Understanding Motivations for Entrepreneurship

Abstract

Key points • This study shows that motivations for starting a business are complex and that motivations other than the traditional opportunity-driven and necessity-driven distinction are more closely related to business survival and success. These motivations can be best classified in terms of the importance attached to ‘autonomy and better work, ‘challenge’, ‘financial’ and ‘family and legacy’ aspects. Across all business types, entrepreneurs say autonomy is their most important motivator. • Businesses can do well regardless of whether they were started out of opportunity or necessity. Both opportunity-driven businesses and necessity-driven businesses create jobs, innovate and export. • The most important factor for business success was ambition with those firms starting out with high growth expectations performing most strongly. Indeed, motivations influence business success mainly by driving differences in growth expectations, which in turn drive success. • Businesses created by autonomy- and family-motivated entrepreneurs have a higher chance of survival. • Motivations are generally stable through the course of running a business, with a small increase in the importance attributed to ‘autonomy and flexibility’. This finding is promising as it suggests that many entrepreneurs’ expectations around autonomy, flexibility and quality of work are being met in their roles as business owner-managers. • The recession increased entrepreneurs’ ‘challenge’, ‘financial’ and ‘family and legacy’ motivations to start a business, while ‘Autonomy and flexibility’, opportunity and necessity motivations did not change. Many recession-era entrepreneurs saw their redundancy as an opportunity and had a high level of ambition when starting their business. • Taken together the research shows that regardless of whether originally driven by opportunity or necessity, a business can be successful. Most important is the expectation to grow and so emphasis should be placed on encouraging and supporting that. The expectation to grow is in turn more strongly related to ‘challenge’, ‘financial’ and ‘family and legacy’ motivations than to the opportunity-necessity dichotomy.