Female Entrepreneurs in Honduras: Factors that Affect their Performance in Microand Small Enterprises

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(1)Female Entrepreneurs in Honduras: Factors that Affect their Performance in Micro and Small Enterprises. by. Carmen Elisa Callejas Arriaga. A Thesis Submitted to the Graduate Faculty in Partial Fulfillment of the Requirements for the Degree of. MASTER OF BUSINESS ADMINISTRATION. Major: International Human Resource Development. Advisor: C. Rosa Yeh, Ph. D. National Taiwan Normal University Taipei, Taiwan June, 2013.

(2) ACKNOWLEDGEMENT. I would like to thank all those people that have helped me to complete my thesis. First I would like to thank God for guiding me every day and providing me the strength and serenity to finish this journey successfully. Next, I would like to express my deepest appreciation to my advisor Dr. Rosa Yeh who patiently guided me throughout this whole process and was always willing to give suggestions and encouragement. I would like to thank the coordinators of The Chamber of Commerce and Vital Voices in Honduras for giving me the opportunity to conduct my research in their organizations and for all the help and support they gave me along the way. Special thanks, to my committee members Dr. Tsai and Dr. Tien who always gave positive feedback. To the rest of the professors I also want to thank you for the knowledge that you shared with me. To all those female entrepreneurs who dedicated their time to help me with my research, thank you very much. I would also like to give a very warm appreciation to my classmates for all their support this past two years and for all those laughs and fun times we shared. But specially I would like to thank my support team, Karen Castellanos and Rossana Obregon and my friends Alejandra Funes and Maria Martha Aguilar for being there for me thought this process and for always giving me support, feedback and most important their friendship. Finally, I would like to thank my family who has been my greatest support in this journey. Thank you for always believing in me and encouraging me to become a better person.. I .

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(4) . ABSTRACT Entrepreneurship is an important driver of economic growth in most developing countries and most of the studies conducted on this topic have been done on male entrepreneurs. In the past decades more females are being motivated to start their own businesses. This research examined the effect of factors affecting the performance of 152 female entrepreneurs in micro and small businesses in Honduras by using Partial Least Square SEM. A quantitative approach was used in this study. Based on the existing literature, a self-report questionnaire was designed and composed of six sections. Results indicate that of the motivational factors, economic and personal motivation have a positive effect on performance, while of the human capital factors, business skills and the influence of the area of education. Regarding the use of networks, only the perceived support from mentors had a positive effect on performance. None of the environmental factors had a significant influence on the performance of these female entrepreneurs. Of the demographics only the business sector had significant influence on performance. Keywords: Entrepreneurship, female entrepreneurs, micro and small enterprise, performance.. I .

(5) TABLE OF CONTENTS Abstract ............................................................................................................................................ I Table of Contents……………..……………………………………………………………….….II List of Tables ................................................................................................................................ IV List of Figures ............................................................................................................................... VI. CHAPTER I INTRODUCTION ........................................................................................... 1 Background of the Study............................................................................................................. 1 Statement of the Problem ............................................................................................................ 3 Rationale...................................................................................................................................... 3 Purpose of the Study ................................................................................................................... 4 Research Questions ..................................................................................................................... 4 Expected Contributions ............................................................................................................... 5 Scope of the Study....................................................................................................................... 6 Definition of Terms..................................................................................................................... 6. CHAPTER II LITERATURE REVIEW............................................................................. 9 Entrepreneurship ......................................................................................................................... 9 Female Entrepreneurs................................................................................................................ 13 Micro and Small Enterprises ..................................................................................................... 17 Female Entrepreneurs in Micro and Small enterprises in Honduras......................................... 18 Performance .............................................................................................................................. 19 Factors Affecting Female Entrepreneurs Performance ............................................................. 24. CHAPTER III METHODOLOGY ..................................................................................... 39 Research Framework................................................................................................................. 39 Research Hypothesis ................................................................................................................. 40 Research Design........................................................................................................................ 42 Research Procedure ................................................................................................................... 42 Sample....................................................................................................................................... 45 Data Collection.......................................................................................................................... 49 Measurement ............................................................................................................................. 49 Validity and Reliability ............................................................................................................. 62. CHAPTER IV DATA ANALYSIS AND RESULTS ................................................... 88 II .

(6) Correlation................................................................................................................................. 88 Hypotheses Testing ................................................................................................................... 94. CHAPTER V CONCLUSIONS AND IMPLICATIONS .......................................... 109 Conclusions ............................................................................................................................. 109 Research Implications ............................................................................................................. 110 Practical Implications.............................................................................................................. 111 Limitations .............................................................................................................................. 112 Suggestions for Future Research............................................................................................. 113. REFERENCES ....................................................................................................................... 115 APPENDIX A: QUESTIONNAIRE ................................................................................. 122. III .

(7) LIST OF TABLES Table 2.1 Review of the Different Meanings of the Term Entrepreneurship………..……….....11 Table 2.2 Classification of Entrepreneurial Motivations……………………………………......26 Table 3.1 Descriptive Statistics of the Sample……………………………...…………………..46 Table 3.2 Scale for Motivational Factors …………...………………………………………......51 Table 3.3 Scale for Support from Women’s Associations…………………................................52 Table 3.4 Scale for Support from Mentors ….…………………………………….......…….….53 Table 3.5 Scale for Support from Personal Networks ………………………......…….…….….54 Table 3.6 Scale for Business Skills .......……………………...……………….....………..….…55 Table 3.7 Scale for Influence of Area of Education ………..…………………...…….…….….56 Table 3.8 Scale for Government Support ...………………………......…...…..…………….….56 Table 3.9 Scale for Country Insecurity ………..………………….....……………...………..…57 Table 3.10 Scale for Profitability………………………………...……………………........…..59 Table 3.11 Scale for Capacity to Respond to Market Demand......……………………..........…60 Table 3.12 Exploratory Factor Analysis Report…………………………………..………….…64 Table 3.13 Descriptive Statistics, Factor Loadings, CR and AVE……………………...........…73 Table 3.14 Cross Loadings among Variables………………………...……………...……….…80 Table 3.15 Discriminant Validity Analysis……………………...…...…………………..……..83 IV .

(8) Table 3.16 Reliability………..………………………………………….………………..….......84 Table 4.1 Means, Standard Deviations and Correlation Coefficients………………….……......88 Table 4.2 Path Coefficients, Error, T-values and R Square………………….…..…………..….92 Table 4.3 Results of One-Way ANOVA………………...…………………...………………....99 Table 4.4. Post Hoc Results of Scheffe’s Multiple Comparison Test for Inner Group. Differences …………………………………………………………..……………………..…....99 Table 4.5 Overview of the Results of Hypotheses Testing in PLS……...…..……………....…103. V .

(9) LIST OF FIGURES Figure 3.1 Research framework………………...……..……………………………..………….39 Figure 3.2 Research procedure…………......……………………………………………….…..44 Figure 4.1 Hypotheses testing, path coefficient and R square…….…………..….……………101 Figure 4.2 Significance levels of hypothesis………………………......……………………....102. VI .

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(11) CHAPTER I INTRODUCTION 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. 1 .

(12) 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 exist in the country. The only statistics available are the ones registered in the Chamber of 2 .

(13) 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 3 .

(14) 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? 4 .

(15) 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; 5 .

(16) 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.. 6 .

(17) 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.. 7 .

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(19) CHAPTER II LITERATURE REVIEW This chapter offers a review of the most relevant literature and empirical studies of the variables to be examined in order to provide a theoretical basis of the study. It provides definitions of the key variables as well the relationships among them. The hypotheses for this research are also presented in this chapter.. Entrepreneurship Definition of Entrepreneurship The concept of entrepreneurship has existed for several centuries, but according to the existing literature defining it is challenging, since there exist different definitions for this term. Authors adopt different definitions, depending on the focus and characteristics of the sector of the economy of their research (Kalyani & Kumar, 2011). The term has been widely but still no concrete definition has been established. The word entrepreneurship comes from the French verb entrprendre, meaning to “undertake” a specific project or activity (Dzisi, 2008). In 1775 Richard Cantillon was the pioneer of the term entrepreneur; he defined it as “someone who exercises business judgment in the face of uncertainty” (Bull & Willard, 1993, p. 185). According to Drucker (1985), entrepreneurship is exploiting opportunities to create changes, using innovation as a tool to achieve this. As an area of study it has been defined by different disciplines including psychology and economics (Bennet & Dann, 2000).. From a psychological point of view,. entrepreneurship is defined as the set of attitudes and values that contribute to entrepreneurial success, rather than it being a rational process, focusing more on personality traits (Bennet & Dann, 2000).. 9 .

(20) From an economic point of view, according to Campbell (1992) entrepreneurship occurs when an individual weights if the profits from becoming an entrepreneur are better than the cost risk and profit of working for someone else. There are two main economic schools of thought of entrepreneurship, Schumpeter and Kirzner. According to Schumpeter (1934) an entrepreneur is someone who introduces something new (products, methods, new industry) to the economy. Basically he’s saying that an entrepreneur is an innovator that translates new ideas or products into the market and creates new opportunities. For him, the entrepreneur is the one who with his actions helps achieve economic development and growth. On the other hand, Kirzner (1979) in his theory states that entrepreneurship is that opportunity an individual seizes to gain profits. It is the entrepreneurial process that sets the direction of the market (Dzisi, 2008). For McClelland (1961), on the other hand it means having a need for achievement and using innovation and creativity to accomplish that need. For Kao (1993) entrepreneurship is “a process of making changes; doing something different, thus creating wealth for the individual and adding value to society” (pp. 69-70). Shane (2003) states that entrepreneurship can be defined in two ways: new firm formation and self-employment. By creation of a new firm he means forming a new business venture that previously not existed, and by self-employment he refers to working for personal profit and not for someone else. He defines it as an “opportunity in which a person can create a new means-ends framework for recombining resources that the entrepreneur believes will yield a profit” (p. 18). Table 2.1 shows a review of all the different definitions given to entrepreneurship across time.. 10 .

(21) Table 2.1. Review of the Different Meanings of the Term Entrepreneurship Author. Year. Richard Cantillon. 1952. Definition Someone who exercises business judgment in the face of uncertainty.. Joseph Schumpeter. 1934. An innovator that translates new ideas or products into the market and creates new opportunities.. David McClelland. 1961. Having a need for achievement and using innovation and creativity to accomplish that need.. Israel Kizner. 1979. Opportunity an individual seizes to gain profits.. Peter Drucker. 1985. Exploiting opportunities to create changes, using innovation as a tool to achieve this.. Raymond Kao. 1993. A process of making changes; doing something different, thus creating wealth for the individual and adding value to society.. Scott Shane. 2003. Opportunity in which a person can create a new means-ends framework for recombining resources that the entrepreneur believes will yield a profit.. Note. This table was compiled by the author for the purpose of this study. Regardless of the many definitions of entrepreneurship there exist some important factors among the different authors. All of them agree that it is a creative or innovative act 11 .

(22) that involves an identification or seizing of an opportunity. Others, like Cantillon acknowledged the uncertainty associated with the entrepreneurial activity. For Schumpeter (1934) what is important is the finding of new combinations into the market, on the other hand Kirzner (1979) and Kao (1993) focuses on seizing an opportunity and taking risks for gaining profit for the individual and for society. McClelland (1961) focuses more on satisfying a need by using innovation and creativity. For the purpose of this study the definition of entrepreneurship was defined as 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.. Characteristics of Entrepreneurs As the definition for entrepreneurship has been established, it is also important to define who the entrepreneur is and identify the major characteristics they possess. An entrepreneur is someone who has either seized an opportunity or has an internal need and decides to create their own business for generating profit and achieving personal satisfaction. According to the different definitions of entrepreneurship, several characteristics have been identified as the major aspects of the entrepreneurial personality. One of the major characteristics is being an innovator; it is a common factor among the different definitions of entrepreneurship. Many authors emphasize on the importance of innovation for entrepreneurial activity (Drucker, 1985; McClelland, 1961; Schumpeter, 1934). Carland, Hoy, Boulton, & Carland (1984) said that innovation is what distinguishes an entrepreneur from a manager.. 12 .

(23) Risk taking is another characteristic of an entrepreneur. Cantillon (1952) stated that an entrepreneur is someone who is willing to take risks in order to start their own business. In his definition he uses the term uncertainty, referring to the fact that entrepreneurs don’t know for a fact if their business will be successful or not. Bennett and Dann (2000) believe that the nature of becoming an entrepreneur is highly risk taking and an entrepreneur must have the belief that they can achieve it. A third common characteristic is bearing a strong need for achievement. As McClelland (1961) said, having a high need for achievement can influence a person for starting a business. But this need for achievement alone cannot induce to entrepreneurial activity, innovation and creativity must be involved. Being able to recognize and seize opportunities is another important characteristic of entrepreneurs. Many researchers believe that for the creation of new ideas, opportunities must be recognized. For Schumpeter (1934) this means to translate new ideas into products, Drucker (1985) believes in exploiting opportunities to create change, whilst Kizner (1979) and Shane (2003) view this in the sense of gaining personal profit.. Female Entrepreneurs When the term entrepreneurship was starting to flourish, this referred mainly to male owned businesses. But over the past decade, even though male entrepreneurs are still the majority, the number of female entrepreneurs has increased. Women have always participated in business, but not as the owners of their own ventures. Many years ago, women didn’t have the opportunity of education or social acceptance to enter into business, but nowadays the number of women in business has increased. Research on female entrepreneurs has received less attention than male entrepreneurship and most studies have been done on gender differences (Dzisi, 2008). 13 .

(24) A female entrepreneur is someone who seizes an opportunity or has a necessity to create a new venture through innovation and risk taking. They use creativity and practical and innovative approaches through the recognition of an opportunity to develop a new venture (Dzisi, 2008). During the process of starting and operating their business they face problems due to a lack of education or business skills, and support systems (Jalbert, 2000). Some socioeconomic factors that make women start their own businesses are age, work status, education, income, social ties and perceptions (Allen, Langowitz, & Minniti, 2007). Female entrepreneurs tend to act differently than men, so they contribute to society with different innovative solutions and perspectives. Female entrepreneurship is growing in both developed and developing countries, and in the latter they represent an important source of economic development (Dzisi, 2008). Jalbert (2000) found that in countries where these female entrepreneurs are successful, the growth of the economy has been steady, contrary to those countries where female entrepreneurship has been restricted.. Characteristics of Female Entrepreneurs Female entrepreneurs possess the main characteristics of an entrepreneur, innovator, risk taking propensity, having need for achievement and being able to seize opportunities. But they also possess other characteristics like highly motivated and self-directed, married, with a family, and interpersonal and communication skills, but one of the most common qualities is being able to focus (Jalbert, 2000). According to Allen et al. (2007) men and female entrepreneurs start up their businesses at a similar age (25-34 years). Other characteristics these female have are that they are more confident and they have less fear of failure than those women who are not involved in entrepreneurial activity.. 14 .

(25) When describing an entrepreneur, there exist different approaches; one of them is based on the psychological perspective which states that they often show a characteristic profile (Dzisi, 2008). Several studies have been done on female entrepreneurs to develop a profile and see how these characteristics affect their success (Bennett & Dann, 2000). Some factors studied are age at business, education and commencement, type of business and demographics.. Female Entrepreneurs in Latin America During the past two decades, female participation in Latin America has increased, achieving in 2007 a 53% (Vakis, 2011). Up to 2006, the gender gaps are still big; men have 70% more opportunities to participate in the labor force. But even though there are still more men working, the income gaps have drastically become smaller. El Salvador, Guatemala and Honduras have had the higher performance, whereas Costa Rica did not have such a high increase. In Central America one third of the participation of the total income of the countries is from females. These women also play an important role in Latin American countries economies. In her article, Vakis (2011) mentions that if there is an increase of female participation in the workforce, there will be a significant increase in the region’s general revenue and a reduction in poverty. Almost 80% of the women in Central America are found in four major sectors: trade, health and education, domestic services and low quality manufacturing (Vakis, 2011). In terms of education, the percentage of women who have finished school and colleges has had a significant increase in Latin America, which has helped make the wage gap smaller with respect to men (Vakis, 2011). Self-employment and employment in micro enterprise are the two main sources of jobs for women in most of Central American countries.. 15 .

(26) According to Bruhn (2009), most of the female entrepreneurs in Latin America are found in micro and small enterprises and in the trade and manufacturing sector. Their firms tend to be younger, have lower profits and are less productive than those owned by men.. Female Entrepreneurs in Honduras Across time, women have been depicted as a source of reproduction within households, and not as a productive source in the economy. In Honduras, over the past two decades female participation in the workforce has increased, more women are becoming selfemployed or starting their own businesses. In Honduras there are almost 50% of self employed women, compared to almost 20% for men. During the past decades, women are getting more education and in Honduras, in 2007, they have achieved levels of achievement of education of 20% higher than men. But despite of this, women are still getting less participation in the workforce than men (Vakis, 2011). In Honduras, there is no official statistic or census of how many female entrepreneurs are in the country. According to the webpage of the Instituto Nacional de Estadística in Honduras, the female economic participation rate is 34.9% and there is a 46.7% rate of female workforce with employment problems (http://www.ine.gob.hn). The only statistics available about female entrepreneurs are the ones provided by two institutions that work with this sector, The Chamber of Commerce and Vital Voices. The Chamber of Commerce has a specific program for female entrepreneurs; they have 425 affiliates up to the date. Through this program, they give trainings to the entrepreneurs as well as guiding them through better practices. The other program, Vital Voices, is an NGO that “identifies trains and empowers emerging women leaders and social entrepreneurs around the globe, enabling them to create a better world for us all” (http://www.vitalvoices.org). This program started in February 2011 16 .

(27) and the way they help develop these entrepreneurs is by using mentors, who are different woman leaders who work pro bono for this program.. Micro and Small Enterprises For many years, micro and small enterprises (MSEs) have been an important source of work for many individuals, and it has grown in number and in importance (Fenwick, Howe, Marshall, & Landau, 2008).There exist a variety of sectors in micro and small enterprises, such as service, industry, handcrafts and food (Dzisi, 2008). However, the number of employees or the value of assets are usually the criteria used to define whether a business is micro or small depending on the country. Various studies show that most of the entrepreneurs businesses are found in micro and small enterprises and are the main drivers of economic growth. In most developing countries, starting small and medium sized enterprises is now used as a way to achieve sustainable socio-economic development and for reduction of poverty (Jalbert, 2000). Micro and small enterprises (MSEs) drive economic growth in developed and developing countries and this sector is where most entrepreneurs are found (Dzisi, 2008). In Honduras, the productive structure, as in most of Latin-American countries, is composed of many micro and small enterprises; they are one of the biggest contributions to the economy of the country (http://www.sic.gob.hn, 2008). These have suffered difficulties in their growth and performance mainly due to the economic, social and educational situation of the country. This is why in October 2000 the Comision Nacional de Micro, Pequena y Mediana Empresa (CONAMIPYME) was created in order to give assistance to this sector. Its main objective is to: “support the development and strengthening of businesses to increase the productivity of these economic units, leading to increased competitiveness of their products or 17 .

(28) services, in order to stabilize and create jobs, increase the income levels and quality of life of the people linked to the micro, small and medium enterprises, and taking into account the gender” (http://www.sic.gob.hn, 2012).. Female Entrepreneurs in Micro and Small enterprises in Honduras In Honduras, as in whole Latin America, most of the female entrepreneurs are found in the micro and small enterprise, being trade and manufacturing the major sector (Bruhn, 2009). Here a micro enterprise refers to a company that employs from one to ten permanent employees and has monthly average sales of about $3,125.00 (Kushnir, 2010).. Micro. enterprises have low profitability, are mostly manual labor and use simple technologies. They usually. operate. informally. and. lack. accounting. and. administrative. records. (http://www.sic.gob.hn, 2008). Whereas, a small enterprise is a company that is composed of eleven to twenty five permanent employees and with monthly average sales of around $9,375.00 (Kushnir, 2010). They are more profitable and use more technology, have some accounting records and administrative controls (http://www.sic.gob.hn, 2008). As in most developing countries, women entrepreneurs in MSEs are an important source for their economy due to the creations of new jobs. They play an important role in developing the economy of a country, alleviating poverty and creating employment.. Women Associations in Honduras The two women organizations that are going to be used in this study are the Chamber of Commerce and Vital Voices. Both of them offer different types of assistance to the female entrepreneurs. The Chamber of Commerce offers the following: •. Legal assistance to start their businesses. •. Business meetings 18 . .

(29) •. Assistance on foreign trade issues. •. Support in trade agreements and international fairs. •. Barcode discount. •. Contact with strategic partners on issues of trademarks, licenses or permits on food issues.. •. Business conferences. •. Mentorship. •. Trainings, conferences and forums. •. Sectorial nuclei: work teams composed of female entrepreneurs of the same business sector to achieve higher levels of competitiveness and productivity.. •. Promotion and management of business fairs and business conferences.. The other women association, Vital Voices offers the following assistance to the female entrepreneurs: •. Mentorship programs. •. Trainings. Performance Performance is using knowledge to do something successfully (Teoh & Chong, 2007). According to existing literature, it can be measured in different ways. According to Shane (2003), entrepreneurs’ performance can be measured according to different factors: survival, growth, profitability, and experiencing an initial public offer. For Haber and Reichel (2005), there are two ways of measuring performance; one is by using subjective measures such as perceived growth in market share, sales growth and profitability relative to competitors, and the other one by using objective measures including indicators such as sales, revenues, earnings and growth in number of employees. 19 .

(30) Assessing performance through objective financial measures can be simpler, but since data is sometimes confidential it may be difficult to obtain it from the respondents, and it will also be difficult to check the accuracy of the data provided (Haber & Reichel, 2005). Subjective measures are more of the respondents’ feelings or judgments, although these may compromise the validity of the results they appear to be content valid and reliable. According to Haber and Reichel (2005), assessing performance based only on financial measures is not enough because it does not take into consideration other important aspects of small ventures that are related with management such as number of employees and market share. Most of the studies on individual factors affecting performance are from developed countries like United States, Canada and the United Kingdom. According to Lerner et al. (1997), the most common performance measures used in previous studies in developing countries are based on size of the business, profitability, revenues and income. Revenues and income can be measured by using the financial data provided by the respondents. This research used both objective and subjective measures of performance, focusing on growth in number of employees, profitability of the ventures, revenue growth and the capacity to respond to market demand. Growth in number of employees can be measured simply by asking the number of employees and years in business, this was the approach taken to measure performance. Revenue growth were measured by knowing the revenues on the year of establishment and on the current year. On the other hand, due to the financial data required, profitability was measured using a subjective approach, comparing their profitability with their competitors. The capacity to respond to market demand was also measured subjectively to know the perceptions female entrepreneur have about their business.. 20 .

(31) Growth in Number of Employees A performance measure used in this research was growth, which Shane (2003) defines as an increase in the new ventures employment or sales. Since most ventures start small, it is a good performance measure to see the improvement over time. Growth is defined differently by many researchers; for Majumdar (2008) the major parameters are employment, profit, added value, turnover, total assets and market share. Others define it as an increase in number of employees and sales turnover rates (Morrison, Breen, & Ali, 2003). Growth can also mean an increase in sales, profits, assets, employees and location (Singh & Belwal, 2008). There are a variety of environmental, individual and organizational factors that affect the growth of female entrepreneurs businesses (Morris, Miyasaki, Watters, & Coombes, 2006). In their study Roomi et al. (2009) found that entrepreneurs’ motivations are important for the performance of female entrepreneurs businesses in England. Other researchers believe that push and pull factors and personal goals and ambitions will affect an individual’s small business orientation towards growth (Morrison et al., 2003; Roomi et al., 2009). Those who are motivated to start a business because of desire to become wealthy or to meet a challenge will probably be more growth intended, than those who start their business because of necessity (Morris et al., 2006).They also mention that more educated women will have stronger growth orientation than those with lack of education. According to Haber and Reichel (2005) growth can be measured according to revenues and number of employees for two consecutive years, and the average growth of these parameters since the venture was established. For small ventures, having a high number of employees can be a source of high costs, so measuring this can help find out the organizations efficiency. 21 .

(32) Growth in Revenues The second measure of performance according to growth that was used in this study is revenues; these are considered to be a valid measure for presenting overall performance (Haber & Reichel, 2005). Usually when there is growth in revenues in small firms there will be subsequent growth in the future and this plays an important role in the sustainability of a venture (Orser, Hogarth-Scott, & Riding, 2000). Growth in revenues can also influence future business development and managerial activities, pointing towards ongoing survival of the venture (Haber & Reichel, 2005). A business ‘growth in revenues indicates its strength and ability to grow (Orser et al., 2000). In a study conducted by Lerner et al. (1997), they found that business skills were highly correlated with revenues. Environmental factors, affiliation to networks were also related to revenues. Independence motivations were found to be negatively correlated to revenues.. Profitability According to Shane (2003) and Haber and Reichel (2005), profitability is one of the measures of performance of an enterprise. Profit or income is defined as “the surplus of revenues over costs” (Shane, 2003, p. 6). There exist several studies that measure the factors that affect female entrepreneurs’ profitability (Coleman, 2007; Lerner et al., 1997; Nordin et al., 2011). According to Coleman (2007) profitability measures “a firm’s ability to generate revenues in excess of expenses, an accomplishment that is necessary if the firm is to be considered a “going concern.” (p. 304) This means a venture that functions without the threat of liquidation.. 22 .

(33) Profitability can be measured either subjectively or objectively, but by using an objective approach there is the risk that the information won’t be reliable, valid and uniform (Haber & Reichel, 2005). On the other hand, using a subjective approach can provide the respondents perception of the profitability of their business. When comparing the profitability of a venture to those of its competitors it can be known the entrepreneurs’ perceived success and position in the industry (Haber & Reichel, 2005). For the purpose of this study using a subjective measure was the best approach, due to the difficulties in collecting reliable data and also the importance of knowing how the entrepreneurs perceive the success of their businesses.. Capacity to Respond to Market Demands Another important measure of performance is the capacity the female entrepreneurs’ ventures have to respond to market demands. It is very important for MSE owners to understand their target market and they also need to know their capacity to respond to the market demands (Wiklund & Sheperd, 2003). Most of the SMEs compete in an equally competitive environment irrespective of their sizes and resources (Abimbola, 2001). It is also important for MSEs to know who their customers are and what their needs are in order to have a unique advantage over their competitors (Abimbola, 2001). Kwaku and Satyendra (1998) also state the importance of knowing their customers in order to survive in a globalized and dynamic market. Small firms feel that their ability to make quick decisions is very important for the success of their ventures and for maintaining market share against their competitors. It is also important to provide instant responses to their customers (Vodafone, 2011).. 23 .

(34) Factors Affecting Female Entrepreneurs Performance This section gives an overview of the different factors that affect female entrepreneur performance in MSEs. According to the existing literature, there are a number of studies that have found several factors affecting women entrepreneurs’ performance, among the most common ones found are motivations, human capital, networks and demographics. In an exploratory study conducted in Honduras (Callejas & Yeh, 2013), female entrepreneurs and experts in the field felt that environmental factors also affected entrepreneurial performance. For the purpose of this research these five factors were studied.. Motivations . For an entrepreneurial act to occur motivations must be present. Just having an idea is. not enough, motivation or intention to do it is also important. Motivations are the “foundation of a goal oriented behavior of a person” (Nordin et al., 2011, p. 975). Motivations are “the process of stimulating a person to participate in a desired course of action” (Holmén et al., 2011). The creation of new ventures is related to self-realization and exploitation of opportunities or the need of survival in an environment where jobs are limited. In developing countries, a need for survival is the most common motive in the creation of new ventures (Kalyani & Kumar, 2011, McClelland, Swail, Bell, & Ibbotson, 2005). The opportunistic entrepreneur achieves success by exploiting an opportunity usually for an economic gain and may be motivated by a need to achieve or to succeed (Reynolds, Bygrave, Autio, Cox, & Hay, 2002). Necessity entrepreneurs, on the other hand, are driven by survival oriented motivations, and earning money to support their families and themselves.. 24 .

(35) Carsrud and Braanback (2011) state that since motivations enable individuals to persist, these play an important role in predicting entrepreneurial behavior. Motivations of female entrepreneurs were found to have a positive relationship with profitability of their ventures, especially on economic necessity. If they are strongly motivated they can achieve high profitability and overcome structural barriers (Lerner et al., 1997). Based on previous studies that have researched female entrepreneurs, several factors that motivate them can be found. In most of the studies (Arasti et al., 2012; Naser et al., 2009; Robinson, 2001; Tundui & Tundui, 2012) that have researched female entrepreneurs’ motivations for startup, two types of factors are found, push and pull. These factors have also been identified as affecting factors of growth orientation. Push factors are those associated with some need that forces females to start their own business (McClelland et al., 2005). According to Naser et al. (2009), these factors are associated with negative conditions and may result from low income, frustration with previous or current job or lack of job opportunities. On the other hand, he stated that pull factors are attributed with positive developments and may result from a need for self-accomplishment or desire to help others. These can be a desire for independence, autonomy, self-fulfillment, wanting to be one’s own boss and desire for wealth (Orhan & Scott, 2001). According to Holmén et al. (2011), entrepreneurial motivations can be classified as personal, economic and social motivations as presented on Table 2.2. In economic motivations, motives such as economic necessity, unemployment and lack of other economic prospects are found; these can be seen as push factors (Bennet & Dann, 2000). Desire for independence, need for self-fulfillment, desire for achievement, being one’s own boss, entrepreneurial drive and desire for social status are all personal motivations and can be classified as pull factors (Lerner et al., 1997). In the social motivations, motives such as need for flexible time, flexibility to balance work and family, unacceptable working conditions and 25 .

(36) frustration are classified in this category (Bennet & Dann, 2000). Table 2.2 shows the different classifications of entrepreneurial motivations and the factors each of them convey. Table 2.2. Classification of Entrepreneurial Motivations Economic Motivations. Personal Motivations. Economic necessity. Desire for independence. Desire for work-family. - Unemployment. Need for self-fulfillment. balance. - Lack of other economic. Desire for achievement. Flexible work patterns. Locus of control. Unacceptable working. Being one’s own boss. conditions. Entrepreneurial drive. Glass ceiling. Desire for social status. Work frustration. prospects. Social Motivations. Note. Table adapted from “Female Entrepreneurship in Afghanistan,” by Holmén, M., Thaw, T. M., and Saarelainen, E. 2011, Journal of Developmental Entrepreneurship, 16(03), 307331, p. 310. As different studies have found in developed countries, entrepreneurial motivations are based on independence and a need for self-achievement, whereas in developing countries it is a necessity or a combination of push and pull factors (Brush & Cooper, 2012; Hisrich & Sevgi, 1999; Orhan & Scott, 2001). In a study done by Dawson & Henley (2012), they examined the reasons why men and women wanted to be self-employed, they found that women reported more on pull of independence but allied with other push factors such as family. But overall they found that there was a predominance of pull motivations.. 26 .

(37) In a study made by Moore & Buttner (1997), they examined why 129 female executives and professionals left their organizations to become an entrepreneur. Findings indicate that the desire for challenge and self-determination and the desire to balance family and work were the most important motivations for them.. Motivations and performance Several studies have researched the effect of motivations on female entrepreneurial performance. Economic, personal and social motivations have all been studied with reference to performance (Alam et al., 2011; Arasti et al., 2012; Lee & Stearns, 2012; Lerner et al., 1997; Morris et al., 2006). In their research, Lerner et al. (1997) studied how motivations are associated with business performance. They found that economic necessity had a significant effect on profitability; independence had a negative impact on revenues and achievement motivation and economic necessity were strongly associated with personal income. Morris et al. (2006) found that women who are pulled by an opportunity are more growth-oriented than those pushed by circumstances such as job loss or economic necessity. They also found that push factors might lead to less promising ventures since they are motivated to start a business because of a necessity, rather than personal achievement. An empirical study by Alam et al. (2011) on the effect of how various factors affect the success of women entrepreneurs in southern region in Malaysia, found that internal motivation affects positively and significantly their success in small business. Lee and Stearns (2012) in their study on success factors in the performance of female entrepreneurs in Korea found that entrepreneurial opportunities, independence and income and entrepreneurial challenges positively affect success of female owned businesses. They 27 .

(38) also found that pull factors by opportunities have more effects than push factors driven by negative circumstances. In another study by Arasti et al. (2012), they did a qualitative study on the individual factors that affect the growth orientation of Iranian women entrepreneurs. They divided the motives into push and pull. Also, pull factors such as self-expression, independency, job creation and flexibility were more motivating than push ones. Naser et al. (2009), in a study analyzing the factors influencing the growth process of women- owned SME’s in England, found that making sufficient income to support themselves and their families, and having balance between work, family responsibilities and others were the most important motivations for these women entrepreneurs. In a qualitative study conducted in Honduras (Callejas & Yeh, 2013), they examined the different factors affecting female entrepreneurs performance in the country. They found that not having the right motivation affects their performance. Hence, the motives female entrepreneurs’ have, will have an effect on the performance of female entrepreneurs’ ventures. Thus, having reviewed the literature, the following hypotheses were proposed: Hypothesis 1: Motivations will have an effect on female entrepreneur performance in micro and small enterprises in Honduras. Hypothesis 1a: Economic motivations will positively affect the performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 1b: Personal motivations will positively affect the performance of female entrepreneurs in micro and small enterprises in Honduras.. 28 .

(39) Hypothesis 1c: Social motivations will positively affect the performance of female entrepreneurs in micro and small enterprises in Honduras.. Networks Another factor frequently researched that also affects female entrepreneurship performance is the use of networks. The use of networks refers to the social relationships venture owners have with all the people related to their business, like customers, suppliers as well as other entrepreneurs. Through these networks they get support, knowledge and access to distribution channels (Greve & Salaff, 2003). Networks such as relatives, access to or membership in associations and mentoring are seen as a key in contributing to small businesses success, the presence or absence of these influences the performance of a business venture (Dzisi, 2008; Roomi et al., 2009). In countries where there is a high degree of economic uncertainty and formal legal institutions are weak, the use of networks could aid entrepreneurs enter the market (Biggs & Shah, 2006). Entrepreneurs in both developed and developing countries rely on their personal networks, especially when starting their businesses (Dzisi, 2008). According to Dzisi (2008), these personal networks help in achieving a solid foundation of the business as well as for its success. Women’s business associations are useful for female entrepreneurs; they offer different types of technical and business trainings; they also provide legal assistance, advice and support. One important aspect of being part of an association is mutual support, where female can benefit and learn from one another. But in some men dominating societies, establishing an effective network can be difficult due to the gender difference. Despite of this networks help members feel like part of a group where they all share similar experiences (Alam et al., 2011). 29 .

(40) For some female entrepreneurs they think having a role model or mentor is a key factor of success (Jalbert, 2000). Role models can either be someone close or someone famous in history, while mentor can be a business person, friend or family member that can guide them through the startup and operation of their business by sharing their business knowledge and experience.. Networks and Performance According to previous studies, networks have an impact on business survival (Alam et al., 2011; Lerner et al., 1997; Roomi et al., 2009). According to Lerner et al. (1997) the presence or absence of networks can influence business performance. Lack of networks tends to deprive women to awareness and exposure to good role models. In the previous study, they found that women who belonged to women’s organizations reported higher profitability than those who didn’t. They also found that the use of mentors was linked to higher revenues. In a research conducted in Malaysia, Alam et al. (2011) studied the success factors of female entrepreneurs and found that networks have a positive and significant effect on business success. This means that the greater the social relationship, the higher the success of the venture. Similar results were found in another study in England; the respondents said that having an effective network is one of the most important factors for the establishment, development and growth of their business (Roomi et al., 2009). Networks are an important factor for successful business performance, thus their existence is crucial for both start-up and operation of the venture. No matter how they use it, either the lack of support or lack of contacts will affect the performance of female owned ventures. As Lener et al. (1997) suggested in their study, having an affiliation to women organizations, gaining previous experience and learning business skills will help improve their performance. Female entrepreneurs feel that being part of an association or program 30 .

(41) helps them improve their performance, since through these associations they build databases of clients, they receive training and mentoring and they can help each other (Callejas & Yeh, 2013). Thus, having reviewed the literature, the following hypotheses were proposed: Hypothesis 2: Networks will have an effect on the performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 2a: The support of women’s associations will have a positive effect on performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 2b: Support from mentors will have a positive effect on performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 2c: Support from personal networks will have a positive effect on performance of female entrepreneurs in micro and small enterprises in Honduras.. Human Capital According to Ployhart and Moliterno (2011), human capital expects that an individual who has high levels of knowledge, skills and other competencies will be able to achieve greater performance than those who have lower levels. Existing literature show that human capital is an important factor for establishing a business (Lerner et al., 1997; Nordin et al., 2011). It has also been found that human capital involves management skills and knowledge such as education level, the influence of the area of education, previous work experience and business skills will influence business performance (Lerner et al., 1997; Nordin et al., 2011). These human capital factors contribute to the growth and success of business ventures (Dzisi, 2008).. 31 .

(42) According to Lerner and Almor (2002), for business owners the business skills are their most important asset since they use them to make strategic and operational decisions. These authors also suggested that the success of an enterprise depends on their previous experience. In their study they found that having business skills and previous experience had a positive effect on volume in sales. Kim, Aldrich, & Keister (2003) studied the effect of education on performance, in their study they explain how formal education influences on a decision to become an entrepreneur. They say that general business skills might help entrepreneurs avoid mistakes and help them set up their business. Human capital is also derived from previous work experience. Kim et al. (2003) stated that if the work experience is in the same industry as the new business, then entrepreneurs will have more knowledge and opportunities to understand the market. Having work experience can also help female entrepreneurs build networks that can be useful for their business.. Human Capital and Performance Previous researches on developed countries show that a higher level of education would be associated with better performance and success (Lerner et al., 1997). General business skills and industry specific skills can help female entrepreneurs run their business more successfully and formal education can provide access to certain networks. Individuals with limited formal education lack necessary qualifications in the labor market, and thus seek to find alternative ways of employment (Kim et al., 2003). In many developing countries, women suffer from a low level of education, and may not have the necessary basic knowledge to know how to start or manage their own business.. 32 .

(43) In a study conducted by Holmén et al. (2011), they found that a low level of education and lack of managerial and technical skills is a problem for entrepreneurs in developing countries. Women usually have less education than men, but they also seem to have limited access to business and managerial training (Powers & Magnoni, 2010). Empirical evidence in a study by Biggs and Shah (2006) in Africa shows that entrepreneurs with university degree start larger businesses that grow faster than those who only attended primary education. Based on past research, possessing relevant skills and experience helps ensure survival and growth of a business (Tundui & Tundui, 2012). In a study on MSEs in Tanzania, Tundui and Tundui, (2012) found possession of business skills related to the business operations and experience predicts business profitability. Morrison et al. (2003) and Tundui and Tundui (2012) found that management skills and technical skills are factors affecting growth orientation of female entrepreneurs. In a study conducted by Nordin et al. (2011), it was found that human capital has a significant relationship with the profitability of female entrepreneur business. Similar results were found in a research done in Israel by Lerner et al. (1997), business skills were found to be related to business performance and success. Kim et al. (2003) says that individuals who have work experience related to the new business venture, will gain opportunities to identify potential market opportunities. This can also help to obtain various networks such as suppliers, customers and capital. In her study, Coleman (2007) found that having prior business experience and education were an important determinant of firm profitability. Thus, previous work experience plays an important role in the success of female owned businesses. ILO (2008) states that lack of management skills and lack of occupational experience in related businesses has been indicated as a constraint to growth for many female entrepreneurs. 33 .

(44) The results in Lerner et al. (1997) study show that previous experience was highly correlated with performance, especially with business growth. Business skills seem to have an effect on revenues and profitability. Therefore, human capital is important for fostering firm survival, profitability and growth (Coleman, 2007). Not possessing the knowledge of basic business management skills, not having a high level of education and not having prior work experience are barriers that female entrepreneurs and experts in the field feel that affect the performance of these women (Callejas & Yeh, 2013). Thus, having reviewed the literature, the following hypotheses are proposed: Hypothesis 3: Human capital will have an effect on the performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 3a: A high level of education will be positively related to business performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 3b: The influence of the area of education will be positively related to business performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 3c: Previous work experience will have a positive effect on business performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 3d: Business skills will have a positive effect on business performance of female entrepreneurs in micro and small enterprises in Honduras.. Environmental Factors In addition to all the previous factors mentioned, environmental factors are all those external to the entrepreneur, such as location, sectorial activities and sociopolitical variables 34 .

(45) that affect business performance. According to Lerner et al. (1997), these factors are critical determinants of performance, but differently affect the type of business and vary by industry sector. In a study conducted by Callejas and Yeh (2013) they found that the environmental problems affecting female entrepreneurs in Honduras were country security and government support. Government support has not been researched so much, but a few authors have included this factor as affecting female entrepreneur performance (Naser et al., 2009; Singh & Belwal, 2008). Unlike government support, country insecurity has not been studied in past researches of female entrepreneur performance, thus there is no existing literature on this topic. But according to local news, this has been a problem affecting the people of Honduras, especially those who own business are been affected by criminality. The major problems in this country are crime and violence, followed by unemployment (Diario La Prensa, 2012). One new criminal trend in Honduras is “impuesto de guerra” or war tax, which is a type of extortion that is happening in most neighborhoods of the country. This type of crime started to affect outlying slums in Tegucigalpa and San Pedro Sula, the two biggest and most important cities in Honduras. These has also affected small businesses who operate in these cities, where criminals force them to pay them the war tax (Proceso Digital, 2011).. Environmental Factors and Performance Environmental factors have not been researched by many scholars, not so much literature was found, especially about government support and country insecurity. In their study Singh and Belwal (2008) found that the amount of government support affects female entrepreneurs’ performance.. 35 .

(46) In their study, Singh and Belwal (2008) said that female entrepreneurs could play an important role in SME development if they had more government support. They also found that even though governments have programs or projects to develop them, these women do not know about them; there is a lack of awareness. More than half of these female entrepreneurs were unsatisfied with government support and the lack of training and promotion. Another study conducted by Naser et al. (2009), stated that financial support from the government is one factor that motivates female entrepreneurs to start their own business. They also found that a flexible government policy that encourage and support female entrepreneurs was positively viewed. Callejas and Yeh (2013) found that the major external factors affecting these women performance are country security and government support. Female entrepreneurs feel that the high criminal rate is a threat for their business, these affects mainly their chance of survival in the market. These female feel that the government does not give the desired training, financing, sponsorship to participate in fairs and publicity that will help them run a more profitable business. The hypotheses proposed were: Hypothesis 4: Environmental factors will have an effect on the performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 4a: Government support will have a positive effect on performance of female entrepreneurs in micro and small enterprises in Honduras. Hypothesis 4b: The insecurity of the country will have a negative effect on performance of female entrepreneurs in micro and small enterprises in Honduras.. 36 .