SMALL FIRM GROWTH IN A

LEAST DEVELOPED COUNTRY

HOW SMALL FIRM OWNERS AFFECT
THE GROWTH OF THEIR FIRMS IN ZAMBIA

MWANSA CHABALA
 Small firm growth in a Least Developed Country

How small firm owners affect the growth of their firms in Zambia

Mwansa Chabala
Reading committee:
prof. dr. C.T.M. Elbers
prof. dr. G. Romme
prof. S. N. Khapova
dr. I.A.W. Wakkee
dr. J. Small

Chabala, Mwansa

Small firm growth in a Least Developed Country: How small firm owners affect the growth of their firms
in Zambia
This book is number 29 in the ABRI Dissertation series

ISBN: 978 90 361 0528 6

Front and back cover design: Mwansa Chabala Tonny Hartog, Haveka.

Front cover photo: Mwansa Chabala. The photo shows one of the construction sites for small firm that
participated in the research OneWest Minerals Limited. The photos have been used with permission from
the firm owner.

© Mwansa Chabala, 2018

All rights reserved. No part of this book may be reproduced or transmitted in any form by any means,
electronically or mechanically, including photocopying, recording or using any information storage and
retrieval system without the written permission of the author, or, when appropriate, of the publisher of the
publication

Printed by HAVEKA
 VRIJE UNIVERSITEIT

Small firm growth in a Least Developed Country

How small firm owners affect the growth of their firms in Zambia

ACADEMISCH PROEFSCHRIFT

ter verkrijging van de graad van Doctor aan

de Vrije Universiteit Amsterdam,
op gezag van de rector magnificus
prof.dr. V. Subramaniam
in het openbaar te verdedigen
ten overstaan van de promotiecommissie
van de School of Business and Economics
op woensdag 3 oktober 2018 om 13.45 uur
in de aula van de universiteit,
De Boelelaan 1105

door

Mwansa Chabala

geboren te Chingola, Zambia

promotoren: prof.dr. E. Masurel
prof.dr. L.J. Paas
copromotoren: dr. J.C. van Burg
prof.dr. J. Lungu
Table of contents

Chapter 1 Introduction ....................................................................................................................................1

1.1 Introduction and study background................................................................................................................2

1.2 Research setting ..................................................................................................................................................7
1.2.1 Least developed countries (LDCs) ...............................................................................................................7
1.2.2 Zambia’s economic history ...........................................................................................................................8
1.2.3 Small and Medium Enterprises .................................................................................................................. 12
1.2.4 Zambian Construction Sector.................................................................................................................... 13
1.3 Introduction to the Chapters ........................................................................................................................ 13
1.4 Methodology .................................................................................................................................................... 15

Chapter 2 Measuring Small Firm Growth in African Least Developed Countries: Evidence from
the Construction Sector in Zambia ........................................................................................................................ 18

2.1 Introduction ..................................................................................................................................................... 21

2.2 Theoretical background.................................................................................................................................. 23
2.2.1 Small Firm Growth ...................................................................................................................................... 23
2.3 Qualitative study.............................................................................................................................................. 31
2.3.1 Selection of small firm growth indicators ................................................................................................ 32
2.3.2 Operationalization of growth..................................................................................................................... 35
2.4 Quantitative study ........................................................................................................................................... 36
2.4.1 Methodology ................................................................................................................................................. 36
2.4.2 Measures ........................................................................................................................................................ 38
2.4.3 Data analysis ................................................................................................................................................. 39
2.4.4 Results ............................................................................................................................................................ 40
2.5 Discussion and conclusions........................................................................................................................... 46

Chapter 3 Which Founders Do Extract Wealth from their Venture? The Moderating Role of Start-
up Motivation .. ................................................................................................................................................ 50

4.1 Introduction ..................................................................................................................................................... 52

4.2 Theory and hypotheses .................................................................................................................................. 54
4.2.1 Firm growth and personal wealth.............................................................................................................. 54
4.2.2 Moderating effect of entrepreneurial motivation.................................................................................... 56
4.3 Methodology .................................................................................................................................................... 59
4.3.1 Data and sample ........................................................................................................................................... 59
4.3.2 Measures ........................................................................................................................................................ 60
4.3.3 Data analysis ................................................................................................................................................. 65
4.4 Results ............................................................................................................................................................... 66
4.4.1 Motivation groups........................................................................................................................................ 67
4.4.2 Hypothesis tests ........................................................................................................................................... 68
4.5 Discussion ........................................................................................................................................................ 71
4.6 Conclusion........................................................................................................................................................ 74

Chapter 5 Entrepreneurial Orientation and Firm Growth in Least Developed Countries: The
Moderating Role of the Business Environment ................................................................................................... 76

5.1 Introduction ..................................................................................................................................................... 78

5.2 Theoretical framework and research hypothesis........................................................................................ 80
5.2.1 Entrepreneurial orientation ........................................................................................................................ 80
5.2.2 Entrepreneurial orientation and firm performance ................................................................................ 81
5.2.3 Moderating role of the business environment ........................................................................................ 83
5.3 Methodology .................................................................................................................................................... 86
5.3.1 Sample and data collection ......................................................................................................................... 86
5.3.2 Data collection.............................................................................................................................................. 86
5.3.3 Measures ........................................................................................................................................................ 87
5.4 Results ............................................................................................................................................................... 90
5.5 Discussion ........................................................................................................................................................ 93
5.6 Limitations to the study ................................................................................................................................. 95
5.7 Conclusions ...................................................................................................................................................... 96

Chapter 6 How Does Entrepreneurial Passion Affect Small Firm Growth? The Mediating Role of
Entrepreneurial Alertness......................................................................................................................................... 97

6.1 Introduction ..................................................................................................................................................... 99

6.2 Theory and hypotheses ................................................................................................................................ 102
6.2.1 Entrepreneurial passion and firm growth .............................................................................................. 103
6.2.2 Entrepreneurial passion, entrepreneurial alertness and firm growth................................................. 105
6.3 Methodology .................................................................................................................................................. 108
6.3.1 Sample and data collection ....................................................................................................................... 108
6.3.2 Measures ...................................................................................................................................................... 110
6.4 Results ............................................................................................................................................................. 115
6.4.1 Correlation results ...................................................................................................................................... 115
6.4.2 Regression results....................................................................................................................................... 116
6.5 Discussion and conclusions......................................................................................................................... 120
6.6 Limitations and future research .................................................................................................................. 121

Chapter 7 Conclusions................................................................................................................................ 123

7.1 Conclusions .................................................................................................................................................... 124

7.1.1 Answers to research questions in empirical studies ............................................................................. 124
7.1.2 Answer to the main research question of the thesis............................................................................. 127
7.2 Contributions to literature ........................................................................................................................... 128
7.3 Research limitations and areas for future research .................................................................................. 130
7.4 Policy and practical implications................................................................................................................. 131
7.5 Overall conclusion ........................................................................................................................................ 133

List of references ..................................................................................................................................................... 134

Appendix 1. Values for NCC grade categories ................................................................................................... 159

Appendix 2. Data collection questionnaire – first wave ................................................................................... 160

Appendix 3 – Data collection questionnaire – second wave............................................................................ 166

English Summary..................................................................................................................................................... 169

Nederlandse samenvatting ..................................................................................................................................... 174

Acknowledgements ................................................................................................................................................. 179

ABRI Dissertation series ........................................................................................................................................ 182

List of tables

Table 2.1. Summary of small firm growth indicators and measuring methods in entrepreneurship
research (2007 to 2013) ................................................................................................................... 26

Table 2.2. Small firm growth calculation formulas .............................................................................. 29

Table 2.3. List of experts interviewed .................................................................................................... 32

Table 2.4. Number of experts recommending a particular small firm growth indicator ............... 33

Table 2.5. Response rates for small firm growth indicators ............................................................... 38

Table 2.6. Result of factor analysis for firm growth measurement scales ........................................ 41

Table 2.7. Confirmatory factor analysis results for growth measurement scales ............................ 42

Table 2.8. Reliability assessment results for growth measurement scales ........................................ 44

Table 2.9. T-test results comparing NCC “growth” and “no growth” Groups .............................. 45

Table 2.10. Reliability and validity results for all measurement scales .............................................. 46

Table 3.1. Factor loadings and reliability results for firm start-up motivation ................................ 64

Table 3.2.Descriptive statistics and intercorrelations of variables ..................................................... 67

Table 3.3. Final cluster centres based on EFA factor scores ............................................................. 67

Table 3.4. Regression Results of relationship between personal wealth, motivation and firm
growth ............................................................................................................................................... 69

Table 3.5. Conditional Effects for motivation groups ........................................................................ 70

Table 4.1. Factor analysis results for EO .............................................................................................. 89

Table 4.2. Correlations and descriptive statistics for firm growth, EO and business environment
............................................................................................................................................................ 91

Table 4.3. Regression results for relationship between EO and sales growth ................................. 92

Table 5.1. Factor analysis and reliability results for entrepreneurial passion ................................. 111
Table 5.2. Factor analysis and reliability results for entrepreneurial alertness ............................... 112

Table 5.3. Factor analysis and reliability results for firm growth ..................................................... 114

Table 5.4. Factor analysis and reliability results for growth intentions ........................................... 115

Table 5.5. Descriptive statistics and correlation results for passion, alertness and firm growth 116

Table 5.6. Hierarchical linear regression results for relationship between passion, alertness and
firm growth ..................................................................................................................................... 117

Table 5.7. Indirect effects of passion for developing (via alertness) on firm growth ................... 119
List of figures

Figure 1.1. Map of Zambia .........................................................................................................................9

Figure 3.1 Relationship between firm growth and growth in personal wealth ................................ 71

Figure 4.1. Research model and hypothesis for the relationship between EO and firm
performance...................................................................................................................................... 86

Figure 5.1. Results of the mediating effect of alertness on the relationship between passion and
firm growth ..................................................................................................................................... 118
List of abbreviations and acronyms
AAC Anglo-American Corporation

AVE Average Variance Extracted

BTS Bartlett’s Test of Sphericity

CBU Copperbelt University

CSO Central Statistics Office

CFI Comparative Fit Index

CI Confidence Intervals

CFA Confirmatory Factor Analysis

EA Entrepreneurial alertness

EO Entrepreneurial Orientation

EP Entrepreneurial Passion

EFA Exploratory Factor Analysis

GEM Global Entrepreneurship Monitor

GDP Gross Domestic Product

GNI Gross National Income

HEART High Education And Research Training

HDI Human Development Index

KMO Kaiser-Meyer-Olkin

LDC Least Developed Countries

NCC National Council for Construction

NUFFIC Netherlands Universities Foundation for International Cooperation

OECD Organisation for Economic Co-operation and Development

RST Roan Selection Trust

RMSEA Root Mean Square Error of Approximation

SMEs Small and Medium Enterprises

IMF The International Monetary Fund

TLI Tucker Lewis Index

UN United Nations

UNCTD United Nations Conference on Trade and Development

UNDP United Nations Development Programme

VIF Variance Inflation Factors

ZANACO Zambia National Commercial Bank

ZDA Zambia Development Agency

ZMK Zambian Kwacha

In loving memory of Rev. Sr. Justina Mwitwa Chabala (1963-2018)

MHSRIEP

Romans 14: 7-12

Chapter 1 Introduction

1
1.1 Introduction and study background
The importance of small and medium enterprises (SMEs) for economic growth has been widely

acknowledged in entrepreneurship research (Ayyagari et al., 2007; Acs et al., 2008; Box et al., 2016).

SMEs represent substantial portions of national economies in both developed and developing

countries (Soininen et al., 2011) and entrepreneurial activities of small firm owners have been

associated with economic growth (Lazear, 2005; Thurik and Wennekers, 2004; Wennekers and

Thurik, 1999; Thurik et al., 2008; Carree et al., 2007; van Stel et al., 2005). It is often argued that

economic growth is attainable through entrepreneurship which leads to competitiveness,

innovation, and employment creation through small firm formation, survival and growth (Friis et

al., 2006; Acs and Storey, 2004). To this effect, Minniti and Levesque (2010) attribute economic

growth of emerging and developing economies such as China partly to the increase in

entrepreneurial attitudes and suggest that entrepreneurship can play an equally pivotal role in

improving the economies of developing countries. Additionally, there is a general understanding

that SMEs drive economic growth through job and wealth creation (Dobbs and Hamilton, 2007).

Consequently, most developing countries employ policies aimed at promoting entrepreneurship

as a source of job and wealth creation (Cornwall and Naughton, 2003; Lazear, 2005; Naudé, 2011).

However, Shane (2009) argues that not all forms of entrepreneurship and business

formation may lead to economic growth, job and wealth creation. He labels policies that encourage

people to become entrepreneurs as “bad public policy”, on the basis that the contribution of

entrepreneurship to economic growth is not about quantity but about the quality and growth of

small firms. The quality of entrepreneurship regarding small firms in an economy can be construed

from the number of small firms which survive and grow. Small firms that grow have better chances

of survival (Andersson and Tell, 2009) and can make more significant contributions to economic

growth than those that do not (Barringer et al., 2005; Hessels et al., 2008). Similarly, the economic

benefits of entrepreneurship and business ownership may only be realised when small firms

achieve sustainable growth (Dobbs and Hamilton, 2007; Moreno and Casillas, 2007). Therefore,

2
from an economic development perspective, small firm growth is a significant aspect of the

essence of entrepreneurship (Davidsson et al., 2006). Entrepreneurs1 who grow their firms would

to a large extent, be considered as successful and their firms are likely to contribute to national

economic growth (Davidsson et al., 2005; Barringer et al., 2005).

The realisation of the importance of firm growth in entrepreneurship has led to

numerous studies on what constitutes and determines firm growth in both developing countries

(Goedhuys and Sleuwaegen, 2010; Naudé et al., 2010) and developed countries (Davidsson et al.,

2010; Leitch et al., 2010; McKelvie and Wiklund, 2010). Although such studies have provided a

substantial body of knowledge, it is still not yet very clear what constitutes small firm growth and

how firm growth is achieved. In particular, the conceptualisation and measurement of small firm

growth has been problematic (Davidsson et al., 2013). Leitch et al. (2010) observe that not much is

known about firm growth. Kiviluoto (2013 pp. 569) further observes that firm growth research

has often been criticised as “stagnated, characterised with inconclusive research results and slow

theory development” due to lack of coherence in the way it is conceptualised and measured.

Understanding small firm growth and its antecedents has resulted in a significant debate

in entrepreneurship research (Simpson et al., 2012; Rogoff et al., 2004; Brush and Vanderwerf,

1992; Murphy et al., 1996). Firm growth has been recognised as a key dimension of business

performance (Wennekers and Thurik, 1999; Shepherd and Wiklund, 2009) resulting in research

interest in understanding differences in growth rates for small businesses. Firm growth signals high

performance and provides a positive return on investment for the business owners and is also

regarded as a way to both improve and protect the firm owner’s investment (Dobbs and Hamilton,

2007). Contrarily, lack of growth may significantly reduce the probability of survival for a small

firm (Gilbert et al., 2006).

1 In this thesis, the terms entrepreneurs, small business owners and owner-managers are used
interchangeably based on Gartner’s (1989, pg. 26) definition of entrepreneurship as the “creation of new
organisations”.

3
 Firm growth research has focused on predicting and measuring growth, as well as gaining

cognisance of how different factors affect it (Unger et al., 2011; Song et al., 2008; Murphy et al.,

1996). Such research has produced lists of different operationalisations and determinants of firm

growth (Shepherd and Wiklund, 2009; Weinzimmer et al., 1998). The operationalisations of firm

growth that have been identified include change in number of employees, sales volume, revenue,

profitability, and size. Similarly, various factors at different levels have been found to affect firm

growth. They include factors related to the entrepreneur, the type of firms and the external

business environment. Factors in these categories have been studied individually and in different

combinations to determine how they influence business growth (Frese et al., 2002; Rauch et al.,

2009). The general conclusion that can be drawn from the body of knowledge resulting from such

research is that a variety of factors at individual, firm and environment level interact, in simple and

complex ways to influence firm growth.

The complexity of the relationship between firm growth and its antecedents has affected

the development of firm growth theories (Simpson et al., 2012; Shepherd and Wiklund, 2009). The

problem of developing firm growth theories is further compounded by the diverse nature of small

firms and idiosyncrasy of the environments in which they operate (Davidsson and Klofsten, 2003).

Therefore, it is vital to continue research in this area, especially in environments such as Least

Developed Countries (LDCs). Disparities in the business environment can be attributed to stages

in economic development of a country or region. Accordingly, a country or region’s level of

economic development can influence the drivers and obstacles of small firm growth (Okpara and

Wynn, 2007; Nichter and Goldmark, 2009; van Stel et al., 2005). It is therefore important that in

the quest to understand firm growth, economic, cultural and contextual variations between regions

are taken into consideration.

Most firm growth research has been conducted in western developed countries, making

valid generalisation of findings to other, contextually different environments, such as African

4
LDCs, less feasible. The environmental conditions faced by small firms in western developed

economies are different from those in African LDCs. Despite recognizing that the nature of

growth and its determinants would be influenced by context-specific factors (Dobbs and

Hamilton, 2007; Davidsson and Klofsten, 2003), relatively little is known about the subject in

African LDCs.

Besides being major contributors to economic growth and job creation (Acs and Mueller,

2008), small firms also have the potential to act as means for increasing personal wealth of the

owners (Cagetti and De Nardi, 2006). The role of small firms as a major source of employment

and income is even more important in LDCs (Mead and Liedholm, 1998; Unger et al., 2009). In

most African LDCs, negative environmental conditions such as unemployment and the difficulty

in finding a suitably paid job can “push” potential entrepreneurs to become de facto entrepreneurs

(Dawson and Henley, 2012; Uddin et al., 2014). Especially for such push-motivated entrepreneurs,

wealth creation is one of the primary motives to start a firm, as they do not have other (good)

options to generate sufficient income. Thus, at least for push-motivated entrepreneurs, extracting

wealth from the firm is a key motive. The rate at which the firm owners extract wealth from the

firm may affect the growth of the firm. Yet, the extent to which firm growth translates into growth

of personal wealth and how the relationship is affected by the motivation for starting a business is

still largely unknown.

It is also known that the strategic orientation of firms and their owners affects firm

growth. This demands that firms adopt a strategic orientation which would enable them to acquire

strategic entrepreneurial aspects of decision making, methods and practices (Wiklund and

Shepherd, 2005). Although research has shown that firms that adopt a more entrepreneurial

strategic orientation are relatively likely to grow (Krauss et al., 2005; Hughes and Morgan, 2007;

Lumpkin and Dess, 2001; Madsen, 2007), the exact nature of the relationship is still unknown.

This has been attributed to the differences in a firm’s entrepreneurial behaviour that are influenced

5
by context specific conditions based on the environment in which the firm operates (Lumpkin and

Dess, 2001; Miller, 2011). Entepreneurial orientation regulates the strategic decisions and resource

allocations in a firm. Therefore, understanding the effects of the strategic orientation of the

entrepreneur on firm growth in different environments is still very important.

Small firm growth is one of the important variables of entrepreneurial success (Unger et

al., 2011). Concerning entrepreneurial success, one of the central questions in entrepreneurial

research revolves around why some entrepreneurs become more successful than others (Baron,

2004a). Although part of the answer to this question is attributed to economic factors that are

external to entrepreneurial firms, the actions of entrepreneurs are also deemed relevant for small

firm growth (Shane, 2001). With such propositions, the entrepreneur, as a person, takes centre

stage as entrepreneurship research searches to better understand the role that an entrepreneur

plays in venture growth. This is despite prior research having investigated and accumulated

substantial knowledge on the effects that individual level factors, such as personality traits and

characteristics, may have on firm performance (Brandstätter, 2011; Gartner, 1989; Zhao et al.,

2009; Mitchell et al., 2002). To further enhance understanding about the role of the entrepreneur

in entrepreneurial success, entrepreneurship research has begun to focus more on the role of

entrepreneurial cognition in venture creation and success (Baron, 2004b; Shepherd, 2015; Mitchell

et al., 2002; Mitchell et al., 2007; Baron, 2000). This has led to a resurgence in research focusing on

the people-side of entrepreneurship that targets the understanding of how entrepreneurs reason,

form judgements and make decisions given the differences that exists in entrepreneurial cognitions

in order to understand while some are successful while others are not (Tang et al., 2008). However,

one key aspect of entrepreneurial cognition regarding how entrepreneurs are alert to opportunities

in the environment, and the affection that they have towards undertaking entrepreneurial activities,

still remains relatively unexplored (Baron, 2008; Grégoire et al., 2015).

6
 Given these remaining questions and puzzles, this thesis investigates the measurement of

firm growth, and evaluates factors that influence firm growth in the context of an African LDC,

Zambia. The thesis sets out to contribute to answering the general question: How do small firm owners

affect the growth of their firms in LDCs? This question is relevant and important because it seeks to

identify the important dimensions and factors that can help improve the performance of small

firms in African LDCs.

1.2 Research setting

1.2.1 Least developed countries (LDCs)

This thesis focuses on small firms in an African LDC, Zambia. There are different broad

classifications of countries based on economic development used by major international

organizations. For example, the World Bank classifies countries based on Gross National Income

(GNI) per capita as low income, low middle income, upper middle income, and high income. It

uses the term “developing country” to represent low and middle-income countries although it

does not imply that all countries in this category are in the process of developing (World Bank,

2013b). The International Monetary Fund (IMF) extends this criterion to include export

diversification and the degree of integration into the global financial system. The IMF classification

divides countries into two major categories: advanced economies and emerging and developing

economies (International Monetary Fund, 2013). The United Nations Development Programme

(UNDP) criterion uses the Human Development Index (HDI), which is derived from GNI per

capita, life expectancy and educational indices. In the UNDP classification, developing countries

occupy the lower three percentiles of the distribution and countries at the lowest end of the

developing countries are termed as the Least Developed Countries.

LDCs are the poorest and weakest of the international community and are at the bottom

of all development rankings. According to the United Nations (2013), they have a low level of

socio-economic development, characterised by weak human and institutional capacities, low and

7
unequally distributed income and scarcity of domestic financial resources. They often suffer from

governance crises, political instability and, in some cases, internal and external conflicts. Their

largely agrarian economies are affected by a vicious cycle of low productivity and low investment.

The category of LDCs consists of 47 countries, out of which 32 are from Sub-Saharan Africa.

Zambia is one of the LDCs located in Sub-Saharan Africa (United Nations Conference on Trade

and Development, 2017)

1.2.2 Zambia’s economic history

The setting for all the empirical data studies reported in this thesis is Zambia. Zambia is

a landlocked country covering an area of 752,614 km2. According to the 2010 census, the country

had a population of 13.1 million people (Central Statistics Office, 2011). More recent estimates

suggest a population of 16.59 million (World Bank, 2017). It is located in the Southern Africa Sub-

region. Figure 1.1 shows the map of Zambia. Zambia's economy underwent strong growth in the

last fifteen years, with GDP growth between the years 2000 and 2005 averaging 5.8 % per year,

while the 2006 to 2015 period recorded increased growth averaging 6.9% (Ministry of National

Development Planning, 2017). The Zambian economy has been dominated by copper mining

from the time the first commercial copper mine was opened in Luanshya at Roan Antelope in

1928 (Lungu, 2016; Boos and Holm-müller, 2016). Zambia is the largest copper producer in Africa

and the sixth largest in the world. Copper accounted for between 70% and 78% of the country’s

foreign exchange earnings and about 70% of total merchandise exported in the period 2008 to

2016 (Bova, 2012; Trimmer III, 2016; Kragelund, 2017; Bank of Zambia, 2016).

The country also experienced economic growth which led to growth in other sectors

such as manufacturing, construction, trading and transport. During that period, Zambia was

considered to be a middle-income country. The mining sector was owned and controlled by two

private companies, namely the Roan Selection Trust (RST) and the Anglo-American Corporation

(AAC). However, during between 1964 and 1970, the Zambian government led by Kenneth

8
Kaunda became dissatisfied with the level of investment into the mines by both RST and AAC.

The government was also concerned about the distribution of the country’s mineral wealth and

wanted revenue from the mining sector to be used to support other sectors such as education and

health (Kragelund, 2017; Lungu, 2008). Such discontent, coupled with the desire for public

ownership of the means of production in line with the government’s political philosophy at that

time, socialism, resulted in the nationalisation of the mines. Nationalisation was implemented

through economic reforms commonly known as the Mulungushi Reforms of 1968 and the Matero

reforms of 1969 (Chirwa and Odhiambo, 2017). Through these reforms, the Zambian government

sought to develop local industry through increased participation in key economic sectors. The

Zambian government obtained a 51 percent share in mining and other major industries resulting

in the economy being dominated by state-owned-enterprises.

Figure 1.1. Map of Zambia

Source: http://www.un.org/Depts/Cartographic/map/profile/zambia.pdf

9
 The nationalisation programme was developed at the time when copper prices were high

and was anchored on a policy agenda that promoted broad social and economic development

(Fessehaie, 2012). Consequently, the government used resources from the mining sector to

support other social sectors such as education and health (Sikamo et al.; 2015, Lungu, 2008).

During the mid-1970s, the mining sector experienced difficulties due to the collapse of copper

prices and the increase in oil prices on the world market (Fraser and Lungu, 2007; Chirwa and

Odhiambo, 2017). However, just as was the case in the pre-nationalisation period, the government

did very little re-investment in mineral exploration and mine development. The mines became

undercapitalised and employed old mining technology using obsolete equipment (Fessehaie, 2012;

Lungu, 2008). Furthermore, the ore deposits became deeper and mineral grades leaner, requiring

modern advanced mining technology to exploit these deposits (Sikamo et al., 2015).

Since Zambia’s economy was heavily dependent on mining (Lungu, 2016; Boos and

Holm-müller, 2016) the resultant fall in production and revenue from the mining sector forced the

government to rely on foreign loans to support health and education facilities. Likewise, other

sectors of the Zambian economy were affected due to their dependency on the performance of

the mining sector. The local industry which was also borne of the Nationalisation programme (that

created state enterprises) was import-dependent and relied heavily on foreign exchange from

copper export earnings. The inability to import inputs both for local industries and mining led to

low capacity utilisation, inefficiency and increased costs in all the state-owned enterprises. The

situation was exuberated by weak management and the conflicting objectives that these

organisations pursued at the time. The enterprises were viewed by government as a way of

employment creation and source of lowly priced consumer goods, while these enterprises also

needed to make a profit for their survival. The country experienced severe economic decline in

the 1980s and 1990s partly due to poor economic management and the decline in international

10
copper prices (Lungu, 2008). The poor performance of the state-owned enterprises led to the

country experiencing severe shortages of consumer goods leading to public discontent. This

culminated in the change of government in 1991.

The new government implemented broad economic reforms that transformed the

economy from a socialist orientation to being market driven. One of the key issues that the reforms

dealt with was the privatisation and commercialisation of state-owned enterprises. This involved

a roll back of the state’s involvement in enterprise management. In the wake of privatisation, state-

owned enterprises collapsed after years of operating under a protectionist economic environment

(Central Intellingecy Agency, 2013; Rakner, 2003; N’gona and Dube, 2012). One of the most

observable effects of the privatisation process were mass job losses in the mining and other sectors

as employment reduced by 66% (Fraser and Lungu, 2007; Gough et al., 2015). The resultant job

losses and reduced employment prospects led to an increase in small firm formation (Kragelund,

2017). It is estimated that small firms accounted for 97% of the total enterprises and 18% of the

total labour force in Zambia in 2007 (Clarke et al., 2010; Ministry of Commerce Trade and Industry,

2009; Phillips and Bhatia-Panthaki, 2007). Because of the change in government policy, many

people who lost employment were pushed into entrepreneurship.

In recent years, Zambia’s economy has experienced strong growth because of the

economic reforms that have been implemented. The country has sustained an impressive record

of macroeconomic stability, achieved single-digit inflation and average Gross Domestic Product

(GDP) growth rates of 6.7% since 2004 (World Bank, 2013c). Zambia has been one of the most

open trade regimes in Africa and is among the top ten African countries on the World Bank’s

“ease of doing business index” (World Bank, 2013a). Zambia has experienced political stability

and no civil conflicts since independence. These factors make Zambia suitable for studying small

firm growth since they reduce external factors that may potentially affect small firm growth and

11
may impair the researchers’ ability to adequately measure firm growth and factors that affect it

(Stenholm et al., 2013; Baum et al., 2001).

1.2.3 Small and Medium Enterprises

There is no single universally accepted criterion for defining small firms. Ayyagari et al.

(2007) note that the term SME encompass an array of definitions and measures, differing from

country to country, as well as between the sources reporting SME statistics. The commonly used

criteria classify firms as small, medium or large enterprises based on the number of employees.

Most developed countries set the upper limit of number of employees in small firms between 200-

250 (Organisation for Economic Cooperation and Development, 2004). Most LDCs consider

firms with less than 100 employees as small (Richardson et al., 2004). In Zambia, small firms can

be defined based on the national definition of SMEs, which categorise firms by the total

investments in assets, sales turnover, number of employees and legal status. Firms with up to 100

employees, total investment in assets less than ZMK2 300,000 (about US$30,000 in 2016) and

annual turnover less than ZMK 800,000 (about US$80,000 in 2016) are categorized as SMEs. A

firm is considered informal if unregistered, the value of its assets is less than ZMK 50,000 (about

US$5,000 in 2016) and employs less than ten people (Ministry of Commerce Trade and Industry,

2004; United Nations Conference on Trade and Development, 2003). Senderovitz (2009) points

out that small firms should be defined based on a deliberate and well-grounded choice, taking the

methodology, purpose and/or content of the study into account. For this study, we adopt Ayyagari

et al.’s (2007) definition of small firms as formal businesses with less than 250 employees.

Formality, in this case, implies being registered and having the necessary permits to operate (Thai

and Turkina, 2014; Webb et al., 2013).

2 ZMK is the abbreviation for the Zambian currency, the Kwacha.

12
1.2.4 Zambian Construction Sector
In this thesis, we specifically focused on the construction sector, which has been pivotal

to Zambia’s economic growth in recent years. The sector contributed 21.1% to economic growth

and accounted for 13.0% of the GDP in 2012 (Zambia Development Agency, 2012). Additionally,

all firms in this sector are required by law to register annually with a national regulatory institution

called National Council for Construction (NCC). NCC uses a six-tier grading system based on

number of employees, level of sales and value of assets. The values the criteria take between the

different NCC grades are shown in Appendix 3. In the NCC grading system, grade 1 is the highest

and grade 6 is the lowest. The grades 4, 5 and 6 are reserved for small firms. The NCC grade for

each firm is reviewed annually and a firm with a grade improvement is considered to have grown

in the period under consideration. From the data collected during the annual registration, NCC

has maintained a database of firms in the construction sector in Zambia. The database contains

data such as yearly number of employees, level of sales and value of assets.

1.3 Introduction to the Chapters

This thesis addresses the question of how different factors related to the small firm owner affect

firm growth in Zambia. To answer this question, a number of factors will be considered in the

following four empirical chapters. They include: start-up motivation, personal wealth,

entrepreneurial orientation, entrepreneurial passion, and entrepreneurial alertness. The

arrangement of the chapters is discussed below.

In chapter 2, we investigate what constitutes small firm growth and how it should be

measured in LDCs. This is necessary because conceptualisation and operationalization of small

firm growth has continued to be problematic, especially for research conducted in non-western

settings such as LDCs. It is also important to recognise that measurement of small firm growth is

affected by context-specific factors such as the level of economic development of the region where

the firm operates. This chapter addresses the research question: What constitutes firm growth in LDCs

13
and how should it be measured? This is vital because before we embark on investigating how individual

level factors affect firm growth; we must first understand what constitutes firm growth and how

to measure it. Therefore, in chapter 2 we develop a scale for measuring small firm growth in

African LDCs.

In chapter 3 we investigate how firm growth translates into economic rewards for the

small firm owner, to further explore the relationship between personal wealth and other firm

growth aspects. This chapter presents an empirical examination of how firm founders extract

wealth from their ventures based on the understanding that increasing personal wealth is one of

the key motives of starting a business, especially in environments with few employment

opportunities such as LDCs. Additionally, having recognised that the amount of wealth extracted

by the founder is related to firm start-up motivation, we further evaluate how start-up motivation

moderates the extraction of wealth from firms by firm founders. The chapter addresses the

research question: What is the relationship between small firm growth and growth in personal wealth of the firm

owner, and how is this relationship affected by the motivation for starting the business?

Chapter 4 focusses on how entrepreneurial practices and behaviour guide the firm’s

growth strategy. The chapter presents an analysis of the effect of entrepreneurial orientation (EO)

on firm growth and the moderating role of the business environment. Although various studies

have investigated the relationship between EO and firm growth, the results have been largely

mixed. The contradictory findings may be due to the context in which a firm operates (Lumpkin

and Dess, 1996). Country-specific business environment conditions have known to affect

entrepreneurial behaviour (Marino et al., 2002; Lee and Peterson, 2000). Nevertheless, the

relationship between EO and firm growth has mostly been studied in western, developed

countries, where the business environment in which the small firms operate is different from that

in LDCs. Therefore, this chapter focusses on how different dimensions of EO affect firm growth

14
in the context of LDCs by seeking answers to the following question: How does entrepreneurial

orientation influence firm growth in LDCs and how does the business environment moderate this relationship?

In chapter 5, the focus shifts to how entrepreneurial passion and alertness of the firm

owners affect firm growth. Entrepreneurial cognition has emerged as one of the major

perspectives for understanding how entrepreneurs as individuals affect the performance of their

firms (Mitchell et al., 2002). This chapter presents an investigation of how firm owner’s

entrepreneurial passion affects firm growth, and the mediating role of entrepreneurial alertness.

As such we address the research question: What is the relationship between entrepreneurial passion and firm

growth and how is the relationship influenced by entrepreneurial alertness?

Chapter 6 presents a summary of the general conclusions from chapter 2, 3, 4 and 5, with

a view to address the overall research question: How do small firm owners affect the growth of their firms

in LDCs? The general theme of this thesis concerns how factors related to entrepreneurial decision

making and behaviour of small firm owners affect the growth of their firms. We first discuss what

constitutes small firm growth in LDCs. In our quest to investigate how firm owners affect the

growth of their firms, we focus on the effects of their decision making and behaviour concerning

the management of their firms. Specifically, we investigate how extraction of wealth from the firm

for personal use is affected by the growth of the small firm. Additionally, we investigate how

entrepreneurial orientation, entrepreneurial alertness and entrepreneurial passion affect firm

growth. It is important to note that these chapters represent stand-alone research papers which

are intended to be self-contained and can be interpreted independently. However, since the setting

for empirical data collection is the same, some overlap and repetition between chapters may occur.

1.4 Methodology
The methodological approach used in this thesis is a mixed methodology employing

qualitative and quantitative methods. Qualitative methods were used in the early stages of the field

work to establish the relevance of the variables to be included in the study to the context of LDCs.

15
This process was conducted through expert interviews with various key stakeholders in Zambian

in November 2012. The interviews were mainly aimed at establishing the contextual relevance of

the measures of growth and other constructs. A total of 13 expert interviews were conducted with

officials from small business support institutions and government agencies in charge of SME

policy, local and national chambers of commerce, financial institutions, prominent entrepreneurs

and trade associations and a former Minister of Commerce. Additionally, expert interviews were

also conducted with academicians engaged in small business research.

The expert interviews served as a guide on the relevance of variables included in the

quantitative research in the context of LDCs. This approach of checking which individual variables

were most relevant for this thesis was important because the effect of an entrepreneur’s behaviour

and decision making on firm performance is a complex and context-dependent process. Therefore,

it was important that we considered variables that were relevant to our research setting but are

relatively underexplored in entrepreneurship research.

From the expert interviews, we observed that small firms in Zambia were achieving

varying levels of growth despite initially being similar in size, structure and operating under same

conditions. Data from the interviews also revealed that differences in firm growth levels could be

attributed to actions and decision-making of the entrepreneurs. Additionally, research suggests

that some entrepreneurs become more successful than others due to differences in individual

behaviour and decision making (Baron, 2004a, Shane, 2001). Through the expert interviews, we

identified the individual level factors which were key determinants of firm growth in Zambia. The

findings from the expert interviews and literature review provided a basis for the development of

two questionnaires that were used to collect quantitative data. The identified factors that, among

other factors, influence firm growth are personal wealth extraction, strategic orientation of the

firm owner, and emotions and cognition of the entrepreneur. Accordingly, this thesis focused on

16
how start-up motivation (chapter 3), entrepreneurial orientation (chapter 4), entrepreneurial

passion and alertness (chapter 5) affect firm growth in LDCs.

Quantitative data collection was conducted in two phases. The first phase was preceded

by a pilot study in November 2012. In the pilot phase, we administered the questionnaire to thirty

owner-managers drawn from our sample. The aim was to check the clarity in the wording of the

questions, time taken to answer the questionnaire, and to find the most convenient way of

administering the questionnaire. In March 2013, we embarked on the first wave of data collection.

We collected data on firm growth, firm start-up motivation and entrepreneurial alertness. Firm

growth data was used in chapter 2, data on start-up motivation and entrepreneurial orientation was

used in chapters 3 and 4 respectively. A year later in March 2014, we conducted the second

fieldwork and collected data on firm growth, entrepreneurial passion and entrepreneurial alertness.

The firm growth data collected in the second wave was used in chapters 4 and 5 while the data on

entrepreneurial passion and entrepreneurial alertness was used in chapter 5.

Our sample for the quantitative analysis was drawn for the Zambian construction sector.

All the data used in this thesis were collected from small firms in the Zambian construction sector.

Apart from its economic importance to Zambia, the construction sector was selected because of

the existence of a national regulation that required all firms in the industry to register with the

NCC, which made it easier to select and locate the firms to be included in the study. The

methodology sections in each empirical chapter provide more detailed explanations of the sample,

data collection and methods used to analyse the data. The questionnaires used during data

collection are in Appendix 2 and 3. Now we turn to the chapters representing the four empirical

studies already introduced in section 1.3.

17
Chapter 2 Measuring Small Firm Growth in African Least
Developed Countries: Evidence from the Construction
Sector in Zambia3

3 This chapter is based on a paper currently under review (second round) for publication in the African
Journal of Management entitled “Measuring Small Firm Growth in African Least Developed Countries: Evidence
from the Construction Sector in Zambia” with as authors M. Chabala, L. Paas, E. van Burg, and E. Masurel.

18
Abstract

Conceptualisation and operationalization of small firm growth has continued to be

problematic, especially for research conducted in non-traditional settings like African Least
Developed Countries (LDCs). This is because the measurement of small firm growth is
affected by context-specific factors like level of economic development. In this chapter, we
present the development of a unidimensional multiple-item scale for measuring small firm
growth in LDCs. Based on an assessment of validity and reliability using growth data from
small firms in Zambia, we find that owner-manager's perception of growth in employees,
sales, assets, personal wealth and expenditure on purchase of key process inputs is the most
suitable way of measuring small firm growth.

19
2.1 Introduction
The contribution of entrepreneurship to economic growth in both developed and developing

countries is widely recognised in entrepreneurship research (Acs et al., 2008; Carree and Thurik,

2005; van Stel et al., 2005). It is often argued that economic growth is achievable when

entrepreneurship leads to competitiveness, innovation, and employment creation through small

firm formation and development (Friis et al., 2006; Acs and Storey, 2004). However, small firms

only contribute to economic growth if they survive and grow (Shane, 2009; Wennekers et al., Wong

et al., 2005). Thus, from an economic development perspective, small firm growth is a significant

aspect of the essence of entrepreneurship (Davidsson et al., 2006). This realisation has resulted in

numerous studies on small firm growth in both developing countries (Goedhuys and Sleuwaegen,

2010; Naudé et al., 2010) and developed countries (Davidsson et al., 2010; Leitch et al., 2010;

McKelvie and Wiklund, 2010). Although such studies have provided a substantial body of

knowledge, conceptualisation and operationalization of small firm growth has continued to be

problematic (Davidsson et al., 2013b). Consequently, small firm growth research is often criticised

for being “stagnated, characterised with inconclusive research results and slow theory

development” (Kiviluoto, 2013 p 569). Leitch et al. (2010) observe that not much is known about

small firm growth and that confusion and misunderstanding surround the phenomenon.

The dominant theoretical concerns in the field relate to incoherence in the way small firm

growth is measured. Davidsson et al. (2007) attribute this to differences in theoretical and

epistemological perspectives and interpretations, operationalizations, empirical contexts, modelling

and analysis approaches, as well as the inherent complexity of the phenomenon itself. Additionally,

there is heterogeneity in form and characteristics of small firms and the environment in which they

operate. All these factors are important elements of small firm growth and their variation affects

its conceptualisation and operationalization (Delmar et al., 2003). As a result, researchers make

21
choices between different small firm growth measurement methods, but there is little guidance on

which choices are most appropriate (Wiklund et al., 2009). As a result, the findings of small firm

growth research are often incomparable, which in turn impedes theory development.

The problem of measuring small firm growth is further compounded when research is

undertaken in contextually different settings such as in Western contexts as well as African Least

Developed Countries (hereafter abbreviated as LDCs). LDCs have different social challenges and

structural characteristics compared to developed countries that have been the focus of most

entrepreneurship research (Naudé et al., 2010; Bruton et al., 2008). Small firm growth is affected by

context-specific factors (Stenholm et al., 2013; Dobbs and Hamilton, 2007; Davidsson and

Klofsten, 2003) such as the national level of economic development (Leitch et al., 2010). Contextual

differences affect key aspects of research design and administration (Kriauciunas et al., 2011;

Natukunda et al., 2016). As such, it is important that conceptualisation and operationalization of

research variables account for the context in which research is conducted. Contextualisation

involves considering the various attributes of the research setting as an integral part of the research

process (Zahra et al., 2014). Therefore, testing and adapting theoretical and epistemological

perspectives and operationalizations used for research in developed countries are important points

to consider when conducting research in African LDCs. Despite this, most entrepreneurship

studies conducted in LDCs have adopted small firm growth conceptualisations and

operationalizations from developed countries without assessing their suitability. Therefore,

improving the conceptualisation and operationalization of small firm growth from the perspective

of LDCs is still an important aspect in the quest to understand entrepreneurship.

This chapter addresses the research question: What constitutes firm growth in LDCs and how

should it be measured? We present the development of a small firm growth measurement scale that

considers the LDC context. This chapter’s contribution is twofold. First, we assess the suitability

22
of existing small firm growth conceptualisations and operationalizations used in developed

countries for research conducted in LDCs. Second, we evaluate the validity and reliability of small

firm growth measurement scales that specifically consider the LDC context. Although there has

been an increase in research in LDCs with firm growth as a dependent variable, much of it has

been conducted without proper operationalization of firm growth. This chapter provides an

operationalization of small firm growth for future research in LDCs. The chapter also provides

guidance on how to adapt existing operationalizations of small firm growth to different contexts.

The chapter is organized in five main sections. First, in the theory section, we outline the

theoretical foundations of measuring small firm growth and present a review of literature on small

firm growth measurement in entrepreneurship research. Second, the qualitative study section

presents an assessment of the suitability and contextualising of existing small firm growth

measurement methods for LDCs. Third, in the quantitative study section we present an evaluation

of the validity and reliability of small firm measurement scales using growth data from small firms

in an African LDC, Zambia. Fourth, in the final section we discuss the results and draw main

conclusions and address the limitations of the study.

2.2 Theoretical background

2.2.1 Small Firm Growth

Most entrepreneurship scholars converge in their understanding of small firm growth by referring

to the classical work of Edith Penrose (Lockett et al., 2011; Bradley et al., 2011; Leitch et al., 2010;

McKelvie and Wiklund, 2010; Davidsson et al., 2007). Penrose (1959) considered firm growth as

having two meanings; first as “increase in amount” and second, as the “internal process of change”.

The former, which is the most emphasised in entrepreneurship literature (Leitch et al., 2010),

focuses on outcome-based indicators that are used when measuring firm growth. From this

perspective, the common indicators of small firm growth that have been used in research include

23
the change in the number of employees, sales volume, revenues, and profitability (Achtenhagen et

al., 2010; Shepherd and Wiklund, 2009; Dobbs and Hamilton, 2007). Firm growth as an internal

process of change is concerned with how growth is achieved and mainly focuses on growth modes.

Therefore, when studying small firm growth, it is important to understand “what is changing” and

by “how much’. In considering “what is changing”, defining the unit of analysis in which the change

is to be observed is key. The “how much” issue involves deciding on how to measure change.

2.2.1.1 Conceptualisation of small firm growth

The heterogeneity in small firms and the variations in growth patterns leads to different

conceptualisations of growth. Researchers decide how to measure growth to suit specific

conditions of their studies. Therefore, measuring small firm growth in entrepreneurship research

is an issue that lacks general agreement on the suitability of the available choices. The key decision

points involve selecting which growth indicator(s) to use, the type of data to collect, and the method

of calculating growth (Delmar et al., 2003). The choices made by researchers lead to different

modelling and analysis procedures, which often produce different results. As a result, the

interpretation and generalizability of research results regarding firm growth has been problematic

(Shepherd and Wiklund, 2009; Dobbs and Hamilton, 2007; Delmar, 2006b).

A number of review articles have analysed and reported the variations in small firm

growth conceptualisation and operationalization in entrepreneurship research. Prominent among

them are studies by Weinzimmer et al. (1998), Shepherd and Wiklund (2009) and Achtenhagen et

al. (2010). These reviews assessed articles with firm growth as a dependent variable that were

published between 1981 and 2008 in leading entrepreneurship and management journals. These

three key papers report a range of growth indicators that included financial and non-financial firm

growth measures. The methods of measuring growth ranged from absolute differences and

regression analyses to subjective perceptions of owner-managers. The review by Shepherd and

24
Wiklund (2009), reviewing 82 articles, found that ‘sales’ was used 61 times, ‘number of employees’

13 times, ‘profit’ 9 times, ‘equity and assets’ 16 times while some other indicators were used 15

times. Achtenhagen et al. (2010) and Weinzimmer et al. (1998) also reported variations in the use of

firm growth indicators and firm growth measurement methods in entrepreneurship research.

We adopted the methodology used by Shepherd and Wiklund (2009) to update the

findings of these studies to include recently published research. We reviewed articles published

between 2007 and 2013 in the current leading entrepreneurship journals, namely Academy of

Management Journal, Entrepreneurship: Theory & Practice, Journal of Business Venturing, Journal of Small

Business Management, Journal of Management Studies, International Small Business Journal, Organization

Science, Small Business Economics, Strategic Management Journal and Entrepreneurship and Regional

Development. Additionally, we analysed how small firm growth has been measured in studies

conducted in African LDCs. We found similar heterogeneity in conceptualisation and

operationalization of small firm growth. We observed that sales, the number of employees and

assets are still the commonly used indicators of growth. The different methods of measuring small

firm growth still being used include: change measured by absolute difference, relative change,

logarithmic difference and change as perceived by the owner-managers. The results of the analysis

are shown in Table 2.1. Other recent studies that focused on how small firm growth, as a dependent

variable, has been operationalized in recent years show similar results (see Rosenbusch et al., 2011;

Brandstätter, 2011; Unger et al., 2011).

25
Table 2.1. Summary of small firm growth indicators and measuring methods in
entrepreneurship research (2007 to 2013)4
Firm growth
References Growth indicators
measurement method
Chowdhury (2011) Revenues Absolute difference
Bradley, Wiklund, and Shepherd (2011) Sales Absolute difference
Brinckmann, Salomo, and Gemuenden
Employees, sales Absolute difference
(2011)
Bruneel, Van de Velde, and Clarysse (2013) Employees, revenue Absolute difference
Headd and Kirchhoff (2009) Employees Relative growth
Stam and Wennberg (2009) Employees Relative growth
Davidsson, Steffens, and Fitzsimmons
Sales Relative growth
(2009)
Bogner and Bansal (2007) Sales Relative growth
Gilbert, McDougall, and Audretsch (2008) Sales Relative growth
Mai and Zheng (2013) Sales Relative growth
Watson (2012) Sales Relative growth
Delmar and Wiklund (2008) Sales, employees Relative growth
Steffens, Davidsson, and Fitzsimmons
Sales, sales and profit Relative growth
(2009)
Tomczyk, Lee, and Winslow (2013) Sales and employees Relative growth
Anderson and Eshima (2013) Sales, employees, market share Relative growth
Watson (2007) Total income (sales plus other income) Relative growth
Goedhuys and Sleuwaegen (2010) Employees Logarithm difference
Rauch and Rijsdijk (2013) Employees Logarithm difference
Younsuk, Jaeun, and Taejong (2010) Employees Logarithm difference
Saridakis, Mole, and Hay (2013) Employees Logarithm difference
Chandler, McKelvie, and Davidsson (2009) Employees, sales Logarithm difference
Coad et al. (2013) Sales Logarithm difference
Coad and Tamvada (2012) Gross output Logarithm difference
Davis et al. (2010) Market share, sales Perceived change
West and Noel (2009) Overall growth Perceived change
Oswald, Muse, and Rutherford (2009) Sales Perceived change
Sales rate, market share, profit rate,
Tang et al. (2008) Perceived change
overall performance
Sales, market share, employees,
Eddleston et al. (2013) Perceived change
profitability
Sales, profit, transaction volume,
Gielnik, Zacher, and Frese (2012) Perceived change
income, employees
Perceived change and
Wright et al. (2008) Employees
Relative growth
Relative growth and
Rutherford, Kuratko, and Holt (2008) Sale, employees
absolute difference
Relative growth and
Wiklund, Patzelt, and Shepherd (2009) Sales, employees
absolute difference
Relative growth and
Moreno and Casillas (2008) Overall growth, sales
perceived change

4 Table 2.1 continues on the next page

26
 Firm growth
References Growth indicators
measurement method
Perceived change and
Wright et al. (2008) Employees
Relative growth
Annual growth rate of
Hamelin (2013) Sales, investment rate
retained earnings
Falk (2012) Employees Geometric growth rate
Coleman (2007) Sales Average yearly change
Pirolo and Presutti (2010) Sales Average yearly change
Patel, Fiet, and Sohl (2011) Employees, number of products Average yearly change
Wang and Altinay (2012) Employees, sales Average yearly change
Zahra and Hayton (2008) Revenues, sales Average yearly change

2.2.1.2 Choice of firm growth indicators

Small firm growth indicators found in the literature can be broadly categorised as financial

and non-financial. Financial indicators include sales, assets, profit, equity, value added, transaction

volume, stock market performance, and cash flow. Non-financial indicators include the number of

employees, the number of customers, market share, new market entry, and export propensity.

Small firm growth indicators are chosen based on availability of data (Bruton and

Rubanik, 2002), what has been used in prior studies, relationship with the other variables under

study (Davidsson et al., 2007), and relevance for policy makers (Davidsson and Wiklund, 2006).

Sales is the most frequently used indicator followed by number of employees and value of assets

(Bradley et al., 2011; Wiklund et al., 2009). Researchers using sales argue that it is a precursor to

other measures urging that an increase in sales leads to increases in assets and employees and

subsequently rising profits or market share (Davidsson et al., 2007; Delmar et al., 2003). Others

contend that the other two indicators (that is: employees and assets) are more inclined to show

change in inputs than in performance outcomes (Casillas and Moreno, 2010; Davidsson and

Wiklund, 2006). From the foregoing, it can be noted that there is still ambiguity on how to select

growth indicators.

27
2.2.1.3 Method of collecting data
There are two prominent methods used for collecting small firm growth data (Coad,

2009). First, data found in secondary sources such as company reports and national databases have

been used. In such cases the data are often termed as “secondary data”. Second, in the absence of

objective data, researchers use self-reported data from owner-managers. Such data is called

“subjective data” because of the bias introduced by relying on respondents’ expectations,

perceptions and knowledge about the firm (Achtenhagen et al., 2010). Subjective data comes in two

forms: the respondent can either report values of growth indicators or his/her perceptions on how

the values have changed over a period of time.

2.2.1.4 Method of measuring small firm growth

The method used to measure small firm growth also depends on the type of data collected

by the researchers. In most cases, researchers ask for objective performance data or perceptions of

owner-managers on changes in firm growth indicators. So-called objective performance data can

be obtained from secondary data sources such as firms’ financial reports and tax registration

equipment. However, such data are not always readily available for small firms, especially in LDCs.

In such research settings, researchers usually obtain the relevant data by asking for figures of

performance data from the survey respondents. Such data are then referred to as self-reported

performance data. For both objective performance data and self-reported performance data,

formulas are used to calculate firm growth. Several formulas have been used to calculate small firm

growth in entrepreneurship research. The most commonly used formulas are shown in Table 2.2.

Based on the analysis by Delmar et al. (2003), Shepherd and Wiklund (2009) and Coad (2009), we

identified five formulas that have been prominent in entrepreneurship research. These formulas

include 1) absolute size growth, 2) relative size growth, 3) logarithm difference growth 4) size

weighted growth, and 5) average size growth.

28
 In research where data are collected based on perceptions, owner-managers are requested

to estimate growth in the chosen small firm growth indicators on a scale that describes possible

changes. For example, the owner-manager may be asked to rate how sales changed over a period

of time on a five-point Likert scale, with possible responses ranging from “increased very much”

to “decreased very much”. In other research, owner-managers are asked to compare the growth of

their firms with that of competitors or peers in the same industry (Ahmad et al., 2011; Krauss et al.,

2005; Madsen, 2007). Small firm growth measured on Likert scales using the perceptions of the

owner-manager is commonly referred to as perceived growth

Table 2.2. Small firm growth calculation formulas

Firm growth measurement Formula References
method
Absolute size growth Delmar, Davidsson, and Gartner
𝐺"# = 𝑆"# − 𝑆"#'( (2003), Shepherd and Wiklund
(2009), Weinzimmer, Nystrom,
Relative size growth and Freeman (1998)
𝑆"# − 𝑆"#'(
𝐺"# = 𝑥 100
𝑆"#'(

Logarithm difference growth Coad (2009)

𝐺-. = log S-. − log S-.'(

Size weighted growth

𝑆"#
𝐺"# = (𝑆"# − 𝑆"#'( ) ×
𝑆"#'(

Average size growth Davidsson et al. (2002) Coad

(𝑆"# − 𝑆"#'( ) (2009)
𝐺"# =
17 (𝑆 + 𝑆 )
2 "# "#'(

Note: = Git = growth in firm i at time t, Sit= size in selected indicator at (e.g. sales, number of employees
𝐺" #

or revenue) time t, Sit-1= size in selected indicator at time t-1

A number of researchers who use perceived growth justify its appropriateness by the high

correlation that has been shown by prior research between firm growth based on perceptions and

on objective performance data (Casillas and Moreno, 2010; Delmar et al., 2003). Others rationalise

its use by pragmatic reasons such as availability of data and the reluctance among owner-managers

to disclose objective performance data (Anderson and Eshima, 2013).

29
2.2.1.5 Multiple indicator indexes versus independent indicators
Some researchers have conceptualised small firm growth as a latent variable (Diambeidou

and Gailly, 2011; Avlonitis and Salavou, 2007) and created multiple indicator indexes to measure

growth. This is based on the understanding that growth can manifest itself in several related but

unique indicators. To illustrate this phenomenon, Davidsson et al. (2007) explain that a firm may

increase turnover through innovative means that do not translate into an increase in assets nor in

employees. Similarly, an increase in the number of employees or assets would not always relate to

the need to meet increased sales. Furthermore, in other types of firms, growth may be moderately

spread across the different indicators (Delmar et al., 2003). Therefore, selecting certain indicators

at the expense of others may lead to failure to capture certain aspects of firm growth properly. In

this situation, combining all indicators into a multiple-indicator index becomes an appropriate

method for capturing growth in all its possible manifestations (Davidsson et al., 2010).

Other researchers select only one small firm growth indicator or a select group of

indicators but analyse the results for each of them independently. Researchers who use the former

justify their choice by referring to the correlations among the different indicators (Casillas and

Moreno, 2010; Delmar et al., 2003). Analysing select groups of indicators is justified from the

perspective that small firm growth is a multi-faceted construct. It is therefore argued that by using

more than one growth indicator, the different aspects of firm growth can be captured (Kiviluoto,

2013; Davidsson et al., 2010).

2.2.1.6 Measuring growth in different contexts

There have been efforts to address problems of measuring small firm growth in developed

countries, with some success (Davidsson et al., 2013; Wiklund et al., 2009), but the applicability of

such methods in different contexts such as African LDCs is under-researched. Most

entrepreneurship studies focus on developed countries despite the importance of understanding

30
what is going on in LDCs (Naudé, 2010). However, there are apparent differences between small

firms in developed countries and LDCs. Kiggundu (2002) identified such differences in the form,

structure, size, management and purpose of the firm. Small firms in LDCs are usually home based,

family businesses or self-employed individuals; the majority of which experience very low sales and

productivity (Clarke et al., 2010). They often face severe market, institutional and resource

constraints. As a result, many of them operate in the informal sector since these constraints largely

impede their ability to register their firms. The contextual differences between small firms in LDCs

and developed countries can be mainly attributed to differences in national economic development.

The existence of such heterogeneity among small firms and their environments is one of the leading

causes of variability in findings in entrepreneurship research (Soininen et al., 2011; Delmar et al.,

2003). Therefore, it is important that measures of firm growth consider the context in which the

firm is operating. We now turn to the qualitative study we performed to further understand the

conceptualization of firm growth in the context of LDCs.

2.3 Qualitative study

Qualitative interviews provide in-depth descriptions of circumstances, behaviours, attitudes,

thoughts and beliefs of people who have experienced the phenomenon (Patton, 2002). In scale

development and validation, qualitative research is used for generating items to represent the

construct and assess the content validity of the items (DeVellis, 2011; DeVon et al., 2007;

Worthington and Whittaker, 2006; Chandler and Lyon, 2001) Specifically, Hardesty and Bearden

(2004) recommend that research using new, changed, or previously unexamined scale items, should

at a minimum be judged by a panel of experts for content validity. Therefore, we conducted expert

interviews to determine the suitability of small firm growth conceptualisation and

operationalization from developed countries to LDCs.

31
 Experts from small firm support institutions, trade associations, chambers of commerce,

government departments responsible for small business development, prominent entrepreneurs

and academicians were interviewed for their expert opinions on measuring small firm growth in

Zambia (see Table 2.3). During the expert interviews, we focused on assessing whether existing

small firm growth indicators and operationalizations of growth are suitable for LDCs.

Table 2.3. List of experts interviewed

Type of organisation
Small business support
institution
Financial Institutions
Trade Associations
Entrepreneurs
Academics
Position of expert
Name of organisation
interviewed
Zambia Chamber of Small and Medium Business
Research Officer
Associations
Zambia Development Agency Director of SMEs
National Council for Construction Executive Director and Registrar
Ministry of Commerce, Trade and Industry Senior Economist
Manging Director,
ZANACO
Head of SME Banking
Zambia Chamber of Commerce and Industry National Trustee
Kitwe District Chamber of Commerce and
Past President
Industry
National Association of Small and Medium
Secretary General
Contractors
Chairperson and Secretary
Association of Small and Medium Contractors
General
Association of Building and Civil Engineering
Executive Director
Contractors
Various Four owner-managers
Two lecturers in School of
Copperbelt University Business who research and teach
entrepreneurship courses

2.3.1 Selection of small firm growth indicators

The experts acknowledged all small firm growth indicators from the literature as shown

in Table 2.1. However, not all small firm growth indicators were considered suitable for the

Zambian context. Table 2.4 shows the list of small firm growth indicators and the corresponding

number of experts recommending each indicator as suitable for the Zambian context.

Some of the experts interviewed cautioned against using financial indicators because of

the lack of accurate and reliable data. Small firms in Zambia often operate without credible and

reliable accounting information management systems and are not legally obliged to produce audited

32
financial statements. The experts indicated that owner-managers in Zambia had a tendency of

overstating profits and sales when the information is meant for financial lenders while understating

them if the recipients were tax authorities, policy makers and creditors.

Table 2.4. Number of experts recommending a particular small firm growth indicator
Growth indicator Responses
Sales 12
Employees 11
Assets 10
*Personal wealth 9
*Expenditure on purchase of key process input 8
Profit 5
Cash flow 4
Credit limit 4
Transaction volume 3
Level of formalisation 2
New market entry 2
Product innovation 2
Value-added 2
Equity 0
Export propensity 0
Financial market performance 0
Market share 0
Number of customers 0
Note: * represents firm growth indicator added from expert interviews

Accounting ratios, equity and cash flow were considered unrepresentative for the day-to-

day management challenges of the owner-managers. Most owner-managers in Zambia focus on

short-term performance management due to uncertainties in the business environment. One expert

added that the “low levels of financial literacy among the majority of small owner-managers make

the accounting-based measures difficult to use”.

A number of non-financial indicators were deemed unsuitable because of the

characteristics of small firms in Zambia. They include number of customers, market share, new

market entry, export propensity, and product innovation. For the market-based indicators, it was

noted that most small firms in Zambia had no capacity to monitor and analyse changes in their

33
markets. Export propensity and product innovation were deemed unsuitable because most of the

small business did not export and rarely engaged in activities related to product innovation.

The three commonly used firm growth indicators (number of employees, level of sales

and value of assets) were considered suitable for the Zambian context. Sales were considered to be

the essence of the firm and therefore any observable change would reflect firm growth or decline.

Specifically, for Zambia, it was observed that most owner-managers use their ingenuity to find

work for their firms and are directly involved in sales. The owner-managers also monitor the

performance of the firm through changes in sales. As one respondent indicated:

Small firm owners use their personal connections to source for orders. They know how many
orders they get and the value of each order. They often refer to the changes in number of
orders and order values when explaining performance.

The experts also observed that change in the number of employees was linked to level of

activity in Zambian small firms. They noted that most small firms used temporary employees to

cater for short-term labour demand fluctuations. They would only hire permanent staff when they

feel the increase in activities is sustainable in the long term. Thus, they recommended the use of

number of employees as an indicator of small firm growth. The value of assets was considered an

important measure of small firm growth. Most owner-managers convert their income into fixed

assets to increase their credit-worthiness. One respondent observed:

It’s common to see new business premises built and cars or other assets bought. They (owner-
managers) reinvest in assets to build strong bases for collateral required for future borrowing
from financial institutions. Most credit providers have high collateral requirements and
investing in fixed assets helps to qualify for credit.

Furthermore, some context-specific growth indicators were identified. They included 1)

change in personal wealth of the owner-manager and 2) expenditure on purchase of key process

input. Using personal wealth as an indicator of small firm growth entails measuring the change in

personal belongings of the entrepreneur resulting from owning the firm. This was justified by the

34
view that most owner-managers do not separate their personal wealth from the firm and vice versa.

As one expert noted:

The premises we use were bought from the money I earned while I was still in employment,
why should I charge myself rent? It’s all my money and charging myself doesn’t make sense at
all. All these assets are mine! It doesn’t matter if I bought them from my personal income or
business income.

In most small firms, assets of the firm and assets of the owner-manager are intertwined.

Measuring small firm growth at firm level has the potential of leaving out a key component of

growth that that may be revealed in changes in personal wealth of the owner-manager.

Expenditure on purchase of key process input was offered as a practical alternative to

using profitability as an indicator of small firm growth. Some experts noted that most small firm

owners monitored expenditure more than profitability. An expert who supported this view

commented:

Most of the entrepreneurs pay a lot more attention to expenditure on inputs than they do with
profit. They know, for example, better how much cement they buy than how much they earn
from it.

Therefore, they are likely to consider an increase in expenditure on purchase of key

process inputs as an indicator of increased activity.

2.3.2 Operationalization of growth

Another key aspect of the expert interviews was to check the suitability of the methods

of operationalizing growth. From extant literature, we found that growth can be measured by

comparing firm performance with that of competitors. For this method, it was observed that most

owner-managers are time-constrained and wary of sharing objective performance data with others.

One expert noted that most small firms in Zambia are still shrouded in secrecy. He explains that

“most small business owners did not know how much their colleagues earn and the range of

activities they undertake”. This reduces their ability to compare their performance relative to

35
competitors. Additionally, they are likely to provide approximate figures and perceived growth

rather than the objective performance data. Two experts who had encountered these challenges

when collecting data also supported this view.

The qualitative study therefore confirmed the three, established small firm growth

indicators (number of employees, level of sales and value of assets) and unveiled two LDC context

specific small firm growth indicators (personal wealth and expenditure on purchase of key process

inputs). These small firm growth indicators have been used to calculate small firm growth in

previous entrepreneurship research. Researchers have used either the formulas shown in Table 2.2

to calculate growth when objective data is available or they have relied on perceptual assessment

of the business owner in the absence of objective data.

2.4 Quantitative study

The aim of the quantitative study was to evaluate the dimensionality, validity and reliability

of scales developed from the small firm growth indicators and measurement methods that were

identified from the literature and confirmed through expert interviews. In this section, we present

the methodology and results of the quantitative analysis.

2.4.1 Methodology

2.4.1.1 Sample characteristics

Our sample was drawn from firms in the Zambian construction sector. The sample

included firms registered with National Construction Council (NCC) in the years 2009 to 2013 in

grades four to six, which are the appropriate categories for small firms. Additionally, the inclusion

of personal wealth as one of the indicators of small firm growth meant collecting data about the

wealth of the owner-manager. Consequently, we included in our sample only small firms that had

owner-managers (Avlonitis and Salavou, 2007; Lyon et al., 2000).

36
 The firms in the sample were drawn from Lusaka and Copperbelt regions. Lusaka is the

capital and largest city of Zambia and is the centre of both commerce and government. Copperbelt

province covers the mineral-rich areas of the Northern parts of Zambia and is considered the

backbone of the economy. The two regions form the commercial and industrial areas in Zambia

and account for 82% of the urban population (Central Statistics Office, 2011) and 56% of the

country’s self-employed population (World Bank, 2013c) and as such provide a fair representation

of small firms in Zambia. Out of the total 235 owner-managers that responded to our

questionnaires 55.3% were from the Copperbelt region while 44.7% came from Lusaka and its

surrounding areas. The average firm age was 10 years. In terms of legal status, 94.5% were limited

companies while the remaining 5.5% described themselves either as sole traders or in a partnership.

2.4.1.2 Data collection

Quantitative data were collected using a structured questionnaire between May and

August 2013. Out of the 475 owner-managers that were contacted 235 agreed to participate in the

study. The majority of the owner-managers who participated in the study were male (89.4%); this

can be attributed to the low level of female participation in commercial sectors such as construction

in Sub-Saharan Africa (Bardasi et al., 2011; Liedholm, 2002). Additionally, the median age group of

the owner-managers was 39 to 40 years and 53.2% of all respondents were below the age of 40.

Nearly all respondents (98.3%) had received formal education and 88.9% completed some form of

tertiary education.

All respondents answered all questions on perceptual small firm growth indicators, hence

the 100% item response rates in Table 2.5. However, for the questions that asked for objective

performance data, disclosure rates were lower as shown in Table 2.5. A number of owner-managers

did not provide objective performance data because they were not comfortable with disclosing

such kind of data despite assurances from the side of the researcher; others said they did not have

37
any archival data available. The information in Table 2.5 supports the ideas from literature (Åstebro

and Chen, 2014; Hurst et al., 2013) and the suggestions from the expert interviews that owner-

managers are reluctant to discuss firm growth based on objective performance data.

Table 2.5. Response rates for small firm growth indicators

Number Response
Growth indicator
Responses rate
Perceived Growth:
Number of employees 235 100%
Sales 235 100%
Assets 235 100%
Expenditure on purchase of key process input 235 100%
Personal wealth 235 100%
Performance information provided by respondent:
Number of employees 217 92.3%
Sales 137 58.3%
Assets 133 56.6%
Expenditure on purchase of key process input 120 51.1%

2.4.2 Measures
In entrepreneurship research, growth has been operationalized based on owner-managers’

perceptions of change and as actual change. We used both operationalizations because our research

focus was finding a valid and reliable means of measuring small firm growth in LDCs. We asked

our respondents how they perceived their firm’s growth on each small firm growth indicator. All

perception-based data were collected using a five-point Likert scale that measured

increase/decrease in employees, sales, assets, expenditure on purchase of key process inputs and

personal wealth. We used questions such as, “how has your sales changed over the last five years

(2009-2013)”, with possible responses on a scale ranging from 1-decreased very much, to 5-

increased very much. We also requested survey-participants to respond on similar Likert scales for

assessing perceived changes in annual figures concerning the number of employees, level of sales,

value of assets and expenditure on purchase of key process inputs, but not for personal wealth

38
because of the difficulties we anticipated in terms of availability and willingness to disclose such

data.

We also used data from the NCC database (see Section 1.2.4) to calculate firm growth for

the purpose of comparing the growth measurement methods with an independent measure of firm

growth used in the Zambian construction sector. Each firm in the sector is given a grade category

that indicates its size and we considered a change in grade as an indicator of change in size.

Therefore, a firm that has increased its size can be considered as having grown over the period

under consideration. Using the NCC grades for each firm for the period 2009 to 2013, we

calculated firm growth by subtracting the firm’s NCC grade in 2013 from the grade in 2009. We

considered firms that had improved their grade as growth firms, while those that remained in the

same grade or moved from a superior to a lower grade as no-growth firms. For example, a firm

that was in grade six in 2009 and in grade four in 2013 was considered to have grown since it had

improved its grade by two (6-4 = 2), while one in grade four in 2009 and grade six in 2013 had

reduced its grade by two (4-6= -2) and was considered a no-growth firm. We created a dummy

variable for allocating each firm in either the “NCC growth” group or the “no NCC growth” group.

We assessed whether our survey-based growth indicators in Table 5 have a positive relationship

with the NCC-growth dummy. For example, if an entrepreneur states that the firms’ number of

employees, sales, assets and the individual’s expenditures and personal wealth have all increased,

this response is deemed more trustworthy when the NCC-dummy also indicates growth for the

firm.

2.4.3 Data analysis

Establishing construct validity involves the empirical assessment of the adequacy of a

measurement scale and requires assessing three essential components: dimensionality, reliability

and validity (O'Leary-Kelly and Vokurka, 1998; Venkatraman and Grant, 1986). Construct validity

39
shows the extent to which the measured variables reflect the latent construct they are supposed to

measure (Kline, 2011). We used Exploratory Factor Analysis (EFA) followed by Confirmatory

Factor Analysis (CFA), to establish construct validity of the six growth indicators from Table 2.5.

EFA was used as a preliminary analysis to determine the number of factors and patterns of loadings

that best represented the data (Hair et al., 2010; Worthington and Whittaker, 2006). For this study,

it was important to check the factor structure using EFA since our scales included new indicators

of small firm growth. CFA was then used to assess unidimensionality, reliability and convergent

validity of the scales (Hair et al., 2010; Mullen et al., 2009; Bagozzi et al., 1991).

We also validated our scales by comparing the difference in the mean score of two groups

(one showing growth and the other no growth) that we created from our sample using data from

the NCC database. Diamantopoulos (2005) notes that with the exception of content validity, all

other forms of validity are defined in terms of patterns of relationships with other measures. In

this regard, the concern for validity is to check whether the indicators accurately capture the real-

world phenomena to which they refer (MacKenzie et al., 2011). For this purpose, we compared the

growth measurement scales with the NCC grade growth. We conducted an independent samples

t-test to check whether belonging to the “growth” group or “no-growth” was significantly related

to the scores from the firm growth measurement scales. This relates back to the previously

mentioned example that if an entrepreneur states that the firms’ number of employees, sales, assets

and the individual’s expenditures and personal wealth have all increased, we should find that the

NCC-dummy also indicates growth for the firm.

2.4.4 Results

2.4.4.1 Scale dimensionality

In scale development, it is important to establish dimensionality before testing for reliability and

validity (Schjoedt and Shaver, 2012). A measurement scale that represents a single latent trait is

40
considered to be unidimensional (Hair et al., 2010; Gerbing and Anderson, 1988). Since all firm

growth indicators in Table 2.5 intend to measure small firm growth, we assumed unidimensionality.

Both EFA and CFA were used to assess dimensionality for the firm growth indicators using the

six alternative methods presented in Table 2.2. We used EFA to explore the underlying factor

structure by checking the number of factors produced. To conduct EFA, we used principal

components factor analysis with Varimax rotation using IBM SPSS statistics version 24 software.

The results presented in Table 2.6 show the factor loadings for each firm growth measurement

method. It should be noted that the variable personal wealth was only measured based on owner-

managers perceptions, hence only has factor loadings for this method in the table.

Table 2.6. Result of factor analysis for firm growth measurement scales
Standardised factor loadings Variance Avg.
explained Variance
Growth measurement scale Personal
Employees Sales Assets *Purchases by the first Explained
wealth factor (%) AVE
Perceived growth 0.671 0.883 0.849 0.831 0.724 63.29 0.55
Absolute size growth 0.763 0.882 0.896 0.964 83.98 0.76
Relative size growth 0.375 0.791 0.227 0.866 39.18 0.45
Logarithm difference growth 0.688 0.800 0.736 0.851 59.44 0.51
Size weighted growth 0.839 0.543 0.902 0.740 58.98 0.46
Average size growth 0.762 0.818 0.834 0.832 65.89 0.63
Note: * Expenditure on purchase of key process input

Only one growth measurement scale, relative size growth, did not produce a single factor

structure, with only 39.18% of the variance of the observed growth indicators explained by the first

factor, and was therefore not considered in subsequent analyses. That is, this particular scale

produced two factors, with employees, sales and expenditure on purchase of key process inputs

loading on one factor, and assets loading on the second factor. All the remaining scales produced

single factor solutions explaining at least 58.98% of the total variance. The factor loadings for all

growth indicators in the growth measurement methods that had a single latent variable namely

perceived growth, absolute size growth, logarithm difference growth, size weighted growth and

average size growth, were above 0.5. Hair et al. (2010) recommends this as threshold for achieving

41
significance in factor loadings when the sample size is 200 or more. These results provide initial

support for the unidimensionality of five out of the six measurement scales.

We conducted our CFA using AMOS 22 and Maximum Likelihood Estimation (MLE)

procedures. CFA offers a more stringent assessment of unidimensionality than EFA and is

considered to provide better inferential statistics that allow for assessing construct validity (Gerbing

and Anderson, 1988; Hair et al., 2010; Kline, 2011). The fit indices that are taken into account when

determining model fit were Chi-square (𝛸2) with the associated degrees of freedom (df) and p values,

Tucker Lewis Index (TLI), Comparative Fit Index (CFI) and the Root Mean Square Error of

Approximation (RMSEA). Values larger than 0.97 for the TLI and CFI and less than 0.08 for

RMSEA signify good model fit for samples less than 250 with less than 12 variables (Hair et al.,

2010). Separate measurement models for each growth measurement methods were estimated

independently. Table 2.7 shows the CFA results for the five categories of measures that were

deemed unidimensinal according to the EFA reported in Table 2.6.

Table 2.7. Confirmatory factor analysis results for growth measurement scales
Growth measurement scale df x2 p TLI CFI RMSEA
Perceived growth 5 9.904 0.078 0.981 0.990 0.065
Absolute size growth 2 4.146 0.126 0.968 0.994 0.068
Logarithm difference growth 2 0.482 0.786 1.072 1.000 0.000
Size weighted growth 2 13.001 0.002 0.651 0.930 0.153
Average size growth 2 3.586 0.166 0.981 0.990 0.065

The results are shown in Table 2.7 and indicate that unidimensionality was achieved in

four measurement scales namely perceived growth, absolute size growth, logarithm difference

growth and average size growth. The only scale that did not show unidimensionality was size-

weighted growth.

42
2.4.4.2 Scale validity
The two important components of scale validity are discriminant validity and convergent

validity. Discriminant validity shows the extent to which conceptually similar concepts are distinct,

while convergent validity measures the extent to which measures of the same concept are correlated

(Hair et al., 2010). Since all our firm growth measurement scales had one latent variable, we only

used convergent validity to establish scale validity. There are two prominent methods for assessing

convergent validity. First, convergent validity is assessed by calculating the average variance in the

indicators that is accounted for by the latent variable (MacKenzie et al., 2011). When each growth

indicator is related to one latent variable, the average variance extracted (AVE) is calculated as the

mean of the sum of the squared standardised factor loading (Fornell and Larcker, 1981). Second,

convergent validity is accessed by considering the size of factor loadings. High and statistically

significant factor loadings show that indicators converge on a common point (Byrne, 2013). Hair

et al. (2010) and Fornell and Larcker (1981) recommend that standardised loading estimates and

AVE values greater than 0.5 show convergent validity.

The results shown earlier in Table 2.6 show that the factor loadings for all growth

indicators in the scales for perceived growth, absolute size growth, logarithm difference growth

and average size growth, had loadings that were above the 0.5 threshold. The values for factor

loadings for sales in the size weighted growth scale were less than 0.5. The AVE value of 0.46 for

size-weighted growth was also below the recommended threshold. These results show evidence of

convergent validity in scales for perceived growth, absolute size difference growth, logarithm

difference growth and average size growth, but not for the size weighted growth. Model fit indices

shown in Table 2.7 also support the validity of these scales.

43
2.4.4.3 Scale reliability
Scale reliability indicates the accuracy and precision of a measurement procedure

(DeVellis, 2011; Chandler and Lyon, 2001). Scale reliability was measured using the two commonly

applied indices, Cronbach’s coefficients alpha (α) and the Composite Reliability, denoted as P(η).

According to Hair et al. (2010) reliability estimates between 0.6 and 0.7 are acceptable provided

other indicators of the model’s construct validity are good, while estimates above 0.7 suggest good

reliability. The results for Cronbach’s alpha and composite reliability are shown in Table 2.8. The

results indicate that only perceived growth, absolute size growth and average size growth are

reliable according to both indices. The Cronbach’s alpha (α) and Composite reliability values for

relative growth and size weighted growth were below the cut-off value. Although Cronbach’s alpha

value for logarithm difference growth was above 0.7, its composite reliability value was below 0.6.

Hence, we did not consider the logarithm difference growth to be reliable.

Table 2.8. Reliability assessment results for growth measurement scales

Cronbach’s Composite
Growth measurement scale
alpha (α) Reliability P (η)
Perceived growth 0.85 0.62
Absolute size growth 0.78 0.78
Relative size growth 0.01 0.48
Logarithm difference growth 0.77 0.59
Size weighted growth 0.34 0.52
Average size growth 0.76 0.68

2.4.4.4 Comparison with an external measure-NCC growth

The data from the NCC database enabled us to compare our scales with the best available

small firm growth measure for the construction sector in Zambia. We compared the three small

firm growth measurement scales (perceived growth, absolute growth, and average size growth) that

were unidimensional, valid and reliable with growth calculated using data from the NCC database.

We used the grade classification from the NCC database for firms in our sample to create the

dichotomous groups of “growth” and “no growth” firms.

44
 We conducted an independent samples t-test with the “growth” and “no growth” groups

as the categorical independent variable and the score from the firm measurement scale as the metric

dependent variable. Only the scores measured using the perceived growth scale showed statistically

significant difference for the “growth” group (M=3.782, SD= 0.608) and the “no growth” group

(M= 3.395, S.D 0.903): t(87)= -2.49, p=0.019. Absolute size growth and the average size growth,

for the “growth” and “no growth groups” were not statistically significant. The results of the t-test

are shown in Table 2.9.

Table 2.9. T-test results comparing NCC “growth” and “no growth” Groups
Growth Grade growth Std.
N Mean t-value p-value
measurement scale Group Deviation
Perceived growth Growth 43 3.3953 0.90342
No growth 34 3.7824 0.60776 -2.142 0.035
Absolute growth
Employee Growth 26 793,104 1,841,314
No growth 26 456,083 1,365,770 -1.545 0.127

Sales Growth 27 246,091 706,141

No growth 25 129,110 437,828 0.750 0.457

Assets Growth 23 519,230 1,814,258

No growth 24 78,966 214,572 0.711 0.48

Purchases Growth 34 0.595 1.177

No growth 32 0.820 1.167 1.181 0.244
Average Size growth
Employees Growth 40 0.451 0.885
No growth 33 0.455 0.637 -0.022 0.982

Sales Growth 26 0.392 0.774

No growth 26 0.361 0.488 0.175 0.862

Assets Growth 27 0.423 0.721

No growth 25 0.417 0.331 0.042 0.967

Purchases Growth 23 0.073 0.188

No growth 24 0.087 0.100 -0.314 0.755
The overall summary of the results for all scale validity and reliability assessments are

shown in Table 2.10. The results indicate that of the six small firm growth measurement scales that

were evaluated, the perceived growth, absolute size growth and average size growth were

unidimensional, valid and reliable. The perceived growth scale also showed a significant

relationship when compared with the best available measure of small firm growth.

45
Table 2.10. Reliability and validity results for all measurement scales
External
Unidimensionality Validity Reliability
Measure
Growth measurement
Average
scale Factors Model Factor
Variance (α) P(η)
extracted fit Loadings
Extracted
Perceived growth ✔ ✔ ✔ ✔ ✔ ✔ ✔
Absolute size growth ✔ ✔ ✔ ✔ ✔ ✔ ✗
Relative size growth ✗ ✗ ✗ ✗ ✗ ✗ ✗
Logarithm difference growth ✔ ✔ ✔ ✗ ✔ ✗ ✗
Size weighted growth ✔ ✗ ✗ ✗ ✗ ✗ ✗
Average size growth ✔ ✔ ✔ ✔ ✔ ✔ ✗
Note: (α)= Cronbach’s alpha, P(η) = Composite Reliability

2.5 Discussion and conclusions

There are several ways of conceptualising and operationalizing small firm growth in

entrepreneurship research. This study focuses on identifying small firm growth indicators and

measurement methods that are suitable for entrepreneurship research in LDCs. The difference in

characteristics of small firms and their environment between LDCs and developed countries makes

it difficult to universally apply the conceptualisation and operationalization of small firm growth

indicators that are commonly used in developed countries to research conducted in LDCs. This

study finds that measuring small firm growth through perceptions of owner-managers on changes

in number of employees, level of sales, value of assets, personal wealth and expenditure on

purchase of key process input was the best method for small firms in LDCs.

The major difference between the scale developed in this study and existing ones concerns

the choice of small firm growth indicators. Results from our study indicate that number of

employees, level of sales and value of assets are the common firm growth indicators from extant

literature that are also appropriate for research in LDCs. Two growth indicators, personal wealth

and expenditure on purchases of key process input, were included in the new scale to make it more

suitable for the LDC context. The addition of the two indicators may emanate from differences in

structure, ownership and governance of small firms in LDCs and developed countries (Kiggundu,

46
2002). In most small firms in LDCs, the wealth of firm and that of the firm owner are not clearly

distinguished as is the case in developed countries.

Regarding the type of data collected and method of calculating growth, there are

similarities between the new scale and existing scales. The scale developed in this study uses

subjective rather than objective growth measures. Our results show that in LDCs, measuring small

firm growth based on owner-managers’ perceptions is preferred over using owner reported figures,

that is, exact amount numbers reflecting financial growth in the appropriate currency or the number

of employees of the firm. Although this method is often criticised for being biased, a number of

studies have found correlation between growth measured using owner-manager perceptions and

owner-reported figures data (Casillas & Moreno, 2010; Delmar et al., 2003). One of the main remain

why reasons owner-managers’ perceptions of growth may be more suitable in LDCs is the absence

of accurate sources of objective data. Many small firms in LDCs do not keep detailed accounts of

their activities and when they do, they are not usually willing to disclose such information to third

parties. Further, there are no reliable secondary sources of small firm growth data in LDCs.

Therefore, researchers in LDCs encounter problems in obtaining objective data on firm growth

measurement variables. Under such conditions, using subjective measures such as owner-

managers’ perceptions of firm growth is acceptable both in developed countries and LDCs (Dess

& Robinson, 1984).

This study also supports the assertions that small firm growth should be measured using

multiple indicators combined into an index to capture the multifaceted nature of growth (Kiviluoto,

2013). The findings of this study indicate that the additional variables, namely personal wealth and

purchase value of key process inputs, provide better firm growth measurement method than using

only number of employees, value of assets, and sales revenue. Since different forms of growth have

to a certain extent common underlying causes, using a composite measure with multiple indicators

47
provides an improved conceptualisation of small firm growth (Delmar et al., 2003). This is especially

important in LDCs where firm growth tends to be affected by external environmental challenges

that affect small firm growth. In LDCs, as firms grow beyond a certain size, they face stringent

regulatory and tax requirements that are bureaucratic and difficult to manage. As a result, most

small firm owners tend to run a number of small firms as opposed to one larger one and convert

some of the business earnings from such firms into personal wealth in order to escape the

challenges of managing a large firm. Therefore, using growth indicators independently of each

other may result in missing certain key aspects of the overall growth (Davidsson et al., 2007; Delmar

et al., 2003). A multi-item scale provides an opportunity to measure the different aspects of growth

that manifests in various forms. The scale developed in this study provides such an

operationalization of small firm growth which can be adopted for future research in LDCs.

Additionally, the scale development process outlined in this chapter provides guidance on how to

adapt existing operationalizations of small firm growth to different research settings.

Overall, our results suggest that context-specific conceptualisation and operationalisation

of small firm growth is relevant for small firms in different research settings. Thus, we conclude

that there is a need to include context-specific growth indicators of small firm growth whenever

growth is measured in different settings. Additionally, in situations where there are challenges of

obtaining objective data, the perceptions of owner-managers can be used to measure growth.

The findings of this study have important implications for future research because the

measurement scale developed considers contextual issues that affect small firm growth

measurement in LDCs. Contextualisation, in its broadest sense, entails placing the researched firms

within their natural settings to understand their origins, forms, functioning and diverse outcomes

(Welter, 2011). It ensures that the circumstances, conditions, situations, or environments that are

external to the respective phenomenon and enable or constrain it are taken into account (Zahra et

48
al., 2014). Conceptualisation also helps to make research models more accurate and interpretation

of results more robust since it is concerned with appropriate specification of constructs and

generalisability of results (Rousseau and Fried, 2001). Since the choice of research setting can cause

variability in research findings, it is important that existing and future small firm growth theoretical

frameworks consider the use of contextualised small firm growth measurement methods.

This study has some limitations. First, our sample was drawn from one sector in one

country. The results therefore represent the Zambian construction sector only and future research

should be undertaken to test the usability of the developed scale in different sectors and in other

LDCs. Second, we used data for one time frame (that is five years) to test the scales. Variations in

choice of time period studied have been identified as one of the causes of variability in results

(Delmar, 2006b). Since our study only used one time period, further research is needed to check if

the developed growth measurement methods show the same results across different time periods.

49
Chapter 3 Which Founders Do Extract Wealth from their
Venture? The Moderating Role of Start-up Motivation5

5 This chapter is based on a paper currently under review (second round) for publication in the Journal of
Small Business Management. The article is entitled “Which Founders Do Extract Wealth from their Venture?
The Moderating Role of Start-up Motivation” and the authors are M. Chabala, L. Paas, E. van Burg, E. Masurel,
and J. M. Lungu

50
Abstract

Increasing personal wealth is one of the motives for starting a business, especially in
environments with few employment opportunities such as Least Developed Countries
(LDCs). However, the relationship between growth in personal wealth, start-up motivations
and small firm growth has hardly been empirically evaluated. Using primary data from 228
small businesses in Zambia, our findings show that overall firm growth is positively related
to increasing personal wealth. Interestingly, we find that push motivated entrepreneurs
extract wealth at a faster rate than those motivated by pull and mixed factors, thus increasing
the risks of early firm failure.

51
4.1 Introduction
Besides the major contribution of small firms to economic growth and job creation (Acs and

Mueller, 2008), small firms have the potential to act as mechanisms for increasing personal wealth

of the firm owners (Cagetti and De Nardi, 2006). A related topic in entrepreneurship studies is the

motivation for entrepreneurs to start their firms (Carsrud and Brännback, 2011; Stenholm et al.,

2016). For some push motivated entrepreneurs, wealth creation is one of the primary motives to

start a firm, as they do not have other options to generate sufficient income. Negative

environmental conditions such as unemployment or the difficulty in finding a suitably paying job

can “push” potential entrepreneurs to become de facto entrepreneurs (Dawson and Henley, 2012;

Uddin et al., 2014). In contrast, others are more motivated by non-pecuniary benefits like the desire

for independence, recognition, innovation, and self-actualisation (Amit et al., 2000; Hamilton, 2000;

Cassar, 2007; Williams and Williams, 2014). Such entrepreneurs are “pulled” into business

formation by positive factors such as self-fulfilment, change in lifestyle or use of one’s experience

and knowledge or a combination of both pull and push factors (Burke et al., 2002; Benzing et al.,

2009).

For push motivated entrepreneurs, wealth extraction from the firm is a key motive. In

this research, wealth extraction refers to the direct expropriation of cash and other firm resources

to private use by the firm owner (Verheul et al., 2010). Yet, the extent to which firm growth

translates into growth of personal wealth is still largely unknown. In this study, we consider

personal wealth as the firm owner’s disposable wealth, which is the sum of all marketable or

fungible assets held by an individual minus liability (Wolff 1983). Thus, the relationship between

the rate at which the entrepreneur extracts wealth from the business for personal use and the

reasons for starting a business is still puzzling. Do push-motivated entrepreneurs extract more

wealth in early growth phases than pull-motivated entrepreneurs? Could that be the explanation

52
for the effect that firms started by pull motivated entrepreneurs are more likely to survive and grow

than those motivated by “push” factors (Amit and Muller, 1995; Reynolds et al., 2002; Vivarelli,

2004; Block and Sandner, 2009)? Personal circumstances and household needs of the entrepreneur

are some of the key firm start-up motivations (Aldrich and Cliff, 2003), particularly in scarce

resource settings like least-developed countries (LDCs). Since start-up motivation affects both firm

growth and the financial rewards the entrepreneur gets from the business, the relationship between

firm growth and personal wealth of the owner-manager is likely to be dependent on start-up

motivation.

This study sets out to answer the following question: What is the relationship between small

firm growth and growth in personal wealth of the firm owner, and how is this relationship affected by the motivation

for starting the business? This question is not only interesting because current literature does not

provide a complete answer, however, the question is important to understanding the rewards for

decision making in small firms, with severe practical consequences. In sum, the aim of this study

is to assess empirically the extent to which firm growth translates into economic rewards for the

entrepreneur, and how the relationship is moderated by the owner-manager’s motivation for

starting the business.

This study responds to the call for research to consider rewards of entrepreneurship by

exploring the incomes, wealth and economic well-being of entrepreneurs at individual and

household level (Carter, 2011; Wiklund et al., 2011). By selecting the resource-scarce setting of

Zambia, a Least-Developed country (LDC) in sub-Saharan Africa, we are able to study

entrepreneurs in a setting in which there is both push and pull driven entrepreneurship. Thus, we

contribute to the debate on the economic incentives for undertaking entrepreneurial activities and

examining how firm performance translates into economic rewards for the entrepreneur.

Moreover, by examining the role of start-up motivation in the relationship between firm

53
performance and economic rewards, we are able to shed light on why some firms are more likely

to fail early because of early wealth extraction while others do not.

This chapter proceeds as follows. The next section provides theoretical foundations of

the relationship between firm growth, personal wealth extraction and start-up motivation and

presents hypotheses. Next, the methodology is discussed, followed by the analysis and results. The

results are discussed and we round off with a number of conclusions and summary of the main

findings.

4.2 Theory and hypotheses

4.2.1 Firm growth and personal wealth

Firm growth is regarded as one of the key indicators of firm success in entrepreneurship research

(Delmar, 2006b, Davidsson et al., 2009; Achtenhagen et al., 2010; Kiviluoto, 2013). Small firm

growth often results from the owners’ positively motivated business intentions and actions, which

are driven by the belief that such efforts provide the best option for attaining desired goals

(Morrison et al., 2003). Entrepreneurs initiate and expend effort when they believe that doing so

will result in performance which in turn would lead to a valued outcome (Shepherd and DeTienne,

2005; Edelman et al., 2010).

The decision to engage in entrepreneurial activities is often considered as an individual’s

choice of where to expend effort, as a choice between self-employment and wage labour, in order

to achieve a desired outcome. This view suggests that starting a business is an individual’s career

choice between wage labour and self-employment. From an economic perspective, individuals are

considered to engage in entrepreneurial activities after assessing the available opportunities for

wealth creation. A typical assumption in economic models of entrepreneurship is that individuals

choose to become entrepreneur because they expect to be rewarded for their undertaking in terms

54
of income and wealth (Benzing and Chu, 2009). In this regard, an individual’s decision to engage

in entrepreneurial activities is based on a comparison of the net present values of entrepreneurship

and alternative avenues of earning income such as wage labour (Douglas and Shepherd, 2002;

Cassar, 2006; McMullen et al., 2008; Edelman et al., 2010).

Increasing personal wealth as a primary motive for business ownership is one of the

common assumptions in entrepreneurship research. Indeed, most entrepreneurs believe that they

have better prospects of improving their personal wealth through business formation (Amit et al.,

2000). Firm ownership is also empirically linked to improving the personal wealth of the business

owner (Caliendo and Kritikos, 2010; Frankish et al., 2014; Mwaura and Carter, 2015). Although

motivational factors may vary because of the differences in employment opportunities in a

particular region, it is found that in general in economically deprived communities—even in

developed countries—business ownership is associated with growth in personal wealth (Frankish

et al., 2014).

This situation is likely to be more prominent in LDCs, where a large number of people

are pushed to start businesses because of poverty and lack of opportunities in the formal wage

sector (Acs and Mueller, 2008; Frankish et al., 2014; Naudé, 2010; Tamvada, 2010). Business

formation is an attractive route for survival and escaping poverty (Kimhi, 2010; Jennings et al.,

2016). In such regions, it is highly likely that one of the main goals of business formation is

increasing personal wealth. However, such potential is to a large extent dependent on the

performance of the firm. Economic rewards of entrepreneurship may only accrue when small firms

actually survive and grow (Wennekers et al., 2005; Shane, 2009). On the basis that firm growth has

the potential to increase personal wealth of the owner, we hypothesize that:

H1: Small firm growth is positively related to growth in personal wealth of the business owner.

55
4.2.2 Moderating effect of entrepreneurial motivation
Numerous scholars have contributed to our understanding of the motivations for starting

a business. This has led to various categorisations of entrepreneurial motivations. Overall, the

common motivations associated with becoming an entrepreneur are desire for financial success,

self-realization, roles, innovation, recognition, and independence (Carter, et al. 2003; Cassar, 2007).

Some researchers have classified motives for business formation as “pull” and “push” motives

(Amit and Muller, 1995; Dawson and Henley, 2012; Gilad and Levine, 1986; Hughes, 2003; Uddin,

Bose and Ferdausi, 2014) while others use the terms “necessity” and “opportunity” motives (Block,

et al., 2015; Hessels, van Gelderen and Thurik, 2008; Verheul, et al. 2010; Williams and Williams,

2014).

The reasons for starting a business can stem from both external environmental factors

which may act as attractors of constraints or as a result of internal personal objectives or self-

perceptions. Both these factors can either “pull” or “push” an individual to form a business. For

example, regarding external factors, loss of employment can be a “push” factor while the desire to

pursue an opportunity in the market can be a pull factor. Similarly, for internal personal objectives

or self-perceptions, job dissatisfaction can be a push factor, while the desire to be your own boss

can be a pull factor (Dawson and Henley, 2012).

Individuals who start firms to exploit an (attractive) business opportunity are “pulled”

into entrepreneurship. People are also attracted positively to engage in entrepreneurship because

of their desire for independence, self-fulfilment, achievement, recognition and personal

development (Amit and Muller 1995; Benzing, Chu and Kara, 2009; Gilad and Levine 1986; Thurik,

et al., 2008). In contrast, those individuals that feel compelled to start their own business because

all other options for work are either absent or unsatisfactory are “pushed” into entrepreneurship

out of necessity. Such push factors relate to negative external forces that make people engage in

56
entrepreneurship, like the inability to find a job, underemployment, facing discrimination in the

labour market, underpayment and the possibility of redundancy.

Motivation plays an important role in firm growth (Carsrud and Brännback, 2011).

Research has shown that entrepreneurs, also in developing economies, are not solely motivated by

economic purposes but in fact pursue a variety of motives through business venturing. For

example, Amit, et al. (2000) found that out of eleven reasons for starting a business, increasing

wealth was ranked the least important among high technology entrepreneurs in British Colombia.

Other reasons for starting a business such as the desire to be innovative, independence and finding

a more challenging job were considered more important than increasing wealth. Similarly, Wiklund,

Davidsson and Delmar (2003) found that non-economic concerns may be more important than

expected financial outcomes in determining growth preferences of entrepreneurs.

Overall, the underlying principle in classifying entrepreneurial motivations as pull or push

is that the decision to engage in entrepreneurial activities is primarily a result of external

environmental factors and/or human agency (Shane, Locke and Collins, 2003). In this regard, firm

formation can be motivated by a combination of pull and push factors acting together (Dawson

and Henley 2012; Kirkwood, 2009). Indeed, studies have argued that classifying motivations

dichotomously as pull versus push is an oversimplified depiction (Dawson and Henley, 2012;

Williams and Williams, 2014). Furthermore, research conducted in LDCs and other economically

deprived communities indicate presence of pull and push motivations acting for the same

entrepreneur (Adom and Williams, 2012; Benzing and Chu, 2009; Bewayo, 2015; Eijdenberg, Paas

and Masurel, 2015; Rosa, Kodithuwakku and Balunywa, 2006).

The prevalence of pull and push entrepreneurial motives at country level is affected by

the level of economic development (Acs 2006; Thurik, et al., 2008). Therefore, in LDCs, with their

weak job markets and low incomes, small business creation is more likely to be push than pull

57
motivated (Gries and Naudé, 2010; Smallbone and Welter, 2006; Wennekers, et al., 2005).

Individuals faced with unemployment and small prospect of gaining wage-work are likely to be

pushed into starting a business (Dawson and Henley, 2012; Ritsila and Tervo, 2002; Storey, 1991).

The decision between self-employment versus wage-work is also influenced by the unattractive

state of employment. Wage-workers face the prospect of being underemployed or unemployed,

leading to insufficient income. In contrast, the choice of self-employment, despite offering

uncertain income, potentially offers satisfactory income. Therefore, in the absence of attractive

employment choices, entrepreneurs are more likely to be motivated by extrinsic rewards such as

increasing their personal wealth and creating jobs for their economic survival than by intrinsic

rewards (Benzing and Chu, 2009).

In this context, firms that are formed by entrepreneurs who are predominantly motivated

by pull factors are more likely to achieve higher growth than those founded by entrepreneurs who

are predominantly motivated by push factors (Dobbs and Hamilton, 2007). This may be because

one of the primary goals of push-motivated entrepreneurs is to increase income, which is likely to

be used for personal economic survival (Hessels, van Gelderen and Thurik, 2008). Specifically, in

the context of LDCs, push motivated entrepreneurs are primarily forced into entrepreneurship

because of the absence of attractive alternatives for increasing income (Benzing and Chu, 2009;

Rosa, Kodithuwakku and Balunywa, 2006). On the other hand, entrepreneurs who are

predominantly motivated by pull factors tend to pursue non-pecuniary rewards such as desire for

independence and innovation. Therefore, we argue that push motivated entrepreneurs are likely to

extract wealth from the firm and use it for personal needs. Pull motivated entrepreneurs are more

likely to postpone the personal wealth benefits of owning a business until the business has grown

to a level that they consider optimal. They are more likely to reinvest their returns from the firm

into the firm in order to improve its performance and chances of success. We argue that this could

be the mechanism behind the relationship between the importance the entrepreneur places on

58
economic motives and the growth achieved by the firm (cf. Cassar, 2007; Edelman, Brush and

Manolova, 2005).

In sum, the effect of entrepreneurial motivation on the relationship between firm growth

and personal wealth is likely to depend on start-up motivation factors. The personal wealth of push

motivated entrepreneurs is likely to increase when their firms grow because they are likely to extract

wealth from the firms at a faster rate than entrepreneurs motivated by pull and mixed factors. To

this effect, we hypothesise that:

H2: The relationship between firm growth and growth in personal wealth is stronger for entrepreneurs
predominantly motivated by push factors than those predominantly motivated by pull factors or
a combination of both.

4.3 Methodology

4.3.1 Data and sample

To test the hypotheses, we collected data from small firms in the construction sector in Zambia.

Zambia is a suitable context to study firm start-up motives, as in such an LDC-setting necessity-

entrepreneurship is likely to be predominately driven by push factors, and those who are driven by

pull factors are more likely to pursue promising opportunities. Zambia has a mix of entrepreneurs

who consider themselves as driven by factors related to push (32%) and pull (46%) factors

(Herrington and Kelley, 2013). Moreover, the Global Entrepreneurship Monitor (Brinckmann et

al. 2010) rates Zambia as having one of the highest proportions of the adult population (18 to 64)

engaged in business activities (42%). By sampling only small firms in the construction sector, we

effectively controlled for variations in firm size and industry effects in our sample (Davidsson,

2004). Construction is chosen as a sector in which firm growth is regularly observed, and it

accounted for 21.1% of the country’s economic growth in 2012 (Zambia Development Agency,

2012).

59
 The small firms in the study were selected from the database of the regulator for the

industry, the National Council for Construction (NCC). The sample included firms that had been

operational for at least five years. This threshold was set on the basis that Zambia has been reported

to have a high business failure rate (Global Entrepreneurship Monitor, 2014). Out of the 475

questionnaires that were administered 228 were fully completed, yielding a response rate of 48.0%.

We checked for non-response bias by comparing the means of early and late respondents. There

were no significant differences in early and late responses, indicating that non-response bias is less

likely to be a problem (Armstrong and Overton, 1977; Lambert and Harrington, 1990; Arend,

2012).

The mean firm size was 29 employees and the mean firm age 10 years. All respondents

were owner-managers of their firms. The majority (89.4%) of the respondents were male, which is

representative of the situation in Sub-Saharan Africa with low levels of female participation in

goods-producing sectors such as construction (Liedholm, 2002; Bardasi et al., 2011). Nearly all

respondents (98.3%) had formal education, with 89.0% having successfully completed some form

of tertiary education. The firms in the sample were from two major commercial and industrial

areas, Lusaka and Copperbelt provinces which account for 82.0% of the 5.068 million people living

in urban areas (Central Statistics Office, 2011) and 55.7% of the country’s self-employed population

(World Bank, 2013c).

4.3.2 Measures

4.3.2.1 Dependent Variable.

The dependent variable for this study is growth in personal wealth. In the context of the current

study, personal wealth is operationalised as personal financial reward accruing from entrepreneurial

activities. Growth in personal wealth was measured by asking the respondent to rate on a five-

60
point Likert scale with responses ranging from 1 (increased very much) to 5 (decreased very much),

“How has your personal wealth changed as a result of owning the business over the last five years?”

In other studies, the methods to measure entrepreneurial earnings include dividing net

profit by the number of hours worked, establishing the amount of money drawn from the business

by the owner-manager, and the growth in business equity of the owner-manager (Parker et al., 2005;

Dobbs and Hamilton, 2007). However, these methods have been questioned because owner-

managers tend to either underestimate or are reluctant to disclose their entrepreneurial earnings.

The use of net profits and hours worked to calculate the entrepreneurial earnings has been

considered unreliable because net profit values are usually understated and there are also difficulties

in establishing the number of hours worked by entrepreneurs. Money drawn from the business is

also deemed to be under reported, as it has been observed that most entrepreneurs’ lifestyles often

exceed the consumption otherwise afforded by the value of money they draw from their firms.

Since most entrepreneurs are able to achieve a higher standard of living than indicated by

conventional measures of earnings, solely relying on wage- and drawings-based methods often fail

to correctly depict the actual entrepreneurial earnings (Carter, 2011). Additionally, for such

methods to be effective, there need to be reliable sources of data such as national surveys of

personal incomes. Since such databases are not available in LDCs, use of these methods for

measuring entrepreneurial earnings in our context was not tenable.

4.3.2.2 Independent Variable.

Firm growth is the independent variable in this study. Firm growth has been measured in

various ways in entrepreneurship research (Dobbs and Hamilton, 2007). For this research, we

measured firm growth using the three most commonly used growth indicators: growth in number

of employees, sales and assets (Delmar, 2006b, Shepherd and Wiklund, 2009; Wiklund et al., 2009;

Achtenhagen et al., 2010). Respondents were asked to rate on a five-point Likert scale the growth

61
in the number of employees, sales and assets over the last five years (1-decreased very much to 5-

increased very much). The use of subjective performance measures in entrepreneurship is common

and has been found to have a high correlation with ‘objective’ performance measures (Delmar et

al., 2003; Casillas and Moreno, 2010). Based on the view that all three indicators are unique but

related attributes of firm growth (Delmar et al., 2003; Shepherd and Wiklund, 2009; Davidsson et

al., 2007) we combined the measures into a multiple-indicator index of firm growth.

We used Principal Component Analysis (PCA) with Varimax rotation and factor

extraction based on Eigenvalues larger than one, to assess the underlying structure for the three

growth indicators. The PCA produced a single factor solution which accounted for 73.01% of the

variance. All three growth indicators had factor loadings greater than 0.7, indicating convergent

validity. The scale also showed a high reliability level indicated by Cronbach’s Alpha (α) value of

0.813. Therefore, we computed the composite score of firm growth based on growth in number

of employees, sales and assets.

4.3.2.3 Moderator Variable

The moderator variable start-up motivation was measured as the extent to which start-up

motivation is dominated by pull and/or push related factors. Start-up motivation can be attributed

to multiple motivations related to both pull and push factors acting solely or in combination

(Dawson and Henley, 2012; Williams and Williams, 2014). We conducted a two-stage approach.

First, principal components factor analysis with Varimax rotation was used to extract the

underlying dimensions of start-up motivations (Hair et al., 2010). This was necessary because we

needed to confirm the underlying factor structure of start-up motivation in our sample since there

are many dimensions of the construct found in entrepreneurship literature (Benzing and Chu, 2009;

Dawson and Henley, 2012; Jayawarna et al., 2013). Principal components factor analysis was used

to reduce the items in the questionnaire to their latent variables and to explore the underlining

62
theoretical structure of start-up motivation in the sample Second, cluster analysis served to identify

the distinct start-up motivation profiles of the respondents (Punj and Stewart, 1983; Jayawarna et

al., 2013). This procedure was necessary because some respondents had a mix of push and pull

start-up motivations and such segmentation can capture this directly.

The questions were adapted from the scales developed by Kuratko et al. (1997) and

Robichaud et al. (2001). These questions have been previously used to study start-up motivation by

entrepreneurs in Africa and have high reliability levels (Chu et al., 2007; Benzing and Chu, 2009;

Isaga et al., 2015) and also other regions (Benzing et al., 2005; Benzing et al., 2009). Respondents

were asked to rank on a five-point Likert scale (1-strongly disagree to 5-strongly agree) the extent

to which they agreed with ten statements related to pull and push factors of starting a business (see

appendix 2).

Statements that related positively to the desire to engage in entrepreneurship for reasons

such as independence, self-fulfilment, achievement, recognition and personal development,

revealed pull motives while those that indicated that business formation was as a result of lack of

better choices for work were classified as push motives (Hessels et al., 2008). The Kaiser-Meyer-

Olkin (KMO), a measure of sampling adequacy, was 0.703 and Bartlett’s Test of Sphericity (BTS)

was significant at p < 0.001, indicating factorability of the ten items representing firm start-up

motivations. The diagonals of the anti-image correlation matrix were all over 0.5, confirming that

each item shared some common variance with other items (Hair et al., 2010). Given these overall

indicators, we proceeded with PCA with Varimax rotation and we included all ten items. Hair et al.

(2010) suggest that researchers can use relevant theoretical conceptualisations to determine the

appropriate number of factors. Since this study used the pull and push categorisation of start-up

motivation, we adopted a two-factor solution. All items loaded as expected on either pull or push

factors without any large cross-loadings. The reliability of the two-factor solution was satisfactory

63
with the Cronbach's Alpha (α) values of 0.622 and 0.719 for pull and push motives respectively.

The results of the factor analysis are shown in Table 3.1.

Table 4.1. Factor loadings and reliability results for firm start-up motivation
Question Factor loadings
I started my business; *Factor 1 **Factor 2
To be my own boss 0.573
To get recognition for my accomplishments 0.738
To emulate the person I admire 0.762
To continue a family tradition 0.613
To achieve a better position for myself in society 0.516
Because I was not able to find a paid job at that time 0.728
Because I was not able to sustain my family at that time 0.829
Because I was dissatisfied with my previous work at that time 0.693
Because it gave me an opportunity to earn more money than I was earning at the
time 0.463
Because it was the only way of making a living 0.707
Cronbach’s alpha 0.656 0.726
KMO = 0.705
*Factor 1 = Pull motivation.
** Factor 2 = Push Motivation.
Note: For the interpretability of the table factor loadings below the 0.300 threshold have been omitted.

For the purpose of grouping respondents based on start-up motives, which had a stronger

influence of firm formation, we used a two-step clustering method based on Punj and Stewart

(1983) and Jayawarna et al. (2013). The factor scores for pull- and push motivations are used for

clustering the respondents. First, hierarchical cluster analysis was performed in order to find the

number of clusters in the data. We assessed the number of clusters by examining the changes in

the agglomeration schedule. We selected a three-cluster solution as a potential clustering solution

since it indicated the largest percentage change in cluster heterogeneity (Hair et al., 2010). Although

hierarchical clustering can help to determine the number of clusters, it does not produce the most

optimal cluster solution in terms of between-cluster heterogeneity. Second, we conducted k-means

cluster analysis using the three-cluster solution obtained in the first stage. Factor scores from

principal components factor analysis were used as variables for pull and push motivation in the

cluster analysis. We compared the cluster centres of the three clusters to come up with the cluster

profiles. The results of the cluster analysis are presented in Table 3.3.

64
4.3.2.4 Control variable.
The control variable used in this study was firm age. Previous research has shown that

firm age tends to have a negative effect on firm growth with younger firms growing at faster rates

than older firms (Wiklund and Shepherd, 2003; Delmar and Wiklund, 2008; Thurik et al., 2008).

Therefore, the rate at which the personal wealth of the firm owner grows is likely to decrease with

the increase in the firm’s age. Firm age was measured as the number of years the firm has been in

existence.

4.3.3 Data analysis

We conducted data analysis in two stages, involving cluster analysis and moderated linear

regression analysis. First, we used cluster analysis to allocate respondents into groups based on the

predominant firm start-up motivations, based on factor scores presented in Table 3.1. Cluster

analysis helps to create subgroups of respondents that are homogenous to each other and

heterogeneous from other groupings (Cardon et al., 2008; Hair et al., 2010).

Second, we used multiple regression analysis, with moderation effects, to test the two

hypotheses. In model 1, we checked for the effect of the control and independent variables on the

dependent variable. In the second model, we adopted the procedure of Tabachnick et al. (2007) for

testing moderation. We choose this procedure because our cluster analysis solution for grouping

respondents based on the dominant start-up motivation produced a multi-categorical moderator

variable. According to this procedure, moderation involving a multi-categorical variable requires

that k − 1 dummy-variables must be created to code group membership (where k is the number

of categories in the variable). Therefore, the three categories in the moderator variable (i.e. pull

motivated group, push motivated group and mixed motivations group) were dummy-coded to

create two groups. The two dummy-coded variables were the pull and the push motivated groups,

while the mixed motivations group was treated as a reference group. We created the moderator

65
variable by multiplying each of the two dummy variables with the mean centred values of the

independent variable, firm growth.

In model 2, we estimated a moderated regression model. The two dummy coded variables

(pull and push motivations), and the two interaction variables (i.e. pull motivation X firm growth

and push motivation X firm growth) were added to the regression in model 1 to estimate the

moderation effects. The third group, mixed motivation was used as the reference group and

therefore not included in the regression model (Hayes and Preacher, 2014). The moderation effect

was assessed by checking whether the regression model that included two additional variables

representing the interaction between start-up motivation and firm growth had a higher R2 value

than the model that excludes these interaction variables (Tabachnick et al., 2007; Aguinis, 2004;

Hayes, 2009b).

4.4 Results
Table 3.2 shows the means, standard deviations, and correlations for all our variables. Some

significant correlations were observed among the dependent, independent, and control variables,

but given that the variance inflation factor values were all below the critical value of 10,

multicollinearity does not seem to be a problem. (Hair et al., 2010). However, the correlations

between the interaction variables and other variables are expected to be higher than those shown

in Table 3.2.

66
Table 4.2.Descriptive statistics and intercorrelations of variables
Variables Mean SD 1 2 3 4 5
1. Personal Wealth growth 3.700 1.161
2. Firm growth 3.506 1.004 0.604**
3. Age of Company 9.410 6.944 -0.148* -0.114
4. Pull Motivation 0.417 0.494 -0.002 0.005 0.145*
5. Push Motivation 0.263 0.441 -0.016 0.026 -0.092 -0.505**
6. Mixed Motivation 0.320 0.468 0.017 -0.031 -0.067 -0.580** -0.410**
** Correlation is significant at the 0.01 level
* Correlation is significant at the 0.05 level

4.4.1 Motivation groups

Cluster centre comparisons across the two motivation factors were used to interpret the

three clusters. The cluster profiles of the respondents in our sample are reported in Table 3.3.

Table 4.3. Final cluster centres based on EFA factor scores

Cluster 1 Cluster 2 Cluster 3
Pull Motivation 0.450 -1.331 0.508
Push Motivation -0.827 0.121 0.977
Cluster names: Cluster 1 (Pull Motivation), Cluster 2 (Push Motivation), Cluster 3 (Mixed Motivation

4.4.1.1 Pull motivated group

The first cluster comprised owner-managers with high factor scores on pull factors but

low scores on push factors. For this group, the underlying motivation to start a business is related

to an individual’s desire to exploit an attractive business opportunity. This group accounted for

41.67% of our respondents.

4.4.1.2 Push motivated group

The second cluster comprised owner-managers with high factor scores on push

motivations but low scores on pull motivations. Push factors were the primary drivers for business

formation in this group, which accounted for 26.31% of respondents in our sample.

67
4.4.1.3 Mixed motivation group
The third cluster consists of individuals who were driven by a combination of both pull

and push motivations. Respondents in this cluster had high scores on both pull and push factors,

and the group accounted for 32.02% of respondents in our sample. This group reaffirmed the

assertion that starting a business is a complex process involving a variety of motivations (Benzing

and Chu, 2009; Dawson and Henley, 2012; Williams and Williams, 2014; Eijdenberg et al., 2015).

4.4.2 Hypothesis tests

Hierarchical multiple regressions were conducted to test the two hypotheses. First, to test

hypothesis 1, we added to model 1 firm age (control variable) and firm growth (independent

variable). We then tested hypothesis 2 in model 2 by adding the two dummy coded variables

representing pull and push motivation, as well as the interaction variables (i.e., the product of each

of these two dummy coded variables and firm growth respectively). The dummy coded variable

representing mixed motivation was treated as the reference group (Aguinis, 2004; Hayes, 2009b).

The detailed results of each regression model are presented in Table 3.4.

The results for testing hypothesis 1, which proposes a positive relationship between firm

growth and growth in personal wealth are shown in Model 1 in Table 3.4. Model 1 is statistically

significant and explains 37.1% of the variance in personal wealth (F (2,225) = 33.134, p<0.001).

This provides support for hypothesis 1 and indicates that there is a positive relationship between

firm growth and start-up motivation.

68
Table 4.4. Regression Results of relationship between personal wealth, motivation and
firm growth
Model 1 Model 2
Variables B SE B SE
Intercept 3.820** 0.104 3.844** 0.103
Firm age -0.013 0.009 -0.017 0.009
Firm growth 0.688** 0.062 0.682** 0.061
Pull motivation 0.026 0.083
Push motivation -0.076 0.092
Pull X Firm growth -0.014 0.085
Push X Firm growth 0.228** 0.086
F 33.134 ** 24.165 **
Model R2 0.371 0.396
Adjusted R2 0.365 0.380
Change in Adjusted R2, F(2,221) = 4.280 0.025*
*p<.05; **p<.001

We used Model 2 to examine hypothesis 2, proposing that the relationship between firm

growth and growth in personal wealth is stronger for those predominantly motivated by push

factors than those motivated by pull or mixed motivations. In Model 2, firm age, firm growth, start-

up motivation and the moderator variables were entered as the independent variables of the

regression. The results of the analysis are shown in Table 3.4. These results indicate that the

addition of the interaction variables in Model 2 fits the data better than Model 1, as shown by the

statistically significant increase in R2 of 0.025, F(2,221) = 4.280, p<.05. This gives evidence of the

presence of the moderator effect.

A simple slopes analysis of the moderation effect revealed a statistically significant

(p<.001) positive linear relationship between firm growth and personal wealth development in all

motivational groups. However, the strength of the effect differed according to groups and is largest

when start-up motivation was predominantly push (b = 0.910, SE = 0.104), followed by pull (b =

0.667, SE = 0.103) and mixed motivation (b = 0.468, SE = 0.109) as shown in Table 3.5.

69
Table 4.5. Conditional Effects for motivation groups
Motivation group b SE
Mixed Motivation 0.468** 0.109
Pull motivation 0.667 ** 0.103
Push motivation 0.910** 0.104
𝑝<.05; **𝑝<.001
These results provide support for hypothesis 2, as they indicate that the relationship

between firm growth and growth in personal wealth is stronger for the push motivated group than

the pull or mixed motivations groups.

We observe that the strength of relationship between firm growth and increase in personal

wealth varied across the start-up motivation groups depending on the level of firm growth achieved

(See Figure 3.1). In contrast to expectations based on theory, we find that when firm growth is low

or non-existent, the personal wealth of push motivated owner-managers emanating from owning

a business, is lower than that of those motivated by pull and mixed factors. Only at higher levels

of firm growth is the relationship between personal wealth and firm growth of push-motivated

entrepreneurs stronger than the groups with pull and mixed motivations. Yet, interestingly, at all

levels of firm growth, push motivated entrepreneurs extracted wealth from the firm at a faster rate

(i.e., the slope in Figure 3.1 is steeper) than of those motivated by pull and mixed factors.

70
Figure 4.1 Relationship between firm growth and growth in personal wealth

4.5 Discussion
One of the key questions in entrepreneurship research concerns motivations to start a

firm (Carsrud and Brännback, 2011), in particular in relation to economic benefits of

entrepreneurship at the individual level (Carter, 2011). In this study, we assessed how firm growth

translates into economic rewards for the firm owners, and how this relationship is moderated by

start-up motivation.

Consistent with previous studies (e.g., Cassar, 2007; Frankish et al., 2014; Kimhi, 2010) we

find that firm growth has a positive effect on the development of the personal wealth of the firm

owner. Thus, individuals who start businesses have a chance to increase their personal wealth,

suggesting that entrepreneurial activity is a viable route for addressing economic challenges at the

micro level. The results of this study may appear to contradict other research findings, which

suggest lower incomes for push motivated entrepreneurs and argue that these individuals are

instead attracted to entrepreneurship for non-pecuniary benefits (Hamilton, 2000; Benz, 2009). It

is important to note that, the focus of such studies has been on comparing the differences in

71
earnings between entrepreneurship and wage employment. These studies do not dispute the

economic benefits of entrepreneurship, but rather focus their discussion on whether

entrepreneurship pays more than wage employment. In developing countries, where there are

limited choices for generating income, such comparisons are not so meaningful because engaging

in entrepreneurial activities is often a matter of economic survival rather than a conscious

occupational choice. Entrepreneurs in such regions are more likely to depend on their firms for

survival, and this may prompt them to strive for growth (Hessels et al., 2008; Kimhi, 2010). The

results of this research, therefore, show that entrepreneurship can lead to an improved overall

economic well-being of the entrepreneur (cf. Blackburn and Ram, 2006; Carter, 2011; Frankish et

al., 2014).

This study also shows the effect of start-up motivation on the relationship between firm

growth and personal wealth. The effect is largest for entrepreneurs who are predominantly

motivated by push factors, followed by pull factors, and then the cluster with mixed motivations.

The results also suggest that the level at which wealth is extracted from business for personal use

varies according to the growth achieved by the firm. This result is consistent with the assertions in

literature that the economic rewards of entrepreneurship will differ according to the degree of

venture success (Carter, 2011). Yet, in contrast to expectations based on theory on start-up

motivations, we find that at low levels of firm growth push-motivated entrepreneurs extract less

than pull-motivated entrepreneurs.

It is important to note that, the effect of firm growth on personal wealth is positive

irrespective of the dominant start-up motive. This finding suggests that the decision to engage in

entrepreneurial activities will lead to increase in personal wealth regardless of the motivation.

However, the strength of the effect differs among all three motivation clusters. As we expected,

push-motivated entrepreneurs have a stronger relationship between firm growth and personal

72
wealth development compared to the other two groups. This finding suggests that as the firm

growth rate increases, push-factor motivated entrepreneurs tend to extract more wealth from the

firm than those motivated by push and mixed factors respectively. The findings may be interpreted

as showing that push motivation is related to the entrepreneur’s desire to satisfy extrinsic rewards,

one of which is increasing personal wealth. Push motivated entrepreneurs usually seek to improve

their economic situation and have a high dependency on their firms for economic survival,

especially in economically deprived regions such as LDCs. Push motivated entrepreneurs are likely

to focus more on short-term financial gains than on long-term growth and success of their firm,

yet this also bears the risk that they use too much of a firm’s resources for personal gain. That

could put the firm’s survival at risk. As such, this study provides insight in a mechanism that

explains why some entrepreneurs are more likely to exhaust their firm’s resources, potentially

leading to faster firm failure. On the other hand, pull motivated entrepreneurs are widely associated

with the desire to fulfil intrinsic rewards. Apart from pursuing financial success, pull motivated

entrepreneurs are driven by their desire for inert needs such as independence, autonomy and self-

efficacy (Hessels et al., 2008; Edelman et al., 2010; Dawson and Henley, 2012). Considering that

entrepreneurs in small firms have a substantial leverage in determining the value and timing of their

economic rewards (Tergiman, 2010; Carter and Welter, 2015), pull motivated entrepreneurs are

likely to trade off personal payments and consumption of the business earnings in preference to

reinvesting in the firm’s future growth.

Although this study makes multiple contributions, some limitations should be considered.

Since data used in this study were collected from only one LDC (i.e. Zambia), the generalisation of

the findings of this research to other regions must be made with caution because of differences in

firm characteristics and the firm’s operating environment, an issue that is especially salient when

generalising to developed economies. Such differences in firm characteristics can affect the timing

and amount of wealth extracted by firm owners from small firms. Moreover, the level of economic

73
development affects the reasons for starting a business. Differences in firm governance regulations

can also affect both the reasons for starting a business and the amount of wealth that can be

extracted by the owner-manager. Therefore, there is a need for future research to be conducted in

other countries with different levels of economic development to ascertain the generalisability of

these findings.

4.6 Conclusion
Small firms are important to any economic system since they provide a source of employment and

economic well-being for individuals (Blackburn and Ram, 2006). Nevertheless, research on the

importance of entrepreneurship to economic development tends to focus on the macro-level

benefits of entrepreneurship at the national and regional level. Yet, it is important to understand

the outcomes of entrepreneurship at an individual level, since it provides important insights in the

realization of economic incentives for engaging in entrepreneurial activities, especially in

circumstances where entrepreneurship is the only likely source of employment. These insights also

help to understand which entrepreneurs are likely to extract more wealth from their firms, thus

possibly threatening company survival.

The findings of this study show a positive relationship between the economic rewards of

entrepreneurship and venture growth, moderated by start-up motivation. These findings imply that

regardless of the circumstances that led to starting a business, the decision to do so has a positive

effect on the economic situation of the entrepreneur. Thus, entrepreneurship has a role in fostering

the economic well-being of firm owners. To this effect, promoting entrepreneurship can be

regarded as a mechanism for broadening labour market alternatives in economically deprived

regions such as LDCs.

In line with the theory on start-up motivations, we found that push motivated

entrepreneurs extract wealth at a faster rate than those motivated by pull and mixed factors. This

74
effect implies that the amount of earnings that push motivated entrepreneurs can reinvest in the

business and potentially boost the firm's long-term growth and success, is lower than those

motivated by pull or mixed factors. Push entrepreneurs, therefore, need institutional support to

improve their management skills if they are to make a meaningful contribution to the growth of

their firm and ultimately to economic development.

75
Chapter 5 Entrepreneurial Orientation and Firm Growth in Least
Developed Countries: The Moderating Role of the
Business Environment

76
Abstract

Although the relationship between Entrepreneurial Orientation (EO) and firm growth has
received considerable attention in the entrepreneurship literature, much of the work has been
conducted in Western developed countries. Very few studies have explored this relationship
in the context of Least Developed Countries (LDCs) in sub-Saharan Africa, despite
acknowledging the social-economic and institutional disparities between Western developed
countries and LDCs which can affect the relationship between EO and firm performance.
In this study, we explore the relationship between entrepreneurial orientation (EO) and firm
growth and the moderating role of the business environment in a least developed country,
Zambia. Using primary data collected from 118 small firms in the construction sector, our
findings indicate that of the three dimensions of EO, namely risk-taking, innovativeness and
pro-activeness, only pro-activeness has a significant positive effect on firm growth. Further,
we did not find evidence of the moderating effect of the business environment on the
relationship between EO and firm growth.

77
5.1 Introduction
Small firms have been hailed as the primary drivers of economic growth in both developed and

developing nations. Small firms are often considered as an important avenue for economic

development through their contribution to employment creation, entrepreneurship and innovation

and the social welfare effects they have on society (Acs et al., 2008). In both the developed and

developing world, there has been a realisation that business formation and innovation can be major

sources of economic growth and social well-being (Miller, 2011).

However, the contribution of small firms to economic growth depends on whether they

achieve superior performance and succeed. This demands that firms adopt a strategic orientation

which would enable them to acquire entrepreneurial aspects of decision making styles, methods

and practices (Wiklund and Shepherd, 2005). Such posture is referred to as entrepreneurial

orientation (EO) and has been defined as strategy making practices, management philosophies, and

firm-level behaviours that are entrepreneurial in nature (Wales et al., 2013; Lumpkin and Dess,

1996). EO generally refers to the strategic process that enhances a firm’s propensity to undertake

risky investments, constantly innovate and be proactive in the market. Research has shown that

firms adopting a more entrepreneurial strategic orientation generally perform better (Hughes and

Morgan, 2007; Krauss et al., 2005; Madsen, 2007; Wiklund and Shepherd, 2005; Lumpkin and Dess,

2001).

Although there have been numerous studies which have investigated the relationship

between EO and firm performance, the overall findings of such research have been largely

inconclusive. While some studies found a positive relationship (Boso et al., 2013; Lumpkin and

Dess, 2001), others found a negative relationship between EO and firm performance (Arbaugh et

al., 2009; Hart, 1992). Furthermore, Su et al. (2011), Wales et al. (2013b) and Kreiser et al. (2013)

78
found a curvilinear relationship, while some other studies have not found any significant

relationship between EO and performance (Wiklund and Shepherd, 2005).

Such contradictory findings have been linked to the differences in firm’s entrepreneurial

behaviour, which is affected by the context specific conditions in the environment in which the

firm operates (Miller, 2011; Lumpkin and Dess, 2001). Nevertheless, EO literature has mainly

focused on Western developed countries and not much has been done to explore the nature of

EO in other contextually different environments such as sub-Saharan Africa (Martens et al., 2016).

Small firms, especially those operating in sub Saharan African’s Least Developed Countries

(LDCs), face severe constraints in accessing and making use of resources for successful

implementation of EO strategies. Yet, EO has been found to be instrumental in enhancing business

success in developing nations (Boso et al., 2016; Frese et al., 2002).

This chapter focuses on the effect of risk taking, innovativeness and pro-activeness on

firm growth and the moderating effect of the business environment on firm growth in LDCs. We

conceptualise EO based on Miller and Friesen (1982) as the firm’s propensity to take risks, be

innovative, and be proactive, while acknowledging that the effect of each of the three dimensions

of EO can vary independently (Lumpkin and Dess, 1996; Kreiser and Davis, 2010) and may have

different effects on firm performance (Hughes and Morgan, 2007). We seek to contribute to

advancing understanding of how each dimension of EO affects firm performance in resource-

constrained environments such as LDCs. Therefore, this chapter addresses the research question:

How does EO influence firm growth in LDCs and how does the business environment influence this relationship?

This chapter is organised as follows: in Section 4.2, provides the theoretical background

of the relationship between the three dimensions of EO and firm performance and the moderating

effect of the business environment. This culminates into the hypotheses that were tested in this

study. Section 4.3, discusses the methodology used in this chapter while the results of the regression

79
analysis are presented in section 4.4. Section 4.5, presents the discussion of the results of the

analysis.

5.2 Theoretical framework and research hypothesis

5.2.1 Entrepreneurial orientation

EO refers to the degree to which the strategic posture of the firm is anchored in the entrepreneurial

practices and behaviours. The origin of EO has been traced to the work of Mintzberg (1973) and

Khandwalla (1976) who were the first to recognise the benefits of a firm’s entrepreneurial strategic

orientation when they found that entrepreneurial firms tended to take more risks than other types

of firms and were more proactive in searching for new business opportunities.

The current scholarly attention to EO started with the study of Miller (1983, p 771), which

argued that an “entrepreneurial firm is one that engages in product–market innovation, undertakes

somewhat risky ventures and is first to come up with “proactive” innovations, beating competitors

to the punch”. As a result of Miller’s conceptualisation of EO, three dimensions were identified,

namely risk-taking, innovativeness, and pro-activeness, which has been the most extensively used

operationalization in literature (Rauch et al., 2009; Wales et al., 2013). The three dimensions of EO

are usually measured based on the scales developed by Covin and Slevin (1989) and aggregated into

a latent construct representing EO. Nevertheless, research has increasingly called for treating EO

as consisting of unique dimensions which are able to vary independently of one another in different

contexts (Kreiser and Davis, 2010; Lumpkin and Dess, 1996). According to Miller (2011) individual

components of EO may explain more than the aggregated measure. Therefore, for this research

we adopted the three-dimensional conceptualisation of EO, while treating each dimension as

unique and capable of influencing EO in an independent way.

80
5.2.2 Entrepreneurial orientation and firm performance

5.2.2.1 Risk taking and performance

Risk-taking involves undertaking activities which involve risks in order to achieve

something (Stewart and Roth, 2001). From an entrepreneurship perspective, risk taking entails

committing resources to projects where the cost of failure may be high and outcomes are uncertain

(Madsen, 2007; Kreiser and Davis, 2010; Rauch et al., 2009; Lumpkin and Dess, 1996; Morgan and

Strong, 2003). It entails making risk investments in untried innovations with a view of reaping from

the potential high returns which such opportunities present in the market (Wiklund, 2006). The

rationale for entrepreneurial risk taking is that firms that engage in uncertain, resource consuming

endeavours tend to monitor, respond and capitalize on market changes faster than competitors,

thereby enhancing their overall level of performance (Wiklund, 2006).

Previous empirical studies on the effects of risk taking and firm performance have

revealed mixed results. While some studies have found a positive relationship between risk taking

and firm performance (Rauch et al., 2009; Wiklund and Shepherd, 2005; Krauss et al., 2005), others

found a negative relationship (Kreiser et al., 2013; Naldi et al., 2007), while there are also studies

reporting a curvilinear relationship (Begley and Boyd, 1987; Miller and Leiblein, 1996).

Consequently, it has been argued that the relationship between risk taking and firm performance

is not very clear. However, a meta-analysis conducted by Rauch et al. (2009c) found that in general,

risk taking is positively related to firm performance, but the effect was smaller compared to the

other dimensions of EO. As indicated by Krauss et al. (2005), a positive orientation towards risk

taking on unavoidable and often sought for challenges can lead to superior performance. Thus, we

hypothesise:

H1: Risk taking is positively associated with firm growth.

81
5.2.2.2 Innovativeness and growth
Innovativeness is regarded as the constitutive element of entrepreneurship which can

even distinguish entrepreneurial acts from non-entrepreneurial ones (Schumpeter, 1934;

Davidsson, 2004). Innovativeness implies a positive inclination towards new ideas targeted towards

new products and processes (Krauss et al., 2005; Rauch et al., 2009; Avlonitis and Salavou, 2007).

According to Wiklund and Shepherd (2003), innovativeness reflects a tendency to support new

ideas, novelty, experimentation, and creative processes, thereby departing from established

practices and technologies. Therefore, innovativeness may enable a firm to explore opportunities

and create a competitive advantage which can lead to growth (Rosenbusch et al., 2011; Wiklund,

2006). Previous research has also shown that a strategy of innovation through new products and

new processes has a positive and significant influence on the firm’s growth rate (Boso et al., 2013;

Casillas and Moreno, 2010). Thus, we hypothesise:

H2: Innovativeness is positively associated with firm growth.

5.2.2.3 Pro-activeness and growth

Pro-activeness is the forward looking, opportunity seeking orientation characterised by

introduction of new products and establishing of market niches ahead of competition, in

anticipation of future demand to create change and shape the environment (Lumpkin and Dess,

2001; Kreiser and Davis, 2010; Rauch et al., 2009). It involves engaging in both related and unrelated

diversification of the firm’s product portfolio and strategically eliminating and replacing operations

which are in mature stages of the life cycle (Venkatraman, 1989). Since pro-activeness enables the

firm to introduce goods and services ahead of competitors, it gives firms first mover-advantages

which can enable them to establish a competitive edge. First movers can target premium market

segments and charge high prices resulting in improved firm performance (Wiklund, 2006). Pro-

activeness also leads to the creation of new opportunities for the firm by actively seeking to redefine

markets. Firms that achieve this are likely to improve their performance through increased demand

82
for their products and customer loyalty (Kreiser et al., 2013; Covin and Miles, 1999). Thus, we

hypothesise:

H3: Pro-activeness is positively related to firm growth.

5.2.3 Moderating role of the business environment

The concept of the business environment includes factors external to the organisation’s

boundaries that affect, or are affected by, the organisation’s actions. A firm’s strategy is dependent

on the environment concerning the different resources and opportunities that can be explored and

exploited (Rosenbusch et al., 2013). Previous research has demonstrated the inseparability of the

external environment from the entrepreneurial process and has identified environmental

conditions that can facilitate or impede EO of firms (Zahra, 1993). The relationship between firm

performance and EO is, therefore, contingent on the environmental context in which the firm is

operating (Kreiser and Davis, 2010). The environment acts as a source of information and stock

of resources for firms, and the two common conceptualisations are environmental dynamism and

environmental hostility (Lumpkin and Dess, 2001; Wiklund and Shepherd, 2005). Environmental

dynamism relates to the rate of unpredictable change in the environment, while environmental

hostility relates to the scarcity and intensity of competition for environmental resources and

exploitable opportunities (Casillas et al., 2010; Lumpkin and Dess, 2001).

5.2.3.1 Environmental dynamism

Dynamic environments are associated with unpredictable changes of customers and

competitors and rapid changes in the business environment. The constant changes in

environmental conditions in dynamic environments provide opportunities for firms with a strategic

orientation to explore and exploit business opportunities, which can lead to improved firm

performance (Wiklund and Shepherd, 2005; Zahra and Bogner, 2000; Dess and Beard, 1984). For

83
firms to compete effectively in such contexts, they need to make high-risk decisions, invest in

highly innovative projects, and must be able to anticipate and adapt to the needs of customers.

Previous research has shown that adopting a higher level of EO on all its three dimensions

(i.e., risk taking, innovativeness and pro-activeness) leads to improved firm performance (Zahra,

1993; Lumpkin and Dess, 2001; Casillas et al., 2010). First, as indicated by Casillas et al. (2010), in

dynamic environments businesses that assume higher risks will be capable of exploring a variety of

potential opportunities, which, when exploited, would offer higher possibilities for growth. Second,

since in dynamic environments there is a greater range of opportunities to explore and exploit,

businesses can reach higher growth rates through product and process innovation. Third, proactive

behaviour entails that a firm acts decisively in opportunity identification and exploitation. In

dynamic environments, the high levels of uncertainties regarding the existing products and services

make firms more likely to take the initiative to explore and exploit opportunities for the

introduction of new products and development of new markets in their quest to minimise the

threat of obsolescence (Lumpkin and Dess, 2001). Therefore, the effect of pro-activeness on firm

performance is likely to be more intense in dynamic compared to stable environments.

In summary, firms operating in dynamic environments are likely to develop high EO in

order to effectively take advantage of the emerging and existing business opportunities (Rauch et

al., 2009; María José et al., 2013). Therefore, we note that the relationship between all three

dimensions of EO and firm performance is likely to be intensified in dynamic environments,

because in such environments, as demand constantly shifts, opportunities arise and firms with a

good fit between their strategic orientation and the environment will have higher performance

(Wiklund and Shepherd, 2005). Thus, we hypothesise the following:

H4a: The relationship between risk taking and firm performance will be stronger when environmental
dynamism is high compared to when environmental dynamism is low.

84
 H4b: The relationship between innovativeness and firm performance will be stronger when
environmental dynamism is high compared to when environmental dynamism is low.
H4c: The relationship between pro-activeness and firm performance will be stronger when environmental
dynamism is high compared to when environmental dynamism is low.

5.2.3.2 Environmental Hostility

Environmental hostility is characterised by a harsh and overwhelming business climate,

intense competition, scarcity of resources and exploitable opportunities (Casillas et al., 2010; Covin

and Slevin, 1989; Lumpkin and Dess, 2001; Rosenbusch et al., 2013). Environmental hostility

indicates the extent to which the business environment poses a threat to the firm’s survival. In such

adverse environmental conditions, firms are likely to respond by adopting an entrepreneurial

posture which involves risk-taking, innovativeness and pro-activeness (Miller, 1983). Research has

shown that firms with higher EO achieve better performance in such environments (Casillas et al.,

2010). In hostile environments, firms that have a higher propensity to take risks and that are

innovative and proactive are more likely to identify and exploit the limited opportunities in the

market at a faster rate than risk averse and reactive firms. Firms with low levels of EO will have

difficulties in achieving growth in hostile environments because of the scarcity of resources,

difficulties in exploiting opportunities, and the intensity of competition. Thus, we hypothesise:

H5a: The relationship between risk taking and firm performance will be stronger when environmental
hostility is high compared to when environmental hostility is low.
H5b: The relationship between innovativeness and firm performance will be stronger when
environmental hostility is high compared to when environmental hostility is low.
H5c: The relationship between pro-activeness and firm performance will be stronger when environmental
hostility is high compared to when environmental hostility is low.

Figure 5.1 shows the conceptual framework and hypothesis tested in this chapter.

85
Figure 5.1. Research model and hypothesis for the relationship between EO and firm
performance

5.3 Methodology

5.3.1 Sample and data collection

The sample was drawn from firms in the construction sector in Zambia. The firms included were

those that had registered with National Council for Construction (NCC) between 2009 to 2013

and were classified as small firms based on the NCC criteria. According to this criterion, companies

registered in categories four to six are deemed as small enterprises. We only considered firms whose

trading addresses were Lusaka and Copperbelt provinces, the two regions which form the

commercial and industrial hubs of Zambia. These two provinces accounted for 82% of the urban

population (CSO, 2011) and 56% of the country’s self-employed population in Zambia (World

Bank, 2013). Lusaka is the capital and largest city of Zambia and is the centre of both commerce

and government, while the Copperbelt Province covers the mineral-rich areas of the Northern part

of Zambia and is considered the backbone of the economy and as such provide a fair representation

of small firms in Zambia.

5.3.2 Data collection

Data were collected using a structured questionnaire which was directly administered by

the researcher. We targeted firms where the founders were active owner-managers. Data collection

86
was undertaken in two waves. First, data on EO and business environment was collected in 2012.

Out of the 475 owner-managers that were contacted in 2012, 235 agreed to participate in the study.

Second, a year later in 2013, data on firm performance was collected from the same firms. In the

second wave of data collection, only 1186 firms provided complete firm growth data and were

subsequently included in this study.

5.3.3 Measures

5.3.3.1 Dependent variable

Firm performance is the dependent variable for this research and was operationalised as growth in

sales. Sales growth was measured by considering the perceptions of the owner-manager. We asked

owner-managers to rate firm growth compared to other firms in the same sector, on a seven-point

Likert scale (see question 106 in appendix 3). This data was collected a year after we had measured

EO. The one-year time-lag was incorporated on the basis that, it may take some time before EO

can affect firm performance and that the effect would be long-term rather than short-term

(Wiklund, 2006; Madsen, 2007). In this case, EO was deemed to apply to the whole period for

which sales growth was measured. This implies that research needs to adopt a longitudinal

approach in analysing the relationship between EO and firm performance (Hughes and Morgan,

2007; Wales, 2016; Miller, 2011).

Subjectively perceived performance of a firm has been found to be positively correlated

with actual performance and has been widely used in entrepreneurship research (Casillas and

Moreno, 2010; Delmar et al., 2003; Naldi et al., 2007). Specifically, regarding the EO-performance

relationship, Rauch et al. (2009c) found that EO has similar relationships with perceived financial

6 The number of respondents differs from the sample size in chapter 3 because we use data from both the
first and second wave of data collection. We could not locate all the respondents from the first wave of
data collection while others did not provide proper firm growth data and were hence not included in the
study in chapter 4. Further, some firm performance data were outliers and hence excluded from the
analysis.

87
performance, perceived non-financial indicators of performance, and performance measured using

objective data. Additionally, subjective performance measures are also appropriate when there is

no verifiable objective data as is the case in most LDCs (Anderson and Eshima, 2013; Rosenbusch

et al., 2013). Our study in chapter 2 also found that owner-managers’ perceptions of firm growth

were the most suitable measure of small firm growth in LDCs (see section 2.5).

The use of sales growth as a measure of firm performance has been widely accepted in

entrepreneurship research (Casillas et al., 2010; Delmar et al., 2003). Sales growth is considered to

reflect both long- and short-term changes in the firm and is easily obtainable (Wiklund, 2006).

Additionally, sales growth is considered a precursor to other measures of firm performance, such

as assets and employees growth (Davidsson et al., 2007; Delmar et al., 2003), while increase in assets

or employees is more likely to show growth in inputs, sales growth indicates increase in business

activities and is hence considered a performance outcome (Casillas and Moreno, 2010; Davidsson

and Wiklund, 2006). Although in chapter 2 we argued for the use of a composite measure that

includes also personal wealth and purchasing expenditure on key process inputs, we only used sales

growth in this study. This is because sales growth has been widely used in models that involve the

effect of EO on firm growth. This study replicates such models in LDCs and hence the use of

additional variables would affect the comparability and generalisability of the findings. Additionally,

apart from sales growth being the preferred measure in the relationship between performance and

EO, we also had a major challenge with missing data on the other performance indicators. When

we included the other financial performance indicators shown from question 100 in appendix 3,

our sample reduced significantly and was less than 100.

5.3.3.2 Independent variable

EO was the independent variable of this study. Based on Covin and Wales (2012), we

conceptualised EO as a three-dimensional construct comprising risk taking, innovativeness and

88
pro-activeness. To measure EO, we adapted the nine-item scale originally developed by Miller and

Friesen (1982) and refined by (Covin and Slevin, 1989), which is the most widely used scale for EO

(Brown et al., 2001; Covin et al., 2006; Andersén, 2010; Alegre and Chiva, 2013; Rauch et al., 2009;

George and Marino, 2011). We used three questions for each dimension measured on a seven-

point Likert scale with anchors: 1 = strongly disagree; and 7 = strongly agree. The questions are

shown in section 4 of the questionnaire in appendix 2.

Table 5.1. Factor analysis results for EO

Question Risk-taking Innovativeness Pro-activeness
The term ‘risk taker’ is considered a positive attribute for 0.645
people in our company
0.873
People in our company are encouraged to take calculated
risks with new ideas
Our company emphasizes both exploration and 0.689
experimentation for opportunities
We actively introduce improvements and innovations in our 0.763
business
Our company seeks out new ways to do things 0.813

Our company is creative in its methods of operation 0.813

We always try to take the initiative in every situation (e.g., 0.697
against competitors, in projects and when working with
others)
We excel at identifying opportunities 0.733

We initiate actions to which other companies respond 0.870

Cronbach’s alpha (α) 0.698 0.871 0.828

We conducted Principal Component Factor Analysis with Varimax rotation to assess the

convergent and discriminant validity of the EO scales in the Zambian context. The factor analysis

results for EO are shown in Table 4.1. The Kaiser-Meyer-Olkin (KMO), a measure of sampling

adequacy, was 0.880. Bartlett’s Test of Sphericity (BTS) was significant at p < 0.001. Communalities

for all variables where above the critical value 0.300. All the items on the scale loaded as expected

and the result produced a three-factor solution which accounted for 73.57% of the total variance.

The resulting three scales showed reliability with the Cronbach’s alpha values for risk-taking (α =

89
0.698), innovativeness (α = 0.871), and pro-activeness (α = 0.828 being above or on the

recommended threshold of 0.700 (Hair et al., 2010).

5.3.3.3 Moderator Variables

The moderator variables of this research were environmental dynamism and hostility. We

adapted questions from Lumpkin and Dess (2001). We measured both variables on a five-point

Likert scale with 1=strongly disagree and 5=strongly agree. The scale had five and three questions

measuring dynamism and hostility respectively. The scales showed reliability with Cronbach’s alpha

values dynamism (α = 0.738) and hostility (α = 0.689).

5.3.3.4 Control variable

The control variable used in this study was firm age. Previous research has shown that

younger firms are more likely to exhibit higher EO than older firms (Andersén, 2010; Luo et al.,

2005). Firm age was operationalised as the logarithm of the number of years the firm has been in

existence.

5.4 Results
The means, standard deviations and correlations of the variables are displayed in Table 4.2. Overall,

the correlations between the variables were relatively moderate, ranging from 0.192 to 0.644 (p

>0.001). To ensure that multicollinearity was not a problem, we tested for possible co-linearity

among all the variables by using the variance inflation factors (VIF). All VIF values were below the

critical value of 10, indicating that multicollinearity was not a problem (Hair et al., 2010).

90
Table 5.2. Correlations and descriptive statistics for firm growth, EO and business
environment
Variable Mean SD 1 2 3 4 5 6
Sales Growth 3.71 0.849
Firm age 8.76 4.309 -0.551**
Risk taking 5.92 0.593 0.249** -0.162
Innovativeness 6.16 0.629 0.419** -0.268** 0.267**
Pro-activeness 6.01 0.751 0.644** -0.487** 0.280** 0.518**
Dynamism 3.53 0.701 0.192* -0.200* 0.033 0.227* 0.170
Hostility 3.04 0.908 -0.350** 0.214* -0.126 -0.161 -0.214* 0.150
** Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).

We tested the hypothesis using multiple linear regression models. The results are shown

in Table 4.3. In model 1, we only considered the control variables and the EO variables

representing the direct effects on sales growth, i.e. risk taking, innovativeness and pro-activeness.

In models 2 and 3, we added the variables representing the interaction effect between the three

dimensions of EO and environmental dynamism and hostility respectively. The results of the

analysis are shown in Table 4.3. Model 1 was statistically significant (F=28.87; p < 0.001) with the

R2 value of 0.514, with firm age (β = -0.559; p < 0.001) and pro-activeness (β = 0.327; p < 0.001)

being the only variables with a significant influence on sales growth. The other two dimensions of

EO, risk taking and innovativeness were not statistically significant. This means that hypotheses

H1, proposing a positive relationship between firm performance and risk taking, as well as H2

proposing a positive relationship innovativeness and sales growth, are not supported.

Model 2, which included the interaction between the three dimensions of EO and

dynamism, was also statistically significant with R2 value of 0.543 (F=15.601; p < 0.001) but the

∆R2 value of 0.027 was not significant. Similarly, Model 3, which included the interaction between

the three dimensions of EO and hostility, despite being statistically significant (R2 = 0.563

F=16.887; p < 0.001), the ∆R2 (0.019) was not significant. The results of both Model 2 and 3

indicate that environmental dynamism and hostility did not moderate the relationship between all

91
the three dimensions of EO and sales growth. Therefore, all moderation hypotheses, H4a, H4b,

H4c, H5a, H5b and H5c are not supported.

Since the relationship between EO and performance has also been found to be non-linear

(Kreiser et al., 2013; Su et al., 2011; Tang et al., 2008; Wales et al., 2013), we also carried out post hoc

tests to check the robustness of the regression models which tested the hypotheses. We added the

quadratic terms of each of the three dimensions of EO to Model 2 to test for the curvilinear

relationship with firm growth.

Table 5.3. Regression results for relationship between EO and sales growth
ß coefficients
Variables Model 1 Model 2 Model 3
Control
Firm Age -0.559** -0.587** -0.545**
Main effects
Risk Taking 0.031 0.032 0.008
Innovativeness 0.098 0.137 0.087
Pro-activeness 0.327** 0.292** 0.325**
Moderating effects
Dynamism 0.085
Risk X Dynamism -0.063
Innovation X Dynamism 0.130
Pro-activeness X Dynamism -0.150
Hostility -0.178*
Risk X Hostility -0.043
Innovation X Hostility 0.119
Pro-activeness X Hostility 0.035
R2 0.514 0.543 0.563
∆R2 0.027 0.019
R2 adjusted 0.497 0.508 0.529
F 28.87 15.601 16.887

According to Aiken and West (1991), in such models, a significant positive coefficient of

the linear term would indicate a predominantly positive relationship, while a significant negative

coefficient would demonstrate a predominantly negative relationship. Further, we created

interaction variables between the quadratic terms of the EO dimensions and environmental

92
dynamism and hostility. None of the quadratic terms and neither the interaction variables were

significant, indicating that the relationship between EO and firm performance was not curvilinear.

5.5 Discussion
The aim of this chapter was to explore the relationship between EO and firm performance and

whether the relationship is moderated by the business environment. The survey data from 118

small firms in the Zambian construction sector yielded three main findings. Based on Lumpkin

and Dess (1996) we conceptualised EO as a multidimensional construct comprised of the Miller

(1983) dimensions of EO, namely, risk taking, innovativeness and pro-activeness.

We hypothesised a positive relationship between all three dimensions of EO and firm

performance. Small firms that exhibit higher levels of EO are more innovative, tend to undertake

risky activities and are likely to be proactive in the market (Covin and Slevin, 1989). Such

entrepreneurial firms are likely to monitor changes in the business environment and achieve higher

growth. EO allows firms to be innovative in developing products and services that respond to changes

in customer needs. Risk taking and proactive behaviour facilitates the firm’s ability to discover and

exploit opportunities in the market, thereby enabling the firm to create a competitive advantage that

can lead to sales growth.

However, the findings of this research indicate that only pro-activeness had a significant

effect on sales growth. Although, the finding are consistent with those of Hughes and Morgan

(2007) and Morgan and Strong (2003), who also found that implementing EO using all its

dimensions does not guarantee improved firm performance, we show in addition that the research

context may contribute to insignificant results. In the context of this research, the non-significant

effects of risk-taking and innovativeness may be attributed to other unobserved firm and

environmental characteristics that are peculiar to LDCs. Entrepreneurs are likely to be proactive,

but take as little risk as possible, and only innovate when it is necessary and yet they are a major

93
force for business creation and economic development (Covin and Miller, 2014). In LDCs, pro-

activeness is required for the firm’s future survival and helps the firms to anticipate and act on

future needs by seeking new opportunities which may or may not be related to existing lines of

business. Small firms that are not proactive in discovering and exploiting business opportunities

have high chances of failure when their existing knowledge and competencies become obsolete

(Rosenbusch et al., 2013). Firm survival is critical in LDCs’ environments because firm ownership

may be the most viable option for firm owners’ economic well-being (Kimhi, 2010; Jennings et al.,

2016).

Risk-taking is closely associated with heavy borrowing and commitment of resources in

anticipation of high returns by taking advantage of opportunities in the business environment

(Lumpkin and Dess, 1996; Memili et al., 2010). Like most entrepreneurial strategies, risk-taking and

innovativeness require considerable financial resources to be successful (Wiklund and Shepherd,

2005). Since small firms in African LDCs face difficulties in accessing financial capital (Kiggundu,

2002), entrepreneurs in such environments are unlikely to rely on potential returns from large and

risky resource commitments in novel projects for achieving firm growth. Furthermore, failure in

risk-taking may lead to financial and personal losses in organisations (Dess and Lumpkin, 2005).

In LDC contexts, difficulties in accessing capital may severely limit the extent to which

entrepreneurs may be willing to make large and risky resource commitments which may have a

reasonable chance of failure. In such environments, entrepreneurs are likely to adopt a conservative

approach and would be discouraged from taking risks that they deem unnecessary and might harm

the firm’s survival (Kreiser and Davis, 2010; Rosenbusch et al., 2013).

In a similar vein, innovativeness is also a resource-intensive orientation which requires

firms to dedicate substantial resources to engaging in experimentation with products and processes

usually through research and development (Rosenbusch et al., 2011; Hughes and Morgan, 2007;

94
Kreiser et al., 2013). Therefore, better access to finance could increase the innovativeness in a firm

(Brown et al., 2012). Additionally, innovativeness would only be beneficial to small firms when the

of costs of engaging in such activities outweigh the benefits of imitating (Barney, 1991). Firms

engaging in innovative ventures ought to believe and perceive that their innovations would be easy

to commercialise and result in gaining competitive advantage. Small firms that are faced with

resource constraints are only likely to use innovativeness as a strategy for firm growth when it is

absolutely necessary.

Our findings do also not support the hypothesis that environmental dynamism and

hostility moderate the relationship between the three dimensions of EO and sales growth. This

entails that irrespective of how entrepreneurs perceive the environment in terms of dynamism and

hostility, risk taking and innovativeness will have no effect on sales growth. Additionally, positive

effects of pro-activeness on sales growth is not affected by the owner-manager’s perceptions of

the dynamism or hostility of their business environment. Similar results have been found in

research in African countries (Shehu and Mahmood, 2015). The possible reasons for the lack of

support for the moderating effect of environmental dynamism and hostility may be due to the

presence of other dominant factors in the external environment such as national culture and the

general conditions in which business is conducted. National culture dimensions such as uncertainty

avoidance, power distance and individualism (Hofstede, 2001) influence EO. Hofstede (2016)

classifies Zambian culture as relatively high on uncertainty avoidance (50) and power distance (60),

and lower on individualism (35).

5.6 Limitations to the study

Our study has a number of limitations. First, we collected data on EO and firm growth from one

sector in one LDC. The insignificant results for the relationship between EO and firm growth may

be attributed to the characteristics of the firm in this sector and the environment in which they

95
operate. Future research should investigate the EO-performance relationship in other sectors in

LDCs. Second, due to the difficulty in obtaining time-lagged sales data our sample size was

drastically reduced. We therefore cannot completely rule out sample size deficiencies as one of the

reasons for not finding significant results. Future research definitely should investigate the

relationship between EO and firm growth in such an LDC-context using a larger sample. Third,

although this research investigated the moderating role of environmental dynamism and hostility,

there are other contextual variables that may impact the EO-firm growth relationship. Especially

in the context of LDCs, the role of other firm and environmental characteristics that may influence

the relationship between EO and firm growth ought to be investigated.

5.7 Conclusions
The findings of this research reaffirm the assertion that not all aspects of EO have the same effect

on firm performance in different environments. In economically deprived environments, which

face severe resource constraints like LDCs, risk-taking and innovativeness may not be beneficial

for small firms. A conservative approach towards the use of resources may be a more appropriate

strategy. At the same time, firms that adopt a higher proactive stance may outperform others since

they are more forward-looking. Firms that are proactive are able to anticipate opportunities and

introduce new or improved products on the market.

96
Chapter 6 How Does Entrepreneurial Passion Affect Small Firm
Growth? The Mediating Role of Entrepreneurial
Alertness

97
Abstract

Although there has been growing interest and substantial development of knowledge
regarding the role of cognition and passion in the entrepreneurial process, there remain
several unanswered empirical questions on how entrepreneurial cognition and passion
directly or indirectly affect firm growth. In this study, we investigate the effects of
entrepreneurial passion on firm growth and the mediating role of entrepreneurial alertness.
Based on primary data collected from 124 small firm owners in Zambia our findings show
that entrepreneurial passion has a direct positive effect on firm growth and that the
relationship was partially mediated by entrepreneurial alertness.

98
6.1 Introduction
One of the central questions in entrepreneurial research revolves around why some entrepreneurs

become more successful than others (Baron, 2004a). Although part of the answer to this question

is attributed to economic factors that are external to entrepreneurial firms, most researchers argue

that decisions and actions of entrepreneurs are particularly relevant for the performance of firms

(Shane, 2001). Such propositions have put the entrepreneur, as a person, at the centre of

entrepreneurship research. Nevertheless, entrepreneurship research still searches to better

understand the role that an entrepreneur plays in venture formation and performance. For instance,

some have focused on the role of personality characteristics on firm performance (Rauch and

Frese, 2007; Brandstätter, 2011; Gartner, 1989; Zhao et al., 2009; Mitchell et al., 2002).

To further enhance understanding of the role of the entrepreneur in entrepreneurial

success, recent research has shifted from less or more stable characteristics to more fluid individual-

level aspects, in particular to the role entrepreneurial cognition plays in venture creation and success

(Baron, 2004b, Shepherd, 2015; Mitchell et al., 2002; Mitchell et al., 2007; Baron, 2000). Cognitive

processes play a vital role in understanding entrepreneurship because they are closely related to

activities involved in venture creation and performance (Baron, 2007; Foo, 2011). Entrepreneurial

cognition has been defined as “the knowledge structures that people use to make assessments,

judgments or decisions involving opportunity evaluation and venture creation and growth”

(Mitchell et al., 2002 p. 97). Suggestions to study entrepreneurial cognition have led to a resurgence

in research focusing on the people-side of entrepreneurship that targets the understanding of how

entrepreneurs reason, form judgements and make decisions given the differences that exist in

entrepreneurial cognitions (Tang et al., 2008). The use of the cognitive perspective in understanding

entrepreneurial behaviour has been hailed as a means to imploring a theoretically rigorous and

99
empirically testable approach capable of systematically explaining the role that individuals play in

the entrepreneurial process (Mitchell et al., 2002).

One key, yet empirically relatively unexplored, aspect of entrepreneurial cognition relates

to how entrepreneurs are alert to opportunities in the environment and the affection they have

towards undertaking entrepreneurial activities (Baron, 2008). Entrepreneurial alertness has been

defined as “a distinctive set of perceptual and cognitive processing skills that direct processes of

identifying entrepreneurial opportunities” (Kirzner, 1973). Individuals differ in the opportunities

they identify as some spot the value of resources that others do not (Barney et al., 2001). Kirzner

(1979) further asserts that the mental representations and interpretations of entrepreneurs differ

because they are driven by entrepreneurial alertness. Therefore, some studies have started to show

the role of entrepreneurial alertness as a crucial cognitive concept based on opportunity

identification and as an important aspect of venture creation and success (Tang et al., 2012; Gaglio

and Katz, 2001; Li, 2012).

Similarly, entrepreneurial passion has been found to influence many aspects linked to

human cognition which are directly related to entrepreneurial activities (Baron, 2008; Vallerand et

al., 2003; Drnovsek et al., 2016). In fact, entrepreneurial passion has emerged as one of the key

motivational drivers of entrepreneurship and some studies have even suggested that passion is

perhaps the most observed phenomenon of the entrepreneurial process (see Smilor, 1997; Baum

and Locke, 2004; Chen et al., 2009). Although extant empirical research has provided insights into

the effect of entrepreneurial passion on entrepreneurs’ behaviours (Murnieks et al., 2012),

investments outcomes (Chen et al., 2009), employee organisational commitment (Breugst et al.,

2012), start-up survival (Stenholm and Renko, 2016), and firm growth (Baum et al., 2001; Baum

and Locke, 2004), we do not yet understand how entrepreneurial alertness complements

entrepreneurial passion in achieving entrepreneurial success.

100
 In this study, we set out to investigate how entrepreneurial passion and alertness jointly

influence small firm growth. Specifically, we focus on the following research question: What is the

relationship between entrepreneurial passion and firm growth and how is the relationship influenced by entrepreneurial

alertness? As noted by Tang et al. (2012), entrepreneurial passion can lead to entrepreneurial

alertness, which may affect entrepreneurs’ ability to discover and exploit opportunities with

business potential. Although research has shown that firm performance can be influenced by

entrepreneurial passion (Baum and Locke, 2004; Shane et al., 2003; Cardon et al., 2009; Baum et al.,

2001), it is still not clear how entrepreneurial alertness affects this relationship. Based on prior work

on entrepreneurial passion by Cardon et al. (2013) and alertness by Tang et al. (2012) we examine

how entrepreneurial alertness affects the relationship between entrepreneurial passion and firm

growth.

This research contributes to literature on the relationship between micro level variables

and macro level measures of firm success (Baum et al., 2001; Baron, 2008). Specifically, by

examining the relationship between entrepreneurial passion and firm growth and the mediating

role of entrepreneurial alertness, this study helps to understand how both entrepreneurial passion

and entrepreneurial alertness affect venture performance. This is especially important as extant

literature tends to focus on how passion influences entrepreneurial cognition and individual

behaviour (Murnieks et al., 2012), but little is known about how affect influences firm-level

outcomes such as firm growth (Drnovsek et al., 2016). Additionally, by examining how

entrepreneurial alertness complements entrepreneurial passion to influence venture performance,

we contribute to the understanding of the relationship between entrepreneurial passion and

entrepreneurial alertness. This is in response to the call by Baron and Tang (2011) to investigate

the relationship between affect and alertness in order to get a deeper understanding of the nature

of alertness. Similarly, Tang et al. (2012) urged for more research on how an individual's passion

for a specific human need may lead to greater alertness, while Ho and Pollack (2014) call for

101
research to investigate mediators that can link entrepreneurial passion to key outcomes, such as

venture growth.

This chapter is arranged as follows: in section 5.2 discusses the theoretical background to

the relationships between entrepreneurial passion, entrepreneurial alertness and firm growth,

leading to the development of the hypotheses for this study. Next, section 5.3, explains the

methodology used to test the hypotheses of this study while section 5.4 presents the results of

analysis. In section 5.5, we provide discussions and conclusions of the results of the hypotheses

test, and finally, section 5.6, highlights the limitations of this study and areas of future research.

6.2 Theory and hypotheses

Firm growth is regarded as one of the key indicators of firm success (Steffens et al., 2009;

Achtenhagen et al., 2010; Kiviluoto, 2013; Delmar, 2006b). Small firm growth is often driven by

the firm owners’ positively motivated business intentions and actions, fuelled by the belief that

such efforts provide the best option for attaining desired goals (Morrison et al., 2003).

Entrepreneurs initiate and expend effort when they believe that doing so will result in high levels

of performance which in turn would lead to the attainment of some valued goals (Shepherd and

DeTienne, 2005; Edelman et al., 2010). Such efforts could lead to the entrepreneur having some

affectionate connection to the firms that they build and may result in the development of intense

positive emotions towards their entrepreneurial actions that drive firm success (Stenholm and

Renko, 2016). To this effect, Cardon et al. (2009) propose that the experience of such intense

positive emotions targeted toward activities that are central to the identity of an entrepreneur (i.e.

entrepreneurial passion) activate an entrepreneur’s self-regulation process aimed at achieving

effectiveness in the pursuit of the desired goals. The self-regulation process involves being alert to

the entrepreneurial opportunities present in the environment.

102
 Although research has shown that entrepreneurial passion is among the key antecedents

of firm growth (Baum and Locke, 2004; Drnovsek et al., 2016; Shane et al., 2003) and that

entrepreneurial passion can lead to alertness (Syed and Mueller, 2015; Campos, 2016), there is

limited empirical research on how alertness may indirectly affect firm growth through its effect on

entrepreneurial passion. Few studies have empirically investigated the mediating role that

complementary cognitive aspects of entrepreneurship, such as entrepreneurial alertness, have on

the relationship between entrepreneurial passion and firm-level outcomes (Omorede et al., 2015;

Baron, 2008; Ma et al., 2017; Welpe et al., 2012).

6.2.1 Entrepreneurial passion and firm growth

There is a general agreement in entrepreneurship research that emotions have a significant

effect on entrepreneurial cognition, behaviour, and outcomes (Baron, 2008; Drnovsek et al., 2016;

Foo, 2011; Cardon et al., 2012). Cardon et al. (2012 p. 3) define entrepreneurial emotions as the

“affect, emotions, moods, and/or feelings—of individuals or a collective—that are antecedent to,

concurrent with, and/or a consequence of, the entrepreneurial process.” They further describe the

entrepreneurial process as the “recognition/creation, evaluation, reformulation, and/or the

exploitation of a possible opportunity”. The role of affect in the entrepreneurial process has

become one of the important avenues in the quest to understand the role the entrepreneur plays

in venture formation and success because of its effect on people’s thinking, judgement and

behaviour (Hayton and Cholakova, 2012; Cohen, 2005; Chan and Park, 2013). One of the key

aspects of affect in relationship to entrepreneurship is passion (Foo, 2011; Cardon et al., 2009).

Entrepreneurial passion involves experience of intense positive feelings and may have

some benefits for individuals operating in an entrepreneurial context. Drnovsek et al. (2009)

contend that, entrepreneurial passion is a powerful motivational resource that drives thoughts,

actions and the pursuit of activities. Consequently, entrepreneurial passion may facilitate idea

103
generation and opportunity recognition since individuals experiencing positive affect are more

adaptive to environmental stimuli (Baron, 2007; 2008).

Entrepreneurial passion has been conceptualised as an affective emotional phenomenon

that one experiences when engaged in entrepreneurial activities (Vallerand et al., 2003; Murnieks et

al., 2012), rather than as a personality trait (Murnieks et al., 2016). As such, Cardon et al. (2009 p.

517) define entrepreneurial passion as a “consciously accessible, intense positive feeling resulting

from engagement in activities with identity meaning and salience to the entrepreneur.” Cardon et

al. (2009) also refer to entrepreneurial passion as the “fire of desire” capable of driving

entrepreneurs to greater things. Based on a common conceptualisation of entrepreneurship as a

three-stage process (Stenholm and Renko, 2016), Cardon et al. (2009) identify the primary role-

identities of the entrepreneurial process as inventing, founding, and developing ventures (Cardon

et al., 2009; Cardon et al., 2012). Accordingly, Cardon et al. (2013) conceptualise entrepreneurial

passion as a three-domain construct comprising passion for inventing, passion for founding, and

passion for developing. Passion for inventing relates to activities concerned with scanning the

environment for new market opportunities and developing new products or services (Cardon and

Stevens, 2009). The experience of passion for invention will lead entrepreneurs to have greater

desire to deliver new solutions to the important needs in the market. Passion for founding concerns

entrepreneurial tasks that are associated with organising the resources necessary for establishing a

venture for commercialisation of opportunities. Passion for developing refers to activities related

to nurturing, growing and expanding the venture (Cardon et al., 2013). Since this study is concerned

with firm growth, we focus on entrepreneurial passion for developing because it deals with passion

concerning the activities related to the growth of firms (Drnovsek et al., 2016).

Stenholm and Renko (2016) noted that entrepreneurial role identity is important for

passionate entrepreneurs because they associate strongly with such an identity, which, in turn,

104
makes their entrepreneurial actions more persistent. Similarly, research has shown that passion for

work affects venture growth (Drnovsek et al., 2016; Baum and Locke, 2004; Baum et al., 2001),

because passionate entrepreneurs are motivated to do everything necessary to build an organisation

and make it successful (Shane et al., 2003). Additionally, as indicated by Drnovsek et al. (2016), the

positive feelings associated with entrepreneurial passion provide entrepreneurs with information

that conveys positive assessment of the current status and motivates them to persist in their

entrepreneurial activities. Persistence is enhanced when behaviours are both relevant and invoke

positive feelings as may be experienced by entrepreneurs in the process of inventing solutions,

founding, sustaining and developing a venture (Cardon and Kirk, 2015). This could translate into

superior firm performance (Stenholm and Renko, 2016) in the form of firm growth, since

entrepreneurs who are passionate may not just accept current performance levels but will be

motivated to develop and grow their ventures (Drnovsek et al., 2016).

Additionally, entrepreneurs value and think about their role identity and act in ways that

re-enforce and promote that identity. As such, when entrepreneurs experience entrepreneurial

passion, they become more creative and persistent towards achieving the goals of developing their

firms. Similarly, the absence of entrepreneurial passion would make entrepreneurs direct their

efforts towards other entrepreneurial activities that are central to their identity. This suggests that

entrepreneurial passion will have a direct positive effect on firm growth. Therefore, we hypothesise

that:

H1 : Entrepreneurial passion has a direct positive effect on firm growth.

6.2.2 Entrepreneurial passion, entrepreneurial alertness and firm growth

Entrepreneurship has been described as involving the identification, evaluation and exploitation of

valuable business opportunities (Minniti, 2004; Shane and Venkataraman, 2000; Brockman, 2014;

Zahra, 2008). One of the important cognitive concepts related to opportunity identification is

entrepreneurial alertness (Tang et al., 2012; Shepherd and DeTienne, 2005). Entrepreneurial

105
alertness consists of a set of unique perceptual and information-processing skills that assist

entrepreneurs to be alert to opportunities (Gaglio and Katz, 2001; Kaish and Gilad, 1991; Amato

et al., 2016; Baron, 2004a). Alertness can lead entrepreneurs to make discoveries that are valuable

to the satisfaction of human needs and can be traded at a profit (Yu, 2001). The concept of

entrepreneurial alertness stems from the work of Kirzner (1985; 1973; 1979). Kirzner initially

defined alertness as “the ability to notice without searching opportunities that have hitherto been

overlooked” (1979 p.48) and later as a “motivated propensity of man to formulate an image of the

future” (1985 p.56).

Tang et al. (2012) conceptualised entrepreneurial alertness as a three-stage process which

can influence venture outcomes. The three complementary dimensions identified were scanning

and searching, association and connection, and evaluation and judgement. The first dimension,

scanning and searching, indicates the entrepreneur’s propensity to continuously probe the

environment in search of new information, changes and shifts that are unnoticed by others.

Scanning and searching can enable the entrepreneur, using prior knowledge and experience, to pick

out entrepreneurially relevant information from the environment to identify and take advantage of

opportunities with a profit potential (Li, 2012; De Koning, 2003). Therefore, entrepreneurs with

more substantial scanning and searching will have a more extensive information and knowledge

span, which can enable them to attain greater alertness to business opportunities (Tang et al., 2012).

The second dimension, association and connection, relates to putting together seemingly unrelated

pieces of information and building them into logical alternatives. This process refers to how

entrepreneurs cognitively respond to and process the new information obtained by scanning and

searching the environment. It involves the entrepreneur’s cognitive ability to “connect the dots”,

think outside the box, and recognise the patterns in the new information (Amato et al., 2016; Tang

et al., 2012; Baron, 2006). The third dimension, evaluation and judgment, involves the

entrepreneur’s evaluation of the opportunity and deciding on its viability. If entrepreneurs judge

106
the opportunity as positive, they are likely to exploit that opportunity by engaging in entrepreneurial

action (Wood and McKelvie, 2015).

Kirzner (1973; 1997) identifies entrepreneurial alertness as a source and profit and

contend that entrepreneurs who are sensitive to the profit potential of opportunities in the

environment become successful. In the same vein, Li (2012) characterises entrepreneurial alertness

as a set of perceptual and cognitive processes by which individuals break and/or construct a

means–ends framework for certain future situations with an aim to create value. The opportunity

to create value emerges when entrepreneurs have insights into the value of resources unnoticed by

others (Barney et al., 2001). Alert entrepreneurs may direct their attention towards finding under-

priced products, services and processes and may evaluate such opportunities based on how they

can enhance company profits. As such, alert entrepreneurs are likely to be more sensitive to the

profit potential of ideas than non-alert entrepreneurs (Gaglio and Katz, 2001). Additionally, as

indicated by Shepherd and DeTienne (2005) potentially profitable business opportunities will

attract alert individuals to undertake entrepreneurial activities. The cognitive ability of alert

entrepreneurs allows them to spot high potential opportunities that could lead to superior firm

performance (Markman and Baron, 2003). Therefore, alert entrepreneurs have a higher chance of

creating and sustaining successful business.

Entrepreneurial passion, being an intensive positive emotion, can influence opportunity

exploitation and evaluation decisions (Welpe et al., 2012). Entrepreneurs who exhibit positive affect

for their work are more likely to make unusual associations, identify seemingly unrelated patterns

in changes and shifts in the environment, and evaluate business opportunities differently compared

to those who do not exhibit positive entrepreneurial passion (Isen and Labroo; 2008, Drnovsek et

al., 2009). Entrepreneurial passion can promote sensitivity to information changes and creativity

that lead to recognition and evaluation of entrepreneurial opportunities (Foo, 2011), which is a vital

107
aspect of entrepreneurial alertness (Tang et al., 2012; Brockman, 2014; Gaglio and Winter, 2017).

Entrepreneurial passion increases entrepreneurs’ beliefs that their work is meaningful, and can lead

to greater levels of persistence and engagement in venture activities (Drnovsek et al., 2016). As

such, entrepreneurial passion could heighten entrepreneurs’ alertness to entrepreneurial

opportunities in the environment (Baron, 2008). In this regard, entrepreneurial passion could drive

an alert entrepreneur to look for new information, cognitively respond to and process the new

information, and assess it to determine if a viable entrepreneurial opportunity exists. In sum,

entrepreneurial passion has potential to spur the entrepreneurial alertness process.

Previous research has shown that entrepreneurial passion has both direct and indirect

positive effects on venture growth (Drnovsek et al., 2016). Given the relationship between

entrepreneurial passion and entrepreneurial alertness, entrepreneurial passion may also influence

firm performance through the process of entrepreneurial alertness. Entrepreneurial passion can

have a positive effect on the entrepreneurs’ ability to continuously search for new information in

the environment, use their perceptual and cognitive skills to recognise the patterns in the new

information and identify entrepreneurial opportunities, then evaluate if those opportunities are

viable and make a judgment on how to exploit them. To this effect, we hypothesise that:

H2 : Entrepreneurial passion for developing has an indirect effect on firm growth through
entrepreneurial alertness

6.3 Methodology

6.3.1 Sample and data collection

The sample for this research was drawn from firms in the construction sector in Zambia, which is

a suitable research setting due to the economic and political stability, and in particular the

construction sector features the presence of many young and small firms. In Zambia, it is

mandatory for all construction firms to register annually with the sector's regulatory institution, the

108
National Council for Construction (NCC). The firms included in our study were those that had

registered with NCC between 2009 to 2013.

We targeted firms classified as small businesses based on a criterion used by the NCC (see

appendix 1). This criterion employs a six-tier grading system based on number of employees, level

of sales and value of assets to categorise firms as large, medium or small enterprises. In this grading

system, grade 1 is the highest and grade 6 is the lowest and firms in grades 4, 5 and 6 are small

businesses. We sampled firms located in the Lusaka and Copperbelt Provinces, the two regions

which form the commercial and industrial hubs of Zambia. The two provinces account for 82%

of the urban population (Central Statistics Office, 2011) and 56% of the country's self-employed

population in Zambia (World Bank, 2013c). A check on the NCC database also revealed that 74.4%

of the companies in the construction sector were from Lusaka and Copperbelt Provinces. Lusaka

is the capital and largest city of Zambia and is the centre of both commerce and government, while

the Copperbelt Province covers the mineral-rich areas of Zambia and is considered the backbone

of the economy; as such the two provinces provide a fair representation of small firms in Zambia.

Data were collected using a structured questionnaire which was directly administered by

the researcher in Zambia in 2014. We targeted firms where the founders were active owner-

managers. Out of the 228 questionnaires that were administered 1247 were returned fully

completed, yielding a response rate of 54.4%. We checked for non-response bias by comparing the

means of responses of early and late responders during this wave of data collection. There were no

significant differences in responses indicating that non-response bias could not be a problem

(Lambert and Harrington, 1990; Arend, 2012; Armstrong and Overton, 1977).

7 The sample size for this chapter was reduced as compared to chapter 3 because we did not manage to find
all the respondents that we used in the first wave of data collection.

109
6.3.2 Measures

6.3.2.1 Entrepreneurial passion

We measured entrepreneurial passion based on the scale developed by Cardon et al. (2013). This

scale asks individuals about the intensity of their positive feelings towards entrepreneurship

relevant activities and the centrality of these activities for their self-identity as entrepreneurs. Based

on Cardon et al. (2013), we used two separate subscales measuring intense positive feelings and

identity centrality, and then multiplied the two to form the entrepreneurial passion variable. Despite

passion for developing being the only relevant dimension for this study, we also measured passion

for inventing and founding to validate and establish discriminant validity for the passion

measurement scale. Our questionnaire included three questions for each of the three dimensions

of passion (inventing, founding and developing) and single questions for identity centrality (see

question 400 in appendix 3). Both subscales were anchored in a five-point Likert scale, ranging

from 1 (strongly disagree) to 5 (strongly agree).

We conducted Principal Component Analysis (PCA) with Varimax rotation to check the

convergent and discriminant validity of the Cardon et al. (2013) scale for measuring entrepreneurial

passion in the Zambian context. The PCA results are shown in Table 5.1. The Kaiser-Meyer-Olkin

(KMO), a measure of sampling adequacy, was 0.776 and Bartlett's Test of Sphericity (BTS) was

significant at p < 0.001. All communalities for the variables were above the critical value of 0.300.

The factor loadings for the scale items for measuring the dimension of passion that was used in

this research, passion for developing, were all above 0.6. All items on the scale loaded as expected,

indicating that the adopted scale measured passion for developing as a distinct dimension of

entrepreneurial passion that was related to passion for inventing and founding since the PCA result

produced a three-factor solution. The three factors accounted for 67.0% of the total variance.

Cronbach's alpha values for passion for inventing (α = 0.786), founding (α = 0.704), and developing

(α = 0.614) indicate reliability of the passion measurement scale, see Table 5.1.

110
 Cardon et al. (2013) further advises that passion measured based on their scale should be

treated as a multiplicative interaction between intense positive feelings toward an activity and the

identity centrality of the activity. The multiplication produces a weighted score of passion.

Therefore, to calculate the factor score for entrepreneurial passion for developing, we first

calculated the average score for intense positive feeling items related to passion for developing and

then multiplied it with the corresponding measure for identity centrality (Drnovsek et al., 2016;

Cardon and Kirk, 2015).

Table 6.1. Factor analysis and reliability results for entrepreneurial passion
Factor Cronbach's
loading alpha (α)
Passion for Inventing
Searching for new ideas for products/services to offer is enjoyable to me 0.696 0.786
I am motivated to figure out how to make existing products/services better 0.771
Scanning the environment for new opportunities really excites me 0.754
Passion for Founding
Establishing a new company excites me 0.569 0.704
Owning my own company energizes me 0.762
Nurturing a new business through its emerging success is enjoyable 0.784
Passion for Developing
I really like finding the right people to market my product/service to 0.694 0.614
Assembling the right people to work for my business is exciting 0.673
Pushing my employees and myself to make our company better motivates me 0.750

6.3.2.2 Entrepreneurial alertness

Entrepreneurial alertness was measured based on the scale developed by Tang et al. (2012),

who conceptualised alertness as having three complementary dimensions: scanning and searching

for new information, associating and connecting previously-disparate information, and evaluating

and judging whether the new information represents an opportunity. Five items were used for each

subscale (see question 300 in appendix 3) and ratings were made on a five-point Likert type scale

ranging from 1 (strongly disagree) to 5 (strongly agree).

We conducted PCA with Varimax rotation to check the convergent and discriminant

validity of the scale of Tang et al. (2012) for measuring entrepreneurial alertness in the Zambian

111
context. The PCA results are shown in Table 5.2. The Kaiser-Meyer-Olkin (KMO), measure of

sampling adequacy, was 0.911 and Bartlett's Test of Sphericity (BTS) was significant at p < 0.001.

All communalities for the variables where above the critical value of 0.300 (Hair et al., 2010). All

items on the scale loaded as expected without any cross loadings and the result produced a three-

factor solution which accounted for 65.2% of the total variance.

Table 6.2. Factor analysis and reliability results for entrepreneurial alertness
Factor Cronbach's
loading alpha (α)
Scanning and searching
I have frequent interactions with others to acquire new information 0.745 0.884
I always keep an eye out for new business ideas when looking for information 0.816
I read news, magazines, or trade publications regularly to acquire new information 0.696
I browse the Internet every day 0.776
I am an avid information seeker 0.718
I am always actively looking for new information 0.682
Association and Connection
I often make novel connections and perceive new or emergent relationships
0.647 0.832
between various pieces of information
I see links between seemingly unrelated pieces of information 0.805
I am good at “connecting dots.” 0.654
I often see connections between previously unconnected domains of information 0.620
Evaluation and Judgement
I see links between seemingly unrelated pieces of information 0.680 0.835
I have a gut feeling for potential opportunities 0.630
I can distinguish between profitable opportunities and not-so-profitable
0.569
opportunities
I have a knack for telling high-value opportunities apart from low-value
0.668
opportunities
When facing multiple opportunities, I am able to select the good ones 0.648

Reliability for all three variables is indicated by Cronbach’s alpha values for searching and

scanning (α = 0.884), association and connection (α = 0.832), and evaluation and judgement (α =

0.835) were above the recommended threshold of 0.7 (Hair et al., 2010; Nunnally et al., 1967), see

Table 5.2. We calculated the composite scores for the three dimensions of alertness (namely,

scanning and searching, association and connection and evaluating and judging) by averaging

responses for each item.

112
6.3.2.3 Firm growth
We measured firm growth based on owner-managers’ perceptions on growth in

employees, sales and assets. We asked the respondents to rate on a five-point Likert scale (1-much

worse to 5- much better) their growth in employment, sales and assets compared to that of their

competitors. Growth in employment, sales and assets are commonly used indicators of firm growth

(Hamann et al., 2013; Achtenhagen et al., 2010; Bradley et al., 2011; Delmar, 2006a). Similarly, the

use of perceptual as opposed to ‘objective’ data to measure firm growth is common in

entrepreneurial research and has been found to have a high correlation with more ‘objective’

performance measures (Delmar et al., 2003; Moreno and Casillas, 2008). In addition, such a

measurement is appropriate especially in situations where objective data is difficult to obtain

and/or not reliable, as is the case for most research conducted in least-developed countries

(Rosenbusch et al., 2013; Anderson and Eshima, 2013). Although in chapter 2 we developed a scale

for measuring firm growth which included personal wealth and purchasing expenditure, we did not

include these variables in our conceptualisation of firm growth in order to keep the measurement

of firm growth in line with existing literature.

We computed the composite score for firm growth by averaging the scores on growth in

employment, sales and assets. This is based on the view that all three indicators used in this study

are unique but related measures of firm growth (Davidsson, 2010; Shepherd and Wiklund, 2009;

Delmar et al., 2003). To assess convergent validity and reliability, we used PCA with Varimax

rotation and factor extraction based on Eigenvalues greater than one. The analysis produced a

single factor solution which accounted for 76.16% of the variance extracted. All three growth

indicators had factor loadings greater than 0.8 and the scale also is considered reliable (Cronbach's

alpha α = 0.840). The results of the analysis are shown in Table 5.3.

113
Table 6.3. Factor analysis and reliability results for firm growth
Factor
loading
Growth in Sales 0.905
Growth in Employment 0.820
Growth in Assets 0.891

6.3.2.4 Control variables

We used three control variables, namely, growth intentions, firm size and firm age. To

measure growth intentions, we used the scale developed by Wiklund et al. (2003) which relies on

the owner-manager's attitude towards firm growth. The use of owner-manager’s attitude towards

firm growth as a control variable is based on the understanding that a firm owner-manager’s growth

intention are major contributors to the growth achieved by a firm (Davis and Shaver, 2012).

Question 200 in appendix 3 was used to measure growth intentions. We asked respondents whether

they would perceive a 25% and a 100% growth in sales and number of employees in five years as

positive or negative on a seven-point Likert scale ranging from 1 (very negative) to 7 (very positive).

The use of a specific amount of growth over a specified time is deemed important because both

the amount of growth and the time span in which it is achieved can affect the owner-managers’

growth intentions (Wiklund et al., 2003). To assess convergent validity of the growth intentions

scale, we used PCA with Varimax rotation and factor extraction based on Eigenvalues greater than

one. The analysis produced a single factor solution which accounted for 57.02% of the variance

extracted. All four growth intentions indicators had factor loadings greater than 0.6. The scale also

showed reliability with Cronbach's alpha (α) value of 0.746. The results of the analysis are shown

in Table 5.4. We computed a global growth intentions index by calculating the average scores of

responses to question 200 in appendix 3.

114
Table 6.4. Factor analysis and reliability results for growth intentions
Factor
loading
Growth Intention of Employment by 25% 0.612
Growth Intention of Employment by 100% 0.809
Growth Intention of Sales by 25% 0.766
Growth Intention of Sales by 100% 0.815

Further, firm size has been found to affect subsequent firm growth, with smaller firms

growing at a faster rate than larger firms (Collewaert et al., 2016; Delmar et al., 2003; Parker et al.,

2010; Moreno and Casillas, 2007). Therefore, in this study we controlled for the effect of firm size

on subsequent firm growth. We measured firm size using number of employees, which is a most

commonly used measure in entrepreneurship research (Coad et al., 2016; Yasuda, 2005). The other

control variable used in this study was firm age. Previous research has shown that younger firms

are more likely to exhibit higher entrepreneurial orientations than older firms (Luo et al., 2005;

Andersén, 2010), suggesting that entrepreneurial passion and entrepreneurial alertness might also

differ depending on firm age. Firm age was operationalized as the logarithm of the number of years

the firm has been in existence to adjust for skewness.

6.4 Results

6.4.1 Correlation results

Table 5.5 presents the means, standard deviations and correlations among all the variables in the

study. Entrepreneurial passion for developing and all the dimensions of entrepreneurial alertness

were positively correlated, ranging from 0.544 to 0.746, p < 0.001. Similarly, correlation between

passion for developing, entrepreneurial alertness and firm growth was equally strong and positive

ranging from 0.668 to 0.727, p < 0.001. Firm growth was negatively correlated with growth

intentions (0.249, p < 0.001), firm age (0.732 p < 0.001) and firm size (0.395, p < 0.001). In general,

the correlation results suggest a strong relationship among the variables in the study.

115
Table 6.5. Descriptive statistics and correlation results for passion, alertness and firm
growth
Correlations
Mean SD
1 2 3 4 5 6 7
Passion for developing 17.60 4.363

Scanning and searching 4.06 0.530 0.594**

Association and connection 3.89 0.521 0.593** 0.548**

Evaluation and judgement 4.09 0.483 0.544** 0.591** 0.746**

Firm growth 3.85 0.767 0.727** 0.688** 0.723** 0.668**

Growth intentions 4.78 0.890 -0.187* -0.256** -0.207* -0.303** -0.249**

Firm age 14.50 9.639 -0.518** -0.595** -0.623** -0.568** -0.732** 0.219*

Firm size 35.55 38.37 -0.253** -0.331** -0.376** -0.384** -0.395** 0.268** 0.448**

** p < 0.001, *p < 0.05

6.4.2 Regression results

To test our hypotheses, we apply hierarchical linear regression since it avoids issues of

model fit that can be problematic when structural equation modelling is used on a smaller data set

(Kline, 2011; Cardon and Kirk, 2015). The use of hierarchical linear regression to test mediation is

common in entrepreneurship research, and studies with smaller sizes are acceptable especially when

research is conducted in environments where sampling is problematic because of difficulties in

identifying the population (Short et al., 2010). To test Hypothesis 1, where we propose a direct

positive relationship between entrepreneurial passion and firm growth we entered first in our

regression model, growth intentions, firm size and firm age which were our control variables. Table

5.6 shows the full details of the hierarchical regression models. Model 1 shows the effect of the

control variables on firm growth and was statistically significant, R2 = 0.078, F(3,120) = 3.37, p <

0.050. In Model 2 we added passion for developing, which led to a statistical significance increase

in R2 of 0.480, F(4, 119) = 37.53, p < 0.001. Passion for developing had a statistically significant

positive effect (p<.001) on firm growth. Based on these results, Hypothesis 1 proposing that

entrepreneurial passion for developing has a significant direct positive effect on firm growth is

accepted.

116
Table 6.6. Hierarchical linear regression results for relationship between passion,
alertness and firm growth

Model 1 Model 2
Control variables
Growth intentions -0.251** -0.118
Firm size 0.078 0.064
Firm age -0.146 -0.148*
Independent variable
Passion for developing 0.705**
R2 0.078 0.558
Adj. R2 0.055 0.543
𝛥 R2 0.480
F 3.37* 37.23**

Note: Dependent variable = Passion for developing, ** p < 0.001, *p < 0.05

Hypothesis 2 proposes an indirect effect of passion for developing on firm growth,

through entrepreneurial alertness. One of the most common methods used for testing indirect

effects or mediation is the Baron and Kenny (1986) procedure. However, the rigor of this method

has faced some criticism lately (see Zhao et al., 2010). The bootstrapping procedure of Preacher

and Hayes’ (2004) has emerged as a better alternative tool for analysing mediation and recent

studies on entrepreneurial passion have adopted this approach (e.g., Breugst et al., 2012; Huyghe et

al., 2016; Biraglia and Kadile, 2017). Therefore, in this study, we tested the mediation hypothesis

using the Preacher and Hayes (2004) procedure using the SPSS PROCESS macro. This macro also

allows for testing models with multiple mediators arranged in a sequence in a single regression

model (Hayes, 2009a). The procedure was therefore appropriate since we conceptualised

entrepreneurial alertness as a process starting with searching and scanning, followed by association

and connection and then evaluation and judgement (Tang et al., 2012). Additionally, this procedure,

unlike other alternatives such as structural equation modelling, does not rely on the assumption of

normality of the indirect effects and is also suitable for smaller sample sizes (Preacher and Hayes,

2008).

117
 To conduct the mediation analysis, we entered all three dimensions of alertness (scanning

and searching, association and connection and evaluation and judgement) as serial mediators at

once, while the control variables (growth intentions, firm size and firm age) were included as

covariates. Figure 5.1 shows the standardised regression coefficients for the relationship between

passion for developing and firm growth as mediated by the entrepreneurial alertness process. The

direct effects path of passion for developing on firm growth (C) was significant, b = 0.705 p <

0.001. When entrepreneurial alertness is included in the model, the direct effects passion for

developing on firm growth reduced from 0.705, p < 0.001 to 0.337, p < 0.001 (C’). However, since

both the direct and indirect effects are significant despite the reduction in effect size, these results

indicate partial rather than full mediation effect of entrepreneurial alertness on the effect of passion

for developing on firm growth. The addition of entrepreneurial alertness to the model as a mediator

also led to a statistically significant increase in R2 of 0.169, F(7,116) = 44.08, p < 0.001. This

indicates that the model with mediation explained the effect of passion on growth better than the

direct effects model.

Figure 6.1. Results of the mediating effect of alertness on the relationship between
passion and firm growth

** p < 0.001, *p < 0.05

To test the significance of the impact of the indirect effects, we used a bias-corrected

bootstrapping procedure with 5,000 bootstrap samples. Table 5.7 shows the indirect effects and

118
the 95% bias-corrected confidence intervals. Using this method, indirect effects are considered to

be significant when the range of the Confidence Intervals (CI) does not include zero (Preacher and

Hayes, 2004). First, the indirect effect of passion for developing on firm growth were significant

through alertness- scanning and searching (indirect effect = 0.145, 95% CI = 0.066 to 0.239) as

well as through scanning and searching and then association and connection (indirect effect =

0.043, 95% CI = 0.015 to 0.095). Second, the indirect effects were also significant for the entire

alertness process; that is, moving from searching and scanning, through association and

connection, and then evaluation and judgement (indirect effect = 0.020, 95% CI = 0.003 to 0.055).

Table 6.7. Indirect effects of passion for developing (via alertness) on firm growth
Bootstrap Lower Upper
indirect limit 95% limit
Mediation path Effect SE CI 95% CI
Passion → SS → Firm growth, (𝛼1-b1) 0.145 0.043 0.066 0.240
Passion → SS → AC → Firm growth, (𝛼1-d1-b2) 0.043 0.019 0.015 0.095
Passion → SS → AC → EJ → Firm growth, (𝛼1-d1-d2-b3) 0.020 0.013 0.003 0.055
Passion → AC → Firm growth, (𝛼2-b2) 0.099 0.035 0.040 0.180
Passion → AC → EJ → Firm growth, (𝛼2-d2-b3) 0.045 0.024 0.007 0.104
Passion → EJ → Firm growth, (𝛼3-b3) 0.010 0.016 -0.014 0.054
Note: SS=Alertness- scanning and searching, AC = Alertness-association and connection, EJ = Alertness-
evaluation and judgement.
The values parenthesis indicates the indirect effects routes shown Figure 5.1

This shows that entrepreneurial alertness mediates the relationship between passion for

developing and firm growth. Third, the indirect effect of association and connection was significant

as well (indirect effect = 0.099, 95% CI = 0.040 to 0.180), also when combined with evaluation

and judgement (indirect effect = 0.045, 95% CI = 0.007 to 0.104). Fourth, regarding evaluation

and judgement, passion for developing was not a significant predictor and subsequently, it did not

indirectly affect the relationship between entrepreneurial passion and firm growth (indirect effect

=0.010, 95% CI = -0.014 to 0.054). These results provide further evidence to support Hypothesis

2. Therefore, Hypothesis 2, which proposes the indirect effect of passion for developing on firm

growth through entrepreneurial alertness process is accepted.

119
6.5 Discussion and conclusions
Although there has been growing interest and substantial knowledge development regarding the

role of emotions and cognition in the entrepreneurial process (Grégoire et al., 2015), there remain

several unanswered empirical questions on how entrepreneurial passion, directly or indirectly,

affects firm performance. In this study, we empirically investigated the relationship between

entrepreneurial passion and firm growth and sought to answer the question how entrepreneurial

alertness mediates this relationship. Our study in particular contributes to a growing body of

knowledge on how passion for developing directly and indirectly relates to firm growth (Ho and

Pollack, 2014; Drnovsek et al., 2016). Additionally, in assessing the mediating role of alertness, we

empirically tested the relationship between passion and alertness and in turn, alertness and firm

growth. To this effect, we contribute to empirical research on antecedents and outcomes of

entrepreneurial alertness which has been lacking in entrepreneurship research. Gaglio and Winter

(2017) observed that despite alertness being regarded as a fundamental concept in entrepreneurial

cognition, there is relatively limited empirical research on the subject. This study is one of the first

to empirically show evidence of how entrepreneurial passion could interfere with a cognitive

process such as entrepreneurial alertness, and in turn, affect firm growth as suggested by Tang et

al. (2012).

The results of this study indicate that passion for developing has a significant positive

effect on firm growth. These findings are consistent with results of other studies that have

established a positive relationship between passion and performance (e.g., Baum et al., 2001; Shane

et al., 2003; Baum and Locke, 2004; Ma et al., 2017; Drnovsek et al., 2016; Fodor and Pintea, 2017;

Baron et al., 2011). Additionally, our results indicate that passion has an indirect effect on firm

growth via entrepreneurial alertness. The indirect effects work through the entire process of

alertness which involves scanning and searching, association and connection, and evaluation and

judgement. Our findings agree with the proposition advanced by Baron (2008) that positive affect,

120
which in our case is in the form of entrepreneurial passion, can influence entrepreneurial alertness.

This can be attributed to the assertion that positive affect strengthens cognitive capabilities, leads

to openness to wider range of opportunities by enhancing the willingness to consider multiple

diverse sources of information (Baron et al., 2011; Baron et al., 2012). An entrepreneur who

demonstrates passion for developing will scan and search the environment for information, process

the seemingly unrelated pieces of information into logical alternatives, and evaluate the viability of

the alternatives. Furthermore, as indicated by Delgado et al. (2015), passion favours simplified and

flexible information processing which may enhance entrepreneurial decision making, which in turn

can influence firm performance.

6.6 Limitations and future research

This study has a number of limitations. First, since we acknowledge that this research contributes

to the understanding of the role of the entrepreneur in venture development and success, it is also

important to note that relationships between characteristics of the entrepreneur and firm

performance are often complex and may involve multiple mediating and moderating variables

(Baron et al., 2011). This research was limited to investigating how entrepreneurial passion directly

and indirectly, through entrepreneurial alertness, affects firm performance. Future research should

investigate how other entrepreneurial characteristics can moderate the relationship between

entrepreneurial passion, entrepreneurial alertness and firm growth.

Second, the cross-sectional nature of this study entails that we should be careful to make

causal conclusions on the nature of the relationship between passion, alertness and firm growth. It

can also be argued that alert entrepreneurs can be more passionate about their firms and that

managing a high growth firm would make the entrepreneur become more alert to the changes in

the environment. Future research should employ longitudinal research designs to establish

causality.

121
 Third, this study conceptualised entrepreneurial passion as an intense positive emotion

directed towards activities that are important to entrepreneurial role identity (Cardon et al., 2009).

This implied that we did not take in consideration the effects of passion in general on firm

performance. Passion can also have a dysfunctional effect on firm performance (Cardon et al.,

2005). Previous research has shown that positive effects of passion on entrepreneurial performance

have a limit (Baron et al., 2011) and that extremely high levels of passion and negative passion can

have a negative effect on performance (Ho and Pollack, 2014). Future research can investigate how

this effect can be mediated or moderated by entrepreneurial alertness.

122
Chapter 7 Conclusions

123
7.1 Conclusions
This thesis studied factors related to the firm owner that influence small firm growth in LDCs. The

focus was on the effects of personal wealth extraction, start-up motivation, entrepreneurial

orientation, entrepreneurial alertness and entrepreneurial passion. Using primary data collected

from firms in the construction sector in Zambia, the empirical chapters of this thesis provide an

account of the analysis of the effects of the individual level factors on firm growth.

This chapter presents the general conclusion to the answers given in each empirical

chapter and the overall research questions. Next, the theoretical contribution to the literature and

the limitations of the research are discussed. The overarching question of this thesis is: How do small

firm owners affect the growth of their firms in LDCs?

7.1.1 Answers to research questions in empirical studies

In chapter 2, we focused on the development of a scale for measuring small firm growth

in LDCs based on the reasoning that conceptualisation and measurement of small firm growth

requires to be context-specific. Firm growth tends to be affected by context specific factors such

as the level of economic development in a country or region where a firm operates. Before we set

out to understand how small firm owners affect the growth of their firm, we had to establish how

to conceptualise and operationalise firm growth in LDCs. Chapter 2 therefore addressed the

research question: What constitutes firm growth in LDCs and how should it be measured? This chapter aimed

at identifying small firm growth indicators and measurement methods for research in LDCs. The

study in this chapter has shown that owner managers’ perceptions of growth in numbers of

employees, level of sales, value of assets, personal wealth and purchase expenditure on key process

input are suitable ways of measuring small firm growth for research conducted in LDCs. The use

of the owner-manager’s perceptions of firm growth may be suitable in absence of accurate sources

of objective data as is the case in LDCs. Many small firms in LDCs do not keep detailed accounts

124
of their activities and when they do, they are not usually willing to disclose such information to

third parties. Further, there are no reliable secondary sources of small firm growth data in LDCs.

Additionally, this study found evidence in support of measuring small firm growth using multiple

indicators combined in an index to take into account the multifaceted nature of firm growth.

Having established the conceptualisation of small firm growth in LDCs, the remainder of

the thesis focused on how factors related to small firm owners affect the growth of their firms. In

chapter 3 we studied the role of wealth extraction in our measurement of firm growth. Therefore,

we explored how wealth extraction relates to firm growth and how firm start-up motivation

moderates the relationship. From this perspective, we discussed the extent to which firm founders

extract wealth from their firms and how the predominant motives for starting a business affect

how much wealth is extracted from the firm for personal use. In this chapter, it was argued that

firm owners increase their personal wealth through a process of extracting wealth from their firms.

This is especially observable in resource-constrained environments such as LDCs. However, it

should be mentioned that the extent to which wealth is extracted is also moderated by the reasons

for starting a firm. As such, chapter 3 focussed on answering the question: What is the relationship

between small firm growth and growth in personal wealth of the firm owner, and how is this relationship affected by

the motivation for starting the business?

Using primary data collected from 228 small firms in the construction sector in Zambia,

we found that firm growth is positively related to the increase in the firm owner’s personal wealth.

We also found that the rate at which push-motivated entrepreneurs extracted wealth from the firm

was faster than that for those motivated by pull and mixed factors. It is clear that there are

economic benefits of starting a firm. However, the findings reported in chapter 3 imply that if a

firm’s establishment is primarily influenced by push factors, the firm has lower chances of ultimate

125
growth because of the speed at which the founders extract wealth compared to their counterparts

who are motivated by pull and mixed factors.

The focus of chapter 4 was the role of the firm owner’s entrepreneurial orientation on

firm growth and the moderating role of the business environment. Prior research has shown that

entrepreneurial firms achieve higher growth compared to firms that do not adopt an entrepreneurial

strategic orientation. The effect of entrepreneurial orientation on firm growth has been linked to

the context in which the firm operates. Firms that adopt an entrepreneurial orientation are inclined

to monitor changes in the environment and respond quickly. Having an entrepreneurial orientation

entails adoption of innovative behaviours that allow firms to develop different products and

services and better respond to changes in customer needs. Similarly, proactive and risky behaviours

enable firms to discover and exploit new opportunities and quickly introduce new products to the

market and adopt new technologies. This can help the firm to create a competitive advantage and

can result in firm growth. Therefore, in chapter 4 we focused on how entrepreneurial orientation

affects firm growth and how the relationship is moderated by the owner-manager’s perception of

the business environment. The research question for the study presented in chapter 4 was: How

does entrepreneurial orientation influence firm growth in LDCs and how does the business environment moderate

this relationship? Based on data collected from 118 small firms in the construction sector in Zambia,

our findings show that of the three dimensions of entrepreneurial orientation, namely risk-taking,

innovativeness and pro-activeness, only pro-activeness has a significant positive effect on firm

growth in LDCs. Contrary to our expectations, the study did not find evidence of the moderating

effect of the business environment on the relationship between EO and firm growth LDCs.

The last empirical study of this thesis is chapter 5. In this chapter, we analysed the effect

of entrepreneurial passion on firm growth and the mediating role of entrepreneurial alertness.

Passion and alertness, which are related to respectively the emotions and cognition of the firm

126
owner, are used as a basis for explaining why some entrepreneurs are more successful than others.

We take this perspective as recent research, studying the effect of individual-level factors on firm

success, has advocated a shift of focus from personality characteristics to more fluid individual

level aspects such as entrepreneurial cognition (cf. Baron, 2004b, Shepherd, 2015; Mitchell et al.,

2002; Mitchell et al., 2007; Baron, 2000). Likewise, positive affect, and specifically entrepreneurial

passion, influences many aspects linked to human cognition which are directly related to

entrepreneurial activities. In particular, the focus was on examining the following research question:

What is the relationship between entrepreneurial passion and firm growth and how is the relationship influenced by

entrepreneurial alertness? This question contributes to answering the general research question of the

thesis by focusing on how the alertness and passion of the entrepreneur affects the growth of their

firms.

Based on data collected from 124 small firm owners in the construction industry in

Zambia, chapter 5 revealed that entrepreneurial passion for developing has a significant direct

positive effect on firm growth. The study also showed that passion for developing has an indirect

effect, via entrepreneurial alertness, on firm growth. The indirect effects work through the entire

process of alertness which involves scanning and searching, association and connection, and

evaluation and judgement.

7.1.2 Answer to the main research question of the thesis

In sum, this thesis examined the role the entrepreneur plays in determining firm growth

by examining the research question: How do small firm owners affect the growth of their firms in LDCs?

The results presented in the empirical chapters indicate a number of ways in which decision making

and overall behaviour of the firm owner influence small firm growth in LDCs. First, we note that

it is very common for entrepreneurs to mix business assets and personal wealth. At the same time,

there is lack of reliable and credible information that can be used as objectively measures of firm

127
growth. In this thesis, we therefore argue for a context-specific firm growth measurement scale

which considers the changes in personal wealth of the firm owner.

Second, we built on that finding to further explore the interrelationship between firm

growth and wealth extraction and found, not surprisingly, that firm growth has a positive effect on

personal wealth of the firm owner. Importantly, we show that an entrepreneur’s decision making

regarding how much wealth he extracts from the firm for personal consumption can affect venture

survival and is dependent on the motivations for starting a business. Entrepreneurs who start their

business primary as a result of push factors, tend to extract wealth from a firm at a higher rate

compared to those who were motived by pull and mixed factors.

Third, regarding entrepreneurial orientation, we observe that pro-activeness had a positive

significant effect on firm growth, while we did not find support for the effect of risk taking and

innovativeness. Furthermore, we did not find support for the moderating effect of the business

environment in terms of environmental dynamism and hostility.

Finally, we observe that having a passion for developing a business has a direct effect on

firm growth as well as an indirect effect through the entrepreneurial alertness process. In sum, the

empirical studies in this thesis show the growth of the firm affects the wealth that the owner-

managers extracts from the firm. Regarding entrepreneurial orientation, pro-activeness had a

significant positive effect on firm growth while passion for developing had a direct positive effect

on firm growth, and an indirect effect through entrepreneurial alertness.

7.2 Contributions to literature

Collectively, the empirical chapters in this thesis contribute to the wider research on the relationship

between individual-level variables and firm-level measures of firm success. This thesis enriches the

understanding of how variables pertaining to motives, strategic orientation, passion, alertness and

128
actions of individual entrepreneurs (i.e., micro-level variables) eventually influence different aspects

of firm’s financial performance (e.g., firm growth in sales, assets, employment) (Baum et al., 2001;

Baron, 2008). More importantly, this thesis contributes to ongoing research on unravelling the role

of emotions and cognition on firm-level outcomes such as firm growth (Drnovsek et al., 2016). By

studying passion and alertness in chapter 5, we use some of the most theoretically rigorous and

empirically testable entrepreneurial behaviour perspectives in the quest to understanding why some

entrepreneurs become more successful than others (Mitchell et al., 2002).

Throughout this thesis we recognise that context-specific factors affect small firm growth.

Most firm growth theories have been predominantly developed based on research from Western,

developed countries. By analysing primary data, hand-collected in an African LDC, we contribute

to the understanding of the role of the individual entrepreneur in firm success in a novel regional

context, differing from the research that was generally conducted in developed economies. The

study reported in chapter 2 reveals the importance of validating the existing conceptualisation and

operationalisation of small firm growth in non-traditional settings and the need to develop context

specific measures of firm growth. Similarly, in chapter 4, we contribute to the understanding of

how entrepreneurial orientation affects firm growth in a resource constrained environment such

as an African LDC. This is important because extant research has to some extent attributed the

inclusive and sometimes contradictory results about the relationship between EO and firm

performance to the context-specific conditions pertaining to the environment in which the firm

operates (Miller, 2011; Lumpkin and Dess, 2001).

Chapter 3 contributed to the debate on the role of economic incentives of small firm

ownership. At individual or household level, extraction of wealth from the firm for personal use

becomes the incentive for the establishement of firms. Besides, by incorporating the role of start-

129
up motivation in the relationship between firm performance and economic rewards, we are able to

shed light on why some firms are more likely to fail early because of speed of wealth extraction.

7.3 Research limitations and areas for future research

It is important to state that the research presented in this thesis has a number of limitations. The

first limitation relates to the collection of empirical data. Data was collected from only one LDC,

Zambia. Although this helped in reducing variability in the sample, it is also important to recognise

that this can affect the generalisability of the findings. Although Zambia is categorised as an LDC

on the basis of the level of economic and human development, this categorisation is quite broad.

That is, countries in the same LDC category may be undergoing through different economic,

political and technological transitions, placing a challenge on the homogeneity of the group.

Therefore, further research is necessary to establish the overall generalisability of these findings to

other LDCs.

Second, with the exception of firm growth data in chapter 4, all empirical data used in this

research was cross-sectional. This poses a challenge to claiming evidence for causality. Collecting

longitudinal data for this thesis proved to be challenging due to difficulties in locating respondents

and lower response rates in the second wave of data collection.

Third, in chapters 3, 4 and 5, we adopted and adapted scales for measuring different

variables from extant literature. EFA was used to establish factor structure. One of the distinctive

features of EFA is that it relies more on extracting factors based on statistical results of the data

collected than on theory (Hair et al., 2010). EFA is more appropriate when the number of factors

and factor structure are not known. Since the scales were adopted from literature, both the number

and the factors structure were known. Although, the number of factors to be extracted can also be

specified in EFA, a confirmatory test of the measurement theory of the variables using CFA would

have been more appropriate. CFA helps in determining how theoretical conceptualisation of the

130
measurement of constructs match actual data. However, CFA is a structural equation modelling

technique, based on model fit statistics which is sensitive to sample size (Kline, 2011, Marsh, 1988).

The sample sizes in chapters 3, 4 and 5 where small to be used for CFA and future research should

consider validating the measurement scales with larger samples using CFA.

Forth, since the focus of the thesis was to establish the extent to which different factors

affect firm growth, it is important to recognise that this thesis concentrated on only a selected

number of variables. As noted by Baron (2004b), entrepreneurship is a complex process influenced

by an enormous array of variables. Prior research also suggests that no single factor has a

determining influence on firm growth, all by itself (Davidsson and Klofsten, 2003). Additionally,

different domains of variables predict growth better when multiple direct and indirect effects are

studied simultaneously (Baum et al., 2001). Although, this research has applied unique

configurations of context-specific variables to analyse small firm growth, there still remain a

number of variables whose direct and indirect effects are underexplored in research and have also

not been tested in this thesis. Future research can for instance, explore the integrative effect of

passion, alertness, and entrepreneurial orientation on firm growth.

7.4 Policy and practical implications

The findings that are reported in this thesis have implications for policy makers in Zambia and

other LDCs. Zambia has developed deliberate policies that encourage private sector participation

in industry, commerce and trade. Such policies are anchored in the belief that growing small firms

are vital for employment and wealth creation. In Zambia, one of the key issues in the Seventh

National Development Plan is the promotion of the growth of small firms (Ministry of National

Development Planning, 2017). In this thesis, we focused on how the decision making and

behaviour of small firm owners affect their firms.

131
 The findings presented in chapter 2 indicate that growth in personal wealth and purchase

expenditure are perceived as key components of firm growth by small firm owners alongside

growth in number of employees, assets and sales. This has practical implications for policies that

promote small firm growth. First, at least for small firm owners in Zambia, firm growth is

considered as a means of increasing wealth and creating job opportunities for themselves and

others. This implies that promoting small firm growth may be favourable for both job and wealth

creation. Therefore, it is important that policies aimed at firm growth are continued and expanded.

Second, since small firm owners see increases in expenditure due to purchase of key process inputs,

impacting firm growth, there is need for policy that can promote increased access to key process

inputs at a competitive cost. Policy makers need to consider tax incentives specifically targeted at

stimulating growth specifically for SMEs, in particular as most of the existing tax incentives appear

to favour larger organisations and foreign multi-national investors.

In chapter 3, we discussed how firm growth may affect extraction of wealth from the

venture by firm owners. Extraction of wealth is likely to happen when there is no clear separation

between personal and business activities. For entrepreneurs, it is very important to know that the

decision to extract wealth from the firm reduces the amount of money retained for growth

purposes, with potential severe impact on the chances for firm survival and growth. Therefore, it

is beneficial for entrepreneurs to create a better separation of business and personal expenditures.

Moreover, there is need to reinforce policies that encourage entrepreneurs to separate business

from personal activities.

In chapter 4, we found that pro-activeness had a positive effect on firm growth. The

practical implication is that, entrepreneurs must adopt a pro-active orientation in order to achieve

growth. This could be achieved by entrepreneurs making deliberate efforts to simulating

132
themselves to be proactive or by hiring proactive others to manage their firms. Policy makers may

also provide training for entrepreneurs targeting improving their pro-activeness.

In chapter 5, we found that entrepreneurial passion has a direct positive effect on firm

growth and that this relationship was partially mediated by entrepreneurial alertness. This has

practical implications for policy makers as well as entrepreneurs. The findings imply that it is

important for both entrepreneurs and policy makers to understand the significance of the effect of

entrepreneurial passion and alertness on firm growth. There is therefore need for policies targeted

at increasing entrepreneurial effort that focus on nurturing entrepreneurial passion and alertness.

Policies that promote channelling of resources to support entrepreneurs who display high levels of

passion and alertness should be encouraged.

7.5 Overall conclusion

The general theme of this research was how factors related to small firm owners affect

firm growth. We discussed how some aspects of decision making and behaviour of the owner-

manager can affect firm growth. We focused on the extraction of wealth from firms,

entrepreneurial orientation, entrepreneurial passion and alertness. However, it is important to

acknowledge that there are other important factors that can affect firm growth that are still under

researched in LDCs. Therefore, this study contributes to the literature by providing a stepping

stone for further research that can identify and investigate other factors that may be important in

the context of LDCs. Overall, the findings in this thesis could provide a basis for entrepreneurs

with a high growth potential.

133
List of references
Achtenhagen, L., Naldi, L. and Melin, L. (2010), "“Business Growth”—Do Practitioners and
Scholars Really Talk About the Same Thing?", Entrepreneurship Theory and Practice, Vol. 34
No. 2, pp. 289-316.

Acs, Z., Desai, S. and Hessels, J. (2008), "Entrepreneurship, Economic Development and
Institutions", Small Business Economics, Vol. 31 No. 3, pp. 219-234.

Acs, Z. and Storey, D. (2004), "Entrepreneurship and Economic Development", Regional Studies,
Vol. 38 No. 8, pp. 871-877.

Acs, Z. J. (2006), "How Is Entrepreneurship Good for Economic Growth?", Innovations, Vol.
Winter No.1, pp. 97-107.

Acs, Z. J. and Mueller, P. (2008), "Employment Effects of Business Dynamics: Mice, Gazelles and
Elephants", Small Business Economics, Vol. 30 No. 1, pp. 85-100.

Adom, K. and Williams, C. C. (2012), "Evaluating the Motives of Informal Entrepreneurs in

Koforidua, Ghana", Journal of Developmental Entrepreneurship, Vol. 17 No. 1, pp. 1-17.

Aguinis, H. (2004), Regression Analysis for Categorical Moderators, Guilford Press.

Ahmad, N. H., Wilson, C. and Kummerow, L. (2011), "Assessing the Dimensionality of Business
Success: The Perspectives of Malaysian Sme Owner-Managers", Journal of Asia-Pacific
Business, Vol. 12 No. 3, pp. 207-224.

Aiken, L. S. and West, S. G. (1991), Multiple Regression: Testing and Interpreting Interactions, Sage.

Aldrich, H. E. and Cliff, J. E. (2003), "The Pervasive Effects of Family on Entrepreneurship:

Toward a Family Embeddedness Perspective", Journal of Business Venturing, Vol. 18 No. 5,
pp. 573-596.

Alegre, J. and Chiva, R. (2013), "Linking Entrepreneurial Orientation and Firm Performance: The
Role of Organizational Learning Capability and Innovation Performance", Journal of Small
Business Management, Vol. 51 No. 4, pp. 491-507.

Amato, C., A. Baron, R., Barbieri, B., Bélanger, J. J. and Pierro, A. (2016), "Regulatory Modes and
Entrepreneurship: The Mediational Role of Alertness in Small Business Success", Journal of
Small Business Management, Vol. No. n/a-n/a.

Amit, R., MacCrimmon, K. R., Zietsma, C. and Oesch, J. M. (2000), "Does Money Matter?: Wealth
Attainment as the Motive for Initiating Growth-Oriented Technology Ventures", Journal of
Business Venturing, Vol. 16 No. 2, pp. 119-143.

Amit, R. and Muller, E. (1995), "“Push” and “Pull” Entrepreneurship", Journal of Small Business &
Entrepreneurship, Vol. 12 No. 4, pp. 64-80.

134
Andersén, J. (2010), "A Critical Examination of the Eo-Performance Relationship", International
Journal of Entrepreneurial Behavior & Research, Vol. 16 No. 4, pp. 309-328.

Anderson, B. S. and Eshima, Y. (2013), "The Influence of Firm Age and Intangible Resources on
the Relationship between Entrepreneurial Orientation and Firm Growth among Japanese
Smes", Journal of Business Venturing, Vol. 28 No. 3, pp. 413-429.

Andersson, S. and Tell, J. (2009), "The Relationship between the Manager and Growth in Small
Firms", Journal of small Business and Enterprise development, Vol. 16 No. 4, pp. 586-598.

Arbaugh, J. B., Cox, L. W. and Camp, S. M. (2009), "Is Entrepreneurial Orientation a Global
Construct? A Multi-Country Study of Entrepreneurial Orientation, Growth Strategy, and
Performance", The Journal of Business Inquiry, Vol. 8 No. 1, pp. 12-25.

Arend, R. J. (2012), "Entrepreneurship and Dynamic Capabilities: How Firm Age and Size Affect
the ‘Capability Enhancement–Sme Performance’ Relationship", Small Business Economics,
Vol. 42 No. 1, pp. 33-57.

Armstrong, J. S. and Overton, T. S. (1977), "Estimating Non-Response Bias in Mail Surveys",

Journal of Marketing Research, Vol.14 No.3, pp 396-402.

Åstebro, T. and Chen, J. (2014), "The Entrepreneurial Earnings Puzzle: Mismeasurement or Real?",
Journal of Business Venturing, Vol. 29 No. 1, pp. 88-105.

Avlonitis, G. J. and Salavou, H. E. (2007), "Entrepreneurial Orientation of Smes, Product

Innovativeness, and Performance", Journal of Business Research, Vol. 60 No. 5, pp. 566-575.

Ayyagari, M., Beck, T. and Demirguc-Kunt, A. (2007), "Small and Medium Enterprises across the
Globe", Small Business Economics, Vol. 29 No. 4, pp. 415-434.

Bagozzi, R. P., Yi, Y. and Phillips, L. W. (1991), "Assessing Construct Validity in Organizational
Research", Administrative Science Quarterly, Vol. 36 No. 3, pp. 421-458.

Bank of Zambia (2016), Bank of Zambia Annual Report 2016. Lusaka: Bank of Zambia.

Bardasi, E., Sabarwal, S. and Terrell, K. (2011), "How Do Female Entrepreneurs Perform?
Evidence from Three Developing Regions", Small Business Economics, Vol. 37 No. 4, pp.
417-441.

Barney, J. (1991), "Firm Resources and Sustained Competitive Advantage", Journal of Management,
Vol. 17 No. 1, pp. 99-120.

Barney, J., Wright, M. and Ketchen, D. J. (2001), "The Resource-Based View of the Firm: Ten
Years after 1991", Journal of Management, Vol. 27 No. 6, pp. 625-641.

Baron, R. A. (2000), "Psychological Perspectives on Entrepreneurship: Cognitive and Social

Factors in Entrepreneurs' Success", Current Directions in Psychological Science (Wiley-Blackwell),
Vol. 9 No. 1, pp. 15-18.

135
Baron, R. A. (2004a), "The Cognitive Perspective: A Valuable Tool for Answering
Entrepreneurship's Basic “Why” Questions", Journal of Business Venturing, Vol. 19 No. 2, pp.
221-239.

Baron, R. A. (2004b), "Potential Benefits of the Cognitive Perspective: Expanding

Entrepreneurship's Array of Conceptual Tools", Journal of Business Venturing, Vol. 19 No. 2,
pp. 169-172.

Baron, R. A. (2006), "Opportunity Recognition as Pattern Recognition: How Entrepreneurs

"Connect the Dots" to Identify New Business Opportunities", Academy of Management
Perspectives, Vol. 20 No. 1, pp. 104-119.

Baron, R. A. (2007), "Behavioral and Cognitive Factors in Entrepreneurship: Entrepreneurs as the

Active Element in New Venture Creation", Strategic Entrepreneurship Journal, Vol. 1 No. 1-2,
pp. 167-182.

Baron, R. A. (2008), "The Role of Affect in the Entrepreneurial Process", Academy of Management
Review, Vol. 33 No. 2, pp. 328-340.

Baron, R. A., Hmieleski, K. M. and Henry, R. A. (2012), "Entrepreneurs' Dispositional Positive

Affect: The Potential Benefits – and Potential Costs – of Being “Up”", Journal of Business
Venturing, Vol. 27 No. 3, pp. 310-324.

Baron, R. A. and Tang, J. (2011), "The Role of Entrepreneurs in Firm-Level Innovation: Joint
Effects of Positive Affect, Creativity, and Environmental Dynamism", Journal of Business
Venturing, Vol. 26 No. 1, pp. 49-60.

Baron, R. A., Tang, J. and Hmieleski, K. M. (2011), "The Downside of Being ‘Up’: Entrepreneurs'
Dispositional Positive Affect and Firm Performance", Strategic Entrepreneurship Journal, Vol.
5 No. 2, pp. 101-119.

Baron, R. M. and Kenny, D. A. (1986), "The Moderator–Mediator Variable Distinction in Social

Psychological Research: Conceptual, Strategic, and Statistical Considerations", Journal of
personality and social psychology, Vol. 51 No. 6, pp. 1173.

Barringer, B. R., Jones, F. F. and Neubaum, D. O. (2005), "A Quantitative Content Analysis of the
Characteristics of Rapid-Growth Firms and Their Founders", Journal of Business Venturing,
Vol. 20 No. 5, pp. 663-687.

Baum, J. R. and Locke, E. A. (2004), "The Relationship of Entrepreneurial Traits, Skill, and
Motivation to Subsequent Venture Growth", Journal of Applied Psychology, Vol. 89 No. 4, pp.
587-598.

Baum, J. R., Locke, E. A. and Smith, K. G. (2001a), "A Multidimensional Model of Venture
Growth", Academy of Management Journal, Vol. 44 No. 2, pp. 292-303.

Begley, T. M. and Boyd, D. P. (1987), "Psychological Characteristics Associated with Performence

in Entrepreneurial Firms and Smaller Businesses", Journal of Business Venturing, Vol. 2 No.1,
pp. 79-93.

136
Benz, M. (2009), "Entrepreneurship as a Non-Profit-Seeking Activity", International Entrepreneurship
and Management Journal, Vol. 5 No. 1, pp. 23-44.

Benzing, C. and Chu, H. M. (2009), "A Comparison of the Motivations of Small Business Owners
in Africa", Journal of Small Business and Enterprise Development, Vol. 16 No. 1, pp. 60-77.

Benzing, C., Chu, H. M. and Kara, O. (2009), "Entrepreneurs in Turkey: A Factor Analysis of
Motivations, Success Factors, and Problems", Journal of Small Business Management, Vol. 47
No. 1, pp. 58-91.

Benzing, C., Hung Manh, C. and Callanan, G. (2005), "A Regional Comparison of the Motivation
and Problems of Vietnamese Entrepreneurs Startup Motivation", Journal of Developmental
Entrepreneurship, Vol. 10 No. 1, pp. 3-27.

Bewayo, E. D. (2015), "Uganda Entrepreneurs: Why Are They in Business", Journal of Small Business
Strategy, Vol. 6 No. 1, pp. 67-78.

Biraglia, A. and Kadile, V. (2017), "The Role of Entrepreneurial Passion and Creativity in
Developing Entrepreneurial Intentions: Insights from American Homebrewers", Journal of
Small Business Management, Vol. 55 No. 1, pp. 170-188.

Blackburn, R. and Ram, M. (2006), "Fix or Fixation? The Contributions and Limitations of
Entrepreneurship and Small Firms to Combating Social Exclusion", Entrepreneurship &
Regional Development, Vol. 18 No. 1, pp. 73-89.

Block, J. and Sandner, P. (2009), "Necessity and Opportunity Entrepreneurs and Their Duration
in Self-Employment: Evidence from German Micro Data", Journal of Industry, Competition
and Trade, Vol. 9 No. 2, pp. 117-137.

Block, J. H., Millán, J. M., Román, C. and Zhou, H. (2015), "Job Satisfaction and Wages of Family
Employees", Entrepreneurship Theory and Practice, Vol. 39 No. 2, pp. 183-207.

Boos, A. and Holm-müller, K. (2016), "The Zambian Resource Curse and Its Influence on Genuine
Savings as an Indicator for "Weak" Sustainable Development", Environment, Development and
Sustainability, Vol. 18 No. 3, pp. 881-919.

Boso, N., Oghazi, P., Cadogan, J. W. and Story, V. M. (2016), "Entrepreneurial and Market-
Oriented Activities, Financial Capital, Environment Turbulence, and Export Performance
in an Emerging Economy", Journal of Small Business Strategy, Vol. 26 No. 1, pp. 1-24.

Boso, N., Story, V. M. and Cadogan, J. W. (2013), "Entrepreneurial Orientation, Market

Orientation, Network Ties, and Performance: Study of Entrepreneurial Firms in a
Developing Economy", Journal of Business Venturing, Vol. 28 No. 6, pp. 708-727.

Bova, E. (2012), "Copper Boom and Bust in Zambia: The Commodity-Currency Link", The Journal
of Development Studies, Vol. 48 No. 6, pp. 768-782.

Box, M., Lin, X. and Gratzer, K. (2016), "Linking Entrepreneurship and Economic Growth in
Sweden, 1850–2000", In: Bögenhold, D., Bonnet, J., Dejardin, M. and Garcia Pérez de
Lema, D. (Ed.) Contemporary Entrepreneurship: Multidisciplinary Perspectives on Innovation and
Growth. Springer International Publishing, Cham, pp. 31-49.

137
Bradley, S. W., Wiklund, J. and Shepherd, D. A. (2011), "Swinging a Double-Edged Sword: The
Effect of Slack on Entrepreneurial Management and Growth", Journal of Business Venturing,
Vol. 26 No. 5, pp. 537-554.

Brandstätter, H. (2011), "Personality Aspects of Entrepreneurship: A Look at Five Meta-Analyses",

Personality and Individual Differences, Vol. 51 No. 3, pp. 222-230.

Breugst, N., Domurath, A., Patzelt, H. and Klaukien, A. (2012), "Perceptions of Entrepreneurial
Passion and Employees' Commitment to Entrepreneurial Ventures", Entrepreneurship Theory
and Practice, Vol. 36 No. 1, pp. 171-192.

Brinckmann, J., Salomo, S. and Gemuenden, H. G. (2011), "Financial Management Competence

of Founding Teams and Growth of New Technology-Based Firms", Entrepreneurship Theory
and Practice, Vol. 35 No. 2, pp. 217-243.

Brockman, B. K. (2014), "Entrepreneurial Alertness in Opportunity Identification and

Opportunity Development", Journal of Business and Entrepreneurship, Vol. 26 No. 2, pp. 27-
44.

Brown, J. R., Martinsson, G. and Petersen, B. C. (2012), "Do Financing Constraints Matter for
R&D?", European Economic Review, Vol. 56 No. 8, pp. 1512-1529.

Brown, T. E., Davidsson, P. and Wiklund, J. (2001), "An Operationalization of Stevenson's

Conceptualization of Entrepreneurship as Opportunity-Based Firm Behavior", Strategic
Management Journal, Vol. 22 No. 10, pp. 953-968.

Brush, C. G. and Vanderwerf, P. A. (1992), "A Comparison of Methods and Sources for Obtaining
Estimates of New Venture Performance", Journal of Business Venturing, Vol. 7 No. 2, pp.
157-170.

Bruton, G. D., Ahlstrom, D. and Obloj, K. (2008), "Entrepreneurship in Emerging Economies:

Where Are We Today and Where Should the Research Go in the Future", Entrepreneurship:
Theory & Practice, Vol. 32 No. 1, pp. 1-14.

Bruton, G. D. and Rubanik, Y. (2002), "Resources of the Firm, Russian High-Technology Startups,
and Firm Growth", Journal of Business Venturing, Vol. 17 No. 6, pp. 553-576.

Burke, A. E., Fitzroy, F. R. and Nolan, M. A. (2002), "Self-Employment Wealth and Job Creation:
The Roles of Gender, Non-Pecuniary Motivation and Entrepreneurial Ability", Small
Business Economics, Vol. 19 No. 3, pp. 255-270.

Byrne, B. M. (2013), Structural Equation Modeling with Amos: Basic Concepts, Applications, and
Programming, Routledge, New York.

Cagetti, M. and De Nardi, M. (2006), "Entrepreneurship, Frictions, and Wealth", Journal of Political
Economy, Vol. 114 No. 5, pp. 835-870.

Caliendo, M. and Kritikos, A. (2010), "Start-Ups by the Unemployed: Characteristics, Survival and
Direct Employment Effects", Small Business Economics, Vol. 35 No. 1, pp. 71-92.

138
Campos, H. M. (2016), "The Role of Creativity in Mediating the Relationship between
Entrepreneurial Passion and Entrepreneurial Alertness", Revista Brasileira de Gestão de
Negócios, Vol. 18 No. 61, pp. 457-472.

Cardon, M. S., Foo, M.-D., Shepherd, D. and Wiklund, J. (2012), "Exploring the Heart:
Entrepreneurial Emotion Is a Hot Topic", Entrepreneurship Theory and Practice, Vol. 36 No.
1, pp. 1-10.

Cardon, M. S., Gregoire, D. A., Stevens, C. E. and Patel, P. C. (2013), "Measuring Entrepreneurial
Passion: Conceptual Foundations and Scale Validation", Journal of Business Venturing, Vol.
28 No. 3, pp. 373-396.

Cardon, M. S. and Kirk, C. P. (2015), "Entrepreneurial Passion as Mediator of the Self-Efficacy to

Persistence Relationship", Entrepreneurship Theory and Practice, Vol. 39 No. 5, pp. 1027-1050.

Cardon, M. S., Shinnar, R. S., Eisenman, M. and Rogoff, E. G. (2008), "Segmenting the Population
of Entrepreneurs: A Cluster Analysis Study", Journal of Developmental Entrepreneurship, Vol.
13 No. 3, pp. 293-314.

Cardon, M. S. and Stevens, C. E. (2009), "The Discriminant Validity of Entrepreneurial Passion",

Academy of Management Annual Meeting Proceedings, Vol. No. 1-6.

Cardon, M. S., Wincent, J., Singh, J. and Drnovsek, M. (2009), "The Nature and Experience of
Entrepreneurial Passion", Academy of Management Review, Vol. 34 No. 3, pp. 511-532.

Cardon, M. S., Zietsma, C., Saparito, P., Matherne, B. P. and Davis, C. (2005), "A Tale of Passion:
New Insights into Entrepreneurship from a Parenthood Metaphor", Journal of Business
Venturing, Vol. 20 No. 1, pp. 23-45.

Carree, M., Van Stel, A., Thurik, R. and Wennekers, S. (2007), "The Relationship between
Economic Development and Business Ownership Revisited", Entrepreneurship & Regional
Development, Vol. 19 No. 3, pp. 281-291.

Carree, M. A. and Thurik, A. R. (2005), "The Impact of Entrepreneurship on Economic Growth",

Handbook of Entrepreneurship Research. Springer, New York, pp. 437-471.

Carsrud, A. and Brännback, M. (2011), "Entrepreneurial Motivations: What Do We Still Need to

Know?", Journal of Small Business Management, Vol. 49 No. 1, pp. 9-26.

Carter, N. M., Gartner, W. B., Shaver, K. G. and Gatewood, E. J. (2003), "The Career Reasons of
Nascent Entrepreneurs", Journal of Business Venturing, Vol. 18 No. 1, pp. 13-39.

Carter, S. (2011), "The Rewards of Entrepreneurship: Exploring the Incomes, Wealth, and
Economic Well-Being of Entrepreneurial Households", Entrepreneurship: Theory & Practice,
Vol. 35 No. 1, pp. 39-55.

Carter, S. and Welter, F. (2015), "Keeping It in the Family", Family Entrepreneurship: Rethinking the
Research Agenda. Routledge, London and NewYork, pp. 131.

139
Casillas, J. C. and Moreno, A. M. (2010), "The Relationship between Entrepreneurial Orientation
and Growth: The Moderating Role of Family Involvement", Entrepreneurship and Regional
Development, Vol. 22 No. 3-4, pp. 265-291.

Casillas, J. C., Moreno, A. M. and Barbero, J. L. (2010), "A Configurational Approach of the
Relationship between Entrepreneurial Orientation and Growth of Family Firms", Family
Business Review, Vol. 23 No. 1, pp. 27-44.

Cassar, G. (2006), "Entrepreneur Opportunity Costs and Intended Venture Growth", Journal of
Business Venturing, Vol. 21 No. 5, pp. 610-632.

Cassar, G. (2007), "Money, Money, Money? A Longitudinal Investigation of Entrepreneur Career

Reasons, Growth Preferences and Achieved Growth", Entrepreneurship & Regional
Development, Vol. 19 No. 1, pp. 89-107.

Central Intellingecy Agency (2013), "World Fact Book" [Online]. Washingtone. Available:
https://www.cia.gov/library/publications/the-world-factbook/geos/za.html [Accessed
Nov, 18 2013].

Central Statistics Office (2011), 2010 Census Report, Central Statistics Office - Zambia, Lusaka.

Chan, C. S. R. and Park, H. D. (2013), "The Influence of Dispositional Affect and Cognition on
Venture Investment Portfolio Concentration", Journal of Business Venturing, Vol. 28 No. 3,
pp. 397-412.

Chandler, G. N. and Lyon, D. W. (2001), "Issues of Research Design and Construct Measurement
in Entrepreneurship Research: The Past Decade", Entrepreneurship: Theory & Practice, Vol.
25 No. 4, pp. 101-113.

Chen, X.-P., Yao, X. I. N. and Kotha, S. (2009), "Entrepreneur Passion and Preparedness in
Business Plan Presentations: A Persuasion Analysis of Venture Capitalists' Funding
Decisions", Academy of Management Journal, Vol. 52 No. 1, pp. 199-214.

Chirwa, T. G. and Odhiambo, N. M. (2017), "Sources of Economic Growth in Zambia: An

Empirical Investigation", Global Business Review, Vol. 18 No. 2, pp. 275-290.

Chu, H. M., Benzing, C. and McGee, C. (2007), "Ghanaian and Kenyan Entrepreneurs: A
Comparative Analysis of Their Motivations, Success Characteristics and Problems", Journal
of Developmental Entrepreneurship, Vol. 12 No. 3, pp. 295-322.

Clarke, G. R., Shah, M. K., Sheppard, M., Munro, J., Pearson, J. and Roland, V. (2010), "The
Business Landscape for MSMS and Large Enterprises in Zambia", Zambia Business Survey,
World Bank: Washington DC.

Coad, A. (2009), The Growth of Firms: A Survey of Theories and Empirical Evidence, Edward Elgar
Publishing Limited, Cheltenham, UK.

Coad, A., Frankish, J. S., Roberts, R. G. and Storey, D. J. (2016), "Predicting New Venture Survival
and Growth: Does the Fog Lift?", Small Business Economics, Vol. 47 No. 1, pp. 217-241.

140
Cohen, J. D. (2005), "The Vulcanization of the Human Brain: A Neural Perspective on Interactions
between Cognition and Emotion", The Journal of Economic Perspectives, Vol. 19 No. 4, pp. 3-
24.

Collewaert, V., Anseel, F., Crommelinck, M., De Beuckelaer, A. and Vermeire, J. (2016), "When
Passion Fades: Disentangling the Temporal Dynamics of Entrepreneurial Passion for
Founding", Journal of Management Studies, Vol. 53 No. 6, pp. 966-995.

Cornwall, J. R. and Naughton, M. J. (2003), "Who Is the Good Entrepreneur? An Exploration

within the Catholic Social Tradition", Journal of Business Ethics, Vol. 44 No. 1, pp. 61-75.

Covin, J. G., Green, K. M. and Slevin, D. P. (2006), "Strategic Process Effects on the
Entrepreneurial Orientation–Sales Growth Rate Relationship", Entrepreneurship: Theory &
Practice, Vol. 30 No. 1, pp. 57-81.

Covin, J. G. and Miles, M. P. (1999), "Corporate Entrepreneurship and the Pursuit of Competitive
Advantage", Entrepreneurship: Theory & Practice, Vol. 23 No. 3, pp. 47-63.

Covin, J. G. and Miller, D. (2014), "International Entrepreneurial Orientation: Conceptual

Considerations, Research Themes, Measurement Issues, and Future Research Directions",
Entrepreneurship: Theory & Practice, Vol. 38 No. 1, pp. 11-44.

Covin, J. G. and Slevin, D. P. (1989), "Strategic Management of Small Firms in Hostile and Benign
Enviroments", Strategic Management Journal, Vol. 10 No. 1, pp. 75.

Covin, J. G. and Wales, W. J. (2012), "The Measurement of Entrepreneurial Orientation",

Entrepreneurship Theory and Practice, Vol. 36 No. 4, pp. 677-702.

Davidsson, P. (2004), Researching Entrepreneurship, Springer, NewYork.

Davidsson, P. (2010), "Small Firm Growth", Foundations and Trends® in Entrepreneurship, Vol. 6 No.
2, pp. 69-166.

Davidsson, P., Achtenhagen, L. and Naldi, L. (2005), "Research on Small Firm Growth: A Review".
European Institute of Small Business, 2005/01/01 2005.

Davidsson, P., Achtenhagen, L. and Naldi, L. (2007), "What Do We Know About Small Firm
Growth?", In: Parker, S. (Ed.) The Life Cycle of Entrepreneurial Ventures. Springer US, pp. 361-
398.

Davidsson, P., Achtenhagen, L. and Naldi, L. (2010), "Small Firm Growth", Foundations and Trends
in Entrepreneurship, Vol. 6 No. 2, pp. 69-166.

Davidsson, P., Achtenhagen, L. and Naldi, L. (2013b), "Towards an Integrative Framework for
Future Research on Small Firm Growth", In: Davidsson, P. and Achtenhagen, L. (Ed.) New
Perspectives on Firm Growth. Edward Elgar Publishing, Cheltenham, UK, pp. 176-183.

Davidsson, P., Delmar, F. and Wiklund, J. (2006), "Entrepreneurship as Growth; Growth as

Entrepreneurship", Entrepreneurship and the Growth of Firms. Edward Elgar Publishing,
Cheltenham, UK, pp. 21-38

141
Davidsson, P. and Klofsten, M. (2003), "The Business Platform: Developing an Instrument to
Gauge and to Assist the Development of Young Firms", Journal of Small Business Management,
Vol. 41 No. 1, pp. 1-26.

Davidsson, P., Steffens, P. and Fitzsimmons, J. (2009), "Growing Profitable or Growing from
Profits: Putting the Horse in Front of the Cart?", Journal of Business Venturing, Vol. 24 No.
4, pp. 388-406.

Davidsson, P. and Wiklund, J. (2006), "Conceptual and Empirical Challenges in the Study of Firm
Growth", Entrepreneurship and the Growth of Firms, Vol. 1 No. 39-61.

Davis, A. E. and Shaver, K. G. (2012), "Understanding Gendered Variations in Business Growth

Intentions across the Life Course", Entrepreneurship Theory and Practice, Vol. 36 No. 3, pp.
495-512.

Dawson, C. and Henley, A. (2012), "“Push” Versus “Pull” Entrepreneurship: An Ambiguous

Distinction?", International Journal of Entrepreneurial Behavior & Research, Vol. 18 No. 6, pp.
697-719.

Delgado, G. J. B., De Quevedo Puente, E. and Blanco Mazagatos, V. (2015), "How Affect Relates
to Entrepreneurship: A Systematic Review of the Literature and Research Agenda",
International Journal of Management Reviews, Vol. 17 No. 2, pp. 191-211.

Delmar, F. (2006a), "Entrepreneurship and the Growth of Firms", In: Davidsson, P., Delmar, F.
and Wiklund, J. (Ed.) Entrepreneurship and the Growth of Firms. pp. 62-84.

Delmar, F. (2006b), "Measuring Growth: Methodological Considerations and Empirical Results",

In: Davidsson, P., Delmar, F. and Wiklund, J. (Ed.) Entrepreneurship and the Growth of Firms.
Edward Elgar, Cheltenham, UK, pp. 62-84.

Delmar, F., Davidsson, P. and Gartner, W. B. (2003), "Arriving at the High-Growth Firm", Journal
of Business Venturing, Vol. 18 No. 2, pp. 189-216.

Delmar, F. and Wiklund, J. (2008), "The Effect of Small Business Managers’ Growth Motivation
on Firm Growth: A Longitudinal Study", Entrepreneurship Theory and Practice, Vol. 32 No. 3,
pp. 437-457.

Dess, G. and Lumpkin, G. T. (2005), "Entrepreneurial Orientation as a Source of Innovative

Strategy", In: Steven, W. F., Roos, J., Jacobs, C. D. and Kellermanns, F. W. (Ed.) Innovating
Strategy Process. Blackwell Publishing, Malden, MA: USA, pp. 3-9

Dess, G. G. and Beard, D. W. (1984), "Dimensions of Organizational Task Environments",

Administrative Science Quarterly, Vol. 9 No. 1, pp. 52-73.

De Koning, A. (2003), "Opportunity Development: A Socio-Cognitive Perspective", In: Cognitive

approaches to entrepreneurship research (Vol. 6): Emerald Group Publishing Limited, pp. 265-
314.

DeVellis, R. F. (2011), Scale Development: Theory and Applications, Sage Publications, London.

142
DeVon, H. A., Block, M. E., Moyle-Wright, P., Ernst, D. M., Hayden, S. J., Lazzara, D. J., Savoy,
S. M. and Kostas-Polston, E. (2007), "A Psychometric Toolbox for Testing Validity and
Reliability", Journal of Nursing Scholarship, Vol. 39 No. 2, pp. 155-164.

Diamantopoulos, A. (2005), "The C-Oar-Se Procedure for Scale Development in Marketing: A

Comment", International Journal of Research in Marketing, Vol. 22 No. 1, pp. 1-9.

Diambeidou, M. B. and Gailly, B. (2011), "A Taxonomy of the Early Growth of Belgian Start-
Ups", Journal of small Business and Enterprise development, Vol. 18 No. 2, pp. 194-218.

Dobbs, M. and Hamilton, R. T. (2007), "Small Business Growth: Recent Evidence and New
Directions", International Journal of Entrepreneurial Behaviour & Research, Vol. 13 No. 5, pp.
296-322.

Douglas, E. J. and Shepherd, D. A. (2002), "Self-Employment as a Career Choice: Attitudes,

Entrepreneurial Intentions, and Utility Maximization", Entrepreneurship: Theory & Practice,
Vol. 26 No. 3, pp. 81-90.

Drnovsek, M., Cardon, M. S. and Murnieks, C. Y. (2009), "Collective Passion in Entrepreneurial

Teams", In: Carsrud, A. L. and Brännback, M. (Ed.) Understanding the Entrepreneurial Mind:
Opening the Black Box. Springer New York, New York, NY, pp. 191-215.

Drnovsek, M., Cardon, M. S. and Patel, P. C. (2016), "Direct and Indirect Effects of Passion on
Growing Technology Ventures", Strategic Entrepreneurship Journal, Vol. 10 No. 2, pp. 194-
213.

Edelman, L. F., Brush, C. G. and Manolova, T. (2005), "Co-Alignment in the Resource–

Performance Relationship: Strategy as Mediator", Journal of Business Venturing, Vol. 20 No.
3, pp. 359-383.

Edelman, L. F., Brush, C. G., Manolova, T. S. and Greene, P. G. (2010), "Start-up Motivations and
Growth Intentions of Minority Nascent Entrepreneurs", Journal of Small Business
Management, Vol. 48 No. 2, pp. 174-196.

Eijdenberg, E. L., Paas, L. J. and Masurel, E. (2015), "Entrepreneurial Motivation and Small
Business Growth in Rwanda", Journal of Entrepreneurship in Emerging Economies, Vol. 7 No. 3,
pp. 212-240.

Fessehaie, J. (2012), "What Determines the Breadth and Depth of Zambia's Backward Linkages to
Copper Mining? The Role of Public Policy and Value Chain Dynamics", Resources Policy,
Vol. 37 No. 4, pp. 443-451.

Fodor, O. C. and Pintea, S. (2017), "The “Emotional Side” of Entrepreneurship: A Meta-Analysis

of the Relation between Positive and Negative Affect and Entrepreneurial Performance",
Frontiers in Psychology, Vol. 8 No. 310.

Foo, M.-D. (2011), "Emotions and Entrepreneurial Opportunity Evaluation", Entrepreneurship

Theory and Practice, Vol. 35 No. 2, pp. 375-393.

Fornell, C. and Larcker, D. F. (1981), "Evaluating Structural Equation Models with Unobservable
Variables and Measurement Error", Journal of Marketing Research, Vol. 18 No. 1, pp. 39.

143
Frankish, J. S., Roberts, R. G., Coad, A. and Storey, D. J. (2014), "Is Entrepreneurship a Route out
of Deprivation?", Regional Studies, Vol. 48 No. 6, pp. 1090-1107.

Fraser, A. and Lungu, J. (2007), For Whom the Windfalls: Winners and Losers in the Privatisation of
Zambian Copper Mines, Printex, Lusaka, Zambia.

Frese, M., Brantjes, A. and Hoorn, R. (2002), "Psychological Success Factors of Small Business in
Namibia", Journal of Developmental Entrepreneurship, Vol. 7 No. 3, pp. 259-281.

Friis, C., Karlsson, C. and Paulsson, T. (2006), "Relating Entrepreneurship to Economic Growth",
In: Johansson, B., Karlsson, C. and Stough, R. (Ed.) The Emerging Digital Economy. Springer
Berlin Heidelberg, pp. 83-111.

Gaglio, C. M. and Katz, J. A. (2001), "The Psychological Basis of Opportunity Identification:

Entrepreneurial Alertness", Small Business Economics, Vol. 16 No. 2, pp. 95-111.

Gaglio, C. M. and Winter, S. (2017), "Entrepreneurial Alertness and Opportunity Identification:

Where Are We Now?", In: Brännback, M. and Carsrud, A. L. (Ed.) Revisiting the
Entrepreneurial Mind: Inside the Black Box: An Expanded Edition. Springer International
Publishing, Cham, pp. 339-358.

Gartner, W. B. (1989), "Who Is an Entrepreneur Is a Wrong Question", Entrepreneurship Theory and

Practice, Vol. Summer No. 11-32.

George, B. A. and Marino, L. (2011), "The Epistemology of Entrepreneurial Orientation:

Conceptual Formation, Modeling, and Operationalization", Entrepreneurship: Theory &
Practice, Vol. 35 No. 5, pp. 989-1024.

Gerbing, D. W. and Anderson, J. C. (1988), "An Updated Paradigm for Scale Development
Incorporating Unidimensionality and Its Assessment", Journal of marketing research, Vol. No.
186-192.

Gilad, B. and Levine, P. (1986), "A Behavioral Model of Entrepreneurial Supply", Journal of Small
Business Management, Vol. 24 No. 4, pp. 45-53.

Gilbert, B. A., McDougall, P. P. and Audretsch, D. B. (2006), "New Venture Growth: A Review
and Extension", Journal of Management, Vol. 32 No. 6, pp. 926-950.

Global Entrepreneurship Monitor (2014), Global Entrepreneurship Monitor 2013 Report. Global
Entrepreneurship Monitor Research Association.

Goedhuys, M. and Sleuwaegen, L. (2010), "High-Growth Entrepreneurial Firms in Africa: A

Quantile Regression Approach", Small Business Economics, Vol. 34 No. 1, pp. 31-51.

Gough, K. V., Chigunta, F. and Langevang, T. (2015), "Expanding the Scales and Domains of
(in)Security: Youth Employment in Urban Zambia", Environment and Planning A, Vol. 48
No. 2, pp. 348-366.

Grégoire, D. A., Cornelissen, J., Dimov, D. and van Burg, E. (2015), "The Mind in the Middle:
Taking Stock of Affect and Cognition Research in Entrepreneurship", International Journal
of Management Reviews, Vol. 17 No. 2, pp. 125-142.

144
Gries, T. and Naudé, W. (2010), "Entrepreneurship and Structural Economic Transformation",
Small Business Economics, Vol. 34 No. 1, pp. 13-29.

Hair, J. F., Black, W. C., Babin, B. Y. A., Anderson, R. E. and Tatham, R. L. (2010), Multivariate
Data Analysis, Pearson Prentice Hall, Essex.

Hamann, P. M., Schiemann, F., Bellora, L. and Guenther, T. W. (2013), "Exploring the Dimensions
of Organizational Performance", Organizational Research Methods, Vol. 16 No. 1, pp. 67-87.

Hamilton, B. H. (2000), "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to

Self-Employment", Journal of Political Economy, Vol. 108 No. 3, pp. 604 - 631.

Hardesty, D. M. and Bearden, W. O. (2004), "The Use of Expert Judges in Scale Development:
Implications for Improving Face Validity of Measures of Unobservable Constructs", Journal
of Business Research, Vol. 57 No. 2, pp. 98-107.

Hart, S. L. (1992), "An Integrative Framework for Strategy-Making Processes", Academy of

Management Review, Vol. 17 No. 2, pp. 327-351.

Hayes, A. F. (2009a), "Beyond Baron and Kenny: Statistical Mediation Analysis in the New
Millennium", Communication Monographs, Vol. 76 No. 4, pp. 408-420.

Hayes, A. F. (2009b), Statistical Methods for Communication Science, Taylor & Francis.

Hayes, A. F. and Preacher, K. J. (2014), "Statistical Mediation Analysis with a Multicategorical

Independent Variable", British Journal of Mathematical & Statistical Psychology, Vol. 67 No. 3,
pp. 451-470.

Hayton, J. C. and Cholakova, M. (2012), "The Role of Affect in the Creation and Intentional Pursuit
of Entrepreneurial Ideas", Entrepreneurship Theory and Practice, Vol. 36 No. 1, pp. 41-68.

Herrington, M. and Kelley, D. (2013), African Entrepreneurship 2012: Sub-Saharan African

Regional Report. Canada: IDRC.

Hessels, J., van Gelderen, M. and Thurik, R. (2008), "Entrepreneurial Aspirations, Motivations, and
Their Drivers", Small Business Economics, Vol. 31 No. 3, pp. 323-339.

Ho, V. T. and Pollack, J. M. (2014), "Passion Isn't Always a Good Thing: Examining Entrepreneurs'
Network Centrality and Financial Performance with a Dualistic Model of Passion", Journal
of Management Studies, Vol. 51 No. 3, pp. 433-459.

Hofstede, G. (2001), Culture's Consequences - Comparing Values, Behaviors, Institutions and Organizations
across Nations, Sage, Thousand Oaks,.

Hofstede, G. (2016), Hofstede. Cultural dimensions - Zambia.

Hughes, K. D. (2003), "Pushed or Pulled? Women's Entry into Self-Employment and Small
Business Ownership", Gender, Work & Organization, Vol. 10 No. 4, pp. 433-454.

145
Hughes, M. and Morgan, R. E. (2007), "Deconstructing the Relationship between Entrepreneurial
Orientation and Business Performance at the Embryonic Stage of Firm Growth", Industrial
Marketing Management, Vol. 36 No. 5, pp. 651-661.

Hurst, E., Li, G. and Pugsley, B. (2013), "Are Household Surveys Like Tax Forms? Evidence from
Income Underreporting of the Self-Employed", Review of Economics and Statistics, Vol. 96 No.
1, pp. 19-33.

Huyghe, A., Knockaert, M. and Obschonka, M. (2016), "Unraveling the “Passion Orchestra” in
Academia", Journal of Business Venturing, Vol. 31 No. 3, pp. 344-364.

International Monetary Fund (2013), World Economic Outlook. Washington DC.

Isen, A. M. and Labroo, A. A. (2008), "Some Ways in Which Positive Affect Facilitates Decision
Making and Judgment", In: Lewis, M., Haviland-Jones, J. M. and Barrett, F. L. (Ed.)
Handbook of Emotions. Third ed. Guilford Press, New York, pp.

Isaga, N., Masurel, E. and Van Montfort, K. (2015), "Owner-Manager Motives and the Growth of
Smes in Developing Countries: Evidence from the Furniture Industry in Tanzania", Journal
of Entrepreneurship in Emerging Economies, Vol. 7 No. 3, pp. 190-211.

Jayawarna, D., Rouse, J. and Kitching, J. (2013), "Entrepreneur Motivations and Life Course",
International Small Business Journal, Vol. 31 No. 1, pp. 34-56.

Jennings, J. E., Jennings, P. D. and Sharifian, M. (2016), "Living the Dream? Assessing the
“Entrepreneurship as Emancipation” Perspective in a Developed Region", Entrepreneurship
Theory and Practice, Vol. 40 No. 1, pp. 81-110.

Isaga, N., Masurel, E. and Van Montfort, K. (2015), "Owner-Manager Motives and the Growth of
Smes in Developing Countries: Evidence from the Furniture Industry in Tanzania", Journal
of Entrepreneurship in Emerging Economies, Vol. 7 No. 3, pp. 190-211.

Kaish, S. and Gilad, B. (1991), "Characteristics of Opportunities Search of Entrepreneurs Versus

Executives: Sources, Interests, General Alertness", Journal of Business Venturing, Vol. 6 No.
1, pp. 45-61.

Khandwalla, P. N. (1976), "Some Top Management Styles, Their Context and Performance",
Organization and Administrative Sciences, Vol. 7 No. 4, pp. 21-51.

Kiggundu, M. N. (2002), "Entrepreneurs and Entrepreneurship in Africa: What Is Known and

What Needs to Be Done", Journal of Developmental Entrepreneurship, Vol. 7 No. 3, pp. 239.

Kimhi, A. (2010), "Entrepreneurship and Income Inequality in Southern Ethiopia", Small Business
Economics, Vol. 34 No. 1, pp. 81-91.

Kirkwood, J. (2009), "Motivational Factors in a Push-Pull Theory of Entrepreneurship", Gender in

Management: An International Journal, Vol. 24 No. 5, pp. 346-364.

Kirzner, I. M. (1973), Competition and Entrepreneurship. Chicago.

Kirzner, I. M. (1979), Perception, Opportunity, and Profit, University of Chicago Press, Chicago.

146
Kirzner, I. M. (1985), Discovery and the Capitalist Process, University of Chicago Press.

Kirzner, I. M. (1997), "Entrepreneurial Discovery and the Competitive Market Process: An

Austrian Approach", Journal of Economic Literature, Vol. 35 No. 1, pp. 60-85.

Kiviluoto, N. (2013), "Growth as Evidence of Firm Success: Myth or Reality?", Entrepreneurship &
Regional Development, Vol. 25 No. 7/8, pp. 569-586.

Kline, R. B. (2011), Principles and Practice of Structural Equation Modeling, Guilford Press, New York.

Kragelund, P. (2017), "The Making of Local Content Policies in Zambia's Copper Sector:
Institutional Impediments to Resource-Led Development", Resources Policy, Vol. 51 No. 57-
66.

Krauss, S. I., Frese, M., Friedrich, C. and Unger, J. M. (2005), "Entrepreneurial Orientation: A
Psychological Model of Success among Southern African Small Business Owners",
European Journal of Work and Organizational Psychology, Vol. 14 No. 3, pp. 315-344.

Kreiser, P. M. and Davis, J. (2010), "Entrepreneurial Orientation and Firm Performance: The
Unique Impact of Innovativeness, Proactiveness, and Risk-Taking", Journal of Small Business
& Entrepreneurship, Vol. 23 No. 1, pp. 39-51.

Kreiser, P. M., Marino, L. D., Dickson, P. and Weaver, M. K. (2010), "Cultural Influences on
Entrepreneurial Orientation: The Impact of National Culture on Risk Taking and
Proactiveness in Smes", Entrepreneurship: Theory & Practice, Vol. 34 No. 5, pp. 959-983.

Kreiser, P. M., Marino, L. D., Kuratko, D. F. and Weaver, K. M. (2013), "Disaggregating

Entrepreneurial Orientation: The Non-Linear Impact of Innovativeness, Proactiveness and
Risk-Taking on Sme Performance", Small Business Economics, Vol. 40 No. 2, pp. 273-291.

Kriauciunas, A., Parmigiani, A. and Rivera-Santos, M. (2011), "Leaving Our Comfort Zone:
Integrating Established Practices with Unique Adaptations to Conduct Survey-Based
Strategy Research in Nontraditional Contexts", Strategic Management Journal, Vol. 32 No. 9,
pp. 994-1010.

Kuratko, D. F., Hornsby, J. S. and Naffziger, D. W. (1997), "An Examination of Owner's Goals in
Sustaining Entrepreneurship", Journal of Small Business Management, Vol. 35 No. 1, pp. 24-33.

Lambert, D. M. and Harrington, T. C. (1990), "Measuring Non-Response Bias in Customer Service

Mail Surveys", Journal of Business Logistics, Vol. 11 No. 2, pp. 5.

Lazear, E P. (2005), "Entrepreneurship", Journal of Labor Economics, Vol. 23 No. 4, pp. 649-680.

Lee, S. M. and Peterson, S. J. (2000), "Culture, Entrepreneurial Orientation, and Global

Competitiveness", Journal of world business, Vol. 35 No. 4, pp. 401-416.

Leitch, C., Hill, F. and Neergaard, H. (2010), "Entrepreneurial and Business Growth and the Quest
for a “Comprehensive Theory”: Tilting at Windmills?", Entrepreneurship: Theory & Practice,
Vol. 34 No. 2, pp. 249-260.

147
Li, Z. (2012), "The Construct of Entrepreneurial Alertness", A Multidimensional Model of Venture
Growth. Academy of Management, Springer, Berlin, Heidelberg, pp. 7-29.

Liedholm, C. (2002), "Small Firm Dynamics: Evidence from Africa and Latin America", Small
Business Economics, Vol. 18 No. 1-3, pp. 227-242.

Lockett, A., Wiklund, J., Davidsson, P. and Girma, S. (2011), "Organic and Acquisitive Growth:
Re-Examining, Testing and Extending Penrose's Growth Theory", Journal of Management
Studies, Vol. 48 No. 1, pp. 48-74.

Lumpkin, G. T. and Dess, G. G. (1996), "Clarifying the Entrepreneurial Orientation Construct and
Linking It to Performance", Academy of management Review, Vol. 21 No. 1, pp. 135-172.

Lumpkin, G. T. and Dess, G. G. (2001), "Linking Two Dimensions of Entrepreneurial Orientation

to Firm Performance: The Moderating Role of Environment and Industry Life Cycle",
Journal of Business Venturing, Vol. 16 No. 5, pp. 429-451

Lungu, J. (2008), "Copper Mining Agreements in Zambia: Renegotiation or Law Reform?", Review
of African Political Economy, Vol. 35 No. 117, pp. 403-415.

Lungu, J. (2016), Effects of Commodity-Led Growth on Development: Lessons from Zambia’s

History. In: School of Business - Copperbelt University (ed.) Inaugural Professorial Lecture. An
inaugural lecture read on the 17th November 2016 as part of the Universities Week
Cerebrations ed. Kitwe.

Luo, X., Zhou, L. and Liu, S. S. (2005), "Entrepreneurial Firms in the Context of China's Transition
Economy: An Integrative Framework and Empirical Examination", Journal of Business
Research, Vol. 58 No. 3, pp. 277-284.

Lyon, D. W., Lumpkin, G. T. and Dess, G. D. (2000), "Enhancing Entrepreneurial Orientation

Research: Operationalizing and Measuring a Key Strategic Decision Making Process",
Journal of Management, Vol. 26 No. 5, pp. 1055-1085.

Ma, C., Gu, J. and Liu, H. (2017), "Entrepreneurs’ Passion and New Venture Performance in
China", International Entrepreneurship and Management Journal, Vol. No. 1-26.

MacKenzie, S. B., Podsakoff, P. M. and Podsakoff, N. P. (2011), "Construct Measurement and

Validation Procedures in Mis and Behavioral Research: Integrating New and Existing
Techniques", MIS Quarterly, Vol. 35 No. 2, pp. 293-A5.

Madsen, E. L. (2007), "The Significance of Sustained Entrepreneurial Orientation on Performance

of Firms - a Longitudinal Analysis", Entrepreneurship & Regional Development, Vol. 19 No. 2,
pp. 185-204.

María José, R. O., Gloria, P. R., Job, R. A. and Pedro, M. G. V. (2013), "Environmental Dynamism
and Entrepreneurial Orientation: The Moderating Role of Firm's Capabilities", Journal of
Organizational Change Management, Vol. 26 No. 3, pp. 475-493.

Marino, L., Strandholm, K., Steensma, H. K. and Weaver, K. M. (2002), "The Moderating Effect
of National Culture on the Relationship between Entrepreneurial Orientation and Strategic
Alliance Portfolio Extensiveness", Entrepreneurship: Theory & Practice, Vol. 26 No. 4, pp. 145.

148
Markman, G. D. and Baron, R. A. (2003), "Person–Entrepreneurship Fit: Why Some People Are
More Successful as Entrepreneurs Than Others", Human Resource Management Review, Vol.
13 No. 2, pp. 281-301.

Martens, C. D. P., Lacerda, F. M., Belfort, A. C. and Freitas, H. M. R. d. (2016), "Research on

Entrepreneurial Orientation: Current Status and Future Agenda", International Journal of
Entrepreneurial Behavior & Research, Vol. 22 No. 4, pp. 556-583.

Marsh, H.W., Balla, J.R. and McDonald, R.P. (1988), “Goodness-of-Fit Indexes in Confirmatory
Factor Analysis: The Effect of Sample Size”, Psychological Bulletin, 103: 391-410

McKelvie, A. and Wiklund, J. (2010), "Advancing Firm Growth Research: A Focus on Growth
Mode Instead of Growth Rate", Entrepreneurship: Theory & Practice, Vol. 34 No. 2, pp. 261-
288.

McMullen, J. S., Bagby, D. R. and Palich, L. E. (2008), "Economic Freedom and the Motivation to
Engage in Entrepreneurial Action", Entrepreneurship: Theory & Practice, Vol. 32 No. 5, pp.
875-895.

Mead, D. C. and Liedholm, C. (1998), "The Dynamics of Micro and Small Enterprises in
Developing Countries", World Development, Vol. 26 No. 1, pp. 61-74.

Memili, E., Eddleston, K. A., Zellweger, T. M., Kellermanns, F. W. and Barnett, T. (2010), "The
Importance of Looking toward the Future and Building on the Past: Entrepreneurial Risk
Taking and Image in Family Firms", Entrepreneurship and Family Business. pp. 3-29.

Miller, D. (1983), "The Correlates of Entrepreneurship in Three Types of Firms", Management Science
(pre-1986), Vol. 29 No. 7, pp. 770-770.

Miller, D. (2011), "Miller (1983) Revisited: A Reflection on Eo Research and Some Suggestions for
the Future", Entrepreneurship: Theory & Practice, Vol. 35 No. 5, pp. 873-894.

Miller, D. and Friesen, P. H. (1982), "Innovation in Conservative and Entrepreneurial Firms: Two
Models of Strategic Momentum", Strategic management journal, Vol. 3 No. 1, pp. 1-25.

Miller, K. D. and Leiblein, M. J. (1996), "Corporate Risk-Return Relations: Returns Variability

Versus Downside Risk", Academy of Management Journal, Vol. 39 No. 1, pp. 91-122.

Ministry of Commerce Trade and Industry (2004), Small and Medium Enterprises Survey (2003-
2004). Lusaka: Ministry of Commerce Trade and Industry.

Ministry of Commerce Trade and Industry (2009), The Micro, Small and Medium Entreprise
Development Policy. Lusaka: Ministry of Commerce Trade and Industry.

Ministry of National Development Planning (2017), Seventh National Development Plan (2017-
2021). Lusaka: Government of Republic of Zambia.

Minniti, M. (2004), "Entrepreneurial Alertness and Asymmetric Information in a Spin-Glass

Model", Journal of Business Venturing, Vol. 19 No. 5, pp. 637-658.

149
Minniti, M. and Levesque, M. (2010), "Entrepreneurial Types and Economic Growth", Journal of
Business Venturing, Vol. 25 No. 3, pp. 305-314.

Mintzberg, H. (1973), "Strategy Making in Three Modes", California Management Review (pre-1986),
Vol. 16 No. 2, pp. 44.

Mitchell, R. K., Busenitz, L., Lant, T., McDougall, P. P., Morse, E. A. and Smith, J. B. (2002),
"Toward a Theory of Entrepreneurial Cognition: Rethinking the People Side of
Entrepreneurship Research", Entrepreneurship Theory and Practice, Vol. 27 No. 2, pp. 93-104.

Mitchell, R. K., Busenitz, L. W., Bird, B., Marie Gaglio, C., McMullen, J. S., Morse, E. A. and Smith,
J. B. (2007), "The Central Question in Entrepreneurial Cognition Research 2007",
Entrepreneurship: Theory & Practice, Vol. 31 No. 1, pp. 1-27.

Mitchell, R. K., Smith, J. B., Morse, E. A., Seawright, K. W., Peredo, A. M. and McKenzie, B.
(2002), "Are Entrepreneurial Cognitions Universal? Assessing Entrepreneurial Cognitions
across Cultures", Entrepreneurship Theory and Practice, Vol. 26 No. 4, pp. 9-33.

Moreno, A. M. and Casillas, J. C. (2007), "High-Growth Smes Versus Non-High-Growth Smes: A

Discriminant Analysis", Entrepreneurship and Regional Development, Vol. 19 No. 1, pp. 69-88.

Moreno, A. M. and Casillas, J. C. (2008), "Entrepreneurial Orientation and Growth of Smes: A

Causal Model", Entrepreneurship Theory and Practice, Vol. 32 No. 3, pp. 507-528.

Morgan, R. E. and Strong, C. A. (2003), "Business Performance and Dimensions of Strategic

Orientation", Journal of Business Research, Vol. 56 No. 3, pp. 163-176.

Morrison, A., Breen, J. and Ali, S. (2003), "Small Business Growth: Intention, Ability, and
Opportunity", Journal of Small Business Management, Vol. 41 No. 4, pp. 417-425.

Mullen, M. R., Budeva, D. G. and Doney, P. M. (2009), "Research Methods in the Leading Small
Business–Entrepreneurship Journals: A Critical Review with Recommendations for Future
Research", Journal of Small Business Management, Vol. 47 No. 3, pp. 287-307.

Murnieks, C. Y., Cardon, M. S., Sudek, R., White, T. D. and Brooks, W. T. (2016), "Drawn to the
Fire: The Role of Passion, Tenacity and Inspirational Leadership in Angel Investing",
Journal of Business Venturing, Vol. 31 No. 4, pp. 468-484.

Murnieks, C. Y., Mosakowski, E. and Cardon, M. S. (2012), "Pathways of Passion: Identity

Centrality, Passion, and Behavior among Entrepreneurs", Journal of Management, Vol. 40
No.6, pp. 1583-1606

Murphy, G., B., Trailer, J. W. and Hill, C. R. (1996), "Measuring Perfomance in Entrepreneuship
Research", Journal of Business Research, Vol. 36 No.1, pp. 15-23.

Mwaura, S. and Carter, S. (2015), "Does Entrepreneurship Make You Wealthy? Insights from the
Uk Wealth and Assets Survey". 2015 Australian Centre for Entrepreneurship Research
Exchange (ACERE) Conference, 2015. 1-55.

N'gona, S. and Dube, C. (2012), Aid for Trade and Economic Development: A Case Study of
Zambia. Consumer Unity and Trust Society (CUTS).

150
Naldi, L., Nordqvist, M., Sjöberg, K. and Wiklund, J. (2007), "Entrepreneurial Orientation, Risk
Taking, and Performance in Family Firms", Family Business Review, Vol. 20 No. 1, pp. 33-
47.

Natukunda, L., Johnson, P. and Dibben, P. (2016), "A Tale from the Field: Reflexivity During
Management Research in an African-Based Development Organisation", Africa Journal of
Management, Vol. 2 No. 4, pp. 422-437.

Naudé, W. (2010), "Entrepreneurship, Developing Countries, and Development Economics: New

Approaches and Insights", Small Business Economics, Vol. 34 No. 1, pp. 1-12.

Naudé, W. (2011), "Entrepreneurship Is Not a Binding Constraint on Growth and Development

in the Poorest Countries", World Development, Vol. 39 No. 1, pp. 33-44.

Naudé, W., Wikman, A., Lambiri, D., Biagi, B., Royuela, V., Klaveren, C., Brink, C. U. o. H. K.,
Cheung, C.-k., Leung, K.-k., Rosenthal, A. D., Russell, J., Thomson, G., Madheswaran, S.,
Romano, C. M., Bruzzese, D., James, J. and Versteeg, M. (2010), "Entrepreneurship,
Developing Countries, and Development Economics: New Approaches and Insights",
Small business economics, Vol. 34 No. 1, pp. 1-12.

Nichter, S. and Goldmark, L. (2009), "Small Firm Growth in Developing Countries", World
development, Vol. 37 No. 9, pp. 1453-1464.

Nunnally, J. C., Bernstein, I. H. and Berge, J. M. F. T. (1967), Psychometric Theory, McGraw-Hill New
York.

O'Leary-Kelly, S. W. and Vokurka, R. J. (1998), "The Empirical Assessment of Construct Validity",

Journal of Operations Management, Vol. 16 No. 4, pp. 387-405.

Okpara, J. O. and Wynn, P. (2007), "Determinants of Small Business Growth Constraints in a Sub-
Saharan African Economy", SAM Advanced Management Journal (07497075), Vol. 72 No. 2,
pp. 24-35.

Omorede, A., Thorgren, S. and Wincent, J. (2015), "Entrepreneurship Psychology: A Review",

International Entrepreneurship and Management Journal, Vol. 11 No. 4, pp. 743-768.

Organisation for Economic Co-operation and Development. (2004), "Promoting

Entrepreneurship and Innovative SMEs in a Global Economy," paper presented at 2nd
OECD Conference of Ministers Responsible for Small and Medium-Sized Enterprises
(SMEs), 3-5 June 2004 of Conference Istanbul, Turkey. OECD.

Parker, S. C., Belghitar, Y. and Barmby, T. (2005), "Wage Uncertainty and the Labour Supply of
Self-Employed Workers", Economic Journal, Vol. 115 No. 502, pp. 190-C207.

Parker, S. C., Storey, D. J. and van Witteloostuijn, A. (2010), "What Happens to Gazelles? The
Importance of Dynamic Management Strategy", Small Business Economics, Vol. 35 No. 2, pp.
203-226.

Patton, M. Q. (2002), Qualitative Evaluation and Research Methods, SAGE Publications, London.

Penrose, E. (1959), The Theory of Growth of the Firm, Oxford University Press, Oxford.

151
Phillips, C. and Bhatia-Panthaki, S. (2007), "Enterprise Development in Zambia: Reflections on
the Missing Middle", Journal of International Development, Vol. 19 No. 6, pp. 793-804.

Preacher, K. J. and Hayes, A. F. (2004), "SPSS and SAS Procedures for Estimating Indirect Effects
in Simple Mediation Models", Behavior Research Methods, Instruments, and Computers, Vol. 36
No. 4, pp. 717-731.

Preacher, K. J. and Hayes, A. F. (2008), "Asymptotic and Resampling Strategies for Assessing and
Comparing Indirect Effects in Multiple Mediator Models", Behavior Research Methods, Vol.
40 No. 3, pp. 879-891.

Punj, G. and Stewart, D. W. (1983), "Cluster Analysis in Marketing Research: Review and
Suggestions for Application", Journal of Marketing research, Vol. No. 134-148.

Rakner, L. (2003), Political and Economic Liberalisation in Zambia: 1991-2001, Nordic Africa Institute,
Stockholm.

Rauch, A. and Frese, M. (2007), "Let's Put the Person Back into Entrepreneurship Research: A
Meta-Analysis on the Relationship between Business Owners' Personality Traits, Business
Creation, and Success", European Journal of Work and Organizational Psychology, Vol. 16 No. 4,
pp. 353-385.

Rauch, A., Wiklund, J., Lumpkin, G. and Frese, M. (2009), "Entrepreneurial Orientation and
Business Performance: An Assessment of Past Research and Suggestions for the Future",
Entrepreneurship Theory and Practice, Vol. 33 No. 3, pp. 761-787.

Reynolds, P. D., Camp, S., Bygrave, W., Autio, E. and Hay, M. (2002), Global Entrepreneurship
Monitor 2001 Executive Report. London Business School and Babson College.

Richardson, P., Howarth, R. and Finnegan, G. (2004), The Challenges of Growing Small Businesses:
Insights from Women Entrepreneurs in Africa, International Labour Office, Geneva.

Ritsila, J. and Tervo, H. (2002), "Effects of Unemployment on New Firm Formation: Micro-Level
Panel Data Evidence from Finland", Small Business Economics, Vol. 19 No. 1, pp. 31-40.

Robichaud, Y., McGraw, E. and Alain, R. (2001), "Toward the Development of a Measuring
Instrument for Entrepreneurial Motivation", Journal of Developmental Entrepreneurship, Vol. 6
No. 2, pp. 189-201.

Rogoff, E. G., Lee, M.-S. and Suh, D.-C. (2004), ""Who Done It?" Attributions by Entrepreneurs
and Experts of the Factors That Cause and Impede Small Business Success", Journal of Small
Business Management, Vol. 42 No. 4, pp. 364-376.

Rosa, P. J., Kodithuwakku, S. and Balunywa, W. (2006), "Entrepreneurial Motivation in Developing

Countries: What Does “Necessity” and “Opportunity” Entrepreneurship Really Mean?",
Frontiers of Entrepreneurship Research, Vol. 26 No. 20, pp. Article 4.

Rosenbusch, N., Brinckmann, J. and Bausch, A. (2011), "Is Innovation Always Beneficial? A Meta-
Analysis of the Relationship between Innovation and Performance in Smes", Journal of
Business Venturing, Vol. 26 No. 4, pp. 441-457.

152
Rosenbusch, N., Rauch, A. and Bausch, A. (2013), "The Mediating Role of Entrepreneurial
Orientation in the Task Environment–Performance Relationship: A Meta-Analysis",
Journal of Management, Vol. 39 No. 3, pp. 633-659.

Rousseau, D. M. and Fried, Y. (2001), "Location, Location, Location: Contextualizing

Organizational Research", Journal of organizational behavior, Vol. 22 No. 1, pp. 1-13.

Schjoedt, L. and Shaver, K. G. (2012), "Development and Validation of a Locus of Control Scale
for the Entrepreneurship Domain", Small Business Economics, Vol. 39 No. 3, pp. 713-726.

Schumpeter, J. A. (1934), The Theory of Economic Development: An Inquiry into Profits, Capital, Credit,
Interest, and the Business Cycle, Transaction publishers.

Senderovitz, M. (2009), "How Are Smes Defined in Current Research?," paper presented at AGSE
2009 Conference, 2009 of Conference Adelaide, Australia.

Shane, S. (2001), "Technological Opportunities and New Firm Creation", Management science, Vol.
47 No. 2, pp. 205-220.

Shane, S. (2009), "Why Encouraging More People to Become Entrepreneurs Is Bad Public Policy",
Small Business Economics, Vol. 33 No. 2, pp. 141-149.

Shane, S., Locke, E. A. and Collins, C. J. (2003), "Entrepreneurial Motivation", Human Resource
Management Review, Vol. 13 No. 2, pp. 257-279.

Shane, S. and Venkataraman, S. (2000), "The Promise of Enterpreneurship as a Field of Research",

The Academy of Management Review, Vol. 25 No. 1, pp. 217-226.

Shehu, A. M. and Mahmood, R. (2015), "The Moderating Role of Business Environment in the
Relationship between Entrepreneurial Orientation and Business Performance among
Nigerian Smes", Jurnal Pengurusan, Vol. 43 No. 119-128.

Shepherd, D. and Wiklund, J. (2009), "Are We Comparing Apples with Apples or Apples with
Oranges? Appropriateness of Knowledge Accumulation across Growth Studies",
Entrepreneurship Theory and Practice, Vol. 33 No. 1, pp. 105-123.

Shepherd, D. A. (2015), "Party On! A Call for Entrepreneurship Research That Is More Interactive,
Activity Based, Cognitively Hot, Compassionate, and Prosocial", Journal of Business
Venturing, Vol. 30 No. 4, pp. 489-507.

Shepherd, D. A. and DeTienne, D. R. (2005), "Prior Knowledge, Potential Financial Reward, and
Opportunity Identification", Entrepreneurship Theory and Practice, Vol. 29 No. 1, pp. 91-112.

Short, J. C., Ketchen, D. J., Combs, J. G. and Ireland, R. D. (2010), "Research Methods in
Entrepreneurship Opportunities and Challenges", Organizational Research Methods, Vol. 13
No. 1, pp. 6-15.

Sikamo, J., Mwanza, A. and Mweemba, C. (2015), "Copper Mining in Zambia - History and
Future," paper presented at 8th Southern African Base Metal Conference, 2015 of
Conference Livingstone, Zambia. Southern African Institute of Mining Metallurgy.

153
Simpson, M., Padmore, J. and Newman, N. (2012), "Towards a New Model of Success and
Performance in Smes", International Journal of Entrepreneurial Behaviour & Research, Vol. 12
No. 3, pp.

Smallbone, D. and Welter, F. (2006), "Conceptualising Entrepreneurship in a Transition Context",

International Journal of Entrepreneurship and Small Business, Vol. 3 No. 2, pp. 190-206.

Smilor, R. W. (1997), "Entrepreneurship: Reflections on a Subversive Activity", Journal of Business

Venturing, Vol. 12 No. 5, pp. 341-346.

Soininen, J., Martikainen, M., Puumalainen, K. and Kyläheiko, K. (2011), "Entrepreneurial

Orientation: Growth and Profitability of Finnish Small- and Medium-Sized Enterprises",
International Journal of Production Economics, Vol. 140 No. 2, pp. 614-621.

Song, M., Podoynitsyna, K., van der Bij, H. and Halman, J. I. M. (2008), "Success Factors in New
Ventures: A Meta-Analysis", Journal of Product Innovation Management, Vol. 25 No. 1, pp. 7-
27.

Steffens, P., Davidsson, P. and Fitzsimmons, J. (2009), "Performance Configurations over Time:
Implications for Growth- and Profit-Oriented Strategies", Entrepreneurship: Theory & Practice,
Vol. 33 No. 1, pp. 125-148.

Stenholm, P., Acs, Z. J. and Wuebker, R. (2013), "Exploring Country-Level Institutional

Arrangements on the Rate and Type of Entrepreneurial Activity", Journal of Business
Venturing, Vol. 28 No. 1, pp. 176-193.

Stenholm, P., Pukkinen, T. and Heinonen, J. (2016), "Firm Growth in Family Businesses—the Role
of Entrepreneurial Orientation and the Entrepreneurial Activity", Journal of Small Business
Management, Vol. 54 No. 2, pp. 697-713.

Stenholm, P. and Renko, M. (2016), "Passionate Bricoleurs and New Venture Survival", Journal of
Business Venturing, Vol. 31 No. 5, pp. 595-611.

Stewart, W. H., Jr. and Roth, P. L. (2001), "Risk Propensity Differences between Entrepreneurs
and Managers: A Meta-Analytic Review", Journal of Applied Psychology, Vol. 86 No. 1, pp.
145-153.

Storey, D. J. (1991), "The Birth of New Firms—Does Unemployment Matter? A Review of the
Evidence", Small Business Economics, Vol. 3 No. 3, pp. 167-178.

Su, Z., Xie, E. and Li, Y. (2011), "Entrepreneurial Orientation and Firm Performance in New
Ventures and Established Firms", Journal of Small Business Management, Vol. 49 No. 4, pp.
558-577.

Syed, I. and Mueller, B. (2005), "From Passion to Alertness: An Investigation of the Mechanisms
through Which Passion Drives Alertness". 2015 2015. Academy of Management, 15608.

Tabachnick, B. G., Fidell, L. S. and Osterlind, S. J. (2007), Using Multivariate Statistics, Allyn &
Bacon/Pearson Education, Boston.

154
Tamvada, J. P. (2010), "Entrepreneurship and Welfare", Small Business Economics, Vol. 34 No. 1, pp.
65-79.

Tang, J., Kacmar, K. M. and Busenitz, L. (2012), "Entrepreneurial Alertness in the Pursuit of New
Opportunities", Journal of Business Venturing, Vol. 27 No. 1, pp. 77-94.

Tang, J., Tang, Z. and Lohrke, F. (2008), "Developing an Entrepreneurial Typology: The Roles of
Entrepreneurial Alertness and Attributional Style", International Entrepreneurship and
Management Journal, Vol. 4 No. 3, pp. 273-294.

Tang, J., Tang, Z., Marino, L. D., Zhang, Y. and Li, Q. (2008), "Exploring an Inverted U-Shape
Relationship between Entrepreneurial Orientation and Performance in Chinese Ventures",
Entrepreneurship: Theory & Practice, Vol. 32 No. 1, pp. 219-239.

Tergiman, C. (2010), "Entrepreneurship Does Pay", Available at SSRN 1659897.

Thai, M. T. T. and Turkina, E. (2014), "Macro-Level Determinants of Formal Entrepreneurship

Versus Informal Entrepreneurship", Journal of Business Venturing, Vol. 29 No. 4, pp. 490-
510.

Thurik, A. R., Carree, M. A., van Stel, A. and Audretsch, D. B. (2008), "Does Self-Employment
Reduce Unemployment?", Journal of Business Venturing, Vol. 23 No. 6, pp. 673-686.

Thurik, R. and Wennekers, S. (2004), "Entrepreneurship, Small Business and Economic Growth",
Journal of Small Business and Enterprise Development, Vol. 11 No. 1, pp. 140-149.

Trimmer III, L. M. (2016), The Mineral Industry in Zambia. U.S. Geological Survey Minerals
Yearbook—2013. U.S Geographical Survey.

Uddin, M. D. R., Bose, T. K. and Ferdausi, R. (2014), "Push and Pull Factors of Entrepreneurs in
Khulna City, Bangladesh", International Journal of Entrepreneurship and Small Business, Vol. 21
No. 1, pp. 101-114.

Unger, J. M., Keith, N., Hilling, C., Gielnik, M. M. and Frese, M. (2009), "Deliberate Practice among
South African Small Business Owners: Relationships with Education, Cognitive Ability,
Knowledge, and Success", Journal of Occupational and Organizational Psychology, Vol. 82 No. 1,
pp. 21-44.

Unger, J. M., Rauch, A., Frese, M. and Rosenbusch, N. (2011), "Human Capital and
Entrepreneurial Success: A Meta-Analytical Review", Journal of Business Venturing, Vol. 26
No. 3, pp. 341-358.

United Nations (2013), "About the Least Developed Countries" [Online]. UN-OHRLLS.
Available: http://unohrlls.org/about-ldcs/about-ldcs/ [Accessed Nov. 19 2013].

United Nations Conference on Trade and Development (2003), Growing Micro and Small Small
Enterprises in Ldcs. New York and Geneva: United Nations Conference on Trade and
Development.

United Nations Conference on Trade and Development (2017), The Least Developed Countries
Report 2017. New York and Geneva: United Nations.

155
Vallerand, R. J., Blanchard, C., Mageau, G. A., Koestner, R., Ratelle, C., Léonard, M., Gagné, M.
and Marsolais, J. (2003), "Les Passions De L'âme: On Obsessive and Harmonious Passion",
Journal of Personality and Social Psychology, Vol. 85 No. 4, pp. 756-767.

Van Stel, A., Carree, M. and Thurik, R. (2005), "The Effect of Entrepreneurial Activity on National
Economic Growth", Small Business Economics, Vol. 24 No. 3, pp. 311-321.

Venkatraman, N. (1989), "Strategic Orientation of Business Enterprises: The Construct,

Dimensionality, and Measurement", Management Science, Vol. 35 No. 8, pp. 942-962.

Venkatraman, N. and Grant, J. H. (1986), "Construct Measurement in Organizational Strategy

Research: A Critique and Proposal", Academy of Management Review, Vol. 11 No. 1, pp. 71-
87.

Verheul, I., Thurik, R., Hessels, J. and van der Zwan, P. (2010), "Factors Influencing the
Entrepreneurial Engagement of Opportunity and Necessity Entrepreneurs", EIM Research
Reports H, Vol. 201011 No. 1-24.

Vivarelli, M. (2004), "Are All the Potential Entrepreneurs So Good?", Small Business Economics, Vol.
23 No. 1, pp. 41-49.

Wales, W. J. (2016), "Entrepreneurial Orientation: A Review and Synthesis of Promising Research

Directions", International Small Business Journal, Vol. 34 No. 1, pp. 3-15.

Wales, W. J., Gupta, V. K. and Mousa, F.-T. (2013), "Empirical Research on Entrepreneurial
Orientation: An Assessment and Suggestions for Future Research", International Small
Business Journal, Vol. 31 No. 4, pp. 357-383.

Wales, W. J., Patel, P. C., Parida, V. and Kreiser, P. M. (2013), "Nonlinear Effects of
Entrepreneurial Orientation on Small Firm Performance: The Moderating Role of
Resource Orchestration Capabilities", Strategic Entrepreneurship Journal, Vol. 7 No. 2, pp. 93-
121.

Webb, J. W., Bruton, G. D., Tihanyi, L. and Ireland, R. D. (2013), "Research on Entrepreneurship
in the Informal Economy: Framing a Research Agenda", Journal of Business Venturing, Vol.
28 No. 5, pp. 598-614.

Weinzimmer, L. G., Nystrom, P. C. and Freeman, S. J. (1998), "Measuring Organizational Growth:

Issues, Consequences and Guidelines", Journal of Management, Vol. 24 No. 2, pp. 235-262.

Welpe, I. M., Spörrle, M., Grichnik, D., Michl, T. and Audretsch, D. B. (2012), "Emotions and
Opportunities: The Interplay of Opportunity Evaluation, Fear, Joy, and Anger as
Antecedent of Entrepreneurial Exploitation", Entrepreneurship: Theory & Practice, Vol. 36 No.
1, pp. 69-96.

Welter, F. (2011), "Contextualizing Entrepreneurship-Conceptual Challenges and Ways Forward",

Entrepreneurship: Theory & Practice, Vol. 35 No. 1, pp. 165-184.

Wennekers, S. and Thurik, R. (1999), "Linking Entrepreneurship and Economic Growth", Small
Business Economics, Vol. 13 No. 1, pp. 27-55.

156
Wennekers, S., van Stel, A., Thurik, R. and Reynolds, P. (2005), "Nascent Entrepreneurship and
the Level of Economic Development", Small Business Economics, Vol. 24 No. 3, pp. 293-309.

Wiklund, J. (2006), "The Sustainability of the Entrepreneurial Orientation–Performance

Relationship", Entrepreneurship and the growth of firms, Vol. No. 141-155.

Wiklund, J., Davidsson, P., Audretsch, D. B. and Karlsson, C. (2011), "The Future of
Entrepreneurship Research", Entrepreneurship: Theory & Practice, Vol. 35 No. 1, pp. 1-9.

Wiklund, J., Davidsson, P. and Delmar, F. (2003), "What Do They Think and Feel About Growth?
An Expectancy-Value Approach to Small Business Managers’ Attitudes toward Growth",
Entrepreneurship Theory and Practice, Vol. 27 No. 3, pp. 247-270.

Wiklund, J., Patzelt, H. and Shepherd, D. A. (2009), "Building an Integrative Model of Small
Business Growth", Small Business Economics, Vol. 32 No. 4, pp. 351-374.

Wiklund, J. and Shepherd, D. (2003), "Aspiring for, and Achieving Growth: The Moderating Role
of Resources and Opportunities", Journal of Management Studies, Vol. 40 No. 8, pp. 1919-
1941.

Wiklund, J. and Shepherd, D. (2003), "Knowledge-Based Resources, Entrepreneurial Orientation,

and the Performance of Small and Medium-Sized Businesses", Strategic Management Journal,
Vol. 24 No. 13, pp. 1307-1314.

Wiklund, J. and Shepherd, D. (2005), "Entrepreneurial Orientation and Small Business

Performance: A Configurational Approach", Journal of Business Venturing, Vol. 20 No. 1, pp.
71-91.

Williams, N. and Williams, C. (2014), "Beyond Necessity Versus Opportunity Entrepreneurship:

Some Lessons from English Deprived Urban Neighbourhoods", International
Entrepreneurship and Management Journal, Vol. 10 No. 1, pp. 23-40.

Wolff, E. N. (1983), "The Size Distribution of Household Disposable Wealth in the United States",
Review of Income and Wealth, Vol. 29 No. 2, pp. 125-146.

Wong, P. K., Ho, Y. P. and Autio, E. (2005), "Entrepreneurship, Innovation and Economic
Growth: Evidence from Gem Data", Small Business Economics, Vol. 24 No. 3, pp. 335-350.

Wood, M. S. and McKelvie, A. (2015), "Opportunity Evaluation as Future Focused Cognition:

Identifying Conceptual Themes and Empirical Trends", International Journal of Management
Reviews, Vol. 17 No. 2, pp. 256-277.

World Bank (2013a), Doing Business 2014: Understanding Regulations for Small and Medium-Size
Enterprises. Washington, DC.

World Bank (2013b), "How to Classify Countries - a Short History" [Online]. World Bank.
Available: http://data.worldbank.org/about/country-classifications/a-short-history
[Accessed Nov 11 2013].

World Bank (2013c), Zambia's Jobs Challenge : Realities on the Ground. Zambia Economic Brief.
Washington DC: World Bank.

157
World Bank (2017), "Country Profile Zambia" [Online]. World Bank. Available:
http://databank.worldbank.org/data/Views/Reports/ReportWidgetCustom.aspx?Report
_Name=CountryProfile&Id=b450fd57&tbar=y&dd=y&inf=n&zm=n&country=ZMB
[Accessed 13/09/2017 2017].

Worthington, R. L. and Whittaker, T. A. (2006), "Scale Development Research: A Content Analysis

and Recommendations for Best Practices", The Counseling Psychologist, Vol. 34 No. 6, pp.
806-838.

Yasuda, T. (2005), "Firm Growth, Size, Age and Behavior in Japanese Manufacturing", Small
Business Economics, Vol. 24 No. 1, pp. 1-15.

Yu, T. F. (2001), "Entrepreneurial Alertness and Discovery", Review of Austrian Economics, Vol. 14
No. 1, pp. 47.

Zahra, S. A. (1993), "Environment, Corporate Entrepreneurship, and Financial Performance: A

Taxonomic Approach", Journal of Business Venturing, Vol. 8 No. 4, pp. 319-340.

Zahra, S. A. (2008), "The Virtuous Cycle of Discovery and Creation of Entrepreneurial

Opportunities", Strategic Entrepreneurship Journal, Vol. 2 No. 3, pp. 243-257.

Zahra, S. A. and Bogner, W. C. (2000), "Technology Strategy and Software New Ventures'
Performance: Exploring the Moderating Effect of the Competitive Environment", Journal
of Business Venturing, Vol. 15 No. 2, pp. 135-173.

Zahra, S. A., Wright, M. and Abdelgawad, S. G. (2014), "Contextualization and the Advancement
of Entrepreneurship Research", International Small Business Journal, Vol. 32 No. 5, pp. 479-
500.

Zambia Development Agency (2012), "Economic Review" [Online]. Lusaka: Zambia

Development Agency. Available: http://www.zda.org.zm/?q=content/economic-review
[Accessed 11 Nov. 2013].

Zhao, H., Seibert, S. E. and Lumpkin, G. T. (2009), "The Relationship of Personality to

Entrepreneurial Intentions and Performance: A Meta-Analytic Review", Journal of
Management, Vol. 36 No. 2, pp. 381-404.

Zhao, X., Lynch Jr, J. G. and Chen, Q. (2010), "Reconsidering Baron and Kenny: Myths and Truths
About Mediation Analysis", Journal of Consumer Research, Vol. 37 No. 2, pp. 197-206.

158
Appendix 1. Values for NCC grade categories

Source: http://www.ncc.org.zm/wp-content/uploads/2012/11/CONTRACTOR-REGISTRATION-
FORM-2013.pdf

159
Appendix 2. Data collection questionnaire – first wave

160
161
162
163
164
165
Appendix 3 – Data collection questionnaire – second wave

166
167
Please indicate the extent to which you agree with the following statements

(100) Financial Performance

Compared to your competitors that you are aware of who are about the same age and stage of development as your
company, how do rate the following over the last 2 years? Much worse (1), Somewhat worse (2), About the same (3),
Somewhat better (4), Much better (5)
1 2 3 4 5
(101) Sales Revenue
(102) Cash Flow
(103) Profitability
(104) Return on Investment
(105) Return on Sales
(106) Sales Growth
(107) Growth in Assets
(108) Growth in employees

(200) Motivation to grow

If the firm develops the way you would like it to, in 5 years’ time, how would you consider the following? Very Negative (1),
Somewhat negative (2), Negative (3), Neither Negative nor Positive (4) Positive (5) Somewhat Positive (6) Very Positive (7)
1 2 3 4 5 6 7
(201) 25% increase in the number of employees
(202) 100 % increase in the number of employees
(203) 25% increase in large Sales
(204) 100% increase in large Sales

Please indicate the extent to which you agree with the following statements, Strongly Disagree (1), Disagree (2), Neither
Agree nor Disagree (3), Agree (4), Strongly Agree (5).
(300) Entrepreneurial Alertness 1 2 3 4 5
(301) I have frequent interactions with others to acquire new information
(302) I always keep an eye out for new business ideas when looking for information
(303) I read news, magazines, or trade publications regularly to acquire new information
(304) I browse the Internet every day
(305) I am an avid information seeker
(306) I am always actively looking for new information
(307) I see links between seemingly unrelated pieces of information
(308) I am good at “connecting dots.”
(307) I often see connections between previously unconnected domains of information
(308) I often see connections between previously unconnected domains of information
(308) I see links between seemingly unrelated pieces of information
(309) I have a gut feeling for potential opportunities
(310) I can distinguish between profitable opportunities and not-so-profitable opportunities
(311) I have a knack for telling high-value opportunities apart from low-value opportunities
(312) When facing multiple opportunities, I am able to select the good ones

Please indicate the extent to which you agree with the following statements, Strongly Disagree (1), Disagree (2), Neither
Agree nor Disagree (3), Agree (4), Strongly Agree (5).

(400) Entrepreneurial Passion 1 2 3 4 5

(401) It is exciting to figure out new ways to solve unmet market needs that can be commercialized.
(402) Searching for new ideas for products/services to offer is enjoyable to me.
(403) I am motivated to figure out how to make existing products/services better.
(404) Scanning the environment for new opportunities really excites me.
(405) Inventing new solutions to problems is an important part of who I am.
(406) Establishing a new company excites me.
(407) Owning my own company energizes me.
(408) Nurturing a new business through its emerging success is enjoyable.
(409) Being the founder of a business is an important part of who I am.
(410) I really like finding the right people to market my product/service to.
(411) Assembling the right people to work for my business is exciting.
(412) Pushing my employees and myself to make our company better motivates me
(413) Nurturing and growing companies is an important part of who I am.

168
English Summary
The importance of small firms to economic growth has been widely acknowledged in

entrepreneurship research. Small firms represent substantial portions of national

economies in both developed and developing countries nations. They are often hailed as

primary drivers of economic growth because of their contribution to job and wealth

creation. This has resulted in most developing countries in promoting entrepreneurship

and small businesses as a viable tool for poverty alleviation.

It is also known that not all forms of entrepreneurship lead to the desired

economic outcomes. Entrepreneurship would lead to job and wealth creation when small

firms survive and grow. However, not all small firms grow and those that do, achieve

different levels of growth. It is also those small firms that grow that can make significant

contributions to economic growth and poverty alleviation. As such, entrepreneurs who

run growth firms are, to a large extent, considered as successful because growth is usually

associated with good performance. The realisation of the importance of firm growth has

led to research interest in understanding what constitutes firm growth and factors that

affect it. Various internal and external factors have been found to affect firm growth.

They include factors related to the entrepreneur, the type of firms and the external

business environment. Factors in these categories have been studied individually and in

different combinations and to determine how they influence business growth. The general

conclusion that can be drawn from the body of knowledge resulting from such research

is that a variety of factors at individual, firm and environment level, interact in simple and

complex ways to influence firm growth.

The complexity of understanding firm growth and its antecedents is further

compounded by the diverse nature of small firms and environmental contexts in which

169
they operate. Drivers and obstacles of small firm growth also vary across countries based

on differences in levels of economic development. It is therefore important that in the

quest to understand firm growth, contextual variations between regions are taken into

consideration. Yet, most research on firm growth has been conducted in Western

developed countries, making valid generalisation of findings to other, contextually

different environments, such as African LDCs, less feasible. The environmental

conditions faced by small firms in Western developed economies are different from those

in African LDCs. Despite recognizing that the nature of growth and its determinants

would be influenced by context-specific factors, relatively little is known about the subject

in African LDCs.

This thesis investigates the measurement of firm growth, and evaluates how

factors related to the entrepreneur influence firm growth in the context of an African

LDC, Zambia. The thesis sets out to contribute to answering the general research

question: How do small firm owners affect the growth of their firms in LDCs? This question is

relevant and important because it seeks to identify the important dimensions and factors

that can help improve the performance of small firms in African LDCs. To answer this

question, a number of factors are discussed in studies presented in four empirical chapters

of this thesis. They include: start-up motivation, personal wealth, entrepreneurial

orientation, entrepreneurial passion, and entrepreneurial alertness.

In the first study presented in chapter 2, we addressed the research question:

What constitutes firm growth in LDCs and how should it be measured? This question is necessary

because conceptualisation and measurement of small firm growth has continued to be

problematic, especially for research conducted in non-western settings such as LDCs.

This is mainly because small firm growth is affected by context-specific factors such as

170
the level of economic development of the region where the firm operates. Therefore, it is

important that before we embark on investigating how individual level factors affect firm

growth, we should first evaluate what constitutes firm growth and how to measure it.

Findings from this study indicate that owner- manager’s perceptions of growth in

numbers of employees, level of sales, value of assets, personal wealth and purchase

expenditure on key process input are the most suitable ways of measuring small firm

growth for research conducted in LDCs. The use of the owner-manager’s perceptions of

firm growth may be suitable in absence of accurate sources of objective data as is the case

in LDCs. Many small firms in LDCs do not keep detailed accounts of their activities and

when they do, they are not usually willing to disclose such information to third parties.

Further, there are no reliable secondary sources of small firm growth data in LDCs.

Having established the conceptualisation of small firm growth in LDCs, the

remainder of the thesis focused on how factors related to small firm owners affect the

growth of their firms and is arranged as follows:

First, in the second study presented in chapter 3, we investigated how the firm

growth translates into economic rewards for the small firm owner. We focus on the

research question: What is the relationship between small firm growth and growth in personal wealth

of the firm owner, and how is this relationship affected by the motivation for starting the business? This

chapter presents an empirical examination of how firm founders extract wealth from their

ventures based on the understanding that increasing personal wealth is one of the key

motives of starting a business, especially in environments with few employment

opportunities such as LDCs. Additionally, having recognised that the amount of wealth

extracted by the founder is related to firm start-up motivation, we further evaluate how

start-up motivation moderates the extraction of wealth from firms by firm founders. Our

171
findings indicate that firm growth had a positive effect on wealth extracted from the firm

by the firm owner. We also found that the rate at which push-motivated entrepreneurs

extracted wealth from the firm was faster than that for those motivated by pull and mixed

factors. It is clear that there are economic benefits of starting a firm. However, the

findings may also imply that if a firm’s establishment is primarily influenced by push

factors, the firm has lower chances of growth because of the speed at which the founders

extract wealth compared to their counterparts who are motivated by pull and mixed

factors.

Second, the third empirical study in chapter 4 focused on how entrepreneurial

practices and behaviour guide the firm’s growth strategy. We evaluated the effect of

entrepreneurial orientation on firm growth and the moderating role of the business

environment by seeking answers to the following question: How does entrepreneurial

orientation influence firm growth in LDCs and how does the business environment moderate this

relationship? Our findings show that the growth of small firms in LDCs is significantly

affected by only one of the three dimensions of EO, pro-activeness, while risk-taking and

innovativeness had no significant effect. Contrary to our expectations, the study did not

also find evidence of the moderating effect of the business environment on the

relationship between EO and firm growth in LDCs.

Third, in the last empirical study presented in chapter 5, our attention shifted to

how entrepreneurial passion and alertness of the firm owners affect firm growth. We

addressed the research question: What is the relationship between entrepreneurial passion and firm

growth and how is the relationship influenced by entrepreneurial alertness? Entrepreneurial passion

and alertness, which are related to respectively the emotions and cognition of the firm

owner, are used as a basis for explaining why some entrepreneurs are more successful

172
than others. We take this perspective as recent research, studying the effect of individual-

level factors on firm success, has advocated a shift of focus from personality

characteristics to more fluid individual level aspects such as entrepreneurial cognition (cf.

Baron, 2004b, Shepherd, 2015; Mitchell et al., 2002; Mitchell et al., 2007; Baron, 2000).

Likewise, positive affect, and specifically entrepreneurial passion, influence many aspects

linked to human cognition which are directly related to entrepreneurial activities. The

findings in this study revealed that entrepreneurial passion for developing has a significant

direct positive effect on firm growth. Further, we also found that passion for developing

has an indirect effect, via entrepreneurial alertness, on firm growth. The indirect effects

work through the entire process of alertness which involves scanning and searching,

association and connection, and evaluation and judgement.

Collectively, all the empirical studies contribute to the wider research on the

relationship between individual-level variables and firm-level measures of firm success.

This thesis enriches the understanding of how variables pertaining to motives, strategic

orientation, passion, alertness and actions of individual entrepreneurs (i.e., micro-level

variables) eventually influence different aspects of firm growth.

In sum, the empirical studies in this thesis show that growth of the firm affects

the wealth that the owner-managers extracts from the firm. Regarding entrepreneurial

orientation, pro-activeness had a significant positive effect on firm growth while passion

for developing had a direct positive effect on firm growth, and an indirect effect through

entrepreneurial alertness.

173
Nederlandse samenvatting
Het belang van kleine bedrijven voor economische groei van zowel ontwikkelde landen

als ontwikkelingslanden is algemeen erkend in onderzoek naar ondernemerschap. Kleine

bedrijven worden vaak geprezen als aanjagers van economische groei vanwege hun

bijdrage aan het scheppen van banen en welvaart. Dit heeft ertoe geleid dat de meeste

ontwikkelingslanden ondernemerschap en kleine bedrijven zien als een belangrijk

instrument voor armoedebestrijding. Het is echter ook bekend dat niet alle vormen van

ondernemerschap leiden tot de gewenste economische ontwikkeling. Ondernemerschap

kan leiden tot het scheppen van banen en welvaart wanneer kleine bedrijven overleven en

groeien. Niet alle kleine bedrijven overleven en groeien echter en degene die dat wel doen,

bereiken verschillende niveaus van groei. Het zijn met name de groeiende kleine bedrijven

die een belangrijke bijdrage kunnen leveren aan economische ontwikkeling. Ondernemers

die leiding geven aan groeiende bedrijven worden in hoge mate als succesvol beschouwd,

omdat bedrijfsgroei wordt geassocieerd met goede prestaties. Het belang van bedrijfsgroei

heeft geleid tot interesse van onderzoekers voor het begrijpen van de beïnvloeding van

bedrijfsgroei. Verschillende interne en externe factoren blijken bedrijfsgroei te

beïnvloeden, factoren die verband houden met de ondernemer, het bedrijf en de externe

omgeving. Deze factoren zijn afzonderlijk en in combinatie onderzocht om te bepalen

hoe ze de bedrijfsgroei beïnvloeden. De algemene conclusie die kan worden getrokken

uit het onderzoek is dat een verscheidenheid aan factoren op individueel niveau, op

bedrijfsniveau en op omgevingsniveau op eenvoudige en complexe manieren op elkaar

inwerkt en zo bedrijfsgroei beïnvloedt.

De complexiteit van het begrijpen van bedrijfsgroei en de determinanten ervan

wordt versterkt door de diversiteit van kleine bedrijven en van de omgeving waarin ze

174
werken. Drijvende factoren achter en obstakels voor bedrijfsgroei verschillen ook van

land tot land, vaak door verschillen in niveaus van economische ontwikkeling. Het is

daarom belangrijk dat in de zoektocht om bedrijfsgroei te begrijpen rekening wordt

gehouden met verschillen tussen regio's. Toch is het meeste onderzoek naar bedrijfsgroei

uitgevoerd in westerse ontwikkelde landen, waardoor generalisatie van bevindingen naar

andere omgevingen, zoals Afrikaanse ontwikkelingslanden, niet goed haalbaar is. De

externe omgeving waarmee kleine bedrijven in westerse ontwikkelde landen te maken

hebben verschilt immers sterk van die in Afrikaanse ontwikkelingslanden. Hoewel wordt

erkend dat de aard van bedrijfsgroei en de determinanten ervan beïnvloed worden door

context-specifieke factoren, is er relatief weinig bekend over het onderwerp bedrijfsgroei

in Afrikaanse ontwikkelingslanden.

Dit proefschrift onderzoekt de meting van groei van kleine bedrijven en

evalueert hoe factoren met betrekking tot de ondernemer de groei van kleine bedrijven

beïnvloeden in de context van een Afrikaanse ontwikkelingsland: Zambia. Het

proefschrift beoogt een bijdrage te leveren aan de beantwoording van de algemene vraag:

hoe beïnvloeden ondernemers van kleine bedrijven de groei van hun bedrijven in

ontwikkelingslanden? Deze vraag is relevant omdat het antwoord de prestaties van kleine

bedrijven in Afrikaanse ontwikkelingslanden kan helpen te verbeteren. Om deze vraag te

beantwoorden wordt een aantal factoren behandeld, in vier empirische hoofdstukken van

dit proefschrift: startersmotivatie, persoonlijke welvaart, ondernemend gedrag, passie van

ondernemers en alertheid van ondernemers.

In het eerste onderzoekproject, gepresenteerd in Hoofdstuk 2 van dit

proefschrift, is de volgende onderzoeksvraag behandeld: wat is groei van kleine bedrijven

in ontwikkelingslanden en hoe moet dit worden gemeten? Beantwoording van deze vraag

175
is nodig omdat het conceptualiseren en het meten van groei van kleine bedrijven

problematisch blijft, vooral in niet-westerse omgevingen zoals ontwikkelingslanden. Dit

komt vooral omdat groei van kleine bedrijven wordt beïnvloed door context-specifieke

factoren, zoals het niveau van economische ontwikkeling van de regio waarin het bedrijf

actief is. Daarom is het belangrijk dat, alvorens te onderzoeken hoe bedrijfsgroei

beïnvloed wordt, te bestuderen wat bedrijfsgroei nou eigenlijk inhoudt en hoe dat kan

worden gemeten. Bevindingen uit dit eerste onderzoeksproject geven aan dat de perceptie

van de ondernemer van bedrijfsgroei in termen van aantal werknemers, omzet, activa,

persoonlijke welvaart en inkoop de meest geschikte manieren zijn om groei van kleine

bedrijven te meten in ontwikkelingslanden. Het gebruik van de perceptie van de

ondernemer van bedrijfsgroei kan geschikt zijn in afwezigheid van nauwkeurige bronnen

van objectieve gegevens, zoals vaak het geval is in ontwikkelingslanden. Veel kleine

bedrijven in ontwikkelingslanden houden geen gedetailleerde boekhouding bij en wanneer

ze dat al doen, dan zijn ze veelal niet bereid om dergelijke informatie aan derden te

verstrekken. Verder zijn er in het algemeen geen betrouwbare secundaire bronnen van

groei van kleine bedrijven in ontwikkelingslanden.

De rest van het proefschrift concentreerde zich op de vraag hoe persoonlijke

factoren met betrekking tot de ondernemers de groei van hun kleine bedrijven

beïnvloeden. In Hoofdstuk 3 is onderzocht hoe bedrijfsgroei zich vertaalt in de

ontwikkeling van de persoonlijke welvaart van de ondernemers van kleine bedrijven.

Hierbij gaat het om de volgende onderzoeksvraag: wat is de relatie tussen de groei van

kleine bedrijven en de groei van persoonlijke welvaart van de ondernemers en hoe wordt

deze relatie beïnvloed door de motivatie om een eigen bedrijf te starten? Onze

bevindingen geven aan dat bedrijfsgroei een positief effect heeft op de ontwikkeling van

de persoonlijke welvaart van de ondernemer. We vonden ook dat de ontwikkeling van

176
persoonlijke welvaart van ‘’push-gemotiveerde ondernemers’ sterker was dan die van

‘pull-gemotiveerde ondernemers’ en die van ondernemers die werden gemotiveerd door

een combinatie van ‘push factoren’ en ‘pull factoren’. Het is duidelijk dat er economische

voordelen zijn bij het starten van een bedrijf. Deze bevindingen kunnen echter ook

impliceren dat als de oprichting van een bedrijf voornamelijk wordt beïnvloed door ‘push

factoren’, het bedrijf minder groeimogelijkheden heeft vanwege de snelheid waarmee de

ondernemers waarde onttrekken aan het bedrijf, vergeleken met hun tegenhangers die

worden gemotiveerd door ‘pull factoren’ en een combinatie van ‘push factoren’ en ‘pull

factoren’.

De derde empirische studie (Hoofdstuk 4) richtte zich op de mate waarin

ondernemend gedrag (‘entrepreneurial orientation’) de groei van het bedrijf beïnvloedt en

de rol van de externe omgeving daarin. De onderzoeksvraag was: Hoe beïnvloedt

‘entrepreneurial orientation’ de groei van kleine bedrijven in ontwikkelingslanden en hoe

beïnvloedt de externe omgeving deze relatie? Onze bevindingen tonen aan dat de groei

van kleine bedrijven in ontwikkelingslanden aanzienlijk wordt beïnvloed door slechts een

van de drie dimensies van ‘entrepreneurial orientation’, te weten pro-activiteit, terwijl het

nemen van risico's en de mate van innovativiteit geen significant effect hadden op de

bedrijfsgroei. In tegenstelling tot onze verwachtingen vond de studie ook geen bewijs

voor een modererend effect van de externe omgeving op de relatie tussen ‘entrepreneurial

orientation’ en bedrijfsgroei in ontwikkelingslanden.

In de laatste empirische studie, gepresenteerd in Hoofdstuk 5, verschoof onze

aandacht naar de vraag hoe passie en alertheid van ondernemers de groei van hun

bedrijven kunnen beïnvloeden. De onderzoeksvraag is als volgt geformuleerd: wat is de

relatie tussen passie van de ondernemer en bedrijfsgroei en hoe wordt deze relatie

177
beïnvloed door alertheid van de ondernemer? Passie en alertheid, die gerelateerd zijn aan

respectievelijk de emoties en de cognitie van de ondernemer, worden gebruikt als basis

om uit te leggen waarom sommige ondernemers succesvoller zijn dan andere

ondernemers. We namen dit perspectief omdat recent onderzoek wees op het belang van

deze focus. De bevindingen in dit onderzoek brachten aan het licht dat alleen passie van

de ondernemer voor ontwikkeling een significant direct positief effect op de bedrijfsgroei

heeft. Verder ontdekten we ook dat passie van de ondernemer voor ontwikkeling een

indirect effect heeft, via alertheid van de ondernemer, op bedrijfsgroei.

Gezamenlijk dragen de vier empirische studies bij aan het brede onderzoek naar

de relatie tussen variabelen op individueel niveau en bedrijfsmaatstaven voor zakelijk

succes. Dit proefschrift verrijkt het begrip van hoe variabelen met betrekking tot

startersmotieven, ondernemersgedrag, passie, alertheid en acties van individuele

ondernemers uiteindelijk verschillende aspecten van bedrijfsgroei beïnvloeden. Ook laat

dit proefschrift zien dat de groei van het bedrijf van invloed is op de persoonlijke welvaart

van ondernemers.

178
Acknowledgements
The successful completion of this work would have not been possible without the support

I received from different organisations and individuals. I am greatly indebted for their

help and for this reason, I would like to extend my sincere gratitude and great appreciation

to them.

During my study, I was privileged to have a great team of supervisors that

comprised Professor Enno Masurel (Vrije Universiteit Amsterdam, The Netherlands),

Professor Leo J. Paas (Massey University, Auckland, New Zealand), Professor John

Lungu (The Copperbelt University, Kitwe, Zambia) and Dr. Elco van Burg (Vrije

Universiteit Amsterdam, The Netherlands). Each one my supervisors provided me

massive personal and professional guidance on how to undertake scientific research and

life in general. I will forever remain indebted to them individually and severally, for their

invaluable and beneficial critical review of my work, support, encouragements and

guidance.

This work would not have been possible without the financial sponsorship of

the HEART project. Between 2011 and 2018 the HEART project in Zambia helped to

strengthen the capacity of the Copperbelt University (CBU) in developing and providing

quality and relevant education programmes, practical research and consultancy to enhance

the contribution to national human resource and economic development. The Centre for

International Cooperation of Vrije Universiteit Amsterdam in The Netherlands

coordinated and implemented the project in close collaboration with CBU in Kitwe,

Wageningen University in The Netherlands and Stellenbosch University in South Africa.

The Netherlands Organisation for International Cooperation in Higher Education

(NUFFIC) provided funding for the HEART project to an amount of € 1,6 mln. I would

179
like to appreciate all the people that worked on this project and specifically, Marinus,

Mike, Wim, Dia and Bert for all the help with my travel and living arrangement in

Amsterdam. Thanks a lot.

I would like to thank all small business owners in Zambia who agreed to participate

in the empirical studies included in this thesis. I was encouraged by their willingness to discuss

factors that affect the growth of small firms in Zambia despite their demanding schedules.

During my stay in Amsterdam, I was hosted by the former Amsterdam Center

for Entrepreneurship at Vrije Universiteit Amsterdam. I would like to thanks staff that

worked at the centre (Fransje, Helen, Jessica, Marieke and Ruby) for their support in different

aspects of life at VU. While at the entrepreneurship center, I also met very good people and

made a lot of great friends whom I socialised with during and after work hours. I would like

to appreciate the companionship and I had with Egide, Emiel, Jacob, Jan, Shiferaw, Marco

and Kimeu. I would like to thank Professor T. K. Taylor for all the services he rendered to

me during my studies, especially providing me with a quiet and convenient space to work

whenever I needed one.

Throughout my academic life, my family has been very supportive. Mum and dad

always checked on my progress even when I was working at PhD level. Thank you so much

for your support and encouragement. My wife and kids suffered most during my studies and

had to cope with my long periods of absence from home. Martha, Mwandwe, Zindaba and

Mwansa I sincerely thank your prayers, sacrifice, love, understanding and encouragement. I

also greatly treasure the support, encouragement and challenge I continue to receive from my

siblings - Chungu, Mpundu, Chola, Kalesha, Chabala and Mumba and all life endeavours. Sr.

Justina (MHSRIEP) was so keen on attending my graduation. I will forever miss your kindness

and devotion towards ensuring success amongst your immediate and wider family.

180
 Most importantly, I would like to thank Almighty GOD for granting me the

strength, knowledge, ability and opportunity to undertake this research study and to persevere

and complete it satisfactorily. It is through his blessings that this achievement was made

possible.

181
ABRI Dissertation series
1. Drees, J.M. (2013). The polycentricity of expansion strategies: Beyond
performance as a main driver.
2. Arzlanian, S. (2014). Social networks and firm performance: Examining the
relation between dimensions of social capital, social network perception and firm
performance.
3. Fleisher, C. (2014). The contemporary career navigator: Individual and
organizational outcomes of self-directed career management.
4. Wruck, S. (2014). Warehouse operations revisited – Novel challenges and
methods.
5. Volk-Makarewicz, W. (2014). Advances in derivative estimation: Ranked data,
quantiles, and options.
6. Van Anholt, R. (2014). Optimizing logistics processes in cash supply chains.
7. Polat, T. (2015). Active aging in work: Motivating employees to continue
working after retirement.
8. Ossenkop, C. (2015). What you see is what you get!? Looking into ethnic
diversity and professional careers in Dutch organizations.
9. Engel, Y. (2015). Venturing into the unknown, but not for the first time: An
examination of firm-founders’ careers & entrepreneurial decision-making under
uncertainty
10. Kolbe, L. (2015). The mindset of the R&D professional: Decision making in
innovative context
11. Pachidi, S. (2015). Crunching the numbers: Studying the enactment of analytics
in an organization.
12. El Baroudi, S. (2015). Shading a fresh light on proactivity research: Examining
when and how proactive behaviors benefit individuals and their employing
organizations.
13. Eijdenberg, E. L. (2016). Small business growth in east African least developed
countries: Unravelling the role of the small business owners.
14. Lysova, E.I. (2016). What does your career mean to you? Understanding
individual career and work behaviors through the prism of the meaning of
career.
15. De Mol, E. (2016). Heart and brain: The influence of affective and rational
determinants in new venture teams: An empirical examination.
16. Daubner-Siva, D. (2016). Dealing with dualities: A paradox perspective on the
relationship between talent management and diversity management.
17. Berkhout, J. (2016). Topics in Markov chain theory and simulation optimization.
18. Van-Werven, R. (2017). Acquiring resources for a new venture: A study of the
micro-level linguistic practices of startup entrepreneurs.
19. Prats Lopez, M. (2017) Managing citizen science in the Humanities: The
challenge of ensuring quality.
20. Kaandorp, M.S. (2017) Creating from within: A study on interpersonal
networking approaches and intuition in task-related interaction.
21. Van Grinsven, M. (2017) A patient is not a car; Lean in healthcare: Studying
agency in the translation of management concepts.
22. Muleta Eyana, S. (2017) Entrepreneurial behavior and firm performance of
Ethiopian tour operators.
23. Van Ee, M. (2017) Routing under Uncertainty: Approximation and complexity.

182
24. Van Dijk, M. (2017) When I give, I give myself: essays on individual
contributions to societal goals
25. Oostervink, N. (2017) Self-Organizing Knowledge: Examining the conditions
under which professionals share and integrate knowledge
26. Mousavi, S. (2017) Managing innovation for sustainability- A dynamic
capabilities approach
27. Cai, W. (2017) Awakening employee creativity in organizations
28. Kranzbuhler, A.M. (2018) Orchestrating the customer journey: Four essays on
how to create meaningful customer experiences

183
SMALL FIRM GROWTH IN A
LEAST DEVELOPED COUNTRY
Small firms represent substantial portions of national economies in both developed and developing countries and
entrepreneurial activities of small firm owners have been linked to national economic growth. However, not all
small firms survive and grow and those that do, achieve different levels of growth. Various factors related to
the entrepreneur, the type of firms and the external business environment affect the amount and type of
growth achieved by a small firm. This thesis investigates the conceptualisation of small firm growth, and
evaluates how firm start-up motivation, personal wealth, entrepreneurial orientation, entrepreneurial
passion, and entrepreneurial alertness influence small firm growth in the context of a Least Developed
Country (LDC), Zambia. This thesis sets out to contribute to answering the general research question:
How do small firm owners affect the growth of their firms in Least Developed Countries? Based on
primary data collected from small firms in Zambia, we found that; 1) small firm growth should
be conceptualised and operationalised using multiple indicators, that include context specific
measures of changes in personal wealth of the firm owners; 2) firm growth had a positive
effect on wealth extracted from the firm by the firm owner and that, the rate at which
push-motivated entrepreneurs extracted wealth from the firm was faster than that for
those motivated by pull and mixed factors; 3) small firm growth is significantly affected
by only one of the three dimensions of EO, pro-activeness, but not risk-taking and
innovativeness, and; 4) entrepreneurial passion has a direct positive effect on firm
growth and the relationship was partially mediated by entrepreneurial alertness.

ABOUT THE AUTHOR

Mwansa Chabala studied for a PhD at Vrije Univertiteit Amsterdam. He
is a lecturer in the School of Business at the Copperbelt University
Kitwe, Zambia. Prior to starting his PhD, he studied for a MSc. Supply
Chain Management (Coventry University, UK) and BSc. Production
Management (CBU). His main research interest is in entrepreneurship
focusing more on the dynamics of small firm growth in developing
countries. His PhD was funded by by Netherlands Organization
for International Cooperation in Higher Education (NUFFIC)
under the High Education And Research Training (HEART)
project.

ABRI
AMSTERDAM
IN AMSTERDAM
SCIENCE, BUSINESS RESEARCH INSTITUTE
ISBN: 978 90 361 0528 6 WWW.ABRI.VU.NL
BUSINESS
AND SOCIETY