About Robert

Robert Vesco

I'm a doctoral student at the University of Maryland's Robert H. Smith School of Business.

My research interests include understanding (a) why some areas are more entrepreneurial than others, (b) what drives people to pursue entrepreneurship, and (c) collaboration and innovation processes.

You can find my CV here

Does the media affect entrepreneurial intentions and entry?

Note: This analysis is not peer-reviewed or cross-checked so caution is needed in drawing any conclusions, but I put this out there in hopes that it might spark conversation. Moreover, this study is correlational in design. I use no fancy natural or quasi-experiments to get at the causality of media (which is a very hard problem!).

So there has been a lot talk about how the media hype machine is setting wannabe entrepreneurs up for failure. That is, it's encouraging folks who may not be serious to try their hand at starting a business when they probably shouldn't. Below are some charts on the relationship between media, legitimacy and entrepreneurship that attempt to understand media's impact. I look forward to hearing any thoughts or ideas you might have. 

On the Data:

The data come from the Global Entrepreneurship Monitor's individual level surveys for years 2006-2008 where they survey folks from over 100 countries. Prior years did not have questions about media. There are about 250,000 individual level observations from nearly 50 countries in this particular analysis.

Intentions = Folks who are thinking about starting a business (i.e. business plan phase, talking about it)
Entry = Not just talk. They have either made some profits in the last 12 months or paid employees for at least 3.
Media = Have you seen success stories of new ventures in the public media?
Legitimacy = Is entrepreneurship a desirable career choice in your country?

Below are some descriptive statistics at the the country-level. The countries are sorted by the percentage of individuals (using a random sample) who saw success stories of new ventures in the public media. I break it down by high and middle income countries as defined by the World Bank. Eyeballing it, it appears there might be some sort of relationship between media and intentions in middle income countries. Again, this is just descriptive and it doesn't control for any other factors.

CountryEntrybyMedia 300x219 Does the media affect entrepreneurial intentions and entry?

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Below is the interaction effect between the level of legitimacy of entrepreneurship in a country and the media success stories of entrepreneurship. I look at their joint impact on an individual's likelihood to have entrepreneurial intentions and entry into the market. In this analysis, I control for as many relevant individual and country-level factors as I can such as: age, education, wealth, GDP, competitive pressure, property rights, and much more. The red and blue colored symbols show where the effects are significant at the 95% level.

In effect I am asking this question:

If we increase media by 1 standard deviation from the mean, how might this affect an individuals' intentions and entry contingent on how cool entrepreneurship already is in their country?

One possible interpretation is that in countries where entrepreneurship is not cool, media boosts entry more than intentions on a relative basis. I say relative because in absolute terms the number of people with entrepreneurial intentions is always greater than those who actually succeed in entering the market and this analysis looks at % not absolute numbers. Obviously, many people drop out of entrepreneurship once reality hits them.

In contrast, in countries where entrepreneurship is already cool, or at least very acceptable, increasing media probably contributes to the hype machine so intentions will increase more relative to entry.

So again, it may be that the media success stories of entrepreneurs helps entrepreneurs in countries where entrepreneurship is not very accepted, but less so in countries where it is already accepted.

One other thing to note is that media increases both intentions and entry no matter what. So one might argue that who cares if media creates hype that causes more people to have intentions than they should. It also increases entry. So maybe that gal who was going to join a hedge fund or consulting firm instead started her own business and was successful... though success in this case is NOT in performance, but simply in entry so I can't say much about how successful they truly were - only that they reached one particularly important milestone. This is a limitation of the data.

I look forward to hearing other interpretations and again, this is purely correlational so it is likely to be wrong in many ways icon smile Does the media affect entrepreneurial intentions and entry?

intgph intention entry MediaXLegit 1SD final 300x218 Does the media affect entrepreneurial intentions and entry?

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2 comments to Does the media affect entrepreneurial intentions and entry?

  • Tim Hannigan

    Interesting data and analysis.
    I'd come at this thinking particularly about how legitimacy is operationalised. Indeed, it is a long-standing joke in the US that many people who list their profession as "entrepreneur" are more often than not, unemployed. Indeed, given the enormous power-law of successful entrepreneurs (see the far end of the long-tail), there is likely some truth in the humour, and the cultural norms on professional flexibility likely speak to important macro dynamics of entrepreneurship.
    I think using media as a barometer and agent of cultural norms is a good starting point. And certainly the legitimacy question is a good one. However, I wonder if the single question about entrepreneurship as a desirable career is a good enough proxy.
    I'd argue that legitimacy is more complex social process.
    Also, another thing you might want to control for is state of the economy. Maybe a binary variable for recession or not. There's a recent study in ERJ (Figueroa-Armijos, 2012) that shows entrepreneurship increasing during recessions.
    Hope that's helpful!

  • Robert Vesco

    Thanks for the comment. Operationalizing legitimacy is indeed tricky. In this case, I used the desirability of the career as a proxy as it seemed to map nicely to one common definition of legitimacy which entails what is desirable, proper, or appropriate within some
    socially constructed system of norms ... a la Suchman (1995). There is another question in the data regarding whether entrepreneurs are respected in the respective countries (i.e. high status) which I think probably captures another element of legitimacy. Out of curiosity how would optimally operationalize legitimacy in this context?

    Regarding unemployment that a good question. I control for the unemployment status of the respondents, but it would be interesting to know how that correlates with entrepreneurship on its own as well as government measures. Regarding state of the economy I control for a whole host factors (about 15) ranging from gdp to inflation, but not specifically for recessions which is probably important. Thanks for the cite, I'll check it out. Cheers!

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