Professional Documents
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TotalearlystageEntrepreneurialActivity(TEA)
Table of Contents
Introduction.............................................................................. 3
Flaws of the TEA Monitoring Process.......................................... 3
Facts and Figures about China and Greece.................................. 4
Argument 1: financial market development................................ 4
Argument 2: Uncertainty Avoidance........................................... 6
References:.............................................................................. 7
Appendix: Implications for Research.......................................... 9
Introduction
The aim of this paper is to introduce our groups results for the assignment in 3 steps. First, we will
make a critical assessment of the TEA as an indicator for entrepreneurship by addressing two major
flaws. Second, we will analyze the differences in the TEA for China and Greece. Third, we will
discuss one argument related to institutional differences, and one related to the cross-cultural
differences of the two countries.
The Total early-stage Entrepreneurial activity in China is 15.5%, while in Greece it is only
7.9%
The business discontinuation rate is higher than the TEA in Greece, mainly due to the
economic crisis.
Perceived opportunities to start a business are dramatically low in Greece, even though
perceived capabilities are quite high.
Graph 1. Interesting numbers related to the Greek and Chinese TEA rates
Figure 1: China financial market development (Source: Global Competitiveness Report 2014-2015)
Figure 2: Greece financial market development (Source: Global Competitiveness Report 2014-2015)
Resource dependence theory states that environmental munificence has a positive relationship with
firm formation (Castrogiovanni, 1991; Specht, 1993). New startups have several options to fund their
business ideas. These funding options will better our understanding regarding the differences between
China and Greece. Firstly, debt financing is one of the most common major sources of funding,
though entrepreneurs that do not have enough tangible assets or leverage may find it difficult to
finance through debt. We believe that one of the reasons that China has a higher TEA rate than Greece
is because China has a much higher ease of access to loans.
Second, compared to banks that offer debt financing, Venture Capitals (VCs) usually invest in small
companies with radical innovations and higher risks. VCs are also more involved in daily business
activities, and give operating advice to companies they invest in. As we see in the table, Greeces
venture capital availability is ranked much lower than Chinas, meaning Greeces entrepreneurs have
much lower chance to obtain funding from venture capital investors.
Thirdly, China has a much higher level of financing through local equity market, which also
provides the entrepreneurs in China easier access to funding than entrepreneurs in Greece. Local stock
market offers companies the opportunity to issue shares to potential investors. The more sophisticated
the equity market, the more likely is it that companies can raise capital for further growth.
To sum up, we believe that China has a higher TEA rate than Greece, due to the different stage of the
financial market development. The favorable environment offers Entrepreneurs in China more
funding opportunities from three channels.
Fear of Failure
Quoting the GEM report, Fear of failure can be a strong inhibitor for seizing opportunities and
transforming entrepreneurial intentions into entrepreneurial activity. (GEM Report, 2014)
Individuals aged between 18 and 64 which are not included in any form of entrepreneurial activity
because they fear failure, are shown by the fear of failure rate. The GEM report measures these rates
for Greece and China, and when we compare these scores we can see an extreme discrepancy. China
scored 39.5 (GEM Report, 2014) in 2014 on the fear of failure rate, whereas Greece had a score of
61.6(GEM Report, 2014) on the same rate. This implies that for Greek people, 61.6% of the
population aged 18-64, which are not engaged in entrepreneurial activity, will not engage in any
entrepreneurial activity because of the fear that they will fail. Compared with China this is a vast
difference of more than 20%. (GEM Report, 2014)
Combining this with Autios research, we argue that uncertainty avoidance is negatively related to
entrepreneurial activity. And a study by Mueller (2001), which found support for their hypothesis that
an entrepreneurial orientation is more likely in low uncertainty avoidance cultures, than in high
uncertainty avoidance cultures. We can conclude that one of the explanations for the differences in the
TEA between China and Greece is the extreme difference in uncertainty avoidance, together with the
fear of failure, which is explained in the GEM document.
Conclusion
In conclusion, our research revealed two significant differences in China and Greece, which both have
an enormous impact on the TEA rates. The first difference is the Financial Market Development,
which is affecting negatively the entrepreneurial activity in Greece. The second difference is the
Uncertainty avoidance and the Fear of failure, which are both significantly higher in Greece than in
China, leading to less entrepreneurial activity in Greece. To conclude, the low competitiveness of the
Greek economy, serves as a barrier for entrepreneurial activity.
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Castrogiovanni, G. J. (1991). Environmental Munihcence; A Theoretical Assessment. Academy of
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Specht, P. H. (1993). Munificence and carrying capacity of the environment and organization
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