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Predicting entrepreneurial development based on individual and business-related characteristics is a key objective of entrepreneurship research. In this context, we investigate whether the motives of becoming an entrepreneur influence the subsequent entrepreneurial development. In our analysis, we examine a broad range of business outcomes including survival and income, as well as job creation, and expansion and innovation activities for up to 40 months after business formation. Using the self-determination theory as conceptual background, we aggregate the start-up motives into a continuous motivational index. We show – based on a unique dataset of German start-ups from unemployment and non-unemployment – that the later business performance is better, the higher they score on this index. Effects are particularly strong for growth-oriented outcomes like innovation and expansion activities. In a next step, we examine three underlying motivational categories that we term opportunity, career ambition, and necessity. We show that individuals driven by opportunity motives perform better in terms of innovation and business expansion activities, while career ambition is positively associated with survival, income, and the probability of hiring employees. All effects are robust to the inclusion of a large battery of covariates that are proven to be important determinants of entrepreneurial performance.
Self-efficacy reflects the self-belief that one can persistently perform difficult and novel tasks while coping with adversity. As such beliefs reflect how individuals behave, think, and act, they are key for successful entrepreneurial activities. While existing literature mainly analyzes the influence of the task-related construct of entrepreneurial self-efficacy, we take a different perspective and investigate, based on a representative sample of 1,405 German business founders, how the personality characteristic of generalized self-efficacy influences start-up performance as measured by a broad set of business outcomes up to 19 months after business creation. Outcomes include start-up survival and entrepreneurial income, as well as growth-oriented outcomes such as job creation and innovation. We find statistically significant and economically important positive effects of high scores of self-efficacy on start-up survival and entrepreneurial income, which become even stronger when focusing on the growth-oriented outcome of innovation. Furthermore, we observe that generalized self-efficacy is similarly distributed between female and male business founders, with effects being partly stronger for female entrepreneurs. Our findings are important for policy instruments that are meant to support firm growth by facilitating the design of more target-oriented offers for training, coaching, and entrepreneurial incubators.
Self-efficacy reflects the self-belief that one can persistently perform difficult and novel tasks while coping with adversity. As such beliefs reflect how individuals behave, think, and act, they are key for successful entrepreneurial activities. While existing literature mainly analyzes the influence of the task-related construct of entrepreneurial self-efficacy, we take a different perspective and investigate, based on a representative sample of 1,405 German business founders, how the personality characteristic of generalized self-efficacy influences start-up performance as measured by a broad set of business outcomes up to 19 months after business creation. Outcomes include start-up survival and entrepreneurial income, as well as growth-oriented outcomes such as job creation and innovation. We find statistically significant and economically important positive effects of high scores of self-efficacy on start-up survival and entrepreneurial income, which become even stronger when focusing on the growth-oriented outcome of innovation. Furthermore, we observe that generalized self-efficacy is similarly distributed between female and male business founders, with effects being partly stronger for female entrepreneurs. Our findings are important for policy instruments that are meant to support firm growth by facilitating the design of more target-oriented offers for training, coaching, and entrepreneurial incubators.
Divergent thinking is the ability to produce numerous and diverse responses to questions or tasks, and it is used as a predictor of creative achievement. It plays a significant role in the business organization’s innovation process and the recognition of new business opportunities. Drawing upon the cumulative process model of creativity in entrepreneurship, we hypothesize that divergent thinking has a lasting effect on post-launch entrepreneurial outcomes related to innovation and growth, but that this relation might not always be linear. Additionally, we hypothesize that domain-specific experience has a moderating role in this relation. We test our hypotheses based on a representative longitudinal sample of 457 German business founders, which we observe up until 40 months after start-up. We find strong relative effects for innovation and growth outcomes. For survival we find conclusive evidence for non-linearities in the effects of divergent thinking. Additionally, we show that such effects are moderated by the type of domain-specific experience that entrepreneurs gathered pre-launch, as it shapes the individual’s ideational abilities to fit into more sophisticated strategies regarding entrepreneurial creative achievement. Our findings have relevant policy implications in characterizing and identifying business start-ups with growth and innovation potential, allowing a more efficient allocation of public and private funds.
From an active labor market policy perspective, start-up subsidies for unemployed individuals are very effective in improving long-term labor market outcomes for participants. From a business perspective, however, the assessment of these public programs is less clear since they might attract individuals with low entrepreneurial abilities and produce businesses with low survival rates and little contribution to job creation, economic growth, and innovation. In this paper, we use a rich data set to compare participants of a German start-up subsidy program for unemployed individuals to a group of regular founders who started from non-unemployment and did not receive the subsidy. The data allows us to analyze their business performance up until 40 months after business formation. We find that formerly subsidized founders lag behind not only in survival and job creation, but especially also in innovation activities. The gaps in these business outcomes are relatively constant or even widening over time. Hence, we do not see any indication of catching up in the longer run. While the gap in survival can be entirely explained by initial differences in observable start-up characteristics, the gap in business development remains and seems to be the result of restricted access to capital as well as differential business strategies and dynamics. Considering these conflicting results for the assessment of the subsidy program from an ALMP and business perspective, policy makers need to carefully weigh the costs and benefits of such a strategy to find the right policy mix.