Int. J. Business Environment, Vol. 3, No.

1, 2010

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Human capital and perceptual factors in the entrepreneurial decision: empirical analysis in the GEM framework Jos Mara Gmez-Gras, Ignacio Mira-Solves* and Jess Martnez-Mateo
Department of Economical and Financial Studies, University Miguel Hernndez of Elche, Avda de la Universidad s/n 03202 Elche, Spain E-mail: gras@umh.es E-mail: imira@umh.es E-mail: jmateo@umh.es *Corresponding author
Abstract: This paper attempts to contribute to the understanding of the elements that influence the individual decision to involve in the act of setting up a business. In this context, we focus on the study of the factors that can better explain and predict the results of the entrepreneurial decision from an individual perspective. After justifying the value of studying nascent entrepreneurs, we propose a model that incorporates different elements of the human capital of individuals as well as perceptual variables related to the individual and the individuals judgement of the surrounding socio-cultural and economic environment. For testing this model, we use a logistic regression to verify the influence that the elements chosen have on the entrepreneurial decision using data from the Survey of the Adult Population of GEM Spain. Analysis confirms the influence of elements proposed on the individuals willingness to involve in activities of firm creation. Keywords: entrepreneurship; GEM; determinants; perceptual variables; human capital; nascent entrepreneurs. Reference to this paper should be made as follows: Gmez-Gras, J.M., Mira-Solves, I. and Martnez-Mateo, J. (2010) Human capital and perceptual factors in the entrepreneurial decision: empirical analysis in the GEM framework, Int. J. Business Environment, Vol. 3, No. 1, pp.1537. Biographical notes: Jos Mara Gmez-Gras is the Vice-Rector of Economic Affairs and University-Enterprise Liaisons at University Miguel Hernndez (UMH) of Elche and Co-Director of the Entrepreneurship Chair, supported by Bancaja, a Spanish savings bank. He is responsible for several projects focused on entrepreneurship, such as Embryo, GlobalStart, EQUAL-AlicanteEmprende and Global Entrepreneurship Monitor-Valencian Community and published in international journals including Industrial Management & Data Systems, Total Quality Management and Business Excellence and relevant Spanish journals such as Economa Industrial or Revista Europea de Direccin y Economa de la Empresa. He is also involved in several networks and entities of national, regional and local entrepreneurship support, such as the Business Innovation Centre of Elche.

Copyright 2010 Inderscience Enterprises Ltd.

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Ignacio Mira-Solves is currently Co-Director of the UMH Entrepreneurship Chair supported by Bancaja. He holds a Bachelors degree in Industrial Engineering and a PhD in Economics. After more than ten years of experience working in the technological institute for the toy industry, as Responsible for the Project Coordination Department and Quality Management Director, in 2000 he moved from a career in technological industry and management consultancy into academia at the UMH. Nowadays, his research is focused on academic spin-offs and nascent entrepreneurs, taking part in Global Entrepreneurship Monitor Project at Valencian Community and in other activities focused on entrepreneurial awareness for students and faculty. Jess Martnez-Mateo is a titular Professor of Management at University Miguel Hernndez (UMH) and currently, the Vice-Dean for Academic Affairs of the UMH Faculty of Social and Juridical Sciences. He holds a Bachelors degree in Economics and a PhD in Management and Business. Nowadays, his research is focused on general entrepreneurship, academic spin-offs and nascent entrepreneurs. Furthermore, he takes part in the research group in charge of carrying out the Global Entrepreneurship Monitor Project at the Valencian Community, in the research group of the UMH Entrepreneurship Chair supported by Bancaja, in several projects focused on entrepreneurship and also in other activities focused on entrepreneurial awareness for students and faculty.

Introduction

In recent decades, there has been wide and growing agreement on the positive role of firm creation in growth and development (Acs and Audretsch, 2003; Wagner and Sternberg, 2004; Reynolds et al., 2005; Mueller, 2006; Fayolle, 2007). Numerous studies have shown this positive influence in terms of employment, economic growth and innovation. Within this framework and considering the notion of entrepreneurship in terms of creation of new firms (Gartner, 1988; Low and MacMillan, 1988), a fundamental goal of the research given the interest in the articulation of policies and actions that support this field is the identification of factors with significant influence on individuals decisions to become involved in the process of firm creation. To support the creation of new firms, it is important to understand who creates them, in what kind of situation and for what kind of reasons (Autio et al., 1997). In this sense, this paper seeks to contribute to understand the elements that influence the individual decision to become involved in actions that set up a firm. We, thus, deem it advisable to focus our research on the early stages of the entrepreneurial process, specifically on the so-called nascent stage. More specifically, we focus on the study of elements that, from a micro-perspective, can explain and predict to a greater extent the result of the individuals decision whether to become involved in the activities that lead to setting up a firm. We examine certain aspects of background of social and human capital contributed by the individual him- or herself, as well as by the individuals perceptions of him- or herself and of the surrounding environment related to the development of entrepreneurial initiatives.

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Firm creation, individual and environment

In general, the different perspectives used in the study of the elements that influence firm creation have ranged from the examination of factors related to individual variables (personal characteristics, traits) to environmental or structural variables (economic and socio-cultural or institutional environment). However, even if the individual is the actor in the process of setting up a firm through his or her actions, it is clear that this process does not occur in a vacuum, but rather in a context that surrounds the individual, such that both personal characteristics and the influence of the environment play an important role in the entrepreneurial process. Thus, different authors in the literature, such as Shane (2003), advocate the development and use of integrated models that take both perspectives into account. These arguments have been developed and can be reviewed in Gmez-Gras et al. (2010, see this special issue). Among the different contributions that integrate these individual and environmental perspectives, we would stress for its relevance the theoretical-conceptual model used in the empirical GEM studies (Reynolds et al., 2005). The model cited distinguishes a series of conditions that configure the entrepreneurial framework that determines the opportunities for entrepreneurship and the entrepreneurial capacity of individuals, that is, the set of preferences, abilities and resources of individuals in the population. Therefore, a nations level of entrepreneurial activity is the result of its populations assessments of entrepreneurial opportunities and of their entrepreneurial potential (i.e., motivations and capacities) [Sternberg and Wennekers, (2005), p.195]. In this context, the presence and recognition of opportunities, and the entrepreneurial potential, are influenced both by the general conditions of the environment and by the entrepreneurial framework, both of which are influenced in turn by different social, cultural and political factors in the environment.
Figure 1 Theoretical-conceptual GEM model
GENERAL FRAMEWORK CONDITIONS SOCIAL, CULTURAL AND POLITICAL CONTEXT ENTREPRENEURIAL FRAMEWORK CONDITIONS Entrepreneurial opportunities Entrepreneurial potential Capacity Motivation Business (firms, jobs) Births Expansion Deaths Contractions

Economic growth (GDP, jobs)

Source: Adapted from Reynolds et al. (2005)

The framework of the GEM study further enables us to isolate the different stages of the entrepreneurial process (entrepreneurial intentions; nascent, new and consolidated activities), which provide an excellent foundation for the study of elements that influence certain individuals to decide to become involved in entrepreneurial processes, as this study seeks to do.

Entrepreneurial decision and nascent entrepreneurs

Although there is already an extensive literature of empirical research on the determinants that lead individuals to create firms, we find increasing agreement that part

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of these studies suffer from certain biases or tendencies assumed in the research (Delmar and Davidsson, 2000; Davidsson and Honig, 2003). These tendencies suggest that it would be advisable to reorient the empirical research to what is called the early stages of the process. Generally, many of the studies and papers on creators of firms are carried out retrospectively, that is, including only surviving businesses several years after their creation. This approach leads to two risks. The first is capturing characteristics and influences that are more related to firm survival than to the decision to set up an entrepreneurial initiative. The second risk is incorporating errors in the information due to the loss of memory or reinterpretation of facts as a result of circumstances that have occurred after the entrepreneurial event. Further, the process of firm creation does not always succeed, and the individuals who disappear in the process do not appear in the sources of data used, causing the loss of valuable information concerning the characteristics, attitudes and circumstances that led these individuals to attempt the process (Delmar and Davidsson, 2000; Gartner et al., 2004; Johnson et al., 2006). In this sense, as Autio et al. (1997, p.2) argue, focusing only on ex-post situations means gathering data from firms after the entrepreneurial event. In this case, the researchers would be assuming that traits, attitudes and beliefs do not change due to ones own entrepreneurial experience (Gartner, 1988, 1989), a belief that Autio et al. (1997) considers to be a strong assumption. In the resulting situation, therefore: 1 On the one hand, most of the contemporary definitions of entrepreneurship revolve around concepts of entrepreneurial emergency and creation of new firms (Gartner, 1988; Shane and Venkataraman, 2000), which should lead research to treat the early stages of the phenomenon. On the other hand, public research is dominated by studies based on samples of already existing firms (survivors) (Davidsson and Wicklund, 2001; Davidsson and Honig, 2003), with very few studies that focus on the early stages (Carter et al., 1996; Davidsson and Honig, 2003), which usually revolve around the models of entrepreneurial intentions and the subfield of nascent entrepreneurs (Autio et al., 1997; Davidsson and Honig, 2003).

As to the two paths mentioned above, the study of the pre-firm stage constitutes an important line of research that typically focuses on intentions () and uses samples of individuals who have not yet entered into nascent entrepreneurial activity [Davidsson and Honig, (2003), p.303]. However, these authors, along with Delmar and Davidsson (2000) and Krueger (2003), warn that the use of intentions as the only dependent variable has its risks. It faces the danger of not distinguishing between dreamers and doers, as research in psychology shows that the relation between intentions and behaviour is not always as strong as that asserted by Ajzen (1991). This paper, thus, focuses on the second path: that of nascent entrepreneurs or individuals who are found to be taking steps to found a new business that they own but who have not yet completed this stage of the process successfully (Carter et al., 1996). They are, thus, subjects who are starting to spend time and resources to create a firm (Reynolds and White, 1997; Reynolds, 2000). The GEM studies cited above allow us to use individuals in precisely this stage of the entrepreneurial process.1

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Nascent entrepreneurs and determinants of entrepreneurial involvement

After adopting the proposal for the integrated framework of determinants and effects proposed by Gmez-Gras et al. (2010, see this special issue), and given the focus on the analysis of the influences on the decision of individuals to initiate the activities that lead to the setting up of a firm, we have reviewed the research related to the early stages of the entrepreneurial process. This review includes some outstanding models of entrepreneurial intentions (it thus assumes as antecedent the development of the nascent conduct that will follow (Ajzen, 1991; Krueger, 2003), as well as the literature related to the so-called field of research of nascent entrepreneurship, with the goal of extracting support for a model that will be tested empirically. Among the diverse conditioners that have been proposed in the literature as issues with potential influence on the decision to initiate this stage, we have selected specifically those related to background of human and social capital contributed by the individuals, as well as certain attitudes and perceptions that the literature has shown to be relevant and that individuals generate, both concerning themselves and concerning the environment. Figure 2 shows the model of influences proposed, which assumes a particular abstraction from the general model of determinants and effects proposed in Gmez-Gras et al. (2010, this special issue).
Figure 2 Model of influences of elements of human and social capital and perceptions (P) in entrepreneurial involvement (developed by the authors)

PERSONAL CHARACTERISTICS Psychological factors Perceived efficacy Attitude (desirability, fear of failure) P ENTREPRENEURIAL PROPENSITY Nascent entrepreneurial activity P ECONOMIC ENVIRONMENT Existence of opportunities P INSTITUTIONAL ENVIRONMENT Culture and values: social norms Non psychological factors Education and experience Relationships Socio-demogaphic elements

The model assumes that the entrepreneurial decision includes as explanatory factors elements that can be attributed both to the subject (objective and subjective elements) and to the environment in which the activity is developed (Shane, 2003; Gartner and Carter, 2003). As to the state of the environment, the individual filters (Wagner and Sternberg, 2004) real or objective information from the environment through specific mechanisms

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and cognitive schemas. The individual, thereby, obtains a series of subjective perceptions of the environment (Greenberger and Sexton, 1988; North, 1993; Fornahl, 2003; Shane, 2003; Wagner and Sternberg, 2004). Based on the information or signals that the individual grasps, he or she can show certain optimism toward the possibility of creating businesses, an optimism formulated in beliefs about the existence of good business opportunities in the future. Further, the individual is influenced by the social norms of the local or regional environment to the extent that he or she believes that this environment values firm creation in a certain way, due to the legitimacy, desirability or social acceptance and rewards granted by the environment that are not strictly economic (prestige, social status,). Also in the field of perceptions, the individual formulates a series of judgements concerning him- or herself. These involve, in particular, determining whether the individual has the appropriate or necessary abilities to carry out the activities belonging to what we call entrepreneurial conduct (i.e., his or her perceived self-efficacy). These judgements are also about his or her own attitude to firm creation, as expressed through desirability for the individual that can impel him or her toward that conduct but also through the weight of hypothetical entrepreneurial failure, which acts as a brake or barrier to this activity. Likewise, in the arena of individual characteristics, individuals contribute a background of human and social capital, including in their educational level, their prior experience, and their knowledge of other entrepreneurs. The presence of two categories of influential factors one of objective elements and the other of subjective factors follows the classification criteria for determining elements from different studies, such as Mazzarol et al. (1999), Shane (2003), Arenius and Minnti (2005), and the models of entrepreneurial intentions in general. It proposes that the individual decide based on a series of constitutive objective elements from his or her heritage or background, to become involved in the activities that lead to setting up a business initiative due to his or her attitudes and perceptions regarding entrepreneurial activity. Specifically, these perceptions are based on: 1 2 3 the individuals net attitude in favour of or against the conduct, expressed by its desirability or the lack of concern regarding failure (Do I want to?) his or her perception of the value that society grants to this professional choice and the status and social prestige in the case of success (Does it look good?) his or her assessment of how relatively easy or complex this will be, that is, from ones opinion of whether opportunities to be taken advantage of exist in the environment and ones perception of whether one has the abilities required to exploit them, or perceived self-efficacy (Can I?).

For the elements in the model, we now collect a brief summary of the related literature and their influence on the entrepreneurial decision. The elements of human and social capital usually indicate individuals resources in the form of educational background, experience and accumulated abilities, as well as networks of contacts, family precedents, and the general role models nearby for observation, which exercise influence and provide vicarious experience. Davidsson (2006) collects a large literature review on the influence of these elements and their involvement in nascent activities.

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As to education level, in general, different studies related to GEM find positive effects on the probability of being a nascent entrepreneur [Davidsson, (2006), p.5]. Some of these results are provided, e.g., by Arenius and DeClercq (2005), Kim et al., (2006), Wagner and Sternberg (2004) and Mueller (2006). Prior experience in firm creation or self-employment, which provide the abilities and capacities to discover and exploit business opportunities, also has positive effects (Crosa et al., 2002; Davidsson and Honig, 2003; Wagner and Sternberg, 2004; Delmar and Davidsson, 2000; Kim et al., 2006; Mueller, 2006; Tamsy, 2006; Wagner, 2006). As to familiarity with entrepreneurs in ones circle of close acquaintances, the different analyses of human capital (provide vicarious experience) or social capital (relations or networks from which one can extract benefit) have shown that this element is positively related to entrepreneurial involvement (Wagner, 2004; Arenius and Minnti, 2005; Mueller, 2006; Tamsy, 2006).

The importance of perceptual variables for nascent entrepreneurship has been shown by Arenius and Minnti (2005), who define them as subjective perceptual variables that are sometimes partial and that come from the psychological and sociological literature, that play an important role in the decision, and that do not necessarily reflect objective circumstances. This kind of variable has been treated in different models related to entrepreneurial activity, primarily in the literature on models of intentions. As to attitude toward firm creation, the perception of desirability refers to the degree to which the individual feels attraction to a given behaviour. Shapero and Sokol (1982) study this cognitive element and establish a positive relation between it and the so-called entrepreneurial event. This relation is also established in different models of intentions by Krueger (e.g., Krueger and Carsrud, 1993; Krueger and Brazeal, 1994; Krueger, 2000, 2003), in which it is established as an antecedent of the manifestation of intentionality and the resulting behaviour, which has not usually been introduced in the study of nascent entrepreneurs. Models of entrepreneurial intentions usually agree that this attitude makes perceived personal conduct or convenience depend on the results expected from the behaviour, involving all of the probable positive and negative consequences [Degeorge and Fayolle, (2004), p.8; Zander, (2004), p.16; Brnnback et al., (2006), p.5]. The individual, thus, not only perceives the desirability of the entrepreneurial behaviour in itself but could also consider his or her fear of failure. In the GEMs analyses of nascent activity, perception of fear of entrepreneurial failure is analysed, based on whether or not it could come to represent a barrier to involvement in entrepreneurial activity. Studies find a negative influence of this fear on the propensity to become involved in these activities (e.g., DeClercq and Arenius, 2003; Wagner and Sternberg, 2004; Arenius and Minnti, 2005; Lee et al., 2005; Tamsy, 2006; Kllinger et al., 2007). As to entrepreneurial opportunities, the contributions of Venkataraman (1997), Shane and Venkataraman (2000) and Eckhardt and Shane (2003) have attributed a very influential role to their existence, detection and exploitation by individuals.

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J.M. Gomez-Gras et al. Likewise, the models of Gnyawali and Fogel (1994), Verheul et al. (2002) and GEM (Reynolds et al., 2005) have shown the importance of the existence of opportunities in the environment and the individuals perception of them to the subsequent engagement in entrepreneurial initiatives. Analyses of opportunities perceptions have also frequently incorporated in the studies about nascent activity. Thus, Alsos et al. (2003), DeClercq and Arenius (2003), Arenius and Minnti (2005), Lee et al. (2005), Koellinger et al. (2007), Tamsy (2006) and Kllinger and Minniti (2006) find a positive and significant effect of the perception of future opportunities on the decision to start a business.

Perceived self-efficacy, an element stressed by Shane (2003) as one of the psychological factors that influence the willingness to exploit opportunities, is a variable that focuses on the individual and refers to the perception of ones own capacity for execution and performance.2 It has generally been included as a factor with positive influence on the generation of entrepreneurial intentions in these models. As to nascent activity, results generally suggest strong effects of this confidence on the propensity to become involved in activities of an entrepreneurial character (Reynolds et al., 2001; Diochon et al., 2002; Alsos et al., 2003; DeClercq and Arenius, 2003; Wagner, 2004; Arenius and Minnti, 2005; Lee et al., 2005; Kllinger and Minniti, 2006; Tmasy, 2006; Kllinger et al., 2007). Socio-cultural elements, in particular the beliefs and attitudes of society concerning the social desirability and legitimacy of entrepreneurial activities, are considered by Shane (2003) as part of the institutional context. These variables influence the exploitation of business opportunities through their influence on the desirability and perception of risks and rewards that each individual associates with them. In the area of the main theoretical models of entrepreneurial intentions, these issues would form part of the so-called subjective norms (Ajzen, 1991) or social norms (Krueger and Carsrud, 1993; Krueger and Brazeal, 1994; Krueger, 2000, 2003). These refer to the social pressure detected concerning the behaviour and the influence on the development of the entrepreneurial intention and subsequent behaviour. In the area of GEM, these questions were introduced as subjective norms (Bruyneel et al., 2006; tested only for the intention phase), socio-cultural norms inherent in the institutional environment (Vaillant et al., 2005), and approaches to the social acceptability of entrepreneurial behaviour and the social legitimacy of the entrepreneur (Tominc and Rebernik, 2007). All these authors did not, however, find any significant relationship.

Methodological issues: origin of the data, questions formulated and analysis technique

The data used to test the proposed model come from GEMs adult population survey (APS) of adults from 18 to 64 years of age in Spain in 2005. The sample includes 18,953 observations, a size that enables us to work with a confidence level of 95% and assuming the hypothesis of maximum indeterminacy and infinite population in order to achieve a sample error for sample estimations of 0.71%3.

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In GEM, individuals are classified as nascent entrepreneurs if they are developing activities that lead to setting up a business in which they will own at least part of the property and have not paid salaries for over three months.
Table 1 Variables employed: questions, values and codification Corresponding question in the APS survey Control variables Age Gender Human and social cap. Educational level Educational level Own entrepr. activity Are you currently, alone or with others, the owner of a firm that you help to direct, that constitutes self-employment, or in which you are selling goods and/or services? Do you know anyone personally who has set up a new business in the last two years? Do you consider it desirable to create or found a new firm? Fear of failure would constrain you if you had to set up a business. In your region, most people consider that starting a business is an attractive professional option. In your region, a person who achieves success in opening a new business obtains high social position and prestige. In the next six months, will there be good opportunities for setting up new businesses in the area where you live? Do you have the knowledge, abilities and experience required to set up a new business? None (1) Compulsory (2) Secondary (3) Medium (4) University (5) Yes (1) No (0) Age Sex Years Man (1) Woman (0) Values and codifications

Role models

Yes (1) No (0)

Variables of perception Personal desirability Fear of failure Social acceptability of the career Social legitimacy Yes (1) No (0) Yes (1) No (0) Yes (1) No (0) Yes (1) No (0) Yes (1) No (0) Yes (1) No (0)

Perception of opportunities

Perceived self-efficacy

Source: APS GEM 2005 Spain

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In order to identify nascent entrepreneurs, all of the individuals were asked these questions: 1 You are, alone or with others, currently trying to start a new business, including any self-employment or selling any goods or services to others?

Those who respond in the affirmative are asked: 2 Over the past 12 months have you done anything to help start a new business, such as looking for equipment or a location, organising a start-up team, working on a business plan, beginning to save money, or any other activity that would help launch a business? Will you personally own all, part or none of this business? Has the new business paid any salaries, wages or payments in any kind, including your own, for more than three months?

3 4

In all of the questions, the individuals may answer using four categories: yes, no, dont know or not answering. In the codification of subsequent variables, a person is classified as nascent entrepreneur if he or she answered yes to question (1) and to items (2) and (3), and no to (4). The explanatory variables considered are presented in Table 1. In addition to the covariables proposed for study, we use the socio-demographic variables gender, age and immigration as control variables. The questions are formulated for the whole sample. In addition to the possibilities for response included in the table, individuals can answer dont know or reject the question. For the purposes of analysis, a rejection is considered a lost value in all of the questions and the answer dont know only in the case of the polytomic variables. For the variables with a working dichotomous answer, a positive response takes the value one and a negative response (no or dont know) the value zero. For the empirical analysis of the relationships proposed in the model, we have chosen the binomial logistic regression analysis, a generalisation from the classic linear regression model when the scale of the variable that quantifies the outcome is dichotomous.

Preliminary analysis and preparation of the sample

Given the exceptional nature of the decision to create a firm, the starting sample offers very low frequencies of appearance based on the variable of interest used as dependent variable. This locates us in a work context of rare events. According to King and Zeng (2001a, 2001b) and Weiss et al. (2007), this situation generates problems of underestimation of the probabilities of events in methods of classification of individuals in general and in the logistical regression analysis in particular. These problems ultimately affect all of the indicators that are calculated from these probabilities, as well as the estimation of parameters, which can be affected by a significant bias, distorting the results.

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One solution4 to this problem, proposed by the authors cited above, consists of using proportions of cases that are balanced relative to the event of interest (Y), including observations (either chosen randomly or using all available) for Y = 1 (the cases) and performing stratified random sampling for Y = 0 (the controls), a method used in the GEM context, e.g., by Levie (2007). In our case, following this procedure through geographically stratified random sampling has configured a new sample composed of 854 individuals: the 427 nascent entrepreneurs detected in the original sample and the same number of individuals who do not demonstrate performance of nascent activities5. In the interest of rigour, we performed a comparative formal analysis that demonstrated that there are no significant differences between the new subsample of individuals without nascent activity and the original subsample.6 The new sample was subjected to a preliminary analysis in order to collate the conditioners to use the logistic regression, and all are verified. That is, the sample size is greater than 10(k+1), where k is the number of explanatory variables, including all dummy variables created; there are no zero frequencies in the boxes in the contingency tables that cross the explanatory variables with the dependent variable; and we find no colinearity between variables (see the correlation matrix in the Appendix).

Results

Table 2 shows five regression models, in which the variables are introduced in blocks to enable us to observe the change in the resulting information based on the progressive expansion of the model in successive steps. The diagnostic indicators for the comparison are: deviance, which always decreases as the number of variables increases; the Akaike Information Criteria, which penalises deviance based on the introduction of variables, ensuring that improvement in the model is not trivial; the likelihood ratio (or difference between two deviances), whose associated statistic informs us whether a set of variables improves the model significantly; and the estimation of Nagelkerkes pseudo-R2, restricted to values between 0 and 1, which offers comparative information between models similar to that provided by deviance. As indicators of the influence and relevance of the variables under study, we show the odds-ratio and the significance level associated with the Wald statistic.

7.1 Diagnostic indicators of the models

The indicators in general show a positive evolution as the variables are introduced, with the exception of the step between Blocks 3 and 4, which correspond to the introduction of perceptions of social norms. In fact, the indicators that show whether or not the improvements in deviance and pseudo-R2 are trivial (Akaike Information Criteria and ratio of likelihood between successive models) detect that the variables added in Block 4 do not improve the model and in fact make it worse. In the other cases, these diagnostic indicators show the relevance of the blocks of variables introduced. Finally, the 5th model is the best, comparatively speaking and based on the results indicated by testing the measurements constructed from likelihood. The Akaike Information Criteria ensures that the improvements are real and not introduced by merely having increased the number of covariables.

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Table 2

J.M. Gomez-Gras et al.

Logistical regression for nascent entrepreneurial activity (stepwise comparison of all of the models

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7.2 Influence and significance of the variables proposed

Of the eleven covariables proposed, six are significant, and the following are excluded: gender, education level, possession of personal experience, and individuals perception of both the social acceptability of the entrepreneurial career as a valid alternative and the social legitimacy of the entrepreneurial success. In the block of socio-demographic variables introduced as controls, only age is relevant, significant in the overall consideration even though we cannot determine the sign of the relation. The relation with gender ceases to be significant with the introduction of the variables in Block 5 (self-efficacy detected and perception of opportunities), which would presumably explain a substantial amount of the differences attributed to gender. From among the variables that indicate background of human capital, only recent knowledge of entrepreneurs and their influence on the individuals (role model, vicarious learning) is relevant. Based on this knowledge, individuals with these characteristics outnumber those without entrepreneurs among their acquaintances by nearly one and a half to one in their propensity to entrepreneurial activity. Education level shows no significance at any point, and the significance of entrepreneurial experience is diluted when the last block is introduced, particularly the variable relative to the perception of self-efficacy or possession of entrepreneurial capacities and abilities. This would, thus, contribute the explanatory portion attributed initially to experience. Regarding the subjective or perceptual variables, the two that we linked to social norms perceived by individuals as socio-cultural pressure or support are not significant. The rest are shown to be highly significant for understanding involvement in nascent entrepreneurial activities. On the one hand, fear of failure influences negatively the individuals propensity to develop entrepreneurial activities. On the other, the perception of desirability, recognition of self-efficacy and the perception of good opportunities have a positive influence. The main influences are those exercised by the perception of business opportunities (odds-ratio 2.042), and mainly by the recognition that one has the capacities to act to take advantage of these opportunities by setting up and managing the business (odds-ratio 4.565).

7.3 Final model and validation

Table 3 shows a final regression model estimated by incorporating only the variables that were significant. The validation of the model (Table 4) was performed based on the test of its validity, specifically on its degree of calibration (Hosmer and Lemeshows test of goodness of fit) and its capacity for discrimination (estimated by the area under the ROC curve), information complemented by the percentage of correct predictions. According to the results of the tests, the capacity to discriminate correctly between entrepreneurial and non-entrepreneurial individuals from all of the possible combinations of pairs is estimated at 78.4%, close to the classification of excellent. The Hosmer and Lemeshow C-statistic indicates the non-existence of significant differences between the values observed and predicted and thus good fit. Further, these measures are supported by the percentages of correct individual predictions achieved, with an overall capacity for accuracy of 71.8%, and, more specifically for the individuals who demonstrate the event in which we are interested (nascent activity), of 78%.

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Table 3

J.M. Gomez-Gras et al.

Final model for nascent entrepreneurial activity B 1.289 Std. error. 0.380 Wald 11.502 p-value 0.001 Exp(B) (odds ratio) 0.276 95% C.I. Lower Upper

Variables Constant

Block 1: Socio-demographic variables Age (five ranges) Age 25 to 34 Age 35 to 44 Age 45 to 54 Age 55 to 64 0.031 0.115 0.271 0.747 0.372 0.368 0.376 0.383 10.760 0.007 0.098 0.521 3.816 0.029 0.933 0.755 0.471 0.051 0.969 0.892 0.762 0.474 0.468 0.434 0.365 0.224 2.008 1.832 1.593 1.002

Block 2: Personal variables Role models 0.408 0.163 6.298 0.012 1.504 1.093 2.068

Block 4: Personal attitude perceived Desirability Fear of failure 0.409 0.606 0.170 0.170 5.798 12.715 0.016 0.000 1.506 0.546 1.079 0.391 2.101 0.761

Block 6: Perceived viability Self-efficacy Opportunities 1.563 0.686 0.179 0.167 76.339 16.980 0.000 0.000 4.774 1.987 3.362 1.433 6.780 2.754

Table 4

Hosmer-Lemeshow Test, area under the COR curve and percentages of correct prediction Hosmer-Lemeshow Test Chi-square gl 8 0.623 Area under the ROC curve 95% C.I. Lower lim. 0.753 Upper lim. 0.814 Significance

6.217

Area (std. deviation) 0.784 (0.016)

Sig. 0.000

Correct predictions Sensitivity Specificity Global % 78.0% 65.6% 71.8%

Notes: Null hypothesis: true area = 0.5 Sensitivity: % accurate subjects that show the event. Specificity: % accurate subjects that do not show the event.

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Conclusions and recommendations

The analysis performed enables us to confirm empirically the degree of influence of a series of elements chosen from the literature, specifically those linked to the background of human capital and individuals perceptions concerning their willingness to become involved in firm creation activities. Our innovation in this study involves using a sample free of certain biases usually ignored, such as those of retrospection and the status of firm creation as a rare event. These biases have been avoided through the use of qualified individuals such as nascent entrepreneurs and a sample balanced relative to the response variable or event of interest. As to the results obtained, of the control variables, only age was shown to be significant, although only in the overall consideration. The results thus seem to point to a lower disposition to become involved in entrepreneurial activity as age increases, but it is not possible to confirm this relationship. The lack of significance of the variable gender occurred when the variables related to perceived viability were introduced, suggesting that gender differences relative to entrepreneurial involvement may originate to a large extent in how individuals evaluate their environment in terms of opportunities and how they evaluate their own capacities to exploit the opportunities detected. As to background of human and social capital that individuals bring, education level does not become significant at any point, whereas the individuals own entrepreneurial experience shows a positive influence up to the point at which perception of self-efficacy is introduced. This seems to indicate that it is not really disposition toward the experience that predisposes the individual to become an entrepreneur but rather the conviction that this experience has actually provided the abilities and capacities needed. Knowing recent entrepreneurs in ones nearby environment is confirmed, in line with the empirical literature described on this issue, as an element with positive influence on the willingness to become involved in activities to set up a business, whether this influence is exercised through a role model or vicarious experience or as social capital. In general, the variables of perception have shown a high connection to the entrepreneurial decision, with the exception of the perceptions that reflect the influence of social pressure detected. The levels of significance enable a much clearer reading of the influence of perceptions, which suggests that these variables have the most impact in relative terms and thus shows the importance of considering this kind of variables in research, a conclusion in line with the results obtained by Arenius and Minnti (2005), among others. In particular, the results lead us to think that an individual having the right attitude toward firm creation can lead to greater entrepreneurial propensity. Viewing the decision to become an entrepreneur as a desirable professional option is shown to be an element with positive influence on the propensity to initiate setting-up activities. However, involvement in entrepreneurial activities, which are naturally subject to risk, can lead to hypothetical failure as an outcome. In this sense, the results of this failure can be interpreted by individuals as serious enough to become a barrier that inhibits their involvement in the process. The analyses performed have enabled us to confirm empirically that this negative perception can reduce peoples propensity to try to create their own businesses by approximately half. On the other hand, the results related to perceived viability show that detection of good business opportunities is an outstanding element in the decision to create a firm,

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making those who read their environment positively in terms of opportunities double their entrepreneurial propensity when compared with those who read their environment negatively. Further, the empirical study stresses the perception of self-efficacy as a crucial factor that stands out from the rest. This indicates that those who evaluate positively their own capacities and abilities to set up and manage a firm can increase their entrepreneurial propensity nearly five times compared with those who do not believe that they have such capacities. The case of the variables proposed as perception of socio-cultural pressure leads, on the other hand, to the reflection that the way of posing these questions in the APS questionnaire might not have been the most appropriate for accessing the specific concepts of social acceptability and legitimacy of the entrepreneurial figure.7 None of the studies reviewed found significant results with these variables, and Tominc and Rebernik (2007) also make some reflections and raise doubts concerning the phrasing of these questions in the APS survey.

8.1 Some recommendations

The influence of attitude in the development of entrepreneurial conduct leads us to consider it reasonable to direct efforts to publicise widely the positive effects of entrepreneurial activity in terms of growth, well-being, innovation and generation of employment. Even if this recognition is generally acknowledged among academics and political agents, the general populations perception may not be widespread and/or intense enough. Indeed, the reading of the empirical evidence can be translated as the belief that greater numbers of individuals with a positive attitude are linked to greater quantities of individuals trying to set up firms. This indicates that focusing efforts to make the population internalise and recognise the beneficial effects of the entrepreneurial function should come to be seen as a relevant matter for consideration. Further, this paper confirms empirically something that seemed a logical expectation but that is now reinforced by empirical evidence: people should feel not only that it is desirable to create firms but that becoming involved in this activity is something within their reach. Thus, the recognition of good business opportunities in the individuals immediate environment and, fundamentally, the judgement of ones background in the resources and abilities needed to exploit and develop such opportunities in the form of a firm have been shown to be aspects with a positive influence on the setting up of business initiatives. Given this positive empirical evidence, and bearing in mind, in agreement with Shane (2003), that 1 2 discovering an opportunity requires first, obviously, that the opportunity exists the opportunities exist independently, whether or not they are discovered by people with the necessary background of abilities.

We think that the actions of different administrations could try to foster as much as possible the conditions that form a good framework for facilitating both the creation of new opportunities and access to these opportunities, as well as their discovery and exploitation, minimising all possible obstacles. Thus, good communication policies that

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are in accord with the environment in which the social and economic activity is developed and that put within the reach of individuals the knowledge that there are opportunities are highly desirable. This paper confirms very clearly the impact of perceived self-efficacy on the entrepreneurial decision. The relation found between feeling that one possesses the abilities needed and entrepreneurial involvement is very significant. This conclusion represents an empirical confirmation of research that advises the development of other studies to investigate the antecedents of self-efficacy related to entrepreneurial activity. Some studies from the field of cognitive psychology indicate that there are two main general sources of self-efficacy: ones own experiences and vicarious experiences. Thus, the expectations of efficacy in general are influenced respectively by:8 1 achievements in execution of these activities based on ones own experience, which (depending on the results) affect the judgements made concerning ones own efficacy the behaviour developed by others and its consequences, the observation of which orients the individual to his or her own capacity, such that the individual can persuade him- or herself that if someone else can do it, I can do it too.

Thus, public administrations can see the importance of developing instruments and educational programmes that help people gain abilities and practical experiences in the area of management and setting up of firms. It is necessary to reinforce and expand connections between educational institutions and entrepreneurial organisations, ensuring however that these measures are oriented to improving personal perception of self-efficacy rather than achieving a mere enrichment of individuals educational curriculum. The examples of entrepreneurs and fostering the publics awareness of them become especially important. Entrepreneurs serve as role models, provide vicarious experience, and act directly on entrepreneurial involvement and indirectly as a source of self-efficacy that the individual perceives. The issues related to the overall study performed in this research influence individuals actions that can be called spreading an entrepreneurial culture. Administration should incorporate the following objectives in their diverse aid programs for entrepreneurial activity: improving the availability of individuals human and social capital, their attitude toward firm creation, their conviction that this is something within their reach, and the perception that society values this activity sufficiently, repays those who succeed and helps those who fail in their attempt. Administrations should expand these programmes beyond their current scope, which is restricted to other aspects of operating character, which are also important but very focused primarily on those who are already entrepreneurs rather than on fostering entrepreneurship in the general population.

Acknowledgements
The authors thank the Bancaja Chair for Young Entrepreneurs-UMH for the support received to develop the research that led to this paper.

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Notes
1 In the research context of GEM, a nascent entrepreneur is defined operatively as somebody who is, alone or with others, currently trying to start a new business; expect to be owners or part owners of the new firm, and have been active in trying to start the new firm in the past 12 months [Johnson et al., (2006), p.1]. 2 Self-efficacy can be understood as peoples judgements of their capabilities to organise and execute courses of action required to attain designated types of performances [Bandura, (1986), p.391], a definition that links it to the concept of perceived control of behaviour (Ajzen, 1987; Boyd and Vozikis, 1994; Krueger and Carsrud, 1993; Krueger and Brazeal, 1994). See chart in the Appendix for tables. Another solution is to use the Relogit technique (rare events logistic regression) developed by King and Zeng (2001a, 2001b). Described in the Appendix. Tests of the equality of means of the independent variables between the two subsamples of individuals without nascent entrepreneurial activity and tests of independence through contingency tables that cross the categories composing each independent variable with the classification variable (subsample to which the individual belongs). To judge from the percentages of responses obtained in the groups of those involved and those not involved in entrepreneurship, we could deduce some disappointment among those who develop entrepreneurial activities, such that these questions, as they are actually formulated, seem to record their impression of the justice with which those involved in the development of a new business initiative are treated, rather than two components of the social norms with the capacity to influence the individuals own perception of entrepreneurial activity. The cognitive literature also mentions other sources of self-efficacy, such as verbal persuasion or persuasive messages from others to convince and help.

3 4 5 6

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Appendix
Table A1 Chart of the APS GEM 2005 Spain Spain 29,130,209 individuals from 18 to 64 years* 18,953 individuals from 18 to 64 years 0.71% 95%

Territory Universe of study Sample Sample error Confidence level

Note: *Review of municipal voting register 2005. Source: *INE (2007) Table A2 N (recount) Variable Age Categories 1824 2534 3544 4554 5564 Men Women None Primary Secondary Medium Higher Yes No Yes No Yes No Yes No Yes No Yes No Yes No Yes No Table summary 854 Total Sample 5.5% 24.5% 27.9% 22.1% 20.0% 49.6% 50.4% 2.6% 25.1% 23.7% 15.8% 32.9% 15.8% 84.2% 44.5% 55.5% 66.2% 33.8% 36.2% 63.8% 62.1% 37.9% 55.7% 44.3% 64.2% 35.8% 38.1% 61.9% 427 (50%) With nascent entrepreneurial activity 5.6% 29.0% 30.7% 20.1% 14.5% 54.8% 45.2% 0.9% 21.8% 23.0% 15.9% 38.4% 20.8% 79.2% 55.5% 44.5% 73.5% 26.5% 24.4% 75.6% 61.4% 38.6% 56.9% 43.1% 84.8% 15.2% 50.1% 49.9% 427 (50%) Rest (control) 5.4% 19.9% 25.1% 24.1% 25.5% 44.5% 55.5% 4.2% 28.3% 24.4% 15.7% 27.4% 10.8% 89.2% 33.5% 66.5% 58.8% 41.2% 48.0% 52.0% 62.8% 37.2% 54.6% 45.4% 43.6% 56.4% 26.0% 74.0%

Gender Education level

Entrepr. exper. Role models Desirability Fear of failure Social aceptability Social legitimacy Self-efficacy Opportunities

Note: Description of the sample used.

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Table A3 Correlation matrix (independent variables and nascent entrepreneurial activity)

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