Parenting Style, Risk Propensity, and Entrepreneurial Interest

Nikodemus Hans Setiadi Wijaya

and Eldian Rinaldi

Department of Management, YKPN School of Business (STIE YKPN), Yogyakarta, Indonesia

Undergraduate Program, Department of management, YKPN School of Business (STIE YKPN), Yogyakarta, Indonesia

Keywords: Parenting Style, Risk Propensity, Entrepreneurial Interest.

Abstract: This study integrates four parenting styles (authoritarian, authoritative, permissive, and uninvolved), risk

propensity, and entrepreneurial interest. Two hundred and seventy six (276) students studying at various

universities were involved as respondents. A series of regression analyses found that authoritative parenting

style was the strongest style to influence individuals’ risk propensity and entrepreneurial interest.

Furthermore, it was found that risk propensity was positively related to entrepreneurial interest. Theoretical

and practical implications are also discussed.

1 INTRODUCTION

Unemployment is a serious problem in Indonesia.

According to the Central Bureau of Statistics, in

August 2017, a total of 7.04 million people were

categorized as unemployed workforces. If the

unemployment rate is increased, the living quality of

Indonesian society will lower, because it decreases

income and social stability, and at the same time

increases criminal activity. Therefore, all parties

have to find a way to solve this problem.

Entrepreneurship is belived to be one of effective

solutions for the problem. Furthermore, Rachbini

(2002) suggests that entrepreneurship is very

necessary for developing countries such as

Indonesia. Dr. Ir. Ciputra, one of the famous

entrepreneurship practitioners and experts in

Indonesia, suggests that a country should have at

minimum 2% entrepreneurs of population if it aims

to be a developed country. Drucker (1996) also

suggests that all economy transformation should

reliy on the entrepreneurs in a country.

It is thus necessary to explore the factors

impacting entrepreneurial interest (or sometimes

labeled as entrepreneurial intention) (Liñán and

Chen, 2006). Indiarti and Rostiani (2008) proposes

that entrepreneurial interest can be influenced by

two factors which are internal and external. To

address this notion, this study focuses on

investigating the influences of parenting style and

risk propensity on entrepreneurial interest. Parenting

style in this study is divided into four styles, namely

authoritarian-, authoritative-, permissive-, and

uninvolved styles of parenting. In this study each

will have different impacts on both risk propensity

and entrepreneurial interest. In addition, it is

suggested in this study that risk propensity may

influence the degrees of invidual interest on doing

entrepreneurship activities.

Figure 1: Research Model.

2 LITERATURE REVIEW AND

HYPOTHESES

Parents have a very significant roles in the

development of their children in many life aspects

(Schmitt-Rodermund and Vondracek, 1999;

Steinberg et al., 1991).

296

Wijaya, N. and Rinaldi, E.

Parenting Style, Risk Propensity, and Entrepreneurial Interest.

DOI: 10.5220/0008492102960301

In Proceedings of the 7th International Conference on Entrepreneurship and Business Management (ICEBM Untar 2018), pages 296-301

ISBN: 978-989-758-363-6

Table 1: Parenting Style Dimensions and Characteristics.

Parenting

dimensions

Low

acceptance/responsiven

ess

High

acceptance/responsiven

ess

High

demandingn

ess/control

AUTHORITARIAN

 Lack of close

communication

 High control

 Emphasizing on

giving punishments

 Strict rules

 Forcing children to

do what have to do

AUTHORITATIVE

 Maintaining a good

communication

 Frequent discussion

 Listen to children’s

perspective and

problems

 Giving responses

 Emphasizing on

rules combined with

strong attention

Low

demandingn

ess/control

UNINVOLED

 Lack of emotional

attachment

 Provides no or very

trivial supervision

and affection,

because the parents

are busy with their

own life problems

 Lack of interest to

giving attention on

children’s behavior

and future hopes

PERMISSIVE

 Lack of guidance

 Giving no or

insignificant

punishments for

children’s

wrongdoing

 Less power compared

to their children

 Giving large extent

of freedom to the

children

Parents are responsible for nurturing and giving

examples which influence the behavior and attitudes

of their children. Hurlock (1999) pointed out that the

role of parents is to equip children with useful skills

and knowledge by providing guidance and

mentoring that will be useful in their future lives. It

is believed that daily things about parents will also

influence children’s career choices. Parenting style

refers to how a parent treat, educate, guide, and

discipline their children (Koestner et al., 1999;

Shyny, 2017). Thoha (1996) suggests that parenting

style reflects the chosen approach to raise children.

Each parent therefore has their own way to raise

their children. A particular parenting style has a

different impact as compared to other styles on

children’s psychology in the future (Baumrind,

1971).

A parenting style stems into two dimensions

(Sigelman, 2002). First, acceptance/responsiveness

describes how parents provide responses towards

their children. The dimension measures the extent to

which the parents show support, affection, and close

communication to their children. Second,

demandingness/control measures how the parents

implement standards to their children. From those

dimensions, theorists have proposed several kinds of

parenting style. For instance, according to Baumrind

(1971), there are four basic types of parenting,

namely (1) authoritarian style, (2) authoritative style,

(3) permissive style, and uninvolved style.

Authoritarian parenting style (high

demandingness/control and low

acceptance/responsive) refers to implementing strict

rules, forcing children to behave as their parents

have, and restricting the autonomy of children from

choosing their preference as they want.

Authoritative parenting style (high in both

demandingness/control and acceptance/responsive)

emphasizes on the recognition of children ability.

Parents with this style will let their children not to

too much rely on them. The next style is permissive

(low in both demandingness/control and

acceptance/responsive). Permissive parents tend to

give a large extent of freedom to their children. The

parents with this style believe that their children are

mature enough to choose their preferences and

behavior. Lastly, uninvolved parenting style (low in

both demandingness/control and

acceptance/responsive) characterizes a dispassionate

communication and interaction between the parents

and their children. In this sense, a strong emotional

attachment between them is not developed. The

following table shows the characteristics of the four

parenting styles (Yatim and Irwanto, 1991).

According to (Suryana, 2006), an entrepreneur

should have a list of traits which may include a

sense of confidence, result oriented, moderate

propensity of risk, strong leadership, creative, and

future oriented. Risk propensity measures the extent

to which one is willing to take or avoid risk-related

to event (Shyny, 2017). As previously mentioned,

parents have an important role in shaping children’s

personality on taking risk, more specifically through

their parenting style, and this is very crucial. As

such, risk-related aspects of entrepreneurship can be

developed as a child was raised by certain parenting

style. This study specifically investigate the impact

of the styles on risk propensity and entrepreneurial

interest (Brockhaus, 1980) (Figure 1).

An entrepreneur should face two possibilities,

advantaged and disadvantaged situations and profit

or loss (Hanafi, 2006). It means an entrepreneur

constantly faces an uncertain situation or risk.

Entrepreneurship risk can be defined as deviations of

the rate of investment return. The act of avoiding or

taking risk may impact on the amount of profit or

loss one may get (Morris and Kuratno, 2002). Risk

propensity refers to an individual attribute

measuring in the extent to which he/she is willing to

avoid or take risk in a particular situation. Risk is

uncertain results as a consequence of an event,

namely an event that result in desirable or

undesirable outcomes. Risk is very relevant to

entrepreneurs, since they face uncertain results from

Parenting Style, Risk Propensity, and Entrepreneurial Interest

297

their activities and decisions. As entrepreneurs they

have to find opportunities provided by the business

environment and how to execute them in real

business activities. The activity may include issuing

a new product/service, implementing a modified

production process, opening new market, running a

new institution in an industry, and developing a new

industry. The decisions may include how much

money will be used for investments, where to find

the fund, and how to manage the business process.

Even though entrepreneurs have to minimize

negative consequences resulting from a decision,

they may fail to do so. To some extent, a risk-free

situation is impossible for all entrepreneurs.

The mentioned parenting styles have their own

advantages and disadvantages (Grolnick and Ryan,

1989). Authoritarian style implements strong control

and strict rules on children, therefore, it may be that

the willingness of taking risk will not be developed.

By implementing strong rules and close relationship

and attention, parents with authoritative style will

help their children take opportunities which are

provided by their environment (Schmitt-Rodermund,

2004; Schmitt-Rodermund and Vondracek, 1999). It

means that the children are also required to take

risks at the same time. Since a strong emotional

attachment developed between parents and children,

the children may also perceive strong support when

they are taking opportunities with the risks. With

permissive style, parents let their children to choose

what they want. The children may take some risk.

However, without a significant guidance they may

not have right direction which opportunities and

risks to take. Lastly, uninvolved style may not be

very favorable for the development of children’s risk

propensity. In light with the above argumentation,

the following hypothesis is proposed:

H1: The positive influence of authoritative

parenting style on risk propensity is the

strongest among the three other styles, i.e.,

authoritarian, permissive, and uninvolved.

Entrepreneurial interest can be defined as the degree

of individual intention to be an entrepreneur. This

interest is influenced by the interactions of personal

attribute and external factors (Bygrave, 2003). In

this sense, entrepreneurial interest is not a heredity

factor, but it should be developed during one’s life.

One factor is how one’s parent nurtures during

his/her childhood. Especially, this study examines

the effects of the four parenting styles. Specifically,

the authoritative parenting style will be favorable to

develop children’s interest on entrepreneurship. By

enjoying an intimate relationship with their parents,

individuals could also have a significant discussion

about appropriate choices for future career (Schmitt-

Rodermund, 2004). A good discussion may also

improve children’s perspective about advantage and

disadvantage about a particular career choice. Such

benefits may not be obtained by children with

parents using the other three parenting styles. For

example, although permissive parenting style

parents let their children to explore career

possibilities, but the children also do not have

guidance about any consequences about a particular

career choice. Therefore, this study proposes:

H2: The positive influence of authoritative

parenting style on entrepreneurial interest is the

strongest among the three other styles, i.e.,

authoritarian, permissive, and uninvolved.

In addition, this study proposes that risk propensity

contributes to entrepreneurial interest (Brandstätter,

2011; Brockhaus, 1980). As previously discussed,

because the activities within entrepreneurship

involve risks, the tendency to take or avoid those

risks is related with the entrepreneurial interest.

Thus, the following hypothesis is formed:

H3: Risk propensity is positively related to

entrepreneurial interest.

3 METHODS

3.1 Research Respondents

The population of this study was students studying

at universities in Yogyakarta. They were studying a

variety of study programs, e.g., business, science,

technology, social, and many more. An online

survey method was used.

Table 2: Means, Standard Deviations, and Correlations.

Variable M SD 123 45 6

1. Authoritarian 2.16 .71 (.76)

2. Authoritative 3.90 .69 -.39** (.87)

3. Permissive 3.52 .65 -.28** .52** (.71)

4. Uninvolve

2.22 .69 .41** -.28** .05 (.84)

5. Risk propensity 3.67 .62 -.05 .30** .28** -.02 (.82)

6. Entrepreneurial interes

4.05 .82 .01 .26** .25** .02 .49** (.93)

Note. N = 276, **p<.01, two-tailed; Cronbach’s alphas are presented in the parentheses.

ICEBM Untar 2018 - International Conference on Entrepreneurship and Business Management (ICEBM) Untar

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3.2 Instruments

3.2.1 Parenting Style

Parenting Style was measured with the measure

developed and validated by Shyny (2017). A total of

32 items stem into four dimensions, i.e., each

dimension has 8 items. A sample item for the

authoritarian dimension is “I strongly believe that

my future is in my hand, and there is a strict time

table for me to follow.” One item was deleted due to

low loading. A sample item for authoritative

dimension is “Important decisions of my family are

done together and my parents give full freedom to

me to share everything with my parents” (2 items

were deleted). A sample item for permissive

dimension is “My parent is very gentle with me and

they cannot correct me by punishment” (two items

were deleted). A sample item for uninvolved

dimension is “My parents do not have any demand

or control over me, and they give total freedom” (2

items were also deleted). The alphas were 0.76, 0.87,

0.71, and 0.84 for authoritarian, authoritative,

permissive, and uninvolved, respectively. The alphas

showed an acceptable reliability.

Table 3: Effects of Parenting Styles on Risk Propensity

and Entrepreneurial Interest.

Variable

Estimate (Significance)

Risk propensity Entrepreneurial Interest

Authoritarian .10 (.128) .14 (.043)

Authoritative .25 (.001) .23 (.002)

Permissive .18 (.010) .16 (.022)

Uninvolved .00 (.949) .02 (.734)

3.2.2 Risk Propensity

In measuring risk propensity, this study employed

the eight-item measure of Hung et al., (2012). One

item was deleted due to low loading. The alpha for

this measure was .82, thus, it is reliable.

3.2.3 Entrepreneurial Interest

Entrepreneurial Interest was measured using the six-

item of Liñán and Chen (2006). All items were

found valid. The alpha was .93, thus, it is highly

reliable.

4 RESULTS

Table 2 shows the means, standard deviation, and

correlations among variables. As found, risk

propensity and entrepreneurial interest were

positively correlated with the authoritative and

permissive style. Furthermore, risk propensity and

entrepreneurial interest were also correlated. The

correlation coefficients were just at moderate in

magnitude.

4.1 Hypotheses Testing

This study proposes that the positive influence of

authoritative parenting style on risk propensity is the

strongest among the three other styles (H1). As

shown in Table 3, the regression coefficient (β) of

the authoritative style  risk propensity was .25

(p<.01) which was the strongest one as compared to

the other coefficients. Therefore, H1 was supported.

This study proposes that the positive influence of

authoritative style on entrepreneurial interest is also

the strongest among the three other styles (H2). The

regression coefficient of the authoritative style 

entrepreneurial interest was .23 (p<.01) which the

strongest one as compared to the other coefficients.

H2 was supported.

Finally, this study believes that risk propensity is

positively related to entrepreneurial interest. As

shown, a positive influence of risk propensity on

entrepreneurial interest was also found (β = .48,

p<.001). The result supported H3. In confirming the

finding, some control variables were also included,

namely gender (female = 0, male = 1) and

employment status of parent (if both were

employees = 1, if one was an entrepreneur = 2, and

if both were entrepreneurs = 3). As also shown, the

influence of risk propensity on entrepreneurial

interest was .46 (p<.001), confirming the previous

finding.

5 DISCUSSION

This study aims to investigate (1) the influence of

parenting styles on risk propensity and

entrepreneurial interest and (2) the influence of risk

propensity on entrepreneurial interest. As found, the

hypotheses were supported by the analysis. As

suggested, the authoritative parenting style is the

most robust to improve risk propensity and

entrepreneurial interest. This study also validates the

importance of risk propensity on entrepreneurial

interest. It is suggested that the higher the risk

propensity, the more the individual has an interest on

taking a career as an entrepreneur. This study found

interesting findings. In terms of impact of the styles

on both dependent variables, similar patterns were

Parenting Style, Risk Propensity, and Entrepreneurial Interest

299

found. Namely, as hypothesized, the authoritative

style has the strongest influence on both variables.

Furthermore, the permissive-, authoritative-, and

uninvolved style were posited in the second, third,

and fourth position, respectively. Although

permissive and authoritative styles are not very

favorable for developing risk propensity and

entrepreneurial interest, they still have some

contribution to the variables. Further research may

investigate this phenomenon.

This study contributes to theory in several ways.

First, this study discloses the relationships among

the four parenting styles, risk propensity, and

entrepreneurial interest, thus this adds validation on

the relationships. More specifically, the findings

suggest that among the four styles, the authoritative

style is the most significant for the development of

individuals’ risk propensity and entrepreneurial

interest. Consistent with prior finding, it is suggested

that risk propensity contributes to entrepreneurial

interest. For practice, this study delivers an insight to

parents on which parenting styles may apply to

improve risk propensity and entrepreneurial interest.

However, since changing a parenting style to

another style is not easy, educational institutions can

play the roles of ‘parents’ who can implement

authoritative style for their students.

Table 4: Effect of Risk Propensity on Entrepreneurial

Interest.

Variable

Estimate (Significance)

Risk propensity

Model 1: no control

Risk propensity

.49 (.000)

Model 2: with 2 controls

Gender

Parent’s employment status

Risk propensity

.06 (.272)

.16 (.003)

.46 (.000)

6 CONCLUSION

The current study integrates the four parenting

styles, risk taking propensity, and entrepreneurial

interest. This study suggests that authoritative

parenting style is the style that is likely to promote

risk propensity and entrepreneurial interest. In

addition, it also suggests that risk propensity

promotes entrepreneurial interest.

Besides the important findings delivered by this

study, it has several limitations. First, this study

implemented a cross-sectional design of survey. It

will provide a different perspective if parenting style

is assessed by parents (Shyny, 2017). Second, the

respondents were the students from various batches.

The students in earlier batches might have not yet

decided about their career choice. Perhaps, future

research could take data from students of the most

recent batch. Third, Indonesian parents mostly use

authoritarian style in nurturing their children.

Therefore, future research may explore the effects of

parenting styles in another cultural context where

different patterns of relationships might be found.

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