Academic journal article Journal of Small Business Management

Encountered Problems and Outcome Status in Nascent Entrepreneurship

Academic journal article Journal of Small Business Management

Encountered Problems and Outcome Status in Nascent Entrepreneurship

Article excerpt

The relationship between outcome status and encountered problems in the business start-up process is investigated. Contrary to expectations, we find that starters do not substantially differ from quitters in the number and type of problems encountered, and that problems encountered generally do not affect outcome status. This research is based on a sample of 414 Dutch nascent entrepreneurs followed over a three-year period. Its design is comparable to that of the U.S. Panel Study of Entrepreneurial Dynamics.

Introduction

Explaining firm performance is a common theme in the world of entrepreneurship research. The first success that must be achieved in the prospective life of a firm is actually getting it started. This paper focuses on a much neglected element of the explanation of this first success: the experience of problems in the process of getting a firm started. Whether problems are encountered, and, if so, the extent to which entrepreneurs are able to resolve, mitigate, or work around such problems, may explain success or disengagement. Such knowledge is of critical importance to aspiring entrepreneurs as well as to business advisers, educators, and policymakers. After all, it is the quantity, type, and impact of problems that aspiring entrepreneurs want to anticipate, that business advisers and educators want to give sage advice about, and that policymakers want to influence by means of policies and programs.

We study the relationship between outcome status and encountered problems in the start-up process by analyzing qualitative as well as quantitative data pertaining to nascent entrepreneurs (NEs) (people in the process of setting up a business) who were followed over a three-year period. The setting is the Netherlands and the research design is in many ways similar to that of the Panel Study of Entrepreneurial Dynamics (PSED): a sample of ongoing early-stage business start-ups was obtained by means of randomly calling phone numbers and followed over a three-year period. Contrary to our hypotheses, we find that starters do not differ from quitters in the number and type of problems encountered and that problems encountered generally do not affect outcome status. Our surprising findings lend support to the idea that, for many, the prestart-up phase is a phase in which the viability of an idea is tested. In many cases, perceptions of market demand and risk, rather than problems encountered, predict outcome status.

Problems and Outcomes in Nascent Entrepreneurship

People setting up a business may face numerous unexpected obstacles and difficulties, and these may take longer to resolve than expected. New ventures can be resource-hungry, and sometimes, acquiring these resources may prove more difficult, expensive, or time-consuming than originally planned. Information may be difficult to obtain, prove unreliable, lack specificity, or turn out to be irrelevant. Governmental regulations may delay the process. A new competitor may capture the targeted customers. Furthermore, one may dislike particular aspects of venturing, for example, bookkeeping or selling. The market may prove to be less interested in one's product or service than was initially hoped for, which can make it difficult to keep up initial levels of enthusiasm. All these difficulties accrue to uncertainty regarding the market, the business environment, and one's own capabilities. These can be compounded by conflict arising among the business partners. Personal or family problems may intervene making the list of potential setbacks, and obstacles endless. NEs try to solve these issues, mitigate their impact, or work around them.

MacMillan Dictionary defines a problem as something that causes trouble or difficulty, and Wikipedia adds that a problem is an issue or obstacle that makes it difficult to achieve a desired goal, objective, or purpose. These definitions imply a negative relationship between problems and outcomes, and in nascent entrepreneurship (NE), this may be no different (Stam, Thurik, and van der Zwan 2010). …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.