Quan Mai and Dr. Kristie Seawright, Marriott School of Management
In the global economy, there are dynamic forces that frame the business environment. In both developed and developing countries, one of these forces is the growing number of entrepreneurs whose internal motivation drives them to seek for new opportunities to overcome their current economic situations. While entrepreneurs in the formal economy often have support from government stability, financial institutions and special interest groups, entrepreneurs in the informal economy often experience difficulty in initiating their ventures. However, there are a growing number of successful entrepreneurs in the informal economy. What matters more is the fact that those successful entrepreneurs have been able to offer more job opportunities to the national economy; thus, they contribute to the development of those struggling economies.
Due to the lack of capital, political challenges, corruptions, etc., economies in developing countries are often unable to provide employment opportunities or adequate benefits for the unemployed; as a result, new ventures development has been growing rapidly. In spite of many challenges, the number of successful entrepreneurs has consistently increased over the years and contributed to the growth of the developing countries.
Purpose of the Study
The purpose of this project is to understand entrepreneurship in the informal economy. It is very difficult to study the entrepreneurs who began in the informal economy because the information is not readily available. For the purpose of this research, Vietnam is the perfect country to study. Entrepreneurship in Vietnam is a recent phenomenon. Fifteen years ago, there were virtually no formal economy entrepreneurs. Yet today, in the formal economy, there are significant numbers of entrepreneurs who started from the informal economy.
This research addresses the question of whether there are certain constructs identifying factors of successful entrepreneurship. Through various studies, the field of entrepreneurship has confirmed that successful entrepreneurs in the formal economy possess certain traits or cognitions. The traits are categorized under the following: venture willingness, venture arrangements, and venture abilities.
I was a part of a research team analyzing a qualitative study based on focus group data collected in the Philippines. We were able to identify some potential constructs that contribute to successful entrepreneurs in this informal economy. The qualitative study has confirmed the 3 constructs identified in the formal economy. In addition, the study has highlighted two of the following new constructs:
1. The need for survival networks
2. The belief that they have the power to make a change in their lives.
Accordingly, my project first attempts to validate the association between these traits and successful entrepreneurs in the informal economy. The second purpose of this project is to identify constructs of entrepreneurial success in Vietnam that may not have been identified in the Philippines.
Methodology and Data Collection
This ex-post-facto survey study consisted of two parts. First, I worked with the research team to develop the survey instrument designed to confirm the constructs identified in the previous qualitative study. The surveys were then administered to samples from two populations in Vietnam: (1) successful entrepreneurs who started small businesses from the informal economy, and (2) managers who have never started businesses. The first group consisted of 37 Vietnamese entrepreneurs and the second group consisted of 41 Vietnamese managers.
Analysis and Results
ANOVA was used to compare the mean scores of the entrepreneurs and the control group on each construct (within each culture). The variables that define each factor suggest five meaningful constructs: 1) Entrepreneurial Spirit, 2) Entrepreneurial Disposition, 3) Initiative, 4) Autonomy, and 5) Growth Focus. Table below lists the variables and loadings related to each factor. A list of questions associated with each factor is included in the appendix. Significant differences (P < .05) were found on the constructs of Entrepreneurial Disposition, Initiative, and Growth Focus.
Five constructs were identified through the factor analysis of participants’ responses to 26 survey questions. Each of these factors describes a personal trait. During the first stage of data collection, successful and less-successful entrepreneurs were given the opportunity to identify what they considered important to entrepreneurial success. Interestingly, entrepreneurs focused on personal traits, rather than policies, training, cognitions or personal circumstances as the keys to entrepreneurial success.
The first construct, Entrepreneurial Spirit, describes a drive to consistently identify and pursue new possibilities—an unwillingness to be satisfied with the status quo. An individual scoring high in Entrepreneurial Spirit is anxious to increase earnings and seek new business opportunities.
Entrepreneurial Disposition, the second factor, measures entrepreneurs’ preference for working for themselves rather than someone else. A strong entrepreneurial disposition corresponds with a preference for owning a business, even if presented with the opportunity to earn a regular, stable income.
The third construct is Initiative, a measure of entrepreneurs’ confidence in their ability to make a difference in their own life and the lives of their family members. Entrepreneurs scoring high in initiative believe in their ability and responsibility to improve their lives.
Autonomy, the fourth construct, describes an entrepreneur’s degree of independence. Entrepreneurs high in autonomy sense that they must achieve success on their own. They tend to avoid dependence on the social safety net that commonly provides financial security among the poor.
Finally, Growth Focus denotes a persistent pursuit of business expansion. An entrepreneur scoring high in Growth Focus consistently thinks of new business ideas and opportunities for business enlargement. In addition, this entrepreneur recognizes the growth the business has already experienced.
In Vietnam entrepreneurs and non-entrepreneurs are significantly different on the constructs of Entrepreneurial Disposition, Initiative, and Growth Focus.