1 the entrepreneurial mind-set in individuals


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  • 1 the entrepreneurial mind-set in individuals

    2. 2. Chapter Objectives1. To identify and discuss the most commonly cited characteristics found in successful entrepreneurs through “The Trait Approach”2. To describe the entrepreneurial mind-set by through “OC theory” whilst elaborating the crucial role of “optimism and chance”.3. To present the major sources of information useful in profiling the entrepreneurial mind-set 2–2
    4. 4. Entrepreneurship Theory• Entrepreneurs cause entrepreneurship.  Entrepreneurship is a function of the entrepreneur: E + f (e )  Entrepreneurship is the interaction of skills related to inner control, planning and goal setting, risk taking, innovation, reality perception, use of feedback, decision making, human relations, and independence. 2–4
    5. 5. The Trait approach • As in the case of leadership research, initially there was a quest to dis­cover the trait or set of traits distinguishing entrepreneurs from non­ entrepreneurs and/or managers (Brockhaus, 1980) • The Big Three’ (Chell, 2008):  Need for achievement (NAch);  Locus of control (LOC); and  Risk-taking propensity 2–5
    6. 6. The Trait Approach • They should be strongly motivated to overcome obstacles and to achieve, as originally described by McClelland (1961); • They should feel a great sense of personal control over outcomes (Rotter, 1966); and, • Given the uncertain nature of the context in which entrepreneurial activity is engaged, they appear to need to manage risk (Knight, 1921). 2–6
    7. 7. From “Big Three” to “Big Five” • Empirical Studies showed mixed evidence • There is some support for NAch and mixed support for ILOC • Thus researchers turned to consider other traits • The ‘Big Five’  (Lower) Neuroticism  (More) Extraversion,  (Higher) Openness,  (Lower) Agreeableness and  (Higher) Conscientiousness 2–7
    8. 8. Neuroticism (sensitive/nervous vs.secure/confident) • Individuals high on this trait experience negative emotions like anxiety, hostility, depression, impulsiveness and vulnerability.  Those low on this trait are considered emotionally stable and are characterized as self­confident, calm, even tempered, and relaxed.  Entrepreneurs have to be very self­confident and resilient in the face of stress. 2–8
    9. 9. Extraversion (outgoing/energetic vs.solitary/reserved) • Extraversion is "the act, state, or habit of being predominantly concerned with and obtaining gratification from what is outside the self".[3]  Extraverts tend to enjoy human interactions and to be enthusiastic, talkative, assertive, and  gregarious.  2–9
    10. 10. Openness (inventive/curious vs.consistent/cautious) • Openness to Experience : Someone that is intellectually curious, creative, imaginative, reflective, and untraditional. • Openness has moderate positive relationships with creativity, intelligence and knowledge. 2–10
    11. 11. Agreeableness (friendly/compassionate vs.cold/unkind)  • Agreeableness : individuals high on agreeableness are trusting, forgiving, caring, and cooperative, while those low on this trait are manipulative, self­centered, suspicious and ruthless.  It’s a jungle out there, and entrepreneurs have to be tough to survive. 2–11
    12. 12. Conscientiousness (efficient/organized vs. ea sy-going/careless) • Conscientiousness :  indicates an individual’s degree of organization, persistence, hard work, and motivation to accomplish goals.  Conscientious individuals are achievement oriented and dependable.  This personality type is the most consistent predictor of job performance across a wide variety of work and occupations. • For comprehensive comments search Wikipedia for “Big Five” 2–12
    13. 13. The Big Five and venture success: Is there a linkage (Ciavarella et al., 2004) ( • In Examining the relationship of the entrepreneur’s personality to long­term venture survival, we measure survival in two ways: (1) the likelihood the venture will survive for at least 8 years and (2) the overall life span of the venture. The ‘‘Big Five’’ personality attributes—extraversion, emotional stability, agreeableness, conscientiousness, and openness to experience provide the measures of the entrepreneur’s personality. • Ciavarella, M. A., Bucholtz, A. K., Riordan, C. M., Gatewood, R. D., & Stokes, G. S. 2004. The Big Five and venture success: Is there a linkage? Journal of Business Venturing, 19: 465– 483. 2–13
    14. 14. The Big Five and venture success: Is there a linkage (Ciavarella et al., 2004) ( • As hypothesized, the entrepreneur’s conscientiousness was positively related to long­ term venture survival. • Contrary to expectations, we found a negative relationship between the entrepreneur’s openness and long­term venture survival. • Extraversion, emotional stability, and agreeableness were unrelated to long­term venture survival. 2–14
    15. 15. Common Characteristics of Entrepreneurs• Commitment, • Calculated risk taking determination, and • Tolerance for failure perseverance • High energy level• Drive to achieve • Creativity and• Opportunity orientation Innovativeness• Initiative and • Vision responsibility • Self­confidence and• Persistent problem solving optimism• Seeking feedback • Independence• Internal locus of control • Team building• Tolerance for ambiguity 2–15
    16. 16. Comment on The Trait Approach • We do not argue that personality theory provides a complete theory of entrepreneurship or even exhausts the range of topics that can be explored at the level of the individual entrepreneur. Rather, our results show that personality must be considered as one important component of a multidimensional model of the variables, processes, and environmental factors affecting entrepreneurship and new venture creation (Zhao and Seibert, 2006, p. 268). 2–16
    17. 17. Outline of the Entrepreneurial Organization Imagination Imagination Acceptance Acceptance Flexibility Flexibility of Risks of Risks 2–17
    19. 19. Who Are Entrepreneurs?  Independent individuals, intensely committed and determined to persevere, who work very hard (Persistence).  They are confident optimists who strive for integrity (optimism)  They burn with the competitive desire to excel and use failure as a learning tool (Learning from failure- learners) 2–19
    20. 20. Optimism and Chance: The Elephants in the Entrepreneurship Room • Storey, D. (2011) ‘Optimism and Chance: The Elephants in the Entrepreneurship Room’, International Small Business Journal, 29, 4, 303­ 321. 2–20
    21. 21. Entrepreneurial Mindset: Optimism, Chance and Learning• How can persistence be achieved? How does it relates to the element of chance?• How is chance a matter of individual choice and an opportunity offered (or encouraged by the society)?• What is optimism and how does it relates to the previous point? 2–21
    22. 22. Optimism and Chance • Optimism (1) A disposition or tendency to look on the more favorable side of events or conditions and to expect the most favorable outcome. (2) The principle that the existing world is the best of all possible worlds. • Chance (1) The unknown and unpredictable element in happenings that seems to have no assignable cause. (2) An accidental or unpredictable event. 2–22
    23. 23. Optimism and Chance (OC) Theory 1. Optimistic individuals are attracted to self employment 2. They enter self-employment if they have access to wealth 3. In self-employment they enter a game of chance 4. The lucky ones for a period of time have an alignment between their skill set and what the customer wants 2–23
    24. 24. Optimism and Chance (OC) Theory 5. The unlucky ones encounter problems immediately 6. The extent to which the unlucky ones survive depends on access to wealth (+) and alternative employment options 7. If they have wealth they can ride out losses and hope to have a longer run at the table and they luck may turn 2–24
    25. 25. OC Theory in Practice 1. Assume a collection of individuals with different levels of optimism and access to resources and alternative uses of their time. 2. They are faced by a roulette wheel where they know the odds are against them but where there is the possibility of a big win 2–25
    26. 26. OC Theory in Practice 3. Who plays the game? Answer – the optimists are more likely to play and those who have some resources and those without good alternatives. This is precisely what we observe. 4. Who stays in the game? The optimists, those with more resources and those with poor alternatives 5. Who drops out of the game? Those who run out of resources and those with better alternatives 2–26
    27. 27. OC Theory in Practice 6. Performance of the survivors: Driven by external circumstances over which the player/business has no control, so good when you have a good run; but a bad run finishes you 7. If you have a good run you acquire resources, you gain the confidence of others – leading to more resources – what is referred to as a track record 8. You also become more confident- and plausible to others all of which generates more resources which enables you to make lots of mistakes whilst still surviving 2–27
    28. 28. OC Theory and Learning • What sort of learning takes place? • Are entrepreneurs really better “learners” than non­entrepreneurs or is it only a matter of being optimistic, getting many chances (thus getting experience) and ultimately succeeding? 2–28
    29. 29. OC Theory assumes Jovanovic learning • Only Jovanovic learning takes place. • Jovanovic (1982) assumes that the longer individuals are in business, the better informed they become about their own entrepreneurial talent. The value of this form of learning is that it enables individuals to make a more informed ‘stay or quit’ business deci­sion. 2–29
    30. 30. Jovanovic Learning • Therefore, the crucial distinction is that by being in business, the individual makes a more informed distinction between the option of staying in business and moving to an alternative state – employment, unemployment, or exiting from the labour force – but not that they become a more talented or more able entrepreneur. 2–30
    31. 31. Jovanovic learning • It does not assume that entrepreneurial talent θ increases with time. Time only enhances the ability of the individual to assess that talent. The value of that greater accuracy is that the individual is able to make a better informed judgement about whether or not to continue in business 2–31
    32. 32. Conclusion of OC Theory •You can do the “right” things and fail •You can do the wrong things and succeed •Learning is really hard for new/small firms because of noise •Forecasting performance is so much harder than “backcasting” •Entrepreneurs are optimists 2–32
    33. 33. Conclusion of OC Theory A theory based on optimism and chance implies: • The wealthy survive in business •Performance fluctuates wildly over time •Many one-shot growers •Those who re-start after failure do NOT (Necesarrily) perform better than novices 2–33
    35. 35. Sources of Research on Entrepreneurs Research and Research and Speeches, Speeches, Direct Direct Popular Popular Seminars and Seminars and Observation Observation Publications Publications Presentations Presentations The The Entrepreneurial Entrepreneurial Mindset Mindset 2–35
    36. 36. Sources of Research on Entrepreneurs(cont’d)• Publications • Direct Observation of  Technical and professional Practicing Entrepreneurs journals  Interviews  Textbooks on entrepreneurship  Surveys  Books about entrepreneurship  Case studies  Biographies or autobiographies • Speeches, Seminars, and of entrepreneurs Presentations by  Compendiums about entrepreneurs Practicing Entrepreneurs  News periodicals  Venture periodicals  Newsletters  Proceedings of conferences  The Internet 2–36
    37. 37. The Dark Side ofEntrepreneurship 2–37
    38. 38. The Dark Side of Entrepreneurship• The Entrepreneur’s Confrontation with Risk  Financial risk versus profit (return) motive varies in entrepreneurs’ desire for wealth.  Career risk—loss of employment security  Family and social risk—competing commitments of work and family  Psychic risk—psychological impact of failure on the well-being of entrepreneurs 2–38
    39. 39. Figure 2.1 Typology of Entrepreneurial StylesSource: Thomas Monroy and Robert Folger, “A Typology of Entrepreneurial Styles:Beyond Economic Rationality,” Journal of Private Enterprise IX(2) (1993): 71. 2–39
    40. 40. Stress and the Entrepreneur• Entrepreneurial Stress  The extent to which entrepreneurs’ work demands and expectations exceed their abilities to perform as venture initiators, they are likely to experience stress.• Causes of Entrepreneurial Stress  Loneliness  Immersion in business  People problems  Need to achieve 2–40
    41. 41. Entrepreneurs: Type A Personalities• Chronic and severe sense of time urgency.• Constant involvement in multiple projects subject to deadlines.• Neglect of all aspects of life except work.• A tendency to take on excessive responsibility, combined with the feeling that “Only I am capable of taking care of this matter.”• Explosiveness of speech and a tendency to speak faster than most people. 2–41
    42. 42. The Entrepreneurial Ego• Self­Destructive Characteristics  Overbearing need for control  Sense of distrust  Overriding desire for success  Unrealistic optimism• Entrepreneurial Motivation  The quest for new-venture creation as well as the willingness to sustain that venture. • Personal characteristics, personal environment, business environment, personal goal set (expectations), and the existence of a viable business idea. 2–42
    43. 43. The Entrepreneur as Manager and Co-worker • The traits and behaviors responsible for the entrepreneur’s success also lead to their undoing/ failure as managers and co­workers. • Study of 38 entrepreneurs in USA and Canada shows a strong need for control and suspicion about authority. • Thus they are unable to work in structured situation where authority is delegated (unless they have created the structured and work is done on their terms). The Dark Side of Entrepreneurship Manfred (1985)
    44. 44. The Entrepreneur as Manager and Co-worker • They are unable to shows submission expected of subordinate and shows great deal of concern with minute details that is stifling. • They are poor collaborator, they are ready for the worst. • Entrepreneurs require more appreciation • Together they can be problematic as employees The Dark Side of Entrepreneurship Manfred (1985)
    45. 45. Entrepreneurs: The Need for Shifting Between Role
    46. 46. The small firm management process
    47. 47. Entrepreneurs: The Need for Shifting Between Role
    48. 48. Entrepreneurs: The Need for Shifting Between Role
    49. 49. Entrepreneurs: The Need for Shifting Between Role
    50. 50. Entrepreneurial Traits as Barrier: The case of Transition Towards a Managerial Role
    51. 51. Entrepreneurial Traits as Barrier: The case of Transition Towards a Managerial Role
    52. 52. Entrepreneurial Traits as Barrier: The case of Transition Towards a Managerial Role
    53. 53. Dealing with Stress• Networking• Getting away from it all• Communicating with employees• Finding satisfaction outside the company• Delegating• Exercising Rigorously 2–53