ENTREPRENEURIAL MOTIVATION IN SERVICE INDUSTRIES: PUBLIC ACCOUNTING FIRMS AS UNINTENDED INCUBATORS
Jeffery S. McMullen Graduate School of Business Administration University of Colorado at Boulder Boulder, Colorado 80309-0419 Ph (303) 410-0968 Fax (303) 492-5962 E-mail
[email protected]
ABSTRACT ENTREPRENEURIAL MOTIVATION IN SERVICE INDUSTRIES: PUBLIC ACCOUNTING FIRMS AS UNINTENDED INCUBATORS
The professional services (i.e. public accounting, law, investing, consulting) are highly susceptible to the loss of entrepreneurially-inclined employees. Often these firms watch their departing employees become instantaneous competitive threats within their market niche. Thus, it is essential that professional service firms understand the factors that motivate their entrepreneurs to leave, as a means of preventing costly attrition, predicting and preparing for the ensuing competitive landscape, and maximizing opportunity recognition. Drawing on interview data from founding partners of three mid-sized public accounting firms, this paper identifies motivational factors that contribute to the decision for employees to become entrepreneurs. The role and characteristics of the “incubator organization” (that organization where the entrepreneur was employed prior to starting a new venture) are then examined to determine whether they: 1) contributed to the motivation to leave and 2) influenced the characteristics of the new firm. The role and characteristics of the professional service incubators are then contrasted with those of high-technology incubator organizations. Similarities in motivational factors are established, and differences are attributed to innovation. Finally, a framework is offered to suggest that employee-retention strategies developed for high-technology industries might be successfully implemented by service industries when the motivational factors contributing to the loss of entrepreneurially-inclined employees are non-innovative.
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ENTREPRENEURIAL MOTIVATION IN SERVICE INDUSTRIES: PUBLIC ACCOUNTING FIRMS AS UNINTENDED INCUBATORS
The professional services (i.e. public accounting, law, investing, consulting) are highly susceptible to the loss of entrepreneurially-inclined employees. Often these firms watch their departing employees become instantaneous competitive threats within their market niche. Thus, it is essential that professional service firms understand the factors that motivate their entrepreneurs to leave, as a means of preventing costly attrition, predicting and preparing for the ensuing competitive landscape, and maximizing opportunity recognition. Drawing on interview data from founding partners of three mid-sized public accounting firms, this paper identifies motivational factors that contribute to the decision for employees to become entrepreneurs. The role and characteristics of the “incubator organization” (that organization where the entrepreneur was employed prior to starting a new venture) are then examined to determine whether they: 1) contributed to the motivation to leave and 2) influenced the characteristics of the new firm. The role and characteristics of the professional service incubators are then contrasted with those of high-technology incubator organizations.
Similarities in motivational factors are
established, and differences are attributed to innovation. Finally, a framework is offered to suggest that employee-retention strategies developed for high-technology industries might be successfully implemented by service industries when the motivational factors contributing to the loss of entrepreneurially-inclined employees are non-innovative.
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ENTREPRENEURIAL MOTIVATION IN SERVICE INDUSTRIES: PUBLIC ACCOUNTING FIRMS AS UNINTENDED INCUBATORS In this paper a conceptual framework is offered that suggests under which motivational circumstances employee-retention strategies introduced by high-technology industries can be successfully implemented by service industries. By integrating interview data with the incubator literature and that of entrepreneurial motivation, the proposed framework generalizes and applies industry-concentrated research in effective high-technology incubation to service industries suffering similar but less attended dilemmas. After a short review of factors affecting incubator success (location, business, type and size of incubator organization, team formation, and motivation) (Cooper 1986), findings from interviews with founding partners of three mid-sized public accounting firms are presented which suggest that professional services and high-technology industries share similar characteristics and motivational factors contributing to the loss of entrepreneurially-inclined employees. These entrepreneurial motivational factors are classified in accordance with the “push” and “pull” models derived by Shapero and Sokol (1982) and Vesper (1983) in which both individual differences and economic factors are incorporated. Subclassification of the “push” and “pull” factors as “innovative” or “noninnovative” is then suggested, and an argument is made that employee-retention strategies developed for high-technology industries can be generalized and applied to service industries when they are targeted at addressing “non-innovative” entrepreneurial motivational factors. Finally, a framework is presented that suggests which motivational factors are “non-innovative” and therefore responsive to alleviation through the transplant of high-technology employee-retention strategies to service industries.
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PREVIOUS RESEARCH The organizations where entrepreneurs were employed prior to starting their own firms have been shown in past research to influence the nature and success of new ventures. (Cooper, 1986)
Although this paper emphasizes the motivational factors
behind an employee’s decision to seek fulfillment through entrepreneurship, it also considers the influence that the incubator organization has on the characteristics of the new enterprise. Incubator Organizations Prior incubator investigation has focused upon intentional high-technology incubator organizations (those organizations designed for the sole purpose of providing a controlled environment in which new enterprises may thrive) (Smilor and Gill, 1986; Rice and Matthews, 1995) or potential high-technology incubators (high-technology firms where entrepreneurs work before leaving to start new ventures) (Cooper, 1985a; Feeser and Willard, 1989). While this concentration on high-technology industries has provided insight into the characteristics necessary for successful new venture creation in innovative industries, it has not been extended to industries perceived as less innovative, such as services. Cooper and Dunkelberg (1987) affirm this limitation by acknowledging that very small firms and businesses in the service industries are underrepresented in their survey of 890 entrepreneurs when contrasted with the U.S. business population. Characteristics and Relatedness Incubator organizations have been studied by Cooper (1985a) and others. These previous studies have identified location, nature of business, type and size of the incubator organization, team formation, and motivation as factors that potentially
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influence the entrepreneurial off-spring, findings in each area have not always been consistent. Location. Location is defined as the proximity of the new venture to the incubator organization where the entrepreneur worked before leaving to start the new firm. Numerous studies have found that at least one of a new company’s founders was already working in the geographic area where the new entrepreneurial firm is located. Percentages ranged from 97.5% in Palo Alto, 90% in Austin, Texas, and in England, 75% in a broad study of 890 founders across the United States (Cooper, 1970; Susbauer, 1972; Watkins, 1973; Cooper and Dunkelberg, 1981). Other studies have shown that 90 percent or more of founders start their companies in the same marketplace, technology, or industry in which they had been previously working (Brockhaus, 1982). However, Cooper and Dunkelberg (1987) found that a surprisingly high 25% of nontechnical founders moved when starting. They sought to explain the nontechnical entrepreneur’s decision to move as a means of finding a more promising local market or avoiding competition with a previous employer. Nature of the Business. Cooper (1985a) contends that entrepreneurs, in most technical industries, usually start businesses related to what they did before. Conversely, he finds that the prospective founders of nontechnical firms appear to be less tied to the experience gained in an incubator organization. Whereas previous studies have found that 85% of 250 technical entrepreneurs (Cooper, 1970) and 70% of 890 founders from a cross section of industries (Cooper and Dunkelberg, 1981) started new businesses closely related to the technologies or markets of their respective incubator organizations, only about 70% of founders of low technology manufacturing firms in Michigan and
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about 60% of service enterprises in Rhode Island had experience in similar businesses (Hoad and Rosko, 1964; Mayer and Goldstein, 1961) These studies suggest that service industries may be less influenced by the experience founders gain in incubator organizations. Type. The incubator literature to date has classified type of organization as university, publicly and privately held profit-seeking firms, not-for-profit organizations, and an “other” category that includes founders with no previous experience. Cooper (1985b) argues that the extent to which universities and not-for-profit organizations function as incubators varies widely depending upon the industry. Although the firms studied by Kenney (1986), Roberts (1972), Susbauer (1972), and Lamont (1972) suggest that substantial percentages of new technical firms studied are direct spin-offs from a university, Cooper (1971) discovered only six of 243 firms founded in Silicon Valley during the 1960s had one or more full-time founders who came directly from a university. In fact, Feeser and Willard (1989) contend that, although it may be a popular belief that universities are the source of technical start-up companies, Bruno and Tyebjee (1984) are more accurate in noting that “this is actually the exception, not the rule.” Size. Cooper (1985b) observes that the size of the incubator organization seems to have a bearing upon the spin-off rates among firms in the same industry. Smaller firms tend to have higher spin-off rates than larger firms, according to a study of small firms (fewer than 250 employees) in England that found them to incubate at six times the rate of larger firms (Johnson and Cathcart, 1979). This is in support of Cooper’s earlier (1971) study, which determined spin-off rates of high-technology firms with less than 500 employees to be ten times that of larger firms. Birch (1979) surprised researchers,
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politicians, and the business world when he reported that 81.5% of net new jobs in the economy from 1969-1976 stemmed from enterprises with 100 employees or less. His study and Kirchhoff’s (1995) recent reconfirmation suggest that, on average, firms with less than 100 employees create the majority of net new jobs in the U.S. economy, but whether new job creation and incubation are synonymous is beyond the scope of this paper. There have been conflicting findings as to the size of effective incubators. A Canadian study observed that 64% of founders studied were from government organizations or firms with more than $10 million in annual sales (Doutriaux, 1984). Additionally, Cooper (1985b) studied the origins of 161 companies that had grown rapidly to discover that three out of four had been started by entrepreneurs from large industrial companies. Team Formation. Founding teams are often formed at incubator organizations. In a study of 955 high-technology foundings, Shapero (1971) found that 59% involved teams. However, Cooper and Dunkelberg’s (1981) study of 890 founders indicated that only 31% involved teams. Cooper and Dunkelberg (1981) contend that the difference in the percentages of founding teams between the two studies might be due to the fact that the latter study included service as well as high-technology firms. As high-technology firms are usually manufacturers or assemblers, their ability to function is naturally more dependent upon the team concept. For high-technology industries, incubator organizations provide excellent settings in which entrepreneurially-inclined employees with diverse functional backgrounds can organize.
Thus, a founder strong in
manufacturing might seek another founder who is strong in marketing, and vice versa.
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Motivation.
Although the incubator literature acknowledges that the
entrepreneur’s motivation is subject to the influence of the incubator organization, discussion is limited. Cooper (1985a) attributes entrepreneurial attrition to strong negative “pushes”, including getting fired, getting out of the military, or becoming a refugee (Shapero and Sokol, 1982). Less drastic examples of circumstances that might encourage a potential entrepreneur to make a career change include being passed over for a promotion, having a pet project turned down, or concluding that the organization is not growing or developing properly. On the other hand, in Cooper and Dunkelberg’s (1981) study of 890 entrepreneurs, only 22% left their prior position due to “pushes” (i.e. they reported being fired, being forced to leave by factors such as their business closing, or quitting with no plans for the future), while 58% left due to the positive “pull” of plans for the new business.
Cooper and Dunkelberg’s (1981) findings are somewhat
contradictory of one of Cooper’s earlier (1970) studies which found that 13% of entrepreneurs were forced to leave their prior jobs, 30% quit with no plans for the future, and 40% were determined to leave even if they had to start their own businesses. Shapero and Sokol (1982) also observed, in a study of 109 technical company formations in Austin, that 65% of the influences leading to new venture creation were “negative”. After reviewing the current incubator literature, it becomes clear that different expectations exist for high-technology and service industries. Founders of service industries are expected to be more likely to move during new venture creation, less influenced by their incubator organization, and less likely to form teams than their hightechnology counterparts. Where clear expectations have not yet been derived for hightechnology industries, such as in the characteristics of type and size of incubator
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organization, it appears that no delineation between high-technology and service firms has arisen. RESEARCH SAMPLE AND METHODOLOGY The objective of this study is to determine the role that the incubator organization plays in motivating a professional service employee to become an entrepreneur from the point of view of several entrepreneurs, to amalgamate their various stories, and to relate the key themes to the conceptual framework provided by the incubator literature. The data used stem from interviews with eight founders of three mid-sized public accounting firms. For the purpose of this study, a mid-sized firm is defined as a firm employing from ten to forty people. This paper employs a case study methodology (Eisenhardt, 1989; Yin, 1981). Within this methodology, numerous cases are used for comparison purposes. Researchers may study a number of cases jointly to inquire into the phenomenon, population, or general condition. Stake (1998) calls this a collective case study. A collective case study is not the study of a collective but rather instrumental study extended to several cases. Such cases are chosen because it is believed that understanding them will lead to better understanding, perhaps better theorizing, about a still larger collection of cases. They may or may not be known in advance to manifest the common characteristic and may be similar or dissimilar, redundancy and variety each having voice. (Stake, 1998). The industry of public accounting and the individual firms involved in this study were selected not only as a result of the author’s familiarity with them but also because of the non-entrepreneurial, non-innovative perception induced by professional service industries, particularly public accounting. Such industry selection is in accordance with
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Patton (1990), who provides guidelines for sampling and suggests that the logic and power behind purposeful selection of informants is that the sample should be information rich. Specifically, extreme case sampling is used to select participants who exemplify characteristics of interest because extreme cases maximize the factors of interest by clarifying factors of importance. Thus, the public accounting industry was selected because (on an innovative, entrepreneurial continuum) it could be perceived as the extreme opposite of high-technology industries. Furthermore, the founders of the firms discussed were known to be what Morse (1991) defines as good informants, people who have the knowledge and experience the researcher requires, have the ability to reflect, are articulate, have the time to be interviewed, and are willing to participate in the study.
CASE STUDIES In semi-structured, tape-recorded interviews lasting about an hour, eight founding partners of three public accounting firms were encouraged to give their account of the factors that motivated them to start their own firm and the role that the incubator organization, if any, played in the process. Following are profiles of the firms selected and partners interviewed. Riggs Stepford Co., P.C.
Riggs, Stepford and Company, is one of the five
largest public accounting firms in a mid-sized city. It offers audit and tax services as well as the most technologically progressive management consulting in its area.. Research was conducted at its office, where about 20 people are employed. Wishing to escape poverty and financial dependence as his uncle had done through entrepreneurship, Larry Riggs majored in accounting at a small college with the goal of being self-employed. After working for a national firm for three years, he started
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his own firm with the intention of using it as a launching pad for other enterprises. After several partnerships and other semi-successful endeavors, Larry realized the need for finding a partner who was interested in working in the business while he worked on the business. Enter Burt Stepford. After several years at a national firm, Burt decided to leave public accounting and return home to continue his father’s business. However, a misunderstanding occurred amongst Burt, his father, and the management, which led Burt to a string of controllerships at companies that he misperceived to be promising opportunities. While working at one of these companies, Burt met Larry Riggs, who was engaged as the company’s independent auditor. Larry encouraged Burt to come work for him, but Burt had already begun building his own practice at night. After a frustrating partnership with an established local accountant, Burt reconsidered Larry’s offer and Riggs Stepford, P.C. was born in 1986. Tasker Johnson, P.C. Tasker Johnson, P.C. currently employs about 35 people and is one of the fifteen largest public accounting firms in one of the ten largest U.S. cities. Tasker Johnson, P.C. specializes in audits of commercial banks although it offers audit, tax, legal, and accounting consultation services as well. Interviews were conducted by phone. With the desire to climb the ladder, Robin Johnson sought employment at a national firm. After a few years of working there, he and a couple of his friends whom he supervised began to share their frustration with the firm hierarchy. Due to their realization that advancement was, “more reliant upon years of employment than
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intelligence or work ethic”, they sought to take control of their own destinies and exploit the market niche in which they were working. George Tasker was one of Robin’s staff. He had recently received his MBA with an emphasis in banking. George had a natural gift for marketing and had been encouraged by his parents while growing up to seize the opportunity to work for himself should it ever appear. He, Robin, and another employee left to work with a couple of friends from another national firm only to leave again shortly thereafter to create their own firm which exists today, twenty years later. Stuart, Williams, Stevens, and Malone, P.C. Stuart, Williams, Stevens, and Malone, P.C. is a recent upstart and spin-off of Tasker Johnson, P.C. It has existed approximately three years and employs about 15 people. Services include audit, tax, and internal audit. However, the firm specializes in the audits of financial institutions and private manufacturing firms. After several years of employment at a small local firm, Jack Stevens sought a position with greater opportunity at a slightly larger public accounting firm. As years passed his firm became top-heavy with senior managers who had little hope of becoming partners. Mutinous camaraderie collided with financial opportunity as a civil war ensued within the incubator organization. Casual conversation led Jack to the realization that both Stuart and Malone were equally frustrated with their current positions and were considering leaving to start their own firms. Williams was then approached for his tax expertise, and plans were made. The result was the birth of a new firm mirroring the old in such attributes as location, structure, and market niche.
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RESULTS In each of the eight interviews, the partners were asked to discuss the motivation behind starting their own firm. They were then requested to consider the role that their previous experience had played in their decision and the characteristics of their new firm. If not volunteered by the interviewee, factors affecting incubator success such as location, nature of business, etc., were inquired about directly. Interview findings were compiled to determine their congruency with the expectations suggested for service industries by the existing incubator literature, and information was analyzed according to the framework provided by the incubator literature to determine similarities with, and deviations from, the current literature. Following are the three categories of data to which a high proportion of the individual interviews contributed: Inevitable Incubator Influence. The greater the entrepreneurial inclination, the shorter the duration spent as an employee. However, the period of apprenticeship, even when short, did have a lasting influence upon the entrepreneurs and the ventures they created. Many of the founders interviewed were latent entrepreneurs who sought entrepreneurship as the solution for their frustration with the incubator organization. All fell victim to the “abusive parent” syndrome, creating the very environment they felt overwhelming compelled to flee. This proclivity permeated every characteristic of the firm, whether organizational structure, location, specialty, or size of the organization. Hierarchy, Impatience, and Childhood Impressions. Everyone interviewed had subscribed to the belief that a period of apprenticeship was necessary early in his or her career, and many preferred national firm experience, no matter what their individual
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background. But, background contributed to the entrepreneur’s degree of impatience with hierarchy, and impatience was king in determining the duration of apprenticeship. Reference was made by many to a childhood impression that shaped a life perspective conducive to entrepreneurship. However, this was not limited to an entrepreneurial parent or role model. In fact, one interviewee captured this best by expressing his intense desire to control his own chances for success. After growing up on a farm, he vowed never to let the greatest factors of success or failure be determined by something as arbitrary as the weather and felt this so strongly that it eventually extended to supervisors as well. Prominence of Teams. Team formation also emerged as an inevitable theme, but the motivation for its development was dependent upon the individuals and situation involved. Teams emulated marriages in depth of relationship and were based upon complementary personalities (adapter and innovator), complementary skills (marketer and expert), or necessity (financial and emotional support). Furthermore, they served as incubators of enthusiasm and confidence, sometimes bordering on irrational. Whatever the reason for their prominence, partnerships were the norm.
HYPOTHESIS DEVELOPMENT The above findings suggest that fundamental similarities exist between professional services and high-technology industries for location, nature of business, type, and team formation. As studies are inconclusive in the incubator literature regarding size of incubator organization for high-technology industries, contrast with professional service findings is difficult. However, the interviews appear to share the literature’s tendency to favor larger firms when considering incubation frequency.
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Finally, motivation in professional service firms shared high-technology’s muddled results according to “push” and “pull” classifications. In accordance with this study’s interview findings and previous research outlined in the literature review, several hypotheses have been developed in an attempt to extend the incubator literature to the professional services and potentially the service industries in general. Location. Based upon the interviews conducted in this study, it seems unlikely that a founding partner of a professional service firm would move to a new geographic region and forgo: (1) the ability to establish a foundation for the new business by “moonlighting”, (2) the utilization of previous contacts (such as friends, clients, bankers, etc.), and (3) the knowledge of the local market. Although contrary to Cooper and Dunkelberg’s (1987) findings that 25% of non-technical firm founders relocated before starting their new venture, interview results from this study suggest that entrepreneurial employees who start their own professional service firms are highly likely to do so in the same geographic location as the incubator organization. Stated formally: Hypothesis 1: Professional service firms are likely to be located in close physical proximity to their incubator organizations.
Tenure.
Cooper and Dunkelberg’s (1987) findings share the incubator
literature’s implicit definition of “technical” as pertaining to innovative, engineer-laden industries. Although public accounting firms or professional services in general would not be considered “technical” under this definition, there is the potential that their study might resemble these “technical” findings more than other service industries. Like “technical” industries, professional services would appear to necessitate a competence
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that is primarily developed through a period of apprenticeship (Timmons, 1999) in which entrepreneurs acquire a wealth of experience that allow them to achieve competence as defined by their field. However, recent studies suggest that this period of apprenticeship is common to all industries since the average entrepreneur has 8-10 years of experience before departing. (Timmons 1999) This period of apprenticeship allows for thoughtful preparation and planning (Cooper and Dunkelberg, 1981), the opportunity to acquire years of substantial experience, the development of know-how (Vesper, 1984), and the establishment of contacts and a track record in the industry, market, and technology niche within which the entrepreneurs eventually launch, acquire or build a business (Timmons, 1999). Although it appears that public accounting firms and professional service firms in general are likely to represent the incubator characteristics of “technical” industries, this study’s interview findings also suggest that founders of professional service firms may serve less than the average eight to ten year apprenticeship that is more common to technical industries. Thus, professional services fulfill, to some extent, the literature’s expectation that service industries may be less dependent upon incubation (Cooper and Dunkelberg, 1987). Accordingly, the following hypothesis is proposed: Hypothesis 2: Founders of professional service firms will serve a shorter period of apprenticeship than founders of high-technology organizations.
Nature. Perhaps more so than in other service industries, it is expected that firms in industries as highly specialized as the professional services would be started by founders who had attained related experience at incubator organizations, especially in public accounting where the creation of a firm by a recent college graduate seems
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unlikely. However, the nature of a public accounting practice (or law, investing, consulting, etc.) provides for many products or areas of expertise within the discipline, such as audit, tax, or internal audit. In addition, a firm may have a specialty within one of these areas of focus, such as the audit of commercial banks. Therefore, the influence of an incubator organization on the new venture can be determined by how closely the services of the new entity reflect the old. The interview results suggest that the nature of the new public accounting firm will be related initially to the founder’s area of emphasis at the incubator organization and that any immediate firm specialty at the new firm will also be the result of a similar specialty at the incubator firm. Formally stated: Hypothesis 3: Professional service firms will share the product emphasis or market niche of their incubator organizations.
Type. The dominance of publicly and privately held profit-seeking firms in the incubation of new technical ventures might be expected in the professional services as well. The potential for a university to fulfill the role of unintended incubator by providing highly adept accounting students or faculty members is unlikely due to the dissuasive effect of a lack of knowledge regarding market opportunities, experience in selling and/or building an organization, or sources of capital. Creation of public accounting firms by someone in a private industry position, such as that of a controller, is doubtful for similar reasons. Finally, many professional service industries require some sort of professional license, most of which have experience or supervision requirements that can only be met through a brief period of apprenticeship. These reasons may explain why all eight partners interviewed had come from public accounting firms. Thus, it appears that public accounting firms dominate in the incubation of new public accounting
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firms just as publicly or privately held profit-seeking firms spawn the majority of new ventures in high-technology industries. Formally stated: Hypothesis 3: Professional service firms are more likely to be incubated by other professional service firms than by universities, non-profit agencies, or profit-seeking firms in other industries.
Size.
Although the influence of the size of the incubator organization is
somewhat inconclusive, the author shared Cooper’s logic (1985a) and expected that smaller firms would generate a higher rate of spin-offs than larger firms. First, employees learn about technologies or markets in small companies that can be exploited by small firms. Second, they have greater opportunity to develop broad experience and to participate in the management of a small firm. Finally, those who choose to work for smaller firms might have done so due to self-selection based upon latent entrepreneurial inclinations. Similar reasoning would suggest that most founders of public accounting firms are from regional or local firms rather than “Big 5” national firms. However, public accounting is a more mature industry than high-technology and has already undergone extensive mergers and industry consolidation. Moreover, the product of a public accounting firm, like many service industries, is inseparable from an employee’s reputation. Accordingly, seven of the eight accountants interviews had sought to establish credibility in the industry by attaining experience at a national firm with name recognition, just as an individual might favor a name university when pursuing a degree. Thus, it appears large national firms produce entrepreneurs who seek credentials but discover unmet market niches along the way. Formally stated: Hypothesis 4: Founders of professional service firms are more likely to come from incubator organizations that are large.
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Although most of the founders interviewed had come from large incubators, the fact that the research sample consisted of three mid-sized public accounting firms may have skewed the results to favor larger incubators. This is because larger public accounting firms are typically structured in a way that demands greater employee specialization. As a result, it might be expected that national or regional public accounting firms would incubate the majority of mid-sized to larger new firms. In contrast, small local firms with very general practices would be more likely to spin-off new firms with less specialization and fewer employees. Therefore, the author suggests the following hypothesis: Hypothesis 5: The size of the professional service firm is likely to be reflective of the size of the incubator organization.
Team Formation. Although founders of service industries could also benefit from the well of talent that incubator organizations provide, functional necessity might not be as great a motivator. Often the allure of service industries is that the founder’s expertise is the product, making the functional purpose of a team less compelling. However, other factors exist that encourage team development in the venture creation process. These include start-up capital, encouragement, complementary skills, and customer base. Because these factors appear to be as compelling as functionality, if not more so, one might expect founding teams developed at incubator organizations to be as prevalent at service firms as they are at high-technology firms. Accordingly, the author expects: Hypothesis 6: Professional service firms will have more than one founder. Hypothesis 7: Founders of professional service firms will be from the same incubator organization.
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Motivation. Although the current literature has been inconclusive in determining “push” or “pull” factors in the decision to pursue the process of entrepreneurship, it does appear to suggest that negative “pushes” are more prevalent. Furthermore, there is a widespread stereotype that “there is no such thing as an entrepreneurial accountant”, implying the greater again of negative “push” factors motivating a risk-averse accountant to assume the role of an entrepreneur. Such logic would tend to favor the argument that negative “push” factors would be more prevalent in the partners’ decisions to create their own firms. However, the attempt to classify this study’s interview findings as “push” or “pull” led to the awareness that this classification schema may be insufficient.
DISCUSSION Two fundamental flaws presented themselves during the author’s effort to classify the interviewees’ entrepreneurial motivational factors as “push” or “pull”. First, this study’s interview findings suggest that “push” factors contributing to employee attrition in high-technology industries may not necessarily be the same as those affecting professional service industries. For example, “lack of organizational support for a product idea” may contribute to employee-attrition at a high-technology company, but such an explanation from a founder of a public accounting firm would not appear likely. Instead, “push” factors such as “frustration with management”, “feeling insulted”, or “perceiving a lack of opportunity” were far more prevalent in the interview findings. However, these “push” factors do not appear to be industry specific. A similar phenomenon occurs in classifying “pull” factors such as “desire to realize the fruition of a product idea” as opposed to “recognition of an economic opportunity” (Gartner, 1988) and
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“encouragement (financial or otherwise) of a customer, investor, or partner” (Shapero and Sokol 1982) to pursue it. Obviously, the latter appears universal whereas the former would seem inapplicable to the professional service industries. Although often used in the literature to account for potential differences between industries (Cooper, 1986; Feeser and Willard, 1989), classifying an industry as “technical” or “non-technical” sheds very little light on the universality or specificity of motivational factors. As discussed during hypothesis development, public accounting, law, and many forms of consulting could all be defined as “technical”. Therefore, segregation is more likely attributable to “innovation”. This seems logical when one considers that the study of incubation developed from a desire to understand how innovation is fostered in an effort to attain and sustain competitive advantage (Smilor and Gill, 1986). Most of the corporate entrepreneurship literature remains grounded in this desire (Peters and Waterman, 1982; Ross and Unwalla, 1986; Hoffer, 1986). This focus has allowed for great advancement in understanding how and why incubation occurs, but it has also led to the inability to extend the literature to other industries deemed less innovative such as the professional services and service industries in general. Although a variety of perspectives, such as a focus on individual differences (trait and behavioral) between entrepreneurs and non-entrepreneurs (Wortman, 1987) and economic opportunism (Gartner, 1988) have been used by researchers to determine the influences of an individual’s decision to undertake the process of new venture formation, the incubator literature has primarily focused its motivational analysis in accordance with the integrated “push” and “pull” models that incorporate both individual differences and economic factors (Shapero and Sokol, 1982; Vesper, 1983). Because this paper suggests
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that similarities exist between incubation in the industries of high-technology and the professional services, the author has chosen to use the “push” and “pull” models currently serving as the convention in the incubator literature as the framework upon which subdivision of motivational factors by innovative inclination might be applied. Accordingly, Table 1 presents a method of separating those motivational factors that remain constant between industry settings from those that are unique to the hightechnology industries. -----------Insert Table 1 about here -----------Because far more time and energy has been invested on understanding why entrepreneurs leave high-technology industries than service industries, many strategies have been designed and implemented to reduce attrition of entrepreneurially-inclined employees. Furthermore, it is expected that most factors motivating employees to become entrepreneurs are of a “non-innovative” nature as Table 1 suggests, even in hightechnology industries. Thus, many of these strategies might prove successful in “noninnovative” industries as well. This appears even more likely after considering the fundamental similarities between the factors of effective incubation identified for hightechnology and professional service industries. The second fundamental flaw identified while attempting to implement the “push”/”pull” classification was that the two are not mutually exclusive as the literature suggests. Perhaps, this accounts for the incubator literature’s inconclusive results as to which is more dominant. Everyone interviewed subscribed to the belief that a period of
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apprenticeship was necessary early in their career, no matter what their individual background. But, there was no denying that background contributed to the entrepreneur’s degree of impatience with the incubator organization’s hierarchy. Superficially, it appeared that the founding partner left the incubator as a result of “push” factors such as “frustration with the management”, “lack of opportunity”, or being “bored, insulted, or angered”, but the degree to which these “push” factors were experienced was heavily reliant upon “pull” factors, such as childhood exposure to entrepreneurial parents or role models, encouragement by others to pursue selfemployment, or an inherent personal need for control. Thus, it would appear that “push” factors are only “push” factors when the individual has latent entrepreneurial tendencies. In other words, a “push” isn’t felt unless a “pull” is present. This is not to say that the most risk adverse individual can’t be pushed into entrepreneurship through a crisis or that the most entrepreneurial-inclined employee can’t be enticed to stay with an environment conducive to his personal work preferences. Rather, this relationship suggests that a continuum exists in which the degree a “push” is felt is contingent upon an employee’s inherent attitude toward becoming an entrepreneur. See Figure 1. -----------Insert Figure 1 about here. -----------What this means for the company that wishes to retain their most innovative employees is that “innovative” and “entrepreneurial” may not necessarily be the synonyms that the literature has considered them. If “pull” factors (inherent or external) are not present for many of the innovative employees, then their ability to tolerate
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“pushes” without leaving to start their own company could be equal or even greater than that of less innovative employees. But, entrepreneurial-inclined employees (innovative or otherwise) who would consider leaving may begin to display some indication of their intentions in accordance with the degree of “push” pressure they are experiencing long before taking the entrepreneurial leap. In fact, “push” motivational factors, like “frustration with management”, “boredom” with their job, or frequent agitation could be viewed as symptoms of the “push” pressure being endured by the employee. This would give the incubator organization an opportunity either to reduce the degree to which the employee is feeling the “push”, if the factor is considered controllable, or to prepare for the possibility that their employee may soon be a competitor, if the factor is deemed uncontrollable. See Table 2. Such forewarning could allow the incubator organization to take the appropriate steps necessary to prevent the loss of their employees or clients. ------------Insert Table 2 about here. -------------
IMPLICATIONS Identifying the similarities and differences between high-technology and professional service incubator organizations is the first of many steps needed to extend and apply industry-concentrated knowledge to service industries. With the realization that similarities exist comes the question of whether programs designed for one industry can be successfully implemented for another. Although the study of the role of the incubator organization in new firm development began as a means of identifying the elements needed to foster innovation and become more competitive, it has resulted in a
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better understanding of why employees decide to pursue entrepreneurship. Such knowledge has led to the creation of intrapreneurship programs designed to retain innovative, entrepreneurially-inclined employees. Because many of the motivating factors addressed in these intrapreneurship programs are not exclusive to innovative industries, it is possible that many of these programs could be implemented to retain entrepreneurially-inclined employees in service industries. Research along these lines could determine which motivational factors are and are not of an “innovative” nature in an effort to suggest when programs designed for high-technology industries might be successfully transplanted to less innovative industries. Although some of the motivating factors identified in the interviews were “pull” oriented or individualistic in nature, their degree of intensity and gestation period appeared to be reliant upon the environment created by the incubator organization. Moreover, the majority of motivational factors were negative “push” factors, which suggests that the incubator firm may have had some ability to alleviate the pressure leading to their emergence.
Although these findings suggest that the incubator
organizations control many of the sources of pressure which lead employees to decide to pursue entrepreneurship, they do not address the question of whether an organization should attempt to retain entrepreneurially-inclined employees. It might be expected that an organization would want to retain the employees in whom they have invested time and money, but there can be consequences associated with the retention of an employee who might be happier as an entrepreneur. Often that which is necessary to make an employee’s job satisfying can not be willingly provided by the incubator organization.
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However, to come to this conclusion, management must be able to adequately assess the costs of entrepreneurial attrition by understanding its causes.
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Table 1.
“Push” and “Pull” factors of entrepreneurial motivation grouped by innovative inclination. Non-Innovative “Push”
• • • • • • • • •
“Pull”
• • • •
Fired Insulted, Angered Bored Reaching middle age Divorced or widowed Frustration with management of project Lack of ownership potential Passed over for promotion Lack of opportunity for advancement Encouragement by partner, mentor, investor, customer Need for achievement Need for control Entrepreneurial parents
Innovative • •
•
Having a pet project killed Lack of organizational support for idea
Desire to realize fruition of an idea
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Motivation Profile of Individual 1:
Motivation Profile of Individual 2:
Few pull factors.
Many pull factors.
Greater immunity to “push” pressure; only felt when intense.
“Push” pressures felt early, perhaps immediately.
Reluctant to leave incubator unless forced by “push” pressure.
Entrepreneurially-inclined. Likely to leave with little prompting.
Incubator Organization
l
2
New Venture Creation
Figure 1. Individual response to “push” pressure based upon presence of “pull” factors.
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Table 2.
“Push” and ”Pull” motivational factors grouped by incubator controllability.
“Push” Motivational Factors Inclination: Controllable by Incubator: Non-innovative • Insulted, Angered • Bored • Frustration with management of project • Lack of ownership potential • Passed over for promotion • Lack of opportunity for advancement Innovative • Having a pet project killed • Lack of organizational support for idea
“Pull” Motivational Factors Inclination: Controllable by Incubator: Non-innovative • Need for achievement
Innovative
•
Desire to realize fruition of an idea
Uncontrollable by Incubator: • Reaching middle age • Divorced or widowed
•
None
Uncontrollable by Incubator: Latent / Inherent: • Entrepreneurial parents and role models • Parental encouragement to pursue selfemployment • Need for control External: • Encouragement by partner, mentor, investor, customer • None
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