MOTIVATION AND BUSINESS SUCCESS THE RELATIONSHIP BETWEEN ENTREPRENEURS MOTIVATION AND NEW BUSINESS
VENTURES SUCCESS By
Dr. (Mrs.) Sidikat Adeyemi and Mr. J. O. Adeoti1
ABSTRACT
The purpose of this study is to investigate factors that contribute to the success of new ventures in Nigerian setting. Success is in the present study defined as profitability and growth. The proposal research question is: which types of entrepreneurial motivation or combination of motivational factors have an effect on new ventures/ business success?
This study classified entrepreneurial motivations according to whether the entrepreneurs are internally or externally motivated. When tested against profitability and growth, the general findings supporting the proposed hypotheses, were that externally motivated entrepreneurs are more likely to achieve a high level of profitability than internally motivated entrepreneurs, and that internally motivated entrepreneurs are more likely to experience a high level of growth than externally motivated entrepreneurs.
INTRODUCTION
There have been general studies of Nigerian entrepreneurs’ right from the pre-independent period. Most of these studies have placed much emphasis on the unfavourable economic environment and argued that it exercised a constraint upon the general growth and development of Nigerian entrepreneurship.
Schatz (1963) in his own study believe that low ability to invest is the most important reason for the poor entrepreneurial performance in developing economy. There has been attempt by most studies to explain the success or failure or even growth of entrepreneurs in Nigeria in terms of certain absent values and motivations. Killy (1963) in his investigation of the courses of business failure or success emphasized the importance of working-capital shortages, deficient product quality control, and poor economic environment. He only speculated on some other factors like entrepreneur motivations, the extended family, and the propensity of entrepreneur to invest his profits, which he believed would be a useful area for further research. Generally, several studies have been done on the attitudes and behavioural characteristics of the entrepreneurs. Some of these studies while found when evaluating an enterprise program with the intention of creating new ventures, no identifiable relationship between the initial motivations of the entrepreneur, whether positive or negative, and subsequent success of the business. Birley (19850 Dunkelberg et al (1987) also failed to find significant difference between growing and declining firms with regard to the entrepreneurs’ most important reasons for starting the business.
However, other studies have found significant differences between successful and unsuccessful entrepreneurs. Sanberg (1986) found Need for achievement and Locus of control to influence performance. Brochheus (1980). Finding suggests that psychological factors such as locus of control influence the profitability of surviving. Smith et al (1987) found significant positive correction between entrepreneurs’ task motivation and growth both in terms of sales and in number of employees.
Even though some contradictory findings have been reported, the theoretical discussion and some empirical evidence leads to the suggestion that the entrepreneurs reasons leading to starting business have an impact on success or performance of the business. This study tries to distinguish between internal and external motivation, as done by Prockhaus (1980); Kolvereid (1986) and Davidson (1989). We define success as being profitability and/or growth. The hypothesis proposed in regard to the ‘entrepreneurs’ motivation in relation to profitability is:
Hypothesis 1
Entrepreneurs that are mostly motivated by external factors are more likely to achieve a higher level of profitability in new ventures that is the case for entrepreneurs that are mostly internally motivated.
Several studies have suggested a relationship between the factors related to the individual entrepreneur and growth patterns. The entrepreneurs’ motivation is suggested as on such factor related to growth patterns. (Roberts, 1969: Perry et al, 1988) The expletory theory (vroom, 1964) suggests that growth willingness is contingent on an expectation that the act will be followed by a certain outcome, and on the relation between that outcome and the outcome and goals of the individuals. Hence the following hypothesis regarding the casual link between the entrepreneur’s motivation and growth is proposed.
Hypothesis 2
Entrepreneurs that are mostly motivated by internal factors are more likely to achieve growth in new ventures, than is the case for entrepreneurs that are mostly externally motivated. Methodology
The main purpose of this was to study the reasons for people to start their own business, emphasizing the effect of cultural values of the entrepreneurs.
Sample
The sample used in the present study consists of new ventures. Entrepreneurs were defined and selected in accordance to the international study’s standard and criteria. We used the business database of all registered companies. A total of 6000 ventures were identified as having been registered in the database during the time period. Random samples of 600 firms were selected. After removing 89 businesses in the non-profit sector, 511 questionnaires were out. Out of these 14 were returned due to insufficient addresses. This gave us a final sample of 497. The questionnaires were followed by calls and letters to those we did not receive any response from after a certain data. The final response of 148 respondents gave us a response rate of 29%. This is considered acceptable.
Reminder letters were sent out again 3 weeks later finally, a number of reminder telephone calls were made. The final return was 159 responses. This gives as response rate of 52%. The questionnaire
The questionnaire was developed on theoretical contribution of Aldrich et al (1987) Baumol (1985), Pruno and Tyebjee (1982), Friberg (1975), Hotstede (1980), McClelland (1961) and Shapero and Sokol (1982). The questionnaire was very comprehensive and included 384 questions divided into 4 sections.
Result and discussion
The entrepreneurs in this study were presented a list of 38 motivations to start a business and were asked to scale the extent to which each motivation influenced their decision to become entrepreneurs. In order to gather those motivational variables that were highly correlated into different groups, a factor analysis was conducted. The unrotated direct extraction of the variables did not, however, illuminate the interrelationship between the collection of variables and the variables were rotated (varimax rotation) in order to isolate more meaningful dimensions. However, the ten-factor solution from this analysis did not meet by the criteria used in this paper. These criteria were:
1. Factor loadings higher than 0.5 (to ensure convergent validation). 2. Correspondence with expected factor (to ensure face validity).
3. No variable should load above 0.4 on two or more different factors ensure discriminant validity).
4. Maximum alpha (for internal consistency).
Following this criteria 10 of variables were dropped. The remaining variables were again factor analyzed. The result of this analysis was that 7 of the variables were dropped. In the last factor analysis variables met the criteria used. The total numbers of variables dropped were 17. The result of the final factor analysis obtained easy understandable factors that convey the essential information contained in the set of variables. Also the intention being to use these factors as new independent variables in the classification of the entrepreneurs into entrepreneurial typologies by the use cluster analysis. The final factor analysis accounted for 60.9% of the variance and is shown in table 1.
Table 1: Motivational factors
Fact 1 Fact 2 Fact 3 Fact 4 Fact 5 Fact 6 Direct contribution to the success of a
company
0.729
Keep learning 0.705
Challenge of staring and growing a business 0.705 Develop an idea for product /business 0.679 Be innovative and in forefront of new
technology
0.648
Achieve higher position in society 0.722
Be respected by friends 0.683
Increase the status of my family 0.673 Follow the example of a person I admire 0.653
Control my own time 0.806
Be on boss-work for self 0.700
Have greater flexibility for private life 0.699 Freedom to adapt my own approach to work 0.686 Contribute to the welfare of my ethnic
group
0.798 Contribute to the welfare of my community
where I live
0.785
Contribute to the welfare of my relatives 0.701
Desire to have high earnings 0.502
Frustrated in previous job 0.826
Not work for an unreasonable boss 0.702
Source: Research Computation
The factor analysis yielded six consistent factors, and on the basis of the factor loadings the six factors were given the following descriptive labels: factor 1: internal achievement, factors 2: status. Factor 3: independence. Factor 4: welfare. Factor 5:
money. Factor 6: escape. Entrepreneurial Typologies
When discussing entrepreneurial motivation, entrepreneurial typologies were put on the agenda. The best-known typologies are the distinction between the two types of entrepreneurs.
The craftsmen and opportunists, originally presented by Simth (1967). The support for theses two dominant types of entrepreneurs has been strong and consistent in most studies (woo et al 1988).
Typologies related to the entrepreneurs’ motivation are developed by Dubini (1989), which in a study of Italian entrepreneurs presented a three-cluster solution, which she labeled, self actualizers, discontented entrepreneurs and family tradition. In order to verify whether one group were predominant in the sample, the five cluster solution made it possible remove several outliners at the same time as four clusters remained which were large enough for further analysis.
Table 2. Motivational typologies of entrepreneurs
Factors Clust 1 Clust 2 Clust 3 Clust 4 Sign
Internal achievement Status Independence Welfare Money Escape N Missing : 60 0.54 0.16 0.26 -0.02 0.26 0.07 133 0.59 0.33 -0.94 -0.89 -1.35 -0.33 23 -0.13 -1.94 -0.02 0.54 -0.01 -1.00 18 -1.03 0.42 -0.05 0.24 -0.06 0.13 73 B, c, d, e, f B, c, d, f A, c, d, e A, b, d, e A, c, d, e B, d, e, f
Source: Researcher’s Computation
A: significant difference (p.,05) between cluster 1 and 2 B: significant difference (p.,05) between cluster 1 and 3 C: significant difference (p,.05) between cluster 1 and 4 D: significant difference (p,.05) between cluster 1 and 3 E: significant difference (p,.O5) between cluster 1 and 4 F: significant difference (p,.05) between cluster 1 and 4
Note that the scale is reversed. A negative figure indicates that this factor is an important motivation for entrepreneurs in that cluster.
Cluster 1 consists of low motivaters, people with a generally low motivation, mainly concerned with the welfare of others. Some of the characteristics of a craftsman entrepreneur.
Cluster 2 comprises money seeker. These entrepreneurs scores relatively high on the money factor, accomplished by a high score on the independence factor. Their urge for internal achievement is, on the other hand, very low.
Cluster 3 consists of status seeker. These entrepreneurs are characterized with high scores on status, but also be escape. They do not seem to care about others, as welfare scores low, i.e. They want their status for themselves.
Cluster 4 comprises self actualizers. These are entrepreneurs that are driven “positive” motivations to start their own business. This can be observed considering their high score on internal achievement, independence and money.
Do motivations affect profitability and growth?
In this section the motivational factors effect on profitability and growth are to be presented. In the present study internal achievement, independence and escape are labeled internal motivations. Consequently, an activity is labeled externally motivating if it leads to external rewards like food, money or social reinforcement, in the present study, money, status and welfare are considered being external motivations.
In addition to look at profitability and growth as a continuous variable, additional information is socked by dividing the entrepreneurs into successful and unsuccessful groups. This capture whether the extreme ends of success differ substantially in this respect. In order to test hypothesis I a, regression model is to be used. The model is as follows: Profit = b1ml +b2m2+b3m3+b4m4+b5m5+b6m6
The following abbreviation is used: bl = the standardized regression coefficient, profit = profitability, ml = internal achievement, m2 = status, m3 = independence, m4 = welfare, m5 = money, m6 escape. The results of the above calculation showed that the factors “status”, “welfare”, “escape” and “internal achievement” did not meet this requirement, hence they were dropped and a new analysis were conducted. The F ‘results from this analysis are shown in table 3.
Table 3. Regression on motivational factors by profitability
Factor Beta Significance
Independence Money 0.09 0.18 0.12 0.00 Source: Researcher’s Computation
Multiple r = 0.21
R2 = 0.05
Significance = 0.08
N = 242
These results of the calculations are, as shown in table 3, not very rewarding, as the variance explained is only 5%. However, the conclusion must be, that the most important motivational factor in regard to explain profitability is the factor “money”. Also, independence seems to have some impact. The above give some support to hypothesis 1a.
The above findings provided some indication toward the likelihood of money seekers to be more profitable than other entrepreneurs. In order to investigate this matter, a cross-tabulation was done for the motivational typologies presented earlier in the paper. Also, as profitability
ends of profitability, namely by considering those entrepreneurs that were very profitable. The results are presented in table 4 below.
Table 4. Motivational cluster membership and profitability
Profitable Low motivaters Money seekers Status seeker Self actualizers Yes No 28(36.1) 97(88.9) 12(6.6) 11(16.4) 4(4.9) 11(16.4) 24(20.8) 48(51.2) Source: Researchers’ Computations
Chi-square = 9.65; significance.04. The number of observations expected in case of independence among clusters is represented within parentheses.
Table 4 shows an over representatives of profitable entrepreneurs among “money seeker” in particular, but also among self-actualizers. This is expected, as the results for money seekers a result of the consistent impact the factor “money” had on profitability. The conclusions must therefore, be that hypothesis 1 a, at large, is supported. The table also shows that “low motivators” are the archetype that experiences the lowest level of profitability. In order to test hypothesis I b, regression model is to be used. The model is as follows:
Growth = b1ml+b2m2+b3m3+b4m4+b5m5+b6m6
The following abbreviation is used: bl = the standardized regression coefficient, growth = growth, ml = internal achievement, m2 = status, m3 = independence, m4 = welfare, m5 = money, m6 = escape. The results of the above calculation showed that the factors “status” did not meet the required 0.05 beta level, hence it was dropped and a new analysis was conducted. The results from this analysis are shown in table 5.
Table 5. Regression on motivational factors by growth
Factor Beta Significance
Internal achievement Independence Welfare Money Escape 0.31 0.07 0.06 -0.09 0.11 0.00 0.24 0.27 0.10 0.06 Source: Researchers’ Computations
Multiple r = 0.36 R2 = 0.13 Significance = 0.00
N =238
The table shows that “internal achievement” is the most important factor in explaining growth, but that “escape” also shows some explanatory power, indicating that the hypothesis cannot be rejected for the whole sample. It is also interesting to note that money is negatively related to growth. The results are also somewhat more rewarding than in the case for profitability, as the variance explained here are 13%, compared with only 5% for profitability. This again indicates that motivation is more important for growth than for profitability.
In the regression models a continuous dependent variable were used. It would, however, as in the case of profitability, be of some interest to take a close look at those with a high level of growth-aspirations. In order to be able to do so the variable growth-aspirations, measured on
a five-point scale, were divided into two groups, those with a high level of growth aspiration and those with a low level of growth-aspiration. A chi-square test was conducted. The results are shown in table 6 below.
Table 6. Motivational cluster membership and growth
Profitable Low motivaters Money seekers Status seeker Self actualizers Yes No 63(74.9) 61(49.1) 16(13.9) 7(9.1) 13(10.1) 5(7.1) 49(42.9) 22(28.1) Source: Researchers’ Computations
Chi-square = 9.21; significance 0.05. The number of observations expected in case independence among clusters is represented within parentheses.
At first glance, the over representativity of money seekers among those with high growth-aspirations may seem somewhat surprising. However, when considering the composition of the money seekers we remember that welfare was a substantial feature. If returning to the regression analysis, we find that welfare had a significant impact on growth-aspirations. The conclusion must therefore be, that hypothesis 1 b, at large, cannot be rejected.
Conclusion
When tested against profitability and growth, the general findings supporting the proposed hypothesis, were: I externally motivated entrepreneurs are more likely to achieve a high level of profitability than internally motivated entrepreneurs.
Some recent research has suggested that the decision to start a business is not influenced by the same motivations for all entrepreneurs. In line with this stream of research, entrepreneurial motivational typologies were developed by using cluster analysis. The outcome of the analysis enabled us to categorize the entrepreneurs into four different motivational groups, being:
1. “low motivators”. These are entrepreneurs with a generally low motivation. They score particularly low on internal achievement, and are mainly driven into entrepreneurship by negative factors.
2. “money seeker”. These entrepreneurs are strongly motivated by money, accompanied by a strong desire for independence. However, their urge for internal achievement is very low.
3. “status seeker”. They are entrepreneurs who are highly motivated by status, and also highly motivated by escape.
4. “self-actualizers”. These entrepreneurs are mainly driven by positive factors. Their need for internal achievement and independence are accompanied by a strong desire to be economically rewarded.
5. The relationship between these types of entrepreneurs and post start-up success revealed that the “self-actualizers” appeared to be the most profitable entrepreneurs, and also those who achieved the highest level of growth. The conclusion must therefore be that although evidence suggests that external motivation enhances profitability and internal motivation enhances growth, there are entrepreneurs who are driven by a combination of internal and external motivation that enables them to be successful both in relation to profitability and growth. These are the “self-actualizers”.
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