The Frugal Entrepreneur
Research Paper Title:
“The frugal entrepreneur: A self-regulatory perspective of resourceful entrepreneurial behavior”
Authors:
Timothy Michaelis (Northern Illinois University)
Jon Carr (North Carolina State University)
David Scheaf (Baylor University)
Jeffrey Pollack (North Carolina State University)
Background:
Do some entrepreneurs have a pre-disposition towards being resourceful? New research on the role of frugality in entrepreneurship suggest that trait frugality is positively related to resourcefulness-related behaviors that are commonly displayed by entrepreneurs; bricolage and effectuation. Thus, those individuals who are more frugal are more likely to repurpose or reuse resources to effectively "do more with less" or "create something from nothing." The study defines frugality as an individual's preference for resource conservation and in being economical regarding the use and acquisition of resources in a new venture.
Methodology:
Sample: Entrepreneurs who have started their business within the past 5 years.
Sample Size: 178
Analytical Approach: Construct Validation, Confirmatory Factor Analysis, OLS Hierarchical Regression
Hypothesis:
Hypothesis 1. Frugality will be positively related to engagement in affordable loss behaviors.
Hypothesis 2. Frugality will be positively related to engagement in flexibility behaviors.
Hypothesis 3. Frugality will be positively related to engagement in experimentation behaviors.
Hypothesis 4. Frugality will be positively related to engagement in bricolage behaviors.
Hypothesis 5. Trait self-control will be positively related to engagement in causation-based entrepreneurial behaviors.
Hypothesis 6. Trait self-control will be positively related to engagement in behavioral pre-commitments.
Results:
This study introduces and validates the construct of frugality within the entrepreneurship literature. Confirmatory factor analysis highlights that frugality is a single dimension and is positioned in the literature as an individual trait (i.e., a stable characteristic of individuals). The authors find that frugality is unique from trait self-control in that frugality is positively related to effectuation behaviors (i.e., affordable loss and flexibility dimensions) and bricolage behaviors. To the contrary, in controlling for trait self-control, the authors find that self-control is positively related to causation behaviors. In sum, this study highlights that trait of frugality is positively related to resourcefulness-related behaviors often displayed by entrepreneurs.
Conclusion:
The paper allows for a new direction in entrepreneurship research related to resourcefulness topics by highlighting the role of individual differences on resourcefulness behaviors during the venture creation process. In other words, self-regulation theory (Bandura, 1991) and the construct of frugality provide a cognitive avenue for future research on resourcefulness topics. The authors hope their work pushes future research to expand understanding of how and why entrepreneurs are resourceful, as both a function of the individual and one's environment. Additionally, they hope frugality will encourage new research related to (a) financial stress and entrepreneurial well-being, (b) opportunity evaluation and pivoting behavior, and (c) the influence of frugality on entrepreneur-stakeholder relationships (e.g., investor-entrepreneur dyads) as it relates to new venture success.