Does Entrepreneurial Self-Efficacy Predict Discontinuation of Venture Idea Development?

Objectives: To study if entrepreneurial self-efficacy predicts discontinuation of venture idea development and how different dimensions of entrepreneurial self-efficacy related to discontinuation of venture idea development. Theoretical Background/Previous Practice: According to social cognitive theory, performance of individuals is predicted by their self-efficacy beliefs (Bandura, 1977). In the entrepreneurship context self-efficacy has proved to be an important variable explaining entrepreneurial intentions and performance. It has generally been studied in its relation to business start-up and business growth (Drnovsĕk, Wincent, & Cardon, 2010). When it comes to early stages of entrepreneurship, policy makers encourage individuals to choose the career of entrepreneurs, but there are still few studies which consider the relationship of entrepreneurial self-efficacy and nascent stages of entrepreneurship (McGee et al., 2009). Opportunity discovery is considered to be one of the success factors of entrepreneurial performance, but research shows that not all discovered opportunities are exploited (Davidsson, 2008; Sarasvathy, Dew, Velamuri, & Venkataraman, 2005; Shane & Venkataraman, 2000). One explanation to why entrepreneurs discontinue the development of venture ideas can be low entrepreneurial self-efficacy. Approach/Methods: Studies about entrepreneurial self-efficacy applied general and specific measures of entrepreneurial self-efficacy. It is suggested that more task specific measurement of self-efficacy will likely have higher predictive ability (McGee, Peterson, Mueller, & Sequeira, 2009). The explanation behind this proposition is that all-purpose operationalization cannot fully reflect the actual context (Bandura, 2006). Therefore, we employ a multi-dimensional construct of entrepreneurial self-efficacy which was developed by McGee et al. (2009). This construct specifically focused on the early stages of entrepreneurial process, especially entrepreneurial intentions and nascent behaviour (2009). It included measurement of entrepreneurial self-efficacy relating to the following phases of venture development: searching, planning, marshalling resources, and implementing. In the frameworks of this study we study if entrepreneurial self- efficacy predicts discontinuation of venture ideas. Because the dependent variable is a categorical variable, we applied regression analysis for categorical dependent variables. Results/Insights: The results show that planning and marshalling self-efficacy predict discontinuation of venture ideas. As for the direction of the relationship between planning self-efficacy and discontinuation, planning self-efficacy is positively related to the discontinuation of venture ideas, i.e., as planning self-efficacy increases the probability of discontinuing the venture increases. When it comes to the marshalling self-efficacy, the direction is opposite – as marshalling self-efficacy increases the probability of discontinuation decreases. Implications: It is difficult at early stages of entrepreneurial process to predict which venture ideas will survive, thus, such stage should be based on the idea of experimentation in entrepreneurship (Carlsson, 2005; Davidsson, 2008), where the aim is to enhance entrepreneurial potential by developing “an ability to evaluate venture ideas and environments in order to assess whether systematic and planned process applies, or a more iterative and flexible approach is called for” (Davidsson, 2008, p. 90).