Entrepreneurial Intention Among Indonesian

Journal of Enterprising Culture
Vol. 12, No. 1 (March 2004) 55-78
ENTREPRENEURIAL INTENTION AMONG INDONESIAN

AND NORWEGIAN STUDENTS1
STEIN KRISTIANSEN
Development Studies Programme
by QUEENSLAND UNIVERSITY OF TECHNOLOGY on 10/14/14. For personal use only.
School of Management
J. Enterprising Culture 2004.12:55-78. Downloaded from www.worldscientific.com
Agder University College

Norway
and
NURULINDARTI
Department of Management
Gadjah Mada University
Indonesia
This paper aims to identify determinants of entrepreneurial intention among

young people. The empirical basis is formed by surveys among Indonesian and
Norwegian students. The main objective is to compare the impact of different
economic and cultural contexts. Independent variables in the study include
demographic factors and individual background, personality traits and attitudes,
and contextual elements such as access to capital and information. The individ-
ual perceptions of self-efficacy and instrumental readiness are the variables that
affect entrepreneurial intention most significantly. Age, gender and educational
background have no statistically significant impact. Generally, the level of en-
trepreneurial intention is higher among Indonesian students. The lower level of
entrepreneurial intention among Norwegian students is explained by the social
status and economic remuneration of entrepreneurs in comparison with those en-
joyed by employees in the Norwegian context.
INTRODUCTION
Any process of economic development is determined by entrepreneurs and

their innovations. Mainstream neoclassical economics has for too long
"left growth outside its borders' and made little room in its science for the
entrepreneurial function (Abramovitz, 1989: 9). Focus has been on equi-
55
Stein Kristiansen and Nurul Indarti
librium and the circular flow, and away from the adjustment process,
which has been theoretically assumed to be instantaneous for the purpose
of analytical clarity. Harvey Leibenstein, however, already in the 1960s
introduced the term 'x-efficiency' in economics. The phrase, equivalent to
adaptive efficiency, means the ability to find new business opportunities in
a society, or the capability to innovate in Schumpeterian terms (Schum-
peter, 1934). The starting point of Leibenstein's argumentation was em-
pirical findings revealing limited gains from improved competition and
allocative efficiency on economic growth in the US. Much more than
allocative inefficiency is the ' x-inefficiency' a serious cause of lost profits
in firms and lost welfare in society, according to Leibenstein (1966, 1968).

Much of the cause of x-inefficiency is attributed to differential and inade-

quate motivation and information usage. Lack of motivation and incen-
tives create a substantial time lag before individuals establish themselves
as entrepreneurs and before firms accomplish new investments and poten-
tial improvements. Unless there is a pressure to innovate and work harder,
individuals and firms will allow levels of x-inefficiency to remain high. A
high level of x-inefficiency is related to the fact that the market for entre-
preneurs is generally one of the least efficient markets in any economy
(Casson, 1995). X-efficiency in a society depends on 'gap-fillers', entre-
preneurs who find new business opportunities that are based on innova-
tions in technology, organisation or market arrangements. The gap-filling
activity in an economy is a result of the combination of the supply of and
the demand for entrepreneurial services, where the supply side is consti-
tuted by motivational factors.
The final decision to start a business probably reflects a process in
which attitudes and intentions evolve based on the development of indi-
vidual competence, experiences and relations to the business context
(Davidsson, 1991, Katz, 1992). Career decisions are clearly planned
(Krueger et al, 2000). The opportunity identification process is intentional
and, accordingly, entrepreneurial intention merits attention in entrepre-
neurship research.
In this article, focus is on entrepreneurial motivation in general, while
the empirical data are limited to the specific groups of university students
at the campuses of two institutions of higher learning in Indonesia and
Norway. Our main focus will be on the impact of personality traits and
attitudes on students' intention to start their own businesses, while atten-
tion will also be paid to demographic factors, individual background and
contextual elements. A main objective is to identify reasons for different
56
Entrepreneurial Intention among Indonesian and Norwegian Students
entrepreneurial intention between the groups of students from the two

countries.
Perceived social norms in a society are presumable of importance and
relate to what potential entrepreneurs believe will be valued in his or her
social context. The choice of carrier would thus be influenced by family
anticipations and expected support of friends and significant others. Social
norms are probably less predictive of entrepreneurial intention for people
in individualistic cultures compared to collectivist societies. According to
Begley and Tan (2001: 549), 'cultural values may hold sway more power-
fully in societies that emphasize conformity rather than prize individual-
ity'. For instance, Davidson (1995) found that social status of entrepre-
neurship did not predict feasibility of business start-ups in Sweden, while

Begley and Tan (2001) included Indonesia in the East Asian countries,
where culture-level social status predicted entrepreneurship interest sig-
nificantly. The following comparison between Scandinavian and East
Asian students in this paper may therefore reveal some culture-related dif-
ferences.
Based on entrepreneurship theory and previous empirical findings, in
section two of the paper we present a model and the hypotheses for the
empirical analysis. In section three we discuss the data and methodology
applied in the study, and the results of the analyses are presented in section
four. Finally the discussion and conclusion bring the article to a close.
A THEORETICAL BASIS
The academic study of motivation for entrepreneurial endeavour started

some 50 years ago and has been dominated by social sciences, included
social psychology, rather than economics. David McClelland for instance
(1961, 1971), introduced the theory on need for achievement, based on
empirical studies from West Africa and the US. The term 'n-ach', still go-
ing strong in development literature (Lewis, 1991), brought into the debate
on economic growth a terminology and scientific tradition from the disci-
plines of psychology and sociology. The need for achievement is a person-
ality trait, while also a result of demographic characteristics and environ-
mental factors. Everett Hagen (1962, 1971) used a similar theoretical basis
to McClelland in his studies in Burma. In 'traditional societies', he says,
the social structure is hierarchical and authoritarian in all of its aspects -
economic, political and religious. Individuals' status in the society is in-
herited, social mobility is limited, and the entrepreneurial motivation is
57
thereby low (Hagen, 1971: 126). Therefore, Hagen has been regarded as
an environmental determinist.
More recent studies have been more specific on demographic factors
and personal history, as well as on personality characteristics and envi-
ronmental factors influencing entrepreneurial intention. Previous empirical
studies of business start-ups, however, have documented limited explana-
tory power of variables related to individual or situational qualities, like
age and gender and employment status. Krueger et al, (2000) therefore
suggest that attitudes behind intentions deserve more attention in entrepre-
neurship research. In this paper, we will make a distinction in the theoreti-
cal discussion and empirical analyses between demographic factors and

individual background, personality traits and attitudes, and contextual

elements.
Demography and Individual Background
Several studies support the argument that demographic characteristics,

such as age and gender, and individual background, such as education and
previous employment experience, have an impact on entrepreneurial inten-
tion. Mazzarol et al, (1999) found that females were generally less likely
to be founders of new businesses than males. Similarly, Kolvereid (1996)
concluded that males had significantly higher entrepreneurial intention
than females in a Scandinavian context. About ten years ago, women ac-
counted for only approximately 20% of new firm formations in the Scan-
dinavian countries. Although age is normally not regarded a significant
determinant of business start-ups, Reynolds et al, (2000) found that indi-
viduals aged 25-44 years are the most active in entrepreneurial endeavour
in Western countries. Findings from a study in India also indicate that suc-
cessful entrepreneurs are relatively young (Sinha, 1996). The same study
from India revealed that educational background is of importance for en-
trepreneurial intention as well as for business success. Lee (1997) studied
women entrepreneurs in Singapore and found that university education
had a great impact on their need for achievement. Mazzarol et al, (1999)
found that respondents with previous government employment experience
were less likely to be business starters compared with employees from pri-
vate businesses. Kolvereid (1996) found that individuals with prior entre-
preneurial experience had significantly higher entrepreneurial intention
when compared with those without such experience.
58
Based on the above-mentioned studies and theoretical discussion we

can reckon that gender, age, educational background and employment ex-
periences might all have an influence on entrepreneurial intention.
Personality Traits and Attitudes
As already mentioned, McClelland (1961, 1971) emphasised that a per-

sonality characteristic such as the need for achievement influences indi-
viduals in the direction of entrepreneurial intention. He characterised indi-
viduals with a high need for achievement as having a strong desire to be
successful. People who score high on the need for achievement scale usu-
ally appreciate personal responsibility and like taking risks, and they have
a strong interest in seeing the results of decisions they make. A person
with high need for achievement is 'more self-confident, enjoys taking
carefully calculated risks, researches his environment actively, and is very
much interested in concrete measures of how well he is doing'
(McClelland, 1965: 7). Terpstra et al, (1993) more recently stated that the
concept of need for achievement includes such characteristics as the desire
to be personally successful, the tendency to take moderate or calculated
risks, and the desire for immediate and concrete feedback. Lee (1997: 103)
argued that the need for achievement is conceptualised as a 'unitary dispo-
sition that motivates a person to face challenges in the interest of attaining
success and excellence'. Scapinello (1989), in a study of differences in the
attributions of groups with high or low motivation, concluded that those
with a high need for achievement were less accepting of failure, and
thereby suggesting that need for achievement clearly affected attributions
for success and failure. Nathawat et al, (1997) found that low need for
achievement is associated with low competence, low expectations, an ori-
entation toward failure, and a tendency toward self-blame and low inspira-
tions.
Locus of control is another personality characteristic indicating the
level of individual feeling of control. According to Hisrich and Peters
(1998: 68), locus of control should be understood as 'an attribute indicat-
ing the sense of control that a person has over life'. A typical question in a
checklist for feelings about control for potential entrepreneurs is the fol-
lowing: 'Do you know that if you decide to do something, you'll do it and
nothing can stop you?' (Hisrich and Brush, 1985: 6). When considering
forming a new business venture, people will be concerned whether they
will be able to sustain the drive and energy required for handling the chal-
lenges of establishing and managing the business and making it prosper-
59
ous. Locus of control refers to the degree to which an individual perceives

success and failure as being contingent on his or her personal initiatives
(Green et al, 1996). The belief that things happen only because of destiny
or accidentally is a reflection of limited internal control with the individ-
ual, which is the same as a low score on the locus of control parameter.
The level of internal control has been identified as one of the most domi-
nant entrepreneurial characteristics (Venkanthapathy, 1984). Individuals
with a high score on feeling of control are also more likely to have a clear
vision of the future and long-term business development plans (Entrialgo
et al, 2000). There seem to be a general acceptance in the literature that the
stronger the internal locus of control of the individuals, the greater the de-
gree of entrepreneurial intention (Mazzarol et al, 1999).

However, Krueger et al, (2000) state that predicting entrepreneurial
activities by modelling personal factors usually result in disappointingly
small explanatory power and even smaller predictive validity. Personality
traits may count, but probably first and foremost through related individual
attitudes. Intentions are predictors of planned behaviour, while certain spe-
cific attitudes in turn predict intentions (Bagozzi et al, 1989, Kim and
Hunter, 1993). Ajzen (1991) argues that intentions mainly depend on per-
ceptions of personal attractiveness, social norms and feasibility, and Shap-
ero (1982) claims that entrepreneurial intentions are dependent on individ-
ual perceptions of desirability and feasibility, and on the propensity to act.
Self-efficacy is at the core of these theories. Cromie (2000) emphasises the
need to make a clear distinction between the concepts of locus of control
and self-efficacy. The first is a generalised construct that covers a variety
of situations, while self-efficacy is task and situation specific. Thus, indi-
viduals may exhibit a weak feeling of control in general, but may have a
high self-efficacy with regard to specific tasks.
The term self-efficacy, derived from Bandura's (1977) social learning
theory, refers to a person's belief in his or her capability to perform a
given task. According to Ryan (1970), self-perception plays an important
role in the development of intention. Intentions and their underlying atti-
tudes are perception-based, which should mean that they are learned and
can be continuously influenced, and not fixed by personality traits formed
in early childhood. Accordingly, they will vary across historical and cul-
tural contexts. Cromie (2000) stated that self-efficacy affects a person's
beliefs regarding whether or not certain goals may be attained. The attitude
provides the foundation for human motivation and personal accomplish-
ment: unless people believe that their actions can produce the outcomes
they desire, they have little incentive to act or to persevere in the face of
60
adversities (Pajares, 2002). Bandura (1977: 2) pointed to the fact that 'peo-
ple's level of motivation, affective status and actions are based more on
what they believe than on what is objectively true'. An individual's per-
ception of self-efficacy has a strong influence on how he or she will act
and how the available knowledge and skills will be utilised. Consequently,
people behave according to beliefs about their capabilities rather than on
real facts based on their competence and capabilities.
Ajzen's (1991) theory of planned behaviour identifies attitudinal ante-
cedents of intention, of which perceived behavioural control is at the core.
It reflects the perceived feasibility of performing a specific behaviour and
is thus closely related to perceptions of situational competence and self-

efficacy. Shapero (1982) similarly offers evidence of how perceptions are

critical in the process of starting a business. In his entrepreneurial event
model, intentions to start a business derive from desirability and feasibility
and from the propensity to act upon opportunities, as perceived by indi-
viduals. Perceived desirability is defined as the personal attractiveness of
starting a business, while perceived feasibility is the degree to which one
feels personally capable of starting a business (self-efficacy). The propen-
sity to act upon opportunities is by Shapero equalised with internal locus
of control. Krueger et al, (2000) conclude after empirical testing that both
Ajzen's and Shapero's models offer valuable tools for understanding in-
tentions and the process of organisational emergence. Certain learned atti-
tudes such as self-efficacy are vital in both models.
We conclude that three main personality and attitude variables might
be of importance for a person's entrepreneurial intention: need for
achievement, internal locus of control, and self-efficacy. We now want to
expand the intention models by including environmental qualities.
Contextual Elements
Environment factors that affect entrepreneurial intention include cultural

characteristics, social relations, economic and political conditions, and
physical and institutional infrastructure (Kristiansenm, 2001, 2002a). Not
only are the objective contextual characteristics of importance when dis-
cussing entrepreneurial intention and behaviour, but also the way potential
entrepreneurs perceive their environments. Anderson (2000: 102) studied
entrepreneurs in the periphery of the Scottish Highlands and found that
one could not understand entrepreneurship as if it was a discrete objective
reality. Objectification of the environment is not reality; '... the environ-
ment is actually enacted and consequently becomes a subject'. In the fol-
61
lowing we shall focus on three contextual elements normally regarded to

be of importance by potential business starters: access to capital, availabil-
ity of business information and social networks.
Access to capital is obviously one of the typical obstacles to the start-
up of new businesses, not least in developing economies with weak credit
and venture capital institutions. Several empirical studies have concluded
that the lack of access to capital and credit schemes and the constraints of
financial systems are regarded by potential entrepreneurs as main hin-
drances to business innovation and success in developing economies
(Marsden, 1992, Steel, 1994, Meier and Pilgrim, 1994). Potential sources
of capital may be personal savings, extended family networks, community

saving and credit systems, or financial institutions and banks. Robinson

(1993) found that informal sources of credit, though with high interest
rates, constitute very substantial contributions to business start-ups in de-
veloping countries, where the capital to labour ratio is normally low and
small amounts of capital may be sufficient for a business start-up. In de-
veloped economies with efficient financial infrastructure, access to capital
may represent similar restrictions to individuals' perception of entrepre-
neurial options because of the high entry barrier ensuing from high capital
to labour ratios in most industries.
Availability of business information is similarly important for the in-
tention to initiate a new enterprise. Singh and Krishna (1994), in their
studies of entrepreneurship in India, pointed out that eagerness in informa-
tion seeking is one of the major entrepreneurial characteristics. Informa-
tion seeking refers to the frequency of contact that an individual makes
with various sources of information. The result of this activity is most of-
ten dependent on information accessibility, either through individual ef-
forts and human capital or as a part of a social capital and networking. In a
study of agribusiness entrepreneurs in Java, Kristiansen (2002b) found that
access to new information is indispensable for the initiation, survival and
growth of firms. Business information of special relevance for the percep-
tion of ability to succeed and thereby for entrepreneurial intention is re-
lated to markets and sources of inputs, technological solutions, design, and
government rules and regulations. The availability of new information is
found to be dependent on personal characteristics such as the level of edu-
cation, infrastructure qualities such as media coverage and telecommuni-
cation systems, and on social capital such as networks (Kristiansen,
2003a).
62
Social networks have an impact on desired career paths and the likeli-
hood of successful entrepreneurial endeavour. The study of entrepreneur-
ship has increasingly reflected the general agreement that entrepreneurs
and new companies must engage in networks to survive (Huggins, 2000).
Networks represent a means for entrepreneurs to reduce risks and transac-
tion costs and also to improve access to business ideas, knowledge and
capital (Aldrich and Zimmer, 1986). A social network consists of a series
of formal and informal ties between the central actor and other actors in a
circle of acquaintances and represents channels through which entrepre-
neurs get access to the necessary resources for business start-up, growth
and success (Kristiansen and Ryen, 2002). The quality of social networks
in a business context is decided by the number and strength of ties and by

diversity and extension (Granovetter, 1973, Aldrich and Martinez, 2001).
In conclusion of this brief sub-section on contextual elements of im-
portance to entrepreneurial intention, we suggest that individuals' percep-
tion of their access to capital and business information and the quality of
their social networks be considered as one factor with a combined measur-
able effect on entrepreneurial intention. We name the combined contextual
elements instrumental readiness.
A Model and Hypotheses
Based on the above three sub-sections on theoretical and empirical contri-

butions to explaining business start-ups, the research model is presented in
Figure 1.
Figure 1. The Research Model.
Demographic factors and

individual background
Gender
Age
Educational background
Work experience
Personality and attitudes

Need for achievement Entrepreneurial
Locus of control intention
Self-efficacy
Contextual elements
Capital access
Information access
Social networks
63
Based on the referred theory and the model above, we set forth the
following hypotheses for empirical analyses in this paper:
HI. Demographic factors and individual background, such as age,

gender, education, and work experience have an influence on entre-
preneurial intention.
H2. High need for achievement has a positive impact on entrepreneu-

rial intention.
H3. High score on locus of control is positively correlated with strong

entrepreneurial intention.
H4. High score on self-efficacy is positively correlated with strong en-

trepreneurial intention.
H5. Instrumental readiness is a positive significant predictor of entre-

preneurial intention.
DATA AND METHODOLOGY
The samples of respondents in the two countries are drawn from the stu-
dent population at Gadjah Mada University (UGM) in Yogyakarta, Indo-
nesia, and Agder University College (AUC) in Kristiansand, Norway. We
used a judgement sampling method (Remenyi, 2000) for the purpose of
having a minimum percentage of students in economics and business ad-
ministration, as well as a balance in the representation of gender and age
groups. The questionnaires, in the English language in Norway and in In-
donesian in Indonesia, were distributed from April to July 2002 at various
locations within the two university campuses, like in the student canteen,
library and computer laboratories. The total sample is 251; 121 Norwegian
and 130 Indonesian students. The response rate was 65% among Indone-
sian students and 60% among the Norwegian students. The demographic
characteristics of respondents are depicted in Table 1.
64
Table 1. Demographic and Background Characteristic of Respondents.
Norwegian Indonesian
Items («=121) (n=130)
n % N %
Gender
• Male 76 62.8 66 50.8
• Female 45 37.2 64 49.2
Age (years)
• <25 61 50.4 110 84.6

• >=25 60 49.6 20 15.4

Educational background
• Economics and Business 83 68.6 72 55.4
• Other disciplines 38 31.4 58 44.6
Employment experience
• None 24 19.8 73 56.2
• Public or government sector 26 21.5 8 6.2
• Private sector 51 42.1 47 36.2
• Both sectors 20 16.5 2 1.5
76% of the Norwegian respondents are males, whereas the percentage

of male Indonesian respondents is 66%. The average age of Norwegian
respondents is 25.2 years and 22.6 years for the Indonesians. 68.6% of the
Norwegians and 55.4 % of Indonesian were taking economics and busi-
ness as their major discipline. The largest proportion, 56.2%, of Indone-
sian respondents had no previous employment experience, while only
19.8% of Norwegian students had never been employed.
The main part of the questionnaire consists of attitudinal questions re-
lated to the main variables of the analysis. Respondents were asked along
a 7-point Likert-type scale to which degree they agreed or disagreed on the
specific items (l=strongly disagree; 7=strongly agree).
Table 2 shows a summary of responses to the main items of the ques-
tionnaire from both Norwegian and Indonesian respondents.
65
Table 2. Summary of Responses.
Variables (w=121) (/i=130)
Mean SD Mean SD
Need for achievement
I will do very well in fairly difficult tasks relating to my study and my
work. 4.70 1.05 5.78 1.06
I will try hard to improve on past work performance. 4.95 1.12 6.20 0.98
I will seek added responsibilities in jobs assigned to me. 4.94 1.17 4.69 1.42
I will try to perform better than my friends. 4.56 1.37 5.92 1.03
Locus of control
Diligence and hard work usually lead to success. 5.55 1.19 6.43 0.95
If I do not succeed on a task, I tend to give up. 2.71 1.46 2.86 1.72
I do not really believe in luck. 3.52 1.59 4.78 1.30
Self-efficacy
I have leadership skills that are needed to be an entrepreneur. 4.32 1.24 4.82 1.39
I have mental maturity to start to be an entrepreneur. 4.07 1.38 4.52 1.31
Instrumental readiness
I have access to capital to start to be an entrepreneur. 2.57 1.61 3.66 1.50
I have good social networks that can be utilised when I decide to be an
entrepreneur. 3.91 1.32 4.46 1.54
I have access to supporting information to start to be an entrepreneur. 3.46 1.48 4.59 1.43
Entrepreneurial intention
I will choose a career as an entrepreneur. 2.86 1.40 4.75 1.54
I will choose a career as an employee in a company/an organisation. 5.04 1.40 4.40 1.73
I prefer to be an entrepreneur rather than to be an employee in a com-
| pany/organisation. 3.28 1.62 5.03 1.55
Multiple-item scales are used for the attitudinal questions to reduce

measurement errors (Krueger et al, 2000) and ensure that the assumption
of interval level measurement is more tenable than in single-item scales
(Remenyi, 2000). A total of 12 items are included in the questionnaire re-
lated to the personality, attitudinal and environmental variables. Indexes
on the independent variables are created by averaging scores of 2 to 4
items. Similarly, the dependent variable is created as an index of three
items in the questionnaire. We have checked the reliability of the indexes,
and the opportunity has been open to drop items if that could improve the
Chronbach's a : item 2 of locus of control was dropped since this in-
creased the internal consistency. Cronbach's a of the indexes varies from
0.33 to 0.82: only the value of Cronbach's a of locus of control among
Indonesian students was less then 0.5. According to Nunally (1978), val-
ues higher than 0.50 can be considered acceptable.
Correlation and regression analyses are deployed, in addition to the
descriptive analysis (i.e. central tendency). Correlation analysis is used to
determine the effect of each independent variable on the dependent vari-
66
able (entrepreneurial intention), while regression analysis is used to ex-

plain the total effect of the independent variables on the entrepreneurial
intention index. The Pearson correlation coefficient is also used to evalu-
ate inter-correlation among independent variables. All questions in the
questionnaire are closed-ended, and a statistical software package, SPSS
10.0, was found to be appropriate for the data analyses. Scores of each
variable were calculated by averaging scores from each item in respective
variables. Reverse scoring was deployed for unfavourable items (item 2 of
locus of control and item 2 of entrepreneurial intention).
ANALYSES
The Demographic and Individual Background Data are Analysed

First
Age: Using the £-test, significant differences are found in the degree of
self-efficacy of various age groups of Norwegian students. Students who
are older than 25, have higher scores as compared to those who are
younger. Similar differences are not found among the Indonesian students.
Entrepreneurial intention is not significantly influenced by age in either of
the two countries.
Gender: In both national groups, male students' self-efficacy was signifi-

cantly higher than females'. Also, the degree of instrumental readiness of
Indonesian male students was significantly higher than for female stu-
dents. The degree of need for achievement, locus of control and entrepre-
neurial intention of female students did not significantly differ from that of
male students in Mests, as shown in Table 3.
Former work experience: The degree of self-efficacy of Indonesian stu-

dents who had previous employment experience was significantly
(p<0.05) higher (w=56, mean=4.94, SD=1.18) compared to those without
work experience (rc=74, mean=4.47, SD=1.27). Likewise, at a significance
level of /?<0.05, Indonesian students who had employment experience had
a higher degree of instrumental readiness («=56, mean=4.54, SD=1.13)
than those without employment experience («=74, mean=4.01, SD=1.25).
Similar differences were not found among the Norwegian student popula-
tion. There are no significant differences of entrepreneurial intention be-
67
than those without employment experience (n=74, mean=4.01, SD=1.25).

Similar differences were not found among the Norwegian student popula-
tion. There are no significant differences of entrepreneurial intention be-
tween students with and without employment experience in either of the
two countries.
Table 3. Independent-samples £-test with Gender as Grouping Variable.
Female Male Female Male
Variables
(«=45) («=76) t («=66) («=64) t
Mean SD Mean SD Mean SD Mean SD

NACH 4.67 0.84 4.87 0.82 -1.27 5.57 0.84 5.55 0.81 0.09
jLOC 5.06 1.15 4.99 1.22 -0.06 5.51 0.94 5.70 0.80 -1.27
SELFEFF 3.84 1.16 4.41 1.17 -2.56* 4.21 1.10 5.15 1.22 -4.60**
INSREAD 3.13 1.14 3.43 1.21 -1.33 3.98 1.04 4.50 1.35 -2.44*
INTENT 2.97 0.97 3.08 1.24 -1.51 4.24 1.30 4.69 1.45 -1.84
Notes: *^<0.05, **^<0.01
NACH: need for achievement, LOC: locus of control, SELFEFF: self-efficacy,
INSREAD: instrumental readiness, INTENT: entrepreneurial intention.
Educational background: Among Indonesian students, the degrees of in-

strumental readiness (n=72, mean=4.01, SD=1.12) and entrepreneurial in-
tention (n=72, mean=4.16, SD=1.26) of economics and business admini-
stration students were, rather surprisingly, significantly lower than those of
non-economics students (instrumental readiness: n=58, mean=4.52,
SD=1.30, /?<0.05; entrepreneurial intention: n=58, mean=4.84, SD-1.45,
p<0.05). Among Norwegian students, there was no significant difference
of entrepreneurial intention and related factors between students of eco-
nomics and business administration and other subjects.
Our findings give no general support for the statements in Hypothesis

1 that demographic factors and individual background, such as age, gen-
der, education and work experience have an influence on entrepreneurial
intention. One peculiar exception is the negative impact of the major dis-
cipline of economics and business administration on entrepreneurial inten-
tion among the Indonesian students. However, as we shall see, adding
demographic and individual background variables in the regression model
increases the percentage of explained variance substantially. Also, it is in-
68
Table 4 and 5 show Pearson's correlation coefficients among vari-

ables in the two data sets.
Table 4. Pearson's Correlations Coefficients, Norwegian Student (n=121).
Variables NACH LOC SELFEFF INSREAD INTENT

NACH
LOC 0.204*
SELFEFF 0.339** 0.095
INSREAD 0.346** -0.059 0.548**

INTENT 0.195* -0.068 0.386** 0.433**

Notes: */?<0.05, **;?<0.01
Table 5. Pearson's Correlations Coefficients, Indonesian Students (n=130).
Variables NACH LOC SELFEFF INSREAD INTENT

NACH
LOC 0.335**
SELFEFF 0.305** 0.212*
INSREAD 0.172 0.139 0.594**
INTENT 0.075 0.207* 0.457** 0.406**
Notes: */?<0.05, **/?<0.01
Instrumental readiness and self-efficacy among Indonesian students

have the highest significant correlation coefficient (0.594, p<0.01). We
also notice a clear and significant correlation between need for achieve-
ment and self-efficacy for both student groups (0.339 / 0.305, p<0.01).
However, we conclude that the model has no multicollinearity problem
when it comes to regression analysis (Gujarati, 1995). In addition to inter-
nal reliability and multicollinearity assessments, no other assumptions of
regression analysis seem to be violated. There is no heteroscedasticity
problem2, and the dependent variable approximates normal distribution.
Also, the ratio of subjects to independent variables is substantial, and no
69
outliers are observed in original or predicted values of the dependent vari-

able.
In the following, the research hypotheses 2-5 are examined. A stan-
dard multiple regression analysis is performed with entrepreneurial inten-
tion as the dependent variable and need for achievement, locus of control,
self-efficacy and instrumental readiness as the independent variables. The
independent variables are entered into the regression equation simultane-
ously. The standardized regression coefficients are presented in Table 6.
Table 6. Standarized Regression Coefficients.

P
Variables Norwegian Indonesian
(«=121) («=130)
NACH 0.034 -0.112
LOC -0.079 0.145
SELFEFF 0.219* 0.340*
INSREAD 0.297** 0.203**
\R2 0.225 0.259
Adjusted-R2 0.198 0.236
i F(4, n-5) 8.424* 10.935**
Notes: */?<0.05, **;?<0.01
Hypothesis 2 states that high need for achievement has a positive im-
pact on entrepreneurial intention. Table 6 shows that the /rvalue of
this variable in the regression analysis is higher than 0.05. Based on
this result, we can conclude that the need for achievement does not
make a significant contribution to determine entrepreneurial intention
among students, neither in Norway nor in Indonesian.
Hypothesis 3 states that a high score on locus of control is positively

correlated with strong entrepreneurial intention. The level of signifi-
cance (p-value) of locus of control shown in Table 6 is higher than
0.05. This finding, again, does not support the hypothesis in either of
the two contexts.
Hypothesis 4 states that a high score on self-efficacy is positively cor-
related with strong entrepreneurial intention. In the analysis, this vari-
able has a positive significant contribution (p < 0.05) in determining
70
entrepreneurial intention in both contexts (/? = 0.219 for Norwegian

and p = 0.340 for Indonesian students). The result fully supports this
hypothesis.
Hypothesis 5 states that instrumental readiness is a positive significant

predictor of entrepreneurial intention. In the correlation analysis we
found strong inter-correlations (r > 0.8; p < 0.05) between the three
items in instrumental readiness (capital access, availability to informa-
tion, and social networks). Hence, combining these three indices into
one variable (instrumental readiness) is the most appropriate way to

avoid multicollinearity problem. The level of significance of instru-

mental readiness as shown in Table 6 is less than 0.01 and the regres-
sion coefficient is clearly positive (/? = 0.297 for Norwegian students
and J3 = 0.203 for Indonesian students). These values lead us to the
conclusion that hypothesis 5 is clearly verified.
From Table 6 we can also see that the independent personality, atti-
tude and context variables (need for achievement, locus of control, self-
efficacy and instrumental readiness) altogether explain entrepreneurial in-
tention significantly. The proportions of variance in the dependent variable
that can be predicted by these independent variables (i?2) are 22.5% for
Norwegian and 25.9% for Indonesian students. Adding demographic and
individual background variables in the regression analysis remarkably in-
creases the percentage of explained variance to 25.1% and 30.0%) respec-
tively.
DISCUSSION AND CONCLUSIONS
The article is based on empirical data from one economically advanced

country and one hit by crisis and permanently high unemployment rates.
Also, the two countries clearly differ in cultural characteristics such as in-
dividualism vs. collectivism. An objective has been to compare the im-
pacts of variables related to different economic and cultural contexts on
entrepreneurial intention among students. The analyses revealed that the
degree of entrepreneurial intention among Indonesian students is signifi-
cantly higher than among Norwegian students. This is only partly ex-
plained by the degree of need for achievement, self-efficacy and instru-
mental readiness, which are also found to be significantly higher among
71
Indonesian students when compared to the Norwegians. The low score on

our measure of entrepreneurial intention among Norwegian students is not
very surprising, given previous research findings documenting that Nor-
way had the lowest level of self-employment among OECD countries
(Reynolds et al, 2000). In a highly developed economy with low unem-
ployment rates, like Norway's, much of the entrepreneurial and innovative
processes take place within established and large-scale firms. Individual
business start-ups are associated with high barriers of entry and relatively
low social status. Potential business entrepreneurs might not perceive their
access to capital and information as sufficient for success in this demand-
ing and highly competitive market. Starting a small-scale business in

Norway is, moreover, not connected with high status or any particular so-
cial prestige, compared to a permanent position as a manager in the private
or public sectors. It might even be associated with greediness and prob-
lems to fall into line in regular employment. Salaries of employees in
Norway are also relatively high, not least for business administration
graduates working in the private sector. The unemployment rate is gener-
ally low in Norway and very few people with higher education need to be
unemployed for more than a few weeks after graduation or while search-
ing for a new position. It can be expected that people are more likely to
enter self-employment when they are unemployed or dissatisfied with their
conditions as employees, or have reasons to expect higher earnings as en-
trepreneurial self-employed individuals.
In an economically poor and populous country like Indonesia, more of
the economic development process is based on individual business starters
and small-scale enterprises. Unemployment rates are high, close to 40%
(Kristiansen, 2003b). Entry barriers are relatively low, measured by capital
investment as well as by necessary competence and information, in most
small-scale industries. It is also much easier in Indonesia than in Norway
to establish a small-scale business in the informal sector, thus evading
formal laws and regulations. The social status of successful business peo-
ple is also high compared to ordinary employees in private companies or
in the government sector, where salaries are low. The substantially higher
scores of the Indonesian students, in comparison to the Norwegian stu-
dents, on the variables related to instrumental readiness are clear indicators
that entry barriers to business are perceived to be lower in Indonesia than
in Norway.
It is interesting to notice the generally higher scores of the Indonesian,
compared to the Norwegian, students on the items related to need for
achievement and self-efficacy, as well as to entrepreneurial intention. This
72
may be explained by the much tougher competition for entry and perform-
ance in tertiary education in Indonesia than in Norway. Also, theories of
face may contribute to explain why Indonesian students are more con-
cerned about acquiring an occupation of high social rank and achievement
and accumulation of influence (Earley, 1997, Begley and Tan, 2001). Not
least could this be the case in a highly prestigious and reputable university
like Gadjah Mada. The unexpected results of the analyses that related to
gender (hypothesis 1) may also have some context-specific reasons. Over
recent years, the gender roles and balance have changed in Norway, result-
ing in females and males being considered as equals in many aspects of
career and employment aspirations. The same is definitely not the case in
Indonesia, but the relatively low percentage of female university students

here is clearly not representative for the general population.
The explanatory power of our analyses is comparable to other entre-
preneurial intention models (Krueger et al9 2000). Although the entrepre-
neurial intention is clearly affected by the independent variables used in
this research, such intentions are clearly also affected by other variables
not included in our study. Adding other factors related to family back-
ground, social capital and contextual perceptions might increase the total
percentage of explained variance. Also, using a higher number of and
more representative student respondents might give a more complete pic-
ture of the degree of entrepreneurial intention among Norwegian and In-
donesian students and the factors that affect them. In this study, we might
have got an imbalanced sampling of respondents. Possibly, the 35-40%
non-respondents who did not take their time to fill in the questionnaire
might be the most ambitious and career-oriented of all the students who
received the questionnaires.
Based on the statistical analyses in this article, several additional con-
clusions can be drawn:
Self-efficacy and instrumental readiness influence the entrepre-

neurial intention in the expected direction, while need for
achievement and locus of control have no significant effect on
the dependent variable in the regression analysis.
The result of the regression analysis shows that the independent

variables related to personality, attitudes and contextual percep-
tions altogether significantly determine the entrepreneurial inten-
tion in both contexts. But, they only explain 22.5% and 25.9%)
73
(R ) of the total variance of the entrepreneurial intention for

Norway and Indonesia respectively.
Each of the demographic and individual background variables,

which are age, gender and previous employment experience, has
no significant effect on the entrepreneurial intention. Surpris-
ingly, students of economics are less entrepreneurial than other
students in the Indonesian university context, while there is no
significant impact of subject major among Norwegians. Adding
demographic and individual background variables into the re-
gression model, however, increases the percentage of explained

variance to 25.1% for the Norwegian and 30.0% for the Indone-
sian students.
Bivariate correlation analyses clearly indicate statistical associa-

tions between personality variables (need for achievement and
locus of control) and the more context-specific self-efficacy vari-
able. Our interpretation is that personality may effect perceived
feasibility and behavioural control, but that opportunity recogni-
tion depends on situational perceptions and learned controllabil-
ity. Personality factors affect entrepreneurial intentions only if
they affect self-efficacy.
The relatively high degree of entrepreneurial intention among Indone-

sian students is a positive indication of growth potential in the economy.
The adaptive efficiency of the society might be high when motivation for
being an entrepreneur is at the elevated level, as documented in this re-
search when compared to Norwegian students. X-efficiency depends on
'gap-fillers', and the gap-filling activity in an economy is partly a result of
motivational factors behind business entrepreneurship. The generally
higher scores on questions related to need for achievement and self-
efficacy among Indonesian students are also indicators of motivation to
work hard and achieve success. When Indonesian students by and large
also regard access to physical and social capital and information as man-
ageable, prospects for a blooming small-scale business sector should be
good. Students' motivation and human resource potentials could be util-
ised better for economic development, however, simply by introducing
entrepreneurship courses in various study programmes at leading Indone-
sian universities.
74
In both contexts, entrepreneurs themselves could benefit from a better

understanding of reasons behind their own intentions. Those who teach
potential entrepreneurs could similarly gain from better understanding stu-
dents' motivation and perception of career objectives. Also, policy makers
should understand how potential founders of private enterprises prioritise
and how they could be encouraged to nurture their entrepreneurial inten-
tions. Obviously, self-efficacy is important and may be developed.
FOOTNOTES
1
The research is a part of the institutional collaboration between Gadjah Mada Uni-
versity, Indonesia, and Agder University College, Norway. The collaboration is
funded by the Norwegian Ministry of Foreign Affairs / NORAD. The authors are in-
debted to Siti Nur Haida for her contribution in data collection in Indonesia. We
would also like to thank Wee-Liang Tan for his insightful suggestions to develop cer-
tain parts of the paper and two anonymous reviewers for their critical comments.
2
Heteroscedasticity occurs when the variance of scores on one variable is not the same
across all values of the second variable. If heteroscedasticity is present, it threatens
the validity of the reported findings.
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Journal of Enterprising Culture

Vol. 12, No. 1 (March 2004) 55-78

ENTREPRENEURIAL INTENTION AMONG INDONESIAN

Agder University College

This paper aims to identify determinants of entrepreneurial intention among

Any process of economic development is determined by entrepreneurs and

in firms and lost welfare in society, according to Leibenstein (1966, 1968).

Much of the cause of x-inefficiency is attributed to differential and inade-

entrepreneurial intention between the groups of students from the two

neurship did not predict feasibility of business start-ups in Sweden, while

The academic study of motivation for entrepreneurial endeavour started

cal discussion and empirical analyses between demographic factors and

individual background, personality traits and attitudes, and contextual

Demography and Individual Background

Several studies support the argument that demographic characteristics,

Based on the above-mentioned studies and theoretical discussion we

Personality Traits and Attitudes

As already mentioned, McClelland (1961, 1971) emphasised that a per-

ous. Locus of control refers to the degree to which an individual perceives

gree of entrepreneurial intention (Mazzarol et al, 1999).

is thus closely related to perceptions of situational competence and self-

efficacy. Shapero (1982) similarly offers evidence of how perceptions are

Environment factors that affect entrepreneurial intention include cultural

lowing we shall focus on three contextual elements normally regarded to

of capital may be personal savings, extended family networks, community

saving and credit systems, or financial institutions and banks. Robinson

in a business context is decided by the number and strength of ties and by

A Model and Hypotheses

Based on the above three sub-sections on theoretical and empirical contri-

Figure 1. The Research Model.

Demographic factors and

Personality and attitudes

HI. Demographic factors and individual background, such as age,

H2. High need for achievement has a positive impact on entrepreneu-

H3. High score on locus of control is positively correlated with strong

H4. High score on self-efficacy is positively correlated with strong en-

H5. Instrumental readiness is a positive significant predictor of entre-

DATA AND METHODOLOGY

Table 1. Demographic and Background Characteristic of Respondents.

• <25 61 50.4 110 84.6

• >=25 60 49.6 20 15.4

76% of the Norwegian respondents are males, whereas the percentage

Table 2. Summary of Responses.

Multiple-item scales are used for the attitudinal questions to reduce

able (entrepreneurial intention), while regression analysis is used to ex-

The Demographic and Individual Background Data are Analysed

Gender: In both national groups, male students' self-efficacy was signifi-

Former work experience: The degree of self-efficacy of Indonesian stu-

than those without employment experience (n=74, mean=4.01, SD=1.25).

Table 3. Independent-samples £-test with Gender as Grouping Variable.

Mean SD Mean SD Mean SD Mean SD

Educational background: Among Indonesian students, the degrees of in-

Our findings give no general support for the statements in Hypothesis

Table 4 and 5 show Pearson's correlation coefficients among vari-

Table 4. Pearson's Correlations Coefficients, Norwegian Student (n=121).

Variables NACH LOC SELFEFF INSREAD INTENT

INSREAD 0.346** -0.059 0.548**

INTENT 0.195* -0.068 0.386** 0.433**

Table 5. Pearson's Correlations Coefficients, Indonesian Students (n=130).

Variables NACH LOC SELFEFF INSREAD INTENT

Instrumental readiness and self-efficacy among Indonesian students

outliers are observed in original or predicted values of the dependent vari-

Table 6. Standarized Regression Coefficients.

INSREAD 0.346 -0.059 0.548

INTENT 0.195* -0.068 0.386 0.433