Exploring the Determinants of
Entrepreneurial Culture
Scott Loveridge
Steven R. Miller
Thasanee Satimon
Session 55
Saturday, October 24, 2009
Kansas City, MO.
Missouri Valley Economic Association
Forty-Sixth Annual Meeting
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Towards a Measure of Entrepreneurial
Culture
Presentation outline:
• Motivation
• Concept
• State of the State Survey
• Findings
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Motivation
• Michigan’s current economic climate
• Michigan communities increasingly seek
alternative approaches to economic
development
• MSU and LPI Creating Entrepreneurial
Communities program
• Response to the need to build evaluation
into entrepreneurship support programs
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Research Concept
• The literature supports enterprise development
strategies for economic development
– Cost per job created is lower than industry attraction (Lyons and Hamlin,
2001)
– Source of growth (Acs and Armington, 2004)
– Source of economic resilience (Markley, et al., 2005)
– Regional equity (Bennett and Giloth, 2007)
– Social equity (Conley, 1999; Markley, et al., 2005)
– More likely to be successful than industry attraction (Dabson, 2007)
– More likely to fit with local values (Hustedde, 2007; )
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Concept
• Local culture plays an integral role in determining
the success of local efforts for building
entrepreneurial friendly communities
– Reinforcing attitudes (Minniti, 2005; Krueger and Brazeal,
1994; Reynolds 1991)
– Social networks (Davisson and Honig, 2003)
– Policy agendas (Rupasingha, et al., 2002; Krueger, 1993)
– Inhibit or encourage individuals to become self employed
(Hustedde, 2007)
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Importance of Culture
• Entrepreneurship is a cultural phenomenon: it is a
function of both the entrepreneur and the community
they operate in.
– Entrepreneurs are the products of their surroundings
– Communities are self-perpetuating; changing in response to
external forces
– Culture can nurture, tolerate or discourage the creation of new
enterprises. Entrepreneurial cultures value independence,
innovation, diversity and wealth creation
– Some mindsets hamper the creation of new enterprises,
including conformity, preference for certainty and insular
attitudes
– Community attitudes shape public policy
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41 Ways to Enhance A Community’s
Entrepreneurial Culture*
• Strengthen three major areas:
– Community and Networks
– Finance and Regulations
– Training and Mentoring
• Many low cost strategies and resources are available to
assist entrepreneurs
– Take full advantage of existing programs and organizations
– Mindset shifts, e.g., design of High School curricula
– Celebrate entrepreneurship through awards and media
• Michigan is a victim of past success in large scale
manufacturing; entrepreneurial mindset has atrophied.
*Loveridge, Scott. 2007. Getting Started in Community-Based Entrepreneurship. In Entrepreneurship and Local
Economic Development, edited by N. Walzer. Lanham, MD: Lexington Books
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Gauging Entrepreneurial Culture:
Goal of the SOSS Survey
• Gauge community attitudes
• Generate baseline values from which to gauge the
effectiveness of community entrepreneur support
programs
• Better understand the factors that contribute to the
support of entrepreneurship
– Do entrepreneurial lifestyle attitudes vary across regions?
– Does an individual’s personal characteristics help predict their
attitudes towards an entrepreneurial lifestyle?
– Do place attributes influence attitudes towards entrepreneurial
lifestyles?
– Which factors are more important in forming one’s perceptions of
entrepreneurship, individuals’ or communities’?
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State of the State Survey Approach
• Quarterly telephone survey of ~1,001 Michigan
households
• Stratified sample representative of 5 regions plus Detroit
• Basic questions funded by MSU central administration
• MSU researchers can add questions for $5K per minute
• Respondents are asked their zip code can tie
individual to community characteristics
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Likert-Scale Questions
1. How important is it for Michigan high schools to encourage
young people to explore careers that involve starting a
business?
2. Locally owned businesses contribute more to the overall
welfare of a community than nationally and internationally
owned businesses.
3. I would encourage a young person to be self-employed or
start their own business instead of working for somebody
else.
4. People who work for large employers are less likely to lose
their source of income than people who work for small
employers or are self-employed (reversed for scoring).
5. People who own their own business or who are self-employed
can make just as good of a living as people who work for
someone else.
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Basic Likert Results
(1-5 scale)
Variable
1. HS programs
Mean Std Dev
4.39
0.83
Min
Max
1
5
2. Welfare contrib.
3. Encourage Entrep
4. Secure Employ.
4.19
3.65
2.94
1.02
1.27
1.41
1
1
1
5
5
5
5. Secure Income
Composite Scores
All 5
All minus #2
4.08
1.13
1
5
19.25
15.06
3.09
2.73
8
5
25
20
All minus #4
16.31
2.78
6
20
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Regional Variation
• F-tests provides evidence of significant differences in
attitudes towards entrepreneurship across Michigan
regions. However, weak evidence exists for the 5-series
composite score.
• Regional variation is more significant when “local
contributions” (Question 2) deleted from composite
variable.
• Regional variation may reflect industry structure or other
community-level variables.
Next step is to control for regional and individual factors.
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Ordered Probit Models
• Individual level variables (16)
– Gender, ethnicity, age, family structure, employment
status, income category
• Community (zip code & county) variables (16)
– Ethnic composition (% hisp, non-white), rurality, age
of housing, % professional and ag occupations,
percent rural, density, median income, population
change, proportion of small establishments (1-19),
proportion of non-employing establishments, density
of persons with higher education,
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Composite Score Results
• Models with environmental control variables generate better fits as
measured by Chi-Squared statistics.
• 5 of 16 individual-level variables and 9 of 16 community level variables
produced t-stats >2.
Positive
Individual
Environmental
Negative
Children
Employed
Urban Residence
Married
Union Membership
Hispanic
Rural
New Residential Development
Median Income
Change in number of small
businesses
Agriculture Occupations
Educational Attainment
Unemployment Rate
Population Change
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Composite Score Results
• Environmental factors are better predictors
of individual perceptions
• Rural regions appear more supportive of
entrepreneurship
• Ethnicity of regions plays a greater role
than ethnicity of the individual
• Community unemployment is a greater
factor than unemployment of the individual
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Solo Entrepreneurship Variable Results
(5 separate equations)
• The same regressions were estimated with each of the 5
individual scores
• Findings are less robust to composite scores; 20 (Q2) to
27 (Q3) of the 32 variables share the same sign
• Measuring multiple dimensions of entrepreneurship via
composite scores reduce noise in equation
• Question 3 (encourage a young person) provides most
robust relationships and appear most related to
composite scores
• If limited to one question, choose, “would you encourage
a young person”
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Solo Question Score Results
Environmental
Individual
• Q3 generates the most number of significant relationships
• Hispanic respondents enter Q3 positively and Q4 negatively
• % of community that is Hispanic does not enter any solo question with
significance.
• Places with increases in bus. Establishments tend to enter positively
• Educational attainment is negative on Q3 and Q5
(+)
Q1 HS programs
Q2 Welfare contrib.
Q3 Encourage Entrep.
Q4 Secure Employ.
Q5 Secure Income
African American
Employed
Male
Children
Employed
Married
Income>$50K
Male
Hispanic
Urban Res.
Married
Union
< 30 years old
Median Age
% Rural
New R. Develop.
Density
Change, small bus.
Educ. Attainment
Unemploy Rate
Pop Change
% Small Businesses
Urban Res.
< 30 years old
> 50 years old
Male
Hispanic
Children
% Rural
% Small Bus.
Change, large bus.
% Rural
New R. Develop.
Density
Median Income
Unemploy Rate
Density
Pop Change
% Agriculture Occ.
Educ. Attainment
Pop Change
% Small Businesses
< 30 years old
(–)
Median Age
New R. Develop.
Change, small bus.
Population Change
% African Amer.
Pop Change
% Proprietors
(+)
(–)
Married
Union
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Solo Question Score Results
• Environmental variables are better predictors of
responses than in individual factors
• Union members negatively perceive Q3 (encourage ent.)
and Q5 (ent. earn equal living).
• Hispanic and male respondents prefer working for large
company on job security grounds
• Male respondents are more likely to encourage one to
become an entrepreneur
• Places with large number of small employers or
population have high population growth tend to be more
closed to entrepreneurship
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Next Steps-USDA NRI Grant
• Will use combination of baseline study here, 41 question
self-assessment, and tracking conversations about
entrepreneurship for a series of studies
• Apply cultural values to community entrepreneurship
programs (CEC) for evaluation
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• PowerPoint presentation can be downloaded at,
www.cea.msu.edu
• For further information, contact
Steven R. Miller
88 Agriculture Hall
Michigan State University
East Lansing, MI 48824
(517) 355-2153
mill1707@msu.edu
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