Entrepreneurial literacy: Empirical evidence

Objectives: Policy makers in the United States and in Europe regard entrepreneurship as a driving force to boost economic growth and innovation. Studies in the extant literature show that in an environment of more sophisticated entrepreneurial activities greater economic development and exposure is obtained. In fact, major reasons for failure of business start-ups range from inconsistent management accounting, funding gaps and indecisive leadership to insufficient market adjustment as well as tax and law-related aspects. Policy makers therefore attempt to promote entrepreneurship at the macro level through education as they believe that a greater understanding is likely to create more adept entrepreneurs. In the last few decades intensified research on literacy in general and financial literacy in particular has been conducted to explore people’s level of knowledge in terms of, e.g., financial decision-making and the interconnection to wealth accumulation or retirement planning. However, research on entrepreneurial literacy which is associated with the structured imparting of knowledge at universities and at other research institutions has been widely left unsought.

Data/Methods: It is foremost our motivation to holistically analyze the level of relevant knowledge that potential business founders, such as students, have obtained to draw inferences on the extant of entrepreneurial literacy. Hereby we examine a unique data set which is not biased by program-specific effects. We give attention to subjects’ understanding of aspects that play a crucial role in business start-up in order to identify specific gaps in entrepreneurial literacy and relevant professional, social and personal competences. Our survey with N=386 business administration undergraduate students is based upon a standardized questionnaire with primarily closed-ended questions. We conduct our empirical analysis as follows: Firstly, we compute the median values of the aforementioned questions of interest and report the respective significance levels by applying Wilcoxon-Mann-Whitney-tests. In the case of a significant Wilcoxon-Mann-Whitney-test, it is very likely that the samples represent populations with statistically different median values. Secondly, in order to gain a deeper insight into subjects’ response pattern we report Spearman’s rank correlation coefficients. Spearman's correlation provides a measure of a monotonic relationship between two items and can be used with ordinal data and is – contrary to Pearson's correlation – robust to outliers.

Results: In this paper we find that potential business founders evaluate schools’ imparting of relevant knowledge for entrepreneurs as being moderate. Furthermore, understanding in the areas of finance, accounting, and management accounting as well as corporate planning and management is considered to be momentous for entrepreneurs. Since, however, subjects assess their know-how with respect to these categories as merely averagely we can infer an obvious gap between subjects’ actual perceived expertise and the knowledge in relevant fields that is considered to be momentousness for business founders. Interestingly, a similar pattern applies in the case of professional competences which involve specialized expertise and proficiency. In our sample a surprisingly large share of students (more than 40% of subjects in our sample) aspires to become entrepreneurs in the future. Based on our findings we convey implications for relevant stakeholders.