1 Entrepreneurial Literacy: Empirical Evidence Andreas Oehler* Chair of Finance, Bamberg University, Germany [email protected]Tel.: +49 951 863 2537 Fax: +49 951 863 2538 Andreas Höfer Department of Finance, Bamberg University, Germany [email protected]Henrik Schalkowski Department of Finance, Bamberg University, Germany [email protected]Abstract In this paper we examine the current state of entrepreneurial literacy among potential business founders. By analyzing a unique data set which comprises responses of N=386 undergraduate students we find evidence that potential business founders evaluate schools’ imparting of relevant knowledge for entrepreneurs as rather moderate. Consistent with evidence in the literature, understanding in the areas of finance, accounting, and management accounting as well as corporate planning and management is considered to be momentous for entrepreneurs. Since, however, subjects assess their know-how with respect to these categories as well as professional, social and personal competences as merely averagely we can infer an obvious gap between subjects’ actual perceived expertise and the knowledge in the aforementioned fields that is considered to be momentousness for business founders. Based on our findings on the current state of entrepreneurial literacy we convey implications for different stakeholders. Key Words: Entrepreneurship, Entrepreneur Competencies and Skills, Literacy, Financial Literacy * Corresponding author
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Merely 38.5% of the respondents read up about business foundation by using
information sources like news & reports (32.4%), information in school (25.7%), and
information at universities (19.7%). Almost one third (32.4%) of the respondents look into the
subject on their own. It is interesting to note that subjects self-evaluate their knowledge on
issues that are relevant for entrepreneurs on average as rather poor. Moreover, 42.7% of the
students report that the prior education on issues that are relevant for entrepreneurs was rather
diminutively.
4.2 Results and Discussion
Table 1 provides an overview of results which indicate the gap between subjects’
actual perceived expertise and the knowledge in relevant fields that is considered to be
momentousness for business founders. This inference can be drawn as students assess their
own knowledge in the areas of finance, accounting and auditing, corporate planning and
management, management accounting, marketing, human resource management, basic law,
fiscal and economic issues as merely satisfactory (Question 21).3 In contrast, the students
evaluate knowledge in these fields as very important or important, respectively (Question 20).
In addition, these findings become even more relevant when the transfer of knowledge on
secondary schools is evaluated. Thereby, subjects evaluate the imparting of know-how that is
relevant for business founders as merely fair (Question 19).
[Insert Table 1 here]
Table 2 (Panel A) displays in detail our findings on students’ assessment of the
imparting of relevant knowledge. Thereby, in all relevant areas the transfer of knowledge on
secondary schools is assessed as rather moderately. Merely the transfer of know-how with
3 These fields are chosen as findings in the extant literature show that insufficient knowledge of founders in these
areas is likely to result in corporate crisis or even insolvencies (Bradley and Cowdey, 2004; Kearney, 2009).
8
regard to economic aspects is evaluated as satisfactory. Furthermore, tests of equality clarify
this picture as many median values with respect to finance, accounting and auditing, corporate
planning and management, management accounting, marketing, and human resource
management are not significantly different to each other. This also indicates a rather
homogeneous response pattern with regard to these areas of competences. With respect to
these findings it is obvious that secondary schools are considered to fall short of transferring
relevant knowledge for business founders.
Table 2 (Panel B) reports Spearman’s rank correlation coefficients. By evaluating the
results substantially greater coefficients in primarily quantitative areas such as finance,
accounting and auditing as well as corporate planning and management and management
accounting become obvious. This indicates that subjects, who assess the transfer of
knowledge on educational institutions with respect to e.g. finance as rather unsatisfactory,
tend to evaluate the aforementioned numeracy-related fields in a similar manner. A possible
explanation for this finding can be that these areas of competences are taught in one subject at
school, possibly even by the same teacher.
[Insert Table 2 here]
In contrast to the previous results, when subjects are asked to evaluate their own
knowledge with regard to the aforementioned categories, a different picture becomes obvious
(see Table 3, Panel A). Generally, in all management and law-related fields and in those
where numeric skills are crucial, the median values are at least one grade higher compared
with the previous question. Furthermore, Table 3 (Panel A) exhibits that most median values
with regard to Question 21 are statistically different to each other. This indicates that the
responses with respect to the areas of competences are rather independent to each other. The
above findings show that subjects evaluate their knowledge in these categories higher than the
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respective transfer of knowledge on secondary schools. In this respect, one explanation can be
that due to further academic education and the time that has been passed since completing
school, subjects’ consider their knowledge to be superior.
Table 3 (Panel B) exhibits a higher correlation among numeracy-related fields and a
higher correlation between fiscal aspects and law issues. As these areas are based
predominantly on hard facts, subjects who believe to have competences in judicial issues
(law, regulation) tend to evaluate their knowledge in finance, accounting and corporate
planning in a similar manner. As the latter are closely related we can figure that our overall
results are likely to be plausible (robustness). Most interestingly, subjects’ knowledge in
quantitative fields such as finance tends to be unrelated with knowledge in creative areas
including marketing and human resource management.
[Insert Table 3 here]
In order to draw inferences on entrepreneurial literacy the students were asked to
evaluate the importance of knowledge in the aforementioned nine categories for business
founders (see Table 4, Panel A). In fact, the students evaluate knowledge in these fields as
very important or important, respectively. As the most median values are statistically different
to each other indicates that student’s responses with respect to the areas of competences are
rather independent to each other.
Table 4 (Panel B) emphasizes that quantitative areas tend to exhibit greater correlation
coefficients, indicating that subjects who find competences in finance as important tend to
evaluate knowledge in accounting and auditing or management accounting as rather important
as well. A potential explanation for this observation is likely to be subjects’ specialization
towards certain fields of expertise (e.g. numeracy-related fields such as finance, corporate
planning and management accounting). This specialization process begins sometimes already
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in school. Intensified by the Bologna Process in Europe, students are directed to emphasize
on certain fields of competences at an early stage. For this reason specialized education
pushes broader education aside. In addition, when correlation tests between quantitative and
those areas that require creatively and strategically thinking – such as human resource
management or marketing – are conducted, lower correlation coefficients are obtained. This
indicates that subjects’ evaluation on the importance of knowledge in quantitative fields, in
particular in finance and corporate planning and management, tends not to be related with the
perceptions on the importance of knowledge in, for instance, marketing or human resource
management.
[Insert Table 4 here]
The findings of our analysis contribute to the discussion on entrepreneurial literacy
because we have gained an insight into the level of subjects’ understanding in the relevant
areas as well as subjects’ assessment of momentousness of know-how in these crucial areas
for business founders. In detail, understanding in the categories finance, tax, and corporate
planning and management are considered as most relevant which is consistent with results in
the extant literature (Bradley and Cowdey, 2004). As subjects, however, evaluate their
individual knowledge merely as satisfactory, there is an obvious gap between relevant know-
how and the actual expertise in the fields of finance, tax and corporate planning and
management. That is, we can infer that subjects regard themselves in terms of these three
categories as not to be literate enough to start a business. A similar but less strong picture can
be observed for the further six categories. These findings indicate very clearly the existing
lack of entrepreneurial literacy which is a result of the difference between subjects’ individual
assessment of understanding and their evaluation of importance of relevant disciplines. In
sum, these findings contribute to the extant literature because the respective gap in literacy in
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the aforementioned areas becomes clearly obvious. Additionally, on average subjects indicate
that in particularly schools and universities should catch up in entrepreneurial education in
general and the areas finance, management accounting as well as issues on taxation in
particular.
An identical response pattern can be observed when professional, social and personal
competences are examined. Table 5 exhibits an overview of the results which indicate that
schools’ imparting of knowledge on professional competence which involves expertise and
proficiency is evaluated on average as satisfactory whereas the transfer of social and personal
competences is evaluated as good (see Question 16). Although the students finished their
schooldays on average one and a half years ago, a similar picture comes to light when they
appraise their individual competences. Particularly, the professional competences are assessed
to be merely satisfactory whereas social and personal competences are regarded more
positively (see Question 18). As these two competences are associated with soft skills such as
the ability to work in teams, self-motivation, capability of conflict management, self-
dependence or one’s own initiative, subjects are more prone to regard themselves more
positively (Oskamp, 1965; Camerer and Lovallo, 1999). In terms of literacy, an interesting
finding comes to light when students’ evaluation of their own competences and the respective
momentousness of these competences (see Question 17) for entrepreneurs are examined
altogether. Particularly, Table 5 displays that the students appraise their individual skills and
abilities in terms of the competences that they regard to be important for entrepreneurs rather
moderately. Thus, it is likely that the subjects believe that they do not possess the relevant
skills to become business founders.4
Note that the above presented findings even hold when sub-samples are formed. That
is, we divided the entire sample into 1) founder and non-founder, 2) students who aspire to
4 With respect to the three competences that are stressed in Questions 16-18 Spearman’s rank correlation
coefficients were also computed (but are not reported in detail). Interestingly, subjects’ that evaluate the transfer
of social competences on secondary schools as good tend to exhibit an identical response pattern towards
personal competences.
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become self-employed and those who do not or 3) female and males. It is interesting to note
that the results show merely marginal variations and no distinct effects (e.g. gender effects).
[Insert Table 5 here]
4.3 Implications
Generally, entrepreneurial literacy is relevant for many stakeholders, e.g. policy
makers, private educational institutions, public educational institutions, creditor investors or
potential entrepreneurs. However, we focus on policy makers, private educational institutions
and potential entrepreneurs because they are most affected by the implications that are based
upon our findings.
As formers and regulators, policy makers are responsible for – and have an interest in
– a sound business environment. From their perspective the findings on the expectations of
potential business founders are interesting with respect to political planning in future. The
answer pattern shows that 55.7% of the students do not have the objective to start a business,
whereas a high stake of 44.3% aspires to become self-employed. In reference to the first
group of students policy makers shall attempt to inform students as potential founders in
principle (e.g. road shows at high-schools and universities; internet portals; advertising) to
raise the attention to the issue. With regard to the second group of students that aims to
become self-employed, policy makers can support potential founders more elaborately, for
example by facilitating consulting activities, providing a wide range of information, launching
subvention funds or issuing other grants.
From the perspective of private educational institutions the findings on both students’
understanding of the topic and their motivation to become self-employed highlight the interest
in more information and superior education. Thereby, potentially more literate business
founders can be formed. Beyond the interest in more information there is a demand for
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education that can be accommodated by private educational institutions. These aspects are
highly relevant as they point out the potential for the business model of private educational
institutions. Hence, this stakeholder is able to organize and adjust future educational programs
or enlarge current programs in form and content. By taking findings from our study into
account, private educational institutions should focus to assist potential entrepreneurs with
professional competences, particularly in fields where numeric skills are required.
In the view of potential entrepreneurs’, literacy is a crucial pillar of success. If they are
endowed with more literacy, further decisions are made intentionally as a result of more and
superior information. That is, they are more likely aware of the individual strengths and
weaknesses and are potentially able to assess the prospective success of a business.
5 Conclusion
Policy makers are aware of the momentousness that entrepreneurial activities play to
stimulate economic growth and innovation in national economies. In order to analyze the
current state of entrepreneurial literacy we examine a unique data set which is not biased by
program-specific effects. We examine subjects’ understanding of aspects that play a crucial
role in business start-up in order to identify specific gaps in entrepreneurial literacy and
relevant professional, social and personal competences. Based on our findings on the current
state of entrepreneurial literacy in Germany we convey implications that are relevant for
certain stakeholders.
In this paper we find that potential business founders evaluate schools’ imparting of
relevant knowledge for entrepreneurs as rather moderate. Furthermore, understanding in the
areas of finance, accounting, and management accounting as well as corporate planning and
management is considered to be momentous for entrepreneurs. Since, however, subjects
assess their know-how with respect to these categories as merely averagely we can infer an
obvious gap between subjects’ actual perceived expertise and the knowledge in relevant fields
14
that is considered to be momentousness for business founders. Another remarkable finding is
that an identical pattern applies in the case of professional competences which involve
specialized expertise and proficiency. In our sample a surprisingly large share of students
(more than 40% of subjects in our sample) aspire to become entrepreneurs in the future.
Therefore, their assessment of the transfer of knowledge and competences on institutions and
their self-evaluation in these fields clearly highlight the gap in entrepreneurial literacy. It
should therefore be policy makers’ objective that business founders have a more advanced
understanding in crucial areas in order to become more sophisticated entrepreneurs.
Further research is required in several facets. First, data sets should be extended by
students who will be finishing their studies shortly (advanced undergraduate students) in order
to measure their (individual) development, experiences and expectations. Second, research on
entrepreneurial literacy can be ameliorated by studies on founders who have already started
up their business lately (Early-Stage). Thereby, practical inferences on an adequately designed
and structured education for entrepreneurs can be drawn.
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Fields of Competences
Appendix
Table 1: Overview of Results on Questions 19 - 21
Median Values
Finance
Accounting
and Auditing
Corporate Planning and
Management
Management
Accounting Marketing
Human Resource
Management
Basic Law Issues,
particularly
Legal Forms
Fiscal Aspects, Subventions,
Subsidies
Economic
Aspects
Assessment of Education in the following Areas at the Institution
that was attended before starting Bachelors studies (Question 19) 4 4 4 4 4 4 4 4 3
Importance of Knowledge in the following Areas of Expertise for
Start-ups (Question 20) 1 2 1 2 2 2 2 2 2
Assessment of own Knowledge in the following Areas of
Expertise (Question 21) 3 2 3 3 3 3 3 4 3
In this Table median values from Questions 19, 20 and 21 are reported. The response option for Questions 19 and 21 range from 1 to 5 (1=very good, 2=good, 3=satisfactory, 4=fair, 5=insufficient). The response option for Question 20 ranges from 1 to 5 (1=very important, 2=important, 3=neutral, 4=rather not important, 5=not important).
Questions
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Table 2: Assessment of Education at the Institution that was attended before starting Bachelors studies (Question 19)
Panel A
Tests of Equality
Fields of
Competences Finance
Accounting
and Auditing
Corporate Planning and
Management
Management
Accounting Marketing
Human Resource
Management
Basic Law Issues,
particularly
Legal Forms
Fiscal Aspects,
Subventions,
Subsidies
Economic
Aspects
Median Values 4 4 4 4 4 4 4 4 3
Finance ** *** *** ***
Accounting and
Auditing *** ** *** *** ***
Corporate
Planning and Management
*** *** ***
Management
Accounting *** * ***
Marketing ** *** ***
Human Resource
Management *** * ***
Basic Law Issues, particularly Legal
Forms
*** **
Fiscal Aspects,
Subventions, Subsidies
***
Economic Aspects
The symbols ***, **, and * denote significance at the one, five, and ten percent level, respectively.
Panel B
In this Panel we report Spearman's rank correlation coefficients for the pairwise comparison of the students' assessment of the quality of education in the
given fields of competences at the institution that was attended before starting bachelor studies. All correlation coefficients are significant at the one percent. level.
Fields of
Competences Finance
Accounting
and Auditing
Corporate Planning and
Management
Management
Accounting Marketing
Human Resource
Management
Basic Law Issues,
particularly
Legal Forms
Fiscal Aspects,
Subventions,
Subsidies
Economic
Aspects
Finance 0.72 0.71 0.72 0.56 0.58 0.51 0.53 0.50
Accounting and Auditing
0.70 0.80 0.58 0.58 0.52 0.44 0.51
Corporate
Planning and Management
0.78 0.64 0.66 0.53 0.57 0.45
Management
Accounting 0.66 0.61 0.48 0.51 0.46
Marketing 0.76 0.50 0.47 0.47
Human Resource
Management 0.50 0.49 0.45
Basic Law Issues,
particularly Legal Forms
0.57 0.53
Fiscal Aspects,
Subventions,
Subsidies
0.47
Economic Aspects
17
Table 3: Assessment of own Knowledge (Question 21)
Panel A
Tests of Equality
Fields of Competences Finance
Accounting and Auditing
Corporate
Planning and
Management
Management Accounting
Marketing
Human
Resource
Management
Basic Law
Issues, particularly
Legal Forms
Fiscal
Aspects, Subventions,
Subsidies
Economic Aspects
Median Values 3 2 3 3 3 3 3 4 3
Finance *** *** *** *** *** ***
Accounting and Auditing
*** *** *** ** *** *** ***
Corporate
Planning and
Management
* *** *** *** *** ***
Management
Accounting *** *** ** *** ***
Marketing *** *** ***
Human Resource
Management *** *** ***
Basic Law Issues,
particularly Legal Forms
***
Fiscal Aspects, Subventions,
Subsidies
***
Economic Aspects
The symbols ***, **, and * denote significance at the one, five, and ten percent level, respectively.
Panel B
In this Panel we report Spearman's rank correlation coefficients for the pairwise comparison of the students' assessment of their own knowledge in the given
fields of competences. All correlation coefficients are significant at least at the five percent level.
Fields of Competences
Finance Accounting
and Auditing
Corporate
Planning and
Management
Management Accounting
Marketing
Human
Resource
Management
Basic Law
Issues,
particularly Legal Forms
Fiscal
Aspects,
Subventions, Subsidies
Economic Aspects
Finance 0.32 0.49 0.44 0.12 0.15 0.24 0.34 0.25
Accounting and
Auditing 0.31 0.33 0.16 0.18 0.34 0.21 0.30
Corporate Planning and
Management
0.47 0.26 0.29 0.31 0.41 0.29
Management Accounting
0.16 0.12 0.29 0.29 0.15
Marketing 0.49 0.12 0.12 0.22
Human Resource
Management 0.18 0.20 0.20
Basic Law Issues,
particularly Legal Forms
0.43 0.32
Fiscal Aspects,
Subventions,
Subsidies
0.23
Economic Aspects
18
Table 4: Importance of Knowledge (Question 20)
Panel A
Tests of Equality
Fields of Competences Finance
Accounting and Auditing
Corporate
Planning and
Management
Management Accounting
Marketing
Human
Resource
Management
Basic Law
Issues, particularly
Legal Forms
Fiscal
Aspects, Subventions,
Subsidies
Economic Aspects
Median Values 1 2 1 2 2 2 2 2 2
Finance *** *** *** *** *** *** *** ***
Accounting and Auditing
*** *** *** ***
Corporate
Planning and
Management
*** *** *** *** *** ***
Management
Accounting *** ** ** ***
Marketing ** ***
Human Resource Management
* ***
Basic Law Issues,
particularly Legal Forms
***
Fiscal Aspects,
Subventions, Subsidies
***
Economic Aspects
The symbols ***, **, and * denote significance at the one, five, and ten percent level, respectively.
Panel B
In this Panel we report Spearman's rank correlation coefficients for the pairwise comparison of the students' assessment with regard to the importance of
knowledge in the given fields of competences. All correlation coefficients are significant at least at the one percent level.
Fields of
Competences Finance
Accounting
and Auditing
Corporate
Planning and Management
Management
Accounting Marketing
Human
Resource Management
Basic Law Issues,
particularly
Legal Forms
Fiscal Aspects,
Subventions,
Subsidies
Economic
Aspects
Finance 0.34 0.36 0.35 0.19 0.10 0.27 0.21 0.16
Accounting and Auditing
0.32 0.42 0.14 0.22 0.37 0.31 0.30
Corporate Planning and
Management
0.41 0.21 0.31 0.29 0.31 0.25
Management
Accounting 0.36 0.27 0.28 0.29 0.35
Marketing 0.39 0.26 0.25 0.34
Human Resource Management
0.20 0.18 0.37
Basic Law Issues,
particularly Legal
Forms
0.57 0.36
Fiscal Aspects,
Subventions,
Subsidies
0.34
Economic Aspects
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Questions Competences
Table 5: Overview of Results on Professional, Social and Personal Competences (Questions 16-18)
Median Values Test of Equality
Professional
Competence Social Competence Personal Competences 1 vs. 2 1 vs. 3 2 vs. 3
Assessment of the Transfer of Competences by the Institution that was
attended before starting Bachelor studies
(Question 16)
3 2 2 *** ***
Importance of the following Competences
(Question 17) 1 1 1 *** *** ***
Assessment of own Competences
(Question 18) 3 2 2 *** *** ***
In this Table median values from Questions 16, 17 and 18 are reported. The response option for Questions 16 and 18 range from 1 to 5 (1=very good, 2=good, 3=satisfactory,
4=fair, 5=insufficient). The response option for Question 17 ranges from 1 to 5 (1=very important, 2=important, 3=neutral, 4=rather not important, 5=not important). The symbols ***, **, and * denote significance at the one, five, and ten percent level, respectively.
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Entrepreneurial Literacy
1) Your age: Years ___
2) Your gender: Female Male
3) Your highest academic qualification:
University of applied sciences/ Technical college
University-Entrance Diploma
Academic Qualification (if so, which degree: __________________)
Others __________________
4) Where have you graduated and received your currently highest degree?
State __________________ Region / Geographical area __________________
5) Semesters of Study: ___ Major: ____________________
6) Do you have any working experience (also apprenticeship)?
No Yes
If so, which business / job / in which apprenticeship? __________________
7) Are there any self-employed persons (freelancer, tradesman, self-employed persons)
in your personal environment?
Yourself
Parents
Brothers and sisters
Spouse
Friends
Others __________________
Nobody
8) Have you already found a corporation/business/firm?
No Yes
If so, which branch? __________________
9) Have you already dealt with “entrepreneurial literacy“ in the past?
No Yes
If so, where or how?
Current news, coverage in the press
Topics at School
Topics at University
Seminar at adult education center
Research on your own
Others __________________
10) How do you assess your knowledge with regard to this topic?
Very
good
Poor
Knowledge concerning “entrepreneurial literacy” o o o o o
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11) Are you interested in more detailed information?
No Yes
12) Do you aspire to become self-employed (as a freelancer, tradesman or self-employed person)
during your career/working life?
No Yes
13) In which institution of education should entrepreneurship literacy be taught?
School
University of applied sciences / Technical college