This chapter offers an insight of the study. It includes the background of the study, statement of the problem, rationale, purpose, research questions, contributions of the study, limitations and delimitations and a definition of terms.
Background of the Study
Due to the recessions in the economy and the lack of jobs in developing countries, there is a higher demand for people to become self-employed, or what is called entrepreneurs.
Entrepreneurship is an important driver of economic growth, innovation and employment (Wube, 2010). One of the major drivers to become an entrepreneur in developed countries is opportunity or the need for achievement, while in developing countries it is necessity or a combination of push and pull factors (Brush & Cooper, 2012; Orhan & Scott, 2001). Push factors are needs such as dissatisfaction with job, necessity of more family income and difficulty finding a job. Pull factors on the other hand refer to need for achievement, independence, entrepreneurial desire and social status.
Over the years, entrepreneurship has contributed to the economic development of a country to achieve higher economic growth. This issue has been researched in the past both in developed and developing countries, but almost all of the studies have been done on male entrepreneurs. In the past few years female entrepreneurs have become another important topic of research. Many studies done on these women in developed countries mainly focus on gender difference, but others also focus on the factors affecting their performance. Little research has been done on this last issue in developing countries, especially on Latin America.
In the past two decades Central America has achieved a modest progress in terms of economic growth and reduction of poverty. Between 1997 and 2006, female participation in
workforce in Latin America has grown, reaching in 2007 an average of 53%. There are approximately 40% of females in the workforce in Honduras, contrary to almost a 90% of males in the Central American region. Even though, female participation in the workforce has increased in the past decades, men are 70% more likely of getting a job (Vakis, 2011). Even though, the trend is for more female entrepreneurs to flourish, most of them are found in micro and small enterprises. According to the webpage of the Portal de Microfianzas, the micro and small enterprises in Honduras, provide a significant percentage of the country’s gross domestic product by creating new jobs and contributing to the economy (http://www/.portalmicrofinanzas.org).
Past research, mostly done in Africa (Afghanistan, Kenya, Ethiopia, Tanzania) and Asia (Malaysia, Iran, Vietnam, China, Israel) have studied several factors affecting female entrepreneur performance in micro and small enterprises, in their findings we can see that some countries have similar factors, but others were also found. In a research done by Callejas and Yeh (2013), business owners of micro and small enterprises and experts in this field helped to identify the different factors that affect female entrepreneurs in Honduras, so for the purpose of this research those factors will be used to study their effect on their performance. In this previous study the factors found were human capital (Lerner, Brush, &
Hisrich, 1997; Naser, Mohammed, & Nuseibeh, 2009), motivations (Arasti, Panahi, Zarei &
Rezae, 2012; Holmén, Min & Saarelainen, 2011;Lee & Stearns, 2012), networks (Alam, Jani
& Omar, 2011; Nordin, Hamid, & Woon., 2011), demographics (Roomi, Harrison, &
Beaumont-Kerridge, 2009; Tundui & Tundui, 2012) and a new factor called environmental factors which include problem with government support (Singh & Belwal, 2008) and country security.
In Honduras, unfortunately there is not a census of how many female entrepreneurs
Commerce and the ones in a program called Vital Voices. So the females registered in these two organizations will be the sample for this research.
According to Bruhn (2009) the percentage of female business owners in micro firms in Honduras is 50%, 24% in small and a 23% in medium firms. In her study she found that women owned businesses are smaller and less profitable than those owned by men. This could be due to different factors that affect female entrepreneurs performance, therefore the aim of this research was to examine the major factors affecting their performance in micro and small enterprises.
Statement of the Problem
In the past few years, female entrepreneurship has become an important issue in Honduras. Due to economic problems and difficulties finding jobs, more women have found the need for creating their own ventures. In Honduras there seems to be more women who are becoming entrepreneurs in the micro and small enterprises. Research has showed that most of the businesses owned by women are smaller and less profitable than those owned by men, even if they have a high level of education. Except for the study done by Callejas and Yeh (2013), so far there seems to be no other studies done on female entrepreneurs’ performance in Honduras. There seem to be several factors (for instances, human capital, motivations, networks, demographics and environmental, etc.) inhibiting the development of their ventures, so research must be done to know the effects these have on their performance
Rationale
This study focuses only on female entrepreneurs; this is mainly because there is little research done on them. Even though, they are not the greatest proportion of the total entrepreneurs in Honduras, in the past years they have become an important source for creation of new jobs and reduction of poverty. Given that the micro and small enterprises are
an important sector of the economy in Honduras and the fact that most of these women entrepreneurs are found here, this study emphasizes on the factors affecting their performance in this sector.
Due to the different problems female entrepreneurs go through in running their businesses, they, as well as microfinance institutions, government entities and the different programs and institutions that aid them, need to know what are the factors and their effects on their performance. It is also important for them to know the challenges they go through in the development of their venture. All this will give a clear picture of what needs to be the necessary actions to take in order to help develop these women’s ventures.
Purpose of the Study The main purposes of this study were:
1. To examine the effects of the factors (human capital, networks, motivations, environmental and demographics) on female entrepreneurs’ performance in micro and small enterprises in Honduras.
2. To identify the major characteristics of female entrepreneurs in micro and small enterprises in Honduras.
3. To identify the major characteristics of female entrepreneurs ventures in micro and small businesses in Honduras.
Research Questions
According to the purpose of the study, the following were the research questions for this study:
1. What are the major characteristics of female entrepreneurs in micro and small enterprises in Honduras?
2. What are the major characteristics of their ventures in micro and small enterprises in Honduras?
3. What effects do the human capital variables have on female entrepreneur performance in micro and small enterprises in Honduras?
4. What effects do the motivation variables have on female entrepreneur performance in micro and small enterprises in Honduras?
5. What effects do the network variables have on female entrepreneur performance in micro and small enterprises in Honduras?
6. What effects do the environmental variables have on female entrepreneur performance in micro and small enterprises in Honduras?
7. What effects do the demographic variables have on female entrepreneur performance in micro and small enterprises in Honduras?
Expected Contributions
This study is a contribution to those female entrepreneurs in micro and small businesses who are trying to make their businesses survive and become more competitive in Honduras. It helps them identify what factors are affecting their performance so they can take corrective actions to alleviate these problems.
It contributes with microfinances, government entities, organizations and programs that provide aid to these women. Since it provides a clear picture of what areas need more support and so they can better position and design their interventions. Since the micro and small ventures are an important sector in the economy of this country; this will also impact in economic and social development.
Another important expected contribution is that most of the previous studies on the performance of female entrepreneurs have been done in Africa (Singh & Belwal, 2008;
Tundui & Tundui, 2012) and Asia( Arasti et al., 2012 ;Nordin et al., 2011), as well as some developed countries like Canada, England and the USA. So this is the first research done in Central America, specifically in Honduras which can lead to further research and it also contributes to the existing literature on female entrepreneurship.
Scope of the Study
A delimitation of this study is that it only focuses on female entrepreneurs, leaving out the male entrepreneurs in the country, thus the results cannot be generalized throughout the whole population. Another delimitation is that this research is only focused in the micro and small enterprises, leaving out other types of businesses. The study was only conducted in Honduras, so it limits the findings only to one country and cannot be generalized to Central America as a whole.
This research only examined the human capital, motivations, networks, demographics and environmental factors that affect female entrepreneurs, thus leaving out other factors that may also affect their performance.
Since in Honduras not all the female entrepreneurs have registered their business and a census has not been done, the population of this study was only those female entrepreneurs that are registered in the Chamber of Commerce and in a program called Vital Voices.
Definition of Terms
Entrepreneurship: the process in which an individual uses innovation and creativity to translate new ideas or products to the market by either seizing an opportunity or for needs of achievement, thus creating wealth for the individual.
Human capital factors: Are the competencies, knowledge and abilities that affect performance. The ones examined in this study were level of education and the influence of the area of education, work experience, and business skills.
Networks factors: Refers to social relations, the ones examined were the support from women’s associations, support from mentors and support from personal networks.
Environmental factors: are those outside influences that affect the performance. The external factors examined were country insecurity and government support.
Motivations factors: refer to why female entrepreneurs are motivated to start their own business (economic, personal and social).
Micro enterprise: In Honduras it refers to a company that employs from 1 to 10 permanent employees and has monthly average sales of about $3,125.00 (Kushnir, 2010).
Small enterprise: In Honduras it refers to a company that is composed of 11 to 25 permanent employees and with monthly average sales of around $ 9,375.00 (Kushnir, 2010).
Medium enterprise: In Honduras it refers to a company that is composed of 26 to 150 permanent employees and with monthly average sales of around $154,000 (Kushnir, 2010).
Microfinance: It is “the provision of financial services to the entrepreneurial poor.
This definition has two important features: it emphasizes a range of financial services—not just credit— and it emphasizes the entrepreneurial poor” (Brandsma & Hart, 2002, p.1).
Entrepreneur Performance: For the purpose of this study performance of the ventures was measured according to growth in number of employees, profitability, revenues and capacity to respond to market demands.