THE SAMPLE AND VARIABLES

Sample

The entrepreneurs we study are drawn from a three-year longitudinal study of new businesses conducted in 1985, 1986, and 1987. The original sample consisted of 2,994 owner/managers (all members of the National Federation of Independent Business) of new, small firms, representing a broad cross-section of industries and all geographic areas of the United States. The sample appears to be broadly representative of full-time new businesses in the United States (Cooper, et al., 1990). The owner/managers were mailed follow-up questionnaires to which 1190 responded in 1986 and 877 responded in 1987. The status (surviving, sold, or discontinued) of non-respondents was determined through short-response postcards, NFIB field data, or post office reports on non-deliverable mail. By the end of the third year, 2,193 of the 2994 firms had survived under the original owners. The final sample consisted of those entrepreneurs who responded to all three yearly surveys, who completed all relevant questions, and who were not clearly outliers. There were 432 entrepreneurs in the final sample.

The surveys sought information about the entrepreneurs, their processes of starting, the nature of their firms, their subsequent management practices, and the performance of their ventures. First year data were utilized to examine the background characteristics of the entrepreneurs and their goals at the time of startup. (At the time of the first survey, the average entrepreneur had been in business for 11 months and was quite small, with only 4.6 employees.) Second year data were utilized to determine the entrepreneur’s time allocations during the second year. It was thought that by the second year the time utilization patterns would have stabilized and would reflect the ongoing activities of the owner-manager within the context of an established organization. Performance data were based upon responses to the third year survey. Presumably, there would be some lag between the entrepreneur’s efforts and organizational performance. A focus upon the third year permits examination of these longitudinal relationships between earlier behavior of the entrepreneur and later performance.

 

Variables

Self-reported time allocation patterns of the entrepreneurs were used to develop a measure of Time Utilization. We do not expect entrepreneurs to have formed regular time utilization patterns in their first year owing to startup problems and demands, such as searching for equipment and suppliers. However, by the second year, these entrepreneurs would have already dealt with some of the startup activities; thus, routines should have stabilized to form more regular time utilization patterns. In year two, entrepreneurs were asked to specify the percentage of time they spent on the following tasks: dealing with employees, record keeping, selling/customer contacts, production of products or services, maintenance, dealing with suppliers, arranging financing, and planning. The activities were classified according to whether they were the type of activities normally preferred by "craftsmen entrepreneurs" versus "administrative entrepreneurs." Most of the work on entrepreneurial typologies has described craftsmen entrepreneurs as preferring "doing" or technical work to administrative tasks. By contrast, administrative entrepreneurs have been characterized as having a proclivity for managerial challenges (Filley & Aldag, 1978; Woo, et al., 1991). In this study, craft activities are defined to include selling/customer contact, production, maintenance, and dealing with suppliers. Administrative activities include dealing with employees, record keeping, arranging financing, and planning.

Time Utilization (Timeutil) is defined as a measure of entrepreneurs’ allocation of time between craft and administrative activities. It is operationalized as the percentage of time each owner-manager spends on craft activities. The percentage of time not spent in this way is classified as administrative activity.

Primary Goal is a multiple item construct representing entrepreneurs’ personal and business goals. It is operationalized as a combination of their scores on: 1) importance of "do the kind of work I wanted," 2) importance of "avoid working for others," 3) satisfaction with "comfortable living is enough success," 4) importance of "build something for family," and 5) "earn lots of money." Since the first two items were obtained on a four-point scale and the last three were obtained on a five-point scale, we standardized the items to reflect their equal weighting in the final measure. The four-point items and the five-point items were added and standardized separately. These scores were then added and standardized again to obtain a means of primary goal (Primgoal) with mean of zero and unit variance.

Entrepreneurs high on the scale are considered craftsmen entrepreneurs, while those on the lower end of the scale are considered opportunistic or administrative entrepreneurs. Thus, the former attach great importance to doing the kind of work they like and avoiding working for others. They assign less importance to economic goals, and they are often satisfied with just a comfortable living. By contrast, administrative entrepreneurs primarily emphasize economic goals.

The Management Level (Mgmtlev) variable reflects the highest level of previous management experience of the entrepreneurs. It is measured as a four-point scale, with "one" indicating the least experience and "four" the most. The four levels are: 1) supervised no one, 2) supervised workers, 3) supervised supervisors, or 4) owned business.

Size of firm in the first year is included as a control variable. Larger firms (measured in number of employees) would clearly require the owner-manager to devote more time to dealing with employees. Larger firms would also permit more differentiation of organizational roles, so that some employees could specialize in particular tasks, such as record keeping or sales. Since we are interested in the behavior of entrepreneurs, controlling for organizational size, we include Organization Size (Qemp1) as a control variable.

Performance (Takeot) is measured as the amount of cash entrepreneurs took out (in the form of salary, draw, dividends, etc.) in year three. Responses were provided on a seven-point scale, with categories ranging from less than $10,000 to more than $75,000. Although this measure can be criticized on the grounds that the money taken out is at the discretion of the entrepreneur, it best captures the immediate direct benefit to the entrepreneur.

Definitions for all variables are listed in Table 1. Descriptive statistics and correlation coefficients are presented in Table 2.

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Last Updated 1/15/97 by Geoff Goldman & Dennis Valencia

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