MOTIVATION AND BUSINESS SUCCESS
THE RELATIONSHIP BETWEEN ENTREPRENEURS MOTIVATION
AND NEW
BUSINESS VENTURES SUCCESS
BY
DR. S. L. ADEYEMI
DEPARTMENT OF BUSINESS ADMINISTRATION
UNIVERSITY OF ILORIN, ILORIN
ABSTRACT
The purpose of this study is to investigate factors that contribute to the success of new ventures
in Nigerian setting. Success is in the present study defined as profitability and growth. The
proposal research question is: which types of entrepreneurial motivation or combination of
motivational factors have an effect on new ventures/ business success?
This study classified entrepreneurial motivations according to whether the entrepreneurs are
internally or externally motivated. When tested against profitability and growth, the general
findings supporting the proposed hypotheses, were that externally motivated entrepreneurs are
more likely to achieve a high level of profitability than internally motivated entrepreneurs, and
that internally motivated entrepreneurs are more likely to experience a high level of growth than
externally motivated entrepreneurs.
INTRODUCTION
There have been general studies of Nigerian entrepreneurs right from the pre-independent period.
Most of these studies have placed much emphasis on the unfavourable economic environment
and argued that it exercised a constraint upon the general growth and development of Nigerian
entrepreneurship.
Schatz (1963) in his own study believe that low ability to invest is the most important reason for
the poor entrepreneurial performance in developing economy. There has been attempt by most
studies to explain the success or failure or even growth of entrepreneurs in Nigeria in terms of
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certain absent values and motivations. Killy (1963) in his investigation of the courses of business
failure or success emphasized the importance of worky-capital shortages, deficient product
quality control, and poor economic environment. He only speculated on some other factors like
entrepreneur motivations, the extended family, and the propensity of entrepreneur to invest his
profits, which he believed would be a useful area for further research.
Generally, several studies have been done on the attitudes and behavioural characteristics of the
entrepreneurs. Some of these studies were found when evaluating an enterprise program with the
intention of creating new ventures, no identifiable relationship between the initial motivations of
the entrepreneur, whether positive or negative, and subsequent success of the business. Birley
(19850 Dunkelberg et al (1987) also failed to find significant difference between growing and
declining firms with regard to the entrepreneurs’ most important reasons for starting the
business.
However, other studies have found significant differences between successful and not successful
entrepreneurs. Sanberg (1986) found Need for achievement and Locus of control to influence
performance. Brochheus, (1980). Finding suggests that psychological factors such as locus of
control influence the profitability of surviving. Smith et al (1987) found significant positive
correction between entrepreneurs’ task motivation and growth both in terms of sales and in
number of employees.
Even though some contradictory findings have been reported, the theoretical discussion and
some empirical evidence leads to the suggestion that the entrepreneurs reasons leading to starting
business have an impact on success or performance of the business. This study tries to
distinguish between internal and external motivation, as done by Prockhaus (1980); Kolvereid
(1986) and Davidson (1989). We define success as being profitability and/ or growth. The
hypothesis proposed in regard to the entrepreneurs’ motivation in relation to profitability is:
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Hypothesis 1
Entrepreneurs that are mostly motivated by external factors are more likely to achieve a higher
level of profitability in new ventures, than is the case for entrepreneurs that are mostly internal
motivated..
Several studies have suggested a relationship between the factors related to the individual
entrepreneur and growth patterns. The entrepreneurs’ motivation is suggested as on such factor
related to growth patterns. (Roberts, 1969: Perry et al, 1988)
The expletory theory (Vroom, 1964) suggest that growth willingness is contingent on an
expectation that the act will be followed by a certain outcome, and on the relation between that
outcome and the outcome and goals of the individuals. Hence the following hypothesis regarding
the casual link between the entrepreneur’s motivation and growth is proposed.
Hypothesis 2
Entrepreneurs that are mostly motivated by internal factors, are more likely to achieve growth in
new ventures, than is the case for entrepreneurs that are mostly external motivated.
Methodology
The main purpose of this was to study the reasons for people to start their own business,
emphasizing the effect of cultural values of the entrepreneurs.
Sample
The sample used in the present study consists of new ventures. Entrepreneurs were defined and
selected in accordance to the international study’s standard and criteria. We used the business
database of all registered companies. A total of 6000 ventures were identified as having been
registered in the database during the time period. Random samples of 600 firms were selected.
After removing 89 businesses in the non-profit sector, 511 questionnaires were out. Out of these
14 were retuned due to insufficient addresses. This gave us a final sample of 497. The
questionnaires were followed by calls and letters to those we did not receive any response from
after a certain data. The final response of 148 respondents gave us a response rate of 29%. This is
considered acceptable.
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Reminder letters were sent out again 3 weeks later finally, a number of reminder telephone calls
were made. The final return was 159 responses. This gives as response rate of 52%.
The Questionnaire
The questionnaire were developed on theoretical contribution of Aldrich et al (1987) Baumol
(1985), Pruno and Tyebjee (1982), Friberg (1975), Hotstede (1980), MC Clelland (1961) AND
Shapero and Sokol (1982). The questionnaire was very comprehensive and included 384
questions divided into 4 sections.
RESULT AND DISCUSSION
The entrepreneurs in this study were presented a list of 38 motivations to start a business and
were asked to scale the extent to which each motivation influenced their decision to become
entrepreneurs. In order to gather those motivational variables that were highly correlated into
different groups, a factor analysis was conducted. The unrotated direct extraction of the variables
did not, however, illuminate the interrelationship between the collection of variables and the
variables were rotated (varimax rotation) in order to isolate more meaningful dimensions.
However, the ten-factor solution from this analysis did not meet by the criteria used in this paper.
These criteria were:
1.
Factor loadings higher than 0.5 (to ensure convergent validation).
2.
Correspondence with expected factor (to ensure face validity).
3.
No variable should load above 0.4 on two or more different factors (to ensure
discriminant validity).
4.
Maximum alpha (for internal consistency).
Following this criteria 10 of variables were dropped. The remaining variables were again factor
analyzed. The result of this analysis was that 7 of the variables were dropped. In the last factor
analysis variables met the criteria used. The total numbers of variables dropped were 17. The
result of the final factor analysis obtained easy understandable factors that convey the essential
information contained in the set of variables. Also the intention being to use these factors as new
independent variables in the classification of the entrepreneurs into entrepreneurial typologies by
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the use of cluster analysis. The final factor analysis accounted for 60.9% of the variance and is
shown in table 1.
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Table 1.
MOTIVATIONAL FACTORS
Fact 1
Direct contribution to the success of a company
.729
Keep Learning
.705
Challenge of staring and growing a business
.705
Develop an idea for product/business
.679
Be innovative and in forefront of new technology
.648
Fact 2
Achieve higher position in society
.722
Be respected by friends
.683
Increase the status of my family
.673
Follow the example of a person I admire
.653
Fact 3
Control my own time
.806
Be on boss-work for self
.700
Have greater flexibility for private life.
.699
Freedom to adapt my own approach to work
.686
Contribute to the welfare of my ethnic group
Fact 4
Fact 5
Fact 6
.798
Contribute to the welfare of my community were
I live
.785
Contribute to the welfare of my relatives
.701
Needed more money to survive
.779
Give myself and family security
.753
Desire to have high earnings
.502
Frustrated in previous job
.826
Not work for an unreasonable boss
.702
The factor analysis yielded six consistent factors, and on the basis of the factor loadings the six
factors were given the following descriptive labels: Factor 1: Internal achievement, Factors 2:
Status. Factor 3: Independence. Factor 4: Welfare. Factor 5: Money. Factor 6: Escape.
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ENTREPRENEURIAL TYPOLOGIES
When discussing entrepreneurial motivation, entrepreneurial typologies were put on the agenda.
The best known typologies are the distinction between the two types of entrepreneurs.
The craftsmen and opportunists, originally presented by Simth (1967). The support for theses
two dominant types of entrepreneurs has been strong and consistent in most studies (Woo et al
1988).
Typologies related to the entrepreneurs’ motivation are developed by Dubini (1989), which in a
study of Italian entrepreneurs presented a three-cluster solution, which she labeled, self
actualizers, discontented entrepreneurs and family tradition. In order to verify whether one group
were predominant in the sample, the five cluster solution made it possible remove several
outliners at the same time as four clusters remained which were large enough for further analysis.
Table 2 below presents the remaining four clusters.
Table 2.
MOTIVATIONAL TYPOLOGIES OF ENTREPRENEURS
Factors
Clust 1
Clust 2
Clust 3
Clust 4
Internal achievement
Status
Independence
Welfare
Money
Escape
N
Missing : 60
.54
.16
.26
-.02
.26
.07
133
.59
.33
-.94
-.89
-1.35
-.33
23
-.13
-1.94
-.02
.54
-.01
-1.00
18
-1.03
.42
-.05
.24
-.06
.13
73
a:
Significant difference (p,.05) between cluster 1 and 2
b:
Significant difference (p,.05) between cluster 1 and 3
c:
Significant difference (p,.05) between cluster 1 and 4
d:
Significant difference (p,.05) between cluster 1 and 3
e:
Significant difference (p,.05) between cluster 1 and 4
f:
Significant difference (p,.05) between cluster 1 and 4
Sign
b, c, d, e, f
b, c, d, f
a, c, d, e
a, b, d, e
a, c, d, e
b, d, e, f
Note that the scale is reversed. A negative figure indicates that this factor is an important
motivation for entrepreneurs in that cluster.
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Cluster 1 consists of low motivaters, people with a general low motivation, mainly concerned
with the welfare of others. Some of the characteristics of a craftsman entrepreneur.
Cluster 2 comprises money seeker. These entrepreneurs scores relatively high on the money
factor, accomplished by a high score on the independence factor. Their urge for internal
achievement is, on the other hand, very low.
Cluster 3 consists of status seeker. These entrepreneurs are characterized with high scores on
status, but also be escape. They do not seem to care about others, as welfare scores low, i.e. they
want their status for themselves.
Cluster 4 comprises self actualizers. These are entrepreneurs that are driven by “positive”
motivations to start their own business. This can be observed by considering their high score on
internal achievement, independence and money.
DO MOTIVATION AFFECT PROFITABILITY AND GROWTH?
In this section the motivational factors effect on profitability and growth are to be presented. In
the present study internal achievement, independence and escape is labeled internal motivations.
Consequently, an activity is labeled externally motivating if it leads to external rewards like
food, money or social reinforcement, in the present study, money, status and welfare are
considered being external motivations.
In addition to look at profitability and growth as a continuous variable, additional information is
socked by dividing the entrepreneurs into successful and not successful groups. This capture
whether the extreme ends of success differ substantially in this respect. In order to test
hypothesis 1a, regression model is to be used. The model is as follows:
Profit = B1M1+B2M2+B3M3+B4M4+B5M5+B6M6
The following abbreviation is used: B1 = the standardized regression coefficient, Profit =
profitability, M1 = Internal achievement, M2 = Status, M3 = Independence, M4 = Welfare, M5 =
Money, M6 = Escape. The results of the above calculation showed that the factors “status”,
“Welfare”, “escape” and “internal achievement” did not meet this requirement, hence they were
dropped and a new analysis were conducted. The results from this analysis are shown in table 3.
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Table 3.
REGRESSION ON MOTIVATIONAL FACTORS BY PROFITABILITY
FACTOR
BETA
SIGNIFICANCE
Independence
0.09
0.12
Money
0.18
0.00
Multiple R = 0.21
r2
= 0.05
Significance = 0.08
N
= 242
These results of the calculations are, as shown in table 3, not very rewarding, as the variance
explained in only 5%. However, the conclusion must be, that the most important motivational
factor in regard to explain profitability is the factor “money”. Also, independence seems to have
some impact. The above give some support to hypothesis 1a.
The above findings provided some indication toward the likelihood of money seekers to be more
profitable than other entrepreneurs. In order to investigate this matter, a cross-tabulation was
done for the motivational typologies presented earlier in the paper. Also, as profitability are
represented by a continuous variables, it would be of some interest to consider the extreme ends
of profitability, namely by considering those entrepreneurs that were very profitable. The results
are presented in table 4 below.
Table 4.
MOTIVATIONAL CLUSTER MEMBERSHIP AND PROFITABILITY
Profitable
Low Motivaters
Money Seekers
Status Seeker
Self Actualizers
Yes
28(36.1)
12(6.6)
4(4.9)
24(20.8)
No
97(88.9)
11(16.4)
11(16.4)
48(51.2)
Chi-square = 9.65; Significance .04. The number of observations expected in case of
independence among clusters is represented within parentheses.
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Table 4 shows an over representativity of profitable entrepreneurs among “money seeker” in
particular, but also among self-actualizers. This is expected, as the results for money seekers a
result of the consistent impact the factor “money” had on profitability. The conclusions must
therefore, be that hypothesis 1a, at large, is supported. The table also shows that “low
motivators” are the archetype that experiences the lowest level of profitability. In order to test
hypothesis 1b, regression model is to be used. The model is as follows:
Growth = B1M1+B2M2+B3M3+B4M4+B5M5+B6M6
The following abbreviation is used: B1 = the standardized regression coefficient, Growth =
growth, M1 = Internal achievement, M2 = Status, M3 = Independence, M4 = Welfare, M5 =
Money, M6 = Escape. The results of the above calculation showed that the factors “status” did
not meet the required 0.05 beta level, hence it was dropped and a new analysis were conducted.
The results from this analysis are shown in table 5.
Table 5.
REGRESSION ON MOTIVATIONAL FACTORS BY GROWTH
FACTOR
BETA
SIGNIFICANCE
Internal achievement
0.31
0.00
Independence
0.07
0.24
Welfare
0.06
0.27
Money
-0.09
0.10
Escape
0.11
0.06
Multiple R = 0.36
r2
= 0.13
Significance = 0.00
N
= 238
The table shows that “internal achievement” is the most important factor in explaining growth,
but that “escape” also shows some explanatory power, indicating that the hypothesis cannot be
rejected for the whole sample. It is also interesting to note that money is negatively related to
growth. The results are also somewhat more rewarding than in the case for profitability, as the
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variance explained here are 13%, compared with only 5% for profitability. This again indicates
that motivation is more important for growth than for profitability.
In the regression models a continuous dependent variable were used. It would, however, as in the
case of profitability, be of some interest to take a close look at those with a high level of growthaspirations. In order to be able to do so the variable growth-aspirations, measured on a five-point
scale, were divided into two groups, those with a high level of growth aspirations and those with
a low level of growth-aspiration. A Chi-square test was conducted. The results are shown in table
6 below.
Table 6.
MOTIVATIONAL CLUSTER MEMBERSHIP AND GROWTH
Profitable
Low Motivaters
Money Seekers
Status Seeker
Self Actualizers
Yes
63(74.9)
16(13.9)
13(10.1)
49(42.9)
No
61(49.1)
7(9.1)
5(7.1)
22(28.1)
Chi-square = 9.21; Significance 0.05. The number of observations expected in case of
independence among clusters is represented within parentheses.
At first glance, the over representativity of money seekers among those with a high growthaspirations may seem somewhat surprising. However, when considering the composition of the
money seekers we remember that welfare was a substantial feature. If returning to the regression
analysis, we find that welfare had a significant impact on growth-aspirations. The conclusion
must therefore be, that hypothesis 1 b, at large, cannot be rejected.
CONCLUSION
When tested against profitability and growth, the general findings supporting the proposed
hypothesis, were: 1 externally motivated entrepreneurs are more likely to achieve a high level of
profitability than internally a high level of growth than externally motivated entrepreneurs.
Some recent research has suggested that the decision to start a business is not influenced by the
same motivations for all entrepreneurs. In line with this stream of research, entrepreneurial
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motivational typologies were developed by using cluster analysis. The outcome of the analysis
enabled us to categorize the entrepreneurs into four different motivational groups, being:
1.
“Low motivators”. These are entrepreneurs with a generally low motivation. They
score particularly low on internal achievement, and are mainly driven into
entrepreneurship by negative factors.
2.
“Money Seeker”. These entrepreneurs are strongly motivated by money,
accompanied by a strong desire for independence. However, their urge for internal
achievement is very low.
3.
“Status Seeker”. They are entrepreneurs who are highly motivated by status, and also
highly motivated by escape.
4.
“Self-actualizers”. These entrepreneurs are mainly driven by positive factors. Their
need for internal achievement and independence are accompanied by a strong desire
to be economically rewarded.
5.
The relationship between these types of entrepreneurs and post start-up success
revealed that the “self-actualizers” appeared to be the most profitable entrepreneurs,
and also those who achieved the highest level of growth. The conclusion must
therefore be that although evidence suggests that external motivation enhances
profitability and internal motivation enhances growth, there are entrepreneurs who are
driven by a combination of internal and external motivation that enables them to be
successful both in relation to profitability and growth.
These are the “self-actualizers”.
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