**DRIVES AND BARRIERS FOR ENTREPRENEURSHIP : A STUDY
BASED ON SRI LANKAN IT ORGANIZATIONS.
Nilakshi W K Galahitiyawe
University of Sri Jayewardenepura, Sri Lanka
[email protected]
Erosha G B Rathnayake
MBF Cards Sdn. Bhd, Malaysia
[email protected]
Abstract
The purpose of this paper is to explore the major entrepreneurial drives and barriers for IT business
in Sri Lanka. The study also describes socio economic factors affecting to the entrepreneurship in
general. Basically, the study used interpretivistic epistemological framework. In-depth interviews
were carried-out for ten entrepreneurs in IT organizations. Data were analyzed based on emerging
themes. The study found, IT related higher education, foreign exposure and social networks are the
main drives and act in combined manner. 60% of entrepreneurs have foreign exposure as an
employee or student in the relevant field. Lack of social intimacy, risk averse, dependency, and lack
of knowledge of the field are the major barriers to be an entrepreneur in IT sector. Further, the
government regulations on hardware dealership also limited the opportunities to be an entrepreneur.
IT education with foreign exposure, flexible regulations, financial support, and informative centers
will enhance the entrepreneurship in Sri Lanka.
Keywords: Barriers, Drives, Entrepreneurs, IT organizations, Social networks.
1. Introduction
Entrepreneurs have become the crucial human resource of economic development in any country. A
society with high level of technology, resources does not guarantee the economic development
itself. Hence, there is a need for strong base of entrepreneurs and spirit of entrepreneurship
especially for the developing countries.
Information Technology (IT) can be identified as an emerging sector in Sri Lanka. The industry
comprises with multinational companies and local IT firms to cater the increasing demand for
Information systems (IS) and Information Communication Technology (ICT)
in Sri Lanka.
According to the findings of Sri Lanka Information Communication Technology Association
(SLICTA), still there is a huge deficiency in IT sector in terms of organizations, workforce and IT
education. Mean while some local organizations outsource their IT requirements from foreign
countries for better systems and solutions. In addition to that, foreign IT firms and educational
institutions have taken this as an advantage and tend to start their business in the country. As a
result the country cash outflow has became very high. Therefore, to overcome above mentioned
problems and to face the rising demand for IT within the country it need to stimulate
entrepreneurship as a central dimension in the development of business and industry. But the
problem is ‘why people do not enter to the business even though there is a considerable potential
market?’. Theoretically, when the industry is in early growth stage more and more rivalry firms are
emerging. However, it has not happen to the IT industry in Sri Lanka over the past decade. This
signs a problem in entrepreneurship, entrepreneur infrastructure, systems and education. To
stimulate entrepreneurship in the country, it is vital to identify drives and barriers to
entrepreneurship to move ahead in socio economic development.
1
2. Objectives of the Study
The main objective of this paper is to examine entrepreneurial drives and barriers exist for IT
business in Sri Lanka. In addition to that we briefly describe socio economic factors affecting to
entrepreneurship in the country as a whole.
3. Literature Survey
As today we live in a world, which is extremely complex and obviously dependent upon others,
neither individuals nor organizations can or it is impractical to exist in isolation in the long-run.
Hence, people, most possibly at different degrees, are interdependent on each other, even in their
day today lives, through different identifiable modes like personal and official relationships, shared
beliefs, values, norms, traditions, customs, practices, behaviors, ideas, opinions, etc. Some scholars
observe this nature as ‘dependency’ which expressed as a common characteristic in developing
countries. Accordingly, this nature has affected to business activities heavily in Sri Lanka. The
findings of this paper further justify dependent nature and how it is affected to entrepreneurship.
3.1 Entrepreneurship
Wikipedia defines Entrepreneurship as ‘the practice of starting new organizations or revitalizing
mature organizations, particularly new businesses generally in response to identified opportunities’.
Entrepreneurship is one of the major topics subjected to discussion among scholars, practitioners
and policy makers and having long history. In 1970, Peter Drucker defined entrepreneurship is
about taking risk and entrepreneur is a kind of person willing to put his or her career and financial
security on the line and take risks in the name of an idea, spending much time as well as capital on
an uncertain venture. Literature shows different scholars operationalized entrepreneurship in
different ways. Despite, Audretsch et al, (2001), defining entrepreneurial activity as a process of
starting a new enterprise and he further describes ‘there is no generally accepted definition of
entrepreneurship for the developed countries. The failure of a single definition of entrepreneurship
to emerge undoubtedly reflects the fact that it is a multidimensional concept. The actual definition
used to study or classify entrepreneurial activities reflects a particular perspective or emphasis. For
example, definitions of entrepreneurship typically vary between the economic and management
perspectives (ibid). Shane and Venkataraman (2000) interpret entrepreneurship as, the focuses on
the discovery of opportunities. As Audretsch (1995) argues, entrepreneurship is about change, just
as entrepreneurs are agents of change; entrepreneurship is thus about the process of change.
Subsequently, the definitions can be categorizes mainly in to two segments; firstly entrepreneurship
is about taking a financial risk of the business, secondly entrepreneurship is discovering
opportunities. For this study we define entrepreneurship as initiating business by taking the
financial risk and uncertainty of business environment. Because we believe that financial risk and
uncertainty in the business climate are more critical factors for developing countries than exploring
new opportunities.
Hence the definition for the entrepreneur can be operationalized as the person who is bearing the
financial risk and uncertainty of the business environment. Audretsch (2003) viewed entrepreneurial
functions as reform or revolutionize the pattern of production by exploiting an invention, or more
generally, an untried technological possibility for producing a new commodity or producing an old
one in a new way.
3.2 Entrepreneurial Drives
Entrepreneurship has become the engine of economic and social development throughout the world.
Any country would enhance opportunities for entrepreneurship in order to achieve economic
development. Entrepreneurial drive in Sri Lanka takes particular social meaning for each individual
on the basis of his/her values and norms which depend on the level of individual’s social intimacy
(Gamage et al, 2003). Further they described that, entrepreneurial drive of successful entrepreneurs
2
resulted from a desire for social power through social fulfillment and social achievement, and is
different from the western ideology of motivation rested on a desire for individual self-fulfillment
and goal achievement through the rational entrepreneurial processes. However, it is widely accepted
that personal inspiration towards taking challenges and risk is the core factor in entrepreneurial
drives. Then other factors such as support from the business environment, government rules and
regulations should be favorable.
3.3 Cultural effects on Entrepreneurship
There are significant cultural differences between developed countries and developing countries.
Hofstede (1984) carried out four dimensions to identify major differences among cultures and it has
extended up to five by Hofstede and Bond in 1988. Namely the dimensions are Power distance,
Uncertainty avoidance, Individualism/Collectivism, Masculinity/ Femininity, and Long-term/ Shortterm orientation. Regarding organizational culture Schein (1985) has identified four types of
organizational cultures: Power Culture, Achievement Culture, Support Culture and Role Culture.
Power cultures are entrepreneurial, ability and expertise values while Achievement Cultures are
personal and intrinsic values. As Hofstade describes developing countries are more dependent and
collective than developed countries. This nature is directly affecting to the decision making and
thinking of the people in developing countries. Sri Lankan entrepreneurs are inherently risk averse
and unprepared for change and disinclined to adopt new ideas and methods (Wickramarathne, 1977;
Jayasinghe et al, 2007). These findings further justified that the nature of the people has not being
changed even after thirty years.
Religion is another major factor that shapes the human thinking and decision making. Sri Lanka is a
Buddhist country. The ethics and code of conducts of the Buddhism guided to each and every
activity of the people. Buddha has advised his followers to cultivate and develop the latent power of
man and showed him how to make the best use of his determination and intelligence without being
a slave to an unknown being to find eternal happiness which he declared to the world through his
own experience but not through theories, mere beliefs and traditional practices (Galahityawe, 2005).
Some reflections of the Buddhist tradition on morality in Asia business are evident at least in two
important directions, namely the development and utilization of human energy in the productive
process, and sharing of economic output of the business system (Nanayakkara 1999).
Sri Lankan history provides much evidences regarding developed civilization which had religion
exposure by the roots. Feudalism practiced by the kings and general public are suppose to provide
their fullest corporation and loyalty to the king. The methodology called as “Rajakariya’. ‘
Rajakariya’ in traditional feudalism in Sri Lanka was based on loyalty to authority…. In Sri Lankan
society, obedience, loyalty and respect mean conformity to the traditional norms rooted in the
family’ (Gamage 2003). Further the scholar expressed Buddhist ethics also uphold obedience and
respect which encourage collective harmony and kings coordinated the kingdom with an
understanding of extreme care of resources and coordinated people by developing collective work
ethics.
4. Methodology
The research approach is interpretivistic epistemological and qualitative. The researchers want to
explore and find out causes for the problem. The ethnographic study was carried out to gather
qualitative data. Ten entrepreneurs used as informants. They were selected from the list of local
enterprises registered under Chamber of Commerce in Sri Lanka. The selected ten organizations are
playing an important role in the IT sector in the country. Those organizations mainly located in the
Colombo city but operating island wide. The main data collection mode involved in-depth
interviews of some three to two-hour duration with the entrepreneur. The special demographic
3
features of the sample are 90% of them are males; minimum education level is bachelor degree,
secondary education in reputed collages in the country and age between 35 – 50.
Inductive data generation strategies (such as open interviews, observations, participation and
analyzing artifacts) provided opportunities to explore emerging themes, based on grounded theory
techniques with triangulation of data (Gamage et al, 2003). The collected data followed emerging
themes and subjected to triangulation for further justification and verification. In-depth interviews
followed a guidelines and open up to free ideas when necessary. Sometimes we conducted
interviews with informants more than one time to further clarifications and time constraints. The
informants wanted to maintain their privacy and hence we code each informant as entrepreneur 01 –
entrepreneur 10. This recode does not carry any meaning but only for identification. Hardcopies and
tape recorder used as tools for record data.
5. Analysis
5.1 Main Entrepreneurial Drives for IT Business in Sri Lanka
The study found three major entrepreneurial drives associate with the IT business in Sri Lanka.
Those factors are; higher education in the IT field or IT related field, social networks (social power)
and foreign exposure in IT. All most all informants at least emphasis on two factors among above
three and they believe those factors are interdependent. Simply, one factor alone does not create an
opportunity to be an entrepreneur, but at least two factors should combine. Figure 01 clearly shows
the relationship among those factors. According to figure 01, only shaded areas will stimulate
entrepreneurship towards IT business. Therefore it is more accurate to define drives in combination
form to be more meaningful rather than isolating factors.
5.1.1 Drive 01: Higher Education combined with Social (Support) Networks
‘My degree in computer sciences helped me to identify the opportunities and current trends in the
market, unless I don’t think I should have enough knowledge to identify this market gap. I am from
a business family and I received lot of advises, guidance and financial support from my family and
relatives’.
(Entrepreneur 02)
Further, Entrepreneur 03, 05 and 09 expressed the same idea. All of them are having bachelor
degree (IT, Physics, Management) and simultaneously they got support from either relative or
friend to start and carry out the business. This is added justification to the finding of Gamage et al,
2003; …. the power of social relations can result in entrepreneurial motivation through establishing
friendly (informal) partnerships or networks.
5.1.2 Drive 02: Foreign Exposure combined with Social (Support) Networks.
‘After I finished my degree in UK , I worked for my fathers business firm. He is engages in
importing computer hardware in large scale. So, I used to travel Singapore and Hong Kong
frequently for business matters. During that time I would able to acquire a dealership for ‘X’
(hardware component) and I started my own business. Since I already have contacts with foreign
suppliers and local buyers, it won’t be a serious task for me to do the business.
(Entrepreneur 04)
According to the expression of entrepreneur 04, it clears that mass level of foreign exposure and
contacts led him to be an entrepreneur in IT field. In this case he found the business opportunity by
his experience and started the business with the support of social networks. Entrepreneur 10 also
expressed an idea which is similar to this. He studied (Primary and secondary education) in one of
the famous and top class school in Colombo, Sri Lanka. The networks and relationships helped him
to establish his own software firm. In addition to that he obtained highly recognized professional
4
qualification in IT field and hence he would be able to gather knowledgeable staff according to his
requirement.
5.1.3 Drive 03: Foreign Exposure combined with Higher Education
Entrepreneur 01 can be categorized under drive 03. He has worked for IBM in USA. His motive is
to be an entrepreneur is personal driven. There is high recognition for educated people in Sri Lanka.
Therefore, education and experience added a value and recognition to the entrepreneur 01 and
hence he received support from his friends and institutions. ‘…the entrepreneur is highly regarded
by the community in this collective culture. Such social power reinforces the collective motivation
of the entrepreneur towards further development of business’ (Gamage et al, 2003).
Other Entrepreneurial Drives
As a whole six entrepreneurs (60%) are either graduated from foreign university or they have work
experience in foreign country. They highly emphasized on that factor as a major factors of
identifying business opportunity.
In addition to that entrepreneur 06, worked as a shareholder and director in partnership
organization. Due to internal problems and politics inside the company he thought to form his own
company.
‘When I was working for ‘X company’ (Previous Company) as a director, It was very hard to
implement new ideas and projects because of the internal struggles, finally I decided to take off my
shares and form a new company. At that time I had enough contacts with clients and other related
institutions. So it helps me to establish my own company and now I can spend my whole capacity to
improve this company’ (Entrepreneur 06).
This clearly shows that his intention to be an entrepreneur rather than be an employee or partner.
This also justifies the support from the social networks. Entrepreneur 07 and 08 can be categorized
under same theme. Both of them from upper level income class families and educated in abroad.
Their major motivation is to maintain family status in the society. Therefore, seeking and
maintaining family recognition is another drive which leads to entrepreneurship.
As a summary there are three major drives exist for entrepreneurship in IT sector. Other miner
factors are personal inspiration and seeking for recognition and status as a businessman.
Figure 01: Combined Nature of Entrepreneurial Drives
5
5.2 Barriers for Entrepreneurship
5.2.1 Mismatch between philosophy of religion and scientific management
Sri Lanka is a Buddhist country and the teachings of Buddhism is highly affecting on people
thinking. Buddhism does not promote capitalism, it allows to maintain spiritual and corporal life in
comfortable manner. Therefore the government and people focus more on welfare than profits.
Entrepreneur’s main objective is to earn considerable profit by bearing the risk. But Buddhist
prefers peace in mind and to be relaxed than bearing risk. Simply they are risk averse.
5.2.2 Socio Cultural Barriers
The study further justifies the dependency nature of the developing countries. All most all
entrepreneurs believes that ‘they were not able to be successful entrepreneurs unless social support’.
No single comment recorded regarding ‘self confidence, effort and dedication’. Even though they
have passion and dedication, it also follows and motivated by the social support.
‘Sri Lankans displays not only their respect and obedience to elders and seniors, but, also strongly
depend on them both in social activities and business matters’ (Chandrakumara, 2003). The cultural
aspect is to evolve society with ethics, responsibilities in courteous behavior. This disciplinary
orientation bound individual’s decision making and hence decisions towards economic achievement
are very low. In general, Sri Lankans are taking collective decisions guided by adults.
5.2.3 Economic Barriers on Entrepreneurship
1. Financial Barriers: Financial institutions prefer to issue loan facilities only for well establish
firms to minimize their
risk. Even though they agree to offer required funds, they need guarantee such as fixed asset or
property which has similar or higher value.
2. High level of Inflation and Interest rate: High level of inflation reflects instability of the
economy and involves risk
of price changes.
3. Lack of Information Systems: There is no well establish information systems in the country to
build awareness
among people. This is an essential factor to identify trends in the industry, process of starting
business, acquiring
license, etc.
5.3.4 Legal Barriers on Entrepreneurship
According to the expressions of some entrepreneurs, there is a legal barrier exist for ‘Hardware’
business. Only one firm can obtain authorized dealership license for one brand. This regulation
automatically creates monopoly and blocked ‘open competitive market’.
6. Conclusion
The study concludes that, there are three main entrepreneurial drives leading to IT business in Sri
Lanka. Those are higher education in IT, foreign exposure in IT field and social (support) networks.
Another special finding is, these factors alone do not make any effect on entrepreneurship, but at
least two factors should combine.
Dependent nature, collective decision making and risk averse are the socio cultural barriers for
entrepreneurship in general. The religion also promotes non capitalistic society and hence people
prefer to spend a simple, trouble free life than bearing risk. Economic instability also badly affects
to demotivate entrepreneurship in Sri Lanka. Government regulations on hardware dealership
restricted on emerging IT organizations and existing firms enjoy monopoly in the market.
6
The study suggests, establish a professional body to support emerging entrepreneurs, introduce
flexible rules and regulations, expand IT education with collaboration of foreign institutions and
government related venture capital body to provide financial support to enhance the
entrepreneurship in IT sector. Another most important factor is to identify future trends in the
market and hence the country need to establish developed IT infrastructure facilities to update
knowledge and awareness. Further the government can conduct continuous consultation and
counseling programs to those who have real inspiration towards entrepreneurship.
Future research can be conduct in positivistic framework based on these findings and hence there is
a possibility to increase sample size to find out more quantitative and generalizable outcome.
References
Audretsch, D. B. (1995). Innovation and industry evolution. Cambridge: MIT Press
Audretsch, D. B. & Roy, T. (2001). What’s new about the new economy? Sources of growth in the
managed and
entrepreneurial economies. Industrial and Corporate Change, 10(1), 267-315.
Chandrakumara, A. (2003) Work and value orientations of Sri Lankan manufacturing sector
employees: An empirical
study. Paper presented at the International Conference on Business Management of Developing
Countries,
University of Sri Jayewardenepura, Colombo. Sri Lanka.
Drucker, P. (1970). Entrepreneurship in business enterprise. Journal of Business Policy, 1, 1970.
Galahitiyawe, N.W.K (2005). Indigenous management and Buddhism: The role of religion in Sri
Lankan
management practices. Paper presented at the 10th International Conference on Sri Lankan
Studies, University of
Kelaniya. Sri Lanka.
Gamage, H. R. Cameron, D. & Woods, E. (2003a) Business relationship strategies of Sri Lankan
entrepreneurs: the role
of relational networker. Paper presented at the First International conference on Business
Management in
Developing Countries, University of Sri Jayewardenepura, Sri Lanka.
Hofstede, G. (1984). Culture’s consequences: International differences in work related values, Saga
Publication,
Beverly Hills, CA
Jayasinghe, K. Thomas, D. and Wickramasinghe, D. (2007). In search of the micro entrepreneur:
Deconstructing the
Schumpeterian legacy. School of Management and Business Research Paper 2007-2, University
of Wales
Aberystwyth
Nanayakkara, G. (1999). Culture and management in Sri Lanka. Colombo- Sri Lanka: Postgraduate
Institute of
Management, University of Sri Jayewardenepura.Sri Lanka
Schein, E.H. (1983). The Role of the founder in creating Organizational Culture. Organizational
Dynamics, Summer,
1983.
Shane, S. & Venkataraman, S. (2000). The Promise of entrepreneurship as a field of research.
Academy of
7
Management Review 25(1): 217-226.
Sri Lanka Information Communication Technology Association (SLICTA). Rising Demand: The
increasing demand for
IT workers spell a challenging opportunity for the IT industry Report, 2007.
From the Website, http://www.slicta.lk/news/fullreport/ict%20wfsr2007.pdf
Wickramarathne, L. A. (1977). Planning and economic development in Sri Lanka: A Survey, The
Institute of Asian
Affairs, Hamburg, pp. 46-61.
Wickramasinghe, D. & Hopper, T. (2005). A cultural political economy of management accounting
controls: A case
study of a textile mill in a traditional Sinhalese village. Critical Perspectives on Accounting, 16,
(4), 473-503.
8