Entrepreneurship Review the following case study: ?Wk5

Encouraging Entrepreneurship:

Resources Supporting Small Business Startup and Growth

By

Karen A. Eagle B.S. May 1983, James Madison University M.S. August 2010, Old Dominion University

A Dissertation Submitted to the Faculty of Old Dominion University in Partial Fulfillment of the

Requirements for the Degree of

DOCTOR OF PHILOSOPHY

OCCUPATIONAL AND TECHNICAL STUDIES

OLD DOMINION UNIVERISTY May 2016

Approved by: Cynthia Tomovic (Co-Director) Darryl C. Draper (Co-Director) Dana D. Burnett (Member)

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ABSTRACT

ENCOURAGING ENTREPRENEURSHIP: RESOURCES

SUPPORTING SMALL BUSINESS STARTUP AND GROWTH

Karen A. Eagle

Old Dominion University, 2016

Co-Directors: Dr. Cynthia Tomovic

Dr. Darryl Draper

Small business success drives the health of a local economy. The problem of this three

phase mixed methods study was to encourage entrepreneurship by identifying the resources

that support business startup and growth. In the first qualitative phase, the city business

resource webpage was observed and 10 entrepreneurs were interviewed to identify which

business resources were used for their recent startups. Using the data from the interviews, a

survey instrument was developed for the Small Business Subcommittee (SBS) that was used in

the second quantitative phase which included 351 business owners; 35% were women and 65%

were men. The sample represented small businesses of varying sizes and industries including

construction trades, professional services, retail, manufacturing, food service, personal service,

and healthcare/biotechnology. Ethnicity of the sample population mirrored the ethnicity of the

city population. The Small Business Survey included 17 Likert-style and 2 open ended

questions. Descriptive statistics were used to report the findings and the open ended questions

were reviewed and coded by the researcher and the SBS. Exploratory factor analysis was

performed on 12 items to validate the survey instrument. The data were used to develop a

protocol for the third qualitative phase of the study and thirteen entrepreneurs who had used

public business resources were interviewed. Three researchers coded the data to provide

interrater reliability. Themes were clustered and a model for small business startup and growth

was developed. The results indicated that the city could improve business growth by providing

information for startups, creating a streamlined process, developing an attitude that supports

small business owners, offering more training opportunities, and initiating supporting services.

iv

Copyright, 2016, by Karen A. Eagle, All Rights Reserved.

v

This dissertation is dedicated to my husband Dan, the love of my life, and to my son John, on

whom the sun rises and sets. Thank you for the endless encouragement and support; this

would not exist without your help. I love you both dearly!

I dedicate this dissertation also to my late parents, Ray and Barbara Weinig. My father instilled

in me a love of learning and striving for excellence. Mom was the greatest encourager on the

planet and the embodiment of unconditional love.

Karen A. Eagle

vi

ACKNOWLEDGEMENTS

To Dr. Cindy Tomovic, my Co-Chair and friend, I wouldn’t be here without you. Thank

you for suggesting that I seek this degree, for your guidance and leadership in this project, and

for the countless hours and hours spent discussing and later editing each phase of this study. I

am forever grateful for your endless support, your expectations for excellence, and especially

for your friendship. To Dr. Deri Draper, my Co-Chair and advisor, you are the reason that I

stayed in the program. With your vast experiences in business, you helped me transition from

practitioner to researcher. You taught me the ropes and your contagious enthusiasm for life and

for learning inspired me, as did your knowledge and understanding of technology in education.

You are a bright light that shines at Old Dominion. To Dr. Dana Burnett, my Leadership

professor, you have a special place in my heart; your kindness and guidance my first semester

at ODU helped me acclimate to academia and your teaching style inspired me. Thank you for

your continued encouragement; I am so blessed to have you on my committee. To Dr. Tony

Perez, thank you for your advice on data analysis and for directing me to factor analysis for this

study. You are a fantastic statistics instructor and I was fortunate to take your class!

I would also give special thanks to Elizabeth Dietzmann; our chance meeting at the

oceanfront shop changed my course entirely and led to this dissertation. Thank you for inviting

me to attend that first SBS meeting, for your support in survey development and data coding, for

introducing me to entrepreneurs to interview, and for bringing me to 1MC. I am thankful for the

members of the SBS that spent additional time coding data and offering further support: Tom

Etter, Tony DiSilvestro, Tuck Bowie, Dane Blythe, Patti Phillips, and Petula Moy; special thanks

to Councilman Bobby Dyer for spearheading this initiative and supporting my research. I want

to thank the entrepreneurs who participated in Phase 1 and Phase 3 interviews for their

valuable time and honest comments; you remain anonymous. To my fellow researchers, thanks

vii

for all the hours spent coding Phase 3 interview data. And finally, I want to thank my friends

and family for believing in me every step of the way.

viii

TABLE OF CONTENTS

Page

LIST OF TABLES ………………………………………………………………………………………………………… x LIST OF FIGURES …………………………………………………………………………………………………….. xI

Chapter

I. INTRODUCTION …………………………………………………………………………………………. 1 STATEMENT OF THE PROBLEM ……………………………………………………………… 2 RESEARCH QUESTIONS ……………………………………………………………………….. 2 BACKGROUND ……………………………………………………………………………………… 2 SIGNIFICANCE OF THE STUDY………………………………………………………………. 3 LIMITATIONS ………………………………………………………………………………………… 5 ASSUMPTIONS ……………………………………………………………………………………… 6 PROCEDURES ……………………………………………………………………………………… 6 DEFINITION OF TERMS ………………………………………………………………………… 8 SUMMARY AND OVERVIEW OF CHAPTERS …………………………………………… 8

II. LITERATURE REVIEW ……………………………………………………………………………….. 10

ENTREPRENEURSHIP EDUCATION AND RESEARCH …………………………….. 10 ORIGINS OF ENTREPRENEURSHIP EDUCATION` ………………………………….. 10 MODERN ENTREPRENEURSHIP EDUCATION AND TRAINING ………………… 12 CONCEPTUAL FRAMEWORK: ELEMENTS OF BUSINESS SUCCESS ……… 13 PERSONAL SKILLS ……………………………………………………………………………… 14 CAPITAL: FINANCIAL, HUMAN, AND SOCIAL ………………………………………….. 16 PUBLIC AND PRIVATE RESOURCES……………………………………………………… 21 SUMMARY ………………………………………………………………………………………….. 26

III. METHODS AND PROCEDURES …………………………………………………………………. 27

SAMPLE ……………………………………………………………………………………………… 28 PROTOCOL AND SURVEY DEVELOPMENT ……………………………………………. 31 METHODS OF DATA COLLECTION ………………………………………………………… 42 ANALYSIS …………………………………………………………………………………………… 44 SUMMARY ………………………………………………………………………………………….. 47

IV. FINDINGS ………………………………………………………………………………………………… 49

PHASE 1: WEBSITE OBSERVATION AND INTERVIEWS …………………………… 49 QUESTIONS AND THEMES FROM INTERVIEWS…………………………………….. 51 NEW THEMES……………………………………………………………………………………… 56 PHASE 2: VIRGINIA BEACH SMALL BUSINESS SURVEY ………………………… 63 FACTOR ANALYSIS ……………………………………………………………………………… 71 OPEN ENDED QUESTIONS ………………………………………………………………….. 75 PHASE 3: INTERVIEWS WITH ENTREPRENEURS WHO USED PUBLIC BUSINESS RESOURCES ……………………………………………………………………… 87

ix

Page THEMES FROM INTERVIEW QUESTIONS ……………………………………………… 87 MODEL FOR VIRGINIA BEACH ……………………………………………………………. 113 SUMMARY ………………………………………………………………………………………… 115

V. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS ……………………………. 117 SUMMARY ………………………………………………………………………………………… 117 CONCLUSIONS………………………………………………………………………………….. 120 RECOMMENDATIONS ………………………………………………………………………… 123

REFERENCES ……………………………………………………………………………………………………….. 130 APPENDICES

A: Protocol Questions –Phase 1 …………………………………………………………… 151 B: Interview Consent Form …………………………………………………………………… 152 C: Virginia Beach Small Business Survey ………………………………………………. 153 D: Protocol Questions –Phase 2 …………………………………………………………… 156

VITA ………………………………………………………………………………………………………………………. 157

x

LIST OF TABLES

Table Page 1. Phase I: Protocol for Interviews with Entrepreneurs ………………………………………………….. 30

2. Phase II: Virginia Beach Small Business Survey ………………………………………………………. 32

3. Labels and the Related Research Question for Survey Analysis ………………………………….. 37

4. Phase 3: Protocol for Interviews with Entrepreneurs ………………………………………………….. 40

5. The Phenomenological Analysis Process …………………………………………………………………. 45

6. Summary of Themes from Phase 1 Interviews ………………………………………………………….. 51

7. Race/ethnicity of Participants and the City of Virginia Beach ……………………………………….. 63

8. Type of Business ………………………………………………………………………………………………….. 63

9. Estimated Annual Revenue ……………………………………………………………………………………. 64

10. Number of Employee (Including Respondent) …………………………………………………………… 64

11. Number of Years in Business …………………………………………………………………………………. 65

12. Descriptive Statistic Results From Survey Questions: Mean, median, Standard Deviation and Variance ……………………………………………………………………………………………………….. 67

13. Factor Analysis and Pearson Correlations ……………………………………………………………….. 72

14. Eigenvalues and Percentages of Explained Variances For Analysis Of Survey Questions ……………………………………………………………………………………………………………. 73

15. Factor Loadings and Communalities For 12 Items From the Virginia Beach Small Business

Survey ………………………………………………………………………………………………………………… 74

16. Recurring Themes from Open-End Questions …………………………………………………………… 76

17. Summary table of themes, Phase 3 Interviews ………………………………………………………….. 87

xi

LIST OF FIGURES

Table Page 1. Conceptual Framework: Elements of small business success …………………………………….. 14

2. Mixed method process model in the study of small business startup and growth …………… 27

3. Themes from the city Business Resource page …………………………………………………………. 50

4. Words used to describe the experiences opening a business in Virginia Beach ……………… 57

5. Initial business startup Phase 1 model: interviews ……………………………………………………… 62

6. Individuals that participants contacted for guidance before opening their business(s) ……… 65

7. Number of individuals interested in each workshop and percentage of interest in each workshop …………………………………………………………………………………………………………….. 70

8. Recurring words in open ended responses on the Small Business Survey …………………….. 76

9. Virginia Beach survey results: Components for business startup and growth. ……………….. 86

10. Themes from Phase 3 interviews ……………………………………………………………………………. 88

11. Themes from three phases of the study …………………………………………………………………. 113

12. Model for small business startup and growth in Virginia Beach ………………………………….. 114

1

CHAPTER I

Introduction

Small businesses play a critical role in the health of an economy. Entrepreneurs who

succeed in their endeavors can grow their businesses, employ more people, and will pay more

taxes; conversely, businesses that struggle or fail can cause the loss of jobs, wages, and tax

revenues. While anyone can start a business in the United States, no education or training is

required; entrepreneurs start their own operations because they seek control over their lives by

doing something personally enjoyable while creating the opportunity for success (Begley &

Boyd, 1987; Jarillo, 1988; Markman & Baron, 2003; Poschke, 2013). However, these

motivations alone do not prepare individuals for the rigors of business ownership. Business

owners require knowledge and special skill sets in order to succeed in today’s competitive

business landscape and can benefit from business planning (Brinckmann, Grichnik, & Kapsa,

2010; Chrisman & McMullan, 2004). In the United States, many individuals start companies

without the information they need to compete and stay in business (Townsend, Busenitz, &

Arthurs, 2010; Watson, Hogarth-Scott, & Wilson, 1998).

The recent recession ranks as history’s worst in terms of the number of jobs lost since

1945, and policymakers are turning their attention to potential new firm growth to provide jobs

and economic stability (Stangler, 2011). With the subdued startup activity, policies at the

federal, state, and local levels can influence an individual's ability to start a business and impact

the growth and survival of the firm (Wiens & Jackson, 2014).

In Virginia Beach, Economic Development offers free courses for entrepreneurs and a

mentorship program through the Small Business Development Center. Although studies show

that individuals who own businesses desire training (Liang & Dunn, 2012; Watson et al., 1998),

few entrepreneurs participate in these programs. Are the business owners aware of the

opportunities available? A myriad of information sources, courses, and consulting opportunities

2

exist in the city and few business owners are participating. Do they have problems finding this

information? Are new entrepreneurs aware of what they don’t know and operating their

business under the assumption that they are informed, in other words, do they know what they

don’t know (Koch, 2006)?

Statement of the Problem

The problem of this study was to encourage entrepreneurship by identifying the

resources that support business startup and growth.

Research Questions

The research for the mixed-method study was guided by the following research

questions relative to Virginia Beach.

RQ1: What are entrepreneurs’ informational needs for business startup and growth?

RQ2: What resources do entrepreneurs seek and use before starting up a new business?

RQ3: To what degree do entrepreneurs perceive Virginia Beach as helpful in the process

of small business startup in the city?

RQ4: To what degree do entrepreneurs perceive Virginia Beach as supportive to small

business expansion?

RQ5: To what degree do entrepreneurs utilize training services offered by the city?

RQ6: What type of training workshops would entrepreneurs want to attend?

RQ7: What resources and assistance should public agencies offer that support

entrepreneurship?

Background

New businesses are important for economic growth and small firms are the significant

players. According to the U.S Census Bureau and the Small Business Administration (SBA),

99.7% of all US companies are “small businesses” and although the SBA defines small

businesses as having fewer than 500 employees, 98.2% of “small” firms have 29 or fewer

3

employees and 81% of these businesses are considered to be “micro businesses” because they

have five or fewer employees (Olsen, 2015; Ryan, 2014). Small business accounts for 41.7% of

employment for the country’s labor force and account for 67% of new jobs (Rauch, Doorn, &

Hulsink, 2014; Stangler, 2011). Despite these promising statistics, firms closing their doors

have steadily increased in the past ten years, with only 44.6% surviving after five years in

operation (Robb, 2013). Of the 55.4% that fail, 80% of those firms can expect to fail within the

first 18 months after opening (Wagner, 2014).

Startups account for nearly all net new job creation and almost 20% of gross job creation

(Wiens & Jackson, 2014). In 2007, the figure was roughly 12 million, or two-thirds of new jobs

(Stangler, 2011, p. 6) and the smaller companies created more of these jobs than larger firms.

However, the real driver of disproportionate job growth has been firm age; since 1980, nearly all

net job creation has come from young firms, less than five years old (Bradley, Dutt,

Mohsenzadeh, Pogue, & Sun, 2012; Haltiwanger, Jarmin, & Miranda, 2013; Stangler, 2011;

Wiens & Jackson, 2014).

The number of new businesses have always outpaced business failures since the US

Census bureau has been measuring business “births and deaths”; nonetheless, the startup

numbers began declining in 2008, ranking the United States 12th among developed nations for

startup activity per capita (Clifton & Badal, 2014). Currently, the number of business “deaths”

far exceeds the number of “births” by 31% ("Small business facts," 2015). These declining

start-up rates threaten growth. Additionally, fewer young adults are starting their own

businesses; the proportion of people under 30 owning a business has fallen to the lowest level

in at least 24 years (Simon, 2015).

Significance of the Study

The consequence of lower startup rates can have a severe effect on the economy. Jobs

lost in established industries due to the recession, globalization, and regulation may never

4

return; therefore, employment and economic growth may depend on new ventures (Blank,

2013b). Education can be the most significant factor that the public sector can affect to

influence start-up rates and growth (Motoyama & Bell-Masterson, 2014) and entrepreneurs are

hungry for information to help them run their businesses. Liang & Dunn (2012) interviewed 564

business owners and found that many entrepreneurs who were currently operating businesses

felt that they needed to gain more business training and would seek help if they were to start

another business. Watson et al. (1998) documented that business owners seek training to

develop their business planning relative to their perceived needs and found that the primary

subject sought for advice centered on developing a formal business plan; 13 other subject areas

of interest for new business owners showed low participation. The authors posited two

important questions for future research: first, “Do applicants correctly perceive their training

needs prior to a business start-up” and second, “Is high quality training in appropriate areas

readily available?” (p. 236).

Municipalities can create programs to assist entrepreneurs with network formation,

provide peer learning opportunities and mentorships to help new businesses start and existing

firms grow (Wiens 2014). Research has shown that guided assistance offered by local Small

Business Development Centers (SBDC’s) improves the growth of firms (Chrisman, McMullan, &

Hall, 2005; Chrisman & McMullan, 2004). But researchers have repeatedly found a “lack of

coordination between economic development activities and support for small business” (Gomez,

Isakov, & Semansky, 2015). In Hampton Roads, these programs already exist. Interviews with

local Economic Development officials revealed, however, that the free workshops offered by the

SBDC are poorly attended. Also, SCORE (the Service Corps of Retired Executives) offers free

business counseling and few nascent owners seek their advice. The researcher recently

conducted three ten-week entrepreneurship training camps called the Hampton Roads Retail

Academy for the Hampton Roads Chamber of Commerce and all sessions were sparsely

5

attended. The lack of participation in sponsored programs has city officials believing that there

is an absence of interest in the services. Why don’t business owners participate? In a study of

entrepreneurs in a Midwest county, Birley (1985) found that business owners and their social

networks appeared to be unaware of formal sources available for guidance. And apparently, in

Virginia Beach, people also seem unaware of these resources.

In Virginia Beach, the recession has had a significant negative impact shown by

decreases in the General Sales tax, Utility taxes, and Business Licenses which reflect the

shrinking business population in the city and present added stress to the overburdened city

budget (Spore, 2015). To overcome such shortfalls in Virginia Beach, city officials are looking

for ways to increase business startups and empower growth in existing businesses. With a goal

to “promote small business and entrepreneurial activity with every resource available” ("Virginia

Beach strategy to grow includes small business," 2014), the city of Virginia Beach initiated a

Small Business Subcommittee (SBS) to develop a survey to identify barriers to small business

success in order to maximize prosperity in the community by recommending practical solutions

to help small businesses thrive ("Small business subcommittee," 2015).

There is a void in the literature describing the motivations for entrepreneurs to use small

business support programs (Shabaya, 2014). The aim of this mixed methods study was to learn

whether entrepreneurs are aware of available public resources that assist startups and

empower business growth and to identify the factors that influenced their decision to use them.

Limitations

The participants of the study included only entrepreneurs with businesses in Virginia

Beach, Virginia. Participants self-selected and the samples for the qualitative interviews did not

include business owners from every industry. Assistance available from government services

was limited to the area. Bias was a limitation in the interviews in which the participants were

acquainted with the researcher.

6

Assumptions

This study was conducted in a south-eastern Metropolitan Statistical Area and assumed

that the surrounding cities offered free or low cost services and resources for entrepreneurs.

Another assumption was that business owners were unaware of available government services

that can enhance business growth. It was assumed that there is a gap between the knowledge

possessed by nascent entrepreneurs and the knowledge required to start and operate a

successful business.

Procedures

The study followed a mixed method design. The first phase of the study explored the

informational needs and use of business start-up resources for the purpose of developing a

survey instrument for the small business population in Virginia Beach and addressed the first

two research questions:

RQ1: What are entrepreneurs’ informational needs for business startup and growth?

RQ2: What resources do entrepreneurs seek and use before starting up a new business?

Based on the literature view, protocol was developed and interviews were conducted from a

sample of 10 entrepreneurs with businesses in Virginia Beach. It was necessary to first conduct

a qualitative study as there were no existing instruments or data that assessed the barriers to

small business growth nor the needs for entrepreneurship training based on the views of the

participants (Creswell, 2007).

The second, quantitative phase followed up on the qualitative phase to answer research

questions 3, 4, 5, and 6:

RQ3: To what degree do entrepreneurs perceive Virginia Beach as helpful in the process

of small business startup in the city?

RQ4: To what degree do entrepreneurs perceive Virginia Beach as supportive to small

business expansion?

7

RQ5: To what degree do entrepreneurs utilize training services offered by the city?

RQ6: What type of training workshops would entrepreneurs want to attend?

A survey instrument was developed based on the initial interviews, and again was informed by

the literature review. Three hundred and fifty one business owners in Virginia Beach completed

the survey, which included 12 Likert-scale questions and two multiple choice open ended

responses that addressed the operations of the city. Quantitative data were analyzed using

descriptive statistics and a factor analysis wa

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