The Entrepreneur

Understanding The Entrepreneur

Defining The Entrepreneur

From our perspective:

Any individual that sees and acts upon an opportunity This includes introducing a new product or service, identifying new markets, or putting a twist on an existing product, process or service Also, includes the raising of capital, taking the risk and controlling the new venture Embodies creativity, aggressiveness, and determination By assembling various resources, s/he takes risks and creates a venture from an idea, hobby, or simply a dream

The underlying premise is that it is an individual undertaking

The Role Of The Entrepreneur

The two possible roles include: Risk-taker/Innovator:

Source of creativity, unconventional in approach, trial and error rather than methodical Management of resources, strategy development and implementation, focus on developing a structure to exploit the opportunity

Manager/Coordinator:

Factors that Shape Future Entrepreneurs

Traits

Environment

Behavior

The Entrepreneurial Process

These factors are commonly grouped under 4 schools of thought
1.

Traits Approach: entrepreneurs are shaped by

2.

their character internal attributes Environmental Approach: entrepreneurs are a product of their environment external factors Behavioural/Managerial Approach : it is neither internal nor external factors but actions & behaviors that lead to entrepreneurship

3.

Contingency Approach

Entrepreneurial Traits Approach

Entrepreneurs generally possess the following characteristics:

High need for achievement need to always achieve new bold goals Risk taking propensity willingness to take financial risks Tolerance for ambiguity no fear of the unknown Innovation ability to create new or modify existing business concepts Intuition make decisions based on gut feelings High need for independence & autonomy make own decisions Internal locus of control belief that the future is determined by their own actions Low need for conformity unhappy in environment with strict rules Proactive plans for events before they occur

The Entrepreneurial Traits Approach

Need for Achievement (n. Ach.)

Strong desire to set own goals and carry them out Want to take responsibility for actions

Tend to do well in competitive situations Are results-driven Dislike routine activities

Predisposition to be preoccupied with quality, service, customer satisfaction MacClelland:

Desire to solve problems, gain satisfaction Ability to take moderate risks after assessing alternatives Need for feedback as a measure of success

The Entrepreneurial Traits Approach

Need for Independence & Autonomy

Want to work independently and be their own boss Attitude may result from resentment of authority figures (parent, bank manager) May impede firms growth due to reluctance to delegate or let go control

The Entrepreneurial Traits Approach

Moderate Risk-Taking Propensity

Take calculated risks Consider alternative solutions before reaching decision For the Entrepreneur, the new business may be considered less risky than other alternatives

The Entrepreneurial Traits Approach

Internal Locus of Control

Refers to Entrepreneurs perception that all events are under their control They are able to influence events and determine outcomes of their own actions Dont attribute outcomes to fate or luck or external environment Individuals tend to: be alert, discover opportunities and scan environment effectively

The Entrepreneurial Traits Approach

Tolerance for Ambiguity

Ambiguity = lack of complete and definitive information Ability to perceive ambiguity in a positive and challenging way Trait seen as an asset because allows Entrepreneur to organize thoughts and make decisions under conditions of uncertainty

The Entrepreneurial Traits Approach

Innovation

Drucker defines innovation as the mechanism by which Entrepreneurs create or increase wealth Arises from search for opportunity in internal/external situations Internal: unexpected occurrences, incongruities, process needs External: economic or political trends, changes in customer preferences

The Entrepreneurial Traits Approach

Proactivity

Ability to take control of events Ability to take initiative in solving problems Ability to set objectives and implement solutions

Low need for conformity

Dislike rigid environment

Environmental Approach
Choice of Entrepreneurship is related to external factors beyond the individuals control, seen as a cultural phenomenon Culture

Entrepreneurs are products of their culture Some cultural groups see Entrepreneurship as a more desirable career opportunity Canada has highest percentage of Entrepreneurs who were born outside the country

Environmental Approach, contd.

Family Background
Entrepreneurial traits are impacted by birth order, role models and experience of rejection in childhood First born: self confidence, independence and internal

locus of control correlation exists with reception of special attention & care Role models: entrepreneurial environments foster the development of entrepreneurial traits risk-taking, independence, creativity and achievement Rejection: rejection from family relations can lead to the development of independence (to avoid authority figures)

Environmental Approach, contd.

Education and Experience

Level of education: more and more entrepreneurs are educated Experience: managerial and industry experience A large percentage of entrepreneurs start businesses in industries they are familiar with

Environmental Approach, contd.

Push-Pull Theory
New venture creation results from positive and negative external factors Pushed into Entrepreneurship by negative elements such as job dissatisfaction or job loss Pulled into Entrepreneurship by the observation of an opportunity, idea (e.g. dot-com mania) Some industries more likely to act as incubators: computer, garment, restaurant

Environmental Approach, contd.

Marginal/Displacement Approach Some studies show that marginal individuals are more likely to become Entrepreneurs

Misfits that cannot fit into the business mainstream

Dislike 9am to 5pm routine Problem with acceptance of authority Difficulty in coping with bureaucracy

Minorities who feel discriminated against, women experiencing the glass ceiling often start own business out of necessity

Behavioral/Managerial Approach

Based on the entrepreneurs ability to achieve goals Success depends on the entrepreneurs ability to obtain resources, implement an appropriate strategy and develop an appropriate structure to exploit the opportunity Actions are the key criteria to determining whether or not an individual fits the profile of an entrepreneur Strategic thinking, goal setting, and planning, are all part of defining the characteristics of an entrepreneur under this theory

Contingency Approach
Combination of ALL factors
The ability to sense the opportunity (result of E traits)

The ability/willingness to exploit (management skill)

Motivation for Becoming an Entrepreneur

Motivation varies from individual to individual Foreign refugees: people escaping political or religious persecution or to seek economy with greater opportunities Corporate Refugees: people dissatisfied with corporate environment Parental refugees: children of self-employed parents Feminist Refugees: women who feel discriminated against by supervisors, peers, education system, corporate world Social Refugees: people who do not agree with certain aspects of their society -- usually start a business tied to their hobby or craft Educational Refugees: young people who drop out of the education system -- feel restricted or because of circumstances