Determinant factors for the development of entrepreneurial activity: a correlational study.

Author:Lugo, Jose E. Berrios
Position:Articulo en ingles
  1. Introduction

    The global economic environment has undergone radical changes over the past decades. This has been characterized by the segmentation of smaller companies. In addition, technological developments have intensified global competition and integrated regional economies (Acs, 1992). Also, small businesses have taken an active role in regional economic development. Research has found that small businesses play an important role in technological change and serve as agents of change and economic regeneration, creating new niche markets and creating jobs.

    Economic regions have a unique set of stimulating activities leading to sustained economic development resources. The literature suggests that there are more favorable regions to pursue entrepreneurial activities than others (Mueller, 2004). Even, there are regions with similar entrepreneurial characteristics and exhibit different rates of development (Acs & Armington, 2003). In addition, the literature indicates that there is great interest from researchers for regional economic behavior and production factors.

    Some researchers (Beugelsdijk & Noorderhaven, 2004) have pointed out that the lack of entrepreneurial activity may be the key factor for the failure of regional innovation systems. Therefore, it is essential the need to innovate and generate knowledge to find solutions to the economic weaknesses (Lamboy, 2005) that can result in economies with low growth rates, which, in turn, generate low rates of entrepreneurship and consequently an economic slowdown, as stated by Belso (2005). Studies (Amoros et al., 2012) have indicated the importance of self-employment initiatives in economic development, but in turn its limitation is also recognized in the impact on the growth of regional economies. To stimulate economic acceleration, there are certain determinants (Acs, 1992) which are essential in the process to generate entrepreneurial activity. While entrepreneurship is identified as the heart of national competitiveness (Porter, 1990), it is increasingly recognized as an important determinant of economic productivity and agent of change in economic markets (Acs, 1992). Therefore, it is important to identify the factors that encourage entrepreneurial activity.

    Entrepreneurial activity can be identified within the companies, regions or organizations that identify business opportunities to generate wealth (George & Zahra, 2002). These environments are characterized by accepting controversial situations as normal, for ability to depersonalize politics, for a long-term emphasis on education in schools, the willingness to pay taxes to support public infrastructure, and the flexibility and diversity of community leaders (MacKenzie, 1992). Lack of an entrepreneurial environment can be felt regionally as a result of a shortage in innovation systems. Research has found evidence indicating that this culture is crucial in producing entrepreneurs (Amit et al., 1993).

    There is a gap between public policies and strategies implemented to promote entrepreneurship in the regions. Lundstrom and Stevenson (2002) argued that policies that encourage entrepreneurship are lacking theoretical basis. Spencer and Gomez (2003) argue that depending on the level of entrepreneurial activity that is pursued, different theoretical frameworks that are independent from economic policies should be developed. However, policy makers lack the knowledge of the factors that are associated with high entrepreneurial activities and actions that governments can take to promote entrepreneurship in their economies. Therefore, it is determined that there is a need to investigate and understand the policies and practices that cultivate regional entrepreneurship. For example, Busenitz and others (2000)) suggest direct research to identify the composition of factors that help governments develop, implement and promote policies that encourage entrepreneurial activities in the long term.

    Existing research and literature reviewed presented fragmented models to relate entrepreneurship to demographic, social and economic factors (Acs & Armington, 2002; Audretsch & Keilbach, 2005; Busenitz et al., 2000; Kostova, 1997; Spencer & Gomez, 2003; Van Stel et al., 2005). These research models identify and use a variety of determinants to shape the regional entrepreneurial activity. However, according to the literature reviewed, there is no integration of these factors to build a conceptual model of these determinants.

    This research will present a model of determinants in which social, institutional and economic factors are considered in order to explore their relationship with the level of entrepreneurship at regional level. In turn, this research will be useful to identify policy tools that encourage accelerated levels of entrepreneurial activity in a region. Using this model, people that develop entrepreneurial policies can direct resources to the areas that are really receptive to these strategies.

  2. Literature Review

    Entrepreneurial activity is a key to economic development. A determining factor is one that increases (Acs & Armington, 2003) and directs entrepreneurial activity. It has been shown that entrepreneurial activity varies with the combination of resources, factors or elements that exist in the regions. The identification of the elements, that are crucial to entrepreneurial activity, leads us to present an integrated model for such activity. The literature reviewed in this research aims to identify the elements that stimulate entrepreneurship. Once these elements are identified a model of integration of these determinants and their relation to economic development is proposed.

    The suggested model is composed of three groups of determinants (Acs & Armington, 2003). These factors are grouped into institutional, economic and social determinants.

    2.1. Institutional Determinants

    Institutional determinants composed of cognitive, regulatory and policy factors are proposed by Kostova (1997).

    The cognitive factor includes the knowledge, skills and frameworks for categorizing and evaluating information possessed by individuals in a region. The ability to identify relevant information to manage the risk inherent in a business must be related to entrepreneurial activity. Knowledge of how to start a company could be dispersed in a region (Spencer & Gomez, 2003). The regulatory factor is constructed with by the laws, regulations, aid programs and government policies to promote entrepreneurship, reducing risk to start a business, and the ease of obtaining resources and succeed. This factor specifies the responsibilities of owners of small businesses by assigning property rights (Gomez, 2003).

    The regulatory factor is composed by the degree to which individuals in a country admired business and value...

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