Portfolio Entrepreneurship in Slovakia
Empirical analysis of small and medium sized enterprises
©2014
Academic Paper
144 Pages
Summary
Business in the beginning of the 21-st century faces very turbulent times as the developments on the debt-crises have threatened the European market. These turbulent times are characterized by doubts on financial markets, the rising of state taxes and inflation, which turns also in difficulties for small and medium sized enterprises. Especially the group of small and medium sized enterprises, which cannot benefit from economies of scale and scope and other advantages, are threatened the most. It requires special alertness in spotting ideas and to combine resources to overcome this entrepreneurial disaster crossing Europe. Especially for small export-oriented countries like Slovakia, which depends on foreign trade, must handle this situations very patient and carefully in order to protect their own small and medium sized enterprises and thus its employment rate. […] Accordingly this thesis represents a complex view about portfolio entrepreneurs with special focus on a region of the Slovak Republic, which is the country of analysis. It delivers new insights about the personality and abilities, capabilities, skills and traits of portfolio entrepreneurs. Thus delivers a special significance for the development of portfolio entrepreneurship, which is derived from the entrepreneurship research. Furthermore this diploma thesis represents a kind of forerunner in this research area for the Slovak Republic as no comparable research done on this theme could be researched during the conducting of the analysis.
The reader will have the chance to find out valuable information about the state of the art literature contributed by other authors in the theoretical part of this thesis. This literature research has been developed from English speaking literature and is notified at the end of the diploma thesis, what makes it affordable for subsequent studies. Subsequently, the results of this study, which has been built on the grounds of extensive literature review, will be presented in the results part. These results have been obtained by a series of in-depth interviews with researched successful portfolio entrepreneurs. In consequence the results come up with new, until now not researched results presented in a very user friendly kind, enriched by citations of portfolio entrepreneurs, expressed during the in-depth interview. […]
The reader will have the chance to find out valuable information about the state of the art literature contributed by other authors in the theoretical part of this thesis. This literature research has been developed from English speaking literature and is notified at the end of the diploma thesis, what makes it affordable for subsequent studies. Subsequently, the results of this study, which has been built on the grounds of extensive literature review, will be presented in the results part. These results have been obtained by a series of in-depth interviews with researched successful portfolio entrepreneurs. In consequence the results come up with new, until now not researched results presented in a very user friendly kind, enriched by citations of portfolio entrepreneurs, expressed during the in-depth interview. […]
Excerpt
Table Of Contents
3.1.3.4
Risk-taking propensity ... 27
3.1.3.5
Entrepreneurial self efficacy ... 27
3.2
Motivations to become a portfolio entrepreneur ... 28
3.2.1
Background and motivations ... 29
3.2.2
Entrepreneurial search process ... 32
3.2.3
Financing business process... 33
3.2.4
Organizational capabilities... 34
3.2.5
Entrepreneur and business performance ... 35
3.3
SME´s clustering in peripheral locations... 36
3.3.1
Stable, independent survivors with no growth aspirations, operating local
markets... 39
3.3.1.1
Characteristics of entrepreneurs ... 40
3.3.1.2
SME´s life cycle ... 40
3.3.1.3
Strategic choices ... 40
3.3.1.4
Success and survival factors ... 41
3.3.1.5
Recapitulation of the most important facts ... 41
3.3.2
Innovator with continuous growth, operating in growing markets ... 42
3.3.2.1
Characteristics of entrepreneurs ... 43
3.3.2.2
SME´s life cycle ... 43
3.3.2.3
Strategic choices ... 43
3.3.2.4
Success and survival factors... 45
3.3.2.5
Recapitulation of the most important facts ... 45
3.3.3
Efficiency-oriented networker with leap-wise growth... 46
3.3.3.1
Characteristics of entrepreneurs ... 47
3.3.3.2
SME´s life cycle ... 47
3.3.3.3
Strategic choices ... 48
3.3.3.4
Success and survival factors ... 49
3.3.3.5
Recapitulation of the most important facts ... 49
3.3.4
Comparison of survival factors of the three clusters ... 50
3.4
SME´s management in context of portfolio entrepreneurship ... 51
3.4.1
Management and entrepreneurial teams ... 53
3.4.2
Management team... 54
3.4.2.1
Advantages of a management team ... 56
3.4.2.2
Disadvantages of a management team ... 57
3.4.3
Entrepreneurial team ... 57
3.4.4
Strategies to setup a management respectively entrepreneurial team ... 59
3.4.4.1
Management Buy-Out (MBO) ... 60
3.4.4.2
Management Buy In (MBI) ... 62
3.4.4.3
Buy-In Management Buy-Out (BIMBO) ... 63
4
Empirical Part ... 64
4.1
Research methodology ... 65
4.1.1
Quantitative vs. Qualitative approach ... 65
4.2
Qualitative research design ... 67
4.2.1
In-depth Interview ... 68
4.2.1.1
Cost and Time... 69
4.2.1.2
Background research ... 69
4.2.1.3
Limited access to the interviewee ... 70
4.2.2
Conducting the in-depth interview ... 70
4.2.2.1
Location... 70
4.2.2.2
Interview schedule... 71
4.2.2.3
Analysis ... 71
4.3
Conducting research ... 72
4.3.1
Search for portfolio entrepreneurs... 73
4.3.2
Taking initial contact ... 74
4.4
Results presentation ... 75
4.4.1
Interview structuring ... 77
4.4.2
General information's about portfolio entrepreneurs... 77
4.4.3
Push/Pull factors ... 81
4.4.4
Traits approach ... 82
4.4.5
Motivation to become Portfolio Entrepreneur ... 85
4.4.5.1
Background & motivations ... 85
4.4.5.2
Entrepreneurial search process ... 87
4.4.5.3
Financing business process... 88
4.4.5.4
Organizational capabilities... 89
4.4.5.5
Entrepreneur and business performance ... 90
4.4.6
SME´s clustering in peripheral locations... 91
4.4.6.1
Stable, independent survivor with no growth aspirations, operating local
markets... 92
4.4.6.2
Innovator with continuous growth, operating in growing markets ... 93
4.4.6.3
Efficiency-oriented networker with leap-wise growth... 95
4.4.7
SME´s management in context of portfolio entrepreneurship ... 96
5
Conclusion... 99
5.1
Relevancy for entrepreneurship ... 99
5.2
Limitations ... 102
5.3
Future research ... 104
6
List of references ... 107
List of Tables
Table 1: Quantitative SME distinction by European Commission ... 13
Table 2: Legal units by legal form and size category by employees of Dec. 31, 2010 ... 18
Table 3: Background and Motivations... 31
Table 4: Entrepreneurial search process ... 33
Table 5: Financing business process... 34
Table 6: Organizational capabilities... 35
Table 7: Entrepreneur and business performance... 36
Table 8: SME´s clustering in peripheral locations ... 37
Table 9: SME clustering in peripheral locations... 38
Table 10: Most important facts... 42
Table 11: Most important facts... 46
Table 12: Most important facts... 50
Table 13: Survival factors by clusters ... 51
Table 15: Structure of economic subjects in Lednické Rovne ... 74
Table 16: Sample ... 76
Table 17: Push/Pull Factors to become self employed ... 81
Table 18: Trait approach... 83
Table 19: Background and motivations ... 86
List of Figures
Figure 1: Europe and CEE region ... 16
Figure 2: Five personality traits of entrepreneurs ... 21
Figure 3: Entrepreneurial traits, The Big five personality dimensions ... 28
Figure 4: MBO Process by CCI ... 61
Figure 5: Trencín County, Slovakia ... 73
Figure 6: Recognition of new business opportunities ... 87
Figure 7: Financing business process ... 88
Figure 8: Entrepreneur and business performance ... 90
Figure 9: Stable independent survivor with no growth aspirations, operating local
markets (I) ... 92
Figure 10: Stable independent survivor with no growth aspirations, operating local
markets (II) ... 93
Figure 11: Innovator with continuous growth, operating in growing markets (II) ... 94
Figure 12: Efficiency-oriented networker with leap-wise growth (I) ... 95
Figure 13: Efficiency-oriented networker with leap-wise growth (II) ... 96
Figure 14: SME´s management ... 97
Figure 15: Motivations for establishment of a management team ... 97
List of acronyms
AG
Aktiengesellschaft
BIMBO
Buy In Management Buy Out
CEE
Central and Eastern Europe
CEEC´s
Central and Eastern European Countries
CEFTA
Central European Free Trade Agreement
CEO
Chief
Executive Officer
CNC
Computer Numerical Control
E.g.
For example
Etc.
And so forth
EUR
Euro
FDI
Foreign
Direct
Investments
GDP
Gross Domestic Product
ICT´s
Information and Communication Technologies
IMF
International Monetary Fund
Ltd.
Limited
Company
MBI
Management Buy In
MBO
Management Buy Out
MNE´s
Multinational Enterprises
MSP Online
Small and Medium-sized Enterprises Online
N.A.
Not
Available
NADSME
National Agency for Development of Small and Medium Enterprises
NATO
North Atlantic Treaty Organization
OECD
Organization for Economic Co-operation and Development
R&D
Research
&
Development
SME
Small and Medium-sized Enterprises
UN
United
Nations
WTO
World trade organization
Executive summary
Business in the beginning of the 21-st century faces very turbulent times as the
developments on the debt-crises have threatened the European market. These turbulent times
are characterized by doubts on financial markets, the rising of state taxes and inflation, which
turns also in difficulties for small and medium sized enterprises. Especially the group of small
and medium sized enterprises, which cannot benefit from economies of scale and scope and
other advantages, are threatened the most. It requires special alertness in spotting ideas and to
combine resources to overcome this entrepreneurial disaster crossing Europe. Especially for
small export-oriented countries like Slovakia, which depends on foreign trade, must handle
this situations very patient and carefully in order to protect their own small and medium sized
enterprises and thus its employment rate.
Thus the personality of the entrepreneurs and its continuous flexibility for adaptation to the
new circumstances at the markets is one of the main forces in developing healthy economic
developments. For this purpose, the individual in the market environment, the entrepreneur,
deserves special focus as the carrier of entrepreneurial values. As the empirical data refers, the
group of small and medium sized companies is the most common in the market with ranging
over 99 % of overall businesses units per country. But it is about the person and its abilities to
develop the business from the scratch, into a well working economic unit.
Thus the entrepreneurial research turned to focus on the business man or women, to analyze
these individuals in more detail. Many entrepreneurial research directions developed since
that time. One of those concentrates on the group of entrepreneurs, whose main characteristic
is to own and lead two and more business simultaneously. As a consequence, this diploma
thesis main goal is to study this valuable group of entrepreneurs. The outcomes of this
analysis come up with certain attributes describing the group of portfolio entrepreneurs. This
is important for certain reasons. The group of portfolio owners distinguishes itself from other
groups of entrepreneurs above all in the way of doing business, the motivation to lead this
business and many others attributes handled in detail in the following diploma thesis. This
will answer many questions about the phenomenon portfolio entrepreneur, from the
theoretical research as well as the empirical viewpoint. This study encompasses a set of
interviews with real portfolio entrepreneurs with the sample of ten individuals.
Accordingly this thesis represents a complex view about portfolio entrepreneurs with special
focus on a region of the Slovak Republic, which is the country of analysis. It delivers new
insights about the personality and abilities, capabilities, skills and traits of portfolio
entrepreneurs. Thus delivers a special significance for the development of portfolio
entrepreneurship, which is derived from the entrepreneurship research. Furthermore this
diploma thesis represents a kind of forerunner in this research area for the Slovak Republic as
no comparable research done on this theme could be researched during the conducting of the
analysis.
The reader will have the chance to find out valuable information about the state of the art
literature contributed by other authors in the theoretical part of this thesis. This literature
research has been developed from English speaking literature and is notified at the end of the
diploma thesis, what makes it affordable for subsequent studies. Subsequently, the results of
this study, which has been built on the grounds of extensive literature review, will be
presented in the results part. These results have been obtained by a series of in-depth
interviews with researched successful portfolio entrepreneurs. In consequence the results
come up with new, until now not researched results presented in a very user friendly kind,
enriched by citations of portfolio entrepreneurs, expressed during the in-depth interview.
Finally the reader will have the chance to read the authors opinion about the relevancy of this
study for the entrepreneurship research, as well as the limitations as perceived by the author.
Not less relevant are the suggested future research themes as supposed as not sufficiently
researched yet in the view of the author. These themes may lay ground for subsequent
research on portfolio entrepreneurship, which may be also based on this diploma thesis.
1
1 Introduction and objectives
1.1
Portfolio entrepreneurship in Slovakia
The importance of the portfolio entrepreneurship is becoming still more recognized as they
are tagged as individuals undertaking activities which have significant impact on the creation
of new ventures.
1
Thus national economies are significantly shaped by these groups of
managers, who are estimated as to be the creators of approximately 12 to 20 % of newly
founded ventures.
2
Furthermore the annual OECD Entrepreneurship outlook published in
2005 described SME´s as the driving force in creating job opportunities and wealth creation.
3
According to the OECD the SME´s gathered the world-wide recognition of being a key
source of dynamism, innovation and flexibility, what is true for both; emerging and
developing as well as advanced economies.
4
Slovakia, as a prior communist country, where private business till the fall of iron curtain in
1989 was very hard to undertake, faces emergence of private business nowadays.
5
However
the time of centralized economy and political dictation was characterised by centralised
control about all economic activity and forced nationalization of private business.
Furthermore the present political and economic developments are very turbulent. Joined with
the growing interdependence of the world economy characterized by falling barriers to free
flow of goods and services, advances in communication technologies and decreasing
restrictions to free movement of capital, people and natural resources; these caused a
considerable change in the business environment.
6
Several attempts of legislative support given by governments imposed agencies like National
Agency for Development of Small and Medium Enterprises (NADSME) or SME Online
(MSP Online) were imposed on the purpose of contributing to the SME entrepreneurship in
1
Cf. Nordqvist and Zellweger (2010), P. 96
2
Cf. Carter and Ram (2003) in Nordqvist and Zellweger (2010), P. 96
3
Cf. OECD (2005), P. 7
4
Cf. OECD (2005), P. 16
5
Cf. Statistical Office of the Slovak Republic,
http://portal.statistics.sk/showdoc.do?docid=3017
[10.06.2011]
6
Cf. Tata McGraw Hill (2010), P. 11
2
Slovakia.
7
These agencies undertake regular surveys, events, support functions, training
programmes, take part on projects and published products to suit all needs of SME
entrepreneurship.
8
Despite this support to the entrepreneurship, there is still a shortage on problems solved
according to the needs and issues portfolio managers face in their day to day business.
Missing literature, support and guidance, these entrepreneurs are not able to derive all
possible benefits out of the possibilities. They cannot build up knowledge, skills and abilities
in organizational as well as managerial way to the full extent. Especially for Slovak portfolio
entrepreneurs, these must find their own ways how to lead their portfolio businesses
successfully.
This diploma thesis should therefore give a theoretical, as well as, practical support for
practitioners and theorists, who are looking for support in doing business as a portfolio
entrepreneur. Furthermore it should provide an overview for the legislature makers with
valuable information's which should vice versa help to enhance the entrepreneurial
environment in Slovak region.
Another contribution is to analyse the needs, backgrounds, motivations, drawbacks, issues
and further more specific information's about portfolio entrepreneurship. What are the
motivations and tensions to establish and enlarge more than one business at a time? What are
the triggers to become a portfolio entrepreneur? Where and why portfolio entrepreneurship
occurs? Who usually becomes a portfolio entrepreneur? What are the consequences for the
economy and employment? How can the national competitiveness be increased through these
entrepreneurs?
7
Cf. MSP Online,
http://msponline.sk/
[21.06.2011]
8
Cf. NADSME,
http://www.nadsme.sk/en
[21.06.2011]
3
1.2
Research objectives, delimitation and research questions
The research on portfolio entrepreneurship as a whole could achieve a lot of consideration as
the general public, policymakers, scientific research and last but not least the entrepreneurs
themselves felt a knowledge deficiency about the phenomenon itself.
9
In the authors opinion
all of the abovementioned actors are now seeking for increasing the self-efficiency and
productivity of the subject of entrepreneurship for very different reasons.
10
Starting with the
general public, who takes share in the entrepreneurial value creation and wealth creation
process undertaken by the private sector. Next the policymakers, whose main objective it
should be to ensure a sustainable and sound development of a healthy business environment.
The scientific research could build up a new discipline around portfolio entrepreneurship,
where many variations exist and still unanswered questions occur. But the most important
group, who is a recipient and implementer of agendas covering entrepreneurship are the
portfolio entrepreneurs themselves. Thus this diploma thesis research objective should serve
as a conceptual basis for further development. Despite the still growing amount of research
done on entrepreneurship, particularly portfolio entrepreneurship, there are huge differences
from country to country. Without any doubts the valuable group of portfolio entrepreneurs has
been neglected in the scientific literature for long time.
11
1.2.1 Objectives
The neglecting of portfolio entrepreneurship is a reason more to undertake such a research in
the sparsely researched Slovak territory. In the following paragraph the objectives of this
study will be settled in the endeavour to analyse Slovak portfolio entrepreneurs.
This thesis will be developed for the purpose of gaining information and knowledge
about the personality characteristics and the types of businesses founded by portfolio
entrepreneurs in the region of Slovak republic
9
Cf. Westhead (2005), P. 109
10
Cf. Westhead (2005), P. 110
11
Cf. Westhead (2005), P. 110
4
For this purpose, the state of the art literature about portfolio entrepreneurs will be
analysed and classified, in order to build up a sufficient basis for deriving conclusions
about the similarities and differences. These conclusions will be either proved or
rejected according to the gained primary data from the face to face in depth interviews
The literature will predominantly originate from English speaking literature. There
will be no or very little Slovak empirical literature used about portfolio
entrepreneurship, as there is, in the authors opinion scarce literature on portfolio
entrepreneurs in this region
The results of this thesis should be used as the basis for further research on portfolio
entrepreneurship. Despite the broad scope of this research, the aim of this study is to
find answers on as much questions about what is perceived as favourable and reversed
barrier to become and be a successful portfolio entrepreneur. Another issue is to
support the further extension of research on entrepreneurship in Slovakia, where basic
statistical data about e.g. entrepreneurial statistics are insufficient. Additional data
should be collected about the amount of portfolio entrepreneurs, number of employees
employed by them, branch heterogeneity and number of enterprises owned by the
portfolio entrepreneurs
Continual analysis and cooperation within the SME infrastructure (NADSME, MSP
Online) and the portfolio entrepreneurs should be promoted. One of the objectives is
to analyse the level of cooperation among the portfolio entrepreneurs and the
government established support organizations. This should lead to a better spread of
awareness, acknowledgement and diffuseness of knowledge about the portfolio
entrepreneurship
5
1.2.2 Delimitation
It must be noted here, that it is not the aim of this thesis to find out reasons why usually all
types of SME´s fail and what are the reasons for their failure or success. Nor is the aim to
derive knowledge and information's about all SME types in Slovakia. Furthermore it is
supposed that the reasons why habitual, novice, serial or portfolio entrepreneurs found their
business differ markedly. The main goal of the research is to specialize on analysis of the
portfolio entrepreneurship, meaning that other tensions must be clearly delimitated.
Additionally the region of Slovakia and its environmental conditions are the only scope of this
thesis.
1.2.3 Research questions
Doing research on portfolio entrepreneurs is a very challenging assignment. This is true
because portfolio entrepreneurs are known as very heterogeneous group of entrepreneurs,
whose main characteristic is to lead, at minimum, two and more businesses simultaneously.
12
13
The portfolio entrepreneurship could gain importance only in the short past, while it was for
a very long time overlooked or ignored. Only a few authors undertook research on this
subgroup of entrepreneurship.
14
The most cited author in respect of portfolio entrepreneurship Paul Westhead et al. (2005)
defines the portfolio entrepreneur as following: "... individual who currently have minority or
majority ownership stakes in two or more independent businesses that are either new,
purchased and/or inherited."
15
There are no more delimitating characteristics found in the literature, which could gain broad
acceptance among academics. Another reason for why the personality of a portfolio
entrepreneur must be analysed as whole is, that there is a scarce literature done so far about
12
Cf. Tihula & Huovinen (2010), P. 250
13
Cf. Woo et al. (1991) in Westhead (2005), P. 109
14
Cf. Pasanen (2003), P. 418
15
Cf. Westhead (2005), P. 111
6
personality traits and strategic, organizational capabilities and the size and scope of such
entrepreneurs.
16
In accordance of these definitions, following research questions are derived. These
incorporate the main issues about portfolio entrepreneurship and shall answer the questions
about the portfolio entrepreneurship in Slovakia.
What are the personal traits and characteristics of the portfolio entrepreneurs? What
are the triggers of becoming a portfolio entrepreneur? Can be any push or pull factors
recognized? In which industries is it usual for the portfolio entrepreneur to set up
businesses? What are the individual's background and business characteristics? What
can be found about financial, organizational, marketing, production, networking and
other capabilities?
1.3
Structure of the diploma thesis
The first Chapter deals with the general introduction the topic of portfolio entrepreneurship
in the Slovak Republic. Aim of the first chapter is to define the difficulty of portfolio
entrepreneurship in Slovakia, as the main problem statement, and accentuate its importance
for the entrepreneurial research. Furthermore the appropriate research methodology will be
explained and goals will be settled in accordance with the thesis objectives. Moreover the
research objectives will be discussed in order to make clear, what is to be researched and what
are the limitations of this study. In the latter part of first chapter, research questions will be
stated.
The general definitions about the portfolio entrepreneurship and other important vocabulary
needed for coping with this thesis will be analysed in chapter two. These definitions will be
derived from deep and wide literature analysis. The main aim of this section is to make the
reader familiar with the vocabulary used throughout this thesis. As in some respect the
phenomenon portfolio entrepreneurship is derived from the common term habitual
entrepreneur and is also very often joined with the serial and novice entrepreneur; clear
16
Cf. Westhead (2005), P. 110
7
distinction must be undertaken. This is caused partly by the relative unconscious use of terms
and newness of portfolio entrepreneurship in the literature and business research.
Furthermore main motivations, drawbacks, advantages and disadvantages of being a portfolio
entrepreneur will be researched in chapter three. The in depth research of portfolio
entrepreneurship will reveal theoretical as well as conceptual answers about the traits of
portfolio entrepreneurs. It will be cleared, what types of SME´s the portfolio entrepreneurs
usually found and why. The theoretical background will be joined with the personality of a
portfolio entrepreneur. This information should be a good basis for practitioners, to avoid
mistakes in dealing with the phenomenon portfolio entrepreneur. The state of the art literature
will be here presented on the purpose to derive valuable conclusions on the empirical part.
The fourth chapter main objective is it to describe the procedure of the used research
methodology. This part can also be called the empirical part, where the results of the
interviews will be presented and evaluated. Its main objective is it to either confirm or reject
the theory about portfolio entrepreneurship on the case studies of Slovak portfolio
entrepreneurs. The implementation, conducting of research, act of interviewing and the kind
of taking contact and negotiating will be described as well in chapter four. Finally the results
will be presented within this part.
Finally chapter five, where the scientific goal of the diploma thesis will be presented, will
take place. Conclusions about the thesis will be derived as well as the relevancy for the
entrepreneurship. Discussion about the results and future study outlooks will be discussed and
performed. Furthermore, the obtained knowledge about the case studies should be used as one
of the first theoretical attempts to support portfolio entrepreneurship in Slovak region.
8
2 Definition of portfolio entrepreneurship
This chapter objective is to provide the reader with reliable knowledge and vocabulary about
the portfolio entrepreneurship. Extensive definition review of portfolio entrepreneurship
found in literature will provide a construct throughout this thesis. Distinction between
habitual, novice, serial and portfolio entrepreneurs must be undertaken for the purpose of
avoiding conceptual misunderstandings. In the subsequent chapter the SME in the context of
portfolio entrepreneurship will be handled from the quantitative as well as qualitative
perspective. Slovakia as a member of the CEE region and the entrepreneurial structure of
Slovakia will be defined next. Finally the trait and behavioural approach of entrepreneurs will
be discussed in order to define the characteristic individual of entrepreneur. The analysis of
the portfolio entrepreneur traits and behaviour plays a crucial role in this thesis.
2.1
Entrepreneurship definition review
In the entrepreneurial theory a basic distinction between the individuals indicated as most
influential decision-makers or the typology of businesses owners is crucial for the
understanding and avoiding of confusion.
17
One of the first intentions to define habitual
entrepreneurs as persons who are experienced in founding several firms and who are
simultaneously committed to at least two firms was undertaken by MacMillan (1986).
18
These
habitual entrepreneurs were further divided by Hall into serial and portfolio entrepreneurs,
this contribution was crucial as the traits and business strategies of these two groups of
entrepreneurs differ markedly.
19
The main definitional issues were undertaken by Paul Westhead et al. (Westhead, Ucbasaran,
Wright, Binks, 2005), who distinct three types of business owners. In the scientific work of
Novice, Serial and Portfolio Entrepreneurship Behaviour and Contributions, novice
entrepreneurs, serial entrepreneurs and portfolio entrepreneurs are illustrated as explained
17
Cf. Westhead (2005), P. 111
18
Cf. MacMillan (1986), in Huovinen
&
Tihula (2006), P.4
19
Cf. Hall (1995), in Huovinen
&
Tihula (2006), P.4
9
below.
20
However, the portfolio entrepreneur is the main target group of this diploma thesis,
and this is why this group of entrepreneurs is considered the most with all aspects found in the
literature review.
2.1.1
Novice entrepreneur
Novice entrepreneurs are characterized as individuals who have no prior experience with
minority or majority business ownership either as business purchasers, inheritors, or business
founders yet. However, these entrepreneurs own currently a minority or majority equity stake
in a business, which has been founded, inherited or purchased.
21
Hall (1995) characterized
this group of novice entrepreneurs as either preceding stage for serial and portfolio
entrepreneurs as independent category.
22
This suggestion is supported by the intention of
Westhead et al. (1998), who stated that founders in this novice category may themselves
become at the later date serial or portfolio entrepreneurs.
23
2.1.2 Serial entrepreneur
Serial entrepreneurs are individuals, who were owners to a minority or majority ownership
stake in a business, which was either sold or closed. Furthermore these serial entrepreneurs
decided to found or purchase a new business, or became inheritors of a business with a
minority or majority ownership stake in a single independent business.
24
According to Hall
(1995) these entrepreneurs own one business after another, but only one business at a time.
25
These entrepreneurs occur due to the entrepreneurial inability to develop the enterprise.
26
They are seen as relinquishing the business at the right moment, and then repeating the whole
20
Cf. Westhead (2005), P. 109
21
Cf. Westhead (2005), P. 111
22
Cf. Hall (1995) in Huovinen
&
Tihula (2006), P. 4
23
Cf. Westhead (1998), P. 176
24
Cf. Westhead (2005), P. 111
25
Cf. Hall (1995) in Morrish, Levy and Dong (2009), P. 2
26
Cf. Westhead et al. (2004) in Huovinen
&
Tihula (2006), P. 4
10
process in another business again.
27
Other authors suggest that they are often cautious and
experience non-specific and uncertain situations as threatening.
28
Westhead et al. (2005)
describes the strengths of the serial entrepreneur as often joined with certain expertise,
whereas outside help shall be necessary in order to reap and exploit the market and to
commercialize the know-how.
29
2.1.3 Portfolio entrepreneur
Portfolio entrepreneurs are according to Westhead et al. (2005), individuals possessing
more diverse experiences, and dispose with more resources than serial or novice
entrepreneurs. Furthermore, the group of portfolio entrepreneurs is seen as important sub-
group of entrepreneur theory, who make a fundamental contribution to the wealth-creation
process.
30
These entrepreneurs are individuals, who currently own two or more independent
businesses with minority or majority ownership stakes, while the businesses has been founded
new, purchased and/or inherited.
31
Portfolio entrepreneurs usually aim at expanding their
original firm for the purpose of increasing their wealth (Iacobucci, 2002), or at leveraging
their profits by developing and seeking for new sources of income in the form of a new
investment (Carter, 1998).
32
Another reason for the occurrence of portfolio entrepreneurs is
the survival strategy, meaning that portfolio entrepreneurs are motivated to establish their
portfolio business in order to find alternative income sources in order to survive their
businesses.
33
Portfolio entrepreneurs can be also found to be seeking for more profitable sources of income
on other markets, if they perceive insufficient income situation in their home market in the
present context. This seeking for more profitable markets is a motivation for portfolio
27
Cf. Wright et al. (1995) in Huovinen & Tihula (2006), P. 4 and Wright et al. (1997), P. 231
28
Cf. Westhead et al. (2005), P. 127
29
Cf. Westhead et al (2005), P. 122
30
Cf. Scott & Rosa (1996) in Westhead (2005), P. 110
31
Cf. Westhead (2005), P. 111
32
Cf. Iacobucci (2002) and Carter (1998) in Huovinen & Tihula (2006), P. 4
33
Cf. Jones & Dimitratos (2004), P. 92
11
entrepreneurs to allocate and differentiate their business activities.
34
According to Westhead
portfolio entrepreneurs are more growth oriented than serial entrepreneurs and more receptive
in recognising business opportunities than their counterparts.
35
Different reason for why
portfolio entrepreneurs occur is if they fund a new enterprise to experiment or to test the
performance of a new product, service or idea; thus the entrepreneurs strive to limit the effect
of a possible failure and risk.
36
The thesis author definition of portfolio entrepreneur, by Branislav Zúrik, is the following:
"The portfolio entrepreneur is derived from the group of habitual entrepreneurs, where serial
and portfolio entrepreneurs can be distinguished. This latter group of portfolio entrepreneurs
possess a larger portion of capabilities, skills and resources, what allows them to undertake
two and more businesses simultaneously. Furthermore this group of entrepreneurs can be
found in very heterogeneous branches within a limited region of performance."
37
2.2
SME´s in the context of portfolio entrepreneurship
Research experts of entrepreneurship handle the group described as portfolio entrepreneurs as
stemming from the group of SME.
38
There is a majority of entrepreneurs accounting for more
than 99, 7 % classified as SME´s in Slovakia.
39
The knowledge about who is considered as
portfolio entrepreneur, how to support develop and threat this subgroup of entrepreneurs is
missing in the Slovak entrepreneurship research. Despite the clear absence of knowledge
derived from real case empirical research done on the personality traits and backgrounds of
this group of entrepreneurs, there is a still increasing demand for resources.
The theoretical research about the state of the art definitions by European Commission
delivered surprisingly poor information about the SME in the European Union context. As the
34
Cf. Carter (1998)/Iacobucci & Rosa (2003) in Huovinen & Tihula (2006), P. 4-5
35
Cf. Westhead (2005), P. 119
36
Cf. Iacobucci (2002)/Rosa (1998) in Huovinen & Tihula (2006), P. 5
37
Cf. Definition by Branislav Zúrik (2011)
38
Cf. Nordqvist and Zellweger (2010), P. 96
39
Cf. Statistical Office of the Slovak Republic (2011)
12
SME and Entrepreneurship Outlook
40
, published by the OECD (2005), points out very
precisely, the full potential remains remarkably untapped.
41
The overall definitions done by
OECD is in the authors opinion best suited for the purpose of shedding light on the issues
plaguing the SME in international context. This is true also in the light of the international
scope of OECD, who embraces EU and non-EU members.
The following definition undertaken by OECD serves as a comprehensive view of all
activities and recent developments of SME´s. It poses an either descriptive character what in
turn is important for the understanding of scale and scope of SME´s.
"SMEs and entrepreneurship continue to be a key source of dynamism, innovation and
flexibility. They account for over 95% of enterprises, generate two-thirds of employment and
are the main source of new jobs. Entrepreneurial activity is especially dynamic in knowledge-
based services. Women´s entrepreneurship has recently shown vibrant growth. SMEs
increasingly engage in cross-border alliances and inter-firm collaboration. SMEs are
particularly innovative in knowledge-intensive services, new technology-based firms, showing
their capability to renew technology. SMEs increasingly rely on networks, clusters and
partnerships for accessing information and new technologies. ICTs and e-business
applications present a growing range of benefits to SMEs. To reap the full fruits of innovative
activity, SMEs need to use effectively the intellectual property rights system."
42
2.2.1
Quantitative SME approach
The executive body of European Union, the European Commission, adopted the
Recommendation 2003/361/EC regarding the new SME definition on 6 May 2003. This
became active from 1 January 2005 and its main objective is to take account of the economic
developments since 1996. It raises financial ceilings in respect of price and productivity
increases and introduces a typology of enterprises. Furthermore used calculative methods
provide a realistic picture of the economic strength of selected enterprises. The main idea is to
deliver a clear distinction among genuine SME and SME being part of a larger group
40
Cf. OECD (2005),
https://www.camaras.org/publicado/europa/pdf/8505011E.pdf
[25.05.2011]
41
Cf. OECD (2005), P. 7
42
Cf. OECD (2005), P. 15
13
(corporation). This is important in the light of providing economic backing, in the form of
SME support schemes, which should be withhold for grouped organizations.
In accordance to the new SME definition we can distinguish between micro, small and
medium-sized enterprises. In order to be categorized as SME the enterprise must fulfil the
various criteria summarized in the Table 1 encompassing staff headcount ceiling, and either
the turnover ceiling or the balance sheet ceiling, but not necessarily both.
Table 1: Quantitative SME distinction by European Commission
43
According to this selection micro enterprises are these with fewer than 10 employees and less
than 2 millions in turnover or that same sum in balance sheet total. Next we differentiate
small enterprises which have fewer than 50 and a minimum of 10 employees while reaching
less than 10 millions in turnover or less than 10 millions in balance sheet total. Finally the
enterprises characterized as medium-sized have less than 250 employees and less than 50
million in turnover or 43 million in balance sheet total.
2.2.2 Qualitative SME approach
The aforementioned quantitative approach helps to define the SME in absolute numbers by
setting limits in headcounts, turnover and balance sheets, but fails to describe the organic
principle which plays an even bigger role in understanding the SME issue. These qualitative
definitions should provide a better overview of what constitutes the SME from very different
angle. It is important to note that there is no commonly accepted qualitative definition of SME
43
Cf. European Commission,
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-
definition/index_en.htm
[24.02.2012]
14
rather these provide a catalogue of possible qualitative characteristics. Despite the
heterogeneity of opinions about the qualitative criteria, employing these can enhance the
quantitative definition.
44
This way characterized Preston et al. (1986) the SME as
independently owned and operated and not dominant in its field of operations.
45
Volkmann
Tokarski and Grünhagen (2010) mention i.e. influence of the personality of the entrepreneur,
close contact between management and staff of the enterprise, low degree of formalization of
the organization and flat hierarchies as examples of qualitative demarcation of the SME.
46
The literature research derived following qualitative criteria, which should constitute a SME.
Scott and Bruce (1987) developed following qualitative criteria:
47
The management is independent; often are the managers the owners of the SME
The capital is supplied and some individual or a small group holds the ownership
These SME´s are usually operating locally. The employees and owners often create
and constitute in a common community, but their markets are not tied to the home
community
Another contribution has been done by the Bolton Committee
48
, whose description of the key
characteristics of a small firm is granted as one of the best among researchers.
49
The Bolton
Report also adopted different statistical definitions consciously recognizing the size of
relevant sector. On these suggestions following traits of a small firm has been elaborated:
50
Has relatively small share of a competitive market
Is unable to influence prices, so it has a low bargaining power
44
Cf. Scott and Bruce (1987)/Gupta (1988) in Analoui and Karami (2003), P.25
45
Cf. Preston et al. (1986) in Analoui and Karami (2003), P.25
46
Cf. Volkman, Tokarski and Grünhagen (2010), P. 28
47
Cf. Scott & Bruce, R. (1987), P. 45-52.
48
Cf. Bolton (1971), in Analoui & Karami P. 26
49
Cf. Analoui & Karami (2003), P. 25
50
Cf. Analoui & Karami (2003), P. 26
15
The management is assumed to have a close personal involvement in all aspects of
decision-making. In the case of commercial organization they are likely to be the
owner or part-owners
Is independent, while the owner/manager possesses effective control over the business
or organizational activities. However they might be limited in their freedom of action
by obligation to financial institutions or founders
2.3
Slovakia and CEE region
The regional block of Central and Eastern European Countries (CEEC´s, CEE) comprise
above all former socialist countries which are stretched in the region from the East German
border, to the south of the Baltic Sea and limited by the border with Greece in the south. The
literature on the definition of the CEE is again inconsistent in respect to the members and
general definition of the region, where different explanations exist. The OECD serves again
as the main actor in defining CEECs. According to the OECD CEECs is an OECD term for
the group of countries consisting of Albania, Bulgaria, Croatia, the Czech Republic, Hungary,
Poland, Romania, the Slovak Republic, Slovenia and the Baltic States Estonia, Latvia and
Lithuania.
51
Nevertheless in many author publications Slovakia has been granted as the one of
the most competitive and reforming countries in the CEE region.
52
Even within the regional block of CEE, there were huge differences in the time of
communism. So the countries like Poland (30 % of total employment in the private sector)
and Hungary (10 %) were allowed to establish private enterprises before 1989, in comparison
the private sector in former Czechoslovakia accounted for less than 5 % of total
employment.
53
For these reasons, we cannot handle whole CEE region as equal case in
respect to the freedom of trade, as this is still quite new phenomenon in Slovak Republic.
51
Cf. OECD, (2011)
http://stats.oecd.org/glossary/detail.asp?ID=303
[21.06.2011]
52
Cf. Oomes (2004), P. 187
53
Cf. Blokker and Dallago (2008), P. 49
16
Figure 1: Europe and CEE region
54
Slovakia became, thanks to the political and economical transition, one of the best performing
countries within the CEE and it could gain high regard by Multinational Enterprises (MNE´s)
in the race for foreign direct investments (FDI). Thus ongoing economic reforms,
privatisation and strategic partnerships with government hold strategic enterprises and the
abundance of qualified and relative cheep workforce, together with the raising image attracted
foreign investors to invest FDI into Slovakia.
55
2.4
Entrepreneurial structure
The entrepreneurial structure of a country is given by the legal forms with very different
rights and obligations according to the chosen legal form. Such a registration of a new
54
Cf.
http://maps.google.sk/maps
, [07.07.2011]
55
Cf. Jungmann and Sagemann (2011), P. 526
17
company entails several procedural stages. These procedural issues in Slovakia can take
anything between five and thirty days and a mandatory registration at the County Registry
Court additional 5 days. Meaning that a maximum time to set up a firm should take at
maximum 35 days.
56
According to Jonathan Reuvid there are six most common legal forms
established by the law offered in Slovakia, comprising the following options:
57
Joint stock company (a.s.)
Limited liability company (s.r.o.)
General partnership (v.o.s.)
Limited partnership (k.s.)
Cooperative
Association of legal entities
As illustrated in Table 2, the most common legal form established in Slovakia within the
private sector is the "Limited Liability Company" with more than 127 778 (21 %). Followed
by 5 547 (0, 9 %) "Joint Stock Companies". The group of "Sole traders entrepreneurs",
plays a specific role, consisting of substantial amount of 410 308 (67, 5 %).
58
As indicated the
group of "Joint stock companies", "Limited liability companies" and "Sole traders
entrepreneurs" play in the entrepreneurial structure of Slovakia a crucial role, this is the
reason for explaining these three legal forms in more depth below.
56
Cf. Lowtax,
http://www.lowtax.net/lowtax/html/slovakia/slovakia_company_forms.asp
[12.06.2011]
57
Cf. Reuvid (2005), P. 55-56
58
Cf. Statistical Office of the Slovak Republic,
http://portal.statistics.sk/showdoc.do?docid=30806
[15.06.2011]
18
Table 2: Legal units by legal form and size category by employees of Dec. 31, 2010
59
2.4.1 Joint stock Company
The Joint Stock Company may issue and sell shares to the public. The management is
managed by the Board of Directors. The governing body of the company pertains to the
General Meeting and is granted to decide on all matters of legal consequences. To carry out
decisions a simple majority of shareholders votes at the General Meeting is needed. The
liability of shareholders is directly limited to the amount of invested capital. A Joint stock
company can be established at minimum of two shareholders; or one, where the shareholder is
a limited company. Basic capital of Joint stock company is at minimum EUR 25, 000, - called
basic capital. A reserve fund of at least 10 % of the registered capital must be set up, and must
contribute annually with additional funds based on annual profits.
60
2.4.2 Limited liability Company
The most common type of new established businesses among native or foreign owned
enterprises in Slovakia is the limited liability company. For an establishment of a Ltd. at
minimum one shareholder is required, whilst individuals or limited companies can become
59
Cf. Statistical Office of the Slovak Republic, http://portal.statistics.sk/showdoc.do?docid=30806[15.06.2011]
60
Cf. Lowtax (2011),
http://www.lowtax.net/lowtax/html/slovakia/slovakia_company_forms.asp
[11.07.2011]
19
partner shareholders. The maximum of shareholders in a Ltd. cannot exceed 50. An investor
must accumulate a minimum capital of EUR 5, 000 and each investor must invest a minimum
of EUR 750 into a new established Ltd. Another requirement for a Ltd. is a registered office
address with all formal company documents kept at the registered office. The governing body,
the General Meeting, can decide on all matters of legal consequence. The simple majority of
shareholders votes are needed to carry out a decision of the General Meeting.
61
2.4.3 Sole Trader
A sole trader can pursue several business activities, but requires a Trade License for each of
them. Sole trader is personally liable, without limit, for all debts run up by his business with
all of his assets (including private property). We can distinguish between general and specific
conditions required for pursuing a trade. General conditions must be met all times. These
encompass the age of 18 years, legal capacity and no criminal record. Specific conditions
must be met depending on type of the business; professional or other qualification for trade.
In the case of professional qualification we can distinguish unregulated, regulated and craft
trades. If the adept intends to conduct trade, the Trade Licensing Office must be asked for
issuing a Trade License. The Trade License fee is EUR 5 for unregulated and EUR 15 for
regulated/crafted trades.
62
2.5
Trait & behavioural approach
Another scientific contribution has been done by Schumpeter (1934), who adds the concept of
innovation in the entrepreneurship theory.
63
The ability to identify new opportunities due to
the market created disequilibrium in the economy is the central activity of entrepreneurs. He
separates two systems of economic activities into static and changing one, while the
entrepreneur is described as the important agent of the mechanism for change.
64
This
61
Cf. Lowtax (2011),
http://www.lowtax.net/lowtax/html/slovakia/slovakia_company_forms.asp
[11.07.2011]
62
Cf. Migration Information Center (2011),
http://mic.iom.sk/en/work/doing-business/86-zivnostenske-
podnikanie-na-slovensku-podmienky.html
[11.07.2011]
63
Cf. Schumpeter (1934) in Philipsen (2011), P. 4
64
Cf. Philipsen (2011), P.4
20
contribution by Schumpeter is also crucial for the understanding of portfolio entrepreneurship
trait approach. His five different kinds of innovation process or ways to act as an
entrepreneur, deliver interesting insides into the understanding of the trait approach, as well
into the analysis of portfolio entrepreneurs.
65
These five kinds of innovations or ways to act as
an entrepreneur by Schumpeter can be found listed below.
1. The introduction of a new good or quality of a good
2. The introduction of a new method of production
3. The opening of a new market
4. The utilization of some new sources of supply for raw materials or intermediate goods
5. The carrying out of some new organizational form of the industry
2.5.1 Traits approach
According to Philipsen (2011) the trait approach build on the presumption that the individual
of entrepreneur differs in particular personality compared with a non-entrepreneur. Thus,
researchers have to analyse personality characteristics which are unique for entrepreneurs and
the key characteristics of such successful entrepreneurs. The trait approach consists of
psychological and sociological or anthropological level.
66
Another contribution in the trait
approach literature states that leaders (entrepreneurs) are born and not made, meaning that,
leader's posses a set of innate psychological characteristics which are unique in comparison
with non leaders.
67
Some authors describe these character traits as e.g. need for achievement, locus of control and
risk-taking propensity.
68
Other authors indicate low aversion to risk taking, aggressiveness,
ambition, over-optimism, desire for autonomy, marginality, personal values and need for
power.
69
Effective leaders, in accordance to Greenberg and Baron (2000) have to possess:
drive, honesty, integrity, leadership motivation, self-confidence, cognitive ability, creativity
65
Cf. Schumpeter (1934), P. 66
66
Cf. Philipsen (2011), P. 8
67
Cf. Henry, Hill, Leitch (2003), P. 43
68
Cf. Ucbasaran, Westhead, Wright (2006), P. 7
69
Cf. Brockhaus (1982); Gartner (1989) ; Aldrich and Zimmer (1986) ; Carson et al. (1995); Delmar (1996)
21
and flexibility.
70
However, this trait approach received a lot of criticism in the scientific
literature, due to insufficient research and lack of convincing evidence and empirical studies
undertaken on this theme.
71 72
Nevertheless the author of this thesis decided to concentrate on the trait approach, in his
opinion, the most crucial for the development and leading of successful business among the
portfolio entrepreneurs. So these personality traits are expected to, "impact the business
development in its starting phase going along the development and mature phase finally
culminate into the exit or entrepreneurial succession. The personality of a portfolio
entrepreneur must obtain a unique combination of personality traits derived by
heterogeneous levels of following characters. Starting with the need for achievement and
autonomy, followed by diverse values in locus of control; influences the personality of a
portfolio entrepreneur substantial. Consequently different risk-taking propensity merits and
the levels of entrepreneurial self-efficacy shape the personality of an entrepreneur
ultimately."
73
Figure 2: Five personality traits of entrepreneurs
74
70
Cf. Greenberg and Baron (2000) in Henry, Hill & Leitch (2003) ,P. 43
71
Cf. Burggraaf, Floren, Kunst (2008), P. 14
72
Cf. Stokes & Wilson (2010), P. 45
73
Cf. Definition by Branislav Zúrik (2011)
74
Cf. Leonardo da Vinci, Vitruvian symbol
Details
- Pages
- Type of Edition
- Erstauflage
- Year
- 2014
- ISBN (eBook)
- 9783954897599
- ISBN (Softcover)
- 9783954892594
- File size
- 3 MB
- Language
- English
- Publication date
- 2014 (July)
