Students’ Entrepreneurial Intention 1

Running Head: STUDENTS’ ENTREPRENEURIAL INTENTION

Comparison of Entrepreneurial Intention Level between Overseas

Scholarship Recipientsand Local Students in Taiwan

Karen Ochaeta

NationalChiao-TungUniversity

Abstract

Entrepreneurship, understood as the creation of new independent firms, is driven by different motivations and people’s attitudes toward this behavior. To better understand the motivations to become an entrepreneur, some researchers have built an entrepreneurial intention model that is a valid tool to measure the entrepreneurial intention level. Nevertheless situational factors that were not considered in this model also affect the intention, and to assess the effect of it, subjects from different cultural environments: overseas students from developing countries with scholarship (n=28) and local students in Taiwan (n=28), both from the second year of a graduate programme, were tested under the model mentioned. The results indicate that there is a direct relationship between the experiences gained during the graduate career and the intention level, although the degree of association was greater for overseas students. The way the participants perceive the importance of academic knowledge on choosing entrepreneurship as a career option is discussed as well as suggestions for future research.

Comparison of Entrepreneurial Intention Level between Overseas Scholarship Recipients and Local Students in Taiwan

Although there are several studies that emphasize the relationship that exists between student’s attitudes toward entrepreneurship and their working experience, educational background, personality,socioeconomic and family influences among others, the influence of situational factors such as the experience gained during the participation in an overseas scholarship programme has been poorly addressed. According to Liñán, Rodríguez, and Rueda(2005), ‘Entrepreneurship is becoming an important instrument to promote economic growth and development in different regional and national economies’ (p.1); this premise is relevant to the present research, since the motivation is to investigate if entrepreneur intention of students from developing countries is influenced by the experience and knowledge acquired during the scholarship programme in Taiwan, taking as a point of reference the local students’ intention level. The hypotheses formulated are aimed at suggesting that there is a significant difference between the entrepreneurial intention levels of those two students’ samples, andthat the specific experience gained during the participation in the graduate programme has a direct relationship with the decision of pursuing a career as entrepreneur in the future. The following literature review shows that several studies have been conducted to establish the factors affecting entrepreneurial intention levels of different samples of students, and how their backgrounds and attitudes are related to the decision making process.

Entrepreneurial Intention Model

In the psychological approaches to measure entrepreneurial intention has been highlighted that entrepreneurship is a way of thinking that emphasizes opportunities over threats (Krueger, Reilly, and Carsrud, 2000). According to the authors, intentions are the best predictors of planned behavior, particularly when that behavior is hard to observe and involves unpredictable time lags. Since new businesses emerge over time and involve considerable planning, entrepreneurship is exactly the type of planned behavior for which intention models are ideally suited. Krueger et al. (2000) took previous studies on this subject and tested the models that were developed so far in a sample consisted of students subjects facing imminent career decisions. Their results offered strong statistical support of the theory of planned behavior, which states the effectiveness of measuring intentions to predict future behavior.

Knowing that educational background plays an important role in determining the intention level of becoming entrepreneur, an article written by Douglas and Shepherd (2002) where they hypothesized that “people choose to be self-employed if the total utility they expect to derive (via income, independence, risk bearing, work effort, and perquisites associated with self-employment) is greater than the expected utility from their best employment option”, can be used as a reference to design the questionnaire to find out what is the level of entrepreneurial intention among the sample of students. Since their work substantially expands the understanding of what drives the intention to become an entrepreneur using an empirical test, it can be used as a starting point to establish the main factors influencing this decision making process. Based on the following hypotheses, the authors conducted a multivariate analytical approach to test them: (1) people’s attitudes to work affect their career choice – people derive disutility from work effort (i.e. they are work averse); (2) the more positive (or less negative) the attitude to work effort the higher the entrepreneurial intention; (3) people’s attitude to risk affect their career choice; (4) the more positive the attitude to risk the higher the entrepreneurial intention; (5) people’s attitude to independence affect their career choice, and (6) the more positive the attitude to independence the higher the entrepreneurial intention. All of these hypotheses were tested using a sample of ninety-four students graduated with their Bachelors of Business degree of an Australian university, and to determine if the attitudes toward work, risk, independence and income affected entrepreneurial intention, a regression analysis was used. The results provided support for hypothesis 3, 4, 5 and 6, which indicate that individuals’ attitudes toward risk and independence significantly affect entrepreneurial intention, meanwhile there was no significant difference in entrepreneurial intention explained by work effort (therefore no support for hypothesis 1 and 2) (Douglas and Shepherd, 2002).

Another important contribution from the literature is the results of the research done by Segal, Borgia and Schoenfeld (2005); it indicates that tolerance for risk, perceived feasibility and net desirability significantly predict self-employment intentions, as shown in Figure 1. The research support the suggestion that event though an individual might find engagement in entrepreneurial activity desirable and has the self-confidence to do so, it is also important that the person has a relatively high tolerance for risk in order to engage in such activity.

In order to determine the possibility of a person becoming an entrepreneur in the future, the intention becomes the fundamental element towards explaining the future behavior; it indicates the effort that the person will make to carry out that entrepreneurial behavior, as explained by Liñán et al.(2005). In their research paper, these authors conducted an empirical analysis supported by a sample of 354 last-year course undergraduate students from Business Sciences and Economics of two public universities in Spain. An Entrepreneurial Intention Questionnaire (EIQ) was developed to allow the statistical validation of the data, using factor analysis and regression techniques to reach a final model in which five significant explaining variables were studied, as entrepreneurial knowledge, personal attitude, perceived social norms, perceived feasibility and objectives. Their findings were that individuals with high entrepreneurial intention do not really think about growth as a key feature for success, do not prefer remunerative jobs, and do not have much attraction for being entrepreneur; although the latter relationship was against their a priori expectations, by changing the factors in the questionnaire, they found that individuals with high entrepreneurial intention find more advantages than disadvantages in being entrepreneur. An interesting point to mention is the negative and weak (-0.18) correlation between personal attitude and the preference for remunerative jobs. That means that individuals with fewer preferences for remunerative jobs would tend to have higher entrepreneurial intention, though this correlation is very slight, consequently, their opinion is that these two factors cannot be seen as opposite. Based on their results and the previous literature related to this subject, the researchers built an entrepreneurial intention model in which is stated that the intention to become an entrepreneur depends on personal attraction towards entrepreneurship, and perceived feasibility (self-efficacy).

The study of Paasio and Pukkinen (2006)suggests that there are certain factors that seem to be in association with entrepreneurship. Their research aim at identifying individual features that may distinguish entrepreneurs from wageworkers and the theoretical background is based on the assumption that becoming an entrepreneur is intentional behavior. They focused on work experience and education to find out the features that would be predictive of entrepreneurial behavior, and their research population was defined as employees and entrepreneurs with a university degree in either business economics or engineering. They suggest that the line of education play an important role when a person has to choose a career since it has been found that entrepreneurial activity is higher among the faculties which are providing professional and vocational training. One of their conclusions is that academic education does not provide for, or individuals do not perceive it providing for enough skills and know-how to establish an own business soon after graduation, especially because newly graduated individuals may not recognize how their university qualification can be turned into a profitable business idea, therefore, another factors have to be considered, as working experience and demographics (Paasio and Pukkinen, 2006).

Following the same pattern of research methodology, another study made by Liñán and Chen (2006) attempted to measure the entrepreneurial intention of two different samples of students: one of them European (from Spain) and the other South Asian (from Taiwan). Their purpose was to test the adequacy of the Entrepreneurial Intention model (Liñán et al., 2005) using a cross cultural approach. The characteristic of the sample was: last year university students of business and economics. To evaluate the data obtained from the surveys, an exploratory factor analysis was carried out to check the correspondence of the indicators used (attitudes toward the behavior or personal attraction, perceived social norms, and perceived behavioral control or self-efficacy) with their theoretical constructs. One limitation of using a cross cultural sample was the identification of bias in the interpretation of the questions, which could be associated with external demographic variables. To avoid this problem, control variables were included as explaining personal attraction, social norms and self efficacy.

In order to measure the impact of studying abroad, for those students under a Scholarship Programme, the article of Legget, K. (2007) gives a better understanding of what are the motivations of students that have participated in international career programmes. Some of those students have identified opportunities of innovation and availability of resources in the foreign countries that have enabled for them the possibility of starting a business. On the other hand, the article mentions that prospective employers place a significant value on education abroad that could have a negative impact on the intention of an individual to become an entrepreneur.

All of the investigations mentioned above conclude that (a) intentions are the single best predictor of any planned behavior, including entrepreneurship, and (b) intentions and attitudes depend on the situation and person. This gives place to the development of research questions and hypotheses of this study. Since individuals studying a career in a foreign country under specific circumstances -as is the case of overseas students under a scholarship programme in Taiwan- and those studying in their own country –Taiwanese students in this case-, face different situations while pursuing the same goal (to obtain a graduate diploma), they might have different entrepreneur intention level, influenced as well by their cultural background. The way this specific situation is related to the intention level, will be tested through the Entrepreneurial Intention Questionnaire developed by Liñán and Chen (2006) plus specific questions that aim to measure the perceived influence that the graduate education has on the decision of becoming an entrepreneur in the future.

Research Questions

  1. The difference between the level of entrepreneurial intention of two groups of students –local and overseas- can be used to determine the influence of international education experience on entrepreneurial behavior?
  1. Are the entrepreneurial attitude and intentions among overseas scholarship recipients in Taiwan influenced by theexperience gained during the programme?
  1. Are the entrepreneurial attitude and intentions among overseas scholarship recipients in Taiwan influenced by the knowledge acquired during the programme?

Hypotheses

  1. There is a significant difference between the entrepreneurial intention level of Taiwanese students and overseas scholarship recipients studying in Taiwan.
  1. The perceived influence that the experience of graduate education has over entrepreneurial intention is different between local and overseas students in Taiwan.
  1. There is a direct relationship between the experience of graduate education and the entrepreneurial intention level.

Method

Participants

28Local (Taiwanese) students and 28 overseas scholarship recipients were asked to fill the Entrepreneurial Intention Questionnaire showed in the Appendix section.

Since the questionnaires were given personally, the response rate was 100%. The sample was selected from second year students of the following careers: Master in Technology Management, Master in Computer Science, and Master in Industrial Engineering.

Overseas students were from different developing countries: 70 percent of them from Latin America and the Caribbean and the rest from Asian countries as Indonesia and Vietnam. 52 percent were women, and the range of age was 21 to 27 years old, with an average working experience of 2.5 years.

From local students, 55% were women; the range of age was 22-24 years old, with an average working experience of 2 years.

Measures

The entrepreneurial intention level of the sample was measured by the main sections of the Entrepreneurial Intention Questionnaire developed and tested by Liñán and Chen(2006). The questionnaire uses a Likert scale of 1 to 7, being 1 ‘total disagreement’ and 7 ‘total agreement’; it is divided in 4 sections:

1 – Professional Attraction (5 questions)

2 – Entrepreneurial Capacity (4 questions)

3 – Entrepreneurial Intention (4 questions)

4 – Influence of graduate education experience (8 questions)

The last section contained questions aimed to identify the relationship between the knowledge acquired during the graduate education and the entrepreneurial intention level.

Procedure

The questionnaire was given personally to the subjects of the sample, selected randomly on each of the Departments mentioned before.After collecting the 56 questionnaires, the results were computed; each section of the questionnaire was analyzed one by one, by calculating the average punctuation of each section for every subject.

To compare the answers of both local and overseas students, and test the hypothesis 1, the results of the average rate from section 1 to 3 were compared using T-test analysis. Version 9.1 of the software package SAS (Statistical Analysis System) was used to generate the results. The entry data was organized as shown in Figure 2, where L means Local and O means overseas. Each X value represents the average of the ratings given to each section.

To evaluate the relationship between the influence of graduate education experience (both local and international) a correlation analysis in Excel was done between the data from the section 4 and the data from section 3, being section 3 (Entrepreneurial Intention) the dependent variable.

To find a pattern between the 4 factors studied, another correlation analysis was of the questionnaire the other 3 sections (1 to 3), generating the following pairs of data:

-Relationship between section 1 (professional attraction) and section 3 (Entrepreneurial Intention), being the last one the dependent variable.

-Relationship between section 2 (entrepreneurial capacity) and section 3 (Entrepreneurial Intention), being the last one the dependent variable.

-Relationship between section 3 (influence of graduate education experience) and section 2 (entrepreneurial capacity) being the last one the dependent variable.

Results

Hypothesis 1

Ho = There is no significant difference between the entrepreneurial intention level of Taiwanese students and overseas scholarship recipients studying in Taiwan.

Ha = There is a significant difference between the entrepreneurial intention level of Taiwanese students and overseas scholarship recipients studying in Taiwan.

The results of the T-test analysis for the equality of variances when comparing the data from section 3 of the questionnaire (entrepreneurial intention) was Pr > F (0.7644), that means that the variances are equal and the pooled method had to be used to test the differences between the two means for each of the subjects. According to the final result, that is (Pr > t) < =0.05, the difference between the entrepreneurial intention level between local and overseas students is statistically different, then, the null hypothesis is rejected and the hypothesis 1 is supported. (See Figure 3 for the results generated by the program).

Hypothesis 2

Ho = There is no significant difference between the perceived influence that the experience of graduate education has over entrepreneurial intention for local and overseas students in Taiwan.

Ha = There is significant difference between the perceived influence that the experience of graduate education has over entrepreneurial intention for local and overseas students in Taiwan.

The results of the T-test analysis for the equality of variances when comparing the data from section 4 of the questionnaire (influence of graduate education experience) was Pr < F (0.0293), that means inequality of variances and the Satterthwaite method was then used to test the differences between the two means for each of the subjects. According to the final result, that is (Pr > t) < =0.05, the difference between the influence of graduate education experience between local and overseas students is statistically different, then, the null hypothesis is rejected and the hypothesis 2 is supported. (See Figure 4 for the results generated by the program).

The general results are detailed in Table 1.

Hypothesis 3

There is a direct relationship between the experience of graduate education and the entrepreneurial intention level.

Supporting the hypothesis 3 are the results from the correlation analysis between data from section 3 (entrepreneurial intention-dependent variable) and section 4 (influence of graduate education experience). For local students, the value of the correlation coefficient is 0.56, and for overseas students is 0.86. There is a direct relationship between both variables –entrepreneurial intention and perceived influence of graduate education experience- but for overseas students the relationship is strong whereas for local students the relationship is weak.