From Military to Entrepreneurship: The Canadian Perspective By: Maeghan Smulders and Kalinga Jagoda

Today’s society has to consider the impact of the complete withdrawal from Iraq and the future of the active duty troops will have on the global economy. Support systems need to be established

to

facilitate the transition from military service to the civilian workforce. This paper attempts to address this developing concern and investigates how labor market conditions and other external factors affect on the probability of personnel moving into self-employment. It also investigates the barriers and problems of transition from active duty to self-employment.

Author Biographies Maeghan Smulders has Bachelor in Business Administration from Mount Royal University with a focus on general management. Maeghan is the 2010/2011 Students In Free Enterprise (SIFE) President for Mount Royal and has created 3 outreach projects focused on entrepreneurship, business, and community development. The SIFE Mount Royal team won first place in entrepreneurship this past March at the ACE Western Canada Exposition based on two of her projects Snatch the Pebble - teaching military wives how to start their own businesses; and Master The Blueprint – teaching women entrepreneurs how to create successful business plans. Maeghan is a strong advocate for Mount Royal and continues to participate in a wide variety of extra curricular activities.

Kalinga Jagoda is an Assistant Professor in Supply Chain Management at Bissett School of Business of the Mount Royal University, Calgary, Canada. He has a PhD from the University of Western Sydney Australia, an Advanced Diploma in Management Accounting from the Chartered Institute of Management Accountants, UK, and a Bachelor of Science in Chemical Engineering from the University of Moratuwa, Sri Lanka. Dr Jagoda has published more than 50 articles in journals, edited books, and conference proceedings. His main areas of scholarly interest include operations management, technology management, entrepreneurship and ERP implementation. Kalinga Jagoda is the corresponding author and can be contacted at: [email protected]

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From Military to Entrepreneurship: The Canadian Perspective

Introduction Today’s society has to consider the impact of the complete withdrawal from Iraq and the future of the active duty troops will have on the global economy.

According to the

International Institute for Strategies Studies (2009), by 2008 there were 20.5 million people serving in the armed forces worldwide. With the anticipated discharge of thousands of actively serving military personnel, the demand for employment will rise. This will put additional pressure on agencies dealing with the record rates of unemployment and create a surplus in supply of labor available in the years to come.

In 2009, it was recorded that soldiers withdrew from the Untied States Afghan National Army accounts for a 25 percent turnover rate in combat troops (Porter, 2009). Once discharged, the stress of adjusting to civilian life and choosing a new career were priorities for most of them. In the past, a larger portion of discharged military personnel would not typically consider the pursuit of entrepreneurial endeavors. However, with the current levels of unemployment and the concern of insufficient job vacancies available in the future, starting a businesses will become a more appealing opportunity to our returning troops.

The effects of this turnover will have a drastic impact on society and Canada is currently making minimal efforts to be proactive and address the issue. Looking south of the

boarder, the United States have specific programs tailored to veterans that aid the opportunity for self-employment and economic stimulation when troops return from tour. Through these types of program, the United States have taken advantage of military entrepreneurship and are now providing support to personnel who are making the transition from military service to the civilian workforce by creating programs that tailor to support, educate, and provide an atmosphere to foster new venture growth. In 2003 alone a United States residential survey estimated that 22.1 percent of veterans in the household populations were either purchasing or starting new businesses, or further considered the possibility of doing so (U.S. Small Business Administration Canadian, 2005). Military and non-military entrepreneurial activity within Canada however, has been stable since 2001 and the rate of business start-ups experienced a substantial growth from 2003 – 2008 (Industry Canada, 2011).

Academic interest in military entrepreneurship has expanded within the past decade (Schwartz and Malach-Pines, 2007; Hudgens, 2004; Azulay et. al. 2002). While the increasing turnover rate of soldiers generating significant attention as time moves forward, the demand for jobs will stress high unemployment and put pressure on military personnel to select a career path or alternatively pursuing entrepreneurial endeavors. Although approximately 5,000 individuals retire each year from full or part time positions within the Canadian forces (Schlosser et al. 2010), military entrepreneurship has received limited attention of business scholars. This paper attempts to address this developing concern and investigates how labor market conditions and other external factors affect on the probability of personnel moving into self-employment. It also investigates the barriers and problems of transition from active duty to self-employment.

Due to little academic research on the topic, providing a platform for military entrepreneurship would lead to the examination of why the findings of this paper should advance our understanding of the barriers and issues related to the military entrepreneurship and add to the comparative management literature with fresh evidence from Canada. The findings should also enable entrepreneurs, policy makers, military and supporting agencies to select the most effective mechanisms to assist military entrepreneurs. The findings of this study outline proactive suggestions on how to prepare for the future discharge of our troops and increased demand for employment. By offering specific training programs to teach small business ownership and entrepreneurship, the goal to bridge the gap of military and entrepreneur mindsets is viable. By providing an opportunity for veterans to use their leadership, organization, and team-building skills, allows them to determine their own course of action for re-entering the workforce. In following suit, other countries should assess the area of military entrepreneurship research to provide a better framework and future development to address this need before it becomes an issue.

Literature Review

There has been limited research carried out on the topic of military entrepreneurship in the Canadian context.

However, recent literature on Military Entrepreneurship on other

countries across the globe provides a compelling perspective to what truly influences a successful venture after serving within the forces. Social capital is a contributor to entrepreneurial success and can be identified as a link to long term success and sustainability for new business ventures. According to Honig, Lerner & Raban (2006) the role military played

historically for Israel entrepreneurial firms can be directly joint to a defense system that raised investment in venture and the firm’s performance. Employees of Israeli military R&D firms demonstrated considerable entrepreneurial behaviors that accounted for a vigorous business environment (Azulay et al. 2002). If employees had military background and were working in a sector that developed R&D for a armed forces sector that they were familiar with, the firms were more prosperous because they were producing products for the self defense industry had greater access to capital and investors due to the network already established within the line of work (Honig, Lerner & Raban, 2006). Firms supplying to the defense sector had better performance based on their experience and the influence it had in attracting both capital and high performance workers for the labour that needed to be done (Honig, Lerner & Raban, 2006). The influence military has on Israel’s society has been the interest regarding the influence of social capital and the warrant it has on new businesses within the high-tech firms. Honig, Lerner, & Raban’s (2006) study explored the experience military graduates had in the ability to freely transfer knowledge to the civilian market after their military tour.

The results showed from an

entrepreneurial perspective that social capital provided the firms with networks that facilitated the discovery of new opportunities for business and allocation of existing and potential resources (Birley, 1985; Greene and Brown, 1997; Uzzi, 1999). Entrepreneurs are required to leverage individual, social and human resources to build an organization’s physical and financial resources (Honig, Lerner, & Raban, 2006). By having an established network of contacts, military entrepreneurs are able to thrive off the defense high-tech sector in Israel because of the relationships and trust associated with being in the forces that suppliers and consumers put confidence in the reputation of the entrepreneur, as well as the product making the assumption

that a positive relationship exists between relationship and performance (Honig, Lerner, & Raban, 2006). In Breznitz (2002) article, he argued that military should be viewed not only as a mechanism for producing highly trained professionals in the software industry and one of the main nodes in the national innovation systems that collects and diffuses information to create a new standard for the industry. Given the social structure of Israel, the military shape the overall structure of the culture of the nation (Gal, 1986; Moskos and Wood, 1988: Ben-Eliezer, 2001). Israeli high-tech start-ups is embedded in the networks of people there and by developing the working relations they have within the military background, they are more committed to the idea of starting a new business as they have the support system available and network to get the capital backing the idea (Honig, Lerner, & Raban, 2006). In summary to the article, it was identified that having an entrepreneur who worked in the military R&D previous to staring the venture had a positive and significant coefficient in the model. This would suggest that military entrepreneurship with strong social capital lead to increased performance and greater investment into the venture.

In general entrepreneurs’ external networks provide extended opportunity for establishing a new business and aid the ability to gain capital support. In the case of military entrepreneurs, they are trained to think as a unit and look for the best interest of a collective group oppose to an individual.

In reference to social capital, military’s network is extremely strong however,

participants commonly expressed in the interview process that military personnel struggle in promoting their individual skill sets and abilities, which would dampen the instinctual desire to seek self-employment and promote one self or a business to their peers. Elisa communicated that

the problem with military personnel is you “have to say sell yourself. I know my husband’s going through it to. He has so many talents, but doesn’t believe that he does. I see them, and everybody else see them. You know you have to believe in yourself and you have to promote yourself. We in the military aren’t good at promoting our self. We are so used to being well, that’s just our job.”

In providing a framework of support that assists in teaching military personnel to communicate their talents and skills would allow them to better advance themselves and be proactive in finding employment or starting a venture.

A study done by the National Business Incubator Association (NBIA) in the US and by independent researchers have confirmed that individuals pursuing entrepreneurial success thrive in incubator companies and are much more likely to grow into a viable job-creating business model (Egorov & Carayannis, 1999).

According to the authors, there are 550

incubators in North America and more continue to open at the rate of one per week. These incubators offer supporting services to aid approximately 8,000 start up and fledgling companies; over 4,000 “graduated” from these same grounds. Now communities around the world have embraced the business incubation concept and recognize the need for information sharing within this new growth industry (NBIA, 2009).

The reason why business incubators benefit new entrepreneurs is because they make information widely available in the parameters of incubating business through marketing and

sales, to R&D and investments.

By providing a centre that stimulates new business growth

creates support and service to client companies to create next generation incubators (Egorov & Carayannis, 1999).

According to this research, these innovation centers offer services that

extend beyond what incubators have traditionally offered, such as working closely with university research and offer such opportunity to administer micro loan funds, and seed capital investments to further new venture sponsors.

This will build aid and encourage new

entrepreneurs to take action in implementing their ideas as they have access to specialized knowledge from other intermediary organizations through virtual incubators to assist in the foundational process of starting a business.

Through these entrepreneurial support systems,

incubators are catalysts for creating support systems within the community. They provide open and available access to network members and share knowledge, expertise, and know-how to challenges new entrepreneurs face (Egorov & Carayannis, 1999). By creating a peer network of like-minded individuals, entrepreneurs can more successfully transfer and provide opportunity for others to purse entrepreneurial dreams and foster a culture of entrepreneurship.

If military personnel were provided with a under grid, or program that recognized their existing skill sets gained from military training and supplied a nurturing atmosphere that encouraged the development of entrepreneurial companies the transition back to civilization’s workforce would be less overwhelming.

This program would help build a network of

individuals seeking self-employment and provides support for individuals to survive and grow during the start-up period, when they are most vulnerable. The NBIA (2009) says that the most common goals of incubation programs are creating jobs in a community, enhancing a

community’s entrepreneurial climate, retaining businesses in a community, building or accelerating growth in a local industry, and diversifying local economies. An incubator program for military would provide an avenue for businesses to thrive. Peter explained how he got his network established for his business was initially through military contacts but resulted in the benefit of getting involved in university and sports and just being open to meeting people. He explained “I assess the return on my investment in meeting people… And understanding the value of knowing about people –what they want, what are they about, and what they value”.

By involving in networks and create discussion in a community of like-minded individuals allows the opportunity for growth and creative development for new business owners.

NBIA (2009) suggests that in order to lay the groundwork for a successful military incubation program, developers must first invest time and further research military entrepreneurship. In considering the potential outcome of a program targeted towards military personnel, we can predict a high enrollment rate due to the forecast of withdrawal from serving over seas. This would be a proactive action taken to address the concern of lack of labour, but also encourage new entrepreneurial endeavors.

Incubator graduates additionally create jobs and commercialize new products and services that strengthen local and national economies. NBIA (2009) estimated that in 2005 alone North America incubator programs assisted in over 27,000 start-up companies and provided full time

employment to over 100,000 workers that generated annual revenue of more than $17 billion.

Methodology

The case study methodology was used in this study. Case studies over the past decades have gained considerable acceptance in business research, particularly as a method of choice for holistically examining complex phenomena in real life settings (Benbasat et al. 1987; Yin 2003; Eisenhardt 1989). According to Yin (2003), the case study strategy is most suitable when the research involves why or how questions. Although case studies have limitations to generalize its findings, when multiple techniques of inquiry and appropriate data validation methods are used, it is rigorous enough to explore relationships (Oliveira and Rozenfeld 2010; Bader 2008; Bhaskaran and Jenkins 2009).

Multiple semi-structured interviews with the entrepreneurs and senior managers of supporting organizations were conducted to collect data for the case studies. The previous literature was used to establish an interview protocol to guide the data collection process. In addition, direct detailed observations, and company documents were used to collect and verify information provided by the participants. The researchers also obtained several entrepreneurial related documents, which were very useful in triangulating the information. Additional interviews were conducted to achieve the theoretical saturation suggested by Eisenhardt (1989).

The authors interviewed five individuals who have served with the Canadian forces on tour overseas, made the transition back to civilization, and are looking for employment or

started their own venture. A message was sent out through the Calgary Family Military Resource Centre and the sample surveyed followed a semi-structured format and answered a list of 16 questions that was provided by the Military Careers: Removing Boundaries from the Career Continuum research. These interviews were performed in public places and typically lasted an hour. The interview questions were submitted to participants via email prior to meeting and two participants filled out and returned their surveys to the writer, as they were unable to meet within the timeline of the paper. A total of 12 people expressed interest in being a part of the survey however, the qualification of being military personnel who had started a venture made the sample extremely small.

Data Analysis

Each of the military entrepreneurs interviewed for this paper displayed unique characteristics and mindsets in comparison to the individuals that have not pursued entrepreneurial endeavors. The table 1 provides the details of the individuals who participated in this research.

and communication leader

and went overseas as a negotiator

Served since she was 18 years old

Management, Personality Profiles

Has taken mediation/conflict course through distance learning. And an event management certificate.

Company that has grown $500,000.00 this past year.

A financial service company that was not successful enough and was shut down. Then a Real Estate

one of our business mentors.

dreams and goals. Process of identifying suitable candidates starts with a relaxed mutual interview with

5) Leadership & Development Consultant offering mentorship program to help people achieve their

with one of the most powerful eCommerce companies in the world Customer rewards programs

4) Online mall stocked full of everything for home, health, appearance and life. Company teamed up

3) Non-profit helping faith based organizations have a greater impact through e-commerce

childcare and early education option in the warmth of a home environment.

2) Kids Day Care Franchise first childcare company in western Canada to offer parents a professional

corporate innovators.

1) Public Relations/reputation management firm. Its clients are high profile individuals and high growth

Company Description

Negotiations and Mediation, Project

received Sales training,

and still involved today. Training

Joined in 1992, served over seas

and public affairs.

works under strategic management

Joined forces as a pilot and now

still actively involved today.

Served 24 months over seas and

Military Background

Table 1: Background and Details of Military Entrepreneurs Name

Peter

Graham

Captain Elisa

Joined in 2002, and served Corporal Kelvin overseas. Still involved as an instructor to new recruits.

Stage of Entrepreneurship

Entrepreneur. Started 5 ventures in Calgary.

Entrepreneur started 2 companies. 1 still

running today

Initial stage of entrepreneurship

Seeking Employment

military entrepreneurs surveyed for this paper shared similar characteristics and overlapping motives explaining their success in starting a new business. Both receiving educational support while serving and recognized the opportunity possible by utilizing the training received in the military.

The contrast seen from the non-entrepreneurs was valuable because it was more

focused on finding the backup plan of education or seeking support from others to make the transition back to civilization more tranquil.

In table 2 we outline key themes in the

entrepreneurial and non-entrepreneurial personnel.

The results of this research showed some common theme from both samples surveyed. The main motive for the two entrepreneurs to start their own venture was the desire to be financially free and take control of their future by making the initiative to choose and not conform with the rest of society within the work force. They also expressed the value they have for helping others and that their businesses supported a greater good than just generating profits. The personnel who were surveyed by did not have their own venture provided interesting insight to how entrepreneurship is viewed within the military.

Through the 12 participants that expressed interest in participating in the paper, when asked if they knew a military personnel who had started his or her own venture the typical response was “that is very uncommon, the military doesn’t attract those types of people”.

Another

interesting response was when the participants were asked if they had any advice for other military personnel going through this same transition and the answer was commonly expressed to trust in their training and be confident in promoting themselves and the skills they have.

Table 2: Key Themes Responses The important things learned through the - It teaches you how to be more confident about taking risk and managing it. process of transitioning out of the military

- Military helped me develop the skill set I currently have. My broad view on life - It has made me a lot stronger. Emotionally and physically than I ever gave myself credit for. - I am intolerant of people who complain about things that don’t matter when they have so much. - How general people have no idea what it takes and what we go through.

Your experience with the military and -

These worlds aren’t so different. Same skills different context.

transition back to civilization to the general -

The skills I developed on both sides can help me no matter the environment

public

-

Everyone can push themselves a lot further.

-

There is a huge disconnect between manager and leader

-

Get a formal education because the civil world needs it and be able to translate military skills into business terms so you can get hired.

Challenges faced in transitioning to an -

Emotional control. Maintaining to think big and not get sucked back to getting a

entrepreneur

cheque. -

Support. Without support from those around you the odds are you would give up.

Observations and advice for new military

-

Don’t be scared. Take risks and trust in your training.

entrepreneurs

-

I would say that military skills in the area of time management, leadership and problem solving are highly sought out by civilian companies.

-

Be patient. The other thing is sell yourself.

-

Seek others who have shared your experiences.

-

You separate leadership and management. Civilian world doesn’t understand the difference.

The Model

To better explain the key factors that contribute to military entrepreneurial success, we have created a model to provide a visual representation in the form of a poppy flower. The three factors to a military entrepreneurial success include:

Mentors/Support Systems (Steam) Military Training (Leafs) Education (Flower Pedals)

The steam of the flower represents a person’s foundational being that is made from external factors that nurture personality and build character over a person’s lifetime. For example: parents, values, and physical surroundings all contribute in the make of a person and build the framework of an individual’s disposition.

In application, the interview completed by Elisa had

her explaining that the reason why she joined the military was because her “Dad served 38 years in the military and I loved everything about him. He is a role model. I want to be like my dad”.

Due to her surroundings and parental figures, she had an aspiration to be in the military. She is now in a higher ranking position within the forces and values her dad’s teaching as it influenced who she is today.

The next portion of the model considers the leaf of the flower in relation to military training. We make the connection that the leaf(s) grow based on the new skills and situations an individual puts them-self in. The leaf directly fastens to the existing values and disposition of a person, but changes the overall shape of who they are.

In reference to the military, the skills

individuals gain from their training in leadership, strategy, risk/conflict management, and more shape a new mindset and view of how they see the world. Within the interview process Graham said “I think the biggest thing for me is that the military helped in many ways to develop the skill sets I currently have. My broad view on life has developed as a result of traveling to many places around the world and across North America as a result of being sent there by the Canadian Forces”.

The final stage of the model would be the flower pedals. This would symbolize the opportunity education provides for military veterans and how it flourishes entrepreneurial success. By pairing academia with military training, a person can apply their existing knowledge to the framework education provides and be more effective and efficient in the work they produce. By having an educational support system, individuals are empowered to be innovative and entrepreneurial because they form a community of like-minded entrepreneurs who can share and expand existing ideas to be better and connect with a group that is working towards the same goal towards making money, being successful, and helping others. Within the interviews, key names of other military entrepreneurs would continually be brought up in the discussion. This is a small group of military entrepreneurs have formed a tight knit group and offer support to each

other. One of the interviewed talk about entrepreneurship as “having the freedom to choose your level of success in life. You are not limited by what others think or feel about you as when you work in a job. The more successful I can become as an entrepreneur the more of an impact I will be able to make on society”. Conclusion

The findings of this study outline proactive suggestions on how to prepare for the future discharge of our troops and increased demand for employment. The United States have taken advantage of the military entrepreneurship and are now providing support to military personnel who are making the transition from military service to the civilian workforce. By offering specific training programs to teach small business ownership and entrepreneurship, the goal to bridge the gap of military and entrepreneur mindsets is viable. Providing an opportunity for veterans to use their leadership, organization, and team-building skills, allows them to determine their own course of action for re-entering the workforce. In following suit, other countries should assess the area of military entrepreneurship research to provide a better framework and future development to address this need before it becomes an issue.

The next step to implement this model is to get it into the practice for governments, policymakers, and educational institutions. If these channels support a program that is targeted to the growth of military entrepreneurship, we can proactively improve our economy by providing veterans with the tools to be productive, create jobs, and grow our financial well being as a country.

We believe further examination regarding military entrepreneurship is warranted to better understand what action can be taken to create support systems that aid the transition for personnel back to the civil workforce. There are strong linkages between entrepreneurship and military training that should be further explored, and translated to be recognized within our employment sectors. Our efforts were limited in collecting a large sample of participants for the purpose of this paper, but further research focused on existing military entrepreneurs and the industries they specialize in would provide insight to sectors of employment that more directly translate military training to civil working skills and would better convey the social need for military entrepreneurship within Canada, and across boarders.

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