Authors

Pia Arenius and Annaleena Parhankangas

Abstract

Principal Topic

The purpose of this study is to explore the implications of past growth experience and social aspiration level on entrepreneurial growth aspiration. Aspiration level is defined as the difference between the ideal size of the firm measured in sales in five years time and the sales level at the time of the questionnaire. Furthermore, the association between social capital and sales aspiration is examined. It is further hypothesized that entrepreneurial aging moderates the above mentioned relationships, proposing that older entrepreneurs exhibit lower sales aspiration levels despite of past growth, social aspiration and high levels of social capital.

Method

The relationships are explored using a sample of 133 Finnish micro-size firms from relatively similar industries, all being business service companies. As in micro-size firms organizational goal setting is relatively simple, they offer an excellent opportunity to examine organizational goal setting and the influencing internal and external factors. Most of the data was collected with a mail survey, but to overcome the unreliability of self-reported data, the sales and number of employees figures were collected from official resources. The hypothesized relationships are tested using regression analysis.

Implications

Small firms adopt a variety of goals, which is also witnessed in this study. Only twelve percent of the entrepreneurs indicated maximizing sales growth as their main managerial goal. The assumption underlying the majority of small and medium sized firms has the assumption of growth orientation. But not all companies seek to grow the firm. In the present sample, the measured sales aspiration levels varied across the sample; the median-split samples differed statistically significantly. Aspiration has been reported to influence behavior. If the performance of the company falls below the expectations, entrepreneurs seek to alter the performance. Thus, if we desire larger companies, then we have to contribute to that entrepreneurs set higher aspiration levels. The results of the present study show that we can expect that growth companies and companies with high levels of social capital seek to grow. Practical implications are many, e.g. venture companies can rely on past growth as a signal for high aspiration levels, support organizations in selecting the potential companies can rely on past growth and high levels of social capital as a measure of potential for growth.

[click here for the abstract at Babson College]

Citation

Pia Arenius and Annaleena Parhankangas, "Effects of Past Performance, Social Aspiration and Social Capital on Aspiration Level", Proceedings of the 20th Annual Entrepreneurship Research Conference, (2000), Babson College.