Ex-entrepreneurs: an elusive group driving sampling considerations.

Askim, Mary K. ; Feinberg, Richard A.

ABSTRACT

The purpose of this paper is to highlight the difficulties in researching the ex-entrepreneur and to provide a rationale for the use of college students in theoretically-driven research in the area of entrepreneurial failure. Three areas are addressed: (1) the difficulty in locating failed entrepreneurs, (2) obtaining a high response rate from this group, and (3) shortcomings of the data. The areas of research presented that support the efficacy of using college students in this type of study include: (1) students are appropriate subjects for tests of theory in social science, (2) students have been used in entrepreneurial research in the past, (3) students are entrepreneurs, and (4) students have accumulated enough experiences to project themselves into real-life situations and can make decisions that reflect what older adult-subject populations might make.

INTRODUCTION

How can you research a population group when it is extremely difficult to find an adequate sample? Does that thwart research in that area? Or are there alternatives in theoretically-driven research?

The population of interest for these authors' research was the ex-entrepreneur, an often elusive group. Past research on the entrepreneur who has failed has been limited and has been generally descriptive, not empirically-based. Because of the limitation, this research intended to expand the theoretical base for understanding the relationship between entrepreneurial failure and what may happen next in the entrepreneur's life.

Despite the limitations that have occurred and the limitations that may still prevail with researching the ex-entrepreneur, the failed entrepreneurial venture and the entrepreneur provide an area that is rich for further study. The problems in finding ex-entrepreneurs for research necessitated the use of college students to extend the theory of attributional explanatory style to perceived outcomes after entrepreneurial failure. The purpose of this paper is to highlight the difficulties in researching the ex-entrepreneur and to provide a rationale for the use of college students in theoretically-driven research in the area of entrepreneurial failure.

RESEARCHING THE EX-ENTREPRENEUR

The literature on business failure has been extensive but has been less than notable concerning the impact of failure on the individual entrepreneur. This may be attributed to (1) the difficulty in locating failed entrepreneurs, (2) obtaining a high response rate from this group, and (3) lack of data analysis and anything other than descriptive statistics concerning the minimal data obtained.

Locating Ex-Entrepreneurs

"The epidemiology of entrepreneurship will never be complete until fatalities are studied and understood. Unfortunately, very few post-mortems have been conducted. When it comes to 'discontinued' entrepreneurial careers, the cadavers have a way of disappearing" (Ronstadt, 1985, p. 409). Wicker and Conn (1990) aptly noted the analogy of finding ex-entrepreneurs as similar to that of a detective searching for a missing person. What may precipitate the ex-entrepreneur to literally vanish without a trace?

When exiting a business has come as a result of bankruptcy or other financial problems, the ex-entrepreneur may want to be as far removed from the locale as possible in order to avoid creditors. The business individual may also see the exiting as a personal failure. The difficulty of facing business associates, friends, and others who were supporters throughout the venture may create a strain the ex-entrepreneur would sooner avoid.

Some of the first work specifically concerning ex-entrepreneurs was done by Ronstadt and Brockhaus. Ronstadt's initial research (1981) focused on development of the entrepreneurial career path model. His 1982 research concerned the timetable surrounding the selection of an entrepreneurial career, when it happened, how long was the career, and if and when the decision was made to exit. Of 191 Babson College entrepreneurs, 25 were found to have exited their entrepreneurial careers and another 16 had exited at one time but resumed it later. Ronstadt (1984) surveyed approximately 3500 Babson College alumni to find an initial sample of about 200 ex-entrepreneurs. Those actually responding were the basis for further descriptive analysis (Ronstadt, 1985).

Brockhaus (1985) attempted to contact from an earlier pool of respondents, 93 businesses that had been licensed during a two-month period the summer of 1975. Sixty of the entrepreneurs were unable to be located by using the business' original name and location and the entrepreneur's name listing in the telephone directory. Further inquiry with neighboring businesses did not result in their discovery. It was determined that these businesses had failed with no viable means with which to contact the ex-entrepreneurs. Of the 33 remaining businesses, 22 were still operating, leaving a sample of 11 ex-entrepreneurs with which to base the study.

Other than the logical aforementioned methods of investigation using the business' original name and address, telephone directories, and talking to neighboring businesses, some other strategies may be slightly more effective in locating the ex-entrepreneur such as requesting an address correction from the post office when contacting by mail.

The use of different methods for locating ex-entrepreneurs is only part of the strategy. When comparing across the studies the success of locating, the shorter the period of time from exiting a business venture to being contacted improved the chances of being found. When years have passed since the exit, the researcher may need to have the mindset of a detective to find the missing person, the ex-entrepreneur.

Difficulty with Response Rate

Compounding the problem of locating ex-entrepreneurs, is the difficulty with obtaining responses from those who were found. Though there have been exceptions to this, most studies have had extremely small samples (Brockhaus, 1980a, 1985; Meyer, Zacharakis, & De Castro, 1993; O'Neill & Duker, 1986).

A 1980 study by Brockhaus looked at how psychological and environmental factors may differ between the successful and unsuccessful entrepreneur. The sample was individuals who had left their places of employment and had opened their own businesses within three months prior to the study. It is only reported how many of these entrepreneurs returned completed questionnaires, that number being 31. Three years later, this group was contacted for further interviews. Of those that could be located, they were subdivided into two groups, successful and unsuccessful entrepreneurs. Again with no reporting of sample size for each of the two groups, taking into account the researcher's recognition that all were not located and then dividing that number into the two groups, sample size is extremely low.

Both Brockhaus (1985) and O'Neill and Duker (1986) based their studies on 11 respondents. Of 93 entrepreneurs identified in 1975, ten years later 60 could not be found, 22 were still in business, and 11 had left their businesses which constituted the Brockhaus' database. In assessing the strategic management of failed and successful small businesses, O'Neill and Duker had only 11 respond with usable questionnaires after mailing to 142 bankrupt firms. Location of these ex-entrepreneurs also had posed a problem since 30 percent of the questionnaires were returned as undeliverable.

A notable exception to the difficulty of obtaining a respectable response rate from ex-entrepreneurs is a descriptive study done by Ronstadt (1986). Ronstadt's study on the characteristics of entrepreneurs from Babson College who had exited their venture career started with a sample of 200 ex-entrepreneurs. Ninety-three questionnaires were usable, a 47 percent response rate.

While the majority of the limited research concerning ex-entrepreneurs has had dismal success with obtaining an adequate sample, it is evident that multiple measures and attempts can increase the chance of locating these individuals and increasing their response to a form of inquiry.

The nature of the information to be gathered may be a strong determinant as to why ex-entrepreneurs tend to not respond to inquiry. To be asked why you failed, what was your management style, and other questions that may reflect on the personal failure issue, are things they may prefer not to share. The personal and professional sacrifices entrepreneurs undertake outside of the business venture may compound the problems associated with, the reactions to, and the perceptions of the impact the business failure has had on their lives.

Shortcomings of the Data

The problems in researching entrepreneurs in general, and failed entrepreneurs in particular, pose very specific problems for conducting research. With extremely small sample sizes, limitations are placed on any analysis other than descriptive statistics; therefore, descriptive statistics have been the mainstay of ex-entrepreneurial research.

Several studies (Brockhaus, 1985; Meyer et al., 1993; Ronstadt, 1984, 1985, 1986) reported only frequencies, percentages, means, and/or rankings. Meyer et al. went as far as to state that the hypotheses proposed in the study would not be supported with larger samples (from frequency data based on interviews with eight ex-entrepreneurs). The inferences made from such descriptive data go beyond the limitations of the data and its interpretation capabilities.

The inferential statistics that were used in another study, along with a previously mentioned study, provided their own limitations with the small sample sizes. The power of statistical analysis has been limited with testing hypotheses by nonparametric measures and/or with small samples (Brockhaus, 1980a; O'Neill & Duker, 1986).

Since ex-entrepreneurial research is a relatively new field of study, the exploratory research that continues to be done may seem justified in order to determine the "lay of the land" in this territory. But when frequencies and percentages are reported in a manner that may imply their statistical significance, the research base does not move forward.

Another limitation in the ex post facto research of business discontinuance, is that subjects can select themselves into this group by deciding whether or not to respond creating a self-selection bias for the validity factor. They may have specific reasons for wanting to share their experiences or for not wanting to. It may have been a positive experience in that lessons were learned, more avenues were opened, and support systems were extended. On the contrary, it may have been a debilitating experience. Financial losses were great, career hopes were destroyed, relationships suffered, and self-confidence faltered.

STUDENTS IN THEORETICALLY-DRIVEN RESEARCH

The problems in finding "real and actual" ex-entrepreneurs for research necessitated exploration of whether or not college students could be used to assess the relationship between explanatory style and the perceived outcomes of entrepreneurial failure. There are four areas of research and thinking that support the efficacy of using college students in this type of study: (1) students are appropriate subjects for tests of theory in social science, (2) students have been used in entrepreneurial research in the past, (3) students are entrepreneurs, and (4) students have accumulated enough experiences to project themselves into real-life situations and can make decisions that reflect what older adult (beyond the age of the "traditional" college student) subject populations might make.

Use of College Students in Theoretical Research

With the use of college students in this area of research, it was not the intent to make generalizations to the ex-entrepreneur population, but rather to extend theory to a new area of application, entrepreneurial failure. There is a broad and consistent literature that supports the use of college students in theoretically-driven research.

Berkowitz & Donnerstein (1982), Calder, Phillips, and Tybout (1981, 1983), McGrath & Brinberg (1983), and Mook (1983) argue that samples need not be representative if one is testing a prediction rather than making one. When samples are not representative of the population, then the issue of external validity arises. Campbell and Stanley (1963) suggest that students be used only when they represent (in interest, experience, or frame of reference) the target population. Only then can generalizability of the results to the population be made. If the intent of this research was to generalize to the population of ex-entrepreneurs, then external validity would be an issue. But when the basis of the research is to test the application of combining theory to entrepreneurial situations in a controlled experimental setting, this relates to the generalizability of theory application that Calder et al. (1981, 1983) discuss.

Calder et al. (1981, 1983) contend there are two types of generalizability, effects application and theory application. Effects application relates to specific effects that would be replicated in subsequent studies of other populations and settings. Theory application "... uses only scientific theory to explain events beyond the research setting. Effects observed in the research are employed to assess the status of theory. But it is the theoretical explanation that is expected to be generalizable and not the particular effects obtained" (1981, p. 197). In order for the theoretical explanation to be generalizable, the theory must survive attempts at falsification and attempts must be made to extend or falsify theory to business context.

Calder et al. (1981) assert that the best sample for this type of study should be homogeneous on dimensions that would most likely influence the variables of interest. Homogeneous samples (such as students) provide a more viable basis to make theoretical predictions; a heterogeneous sample weakens the testing of the theory and increases the chance of making a Type II error. Calder et al. (1981) are adamant that a representative sample is not needed when testing theory. "The research sample need only allow a test of the theory. And, any sample within the theory's domain (e.g., any relevant sample), not just a representative one, can provide such a test" (p. 200). The use of college students, homogeneous on a dimension of entrepreneurial attitude (i.e., innovation), would satisfy this criterion. [Note: Students were provided the Entrepreneurial Attitude Orientation scale developed by Robinson et al. (1991). Those respondents above the median split on the innovation dimension were used for the study. The innovation dimension is the stronger dimension for U.S. entrepreneurs in comparison with entrepreneurs from other countries (Robinson, personal communication, January 15, 1999)].

Use of College Students in Entrepreneurial Research

Entrepreneurial research has used college students as subject populations successfully. Three areas of research noted include instrument development, determining entrepreneurial and nonentrepreneurial characteristics, and factors affecting entrepreneurial career aspirations.

Robinson et al. (1991) developed the Entrepreneurial Attitude Orientation (EAO) scale using college undergraduate students from introductory psychology classes in the instrument's development. The EAO scale was subsequently validated by known groups of entrepreneurs and nonentrepreneurs. The entrepreneur group was those "who had started at least one business within the past five years and had started other businesses at other times in their careers" (p. 21); the nonentrepreneur group was not currently or had ever in the past been engaged in starting a business. It was found that the scale developed using undergraduate students did reveal significant differences between the two groups on each of the four subscales (achievement, self-esteem, personal control, and innovation).

Along with using college students to develop an entrepreneurial attitude orientation instrument, college students have been the samples in studies assessing entrepreneurial characteristics. Koh (1996) used MBA students to assess entrepreneurial characteristics of need for achievement, locus of control, risk-taking propensity, tolerance of ambiguity, self-confidence, and innovativeness. Significant differences were found with the characteristics of risk-taking propensity, tolerance of ambiguity, and innovativeness between those students who had entrepreneurial and nonentrepreneurial intentions.

Other studies have also used college students as subjects to understand entrepreneurial and nonentrepreneurial characteristics. In particular, Sexton and Bowman have used college students extensively in their research. Sexton and Bowman (1983a, 1984) found differences in entrepreneurial characteristics among business majors, business majors that had taken an entrepreneurship course, entrepreneurship majors, and nonbusiness majors; and they looked at the comparison of personality characteristics among female entrepreneurship majors, business students, entrepreneurs, and managers (Sexton & Bowman, 1986) and between entrepreneurship and nonentrepreneurship students (Sexton & Bowman, 1983b). Differences were found that distinguished entrepreneurship students and entrepreneurs from the other groups.

Entrepreneurial career development has also been a research area where undergraduate and/or graduate students have been used as subjects. Determining work values and career intentions in relation to organizational employment versus entrepreneurship (Brenner, Pringle, & Greenhaus, 1991); examining entrepreneurial intentions, gender, education, having an entrepreneurial parent, and a proactive personality and their relationship with entrepreneurial careers (Crant, 1996); the impact of a family business on entrepreneurial intentions and attitudes (Krueger, 1993); and understanding what factors are influential in developing entrepreneurial career aspirations (Scott & Twomey, 1988) are examples of such research.

College Students as Entrepreneurs

While students are in the midst of their academic careers, many become entrepreneurs by initiating business ventures on the sidelines. Several student organizations, such as The Association of Collegiate Entrepreneurs (ACE), the Collegiate Entrepreneurs Organization (CEO), and Students in Free Enterprise (SIFE) promote the development and success of these young entrepreneurs.

Though it has been difficult to find research on entrepreneurs who are college students (other than the previously cited works on entrepreneurship college majors), there are numerous articles in the popular press documenting the trend of students, both college and high school, launching businesses (Aley, 1997; Gendron, 1998; Madison, 1994; Miniter, 1997; Oliver, 1995; Rozen, 1994). Probably some of the most notable have been in the computer industry (Apple and Dell), and with Yahoo, an Internet search engine, founded by two graduate students from Stanford University (Stross, 1998; Yang, 1997).

Life Experiences of College Students

Though there is a growing number of students who have engaged in starting their own businesses, and students have been used in previous entrepreneurial research, the question still remains whether these individuals have been exposed to enough life experiences that would enable them to make assessments about a major event such as a venture failure? Of particular relevance to this question is the work of Baum & Stewart (1990). Men and women, from the ages of 17 to 96 years, were asked questions concerning the number and types of meaningful life events they had experienced. These events reflected the personal and work areas of their lives. It was found that "... there were no dramatic differences in meaningful experiences whether a respondent was 25 or 85 yr. old" (p. 11).

Another argument to support the assumption that college students have experienced enough of life to project outcomes of certain major events, particularly venture failure, is that it is likely a representative number of them are in a family where the parents are, or were, owners of a business. With being a family member, the student has experienced what risks were involved in starting the business and how its daily management affected aspects of the family's well-being. Some may have even experienced the failure of the family business. From this first-hand experience, it is likely that students could project themselves into the situations presented to them in this research study.

CONCLUSION

Because of the difficulty of locating ex-entrepreneurs, students should serve as an appropriate sample in extending theory to the research area of entrepreneurial failure. In this particular situation, the application of attributional theory to a business situation, students were an appropriate sample for this theoretical research. It is not the authors' viewpoint that college students are a perfect substitute for the real thing. Entrepreneur research cannot exclusively use college students as subjects and believe that it has adequately studied the entrepreneur. Yet, prior research supports the notion that for certain theoretically-driven research, college students can be used to develop and uncover basic relations between variables. Ultimately, the generalizability of these relationships depends on testing the relationships with the population of interest.

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AUTHORS' NOTE

This paper was presented at the Midwest Business Administration Association 2001 Annual Meeting held in Chicago, IL, and earned the Distinguished Paper Award from the Operations Management and Entrepreneurship Association.

Mary K. Askim, University of North Dakota

Richard A. Feinberg, Purdue University