Title: Factors Influencing Small Business Start-ups in Bangladesh

Introduction

In recent years, entrepreneurship has become an important issue due to national economic
development and the contribution of society. The decision as an entrepreneur is determined by
certain factors, it is a planned action, instead of using it by mistake. In general, entrepreneurial
intent is defined as a mindset that directs a person's attention and action towards supporting
entrepreneurial behavior, developing a new business concept, and pursuing entrepreneurial
careers. (Haque, 2018)1

Through their initiatives, small business entrepreneurs create job in the society, promote capital
formation, increase the export trade, uphold balanced regional development, develop forward or
backward linkage among the industries and even ensure the equitable redistribution of wealth,
income and power (Hossain, 2006).2 Despite of having poor entrepreneurial heritage Bangladesh
has witnessed several remarkable value adding entrepreneurial growths of some giant indigenous
ventures. In addition, there are thousands of pioneering examples of SME enterprises that are
operating successfully in our urban and rural areas. But unfortunately, the growth in
entrepreneurial undertakings is not enough.

According to the Department of Youth Development (DYD)3, one third people of Bangladesh
are youth who are aged between18 to 35. Youth population is presently 50 million, almost 32.7%
of the total population. It has been estimated that the youth population is going to reach at 60
million in 2020. According to Begum (2011)4 two million young people are added to the labor
force every year while only 600,000 find real jobs. The report of 2011 Commonwealth youth
program (CYP), presented the most recent status of the youth employment in Bangladesh. The
worst part is, almost thirty five percent of the young people are partially employed or under
employed, and fully unemployed.

1
Haque, S. E. (2018). Factors Affecting Entrepreneurial Intention in Bangladesh. BRAC. Retrieved April 14, 2019,
from http://dspace.bracu.ac.bd/xmlui/bitstream/handle/10361/10320/12304045_BBA.pdf?
sequence=1&isAllowed=y
2
Hossain, D.M: “A Literature Survey on Entrepreneurs and Entrepreneurship in Bangladesh” Southeast University
Journal of Business Studies, Vol. II, No. 1, pp. 85-100. (2006)
3
www.dyd.gov.bd
4
Begum, Ferdaus Ara: “Growth of youth enterprises key to reducing unemployment” The Financial express, Dhaka.
(2011)
Therefore, this study attempts to examine the effects of behavioral attitudes, subjective norms,
perceived behavioral control, entrepreneurial education and personality traits, social, political
and economic context of behavioral change and other relative factors behind initiating small
entrepreneurial business in Bangladesh.

Research Gap

For the past decade, entrepreneurship has been one of the driving forces strengthening the
economy of the sub-continent. Small businesses have accounted for 60 to 80 percent of new jobs
in recent years (Small Business Administration, 2016) 5. Although research has been conducted
on the characteristics of small business owners, resources, start-up activities, and external
factors, there is a gap in understanding the gestation phase of new entrepreneurship.

Several extensive research works have been conducted on Bangladeshi entrepreneurs to identify
their background factors, psychological attributes and most importantly, the barriers they face as
entrepreneurs. But unfortunately, there has been no systematic attempt to look at
entrepreneurship from a youth viewpoint. But in Bangladesh it is relatively under-studied.

Literature Review

According to Chigunta (2002) young people, in order to bring in some economic and social value
in their life, can join entrepreneurship as it allows them to pursue independent livelihoods and in
self-esteem and happiness. The reasons for starting a business largely varies in developed nations
from developing nations (Gray, et al., 1995, Chigunta, 2002) 6. In North America, Europe and
Japan young people starts their own business ‘to be one’s own boss, with more control over
one’s own work and life; to obtain an alternative route for advancement from a dead-end job; to
obtain additional money; and to provide products not elsewhere available’. In contrast, this group
in developing countries enters into business ‘out of economic necessity or need to survive, or out
of failure to find productive use of their energy in other avenues’.

5
Small Business Administration (2016). New business start-up and subsequent entry into self-employment. Journal
of
Business Venturing, 21, 866-885.
6
Chigunta, F.: Youth Entrepreneurship: Meeting the Key Policy Challenges. Final Report Prepared for the Youth
Employment Summit, Wolfson College, Oxford University, England. (2002)
Behavioral intention is “a person’s subjective probability that he will perform some behavior”
(Fishbein & Ajzen, 1975).7 With both the theory of reasoned action and the theory of planned
behavior, Ajzen and Fishbein made a link between attitude, behavior, and intention. Although
many factors could affect behavioral intention, research suggests the most promising are attitude,
education and training, gender, and ethnicity (Krueger et al., 2000).8 By themselves, these factors
could positively or negatively affect the intention leading to a new venture. However, those who
decide to become self-employed make this decision with the influence of attitude, subjective
norms, and perceived behavior control.

Fishbein and Ajzen (1975)9 posited that an attitude is a reliable predictor of a future behavior.
Kolvereid and Isaksen (2006)10 cited Douglas and Shepherd who found the intention to be an
entrepreneur was stronger for those with positive attitudes toward risk or independence and it
was suggested that the role of psychological variables, one of them being attitude, had been
established by models from Bird, Shapero, and Ajzen’s theory of planned behavior.

Although several studies have included a gender variable, results have not shown a consistent
influence between gender and intention. Davidsson (2000) 11 concluded that maneuvering from
nascent to start-up entrepreneur was not related to gender. Cliff (1998)12 argued that female
entrepreneurs tend to have smaller business thresholds so they can balance personal life and
business life. Some women view the responsibilities of raising a family as a barrier for self-
employment (Mazzarol et al., 1999).13

7
Fishbein, M., & Ajzen, I. (1975). Belief, attitude, intention, and behavior: An introduction to the theory and
research. Reading, MA: Addison-Wesley.
8
Krueger, N.F., Reilly, M.D., & Carsrud, A.L. (2000). Competing models of entrepreneurial intentions. Journal of
Business Venturing, 15(5-6), 411-432.
9
Fishbein, M., & Ajzen, I. (1975). Belief, attitude, intention, and behavior: An introduction to the theory and
research. Reading, MA: Addison-Wesley.
10
Kolvereid, L., & Isaksen, E. (2006). New business start-up and subsequent entry into self-employment. Journal of
Business Venturing, 21, 866-885.
11
Davidsson, P. (2000). Where do they come from? Prevalence and characteristics of nascent
entrepreneurs. Entrepreneurship and Regional Development, 12, 1-25.
12
Cliff, J.E. (1998). Does one size fit all? Exploring the relationship between attitudes towards growth, gender, and
business size. Journal of Business Venturing, 13, 523-542.
13
Mazzarol, T., Volery, T., Doss, N., & Thein, V. (1999). Factors influencing small business start-ups. International
Journal of Entrepreneurial Behavior and Research, 5(2), 48-63.
Experience teaches a person how to be a business owner, and training teaches a person how to
work for an entrepreneur (Aronsson, 2004).14 Hynes (2007)15 concluded that a high level of
education is applied only to becoming a nascent entrepreneur.

In a study of self-employed Japanese men, Cheng (1997) 16 found previous self-employment

experience significantly influenced future self-employment. One of the most overrepresented
groups of small business owners is people with previous ownership experience (Delmar &
Davidsson, 2000).17

Hypotheses

Based on previous research, it is hypothesized that individuals with a more positive attitude
toward small business ownership, those with a more positive impression of small business
ownership, those who have family or friends who are small business owners, those with more
education, and those who had taken a business training course would be more likely to become
small business owners than their counterparts. It is hypothesized that the likelihood of starting a
business would not differ between men and women. Age, marital status, children under the age
of 18 and at home, and household income were included as control variables.

Research Methodology

In order to examine the factors likely to motivate an individual to establish asmall business, the
study will be undertaken with entrepreneurs from different locations in Dhaka city. The purpose
of this study is to identify the factors important in serving as either barriers or triggers to small
business start-up. The study will draw a sample of 241 respondents. 100 of these entrepreneurs
successfully established a small business within the previous two years prior to interview. The

14
Aronsson, M. (2004). Education matters – But does entrepreneurship education? An interview with David Birch.
Academy of Management Learning and Education, 3(3), 289-292.
15
Hynes, B., & Richardson, I. (2007). Entrepreneurship education: A mechanism for engaging and exchanging with
the small business sector. Education and Training, 49(8/9), 732-744.
16
Cheng, M. M. (1997). Becoming self-employed: The case of Japanese men. Sociological Perspectives, 40(4), 581-
600.
17
Delmar, F., & Davidsson, P. (2000). Where do they come from? Prevalence and characteristics of nascent
entrepreneurs. Entrepreneurship and Regional Development, 12, 1-25.
remaining 141 individuals would have had given serious consideration to establishing a business
within the previous years, but had not proceeded for some reason.

The sample will be clearly divided into two groups

(1) those respondents who had established their business and

(2) those who had not proceeded to foundation