A Career Success of the Distributors in MLM Company
6 December 2014
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A Career Success of the Distributors in Multi-Level Marketing
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A Career Success of the Distributors in Multi-Level Marketing (MLM) Company
*E]isabet Siahaan, Prihatirr Lumbanraja, Yasmin Chairutlisa, M.
Universitas Sumatera Utara, Medan, Indonesia
*elisabeth.siahaan.dr@ gn.rail.com
Abstract Nowadays, MLM Company around the world are highly developed, and companies especially
in MLM
in Indonesia have been using a .yri". of direct sales to the consumers. The career structure
achieve
the
to
able
are
Company has been1r"ry rnr.f, acknowledged. However, not all MLM distributors
career success in MLM
Iine of succession. The purpose of this reiearch is to analyse the main causes of
of samples is carried
selection
The
methods.
qualitative
Company. This study uses both quantitative and
at the Multi-Level
registered
distributors
198
as
aimany
out usini a snowbali technique which retrieved
Ayu
Orindo
PT'
Indonesia,
foriflameJ' PT'
Herbalife
PT.
namely;
Medan,
in
Marketiig 1MLM) Company
result of the
The
Indonesia'
Sophi Martin Indonesia, PT. K-linh PT, Tupperware Indonesia and PT' Amway
a
significant
have
study finds that entrepreneurial competency and committment simultaneously
relationship
partial
a
finds
study
the
influence to the career success of MLM distributors. Moreover,
effect on career success,
between the entrepreneurial commitment and motivation that has a significant
of career significantly'
success
the
partially
influence
not
does
while the entrepreneurial competency
is able to strengthen
that
variable
moderating
a
is
motivaiion
entrlpreneurial
The results also show that
as hetween the
well
as
success,
career
to
commitment
entrepreneurial
of
the
the influence
entrepreneurial competenry and career success.
career
Keywords: Entrepreneurial competency, entrepreneurial commitment, entrepreneurial motivation,
success,
1.
Multi Level
LM)
Introduction
million people [BPS,
The total unemployment in Indonesia up to August ?O!2 had reached 7.244'956
One form of t}te
ZOLZ).One of the best alternatives in solving this problem is by way of entrepreneurship'
of the ventures
example
the
Among
solutions is to resolve the issue by creating entrepreneurial ventures.
and also is
in
capital
much
require
not
does
which
(MLMI
is to be a distributor of Multi-Level Marketing
small, but
relatively
Indonesia
in
entrepreneurs
of
number
total
not time-constraint. Meanwhile, the
the total
2o/o
of
by
increase
an
be
would
there
that
expectation
the
with
there was a positive trend
in the
entrepreneurs
of
number
the
that
a
fact
with
aligned
been
has
This
(Soebari,
2008).
population
past
the
for
increased
even
it
had
lountry wili have increased significantly to 1.50 & in 2014, was and
move
SMEs,
a-nd
of
cooperatives
Ministry
the
three years by 0.18ol0. with this, the governmen! through
forward with the National Entrepreneurship Movement IGKNJ to increase the number of entrepreneurs
through
which is dedicated to reduce unemployment and poverty. The option to become entrepreneurs
others,
and
oneself
motivate
to
the
ability
innovation,
creativity,
of
in
termi
MLM requires competency
the
However,
the courige to tak; risks as well as to encourage the changes in the career development'
for
instance;
company,
MLM
problems-may still occur with the distributor's career development in the
those
entrepreneurial competencies are still far from the expectations, also seeing the inability of
their
products'
using
for
prospective
buyers
of
distributors in motivating its downline and the distrust
only a small number of product users are turning to become MLM distributors. This leads to the
inhitrition of the distributors' career success in Multi-Level Marketing Company'
It is an attitude
The entrepreneurial commitment is referred as one of the key success of an entrepreneur.
in MLM
phenomenon
commitment's
the
while
that must be owned by an entrepreneur or distributor,
get
involved
rather
but
concepts,
and
ideas
sell
not
merely
does not emerge. fhe trigh commitment does
utilize the
in a whole p.oi.r, of eac-h businesses-related matter with the presence of ancillary factors tJlat
several
has
formulated
study
this
arguments,
above
the
Given
attitude.
high-commitment
functionality of
objectives of studY as follows:
entrepreneurial competency, entrepreneurial committment and
Marketing
entrepreneurial motivation towards career success of the distributors in Multilevel
r To analyze the effect of
ComPanY'
309
entrepreneurial motivation in strengthening the influence of
the distributors in Multi entrepreneurial competency variable towards the career success of
Level Marketing ComPanY.
of
To analyze the ability of entrepreneurial motivation in strengthening theininfluence
Level
Multi
distributors
of
success
the
career
entrepreneurial commitment variable toward
To analyze the ability of
Marketing ComPanY.
2,
Literature Review
skills needed to produce an
Entrepreneurial Competency: The competency refers to the knowledge or
Lagan & Suhadolink in
outcome, or an internal capability that is uied in working activities [Mc
useful consists
considered
is
that
competency
entrepreneurial
Lertwannawit et al., 2009). Ulrn*t it", the
such as creativity
qualities/selfentrepreneurship
personal
and
atritude
ofskills [technical and bu'siness),
peters, iooz). Moieover, Hirsch and Peters [2002J state that the
and initiated enthusiasm [uisrich &
management and personal skills'
skills required by entreprin",,., are classified into technical, business
monitoring technical aspects on
The technical skills include writing oral communication, environmental
skills' while the business
organizational
and
business management, technolory, interpersonal
public
relations' marketing'
decision-making
goal
setting,
management skills inciude ptanrilg and
self-discipline' risk-taking
finance, accounting and manage*Int, ,na the perlonal skills -include
innovative, change-oriented, persisten! and having visionary leadership'
refer to the concept of
Entrepreneurial Commitment: Meyer and Allens in Clercq and Ruis [2007)
and normative
affective
Both
commitment'
commitment as affective, normative and continuous
commitment is
affective
The
organization'
the
to
bond
commitment refer to the personal emotional
the normative
while
organization,
related to a person's emotional attachment and identification to the
employees
the
that
so
commitment is associated with a person's belief or loyalty to the organization,
the
means
components
continuance
would feel obliged to remain in the organization. ttoieover, the
left
the
if
they
face
they
losses
Would
the
componenG are based on employees'
-by perceptions about
the staiement in Malewcki [2003J, who mentioned that the
organization. This is supported
in the context of enffepreneurial networking in the
phenomenon
commitment is seen as a motivation
found that the committrnent has three
oiganizatlons, as well as an attachmeni to the organization' He also
to measure commitment
continuous affective and normative componentt. rnu iftms of instruments
perceived costs or loss if
the
as
which are called as continuance by Mayer and Allens theory are defined
on the interests of a
based
to
be
tends
ones left the organization. Overall, the shape of these commitments
attachment that
emotional
on
focuses
commitment
person towardl a relationship. Meanwhile, affective
In contrast' the
organization'
the
of
members
by
shown
attitude
refers to the amount of good ieeling and
to maintain
members
normative commitment"*"rn, the extent of a moral responsibility of organizational
their relationship with the organizations'
entrepreneurial
Enfepreneurial Motivation: Rotenbegr-Shir and Weneberg [2011'J define the motivation of
the
on
focused
solely
is
that
theory
goll
setting
motivation by adopting a theoretical
as the core indicators of
ehtrepreneurial career,-which consideis a specifii task indthe goal direction
higher due to the
entrepreneurial motivation. Therefore, the entrepreneurial motivation becomes
as the need for
such
factors
emergence of social problems, namely; unemployment or psychological
procedure or something to do with
achievement. The entrepreneurial moiivation is aiso explained as a
and extrinsic motivations' Thus' it
as
intrinsic
the results, but on the other hand, it can also be interpreied
to become an entrepreneur'
push
himself
to
drive
someone's
is
concludes that entrepreneurial motivation
the literature is the desire
in
reported
commonly
most
is
that
motive
In the meantime, an entrepreneurial
2007)' Mofeover' generating
to be your own boss or work independently [Hundley, in Taormina & Lao,
merely the money tlat can
not
money is an important motivation for every entrepreneur, however, it is
two categories; internal
into
grouped
motivate the entrepreneurs. The motivational factors are broadly
factors that include
external
etc;
experience
factors that include family background, education, training,
is also grouped
motivation
entrepreneurial
ihe
Meanwhile,
raw material, product demand, financial etc.
in GunU 2010)
into three which are based on necessity, facilities and ambition [Badi & Badi
needs and desires of a person
The Career Success: The career success is seen as a tool to meet the
in Lertwannawit et al, 2009J'
&
Shaffer
through achievemen! completion and acquisition of power [Lau
namely; structural and
perspectives'
competitive
The study of career ,r.."ri has been dominated by two
is
the main agent for
aspirations
career
thai
,igo"t
perspectiv*
individualistic. The individualistic
310
determining a career, which includes knowing the strengths and an individual interest, but not much
about the career system in an organization fAryee et al. in Kristyanto, 2005J. On the other hand, based on
a iob fstructural] perspective, the entrepreneurs' career success differs from the general employees, such
as the fact that promotion and employment levels are often used as a dimension of career success,
however, these are not suitable for the assessment of entrepreneurial success because they are generally
categorized as business owners who usually have a position at the top level [Lau, 2007). Moreover, based
on the cultural view, although it is believed that a career success is known popularly and considered as a
crucial point at every level of the society, the content of career success can change, depending on the
geographical and cullural functions. Traditionally, career success had been conceptualized in the form of
oU;*tiu" and subjective aspects. The objective career success fextrinsic) is often measured in terms of
income, promotion, position, status and reputation fNicholson & de Wal-Andrews in Lau, 2007), while
subjective career success [intrinsicJ refers to the individual assessment oftheir career experience [Judge
et al. in Lau,2007).
The Multi-Level Marketing (MtM) Company: The purpose of adopting the Multi Level Marketing
(MLMJ is to disseminate products as well as prosper its employees or commonly called as the
dlstributors. Cahn [2008j has posited that being a direct seller does not require work experience and
formal education, but it only needs less capital for investment. Therefore, joining the MLM company is
very interesting when other jobs are unavailable. Cahn [2008] also states that the MLM Company like
Amway
the development of style 'anticorporates' by empowering the workers to be the 'boss'
"n.ou.ig.
for themselves who will set up their own time. Thus, the advantage of MLM business is having less capital
with great opportunities while the future is determined by the distributor itself, and there is no risk of
bad loans, tliere will be free working hours and one will also be able to achieve his or her own dream.
MLM is a method of selling goods directly to customers through a network of distributors developed by
the chains and tiers. Each distributor recruiting or sponsoring other people is called a partner fdownline]
who is always associated with bonuses and commissions, and every MLM company has its own
calculation method. The MLM distributors are independent business people who earn from their
activities of selling the products and capturing partners' activity. The working manners of MLM
entrepreneurs are done without such regular working hours in an office, where many of them are
working after office hours to earn extra income.
Conceptual Framework: Based on a study done by Chreptaviciene & Starkute (2012), it is found that
career development is influenced by the competencies possessed by a person in an organization. The
Ievel of competency should be developed along with the increase in one's career. However, the high
competency which is not supported by the commitment will not be able to make an entrePreneur's career
succeed. This makes the commitment useful to maintain the business, grow the business and the
willingness to sacrifice or invest is able to provide a strong boost to a person's performance in conducting
the business relationship. Traditionally, the career was completely determined by the training programs
that had been attended by a worker and the opportunities provided by the employer. However, this has
been changed whereby, a career success is determined by the workers themselves fKuiipers et al., 2006J.
People who will be motivated to get involved in business is expected to increase the performance and
will provide valuable results [Katzell & Thompson, in Sugiyanto, 2007). Conclusively, a motivated worker
who runs a high level of venture will tend to believe that the level of ventures will give a good assessment'
A good assessment will encourage Company to give bonuses and promotions that will satis$r the purpose
of the workers.
Figure 1: Conceptual Framework
Entrepreneurial
Motivation
311
T
Hypothesis
significantly influence the career
The entrepreneurial competency, commitment and motivation
r
successofthedistributorsinMultilevelMarketingcompany.
rTheentrepreneurialmotivationisamoderatingvariablethat
betweenentrepreneurialcompetencyandthedistributors'
o
can strengthen the relationshiP
career success in Multi Level
Marketing company.
that can strengthen the relationship
The entrepreneurial motivation is a moderating variable
and the distributors' career success in Multi Level
between entrepreneurial commitment
Marketing company.
3.
Methodolory
who have
population and sampling; The population of this study consists of all members fdistributors)
Orindo
PT'
oth"tt, PT' Hertralife Medan Indonesia'
been officiatly registered in trt" ut-tut company, amonS
PT'
and
lndonesia
K-Link' PT. Tupperware
Ayu Natural [oriflame], pT. Sophi Mlrtin Indonesii PT.
distributors on each
the number of registered
Amway Indonesia. fneiifficuttyof finding official data on
of the population to have been unknown' The
of the MLM companies, had caused the actual number
population:
,r-plins technique or iiir iiray ,ses a formula of Isac Michel for the unknown
-:
ira i{\
tzj
Note:
P'q
6
n = Sample size
p= Population ProPortion
q= 1-p
Z = Level of confidence
e = Margin of error
as follows:
Using the above formula, thus the sample is obtained
(1,!16,): (0, 117)i
0,Siii
0.053,8* 16i O, 1-19 1 l
'tt : -*-i,Ja']s- = 213,7 orZl4people/respondents
study uses a non-probability sampling through
The sampling technique: The sampling technique in this
a-non-probability sampling is a technique
the purposive snowball approach. drrgiyo.,o i20b4l states that
of the population to be elected as the
that does not provide equal opporrunities for each ilement/member
with consideration given to
technique
is a
members of the sample. Meanwhile, the purposive sampling
in Medan' Thus' it
Company
MLM
the
in
certain criteria, such as the fact that they are the distributors
found' Moreover'
to
be
6
respondents
of
out
1
was
there
obtained the proportio n of O^767,indicating that
is involved' then it
population
of
number
a
small
first,
at
whereby
the snowball sampling is a technique
for a period of time [Sunyoto, 2014)' In this
swells like a snowball rolling to be larger in a long time
and later they were asked to choose their
research, the first one or two respondents were to b"e selected,
of samples was obtained' Despite this' it
ftiends to be the sample, and so on until the desired number
225 questionnaires disffibuted to the
were
there
needs a total of 214 respondents to be asked, however,
to replace the questionnaires that
able
be
would
excesses
respondents with the assumption that these
incomplete' Upon editing the data on the
might not be returned or has incomplete dwhich data were
that can be used is 198 questionnaires
entire returned questionnaire, the totil number ofquestionnaires
or with the return rate of 9Zo/o.
4. Findings
Multiple Regression Equation:
Tablelfindsanequationofthemultiplelinearregressionasfollows:
Y = -3.851 + 0.2|87 X1+O.015 X2+ 0.303 X3 + e
Based on the above equation, it can be explained as follows:
rConstant[a]=-3'S5l,Thisshowsthatiftheentrepreneurialcommitment,competenryand
motivationhasazerovalue,thenthecareersuccesswilldecline'
312
then the
Coefficient b1 = 0.287. This shows that if the entrepreneurial competenry is increasing,
r
career success will be increased.
then the
Coefficient bZ = 0.015. This shows that if the entrepreneurial commitment increases,
career success will be increased'
will be increased.
Ioefficient b3 = 0.303. This suggests that if the motivation increases, the career success
.
Table 1: Coefficient
Standardized
Coefficients
Beta
Unstandardized
CoefEcients
Model
Std.
Error
Sig.
-1.757
0.380
Constant
-3.851
2.791
TX1
0.015
0.041
0.029
0.053
0.287
0.070
0.303
TX3
R = 0.811
R Square = O.657
Adiusted R Square = 0.652
Std. Error of the Estimate = 5.747
a. Dependent Variable Y
Source: Data OutPut, 2014
0.451
5.402
0.368
+324
TXz
0.080
0.705
0.00
0.00
variable of
As depicted in Table 2, the value of the adiusted R Square is 0,652, where this means that the
on career
65.20/o
as
much
as
contributed
motivation
and
entrepreneurial competency, commitment
company.
the
MLM
in
success of the distributors
F Test
(Simultenous)
Table 2:
F
Test
s
Sum ofSquares
12274.4774
6394.680
18669.455
Model
Regression
Residual
Total
a.
Df
Mean
F
3
4091.597
r24.730
t94
32.962
797
Predictors: [Constant), TX3, T1', TZ
b. Dependent Variable : Y
Based on Table 2, it found the significant value of 0'00. 0.05. This suggests that partially, the motivation has a significant effect on career
success of the distributors in the MLM company'
313
Residual Test
success:
Motivation serves as a moderator between entrepreneurial committment on career
This
success'
career
and
committment
entrepreneurial
Motivation functions as a moderator between
entrepreneurial
between
influence
the
strengthen
to
able
is
means that a high level of motivation
committment on career success.
Committment
Standardized
Table 4: Coefficient
Unstandardized
Model
Coefficients
std. Error
1.239
7.795
Constant
a.032
-0.066
Y
:
AbsRes-l
Variable
Dependent
Sourcel Data OutPug 2014
sig.
Coefficients
Beta
-0.145
6.291
-2.053
0.00
0.047
0'05 and a parameter coefficient of
Based on Table 4, it is found that Y [career successJ has a sig 0.041>
variable'
negative value, and it concludes that motivation is used as a moderating
career success:
Motivation serves as a moderator between entrepreneurial competency on
success' This
career
and
competency
Motivation functions as a moderator between entrepreneurial
entrepreneurial competency on
means that a high motivation is able to strengthen the influence between
career success.
Table 5: Coe
Unstandardized
Model
Coefficients
Std.
Error
1.185
8.969
0.031
-o.712
Y
a. Dependent Variable : AbsRes-2
Source: Data OutPut, 2014
Constant
Standardized
Coefficients
Beta
sig.
7.567
-0.253
-3.654
0.00
0.00
a parameter coefficient of a
Based on Table 5, it is found that Y [career successJ has a sig 0'00> 0.05 and
variable'
moderating
as
a
negative value, so it concludes that motivation is used
5. Discussion and Conclusion
competency- significantly
Based on the results of the partial test [t test), it is known that entrepreneurial
is
aligned with the theory
phenomenon
This
influences the career ,.r.."., of the tvtl,tvt distributors.
formation of a
stating that the entrepreneurial competenry is a very important element in the
is also fully
concept
this
as
businesses,
MLM
of
types
all
towards
as
businessman's career success as well
are a
there
that
aware
fully
are
distributors
independent
business,
MLM
of
applicable. In this tlpe
and
successfully,
business
number of competencies they should possess or master to be able to run the
point
of
company's
MLM
In
the
furthermore in order for them to be able to achieve an optimal career'
an
if
Therefore,
the
distributors.
from
innovation
view, its system does require high creativity and
able to be modified
independent distributor his less creativity und do"r not possess ideas that are always
to b.i.tg new ideas, thus it will be difficult to reach a career peak'
is related to career
Based on the partial test [t testJ, it is known that the entrepreneurial commitment
by Porter et al'
introduced
concept
success but has insignificint effect. Theoretically, this was the first
goals
organizationals'
the
of
acceptance
that defines the organizational committment as a strong belief,
Ifthe
20071'
Ruis,
&
in
Clercq
al.
et
ofganization
in
the
[Porter
and values and a strong desire to remain
with the original concept of commitment, this indicates that any
results of this study
ire
associated
or called
distributor who wants to achieve careeruu..".i requires high commitment in ventures,
in MLM Company
entrepreneurial commitment. However, many of the respondents considered the career
MLM Company'
in
career
their
,, , .ld" job. Thus, they do not give full iommitment in developing
influences
significantly
motivation
Moreover, the partial teit results (t testJ show that entrepreneurial
theoreticai
of
existing
variety
a
with
is
associated
If
this
the career success of the MLM's disffibutors.
314
variety of activities. This is aligned
concepts of motivation, it is often shown as a strong effort to excel in a
is
based on the classical theory of
which
with the concept of the need for achievement by Mcclelland
Collins et al. in Rotenbegr-Shir
by
study
A
behavior.
human
of
needs, which states the need as a motivator
factor'
entrepreneurial
predictive
is
a
excel
to
desire
the
that
& Weneberg [2011), also shows
entrepreneurial competency and
Based on the residual test, motivation seryes as a moderator between
the influence of
career success. This means that high motivation will be able to strengthen
is one's career
achievement
to
obtain
needs
the
of
entrepreneurial competency to career success. One
through the
person
a
of
desires
and
needs
the
meet
to
tool
success. The careeruu.a".. is seen as a
al" 2009]'
et
Lertwannawit
in
Shaffer
&
power
of
acquisition
and
[Lau
achievement, also the completion
towards
directed
With high motivation, then the person has high-intensity efforts that are always
a good
has
although-one
meeting the needs in a long period of time, and 'iice versa, It further explained,
their
achieving
process
of
the
certainly
entrepreneurial competen{rif nit or her motivation is weak, thus
they
example,
for
motivation,
with
associated
problems
n"eds lcare"r succeisJ wili experience a lot of
lack
and
achievement
for
desire
low
have
discipline,
lack
will be Iess diligen! easily discouraged,
confidence.
between entrepreneurial
Based on the residual test, the motivation also serves as a moderator
the influence of
to
strengthen
be
able
will
commitment and career success. It means that high motivation
a motivational
as
is
seen
commitment
the
Since
entrepreneurial commitment to career success-.
attachment to
an
actually
it
is
networking,
organization
phenom"non in the context of entrepreneurial
that can strengthen or weaken
the organization, then the existence of motivation ai a moderating variable
success would be highly
the effect of the relationship between entrepreneurial commitment and career
condition will generally
this
relevant. This can be explained as follows; if o.r"'r motivation is high, then
normative, affective
whether
of
person
irrespective
strengthen the commitments that had been there in a
career success,
with
achieving
specifically
is
associated
and continuous commitment. If this condition
in a particular
success
career
The
commitment.
continuance
to
then this would be strongly related
a long period
within
organization
the
in
himself
involve
not
does
one
if
achieved
organization will not be
of time.
Finatly, this study produces several points as follows:
r Based on the F test, the entrepreneurial competency, commitment and motivation simultanously
affect the career success of the distributor in the MLM company'
. Based on the t test, the entrepreneurial competenry partially has no effect on career success'
effect on
Meanwhile, the entrepreneuriil commitment to motivation partially has a significant
.
o
career success'
R Square was 0'652,
Based on the results of the determinant coefficient (R squaredJ, the adjusted
and motivation had
commitment
which means that the variables of entrepreneurial competency,
company'
in
MLM
distributors
of
the
given a contribution of 65.2o/o to the career success
variable which
The residual test results indicate that entrepreneurial motivation is a moderating
strengthens the influence
.
of
entrepreneurial competency
with a career success of
the
distributors in MLM company.
variable that
The residual test results indicate that entrepreneurial motivation is a moderating
of the
success
the
career
to
commitment
entrepreneurial
of
influence
the
can strengthen
distributors
in
MLM company.
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Management
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Editorial Board
Editor
Dileep Kumar,
fl., Ph. D., University utara ttalaysia, llalaysia
Editorial Board
AriWarokka, Ph. D-, University Utara Malaysia, Malaysia
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Dong Hwa Kim, Fh. D-, Hanbat National University, Daejeon, Republic of Korea
Eric Bentzen, Copenhagen Business School, Denmark
Gurmeet singh Bhabra, Ph. D, University of otago, New Zealand
NazliAkman, Ph. D., Bilkent University, Turkey
Hoonandara R Goonatilake, Ph D, Texas A&M University, USA
Ketna Mehta, Ph. D, Welingkar Education, lndia
Khorshed chowdhury Ph" D, University of wollongong, Australia
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samsudin wahab, Ph. D-, MARA University of Technology, Malaysia
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KOH Noi Keng, ph.D, National lnstitute of Education, Nanyang Technalogical university, singapore
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lnformation Management and Business Review
Vol: 6 No. 6 December 2014
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Pakistani Television advertisements
Aalia Mehar Khan
Competitiveness of Thai Entrepreneurs: Key
Success Factors of Logistics Business Operations
Adisak Suvittawat
Provincial Patronage Networks & Small Businesses in
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the ASEAN Economic Community (AEC) 2415
Lavanchawee Sujarittanonta, John Walsh
Some lnsights in the Historical Prospective of Hierarchy of
Effects Model: A Short Review
Fazal ur Rehman, Farwida Javed, Tariq Nawaz, lshfaq Ahmed, Shabir Hyder
A Career Success of the Distributors in Multi-Level Marketing
(MLM) Company
Elisabet Siahaan, Prihatin Lumbanraja, Yasmin Chairunisa, M.
lnternet Search Volume and Stock Return Volatility:
The Case of Turkish ComPanies
Semen Son Turan
Female lndigenous entrepreneurship in remote
communities in northern Australia
CecilA. L. Pearson, Sandra Daff
Problems and Factors of Non-Completion of Promising Projects
by Young Entrepreneurs: The Case of Tunisia
Salah Ben Hamed, Samira Boussema
.'t*To*,
YW
lntemational Foundation for Research & Development
Information Management and Business Review
Vol.6, No.
6, pp.
309-316, December 2014 0SSN
22]9-Y24.
A Career Success of the Distributors in Multi-Level Marketing (MLM) Company
*E]isabet Siahaan, Prihatirr Lumbanraja, Yasmin Chairutlisa, M.
Universitas Sumatera Utara, Medan, Indonesia
*elisabeth.siahaan.dr@ gn.rail.com
Abstract Nowadays, MLM Company around the world are highly developed, and companies especially
in MLM
in Indonesia have been using a .yri". of direct sales to the consumers. The career structure
achieve
the
to
able
are
Company has been1r"ry rnr.f, acknowledged. However, not all MLM distributors
career success in MLM
Iine of succession. The purpose of this reiearch is to analyse the main causes of
of samples is carried
selection
The
methods.
qualitative
Company. This study uses both quantitative and
at the Multi-Level
registered
distributors
198
as
aimany
out usini a snowbali technique which retrieved
Ayu
Orindo
PT'
Indonesia,
foriflameJ' PT'
Herbalife
PT.
namely;
Medan,
in
Marketiig 1MLM) Company
result of the
The
Indonesia'
Sophi Martin Indonesia, PT. K-linh PT, Tupperware Indonesia and PT' Amway
a
significant
have
study finds that entrepreneurial competency and committment simultaneously
relationship
partial
a
finds
study
the
influence to the career success of MLM distributors. Moreover,
effect on career success,
between the entrepreneurial commitment and motivation that has a significant
of career significantly'
success
the
partially
influence
not
does
while the entrepreneurial competency
is able to strengthen
that
variable
moderating
a
is
motivaiion
entrlpreneurial
The results also show that
as hetween the
well
as
success,
career
to
commitment
entrepreneurial
of
the
the influence
entrepreneurial competenry and career success.
career
Keywords: Entrepreneurial competency, entrepreneurial commitment, entrepreneurial motivation,
success,
1.
Multi Level
LM)
Introduction
million people [BPS,
The total unemployment in Indonesia up to August ?O!2 had reached 7.244'956
One form of t}te
ZOLZ).One of the best alternatives in solving this problem is by way of entrepreneurship'
of the ventures
example
the
Among
solutions is to resolve the issue by creating entrepreneurial ventures.
and also is
in
capital
much
require
not
does
which
(MLMI
is to be a distributor of Multi-Level Marketing
small, but
relatively
Indonesia
in
entrepreneurs
of
number
total
not time-constraint. Meanwhile, the
the total
2o/o
of
by
increase
an
be
would
there
that
expectation
the
with
there was a positive trend
in the
entrepreneurs
of
number
the
that
a
fact
with
aligned
been
has
This
(Soebari,
2008).
population
past
the
for
increased
even
it
had
lountry wili have increased significantly to 1.50 & in 2014, was and
move
SMEs,
a-nd
of
cooperatives
Ministry
the
three years by 0.18ol0. with this, the governmen! through
forward with the National Entrepreneurship Movement IGKNJ to increase the number of entrepreneurs
through
which is dedicated to reduce unemployment and poverty. The option to become entrepreneurs
others,
and
oneself
motivate
to
the
ability
innovation,
creativity,
of
in
termi
MLM requires competency
the
However,
the courige to tak; risks as well as to encourage the changes in the career development'
for
instance;
company,
MLM
problems-may still occur with the distributor's career development in the
those
entrepreneurial competencies are still far from the expectations, also seeing the inability of
their
products'
using
for
prospective
buyers
of
distributors in motivating its downline and the distrust
only a small number of product users are turning to become MLM distributors. This leads to the
inhitrition of the distributors' career success in Multi-Level Marketing Company'
It is an attitude
The entrepreneurial commitment is referred as one of the key success of an entrepreneur.
in MLM
phenomenon
commitment's
the
while
that must be owned by an entrepreneur or distributor,
get
involved
rather
but
concepts,
and
ideas
sell
not
merely
does not emerge. fhe trigh commitment does
utilize the
in a whole p.oi.r, of eac-h businesses-related matter with the presence of ancillary factors tJlat
several
has
formulated
study
this
arguments,
above
the
Given
attitude.
high-commitment
functionality of
objectives of studY as follows:
entrepreneurial competency, entrepreneurial committment and
Marketing
entrepreneurial motivation towards career success of the distributors in Multilevel
r To analyze the effect of
ComPanY'
309
entrepreneurial motivation in strengthening the influence of
the distributors in Multi entrepreneurial competency variable towards the career success of
Level Marketing ComPanY.
of
To analyze the ability of entrepreneurial motivation in strengthening theininfluence
Level
Multi
distributors
of
success
the
career
entrepreneurial commitment variable toward
To analyze the ability of
Marketing ComPanY.
2,
Literature Review
skills needed to produce an
Entrepreneurial Competency: The competency refers to the knowledge or
Lagan & Suhadolink in
outcome, or an internal capability that is uied in working activities [Mc
useful consists
considered
is
that
competency
entrepreneurial
Lertwannawit et al., 2009). Ulrn*t it", the
such as creativity
qualities/selfentrepreneurship
personal
and
atritude
ofskills [technical and bu'siness),
peters, iooz). Moieover, Hirsch and Peters [2002J state that the
and initiated enthusiasm [uisrich &
management and personal skills'
skills required by entreprin",,., are classified into technical, business
monitoring technical aspects on
The technical skills include writing oral communication, environmental
skills' while the business
organizational
and
business management, technolory, interpersonal
public
relations' marketing'
decision-making
goal
setting,
management skills inciude ptanrilg and
self-discipline' risk-taking
finance, accounting and manage*Int, ,na the perlonal skills -include
innovative, change-oriented, persisten! and having visionary leadership'
refer to the concept of
Entrepreneurial Commitment: Meyer and Allens in Clercq and Ruis [2007)
and normative
affective
Both
commitment'
commitment as affective, normative and continuous
commitment is
affective
The
organization'
the
to
bond
commitment refer to the personal emotional
the normative
while
organization,
related to a person's emotional attachment and identification to the
employees
the
that
so
commitment is associated with a person's belief or loyalty to the organization,
the
means
components
continuance
would feel obliged to remain in the organization. ttoieover, the
left
the
if
they
face
they
losses
Would
the
componenG are based on employees'
-by perceptions about
the staiement in Malewcki [2003J, who mentioned that the
organization. This is supported
in the context of enffepreneurial networking in the
phenomenon
commitment is seen as a motivation
found that the committrnent has three
oiganizatlons, as well as an attachmeni to the organization' He also
to measure commitment
continuous affective and normative componentt. rnu iftms of instruments
perceived costs or loss if
the
as
which are called as continuance by Mayer and Allens theory are defined
on the interests of a
based
to
be
tends
ones left the organization. Overall, the shape of these commitments
attachment that
emotional
on
focuses
commitment
person towardl a relationship. Meanwhile, affective
In contrast' the
organization'
the
of
members
by
shown
attitude
refers to the amount of good ieeling and
to maintain
members
normative commitment"*"rn, the extent of a moral responsibility of organizational
their relationship with the organizations'
entrepreneurial
Enfepreneurial Motivation: Rotenbegr-Shir and Weneberg [2011'J define the motivation of
the
on
focused
solely
is
that
theory
goll
setting
motivation by adopting a theoretical
as the core indicators of
ehtrepreneurial career,-which consideis a specifii task indthe goal direction
higher due to the
entrepreneurial motivation. Therefore, the entrepreneurial motivation becomes
as the need for
such
factors
emergence of social problems, namely; unemployment or psychological
procedure or something to do with
achievement. The entrepreneurial moiivation is aiso explained as a
and extrinsic motivations' Thus' it
as
intrinsic
the results, but on the other hand, it can also be interpreied
to become an entrepreneur'
push
himself
to
drive
someone's
is
concludes that entrepreneurial motivation
the literature is the desire
in
reported
commonly
most
is
that
motive
In the meantime, an entrepreneurial
2007)' Mofeover' generating
to be your own boss or work independently [Hundley, in Taormina & Lao,
merely the money tlat can
not
money is an important motivation for every entrepreneur, however, it is
two categories; internal
into
grouped
motivate the entrepreneurs. The motivational factors are broadly
factors that include
external
etc;
experience
factors that include family background, education, training,
is also grouped
motivation
entrepreneurial
ihe
Meanwhile,
raw material, product demand, financial etc.
in GunU 2010)
into three which are based on necessity, facilities and ambition [Badi & Badi
needs and desires of a person
The Career Success: The career success is seen as a tool to meet the
in Lertwannawit et al, 2009J'
&
Shaffer
through achievemen! completion and acquisition of power [Lau
namely; structural and
perspectives'
competitive
The study of career ,r.."ri has been dominated by two
is
the main agent for
aspirations
career
thai
,igo"t
perspectiv*
individualistic. The individualistic
310
determining a career, which includes knowing the strengths and an individual interest, but not much
about the career system in an organization fAryee et al. in Kristyanto, 2005J. On the other hand, based on
a iob fstructural] perspective, the entrepreneurs' career success differs from the general employees, such
as the fact that promotion and employment levels are often used as a dimension of career success,
however, these are not suitable for the assessment of entrepreneurial success because they are generally
categorized as business owners who usually have a position at the top level [Lau, 2007). Moreover, based
on the cultural view, although it is believed that a career success is known popularly and considered as a
crucial point at every level of the society, the content of career success can change, depending on the
geographical and cullural functions. Traditionally, career success had been conceptualized in the form of
oU;*tiu" and subjective aspects. The objective career success fextrinsic) is often measured in terms of
income, promotion, position, status and reputation fNicholson & de Wal-Andrews in Lau, 2007), while
subjective career success [intrinsicJ refers to the individual assessment oftheir career experience [Judge
et al. in Lau,2007).
The Multi-Level Marketing (MtM) Company: The purpose of adopting the Multi Level Marketing
(MLMJ is to disseminate products as well as prosper its employees or commonly called as the
dlstributors. Cahn [2008j has posited that being a direct seller does not require work experience and
formal education, but it only needs less capital for investment. Therefore, joining the MLM company is
very interesting when other jobs are unavailable. Cahn [2008] also states that the MLM Company like
Amway
the development of style 'anticorporates' by empowering the workers to be the 'boss'
"n.ou.ig.
for themselves who will set up their own time. Thus, the advantage of MLM business is having less capital
with great opportunities while the future is determined by the distributor itself, and there is no risk of
bad loans, tliere will be free working hours and one will also be able to achieve his or her own dream.
MLM is a method of selling goods directly to customers through a network of distributors developed by
the chains and tiers. Each distributor recruiting or sponsoring other people is called a partner fdownline]
who is always associated with bonuses and commissions, and every MLM company has its own
calculation method. The MLM distributors are independent business people who earn from their
activities of selling the products and capturing partners' activity. The working manners of MLM
entrepreneurs are done without such regular working hours in an office, where many of them are
working after office hours to earn extra income.
Conceptual Framework: Based on a study done by Chreptaviciene & Starkute (2012), it is found that
career development is influenced by the competencies possessed by a person in an organization. The
Ievel of competency should be developed along with the increase in one's career. However, the high
competency which is not supported by the commitment will not be able to make an entrePreneur's career
succeed. This makes the commitment useful to maintain the business, grow the business and the
willingness to sacrifice or invest is able to provide a strong boost to a person's performance in conducting
the business relationship. Traditionally, the career was completely determined by the training programs
that had been attended by a worker and the opportunities provided by the employer. However, this has
been changed whereby, a career success is determined by the workers themselves fKuiipers et al., 2006J.
People who will be motivated to get involved in business is expected to increase the performance and
will provide valuable results [Katzell & Thompson, in Sugiyanto, 2007). Conclusively, a motivated worker
who runs a high level of venture will tend to believe that the level of ventures will give a good assessment'
A good assessment will encourage Company to give bonuses and promotions that will satis$r the purpose
of the workers.
Figure 1: Conceptual Framework
Entrepreneurial
Motivation
311
T
Hypothesis
significantly influence the career
The entrepreneurial competency, commitment and motivation
r
successofthedistributorsinMultilevelMarketingcompany.
rTheentrepreneurialmotivationisamoderatingvariablethat
betweenentrepreneurialcompetencyandthedistributors'
o
can strengthen the relationshiP
career success in Multi Level
Marketing company.
that can strengthen the relationship
The entrepreneurial motivation is a moderating variable
and the distributors' career success in Multi Level
between entrepreneurial commitment
Marketing company.
3.
Methodolory
who have
population and sampling; The population of this study consists of all members fdistributors)
Orindo
PT'
oth"tt, PT' Hertralife Medan Indonesia'
been officiatly registered in trt" ut-tut company, amonS
PT'
and
lndonesia
K-Link' PT. Tupperware
Ayu Natural [oriflame], pT. Sophi Mlrtin Indonesii PT.
distributors on each
the number of registered
Amway Indonesia. fneiifficuttyof finding official data on
of the population to have been unknown' The
of the MLM companies, had caused the actual number
population:
,r-plins technique or iiir iiray ,ses a formula of Isac Michel for the unknown
-:
ira i{\
tzj
Note:
P'q
6
n = Sample size
p= Population ProPortion
q= 1-p
Z = Level of confidence
e = Margin of error
as follows:
Using the above formula, thus the sample is obtained
(1,!16,): (0, 117)i
0,Siii
0.053,8* 16i O, 1-19 1 l
'tt : -*-i,Ja']s- = 213,7 orZl4people/respondents
study uses a non-probability sampling through
The sampling technique: The sampling technique in this
a-non-probability sampling is a technique
the purposive snowball approach. drrgiyo.,o i20b4l states that
of the population to be elected as the
that does not provide equal opporrunities for each ilement/member
with consideration given to
technique
is a
members of the sample. Meanwhile, the purposive sampling
in Medan' Thus' it
Company
MLM
the
in
certain criteria, such as the fact that they are the distributors
found' Moreover'
to
be
6
respondents
of
out
1
was
there
obtained the proportio n of O^767,indicating that
is involved' then it
population
of
number
a
small
first,
at
whereby
the snowball sampling is a technique
for a period of time [Sunyoto, 2014)' In this
swells like a snowball rolling to be larger in a long time
and later they were asked to choose their
research, the first one or two respondents were to b"e selected,
of samples was obtained' Despite this' it
ftiends to be the sample, and so on until the desired number
225 questionnaires disffibuted to the
were
there
needs a total of 214 respondents to be asked, however,
to replace the questionnaires that
able
be
would
excesses
respondents with the assumption that these
incomplete' Upon editing the data on the
might not be returned or has incomplete dwhich data were
that can be used is 198 questionnaires
entire returned questionnaire, the totil number ofquestionnaires
or with the return rate of 9Zo/o.
4. Findings
Multiple Regression Equation:
Tablelfindsanequationofthemultiplelinearregressionasfollows:
Y = -3.851 + 0.2|87 X1+O.015 X2+ 0.303 X3 + e
Based on the above equation, it can be explained as follows:
rConstant[a]=-3'S5l,Thisshowsthatiftheentrepreneurialcommitment,competenryand
motivationhasazerovalue,thenthecareersuccesswilldecline'
312
then the
Coefficient b1 = 0.287. This shows that if the entrepreneurial competenry is increasing,
r
career success will be increased.
then the
Coefficient bZ = 0.015. This shows that if the entrepreneurial commitment increases,
career success will be increased'
will be increased.
Ioefficient b3 = 0.303. This suggests that if the motivation increases, the career success
.
Table 1: Coefficient
Standardized
Coefficients
Beta
Unstandardized
CoefEcients
Model
Std.
Error
Sig.
-1.757
0.380
Constant
-3.851
2.791
TX1
0.015
0.041
0.029
0.053
0.287
0.070
0.303
TX3
R = 0.811
R Square = O.657
Adiusted R Square = 0.652
Std. Error of the Estimate = 5.747
a. Dependent Variable Y
Source: Data OutPut, 2014
0.451
5.402
0.368
+324
TXz
0.080
0.705
0.00
0.00
variable of
As depicted in Table 2, the value of the adiusted R Square is 0,652, where this means that the
on career
65.20/o
as
much
as
contributed
motivation
and
entrepreneurial competency, commitment
company.
the
MLM
in
success of the distributors
F Test
(Simultenous)
Table 2:
F
Test
s
Sum ofSquares
12274.4774
6394.680
18669.455
Model
Regression
Residual
Total
a.
Df
Mean
F
3
4091.597
r24.730
t94
32.962
797
Predictors: [Constant), TX3, T1', TZ
b. Dependent Variable : Y
Based on Table 2, it found the significant value of 0'00. 0.05. This suggests that partially, the motivation has a significant effect on career
success of the distributors in the MLM company'
313
Residual Test
success:
Motivation serves as a moderator between entrepreneurial committment on career
This
success'
career
and
committment
entrepreneurial
Motivation functions as a moderator between
entrepreneurial
between
influence
the
strengthen
to
able
is
means that a high level of motivation
committment on career success.
Committment
Standardized
Table 4: Coefficient
Unstandardized
Model
Coefficients
std. Error
1.239
7.795
Constant
a.032
-0.066
Y
:
AbsRes-l
Variable
Dependent
Sourcel Data OutPug 2014
sig.
Coefficients
Beta
-0.145
6.291
-2.053
0.00
0.047
0'05 and a parameter coefficient of
Based on Table 4, it is found that Y [career successJ has a sig 0.041>
variable'
negative value, and it concludes that motivation is used as a moderating
career success:
Motivation serves as a moderator between entrepreneurial competency on
success' This
career
and
competency
Motivation functions as a moderator between entrepreneurial
entrepreneurial competency on
means that a high motivation is able to strengthen the influence between
career success.
Table 5: Coe
Unstandardized
Model
Coefficients
Std.
Error
1.185
8.969
0.031
-o.712
Y
a. Dependent Variable : AbsRes-2
Source: Data OutPut, 2014
Constant
Standardized
Coefficients
Beta
sig.
7.567
-0.253
-3.654
0.00
0.00
a parameter coefficient of a
Based on Table 5, it is found that Y [career successJ has a sig 0'00> 0.05 and
variable'
moderating
as
a
negative value, so it concludes that motivation is used
5. Discussion and Conclusion
competency- significantly
Based on the results of the partial test [t test), it is known that entrepreneurial
is
aligned with the theory
phenomenon
This
influences the career ,.r.."., of the tvtl,tvt distributors.
formation of a
stating that the entrepreneurial competenry is a very important element in the
is also fully
concept
this
as
businesses,
MLM
of
types
all
towards
as
businessman's career success as well
are a
there
that
aware
fully
are
distributors
independent
business,
MLM
of
applicable. In this tlpe
and
successfully,
business
number of competencies they should possess or master to be able to run the
point
of
company's
MLM
In
the
furthermore in order for them to be able to achieve an optimal career'
an
if
Therefore,
the
distributors.
from
innovation
view, its system does require high creativity and
able to be modified
independent distributor his less creativity und do"r not possess ideas that are always
to b.i.tg new ideas, thus it will be difficult to reach a career peak'
is related to career
Based on the partial test [t testJ, it is known that the entrepreneurial commitment
by Porter et al'
introduced
concept
success but has insignificint effect. Theoretically, this was the first
goals
organizationals'
the
of
acceptance
that defines the organizational committment as a strong belief,
Ifthe
20071'
Ruis,
&
in
Clercq
al.
et
ofganization
in
the
[Porter
and values and a strong desire to remain
with the original concept of commitment, this indicates that any
results of this study
ire
associated
or called
distributor who wants to achieve careeruu..".i requires high commitment in ventures,
in MLM Company
entrepreneurial commitment. However, many of the respondents considered the career
MLM Company'
in
career
their
,, , .ld" job. Thus, they do not give full iommitment in developing
influences
significantly
motivation
Moreover, the partial teit results (t testJ show that entrepreneurial
theoreticai
of
existing
variety
a
with
is
associated
If
this
the career success of the MLM's disffibutors.
314
variety of activities. This is aligned
concepts of motivation, it is often shown as a strong effort to excel in a
is
based on the classical theory of
which
with the concept of the need for achievement by Mcclelland
Collins et al. in Rotenbegr-Shir
by
study
A
behavior.
human
of
needs, which states the need as a motivator
factor'
entrepreneurial
predictive
is
a
excel
to
desire
the
that
& Weneberg [2011), also shows
entrepreneurial competency and
Based on the residual test, motivation seryes as a moderator between
the influence of
career success. This means that high motivation will be able to strengthen
is one's career
achievement
to
obtain
needs
the
of
entrepreneurial competency to career success. One
through the
person
a
of
desires
and
needs
the
meet
to
tool
success. The careeruu.a".. is seen as a
al" 2009]'
et
Lertwannawit
in
Shaffer
&
power
of
acquisition
and
[Lau
achievement, also the completion
towards
directed
With high motivation, then the person has high-intensity efforts that are always
a good
has
although-one
meeting the needs in a long period of time, and 'iice versa, It further explained,
their
achieving
process
of
the
certainly
entrepreneurial competen{rif nit or her motivation is weak, thus
they
example,
for
motivation,
with
associated
problems
n"eds lcare"r succeisJ wili experience a lot of
lack
and
achievement
for
desire
low
have
discipline,
lack
will be Iess diligen! easily discouraged,
confidence.
between entrepreneurial
Based on the residual test, the motivation also serves as a moderator
the influence of
to
strengthen
be
able
will
commitment and career success. It means that high motivation
a motivational
as
is
seen
commitment
the
Since
entrepreneurial commitment to career success-.
attachment to
an
actually
it
is
networking,
organization
phenom"non in the context of entrepreneurial
that can strengthen or weaken
the organization, then the existence of motivation ai a moderating variable
success would be highly
the effect of the relationship between entrepreneurial commitment and career
condition will generally
this
relevant. This can be explained as follows; if o.r"'r motivation is high, then
normative, affective
whether
of
person
irrespective
strengthen the commitments that had been there in a
career success,
with
achieving
specifically
is
associated
and continuous commitment. If this condition
in a particular
success
career
The
commitment.
continuance
to
then this would be strongly related
a long period
within
organization
the
in
himself
involve
not
does
one
if
achieved
organization will not be
of time.
Finatly, this study produces several points as follows:
r Based on the F test, the entrepreneurial competency, commitment and motivation simultanously
affect the career success of the distributor in the MLM company'
. Based on the t test, the entrepreneurial competenry partially has no effect on career success'
effect on
Meanwhile, the entrepreneuriil commitment to motivation partially has a significant
.
o
career success'
R Square was 0'652,
Based on the results of the determinant coefficient (R squaredJ, the adjusted
and motivation had
commitment
which means that the variables of entrepreneurial competency,
company'
in
MLM
distributors
of
the
given a contribution of 65.2o/o to the career success
variable which
The residual test results indicate that entrepreneurial motivation is a moderating
strengthens the influence
.
of
entrepreneurial competency
with a career success of
the
distributors in MLM company.
variable that
The residual test results indicate that entrepreneurial motivation is a moderating
of the
success
the
career
to
commitment
entrepreneurial
of
influence
the
can strengthen
distributors
in
MLM company.
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