Relationship between Small Business Growth and Personal Characteristics of Owner-Managers in Australia

Abstract

RELATIONSHIP BETWEEN SMALL BUSINESS GROWTH AND PERSONAL CHARACTERISTICS OF OWNER/MANAGERS IN AUSTRALIA The psychology of entrepreneurs has been a topic of interest for small business and entrepreneurship research since McClelland's pioneering investigation of the need for achievement. The present research traced the relationship between sales growth of established nursery businesses and the personal characteristics of their owner/managers over a five-year period in Brisbane and Sydney, Australia. This narrow focus differentiates the present research from previous Australian studies of the relationship between small firm growth and owner/managers' personal characteristics in that previous studies included manufacturers and/or non-established owner/managers. For the purpose of this study, small businesses are defined as those in which one or two people make all the key managerial decisions, without the help of internal specialists. Nurseries are businesses listed under Nurserymen in the business listing of the Yellow Pages. Both wholesale and retail nursery owner/managers were included, because nursery owner/managers shifted from one sector to the other over the five years studied, and because the nursery industry association does not distinguish between them in its membership. The nursery industry was chosen in part because it is one where there appears to be no size limitation to growth. In industries with size limitations on growth, fewer businesses grow beyond the size limit of five employees. Industries with size-limited activities grow mainly by entrants starting new businesses rather than by growth of existing businesses. In the nursery industry, however, growth of small businesses after successful start-up can be an important source of total industry growth. Growth after successful start-up was defined as growth in sales per year beyond the level of sales required to provide for personal income and return on investment for the small business owner/manager. The small business owner/managers themselves identified when successful start-up had occurred. It was hoped that concentration on one industry would help to hold constant factors other than personal characteristics of the owner/manager which can affect growth, such as type of industry, location, and economic conditions. It is self-evident that economic conditions affect business success. Therefore, questions in the survey referred to the five years of business history prior to June 1983, to isolate fluctuations in growth due to changing economic conditions. Because location also affects small business growth, the sample was restricted to nurseries in Brisbane and Sydney. HYPOTHESES The following hypotheses were tested: Among owner/managers of small businesses that have successfully started up, business growth correlates positively with the following business management-related characteristics: social credibility of growth, examples of growth within the industry, proportion of equity in initial capital, proportion of profits reinvested, willingness to use external financing, experience with mentors, number of previous start-ups and business changes, experience in growing industries and/or medium-to-large firms, and number and variety of pre-start-up activities. It was further hypothesized that business growth correlates positively with these personal characteristics: need for achievement (nAch), internal locus of control (ILC), and powerful others' locus of control (POLC); and negatively with chance locus of control (CLC). SAMPLE AND METHOD A mail survey was sent to 227 owner/managers in Brisbane and 445 owner/managers in Sydney, with usable response rates of 32.2 percent (Brisbane) and 20.6 percent (Sydney). Normal survey procedures of pilot-testing the questionnaire, industry association sponsorship, one follow-up mailing, and interviews to determine non-response bias were carried out. …

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