This document provides an update on research activities from October 2014 to June 2015 for the ERC Theme 1 on entrepreneurial ambition and growth. It summarizes publications, presentations, and ongoing research projects focusing on entrepreneurial motivation and aspirations among entrepreneurs, including migrants and how these relate to business growth. A key project involves a follow-up survey of over 500 businesses to analyze how growth ambitions have changed over time and their relationship to actual business performance. Preliminary results suggest ambitions are stable for most businesses but can be influenced by market conditions, and that higher ambitions are linked to innovation, investment, and growth. The document outlines plans for further engagement and research outputs in 2015.
2. 1.2 and 1.3: Entrepreneurial Ambition,
Resources and SME Growth: UK and
International Comparisons
Publications since October 2014
• Grant, A. Pooley, E., Levie, J and Botham R. (2015).
Business Growth Ambitions amongst SMEs – changes
over time and links to growth (Interim report) BIS
Research Paper No. 215, March (presented at BIS
research conference, March)
https://www.gov.uk/government/uploads/system/uploads/
attachment_data/file/408404/bis-15-152-business-growth-
ambitions-among-SMEs.pdf
3. 1.2 and 1.3: Entrepreneurial Ambition,
Resources and SME Growth: contd
Research output since October 2014
• Levie, J. and Hart, M. ISBE Conference Paper, Nov:
Exporting by Male and Female Entrepreneurs over the
Business Cycle
• Mickiewicz, T., Estrin, S. (LSE) and Korosteleva, J. (UCL) ERC
research conference paper, June: “New Ventures’ Strategy,
Knowledge Spillovers and Firm Growth Aspirations
• Levie, J. and de Borst, J. Book chapter accepted “The more
the merrier: How owner-manager team size influences the
potential economic contribution of owner-managed
businesses across the world”
4. 1.2 and 1.3: Entrepreneurial Ambition,
Resources and SME Growth: UK and
International Comparisons
Research Output since October 2014 contd.
• Ambition, People and Places: Opening Video of
State of Small Business Britain Conference, June
(Hart, Mickiewicz)
• Work in Progress on Final Report on Ambition and
Growth Three Year Follow-up Study (Levie)
5. 1.2 and 1.3: Entrepreneurial Ambition,
Resources and SME Growth: UK and
International Comparisons
Examples of Engagement Output since October 2014
• ERC Research Conference, February
• BIS Research Conference, March
• Opening Video of State of Small Business Britain
Conference, June
6. 1.4 Entrepreneurial Ambition, Resources
and SME Growth -Identifying bottlenecks
in UK Systems of Entrepreneurship
Headline Activity since October 2014
• Theory and methodology development
– Conference Paper: Hard Facts or Soft Insights? Fact-
based and Participative approaches to
Entrepreneurship Ecosystems Policy Analysis and
Management (Autio, Levie, November and December)
• Engagement
– Scotland, Estonia (Switzerland, Upper Saxony,
Athens, Thailand, Turkey...)
8. Introduction
• Cross-border migration is a highly charged issue that dominates
current political debates in developed countries. Much of that
discussion is focused on economic benefits versus economic cost of
migration. However, public conversations are based on thin
evidence and speculation.
• Migrants tend to be entrepreneurial. Yet little is known and
understood about both the motivation and the aspirations of the
immigrants-entrepreneurs; aspects which are crucial predictors of
the economic implications of the new ventures.
• Moreover, focus on cross-border flows of people results in too little
attention being paid to the related issue of inter-regional
migration, again in particular in the context of the entrepreneurial
motivation and aspirations (Levie and Hart, 2013).
9. Research Questions
• Is mobility associated with entrepreneurship?
• Are (internal and cross-border) migrants pull- or push-
driven entrepreneurs?
• Are they high aspirations, ambitious entrepreneurs,
whose aim is to create ventures that have economic
impact beyond creating employment for those who
start them?
• Are these individual effects or local externalities?
• Is it ethnicity or mobility that matters?
10. Push factors In entrepreneurship
• Entrepreneurship is an occupational choice that may be a result of
push or pull factors.
• Push: self-employment is chosen because other labour market
opportunities are limited. This often leads to imitation; type of
activity and business model are borrowed from already existing
businesses. It still creates a positive competitive pressure, but may
mostly result in crowding out existing ventures, leading to limited
net economic impact.
• Applying this description to new entry by immigrants, leads to
portraying them as economic agents taking over jobs from
ingenious entrepreneurs; if so, the logic of it amounts to little more
than a zero-sum game.
11. Pull factors In entrepreneurship
• Pull factors: entry is attractive because of perceived opportunities
of realising a unique, inimitable project that leads to quasi-rents.
• Rather than taking a share of the existing market from other
economic agents, an entrepreneur creates a new market (or some
elements of it). In this case, a resulting competitive pressure may in
fact be even stronger, but remains less direct, and it is
counterbalanced by strong economic value generated by new ways
of doing things and by new products or services.
• Importantly, any quasi-rents associated with market innovations are
temporary: knowledge spills over to other businesses in the
neighbourhood and only a fraction of the economic rent can be
retained by the innovator - owner of new venture.
• Migrants who enter into entrepreneurship along the pull-
opportunity route are less likely to provide arguments for those
who build their political programme on resistance to migration.
12. Growth Ambitions
Motivation:
– Theoretical: Growth starts with attitudes and
characteristics of those who run companies: what
owners-managers think matters first and foremost
(Penrose, 1959)
– Empirical: evidence of significant positive correlation
between aspirations and growth outcomes
– Practical: longitudinal datasets are narrow and
typically cannot tackle selection problem - by focusing
on aspiration we get a wider empirical base
13. Defining Ambitious
Entrepreneurship
• GEM - Early stage entrepreneurs (i.e. either involved in start-ups or
owners-managers of young companies up to 42 months)…
• who aim to increase employment by 50% or more over the next five
years, and…
• will employ 10 people or more
• This definition combines two characteristics used alternatively in
earlier literature:
– Looking at the expected level of employment after 5 years (but
companies could start large, hence no dynamism)
– Looking at expected percentage change, controlling for initial level
(but a self employed adding an employee produces lots of dynamics
but little impact)
14. High-low ambition
versus pull-push factors
• High-low growth distinction cannot be reduced to the
opportunity-push dimension discussed earlier.
• In particular, an opportunity driven entry may still be
associated with little dynamism, if the entrepreneur
lacks self-efficacy or is highly risk averse.
• Thus, it is best to look at both dimensions, when trying
to assess what economic impact may be associated
with entrepreneurial entry by migrants.
15. Hypotheses: Push and Pull (Necessity
and Opportunity) Entrepreneurship
• H1a. Immigrants are more likely to enter necessity-motivated
entrepreneurship than non-migrants.
• H1b. Internal migrants are more likely to enter necessity-
motivated entrepreneurship than non-migrants.
• H2a. Immigrants are more likely to enter opportunity-
motivated entrepreneurship than non-migrants.
• H2b. Internal migrants are more likely to enter
entrepreneurship with the opportunity motive than non-
migrants.
16. Hypotheses: High and low
aspiration entry
• H3a. Immigrants are more likely to enter low growth
aspirations entrepreneurship compared to non-migrants.
• H3b. Regional migrants are more likely to enter low growth
aspirations entrepreneurship compared to non-migrants.
• H4a. Immigrants are more likely to enter high growth
aspirations entrepreneurship compared to non-migrants.
• H4b. Internal migrants are more likely to enter high growth
aspirations entrepreneurship compared to non-migrants.
17. Data and Estimator
• Combined data from Global Entrepreneurship Monitor
(GEM) UK: representative sample of working age
population.
• 2003-2013 data, 81k-283k observations used in
estimations, with location of respondents attributed to
one of 326 local authorities (LA) & one of 39 LEPs at a
higher level
• We apply a multilevel multinomial logit models,
estimating a likelihood of
– being engaged in high ambition entrepreneurship versus
low ambition entrepreneurship, with non-active in
entrepreneurship (GEM defined)
– being engaged in push and pull entrepreneurship.
18. Developing an Appropriate
Analytical Framework
• Multi-level analysis (an extension of linear regression analysis)
seeks to control for a set of independent variables which operate at
the individual level (i.e., age, gender education, attitudes etc)
• …..and those which operate at a ‘higher level’ (i.e., LEP or LA –
contextual variables) and in particular to control for the fact that
individual observations share joint factors across space.
• It is perhaps a reasonable starting assumption to make that the
characteristics of a population in a particular local area differ from
those in another.
19. Specifications: explanatory
variables
• Indicator variables for being an immigrant and for being a
regional migrant
• Indicator for being a graduate
• Initial labour market status
• The LA average of graduates (density of people with HE)
• Ethnicity (8 categories)
• Being female
• Age (categorised into 7 intervals)
• Annual dummies
• Dummy for inner London
• Random intercepts for LA areas
20. Results on Motivation
• Both immigrants and regional migrants are more likely to be engaged in
opportunity (pull) entrepreneurship compared with non-migrants
• Regional migrants are also more likely than non-migrants to be engaged
in necessity (push) entrepreneurship; the immigrants aren’t;
• Thus, it is opportunity entrepreneurship that is
characteristic for immigrants
• Contextual factors: the impact of quality of local human capital is highly
significant for opportunity entrepreneurship, but not for necessity
entrepreneurship
• Highest income groups dominate for opportunity entrepreenurship
• Black respondents most likely to enter opportunity entrepreneurship
(controlling for individual characteristics)
• Ethnic Pakistani and Bangladeshi respondents most likely to enter
necessity entrepreneurship (controlling for individual characteristics)
21. Results on Aspirations
• Both immigrants and regional migrants are more likely to be
engaged in high aspiration entrepreneurship compared with non-
migrants
• Regional migrants are also more likely than non-migrants to be
engaged in low aspiration entrepreneurship; the immigrants
aren’t;
• Thus, it is high aspiration entrepreneurship that is
characteristic for immigrants
• Contextual factors: the impact of quality of local human capital
dominates: robust over different specifications; highly significant;
stronger for high ambition entrepreneurship
• Highest income groups dominate for high aspiration entry
• Being in Inner London is associated with high aspiration
entrepreneurship
• Black respondents have highest aspirations (controlling for
individual characteristics)
22. More results /
Robustness checks
• We introduced control for ethnic diversity measure (calculated as a local
Herfindahl index of ethnic distribution): no effect
• Results on migration robust over the business cycle; they do not change
significantly over time
• We introduced a proxy for local dynamism: percentage change in
population, no effect (albeit measured at higher, LEP level)
• Interactions between migration and education (individual effects): higher
education matter less for migrants
• Interactions between migration and education (contextual effects): an
environment that combines human capital and presence of migrants is
the most conducive to high aspirations entrepreneurship
• We explored if there are either overcrowding or wave effects: migration
indicators interacted with local authorities migration averages – little
evidence
• …but the interaction models could be over-specified or masking some
other nonlinear effects
23. Business Growth Ambitions
amongst SMEs
Changes over time and links to growth
Andrew Graves and Emma Pooley, TBR
Professor Jonathan Levie, Enterprise Research Centre
and University of Strathclyde
Dr Ron Botham
24. Ambition and Growth
Three Year Follow-up
• Re-survey of 1,250 SME owner/managers surveyed in
2011 for BIS by TBR
• Approximately half have participated in the follow-up
• Secondary data search and phone calls to get
employment and status around end 2014 for 100% of
firms originally surveyed
• Only way of verifying a link between ambition and
subsequent growth
25. What We Want to Know
• How does ambition among SMEs change
over time and what influences this?
• What is the relationship between SME
ambition and SME business performance?
26. Three Levels of Ambition
• Substantive ambition – respondents have the
highest level of personal ambition for business growth
(10 out of 10 on a Likert scale) and intend to grow their
business significantly larger than its current size.
• Low ambition – respondents have a low level of
personal business growth ambition (5 or lower on a
Likert scale), or a medium level ( 6 or 7) AND do not
intend to grow their organisation and view the ideal size
of their business as being no higher than current size.
• Moderate ambition – all others
27. The 2012 Study’s Findings
• Based on recall of ambition 3 years previously:
– Growth was not confined to firms with substantial
ambition
– Firms with substantial ambition more likely to
grow more rapidly, but also to decline (in
employment and turnover)
28. Ambition and Growth
Follow-up study interim results
• Follow-up in Nov/Dec 2014 of 1,250 senior
executives of SMEs originally surveyed in
Jan/Feb 2012
• 503 firms re-surveyed
• Legal status and employment in 2014 identified
for all 1250 firms
29. Follow-up Survey
of 503 Surviving Firms
• 57%: no change in ambition level
• 24%: ambition level dropped
• 17%: ambition level increased
• Most of these change one level only, into or out
of the middle
• Only one in forty (2.4%) move significantly - from
substantive to low, or vice versa
30. Why ambition changed
• Why Ambition level dropped
– Reason #1: Changed market conditions (28% of sample)
• Why ambition level increased
– Reason #1: Changed market conditions (37% of sample)
Many individual reasons given for change
NB: This does NOT mean that ambition has
declined among SMEs!
31. Follow-up Survey
of 503 Surviving Firms
• Firms with substantive ambition in 2012 were
more likely than firms with low ambition to have
–Innovated
–Invested in training and development
–Developed new strategic goals
–Made investments or acquisitions
–Exported.
32. Follow-up Survey
of 503 Surviving Firms
• Firms that grew between 2012 and 2014 were
more likely than other firms to have
–Innovated
–Invested in training and development
–Developed new strategic goals,
–Made investments or acquisitions,
–Exported.
33. Follow-up Survey
of 503 Surviving Firms
• Dual effect feedback from past business
performance and major business events onto
current growth ambition (i.e. in 2014)
–for some firms these have a positive effect
–for others these have a negative feedback
effect
34. Tracking Study of All 1,250 Firms
Ambition level 2012
2014 legal status outcome Substantive Moderate Low
Dead/not trading 9% 7% 10%
Phoenix/owner change 10% 7% 5%
Continuing (includes status
change) 81% 87% 86%
Total 100% 100% 100%
2014 employment outcome Substantive Moderate Low
More employees 41% 38% 32%
No change in employee numbers 17% 20% 20%
Fewer employees 34% 34% 37%
No employees (includes dead
firms) 8% 8% 11%
Total 100% 100% 100%
35. 1250 Firm Tracking Study
Summary
• Firms with low ambition more likely to
reduce employment and less likely to
increase it
• The chances of changing owners/phoenix
rises with ambition level
• Results generally support the first study
36. Further Engagement & Output in 2015
• Engagement events
– Any suggestions?
• Possible Insight papers (short 4 pagers)
1.Export propensity and gender over the business cycle (Levie, Hart)
2.What drives entrepreneurial aspirations? (Autio, Mickiewicz)
3.Growth intention: migrant and family business effects (Levie, Hart)
4.Characteristics of highly aspirational entrepreneurs (Mickiewicz, Hart)
5.Cultural Influences on entrepreneurial entry and growth aspiration
(Autio)
6.Ambition and Growth (Levie)
• White Paper (longer more in depth report)
– Factors affecting high aspiration entrepreneurship in the UK: a
Multilevel study (Mickiewicz, Hart)
37. Discussion
• Other related issues we should be looking at that are
of interest to you and where you would wish to be
engaged?
• Do you have data or research evidence on these
topics you can share with ERC?
• Are there other organisations we should be talking
to?
38. Contact us:
If you would like any more information about Theme 1 and any
of its activities please contact the Theme Lead, Jonathan Levie at
j.levie@strath.ac.uk
or Mark Hart at mark.hart@aston.ac.uk
or Tomasz Mickiewicz at t.mickiewicz@aston.ac.uk
or Erkko Autio at e.autio@imperial.ac.uk
More details about the activities of the ERC and our latest events
can be found at:
www.enterpriseresearch.ac.uk