Analysis of internal barriers toward the growth of start up business in Indonesia

Abstract

This study aims to analyzed internal barriers such as motivation, management capacity, funding and marketing influenced toward the growth of start up Business in Indonesia. This research in SME’s Indonesia using samples from 100 respondent with sample technique is purposive sampling. Data collection method used a questionnaire, documentation and interview. The method of analysis used is multiple linier regression. The result showed that the motivation, management capacity, funding and marketing influence on the growth of start up business in Indonesia. Corresponding author: I Gusti Putu Diva Awatara Email address for corresponding author: gruppe_cemara@yahoo.co.id First submission received: 29th September 2017 Revised submission received: 13th November 2017 Accepted: 15th March 2018 A. Introduction Given the current economic challenges facing many countries across the globe, the notion of engendering greater entrepreneurial activity has become a prominent goal for many national governments. The relevance of entrepreneurship to economic development has been highlighted by many researchers (e.g. Davidsson et al, 2006) and it is now well-recognised that education and training opportunities play a key role in cultivating future entrepreneurs and in developing the abilities of existing entrepreneurs to grow their business to greater levels of success (Henry et al, 2003). According to the European Commission (2008), the aim of entrepreneurship education and training should be to ‘develop entrepreneurial capacities and mindsets’ that benefit economies by fostering creativity, innovation and self-employment. More globally, governments across the world are increasingly recognising the positive impact that the creation of new businesses can have on employment levels, as well as the competitive advantages that small firms can bring to the marketplace (Scase, 2000). Moreover, while entrepreneurship provides benefits in terms of social and economic growth, it also offers benefits in terms of individual fulfilment, with entrepreneurship now breaking through the barriers of class, International Journal of Business and Economic Development, Vol. 6 Number 1 March 2018 www.ijbed.org A Journal of the Academy of Business and Retail Management (ABRM) 49 age, gender, sexual orientation, and race. However, because the relationship between entrepreneurship and economic growth is quite complex, many different approaches to encouraging entrepreneurship have been applied by a wide variety of agencies, with enterprise policies varying from country to country. Hoy et al (1992) recorded that a wide variety of growth measures were used ranging from increased market share or enhanced venture capital funding, to growth in revenue, return on investment, or the number of customers of a firm. Within these studies, employment was generally the most accepted method of measuring growth. This occurs because the data is easily gathered, determined and categorised, and because this system is already frequently utilised to ordain firm size. Additionally, employment figures will be unaffected by inflationary adjustments and can be applied equally in cross-cultural studies, although difficulties may arise in determining how one measures part-time or seasonal employees. It is also worth noting that while a firm may increase its level of employment, it does not necessarily follow that it has expanded its market or financial success. However, it is now broadly agreed that if a firm is to achieve sustained expansion, it must satisfy a number of requirements for growth it must increase its sales, it must have access to additional resources, it must expand its management team, and it must extend its knowledge base. But each set of requirements establishes a different set of obstacles for the entrepreneur. In addition to resource shortages and capacity limitations, an important set of internal barriers to growth is related to the whole issue of human resource management and the conditions concerning the hiring and firing of labour. A key internal constraint on growth of SMEs is a reluctance or inability of owner managers to diversify control over business functions to professional managers. Gibb (1987) noted that while the entrepreneurial role can be both culturally and experimentally acquired, it is consistently being influenced by education and training. It has also been argued that the traditional approach to entrepreneurship needs to change and that the relevance of entrepreneurship education and training must be expanded. Indeed it is now widely recognised that there is a requirement to move from traditional ‘instruction’ towards an experiential learning methodology, utilising an action oriented, mentoring and group-work approach to ensure greater learning effectiveness. Within this approach, critical thinking and problem solving are recognised as key skills, while it is also appreciated that skill development regarding risk-taking, innovation, creativity and collaboration needs to be valued more. A more hands-on approach is also required for the development of project management and budgetary skills. Therefore, increasingly it is being recognised that teaching entrepreneurship skills should be interactive and might include case studies, games, projects, simulations, real-life actions, internships and other hands-on activities (Kutzhanova et al, 2009). B. Literature Review 1. Entrepreneurship and Enterprise Growth Entrepreneurship is all about the identification of an opportunity, creation of new organization, and pursuing new ventures (Carton et al., 1998). There are many studies done on entrepreneurship like external skills required in entrepreneurs. For example, Wickham (2006) has stated that an entrepreneur needs to be innovative, creative and should be able to take risk. Barringer and Bluedorn (1999) have described entrepreneurs as individuals who can explore the environment, discover the opportunities, and exploit them after proper evaluation. Kuratko (2009) in his book, International Journal of Business and Economic Development, Vol. 6 Number 1 March 2018 www.ijbed.org A Journal of the Academy of Business and Retail Management (ABRM) 50 distinguishes between entrepreneurs and small business owners. He highlights that these two terms are often used interchangeably, but both have a lot of differences in their reaction under certain situations. An entrepreneur aggressively focuses on innovation profit and growth of the enterprise. On the other hand, a small business owner's objective and focus is mostly on managing stable growth, sales, and profits. An entrepreneurial venture is successful if it is growing. Gilbert et al (2006) suggested how and where questions are important in the context of the growth of the enterprise. It has been highlighted that growth is a function of the decisions an entrepreneur makes, like how to grow internally or externally and where to grow in domestic market or international market. There are many different theories on identifying the main factors underlying the growth of the enterprise. One set of theories addressed the influence of enterprise size and age on growth (Morone and Testa 2008), and the second set deals with the influence of variables such as strategy, organization, and the characteristics of the enterprise's owners (Freel and Robson, 2004) on growth of the enterprise. Mateev and Anastasov (2010) have found that an enterprise's growth is related to size as well as other specific characteristics like financial structure and productivity. They further added that the total assets which is one of the measure of the enterprise size has a direct impact on the sales revenue, but the number of employees, investment in R & D and other intangible assets have not much influence on the enterprise's growth prospects. Lorunka et al (2011) have found that the gender of the founder, the amount of capital required at the time of starting the business, and growth strategy of the enterprise are very important factors in predicting growth in a small enterprise. They have further highlighted that apart from human capital resources, the growth of an enterprise can be predicted on the basis of commitment of the person starting a new enterprise. 2. Entrepreneurship Skills Required to Overcome Barriers to Growth Drucker (1985) argued that entrepreneurship is a practice and that “most of what you hear about entrepreneurship is all wrong. It’s not magic; it’s not mysterious; and it has nothing to do with genes. It’s a discipline and, like any discipline, it can be learned.” If one agrees with Drucker’s concept of entrepreneurship, then it follows that education and training can play a key role in its development. In a traditional understanding, entrepreneurship was strongly associated with the creation of a business and therefore it was argued that the skills required to achieve this outcome could be developed through training. More recently entrepreneurship is being viewed as a way of thinking and behaving that is relevant to all parts of society and the economy, and such an understanding of entrepreneurship now requires a different approach to training. The educational methodology needed in today’s world is one which helps to develop an individual’s mindset, behaviour, skills and capabilities and can be applied to create value in a range of contexts and environments from the public sector, charities, universities and social enterprises to corporate organisations and new venture start-ups. Lichtenstein and Lyons (2001) argued that it is important for service providers to recognise that entrepreneurs come to entrepreneurship with different levels of skills and therefore each entrepreneur requires a different ‘game plan’ for developing his or her skills. Furthermore, they suggested that skill development is a qualitative, not quantitative, change which demands some level of transformation on the part of the entrepreneur. Storey (1994) h