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Role-Models & Entrepreneurial Process

Lafuente, E., Vaillant, Y., Rialp J. (2007). Regional differences in the influence of Role-Models: Comparing the Entrepreneurial Process of Rural Catalonia. Regional Studies, 41 (6): 779 – 795.

Summary:

The European Union is beginning to pay more attention to rural development beyond simple agricultural support, and just as the opinion is beginning to install itself that business creation and development may be the best strategy for rural development, new reports from different international sources are now questioning the benefits of entrepreneurship support for the economic development of rural areas.

A recent study (OECD, 2003) of the influence of entrepreneurship over local economic development involving 30 countries concluded that stimulating entrepreneurship can provide an alternative to paying unemployment insurance in rural areas, but that the direct employment and growth effects in these areas are modest and often favour specific segments of the population. According to the study there are many obstacles that hinder entrepreneurship in rural areas, influencing both the extent and form of entrepreneurial activity and its prospects for survival. The study concludes that informal institutional factors, such as the lack of positive entrepreneurial examples (role models) and limited networks are some of the most important barriers that restrain rural entrepreneurship (OECD, 2003). In the absence of entrepreneurial role models, economic agents are not as propelled to take the different decisions needed to become an entrepreneur.

Using a sample for 2003 of 843 Spanish individuals, the main objective of this research is to follow up on the determination and comparison of the levels of entrepreneurial activity in rural Catalonia versus that of rural areas for the rest of Spain. The desire was to determine whether entrepreneurial role models have the same impact, across regions, upon the different stages of the entrepreneurial process. Consequently, the aim is to evaluate the specific influence that entrepreneurial role models are having upon the superior entrepreneurial activity levels found in rural Catalonia.

The main contribution of this paper indicates that there is a significant difference in the influence of entrepreneurial Role-Models upon the different decisions of the entrepreneurial process in rural Catalonia as compared to rural areas of the rest of Spain. The results from our first hypothesis indicate that entrepreneurial Role-Models have a significant positive effect upon entrepreneurial intentions (the first phase of the entrepreneurial process) of rural individuals throughout Spain. To the contrary, in the case of our second and third hypotheses measuring the influence of Role Models over ‘pre’ and ‘post’ start-up entrepreneurial activities (second and third phases of the entrepreneurial process), we found that the personnel knowledge of recent entrepreneurs only has a statistically significant positive influence over rural Catalans. Another important finding is that self-confidence in entrepreneurial skills appears as a statistically significant factor influencing all stages of the entrepreneurial process.

The academic implications of these findings lay mostly in the strong support in favour of a greater use of an institutional approach to the study of entrepreneurship, especially in what concerns differences in entrepreneurial activity levels across regions. From this research it can be concluded that informal institutions are the underlying backbone to entrepreneurial decision-making. Even in areas bounded by relatively homogeneous formal institutions and policy, entrepreneurial activity is often unevenly distributed as a consequence of varying informal institutional structures, mostly linked to historical events that set different areas upon distinct institutional evolutionary paths. This paper gives empirical support to a growing number of theoretical works that lay the basis for a similar premise. Regions with different informal institutional frameworks will react differently to identical formal institutions and policies.

This brings about important implications of the findings of this paper for policy-makers. Basically, the conclusions of the study lends to recommend that entrepreneurship support policy at local level must first establish the necessary informal institutional foundation within a community before attempting to apply formal institutional measures for the promotion of entrepreneurial activity. Formal support may be vain in the presence of an inappropriate informal institutional framework.

The results of the study specifically highlight the importance of entrepreneurial Role-Models in an individual’s personal social circle as a positive stimulus explaining uneven entrepreneurial activity levels across different geographical areas. This would tend to imply that entrepreneurship support policy should lay the grounds for a greater social interaction on the part of existing entrepreneurs, promoting networking possibilities with potential entrepreneurs, glorifying the role of the entrepreneur in the community, as well as socially celebrating the entrepreneurial successes of existing entrepreneurs. The local administrations must magnify the visibility of positive entrepreneurial examples within their communities. Entrepreneurial Role-Models can help instil the appropriate entrepreneurial atmosphere within a community’s informal institutional framework that will then permit formal entrepreneurship support policy to have a much more potent impact upon local entrepreneurial activity levels.

For the entrepreneur, the implications of the study indicate that in all institutional frameworks, entrepreneurial self-confidence is a driving force leading individuals through the different stages of the entrepreneurial process. Entrepreneurial self-confidence is a natural consequence of prolonged exposure to positive entrepreneurial examples. An individual with entrepreneurial ambitions can gain the necessary confidence in his/her own entrepreneurial skills by being in close personal contact with individuals who have themselves successfully established their own businesses.