Academic journal article SAM Advanced Management Journal

Need-Driven and Opportunity-Driven Women in Entrepreneurship in Alabama

Academic journal article SAM Advanced Management Journal

Need-Driven and Opportunity-Driven Women in Entrepreneurship in Alabama

Article excerpt

Entrepreneurship has attracted the attention of many and is seen as the economic engine that has the potential to deliver future job growth. Because of this potential, it is crucial to identify what drives entrepreneurship. Extant literature has focused on availability of financing--sufficient collateral--as a significant constraint hindering small business capitalization and business startups. Existing literature also suggests a dichotomy that need-driven entrepreneurs are more impacted by availability of financing than opportunity-driven entrepreneurs. This study empirically investigates the expected linkage between availability of financing and intention to start a business for need-driven and opportunity-driven women entrepreneurs in the state of Alabama. The results from a survey of 1,200 women intending to start a business in Alabama reveal that the strength of the linkage between availability of financing and intention to start a business varies with the entrepreneurial archetype. The study is concluded with implications for women entrepreneurs, policy makers, and future research.

Introduction

While entrepreneurship has been recognized as an area of interest by academics, business specialists, governments, and policy makers (Link & Strong, 2016; Jack, Moult, Anderson, & Dodd, 2010; Schramm, 2006; Davidsson & Honig, 2003), women entrepreneurs are still underrepresented in enterprises of all sizes despite the fact that women entrepreneurs account for nearly one third of all businesses worldwide (ILO, 2012). Consequently, legitimate interest is focused on exploring incentives and constraints in business startups for women. Among the many barriers identified in the literature, the constraints of personal wealth and liquidity together with lack of governmental financial support have been a consistent theme in the many studies done across the globe. However, there is a lack of consistency among these studies, which are often done in vastly different national and economic contexts.

Jennings and Brush (2013) outlined several challenges from broader entrepreneurship literature and suggested that one way to address these challenges is to conduct future research in more geographically narrower contexts to produce specific guidelines for policy and practice. The current study is a region-focused initiative justified by an intensifying demand from scholars for additional studies that investigate the role played by entrepreneurs in regional and local economies (Agnete Alsos, Ljunggren, & Hytti, 2013; De Bruin, Brush, & Welter, 2007; Shane, 2006). The demand is rationalized along the view that entrepreneurs play an important role in local economies through investment activities, which help to foster job creation, reduce wealth and income disparity among local residents, and connect the local economy to the larger global economy (Henderson, 2002). Our study starts with a brief overview of financing barriers to entrepreneurship, continues with a discussion of women in entrepreneurship, and presents a research framework focused on personal wealth and liquidity constraints and availability of public financing mechanisms as barriers to women in entrepreneurship. The research framework then leads to the hypotheses that are empirically tested using the largest survey of women entrepreneurship ever done in the state of Alabama. The findings are discussed and the paper concludes with limitations and suggestions for future research and policy making.

Literature Review

Access to capital is critical to new venture creation, whether that capital comes from personal assets or external financing. Studies in the United States have shown that in a credit-constrained environment, the probability of entrepreneurship increases with personal assets (Evans & Jovanovic, 1989; Evans & Leighton, 1989). There are similar empirical results for measures of external capital in relation to entrepreneurial activity (Blanchflower & Oswald, 1998; Guiso, Sapienza, 8c Zingales, 2002). …

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