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  • Outline the introduction paragraph
  • Indicate the topic you will explore in the paper and assert a tentative thesis statement.

Outline your three body paragraphs

In each section, you will identify the article under consideration. Then include notes to indicate how you plan to

  • Describe the perspective presented in the article. 
  • Summarize the article’s findings on your identified topic. 
  • Show how the article’s perspective contributes to your overall thesis.

Outline the conclusion paragraph:

  • Restate the main points while reflecting on the significance of the evidence cited and the connections you have made.
    • Connect the ideas presented to show why the topic is an important one.

The outline Template is attached

ENG 122 WEEK 3 – FINAL PAPER OUTLINE

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Thesis:
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Introduction:
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Body Paragraph 1:
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Body Paragraph 3:
Include the title and author of your third article. Provide a brief summary of the main points and the findings presented in the article as well as the author’s perspective on the problem. Next, analyze the article as a member of the profession or field of study. Describe why the article is useful and should be read. Explain what is important about the problem as discussed in the article and how it affects the profession or discipline. Summarize your professional response to the ideas presented.

.


Conclusion:
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World Journal of Social Sciences

Vol. 2. No. 6. September 2012 Issue. Pp. 79 – 100

Barriers to Entrepreneurial Endeavors in a Developing
Economy

Rima M. Bizri*, Alia Kojok**, Abdallah Dani, Mohammad Mokahal and
Mohammad Bakri

Entrepreneurship has long been perceived as one of the significant
factors leading to development. This research examines the barriers
that pose as obstacles to the pursuit of entrepreneurial endeavors in
Lebanon, a middle-eastern developing nation. This study is based on
quantitative research, using a questionnaire of 27 items for data
collection. Descriptive data and statistical analyses are presented to
identify and assess barriers to entrepreneurship in Lebanon. The
findings provide valuable insight into the factors affecting
entrepreneurial inclination in developing countries. They suggest that
there are important barriers to entrepreneurship in developing countries.
In Lebanon, the most significant of those barriers are: the lack of social
network, lack of external stability, risk aversion, and lack of a business
environment conducive to entrepreneurship. The significance of this
research lies in the fact that it fills an important gap in the literature,
offering deeper understanding of the barriers to entrepreneurship in
developing nations, while focusing on a representative middle-eastern
developing country: Lebanon.

1. Introduction

Though entrepreneurship has always existed as an economic activity, it is a somewhat
novel concept to researchers and academics in developing countries. With
entrepreneurs now numbering near 400 million in 54 countries (GEM Global Report,
2011), interest in investigating entrepreneurial inclination is on the rise. Consequently,
research on entrepreneurship is quickly gaining ground since there is so much to learn
about the antecedents of entrepreneurship, as well as its effects on the individual,
community, and nation. Such research becomes more important, even more
challenging, when focusing on developing nations, where investigative studies are much
fewer and accurate data is, to a large extent, unavailable.

Most of the available research on entrepreneurship focuses on advanced economies
rather than on developing ones (Krueger, Reilly & Carsrud 2000). Though this poses a
challenge to researchers, it also presents an opportunity to investigate a variety of
variables related to entrepreneurship for the purpose of reaching a paradigm that is
workable in developing nations.

________________________
*Rima M. Bizri, Coordinator and Lecturer of Management, CBA, Hariri Canadian University, Lebanon
Email: [email protected]
**Alia Kojok, Abdallah Dani, Mohammad Mokahal, Mohammad Bakri (Researchers) www.rhu.edu.lb

Bizri, Kojok, Dani, Mokahal & Bakri

80

In Lebanon, a representative middle-eastern developing nation, the rate of
entrepreneurship is nowhere near other developing countries. In fact, Lebanese
investors in entrepreneurial startups do not exceed 2% of the population (GEM 2011).
This raises questions as to what might be the reasons behind this abstention.
Therefore, the objective of this paper is to identify the factors that inhibit entrepreneurial
activities in Lebanon, and pose as barriers to entrepreneurial inclination.

Though entrepreneurship in Lebanon is currently attracting more attention, it is mainly
centered on conferences, exhibitions, and preliminary statistics and newsletters, rather
than academic research of a quantitative or qualitative nature. Thus, this paper is
unique in that it offers deep insight into the perceptions of people who are, or might one
day become entrepreneurs. It identifies factors that are perceived by the respondents to
be barriers to entrepreneurship.

These factors are documented and explained in the literature review, while the methods
used to gather data and analyze it are explained in the methodology section. Later, the
perceptions of the respondents are presented and analyzed in the data analysis and
findings section. Conclusions and implications of the study as well as relevant
limitations ensue.

2. Literature Review

An entrepreneur is defined by Longman’s dictionary as someone who starts a new
business or arranges business deals in order to make money, often in a way that
involves financial risks. An entrepreneur can also be defined as a person who organizes
and manages a business, assuming risk for the sake of potential return (Mariotti &
Glackin 2012). This implies that risk, though undesirable, is an essential element of any
entrepreneurial venture, where the return can be immense and multi-faceted.

2.1 Antecedents and Consequences of Entrepreneurship: Two Levels

At the macro-level, entrepreneurship seems to be stimulated by government practices
that facilitate and encourage new business startups. By the same token, most
researchers support the claim that entrepreneurial endeavors seem to contribute to job
creation, economic growth, and competitiveness (Thurik & Wennekers 2004). It has
become widely agreed that entrepreneurship is necessary for economic development,
job creation, and improvement of the standard of living of people worldwide (Zelealem
Temtime, Chinyoka, & Shunda 2004). Entrepreneurs are not only creating jobs for
themselves, but for others as well. The positive and statistically robust link between
entrepreneurship and economic growth has now been verified across a wide spectrum
of units of observation, spanning the establishment, the enterprise, the industry, the
region, and the country (Thurik & Wennekers 2004).Therefore, to effectively address
unemployment and revitalize the economy, a developing nation should rediscover the
entrepreneur who takes risks, breaks new ground and innovates (Jesselyn Co &
Mitchell 2006).

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81

At the individual level, the antecedents to entrepreneurship may vary. Collins, Hanges,
and Locke (2004) show that the need to achieve is an important determinant of
entrepreneurial inclination. Other motives for entrepreneurial endeavors include the
desire for financial gain, freedom, control, and employment security (Turnbull, Williams,
Paddison, & Fahad 2001). All these posit powerful stimulants to entrepreneurial activity.
However, the consequences of entrepreneurial activity may also include failure if the
business startup did not pull off, thus the risk element in entrepreneurship. It is not
surprising, therefore, that nations are striving to enhance the entrepreneurial spirit in the
character of their youth. It has been shown that entrepreneurship education should be
emphasized at the college level to produce better quality entrepreneurs in the future
(Jaafar & Abdul Aziz 2008). Along those lines, it is essential for developing nations to
identify barriers to entrepreneurship that may hinder economic progress. This will assist
in creating government strategies that would mitigate, if not alleviate, those barriers so
as to maximize economic growth and development in those countries.

Evidently, there are significant barriers to entrepreneurship in most nations, developed
and developing, worldwide. Barriers in developed countries have been investigated
relatively thoroughly Robertson, Collins, Madeira & Slater 2003; Michaelis, Smith &
Richards 2001; Klapper 2005; Hurel 2002 as quoted in Klapper 2004; Collins, Hanges,
& Locke 2004; Henderson & Robertson 1999; Kwong, Thompson & Jones-Evans 2012;
Matlay & Carey 2007; Brennan, Wall, & McGowan 2005).

However, the research on entrepreneurship in developing countries is rather scanty and
scattered (Kwong, Thompson, Jones-Evans, & Brooksbank 2009; Nabi & Linan 2011;
Jamali 2009; Ahmad & Xavier 2012; Al-Ariss 2010; Sandhu, Siddique & Riaz. 2011; Lan
& Wu 2010; Taormina & Lao 2007). Until recently we have understood little about
entrepreneurship in developing countries, particularly the characteristics of new and
growth-oriented firms. Scholars and practitioners alike have implicitly assumed that
entrepreneurship was largely the same the world over (Lingelbach, de la Vina & Asel
2005). In developing countries, it is difficult to track new ventures to determine whether
they succeed or fail, since only few of them are officially registered, or included in
government records. Moreover, due to tight budgets in developing nations, little funding
is provided for conducting research, leading to inadequate investigation of
entrepreneurial activity, let alone barriers to it. According to a recent study,
entrepreneurship in developing countries is arguably the least studied significant
economic and social phenomenon (Abdullah, Hamali, Deen, Saban, & Abdurahman
2009). There is a lack of research in the field of graduate entrepreneurship in the
developing world, and further research in developing countries may help to understand
and shed light on the issues evolving around graduate entrepreneurial intentions (Nabi
& Linan 2011).

2.2 Barriers to Entrepreneurship

Two trends of thought dominate research related to barriers to entrepreneurship, one
highlighting psychological variables deterring entrepreneurial endeavors, and the other
accentuating variables related to the business environment. Taormina and Lao (2007)
show that budding entrepreneurs face psychological issues such as achievement

Bizri, Kojok, Dani, Mokahal & Bakri

82

striving and optimism. Sandhu, Siddique and Riaz. (2011) suggest that internal
psychological variables that affect entrepreneurship include aversion to risk, fear of
failure, aversion to stress and hard work, while external factors include lack of social
networking and lack of resources, and have an equally significant impact on
entrepreneurial inclination.

Indeed, macro-level environmental forces should not be underestimated. Factors in the
external environment, can potentially influence the start-up decision (Aldrich 2000). Just
as favorable external factors can be considered conducive to entrepreneurship,
unfavorable external factors can be powerful barriers to it. For example, inadequate
financial support, bureaucracy and inconsistency of government policies, lack of
entrepreneurial education at tertiary level and inadequacy of entrepreneurial training are
some of the important obstacles (Ahmad & Xavier 2012). Similarly, Chowdhury (2007)
explains that political instability, corruption, lack of infrastructure facilities, education and
training, lack of financial help, all pose as barriers to entrepreneurship in developing
nations.

2.3 The Variables Under Study

In this study, barriers belonging to both schools of thought will be examined for the
purpose of determining their effect on entrepreneurial inclination. The independent
variables will be partly psychological: aversion to risk, fear of failure, aversion to stress
and hard work, partly environmental, including lack of resources and lack of social
networking (Sandhu, Siddique & Riaz 2011); in addition to other environmental
variables such as lack of economic stability and lack of political stability, as suggested
by Taormina and Lao (2007). The dependent variable in the study will be
entrepreneurial inclination in a developing nation. Hence, this paper will use a collective
approach that will investigate the combined effect of the above independent variables
(psychological, social, political and economic) on entrepreneurial inclination in Lebanon,
thus offering a new comprehensive perspective on an area of study that has not been
addressed this way before in Lebanon.

2.3.1 Entrepreneurial Inclination

The entrepreneurial inclination in a country refers to the tendency of a population to
engage in entrepreneurial activity, at any stage of entrepreneurship, whether nascent,
startup, or established. There have been numerous studies about entrepreneurial
inclinations around the world. There are even periodic surveys that measure this
variable across countries.

Indeed, there have been numerous studies investigating the qualities of potential
entrepreneurs. For example, senior students that are entrepreneurially inclined are
found to have higher risk taking propensity, internal locus of control, higher need for
achievement and higher innovativeness (Gürol & Atsan 2006). In this study,
entrepreneurial inclination will be the dependent variable under study, likely to be
influenced by psychological factors, business environment factors, as well as other
external stability factors.

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83

2.3.2 Aversion to Risk

On one hand, in a risk-averse society, not only is the entrepreneur risk averse but so is
the lender or investor, which makes the business startup more costly, with a lower
potential for success. This may pose a serious barrier to the entrepreneur. On the other
hand, risk aversion may contribute to entrepreneurial success. Some risk-averse
people, long deemed inherently ill-suited to entrepreneurship, might actually be well-
suited to this occupation after all (Hsieh, Parker, Van Praag 2011). Nevertheless,
evidence points to risk aversion as one of the barriers to entrepreneurship. Hence, the
first hypothesis in this study is: H1: Risk aversion has a significant negative impact on
entrepreneurial inclination.

2.3.3 Aversion to Stress and Hard Work

It can be expected that the process of initiating a business involves stressful work
activities, follow up work, meeting timelines, and dealing with exhausting demands of
the startup and its ups and downs. All this may inflict aggravation on the entrepreneur
and may disrupt his/her life, routine, and work/life balance. Therefore, aversion to stress
and hard work is considered a psychological factor that posits as a barrier to
entrepreneurial activity. Hence the second hypothesis in this study is: H2: Aversion to
stress and hard work has a significant negative impact on entrepreneurial inclination.

2.3.4 Fear of Failure

If the entrepreneur fails, this has many psychological implications. It affects one’ self-
esteem, confidence, and trust in one’s abilities. It is not surprising that fear of failure is
yet another significant barrier to entrepreneurship. About 21% of the Lebanese
population (between 18 and 65 years of age) declare that fear of failure prevents them
from pursuing entrepreneurial ventures (Global Entrepreneurship Monitor 2009). It is
deemed important by the researchers to further investigate the effect of fear of failure on
entrepreneurial inclination in Lebanon. Hence, the third hypothesis in this study is:
H3: Fear of Failure has a significant negative effect on entrepreneurial inclination.

2.3.5 Lack of Social Networking

Social networking is considered to be a common daily activity that relates to all aspects
of life, especially in developing nations. For example, in China, networking is used at all
levels of social life (Luo 2000). It is especially important in Chinese business because
an entrepreneur’s connections are often a critical success factor (Yeung & Tung 1996).
Along the same lines, Sandhu, Siddique & Riaz (2011) argue that in a developing
country such as Malaysia, social networking is an important factor in influencing
entrepreneurial activities. As such, lack of social networking can hinder entrepreneurial
intentions, they point out. Hence, the fourth hypothesis in this study is: H4: Lack of social
networking has a significant negative impact on entrepreneurial inclination.

Bizri, Kojok, Dani, Mokahal & Bakri

84

2.3.6 Lack of Resources

Entrepreneurs have a universal need: the need for resources, especially adequate
funding. In developing nations, it is clearly difficult for entrepreneurs to raise funds for
starting their business. Apart from banks, there are very few funding agencies, and
venture capitalists and business angels are, with a few exceptions, almost unheard of.
In Lebanon, sources of funds for entrepreneurs are little and are limited to commercial
banks. To help entrepreneurs obtain funds from local banks, there are organizations like
Kafalat which is a Lebanese financial company with a public concern that assists small
and medium sized enterprises (SMEs) to access commercial bank funding. Kafalat
helps SMEs by providing loan guarantees based on business plans / feasibility studies
that show the viability of the proposed business activity (Kafalat 2012). However,
informal investments in an entrepreneur’s startup have not exceeded 2% of the
population (Global Entrepreneurship Monitor 2009). This accentuates the fact that funds
are quite difficult to raise for entrepreneurial ventures, and that lack of resources may
pose as a barrier to entrepreneurship. Therefore, the fifth hypothesis in this study is:
H5: Lack of resources has a significant negative impact on entrepreneurial inclination.

2.3.7 Lack of Economic Stability

Through the course of their development, economic instability remains a common
characteristic of developing countries, despite the general upward trend of their growth
rates. A developing economy is subject to variations in aggregate demand, investment,
exports, and exchange rates, making it difficult for a startup to pull off and survive. The
unfavorable state of the economy may negatively affect entrepreneurship (Baena 2012).
The negative effects are accentuated if the lending institutions become more
conservative, thereby reluctant to extend credit to entrepreneurs. Thus, the sixth
hypothesis is: H6: Lack of economic stability has a significant negative impact on
entrepreneurial inclination.

2.3.8 Lack of Political Stability

Political stability is essential for stimulating entrepreneurship in developing nations
(Baena 2012). In a study using structural equation modeling to depict precursors to
entrepreneurial intentions, Ali, Tajddini, Rehman, Ali, and Ahmed (2010) found that
political instability had negative effects on entrepreneurial intentions. However, there is
no conclusive evidence linking entrepreneurship to political stability, making this
relationship worthy of further investigation. Therefore, the seventh hypothesis in this
study is: H7: Lack of political stability has a negative impact on entrepreneurial
inclination.

2.3.9 Demographics

It is expected that demographic factors like age, gender, education, employment status,
and income may have some effect on entrepreneurial inclination. Many studies were
conducted to examine the effect of demographic factors, and the results were not

Bizri, Kojok, Dani, Mokahal & Bakri

85

conclusive. Hence, to further investigate the effect of demographic variables on
entrepreneurial inclination, an eighth hypothesis is suggested:
H8: Demographic factors have a significant impact on entrepreneurial inclination.

2.4 Conceptual Framework

The model underlying this study suggests that independent variables related to the
psychological school, the business environment, and environmental stability, have a
significant effect on entrepreneurial inclination. Figure I presents the conceptual
framework underlying this study.

Conceptual Framework for This Study

Figure I. Conceptual Framework for this study

3. Research Methodology

A sample of 101 surveys was used to assess entrepreneurial inclination among different
members of the population: college students, employees, unemployed individuals, and
entrepreneurs. Such a wide variety of respondents provides a better understanding of
people’s perceptions about starting a business since anyone of them can be an existing
or potential entrepreneur. The questionnaires were distributed by researchers who
waited for the respondents to complete the surveys and then collected them in person,
thus obtaining a 100% response rate. The survey instrument consisted of a total of 27
items, 7 of which were related to demographics, and 20 were related to individual
perceptions, measured on a 5-point Likert scale, ranging from 1 (strongly disagree) to 5
(strongly agree). Each item was presented in both languages: English and Arabic since
not all respondents were proficient in English. The sample size of 101 surveys was
deemed appropriate since the authors were following the dominant rule which specifies
a sample size 4-5 times the number of items in the questionnaire. In this case, 20
perceptual questions warranted a minimum of 80 to 100 usable questionnaires.

Bizri, Kojok, Dani, Mokahal & Bakri

86

Reliability measures the internal consistency of the scale, and Cronbach’s alpha is used
as an indication of reliability. An alpha > 0.7 is recommended (Nunnally 1978), but an
alpha > 0.6 is acceptable for exploratory research (Hair, Bush & Ortinaou 1995). For this
study, Cronbach’s alpha was 0.61 which is acceptable since this study is exploratory
and our data is primary.

The data was subjected to several statistical tests. Analysis of variance was run on
demographic variables to see if they are in any way correlated with entrepreneurial
inclination. Factor Analysis was conducted to identify the small number of factors that
may have some influence on entrepreneurship inclination in Lebanon. Later, regression
analysis was run on the identified factors to assess their importance in predicting
entrepreneurial inclination. The Statistical Package for Social Sciences (SPSS 19.0)
was used for data analysis, whose results will be displayed in the next section.

All previous studies conducted in Lebanon were merely frequency statistics that did not
address correlative relationships between variables. Furthermore, though there were
numerous previous studies about entrepreneurship in developing countries, as
evidenced by the above literature review, however, they did not employ this chosen
research methodology on the above selected combination of variables, hence, the
originality and value of this particular study.

4. Data Analysis and Findings

4.1 Profile of the Respondents

The age group of the respondents was relatively young, i.e. 56.4% of the respondents
were between 20 and 29 years of age, 32.7% were between 30 and 39 years old, while
only 8.9% were above 40 years old. The data for gender showed that 60.4% of the
respondents were males, while only 39.6% were female. Most of the respondents
(67.3%) were single, while only a third (30.7%) were married. Over 66% of all
respondents had a college degree, and about one third (33.7%) had only a high school
degree. The employment status of the respondents well reflected the population, as
over a quarter of the respondents (26.7%) were unemployed. An almost similar
percentage (22.8%) was self-employed, while 46.5% were employed in organizations
belonging to either the private or the public sector. Most of the respondents (46.5%)
earned a monthly income between $500 and $1000, while a slightly smaller percentage
(32.7%) earned between $1,000 and $3,000. Almost 12% of respondents earn below
$500. Table I clearly presents the demographic characteristics of the respondents.

4.2 Cross-tabulation of Entrepreneurial Inclination with Demographic Variables

Respondents were highly inclined to start their own business as the mean for this
dimension reached 3.55 on a 5-point Likert scale. Moreover, almost two thirds of the
respondents (59%) expressed an inclination to start a business, and answered strongly
agree or agree. Only 27% of the respondents said they were disinclined (Strongly
disagree or disagree) to start their own business.

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87

4.2.1 Age: A cross tabulation between age and entrepreneurial inclination indicated that
almost half (49.1%) of the youngest category of respondents (between 20 and 29 years
old) had an inclination to start their own business. Among the slightly older age
category (between 30 and 39 years of age), a much bigger percentage (72.8%)
indicated a similar inclination (Strongly agree or agree), whereas only 18.2% showed
entrepreneurial disinclination. This means that entrepreneurial inclination was mostly
exhibited among people between 30 and 39 years old.

4.2.2 Gender and Marital Status: A cross tabulation between gender and
entrepreneurial inclination showed that 52.5% of female respondents had an inclination
to start their own business, while 63.9% of the male respondents had this inclination. A
similar cross tabulation between entrepreneurial inclination and the marital status of the
respondents showed that about 67% of married respondents were entrepreneurially
inclined, while 56% of single respondents were. Both marital statuses show
considerable inclination towards entrepreneurship. Thus, a bigger percentage of male
and married respondents showed entrepreneurial inclination than female or single ones,
though all four categories exhibited a relatively high tendency for starting a new
business.

4.2.3 Education: Cross tabulation between education and entrepreneurial inclination
showed that the educational level of the respondents was not necessarily related to
their tendency to start a business. For example, 58.9% of respondents with only a high
school certificate were positively inclined, while 55.7% of the respondents with a college
degree were similarly inclined.

4.2.4 Employment Status: The respondents’ employment status seemed to show
different results: about 48% of the unemployed respondents showed entrepreneurial
inclination, while about 68% of employed respondents showed similar inclination. This
result is interesting because respondents who already have jobs had more inclination to
start their own business than those who were unemployed.

4.2.5 Income: Cross tabulation between income and entrepreneurial inclination
revealed an unpredicted trend. Only 50% of the low-earning respondents (below $500)
indicated entrepreneurial inclination, though they had the biggest motive to do so; a
similar percentage was indicated by respondents earning between $500 and $1,000;
however, as income increased ($1,000-$3,000), so did entrepreneurial inclination:
(72.8% of this income category were positively inclined). These results emphasize the
pull factor (attractiveness of entrepreneurship) as opposed to the push factor (obligation
to start a business) in entrepreneurial inclination, both of which will be explained
thoroughly in the interpretation section.

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Table 1: Demographic Characteristics for Respondents

Variable Frequency Valid Percentage

Age
20-29
30-39
40-49
50 and above

57
33
9
2

56.4%
32.7%
8.9%
2%

Gender
Males
Females

61
40

60.4%
39.6%

Marital Status
Single
Married
Divorced

68
31
2

67.3%
30.7%
2%

Education
High school
BA degree
MA/MS
PhD

34
61
5
1

33.7%
60.4%
5%
1%

Employment
Unemployed
Employed
Business owner
Seriously
considering
starting own
business

27
47
23
4

26.7%
46.5%
22.8%
4%

Income
Below $500
$500-$1000
$1001-$$3000
$3001-$5000
Above $5000

12
47
33
5
4

11.9%
46.5%
32.7%
5%
4%

4.3 Anova

Analysis of variance was performed on the demographic variables as independent
variables, and entrepreneurial inclination as the dependent variable. The results of the
analysis show that none of the demographic variables has a statistically significant
impact on entrepreneurial inclination except for income. Income was the only
demographic variable with a statistically significant F-statistic (Sig. 0.028 < 0.05),
indicating that people belonging to different income categories may have statistically
different entrepreneurial inclinations. None of the other demographic variables (age,
gender, education, marital status, or employment status) had a statistically significant
impact on entrepreneurial inclination among the respondents. Looking back at
descriptive statistics of income, it seems that higher income individuals are more
inclined to engage in entrepreneurial endeavors than their lower income counterparts.
Hence, Analysis of Variance identified income as the only demographic variable that
has a significant relationship with entrepreneurial inclination. Thus H8 is well-supported
though only for the income variable. Table II presents the results for ANOVA for Income
and Entrepreneurial Inclination.

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89

Anova

Income categories and Entrepreneurial Inclination

Sum of Squares df Mean Square F Sig.

Between Groups 18.930 4 4.732 2.839 .028
Within Groups 160.021 96 1.667
Total 178.950 100

Table II. ANOVA for Income and Entrepreneurial Inclination

4.4 Factor Analysis

Factor analysis is a multivariate statistical technique that is used to summarize the
information contained in a large number of variables into a smaller number of subsets or
factors (Hair, Bush & Ortinaou 2008). To perform factor analysis, the sampling
adequacy had to be ascertained. This is why Kaiser-Mayer Olkin and Bartlett’s
sphericity tests had to be conducted. (KMO) test is needed to assess the suitability of
the survey data for factor analysis. A value of KMO>0.5 shows that factor analysis is
appropriate since correlations between pairs of variables can be explained by other
variables. Moreover, Bartlett’s sphericity test is used to determine suitability of the data
by examining the correlation of the variables in the population. The result for Bartlett’s
sphericity test should be statistically significant.

For this survey, the KMO was 0.62 which is greater than the threshold of 0.5. Moreover,
Bartlett’s sphericity test was highly significant (Sig. = .000), so we conclude that the data
in the sample is suitable for factor analysis. Table III presents the results of KMO and
Bartlett’s sphericity test.

KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .620
Bartlett’s Test of Sphericity Approx. Chi-Square 300.802

df 190

Sig. .000

Table III. Sample Adequacy Tests

Factor analysis was run using SPSS 19.0, and the principal components method was
used as an extraction method. Only Eigenvalues greater than one were retained, and
the Varimax rotation method was used to optimize the loading factor of each item on the
extracted components. Items with factor loadings greater than or equal to 0.3 were
retained, while those <0.3 were suppressed. The analysis generated nine factors, eight
of which were considered representative of distinct barriers, while one was deemed not
meaningful and was deleted from the factor set. The retained factors were named 1)
social network, 2) fear of failure, 3) business environment, 4) external stability, 5) Lack
of resources, 6) aversion to stress and hard work, 7) aversion to risk, and 8) lack of
preparation and training. Table IV presents the factors, their loadings, eigenvalues, and
associated variance explained.

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Factors Analysis Results

Factors Items Factor Loading

1. Social Network Support from community, family, & friends
Entrepreneurs feel they can overcome risk
Social network helps entrepreneurs
Eigenvalue
Variance explained

0.564
0.537
0.514
2.325

11.625%

2. Fear of Failure One reason behind lack of entrepreneurship is fear of failure
No good balance between work and personal life
Eigenvalue
Variance explained

0.603
0.345
1.795

8.973%

3. Business Environment

Existence of community support
Environmental stability
Active funding programs
Eigenvalue
Variance explained

0.390
0.443
0.314
1.603

8.016%

4. External Stability Economic stability
Political Stability
Eigenvalue
Variance explained

0.824
0.300
1.439

7.194%

5. Lack of Resources Difficulty raising funds
Eigenvalue
Variance explained

0.850
1.388

6.938%

6. Aversion to Stress &
Hard Work

Intimidated when work is stressful & hard
No work/life balance
Eigenvalue
Variance explained

0.829
0.254
1.289
6.446

7. Aversion to Risk Risk prevents entrepreneurs from starting their own business
Entrepreneurs are intimidated by risk related to new business
Eigenvalue
Variance explained

0.790
0.543
1.288
6.440

8. Lack of Preparation and
Training

Lack of flexibility & adaptability to changes facing new business
Eigenvalue
Variance explained

0.905
1.108
5.540

Table IV. Factor Analysis of Barriers to Entrepreneurship

The eight factors obtained seem to be able to explain a good percentage (61.174%
excluding the deleted factor#8) of the variance in entrepreneurial inclination, where the
first factor was able to explain almost 12% of the variance. Table V clearly presents the
variance explained by the identified factors.

These results are significant in that they identify the eight major factors affecting
entrepreneurial inclination in Lebanon, a developing country, representative of middle-
eastern Arab nations. The factors scores are thus saved to be used later in regression
analysis in order to determine their relative importance in predicting entrepreneurial
inclination.

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91

Total Variance Explained

Component

Rotation Sums of Squared Loadings

Total % of Variance Cumulative %

1 2.325 11.625 11.625
2 1.795 8.973 20.598
3 1.603 8.016 28.614
4 1.439 7.194 35.808
5 1.388 6.938 42.747
6 1.289 6.446 49.193
7 1.288 6.440 55.633
8 1.216 6.082 61.715
9 1.108 5.540 67.256

Table V. Extraction Method: Principal
Component Analysis.

4.5 Regression Analysis

The purpose of conducting regression analysis is to determine the importance of each
independent variable (from the eight identified meaningful factors) in predicting the
dependent variable: entrepreneurial inclination. The beta coefficient of each variable
indicates the significance of the variable and the direction of its effect.

Regression analysis is run using SPSS 19.0, and the model summary shows that
adjusted R square is 0.604, which means that the suggested model is able to predict
about 60% of the change in entrepreneurial inclination. This means that the variables in
the linear equation possess powerful predictive power, and that the model itself has
strong predictive capability. Table VI presents the model summary of the regression
model.

Model Summary

Model R R Square
Adjusted R

Square
Std. Error of the

Estimate

1 .795
a
.632 .604 .84134

Table VI. Model Summary for Regression
Equation

The ANOVA table shows a fairly large F statistic (19.84) with a high significance level
(Sig.=.000), assuring that the overall model is significantly different from zero.
Table VII presents the ANOVA table and related F-statistic.

Anovab

Model Sum of Squares df Mean Square F Sig.

1 Regression 113.286 8 14.161 19.840 .000
a

Residual 65.664 92 .714

Total 178.950 100

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92

Anovab

Model Sum of Squares df Mean Square F Sig.

1 Regression 113.286 8 14.161 19.840 .000
a

Residual 65.664 92 .714

Total 178.950 100

Table VII. Dependent Variable: Entrepreneurial Inclination

However, it is essential to assess the statistical significance of each beta coefficient to
determine its ability to predict entrepreneurial inclination. The multiple regression
analysis generated a coefficients table that showed the t-statistic for factors 1, 4, and 7
that are statistically significant at (p-value <0.000, p-value <0.01, and p-value <0.01
respectively), while the t-statistic for factor 3 is marginally significant at (p-value <0.055).
Therefore, this analysis identifies the factors that have statistically significant beta
coefficients that effectively contribute to the prediction of change in entrepreneurial
inclination. Hence, H1, H4, H6, and H7 are sufficiently supported, and a detailed
explanation is presented in the discussion and interpretation section. Refer to Table VIII.

The regression equation is:

EI = b1 Social network + b2business environment + b3 External stability+ b4 Aversion to risk + e

Where:
b1, b2, b3, and b4 are the statistically significant beta coefficients for the independent
variables. Social network, business environment, external stability, and aversion to risk
are the independent variables that had statistically significant beta coefficients. This
shows that out of the eight identified factors, only three had statistically significant beta
coefficients and one had a marginally significant beta coefficient:

1) Social network: beta coefficient of 0.720 that is statistically significant (Sig.= .000)
2) External stability: beta coefficient of 0.211 that is statistically significant (Sig. = .001)
3) Aversion to risk: beta coefficient of -.226 that is statistically significant (Sig.= .001)
4) Business environment: beta coefficient of .122 marginally significant (Sig.= .056)

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93

Coefficientsa

Model

Unstandardized Coefficients
Standardized
Coefficients

t Sig. B Std. Error Beta

1 (Constant) 3.554 .084 42.283 .000

Social Network .964 .084 .720 11.406 .000

Fear of Failure -.019 .084 -.014 -.222 .825

Business Environment .163 .084 .122 1.932 .056

External Stability .283 .084 .211 3.346 .001

Lack of Resources .041 .084 .030 .483 .630

Aversion to Stress and Hard
Work

.037 .084 .028 .438 .662

Aversion to risk -.302 .084 -.226 -3.576 .001

Lack of Training and
Preparation

-.056 .084 -.042 -.666 .507

Table VIII. Dependent Variable: Entrepreneurial Inclination.

5. Discussion and Interpretation of Results

5.1 Demographics

The analysis of the demographic data using ANOVA showed that people belonging to
different income level categories may vary in their entrepreneurial inclination. Though
respondents at the lowest income category (earning below $500) had the greatest
incentive to start their own business in order to raise their income level, their inclination
was no greater than that of the higher income category ($500-$1000), and less than the
inclination of even higher income categories ($1000-$3000). This supports the view
behind pull-factors, which include factors that attract the entrepreneur such as
opportunity for profit, sense of achievement, the challenge, independence and freedom,
control of one’s destiny, rather than push factors such as need for income,
dissatisfaction at work, etc. Pull factors render the entrepreneurial venture attractive to
the entrepreneur, and stimulate entrepreneurship. This study shows that higher income
individuals consider entrepreneurship as a viable option more than lower income
individuals do, hence concluding that entrepreneurship seems to be a function of “pull”
factors not “push” factors. This finding is interesting because it seems to be consistent
with previous research that accentuates the importance of pull factors. Segal, Borgia, &
Schoenfeld (2005) showed that pull factors have been found to be more prevalent than
push factors. Thus it is fair to conclude that higher income individuals (a demographic
variable) may be more inclined to start up their own business. Therefore, H8 is
supported only where income is concerned.

5.2 Lack of Social Network

The results of the multiple regression analysis showed that the factor with the greatest
influence on entrepreneurial inclination is social network. Its standardized beta
coefficient was 0.72 and the t-statistic was significant at (Sig. = .000). This is consistent
with previous research performed in Malaysia on postgraduate students, where social
networking also ranked as the most prominent factor influencing entrepreneurial

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94

inclination, and with a beta coefficient of 0.267 in the regression equation (Sandhu,
Siddique & Riaz 2011). Focusing on Lebanon, this study has shown that Lebanese
people feel that social networking plays a critical role in the success of the entrepreneur.
This is ingrained in their culture as in most developing countries’ cultures. Thus, this
study’s finding regarding the importance of social networking in predicting
entrepreneurial inclination in Lebanon seems to be consistent with previous research,
shedding light on one of the most prominent variables influencing entrepreneurship.
Therefore, lack of a strong social network may be perceived as a barrier hindering
entrepreneurship. Hence, H4 is sufficiently supported.

5.3 Lack of External Stability

The results of this study show that economic and political stability seems to be
perceived by respondents as a single factor separate from the business environment. It
is understandable that external stability is considered crucial for entrepreneurs in
Lebanon, since this country has gone through, and still is going through economic and
political instability which is affecting its growth and development. Lack of stability may
pose as a barrier facing entrepreneurs, deterring them from starting their own business
when the external environment is not stable. The Lebanese economy suffers from ups
and downs in its economy and its political arena, instability inherent in most developing
countries. The regression analysis shows that external stability is a factor that has a
significant impact on entrepreneurship, thus supporting the two hypotheses H6 and H7.

It is important to restate that factor analysis combined economic and political stability
into one factor that the researchers named external stability. Indeed, external stability,
both economic and political, is considered favorably associated with entrepreneurial
inclination. Baena (2012) shows that political stability and GDP growth are significantly
and positively associated with franchising into emerging nations. To develop
entrepreneurial policy, political, social and economic factors need to be taken into
consideration (Heinonen, Hytti & Cooney 2010). Baena (2012) also suggests that the
economic and political context affects entrepreneurial startups. Hence, the fact that
external stability was found by this study to have a significant impact on
entrepreneurship is consistent with previous research, and lack of external stability can
be considered a significant barrier to entrepreneurship.

5.4 Aversion to Risk

Regression analysis conducted in this study showed that risk aversion is indeed a factor
that has a significant effect on the dependent variable, but it was clear that since the
beta coefficient is negative, the impact of this factor is negatively associated with
entrepreneurial inclination. This means that the more risk averse the individual is, the
less his inclination to become an entrepreneur. This is consistent with previous research
that identifies risk taking ability as a trait needed for successful entrepreneurs (Dyer
1994). This has been also confirmed by Hian Chye Koh (1996), whose study showed
that entrepreneurially inclined individuals have a higher propensity to take risk. Thus,
aversion to risk may indeed pose as a barrier to entrepreneurship, and H1 is sufficiently
supported.

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95

5.5 Weak Business Environment

In this study, regression analysis showed that the business environment is an important
factor that can help predict change in entrepreneurial inclination. Its beta coefficient was
0.122 with a marginally significant t-statistic at (Sig. = 0.056) It is essential for the
entrepreneurial venture to start in an environment that is conducive to growth and
sustainability. Such an environment must have certain building blocks, such as a stable
context for doing business, stable exchange rates, taxes, interest rates, regulations and
government procedures, active NGOs that facilitate the business processes of the
startup, and provide programs for funding and financing at the time that the startup
needs it. This means there should exist an external infrastructure, both public and
private to support the entrepreneurial endeavor. Focusing on Lebanon, There are a few
initiatives whose main objective is to assist in the finding and developing of
entrepreneurs, and finally in turning their ideas into real business ventures. One such
organization is BADER, whose mission is to provide the necessary tools for the
successful launching and development of high impact entrepreneurial projects in
Lebanon with the aim to promote national economic development, job creation and a
reduction of the brain drain (BADER 2012). Another such organization is Kafalat
(mentioned above) whose objective is to facilitate access to credit for entrepreneurs by
granting them guarantees to present to commercial banks. UNIDO is also active in
Lebanon through its awareness projects which it carries out in conjunction with the
Union of Chambers of Commerce in Lebanon (UNIDO 2011).

Though the impact of such organizations so far is relatively small, it is expected that
with continuous effort, they will contribute to the buildup of a business environment that
is conducive to entrepreneurship, especially since this study shows that people consider
such an environment to have a positive influence on business startups. These results
seem to be consistent with previous research; for example, Taormina and Loa (2011)
suggest that perceived business environment is positively and significantly correlated
with motivation to start a business. We may thus conclude that though marginally
significant, the absence of a business environment that is conducive to
entrepreneurship may be a considered one of the barriers that prevent individuals from
starting a new business in a developing nation.

6. Conclusions and Implications

This study sheds light on one of the most important drivers of the economy in a
developing nation: entrepreneurship. The results of this study can be used in the
process of developing and upgrading policies that stimulate entrepreneurship and
enhance the sustainability of new ventures.

1) Since income was found to have a statistically significant impact on
entrepreneurial inclination, and since high income individuals were more inclined
towards entrepreneurship, policy makers should capitalize on this finding, and
create policies that encourage and activate this inclination into materialized
business projects, thus focusing on the later stages of entrepreneurship

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96

associated with implementation. Such policies may be related to financing
facilities, marketing consultation, tax incentives, among others.

Policy makers should also direct some attention to low income individuals, whose
financial situation may deter them from pursuing entrepreneurial endeavors. For
these people, policies should be created that can engage them and enhance
their participation in entrepreneurship. This can be done through the
development of specialized programs targeting low income individuals, to help
them, most importantly, believe in their ideas and in their ability to pull them
through – programs that can pool low income individuals together, aiming at
synergy, then refining their ideas, and later channeling them through to funding
agencies and facilitating their implementation. Thus the focus for low income
individuals should be at the earlier stages of entrepreneurship.

2) Social network was identified as a significant factor affecting entrepreneurial
inclination. This result indicates that individuals perceive the social network to be
essential to the success of their business. Thus, policy makers should work on
the development of the civil society and its agencies, in terms of expanding their
role, widening the scope of their services, extending their reach to all groups in
society. It is easier for an entrepreneur to contact a local NGO that can offer
timely assistance. Networking should be on the agenda of all local NGO’s,
providing contact information for entrepreneurs, lists of available and potential
services related to marketing, exporting, packaging, inspection, approvals,
certification, sales, distribution, and even funding. Hence the importance of
initiating and sustaining such NGO’s which can act as a social cushion, lending
support to the entrepreneur.

3) Since aversion to risk was shown to negatively impact entrepreneurial inclination,
policy makers need to create a culture of relatively higher risk tolerance, where
potential entrepreneurs are trained, throughout basic and college education, to
take moderate calculated risk when making decisions. This can be done by
introducing the principles of decision making under risk and uncertainty at the
high school level, and later developed further at the college level where students
can identify and assess the rewards of risk taking. Uncertainty avoidance is a
cultural value (Hofstede 1980), and as such, it can only be changed if successive
generations learn to be more tolerant of risk and more willing to accept it. Hence
the need to ingrain risk tolerance in the younger generations by reevaluating the
curricula and making the necessary adjustments.

4) External stability has been found to positively impact entrepreneurial activity, so
policy makers need to make an effort to maintain economic and political stability
in the country. A sustainable economic growth rate is necessary to encourage
entrepreneurship, so fiscal and monetary policy should be synchronized to
achieve the desired GDP growth rate. Furthermore, political stability, no matter
how difficult it may be in a developing nation, must be maintained, such that any
political disagreement is resolved through democratic and institutional means.

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97

5) The business environment should be conducive to entrepreneurship, so
policymakers need to create the infrastructure necessary for new business
startups. This infrastructure may include government procedures free of red tape
and bureaucracy, establishment processes that are simple and free of overlap
and redundancy, low cost of initiation and effective tax incentives, funding
programs for entrepreneurs to help them start up the business, and later meet
their short term financial obligations, and local business consultation bureaus that
can offer the entrepreneur timely, expert, free advice. Such an environment is
essential for encouraging new startups, and for sustaining their development
over time.

7. Limitations of the Study and Directions for Future Research

One of the factors identified through factor analysis was the business environment that
is conducive to entrepreneurial endeavors. This study was able, through regression
analysis, to assess its importance in predicting the dependent variable, but it was not
able to comprehensively investigate the elements that go into this factor. For example, it
would be useful to investigate what elements of the business environment (consultation
centers, financing agencies, establishment offices, etc.) need to be developed and
which elements are more valued by entrepreneurs. Another empirical study focusing on
this factor would be considered valuable to entrepreneurship research.

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UDC 334.72:364-3].01

Goran GOLUBOVSKI, PhD∗
Marina KANTARDJIEVA, PhD∗
Irena ASHTALKOSKA, PhD∗

BARRIERS THAT AFFECT THE SOCIAL
ENTREPRENEURSHIP

Abstract: This paper is focused on the barriers of the social

entrepreneurs and their social enterprises experience during their activities.
The social entrepreneurship represents an alternative approach in solving the
social problems in the society. Hence, the social entrepreneurship is a hybrid
of its social mission and its business approach needed to support the mission.
This hybridization produces a complex model and its complexness can be
seen through analysis of the barriers that social entrepreneurs face during the
execution of their social aims. The barriers of the social entrepreneurship can
be of economic, socio-cultural and institutional nature and often they
represent an opportunity for the social entrepreneurs. This ability of seeing
the barriers as opportunities by the social entrepreneurs is a result of their
embeddedness in the local communities and their knowledge of the local
formal and informal relationships.

* AUE-FON, Skopje [email protected]
* AUE-FON, Skopje [email protected]
* [email protected]

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394

Keywords: social entrepreneurship, social entrepreneurs, social
barriers, institutional barriers

Introduction
Conventional business strives towards economic gain in the form of

profit or increased market share. Recently, a new paradigm has taken the place
of this established view. Social enterprises and social entrepreneurs are
representatives of this new paradigm and they strive to create sustainable
social value in addition to economic value. In fact, they use economic gain to
achieve social goals by undertaking activities such as economic integration of
people with special needs, ethical agriculture in which farmers are paid fairly,
activism, environmental protection, etc.

From the above we can say that social entrepreneurship has a dual
mission that aims to create social and economic value. The very intention to
realize this dual mission is more complex in its nature than the mission of
conventional businesses and business entrepreneurs who strive to realize only
economic value. Because of this complexity embedded in the identity of
social entrepreneurship they face equally compound and complex barriers
(Davies, Haugh & Chambers, 2019:1616-1617).

Barriers as opportunities for social entrepreneurs
The entire economic activity takes place within a social and

institutional structure that inevitably affects all actors. Social
entrepreneurship is no exception because it deals with activities that fall
within the framework of social and economic (Robinson, 2006:101). This
institutional structure, as well as the culture in which the institutions function,
creates barriers, but also opportunities for market entry and further
development of social enterprises.

Even more than a century ago, authors such as John Bates Clark, as
far back as 1907, wrote about the barriers that prevent competition from
taking over the market. Since then, many authors have dealt with this field of
study, but certainly the most famous, according to Robinson (2006), are
Sherer and Porter, who in the 80s of the last century clearly specified the
barriers to market entry and which are studied today in the subject of strategic
business management and entrepreneurship.

In countries with weak institutional capacities, the provision of
social goods and services by the state is ineffective. This inefficiency is an
opportunity for social entrepreneurs to put themselves in the position of
distributors of goods that are not in supply. Barriers are challenges and
opportunities for social-entrepreneurial action. Unfortunately, there is no

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395

substantial literature addressing entry barriers in social entrepreneurs. This is
also noted by Krueger, Schulte & Stamp (2008) who explicitly state that there
is a lack of research on the role of barriers in social entrepreneurs.

Robinson (2006:100) is the most cited author who deals with the
analysis of barriers in the context of social entrepreneurship, and he believes
that entry barriers are the “antonym” of opportunities, but these same
obstacles, depending on perception, can also represent opportunities.
Business entrepreneurs often use the analysis of these entry barriers as a
criterion for evaluating opportunities. Their perception of these entry barriers
influences the final decision to enter a particular market.

In this context of the duality of the term barrier, which can also
represent an opportunity, Krueger, Schulte & Stamp (2008) provide a general
cognitive picture of barriers, emphasizing that barriers are at the same time
triggers of socially entrepreneurial action. Thus, they distinguish between
push and pull barriers, depending on the entrepreneur’s perception.

In this context, some positive events can push the entrepreneur to
establish a company, while for social entrepreneurs it is mostly about negative
events that create frustration and dissatisfaction with the current status quo
situation in his contextual environment and hence the desire for social
entrepreneurial action is born.

Types of barriers in social entrepreneurship
Robinson (2006) suggests that it is best to view social

entrepreneurship opportunities in the context of the social and institutional
factors that create them. From there, Robinson lists three categories of entry
barriers that affect social entrepreneurs and their social businesses. He divides
these entry barriers into:

• Economic barriers
• Social barriers
• Institutional barriers

In the context of economic barriers, Robinson (2006) uses already
established definitions that focus on entry barriers that the company itself
creates to prevent competition. This implies investments in the development
of technology, resources, etc., which creates a competitive advantage to the
level that will create a problem for the competition. Lower cost advantage,
product differentiation, need for capital investment, customer or product
switching cost, investment in technology as well as investment in research
and development are examples of economic barriers. Obviously, these
“scarecrows” are of a financial (economic) nature.

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396

On the other hand, Dacin, Dacin, & Matear (2010:49) provide a
striking analysis regarding social entrepreneurs and competitiveness. They
believe that it is precisely the characteristic approach to competitive
advantage that defines and exposes true social entrepreneurs. Social
entrepreneurs do not establish competitive barriers, like traditional
businesses, but they, above all, share their knowledge and use resources in a
cooperative way (Davies, Haugh & Chambers, 2019).

Based on the findings so far, we can say that economic barriers are
one of the biggest challenges for social entrepreneurs due to the lack of a legal
framework in many countries for them to register and access formal capital.
That is why innovation comes into play when collecting funds and resources
from a variety of possible sources, with which social entrepreneurs become
flexible and responsible, above all to their stakeholders (Wildmannova,
2018).

Social barriers follow that prevent entrepreneurs from using social
networks that exist in the market. When we consider that communication
takes place through these networks which can be formal and informal, then it
is clear that they significantly influence the performance of an organization.

Robinson (2006:101) lists five categories of social networks that can
represent entry barriers: business owners, business organizations, civic
organizations, political infrastructure, and an attractive labor market. Lack of
access to these social networks can be fatal when entering the market,
especially for new companies that lack experience and knowledge of the new
market.

The impact of social barriers is best seen through the consumer
behavior of the products and services of social entrepreneurs compared to
those of conventional businesses. While conventional businesses convey
messages such as price and quality, social entrepreneurs convey messages
such as fair treatment throughout the entire production chain, sustainability,
environmental protection or investing in the community. These messages are
more complex than those of conventional businesses to be conveyed and
absorbed by consumers (Davies, Haugh & Chambers, 2019:1637-1638).

Wildmannova (2018) in her study of social enterprises in the Czech
Republic notes this barrier and suggests that the message emitted by social
entrepreneurs should be spread in a targeted promotion to the public by
introducing courses on this type of innovative business in the curricula for
secondary schools and colleges.

On the other hand, although social entrepreneurs have a complex
message to convey, through their rootedness in the community they get easy
access to informal networks that are outside the established

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business/economic circles. In relation to civic society organizations, political
infrastructures and access to the labor market, they have an advantage due to
their ideological and political direction, which finds support in the mentioned
circles.

Finally, Robinson (2006:102) says that institutional entry barriers
prevent the entrepreneur from getting to know or adapting to the rules, norms
and values that are part of the culture and behavior of the market, industry
and society.

Bornstein & Davis (2010:71) provide a very interesting retrospective
analysis of the source of institutional barriers. These authors point out that
with the industrial revolution there is a division of labor into different sectors
which are further institutionalized through the action of isomorphic forces,
that is, through the creation of standards and norms which are characteristic
of that industry and which lead to progress. But also, Bornstein & Davis
(2010:71) emphasize that this institutionalization leads to divergence between
different sectors and institutions, creating barriers: “At the same time,
institutional and conceptual barriers that separate fields, industries and
sectors create the difficulty of giving a single solution (for socio-economic
problems in the society)”.

These barriers appear at multiple levels and dictate the relationship
between the company and customers and between the company and society,
hence Robinson further divides institutional barriers into:

• Formal, that is, public institutional barriers and
• Informal, cultural barriers

Every system consists of rules and norms that are necessary in order
to be part of the same. The system of government, law and legislation,
financial markets and institutions are codified and formalized institutional
structures that level the transactions between the participants in the system
itself, that is, the market.

Formal institutional barriers can deter new market entrants if the
market lacks adequate institutions to encourage entrepreneurial activity.
Organizational development depends on legal, political and financial
institutions, but on the other hand, the development of social entrepreneurship
is conditioned and encouraged precisely by this institutional deficiency that
produces socio-economic problems. Even when we have established
institutions, their inefficiency becomes fertile ground for social entrepreneurs,
in which they see an opportunity in line with Schumpeter’s creative
destruction. The problem does not lie in the availability of existing
institutional resources, even when they are scarce, but that the real task lies in
the ability of social entrepreneurs to create resources that will cope with the

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problem of lack of institutions in a given context (Dacin, Dacin & Matear,
2010:50).

For example, if the market opportunity is located in countries in
transition from public ownership to private ownership, then irregularities and
carelessness around property rights represent entry barriers for entry into that
market.

Furthermore, some markets do not have active financial markets.
Some entrepreneurs would not consider these markets as an entry opportunity
because they do not believe they can overcome these institutional barriers to
create a social enterprise. In this context, perhaps the biggest barrier for social
entrepreneurs is the lack of staff that can develop a business plan and then
adapt it in an organization whose main goal is a social mission (Bornstein &
Davis, 2010:50; Dacin, Dacin & Matear, 2010:50; Robinson, 2006:103;
Dacin, Dacin & Matear, 2010:50).

Simply put, in underdeveloped economies and regions entrepreneurs
face underdeveloped infrastructures, corruption, financial crime and
racketeering, lack of banking institutions and so on, which represent
institutional entry barriers (Davies, Haugh & Chambers, 2019).

On the other hand, cultural barriers are informal in nature. We know
that culture is a set of informal, norms, customs and rules characteristic of a
certain group of people. Knowledge of these informal “institutions” such as
language, slang, dress and behavior are often of paramount importance to a
company’s success in securing goodwill and trust among stakeholders. These
forms represent a barrier, but at the same time they also represent the so-called
cultural capital (Robinson, 2006; Vuković, Kedmenec, Postolov, Jovanovski
& Kornet, 2017).

When we talk about values and principles Davies, Haugh &
Chambers (2019:1630) give a nice example of ethical value barriers that
explain the disagreements between the principles of the social enterprise and
the other stakeholders. They talk about cases where social entrepreneurs do
not accept a financial grant, bank loan or promotional materials from a
supplier because the organization providing it does not share the same values
and principles with their organization. Social enterprises see this as a threat
to their authenticity and their social mission.

Social entrepreneurs are, above all, local experts and most often
come from within the affected community, so the knowledge of cultural
circumstances, which can later be used as cultural resources, is of great
importance for the success of social-entrepreneurial operations.

Social entrepreneurs are mostly conceptually dependent on the
location and culture of operation, and it is very likely that a certain practice

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399

of social enterprises in underdeveloped countries cannot be used in developed
countries, where consumers have different expectations for services. The
context of underdeveloped countries allows the development of low-cost
solutions that allow social entrepreneurs to focus more on results rather than
on standards that are often the occasion of cultural norms (Staber, 2005 and
Robinson, 2006 cited in Dacin, Dacin & Matear, 2010: 49).

Social entrepreneurs operate within local problems, so cultural
capital and barriers are particularly important in the relationship between
social business and residents in a social sector market where many norms and
rules exist. Naturally, these informal institutions are much clearer for those
who are already integrated into that culture than for those who come from
outside, so successful social entrepreneurs usually come from within the
specific culture. Any lack of mutual understanding due to a cultural gap can
be a serious entry barrier for the interested entrepreneur.

In line with this thinking, we will mention the perceptual-cultural
barrier mentioned by Borzaga & Defourny (2003:363-364). This barrier
isolates the psychological-perceptual bias that is characteristic, most of all, in
countries with a high degree of competitiveness and which refers to the
perceptive capacities of social businesses in dealing with social problems.

In Europe, or especially Germany, as Borzaga & Defourny
(2003:363-364) conclude, only organizations that generate income through
commercial activities, serve the interest of the owner and bring him profit
have an exclusive right to the term “enterprise-business”. Hence, social
businesses and entrepreneurs are viewed with distrust due to the widespread
belief that for-profit businesses and good public policy of state administration
can effectively solve social problems, while the third sector, and more
recently social businesses, are only auxiliary and not so important tools in
case of occasional inefficiencies of social public policy.

Conclusion
Lienet al.,(2002), cited in Krueger, Schulte & Stamp (2008:3),

highlight that the barriers can explain the different behavior among the
people. Hence, the social entrepreneurship behavior is also influenced by
different barriers and if we want to encourage and promote the social
entrepreneurship and its actions as an innovative solution for the social,
economic and environmental problems we have to research these barriers.

By using the above-mentioned framework that describes the concrete
barriers we believe that we can more easily deconstruct the phenomena of
social entrepreneurship.

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400

Firstly, the social entrepreneurship is not just a process which can
help us to solve the societal problems by using entrepreneurial strategies. It
is a process that navigates us across the social and institutional barriers. The
social entrepreneurs are successful because they are capable to navigate
throughout the obstacles (Robinson 2006:105).

Dacin, Dacin & Matear (2010:48) in a same manner state that the
social entrepreneurship, in contrast to the conventional entrepreneurs, do not
allow the external factors and barriers to dictate them if they are going to
start a social business. The social entrepreneurship develops creative
mechanisms and they overcome the external obstacles.

In addition, the social entrepreneurs explore the opportunities inside
the local communities which they know and understand. In comparison, the
globalized conventional business models strive to homogenize the markets
despite their different cultural specifics (Robinson 2006:105-106).

Finally, we can conclude that the formal institutional barriers and
the informal cultural barriers have a biggest influence on the social
entrepreneurship. They are of biggest importance because they are the reason
behind the societal problems that the social entrepreneurs strive to solve.

This conclusion is a logical derivative because of the sole nature of
the social entrepreneurship that emerges as an alternative to the institutions
that are dealing with the socio-economic problems (multicultural
organizations, state agencies, non-governmental organizations and the
corporative social responsibility programs) but cannot solve them because of
their top-bottom strategy that frequently is not well acquainted with the local
context of the community.

Reviewers (Recenzentes)
Prof. Dr. Mirko Tripunovski
Prof. Dr. Savo Ashtalkovski

References

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We Don’t Need a New Theory and How We Move Forward from Here.

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