Business Startup Motives and Growth Expectations of MSEs: The Mediating Role of Entrepreneurial Orientation

Abstract

New venture creations have been considered as importance for the economic growth of any country because of its contribution to the Gross Domestic Production, diversification of local economy, employment generation, creation of innovations and value additions. Though a large number of new venture creations occur every year in Sri Lanka, recent research findings highlighted that a smaller percentage from those were able to grow and survive. Hence, number of business establishments cannot be considered as a meaningful indicator of economic growth of the country and why such a high failure rate was reported has become a crucial issue. Past studies revealed that business startup motives of the entrepreneur effect on the growth and survival of the SMEs. However, concentration on the impact of business startup motives on the success and survival of newly established ventures is lacking. Further, Entrepreneurial Orientation plays a crucial role in directing the business towards success. However, still there is a gap in the literature relating to the mediating role of the entrepreneurial orientation in the link between start-up motives and new venture success. Therefore, present study attempted to answer the research questions as; is there a significant relationship between the business startup motives and growth expectations; is there a significant difference exists in growth expectations between the necessity driven and opportunity driven entrepreneurs; and whether Entrepreneurial Orientation plays a mediating role. Independent Sample T test and Structural Equation Modeling (SEM) were applied to test the hypotheses based on a sample of 120 micro and small-scale entrepreneurs from Southern province of Sri Lanka. Findings revealed that there is a significant difference between the necessity driven entrepreneurs and opportunity driven entrepreneurs in terms of proactiveness, competitive aggressiveness, and autonomy. Results show that there is no any significant difference exist in growth expectations between the necessity driven entrepreneurs and opportunity driven entrepreneurs and Entrepreneurial Orientation partially mediates the relationship between business startup motives and growth expectations.