Promoting new venture formation by the unemployed

Abstract

Excessive levels of unemployment exist in many South African communities (www.statssa.gov.za) alongside low levels of entrepreneurial behaviour (GEM Report, 2006). This is true even when South African figures are compared to figures from similar developing countries (GEM Report, 2006; Urban, 2006). This thesis looks for reasons why this situation exists and examines possible solutions by considering the motivation to create new ventures alongside contemporary theories of work motivation. It considers those theories in light of the known depressing effects that unemployment has on an individual (Darity et al, 1996; Feather, 1992; McKee-Ryan et al, 2005; Rodriguez, 1997; Shamir, 1986; Vansteenkiste et al, 2004; Vansteenkiste et al, 2005) in order to gain a better understanding of why entrepreneurship is not flourishing in South Africa’s unemployed communities. The motivation to form a new venture is vital to new venture formation (Herron&Sapienza, 1992; Douglas et al, 1994; Wennekers and Thurik, 1999; Wiklund et al, 2003; Segal et al, 2005) but is under-considered in many programmes aimed at encouraging entrepreneurship. Where the psychologically depressing effects of unemployment have reduced an individual’s intrinsic motivation to form a new venture, a structured environment should be created to facilitate the early stages of new venture formation. Individuals should be extrinsically motivated to achieve goals until the benefits of accumulated achievements have countered those depressive effects and traditional venture formation theories once again become valid.