SWEDEN: BRAZIL: 9.7 million inhabitants 210.2 million inhabitants 39,263 new LLC* in 2012 53,876 new LLC* in 2012 *LLC: limited liabilities companies; Ref.: WorldBank, 2014 Entrepreneurship dynamism: The influence of contextual factors on new entries A comparative study of two business environments: Sweden and Brazil Authors: Branz, Riccardo Gleizal, Aurore Supervisor: Zsuzsanna Vincze Student Umeå School of Business and Economics Spring semester 2014 Master thesis, two-year, 30 hp Summary The entrepreneurship dynamism of a country is the center of Schumpeter’s creative destruction process and virtuous circle, in which new and innovative companies entering the market drive the obsolete and less productive ones out of the market. As a consequence of this process, the market is improved and it incentivizes the creation of innovative solutions to solve problems. The study focuses on the pivotal function of the entries in this process. To better understand the creation of new ventures process the study investigates how the contextual factors impact the entrepreneur’s decision of starting a new business, focusing on two business environments: Sweden and Brazil. Through interviews with Swedish and Brazilian entrepreneurs we analyze how entrepreneurs perceive the contextual factors and how it impacted their new venture creation process. Through the literature we find that the business environment is composed by seven major factors that, with an extended framework based on literature review, we consider as: economic wealth, government policies and procedures, legal & administrative, society’s culture; network and knowledge; financial assistance; and non-financial assistance. Analyzing the empirical material about the business environments we find that Swedish and Brazilian entrepreneurs feel the influence of the different contextual factors in business creation but do not always understand their causes. Our findings show that the seven contextual factors do not have the same level of influence in Sweden and Brazil and often depend on the environment. However, for entrepreneurs in both two contextual factors have a pivotal impact: network and financial assistance. This study contributes to the theory by providing a more detailed extended framework to study the influence of contextual factors on the process of starting a new business. Furthermore, this research also contributes by providing empirical evidence of Swedish and Brazilian entrepreneurs’ perceptions of their business environment and the influence of the contextual factors. Key words: New business, entrepreneurship, entrepreneurship dynamism, geographical economy, contextual factors, business environment, entrepreneurial decision, Sweden, Brazil. i The authors Aurore Gleizal has a Master’s degree in International Management and Marketing from the École de Commerce Européenne de Lyon – INSEEC group, France and International School of Law and Business of Vilnius, Lithuania. She worked as an intern in a luxury store in Cannes, as an international business developer in Israel, as a marketing and project manager in an event organization in Lyon, and press/public relations and project manager in Paris. She also gives advises on business creation and development since a couple of years. Aurore is currently studying the Master’s program in Internationalization and Business Development at Umeå School of Business and Economics in Sweden. Last semester, she was an exchange student at Université de Montréal – HEC Montréal, Canada in International Studies with focus on international psychology, culture diversity and globalization, and international political economy. Riccardo Branz has a bachelor´s degree in Business Administration from the Universidade Federal do Espírito Santo, Vitória, Brazil and a MBA in Finance, Audit and Control Management from the Fundação Getúlio Vargas. In Brazil, he worked as an intern in a governmental agency, part-time in a small business in management and as a finance controller in a medium- size company. He also worked in a hotel in Florida, USA. He is currently studying the Master´s Program in Finance at Umeå School of Business and Economics in Sweden. Last semester, he was an exchange student at the University of Torino, Italy and there he studied Economy and Finance. ii Acknowledgment We cannot thank enough all the participants of our study. All of you we interviewed, who agreed to share your experience to help improve our research, we are thrilled by your kindness and we appreciate that you allocated your valuable time for us between your busy schedule: Thank you. We would like to give our deep gratitude to our supervisor Zsuzsanna Vincze who guided us through the entire process, who encouraged us during the whole time, and who shared with us her extensive experience and knowledge about academic writing in general, thesis requirements and more important about entrepreneurship. Her advice, feedbacks as well as help in the preparative work throughout all the development stages were invaluable to keep us on track. Further, we would like to extend our appreciation to our friends for their motivating support throughout this sometimes rather exhausting period. You helped us clear our mind and restock energy to manage this project. "In the realm of ideas everything depends on enthusiasm... in the real world all rests on perseverance." - Johann Wolfgang von Goethe Thank you! Umeå, May 2014 Branz, Riccardo & Gleizal, Aurore iii Table of Contents Chapter 1: Introduction .................................................................................................. 1 1.1. Problem background and discussion .................................................................. 1 1.2. Knowledge and research gaps ............................................................................ 3 1.3. Research questions ............................................................................................. 4 1.4. Purpose of the study ........................................................................................... 4 1.5. Limitations ......................................................................................................... 5 1.6. Definition of key concepts ................................................................................. 5 Chapter 2: Research Methodology ................................................................................ 7 2.1. Scientific perspective ......................................................................................... 7 2.1.1. Choice of subject and preconceptions ........................................................ 7 2.1.2. Methodological assumptions ...................................................................... 8 2.1.3. Research approaches................................................................................... 9 2.1.4. Choice of Literature .................................................................................. 10 2.1.5. Criticism of the secondary sources ........................................................... 11 2.2. Research design ............................................................................................... 11 2.2.1. Nature of research design ......................................................................... 11 2.2.2. Research strategy ...................................................................................... 12 2.2.3. Choice of research methods ...................................................................... 13 2.3. Semi-structured interviews .............................................................................. 15 2.3.1. Developing an interview guide ................................................................. 15 2.3.2. Choice of respondents .............................................................................. 16 2.3.3. Contacting the respondents ....................................................................... 17 2.3.4. Conducting the interview and interview setting ....................................... 17 2.3.5. Difficulties observed in conducting the interviews .................................. 19 2.4. Process of the collected empirical material ..................................................... 19 2.5. Truth criteria .................................................................................................... 21 2.5.1. Validity and credibility ............................................................................. 21 2.5.2. Transferability .......................................................................................... 21 2.5.3. Reliability ................................................................................................. 21 2.5.4. Confirmability .......................................................................................... 22 2.6. Ethical considerations ...................................................................................... 22 Chapter 3: Literature review and theoretical framework ......................................... 24 3.1. New venture creation ....................................................................................... 24 3.2. Business environment ...................................................................................... 26 3.2.1. Dimensions of entrepreneurial environment ............................................ 26 iv 3.2.2. Occupational choice and contextual factors ............................................. 27 3.2.3. Regional characteristics ...........................................................................