What obstacles do entrepreneurs encounter?
| Published date | 14 October 2014 |
| DOI | https://doi.org/10.1108/JEPP-08-2012-0041 |
| Date | 14 October 2014 |
| Pages | 275-291 |
| Author | Monia Lougui,Kristina Nyström |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
What obstacles do entrepreneurs
encounter?
Monia Lougui and Kristina Nystro
¨m
Department of Industrial Economics and Management,
The Royal Institute of Technology, Stockholm, Sweden
Abstract
Purpose – The purpose of this paper is to identify the obstacles encountered by current and potential
entrepreneurs. The authors explore the areas associated with starting and running a business in which
entrepreneurs find difficulties. Furthermore, the authors explore which entrepreneurs experience most
difficulties. What issues do entrepreneurs in different sectors need help with? What issues do
entrepreneurs with different current positions in the labor market need help with?
Design/methodology/approach – The authors use a unique database that includes information
regarding the questions that entrepreneurs ask when they call a government helpline established to
provide information about how to start and run a business. The database consists of more than 30,000
observations during the period from 2005 to 2009.
Findings – The results indicate that aside from general questions and concerns, taxes, laws and
permits are the issues with which entrepreneurs most frequently need help. The autho rs do not find
any gender differences regarding the ne ed for help. Cur rently or future unemployed entrepreneurs
more often need help related to financing, grants and business plans. Self-employed
entrepreneurs need help with issues related to operating the firm, such as questions regarding
employment, accounting, permits and laws.
Originality/value – The research provides unique insights into the problems that entrepreneurs
encounter during the entrepreneurial process. Hence, the paper identifies areas in which better o r
additional counseling and support from public policy agencies may be ne eded to improve the
development and performance of new ventures.
Keywords Entrepreneurs, Business development, Industrial policy
Paper type Research p aper
1. Introduction
The relationship between entrepreneurship and economic growth has been of g reat
interest to researchers and policymakers during recent decades. Empirical research
indicates that entrepreneurship is important for generating productivity and economic
growth in the long term (see, e.g. Nystro
¨m, 2008a; van Praag and Versloot, 2007, for
an overview of this literature). Acknowledging the role of entrepreneurship in
economic dynamism and growth has led governments to implement numerous policy
initiatives to support small businesses and stimulate the creation of new ventures. The
Swedish government is no exception. The Swedish government has expressed an
explicit goal of increasing the number of new and growing firms (Ministry of
Enterprise, 2013), and in 2009, it spent about 17 million Euros to support small
businesses (Growth analysis, 2011).
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/2045-2101.htm
Received 10 August 2012
Revised 19 June 2013
Accepted 19 June 2013
Journal of Entrepreneurship and
Public Policy
Vol. 3 No.2, 2014
pp. 275-291
rEmeraldGroup Publishing Limited
2045-2101
DOI 10.1108/JEPP-08-2012-0041
The authors would like to thank Viktor Jedeskog and Kalle Westberg at the Swedish Agency for
Economic and Regional Growth for providing us with data and valuable information about the
helpline and with the funding to enable us to work with the database. The views and opinions
expressed in this paper are those of the authors and do not necessarily reflect the opinions of the
Swedish Agency for Economic and Regional Growth. Furthermore, the authors would like to
thank the three anonymous referees for their valuable suggestions.
275
What obstacles
do entrepreneurs
encounter?
Even though Sweden is a country where the population perceives that it has the best
entrepreneurial opportunities[1], it ranks quite low in terms of entre preneurial activity,
with about 6 percent of the population involved in early stage entrepreneurial activity
(Xavier et al., 2013). In addition, starting a new venture is generally perceived to be
difficult by many Swedes. In fact, a majo rity of the Swedish population thinks that it
is difficult to start a business (Swedish Agency for Economic and Regional Growth,
2013)[2]. Furthermore, there seems to be a lack of confidence with respect to their
perceived entrepreneurial capabilities. Less than 40 percent of the Swedish population
perceives that they have the capabilities required to become an entrepreneur (Xavier
et al., 2013). This figure is among the lowest within the EU countries.
Despite the perceived opportunities, potential Swedish entre preneurs seem to face
obstacles to entrepreneurship. For many entrepreneurs, the initial stages of the
business creation process are extremely challenging, and a majo rity of new firms
do not survive their first five years (e.g. Geroski, 1995; Shane, 2009). The challenges
involved include, for example, getting access to the right human, social and physical
capital. During these difficult initial stages of the entrepreneurial process,
entrepreneurs often seek external guidance and assistance. W hat sources of advice
and assistance do potential entrepreneurs tur n to? According to a survey by the
Swedish Agency for Economic and Regional Growth, apart from relatives and
friends, different government agencies (such as tax authorities and the Swedish
Companies Registration Office) are the primary sources of assistance from which
Swedes seek out information about starting a business (Swedish Agency for Economic
and Regional Growth, 2013).
Hence, government agencies are an important source of info rmation and assistance
for entrepreneurs. To design an adequate and efficient entrepreneurship policy, it is
important for policymakers to know what obstacles entrepreneurs face and what
needs they have. What are the questions that entrepreneurs most frequently ne ed
help with, and what do different types of current or potential entrepreneurs need help
with in the entrepreneurial process? In this paper, we use a unique database collected
by the Swedish Agency for Economic and Regional Growth to analyze the issues with
which current and potential entrepreneurs need help. The database consists of 33,315
observations collected during the period from 2005 to 2009 and conta ins information
about the characteristics of entrepreneurs and the questions that they ask when calling
a government helpline for entrepreneurs.
Existing research on which obstacles entrepreneurs encounter is primarily based on
surveys of active or nascent entrepreneurs (see , e.g. Lorrain and Laferte
´, 2006; Yusuf,
2010). In addition, there are research initiatives to identify obstacles based on surveys
of entrepreneurship experts, such as the national expert su rvey conducted in the
Global Entrepreneurship Monitor (GEM) framework. Finally, there are initiatives from
organizations, such as the World Bank[3], to measure and rank the conditions for
starting and running a business. However, the use of information from a government
helpline to identify the obstacles to entrepreneurship is, to the best of our knowle dge,
unique. This database enables us to explore the obstacles entrepreneurs encounter, and
hence, this paper can provide valuable information on the areas in which entrepreneurs
need better or additional counseling and suppor t from, for example, public policy
agencies to initiate the start-up process or improve the development and perfo rmance
of their ventures.
This paper is organized as follows: Section 2 discusses the conditions for
entrepreneurship, with a focus on Sweden, and the role of public policy in stimulating
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