BA350

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Chapter Two
Small Business Entrepreneurs:
Characteristics and Competencies
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Education.

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The Psychology of Entrepreneurs
Aspects of an
entrepreneur’s behavior,
their way of looking at and
thinking about themselves
and their world is called
cognition, visible in their
actions.
There is no one pattern of
entrepreneurial behavior or
entrepreneurial type.
There are literally hundreds
of ways to think about
entrepreneurial
personalities.
Successful entrepreneurial
behavior leads to the
creation of a new firm that
meets the goals of the
entrepreneur.

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Professionalization.
The Five Ps of Entrepreneurial Behavior
Passion.
Perseverance.
Promotion-Prevention
Focus.
Planning Style.

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Five Ps of Entrepreneurial Behavior:
Passion and Perseverance
An entrepreneur’s passion both increases their commitment to the firm,
and inspires key stakeholders like potential investors or employees.
Passion is displayed in three ways:
• By looking at the challenges of the business in a creative way.
• By being persistently focused on the business.
• By being absorbed by the tasks and concerns of the business.
Perseverance is best thought of as a type of learned optimism and one
of the most powerful contributors to entrepreneurial success.
• The danger is to keep trying the same action repeatedly without
learning.
• This is a problem behavior called perseveration.

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Five Ps of Entrepreneurial Behavior:
Promotion-Prevention Focus and Planning
A promotion focus is intent on maximizing gains.
• Yields results in richer, dynamic, environments or industries.
A prevention focus is intent on minimizing losses.
• Can work well in an established industry or a poor one.
Successful entrepreneurs balance the two focuses.
Comprehensive planners take a long-term view and act on their plans.
Critical-point planners plan first, act on it, then consider more planning.
Opportunistic planners start with a goal and look to achieve it.
Reactive planners are passive, the environment determines actions.
Habit-based planners do not really plan, they just have a routine.
• Reactive and habit planners generally do very poorly in business.

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Five Ps of Entrepreneurial Behavior: Professionalization
Every industry has an average called a standard business practice.
• Performing at that level or better is termed professionalization.
There are three levels or professionalization.
• Expert business professionalization occurs
when most aspects of the business meet or
exceed the industry’s standard.
• Specialized business professionalization
occurs when one or two aspects of the
business are at this level.
• Minimalized business professionalization
occurs when none of the aspects of the
industry standard appear in the business.
One other
approach to
thinking about the
entrepreneurial
personality is the
idea of the
entrepreneurial
mindset.

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Entrepreneurial Operational Competencies
Successful entrepreneurs exhibit
business-related expertise, called
competencies.
The BRIE model’s boundary uses
key business functions to create
the boundary.
• There is also industry-
specific knowledge that uses
a particular kind of skill.
• A mechanic.
• A cook.
Resources lead to specific
resource competencies, or the
ability to procure raw materials.
Intention reflects determination, or
determination competencies,
shown through focus and choices.
Exchange, or ‘making sales,’ uses
opportunity competencies.

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The Sociology of Entrepreneurs:
Women and Minorities in Small Business
Women-owned businesses are a large sector of U.S. firms, yet they
account for only 4.3% of national small business revenue.
• Women choose service industries with lower sales levels, while men
choose construction and financial industries, with higher sales.
• Men are motivated more by money and women more by flexibility.
• Women want less risk, which are also the firms with lower returns.
Minority-owned firms has also grown explosively.
• Public and private initiatives have helped level the field.
Both women and minorities face access issues, most often in financing.
• On solution are set-asides from big companies and the government,
and certification proves the firm is minority or women-owned.
• The second solution is making extra efforts to network.

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The Sociology of Entrepreneurs:
Second Career and Veteran Entrepreneurs
A special group of entrepreneurs are second career entrepreneurs.
• Related are veteran entrepreneurs.
Workers are taking generous offers to retire early, due to downsizing, and
using the money to start their own business.
A particular challenge is the difficulty of the do-it-yourself approach.
• Get plenty of advice and consider subcontracting difficult tasks to
other firms.
A second challenge is keeping personal finances out of the business.
• Don’t risk all of your retirement nest egg.
Loss of confidence is another challenge.
• Take time to recoup and then start networking.

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Entrepreneurial Teams
Access text alternative for this image.
Source: Original analysis using PSED 1 and PSED 2 data (covering 1998 and 2006, N = 1749) done by Kelly Shaver, College of Charleston, for Entrepreneurial Small Business, February 2019.
Most teams are family related.
• They know/trust each other.
When assembling a team, work
out key issues ahead of time.
Pick good team members for a
strong organizational culture.
They should have passion for:
• The mission.
• The team.
• Innovation.
• Fairness.

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Family Businesses
Firms with a majority family ownership are a family business and they
employ 58% of America’s total workforce.
• A strong unit can be effective with quick decision making.
• Families are a source of funds and personnel.
• They also tend to raise future entrepreneurs.
Two challenges are role conflict and time
management.
• Reduce role conflict by keeping family issues
out of the business.
• A basic method of time management is to
make a list, prioritize that list, then delegate
tasks – repeat daily and strategize weekly.
Lack of a clear
succession plan
could end a family
business.
Create a family
council, gather an
advisory board, or
a formal board of
directors for advice.

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The Entrepreneurial Life Cycle
A firm’s growth is predictable, as in a
business life cycle.
Emergence is when a person takes
steps to start a business.
Existence finds the firm in
operation, but not yet stable.
• The liability of newness is an
issue at this stage.
The success stage occurs once the
firm is established in its market.
• Slack resources can be put
back into the firm if needed.
The resource maturity stage may
include micro-commitments.
The takeoff stage occurs if the firm
has a period of exceptional growth. Access text alternative for this image.
Sources: Neil C. Churchill and Virginia L. Lewis adapted Greiner’s model in “The Five Stages of Small Business Growth,” Harvard Business Review, May–June 1983; William J. Baumol, “Entrepreneurship in Economic Theory,” American Economic
Review 58, no. 2 (May 1968), pp. 64–71; Gaylen Chandler and Steven H. Hanks, “Market Attractiveness, Resource-Based Capabilities: Venture Strategies and Venture Performance,” Journal of Business Venturing 9, no. 4 (1994), pp. 331–349; Jerome
Katz and William B. Gartner, “Properties of Emerging Organizations,” Academy of Management Review 13, no. 3 (July 1988), pp. 429–441.

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Rewards for Starting a Small Business
Income rewards are the money made from owning your own business.
Flexibility rewards
are perhaps the
most rapidly
growing type of
reward.
Growth rewards
come from facing
and beating or
learning from
challenges.
Access text alternative for this image.
Source: Nancy M. Carter, William B. Gartner, and Kelly G. Shaver, “Career Reasons,” in William B. Gartner, Kelly G. Shaver, Nancy M. Carter, and Paul D. Reynolds (eds.), Handbook of Entrepreneurial
Dynamics: The Process of Business Creation (Thousand Oaks, CA: Sage, 2004).

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