Entrepreneurship Quality Index (EQI): A New Operations Research Model Using Bayesian Approach and Quality Engineering (Contributions to Management Science) 303077158X, 9783030771584

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Contributions to Management Science

Nezameddin Faghih Lida Sarreshtehdari Ebrahim Bonyadi

Entrepreneurship Quality Index (EQI) A New Operations Research Model Using Bayesian Approach and Quality Engineering

Contributions to Management Science

More information about this series at http://www.springer.com/series/1505

Nezameddin Faghih • Lida Sarreshtehdari  Ebrahim Bonyadi

Entrepreneurship Quality Index (EQI) A New Operations Research Model Using Bayesian Approach and Quality Engineering

Nezameddin Faghih UNESCO Chair, Professor Emeritus Cambridge, MA, USA Ebrahim Bonyadi GEM Office University of Tehran Tehran, Iran

Lida Sarreshtehdari GEM Office University of Tehran Tehran, Iran

ISSN 1431-1941     ISSN 2197-716X (electronic) Contributions to Management Science ISBN 978-3-030-77158-4    ISBN 978-3-030-77159-1 (eBook) https://doi.org/10.1007/978-3-030-77159-1 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

“Professor Faghih begins this book by remarking correctly that businesses are also driven by a dominant role played by quality and quality management in products and services. One of the fundamental techniques that this interesting book proposes is the measurement of the quality of entrepreneurial activity. The development of the framework of indexing entrepreneurship quality in this book flows from recognition that metrics of quality improvement for sustaining strategies directed to achieve and sustain competitive advantage in markets are hardly known. In fact, in this excellent book, dominant theme of measuring entrepreneurial activity gives power and focus and is developed using different statistical methods associated with managerial approaches. In much of the suggested approach, quality improvement is visualized as being determined by conditions of products and services, market demand, factor cost, process and product innovations, and managerial and organizational behavior. Professor Faghih’s approach for measuring entrepreneurship quality is argued forcefully, explained, and documented well. v

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The approach and results proposed in this book can be important for entrepreneurship to design strategies directed to take advantage of important opportunities or to cope with consequential environmental threats to achieve and/or sustain competitive advantage in more and more turbulent markets. Various implications are drawn out skillfully; the discussion of implications for quality improvement and management is particularly well done to support strategic change of entrepreneurial activity in modern economies. Scholars, managers, policy-makers, and entrepreneurs interested in these vital topics of improving the quality of products and services in business to support competitive advantage in markets, I suggest that they study this interesting book, rich with vital contents, in the field of entrepreneurship and strategic entrepreneurship.” February 3, 2021 —Mario Coccia, National Research Council of Italy, Torino, Italy “The book addresses a most interesting topic, namely, the differences between firms in their activity and their contribution to the economic development of their economies. Not all firms contribute the same, and the proportion of “high-quality” firms should be of the highest concern for academics, policymakers, and any other stakeholders involved. The entrepreneurial quality of firms has been studied at the individual level by several researchers over time (called entrepreneurial



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orientation or otherwise, depending on the author). But Prof. Faghih analyses it from an aggregate perspective, providing insight on the institutional and macroeconomic characteristics associated with a higher proportion of high-quality firms. I find it fascinating and opening up a full range of new avenues for future research.” January 25, 2021 —Francisco Liñán, University of Seville, Seville, Spain

This book, published during the COVID-19 pandemic, is dedicated to all academics, experts, and researchers worldwide from a wide range of disciplines, who serve humanity by focusing on comprehensive global studies related to fighting COVID-19, its aftermath, consequences, and repercussions.

Foreword

The study of entrepreneurship has grown rapidly worldwide. This growth reflects the rising recognition of entrepreneurship as a major instrument of economic, technological, and social change and development. For many countries, entrepreneurship provides an important, indeed indispensable, pathway to addressing issues related to economic development, raising their standard of living and promoting technological progress. Entrepreneurship, thus, has evolved into a crucial source of global competitiveness. The quality and amount of data on entrepreneurial activities worldwide have improved significantly. In turn, this has resulted in an avalanche of studies seeking to document the antecedents, processes, and consequences of entrepreneurship. Much of this research appears to be data-driven seeking to find generalizations across countries in how entrepreneurs define their work and pursue their ideas— from conception to commercialization. This work has also paid attention to the diversity of the contexts in which entrepreneurship takes place—studying social, environmental, and public sector entrepreneurship, among others. A persistent problem with this research is that researchers and public policymakers have a tendency to count new firms similarly regardless of their impact. Hence, in doing their analyses, researchers would count a “ma and pa” firm with two or three employees as equal to Amazon, Microsoft, or Uber. This practice raises questions about the conclusions reached in recent entrepreneurship research. Zahra and Wright (2014) recognized this problem, arguing that researchers ignore the qualitative differences that influence entrepreneurship’s variety in a country—highlighting the rate, radicalness, and heterogeneity of these outcomes. Moreover, they argue that each of these three dimensions has important implications for capturing the quality of a country’s entrepreneurship. The same logic holds well when comparing companies’ or individuals’ entrepreneurship. For instance, some entrepreneurs are prolific—with some habitual and repeat entrepreneurs typically creating many ventures while others create only one or a few. Portfolio entrepreneurs also create different types of ventures, showing great heterogeneity in their creation. Many entrepreneurs produce ventures that cater to known needs in existing markets whereas a few introduce radically new ventures that change their industry and the xi

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world. These differences are easy to observe and understand; yet, they have proven very hard to measure, raising persistent questions about the external validity of recent entrepreneurship research. This is why I am pleased to write this foreword to Professor Dr. Faghih’s Entrepreneurship Quality Index as he tackles the perplexing problem of how to capture the qualitative differences that exist in entrepreneurship at any given point in time or across time. Professor Faghih does a masterful job in explaining the diversity of existing perspectives, their contributions, and their shortfalls. Building on statistical methods used to study the general concept of quality, he offers a number of important insights as to how to better measure the quality of entrepreneurship. He also illustrates his proposed approaches showing their efficacy across time. Faghih’s proposed solutions are logical and empirically sound; they represent an important leap in thinking about the quality of entrepreneurship. I believe his contribution is crucial and timely—one that will be well recognized by researchers worldwide. They give us a much-needed framework along with the necessary tools to evaluate and measure entrepreneurial activities. I invite you to read his work and make use of his important ideas. University of Minnesota Minneapolis, MN, USA September 21, 2020

Shaker A. Zahra

Reference Zahra, S. & Wright, M. (2011). Entrepreneurship’s Next Act. Academy of Management Perspectives, 25(4), 67–83.

Foreword

The language of indicators emerged from the need to communicate informational content in a more concise, but standardized way. How difficult it is to codify the language of indicators is known to both producers and users of indicators. The story of the most known indicator Gross National Product/Gross Domestic Product (GDP) confirms it. Based on Kuznets’ empirical work grounded in his historically developed theory of economic growth, GDP was accepted as a unique measure of the economic growth, first in the United States in 1937. After the Bretton-Woods conference in 1944, the GDP became a standard tool for measuring a country’s economy. Moreover, it is still around because it helps to monitor changes in economic growth vertically (in time, for a country) and horizontally (comparing countries at the same time). Questioning what the GDP stands for started to be intensified from the late 1950s (Abramovitz, 1959), by providing a lot of evidence why GDP cannot be used as a proxy for identifying a society’s overall well-being. Despite the fact that Kuznets extensively used demographical data in designing the GDP, many other dimensions that he identified as important factors of economic growth (interactions between science/technology and institutional structure, moral climate in society…) stayed out of the calculation. Kuznets recognized the issue of misuse of GDP in presenting the well-being of a society from the moment of its introduction. In 1934 Kuznets warned that “the welfare of a nation can scarcely be inferred from a measure of national income” (Kuznets, 1934) and he expressed it again in his Nobel Prize lecture in 1971: “It seems fairly clear that a number of analytical and measurement problems remain in the theory and in the evaluation of economic growth”(Kuznets, 1971). Eventually, a consensus was achieved that growth does not mean development, and it opened a door for enriching the language of indicators. Gross National Happiness Index (National Council, Royal Government of Bhutan, 1972), GDP per capita (Kravis et al., 1978), and “Green” GDP in China (Alfsen et al., 2006) are examples of looking for indicators informing about changes in a society’s well-­ being. With the Human Development Index based on factors such as education, gender equality, and health (launched in 1990), the United Nations took a lead in discussion on measuring well-being of societies. It is an interesting anecdote how xiii

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U.N. economist Mahbub ul Haq convinced Amartya Sen to collaborate on creating “an index as vulgar as GDP but more relevant to our own lives”(Gertner, 2010). Indicators are always dancing between the truth (in Hegel’s sense that the truth is the whole) and simplicity (how much of complexity is recognized, how much can/have to be reduced and not to compromise the meaning due to availability of data, methodological knowledge of calculating the composite index). Researching about complexities in different fields identified informational deficiencies of many traditionally used indicators, which intensified work on their innovation or development of new ones. As in any industry, emerging industry of indicators requires rigorous quality standards expressed through a rigorous scientific validation (theoretically grounded, methodologically feasible). Fulfilling these conditions, new indicators will contribute to building knowledge about complex processes in different segments of social, economic, and political life needed for better decision-making processes on a country level, as well as globally. Entrepreneurship is a complex phenomenon of identifying existing and making new, knowledge-based opportunities and exploiting them in order to create value for others. In order to contribute to well-being, entrepreneurship requires implementation of proactiveness, innovativeness, sustainability, inclusiveness, and moral responsibility toward the planet and people. In order to sustain such entrepreneurship, a supportive institutional context (education, R&D transfer, government policies, regulatory framework, cultural values) is essential. Interactions between an individual and an institutional context, as well as interactions among components of the institutional context are critical for designing an explanatory indicator. Professor Dr. Nezameddin Faghih is proposing the Entrepreneurship Quality Index as a new composite index based on recognized interactions among different factors affecting intensity and types of entrepreneurial activity, which in turn is impacting the well-being. Using the data collected by the Global Entrepreneurship Monitor survey, Professor Faghih is bringing qualitative differences in entrepreneurship depending on time and space into calculation of the composite index. At the same time, Professor Faghih is revealing “hidden” informational values of GEM data stemming from identified interconnectedness of components of the GEM conceptual framework. It enabled Professor Faghih to build a composite index that is grounded in the underlying GEM theoretical framework, by using statistical methods related to researching the quality dimension of individual and institutional activities. By doing this, Professor Faghih contributes to the discussion on composite indicators in the field of economic and social development. Departing from using a fragmented relationship approach in calculating different indices and opting for the systems approach, Professor Faghih is bringing more truth in our understanding of the entrepreneurship phenomenon as a route toward well-being. The ability to identify changes across time and compare what is happening across countries only upgrades the informational value of the proposed Entrepreneurship Quality Index. Faghih shows a nonlinear and direct relationship between the Global Resilience Index and the Entrepreneurship Quality Index at the significant level of 95%. The information that with the growth of the quality of entrepreneurship in a society the level of resilience of that society will also increase when faced with different types

Foreword

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of crises (economic, health, natural) is an important guide for policy-makers, as well as all other stakeholders responsible for well-being in a country. Such an approach and presented results will add a new spark to the recent discussion about entrepreneurship among researchers, but it will also enrich education related to entrepreneurship by introducing such novel theoretical thinking confirmed by empirical evidence, which brings entrepreneurship closer toward well-being. By identifying some shortcomings in the implemented research (e.g., informational accuracy of some collected data) and by identifying future research in combining several other global indicators (like GDP and the HDI), Professor Faghih calls for more transparency and research collaboration. Take this opportunity to work on enriching the language of indicators—it is an excellent opportunity to contribute to understanding what is going on and how to manage the anticipated changes in wellbeing through entrepreneurship. J.J. Strossmayer University of Osijek Osijek, Croatia January 15, 2021

Slavica Singer

References Abramovitz, M. (1959). The allocation of economic resources. Stanford University Press. ISBN 0804705690, 9780804705691. Alfsen, K. H., Hass, J. L., Tao, H., & You, W. (2006). International experiences with “Green GDP”. Reports 2006/32. Statistics Norway. Gertner, J. (2010). The rise and fall of the G.D.P. The New York Times Magazine. nytimes.com Kravis, I. B., Heston, A. W., & Summers, R. (1978). Real GDP per capita for more than one hundred countries. Economic Journal, 88(350), 215–242. Kuznets, S. (1934). National income, 1929–1932. In 73rd US Congress, 2d Session, Senate document no. 124, p.  7. http://library.bea.gov/u?/SOD,888. Archived 2008-12-16 at the Wayback Machine. Kuznets, S. (1971). Modern economic growth: Findings and reflections. Prize lecture, The Nobel Prize. https://www.nobelprize.org/prizes/economic-­ sciences/1971/kuznets/lecture/ National Council, Royal Government of Bhutan. (1972). The Constitution of The Kingdom of Bhutan, Article 9, point 2.

Foreword

Entrepreneurship is a concept that can be poorly understood and is often ill defined. What is it? Who can we define as an entrepreneur? How does entrepreneurship take hold within a given context? And what impact does entrepreneurship have within and across our societies? These very questions led to the creation of Global Entrepreneurship Monitor (GEM) some 22 years ago. Today, GEM is the world’s most extensive, comprehensive, and credible study of entrepreneurship. Since its inception, GEM has more than proven its worth to the policy decision-making of national governments and to many other stakeholders. At the time of writing this foreword, the world is undergoing perhaps its most fundamental transformation in centuries, all because of heavy COVID-19 pandemic impact on people and societies, beginning in early 2020. As this book goes to press, many national economies have been brought “to their knees.” Multitudes of small and medium-sized companies have either collapsed or, without government support, would have collapsed many months ago. Even global multinationals have fallen or are at risk. At the same time, there are industries and companies that have grasped the opportunities that the pandemic presented and have thrived through the virtue of entrepreneurship and intrapreneurship. Emerging from this pandemic, the world will have transformed, but there will also be many new challenges and opportunities. In fact, we may be entering a time in history when entrepreneurship will shine—and need to shine—more than ever. Entrepreneurs can drive change and adaptation to change through innovation by developing new products and services for entirely new markets. And quality entrepreneurship can contribute to increasing national income and tax revenue while increasing national competitiveness. Above all, successful start-ups can become successful, high-quality established businesses that provide essential employment and improved quality of life to millions. So, in transitioning to a post COVID-19 world, healthy national economies will need equally healthy and high-quality start-­ ups and established businesses. This becomes even more important in crisis situations where economic recovery needs to be accelerated and enhanced as quickly as possible, to avoid chronic unemployment and ensuing poverty worldwide.

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To succeed, national economies will require multitudes of entrepreneurs working toward finding and outreaching solutions to global challenges that either existed before the pandemic or have been magnified or created because of it. Human beings are ingenious solution creators, but in a world where resources are increasingly scarce, it will be important that investments are first and foremost directed at high-­ quality, high positive impact initiatives. But how can we know which these are? This is where the impressive work of Professor Dr. Nezameddin Faghih comes into focus. By applying a structured logic to the notion of entrepreneurial quality, he has come up with important insights on how to build an “Entrepreneurship Quality Index” reflecting the measurement of the quality of entrepreneurship both in the present moment and over time. Since the evaluation and measurement of entrepreneurial activities will be of increasing importance to economies of the future, this is a most timely, useful, and—frankly—necessary contribution. We at GEM are delighted that our data has been instrumental in allowing Professor Dr. Faghih’s clear-sighted vision to take shape. As a dedicated and valued—but also prolific—GEM expert and colleague, we congratulate him, once again, on the exceptional quality of this much needed work and highly recommend it to readers. Executive Director Global Entrepreneurship Monitor (GEM) London, UK February 22, 2021

Aileen Ionescu-Somers

Foreword

Given a relatively well-established scientific literature (of both quantitative and qualitative nature) with regard to the entrepreneurship and intrapreneurship dynamics, it is time for global entrepreneurship experts to start introducing pertinent methodological innovation models, oriented to the quality measurement matrix in terms of its efficiency, objectiveness, accuracy, multifaceted holistic view, social contributions, and sustainability. It is time to scrutinize the in-depth liaisons between various entrepreneurship success factors, diverse effects of entrepreneurship for businesses, industries, economies, regions, and society as a whole, which could contribute to sustainable development of entrepreneurial activities and various synergy effects among stakeholders. The present study is of significant scientific value-added, because it tackles the entrepreneurship quality from three different angles: (1) conceptualizing, modeling, and quantifying the qualitative data; (2) covering the key social/qualitative aspects of entrepreneurship (such as social value-added; innovative, creative, international, collaboration-based activities; and sustainable development); and (3) operational efficiency, which can be reached through effective and efficient management/leadership and a healthy combination of inputs and outputs. In light of the emergence of modern technologies, rapidly transforming HR strategies as well as the role of cultural and social norms on the quality of entrepreneurship, the attempts to introduce a new quality index (Entrepreneurship Quality Index—EQI) deserve our acknowledgement, further discussions as well as its practical application, thanks to some incremental research model innovation (based on Bayesian Quality Control tool, linear and nonlinear regressions used in statistics, mathematics and engineering sciences, in addition to slightly different analysis angles of qualitative National Expert Survey (NES) and quantitative Adult Population Survey (APS) data, deriving from the GEM dataset). Notwithstanding the nature of GEM data (APS is based on attitudes, while NES relates to entrepreneurship framework conditions), a more mathematical methodological approach to data interpretation makes the perception-based information more tangible, while a slightly different set of quality criteria helps regroup the participating countries into completely different and unexpected categories. I really xix

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appreciate that the authors unleashed the potential of the GEM comprehensive socioeconomic approach and drew attention to the social value-added of entrepreneurship in terms of the progress of societies and sustainability. A logical structure and a sound methodology (using scholars’ insights, statistics, and probability theories, in parallel with combining parametric and nonparametric methods) and a smooth flow of arguments are backed by the clear objectives and well-developed chapters, where a solid part of analysis is dedicated to the introduction of concepts, terms, tools, along with the methodological peculiarities of the present study. For instance, the first chapter calls for distinctive differences between the quality and the quantity, while paying attention to the efficiency and taking into account the volatile nature of the entrepreneurship dynamics and/or the transformation of the quality over time. The second chapter links the quality to both the economic and social value-added and introduces the potential quality measurement models or the innovation of such models. Within the third chapter, we can acknowledge the in-depth analysis of the notion “Quality” via business performance optimization techniques, process innovation, and some business intelligence tools. These business intelligence attempts are logically leading to the part of quality monitoring in terms of tracking the missing values and applying the Bayesian approach in practice. While having a deeper look at the fifth chapter, we can find interesting classifications of Entrepreneurship Quality dimensions and subdimensions, including some aspects of intrapreneurship or career choices, as well as interpreting the data from diverse perspectives (TEA vs. Established or GDP vs. Human Development) which calls for regrouping countries, based on the Entrepreneurship Quality. Finally, the significance and competitiveness of the indices are supported by a few examples, practicality, recommendations, and future research opportunities. The literature review is anchored in important pillars of knowledge economy, innovation, and social wealth, where a sufficient attention is paid to the Schumpeterian, neo-Schumpeterian, and neo-classical theories: leading to the important implications in terms of equilibriums between inputs and outputs, market failures, spillover effects, knowledge and resource sharing, creativity and innovation, technological evolution, and the role of education. The fact that the study ingeniously addresses social wealth and sustainability aspects of quality (via public interest, social capital dimensions, life quality, or economic and social prosperity) proves that the research object is well formulated and tackled, while the research problem is relevant and innovative. Deriving from the routes of the quality science in Japan and the United States, the perception of quality is not limited to the consumer behavior. On the contrary, a big diversity of drivers (due to the specificity of the compared countries) and the  introduction of new critical dimensions (such as life-health) make the Index ­complementary with other existing metrics or indices (GDP, TEA, GEI, HDI, etc.). Moreover, I believe this study could be used as a methodological pillar for further testing of how the equilibrium between necessity and opportunity, capabilities and opportunities, or the combination of high tech and low tech affects the relationship between the economic growth and the entrepreneurship dynamics.

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The present study and the introduced index could be a great complementary instrument to help policy-makers, experts of governmental programs, entrepreneurs, and scientists analyze, anticipate, and foresee the volatility of the Global Resilience Index as well as develop effective innovation and entrepreneurship enhancement strategies in the future. Enjoy the read! Vilnius University Business School Vilnius, Lithuania January 29, 2021

Mindaugas Laužikas

Preface

If there be no faulty things in the world, all fools would be merchants. Then it would be very easy to know goods: when there is no defect, what the incompetent and the competent? And if everything is faulty, knowledge is of no advantage: since everything here is wood, aloes-wood is not. He that says, “All are true”—it is folly. and he that says, “All are false”—he is damned. —Rumi (1207–1273).

Quality and quality management have been keywords in the business world for more than two decades. The concept of quality in business is more focused on saving and doubling the income that organizations can earn by eliminating errors in operations and thus producing goods and providing services at the most optimal level of customer satisfaction. Products and services provided by an entrepreneur require considerable quality to stay competitive. Therefore, entrepreneurship, as an emerging phenomenon, needs to be improved in terms of quality to have a profound impact on the economy of societies. But, is there a criterion for measuring the quality of entrepreneurial activities? In the rapidly moving era of globalization, the measurement of social and economic indicators plays a key role in providing both governmental and international organizations with information that will help to facilitate international interaction and a greater understanding of the evolution of the phenomenon associated with the development and progress of societies. For this purpose, many institutes such as the World Bank, the OECD (Organization for Economic Co-operation and Development), and the World Economic Forum contribute to providing and presenting more accurate and categorized information about the status of countries, as well as taking great steps for enhancement and strengthening of such information. In the field of entrepreneurship, the Global Entrepreneurship Monitor (GEM) is a research consortium that collects data annually and reviews the self-made indexes and, finally, reports them at the international level. Besides, it measures individuals’ xxiii

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perceptions toward entrepreneurship, involvement in entrepreneurial activities, and the rate of entrepreneurship aspiration, intention, and motivation. GEM takes a comprehensive socioeconomic approach and considers the degree of involvement in entrepreneurial activities within a country, identifying different types of entrepreneurship motivations, and focuses on various phases effective in business success. This approach, and especially focusing on the individual factor as the most effective factor in entrepreneurial activities’ outcome(s), differentiates GEM’s indicators from other index sets created by other competitors. However, there is a tangible point in the GEM definition. The GEM’s definition of entrepreneurship seems to be open and unlimited that may make it difficult to measure some concepts of entrepreneurship. Regardless of their quality, the Global Entrepreneurship Monitor considers all of the entrepreneurial activities into the group of activities carried out in the business sector. This extensive definition of entrepreneurship may sometimes confuse the reader. For example, the rate of entrepreneurship in developing and developed countries has always been lower than in undeveloped countries. Perhaps this is a bit controversial from the viewpoint of many researchers and even the public opinion that the rate of entrepreneurship in the underdeveloped countries goes beyond developed countries. The main reason leading to these contradictory results is rooted in the quantitative nature of its collected data. Given this issue, it seems that the absence of the qualitative indicators for assessing entrepreneurship concepts is one of the issues that require another type of data. Hence, focusing on the qualitative data will help to understand the more accurate relations among factors affecting the entrepreneurship situation worldwide. This study is an introduction to the Entrepreneurship Quality Index (EQI), which will contribute the researchers to comprehend the effect of entrepreneurship and subdimensions of the Entrepreneurship Quality Index on economic growth at the country level. The main objective of the present book is interpreting and calculating this qualitative index that is created based on the Global Entrepreneurship Monitor (GEM) data as well as by using rigorous statistical methods. Besides, it is attempted to clarify all used statistical methods from the very beginning. All the statistical methods considered introducing the Entrepreneurship Quality Index (EQI), e.g., Bayesian statistics, quality engineering and quality control (QC) methods, linear and nonlinear regressions, etc., are based on theories that are widely used in statistics, mathematics, and engineering sciences. Cambridge, MA, USA Tehran, Iran  Tehran, Iran 

Nezameddin Faghih Lida Sarreshtehdari Ebrahim Bonyadi

Acknowledgments

The authors would like to acknowledge the encouragement and support of their families, friends, colleagues, and especially the eminent scholars who have kindly reviewed and written their great forewords/endorsements to the book.

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Contents

1 Introduction����������������������������������������������������������������������������������������������    1 1.1 Entrepreneurship and Economic Development��������������������������������    2 1.2 Effective Entrepreneurial Activities��������������������������������������������������    6 1.3 Quality����������������������������������������������������������������������������������������������    9 1.3.1 What Is Quality? ������������������������������������������������������������������    9 1.3.2 The Quality Over Time ��������������������������������������������������������   10 1.3.3 Ways to Improve Quality������������������������������������������������������   11 2 Entrepreneurship and Quality Control ������������������������������������������������   13 2.1 Entrepreneurship and Life Health����������������������������������������������������   17 2.2 Differences Between Entrepreneurial Activities������������������������������   20 2.3 Human Development Index��������������������������������������������������������������   21 2.4 Effects of Entrepreneurship��������������������������������������������������������������   24 2.5 Objectives of the Book����������������������������������������������������������������������   28 2.6 Quality in Business Sector����������������������������������������������������������������   29 2.6.1 Need for Quality in Business Sector������������������������������������   30 2.7 Entrepreneurship and Quality ����������������������������������������������������������   31 2.7.1 The Importance of the Scale of Measurement����������������������   33 3 Quality Control����������������������������������������������������������������������������������������   37 3.1 Quality Control Tools������������������������������������������������������������������������   38 3.2 Six-Sigma Method����������������������������������������������������������������������������   38 3.3 Standardization ��������������������������������������������������������������������������������   41 3.4 Missing Values����������������������������������������������������������������������������������   42 4 Estimation of Missing Values������������������������������������������������������������������   45 4.1 Bayesian Approach ��������������������������������������������������������������������������   45 4.2 Prior Probabilities ����������������������������������������������������������������������������   48 4.3 Likelihood Function��������������������������������������������������������������������������   49 4.3.1 The Mechanical Part ������������������������������������������������������������   50 4.3.2 Interpretation of the Bayes’ Box������������������������������������������   50 4.4 Bayes’ Law ��������������������������������������������������������������������������������������   51 xxvii

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Contents

4.5 Bayesian Estimator ��������������������������������������������������������������������������   52 4.5.1 Parameter Estimation������������������������������������������������������������   52 4.5.2 Why Bayesian Approach?����������������������������������������������������   54 4.6 Estimation of Missing Values�����������������������������������������������������������   54 4.7 Multinomial and Dirichlet Distributions������������������������������������������   55 5 Indexing the Entrepreneurship Quality������������������������������������������������   59 5.1 Subdimensions of the Entrepreneurship Quality Index��������������������   60 5.2 The Importance of Reviewing Entrepreneurial Employee as the Qualitative Element����������������������������������������������������������������   66 5.3 The Subdimensions of the Entrepreneurship Quality Index ������������   67 5.4 Illustrative Examples������������������������������������������������������������������������   69 5.4.1 Innovation Quality Index in the Early Stage Entrepreneurial Activities Subgroup������������������������������������   70 5.4.2 Innovation Quality Index in the Established Businesses Subgroup ������������������������������������������������������������������������������   73 5.4.3 Overall Entrepreneurial Innovation Quality Index ��������������   73 5.4.4 Entrepreneurship Quality Index in the Early Stage Entrepreneurial Activities Subgroup������������������������������������   80 5.4.5 Entrepreneurship Quality Index in the Established Businesses Subgroup������������������������������������������������������������   87 5.4.6 Overall Entrepreneurship Quality Index ������������������������������   91 5.5 The Role of Entrepreneurship Quality in Global Development ������   92 5.5.1 Entrepreneurship Quality and GDP��������������������������������������   94 5.5.2 Entrepreneurship Quality and Human Development������������   97 5.6 A New Classification of Economies ������������������������������������������������  100 5.7 Entrepreneurship Quality and Economic Resilience������������������������  102 5.8 Adjustment of the Entrepreneurship Quality Index��������������������������  106 6 Summary of Study ����������������������������������������������������������������������������������  111 6.1 Objectives of the Book����������������������������������������������������������������������  111 6.2 Overall Assessment��������������������������������������������������������������������������  111 6.3 Findings and Recommendations ������������������������������������������������������  114 6.3.1 The Meaning of the Created Indices������������������������������������  114 6.4 Application of the Present Book ������������������������������������������������������  115 6.4.1 How Much Are These Indexes Competitive to Others on the Market of Informational Products?����������������������������  115 6.4.2 Who Are Potential Users?����������������������������������������������������  115 6.4.3 What Is the Value-Adding of the Indexes for Policy-makers?����������������������������������������������������������������  116 6.4.4 What Are Theoretical and Methodological Pitfalls and Shortcomings?����������������������������������������������������������������  116 6.5 Future Research��������������������������������������������������������������������������������  117 References ��������������������������������������������������������������������������������������������������������  119 Index������������������������������������������������������������������������������������������������������������������  127

List of Figures

Fig. 3.1 Areas of different quality levels classified by six-sigma method................................................................................................  39 Fig. 4.1 Graphical depiction of probability’s applicability in mentioning the degree of certainty and plausibility..............................................  47 Fig. 4.2 Prior, likelihood, and posterior density functions..............................   54 Fig. 5.1 Fig. 5.2 Fig. 5.3 Fig. 5.4 Fig. 5.5 Fig. 5.6 Fig. 5.7 Fig. 5.8 Fig. 5.9 Fig. 5.10 Fig. 5.11 Fig. 5.12 Fig. 5.13

The conceptual model........................................................................   60 Conceptual model for Entrepreneurship Quality Index (EQI)...........   69 Power model......................................................................................   79 Scatter plot of total early stage entrepreneurial activities vs. Early stage Entrepreneurship Quality Index................................  83 Scatter plot of the TEA vs. the GDP (GEI report, 2017)...................   84 Early stage Entrepreneurship Quality Index vs. the rate of the difference of opportunity with necessity.................................   86 Rate of established businesses vs. established businesses quality index.......................................................................................  90 EQI vs. GDP......................................................................................   97 Historical Index of Human Development—2015 (hdr.undp.org)......   98 Scatter plot of the Entrepreneurship Quality Index (EQI) vs. Human Development Index (HDI)...............................................  100 The Entrepreneurship Quality Index levels by the breakdown of the GEM member countries in 2015.............................................. 102 Scatter plot of the rate of Total Early stage Entrepreneurial Activities vs. Global Resilience Index...............................................  104 Scatter plot of the Entrepreneurship Quality Index (EQI) vs. Global Resilience Index...............................................................  105

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List of Tables

Table 2.1 A simple example of revalidating the responses of some variables of the Global Entrepreneurship Monitor (GEM).............  34 Table 3.1 Table 3.2 Table 3.3 Table 3.4

A simple example of reordering the value of answers....................   40 Determining the levels of quality using the Six-sigma method.......   40 Modified levels of quality by applying Six-sigma method.............  41 Standardization models...................................................................  43

Table 4.1 Bayes’ box: adding prior probabilities............................................  49 Table 4.2 Bayes’ box: adding likelihood values..............................................   50 Table 4.3 Bayes’ box: adding posterior probability........................................  51 Table 5.1 The questions used in the creation of quality-based indexes..........  68 Table 5.2 Innovation Quality Index in the early stage entrepreneurial activities subgroup...........................................................................  72 Table 5.3 Innovation Quality Index in the established businesses subgroup........................................................................  74 Table 5.4 Overall Entrepreneurial Innovation Quality Index..........................   76 Table 5.5 Entrepreneurial Innovation Index....................................................   77 Table 5.6 Model summary and parameter estimates of Entrepreneurial Innovation Quality Index and the rate of Entrepreneurial Innovation Index..............................................................................  78 Table 5.7 Entrepreneurship Quality Index in the early stage entrepreneurial activities subgroup..................................................   81 Table 5.8 Model summary and parameter estimates of the rate of Total Early Stage Entrepreneurial Activities and the Early Stage Entrepreneurship Quality Index......................................................   82 Table 5.9 Ranking of Entrepreneurship Quality Index in the established businesses subgroup........................................................................  88 Table 5.10 Model summary and parameter estimates of established businesses quality index and the rate of Established Businesses (EB)...............................................................................  89 xxxi

xxxii

List of Tables

Table 5.11 Rank of overall Entrepreneurship Quality Index (EQI) at the country level..........................................................................   93 Table 5.12 Correlations: Entrepreneurship Quality Index (EQI) vs. Gross Domestic Product (GDP).................................................................  95 Table 5.13 Model summary and parameter estimates of Entrepreneurship Quality Index (EQI) and the Gross Domestic Product (GDP)........   96 Table 5.14 Correlations: Entrepreneurship Quality Index (EQI) vs. Human Development Index (HDI)............................................  99 Table 5.15 Model summary and parameter estimates of Entrepreneurship Quality Index (EQI) and the Human Development Index (HDI)...............................................................   99 Table 5.16 Classification of the Entrepreneurship Quality Index by applying the six-sigma method................................................... 101 Table 5.17 Non-standardized scores for the example of students average score................................................................................... 106 Table 5.18 Standardized scores for the example of students’ average score................................................................................... 107 Table 5.19 Calculating weights of the different levels of the entrepreneurship quality........................................................ 108 Table 5.20 Normalized total Early stage Entrepreneurial Activities (TEA).............................................................................. 109

Chapter 1

Introduction

The obvious sign of today’s economy is the rapid changes. Countries can succeed in such an economy that can adapt to these changes. If we look at the historical evolution of economic development theories, we find that the latest theories emphasize that industrial development and advancement in the economy of society is based on changing ideas and creating innovations (ÇalÕúkan, 2015). Without a leader and innovation, no country will pass the path of success and development (Wasim and Imran, 2010; Amabile and Khaire, 2008; OECD, 2012). Naturally, entrepreneurship is the most obvious tool that can help us achieve this. In an entrepreneurship-based economic system, innovators and creatives are the primary assets of an enterprise and one of the key drivers of sustainable development. Entrepreneurship is closely linked to the economic and social development of countries, and today is one of the indicators of development in developing countries (Naudé, 2013; Toma et al., 2014; Stoica et al., 2020). Due to the special role of entrepreneurs in the process of economic growth and development of societies, many governments in developed and developing countries try to maximize the opportunities and exploitation of research achievements and also guide many people with high entrepreneurial characteristics to entrepreneurship education and entrepreneurial activities (Almodóvar-González et  al., 2020; Brajević and Babić, 2020). Entrepreneurial development in the country, while providing sustainable growth and development, will alleviate current problems and weaknesses, including poverty, social and cultural disruption, unemployment of university graduates, and mass unemployment of other unemployed. Achieving social growth and development as a national vision is the most important aspiration of any nation, but making such a vision requires effective strategies to be formulated and implemented. Entrepreneurship is one of the most executed of these strategies (Castro et al., 2020; Stoica et al., 2020). Entrepreneurship, which means the discovery and exploitation of opportunities to create value in the various economic, social, and cultural of society, is the basis © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Faghih et al., Entrepreneurship Quality Index (EQI), Contributions to Management Science, https://doi.org/10.1007/978-3-030-77159-1_1

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1 Introduction

for comprehensive development (Garcia and Manuel, 2017; Klein, 2008). Studies show that entrepreneurship has a proper and convenient role in economic growth and development, active participation in global markets, competition, sustainable employment, development of justice, poverty reduction, national income, and solving the problems of government and public sector. Empowered entrepreneurs are needed to develop entrepreneurship in the country. Entrepreneurial development is meant to create an entrepreneurial culture in the country, to foster positive public interest in entrepreneurship, and to increase the rate of entrepreneurial activity (Empowered entrepreneur training handbook, 2016). Entrepreneurship is not only an emerging field of science but also a way of life. The reality is that development in most of the countries requires entrepreneurial capacity building in different economic, social and cultural sectors of society. This leads to the fostering of individuals who can create new businesses in different parts of the community, develop existing capacity and reduce community, government, and public sector problems, with innovation. If this important goal is achieved, the maximum use of potential in society will be taken place. Also, employment, justice, social welfare, sustainable development, quality of life, happiness and life expectancy and national authority will be met (Villanger and Berge, 2015; Hussain et al., 2014). Therefore, the development of entrepreneurship is essential to meet the country’s needs and to achieve its soaring goals.

1.1  Entrepreneurship and Economic Development Entrepreneurship is seen as a strategy for developing countries, creating employment, realizing appropriate opportunities, and increasing production, as its innovations will generate demand for new products and services that did not exist before, thereby increasing the supply of new products (Doran et al., 2018). It will increase employment and improve the lives of people in the community as well. Governments and organizations today have greater attention to entrepreneurship and see the path to economic prosperity as the development of entrepreneurship. Therefore, as entrepreneurship is one of the key factors in the economic development of societies, governments and policy-makers must establish sustainable entrepreneurial activities to achieve economic growth in society using education, cultivating culture, powerful infrastructures, and financial supports (Schumpeter, 1934; Acs and Audretsch, 1988; Wennekers and Thurik, 1999; Baumol, 2002). Entrepreneurship is a concept that has always been with humanity. As a new phenomenon, it has played an important role in the economic development and development of countries so that it plays a key role in today’s competitive and market-­based economy (Grebel et  al., 2001). Thus survival of countries requires innovation, invention, and creating new products and services. Therefore, for the first time, economists have discussed entrepreneurship and entrepreneur in their theories. The extreme population growth during the nineteenth and twentieth centuries and also the inadequate control of the big population led to a growing wave of

1.1  Entrepreneurship and Economic Development

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unemployment around the world. Likewise, in today’s world, unemployment is turned into one of the major crises in almost all societies (Vantulder and Derzwart, 2006). In the past, there were various ways to tackle unemployment and manage this crisis. What was important at the time was that everyone was unanimous on one topic that entrepreneurship development was as the engine of growth and development (Mehmood et al., 2019; Śledzik, 2013). Therefore, the world’s major universities put entrepreneurship education and thinking at the top of their agenda. Finally, under UNESCO’s supervisory in Paris, a statement was issued in October 1998 that the development of entrepreneurship skills and initiatives shall be included in university education. Besides, in developing countries, organizations were set up to promote entrepreneurship, and due to the phenomenon of globalization, entrepreneurship was transmitted from area to area and turned out to be a global culture. What is plain about entrepreneurial merits is that it leads to a new business, product, service. Entrepreneurship may be described as a special form of innovation that is not limited to starting a new business because it can also be found in established businesses. In the meantime, the role and importance of the family as the focal point of modernism, in creating a spirit of creativity and innovation in individuals, in spreading the entrepreneurial spirit and in developing new business in the community, is undeniable. Because the family, both quantitatively and qualitatively, nurtures the spirit and creativity of ideas and work in individuals. Realizing entrepreneurship requires parental attention to the dimensions and areas of a child’s individual life from birth to the development of his or her personality. If parents persuade the child to move his or her mind coherently, it would be valuable for such a person to gain access to economic resources through work and conquer new spaces. Such a perception of the world around one’s mind transforms one and finally will, in turn, lead to create a new idea and economic independence and achieve success (Lindquist et al., 2012). The family can bring in the element of dynamism and mobility into the depths of self-influenced and dependent individuals in a way that the individual and the community interact in a harmonious environment and develop innovative social frameworks. The first and foremost theory of entrepreneurial mentality was put forward by David McClelland in the 1980s (Antawati, 2016; Lindquist et al., 2012). He acknowledged, entrepreneurs are people who are in an extreme need for success and accept high risks, and such risks stimulate them to continue working. Entrepreneurs are always risk-takers. They do not need to be always inventors; they can simply meet the needs of others with a new idea. Most entrepreneurial studies today are case studies, and many prominent economists and scientists have studied the issue. Schultz (1990), for example, regards entrepreneurship as the ability to deal with disequilibrium rather than the ability to deal with ambiguities. Sciortino et al. (1988), Motaharrad et al. (2014), and Naldi et al. (2007) argue that risk-taking is the gravity point of the concept of entrepreneurship. Ling and Herbert integrate concepts such as risk, ambiguity, innovation, understanding, and change to define entrepreneurship. They describe the entrepreneur as someone who

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1 Introduction

is an expert in accepting responsibility and in making legal decisions that affect the type of use of goods and resources, or institutions. Drucker sees entrepreneurship as a landscape of change that is always in search of change and sees it as an opportunity. He views entrepreneurship management as a response to innovation, a desire to change as an opportunity, and second that he believes that systematic criteria for evaluating the performance of a company as an entrepreneur or innovator are critical to the development of performance, and third that considers organizational structure as the most appropriate space for creating an entrepreneurial space. Thomson and McNamara (2001) point out ten key points about entrepreneurship that involves distinguishing the entrepreneur from others, exploiting and positioning opportunities, finding needed resources, creating value-added, social and financial networking, having scientific knowledge, creating financial, social, and artistic capital, risk management, having capability to face difficulties, and finally, embracing creativity and innovation. According to various definitions of experts and theorists, economic and employment issues emphasize the necessity of entrepreneurship development. In the globalization era, its role in the economic, social, and cultural situations of countries is very important (Coulibaly et al., 2017; Acs et al., 2009). According to the specific characteristics of entrepreneurship, different definitions can be given. Including (Hebert, 1989): • Entrepreneurship is the process by which an entrepreneur enters new and creative ideas and identifies new opportunities, ventures into innovative and growing businesses, and companies that are risk-taking and lead to the presentation of a new product or service to the community. • Entrepreneurship is a process that generates new satisfaction or demand or is a process of creating value through the formation of a unique set of resources to seize opportunities. Now, who is an entrepreneur, and what are the features? Entrepreneurs are the source of enormous human capital who have a critical impact on the development of society, being very effective in the development of a community (Xavier-Oliveira et al., 2015; Kritikos, 2014). As new needs in societies increase, they can control and handle situations by identifying opportunities, and ultimately creating useful and outstanding work that will bring peace, comfort, prosperity, and welfare to all individuals in society. An entrepreneur is a bridge between industry and academia, or, in other words, a bridge between science and the market. In addition to not taking too easy the problems around them, they also stimulate the economy, boost productivity, and help grow and expand many indicators through efficient and productive employment (Kritikos, 2014). If we track almost every business in the world, we will find an entrepreneur behind it, someone who has found an idea or an opportunity to deliver a product or profitably, regardless of the problems on the way. He provides a model for countering and adapting to new circumstances.

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There are always people who make good use of opportunities in each field, including technology, consumer tastes, social advantages, etc. or create new things. Certainly, primary resources are limited, but entrepreneurs do not allow their freedom to be limited (Ucbasaran et  al., 2007). They mobilize resources to achieve entrepreneurial goals, and sometimes with the same limitations, offer specific service to new customers in a useful and desirable way. Entrepreneurs, as the lifeblood of innovation and value-creation, help boost the economy and elevate societies. The following are the most important characteristics of entrepreneurs (Pekkala Kerr et al., 2017; Ucbasaran et al., 2007; Chavez, 2017): 1. Need for Success: The desire to work on financial standards to succeed in competitive situations. 2. Belief in the control of external events. 3. The risk acceptance that a person can harness moderate risks through personal efforts. 4. The need for independence, which is the driving force behind one’s free dom to act. 5. Creativity, which is the ability to create new ideas that lead to new productions of new products or services. Creativity is the force behind innovation. 6. The power of ambiguity tolerance in the event of failure and the ability to survive. According to the Global Entrepreneurship Monitor (GEM) report, more than 73 million of the 874 million human resources in the world are engaged in entrepreneurial activities, which refers to the 3.9% of the adult population worldwide. These people are between the ages of 25 and 35 years old, and after 35 years, entrepreneurial activity declines among individuals. The relationship between age and entrepreneurship is constant over time. Additionally, age is important in deciding to become an entrepreneur. In high-income countries, men are 33% more likely to be entrepreneurs than women, and in low-income countries, they are 41% more likely than women. The population of Male entrepreneurs is about twice the females’, which varies across countries with different incomes. In middle-income countries, men are 75% more likely to be entrepreneurs than women, but in no country, women entrepreneurs are more likely than men. Furthermore, there is a clear correlation between women’s freedom and working conditions and their health. Entrepreneurs who are generally middle-educated and those with higher education are more likely to engage in activities with higher risks. It is very interesting to know that those who work somewhere are looking for other opportunities with security and peace of mind. Furthermore, 81% of entrepreneurs in high-income countries, 91% in middle-income countries, and 77% in low-income countries, have jobs. It can be argued that the underlying cause of economic underdevelopment in developing countries is the lack of understanding of individual creativity, which can, of course, be reinforced by the proper education and training of societies to provide the conditions for industrialization of nations.

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1 Introduction

In advanced countries, the internet is one of the most important tools for entrepreneurs. The government should develop an information technology entrepreneurship platform, which is a communication and information network, and make it easy for everyone to access it. The “brain drain” phenomenon, which is especially common in new technology, is a consequence of the weakness of entrepreneurship in developing countries. Governments and nations need to act coherently with all potential and capability to educate, promote, and develop all levels of society, regardless of their affiliation, race, and nationality. This issue is especially important in societies, which have shortcomings in employment, productivity, and skills of the ready forces, which consequently suffer from economic insecurity, anxiety, and social disadvantages. As such, it is necessary, all social, economic, cultural, and educational entities cooperate to promote entrepreneurship and exploit entrepreneurs. Meantime, the role of scientific-educational institutions will be crucial in the creation and expansion of the national entrepreneurship movement. Then, it is merit, in addition to paying attention to the entrepreneurship issue, all professors, elites, officials, and other persons involved in this issue to institutionalize this transcendent culture in the cohesion of organizations, they should also strive to eliminate any obstacle to growth.

1.2  Effective Entrepreneurial Activities The relationship between entrepreneurship and economic growth has been examined from different perspectives. The most important views are Schumpeter’s and Bramwell’s (Ferreira et  al., 2017; Bramwell and Wolfe, 2008; Bramwell, 2011). From Schumpeter’s and Bramwell’s perspective, entrepreneurship is defined as innovation and competitiveness. When conditions (entities, cultures, etc.) are provided for entrepreneurship, entrepreneurship has a profound impact on economic growth through innovation, resource diversification, invention, and competitiveness. Whereas, from many perspectives, entrepreneurship is the process of identifying opportunities. According to Kirzner (2009), an entrepreneur creates new and profitable opportunities in the market. He believes that the link between entrepreneurship and economic growth will emerge when the entrepreneur receives the desired profits by improving inefficient markets. In extending the Kirzner model, Holcomb et al. (2009) have argued that profitable opportunities should be in places where savvy entrepreneurs exist to achieve enormous economic growth. Entrepreneurship creates opportunities and, therefore, more entrepreneurship, and this is a fluid, sustainable, and ever-moving drive for economic growth. The role of entrepreneurship in economic growth from the neoclassical perspective is further explained in the Solow–Swan model. In this model, the only factor

1.2  Effective Entrepreneurial Activities

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that will drive economic growth is the advancement of knowledge, that one of its results is the development of technology. Entrepreneurship does not exist directly in the Solow–Swan model. Still, it can be recognized that the existence of a knowledge factor in this model reflects the role of entrepreneurship in economic growth. The knowledge factor is considered as the exogenous factor in the Solow–Swan model; it is clear that one of the important factors influencing the knowledge and development of entrepreneurial technology. Entrepreneurship, therefore, will boost economic growth by enhancing knowledge and advancing technology. The most important endogenous growth models are those of Roemer (1986, 1990), Lucas (1988), and Grossman and Helpman (1991). In some of these models, physical capital differs from human capital, and human capital is given more importance than neoclassical growth models. The knowledge factor in these models is assumed to be endogenous and economic growth is influenced by investment in knowledge. Roemer (1986) essentially introduced the role of knowledge in economic growth through the R&D factor. According to his analysis, new ideas and innovations improve production technology and increase the productivity of production agents. According to the theory of entrepreneurial knowledge overflow, entrepreneurship is the result of the R&D process and gives a commercialized form to the knowledge created. An entrepreneur is a factor that responds to the motivations embodied in institutional frameworks. If existing organizations and institutions are inefficient in the economy, individuals may not be encouraged to pursue productive and efficient activities that lead to economic growth. Also, factors such as innovation, education, and capital accumulation cannot be considered the main drivers of growth. Among those who have emphasized the importance of efficient institutions in running businesses affecting economic growth can be Shane and Venkataraman (2000), Cole (1949), and Gnyawali and Fogel (1994). The following is a summary of areas in which entrepreneurship can accelerate economic growth and development. 1. Privatization: Martin et al. (2013), in their study, examined the impact of entrepreneurship on the economic growth of 25 selected countries during the period 2000–2006. Those using the Total Entrepreneurial Activities (TEA) as an indicator of entrepreneurship, by estimating the regression model proposed by the Positive Effects approach they concluded that entrepreneurship through private sector investment had an indirect positive effect on economic growth. In countries where there is no robust private sector, one of the governments’ tasks is to empower the private sector which can be pursued through the Comprehensive Entrepreneurship Development Program. 2. Productivity and Efficiency: Entrepreneurship can accumulate unnecessary wasteful public savings and useless skills and improve capital formation. Entrepreneurs are those who emphasize the relocation of economic resources based on the principles of productivity. 3. Export Development: A key feature of today’s economy is the rapid change. Hence, countries can be succeeded in such an economy that can adapt to these

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1 Introduction

changes. Export development is one of the key components of the economic development of nations, and the role of innovative managers will be very effective (ministry of economic development and trade of Ukraine, 2019). Despite the multitude of factors of production, including labor, natural resources, capital, specialist labor, strategic geographical location, and even the allocation of high costs to science and technology and the training of scholars, none can alone or in an incompatible composition, guarantee development. With the growth and development of the domestic industry, the entrepreneur has linked the local economy to the higher levels of the world, providing a competitive edge with foreign enterprises and becoming a source of currency for the country. Competition: Entrepreneurial organizations can gain greater market share by enhancing the quality of goods in the same industries as the domestic ones; as ideas, products, and services are constantly changing in a competitive economy (Schubert, 2010). Employment: When entrepreneurial activity in a society subsides, the unemployment rate increases. In developed countries, everyone does not need to succeed through college education and government employment because they can succeed in another way. Entrepreneurship does not merely mean job creation but can be the key to solve the employment problem (KritiKos, 2014). Linking Science and Market (Knowledge Commercialization): An entrepreneur connects science with industry and markets; he strives to convert the knowledge produced in research centers into the knowledge of product production. From the perspective of endogenous growth theories, entrepreneurs are an important tool in the transfer of knowledge to new goods and services, and one of the best ways to use science in the market of individual entrepreneurship and inter-organizational entrepreneurship. Entrepreneurship is the intersection of knowledge, specialization, and business skills. Justice and Welfare: Entrepreneurship is an art that is adaptable to society. If an entrepreneur seeks to create wealth for others, he presumably cannot think only of his interests. He adheres to certain values, thus honesty, trust, self-sacrifice, and philanthropy, which are the core of entrepreneurial ethics will expand social capital.

By creating new ideas and applying them in the production process, the entrepreneur creates new products, services, methods, policies, and strategies to solve the problems of his or her community. On the other hand, applying the above mentioned in the entrepreneurial process not only enhances the quality of the products and services delivered but also increases the confidence of consumers and customers in the product and service produced. Doing so, in turn, leads to the viability of entrepreneurship and a positive effect on economic development.

1.3 Quality

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1.3  Quality 1.3.1  What Is Quality? Quality can be defined in the following ways: • Based on customer expectations of the design of the product or service and how well the design conforms to the primary specifications: What leads to customer satisfaction is applying innovative ideas, competitiveness with other companies, useful services and facilities, and the use of advanced technology to reduce manufacturing error, and so on. • The ability of goods or services to satisfy needs expressed directly or implicitly: Achieving this level of quality will come about when the company can abide by its tempting promise. Undoubtedly, an innovative company that employs specialist forces will have this potential. A quality management system is a management technique for transferring the production needs of good quality products/services to employees and influencing their performance in completing tasks according to quality criteria. What is the purpose of a quality management system (Kim-Soon, 2012)? • • • • • •

Creating a quality commodity outlook for employees and customers; Defining standards of quality goods and services for employees; Motivating the organization to prevent creating low-quality outputs; Setting a goal for employees to keep motivated; Help to prevent resistance to change; Help to orient organizational culture in line with innovative ideas and practices.

The level at which an organization can produce a quality product or service at a competitive price can be the level of business success. Therefore, the criterion of quality not only leads to business success but, in turn, brings economic development. When quality is one of the pillars of a company’s success, quality management systems help organizations achieve the required quality level, meet customer quality requirements, and retain employees through competitive programs, and always use the latest technology. Indeed, the quality of entrepreneurship results from the activities of quality management that focus on improving the quality of the product, services, technologies in use, innovative ideas, job creation, earnings per personnel employed in the company, and so on.

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1 Introduction

1.3.2  The Quality Over Time In the 1980s, Japanese companies realized the benefits of focusing on quality in their organizations and sought the help of an American named Edwards Deming, who is credited with helping Japanese companies in the quality movement (Syaiful et al., 2019). Deming techniques, including Statistical Process Control (SPC) and problem-­ solving techniques, could create a driving force for people’s attitudes to change in organizations that needed to produce better goods or services. Deming developed his 14-scale methodology for training managers in quality improvement in the organization. He believed that 85% of all quality problems were due to managerial mistakes (Koskela et al., 2019). According to Deming, quality management systems should be able to cover two different concepts of process improvement: first common (systematic) causes of errors and second, specific causes of error. Common causes relate to the multitude of personnel of machinery or goods, but specific causes relate to individual employees or specific equipment. Systematic causes of errors include the poor design of goods/services, inappropriate materials, inadequate documentation, and poor physical conditions, and specific causes include lack of required skills training, inadequate quality of input materials, or device failures (Koskela et al., 2019). Another influential person in the development of quality control was Joseph M. Juran, who, like Deming, was known for working in Japanese quality-focused organizations. He also founded the Uranus Institute in 1979, with a focus on helping other organizations to improve the quality of their goods or services. Uran described quality as “ready to use.” That is, users of the goods/services must be confident that the goods/services will work appropriately, without worrying about a malfunction. In that case, it can be said that the products or services are suitable for use. Practical application also demonstrates the ability of the product to meet the needs of the end-user, including packaging, transporting, storing, and the ability to provide in-site and speed services. Also, Juran created a comprehensive quality approach that extended the service life cycle from the design stage to customer access and all the steps between them. Juran guided organizations to apply all of their processes and procedures from a quality perspective. When this is done within an organization, the organization can assess changes based on the quality model (Syaiful et al., 2019; Koskela et al., 2019). 1.3.2.1  The Quality Revolution Is Coming to America The move toward greater quality in the American industry began in the 1980s with the pursuit of Japanese industries. Japanese companies outperformed American companies by producing better quality and fewer waste goods. Ford was the first

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company to invite Deming to help them become a quality company. As a result, the Ford company was able to achieve quality standards more than other automotive companies. Although the car market prosperous in the late 1980s diminished, Ford was able to increase its sales. As U.S. companies needed to improve quality, the U.S. Congress established the Malcolm Bridge National Quality Award, based on the Japanese Deming Award model (Cole, 2009). The move increased the resources that American businesses devoted to improving quality, and within 10 years, the U.S. company Florida Power & Light won the Deming Quality Award. From the beginning of the 1980s and onward into the twenty-first century, the issue of quality has been raised in all industries and almost every organization in America (Kolb and Hoover, 2012). The quality movement began in manufacturing and then shifted to the service industries. Initially, it was not expected that quality systems could be easily transferred from manufacturing to the service industries. Still, today these industries have made huge profits by implementing quality programs. In the history of quality, there have been various approaches to quality, and even several organizations have emerged only to set quality standards.

1.3.3  Ways to Improve Quality To improve the quality of different businesses, processes must be identified throughout the organization and also ought to be compatible with goals over time. To review processes and their associated activities and address their weaknesses, it is necessary to document their processes and thereby ensure that you are moving toward your goals. If you are concerned about quality improvement, you know that all activities, and even documentation, must be done in the best quality and at the lowest cost. Quality and quality management have been keywords in the business world for more than two decades. Many consultants were working in the field, and organizations and even new industries such as the Six Sigma institute have been created in this regard. The concept of quality in business focuses on saving, further income, innovation, job creation, competitiveness, the use of advanced technology, specialized workforce, and other things that organizations can do by eliminating operational errors and thus producing goods and delivering services that meet the most optimal level of customer satisfaction. Errors may be appearing in different kinds—for example, producing the wrong pieces, reduction of products or services quality, losing customers, and so forth. Usually, all of these errors occur, and the cost of them seems negligible. But over time, costs go up when errors are repeated frequently, so eliminating them can significantly increase a business’s revenue.

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As said during preceding subsections, quality products and services will finally influence the quality of the entire entrepreneurship. In search of the businesses affecting economic development, the group of businesses wherein quality management is the underlying criterion of the process of products and services will be turned out.

Chapter 2

Entrepreneurship and Quality Control

Economic growth, as the main distinction of developed and undeveloped economies, plays a drastic role in the context of social welfare. Among all components relating to making-money, no doubt, the entrepreneurial activities affect is the most noteworthy one. In this regard, nowadays, entrepreneurship has turned into a global strategy for economic development. There exists no country or region of the world that is not interested in development. Hence, much of the intellectual, cultural, and economic capital of nations is spent on development affairs. The difference of societies for getting developed, as a case may be, is just because of their approach toward developmental concepts and taking them into effect. That is, it might traditional manners or the modern methods become applied by the policy-makers of countries as the main plan of economic growth programs. ­ Likewise, it is an undeniable fact that many old and traditional methods must be discarded and replaced by new ones. Although there are various definitions of development but the ideas of conversion of traditional society to modern society and transform luxury goods into essential or increasing the amount of savings or investing are the most-known definitions considered by people. All countries of the world are trying to advance from the first stage (the economy based on the traditional factors of production) to the second stage of development (an efficiency-driven economy) and the third stage (the innovation-driven stage). Now, the question that comes up here is: “Having what traits push countries to the next stage?” In response to this question, a multitude of experts have referred to the economic indicators showing the disposition of development. Today, using Global Entrepreneurship Monitor (GEM) surveys carried out in both fields, Adult Population Survey (APS) and National Expert Survey (NES), most scholars and researchers, including economists, managements, people in business, and entrepreneurs, acknowledge that the most important and most effective strategy to the © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Faghih et al., Entrepreneurship Quality Index (EQI), Contributions to Management Science, https://doi.org/10.1007/978-3-030-77159-1_2

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development of countries is entrepreneurship. For instance, outstanding theoreticians, like Schumpeter and Bargawa, consider entrepreneurship as the underlying key for economic growth in the economies (Langowitz and Minniti, 2007; Bhargava, 2007). The domain of entrepreneurship is expanding, which is a positive sign of drawing millions out of poverty, reducing unemployment, and, most importantly, pointing to its role in the quality of life in a country. This fact that global society is united in terms of business activities is obvious to all and, as well as, what seems to be different in implementation of business-based ideas in the different countries is the policy-makers’ programs and also the government’s financial supports and as well as the infrastructures of the business sector. The proper support of business plans and innovative ideas by the government and investors will drive the economies toward global economic growth. In contrast, any attempt against this approach not only will have grave consequences in the future but also would conduct the running-­ businesses to fail and go bankrupt. An accurate analysis of the status quo of the global economy reveals a similar approach in developed economies. Researchers have shown that entrepreneurship and entrepreneurs have an important role in such economies in which the impact of business quality is significant. Hence, the work of Assudani (2009) aptly signifies the strong and positive relationship between entrepreneurial activities and economic development. During the preceding decades, entrepreneurship generally has been described as the ability of an individual or a group of individuals to create or discover a business-­ opportunity. Entrepreneurial activities are often applied in favor of society. Additionally, such mandatory or opportunistic actions result from innovative and fertile minds (Davidsson, 2004). Entrepreneurship is recognized as a critical factor for earning wealth and making a competitive market, and it is a hub of public policy. Likewise, policy-makers have made promoting entrepreneurship a priority, and special attention is focused on how government policies and other institutions can amend the current condition of entrepreneurship to accelerate economic growth (Bianchi and Biffignandi, 2012). Although the development of policies relating to entrepreneurship has been limited for a long time, especially in terms of international scale, the perceiving that entrepreneurship and entrepreneurs are important drivers of economic growth, employment, innovation, and productivity, by the emergence of vast analysis methods, has been generally accepted (Bianchi and Biffignandi, 2012). With these all, the question that how government policies may affect the rate of entrepreneurial activities has turned into a complicated problem. However, the key to solving such vague subjects is in the hand of governments’ future programs and, no doubt, in the mind of innovative entrepreneurs. The thorough attempts to investigate this problem is also pursued by many international bodies (like OECD—the organization for economic cooperation and development—and Eurostat—Global Entrepreneurship Monitor (GEM)). Additionally, scientific studies on the roots of successful or failed activities entail comprehensive data that is gathered from relevant respondents (including entities, institutions,

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expert entrepreneurs, or even general public). In the next stage, this big data needs to be summarized before being studied. By theoretical manipulation and with the use of methods called “Dimension Reduction,” these multidimension big data would be utilized by competent authorities. In this regard, plenty of time and expense to probe into this phenomenon, entrepreneurship, is spent. All efforts made by policy-makers, research institutions, sponsors, researchers, critics, and so forth are in line with improving the living status of people. The efforts carried out by researchers finally are summarizing in numerical indexes. The indexes that carry a concept relating to the subject in question. For example, Total Early-stage Entrepreneurial Activities (TEA) signifies the rate of nascent businesses that have been launched at most 42 months ago. The generated indexes that carry comprehensive concepts of entrepreneurship will allow investors and policy-makers to comprehend this phenomenon and apply their plans to move it forward. For example, according to research by the global entrepreneurship and development institute, it was found that the United States of America is a world leader when it comes to supporting its entrepreneurs concerning the business formation, expansion, and growth. They also finance new businesses through venture capital. This type of financial capital is provided to early stage, high-potential, and riskier start­up companies. Countries like Canada, Australia, came second and third, respectively according to the 2014 statistics. These countries’ economies are ranking very high because they understand the impact of entrepreneurs on the growth of their economy. On the other hand, Nigeria, Ghana, Uganda, and most other Africa countries refuse to accord entrepreneurs the high place they deserve and not providing an enabling environment for their businesses to thrive. Africa still has a long way to go. In contrast, Kenya is fast coming up and South Africa has always been the pioneer among the developed groups in Africa with advanced electricity channels and business infrastructures that provide fields to enable entrepreneurs to prosper. Notwithstanding that the importance of entrepreneurship in the economic process has been affirmed by researchers and policy-makers, entrepreneurship is an elusive phenomenon, difficult to define and measure. Existing research is far from conclusive in terms of providing a comprehensive definition and measure of entrepreneurship. However, if entrepreneurship is not properly measured, then it is not possible to understand its determinants, why and where the phenomenon flourishes, and to assess the effects of public policies. Being able to measure entrepreneurship is essential both as a competitive factor for companies and in planning development policies. On the one hand, it is useful in search of good entrepreneurs. Having used indicators created by entities and researchers, the identification of active companies and firms will be easy to do. On the other hand, it is useful for policy-makers to identify the priority areas for intervention. For example, by separation of factors into two groups (like accelerator factors and deterrent factors), investors and politicians would be able to focus on factors each area individually.

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The Global Entrepreneurship Monitor (GEM) is the world’s oldest hub of datasets and reports for studies in entrepreneurship. It measures the individuals’ attitudes toward entrepreneurial activities by conducting an annual survey known as the Adult Population Survey (APS). likewise, its second mission that measures the entrepreneurship ecosystem factors by gathering data from national experts is named the National Expert Survey (Bosma et al. 2012a, b). Notwithstanding the wide-ranging indicators generated and introduced by the GEM, the lack of some information, especially in the context of business life cycle, entrepreneurship quality, and so forth, is sensible. Additionally, an overall index measuring the entrepreneurship status across countries is absent in the dataset of the GEM. For example, based on the GEM dataset, the value of an entrepreneurship indicator might be high for a country. At the same time, it never signifies the capability of the country in terms of the index in question. As a case, based on GEM reports, the Total Early stage Entrepreneurial Activities (TEA) rate in low-income (factor-­ driven) economies is so higher than this index in the high-income (innovation-­ driven) economies which seems to be a contradiction. In response to such conflict, it seems the computation of an index covering all worth information resulted from entrepreneurial activities is vital. An index which provides an accurate answer to the following questions: • What is the comprehensive index indicating the entrepreneurship status of countries? • How to stratify effective business activities launched in a country? • What percentage of entrepreneurial activities, activated in a country, directly affects its economic cycle? • How to measure only the quality businesses? • As regards indexing an entrepreneurship indicator, how to nullify the effect of poor businesses? With a review into the indicators made by the GEM, it can be said, and there is no accurate response to such questions. In other words, because all the GEM’s indicators have been generated based on the proportion of entrepreneurs’ population rather than the quality of the entrepreneurial activities, given the GEM’s triple category, entrepreneurial activities, perception, and aspiration, the results derived from each group may vary. Therefore, the only index which can accurately answer these points requires a structure on a quality basis. For example, by considering the rate of exports of a company as a kind of its outputs this variable would play an effective role in measuring an index to indicate the entrepreneurship status compared to the lifetime (age) of the company. Age of businesses might imply the quality of products and services presented by them, but, no doubt, there would be many businesses offering products and services lower than common standards whereas they age so long. To this end, attention to the age variable of companies as the only variable to make an index of quality entrepreneurship may impose mistakes on the result. While the use of the interaction of

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various variables relevant to the quality of businesses would result in a comprehensive and forceful index. Given the wide variety of variables resulting from the big dataset gathered by GEM, it sounds no single indicator can ever adequately cover the entrepreneurial activities’ status of countries. One could achieve a single indicator reflecting the numbers of entrepreneurs who satisfy just themselves and their employees, in the same way, for example, one may provide an indicator describing the number of innovative firms which presents the percentage of businesses affecting the welfare and economic growth. The single indicator will not be able to measure the informative index useable to assess the status of entrepreneurial activities worldwide (Ahmad and Hoffman, 2007). Accordingly, there may be a need to integrate some indicators, of different and relevant concepts, to extract an accurate index of entrepreneurship performance in countries. More importantly, as shown and provided using wide empirical evidence of a positive effect of entrepreneurial activities on economic growth only in developed and high-income countries (Tang and Koveos, 2004; Van Stel et al., 2005; Wennekers et al., 2007; Acs and Amorós, 2008), whereas it is asserted entrepreneurship is a main driving force in any economy (Schumpeter, 1934). Undoubtedly, by a well-­ defined index based on quality concepts, the accurate answer to this uncertainty and disequilibrium will be easy to access.

2.1  Entrepreneurship and Life Health Entrepreneurship, as the behavior-based act, plays the most effective role behind the business sector. The role that is not tangible and visible, but without this behavior, no economy will not be flourished. Entrepreneurship, as the pillars of an economy, sometimes neglected by state-run entities as well as policy-makers who plan the determinant programs in the future of the business sector in a country. While a multiple of scholars, compilers, researchers, and even governmental entities have acknowledged the momentous role of entrepreneurs and entrepreneurship. The idea that entrepreneurship and economic growth are very close and also positively linked together has undoubtedly been focused by researchers since the early works of. Schumpeter (1934) has been released. According to Acs and Szerb (2009), an increase in the population of entrepreneurs will lead to a remarkable increase in economic growth. The increase in the rate of entrepreneurs results from the perceived capabilities of entrepreneurs’ skills, perceived opportunities, and risk-taking, which finally will be used to run an innovative business. The innovative business, which often considered as the most effective factor in economic growth, is studied more than other portions. Due to the importance of innovative businesses, researchers have tried to analyze this type of entrepreneurship more accurately. Schumpeter

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(1911) has already described this innovative activity, “the carrying out of new combinations, by distinguishing into five subgroups as follows: 1. The presentation of a new commodity/service or a new quality of a good or service. That is one with which consumers are not yet familiar; 2. The presentation of a new method of production. That is one method that not yet tested by experience in any branch of any manufacture. This method does not need by no means be founded upon a discovery scientifically new, and can also lead to a new way of handling a commodity/service commercially; 3. The opening of a new market. That is a market in which the specific branch of manufacture has not previously entered, whether or not this market has existed before; 4. Providing a source of supply of raw materials, again irrespective of whether this source already exists or whether it has first to be created; the introduction of the new organization of any industry, like the creation of a monopoly position (for instance, through justification) or the breaking up of a monopoly position.” According to Baumol (1990), Bosma and Levie (2010), Leibenstein (1968), Rebernik et al. (2015), Schumpeter (1934), Von Mises (1949), there is no doubt that the advanced entrepreneurial sector has a striking impact on economic growth and also on the success of national economies. Based on the research of Reynolds et al. (2002), two basic drivers of economic growth through entrepreneurship can be distinguished as follows: 1. The existence of major established businesses—which called the established entrepreneurship; 2. The entrepreneurial process that is taking place in new and growing firms— which called early stage entrepreneurship. As Reynolds et al. (2005) have stated, and also based on framework regulated by the GEM, early stage entrepreneurs are those individuals who are personally ventured into a new business and are simultaneously owning or managing a new firm that is less than 42 months old. While the established business refers to the firms which age exceeds 42 months. On the other hand, although the characteristics of entrepreneurship as well as the properties of the impact of the entrepreneurial sector on economic growth may vary, regardless of the different stages of economic development, it is clear that the dynamic sector of entrepreneurship is remarkable for economic growth. In this study, we will also explore the relationship between national competitiveness, as defined by WEF (2014), and entrepreneurship and economic growth, as measured by Gross Domestic Product (GDP) per capita growth rates. As regards innovative businesses, Schumpeterian entrepreneurs seek to create new profitable opportunities through their innovative activities. These opportunities can result from productivity growth and or increase of products or services efficiency that in which case, the innovative businesses’ relationship to economic

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growth unfolds quite clearly. Furthermore, the disequilibrium made by entrepreneurs can be convenient for surplus innovations and also further profit opportunities in its wake. Therefore, the term “more entrepreneurs” means more growth, which in turn leads to more innovation, further products, and services and in summary, the phenomenon of entrepreneurship seems to be self-feeding that supplies the requirements toward becoming developed. As a result, the increase in the rate of entrepreneurs theoretically, in turn, will indirectly and implicitly lead to economic development. According to Audretsch et al. (2006), the authors assert that the drastic contribution of entrepreneurship to economic growth lies in its serving as a method for the spillover of knowhow that might otherwise have remained un-commercialized. However, as Van Stel et al. (2005) have stated, there is yet empirical evidence on the relationship between entrepreneurship and economic growth that signifies an inverted link. That means, in uncertain reasons, in some countries, especially in factor-driven economies, the relationship between entrepreneurship and economic development turned out to be negative. In support of this claim, these authors have proved that while entrepreneurship has a positive correlation with per capita GDP growth, as the index of economic status, in wealthy countries, this relationship in poor economies is negative. In another research carried out by Reynolds et al. in 2003, it was acknowledged that there had been a negative correlation between real per capita GDP entrepreneurial activity worldwide. Additionally, some other authors (such as Iyigun and Owen, 1998; Yamada, 1996; Schultz, 1990) have reached a similar outcome in their studies. In our opinion, what leads to such contradictions during the same topic of research (i.e., the relationship between entrepreneurship and economic growth) is the lack of a unique definition of entrepreneurship. Not each type of entrepreneurship, entrepreneurship that affects the economic cycle in a country. All in all, the main reason for reaching such contradiction results is the existence of a remarkable volume of businesses that literally do not affect economic development. In short, there are some businesses, especially in low-income countries that not only have no positive effect on economic development but, because of expenses required to launch and holding them, they harm economic growth. According to Baumol (2014), it is clear that one of the most important tasks and objectives of entrepreneurs and government policy-makers in setting up businesses is that at times of economic crisis, the business sector in society can cure and improve bad economic conditions. Also, Baumol (2014) has asserted that abundantly projects of entrepreneurial activities can at least be applied as the alternative means of stimulating growth “that may hold greater appeal for today’s policy-makers and global leaders.”

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2.2  Differences Between Entrepreneurial Activities As referred to in the subsection above, Robbins et al. (2000), Mueller (2007), and Acs et  al. (2013) strongly affirm that entrepreneurship contributes to economic growth in developed nations. In uncertain reasons, the importance of entrepreneurs in middle and low-income nations is less studied. According to Acs and Szerb (2007), the relationship between entrepreneurship and economic growth in less developed countries is complex although it is negatively connected with income per capita. Moreover, the impact of entrepreneurship on real GDP growth in low-income nations is treated to be heterogeneous and erratic (Bampoky et al., 2013). There is no doubt that the lack of an appropriate and well-measured index in the context of entrepreneurship has made such antonym results. Additionally, the existing inefficient or ill-defined indices that have been created to measure the status of entrepreneurship across the globe are the next reason for reaching such unreasonable results. Entrepreneurship and the activities in its wake mostly come up from mind, and literally, such activities are behavior-based processes. Therefore, measurement of the individual factors (e.g., role model, perceived opportunity, perceived capability and entrepreneurship skill, risk-acceptance, entrepreneurship intention, entrepreneurship motivation) requires a systematical study which, in addition to converting entrepreneurship behaviors into quantity scales, can properly mention the value of attitudes and behaviors in this regard. The programs made by policy-makers and state-run entities in line with enforcement of business measures in a country cause only those who hold an innovative plan on their mind or those how are sure about their success come into the field of the competitive field. Given such selective circumstances that only the determined individuals would dare to venture into business, the poor1 entrepreneurs will automatically go out of the business sector in the developed economies. With these explanations, the main reason that seems scholars declare that the relationship between entrepreneurship and economic growth in developed nations is positive but this relationship in undeveloped countries is not certainly known is that, a great percentage of entrepreneurs in developed countries includes capable and skillful individuals; whereas in undeveloped countries, because of weak programs prescribed by governments and also lack of investors, the society of entrepreneurs mostly is affected by poor entrepreneurs those who not surly affect economic growth. To ignore the effect of the weak entrepreneurs on the indexing the measures required for indicating the status of entrepreneurial activities in a country, it is essential to consider the quality of entrepreneurial activities rather than their 1  A poor entrepreneur not solely refers to a person with no financial support(s), it may imply a business holder who handles his/her business(s) with non-innovative plans, weak technologies, repetitive products or services, and so forth.

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frequency. Doing so not only considers the skillful and efficient businesses but, naturally, will result in a reasonable comparison among countries worldwide. The quality of products or services created during the process of entrepreneurship is the criterion which may assess the status of the business the best. Nevertheless, we might justify the quality of entrepreneurship as the best benchmark to assess such challenges, but how can we achieve this index? Since there are no entrepreneurship indexes to study the state or quality of entrepreneurship in a region, so there is a need to make comprehensive attempts to define the structure of such indexes from the very beginning. To solve such problems, more studies have been done. For example, the Global Entrepreneurship Index (GEI) is a multidimensional index showing the health of the entrepreneurship ecosystem in a given country. Additionally, The GEI measures both the status of entrepreneurship and also the rate of the entrepreneurial ecosystem in quantity scale, which includes 14 components that are important for the health of entrepreneurial ecosystems (Acs and Szerb, 2018). Although the Global Entrepreneurship Index (GEI) has been made based on some valuable entrepreneurship concepts, still, it relates to the entrepreneurial ecosystem and is not able to measure the quality of entrepreneurial activity in a given country. Additionally, the individual-based variables which are extracted from the dataset gathered by Global Entrepreneurship Monitor (GEM), are not available for all countries, whereas the GEI has been calculated for all countries worldwide. Based on the model considered by GEI authors, most of the data are being estimated using nearby countries, which do not seem to be a trustworthy method. In this study, we intend to find a measure to explain the entrepreneurship quality of the GEM member countries based on the relevant data gathered by the GEM. It is important to outline that, Santos-Cumplido and Liñán (2007) believe that the most important issue needed to calculate the qualitative characteristics of entrepreneurs is the lack of use of specific data collected by institutions and organizations. Hence, during their research on entrepreneurial quality in southern Europe, they used the field study method to collect data to deepen their knowledge about data related to the qualitative characteristics of entrepreneurs. After recording the data collected in the interviews, Santos-Cumplido and Liñán (2007) began to measure the entrepreneurial quality in southern Europe using a clear definition of the target population and the robust statistical methods. Before specifying the data contributing to the creation of the Entrepreneurship Quality Index, there is a need to describe another index that is useful for assessing social welfare and has been repetitively utilized during this book also.

2.3  Human Development Index We have read many times in books, articles, official, and unofficial websites that show a great deal about the relationship between entrepreneurship and regional development. However, do we have definitive and empirical evidence to justify and

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prove this relationship? Policy-makers expect entrepreneurship to have a positive impact on the country’s wealth and employment. However, there has also been evidence from many researchers that entrepreneurship may sometimes have a negative relationship, especially in companies that do not work to improve the income and welfare of the community, with the economic status and welfare of communities. According to research by Dvouletý et al. (2018), a recent empirical study that would be investigating this relationship is missing. Hence, they utilized the dataset of 48 countries classified according to U.N. as developing for years 2000–2015 and they empirically tested the relationship between the established business ownership rate (obtained from Global Entrepreneurship Monitor) and a set of countries’ economic indicators (like Gross Domestic Product, Gross National Income, and Human Development Index). Obtained estimates support a hypothesis showing a negative impact of entrepreneurship on the regional development of developing countries (represented by the GDP and the GNI). Nevertheless, they failed to prove any positive impact of entrepreneurship on the HDI. These findings have crucial implications for both policy-makers and researchers. Based on this study, more efforts need to be done to get a better understanding of entrepreneurial activities in developing countries. Maybe the following question is the first step to reach the measure an accurate index to justify such paradoxes. “What is the main reason leading to this paradox that there is a negative relationship between entrepreneurship and economic growth?”

On the other hand, many authors discussed the strong and positive relationship between entrepreneurship and developed countries. According to GEM’s annual reports, it seems the impact of entrepreneurship is negative on economic growth. More precisely, a large percentage of entrepreneurial activities not only do not promote the country’s economy but, because of the expenses spent to maintain a great number of ineffective businesses, they probably push the country toward poverty. Now, how to create an index to respond to all contradictions like this? First of all, there is a need for clarifying and defining the structure of the economic-­based indexes. Human Development Index (HDI) is one of the most advantageous indexes in which three dimensions, namely education, income, and social welfare have been deemed as the underlying pillars. The Human Development Index (HDI) was first released in 1990 under the supervision of former Pakistani Finance Minister Mahbo ul-Haq, with technical assistance from the Nobel laureate economist Amartya Sen. The HDI appears annual as a report on human development with the statistical structure of the United Nations Development Programme (UNDP). HDI has also been used in most studies as a viable alternative in development-based assessments as a criterion of per capita income (such as GDP). This index presents far beyond income because it also provides a broader look at the well-being and welfare of society. The components of this index (i.e., health, education, and income) are intended to address the fundamental dimensions of human quality of life or human development.

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The main purpose of the Human Development Index is to emphasize the financial, educational, and welfare infrastructures that individuals are always looking for in employment and income generation. Studying a country’s potential for assessing individual human development, in addition to taking into account a standard measure of economic growth, such as Gross Domestic Product (GDP), provides a complementary measure for assessing the country’s development level. This index can also be used to analyze different policy choices of nations. For example, if the two countries have approximately the same Gross National Income (GNI) per capita, it can help assess the reason for producing results that are commensurate with human growth. One of the goals of the HDL’s advocators is to intensify the public policy debate. The HDI is, in essence, a summary measure of the level of basic achievement in society generally found in the basic dimensions of human development. The calculated HDI for any country is based on the Geometric Mean (GM) of normalized subindexes of each of the life aspects that are analyzed (including knowledge, understanding, long and healthy life, and an acceptable standard of living). The reason why the Geometric Mean has been considered as the main equation of this index is because of some special characteristics of this average maker. The main attribution of this formula is the interaction of subindexes utilized for making a new index. That is, applying the Geometric Mean for computation of a new index, the interaction, not solely a simple linear or nonlinear model, of its component will come out. the structure of applying subdimensions to calculate the HDI is as follows: 1. The health subdimension of the HDI is measured by the life expectancy, as calculated at the time of birth, in each country; 2. Education is measured on two levels: • The mean years of schooling for residents of a country; • The expected years of schooling that a child has at the average age for starting school. 3. The metric chosen to represent the standard of living is GNI per capita based on purchasing power parity (PPP), a common metric used to reflect average income. The HDI is a method of simplifying and limit evaluation that, because of its structural nature, contains information on human development. HDI does not specifically refer to the quality of life and factors such as future improvement or general security. In recognition of these facts, the Human Development Report Office (HDRO) provides additional composite indices to evaluate other life aspects, including inequality issues such as gender disparity or racial inequality. Examinations and appraisements of a country’s HDI are best done which is accompanied by examining these and other factors, such as the country’s economic growth rate, creation of employment opportunities, and the success of initiatives undertaken to modify the overall quality of life within a country. The report on HDI in 2010 amended its version of the formula using data and methodologies that were not available in most nations when the first version of HDI

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was released in 1990. According to the report of HDI in 2010, the HDI was calculated using the following indicators: (a) Health—life expectancy at birth; (b) Education—expected years schooling for school-age children and average years of schooling in the adult population; (c) Income—measured by Gross National Income (GNI) per capita (PPP US$). Take notice that, the structure of the Human Development Index has come under criticism due to some reasons set forth below: (a) Too similar to GDP per capita in the outcome of the country rankings; (b) The components (health, education, and income) are weighted equally but do not necessarily equally contribute to human development; (c) The components are too narrow and do not contain indicators of freedom or political development, which many consider crucial to human development; (d) The indicators do not take into account inequalities within countries; (e) Sustainability is not considered.

2.4  Effects of Entrepreneurship During the last two decades, much research has been published on entrepreneurship and its impact on the level of life’s health and quality. While some of these studies are theoretical (e.g., Holmes and Schmitz, 1990), the empirical approaches are prevalent as well (like works published by Evans and Leighton, 1990; Faghih et  al., 2019). Moreover, the effects of entrepreneurship on the economic sector have also developed vast literature. According to Rauch et al. (2009), the lack of consensus on the type of measure that should be considered in entrepreneurship research carried out by scholars makes a comparison of different studies difficult in this field. There is no doubt that the existence of some accurate and well-defined indexes of entrepreneurship various concepts will allow the researchers and policy-makers to discuss the common issues (like the efficiency of entrepreneurship) by varied approaches and finally reach a unique conclusion rather than a premeditated and dichotomous result. Entrepreneurship productivity and efficiency indicators include all outputs related to all upshots of an entrepreneurial process, which ideally are directly linked to either productivity growth or job creation. The outputs include variables like the number of new firms, growth, job creation, level of performance, innovation, level of income, exports, effectivity in the market, etc. These criteria are essential for the analyses and understanding of the entrepreneurship effects on economic growth in the view of macroeconomic that are considered as the efficient outputs of entrepreneurial activities. To get the main objectives of this book by applying the GEM’s dataset, there is a need to specify and describe the various outputs of entrepreneurial activities. As

2.4  Effects of Entrepreneurship

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listed below, all applied variables in the present book have been caught only from the annual surveys carrying out by the Global Entrepreneurship Monitor (GEM). The interpretations and speculations are based on scientific works presented by scholars and researchers over the preceding years. • International trade (export and import) and its relationship with entrepreneurship and economic growth: According to Saci, Giorgioni, and Holden (2009) and Zang and Kim (2007), this item highlights the value of openness to international trade, both as a tool for influencing the transfer of technical progress and as an engine of growth at the economic development and also business sector. Trade, whether export or import, is a growth-enhancing interaction (exchange of ideas through export or the acquisition of foreign technology through quality imports) among countries that act as channels for knowledge dissemination. Therefore, open economies must consider higher growth rates in their economic plans (Apergis et  al., 2007). According to their research in Central, North, Southern, and West Africa, Anyanwu and Yameogo (2015) acknowledged that there is a positive and strong relationship between trade openness and foreign direct investment (FDI). This finding may be subject to change over time because they have observed that FDI is useful to Africa’s development measures. • In fact, by flourishing the business market and increasing the quality products and services, the high rate of exports, as the channel of product presentation all over the globe, may turn on the engine of the economy. Additionally, a thriving business market with quality products and services that have been presented by quality entrepreneurial activities can guarantee profitability. • Entrepreneurial innovation and its relationship with economic growth: Over the four preceding decades, the amount of government propensity toward entrepreneurial activities and even small business launching, as feasible solutions to feeble economic growth and increasing unemployment, has intensified. This tendency of governmental entities helped to create a new scope of academic study and scientific research (Faghih et al., 2019). Innovation helps the emergence of modern theories of factors affecting economic development (World Bank, 2015). It is interesting to know that factors such as technological products, costs, the pathway of business, and innovative ideas have turned into the keys affecting the competitiveness and business success (World Bank, 2015). It is worth noting that, presently, competition in the global economy is highly dependent on knowledge, and this is what the economies in Sub-Saharan Africa need to adapt to improve and grow their economic situation. According to the World Bank report in 2015, plenty of economies in the Sub-Saharan are known for their traditional economic activities like hand-made artifact commodities, textiles, raw leather, and food processing. Such traditional economic-based sectors are in urgent need of innovation to grow. Furthermore, it is essential to take into consideration the technological progress for such regions to support and then the emergence of modern and innovative entrepreneurial activities that will uphold economic growth. Governments shall have to support innovative entrepreneurial activities as a key policy to remove a large percentage of people from poverty. Since the

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main mission of innovative businesses is to act over changes in the substructure of the economic system, technological tools and ideas in production and quality services (World Bank, 2015) so this is what underdeveloped and poor Sub-­ Saharan African countries need to get developed. If the governments hold the potential to be flexible in front of the technological change that encompasses the innovative and modern machinery and equipment and the new generation of educated experts and workers, the country will experience an abrupt shift in its economic situation and will not need contributions from advanced economies. • Employment, job creation, and entrepreneurship: Entrepreneurship stimulates the market to provide better conditions of employment growth by the creation of new jobs when entrepreneurs venture into businesses (Ashworth, 2011). So far, many studies have shown that most countries enjoy a slow growth in economic. Their condition is worsened by the economic recession and fiscal crisis. Lack of job opportunities in the labor market persists, especially in underdeveloped economies. As such, notwithstanding the presentation of remarkable stimulus packages by state-run entities that have been directed at large institutions, entrepreneurship has appeared as one of a few sources of economic activity at the country level that can lonely resist these destructive trends. The United States of America can be studied as a case to observe how efficient entrepreneurship can generate jobs and even reduce poverty. Scholars, researchers, and even policymakers have often paid attention to the limitations of economies to optimizing the outputs of entrepreneurial activities (Fund, 2006). Although scholars in the field of entrepreneurship and economists constantly observed that the business sector might present a substantial solution to the poverty of Sub-Saharan Africa regions. • Entrepreneurship contributes to reducing poverty when it is generating employment through the launching of new efficient businesses or the development and establishment of existing ones. Doing this will reinforce economic health by creating novel markets, new innovative industries, efficient technology, efficient small businesses, new jobs, and also entrepreneurship creates opportunities for higher income generation, which proper better living standards for people. According to African Pulse (2017), this refers to the fact that as much as the number of entrepreneurs in a country increases, the poverty line will automatically diminish. To eradicate poverty in Sub-Saharan African countries, there is an urgent need for rapid development in the business sector to the creation of new jobs and more income generation for the people (Kalan, 2013). As African Pulse (2017) and Gnyawali and Fogel (1994) acknowledged, the strategic importance of entrepreneurial activities in the development of the national economy is unanimously affirmed by scholars. • Competitiveness and entrepreneurship: There is a clear ongoing dichotomy among politicians and scholars over the meaning of the concept of competitiveness and its sub-dimensions. Boltho (1996) interprets it as a potential of an economy to maintain a higher standard of living as compared to other economies and, in contrast, Porter (1998) explains that the only significant way of competitiveness among countries is the criterion of national productivity.

2.4  Effects of Entrepreneurship

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• Additionally, it is interesting to know that exploiting new and unfamiliar technologies and services to build an uncompetitive product/service will enhance the innovative activities in a country. That is, the unfamiliar and uncompetitive products will have a positive effect on economic growth. • Impact of businesses’ age on their performance growth: Theoretical and scientific concepts dependent on age are still being amended. Given the organizational strength, for instance, Loderer et al. (2017) render theory and documents that the diminish in the growth of opportunities (proxied by Tobin’s q), that comes about as businesses age, is because of the organizational rigidity that results from a persistent focus on the improvement of the management of assets and resources. Yang and Aldrich (2017) reviewed the meaning of responsibility of newness and differentiated the resources at the birth and resources gathered instantly after entry. • The rising interest of researchers in the field of company age and performance issues also reflects a slow change in focus over time. While it seems that firm age is mainly examined concerning the organization structure, to date, many basic questions like the link with company performance, the growth of entrepreneurial activities, and the innovative ideas at work have come out. This Schumpeterian approach that economic development over time is essentially influenced by the advent of innovative business is still reviewed in the literature of business researches, especially in studies on the life cycle. However, many contributions in this domain are also inclined to follow a practical view, by asking the relationship between the emergence of businesses and the young age of companies composing the industry, or the link between established industries and incumbent aging firms (Krafft et al., 2014; Colombelli et al., 2014, 2016). In general, the predominant perspective today is that each type of business activates concurrently in the business sector and also, in turn, contributes to economic growth in its way, through innovative products/services. In this new vision, the company’s age is beyond a control variable. As such, the conflict between young and old companies in itself needs a comprehensive revision because age is a continuous variable and is not a discrete factor. In a remarkable number of studies, business viability is observed only because these businesses were appeared 1 year before or after a specific event that led to massive exits in the business market. This requires more than a distinction between young and old, but rather how the classification of firms into younger and older classes can influence the evolution of the business market. Finally, referring to the literature above, it is easy to say that the developed business sector has a critical effect on economic growth and the success of national economies. To evaluate the outputs of entrepreneurial activities in a given country, five categories of the outputs (which are referred to in paragraphs above) will be used. International trade (exports and imports), employment and job creation, innovation, competitiveness (new and unfamiliar products), and firm life cycle have been considered as the outputs of entrepreneurial activities.

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2.5  Objectives of the Book Although the field of entrepreneurship is recognized as the fundamental basis for our economy and also many researchers throughout the world have turned their attention about it over time, there are only a few comprehensive studies over qualitative evidence showing the impact of entrepreneurship on economic development. Empirical research has described this phenomenon from different standpoints. It has also shown that this phenomenon is much more complex and heterogeneous than the 1980s. However, to grow the knowledge over tools that are useful in practice, it is necessary to put up theories that can generate more sensible empirical research. One of the determinant factors of economic growth, which also includes a lot of empirical studies, is the fiscal situation of the population. Investigations into the relationship between finance and economic growth have reported conflicting outcomes. Whereas researchers such as Jalil and Feridun (2011), Tran (2008), Waqabaca (2004), Levine et al. (2000) have found a positive relationship between finance and growth, studies such as Adusei (2013a, b), Qma and Islam (2013), Adusei (2012), Liang and Reichert (2012), and Ram (1999) have reported a negative relationship between them. Few studies have reported an insignificant relationship between finance and growth (Guryay et al., 2007; Lucas, 1988). As the literature indicates, there is a different behavior of entrepreneurship impacts on the varied economic classes. That is, the entrepreneurship affects the economic growth in the high-income or developed countries, whereas the effect of entrepreneurship is not predictable in the low-income or undeveloped countries. Due to some contradictions in the field of entrepreneurial activity, it seems most of the studies are carried out on quantitative data rather than qualitative data. Hence, the common questions that may come to researchers are as follows: 1. What is the main criterion of appraisement of the business sector? 2. Which type of data should be applied to assess the rate of efficient businesses? 3. What is the accurate method of this assessment? To answer such questions, we intend to introduce a new metric instrument called the “Entrepreneurship Quality Index.” Take into consideration that the indicators of entrepreneurship are measurable at various layers and portions such as individual attitudes, region or industry, and environmental frameworks (Davidsson, 2005; Wennekers and Thurik, 1999). The studies of the GEM are based on individual attitudes (based on the APS survey) and the entrepreneurship ecosystem (based on the NES survey). Therefore, all the results obtained from this research in each given country are based on either personal perception or entrepreneurship environmental framework. To define a new concept, there is a need for relevant variables. The GEM questionnaire provides a broad number of variables relating to the quantitative measures that will be used in this study. The next sections introduce the variables applied in the present book.

2.6  Quality in Business Sector

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2.6  Quality in Business Sector The definition of “Quality” has changed over time, and even today, some differences are found in how it is interpreted (Badr Eldin 2012). Quality has no specific meaning unless related to a particular function and/or objects. For example, the common element of the definitions of business is that: the quality of a product or service refers to the perception of the degree to which the product or service meets the customer’s expectations that results from the outcomes of business activities. In this example, from the viewpoint of business studies, quality means the satisfaction of consumers from the products and services (Nanda, 2016). The word “Quality” entails the qualification of the components that make it poor or reliable. In business, the main objective is usually to ensure that the products/services are appropriate to meet the customer’s expectations or not. Doing so not only attract massive customers but, naturally, provides good opportunities to land other profitable jobs (Elshaer, 2012). On the other hand, the qualitative metric instruments allow evaluating the key factors which contribute to making up “appropriate quality” and may including the following: 1 . Understanding the real value of products, goods, and services; 2. Fair judgment about customer expectation; 3. Assessment of the productivity and efficiency of products, goods, and services concerning the cost of quality; 4. Specifying the error percentage in the process of production; 5. Assessing the components identified as specified outside tolerance, etc. In engineering, business, and statistics, quality has a realistic interpretation as the non-baseness or excellence of the goods, materials, equations, behaviors, etc. it’s also considered as a criterion affecting the satisfaction of the customer. According to Nanda (2016) and Gitlow (2000), it can be said that quality is almost a perceptual, conditional, subjective, so everyone may have a different understanding of the real quality of a product. Quality is defined as “fitness for use” in terms of user needs. This interpretation is extensive than has been ordinarily used in the past when quality was considered as “accuracy.” Today, it is accepted that there are other visions to recognize important factors affecting quality. It can no longer be said that a less accessible product has a higher quality. Or a more expensive commodity is not necessarily of good quality. In today’s world, things like speed to meet customer needs, availability of goods, etc. are not without impact on judging the quality issue. Quality has become a multifaceted component whose only way of analyzing is to consider a large amount of data. Although it is the idea that leads to a product or service, various aspects that determine the quality of the product. These products and services include a variety of processes, procedures, equipment, personnel, and large and small investments, all of which affect the final quality of the product or service. Determinant factors of

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quality and how it’s distributed all over the business are rooted in the concept of quality management (Nanda, 2016; Gitlow, 2000). The substructures of quality management, including the following titles: • Quality planning is applied as a strategy of “developing the products, services, and processes that are necessary to resolve customer needs” (Nanda, 2016). This stage of quality management contains methods to resolve needs and meet the expectations of customers. • Quality assurance focuses on ways to provide enough guarantee and confidence for products or services presented by businesses in the process that determined in quality planning. This step of quality management can be considered as the stage of error prevention that is carried out by using a systematic measurement, comparison with a standard (as a quality benchmark), and monitoring of processes of production. • Quality control (QC) is a tool for inspecting the production process that halts and improves the production process if product or service quality is reduced. This stage of quality management has always sought to achieve organizational goals and deliver quality products in advance. If the objectives are not met, the production process will be reviewed. QC focuses on process output(s). • Quality improvement is the stage of quality management that does the final job of achieving the desired quality of the product/service organization. Achieving a better product or service quality requires flexibility in the infrastructure and product production process. Without the flexibility of the manufacturing process, quality management is almost meaningless. In the early 1900s, pioneers such as Frederick Winslow Taylor and Henry Ford indicated the limitations of methods used in mass production at the time, and they upgraded previous methods, implemented quality control, inspection, and standardization methods in their products (Papp, 2014; Wood and Wood, 2003). After that, in the twentieth century, people such as William Edwards Deming and Joseph M. Juran proceeded on to promote higher levels of quality, the idea of which ​​ originated in Japan and later elsewhere (Gitlow, 2000).

2.6.1  Need for Quality in Business Sector The quantitative variables can be applied to report the proportion, frequency, descriptive statistics, and finally comparative studies. Considering the quantitative variables to conduct research-led studies will go wrong. For instance, according to the GEM reports, the rate of total early stage entrepreneurial activities in factor-­ driven economies is more than in innovation-driven countries, and the rate of exited business in the former group is so higher than the latter group. While, according to Faghih et al. (2019), the Gross Domestic Product per capita in the factor-driven economies is lower than the innovation-driven economies. The

2.7  Entrepreneurship and Quality

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rate of entrepreneurial activities in low-income countries is more than high-income economies. It looks like a contradiction occurs here! Why do the countries with high entrepreneurial activities fall into the low-income group? No doubt, the data gathered by the Global Entrepreneurship Monitor (GEM) is so reliable, and the justification of this contradiction shall be found in another place. The quantitative and qualitative indicators are the response to this point. Since the indicators, like TEA and the rate of exit from the business, created by the GEM comes directly from the questionnaire of this consortium, so the indicators of the GEM are quantitative that result from raw data. Hence, the main reason leading this contradiction is the use of non-qualitative, quantitative indicators. The quality issues highly depend on user perspectives, needs, and priorities, which vary from user to user. It is important to note that each quantitative indicator must result from the relevant subdimensions. These are subdimensions that may carry a little of information about the indicator in question. Consequently, because of the real value of such indicators, the indicator used in a qualitative assessment may be applied in other studies to assess other subjects (for instance, entrepreneurship, human resources). Thus, the quality of an indicator, which means guiding the policy-maker rather than the statistician, not only presents reasonable results but can be generalized by applying wide-ranging subdimensions. On the whole, the tool which can judge the efficiency of a product, service, and so forth is its quality. Measuring the qualitative indexes not only requires the opinion of consumers but entails various dimensions to cover all aspects.

2.7  Entrepreneurship and Quality Entrepreneurship seems to be an ill-defined and multidimensional phenomenon. It means that the definition of entrepreneurship quality with considering varied dimensions, different viewpoints, and aspects of entrepreneurship sciences will not be unique due chiefly to the open definition of entrepreneurship, which is adopted by GEM.2 For as much as Douglas and Shepherd (2000) assert that “entrepreneurship research can be classified under three main categories: namely how entrepreneurs act (i.e., what it is they do); what happens when entrepreneurs act (i.e., what are the outcomes of their actions); and why people choose to be entrepreneurs (i.e., what motivates them to be entrepreneurs)”, therefore, this classification provides a new idea to define the entrepreneurship quality to each triple class. It is worth mentioning that, the process of creating products does not present the evidence showing

2  Based on the definition of entrepreneurship defined by GEM, any activity regardless of its effectivity or uselessness is deemed as an entrepreneurial activity.

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their quality. As a result, what seems to involve the information mentioning the quality of products/services is the final outputs, not the process of production/ service. Quality of output is directly related to the quality of the business so that it can be said, the quality of outputs reflects the interaction of entrepreneurial capabilities (such as perceiving opportunities, perceiving skills, risk-acceptance, motivation, intention, etc.) with the environmental factors (like financial supports, government programs and policies, education, culture, the situation of open market and so on). The quality of outcomes results from the interplay between exogenous and endogenous factors. Meanwhile, using this classification, the present book uses the concepts of three groups (performance, outputs, and motivations) to introduce the quality of entrepreneurship. Quality relates to all of the outputs from any work activity or process (UK Centre for the Measurement of Government Activity, 2008). It means that the outputs of entrepreneurial activities, from intention to income and job-generation, are critical to measuring the Entrepreneurship Quality Index. No doubt, in economics, the way that an entrepreneur acts to reach a product has been overlooked. Moreover, according to Naudé (2011, 2013), economists have focused only on the impact of entrepreneurship outputs on the economic-based indexes like GDP and HDI rather than productivity and employment. In this study, we have focused on entrepreneurship outputs (including material or immaterial) to assess the quality of entrepreneurship. Hence, the various variables designed in the GEM questionnaire like innovation, growth expectation, and employment-generation are considered as indicators showing outputs of any entrepreneurial activity that would be used in this study. Entrepreneurship is a multifaceted and heterogeneous activity (Audretsch and Thurik, 2001; Audretsch et al., 2002) and take into account that the wide and complex content of entrepreneurship concept may identify numerous correlations with other economic aspects. Maybe this is reasonable to claim that entrepreneurship can be studied along with sustainable development, globalization, and economic growth to assess factors affecting economic development. According to Schumpeterian entrepreneurship, innovative entrepreneurial activities, which result from many individual and environmental factors, are the main driving force in economic growth. Also, it is widely believed that entrepreneurship matters for development. Meanwhile, in recent years, researchers and policy-makers have devoted a lot of attention to the role of entrepreneurship in economic growth. Many policy-makers believe that improved levels of entrepreneurship are the salvation for economies struggling with declining economic growth rates and employment rates (Nyström, 2009). Therefore, in measuring the entrepreneurship quality, we need to comply with the factors in conformity with economic development. Each concept holds its specific way of getting calculated. Straightforwardly, one could claim that entrepreneurship quality can be measured in the same way that the GDP is being calculated. But this is an unprofessional fashion to get inspiration from a quantitative index approach for the calculation of a qualitative index. Doing

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this will, in turn, lead to overlooking the fact that the outcomes and/or impacts of entrepreneurship may get appeared in different ways that are not calculable. The hidden aspect of the business sector, which creates the quality dimension, may be underestimated. For example, the expectation of job creation, the amount of competitiveness of launched business, value-added of businesses, and so on are some invisible factors of the business sector that absence of these factors in the business qualitative indexes may create deficient information. Likewise, according to Ahmad and Hoffman (2007), it is obvious that this index shall come out of a framework accepted by researchers, policy-makers, and the public crowd as well as it shall not turn into a dichotomy. Considering such rules before reaching any conclusion, at least, will receive the said group’s approval.

2.7.1  The Importance of the Scale of Measurement There is an increasing interest in setting up a general concept for quality management and quality control in research and development. For example, research in the fields of medicine and social sciences look for a method to reach quality measures (Cammann and Kleiböhmer, 1998). This subsection aims to introduce a simple method to prepare the utilized data before judging the quality of entrepreneurial activity outputs. Since the variables of the GEM questionnaire are in different units (metric units), therefore, the use of a reliable method to make the GEM dataset uniform is vital before starting the process. For example, according to the Adult Population Survey (APS) questionnaire in 2015, the question about export (question 1G4 in block 1: nascent entrepreneurs) is in seven quality levels and is designed as follows: 1G4: What percentage of your annual sales revenues will usually come from customers living outside your country? Is it more than 90%, more than 75%, more than 50%, more than 25%, more than 10%, or 10% or less? Besides, the question about new or good services (1G1), which is in three levels, is as follows: 1G1: Will all, some, or none of your potential customers consider this product or service new and unfamiliar? The question 1G4, which measures the level of export acts, refers to the status of the business holders in terms of entrepreneurial activities and/or their state in the context of success in business. Therefore, a manufacturing firm that ships products to customers outside the country or a resort hotel that serves tourists outside the country would be scored the best in this regard. It is assumed that all customers are equal in terms of a source of revenue. Still, if there is confusion, it is appropriate to consider this in terms of the proportion of total sales (total turnover) generated by customers inside and outside the country.

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The purpose of the question 1G1 is to determine how new the goods or services are for the intended customers. It is designed to allow for a wide range of customers’ populations, from retail customers in a small rural village confronting a new kitchen appliance to sophisticated software buyers in international firms considering new inventory management systems. The issue is “newness” to the intended customers, not new to any possible buyer in the world. Some would be in the range of 10–25%; more than 25% would be “all” or “almost all.” In summary, it can be said that the question 1G1 extracts information about innovative perspectives from a population, and the 1G4 describes the levels of export numerically. When we aim to use the data with different units and quality levels in the creation of an index, it is vital to re-unit them to reach the same units (or quality levels). The main reason that led us to seek the mathematical method/methods applicable to re-unit the variables with different units is; How to equalize the levels of the question 1G1 (including three levels) with the levels of the question 1G4 (including seven levels)? For more details, suppose answers of the respondent A to the question 1G1 and 1G4 are 1 and 4, respectively. Additionally, the answers of respondent B to the same questions are 3 and 7, respectively. For more details, see Table 2.1. According to Table 2.1, what is the accurate value of M and N? Before discussing the answer to this question, there is a need for a presentation of the “same unit” data. Does the first level answer in the question 1G1 has an equal value with third level answer in the question 1G4? Besides, does the fourth level answer in the question 1G1 has an equal value with the seventh level answer in the question 1G4? Note that M = 1 + 3 and N = 4 + 7 are not the correct answers since the units of question 1G1 and 1G4 are not equal. So adding them to make a new index is an error. If we wish to avoid such mistakes, two steps shall be applied as follows:

Table 2.1  A simple example of revalidating the responses of some variables of the Global Entrepreneurship Monitor (GEM) Question 1G1: Will all, some, or none of your potential customers consider this product or service new and unfamiliar? (DO NOT READ ANSWER LIST. ENTER SINGLE RESPONSE.) 1G4: What percentage of your annual sales revenues will usually come from customers living outside your country? Is it more than 90%, more than 75%, more than 50%, more than 25%, more than 10%, or 10% or less? Total

Answers of respondent A 1: All

Answers of respondent B 4: 26–50%

3: None will consider it new and unfamiliar

7: None (DO NOT READ)

M

N

2.7  Entrepreneurship and Quality

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• First: using the quality control tools to make a new structure for data, and defining new computable levels of answers to calculate new indexes. • Second: using a statistical standardization method to create a new structure of data with the “same units.” The next chapter has presented comprehensive instruction to implement the preceding approach which was referred to in the last subsection.

Chapter 3

Quality Control

Quality control is the set of measures and procedures to follow to ensure that the quality of a product is maintained and improved against a set of criteria and that any errors encountered are either eliminated or reduced. The focus of quality control is to ensure that the product manufacturing and services are not only consistent but also in line with customer requirements (Koskela et al., 2019). Quality control is similar to quality assurance. One of the features of quality control is its daily defined, developed, and updated methods of control. It brings standardization into the process of evaluation. Most organizations have a quality control department that provides a set of standards to be followed for each product/ service. Either an internal team or a third-party team is hired to determine whether the products that are delivered meet these standards. Quality control relies on testing products, as product inspection gives a clearer picture of the quality of the end product. There are different standards available for quality control. The quality of a product is often impacted by deviations from target standards and by the high variability around target specifications. Effective quality control should be able to address both these issues. Quality control can contribute to businesses in improving their products/services in the market, along with brand recognition. It also helps in addressing liability concerns, planning and decision-making, and meeting customer needs. The effort and finance involved in product delivery can be much improved with the help of quality control. If we consider the outputs of entrepreneurial activities as the output of a company, by using the quality control tools, the management of the performance of the company will be carried out in the best way (Kolb and Hoover, 2012; Koskela et al., 2019).

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 N. Faghih et al., Entrepreneurship Quality Index (EQI), Contributions to Management Science, https://doi.org/10.1007/978-3-030-77159-1_3

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3.1  Quality Control Tools There are a total of seven ways to control the quality of a dataset. These seven main tools for quality control are a set of statistical, mathematical, and graphical techniques to help troubleshoot and find low-quality products (Montgomery, 2005). These methods are of well-known and basic algorithms because they are suitable for people with little formal knowledge of statistics and because they can contribute to solving the vast majority of quality-related issues (Ishikawa, 1985). According to Nancy (2004), Ishikawa (1985), and Imai (1986), the seven tools are as follows: • The “fishbone” or “Ishikawa” diagram (alternatively, “cause-and-effect” diagram). • Check sheet • Control chart • Histogram • Pareto chart • Scatter diagram • Stratification (also known as the run chart or flow chart). Unlike many advanced statistical methods like survey data gathering, acceptance sampling, inferential statistics (like hypothesis testing), design of experiments, multivariate analysis, and so on, these seven basic tools are developed in the field of operations research (Imai, 1986).

3.2  Six-Sigma Method One of the statistical methods to analyze the quality of a dataset (alternatively, products and services) is known as “Six-sigma” which is widely used by those researchers who are not even familiar with its concept. Six-sigma is a method that works by considering confidence intervals and tries to identify data that is of poor quality. It is the responsibility of this method to identify low-quality units and products that are out of the ordinary. Still, the low-quality product is removed at the discretion of the supervisor (Aboelmaged, 2010). This method not only reduces defects of the process but also is capable of provides a new framework supporting the improved structure of product production. At many companies, organizations, and working teams, the term six-sigma refers to a measure of quality that tries for near perfection. Six-sigma is a data-driven method and methodology that is sensitive to data that is outside the confidence range. According to the methodology and structure of this method, and depending on the definition of variables, the closer the data is to the center of the index, the higher the quality. Figure  3.1 presents graphical information of the six-sigma concept.

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3.2  Six-Sigma Method Process Average

Lower Limit

Upper Limit

99.7% 95% 68%

-6σ

-5σ

-4σ

-3σ

-3σ

-1σ

Mean

1σ

2σ

3σ

4σ

5σ

6σ

Fig. 3.1  Areas of different quality levels classified by six-sigma method

This figure demonstrates that 68% of data are between −1σ and 1σ, 96% between −2σ and 2σ, and finally, 99.77% of data are between −3σ and 3σ. This means that 68% of data are near the mean value with the least variance. Twenty-eight percent of the observations are a little away from the mean value, and 3.7% of data are located at a high distance from the mean value, and this group will lead to the magnitude of the total variance. Therefore, the data with the nearest distance from the sample mean are of the most reliable, and, in the viewpoint of statistics, this data is considered acceptable to get used in the analysis. The use of this method will provide a new style to classify the levels of quality in each dataset. The remarkable point of the six-sigma method is the capability of this scheme to classify the raw data into low-quality, medium-quality, and high-quality groups or more classes. Before using the six-sigma algorithm to define different quality levels, it is necessary to reorder the data in the same direction (namely positive or negative direction). For instance, consider a questionnaire. Clearly, in a positive question of the questionnaire, the lowest value of answers refers to the least value of the variable (or question). Hence, to apply the six-sigma method in such a case, other utilized questions, whether positive and negative, must be redirected in the same direction. For more details, take consideration of the question 1G1 of the GEM questionnaire as indicated in Table 3.1. Since the purpose of this question is to determine this point that “how new are the products or services”, hence if “All” is the selected answer by the respondent (in which, from the respondent view, all people consider the product or service as a new and they are unfamiliar with), it can be said that this new business is a valuable and innovative entrepreneurial activity. Therefore, in question 1G1, we allocate score 3, so arbitrarily, to someone who says “All,” score 2 for the answer “Some,” and score 1 for the answer “None will consider it new and unfamiliar.” Note that, according to

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3  Quality Control

Table 3.1  A simple example of reordering the value of answers Question Answer 1G1: Will all, some, or none of your potential customers consider 1: All this product or service new and unfamiliar? 2: Some 3: None will consider it new and unfamiliar  −1: Don’t know  −2: Refused Source: GEM questionnaire Table 3.2  Determining the levels of quality using the Six-sigma method Question 1G1

Answer New value 1 2 3 4 5 6 7 8

Condition If 1G1