Reasons Leading to Start-Up
Twenty-three reasons leading to start-up statements were presented to respondents (see Birley and Westhead (1994) for a complete list). Significant differences between the three types of founders emerged with reference to seven variables. Novice founders were significantly more likely than serial founders to have suggested 'it made sense at that time in my life' ('need for independence'). They were also significantly more likely than portfolio founders to have suggested 'to achieve something and to get recognition for it' ('need for approval'). In marked contrast, novice founders were significantly less likely than portfolio and serial founders to have reported 'to continue a family tradition' ('follow role models').
Habitual founders were, in addition, significantly more likely to have emphasized 'perceived instrumentality of wealth' and 'need for personal development' reasons leading to start-up than was the case for novice founders. Portfolio founders were significantly more likely than novice and serial founders to have suggested 'to give myself, my spouse and children security' ('perceived instrumentality of wealth'). A significantly larger proportion of portfolio rather than serial founders also reported 'to have access to indirect benefits such as tax exemptions' ('tax reduction and indirect benefits'). Serial founders, however, were significantly more likely than novice founders to have suggested 'to develop an idea for a product' ('need for personal development'). In marked contrast, serial founders were significantly less likely than novice and portfolio founders to have reported 'to have more influence in my community' ('welfare considerations'). Hence, propositions P3a, P3b and P3c are supported.
Personal Attitudes to Entrepreneurship
Twenty-one personal attitudes to entrepreneurship statements were presented to founders (see Birley and Westhead (1992) for a complete list). Statistically significant personal attitudes to entrepreneurship statement differences were recorded between the three types of founders, particularly between portfolio and serial founders. Portfolio founders were significantly more likely than novice and serial founders to have agreed with the personal attitude to entrepreneurship dimension relating to 'individualism-relationship between individuals' ('I have a duty to give clients and customers the same treatment' and 'equality is characterized by a stress on rewards based on merit, ability and skill'). In addition, novice and portfolio founders were significantly more likely than serial founders to have agreed with the personal attitude to entrepreneurship dimension relating to 'power distance-management of inequality between people' ('equality is everyone's right'). Serial founders, however, were weakly significantly less likely than novice or portfolio founders to have agreed with the personal attitude to entrepreneurship statement relating to an 'uncertainty avoidance-stance towards the future' ('starting a business means uncertainty but adds to the excitement of life'). As expected, serial founders had taken a more cautious view and had sought to reduce uncertainty by greater control, by focusing on achieving an exit at an appropriate time in order to realize their gains and putting themselves in a position to focus on their next venture. This seems in contrast to the suggestion made above that portfolio entrepreneurs may start up new ventures in uncertain areas on the back of their original business, but focus insufficient attention on each of their individual ventures, thereby introducing the scope for greater uncertainty. Proposition P4 is, therefore, tentatively supported.
Sources of Finance Used During the Launch Period
With regard to the sources of finance used during the launch period of the surveyed businesses, four weakly significant differences were recorded between the three founder types. Habitual founders, particularly serial founders, used significantly more sources of finance than novice founders. Contrary to expectation, over 51% of founders in each group had used finance from banks and financial institutions. Portfolio founders with established track records were, however, more likely to have obtained finance from this source, although not in a statistically significant direction. However, this group of founders were significantly more likely than the other founders to have used personal savings, family and friends as a source of start-up capital in their current business. Portfolio founders were the least likely to have done so, perhaps reflecting notions that they can fund new ventures from the reputation and track record associated with their existing ventures. This is to some extent borne out by the greater incidence of portfolio founders having used customers and suppliers and 'other' sources of finance. As a result, propositions P5a and P5c, are supported. In marked contrast, proposition P5b cannot be confirmed.
Future of the Business
Approximately, half the founders in each of the three groups considered that their standard of living was better now than when they started the business. Although not in a statistically significant direction, both types of habitual founders were somewhat more likely than novice founders to be optimistic that their business would expand over the next two years. Moreover, over 91% of founders in each of the groups suggested that they wished to grow their business in the future, with there being no significant difference between the groups. To a lesser extent founders wanted to increase the total employment sizes of their businesses. Although not in a statistically significant direction, slightly fewer novice founders reported that they wished to grow employment while both types of habitual founders expressed similar levels of positive support for increasing the number of employees in their businesses. Consequently, proposition P6 cannot be supported.
Performance of the Business
Business performance was examined on several dimensions covering levels and changes in sales revenues, levels and changes in profitability, the performance of the firm relative to the competition and the share of sales exported abroad. No significant differences in performance were identified between firms owned and controlled by the three groups of founders. However, a weakly significantly larger proportion of novice rather than habitual founders operated businesses which were profitable at the 0.1 level of significance. Although not in a statistically significant direction, firms owned by portfolio founders were somewhat more likely to have increased their profits in the last year and to rate their businesses favorably in relation to the competition than was the case for firms owned by novice or serial founders.
ANOVA tests were also used to detect levels and changes in employment contrasts between the three groups of firms. No statistically significant differences were identified. Although serial founder firms reported higher levels of current employment and standardized changes in employment (i.e., after adjusting for the effects of part-time and casual employees), although not in a statistically significant direction. Hence, proposition P7 cannot be confirmed.
An exploratory discriminant analysis minimizing the Wilks' lambda was employed to identify the combination of variables which best summarized and dichotomized the three types of founders. The final discriminant analysis model is detailed in Table 2. Two discriminant functions are summarized in Table 2. The first function, which explained most of the variance (70.6%), differentiated the serial founders from the other two types of founders. Serial founders were drawn from non-managerial parental backgrounds and they established their first business at a very early age. They had gained experience by working in a large number of organizations on a full-time basis. Immediately prior to the start-up of the surveyed firm a larger proportion of them had been self-employed. In terms of the reasons leading to start-up of their current venture, 'it made sense at that time in my life' ('need for independence') and 'to have more influence in my community' ('welfare considerations') were to no extent important. Further, they had obtained start-up capital during the launch period from personal savings, family and friends.
The second function separated portfolio founders from the other two
types of founders. Portfolio founders' parents during childhood mostly
held managerial positions. They were young when they started their
first business. Because they owned other businesses (with employees)
portfolio founders generally had not been self-employed immediately prior
to the start-up of the surveyed business. The managerial, technical
and financial resources of at least one additional shareholder or partner
were utilized to develop the surveyed business. In addition, drawing
upon prior experience and contacts, customers and suppliers had been used
as a source of start-up capital during the launch period of the business.
The principal reasons leading to the start-up of the surveyed firms were
as follows: 'to give self, spouse and children security' ('perceived instrumentality
of wealth') and 'to have access to indirect benefits such as tax exemptions'
('tax reduction and indirect benefits'). Interestingly, 'to achieve
something and get recognition for it' ('need for approval') was to no extent
important. However, three personal attitudes to entrepreneurship
were important: 'I have a duty to give all clients and customers the same
treatment ('individualism?relationship between individuals'), 'equality
is everyone's right' ('power distance?management of inequality between
people') and 'starting a business means uncertainty but adds to the excitement
of life' ('uncertainty avoidance-stance towards the future').