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The current issue and full text archive of this journal is available at West Chester University, West Chester, Pennsylvania, USA AbstractPurpose – This paper sets out to examine the reasons why 599 entrepreneurs in Kenya, Ghana andNigeria started their small businesses. It aims to compares ten motivations across three countries andby gender.
Design/methodology/approach – Ten Likert-style questions were used to determine start-upmotivations. The mean scores were calculated and compared to test for significant differences. Afactor analysis was conducted to see whether the ten items could be synthesized into distinct factors.
Then, the factors were compared across countries and by gender.
Findings – The strongest motivator across countries was the opportunity to increase income. Afactor analysis found three motivation factors: a family factor, an external validation factor, and aself-betterment factor. The three countries showed significant differences with Ghanaianentrepreneurs rating the family factor as more important. The item analysis showed that femaleentrepreneurs were less motivated to create a business as a legacy or for external validation.
Research limitations/implications – The list of motivations here is non-exhaustive. The additionof other motivation items could change the results. Results should not be generalized to other countriesor other regions of the countries surveyed.
Practical implications – Since motivations differ across countries and gender, countries can benefitfrom developing country- and gender-specific programs to encourage business creation. For instance,Nigeria and Kenya should develop stronger succession laws so that businesses can be inherited byfamily members. Ghana and Nigeria might stimulate more enterprise development by providingpublic recognition for entrepreneurial behavior.
Originality/value – This is the first cross-country study of the motivations of entrepreneurs insub-Saharan Africa.
Keywords Africa, Small to medium-sized enterprises, Entrepreneurs, Motivation (psychology) IntroductionBased on sheer numbers, small businesses dominate the economic landscape of mostcountries. Micro- and small-sized enterprises (MSEs) contribute to economicdevelopment, increase household income and create jobs (International FinanceCorporation, 2000; Spring and McDade, 1998; Steer and Taussig, 2003). Smallbusinesses play a similar role on the African continent. For example, in 2003 small andmedium-sized enterprises (SMEs) in Kenya employed 3.2 million people and produced18 per cent of the nation’s GDP (OECD Development Centre, 2005). In Nigeria, SMEsare responsible for 95 per cent of formal manufacturing activity (OECD Development Journal of Small Business andEnterprise Development Centre, 2005). In Ghana 70 per cent of the business firms are microenterprises with less than five employees and approximately 70 per cent of the Ghanaian workforce is q Emerald Group Publishing Limited employed in microenterprises and SMEs (Government of Ghana, 2003; World Bank, According to the World Bank (2007a), Kenya, Ghana and Nigeria are considered low income countries with annual per capita incomes less than $1,025 and an inability to borrow from the IBRD. Although they suffer from low income, Kenya, Ghana andNigeria have experienced better than average economic growth when compared to the owners in Africarest of Africa. As shown in Table I, Ghana’s GDP growth rate in 2005 was 5.9 per cent,Kenya’s was a close 5.8 per cent, while Nigeria’s was 6.9 per cent. Nigeria’s andKenya’s economies have significantly improved during the last few years, but Ghana’s macroeconomic policies, in particular, have become an example for other Africancountries to emulate.
Kenya, Ghana and Nigeria provide moderate business environments with Ghana named one of the top ten reformers of 2006 (World Bank, 2007b). Although Ghanashowed improvement in the ability to register property and the collection of taxes,Kenya still ranks higher in the World Bank’s “Doing Business” index. Table Ihighlights some of the economic and business factors that would be relevant toentrepreneurs. The 74.2 per cent tax rate in Kenya is an example of a businesscondition that can significantly reduce the motivation to start a business. Unfavorablebusiness conditions like this also tend to keep MSEs in the informal economy wherethey are less apt to pay taxes, less able to secure capital and less likely to receivegovernmental support.
The purpose of this study is to better understand what motivates entrepreneurs to start and maintain small businesses in Africa. Almost 600 entrepreneurs in Kenya,Ghana and Nigeria responded to a questionnaire about themselves, their businessesand their motivations for starting their current business. This study seeks todetermine if entrepreneurs have similar motivations across countries and acrossgender or do the motivations among entrepreneurs differ due to environmentalfactors within each country. A better understanding of the motivations for businessownership can help policymakers design policies that encourage and promote thecreation of businesses. If the motivations differ across countries, then the policiesmust be specifically designed to meet the goals and needs of the entrepreneurs withineach country.
Number of procedures necessary to start a business Cost of starting a new business (per cent of GNI/capita)Number of days to build a warehouse – to obtain licenses, permits, inspectionsTotal tax rate – includes profit taxesLabor taxes, etc. (per cent of profit) Note: All data are 2006 except GDP growth and inflation rate Source: World Bank Group. Country data profiles and “Doing Business” web site Researchers have taken various approaches to explain what motivates individuals to start their own businesses. Some researchers believe innate personality traits are theprimary motivators, while others believe external/situational factors (push-pull) aremore important. Personality traits, such as the need to achieve, a tolerance forambiguity, a desire to innovate, a propensity for risk-taking and a preference for locus of control, have all been shown to influence entrepreneurial activity (Collins et al., 2004;Chell, 1985; Ginsburg and Buchholtz, 1989; Johnson, 1990; Shaver and Scott, 1991;Stewart et al., 1996). This study, however, concentrates on the situational andenvironmental motivations for creating a business since these can be more easilyinfluenced by policy-makers. These “push-pull” factors often determine whether anindividual will take the initiative to launch a new business venture.
According to researchers, individuals can be “pushed” into starting a business by external negative conditions such as unemployment and retrenchment, a low payingjob with little upward mobility and/or a desire to escape supervision (Curran andBlackburn, 2001; Moore and Buttner, 1997). At the same time “pull” factors, such as thedesire to be one’s own boss, increase wealth, change lifestyle or use one’s experienceand knowledge, can attract an individual to entrepreneurship (Birley and Westhead,1994; Burke et al., 2002).
A number of studies provide insight into entrepreneurial motivation in developed nations. Kuratko et al. (1997) and Robichaud et al. (2001) surveyed North Americanentrepreneurs to determine how motivation relates to business success. According totheir studies, motivation items could be grouped into four factors: Extrinsic motives are the economic reasons that entrepreneur’s work, while intrinsicmotives are related to self-fulfillment and growth. Because Kuratko et al. (1997) andRobichaud et al. (2001) concentrated on the relationship between motivation andbusiness success, they did not indicate which factors were the strongest amongentrepreneurs. Wang et al. (2006) performed a factor analysis on the motivations ofsmall business owners in Western Australia. The 17 motivation items grouped intofour factors: personal development motivations, financial motivations, “push”motivations and flexible lifestyle motivations. In general, Wang et al. (2006) foundthat “pull” motivations are more important motivators than the “push” motivations.
Cross-country studies of developed countries have found that motivations differ across countries. According to Scheinberg and MacMillan (1988) entrepreneurs in theUS and Australia are highly motivated by the need for independence. In contrast,Italian and Chinese entrepreneurs are strongly motivated by communitarianism.
Portuguese and Chinese entrepreneurs establish businesses to fulfill a need forapproval. Shane et al. (1991) provided a cross-country comparison of entrepreneurs inGreat Britain, Norway and New Zealand. According to their results 14 motivationitems loaded on four factors: recognition, independence, learning and something theycall “roles”. Shane et al. (1991) found that the desire for recognition is stronger in New Zealand and Great Britain than in Norway. Further, Norwegian business persons are more likely to start a firm to “develop an idea for a product” and “continue learning”.
With respect to entrepreneurial motivation in developing countries, Swierczek and Ha (2003) examined the motives of Vietnamese entrepreneurs. Swierczek and Ha’s owners in Africasurvey concluded that challenge and achievement are significantly more importantmotivators than were necessity and security. A study of motivation by Benzing et al.
(2005) discovered some regional differences in Vietnam. Entrepreneurs in Ho Chi Minh City are more motivated to start a business for personal satisfaction and growth, whileentrepreneurs in Hanoi are motivated by “push factors” related to job creation. Hanoisuffers from a weaker economy and higher jobless rate than Ho Chi Minh City, whichmay lead to greater security needs there. In Romania, income needs are significantlystronger motivators than self-satisfaction and personal needs (Benzing et al., 2005). Incontrast, entrepreneurs in a more developed region of India are most stronglymotivated by the desire for independence/autonomy, i.e. to be their own boss. Thesecond strongest motivator is to increase their income (Benzing and Chu, 2005).
In Africa, Uganda’s entrepreneurs indicate that “making a living” or “making money” is the most important motivator for their business ownership (Bewayo, 1995).
Bewayo’s survey also shows that a majority of entrepreneurs (61 per cent) preferbusiness ownership to working for a corporation because of autonomy, freedom, andindependence. Chu et al. (2007) found that increasing income is the most importantmotivation for entrepreneurs in Ghana and Kenya. According to a study byChamlee-Wright (1997), Ghanaian entrepreneurs often invest in a business becausethey have few other savings/investment options.
Cultural factors and gender may also affect the motivations of entrepreneurs.
Studies by Chu et al. (2007) and Gray et al. (2006) in Turkey and Morocco found thatbusiness activity in Moslem countries is heavily dominated by males. Thus, the factthat entrepreneurs in Turkey were most motivated by the desire to increase income(Chu et al., 2007) may be the result of the sample being dominated by males, the factthat most of the respondents were Moslem, and/or the existence of weak economicconditions in Turkey. In contrast, entrepreneurs in another Moslem country, Morocco,were most motivated by the desire to exploit a business opportunity and achievepersonal freedom (Gray et al., 2006).
To date few studies compare the motivations of men and women in establishing their own businesses. Shane et al. (1991) found that gender interacts with countrydifferences and, consequently, there were no consistent gender differences in motivesacross New Zealand, Norway and Britain. Burke et al.’s (2002) study found that thedesire to be one’s own boss is a significant motivator for both male and femaleentrepreneurs in Britain. Cromie’s (1987) study of 69 men and women in NorthernIreland found that while both genders cite autonomy, achievement, and jobdissatisfaction as motives for starting a business, women are less likely to indicateincome as a motivator. Women are more likely to mention career dissatisfaction andchild rearing as reasons for starting their own business. Buttner and Moore’s study(1997) of female entrepreneurs found that women leave management positions to starttheir own businesses primarily for the challenge and personal growth opportunities.
Overall, the literature indicates that there are differences in the motivations of entrepreneurs by country, gender, and possibly religion. These differences point theway toward a new strategy for motivating entrepreneurs. Strategies used in developed countries may not work in developing countries. Developing countries need to examine the priorities and desires of their own citizens to determine the most effective incentives. This study examines entrepreneurial motivations in three developingcountries in Africa to determine if and how they differ.
The first hypothesis is that the most important motivation for entrepreneurs in Kenya,Ghana and Nigeria is to increase income. This hypothesis has been supported in priorstudies of motivation in Romania and Uganda (Benzing et al., 2005; Bewayo, 1995).
Because of weak employment and savings opportunities, business owners might bemore motivated by extrinsic rewards such as increasing income and creating a job forthemselves than by intrinsic rewards and autonomy. In many developing countriesunemployment is relatively high and state employees face job loss due to privatization.
If one looks at motivation in terms of the “push-pull” dichotomy, one would expectindividuals in developing countries to face greater pressure from “push” factors than“pull” factors.
Second, we hypothesize that the ten motivation items can be condensed into four factors similar to Robichaud et al. (2001) and Kuratko et al. (1997). Based on previousresearch in developed countries, four categories of motives have emerged: extrinsic,independence, intrinsic and family security. These four categories are probably broadenough to cover the desires and needs of small business owners in developingcountries as well.
Third, we hypothesize that there will be significant differences in the motivations of entrepreneurs in Kenya, Ghana and Nigeria. Previous cross-country and regionalstudies have shown that the motivations of entrepreneurs can differ across countriesand even regions of the same country (Shane et al., 1991; Benzing et al., 2005). As aresult, the historical, economic, political and cultural differences between Kenya,Ghana and Nigeria are likely to cause differences in the importance of motivation itemsand motivation factors.
Finally, we expect no significant difference between the genders with respect to the most important motivation (to increase income) and other motivation items/factors.
Although Cromie (1987) found income was less of a motivator for womenentrepreneurs (Shane et al., 1991); cross-country comparison found no significantdifferences between the genders.
In summary the four hypotheses are as follows: Given the low income in Kenya, Ghana and Nigeria, the most importantmotivation for starting a business is to increase income.
The ten motivation items can be condensed into four factors: extrinsic,independence, intrinsic and family security.
Differences in economics, politics and culture will produce significantdifferences in the motivations of entrepreneurs across Kenya, Ghana andNigeria.
There will be no significant difference between the genders with respect to themost important motivation (to increase income) and other motivationitems/factors.
Surveys were collected from 599 entrepreneurs in Kenya, Ghana and Nigeria. The samples were chosen from the Chamber of Commerce membership directories forNairobi and Accra, the capital cities of Kenya and Ghana, respectively. The Nigerian owners in Africasample was obtained using the Yellow pages (business directory) in Lagos, the formercapital city. Although Lagos has not been the capital since 1991, Lagos is still thelargest city and the administrative and economic center of the country. Every second entry in the business directories was chosen for contact. Businesses chosen weredomestic private businesses with less than 250 employees. If the second entry did notfulfill the requirements or the business owner refused participation, the next entry fromthe alphabetical list of institutions was contacted. The surveys were conducted by paidgraduate assistants/teachers. The method of filling out the questionnaire was a“face-to-face” meeting with the owner. In the Nigerian sample, telephone interviewswere conducted when the business was located at some distance from the interviewer.
A total of 200 Kenyan business owners, 156 Ghanaian entrepreneurs and 242 Nigerianentrepreneurs participated in the survey.
Since English is the official language used in Kenya, Ghana and Nigeria, the survey was written and conducted in English. The questionnaire used in this study wasdeveloped by Hung M. Chu (Chu and Katsioloudes, 2001) and has been used in studiesof entrepreneurs in Vietnam, Romania, India and Turkey (Benzing et al., 2005; Benzinget al., 2005; Benzing and Chu, 2005; Chu et al., 2007). The motivation factors are similarto those suggested in the work of Robichaud et al. (2001) and Kuratko et al. (1997).
MethodologyThe strength of a motivational item was measured using a five-point Likert scale. Thescale ranged from one, which indicates that the motive is unimportant to a score of five,which indicates that the motive is extremely important. A mean score was computedfor each of the ten motivational items. A higher mean score indicates that the motivewas more important to the entrepreneur. For the total sample, a nonparametric test (theWilcoxon rank sum test) was used to determine if the motivation “to increase income”is significantly higher than the other motivations. Such a finding would support H1that the income motive is the most important reason for starting a business. Anonparametric test was used to test for significance because the Anderson-Darlingnormality test determined that the data are not normally distributed.
The ten motivational items were then subjected to a factor analysis to determine if the items could be grouped onto the same four factors observed by Robichaud et al.
(2001) and Kuratko et al. (1997). If the four factors emerge, this would provide evidencesupporting H2 and the four-factor theory of motivation. The sample size of 599 isdeemed adequate for a factor analysis of ten variables. With almost 60 cases pervariable, this study more than meets the minimum requirement of 50 cases per variablecited in Hair et al. (2006).
To test H3 summated scales of each factor were computed for each country. These scales were then compared across countries to determine if there were significantdifferences. The Mood Median test (also called a median test or sign scores test) wasused instead of the one-way ANOVA because the distribution of the summated scaleswas also non-normal. Cross-country differences among the mean scores for individual motivation items were also tested for significant differences using the Mood Median H4, which deals with gender differences, was tested two ways. First, the summated factor scores for females and males were compared for significant differences using theWilcoxon rank sum test. Second, the item-by-item mean scores of the motivations bygender were compared using the Wilcoxon rank sum test to determine if there were significant differences in mean scores.
Sample characteristicsAccording to the European Commission’s definition (European Union, 2007) amicro-enterprise employs less than ten full-time workers or full-time annual workunits, while a small-sized enterprise employs between ten and 50. All businessessurveyed for this study employ less than 50 full-time workers and, thus, can beclassified as either micro- or small-sized enterprises (MSEs). All three samples aredominated by micro-enterprises with 92 per cent of the Kenyan sample, 85 per cent ofthe Ghanaian sample, and 86 per cent of the Nigerian sample employing less than tenfull-time workers. Since the majority of the businesses in all countries aremicroenterprises, the sample is consistent with the larger world market. The sampleis also fairly consistent with the level of microenterprises found in Africa. According toSpring and McDade (1998) and Manu (1999) 98 per cent of businesses in Africa haveless than ten employees.
As shown in Table II the sample consists of primarily service businesses, but the samples differ in that the Kenyan sample is more heavily retail, while the Ghanaiansample has a greater percentage of manufacturing businesses. A large percentage ofthe businesses were established by the owner and independently owned. Althoughvery few of the businesses are partnerships or franchises, the Kenyan sample has ahigher percentage of partnerships than the Ghanaian and Nigerian samples. It isinteresting to note that 11 per cent of the Ghanaian business owners had inherited theirbusiness. This is compared to 4 per cent of Kenyan entrepreneurs and 2 per cent ofNigerian entrepreneurs. The average number of full-time employees is similar acrossthe countries ranging from 3.8 in Kenya to 4.9 in Ghana. The age of the businessesdiffers in that the average age of a Nigerian business in the sample is 8.4 years, whilethe average age of a Kenyan and Ghanaian business is 4.76 and 4.42 years,respectively.
As shown in Table III the Nigerian sample has a higher percentage of older married entrepreneurs. In addition, the groups are quite different with respect to theireducational levels. In total, 40 per cent of the Nigerian sample claimed to havecompleted a graduate degree, while only 7 per cent and 21 per cent of the Ghanaian andKenyan samples had a comparable education. Further, the Nigerian sample has aslightly lower percentage of female entrepreneurs. This may be the result of a higherconcentration of Moslems in Nigeria than in Kenya and Ghana. In many countries, theMoslem faith does not encourage females to own their own businesses. As a result thissample shows a lower overall percentage of female business owners in Nigeria.
Kenyan, Ghanaian and Nigerian entrepreneurs work fewer hours in their businesses than entrepreneurs in other countries. Kenyan entrepreneurs reported working 45hours on average per week; Ghanaian and Nigerian entrepreneurs reported 38 hoursper week. In comparison to other studies of entrepreneurs in developing countries like Agricultural products, tools, equipment (%) Type of business ownership (respondents could selectmore than one answer so percentages can total tomore than 100%)Established by you (%) Notes: Not all survey respondents answered every question. For some questions more than one answer was allowable which leads to a total number of answers greater than sample size. All percentages are based on the number of entrepreneurs who answered the question Educational level achievedNo formal education (%) Notes: Not all survey respondents answered every question. All percentages are based on the number of entrepreneurs who answered the question Vietnam, Romania and India, the average hours worked is relatively low (Benzing et al., 2005; Benzing et al., 2005; Benzing and Chu, 2005). A total of 19 per cent of the Ghanaian owners and 35 per cent of the Kenyan and Nigerian owners work 20 hours orless per week in their businesses. These entrepreneurs may be working second jobs orrunning other businesses. In contrast to small business owners in other regions of theworld, African business owners often own and operate several businesses simultaneously which increases their diversification and reduces the risk of “puttingall their eggs in the same basket” (Spring and McDade, 1998). Although manyentrepreneurs work part-time in their business, those who reported a full-timecommitment work extremely long hours. In total, 14 per cent of the Kenyanentrepreneurs work 84 hours or more per week.
ResultsAs shown in Tables IV and V, the highest scoring motivation for the total sample is “toincrease income”. The overall mean score for the income motivation was 4.19 with 84per cent of the respondents indicating that the motivation was extremely or veryimportant. Based on overall mean score for the entire sample, the second mostimportant motivation was “for my own satisfaction and growth” with a mean score of4.04. Since the mean score for “to increase income” is significantly greater than the nextclosest motivation at the 99 per cent level, one can conclude that the results support H1that income is the most important motivator for owners of small businesses. When thedata is broken down by country, Kenyan and Ghanaian entrepreneurs weresignificantly more motivated by income than any other motivation factors. In contrast,data from Nigerian entrepreneurs showed no significant difference among the meanscores for the top five motivations of which “to increase income” is but one. The twoleast important motives for the entire sample were “to be closer to my family” and “togain public recognition” which had mean scores of 2.76 and 2.84, respectively. Whenasked if there were any other reasons for starting a business, ten of the Nigerianbusinesspersons cited God or divine inspiration as a motive for starting their business; important important important Unimportant To be able to use my past experience and training Notes: 5 ¼ extremely important, 4 ¼ very important, 3 ¼ mildly important, 2 ¼ not very important, another ten cited the desire to help the community or to create jobs. Other motiveslisted by the entrepreneurs were unique or only appeared in two or three surveys.
An item-by-item comparison showed strong and statistically significant differences across the countries on every motivation variable. Because the data is not normallydistributed, a nonparametric test (Mood Median test) was used to determine if therewere significant differences in the mean scores across the three countries. “To increaseincome” was a significantly more important motivation for entrepreneurs in Kenya andGhana. The motivation “to gain public recognition” is fairly strong for Ghanaianentrepreneurs, and much stronger than it is for Kenyan entrepreneurs who gave thismotivation the least importance.
Ghanaians also gave a much higher rating to motivation number 9 “to build a business to pass on”. This may be the result of better-developed inheritance laws aswell as relatively fewer savings opportunities in Ghana. Ghanaian entrepreneurs aremore likely to see the bulk of their estate inherited by their surviving spouse and/orchildren than is the case in Kenya and Nigeria. In Kenya and Nigeria, tribal customsand Islamic law have been allowed to determine succession, making it less likely for awidow and her children to inherit an estate from a deceased spouse (Kameri-Mbote,1995). As an example, the Kenyan Law of Succession of 1981 was designed to betterprotect surviving spouses and their children, but the act was amended in 1990 to allowMuslims to practice inheritance laws based on their religion. Since Muslims practicepolygamy and have their own laws governing distribution of a deceased person’swealth, the government has less ability to protect the rights of a decedent’s spouse andchildren, and the estate is more likely to be fragmented. In contrast, Ghana’s IntestateSuccession Law (PNDCL 111) of 1985 provides a unified inheritance law applicable toall citizens of Ghana regardless of religion. The law guarantees a larger portion of theestate to the surviving spouse than had been the case prior to 1985 (Dovlo, 2005;Woodman, 1985). The Ghanaian government has continued to support PNDCL 111despite its being undermined by Muslims who refuse to abide by it.
Finally, Nigerian entrepreneurs were more motivated by motive number 10 “to be closer to my family” than entrepreneurs in Kenya or Ghana. There is no clear reasonwhy this should be the case. Africans, in general, have strong tribal roots and remainwell connected to their families. Forrest (1994) speculated that Nigerian entrepreneurs were employing children and spouses in their businesses more intensively in an effort to establish clearer succession, which may lead to closer family relationships. But, when asked if family members were employed in their business, Nigerianbusinesspersons were less likely to employ family members than entrepreneurs inGhana. In total, 71 per cent of the entrepreneurs in Ghana said that they employedfamily members, while only 47 per cent of Nigerians and 40 per cent of Kenyans did the As shown in Table VI, a principal component factor analysis (Varimax rotated) found that the ten motivation variables could be represented by three factors. Based onan unrotated factor matrix, motive number 2 “to be able to use past experience andtraining” had a low level of communality (0.37) which indicates that this variableshares less than one-half of its variance with the three factors. For this reason motivenumber 2 was removed from the analysis before the varimax rotation was applied. Theother nine variables loaded on the three factors with factor loadings greater than 0.66.
These three factors account for 57.8 per cent of the total variance. This result does notsupport hypothesis number 2 that four factors would emerge similar to Robichaud et al.
(2001) and Kuratko et al.’s (1997) four factor model. This could be the result of nothaving enough motivation items to generate two factors from factor 3. One couldspeculate that the income/job security motivation might have separated from personalsatisfaction and growth had other questions related to internal rewards and wealthbeen included in the survey. The addition of motivation items such as “to gain greaterindependence”, “to gain greater time flexibility” or “to increase savings” might havegenerated four independent factors instead of three.
Factor 1 could be called a family factor since it includes motivations related to providing jobs to family members, building a business as a legacy, and starting abusiness to be closer to family. Factor 2 could be called an “external validation” factor.
This factor includes starting a business to prove he/she can do it, to gain publicrecognition, and to be his or her own boss. Factor 3 is referred to as a self-bettermentfactor because it includes income, job security, and personal satisfaction and growth.
H3 was supported in that the factor scores were significantly different across the three countries. Table VII shows the summated scales for entrepreneurs in each of thethree countries. Ghanaians were more strongly motivated by the self-betterment factorand family factor, while Nigerian entrepreneurs scored highest on factor 2, externalvalidation. The summated scores for Kenyan entrepreneurs indicate that the family Notes: Summated scales were calculated as average score across items contained in that factor. Scale 1 is the average of the scores on motivations 6, 9, and 10; Scale 2 is the average of the scores on motivations 1, 3, and 5; and Scale 3 is the average of the scores on motivations 4, 7, and 8. aA non-parametric test (Mood’s Median Test or sign scores test) was used to determine whether there was a significant difference among the three countries on each factor. A non-parametric test was used because the data were not normally distributed factor was not as strong a motivator for Kenyans. As discussed earlier, Kenyanentrepreneurs are less likely to employ family members in their businesses and ratedthe legacy factor much lower than their Ghanaian and Nigerian counterparts.
An analysis and comparison of the individual item motivations by gender was performed. H4 was supported in that the motivation “to increase income” wassignificantly higher than the other motivations for female entrepreneurs. There was nosignificant difference between the mean score for males and females on that motivationitem. With respect to the other motivation items, only two motivation items yielded asignificant difference based on gender. Compared to male entrepreneurs, femaleentrepreneurs indicated that motive number 3 “to prove I can do it” and motive number9 “to build a business to pass on” were significantly less important (at a 5 per cent levelof significance) to them. But, it should be pointed out, motive number 3 was animportant motive for both genders - it was just less important to female entrepreneurs.
With respect to motive number 9, female entrepreneurs may be less interested inleaving a legacy than their male counterparts because they are less likely toaccumulate earnings compared to men. Previous studies have shown that women areless likely to grow their businesses as large as men. A comparison of the threesummated scores of the three factors showed no significant difference between femaleand male entrepreneurs. The detailed results of the gender analysis are available fromthe authors.
Limitations and implications for further studyThe list of motivations used in the survey was limited to ten. A more comprehensivelist of motivations may have yielded the four factors found by Robichaud et al. (2001)and Kuratko et al. (1997). Future surveys could consider adding other motivationalitems such as “to maintain my personal freedom”, “to create my own job” and “tocontrol my own time”. In addition, Africans often view a business as an extension oftheir religious and family life. (Bowditch, 1999) As a result, additional motivationscould include: “to fulfill God’s will” or “to benefit the community”. This study is also limited in that it only examines three countries in Africa using a randomized sample of urban entrepreneurs. Perhaps a stratified sample or a sample matched by size and/or type of business (service versus retail, etc.) would yield different results. Readersshould not generalize the results of this study to other countries until more study isdone on the motivations of businesspersons across countries and cultures.
Discussion and policy implicationsThis analysis points to the fact that entrepreneurs in developing countries aremotivated by the desire to increase their income and improve their standard of living.
At the same time, entrepreneurs see running a business as a way to gain personalgrowth and satisfaction. Governments must ask themselves how they can enhance theenvironment and enable entrepreneurs to earn and keep more money. By decreasingthe barriers to starting a business and the time to obtain licenses and permits,governments could encourage entrepreneurial activity.
A decrease in tax rates would enable entrepreneurs to keep more of what they earn and stimulate the creation of small businesses. Any federal tax system should coverboth the informal and formal business sectors. By including the informal sector, the taxbase would broaden which would permit a decrease in tax rates. A tax that applies toall businesses would also allow the government to better track private sector activityand encourage business owners to formally register their businesses since informaland formal businesses would face the same tax responsibilities. Lower tax ratesincrease an entrepreneur’s rate of return which increases the funds available forreinvestment in his or her own business. In this way, the lower tax rates may result ingreater private savings and decrease the need for scarce external capital.
Finding the right tax rate and system is difficult given the need to raise revenue and reduce budget deficits in developing countries. Ghana recently simplified its taxsystem by instituting a flat rate VAT for retailers. This voluntary tax payment appliesto retailers in both the formal and informal sectors (Ghanaweb.com, 2007). As avoluntary system, it remains to be seen whether this tax will be effective in stimulatingbusiness ownership and generating revenue for the government. Nigeria has recentlydesigned a progressive system of taxation with the goal of reducing inefficientoverlapping systems. It also asks states to collect taxes themselves rather than payexorbitant fees to privately contracted tax consultants. The Joint Tax Board’slong-term goal is to establish a tax system that is fair, efficient, and automated (Ujah,2007). Governments in Africa should continue to work toward fair and comprehensivetax reform since it can take years for such changes to bear fruit. It is good to see thatsome governments have begun to take this issue seriously since instituting a federaland local tax system that promotes small business growth while improving revenuecollection is well worth it.
Developing countries also need to provide strong inheritance laws that allow entrepreneurs to pass their wealth to their spouse(s) and children without hindrance.
This issue is especially important to small and micro-business owners who are morelikely to die Intestate than the owners of large businesses. An inheritance law thatallows for multiple interpretations based on religion or tribal customs can undermineeconomic growth if it discourages citizens from working to save and accumulatewealth. Kenya and Nigeria might benefit from enacting stronger inheritance laws to keep inheritable property more intact and available for the benefit of the immediate Since Ghanaian and Nigerian entrepreneurs appear to be more motivated by public recognition, their governments might consider recognizing and rewarding innovative owners in Africaor successful small business owners. One should not underestimate the importance ofthis motivation in some countries. The local governments might institute contests andprograms that publicly acknowledge the achievements of their businesspersons. For instance, billboards could be graced with the pictures of successful entrepreneurs alongwith a “thank you”. Providing this recognition will increase the visibility of smallbusiness owners and might motivate others to start their own businesses, too.
The Kenyan, Ghanaian and Nigerian governments recognize the economic importance of small businesses. They have already instituted many programs toincrease available funds promote training, and provide aid to existing businesses, butmore can be done to stimulate the creation of new businesses. Special attention to themotivating factors could result in more persons making the decision to start their ownbusiness, thereby creating jobs and promoting economic growth.
ConclusionAccording to the results of this study, urban entrepreneurs in Kenya, Ghana andNigeria are most strongly motivated to start their small businesses by the desire toincrease their income. This is not surprising given the low income and weak job marketin these developing countries. This result supports the idea that entrepreneurs indeveloping countries are “pushed” into entrepreneurship by the need to increaseincome and create job stability for themselves. For the total sample “satisfaction andpersonal growth” is the second most important motivator. Other studies have foundthat entrepreneurs in developed countries are motivated by independence andself-fulfillment more than income. Higher GDP per capita economies tend to produceentrepreneurs who are motivated by higher order needs that “pull” the business personinto a new venture. As Kenya, Ghana and Nigeria achieve higher standards of living,one might expect the “satisfaction and personal growth” aspects of business ownershipto become more important than the income aspect.
In an item-to-item comparison, differences emerged among entrepreneurs in the three countries. Ghanaians are more influenced by public recognition and theopportunity to create a legacy than are their counterparts in Nigeria and Kenya.
Kenyan entrepreneurs are the least interested in gaining public recognition. Nigerianentrepreneurs are more motivated by the opportunity to be closer to their family.
A factor analysis of the ten motivation items resulted in three factors: a family factor; an external validation factor; and a self-betterment factor. A comparison of thethree factors across the three countries showed that entrepreneurs have a significantlydifferent attitude toward the three factors although the self-betterment factor wasstrongest for the entrepreneurs in all three countries. Kenyan entrepreneurs ratedexternal validation the lowest among the three groups of entrepreneurs, whileGhanaians rated the family factor the strongest among the three groups. Given the lackof savings institutions in Ghana and the existence of comprehensive inheritance laws,Ghanaians have come to see their business is an important part of their inheritableassets. Further, according to Bowditch (1999), Africans, and especially Ghanaians, seetheir businesses as inseparable from their family and religious beliefs. Ghanaian entrepreneurs actively use their businesses to promote the welfare of other family members. In total, 71 per cent of the Ghanaians surveyed employ family members in their business on a full-time or part-time basis.
Finally, when comparing the motivations by gender, there was not a significant difference between the mean scores of female and male entrepreneurs on themotivation “to increase income”. Males and females both rated the income motivation as the most important one. There were, however, two motivation items on whichfemale and male entrepreneurs differed significantly. Female entrepreneurs rated “toprove I can do it” and “to build a business to pass on” as less important than maleentrepreneurs. However, there was no significant difference when the three summatedfactor scores were compared by gender.
Governments in developing countries have started to appreciate the contribution of the micro- and small business sector to GDP growth and employment. But more can bedone. A better understanding of entrepreneurial motivation within a country couldresult in policies that directly influence the formation of such businesses. As indicatedby the results of this study, motivations differ across countries. Governments,therefore, need to design country-specific policies to encourage citizens to invest intheir own businesses, their own future and their country’s future.
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Cynthia Benzing is a Professor of Economics and Finance at West Chester University of Pennsylvania. She has published articles related to entrepreneurship in the Journal ofDevelopmental Entrepreneurship, Journal of Small Business Management and the Journal of owners in AfricaGlobal Business. She has also published in the Atlantic Economic Journal, Journal of EconomicEducation, Journal of Psychology, International Advances in Economic Research, and the Journalof Financial Education. Her topics of interest include small business conditions in developingcountries, the determinants of price in internet auctions, and economics/finance education.
Cynthia Benzing is the corresponding author and can be contacted at: [email protected] Hung M. Chu is a Professor of Management at West Chester University of Pennsylvania. Dr Chu has published articles related to entrepreneurship in the Journal of DevelopmentalEntrepreneurship, The Transnational Journal, Journal of Small Business Management and theJournal of Global Business. He has conducted research on entrepreneurs in Kenya, Ghana,Nigeria, India, Vietnam, and Romania. He currently has surveys being conducted in China andBulgaria.
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