The effect of small business managers' growth motivation on firm growth: a longitudinal study.

This study addresses the role of small business managers' growth motivation for business growth, taking into account the important effects of previous motives and feedback from earlier performance. We hypothesize that small business managers' growth motivation has a unique influence on firm outcome measured as growth in sales and in number of employees. Data were gathered from two different Swedish samples of small firms using telephone interviews. Using cross-lagged regression analysis, we find support for our hypotheses when examining employment growth, but only partial support when examining sales.

Introduction

The psychological construct of motivation has an important role to play in entrepreneurship research. As stated by Shane, Locke, and Collins (2003, p. 257): "We believe that the development of entrepreneurship theory requires consideration of the motivations of people making entrepreneurial decisions." One of the areas in entrepreneurship where motivation is potentially of great importance relates to firm growth. There is research to suggest that growth is one of the most important outcomes of entrepreneurial efforts because it indicates the degree of success of that effort (Bhide, 1999; Venkataraman, 1997), and effort exerted is closely related to the individual's motivation (Davidsson, Delmar, & Wiklund, 2002). Research examining the link between growth motivation and growth appears to support this view as it finds a positive relationship between growth motivation and growth (e.g., Baum, Locke, & Kirkpatrick, 1998; Baum, Locke, & Smith, 2001; Kolvereid & Bullvag, 1996; Miner, Smith, & Bracker, 1989).

Implicitly, the view underlying this research and the theories used is the assumption that growth motivation affects the future growth of the firm, i.e., that growth motivation has a causal effect on firm growth. However, in their review and test of leading theories on goal-directed behaviors, Bagozzi and Kimmel (1995) demonstrated that these theories are incomplete because they fail to consider the feedback from past behavior and behavioral outcomes. Drawing on these findings, later research has further elaborated on the relationship between motivation and behavior (see e.g., Conner, Sheeran, Norman, & Armitage, 2000; Ouellette & Wood, 1998; Perugini & Conner, 2000; Sheeran & Abraham, 2003; Triandis, 1977). Specifically, the temporal stability of motives has been investigated, with results indicating that stable motives are good predictors of behavior (Sheeran & Abraham, 2003). These recent theoretical developments open up for the possibility that both motivation and future behavior represent reactions to past behavior and outcomes rather than being the result of the commitment to specific motives (e.g., Ouellette & Wood, 1998), thus challenging the causal structure of motivational models in entrepreneurship research.

To our knowledge, no research has considered how the outcomes of past behavior and the stability of motives affect the relationships between the motivations of small business managers and future outcomes. Such research is important because the failure to recognize the influence of past behavior and temporal stability of motives could lead to misinterpretations of the causal effects of motivations on outcomes. This has implications for how we model the relationship between motivation and outcomes in entrepreneurship research. Explicating and testing the causal structure of research models constitute an important step in theory development (see e.g., Whetten, 1989 for a discussion of theoretical contributions and Gartner, 1989 for a specific discussion on entrepreneurship theory and theory development).

Therefore, the purpose of this paper is to examine the causal direction between growth motivation and firm growth. We test to what extent the motivation of small business managers affect growth accounting for the feedback from previous growth using longitudinal data and cross-lagged regression analyses.

The paper continues as follows. Next we provide a short summary of the theoretical rationale for the study. We then review relevant motivation-outcome research and develop our hypotheses. This is followed by a section on methodology, which describes our sample and variables and analyses and results. Finally, we discuss the findings and draw the theoretical and empirical implications of the research.

Theory and Hypotheses

Temporal Stability of Growth Motivation

Motivation theories build on the premise that our motivations affect our behavior. Motivation affects the choice of behavior, the longevity of the behavior, and the level of effort (Kanfer, 1991). The growth motivation of a small business manager, defined as the aspiration to expand the business, reflecting attitudes and subjective norms in Ajzen's (1991) theory of planned behavior, affects his or her choice to expand the business, the willingness to sustain this choice over time, and at what level of effort. As opposed to many other behaviors and outcomes studied in the motivation literature, growth is not instantaneous but a process that unfolds over time (Penrose, 1959). Empirical studies of firm growth have typically assessed periods varying from 1 or 2 years up to 5 years (Wiklund & Shepherd, 2005). Over such relatively long time periods, there are multiple activities, actions, and decisions that affect the firm growth process. If the small business manager is motivated to expand his or her firm during a short period of time only but later prioritizes other goals and behaviors--for example because the efforts put into expanding the business did not lead to the desired outcomes (McCloy, Campbell, & Cudeck, 1994)--there is likely little effect of growth motivation on actual growth during extended periods of time. Unless motivation remains relatively constant over time until the behavior is performed, prediction will be weak (Ajzen, 1995). Empirically, research has found that stable motivations are good predictors of behavior while unstable motivations have no association with behavior (Sheeran, Orbell, & Trafimow, 1999). Therefore, an implicit assumption in the literature on growth motivation is that this motivation remains relatively stable over time.

The stability of growth motivation is central to theoretical development and to our subsequent hypotheses because the argument for the relationship between motivation and growth hinges on relative stability of growth motivation, but it has not been empirically assessed in the literature. Some indirect indications of stability may be inferred from previous research. A few studies have assessed the relationship between growth motivation and growth using a time lag between motivation and growth and have found support for a positive association (e.g., Baum et al., 2001; Kolvereid & Bullvag, 1996). Unless these findings are spurious, it suggests that growth motivation has some stability over time. This allows us to formulate our first hypothesis:

Hypothesis 1: Growth motivation at time1 (T1) has a positive effect on growth motivation at time2 (T2).

The Effect of Growth Motivation on Growth

The effect of motivation on behavior is less obvious than may be assumed for two primary reasons. First, the strength of the relationship is affected by the individual's degree of volitional control, i.e., the ability to perform the behavior at will. Environmental constraints and insufficient ability or task comprehension (i.e., not understanding what to do) diminish the effect of motivation on behavior. For example, the greater an individual' s ability, the greater is his or her tendency to choose to act (Kanfer, 1991; McCloy et al., 1994). Limited volitional control has been incorporated into goal-directed behavioral theories. The theory of planned behavior is an extension of the theory of reasoned action (Ajzen & Fishbein, 1977), adding aspects of individual ability (Ajzen, 1991), thus incorporating behaviors over which people have incomplete volitional control. As expected, this theory has been shown to outperform the theory of reasoned action in situations of limited volitional control (Netemeyer, Burton, & Johnston, 1991).

The expansion of a firm is an example of a behavior that is under limited volitional control. Unless the managers of the firm have the ability to develop suitable strategies and can spot growth opportunities, the firm will not grow irrespectively of the motivation to expand the business (Wiklund & Shepherd, 2003).

Second, the complexity of the behavior also affects its relationship with motivation. The expansion of a business is complex and can therefore be considered a fuzzy task (Campbell, 1988), characterized by multiple ways of attaining the desired outcome. It is also characterized by uncertainty and interdependences. This means that small business managers can choose many different ways to achieve growth and the goal of growing the firm can be interdependent with other goals. For example, small business managers may want to expand their firms but can achieve this desired outcome in several different ways; they can acquire another firm or grow organically; grow by increasing sales while outsourcing the production, thus expanding sales but not employment. Furthermore, if the goal of expanding the business conflicts with other goals, the small business manager may choose actions that do not completely fulfill the expansion goal.