Socio-cultural factors and youth entrepreneurship in rural regions.
| Autor | Gomez-Araujo, Eduardo |
1 Introduction
Entrepreneurship is increasingly recognized as a fundamental component of economic growth, employment generation, and innovation (Carree & Thurik, 2010; Fritsch & Wyrwich, in press; Organisation for Economic Co-operation and Development [OECD], 2003; Van Praag, Versloot, 2007). The strong positive correlation between entrepreneurship and economic growth (Acs, Desai, & Hessels, 2008; Bosma & Levie, 2010) has led some authors to suggest entrepreneurship as the key to rural revitalization (North & Smallbone, 2006; Organisation for Economic Co-operation and Development [OECD], 2009b). It is argued that the benefits of entrepreneurship in rural regions are manifold. Entrepreneurship helps diversify the rural economy, reducing dependence on a mono-industrial base (Bryden & Hart, 2005). Entrepreneurship provides opportunities for skill diversification among the rural population as well as attracting new residents, thereby providing stimulus for the growth of the rural economy (Akgun, Nijkamp, Baycan, & Brons, 2010; Demurger & Xu, 2011; Reichert, Cromartie, & Arthun, 2014; Siemens, 2014; Vaillant, Lafuente, & Serarols, 2012). As such, in recent years we have seen development agencies such as the European Union and the OECD giving priority to entrepreneurship as a tool for rural development and growth (European Commission, 2003, 2008; OECD, 2003, 2006, 2012). However, notwithstanding the importance of entrepreneurship in the rural regions, important barriers to entrepreneurship in rural regions still remain.
Several studies show that the impact of macro-level factors on entrepreneurial activities across urban and rural regions is not uniform (Driga, Lafuente, & Vaillant, 2009; Lafuente, Vaillant, & Rialp, 2007; Noguera, Alvarez, & Urbano, 2013). More importantly, rural regions lag behind in entrepreneurial activity, not necessarily because of (macro-level) physical or economic disadvantages, but because of meso-level socio-cultural characteristics (Fornahl, 2003; Lafuente & Vaillant, 2008). In addition, evidence also suggests that such factors do not have a homogeneous impact on all segments of the population. In this regard, extant studies have mainly examined the distinctive effect of gender (see, e.g., Carter, Anderson, & Shaw, 2001; Delmar & Holmquist, 2004; Driga et al., 2009), and/or being native and immigrant at an aggregate level (see, e.g., Levie, 2007; Mancilla, Viladomiu, & Guallarte, 2010; Peroni, Riillo, & Sarracino, 2016). In this paper, we focus on young individuals at a regional level.
The study of young individuals and their involvement in entrepreneurial activities is increasingly gaining relevance due to the economic downturn of recent years (Brixiova, Ncube, & Bicaba, 2015; European Commission, 2012; Minola, Criaco, & Obschonka, 2016; O'higgins, 2012; Rojas & Siga, 2009; Thomas, 2009). Although it has affected all segments of the population, the figures are dire in Spain, where the unemployment of young individuals rose from 21 per cent in 2005 to a staggering 46 per cent and above between 2011 and 2014. The systematic rise of the unemployment amongst young individuals, together with the lack of new job opportunities for young people, especially in rural areas, has led to worries about the social and economic costs of youth inactivity (Vogel, 2015). Hence, the need to explore the impact of meso-level socio-cultural factors influencing entrepreneurship among the youth in the rural regions. It is argued that the positive impact of entrepreneurship on rural development is amplified when these entrepreneurial activities are carried out by young people residing in these areas (Brixiova et al., 2015; North & Smallbone, 2006). Therefore, the main objective of our study is to determine the impact of socio-cultural factors, such as entrepreneurial role models and fear of failure, in the entrepreneurial activity of rural youths in Spain.
This study is structured as follows. Section two presents the literature review along with the hypotheses tested in this study, followed by data and methodology in section three. The empirical results are presented in section four. Section five discusses the conclusions and implications of the study. We conclude by indicating the possibilities for future studies.
2 Literature review and hypotheses
2.1 Young entrepreneurs
Entrepreneurship through the creation of a new business can be considered as an alternative vocational choice that has the potential to harness the human capital of young individuals. In recent years, several factors have inspired young individuals to set up their own businesses. First, the increasing human capital of young individuals has provided them with a wider range of alternatives and a higher capacity for the identification and exploitation of business opportunities (Haynie, Shepherd, & McMullen, 2009). Young individuals today are generally better trained in comparison to previous generations. This, in turn, has made them more capable, for instance, to create and manage their own businesses (Honjo, 2004). This has been supported by the gradual change in the social attitude towards entrepreneurship. For instance, entrepreneurship through the creation of new business is increasingly being socially accepted (Begley & Tan, 2001; Blanchflower & Meyer, 1994; Kibler, Kautonen, & Fink, 2014). Development agencies have also contributed their bit by promoting entrepreneurship among the youth. For several years the European Commission (2003) and the OECD (2012) have been recommending programs to develop an entrepreneurial spirit among the younger population. Academia studies have also been directed towards understanding the issue of young individuals and entrepreneurship (Aidis & Van Praag, 2007; Brixiovaet al., 2015; Fairlie, 2005; Honjo, 2004; Levesque & Minniti, 2006; Parker, 2006; Rojas & Siga, 2009; Thomas, 2009). Researchers comparing entrepreneurship by young individuals with respect to the rest of the population suggest that younger individuals are more likely to be entrepreneurs (Bonnett & Furnham, 1991; Honjo, 2004; Lamotte & Colovic, 2013; Levesque & Minniti, 2006; Minola et al., 2016). For instance, Bonnett and Furnham (1991) claim that people with a greater internal locus of control tend to develop entrepreneurial attitudes more easily. In their study, Bonnett and Furnham (1991) found that young individuals, unlike their older counterparts have a greater internal locus of control. In similar fashion, Honjo (2004) proposes that the capacity for learning and changing in young individuals when it comes to accepting business challenges is much greater than in older individuals. Moreover, as individuals get older they find the idea of starting a new business less desirable because the aversion to risk increases with age (Kautonen, Down, & Minniti, 2014; Levesque & Minniti, 2006). This greater propensity among young individuals to take risks therefore makes them more likely to choose entrepreneurship. In addition, young individuals have a lower opportunity cost when it comes to creating a business (Amit, Muller, & Cockburn, 1995) because it is easier for young individuals to return to salaried employment in case of a business failure compared to older individuals. Therefore, we suggest that:
H1: The probability to engage in entrepreneurial activities is greater among younger individuals compared to older individuals.
An important concern among policy makers when it comes to promoting entrepreneurship is the identification of factors that make some young individuals more prone to entrepreneurship than others. Several studies in recent years have indicated that the region, the place where individuals reside, is a crucial factor in explaining differences in the level of the entrepreneurial activity among individuals (Aitken, 2006; North & Smallbone, 2006).
More specifically, young individuals in urban regions are more likely to pursue entrepreneurship compared to rural ones (Akgun et al., 2010; Fuller-Love, Midmore, Thomas, & Henley, 2006; Stathopoulou et al., 2004). In this context, classical and contemporary economic thinking has consistently portrayed urban agglomerations as the preferred setting for conducting business. It has been argued that urban centers offer a greater division of labor (Smith, 1776), a larger ('pool') labor market supply (Marshall, 1920), a greater provision of non-traded inputs (Marshall, 1920), an easier and cheaper access to markets (Hoover, 1948), a greater availability of complementary services (Mydral, 1957), better infrastructures (Jacobs, 1969), and greater volumes of demand (Krugman, 1981, 1991). Wagner and Sternberg (2004) found that regions with high population density and high population growth rates show higher rates of nascent entrepreneurship. On the other hand, in rural regions, as mentioned earlier, there are greater socio-cultural barriers to the entrepreneurial activity (Fornahl, 2003). In many cases, young individuals may feel attracted to the city lifestyle, and the better professional opportunities available in urban agglomerations make them leave their places of origin to settle in cities. This discourages them from considering the possibility of creating a business or developing their profession in a rural environment (Meccheria & Pelloni, 2006). In a similar fashion, the embedded and relatively immobile character of most business activities makes an entrepreneurial career unattractive for those rural youths who long for the city (Akgun et al., 2010). Given the aforesaid arguments, we hypothesize that:
H2: Younger individuals in rural regions are less likely to engage in entrepreneurship compared to older individuals.
2.2 Role models
Over the years, researchers have identified the importance of role models in entrepreneurship (Bosma, Hessels, Schutjens, Van Praag, & Verheul, 2012; Contin-Pilart & Larraza-Kintana, 2015; Gibson, 2004; Gnyawali & Fogel, 1994; Krueger & Brazeal...
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