through the social capital they involve at the pre-organisation stage. The ESC Rouen, whose Anciens are the central players in this thesis, is the second eldest Management Grande Ecole in France and part of the French higher education (HE) system which dates back to the late 18th century (MacLean 2002). The latter is characterised by a tri-partite organisation consisting of universities, Grandes Ecoles (these include both management and engineering schools) and other Higher and Further Education institutes (see Chapter 2).

As Hemery (2005) highlights, the network of the Grandes Ecoles is one of the major triumphs of the Grande Ecole system in the way that it is a useful tool to finding internships and employment. As a result, Grandes Ecoles such as the 'Ecole de Management de Grenoble' and 'Sciences-Po Paris' regularly publish information about the network of the 'Anciens' on their websites (Hemery 2005). The ESC Rouen, whose Anciens I investigate in this thesis, is no exception to this.

The importance of this network of 'Anciens', which is unique to the French Grande Ecole system, triggered my interest in the subject, as, to date, to my knowledge, no study exists that has explored the role of social capital in entrepreneurial networks of Anciens at the pre-organisation stage. Arguably, the network of the Anciens can playa key role in the process of enterprise creation. In fact, one of the results from a roundtable table on entrepreneurship I organised in September 2005, was the launch of a 'Club des Entrepreneurs et Repreneurs' (Club of Entreprise Creation and Takeovers) by Anciens in_spring 2006. One of the goals of this club is to support and assist ESC students (former and present) in their efforts to create or take over a company. The importance of the entrepreneurial entourage for the entrepreneurial venture was also highlighted in a recent INSEE survey that found that 700/0 of all entrepreneurs who survived a 5 year period knew somebody who had either created or taken over a company (Fabre 2006b). Hence having role models in the entrepreneurial network may

Being Gennan, but working in a Grande Ecole (ESC Rouen) and speaking French fluently, has given me a unique insight into the French HE system. French business culture, but also aspects of entrepreneurship and enterprise creation. I have pursued my interests in entrepreneurship through the investigation of French students' attitude towards enterprise creation, which has resulted in a number of publications, see for instance Klapper (2005a,b) and Klapper & Leger lamiou (2006). My concern was triggered by the lack of actual creations by Anciens within and outside the Grande Ecole context as well as the low level of interest of the student population in the subject. Arguably, some of this is due to the nature of the French Grande Ecole system which aims to prepare students for senior management positions in large companies (see Chapter 2). The initial research established some understanding about French student culture, French entrepreneurship and cultural issues that may hinder or promote entrepreneurship and I argue that this study presents, to some extent, a logical extension to earlier work.

1.3 The contribution to knowledge

One of the major questions this thesis was to address is the issue of where my contribution to knowledge would lie. I argue that this thesis would add to existing knowledge in a number of different ways:

First, and perhaps most significant of all, the research will focus on the social capital in entrepreneurial networks of Anciens of the ESC Rouen. As highlighted earlier, the Grandes Ecoles are part of the French HE system, set up with the social imperative to train the senior managers needed by the state and later by the large state-run conglomerates created during the Trente Glorieuses (see Chapter 2). With the changing imperative of French politics in the 1990s (Chapter 2) the Grandes Ecoles have increasingly been presented with the challenge to provide and train entrepreneurs for French society. It is clear that this is not an easy task. Furthennore the literature review highlights that there is little information available about entrepreneurial Grande Ecole students and their entrepreneurial networks in the different phases of the entrepreneurial venture within the French context, a fact confinned following discussions with the Director of the

Observaloire des Praliques Pedagogique en Entrepreneurial

(Observatory for Pedagogical Teaching Practices in Entrepreneurship, OPPE), founded in 2001. Given this background, a research study that investigates the entrepreneurial activities of former Grande Ecole students offers a unique insight into the way these

entrepreneurs think and how they create and manage the social capital in their entrepreneurial networks.

Second, the research will represent a umque mIX of Anglo-Saxon and French approaches to entrepreneurship and enterprise creation. Whereas French researchers such as Christian Bruyat, Alain Fayolle, Bernard Saporta and Thierry Verstaete are aware of the ground-breaking work done by Anglo-Saxon scholars the same can, however, not be said about the Anglo-Saxon academics; one of the reasons simply lies in the linguistic barrier as French entrepreneurship literature is not necessary accessible to any Anglo-Saxon researcher nor can any French researcher publish in English, some notable exceptions are Alain Fayolle and Thierry Verstraete.

Third, one of the principal contributions I hope the study will offer is an investigation of social capital from a three-dimensional perspective: structural, relational and cognitive, which responds to Liao & Welsch's (2005) demand for more multi-dimensional research on social capital, exploring all three dimensions of social capital. As illustrated by the literature review in Chapters 3 and 4 much research has focussed on the structural and relational dimension, yet significant less on the cognitive side and even fewer studies have explored all three dimensions of social capital. A major contribution to existing knowledge is made in this area.

Fourth, resulting from the investigation of the structural dimension of social capital the study will contribute with a 'phases' model' of entrepreneurial networking and add to understandings of entrepreneurial network development at the all important pre-organisation stage (Chapter 6).

Fifth, this research will contribute to the development of a number of models detailing the different roles and contributions of family, friendship and professional ties at the pre-organisation stage (see Chapters 7-9), highlighting the important role of Anciens throughout the venture creation process.

Sixth, the study will add to the extant knowledge on entrepreneurial cognition through an investigation into the cognitive dimension of social capital (see Chapter 10), facilitated through the use of repertory grids (see Chapter 5), a tool, to date,

underexploited in entrepreneurship research. The latter were employed to shed light on how entrepreneurs perceive their network ties at the pre-organisation stage.

Seventh, the research will integrate both longitudinal and retrospective cases in order to explore the role of social capital at the pre-organisation stage and thus respond to the growing concern of researchers such as Davidsson & Honig (2003), Ripsas (1998) and Wennekers & Thu.rik (1999) that the existing knowledge about entrepreneurship at the emergence stage is still very limited.

Eighth, the study will contribute to our knowledge about founder teams, which is, according to Davidsson & Wiklund (2001), an under-researched area. As Witt (2004) highlights, existing research on entrepreneurial networks focuses on individual entrepreneurs which may not be an adequate reflection of entrepreneurial reality given the growing numbers of start-ups by teams of entrepreneurs. Seven cases (see Chapter 5) were created by teams. The results are expected to contribute to the extant literature (see Chapters 8-9).

1.4 Research SUbject and Organisation of the Thesis

This study combined a longitudinal with retrospective cases to develop a theoretical understanding of

The role of social capital in French entrepreneurial networks at the pre-organisation stage

In recognition of the three-dimensional nature of social capital (see Chapter 4) and the latter's role in the development of entrepreneurial ventures, and against the paucity of information on the entrepreneurial networks of French Grande Ecole graduates this research study can be characterised as investigating the above with four more focussed research questions which aimed to establish Who would be involved at what stage (When) with What contribution and Why in the entrepreneurial venture. In line with these guiding questions the study sets out to pursue the following objectives:

1. To conduct a qualitative study in a number of orgarusations to understand the role of social capital at the pre-organisation stage using appropriate research methods.

2. To establish the entrepreneurial perception of the different phases. associated activities and ties involved in the entrepreneurial venture.

3. To investigate entrepreneurial perception of the different contributions network ties make to the entrepreneurial venture and the reasons for their involvement.

4. To explore the socio-economic, political and educational factors that impact upon entrepreneurship and enterprise creation in the French context and identify both possible impediments and facilitators to business start-up.

5. To explore the implications of being an Ancien for the process of enterprise creation in terms of social capital theory.

6. To locate the findings in the appropriate literature on entrepreneurial networking and social capital theory.

7. To develop recommendations for policy and practice In the field of

entrepreneurial support.

In line with the research topic and the related objectives the thesis is organised into eleven chapters. This introduction is followed firstly by three theoretical chapters, of which the first introduces the reader to a survey of the current knowledge base about entrepreneurship and enterprise creation within the French context. I establish the socio-economic, political and educational factors that have impacted on entrepreneurship and enterprise creation and I conclude that enterprise creation by Grande Ecole graduates is still a very rare phenomenon (Chapter 2). The following two theoretical Chapters (Chapters 3 and 4) review the relevant literature on entrepreneurial networks and social capital, concluding with a positioning of this research. Chapter 5 covers the methods and methodological choices made in this research, providing details of the cases investigated in this study. Chapters 6 to 10 present the findings from the analysis of the three dimensions of social capital with Chapter 6 focussing on the structural, Chapters 7-9 on the relational and Chapter lOon the cognitive dimension. The final Chapter (Chapter 11) rounds off the thesis with a discussion which brings out the main findings and links these to the contributions they make to the literature, but also to business support and education policies.

The following Chapter (Chapter 2) provides an overvIew of entrepreneurship and enterprise creation within the French context discussing the range of different factors that have worked both as impediments and facilitators.

Chapter 2 Entrepreneurship - A comprehensive review in the French

context

2.1 Introduction

The preceding Chapter introduced the reader to the subject of this thesis, the four research questions as well as objectives pursued by this research. I concluded the chapter with an overview of the structure of the thesis.

This research focuses on the role of social capital in French entrepreneurial networks at the pre-organisation stage. The target of the study are former French Grande Ecole students, the Anciens. As enterprise creation is not taking place in a vacuum, but is contextually bound, this Chapter introduces the reader to the socio-economic, political, technological and educational factors that have impacted entrepreneurship and enterprise creation in France.

2.2 The importance of the context

Traditional approaches to entrepreneurship have rarely considered the contextual nature of entrepreneurship. Whereas Granovetter (1992, p. 47) viewed context as an economic institution resulting from "socially situated individuals embedded in networks of personal relations with non-economic as well as economic aims", 10hannisson et al. (1994) proposed that "the organising context carries the generic function with which to balance the entrepreneur's need for both guidelines and independence and herlhis firm's need for stability and change. The context thus helps the entrepreneur to practically realize or enact herlhis venture" (p. 330).

Following Johannisson et al. (1994) there are a number of reasons that justify a contextual approach to entrepreneurship. First, the liability of newness of a newly established venture as well as the dominance of large companies in the corporatist societies of Western Europe have created a political and institutional system that favours large-scale operations. Consequently young entrepreneurial firms need all the support they can get to acquire the legitimacy and resources to stay in business. This support would be provided by the context. Second, it has been argued elsewhere that

"entrepreneurship is perpetual learning through action" (Johannisson et al. 1994, p.

330). Consequently, the context provides a learning setting for the young enterprise. Third, entrepreneurs need to manage ambiguity and the entrepreneur needs a 'retreat',

I.e. a local or regional or national context which balances the uncertainty of the commercial operations and where (s)he feels at home. Fourth, in the 1980s there has been a trend to create alternative national strategies to promote the competitiveness of small firms. This together with the emergence of concepts such as the "industrial district', as a spatial agglomeration of small firms creating a local texture that compensates for the lack of resources and isolation (Prax 2004), emphasises the importance of the context for enterprise creation. Fifth, both science parks and locally initiated economic development are phenomena of the 1980s. Arguably, context here refers to the socio-economic conditions in which the entrepreneur and the venture are embedded. Sixth, the organising context encompasses values which favour entrepreneurship and will support the entrepreneur in fulfilling both his existential and materialistic expectations when launching a business venture (Johannisson 1988). Yet, there may be regional variations in values and attitudes towards entrepreneurship as well as differences in structural conditions that impact on the creation and development of new firms (Johannisson 1987b). Seventh, as Johannisson (1988) observed, the organising context may be a spring-board (supporting ecological change/enactment), a gear-box (supporting selection), a shock-absorber or defence wall (supporting retention) between the entrepreneur and environments beyond the context. Johannisson neglected, however, that the context could also work against the entrepreneur and his venture as I will illustrate in this Chapter. Schutjens & Stam (2003) also warned that contextual influence on networks and networking is rather a complex issue as contexts tend to vary and different situational and social variables interact and affect the individual (Cooper

& Dunkelberg 1981, Jack & Anderson 2002). I argue that context plays a significant role in this investigation and the following discussion will illustrate France-specific aspects that have arguably created (un)favourable conditions for entrepreneurship and enterprise creation.

All thirteen ventures I investigated for this study are embedded in the French socio-economic, political and educational system; all creations share at least a common national context. Two ventures were created in Haute Normandie, a French region close to Paris, the remaining eleven were set up in or around Paris.

2.3 French Entrepreneurship research

As Fayolle (2004b) comments, interest in entrepreneurship and enterprise creation is rather a recent phenomenon in France and in particular entrepreneurship research is still

In its developing phase (Carayannis, Evans & Hanson 2003, Verstraete & Fayolle

2005). One of the earliest studies was Bruyat's (1993) pioneering PhD research

(Saporta 2003) and the first journal dedicated to entrepreneurship, the Revue de

I' Entrepreneuriat, was founded by Alain F ayolle and Thierry Verstratete in 2001.

Change has been on its way, however, due to internationalisation pressures coming from European and Anglo-Saxon accreditations such as EQUIS and AACSB. As a result, French Higher Education institutions have increasingly discovered the importance of their researchers publishing in a wider range of international journals (see

for instance Bruyat & Julien 2001 and Verstraete 2003) and have subsequently

promoted such efforts, in particular at Grande Ecole level. This is primarily due to a more readily available funding within the Grande Ecole context and the need to achieve high rankings in the national ranking system; accreditations such as EQUIS and AACSB have become the sine qua non for top French Grandes Ecoles.

One of the most prolific writers on French entrepreneurship and enterprise creation is

Alain Fayolle. He recently provided a comprehensive overview of the field of

entrepreneurship research identifying major currents in the literature considering both

Anglosaxon and French literature (see Fayolle 2004a, 2005). He identified four

different approaches to entrepreneurship research: a 'What', 'Who/Why' and 'How'

approach. Whereas researchers have asked the question what entrepreneurship is about

for the past 200 years, the individual-based who/why approach has only been pursued

since the beginning of the 1950s and the process-based how approach followed later at

the beginning of the 1990s (for a further elaboration see Fayolle 2004a, 2005).

The' What' question is key, as in order to provide entrepreneurship we need to know,

however, what it is about (Fayolle 2005). Yet, one of the main problems in

entrepreneurship research relates to the lack of consensus regarding a definition for

entrepreneurship (Bygrave & Hofer 1991, Cunningham & Lischeron 1991, Fayolle

2000, 2003, 2005, Gartner 1989,90). Following Gartner (1989) it is, however, essential to provide a definition of entrepreneurship as it gives the reader a clear sense of the study's specific research focus, which is also the view of Fayolle (2005). I take

Fayolle's 'What' approach as a starting point to discuss a selection of different

2.4 Definitions in French Entrepreneurship research

Having examined the French literature on entrepreneurship and enterprise creation we notice the use of different definitions, depending on whether they are used in an academic or official government context. In the academic domain French researchers such as Boutillier & Uzinidis (2000), Fayolle (2005), Verstraete (2000) and Verstraete

& Fayolle (2005) tend to refer to well-known Anglo-Saxon definitions of entrepreneurship such as Gartner (1988), Hitt et al. (2001), Shane & Venkataraman (2000), and/or have developed their own conceptualisation such as Verstraete (2003). For the latter entrepreneurship is "a phenomenon that leads to the creation of an organisation that is triggered by one or several individuals who are working together for this occasion" (est vu comme un phenomime conduisant

a

par un ou plusieurs individus s 'etant associes pour I 'occasion) (own translation) (Verstraete 2003, p.

13). Verstraete (2003) and Verstraete & Fayolle (2005) made a clear distinction between the phenomenon of entrepreneurship and the entrepreneurial process. Verstraete's definition emphasises two different aspects: the idea of 'impulsion', a term he prefers to the word creation; and second the notion of a symbiosis between the entrepreneur and the organisation triggered by him. For a further elaboration of the idea of 'impulsion' see Verstraete (2000, 2002). Verstraete (2003) commented, however, critically that entrepreneurship is a much too complex phenomenon to be reduced to one simple definition.

In companson, for Bruyat (1993, 2001) entrepreneurship is about the relationship between the individual and the value creation aspect of entrepreneurship. He suggested the following: "The scientific object studied in the field of entrepreneurship is the dialog between the individual and the creation of value" (I'objet scientifique etudie dans Ie champ de I'entrepreneruship est la dialogique individulcreation de valeur) (own translation) (Bruyat 1993, p. 57). Bruyat's conceptUalisation is interesting as it suggests that new value is created in terms of more or less intense change in the environment directly concerned by the entrepreneurial process (Verstraete & Fayolle 2005).

Conversely, one of the first government reports on entrepreneurship teaching for engineers by Beranger et ale (1998) proposed two ways of defining entrepreneurship: In terms of an activity: the total of all activities and approaches which imply the creation and development of an enterprise and more generally the creation of an activity. In terms of an academic discipline: a discipline which describes the environment and the

process of wealth creation and social construction, starting with individual risk laking

(En tant qu'activite : Ensemble des activites et des demarches qu'implique la creation et Ie developpement

d'une entreprise et plus generalement la creation d'activite. En tant que discipline academiqlle : discipline qui decrit I'environnement et Ie processus de creation de richesse et de construction socia Ie, it partir d'un prise de risque individuelle (own translation) (Beranger et al. 1998, p. 105). The first part of the definition views entrepreneurship as the actual creation of a business, yet leaves the possibility open to include entrepreneurial activities which do not lead to enterprise creation such as, for instance, intrapreneurship. The second part raises wider reaching issues regarding entrepreneurship as an academic discipline covering entrepreneurial teaching and learning, yet also explores both the entrepreneurial environment and the role of entrepreneurship in wealth creation and social construction. Beranger et aI's definition shares elements with, for instance, the Global Entrepreneurship Monitor's (2004) definition which suggests that entrepreneurship is "any attempt at new business or new venture creation, such as self-employment, a new business organisation, or the expansion of an existing business by an individual, teams of individuals or established business" (Harding 2004, p. 14). This broad definition allows to include both individual and team activities, yet also the creation of a new firm or expansion of an already existing firm.

A very comprehensive definition of the term entrepreneurship was also offered by Fayolle (2005), who argued:

Entrepreneurship concerns essentially the emergence and transformation of human organisations. It is not just about the reasons of this emergence, rejoining economists, sociologists, political scientists ... but is also interested in the way we can conceive and construct new activities or new organisations (L'entrepreneuriat conceme, pour I'essentiel, I'emergence et la transformation choisie des organisations humaines. 11 s'interesse ainsi non seulement aux raisons de cette emergence, rejoignant ainsi les preoccupations des economistes, des sociologues, des politologues ... mais aussi Ii la fa~on dont on peut concevoir et construire de nouvelles activites ou des nouvelles organisations) (p. 40) (own translation).

Consequently Fayolle suggests four perspectives of viewing entrepreneurship: as a phenomenon, as a process, as a field that unites methods and specialised research and as a way of thinking. Fayolle's definition includes the idea of 'emergence', which goes back to Gartner (1988, p. 11) who proposed that entrepreneurship is simply "the creation of organizations, the process by which new organizations come into existence". Gartner's definition encompasses all newly created organisations and activities, yet does not neglect the importance of the process.

For the purpose of this research I have chosen the latter's definition as I have investigated the role of social capital in entrepreneurial networks at the pre-organisation stage which implies an interest in the 'coming into being' of entrepreneurial activities resulting into the creation of a venture. I focus on the process (see Chapter 5) in order to investigate the three dimensions of social capital in French entrepreneurial networks (see Chapter 1) and I argue that Gartner's definitions suits this objective.

Different from academic definitions, official statistical definitions used by government bodies propose a three-tier split of creations into businesses created ex-nihilo, re-launches and take-overs. The next section will give a more detailed overview of enterprise creation in France.

2.5 Enterprise creation: Some facts and figures

2.5.1 Introduction

Fayolle (2007) pointed out that the official government definition of entrepreneurship comprises a three-tier categorisation into 'ex-nihilo' creations (creations ex-nihilo) created by one or several individuals; re-Iaunched businesses (reactivations),which are existing companies that have been dormant for an unspecified period of time, and take-overs (reprise). The latter describes the creation of a company through the partial or total takeover of activities and assets of an existing company. It is important to bear this three-tier categorisation in mind when talking about French enterprise creations.

In France 322,270 enterprises were created in 2006; 233,045 of which were created ex-nihilo, 50,451 were re-Iaunches and 38,774 take-overs (http:www.apce.com accessed on 26.8.2007). Looking at businesses created ex-nihilo, the leading sector was business services with 55,379, to be followed by trade with 41,940, construction with 18,379, education with 12,396, real estate with 11,128, industry with 10,029 and domestic services with 9,735 companies. In comparison, out of the 50,451 re-Iaunched companies in 2006 14,800 occurred in trade, 8,336 in construction and 5,823 in the hotel sector. In addition, 6,133 restaurants, 4,287 business services companies and 2,918 firms in education and 2,261 in health were re-Iaunched.

In terms of takeovers we find that there were altogether 38,774 takeovers in 2006, the majority of which were hotels (14,170), followed by restaurants (11,537), and businesses in trade (2,970), domestic services (2,787), food processing (2,749),

construction (l,409), industry (l,326), business services (692), transport (564) and Education (311).

As the data shows, the majority of companies were created in commerce and in services. All ventures included in this research belong to the services sector, only two included a manufacturing element. Considering the development of the number of creations over the past 13 years we find that the actual number has increased by less than 50,000 between 1993 and 2006. In fact, in the 1990s the number of creations per year averaged around 270,000; the exception is 1994 with 294,114. This trend continued up to 2003, when the number of creations rose to 293,571 and to 320,016 later in 2004. Since then the actual number of creations has been relatively stable averaging around 320,000. One possible explanation for this rise in creations from 270,171 in 2002 to 293,571 in 2003 is the publication of a new law, 'la Loi Dutreil'. The latter was designed to facilitate enterprise creation in terms of administrative measures but also to assist unemployed people to create their own company. I will come back to this later in section 2.7. Table 2.1 gives an overview of the development of enterprise creations in France over the period from 1993 to 2006 (all data was provided by http://www.apce.com. accessed on 26.8.2007).

Table 2.1: Enterprise Creations in France in 2006

Dates Ex-nihilo Relaunches Take-overs Total

1993 170,904 54,405 48,138 273,447 1994 183,748 60,693 49,675 294,114 1995 178,913 59,384 46,545 284,842 1996 171,613 57,602 46,043 275,258 1997 166,836 57,853 46,385 271,074 1998 166,174 55,775 44,480 266,429 1999 169,661 56,085 43,159 268,905 2000 176,753 53,666 41,652 272,071 2001 177,027 51,995 41,560 270,582 2002 177,997 52,050 40,124 270,171 2003 199,290 54,298 39,983 293,571 2004 223,944 53,844 42,228 320,016 2005 224,830 51,167 40,832 316,829 2006 233,045 50,451 38,774 322,270

2.5.2 The importance of company size

Looking at the relationship between company size and number of creations we find that the majority of all creations (256,872 out of 322,270) did not involve any employees.

the picture was the same for ex-nihilo creations, re-Iaunched companies and takeovers. This compares with 36,275 companies which employed 1 to 2 people and 10,987 firms that had between 3 to 5 employees. Table 2.2 shows a breakdown of the number of creations by firm size. The figures clearly emphasise that the majority of enterprise creations (comprising all three types of creations) did not generate any additional employment except for the founder/so This observation was also shared by a study conducted by the Institut National de la Statistique et des Etudes Econom;ques

(INSEE), (National Institute for Statistics and Economic Studies) which compared the profile of creators between 2002 and 2006 and found a growing trend of new companies

not to create any other employment, except for the founder himlherself (APCE 2008).

This finding was again confirmed by the 2007 data which found that 87% of the newly created companies, the majority of which were set up in the field of education, health and social action, had no employees. A further important observation was a significant increase in the number of unemployed people who created their own company. In fact, 41 % of all creators had been unemployed in 2006, in the previous years the figure averaged around 35% (APCE 2008).

Furthermore, ex-nihilo creations generated in total 419,500 (66.6%), re-Iaunches 70,500 (11.2%) and takeovers 139,500 (22.2%) of all new jobs created in 2006 (http://www.apce.com. accessed on 26.8.2007). The latest figures available showed that 321,000 companies were created in 2007 which represents an increase of 13% in comparison with 2006 (INSEE 2008).

Table 2.2: Number of creations by firm size (2006)

Size New ex-nihilo Re-Iaunches Take-overs Total

0 191.257 46.510 19.105 256.872 Ito 2 23.813 3.124 9.338 36.275 3-5 4.508 653 5.826 10.987 6-9 997 141 2.067 3.205 10 or more 2.407 22 1.104 3.533 Unknown 10.063 1 1.334 11.398 number Total 233,045 50,451 38,774 322,270

2.5.3 Enterprise creation in French regions

Having examined the total number of creations and the break-down according to size this section will shed light on the regional distribution of creations. The data is based on 2006. Table 2.3 is again organised according to the three-tier split into "ex-nihilo' creations, relaunches and take-overs. Taking the three types of creations together the region called lIe-de-France ranks first with 72,798 companies, 60,300 of which were ex-nihilo creations, 6,437 relaunched businesses and 6,6061 takeovers. Ile-de-France includes Paris and its surrounding suburbs. In second position we find P ACA, short for Provence Alpes Cote d' Azur in the South of France, followed closely by the region Rhone-Alpes, in the South-West of France. Normandy, where the ESC Rouen and some of the ventures I investigated are based, comes out eight in the ranking if Haute and Basse Normandie are taken together. Given that Paris is the centre of French government administration and the headquarters of many large multinationals such as BT, FranceTelecom and Thales it is not surprising that many creators prefer to set up their business in such a dynamic context. In an examination of socio-economic factors on local enterprise creation Lasch (2007) found that in particular Paris and the Parisian suburbs, the Mediterranean region and the Atlantic Coast offer very favourable conditions for entrepreneurs and both France's South and West see an increasing intensity in enterprise creation. As a possible explanation for this phenomenon Lasch suggests that regions with a strong rate of migration and demographic growth tend to have a higher rate of enterprise creation. Furthermore the author also underlines the attractiveness of the territory as a factor that may positively impact the rate of enterprise creation in regions such as the South of France, in particular around Nice. Moreover, Lasch's analysis showed that the presence of large companies may also have a strong positive impact on enterprise creation as these companies are potential partners for outsourcing and general contracting.

Table 2.3 Number of creations in French regions

New ex-nihilo Re-Iaunches Take- Total Development

overs 05/06 in 0/0 Alsace _{5.593 815 836 7.244 +3.5} Aquitaine 11.464 4052 2015 17531 3.5 Auvergne 3.235 872 974 5.081 +5.1 Burgundy 4.339 957 1.084 6.380 +6.2 Brittany 8.236 2.197 2.301 12.734 +2.6 Centre 6.580 1.373 1.471 9.424 +2.0 Champagne- 3.121 668 705 4.494 +5.5 Ardenne Corsica 1.667 636 221 2.524 +5.2 Franche-Comte 2.908 653 739 4.300 -2.3 lie-de France 60.300 6.437 6.061 72.798 +0.9 Languedoc- 11.876 4.456 1.936 18.268 +2.2 Roussillon Limousin 1.839 448 506 2.793 3.6 Lorraine 5.786 1.104 1.027 7.917 +2.3 Midi-Pyrenees 10.181 2.748 1.799 14.728 +2.3 Nord-Pas-de Calais 9.538 1.484 1.614 12.636 +2.2 Basse Normandie 3.670 1.053 1.159 5.882 +5.9 Haute Normandie 4.090 976 1.051 6.117 +1.0 Pays de la Loire 9.365 2.517 2.360 14.242 +0.9 Picardy 4.026 816 939 5.781 +0.4 Poitou-charentes 4.904 1.607 1.164 7.675 +3.9 P ACA (provence 25.475 6.906 3.774 36.155 -0.3

Alpes Cote d' Azur

Rhone-Alpes 22.907 5.059 4.647 32.613 -0.6

Sub-total 221.100 47.834 38.383 307.317 +1.7

Metropolitan France

Having examined the regional variations in enterprise creation in France the next section will shed light on the profile of the French entrepreneur.

2.5.4 The profile of the French entrepreneur

A survey conducted by the government body SINE/ APCE companng enterprise creation over the period from 2002 to 2006 highlighted some interesting findings about the profile of the French entrepreneur (The following information was taken from http:wwww.apce.com.accessedon26.04.2008).In 2006 the average entrepreneur was 38.6 years old at the time of creation. Those younger than 30 represented 21 %, those younger than 25 a minority of 6% and those 50 and older made up 16% of all entrepreneurs in France.

The study showed that almost one third of the newly established entrepreneurs had a HE qualification such as BAC professionnel or technologique, which corresponds to a

professional/technological A-level. Among the creators three out of 10 were women. their activity primarily focused on education, health and personal services. Enquiring into the support for the entrepreneurial project, the study found that 21 % of all creators had been aided by their partners, 23% by other members of the family, 11 % by their professional entourage, 31 % by specialised support organisations such as the Chamber and 23% by specialists such as accountants and lawyers. This information is very interesting as reference point for later findings (see Chapter 7-9).

More than half of the entrepreneurs did not carry out any professional activity before the actual creation, they were either classified as unemployed, inactive or students and 300/0

had salaried status. The latest figures from 2007 confirmed this trend as there was a growing number of unemployed people (+42% over the first 11 months of 2007) who benefited from a support device called ACCRE (Aide aux Ch6meurs Createurs et Repreneurs d 'Entreprises - assistance to unemployed creators and those who take over

a company) to create their own company (INSEE 2008). In the majority of the cases (55%) people set up their business in their sector of former activity (APCE 2008), which also corresponds to the majority of the entrepreneurs who participated in this research.

This first part of this Chapter has emphasised the importance of context for this study and I briefly discussed different definitions in use for entrepreneurship within the French context. Furthermore I provided an overview of the number of different types of creations within the French context and I shed light on the profile of the French entrepreneur. The next section illustrates the development of French economic policy starting with the Trente Glorieuses, the 30 Glorious Years after WWII, highlighting the very important role of the state in French economic policy. I conclude with the recent initiatives taken by the government under Nicolas Sarkozy.

2.6 Les Trentes Glorieuses, the 30 Golden Years after WWII

There has been a long tradition of French state involvement in the economy which goes back to Jean-Baptiste Colbert (1619-83) (Gordon 1993). Colbert's intellectual legacy has been associated with a long-standing tradition of state intervention through discriminatory fiscal and public procurement policies, aiming to develop and nurture