FACTORS DRIVE BUSINESS OWNERS TO START A NEW BUSINESS

A Research Presented to the Faculty of College of Business and Accountancy

San Mateo Municipal College

Guitnangbayan I, San Mateo, Rizal

In Partial Fulfillment of the Requirements for the Degree

Bachelor of Science in Business Administration

Major in Financial Management

By

Auguspina, Hanna Zairah

Cruz, Ross Kian Edward

De Jesus, Geraldine Azenith

Ganaganag, Gennie Rose

Jaugar, Ma. Catherine Ann

Vicencio, Racquel Ibana

2020

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 San Mateo Municipal College

General Luna St. Guitnang Bayan I , San Mateo, Rizal

Tel. No (02) 997-9070

APPROVAL SHEET

This Thesis entitled “FACTORS DRIVE BUSINESS OWNERS TO START A

NEW BUSINESS” prepared by our group in partial fulfillment of the requirements

in Business Research 1 for the Degree of Bachelor of Science in Business

Administration Major in Financial Management has been examined and is

recommended for approval and acceptance.

Dr. Delia Padlan Jadaone

Research Adviser

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 ABSTRACT

This paper examines the different factors which drives the business owners to

start a new business. Particular attention is given to the theories related to the

creation of a new venture which explains the phenomenon of its creation. And

also the motivational factors that urged business owners or entrepreneurs to

begin their own business and the possible challenges that they will be facing in

starting a business.

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 ACKNOWLEDGEMENT

The Researcher owes a great many thanks to the people who helped and

supported us during the making of this research paper.

The group would like to thank our Instructor Dr. Delia Padlan Jadaone is the Vice

President for Academic Affairs, Research, and Development for guiding and

directing various documents of the group with attention and care. She has taken

time and effort to go through the project and make necessary corrections as and

when needed.

The group would also thank all the group members without them that this

research has been a distant reality. The group would also extend our heartfelt

thanks to our family who support us morally.

Above all, we give glory back to God for he is the main reason for our success in

making this project possible. We praise you.

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 Table of Contents

Title Page 1

Approval Sheet 2

Abstract 3

Acknowledgement 4

Table of Contents 5

List of Tables and Figures 6

CHAPTER

I. THE PROBLEM AND ITS BACKGROUND

Introduction 7

Theoretical Framework 8

Conceptual Framework 12

Statement of the Problem 14

Hypothesis 15

Significance of the Study 15

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 Scope and Limitations of the Study 16

Definition of Terms 16

II. REVIEW OF RELATED LITERATURE AND STUDIES

Local Literature 18

Foreign literature 19

III. RESEARCH METHODOLOGY

Research Design 23

Research Locale 23

Respondents of the Study 24

Research Instrument 24

LIST OF TABLES AND FIGURES

Figure 1: Schumpeterian model of Entrepreneurial Function 10

Figure 2: Gartner’s Conceptual Framework 14

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 CHAPTER I

PROBLEM AND ITS BACKGROUND

Introduction

Entrepreneurship is an endeavor to begin own business as well as

survival on the market while doing business activities. Entrepreneurs are the

people who start a business, organize, manage, and assume the risks of a

business or enterprise (Merriam Webster). Entrepreneurs are meeting our

country’s economic needs through the creation of lots of new businesses each

year which provides job opportunities for the people and social empowerment.

In recent years entrepreneurship and the nurturing of small, medium

businesses have become one of the dominant themes in most of the developing

countries. Especially in our country were the high percentage of poverty is a real

big issue that is why our government viewed entrepreneurship as important to

empower the poor, enhancing production, and as a stimulant to innovation.

Starting up a business is full of excitement and surprises, but the

drawbacks of it are it is full of risks and uncertainty. Some business owners

(especially young entrepreneurs who have just started their businesses) are

facing challenges, making sacrifices and facing constant uncertainty.

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 Small businesses or newly established enterprises are considered to be

vulnerable in the first to five years period following its establishment. Over 50% of

start-up businesses don’t even make it to the fifth year because they have no

idea about the different factors that they have to consider before starting a

business.

Entrepreneurs are exposed to external risks such as economic and

industry risks during their first year of operations. Despite of their difficult

experiences they still have a lot of reasons not to give up and continue their

business journey.

The goal of this research was to identify the different motivational factors

that have urged our entrepreneurs to set up a new business venture, factors that

influence business start-up, challenges in starting a business, factors to consider

before starting a business and factors affecting the growth of small businesses.

Theoretical Framework

This study is framed to different theories of entrepreneurship to provide an

understanding and explanation to the factors influencing the creation of a new

venture.

A. Schumpeterian Conceptualization of the New venture Creation

Process

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Joseph Schumpeter’s was an economist and one of the 20 th century’s

greatest intellectuals. He is well-known for his theories about business

cycles and for introducing the concept of entrepreneurship. He has a book

entitled “The theory of Economic Development”, was the first to introduce

the creation of new venture as a factor of economic development.

He defined development as a “Spontaneous and discontinuous change in

the channels of flow, disturbance of equilibrium which forever alters and

displaces the equilibrium state previously existing” (Theory of economic

development).

Schumpeter assumed that change is the basic element of dynamic

process, which comes in the form of innovations. He claims that

innovation is the most important factor in a new venture creation and the

driving force behind industrial change. According to him “A perennial gale

of creative destruction” brings new venture creation where destruction is

the price of innovation leading to the emergence of new venture in

economies.

One of the main features of his Economic development theory is the ‘Role

of Entrepreneur’, which is the key figure in his analysis of process of

development. Entrepreneur’s has a crucial role in the development

process because he/she begins the development in society and carries it

forward. Entrepreneurship requires the introduction of something new.

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 Thus, entrepreneurial development brings economic development. The

Schumpeterian model of new venture creation is illustrated in figure 1.

SCIENCE &
TECHNOLOGY
New Entrepreneurial
Entrepreneurial Function
Production Profit resulting in
Function innovation
FFDunbction

MARKET IN

Figure 1: Schumpeterian model of Entrepreneurial Function (ITB Journal)

Role of Profits: Entrepreneur’s innovates to earn profits. Profits arise because of

dynamic changes resulting from innovation. It continues to exist until the

innovation becomes general. (Article Shared by Sanket Suman)

Joseph Schumpeter’s perspective may useful for explaining the emergence of

new businesses characterized by short product cycles like Internet services,

Telecoms, electronics and so on- where the value of product innovation is very

high. Schumpeter’s theory demonstrates the creation of new business start-ups

in dynamic innovative industries. (ITB Journal)

B. Need for Achievement Theory

This theory was developed by an American Psychologist David C. McClelland.

As the name itself suggests is the drive to achieve something in what he/she do.

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People who have high achievement needs are people who always work to do

better by particularly avoiding low reward low-risk situations and difficult to

achieve high-risk situations. McClelland concerned himself with economic growth

and the factors influencing it. He tries to find the internal factors “human values

and motives that lead man to exploit opportunities, to take advantage of

favorable trade conditions”. McClelland gives importance to the innovative

characteristics of entrepreneurial role. He stated that entrepreneur is concerned

with the need for achievement (n-achievement). The n-achievement is also called

as “a desire to do well, not much for the sake of social recognition or prestige, but

for the sake of an inner feeling of personal accomplishment” this motive guides

the actions of entrepreneur. That is why it’s better to develop n-achievement

among individuals to guarantee economic development. (‘Theories of

entrepreneurship’ article shared by Aparna J)

McClelland identified the two characteristics of entrepreneurship:

1) Doing things in a new and better way

2) Decision making under uncertainty

People who possess high need for achievement are more likely to succeed as

entrepreneurs.

C. Theory of Leadership

Bert Hoselitz is a development theorist who concentrated on the socio-

institutional aspects of economic development. According to him,

entrepreneurship is a function of managerial skills and leadership. It is true that

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business requires finance but that is only a secondary importance. That is why

he further explains that an individual who wants to become entrepreneur must

have more the urge to earn profits and accumulate wealth. (Article shared by

Aparna J)

In this context, he/she has to show off his/her ability to lead and manage. In

business there are three generally types of leadership:

1) Merchant money lenders - They are the market oriented

2) Managers – They are the authority oriented

3) Entrepreneurs – They are the production oriented

The Merchant money lenders deal in goods and services which are generally

accepted by everyone. But an entrepreneur creates and develops his/her

products and its acceptability is sometimes uncertain. That is why entrepreneurs

take more risk compared to a money lender. (Article shared by Aparna J)

Making profit is not enough to succeed in entrepreneurship. Hoselitz observe that

entrepreneurship can evolve in society where the culture allows a different

choices and where social changes are not rigid. It is important that the social

conditions should guarantee the development of enterprise-oriented individuals.

Conceptual Framework

A. Gartner’s Conceptual framework for Describing the Phenomenon of New

Venture creation (1985).

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William B. Gartner is an American Professor of Entrepreneurship. He is

known for his research on new venture creation and entrepreneurial behavior.

In 1985 he proposed a conceptual framework that describes the phenomenon

of new business venture creation. He argued that the process of new

business venture creation was a complex and multidimensional phenomenon.

He suggests that a new business/enterprise is the product of the four

dimensions variables: (Gartner, 1985)

1) Individuals – the person’s involved in starting a new organization.

2) Process – the actions undertaken by the individuals to start a new

venture.

3) Environment – the situation surrounding and influencing the

emergence of organization.

4) Organization – the kind of firm that is started.

INDIVIDUALS

Need for
achievement

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 ENVIRONMENT ORGANIZATION

Venture Overall
capital NEW VENTURE CREATION cost
Availability leadership

PROCESS

Locates a
business
opportunity

Figure 2: Gartner’s Conceptual Framework for Describing the Phenomenon

of New Venture Creation (Gartner 1985)

Each variable describes one aspect of the new venture creation process and is

related to other variables in the framework. Gartner adds that entrepreneurs and

firms are different when it comes to the actions, choices, behavior, environments

that they operate in and how they react to different both internal and external

situations.

Statement of the Problem

This study aimed to know the factors that drive business owners to start a new

business.

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Specifically, this research wants to answer the following problem:

1. What is the profile of the respondents in terms of the following:

a. Age

b. Gender

c. Occupational Status

2. What are the factors to consider before starting a business?

3. What are the factors that influence business start-up?

4. What are the biggest challenges in starting a business?

5. What motivational factors help entrepreneurs to start a business?

6. What factors affecting the growth of small businesses?

Hypothesis

Hypothesis 1: The factor that drive business owners to start a new business are

their desire to do something.

Hypothesis 2: The factor that drives business owners to start a new business is

to achieve what they want to have in life.

Hypothesis 3: The factor that drives business owners to start a new business is

they’re tired of the demands of traditional work. 

Hypothesis 4: The factor that drives business owners to start a new business is

their desire to take full control over every decision made under them.

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Hypothesis 5: The factor that drives business owners to start a new business is

because they’re in it for a lasting legacy.

Significance of the Study

The study was conducted to gather information and data about the factors that

drive business owners to start a new business.

The result of the study will be significant value of the following:

Aspiring Entrepreneurs: People who wants to be an entrepreneurs will be able

to know the different factors that they need to consider before business start ups.

The business owner will become aware of the factors that influence business

start-up and the possible challenges that they will be facing in starting their own

businesses and how they will be able to overcome those challenges to avoid

business failure.

Future Researcher: This research will be beneficial to the future researcher’s

who will be doing a business research related to our study.

Scope and Limitations of the Study

The study is delimited to a group of young and experience entrepreneurs in San

Mateo, Rizal. The goal of this study is to provide, identify and explain the different

factors that lead business owners to start a new business. The data will be

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gathered through survey questionnaires from 80 randomly selected

entrepreneurs in San Mateo, Rizal.

Definition of Terms

The following are the jargons that are used in the current research.

They were defined ideally and operationally for a clearer understanding of the

research.

Business Start-up – Refers to business strategy before or during the

entrepreneurial journey.

Entrepreneurship – Refers to an entrepreneur who plans to begin one’s own

business in the future.

Financial Venture – Refers to companies which raise money and makes

investment in accordance with regulation.

Motivation – Refers to inspiring people to act in achieving goal

Entrepreneurship Development – It is a process of improving the skills and

knowledge of entrepreneurs through various training and programs.

Commencement – A beginning or start of something.

CHAPTER II

REVIEW OF RELATED LITERATURE AND STUDIES

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This chapter presents the local and foreign related literature and studies after the

thorough and in-depth search done by the researchers.

● Related literature

Numerous studies have shown that there are different factors that drive business

owners or entrepreneurs to start their own business.

● Local literature

In recent years entrepreneurship and the nurturing of small, medium businesses

have become one of the dominant themes in most of the developing countries.

Especially in our country were the high percentage of poverty is a real big issue

that is why our government viewed entrepreneurship as important to empower

the poor, enhancing production, and as a stimulant to innovation.

According to the studies entitled “Entrepreneurship in the Philippines” conducted

by the Philippine GEM National Team and the DLSU Angelo King Institute for

Economic and Business Studies. Being financially independent and improving

one’s income are the two primarily motivation why Filipinos consider

entrepreneurship. Filipino entrepreneurs engage in consumer services such as

retail, motor vehicles, lodging, restaurants, personal services, health, education

and social services and recreational services.

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Generally, Filipino Start-up entrepreneurs agree that they are more satisfied with

the opportunity given to them in balancing their time between work and family or

personal life. This can be a result of having more control of one’s time when one

owns the business as opposed to being an employee.

● Foreign literature

According to Deborah Sweeny a CEO of MyCorporation.com which provides

online legal filing for entrepreneurs and businesses start up she identified the

three motivations that motivates entrepreneurs to start a small business.

According to her starting a small business means that people’s are not only

pursuing their passion but also making sacrifices to reach their goals. However,

their sacrifices do pays off as their business continues to grow and to become

successful. Here are the three motivations that motivate individuals to explore

entrepreneurship: (What Motivates Entrepreneurs to Start Small Businesses? by

@Deborah Sweeney, January 16, 2020)

1) Ready to be your own boss.

⮚ Last 2018, the Small Business Trends Alliance (SBTA) conducted a

survey to entrepreneurs and overall business climates (49%) of the

individuals said that they were ready to be their own boss. While on the

year 2019, only (26%) of the individuals said that they were ready to be

their own boss and the year 2020 got the highest response of (55%)

individuals who are ready to become their own boss.

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 2) Growing desire to pursue your passion.

⮚ Small Business Trends Alliance (SBTA) surveyed individuals about this

motivator and the results of their survey are (45%) of response from

individuals are from the 2018 survey. While (23%) of individuals agreed in

the year 2019 and (39%) of response comes from current year 2020.

Starting business is never been easy but you must stay motivated enough to

keep going through and let your passion act as your guide towards

entrepreneurship.

3) Opportunity presented itself.

⮚ The Small business trends alliance (SBTA) survey results for this

motivator have change a bit during the year 2018. (36 %) of individuals

agreed with this, while (19 %) responses in the year 2019 and (25 %) in

current year 2020.

Once you know that you want to turn your dream into business, you need to start

creating a business plan to act as your business foundation and outline goals to

achieve.

According to George N. Root III a writer in the business website named ‘Chron’

He discusses the five factors that drive entrepreneurs to start a business. These

are the (1) Business Involvement (2) Make it Personal (3) be in charge (4)

Financial Need and lastly (5) Accomplishment.

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1) Business Involvement.

⮚ Entrepreneur is motivated to start business because they have a desire to

become involved in all aspects of business operations particularly in

product designing, sales, marketing, engineering and production. Because

he/she want to make sure that the business runs properly to become

successful.

2) Make it Personal

⮚ Entrepreneur sometimes feels that doing business with a large corporation

or working for a company become very interpersonal. That’s why the drive

to start a business comes from the desire to have a personal control into

doing business.

3) Be In Charge

⮚ Most of the entrepreneurs start their own business because they want to

be in charge in all of the day-to-day operations of their business. They

want to be the one making important business decisions, the one to

determine the direction of their company will take the one to contact their

product development and marketing and the one being responsible for

every aspect of the business operations.

4) Financial Need

⮚ Some of the entrepreneurs are driven to start their own business out of

necessity. Especially if their current job does not offer enough income,

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 they tend to have a side-business to get extra income that can be turn into

a full-time business.

5) Accomplishment

⮚ For some entrepreneurs, having a successful business brings a feeling of

accomplishment. Because they can feel that they’re offering a valuable

service to their customers and clients that is why they’re doing the best job

possible. Most of them give back to their communities by donating to

charitable institutions and by participating in charitable events. This feeling

of accomplishment is an important factor in starting a business.

According to the study entitled “Motivating factors and barriers in the

commencement of one’s own business for potential entrepreneurs” from the

(Journal of Economic Research, Volume 28, 2015). The result of the study found

out that there are 3 factors that are very crucial motivators to entrepreneurs in the

commencement of their own business: (1) Self-realization and Self-satisfaction

(63 %) out of 255 respondents, (2) Possibility of higher earnings (as compared

with other business or companies) (48 %), (3) Independence in Decision-making

(30 %). Less important motivators is also included in the results of the study: (1)

Independence in actions and Pursuit of self-testing (25 %), (2) Affirmation of

one’s own value (21 %) and (3) Higher social status (5 %).

The study also included the factors that hurdle the commencement of potential

entrepreneurs in starting their own business: (1) Civil, commercial, economic,

and taxation (59 %), (2) Financial reporting and accountability (51 %), (3)

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Regulations concerning the registration implementation of business activity (45

%).

CHAPTER III

RESEARCH METHODOLOGY

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This chapter covers the research design and methodology, including the

research locale, research respondents, research instruments, the data gathering

procedure and data analysis.

● Research Design

The researchers used quantitative method to answer the problem in the study.

To collect, analyze, classify and tabulate the data about the factors that drive

business owners to start a new business.

According to the SIS International Market Research (2020) quantitative research

involves the use of computational, statistical, and mathematical tools to derive

results. A type of research that is dependent on the collection of verbal,

behavioral or observational data that can be interpreted in a subjective manner.

Hence, this method was use in this study.

● Research Locale

The researchers conducted the study among the (50) individuals in different

Barangays of San Mateo, Rizal: Ampid 1, Ampid 2, Banaba, Guitnang Bayan 1

and Guitnang Bayan 2, where most business establishment of the city are

located.

● Respondents of the Study

The respondents of the study were the business owners of small businesses in

the five Barangays of San Mateo, Rizal. The researchers didn’t put a specific age

group of the business owners as long as they are running a business may it be

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small or medium businesses. There were seven (7) groups of respondents, the

first group was composed of five (5) welding shops owners, second group was

composed of five (5) motor pool owners, third group was composed of (10) agri-

business owners like poultry and piggery, fourth group was composed of five (5)

restaurants owners, fifth group was composed of ten (10) small eateries owners,

sixth group was composed of five (5) Retail stores owners.

● Research Instrument

The researchers used a survey questionnaire to gather all the needed

information and data for this study. The questionnaires are composed of different

types of questions: Multiple choice, close-ended (where the respondents will

answer Yes or No only) and likert scale questions (where the respondents will

answer: Strongly Agree, Agree, Neutral, Disagree and strongly disagree)

depending on the given questions that are being ask to them. The questionnaire

has two parts, the first part is about the profile of the respondent to know who

they are, what they do for a living and how many years they are already in

managing their business. The second part is the questions that can possibly

answer the hypothesis of this study about the factors that influence them to start

their own business. The researchers did not adopt any kinds of questionnaire

from other sources because the researchers made it originally.

BIBLIOGRAPHY

A. On-Line Sources

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Alton, Larry (2015). The 5 Motivations that drives people to choose

Entrepreneurship, retrieved from: https://www-entrepreneur-

com.cdn.ampproject.org

Abbhiram, Muthiah (2017). Entrepreneur Resilience: What makes entrepreneurs

start another business after a failure?, retrieved from:

https://www.academia.edu/34257279/Entrepreneur_Resilience_What_makes_en

trepreneurs_start_another_business_after_a_failure?

fbclid=IwAR3Raz1lsrackkUb-

4wYUwCKbA8rcX_BhZMV7hoXFrrMGXm4_Jv2VFGJQ7U

Cant, M.C (2015). Starting One's Own Business What Motivates Entrepreneurs?,

retrieved from:

https://www.researchgate.net/publication/298728245_Starting_Ones_Own_Busin

ess_What_Motivates_Entrepreneurs?

fbclid=IwAR1NR4RHcNMT5oQxY7UG8AT0FbUjquxqkHQGgvW13RHEuA8zGrN

yD5L6Jnw

Cabrera, Alexander B. (2020). Startups and the business impact of Covid-19,

retrieved from: https://www.pmc.com/ph/en/publications/startups-pwc-

philippines/startups-covid19.html

Evers, Natasha. The Process and Problems of Business Start-Ups,retrieved

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Kirkley, William W. (2016) Creating ventures: decision factors in new venture

creation, retrieved from:

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https://www.emerald.com/insight/content/doi/10.1108/APJIE-12-2016-

003/full/html

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fbclid=IwAR0cb7G4-ippUTbq2NGqn5BIgLnm_rifn_iBy1vvLI-peotxeYFC2PxTt0E

Sweeny, Deborah (2020). What motivates entrepreneurs to start small

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Initiation of a Business, retrieved from:

http://www.temjournal.com/content/82/TEMJournalMay2019_486_491.pdf

QUESTIONNAIRE

This questionnaire is used to help the researchers collect the information needed

to complete the study “FACTORS DRIVE BUSINESS OWNERS TO START A

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NEW BUSINESS”. The researchers assure you that the data will be treated with

utmost confidentiality.

Name (Optional): ________________________

Gender: ______________

Current Job: ____________________________

I. Do you think that the factors below are the factors that influence you to

start a business? Kindly put a check in the corresponding space provided.

S.A A N S.D D
Factors (Strongly (Agree) (Neutral) (Strongly (Disagree)
Agree) Disagree)

MONEY

FLEXIBILITY

CONTROL

TEAMWORK

LEGACY

PASSION

SELF-RELIANCE

PERSONAL
GROWTH

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