27th In ternational Scientific Conference on Economic and Social Development Rome , 1-2 March 2018 [626801]

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710
ENTREPRENEURSHIP IN THE EUROPEAN UNION – FACTORS OF
BUSINESS SUCCESS

Lucian Belascu
“Lucian Blaga” University of Sibiu, 10 Blvd Victoriei, Sibiu, Romania
[anonimizat]

Alma Pentescu
“Lucian Blaga” University of Sibiu, 10 Blvd Victoriei, Sibiu, Romania
[anonimizat]

ABSTRACT
In recent years, several papers, conferences and discussions have highlighted the importance
of entrepreneurship in terms of potential for future jobs created and contribution to economic
growth. What people understand by “entrepreneurship” varies from a narrow definition –
business creation, to a wider one – a type of behaviour concen trated on opportunities. Thus, in
this paper we will focus just on the business creation. Furthermore, when it comes to the
reasons why people are interested in opening their own business, these are very diverse: desire
to be one's own boss, desire to make a living from a hobby, tradition for self -employment in the
family, prospect of making more money, avoiding unemployment, getting away from an
unsatisfactory work situation and others (Eurostat). When it comes to outcomes, SMEs generate
income, employment , innovation and new technologies. However, sometimes new businesses
have a limited survival rate. In this context, the following questions emerge: What makes a
company successful? Are there any differences based on the founders’ demographics? Can a
compan y found by a student / young person last for a long time? Thus, this paper aims to take
a look at potential factors of business success, using secondary data, in order to identify what
makes a company different from its competitors, what are the key aspect s to keep in mind and
what might cause problems.
Keywords: entrepreneurship, European Union, secondary data, SMEs, success factors

1. INTRODUCTION
Entrepreneurship has become a widely researched topic, being seen as one of the key segments
of economic development. However, economic development depends on the business
environment (investments, laws and regulations), as well as on investments in knowle dge and
innovation. When it comes to the reasons why people are interested in opening their own
business, these are very diverse: desire to be one's own boss, desire to make a living from a
hobby, tradition for self -employment in the family, prospect of ma king more money, avoiding
unemployment, getting away from an unsatisfactory work situation and others (Eurostat). As
regards the outcomes, SMEs generate income, employment, innovation and new technologies
(Liñán, Fernandez -Serrano, 2014). In terms of conte xt, different cultures provide different
contexts for entrepreneurship. Hence, countries capable to accommodate high rates of business
formation and dissolution will be best positioned to compete in world markets (Bednarzik,
2000, p.3). This subject, of in terest for both policy makers and academia, is complex and needs
to be analysed from different perspectives. Thus, this paper cannot and does not attempt to offer
answers to all questions, rather it sets a stage for discussion, exploring some of the factor s
considered important for business success. The paper is structured as follows: section 2 offers
a brief literature review, section 3 describes in short entrepreneurship in the European Union,
and section 4 concludes.

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2. FACTORS OF BUSINESS SUCCESS
In recent years, entrepreneurship has drawn a lot of attention, which resulted in a variety of
definitions and views of it. Thus, entrepreneurship is defined as starting and running one’s own
firm; creation of new economic activity; corporate entrepreneurs hip – i.e., creation of new
economic activities by large, established firms (Davidsson, 2016). Although often associated
with small business, entrepreneurship is not exactly the same. According to some others,
entrepreneurship is a competitive behaviour th at drives the market process (Kirzner, 1973); a
type of behaviour concentrating on opportunities rather than resources (Thurik, Wennekers,
2004), which means that it is relevant for both small and large businesses. Also,
entrepreneurship is discussed as a societal phenomenon, as well as a scholarly domain. As
regard the implications entrepreneurship has at macro level, one could study the impact on the
economic system and/or the novelty to the market. But entrepreneurship does not happen
automatically on it s own. It must be developed and cultivated. Consequently, business creation
must be supported, encouraging the creation of small businesses and supporting them to become
active and successful (Samli, 2016). Also, entrepreneurship depends, up to a point, on the
personal characteristics of people, but is also related to education. Nowadays, in a challenging
market environment, being able to develop a competitive advantage is a critical success factor
for a small company. In order to do so, entrepreneurs have to identify the relevant competitors,
the company’s strengths and the available resources. Additionally, entrepreneurs should have a
clear understanding of their customers (who is buying their products/services, which are their
needs, how often do they buy , why did they chose this company and not one of its competitors,
etc.). In fact, the absence of market orientation in SMEs often leads to lower performance and
higher risks of business failure (Blankson, Stokes, 2002; McCartan -Quinn, Carson, 2003;
Alpkan et al., 2007). People usually think of markets as a given. But the challenge comes into
play when the market does not yet exist, or is being redefined. In such instances, high levels of
learning become necessary (Schindehutte et. al, 2008). Last but not least, the company has to
deliver as promised. In terms of personality and entrepreneurship outcomes, several authors
have begun studying various personality characteristics of entrepreneurs (Rauch, Frese, 2007;
Zhao et al., 2010, Miller, 2014; DeNisi, 201 5; Klotz, Neubaum, 2016). While there is evidence
of the positive role of certain personality traits in driving entrepreneurship outcomes, some
authors became interested in the “potential dark side to the entrepreneurial personality”
(DeNisi, Alexander, 20 17). In terms of positive traits, Rauch and Frese (2007) found that the
need for achievement and for autonomy, innovativeness, a proactive personality, stress
tolerance, locus of control and risk -taking are relevant both for entrepreneurial success and the
decision to become an entrepreneur. On the other hand, ambition and/or need of control at
excessive levels might lead to problems for the entrepreneurs themselves, their company, and
those who might work with them. Finally, there is no substantial empiric al evidence to prove
the “dark side” to the entrepreneurial personality, which makes it an open question requiring
further research. Human capital (education level, industry experience and management
experience) is another aspect which has been extensively studied. Along these lines, family –
environment, education, age, work history, role models and support networks have been
identified to contribute to the business venture success (Krueger, 1993). Human and social
capital enable entrepreneurs to envision th e future, recognize and pursue opportunities, develop
new business models, overcome risks, and use unique resource bundles (Erikson, 2002;
Schindehutte et. al, 2008).

3. ENTREPRENEURSHIP IN THE EUROPEAN UNION
As regards the reaction of the European Union towards entrepreneurship and polices supporting
it, European countries have been slow in recognizing its potential, compared to the United
States of America.

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At first (1980s – early 1990s), European policy makers looked at Silicon Valley with scepticism,
being rather concerned of the large multinational corporations (such as General Motors, IBM,
etc.). During the mid -1990s, Europe recognized the sustainable lon g-run performance of
companies in Silicon Valley. However, it was thought that Europe will provide automobiles,
textiles and machine tools, while the USA will produce software and microprocessors, trading
with each other. Thus, Europe decided to focus on t raditional technology industries. During the
second -half of the 1990s, USA and Europe seemed to be on totally different trajectories. It was
in the final years of the last century when European policy makers admitted the superiority of the
entrepreneurial economy and Europe’s potential of implementing one (thanks to its educated and
skilled labour force, variety in cultures and hence innovative approaches). Thus, the Green Paper
on Entrepreneurship of the European Commission (2003) was the first document ac knowledging
entrepreneurship as an important driver for economic growth (Thurik, Wennekers, 2004, pp.142 –
143). According to the Global Entrepreneurship Monitor for 2017 -2018, when it comes to the
total early -stage entrepreneurial activity (TEA, meaning % of adults who have started or are
running a business up to 3.5 years), Europe has the lowest rate (8.1%), while Latin America
and the Caribbean, as well as Africa have the highest rate (18.5%). This might be explained by
the fear of failure, which seems to be the highest in the European Union, with 46.7% of the
youth and adults indicating that this would prevent the m from starting a business (Global
Entrepreneurship Monitor & Youth Business International, 2013, p.35). In terms of the
motivation for early -stage entrepreneurial activity (fig. 1), last year, in Europe, there were 3.4X
as many improvement driven opportun ity entrepreneurs (meaning those seeking independence
in their work or increased income) as necessity driven ones.

Figure 1: Motivational index for early -stage entrepreneurial activity
(Global Entrepreneurship Monitor, 2017 -2018 Global Report, p.13)

The key reason for closing a business (worldwide, in the last three years: 2015 -2017) was the
lack of business profitability. Also, women entrepreneurs have lower growth expectations and
higher rates of discontinuance (Global Entrepreneurship Monitor, 2017, p .52), which means
that women face challenges in sustaining their businesses. As regards the entrepreneurial
employee activity (EEA or intrapreneurship, meaning % of employees developing new goods
and services for their main employer) Africa has the lowest rate (0.9%), followed by Latin
America and the Caribbean (1.6%), Asia and Oceania (3.1%), Europe (4.4%) and North
America (7.9%). When compared to other regions in the world, European economies rank low
in terms of proportion of people starting businesses. But in Europe, most entrepreneurs choose
to innovate inside larger organizations (intrapreneurship), with Denmark, Sweden and the
United Kingdom as leading economies (fig. 2).

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An exception are most of the eastern European and Baltic economies, which have high rates of
business formation (TEA) and lower rates of EEA (World Economic Forum & Global
Entrepreneurship Monitor, 2016).

Figure 2: Entrepreneurial employee activity (EEA or intrapreneurship) in Europe
(World Economic Forum & Global Entrepreneurship Monitor, 2016, p.7)

Furthermore, North America is the region with the highest proportion of entrepreneurs
expecting medium to high job creation (6 or more jobs in 5 years) (29.5%), followed by Asia
and Oceania (21.0%), Europe (18.5%), Latin America and t he Caribbean (18.0%) and Africa
(17.0%). Usually, young entrepreneurs (18 -34 years old) are more confident than older ones
about creating jobs over the next years, but in terms of starting a new business, fewer young
people in Europe and Asia think that th ey have the capability and the opportunity, compared to
young people from the Middle East, Africa and Latin America (Global Entrepreneurship Monitor
& Youth Business International, 2013, p.7). When it comes to gender distribution of early -stage
entrepreneu rial activity (fig. 3), Europe ranks the lowest, with 6 women for every 10 male
entrepreneurs (compared to Latin America and the Caribbean, the highest, with 17 women for
every 20 male entrepreneurs). Still, there are three economies where women report equ al or
higher entrepreneurship rates than men: Ecuador (30.6%), Vietnam (24.8%) and Brazil
(20.7%).

Figure following on the next page

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Figure 3: Comparison of gender distribution of early -stage entrepreneurial activity
in Europe and Latin America and the Caribbean (based on data from
Global Entrepreneurship Monitor, 2017 -2018 Global Report, p.15)

As regards age distribution of total early -stage entrepreneurial activity (TEA), Europe ranks
again the lowest of all regions, in all age groups. North America has the highest level of TEA
for the 25 -34 year -old age group (23.4%), while Latin America and the Caribbean have the
highest youth entrepreneurial activity (18 -24 year old = 16.5%) (Global Entrepreneurship
Monitor , 2018, pp.15 -16). In terms of context, according to the experts surveyed by the Global
Entrepreneurship Monitor (2018, p.26), globally, education at school stage, government
policies related to taxes and bureaucracy and R&D transfer have a more hindering than
stimulating impact on entrepreneurial activity in 2017, as was the case in 2016. Also, North
America has the most supportive entrepreneurial framework conditions. As for
entrepreneurship societal values and self -perception, last year Europe ranked the lowest in
seeing entrepreneurship as a good career choice (58.7%). Last but not least, it seems that most
entrepreneurs around the world are opportunity -motivated (Global Entrepreneurship Monitor,
2018, p.33), most of them located in North America.

4. CONCLUSION
To sum up, entrepreneurship does not mean just business creation. It can be found also inside
large companies (intrapreneurship), in all phases of the business life cycle, both in the private
and public sector, and in all countries across the gl obe. Nowadays, in a challenging market
environment, the traditional “job for life” will be more an exception, than the norm. Thus,
entrepreneurship and youth entrepreneurship will need to be seen as an additional way of job
creation. But society’s percepti on of it (its attractiveness as a career choice) influences the
desire to start a business and the likelihood that businesses will find investors, suppliers and
customers. Europe ranks low in terms of early -stage entrepreneurial activity, because most of
its entrepreneurs choose to innovate inside larger organizations (intrapreneurship).
Consequently, European policy makers should focus on entrepreneurial employee activity
(intrapreneurship) in order to gain a competitive advantage, rather than trying to em ulate other
regions (for example Silicon Valley), that are driven by spin -offs and independent
entrepreneurship. Also, policy makers have to understand that entrepreneurship is influenced
by the quality of the institutional and regulatory context of a coun try (taxation schemes that
support new businesses and SMEs; less bureaucracy at national, regional and city level;
effective implementation of government policies).

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When it comes to comparisons, it is difficult to compare entrepreneurial activity between
countries, because each country has specific economic, political and cultural environment,
which influences the climate in which businesses operate. Still, data collected by the Global
Entrepreneurship Monitor assesses entrepreneurial activity in 54 world e conomies, while the
World Economic Forum’s Global Competitiveness Index ranks economies on their economic
competitiveness. Individuals who are confident that they possess the skills to start a business
are more likely to be involved in entrepreneurial acti vities. Thus, entrepreneurship education is
key (at all school levels). Universities should create co -op educational programs (classes +
internship programs) getting students involved in entrepreneurial activities throughout the
entire program of study. Fu rthermore, mentorship programmes (especially for young
entrepreneurs), training and coaching (including details about access to financing and other
resources) are important to help both new and established businesses to grow over time.

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