Water_and_Sanitation_Enterpreneurs.pdf

WORKING PAPER 4

Private and social enterPrise engagement in water and sanitation for the Poor Water and sanitation entrepreneurs in indonesia, Vietnam and timor-Leste: traits, driVers and chaLLenges Juliet willetts, Janina murta & anna gero With support from Nurul iNdarti, rokhima rostiaNi, diNa ocvita daulay, ly Bui ha, doaN trieu thaNh, Jose lucas da silva & domiNgas dos reis

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‘Enterprise in WASH’ is a joint research project led by the Institute for Sustainable Futures (ISF) at the University of Technology Sydney, which investigates the role of private and social enterprises in the delivery of water, sanitation and hygiene (WASH) services for the poor. Partner organisations are shown below. For other Enterprise in WASH publications, see www.enterpriseinwash.info aBout the authors The Institute for Sustainable Futures (ISF) was established by the University of Technology Sydney in 1996 to work with industry, government and the community to develop sustainable futures through research and consultancy. Our mission is to create change toward sustainable futures that protect and enhance the environment, human well-being and social equity. We seek to adopt an inter-disciplinary approach to our work and engage our partner organisations in a collaborative process that emphasises strategic decision-making. For further information visit: www.isf.uts.edu.au citation Willetts, J., Murta, J., Gero, A. (2016), ‘Water and sanitation entrepreneurs in Indonesia, Vietnam and Timor-Leste: Traits, drivers and challenges’, Enterprise in WASH – Working Paper 4, Institute for Sustainable Futures, University of Technology Sydney acKnowledgements The authors thank research partners Research in Economics and Business (P2EB) at University Gadjah Mada (UGM) and Plan Indonesia for their role in supporting research conducted in Indonesia. Nurul Indarti and Rokhima Rostiani from UGM supported the design of the data collection tool and fieldwork conducted in Indonesia, as well as data collection and analysis. Dina Ocvita Daulay from Plan Indonesia offered data collection support.

The authors also thank research partners Centre for Natural Resources and Environmental Studies (CRES), Vietnam National University (VNU) and SNV for their role in supporting research conducted in Vietnam.

Ly Bui Ha from CRES and Doan Trieu Thanh from SNV supported the design of the data collection tool and fieldwork conducted in Vietnam. We also sincerely thank Mr. Hoan Tran for his support during fieldwork.

Research conducted in Timor-Leste was supported by WaterAid through logistics support and review of the research design and outputs. Data collection was conducted in partnership with Universitas Nationale Timor Lorosa’e (UNTL) with assistance from Jose Lucas da Silva and Domingas dos Reis. The research also benefited from insights from Marcal Gusmao form UNTL, and staff of the Australian aid-funded Rural Water Supply and Sanitation Program (known by its Tetum acronym BESIK), particularly Keith Simpson, Olivier Gaucher, Michelle Whalen and Ansye Sopacua. The Market Development Facility (MDF) funded by the Australian aid program also provided useful input.

Dr Paul Crawford is thanked for his literature review on entrepreneurship and social entrepreneurship that underpinned the research design and tools.

We would also like to thank ISF researchers Reza Memary and Jenni Downes for their contributions to data analysis that underlies this paper.

This research was funded by the Department of Foreign Affairs and Trade through the Australian Development Research Awards Scheme.

institute for sustainable futures University of Technology Sydney PO Box 123 Broadway, NSW, 2007 www.isf.edu.au

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Enterprise in WASH Working Paper 4 – 3

This paper explores the entrepreneurial and pro-social traits, motivations and challenges of different types of water and sanitation entrepreneurs in Indonesia, Vietnam and Timor-Leste. The paper also explores the socio-cultural dynamics that affect women’s involvement in leading water and sanitation enterprises.

The research analysed the presence of five entrepreneurial traits (need for achievement, proactiveness, risk-taking, innovativeness and need for independence) amongst the entrepreneurs and the relationship between the presence of these traits and business success. Most entrepreneurs demonstrated one to five traits and that need for achievement and proactiveness were the most commonly demonstrated traits. A positive relationship between the number of traits and business success was also found. Proactiveness and risk-taking were the key traits differentiating successful entrepreneurs from unsuccessful entrepreneurs across the majority of the sample.

The research also analysed the presence of pro-social traits amongst the entrepreneurs and what types of motivations underpinned the presence of this trait. Most entrepreneurs demonstrated medium to strong pro-social traits, however they were less present amongst sludge removal entrepreneurs as opposed to water enterprise leaders or sanitation entrepreneurs. Motivations underpinning pro-social behaviour included self-satisfaction, religious beliefs, empathy for the poor and extrinsic factors associated with other positions or roles held by the entrepreneur.

The research identified a diverse range of motivations for entrepreneurs to engage in the provision of water and sanitation services beyond pro-social motivations.

These included extended social networks, new skills, knowledge and experience, status and acknowledgment, pride, and lifestyle and time flexibility offered by the job.

Membership of associations of water and sanitation enterprises was found to provide benefits to entrepreneurs. Involvement in associations was found to enhance motivation for existing entrepreneurs to continue their engagement in water and sanitation service provision, and associations also encouraged the involvement of new entrepreneurs.

The most reported benefits from association membership included peer-to-peer learning and capacity building opportunities, sense of camaraderie, friendship, and sense of group mission.

Other less pronounced benefits included access to information, networking, opportunity for new experiences, fair competition, access to cheaper materials, access to credit, and capacity for advocacy concerning common issues shared by the association members.

Concerning challenges faced by the entrepreneurs, the research analysed the presence of five broad categories of challenges: ‘access to market’ challenges, financial challenges, human resource challenges, operational challenges, and government and regulatory related challenges. Dominant challenges amongst water enterprises in Indonesia and Vietnam were operational challenges as well as difficulties accessing finance in terms of obtaining bank loans or excessively high interest rates.

The dominant challenge amongst sanitation enterprises concerned adequate consumer demand. Human resource challenges for both water and sanitation enterprises revolved around access to staff with relevant skills.

Government and regulatory challenges were more pronounced in Indonesia than Vietnam, reflecting the stronger enabling environment for private sector development in Vietnam.

Lastly, concerning gender equality aspects, findings from this study confirmed that entrepreneurial activity in water and sanitation in each of the countries covered in this study was male-dominated. The research sought to understand the dynamics that may bring about these gender imbalances by analysing the relationship between gender and business success and gender and pro-social traits in the context of Indonesia and Vietnam. Open-ended questions concerning how easy or difficult it was for women to become entrepreneurs were also used to explore this issue. The level of success amongst female entrepreneurs in Indonesia was lower than male entrepreneurs, SUMMARY

4 – Enterprise in WASH Working Paper 4 indicating that particular forms of support are required to support female-led enterprises. Female entrepreneurs in Vietnam demonstrated a stronger presence of pro-social traits than male entrepreneurs, a finding which could be capitalised upon in efforts to serve the poor. Amongst entrepreneurs in Indonesia and Vietnam, the perception that it was easy for a woman to become an entrepreneur was predominant. However, the reasons provided for answers to this question pointed to the complexity of the issue, and the slowly changing gender norms in the relevant countries.

The findings of this research are relevant to both Civil Society Organisations (CSOs) applying market-based approaches as well as governments interested to support private sector roles in water and sanitation.

Understanding the drivers for individuals to engage in water or sanitation entrepreneurship can help capitalise on those motivations. Awareness of the characteristics of successful water or sanitation entrepreneurs as well as an understanding of typical challenges faced can be used to devise targeted strategies to support such enterprises. Supporting associations and membership of associations is likely to facilitate greater business success. Finally, addressing the gender gap in women’s involvement in water and sanitation enterprises is needed, and facilitating specific support to female entrepreneurs should be an area of focus going forward.

SUMMARY

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1. INTRODUCTION

This paper explores findings across three country-level studies into the motivations, drivers and barriers experienced by water and sanitation enterprises in Indonesia, Vietnam and Timor-Leste. Empirical research for these three studies was conducted between November 2014 and March 2015. A total of 172 water and sanitation enterprises were interviewed altogether, using a semi-structured format.

In this research we focus on the leading edge developments in each country;

this is not a comprehensive study of all possible enterprise roles. This means that in Indonesia, the research was undertaken in five provinces (West Java, Central Java, Yogyakarta, East Java and East Nusa Tenggara), where international agencies have focused their efforts to support water and sanitation enterprises.

In Vietnam, the research focused on five provinces in the Mekong area (Tien Giang, Dong Thap, Long An, An Giang, and Ben Tre) for water enterprises, and the district of Muong Ang in the Dien Bien province, north west Vietnam, for sanitation enterprises. In Timor-Leste, where private sector involvement is in its early stages, interviews were conducted in Dili and four districts (Liquiçá, Baucau, Manatuto and Maliana).

A diverse range of motivations for entrepreneurs to engage in the provision of water and sanitation services beyond pro-social motivations were identified.

In Indonesia these included University Gadjah Mada (UGM) and Plan Indonesia. In Vietnam these were the Centre for Natural Resources and Environmental Studies (CRES) of Vietnam National University, East Meets West Foundation, and the SNV Development Organisation. In Timor-Leste our partners were the National University of Timor Lorosa’e (UNTL) and WaterAid Timor-Leste. In Indonesia, the research also involved cooperation with the World Bank Water and Sanitation Program.

In this paper we provide background information on the emergence and roles of water and sanitation enterprises in each country (Section 2) and a characterisation of the different types of water and sanitation enterprises covered in this research in each country (Section 3). This is followed by a discussion of the presence of entrepreneurial and pro-social traits and motivations amongst water and sanitation entrepreneurs in each country, as well as other types of motivations beyond pro-social motivations (Section 4). We also we discuss the relationship between success and these traits, and analyse common contextual factors influencing the success of entrepreneurs and the enterprises they led (Section 5). Lastly, we discuss contextual, cultural and gender dimensions of entrepreneurship and their influence on the success of the relevant enterprises (Section 6).

Further details of the country-level findings and methodology are contained in relevant research reports (Murta et

al. 2015a; Murta et al. 2015b; Gero et al.

2015; Willetts and Murta 2015). Further details of the methodology are provided in Appendix 1.

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2. BACKGROUND

In Indonesia, Vietnam and Timor-Leste, various types of enterprises play roles in the provision of water and sanitation products and services (Willetts et al. 2015;

Murta and Willetts 2014; Gero and Willetts 2014; Murta and Willetts 2014b). These range from fully for-profit enterprises, to hybrid organisations with a commitment to a social purpose whilst operating with a business model, to collective social enterprises. Table 1 provides an overview of these different types of organisations in each of the countries in this research. A total of 172 enterprises were interviewed.

The emergence and stages of development of these enterprises are shaped by each country’s history and the dynamics of its political economy, and to some extent, they reflect the status of each country’s private sector development (Willetts et al. 2015).

In Indonesia, for example, although there are a large number of small and medium-sized enterprises, there are significant shortcomings in business skills and capacity, particularly in rural areas

(Willetts et al. 2015). Further, government private sector support agencies tended to focus on sectors with higher visible connections to socio-economic outcomes such as food, construction and craft businesses (Murta and Willetts 2014a). Therefore, enterprises providing water and sanitation services such as sanitation entrepreneurs and formalised community-based organisations managing water supplies have relied largely on the support of external agencies for capacity building support (Willetts et al. 2015; Murta and Willetts 2014a). For example, the formation of sanitation enterprises has been largely supported by development agencies such as the Water and Sanitation Program (WSP) and Plan International who have trained local masons and artisans to become entrepreneurs. In East Java and Grobogan, sanitation entrepreneurs have formed associations which provide a range of support services and functions to entrepreneurs such as access to cheaper materials, networking and cross-learning opportunities, training and taBle 1: Types of privaTe and social enTerprises playing roles in The provision of waTer and saniTaTion producTs and services in rural indonesia, vieTnam and Timor-lesTe (willeTTs eT al. 2015) suBsector indonesia vietnam timor-leste

Water • Formalised community-based organisations (CBOs), village- owned enterprises or cooperatives managing rural water supply

• District associations of water CBOs offering loans and technical support

• Distributors of household water treatment products

• Small-scale private water service providers

• Cooperatives managing rural water supply and other services

• Social enterprises for localised bottled water production

• Distributors of household water treatment products

• Private companies and not-for-profit enterprises providing support to service provision

• Kiosks retailing water spare parts in addition to other small household products

• Association of community-based water committees offering support to water CBOs

Sanitation • Sanitation entrepreneurs and masons providing sanitation products and services

• Retail shops with sanitation products

• Associations of sanitation entrepreneurs offering training, loans and technical support

• Small private de-sludging service providers

• Masons building toilets, usually as a side business to building houses

• Retail shops selling sanitation products

• Small private de-sludging service providers

• Sanitation entrepreneurs providing sanitation products and services

• Retail shops selling construction materials in district capitals

Enterprise in WASH Working Paper 4 – 7 advocacy (Murta and Willetts 2014a).

In response to a lack of institutions and functions which support service delivery, water community-based organisations (CBOs), water and sanitation enterprises have also started to form associations at the district, provincial and national levels.

These associations provide a range of support functions to the water CBOs such as access to technical support and access to credit (Murta and Willetts 2014a).

Of the three countries studied, Vietnam is the one with the highest level of private sector development and innate business activity (Willetts et al. 2015).

The government is becoming increasingly interested in the role the private sector can play in various sectors, including the WASH sector (Gero and Willetts 2014). As a result, in the rural areas of the Mekong region in particular, there is a growing number of private enterprises providing water supply services. However, there are few enterprises specifically focused in the provision of sanitation products and services in rural areas, particularly in remote mountainous regions where business activity tends to be lower than in the more densely populated plains due to high supply-chain and transportation costs (Willetts et al. 2015; Gero and Willetts 2014).

In contrast, the private sector of Timor- Leste is nascent, with little economic activity beyond the capital, Dili. Therefore, many of the factors necessary to support enterprise development, such as transport infrastructure, financing mechanisms and capacity building opportunities, are not yet present. While the government has made some efforts in this direction, these have been largely focused on the construction sector (Willetts et al. 2015; Murta and Willetts 2014b). Therefore, the engagement of enterprises in the provision of water and sanitation products in Timor-Leste is less visible than in Indonesia and Vietnam.

The enterprise roles that are found in Timor-Leste have been largely initiated through development agencies and are highly dependent on external support from these agencies, and thus remain fragile (Murta and Willetts 2014b).

2. BACKGROUND

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This study focused on a sub-set of the different types of water and sanitation enterprises in each country. In the following sections we describe the typical characteristics of these enterprises.

indonesia In Indonesia, this study focused on three types of water and sanitation enterprises: formalised CBOs managing a rural water supply (water enterprises), sanitation entrepreneurs and sludge removal enterprises. The following is a characterisation of these enterprises.

water enterprises (n = 21): Each of these was a CBO managing a rural water supply scheme. Most of the schemes were initiated with financial support from development agencies and government (86%). The water enterprise leaders interviewed were all male and predominantly aged between 36 and 55 (81%). Almost half had a university degree (48%). Most had previous work experience (71%), mainly in the public sector (73%). Most enterprises were small, with six to ten people (81%), and part of an association of water CBOs (76%).

Most were located in rural areas (95%) and more than half had been in operation for more than ten years (62%). The vast majority (95%) were formal enterprises, and 52% were village-owned enterprises.

The number of households served by these enterprises ranged from 186 to 2,800 households, with the majority (71%) serving less than 1,000 households. The majority (86%) served up to four villages.

sanitation enterprises (n = 56): These were mostly small businesses with one to ten people (89%), predominantly informal (89%), producing and selling toilet pans (61%) and offering toilet installation services (78%). More than half (52%) operated in rural areas. Of the sanitation entrepreneurs interviewed, the majority (87%) were males aged between 36 and 55 (79%), with qualifications above senior high school (59%), and with previous work experience (88%) in a variety of sectors, including a significant proportion (37%) concurrently working for the government (e.g. as sanitarians). Most enterprises (71%) were recent, with up to five years of operation, and belonged to an association of sanitation entrepreneurs (75%).

sludge removal enterprises (n = 24):

These were all small businesses with one to ten people, predominantly informal (63%), providing faecal sludge collection services to both households and institutions (88%) in urban and suburban areas (96%). Most of the leaders of these enterprises were male (96%) aged between 36 and 55 (63%), with qualifications equal to or above senior high school (75%), and with previous work experience (67%) mainly in the private sector (94%). More than half these enterprises had been in operation for more than ten years (51%) and a smaller proportion were members of a sanitation-related association (25%).

vietnam In Vietnam, this study examined two types of enterprises engaged in water and sanitation services: water enterprises and masons. The following provides a characterisation of these enterprises.

water enterprises (n = 20): These were small-scale private water service providers who were able to buy a water system or cooperate with the government through a lease contract to manage a water system. The enterprise leaders interviewed were predominantly male (80%), aged between 46 and 65 (74%), with high school qualifications or above (90%). Most also had previous work experience (95%), the majority of which was in the public sector (65%).

All enterprises were formal and most were located in rural areas (90%). More than half had a workforce of one to ten employees (55%), and had been in operation for more than ten years (60%).

The number of households served by these enterprises ranged from 148 to 13,500 households, with most (60%) serving more than 1,000 households.

Almost all enterprises (65%) served five or less communes.

masons (n = 20): These were predominantly informal businesses (70%), and provided a range of masonry services, including toilet installation services (85%) and the production of toilet pans (40%). Masons worked alone or in teams including a master mason, skilled masons, and assistants, with the master mason playing a business leadership role. The masons interviewed were predominantly

3. ENTERPRISE CHARACTERISTICS

Enterprise in WASH Working Paper 4 – 9

3. ENTERPRISE CHARACTERISTICS

male (60%), under 36 years old (75%), with secondary school education or lower levels of qualification (65%), and no previous work experience (80%). Most had been active as masons for less than ten years (60%) and devoted part of their time to other jobs concurrently to their masonary business (90%). Only a small proportion (15%) was fully dedicated to building toilets, whereas the rest offered other types of construction services, such as building houses.

timor-leste In Timor-Leste, this study examined three types of enterprises: water contractors, district retailers of construction materials, and local NGO-led sanitation enterprises.

The following is a characterisation of these enterprises.

water contractors (n= 14): These construction companies play an important role in the development of the country’s rural water services. In recent years, government contracts for water system construction have been tendered to such registered companies, as have systems built under the Australian aid-funded Rural Water Supply and Sanitation program ‘Bee, Saneamentu no Ijiene iha Komunidade (BESIK)’. The owners of water contractor businesses interviewed were predominantly male (78%), and half were between 35 and 45 years old. Almost half (43%) were university educated, a few had graduated from technical schools (14%) and the remainder had completed high school (43%). Their diverse work experience was in the private sector (45%), self-employment (21%), NGOs (1%), banks (1%), agriculture (1%) and the public sector (14%). The ages of the companies varied, depending on whether they were district-based or national. Almost all national-based companies were between 12 and 18 years old (93%), whereas all district-based companies were between three and 12 years old. In general, all the companies were relatively small, with no company employing more than 10 people, and most staff only working on a project-by-project basis.

district retailers of construction materials (n = 12): These were materials supply shops located in district centres.

They play a major role in the supply chain of sanitation products as they provide the majority of toilet building materials available in the market, including imported toilet pans, cement and other related construction materials. The retailers of construction materials interviewed were predominantly male (67%), half were 35–45 years old (50%) and half were 46–55 years old (50%), and most had high school qualifications or higher (67%). The majority had previous working experience (67%), mainly as employees for others or in self-employed occupations or in business (83%). Most sold toilet pans (75%), although these were not the core focus of their business, which included a broad range of other products such as basic food and household items.

All businesses were formally registered and 67% had more than ten years of operation.

The majority had ten or less staff (75%), although a small percentage operated a larger set of business activities associated to their retail business and had more staff (25%). These additional business activities included concrete and brick production, welding, maintenance services within the warranty period of some products, and construction contracting.

local ngos (n = 5): Locally made sanitation products are provided by local NGO-led small enterprises supported by international development agencies.

These represent only a small percentage of the sanitation products in the country, but they are expected to play a role in developing locally appropriate solutions for rural community sanitation needs.

The leaders of local NGOs interviewed were all male, predominantly in the 35-45 age bracket (four leaders), and university educated (four leaders). Most leaders had previous working experience within the NGO sector (three leaders) and only one had previous business experience. All NGOs had been trained in how to produce toilet pans through their international NGO partners, although only three had proactively engaged in selling these products as a business activity. All NGOs had been operating for nine to 15 years.

Three of the NGOs had a fixed number staff (five to six) with permanent salaries, whereas the other two assembled teams depending on the availability of contracting services to international NGOs. Three NGOs had established businesses selling sanitation products which were separate to the NGO. However due to insufficient sales, two of these businesses had stopped operating.

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4. TRAITS AND MOTIVATIONS

How entrepreneurs behave is determined by their personality traits such as entrepreneurial and pro-social traits, and their motivations. Understanding these traits and motivations can us help further understand the drivers for individuals to engage in water or sanitation product and service entrepreneurship, the characteristics of potentially successful water or sanitation entrepreneurs, and strategies to interest them in water and/ or sanitation entrepreneurship.

4.1 entrePreneurial traits Research in the field of entrepreneurship has shown that individuals who are entrepreneurial are more likely to have certain personality traits than those that are not. These traits include: a proactive approach, need for independence, need for achievement, innovativeness, and risk taking propensity (Baum et al. 2007; Ernst 2012; Douglas, E. 2009 in Carsrud and Brannback 2009).

Studies have found evidence of small to moderate positive correlations between these traits and business success (Baum et al. 2007). Of all entrepreneurial traits, “need for achievement stands out consistently as a principal motive for entrepreneurial success” (Wu et al.

2007, p.930). Wu et al. (2007) found that the effect of risk-taking propensity on entrepreneurship and business success, although positive and significant, was small when compared with other personality traits (Baum et al. 2007).

Concerning need for independence, although studies have shown that it is positively correlated to entrepreneurship and business success (Baum et al. 2007;

Douglas 2009), there is little evidence on whether this trait hampers business growth (Baum et al. 2007).

Personality traits cannot be assumed to be predictors of individual actions (Baum et al. 2007) and it cannot be assumed that they are “necessary or sufficient for entrepreneurial activity”. Rather, they should be regarded as “facilitators of entrepreneurial activity” (Ernst 2012, p. 55).

The following sections analyse the presence of entrepreneurial traits amongst the respondents in this research.

We first examine the prevalence and patterns of the types of traits most commonly demonstrated, and we then outline the ways in which each of the five traits manifested.

Prevalence of entrepreneurial traits In general, most entrepreneurs exhibited several of the traits, and amongst all traits, need for achievement and proactiveness were the most commonly demonstrated. Further detail of these findings is presented below.

total number of traits demonstrated:

Leaders of enterprises in the water sector in all three countries demonstrated one to five entrepreneurial traits.

Amongst sanitation-related enterprises, those in Indonesia also exhibited multiple traits (one to five). However, sanitation-related enterprises in Vietnam and Timor- Leste demonstrated only one to two of the traits (Table 2). The smaller number of traits observed in the sanitation sector in Vietnam can be explained by the fact that most masons did not consider themselves to be entrepreneurs. Rather their vocation was one of necessity in that they felt they had no other choices for income generation. In the case of NGO-led sanitation enterprises in Timor- Leste, the low number of entrepreneurial traits is consistent with the fact that the leaders of these enterprises did not have experience in running a business, as their history of employment experience was predominantly within the NGO sector. In the case of the retailers of construction materials in Timor-Leste, evidence supporting the presence or absence of traits other than need for achievement and proactiveness was insufficient to draw strong conclusions. However, the smaller number of entrepreneurial traits found amongst this type of respondent was consistent with evidence of their limited business expertise and predominantly ad hoc and rudimentary approaches to business management.

Further, it reflects the context of Timor-Leste’s nascent private sector development, with a shortage of general business skills, and the absence of many of the customary business support functions (Murta and Willetts 2014b).

types of traits: Across different types of enterprises, need for achievement

Enterprise in WASH Working Paper 4 – 11 and proactiveness stood out as the ones most commonly present. Need for achievement was evident across all types of enterprises, and proactiveness was present across entrepreneurs of all types of enterprises except masons in Vietnam. For some enterprises, in addition to looking for the presence of traits, we sought to identify which ones predominated. These enterprises included water- and sanitation-related enterprises in Indonesia and water enterprises in Vietnam (Table 2). In these cases, need for achievement and proactiveness stood out as the dominant traits.

Risk-taking, need for independence, and innovativeness were the traits less commonly present across the whole sample. Although risk taking was present at some level amongst all types of entrepreneurs in Indonesia and in water enterprises in Vietnam, risk taking was only strongly pronounced amongst Indonesian sludge removal entrepreneurs and water enterprise leaders in Indonesia.

Regarding need for independence and innovativeness, these traits were only evident amongst water contractors in Timor-Leste.

In the following sections the presence of each entrepreneurial trait amongst the respondents of this study is analysed.

Need for achievement Need for achievement is considered to be at core of entrepreneurial activity.

This trait is associated to an individual’s relentless ambition and determination to pursue new opportunities and/or achieve success (Ernst 2012). Individuals with high levels of this trait tend to enjoy moderately challenging tasks, overcome obstacles, excel themselves, and rival and surpass others. Further, they take responsibility for their own performance by seeking feedback about their performance and exploring ways to improve it (Baum et al.

2007; Douglas 2009).

Need for achievement was present amongst 64% of the overall sample (n= 172). Entrepreneurs demonstrated a need for achievement by, for example, articulating clear future goals for the future of the business, explaining how the further development of their businesses was important for their own self-actualisation and success, and/or noting how they enjoyed challenges. For taBle 2: proporTion of enTerprises exhibiTing parTicular enTrepreneurial TraiTs evidenT across differenT Types of enTerprises and counTries sector indonesia vietnam timor-leste

Water Water enterprises (n=21)

• Up to 5 traits present

• Dominant traits:

– Proactiveness (86%)

– Risk taking (71%)

– Need for achievement (48%)

Water enterprises (n=20)

• Up to 4 traits present

• Dominant traits:

– Proactiveness (53%)

– Need for achievement (47%)

– innovativeness (47%)

• No evidence of need for independence found.

Water contractors (n=14)

• Up to 4 traits present:

– Proactiveness (100%),

– Need for achievement (100%),

– innovativeness (71%)

Sanitation Sanitation enterprises (n=56)

• Up to 5 traits present.

• Dominant traits:

– Proactiveness (75%)

– Need for achievement (63%),

– innovativeness (48%)

Masons (n=20)

• Up to 1 trait present:

– Need for achievement (50%)

– Presence of other traits weak.

Retailers (n=12) Up to 2 traits present: need for achievement (100%), proactiveness (33%)

Sludge removal enterprises (n=24)

• Up to 5 traits present

• Dominant traits:

– Risk taking (88%)

– Proactiveness (79%)

– Need for achievement (71%)

– NGO led sanitation enterprises (n=5)

• Up to 2 traits present:

– Need for achievement (40%)

– Proactiveness (40%)

12 – Enterprise in WASH Working Paper 4 example, one water entrepreneur from Timor-Leste noted: “you need to want to do it…you need to be adventurous, to like a challenge, it is very challenging.” The finding regarding this trait is consistent with literature on entrepreneurship (Wu et

al. 2007), which considers this at the core of entrepreneurial activity.

Proactiveness Proactiveness is understood as individuals’ willingness to shape things and make the most out of opportunities available to them (Ernst 2012). This trait is associated with the entrepreneurs’ internal locus of control and belief that they can control their reality and environment, and beat the odds (Monsen and Urbig 2009; Baum et al. 2007). In contrast, individuals with an external locus of control believe that they are controlled by their surroundings and therefore tend to be more passive and act in reaction to their environment (Baum et al. 2007).

Proactiveness was present amongst 67% of the overall sample (n= 172). Entrepreneurs demonstrated proactiveness by, for example, noting a positive, practical attitude when faced with problems, for instance by seeking help from their social networks and approaching relevant institutions. One sanitation entrepreneur from Indonesia demonstrated this trait by noting that he was ‘not shy in asking questions and seeking for help’.

Risk taking propensity In the context of entrepreneurship, different authors consider risk taking differently, and a nuanced definition of risk-taking propensity and its drivers is needed. One perspective is that because entrepreneurship concerns decision-making under conditions of uncertainty, entrepreneurs are inherently risk-tolerant people (Baum et al. 2007). Entrepreneurs are often considered to have the ability to act boldly in the face of challenges or high uncertainty, and not let the fear of failure stop them from starting a venture (Ernst 2012). However, empirical evidence has demonstrated that entrepreneurs are not necessarily willing to take more risks than other individuals.

An alternative proposition focuses on risk perceptions rather than risk preferences.

This view focuses on the perception of risk rather than risk per se. It suggests that entrepreneurs may have similar risk preferences to non-entrepreneurs, but perceive risks differently, by overestimating their likelihood of success (Elfving et al. 2009; Douglas 2009). As Monsen and Urbig (2009) note, entrepreneurs may not actually perceive themselves as taking risks.

Varied but interrelated factors are at play in influencing how entrepreneurs may perceive risk differently. These include, for example, self-serving biases such as overconfidence, and decision-making approaches, greater entrepreneurial knowledge and experience, greater personal investments in searching for information to support decision-making, search activities, and access to information through social networks (Douglas 2009; Monsen and Urbig 2009).

On the other hand, Douglas (2009) argued that individuals with higher levels of self-confidence tend to devote less effort to searching for information and make decisions with less information than other individuals. As a result they bear greater risk, due to the limitations in their understanding of the risks at play.

Risk taking propensity was present amongst 38% of the overall sample (n= 172). Although risk-taking was present in sanitation and water-related enterprises in Indonesia and in water enterprises in Vietnam, no evidence of this trait was found amongst enterprises of any type in Timor-Leste. Entrepreneurs in Indonesia and Vietnam demonstrated this trait in their perceptions of the risks involved in taking a bank loan, and their risk perceptions of their business ventures. In contrast with entrepreneurs from these two countries, entrepreneurs from Timor- Leste demonstrated a greater aversion to taking bank loans. Although this suggests low levels of risk-taking propensity, it may also be a reflection of limited access to capital for small businesses in Timor-Leste and the high interest rates demanded by banks.

Need for independence Need for independence relates to an individual’s preference for decision-making autonomy and for avoiding rules and potential limitations of organisations.

Typically, entrepreneurs have decision-

Enterprise in WASH Working Paper 4 – 13 making autonomy. Unlike employees, they make decisions independently about their business goals and plans of action, and they control how they go about pursuing them (Baum et al. 2007; Ernst 2012).

Need for independence was present amongst 23% of the overall sample (n= 172). Entrepreneurs were considered to have this trait if they had initiated the business by themselves or if they noted the advantages of running a business independently of relatives. For example, one sludge removal entrepreneur demonstrated this trait by explaining that he first started in the sludge removal sector working for a friend but later decided to run his own business. The general low presence of this trait across the whole sample may be a reflection of the more collectivist cultures commonly found in Asian countries compared to Western countries. In general, in the sample, many enterprises were family, community or cooperative businesses.

In particular, family involvement was common in enterprises across all three countries. In Indonesia, family involvement in the business was evident amongst 46% of the sanitation entrepreneurs and 73% of the sludge removal entrepreneurs. Further, more than half of these entrepreneurs cited benefits of such family involvement including trust and reliability, lower wages, easier access to assistance and financial support, and easier communication. In addition, need for independence was higher amongst sanitation enterprises in Indonesia than water enterprises. This may be explained by the collective nature of the water enterprises included within our sample in Indonesia, as opposed to the more individually-based orientations of most sanitation enterprises.

Innovativeness Innovativeness is defined as an individual’s willingness and interest to pursue new and different ways of doing things, outside of conventional patterns (Marcati et al. 2008;

Baum et al. 2007). In an entrepreneurial context, innovation can be framed in terms of its content and its intensity (Massa and Tessa 2008).

In terms of content, innovation can relate to the development of new products, new technologies, new services, new processes of production, new markets, new business models or organisational management approaches, or new research into the business organisation (Baum et al. 2007;

Massa and Tessa 2008).

In terms of intensity, innovativeness can be radical or incremental, discontinuous or continuous, revolutionary or evolutionary, and major or minor (Massa and Tessa 2008). Innovative behaviour is also framed with relation to its association with other personality traits and the cognitive styles of individuals. In this respect, it can be classified as either general innovativeness or specific innovativeness. General innovativeness is related to an individual’s degree of openness towards new ideas, creativity in solving problems, and predisposition to make original decisions autonomously. Specific innovativeness relates to an individual’s degree of readiness to adopt innovations in a specific field earlier than others (Marcati et al. 2008).

Innovativeness was present amongst 38% of the overall sample (n= 172).

However, reported innovations were largely minor incremental improvements to existing products or services, or they were related to the adoption of existing technological innovations. Further, these were considered as relative innovations compared to a baseline of typical products, services and operational and management approaches observed within these enterprises’ sector. For example, one sanitation entrepreneur from Indonesia demonstrated innovativeness by offering toilet pans in different colours with the aim of attracting customers. One water entrepreneur from Vietnam and another from Indonesia demonstrated a degree of innovativeness by starting to sell new products and services in addition to water service provision to their customers. Additional products and services included pipes and taps and drinking water refilling and pipeline installation services. The overall low level of innovativeness in our sample is surprising as regards sanitation, where there is perhaps greater opportunity for innovation in terms of technology, product design and business models than is the case for water enterprises.

14 – Enterprise in WASH Working Paper 4 entrepreneurial traits and success We tested the relationship between the presence of entrepreneurial traits and respondents’ levels of business success.

However, as explained earlier, we did not test this relationship for masons in Vietnam and water and sanitation enterprises in Timor-Leste, given the stronger qualitative approach in these studies.

The level of success was assessed by analysing the enterprises’ profit growth after establishment and over recent years, monthly revenue in the past year, amount of accumulated assets per year, and clarity of vision about the future of the business.

We found a positive relationship between business success and the total number of entrepreneurial traits amongst water enterprises in both Indonesia and Vietnam and enterprises in the sanitation

4. TRAITS AND MOTIVATIONS

sector Indonesia. As Figure 1 below shows, a higher number of traits was found amongst successful enterprises than amongst those that had lower levels of success or were unsuccessful.

We observed similarities in the dominant traits evident amongst leaders of successful enterprises across different sectors and countries. Proactiveness and risk taking were strongly present amongst leaders of successful water enterprises in both Indonesia and Vietnam, as well as sanitation enterprises in Indonesia. In the case of sludge removal enterprises in Indonesia, the main differentiating factor in terms of traits of high success and low success enterprises was ‘need for independence’.

This suggests that in this context, sludge removal businesses functioned best when the entrepreneur was able to operate with a high level of autonomy.

figure 1: number of enTrepreneurial TraiTs versus level of success

2.9

3.3 3.3

Unsuccessful Some success High success

Av er ag e nu m be r o f tr ai ts

Sludge removal enterprises Indonesia

2.2 2.6

3.4

Unsuccessful Some success High success ag e nu m be r f

Sanita2on enterprises Indonesia

1.0

2.3

3.0

Unsuccessful Some success High success ag e nu m be r f

Water enterprises Indonesia

0.9

2.4

2.0

Unsuccessful Some success Highly successful ag e nu m be r f

Water enterprises Vietnam

Enterprise in WASH Working Paper 4 – 15

4.2 Pro-social traits

and motivations The term ‘pro-social’ is often used to explain the tendency of a person to behave in a way that benefits others and promotes wellbeing in the society (Brief & Motowidlo, 1996). Ernst (2012) explain that pro-social behaviour is motivated by feelings of empathy and compassion for people affected by social issues, and a sense of obligation to help those in need. In this sense, in addition to the commitment and determination that a traditional business entrepreneur has, social entrepreneurs also have an interest contributing to a social cause and they have lower expectations of obtaining significant financial gains (Guclu and Dees, 2002; as cited in Ernst 2012).

For example, tolerating low profit margins due to a desire to offer water tariffs that are tailored to the customer’s financial capacity to pay is indicative of pro-social behaviour. Such pro-social behaviour can occur as a result of the intrinsic motivations of the entrepreneur, or it could be the result of external pressure from the enterprise’s customer base. For instance Gero and Willetts (2014, p.11) found that some water enterprises in Vietnam were regarded by community members as social enterprises and hence they were expected to offer low water tariffs and tolerate low profit margins: “It [water supply service delivery] is like a social enterprise, so we are not able to increase the tariff. With the current tariff the enterprise still has profit, even if not so much.”

Similarly, offering customers the option to pay by instalments is indicative of pro-social behaviour, as it acknowledges a customer’s financial situation, which may not permit for full payment upfront. Murta and Willetts (2014a, p.11) report that in Indonesia some sanitation entrepreneurs demonstrated pro-social traits by offering lenient instalment payment terms and conditions, and by being flexible about late repayments from their poorer customers: “[repayments] can take one week, one month, one year, one-and-a half years … we’re not only about business, it is a social purpose.”

Presence of pro-social traits Medium and strong pro-social traits were present amongst the majority of the respondents across different sectors and countries. Medium and strong pro-social traits were evident amongst 67% of the respondents from Indonesia and Vietnam.

In Timor-Leste pro-social traits were evident amongst 52% of respondents.

As Table 3 shows, these traits were predominant amongst five out of the eight different types of respondents.

These five groups included water and sanitation enterprises in Indonesia, water enterprises in Vietnam, and water contractors and sanitation enterprises in Timor-Leste. Weak pro-social traits were predominant in sludge removal entrepreneurs in Indonesia and masons in Vietnam (Table 3, next page).

water and sanitation enterprises in indonesia and vietnam were considered to have demonstrated medium to strong pro-social traits if, for example, they showed pro-social concerns when articulating the goals of their enterprises, what led to their creation and personal benefits gained from it, and/or offered flexible payment options for customers who faced financial difficulties. For example one water enterprise leader from Vietnam demonstrated medium pro-social traits by noting the goal of his enterprise was “to bring benefits to society, lessen burden for the poor, and help them have the chance to use fresh water” and adding that if people didn’t “have enough money to pay for a new connection, they can pay in instalments.”

sludge removal entrepreneurs in indonesia demonstrated mostly weak pro-social traits, which may be associated with the less personal nature of a sludge removal business as opposed to, for instance, water services in terms of relationships with customers. Another explanation is that many of the water and sanitation enterprises included in the sample for this research had some connection with the initiatives of external development agencies who were likely to have nurtured a focus on inclusive services, whereas the sludge removal businesses within this sample arose purely from business opportunities.

[repayments] can take one week, one month, one year, one-and-a half years… we’re not only about business, it is a social purpose.

16 – Enterprise in WASH Working Paper 4 taBle 3: pro-social TraiTs evidenT across differenT Types of enTerprises and counTries1 sector indonesia vietnam timor-leste

Water Water enterprises (n=21)

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