Using high-potential firms as the key to achieving territorial development

Abstract

This study examines which entrepreneurial antecedents like education, gender, motivation, and age; and environmental variables like citizen insecurity enable high-potential firms to establish themselves and act as the key to territorial development. The inclusion of the variable citizen insecurity is unusual, but several authors note how a violent context can affect entrepreneurial activity in Latin America. Insecurity generates massive expenses for entrepreneurs, who must invest to protect themselves against violence and cover the extraordinary expenses arising from this violence. The data analysis technique is fuzzy-set qualitative comparative analysis (fsQCA), a powerful technique for analyzing complex causal relationships. The results highlight that policies should focus on reducing levels of citizen insecurity, among others, to lead to the creation of high-potential firms in countries similar to El Salvador.

Introduction

Interest in entrepreneurship in Latin America is greater than ever before. This interest owes to the extent to which entrepreneurship contributes to economic growth, productivity, and the rejuvenation of productive and social networks (Audretsch and Thurik, 2001, Kantis et al., 2002). Entrepreneurship helps to refresh regional identity, driving innovation and creating job opportunities (Audretsch & Thurik, 2001). Likewise, innovation and growth contribute significantly to citizens' prosperity and well-being (Acs and Armington, 2006, Audretsch, 2007, Levie and Autio, 2008, Schramm, 2006).

Latin America has one of the highest levels of entrepreneurial activity in the world (Acs et al., 2008, Allen et al., 2008, Weeks and Seiler, 2001), yet their economies are much less dynamic than many other emerging economies are. This lack of dynamism in Latin American economies owes mainly to high levels of necessity entrepreneurship and the low value added of entrepreneurial ventures in the region (Amorós and Cristi, 2008, Autio, 2005, Kantis et al., 2004, Minniti et al., 2006). In fact, Latin American countries have poor technology and innovation development (López-Claros, Altinger, Blanke, Drzeniek, & Mía, 2006). Large firms absorb all technology- and innovation-based opportunities, and only a few small enterprises have the necessary capabilities to become high-potential firms (Acs & Amorós, 2008). This paucity of technology- and innovation-based small firms creates problems when trying to identifying them. Nevertheless, the study of such companies is of interest because innovation not only expressly aids performance, but also contributes to economic well-being and wealth creation in the country of origin (Braunerhjelm, 2011, Holcombe, 1998, Mas-Tur and Soriano, 2014, Wennekers and Thurik, 1999).

Unlike the abundant literature on entrepreneurship in Europe and North America, research on entrepreneurship in Latin America is scarce (de Arruda, 2009). To fill this research gap, the current study examines which entrepreneurial characteristics (education, gender, motivation, and age) and environmental variables (like citizen insecurity) enable high-potential firms to establish themselves and act as the key to territorial development. The aim of this research is to produce a series of recommendations for policymakers in Latin America.

The inclusion of the variable citizen insecurity is unusual in this type of study (Brück, Naudé, & Verwimp, 2013), but several authors note how a violent context can affect entrepreneurial activity in Latin America (IDB, 2014, Schwab et al., 2009, Vidal, 2008, World Bank, 2011). Accordingly, this study focuses on El Salvador, which has one of the lowest levels of citizen insecurity in Latin America (World Bank, 2011).

To achieve these research objectives, the study uses 2014 Global Entrepreneurship Monitor (GEM) data for El Salvador. The GEM project is the leading global study of entrepreneurial activity, analyzing the issue of entrepreneurship from the perspective of the entrepreneur. By applying a uniform method across all participating countries, the GEM's national teams assess entrepreneurial activity with three aims: (1) to compare entrepreneurial activity among countries, (2) to identify the factors that enable entrepreneurial activity in each country, and (3) to propose measures so that policymakers can enhance entrepreneurial activity in certain countries or regions (Bosma & Levie, 2010).

These characteristics are consistent with the goals of the present study and provide evidence of why such research is necessary. The data analysis technique in this study is fuzzy-set qualitative comparative analysis (fsQCA), which is a powerful technique for analyzing complex causal relationships in studies with medium-sized samples (Eng & Woodside, 2012).

Section 2 presents a review of the literature on high-potential firms and a discussion of entrepreneurial and environmental characteristics that may affect the creation of this type of firm. Section 3 explains the fsQCA method and sets forth the results of the analysis. Section 4 presents findings. Finally, Section 5 offers the main conclusions of the study and discusses some policy implications.