Uncovering the backings to passion: why do small firm owners/managers engage in entrepreneurship?

Abstract

This study aimed to uncover the backings to passion that plays a great role on firm’s entrepreneurial engagement. It explores a framework on what other factors determine the individual’s engagement on entrepreneurship. To meet this, data’s were collected from a sample of 112 firms and analyzed using descriptive and hierarchical linear regression analysis. The finding reveals that, Even if passion has a great impact on entrepreneurial engagement; it may not be successful without consideration of both their internal resource and external environments. The presence of human and financial capital as well as government supports intensifies the engagement of firms in entrepreneurship, while the unpredictability of environment hinders the successful practice of entrepreneurship. These are not the only factors that intensify the relationship; therefore, the future research should add other determinants such as technology diffusion and marketing environment and test on longitudinal study to capture the trends of individual firm’s engagement.

Background

Entrepreneurial engagement involves the discovery, evaluation, and exploitation of opportunities by individuals (Sarason et al. 2006; Shane and Venkataraman 2000; Lim et al. 2016). Entrepreneurship provides small businesses with the ability to discover new business opportunities and the discovery of new opportunities enhances their differentiation from other firms (Omisakin et al. 2016), but some of the owners/managers of established firms are not entrepreneurs. Individuals decide to engage in entrepreneurial activity because of different (combinations of) start-up motivations (Zwan et al. 2016).Entrepreneurial engagement is determined by both individual and institutional conditions. One of the individual condition that determines entrepreneurial engagement is passion. Passion is important in entrepreneurship because it can “fuel motivation, enhance mental activity, and provide meaning to everyday work” (Cardon 2008a, 2008b). Passion is needed as a means to achieve high levels of performance and to overcome barriers to change (Esmail et al., 2016). Interest in entrepreneurial passion is growing because passion has been demonstrated to drive tenacious pursuit of goals and to inspire stakeholders to support ventures (Murnieks et al. 2016).

Increasing attention from practitioners and researchers has focused on the role of passion in the entrepreneurial process of discovering and exploiting profitable opportunities, (e.g., Byron, 1994; Locke 2000; Shane and Venkataraman 2000). Entrepreneurial passion is defined as consciously accessible intense positive feelings experienced by engagement in entrepreneurial activities associated with roles that are meaningful for the self-identity of the entrepreneur (Cardon et al. 2009,). The passion for entrepreneurial activities, such as exploring new market ideas, sourcing founding capital, and establishing and developing new products (Cardon et al. 2009; Cardon et al. 2013), can lead individuals to become entrepreneurs (Biraglia and Kadile 2017). The activity of exploring new market ideas, sourcing founding capital, and establishing and developing new products is highly undertaken by the owner/managers of established firms. That is why passion is important not only to enter a new business, but also important to involve in entrepreneurial activity by established firms to survive and grow. This interest was practiced by owner/managers of established firms to grow their enterprises.

Passion research is burgeoning as more and more studies emerge that investigate the role of this construct in entrepreneurship (Murnieks et al., 2016). Vallerand et al. (2003), introduced the concept of The Dualistic Model of Passion which suggested that individual may experience passion in two (2) ways: The obsessive or the harmonious passion. In their study (Esmail et al., 2016) used harmonious passion to explain entrepreneurial passion which is hypothesized by Vallerand’s “emerge from autonomous internalization” as compared to obsessive passion. Scholars have recently focused on the role affect and emotion play in entrepreneurship (e.g. Baron 2008), and in particular have noted that entrepreneurial passion may be an important construct in need of more careful study (Cardon 2008a, 2008b; Cardon et al. 2009). A growing volume of research indicates that entrepreneurial passion, which involves intense positive emotions and a meaningful identity connection is central to the entrepreneurial experience and venture-related outcomes (Huyghe et al. 2016). But, passion alone will not make owner/managers to engage on entrepreneurial activity. In order to discover, evaluate, and exploit opportunities, owner/managers may require resources (both capital and human) to be passionate and engage on entrepreneurship. The owner/managers that developed experience previously, learn from their family occupation, and existence of successful entrepreneurs in the area contributes for passionate owners/managers to engage their firm on entrepreneurship. Similarly, government support in providing training, credit, working space, and technical advice for established firm owner/managers, may help to turn their passion to entrepreneurial engagement, while the unpredictability of environment may block firms that tend to involve in entrepreneurial activity.

Researchers identified that, most firms start small, live small and die small. They never embark on a significant growth trajectory (Storey 1994), because of poor engagement on entrepreneurship. Whatever the advantages the new innovation offers it will not succeed without adequate financial backing, marketing and production competencies. These are frequently the types of resources that small firms lack (Mazzarol 2004).While the larger competitors can have significant influence over the market place and hence over the small firm competitors, the smaller firms’ limited resources mean they are likely to have very limited influence in return (Bianchi et al., 2012).The major reason for this is that the majority of business start-ups are imitative businesses in mature industries, serving local markets (Reynolds et al. 2004). As Cardon et al. (2013), entrepreneurial passion is operationalized as passion for inventing-searching for a new business opportunity in new markets, founding-establishing a new business, and developing an already existing one. Our study focused on owner/managers who are running the established business, by excluding passion for founding, because passion for founding captures the establishment of a new venture by excluding the search for business opportunities in new markets for existed business. This research is among the first to capture the moderating role of both individual and environmental factors on the relationship between entrepreneurial passion and entrepreneurial engagement of owner/managers of established firm. The study uncovers how entrepreneurial passion can lead owner/managers to engage on entrepreneurial activity under the availability of entrepreneurial resources, different entrepreneurial background, existence of governmental support, and different environmental condition. The authors aim to understand how these variables facilitate the relationship between entrepreneurial passion and entrepreneurial engagement. In addition, most of the researches in the area focus on creation of new business in developed counties, our study is different from these researches by uncovering the backings to passion in the involvement of established small firm’s owner managers on entrepreneurial activity in one of developing country. The research tends to answer the following research questions; does entrepreneurial passion influence the owner/managers entrepreneurial engagement? Do individual factors such as entrepreneurial resource and background intensify the influence of entrepreneurial passion on entrepreneurial engagement? Does environmental factors such as government support and environmental unpredictability intensify the influence of entrepreneurial passion on entrepreneurial engagement? Therefore, this study will help to bring the discussion forward on the subject matter by highlighting the influence of individual and environmental factors on the relationship between entrepreneurial passion and engagement among small firm owners/managers. As a result, this study was designed to fill the gap identified by providing a holistic view of backing factors to entrepreneurial passion in determining entrepreneurial engagement.

Methods

Research and sample design

The design of the study that was used is descriptive and explanatory in nature. Descriptive research design was employed in order to discover the current situation in the firm as it exists and to draw valid general conclusion regarding entrepreneurial engagement, passion, resources, background, government support, and unpredictable environment. The study also employs explanatory study in order to discover the influence of entrepreneurial passion on entrepreneurial engagement under the contexts of individual factors and the environmental factors with an aim of estimating the integrated influence of these factors on entrepreneurial engagement.

To address this, primary data’s were used. The primary data were obtained by questionnaire from selected small firm owners/managers that have grown to medium enterprise. To obtain primary data, we selected 128 small firms from central part of Ethiopia using multi-stage sampling techniques. The researchers focus only on the grown small enterprises that are registered, licensed formally and currently operating under Trade and Transport Bureau. Therefore, a questionnaire is distributed to 128 selected owner/managers from manufacturing, construction, service, trade and urban farming and 112 were responded appropriately and used for analysis.

Measures

The questionnaire consists of three parts. The first part is about the background information including the age of the firm, size of the firm, educational level, and household income. The second part contains five items about entrepreneurial engagement, while the third part is about entrepreneurial passion that consists of 9 items. In the fourth part contains five items that measure government support and finally the three items of environmental unpredictability included.

According to Hessels et al. (2011); Entrepreneurial engagement is a categorical variable that reflects the following categories for entrepreneurial engagement: no entrepreneurial engagement, potential entrepreneur, Intentional entrepreneur, Nascent entrepreneur, Young business owner, and established business owner. Their study specifically aims to examine whether individuals who have recently exited are more likely to be engaged in entrepreneurial initiatives than those without a recent exit experience. In our case, we examine only the established business owners/managers. Therefore, for our study we developed a five item instrument that was measured on seven point Likert scale ranging from 1 (strongly disagree) to 7 (strongly agree). The items includes; (1) I am continuously discover and exploit new business opportunities to grow my business. (2) I always engaged in evaluating and exploiting opportunities to develop new products/services. (3) I always engaged in discovering, evaluating and exploiting new way of doing things to grow my enterprise. (4) I am engaged to identify and differentiate my products from competitors. (5) I am building culture that exciting to work. The highest the value indicates the higher the engagement on entrepreneurial activity.

Entrepreneurial passion (EP) reflects the positive and intense feelings for activities associated with roles that are meaningful to the self-identity of the entrepreneur (Cardon 2008a, 2008b). The approach of Cardon et al. (2013), specifically focuses on entrepreneurs’ experience of passion as entrepreneurs ‘live’ the influence of this passion. In consistent with (Cardon et al. 2009) model of the nature and experience of entrepreneurial passion, Cardon et al. 2013), adopt the view that cognitive or behavioral manifestations are outcomes of the affective experience of passion, rather than part of the experience itself (Cardon et al. 2013). According to Stryker and Burke (2000) Existing scales that measure passion based on the time spent on a task are missing the fundamental nature of passion, which is that it involves affective feelings that are intertwined with the entrepreneur’s definition of themselves their identity. Therefore, to measure a passion scale we adopt nine item instruments that concerns Passion for inventing, and Passion for developing firms from Cardon et al. (2013). The highest value indicates the individual was highly passionate.

Lim et al. (2016) and Autio and Acs (2010) focus on financial capital (household income) and human capital (level of education) as two key individual resources. We also employed household income and level of education to measure financial resource and human resource respectively. To measure household income we use a five point likert scale ranging from very less (1) to substantial (5). For individuals educational level, we measure by providing five alternatives, including illiterate, primary school, secondary school, technical and vocational education, and graduated. We entered this variable to the model by taking an average score of both items under the variable. Regarding entrepreneurial background, we developed three questions for this research. Respondents answer yes or no to questions; (1) do the entrepreneurs you know in your area successful? (2) Is your families’ background is entrepreneurs? and (3) Do you have experience on entrepreneurship previously? We entered this variable to the model by taking an average score of all the items.

We also used governmental support and environmental predictability from environments external to the enterprise as a moderators. The governmental support dimension was measured by a scale developed for this research. The items includes (1) access to credit (2) availability of training (3) distribution of working space (4) technical advice, which are measured on five point Likert scale ranging from very less (1) to substantial (5). We used a 3 item scale developed by (Durand and Coeurderoy 2001) to measure environmental unpredictability. Finally, to control the relationship between entrepreneurial engagement and explanatory variables, we used firm age (0 for firms less than 10 years and 1 for firms existed for 10 and more years) and firm size (0 assigned for firms with 10 or more workers and 1 for firms with less than 10 workers).

Theoretical Background

Entrepreneurial engagement involves the discovery, evaluation, and exploitation of opportunities by individuals (Sarason et al. 2006; Shane and Venkataraman 2000; Lim et al. 2016). A distinction is made between opportunity recognition and opportunity exploitation stages and distinguishing between the stages continues even after a business is established (Thurik and Grilo 2008). While SMEs owners engagement might be at a lower level, less visible and more informal than that of larger companies, the upside is that SME owner/managers have more freedom to run their businesses as they see fit (Williams and Schaefer 2013; Murillo and Lozano 2006; North and Nurse 2014). There is a limited set of empirical investigations that focus on the determinants of entrepreneurial reengagement (Hessels et al. 2011).

Passion

A number of perception-based elements may be attributed to entrepreneurs, perhaps the most widely noted and readily visible element is passion (Smilor 1997; Davis et al. 2017), because it indicated that entrepreneurial behavior is passionate, full of emotional energy, drive, and spirit (Huyghe et al. 2016). Passion is at the heart of entrepreneurship (Cardon et al. 2005), since it can foster creativity and the recognition of new information patterns critical to the discovery and exploitation of promising opportunities (Baron 2008; Sundararajan and Peters 2007; Cardon et al. 2013). It is the “fire of desire” that fuels entrepreneurs’ daily efforts and creativity (Cardon et al. 2009) and urges them to persist even in the face of challenge and adversity (Cardon et al. 2005; Cardon and Kirk 2015; Huyghe et al. 2016).

Entrepreneurial engagement and entrepreneurial passion

Identity relevance involves finding personal meaning in the activities one is engaged in, typically because they relate to an enduring and central characteristic of a person’s sense of who they are as an individual (Stryker and Burke, 2000). Engaged users show emotional attachment, dedication and passion (Herrando et al. 2016) and engagement generation process is measured by enjoyment and passion.

H1: There is a positive influence of entrepreneurial passion on entrepreneurial engagement.

Entrepreneurial engagement and entrepreneurial resource

Most new ventures are resource constrained, and the issue of acquiring and organizing resources is a central part of the start-up process (Shook et al. 2003). There are different outcomes in testing the relationship of entrepreneurial resources with entrepreneurial passion and engagement. Most of researchers stated that the direct effect of entrepreneurial resources on entrepreneurial engagement while others test the direct effect of resources on passion, but our study tends to test the influence after entrepreneurial passion. For example, Lack of financial support does not seem to discourage an active involvement in entrepreneurial activity (Thurik and Grilo 2008). Others stated that, compared to large firms, small firms have less financial and human resource.

H2: Firms who have adequate resources tend to have higher levels of entrepreneurial passion to engage in entrepreneurship than their counterparts.

Entrepreneurial engagement and entrepreneurial background

Individuals decide to engage in entrepreneurial activity because of different (combinations of) start-up motivations (Zwan et al. 2016). Among these, the family entrepreneurial background, previous work experience, and other entrepreneur’s success history in the area are some of them. Entrepreneurial family background is considered to affect the way entrepreneurial process unleashes (Shirokova et al. 2016). Entrepreneurial family background may impact vocational choice to pursue an entrepreneurial career. It has impact on individual engagement (Laspita et al. 2012; Zellweger et al. 2010). Therefore, it helps in creating positive beliefs about an entrepreneurial career and a favorable attitude towards engaging into entrepreneurial activities (Shirokova et al. 2016).

H3: Firms who have good entrepreneurial background tend to have higher levels of entrepreneurial passion to engage in entrepreneurship than firms with poor entrepreneurial background.

Entrepreneurial engagement and governmental support

A growing body of academic research documents that entrepreneurial activity is influenced by the institutional context (Estrin et al. 2013). Baumol suggests that productive entrepreneurship will be at low levels where the incentives supporting it are weak (Aidis and Mickiewicz, 2008). Aidis and Mickiewicz (2008) build on the work of Baumol (1993) and North (1990) in highlighting the impact of institutional incentives and structures on entrepreneurial activity. Government inactivity motivates social enterprises and others in the private sector to fill this gap, or “void.” Conversely, the presence of active and engaged governments leads to fewer societal problems and lower demand for SE, and thus fewer individuals are likely to be motivated to engage in SE (Stephan and Stride, 2015). Stephan and Stride (2015) find that government activism, by providing tangible and intangible resource support for social entrepreneurs can enhance social entrepreneurship (Zahra and Wright 2011).

H4: Entrepreneurial passion is better among owner/managers who take government support to have better entrepreneurial engagement.

Entrepreneurial engagement and environmental unpredictability

Corporate performance may be highly influenced by the level of environmental uncertainty and by the dynamics of critical environmental changes (Durand and Coeurderoy, 2001). That means the presence of unpredictable environment also influence the discovery, evaluation, and exploitation of new opportunities by firms. Zwan et al. (2016) added perceived environmental barriers to entrepreneurship. Many authors also reported as important factors when explaining entrepreneurial activity (Arenius and Minniti 2005; Koellinger and Minniti 2006; Grilo and Thurik 2008; Van der Zwan et al. 2010). Durand and Coeurderoy (2001) tested the influence of environmental unpredictability on entrepreneurial engagement and found that the unpredictability of the environment consistently reduces the performance of a firm.

H5: Entrepreneurial passion is better among owner/managers involved in an unpredictable environment to have higher entrepreneurial engagement.

Results and Discussions

In order to test validity, pre-tests of the questionnaire were conducted with firms belonging to different sectors for getting feedback regarding the clarity of the survey items and to evaluate new questionnaire items developed for the research. The same instrument is used for pre-test and post-test measures to ascertain the data quality. The data gathered through questionnaires was analyzed and presented by quantitative methods of data analysis. For this analysis, descriptive statistics analysis and multilevel linear regression analysis were applied and tested by using the statistical software SPSS version 20.

Results of descriptive statistics analysis

From the mean value in Table 1, we identified that the firms are moderately engaged in entrepreneurship. Regarding the age and size of the firm, less than half of firms are above 10 years in existence and less than half of firms have more than 10 workers. From this, we can understand that more firms have less experience in the market since they are recently established and these firms’ size is also small. Small-firm owners/managers are moderately passionate towards their job. Most of the firms faced scarcity of entrepreneurial resources that used (both financial and human capital) to run their business, while their entrepreneurial background is also poor that is the average of successfulness of other entrepreneurs in the area, previous experience on entrepreneurship, family background, and work status. Regarding the external environment to the firm, the government support is less than moderate while the presence of unpredictable environment is approximately moderate.

Table 1 Results of descriptive analysis

To overview the actual practice of firms, we identify that there is a moderate engagement of firms on entrepreneurial activity and their passion level is also moderate. Most of the firms have less experience since recently established. The size of the majority of the firms is also low with less human and financial resources and moderate entrepreneurial background, including inadequate successful history of other entrepreneurs in the area, lack of previous experience on entrepreneurship, and poor families entrepreneurial background.

The correlation result is also shown in the table below. The correlation between entrepreneurial engagement and passion is more than moderate while its week with entrepreneurial resource and background. We find that there is a significant relationship with passion (β = .607; p = 0.000) at 1% level of significance. Regarding the moderating variables, entrepreneurial resource (β = .340; p = 0.000) at 1% significance level, while entrepreneurial background is insignificantly related. Government support related significantly positively with engagement (β = .509; p = 0.000), while environmental unpredictability is significantly negatively related to engagement (β = −.495; p = 0.000) at the 1% level of significance (Table 1).

Results of regression analysis

To test regression analysis diagnostic test was undertaken. According to Cooper and Schindler (2009), multicollinearity problem should be corrected when the correlation extent to be above 0.8. In our case, there is no correlation because there is no value that exceeds this value. The tolerance value which is also used to show the collinearity problem shows the absence of multicollinearity. That is all the tolerance values are not less than 0.10. As a result, collinearity is not a problem.

For this study multilevel regression analysis was applied. In the first model, only control variables were included and the main effects are added in the second model. Later moderating variables are included. Our control variables include firm age and firm size. We used entrepreneurial resource, entrepreneurial background, government support, and environmental unpredictability as moderating variables. The outcome of the analysis reveals that, our results were statistically significant because F = 5.226, p = 0.007 for model 1, F = 24.409, p = 0.000 for model 2, F = 21.510, p = 0.000 for model 3. The main effects with control variables alone explain entrepreneurial engagement 38.3%. In model 3, after moderators are added, it explains about 56% (Table 2).

Table 2 Multi-level regression result

The result of model 1 indicates that firm size positively influences entrepreneurial engagement, while the firm age of individuals does not have influence on entrepreneurial engagement. We find that positive direct impact of passion on entrepreneurial engagement. This indicates the passionate individual was more to engage in opportunity discovery, evaluation, and exploitation. The entrepreneurial resources such as human and financial capital help to engage in discovering, evaluating, and exploiting opportunity. That means financial affluent individuals are more likely to engage in entrepreneurial activity than firms who lack human and financial capital. The entrepreneurial background, including entrepreneur’s success history, entrepreneur family background, work status and past entrepreneurial experience has no significant impact on entrepreneurial engagement.

We also find that there is a positive moderation effect of government support between passion and engagement and between entrepreneurial resource and engagement, while we get entrepreneurial unpredictability negatively moderates the relationship between both passion and resource and engagement. That is, favorable government support helps individual’s passion towards engagement, while the environmental unpredictability hinders firms from engaging on entrepreneurial activity (Table 3).

Table 3 Hypotheses testing

Hypothesis testing

Generally, the hierarchical regression model combines the dimensions of entrepreneurial passion with the context of external environment and internal factors in order to establish an entrepreneurial engagement model and uncover the backings of passion on influencing firm’s entrepreneurial engagement. Drawing on the previous literature, we identify the personal drives as well as resources and background factors that increase the likelihood of engagement and external environments that increase/reduce the likelihood of engaging in entrepreneurship. Passion may not be successful without consideration of both their internal resource and external environments. Owner/managers in firms who have high resources are more passionate than their counterpart that makes firms to engage on entrepreneurial activity.

Majority of the owner/mangers who are successful were the firms that have adequate resources allocated to run their business. When human and capital resources are not existed, it is difficult to turn the internal passion to entrepreneurship practice because it needs financial capital to search for new market and produce new products. It is not only financial capital, but also human power is needed to innovate new way of doing things to generate new idea that contribute for new product innovation and large market share. Therefore, these resources are highly important in helping small firm’s owner/managers to exploit new opportunities that found in the area and to expand their business by practicing entrepreneurial activities.

Government support is another moderator that moderates the relationship between entrepreneurial passion and entrepreneurial engagement. Firms who take support from government are passionate more than owner/managers who did not get supports from government. In practice, we observed many firms that grow to medium enterprises because of government support. This support includes facilitating for access to credit, providing training, providing working space, and giving advising service. Therefore, these supports actually encourage owner/managers of small firms to be entrepreneurially passionate and engage because of provided training and advice with having access to credit and working space. Therefore, we identified that the owners/managers are successfully engaged on entrepreneurial activity when government provides support to them; otherwise, they face difficulty in accessing facilities that makes them to be motivated internally. Government support is another factor that leads passionate firms to involve on entrepreneurial activity. Conversely, the presence of unpredictable environment hinders the successful involvement of passionate firms on entrepreneurship because these firms fear the failures in this unpredictable environment. Generally, the study offers a theoretical basis in the above linkage between the main and moderating effect of entrepreneurial resource and external environments.

Conclusions

The adoption of entrepreneurial activity by small firm owners/managers depends on their passion, which is influenced by entrepreneurial resources, entrepreneurial background, government support, and the unpredictability of the environment in which the business is operated. This study makes contribution to the fields of entrepreneurial engagement and passion through a comprehensive review of literature and empirical study available in the area. That is, the moderating effect of both individual and environmental factors on the relationship between entrepreneurial passion and entrepreneurial engagement are tasted and explored to better understand how entrepreneurial passion influences entrepreneurial engagement under different circumstances. More specifically, Passion influences firm owners/managers to engage in entrepreneurial activity but, it is successful with internal resource and external environments because, owners/managers who have high resources (both human and capital resources) are more passionate in engaging on entrepreneurial activity. In addition, firms who take support from the government are more passionate than owners/managers who did not get support from the government. On the other hand, the presence of unpredictable environment hinders the successful involvement of passionate firms on entrepreneurship because these firms fear the failures in this unpredictable environment.

By having the above conclusions, we provided the following implications to the government, policy makers, and firm owners/managers. As the finding of the study indicates, the firms that are supported by the government were more successful than their counter parts, therefore the government should expand its scope in developing small firms that contributes for the development of economy. The policy makers also should improve on the policy of developing small firms by giving consideration to facilitate on how to access resource and stabilize the unpredictable environment. The strategy that was developed should be helpful in facilitating good environment for owners/manager of small firms, by removing unnecessary conditions that hinders the development of small enterprises. Finally, the small business owners/managers who are passionate should look to how to access resources and work with government institutions to transfer their passion to actual practice and engage on entrepreneurial activity since they become more passionate with the existence of resource and government support to engage on entrepreneurship.