Professor Matthias Fink is Professor for Innovation and Entrepreneurship at our Institute for International Management Practice (IIMP), as well as being Head of the Institute for Innovation at the Johannes Kepler University Linz, Austria.
Matthias's research focuses on the role of innovation in new venture creation and small business management, with work published in several leading industry journals.
Why is it that so many budding entrepreneurs who plan to start a new business don’t do so? The short answer is usually down to ‘the economic climate’ or ‘lack of access to finance’, but new research conducted by Prof Matthias Fink shows that the lion’s share of reasons is not related to either of these areas.
“The statistics were quite surprising,” Research matters explains Matthias. “We surveyed over 3,000 people and, of those who said they wanted to become entrepreneurs and start a business, when we went back to them a year later to find out if their plans had progressed, only one third had really done so. The task was then to identify what had happened to prevent commercial ambitions from being realised.”
There are several key factors it seems, and these are external to budding entrepreneurs. “The place where the individuals are geographically and the people who are around them play a key role in their decision to start a business,” says Matthias. The ‘who’ is their community, including the budding entrepreneur’s family, friends, and peer groups. The social context is particularly important for starting a business and this was explored during the study.
“Social legitimacy of entrepreneurship in the community is decisive,” adds Matthias. “Those surrounded by negative perceptions of being an entrepreneur – facing comments from ‘it’s not secure’ to ‘you might fail’ – were significantly more unlikely to have taken the step of starting a company than those who had more positive surroundings and encouragement.” However, it’s not just the social situation that impacts on whether intention turns to enterprise, explains Matthias. “There is also the question of what support is available in the budding entrepreneur’s specific region. In communities well equipped with supporting resources, including education, financial resources and social support, the share of individuals realising their entrepreneurial intention was higher.”
What can be done to address the shortfalls? And how do we help more people to turn entrepreneurial intentions into action? Matthias’s advice for budding entrepreneurs is simple: “Basically, it’s important to be part of a community that rates entrepreneurship as a legitimate career choice.” The other factors that need addressing are more in the hands of policy-makers. Matthias cites key ones as “fostering greater understanding and more positive attitudes towards entrepreneurial activity in communities and improving practical support systems and resourcing for those intending to start a business.”
What inspired you?
I wanted to understand what, apart from money, is hindering entrepreneurs from following their intentions to start businesses.
I would say it was that we got such clear results from our study. There are clearly identifiable reasons why people do not start a business and the largest share of these are non-financial hurdles. If you look at the media and public discourse, it’s all about financial issues. However, this debate needs to be refocused.
Why does this research matter?
It will inform and support policy-makers to design appropriate policy interventions for fostering entrepreneurship and encouraging budding entrepreneurs to act. In a broader sense, if we support the concept that entrepreneurship helps our economy to grow and generate wealth for the population, then the more entrepreneurship there is, the better it will be for all of us.
Ewald Kibler, Teemu Kautonen & Matthias Fink
Regional Social Legitimacy of Entrepreneurship: Implications for Entrepreneurial Intention and Start-up Behaviour, Regional Studies (2014)
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