An Empirical Study on the Relationships between Entrepreneur and SMEs'
Vitality
Feng-hai Zhang, Xiao-wei Ma, Wei-hua Yang, Yue-kui Xu
School of Management, Dalian Polytechnic University, Dalian, China
(fhzhang66@163.com)
Abstract - Entrepreneur is the driving force of survival
and development of the small and medium-sized enterprises
(SMEs), and is one of the most important factors which
affect the vitality of SMEs. In this paper, we discussed
entrepreneurs’ own accomplishment of knowledge and
practical experience, social networks (relationships between
entrepreneurs and external stakeholders), cohesion of
entrepreneurs (relationships between entrepreneurs and
internal employees) and so on. This empirical study on the
relationships between these 3 dimensions, 4 elements and
SMEs' vitality was conducted based on 267 Chinese SMEs.
The results show that practical experience, accomplishment
of knowledge, cohesion and social networks play a positive
role in promoting the continuous growth of the SMEs, and
have a positive effect on SMEs' vitality.
Keywords - Entrepreneur, SMEs, Enterprises’ vitality
I. INTRODUCTION
SMEs play an increasingly important role in
expanding employment, promoting economic growth, and
promoting social harmony and stability. However, the
general life of China's SMEs is not long, and the standard
of their sustainable growth is also poor. According to a
special research report titled Investigation and
Recommendations of the SME Transformation and
Innovation in Post-crisis Era, issued by the Central
Committee of China Democratic National Construction
Association at the end of 2010, demonstrated that, at
present, the average life expectancy of China's SMEs was
only 3.7 years, whereas, Europe’s and Japan’s were 12.5
years, America’s was 8.2 years, and 1/4 of 500
outstanding SMEs in Germany survived more than 100
years. Therefore, research on the problem of effect factors
of SMEs' vitality in China has important practical
significance.
II. HYPOTHESES
By reading the existing literature we found that,
numerous studies had verified that there was a positive
correlation between entrepreneur quality, entrepreneur
competencies and enterprise performance [1]. Hanks and
Chandler’s empirical studies showed a positive
correlation
between
opportunity
perception
of
entrepreneurs
and
enterprise
performance,
the
management ability of entrepreneurs would bring about
economic efficiency for the enterprise directly [2].
Project support: Humanities and Social Sciences project of the
Education Department of Liaoning Province, The research on the
elements of SMEs’ vitality, (Project Number: 2008Z035).
Entrepreneur competencies and competitiveness of
enterprises has a significant positive correlation [3]. The
founder with rich entrepreneurial characteristics is the
most important factor to promote high-growth enterprises'
growth [4]. Entrepreneurs bring about performance
through productive efforts, which meanwhile restrict the
performance of entrepreneurial talents [5]. Innovation
ability, and entrepreneurs' capacity of organizing,
decision-making, communication, and learning had a
significant positive impact on SMEs' performance [6][7].
Relational capabilities of entrepreneur has a significant
positive correlation
with enterprise innovation
performance and business growth performance [8], and has
a positive impact on enterprise performance [9][10].
Entrepreneur's qualities has a significant positive effect on
the growth of innovative-styled SMEs [11][12].
In summary, most of the former empirical researches
on entrepreneurs were mainly focused on the relationship
between entrepreneur's quality or competencies and
enterprise's performance [13][14]. Entrepreneur's qualities
are entrepreneur's characteristics, accomplishment of
knowledge, the synthesis of the style and ability of
entrepreneurs manifested in the innovation activities.
Therefore, in essence, the study on entrepreneur
competencies can also be classified in the study on
entrepreneur's qualities. Research on the qualities is very
broad and difficult to focus on. However, the core for
enterprise to survive and develop is the “human” and
resources related to human closely. Entrepreneurs, the
most important human resource of SMEs, are the soul and
the commander-in-chief of enterprise's survival and
development. And entrepreneurs themselves, relations
between entrepreneurs and “human” outside the
enterprise---external stakeholders, relations between them
and “human” inside the enterprise---employees, have a
direct effect on the enterprise's ability of survival and
development. Therefore, on the basis of existing
researches, we focus on considering the “human” factor in
this paper, revolving around entrepreneurs as “social
man”. That is to study the effect of entrepreneurs
themselves, relationship between entrepreneurs and
external “human”, relationship between entrepreneurs and
internal “human” on SMEs' vitality1.
Based on existing researches, we propose the
hypotheses: entrepreneurs themselves, relationship
between entrepreneurs and external “human”, relationship
between entrepreneurs and internal “human” will play a
positive role in promoting the sustainable growth of
SMEs, and have a positive effect on Enterprises’ vitality.
1
In this paper, SMEs' vitality=F (Survival ability, Development ability).
III. RESEARCH DESIGN AND METHODS
A. Questionnaire Design and Data Collection
This research mainly adopted questionnaire method,
using Likert five points equidistant scale measurement. In
this study we made the domestic manufacturing SMEs as
the research object, and issued the questionnaires by the
way of college students’ holiday social practice. Most of
the interviewees were entrepreneurs or senior managers.
We issued 500 copies of questionnaires and recovered
310 copies, and the recovery rate is 62 %, of which 267
copies were valid. The rest recovered 43 copies were
regarded as invalid, because some items were not
completed or there were a large number of items which
selected the same choice, so the overall effective rate is
86.13%. Finally we made a statistical analysis of effective
data by using of the SPSS13.0 data processing software.
B. Measurement of Variables
each variable’s weight temporarily, and just took the
three’s mean value to calculate the vitality. The formula
of enterprises’ vitality is Y= (a+b+c)/3. “Y” represents
SMEs' vitality, “a” represents sales changes, “b”
represents the enterprise’s age, and “c” represents the
changes in the scale.
IV. DATA ANALYSIS AND RESULTS
A. Reliability Analysis
First we made a reliability analysis of the whole
questionnaire items. The following table is the analysis
results.
TABLE I
RELIABILITY ANALYSIS OF THE QUESTIONNAIRE
Item dimensions
Cronbach
Analysis of variance
Analysis of variance
α
F
P
Total questionnaire
0.881
109.123
0.000
Measurement of Independent Variables
According to the early research of domestic and
foreign scholars, this study preliminary selected
“Entrepreneurs’ number of times in creating new
ventures”, “Entrepreneurs’ experience of management”,
“Entrepreneurs’ educational background”, “Entrepreneurs’ number of times of participating in training”, “Rate of
employees’ support”, “Degree of emphasis on employees’
views”, and “Network of social relations” as independent
variables to carry on the questionnaire design, and then
extracted common factors with the method of exploratory
factor analysis in the data analysis phase. Finally, we used
the method of regression analysis to study the relationship
between the common factors (independent variables) and
Enterprises’ vitality (dependent variable).
Measurement of Dependent Variables
SMEs' vitality contains the ability of survival and
development. In this paper, we used sales changes of the
last three years and enterprises’ age, these two aspects to
reflect their ability of survival, and used enterprises’ scale
changes in the last three years to reflect their ability of
development. Sales changes were measured by Likertfifth measuring scale, that is to say, the greater the value,
the more powerfully to reflect the ability of survival;
enterprises’ age was represented as the fixed number of
years from the creation to the time of this survey, that is to
say, the longer the year, the more powerfully to reflect the
ability of survival; enterprises’ scale changes were also
measured by Likert-fifth measuring scale, that is to say,
the bigger the number, the more powerfully to reflect the
ability of development. Owing to 1.9 years average age of
the sample enterprises (93% within three years), Likertfifth scale values range from 1 to 5, variables’ order of
magnitude, such as sales volume changes, the change of
age and scale, was considerable. So we didn’t consider
Table I shows that Cronbach α value of the reliability
is 0.881. It illustrates that consistency degree of
measurement is higher. P value of F Test, that done by
repeated measure analysis of variance, is less than 0.01,
which shows that the repeated measure of the scale is
good, so the reliability reaches an acceptable level.
B. Exploratory Factor Analysis
According to the quantifiable principles, we designed
9 options, of which 2 used descriptive statistics, and 7
were carried on by factor analysis.
TABLE II
KMO AND BARTLETT’S TEST
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Bartlett's Test of Sphericity
Approx. Chi-Square
Sig.
0.600
1.192E3
0.000
KMO is 0.600, it shows that the data is suitable for
factor analysis. The significance probability of χ2 statistics
value is 0.000, less than 1%. It means that correlation
coefficient matrix can not be seen as identity matrix,
variables between each other is not independent, and they
are correlative, so this data is suitable and needed for
factor analysis[15].
We used Varimax orthogonal rotation to extract
factors, and 4 factors were extracted from 7 question
items. Table III is the results of factor loadings after
orthogonal rotation matrix.
According to the factor analysis, we extracted 4
factors; we named “Number of times in creating new
ventures” and “Experience of management” Factor 1
“Practical experience”. In a similar way, “Entrepreneurs’
educational background” and “Number of times in
training” were named Factor 2 “Accomplishment of
knowledge”; “Rate of employee’s support”, “Degree of
emphasis on employee’s views” were named Factor 3
“Cohesion”; and “Network of social relations” was named
Factor 4 “Social networks”.
TABLE III
FACTOR EXTRACTION RESULTS OF ENTREPRENEUR
Independent variable
1
Number of entrepreneurs venture
Experience of management
Entrepreneurs’ educational background
Number of entrepreneurs training
Rate of employee’s support
Degree of emphasis on employee’s views
Network of social relations
Entrepreneur
Accomplishment of knowledge
Practical experience
(Selves)
SMEs' vitality
Factor loading values
2
3
4
0.946
0.104
0.183
0.011
0.944
0.114
0.203
0.040
-0.104
0.947
0.150
0.008
0.248
0.916
0.081
-0.055
0.096
0.124
0.946
0.146
0.369
0.132
0.868
0.098
0.034
-0.039
0.172
0.984
Cohesion
(Relations with the internal “human”)
Social networks
(Relations with the external “human”)
Fig.1. Theoretical model
V. RESULTS AND DISCUSSIONS
Note: Factor extraction method: Principal Component Analysis.
C. Regression Analysis and Hypothesis Testing
A. Practical Experience and SMEs' Vitality
SMEs' vitality was taken as the dependent variable,
and the 4 factors above were taken as independent
variables, we established the following multiple linear
regression equation:
TI=A1X1+A2X2+A3X3+A4X4+B
TI represents SMEs' vitality, A1 … … A4 are
regression coefficients, X1 represents Practical experience,
X2 represents Accomplishment of knowledge, X3
represents Cohesion, X4 represents Social networks, B is
constant.
It can be seen from the regression analysis that, the
effect value of practical experience on vitality is 0.722;
practical experience is the most significant factor of
entrepreneur element effect on SMEs' vitality. Work
experience (including entrepreneurial experience) is
helpful for entrepreneurs to make effective management
and decisions, and they can learn lessons from failures,
avoid detours and grasp the correct direction of the
development accurately. In this research, 91% of
entrepreneurs have 4 to 12 years of management
experience; even 7.3% have more than 13 years of
experience, 72.7% of entrepreneurs had 2 to 4 times of
entrepreneurial
experience.
Obviously,
practical
experience of the entrepreneurs has an important effect on
SMEs.
TABLE IV
REGRESSION ANALYSIS RESULTS ON ENTERPRISES’ VITALITY AND
ENTREPRENEUR FACTORS
Model
Constant
Factor 1
Factor 2
Factor 3
Factor 4
Non-standardized
regression coefficients
B
Std. Error
3.509
0.722
0.293
0.548
0.140
0.045
0.045
0.045
0.045
0.045
t
Sig.
77.836
15.987
6.482
12.123
3.104
0.000
0.000
0.000
0.000
0.000
Note: After adjustment: R2=0.634, F=113.549, P<0.01.
According to Table IV, we saw that 4 independent
variables came into the regression equation, and the
coefficients of these factors were significantly different
from 0 at the level of 0.01. It means these 4 factors could
be used as explanatory variables in the model to explain
the strength of SMEs' vitality. So we got the regression
equation of entrepreneur and SMEs vitality:
TI=0.722X1+0.293X2+0.548 X3+0.140 X4+3.509
According to the above analysis, we saw that
Practical experience, Accomplishment of knowledge,
Cohesion and Social networks would have a positive
effect on SMEs' vitality, and all of hypotheses got to be
verified. So the theoretical model could be constructed
(Fig.1.).
B. Accomplishment of Knowledge and SMEs' Vitality
The effect value of accomplishment of knowledge on
vitality is 0.293, which is the third significant factor of
entrepreneur element effect on SMEs' vitality. A good
educational background and follow-up study or training
can help entrepreneurs have a more complete knowledge
structure, acquire the modern management of scientific
knowledge concerned with the work of corporate
leadership, and master the professional knowledge
concerned with business activities. These will help
entrepreneurs to fulfill their management responsibilities
better and manage their enterprises more effectively.
Meanwhile, it reminds our entrepreneurs that only by
establishing the concepts of lifelong learning, updating
their knowledge and ideas constantly can them keep the
enterprises built to last.
C. Cohesion and SMEs' Vitality
The effect value of cohesion on vitality is 0.548,
which is the second significant factor of entrepreneur
element effect on SMEs' vitality. Cohesion will help
entrepreneurs maintain good relations with employee,
pool the wisdom and efforts of everyone, and form a good
cultural atmosphere. At the same time, it will be
conducive for entrepreneurs to know how to judge and
use people truly, let each person do his best according to
his ability, give full play to the initiative, enthusiasm and
creativity of each employee, enabling enterprises to
maintain strong vitality.
D. Social Networks and SMEs' Vitality
The effect value of social networks on vitality is
0.140, which is the fourth significant factor of
entrepreneur element effect on SMEs vitality. If
entrepreneurs establish good interpersonal relationships
with external stakeholders, not only can they significantly
reduce the uncertainty faced in the process of enterprise
growth, but also obtain a lot of entrepreneurial resources,
alleviating the general problem of resource constraints in
the growth of SMEs effectively. In a word, social
networks can enhance their ability of adapting to complex
and external environment, to achieve sustainable growth.
VI. RESEARCH CONCLUSIONS
The results show that practical experience,
accomplishment of knowledge, cohesion and social
networks have a positive role in promoting the continuous
growth of the SMEs, and have a positive effect on SMEs'
vitality. Practical experience made a greatest contribution
to SMEs' vitality, followed by cohesion of the
entrepreneurs. The significance of accomplishment of
knowledge and social networks lived one by one behind
the former two. So entrepreneurs, besides upgrading their
accomplishment of knowledge through lifelong learning
continuously and establishing a good network with
external stakeholders, more importantly, they need the
courage to practice and give full play the creativity of
subordinates, so as to enhance the survival and
development capacity of the enterprises.
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