Description
This book would not have been possible without the support of many individuals and institutions.
Psychology of Entrepreneurship
Research and Education
Juan Antonio Moriano León
and Marjan Gorgievski (coordinators)
UNIVERSIDAD NACIONAL DE EDUCACIÓN A DISTANCIA
VARIA (37327PB01A01)
PSYCHOLOGY OF ENTREPRENEURSHIP: RESEARCH AND EDUCATION
Quedan rigurosamente prohibidas, sin la
autorización escrita de los titulares del
Copyright, bajo las sanciones establecidas
en las leyes, la reproducción total o
parcial de esta obra por cualquier medio
o procedimiento, comprendidos la reprografía y
el tratamiento informático, y la distribución
de ejemplares de ella mediante alquiler
o préstamo públicos.
© Universidad Nacional de Educación a Distancia
Madrid 2007
Librería UNED: c/ Bravo Murillo, 38 - 28015 Madrid
Tels.: 91 398 75 60 / 73 73
e-mail: [email protected]
© Juan Antonio Moriano León and Marjan Gorgievski (coordinators)
ISBN: 978-84-362-5493-8
Depósito legal: M. 30.748-2007
Primera edición: julio de 2007
Impreso en España – Printed in Spain
Imprime y encuaderna: CLOSAS-ORCOYEN, S.L.
Polígono Igarsa. Paracuellos de Jarama (Madrid)
This book would not have been possible without the support of many individuals and institutions.
We want to express our appreciation to Francisco Claro Izaguirre who serves as the dean of the
Faculty of Psychology and Francisco J. Palací Descals, former head of the Department of Social
and Organizational Psychology at UNED. We would like also to thank to Encarna Valero,
Erasmus coordinator at UNED, for her encouragement and support.
We are grateful to all members of INPERE
(International Network for Psychology of Entrepreneurship Research and Education)
for the valuable perspectives and ideas contained into this book.
9
INDEX
Chapter 1. ERASMUS INTENSIVE PROGRAMME ........................................ 15
1. Background......................................................................................... 15
2. Aims and objectives of the programme ................................................ 16
2.1. The project contributes to the aims and priorities described in the european
policy statement .......................................................................................... 17
2.2. The ip ties in with the existing teaching programs of the participating
institutions .................................................................................................. 18
3. Main pedagogical and didactical approaches......................................... 18
4. Partnership composition ...................................................................... 20
Chapter 2. INPERE................................................................................... 25
1. Story of the network ........................................................................... 25
2. Structure and members of the network................................................ 26
2.1. Member of the council ......................................................................... 26
2.2. Senior members and advisors of inpere ................................................. 28
3. INPERE meetings and common activities ........................................... 28
3.1. Istanbul ................................................................................................ 28
3.2. Marburg & giessen ............................................................................... 29
3.3. Verona ................................................................................................. 29
3.4. Athens 2006......................................................................................... 30
3.5. Dresden................................................................................................ 30
4. Mission statement and goals of inpere .................................................. 31
5. How was born the intensive programme socrates erasmus? .................. 31
10
6. Research project proposal.................................................................... 31
Chapter 3. ENTREPRENEURSHIP AS A PROCESS ....................................... 33
1. Learning goals ..................................................................................... 33
2. Theoretical background....................................................................... 33
3. Literature list ....................................................................................... 36
References .............................................................................................. 37
Chapter 4. ENTREPRENEURIAL INTENTIONS............................................ 39
1. Learning goals ..................................................................................... 39
2. Theoretical background....................................................................... 39
3. Entrepreneurial intention questionnaire (eiq) ....................................... 43
3.1. Project summary: ................................................................................. 43
3.2. Participating teams:............................................................................... 44
3.3. Steps of the project:.............................................................................. 45
4. Entrepreneurial intention questionnaire (eiq) ....................................... 48
References .............................................................................................. 55
Chapter 5. MOTIVATION TO BECOME ENTREPRENEUR .......................... 57
1. Learning goals ..................................................................................... 58
2. Theoretical background....................................................................... 58
2.1. Related in-class activities ...................................................................... 63
References .............................................................................................. 63
Chapter 6. OPPORTUNITY RECOGNITION AND DEVELOPMENT ............. 65
1. Learning goals ..................................................................................... 66
2. Theoretical background....................................................................... 67
3. Related in-class activities ..................................................................... 72
References .............................................................................................. 73
Appendix 1: ............................................................................................ 75
11
Appendix 2: ............................................................................................ 77
Appendix 3: ............................................................................................ 79
Chapter 7. PERSONALITY AND COMPETENCIES ....................................... 83
1. Theoretical background....................................................................... 84
1.1. Personality variables and entrepreneurship ............................................ 86
1.2. Entrepreneurial competencies ............................................................... 90
2. Learning goals ..................................................................................... 92
3. Related in-class activities ..................................................................... 92
References .............................................................................................. 93
Chapter 8. MANAGING BUSINESS GROWTH ............................................. 95
1. The growth of rim-tech ...................................................................... 95
2. Learning goals ..................................................................................... 97
3. Theoretical background....................................................................... 97
3.1. Framework for managing a growing venture ........................................ 99
3.2. Growth strategy..................................................................................... 100
3.3. Framework pcdo (people, context, deal, opportunities).......................... 100
4. Related in-class activities ...................................................................... 102
References ............................................................................................... 103
Chapter 9. INTRAPRENEURSHIP ................................................................. 105
1. Learning goals ...................................................................................... 105
2. Theoretical background........................................................................ 105
References ............................................................................................... 109
Chapter 10. ENTREPRENEURIAL STRESS.................................................... 111
1. Learning goals ...................................................................................... 112
2. Theoretical background........................................................................ 112
2.1. Conservation of resources theory........................................................... 113
12
2.2. Entrepreneurship and entrepreneurial activities ...................................... 114
2.3. The entrepreneurial process, an activating process.................................. 115
2.4. The entrepreneurial stress process .......................................................... 116
3. Related in-class activities ...................................................................... 118
References ............................................................................................... 118
Chapter 11. CREATE ENTREPRENEURIAL MINDSETS................................ 121
1. Learning goals ...................................................................................... 121
2. Theoretical background........................................................................ 121
References ............................................................................................... 123
Charter 12. SOCIAL ENTREPRENEUR (SHIP) .............................................. 125
1. Learning goals ...................................................................................... 125
2. Theoretical background........................................................................ 125
References ............................................................................................... 126
Chapter 13. CULTURE AND ENTREPRENEURSHIP ..................................... 127
1. Introducción ........................................................................................ 127
2. Learning goals ...................................................................................... 128
3. Theoretical background........................................................................ 128
4. Related in-class activities ...................................................................... 133
References ............................................................................................... 133
Chapter 14. POSITIVE PSYCHOLOGICAL CAPITAL..................................... 135
1. Learning goals ...................................................................................... 135
2. Theoretical background........................................................................ 135
References ............................................................................................... 139
Literature list ............................................................................................ 142
Chapter 15. AN ALTERNATIVE CAREER FOR SCIENTISTS......................... 143
1. Learning goals ...................................................................................... 143
13
2. Theoretical background........................................................................ 143
2.1. Marie curie: scientific entrepreneur ....................................................... 145
References ............................................................................................... 146
Chapter 16. SELF-MANAGEMENT FOR ENTREPRENEURIAL SUCCESS........147
1. Introduction..........................................................................................147
2. Learning goals .......................................................................................148
3. Theoretical Background ........................................................................148
3.1. What is planning/self-management? .......................................................148
3.3. Is planning always useful? For everybody?...............................................150
Summary ......................................................................................................151
Related in-class activities ...........................................................................151
References ................................................................................................151
Appendix A:..............................................................................................153
Appendix B:..............................................................................................156
Chapter 17. SUCCESSFUL ENTERPRISES ......................................................159
1. Which one of the Three? ......................................................................159
2. Learning Goals ......................................................................................160
2. Theoretical Background ........................................................................160
3.1. Criteria of entrepreneurial success...........................................................148
3.2. Conflicts and compatibilities between criteria of business success ............150
3.3. Personal differences in weighing entrepreneurial success .........................148
3.4. To Conclude..........................................................................................150
4. Related in-class activities .......................................................................159
References ................................................................................................160
Suggested further readings .........................................................................160
14
15
CHAPTER 1
ERASMUS INTENSIVE PROGRAMME
Juan A. Moriano and Encarna Valero
Department of Social and Organizational Psychology
UNED
1. BACKGROUND
The European Commission and national governments world-wide are
calling for an increase in Entrepreneurship (e.g. Reynolds, Bygrave, & Autio,
2004, Observatory of European SMEs, 2004). They have recognized the impact
of entrepreneurship on: economic growth, a reduction of unemployment,
regional development, innovation, and individual growth. These calls for
entrepreneurship include the study, promotion, and development of both the
entrepreneurial business and the entrepreneur. As a result, it is one of the fastest
growing fields in the social sciences (Katz, 2003).
While there are many different career options, few offer as much potential
for personal achievement and independent wealth creation as starting or running
a new business. However, compared to the US, significantly fewer EU citizens
prefer to be self-employed (Flash Eurobarometer 160, Entrepreneurship),
furthermore new businesses in the EU grow significantly slower than those in
the US. Furthermore, the Global Entrepreneurship Monitor (GEM, who
identifies entrepreneurship needs of countries across the world) reports that the
level of entrepreneurial activity is low in the EU (approx. 6%), and even lower
in Central Europe (approx. 4%), especially compared to the U.S. (more than
10%). According to GEM experts, better education and training are important
tools that can strongly motivate entrepreneurial activity. This indicates a strong
need for increasing the quality of entrepreneurship education and training in EU
countries (EU final report Education for Entrepreneurship, 2004).
PSYCHOLOGY OF ENTREPRENEURSHIP
16
With the objective to study entrepreneurship from the Social Sciences
perspective (Psychology, Education and Management and Business
Administration), researchers/educators from 6 European countries founded in
2005 the International Network for Psychology of Entrepreneurship Research
and Education (INPERE, www.inpere.org). Its main goal is to conduct research
that will advance the field of psychology of entrepreneurship and to apply the
findings to practical use, most importantly for use in education and training.
The European universities that are part of INPERE are the following:
Spanish National Distance University (UNED), University of Verona (Italy),
Erasmus University Rotterdam (The Netherlands), University of Economics
Prague (the Czech Republic), Philipps-University Marburg (Germany),
University of Technology (Dresden, Germany) and Silesian University
(Katowice, Poland).
The EU definition of entrepreneurship starts with “entrepreneurship is a
mindset...” (Green Paper on Entrepreneurship, 2003, p. 6). However, most
educational approaches to entrepreneurship focus on developing technical skills
(e.g., entrepreneurial finance). The first step to development, to enhance the
motivation and drive of the students, is often underestimated. This clearly
indicates a deficiency in the current entrepreneurial education. INPERE intends
to help the creation of an entrepreneurial mindset through the development of
psychological approaches within the interdisciplinary field of entrepreneurship.
This goal is in-line with the findings of the EFER survey on Entrepreneurship
education in Europe (Wilson, 2004). They recommend that more attention
should be devoted to culture, attitudes, skills, growth, success and
intrapreneurship.
In order to advance academic research, to facilitate the sharing of knowledge
between the European member countries and to get the useful results for
helping entrepreneurs through training and education, INPERE strives to create
this Erasmus Intensive Programme, Psychology of Entrepreneurship Research
and Education.
2. AIMS AND OBJECTIVES OF THE PROGRAMME
The main objective of this project is to bring together professors, researchers,
lecturers and university students from various European countries to share the
ERASMUS INTENSIVE PROGRAMME
17
knowledge of how to educate, guide and promote entrepreneurship in Europe
through the use of psychological approaches.
The specific aims are the following:
1. Provide students an overview of entrepreneurship and develop an
understanding of specific entrepreneurial challenges and opportunities.
2. Offer methods and techniques to develop the skills required to become
an entrepreneur and to elaborate an entrepreneurial approach.
3. Teach students the latest research in Entrepreneurship from social
sciences and show them how to apply the findings to practice.
4. Transfer of know-how in entrepreneurship training and education for
graduates, and higher education students between EU universities.
5. Promote interdisciplinary teamwork and self-starting behaviour among
participants as well as the creation of multidisciplinary research groups
between participants in the intensive program for entrepreneurship. For
example, the students from different universities will be encouraged to
work on the common research topics in their thesis following the
intensive program.
6. Creation of new educational and training programs, and development of
quality training materials (in the form of printed materials, a CD-ROM
and a practical handbook).
7. Dissemination of the products to target groups (e.g., potential and
current entrepreneurs, entrepreneurial trainers) to be used to develop
entrepreneurs. The final products of the Intensive Program (a handbook,
a web page and CD-ROM) will be promoted and distributed to as many
individuals from the project target groups as possible via advertisements
and active distribution by all the project members.
2.1. The project contributes to the aims and priorities described in the
European Policy Statement
The development of the Educational European Space is a major part of the
European Policy Statement of Spanish National Distance University (UNED). The
project involves the establishment of international agreements with multiple
PSYCHOLOGY OF ENTREPRENEURSHIP
18
European universities. The contributions of the project include bringing together
premier entrepreneurial researchers and educators to educate students on the latest
developments in entrepreneurship research and the stimulation of discussion among
an international group of students and scholars.
2.2. The IP ties in with the existing teaching programs of the
participating institutions
This IP about Psychology of Entrepreneurship Research and Education is
innovative in its interdisciplinary and international character. The professors who
participate in the IP come from different European countries and have diverse
backgrounds ranging from Work and Organizational Psychology, HR
Management and Organizational Behaviour to Management and Business
Administration. Therefore, the content of the program will be very
interdisciplinary, starting with psychosocial variables, such as motivations,
personality traits, attitudes, abilities, cognitions, and including opportunity
recognition and development, entrepreneurial team selection, encouraging
company growth, self-development, and health issues.
This programs ties with the following teaching programs of the participating
universities: “Educate how to become an entrepreneur” (UNED, Spain),
“Psychology of Successful Entrepreneurship” (Philipps-University Marburg,
Germany), “Training of Social and Managerial Skills” and “Psychology of
Entrepreneurship” (University of Economics Prague, Czech Republic),
psychological education in coaching, personal development and training (“Training
the trainer”), and Entrepreneurship education (start-up and growth, Business
Planning) (Erasmus University Rotterdam, The Netherlands).
3. MAIN PEDAGOGICAL AND DIDACTICAL APPROACHES
The learning method is explicitly ‘student-centred’ rather than ‘teacher-
centred’. This means that the students will first spend time exploring and
discussing what they already know about particular topics, which will enable
them to recognize where and how the new material fits into their current
knowledge base. We will stimulate the students to have an active role in the
ERASMUS INTENSIVE PROGRAMME
19
learning process, and they will be trained to apply what they have learned to
practice. The student learns to learn, analyse and solve problems. The advantage
of this method is that it increases retention, because the student acquires
knowledge that is directly useable and applicable.
During the intensive program, students experience the importance of
interdisciplinary knowledge for solving problems. They learn the relationship
between information derived from different disciplines and how to integrate this
information efficiently in order to acquire new knowledge and to solve the
problems. The student’s knowledge develops cumulatively throughout the study
program through progressive acquisition of new information.
Additionally, the program also pays attention to the development of attitudes
with concomitant knowledge of culture-related values and norms. They will
work in small teams, which will stimulate discussion and force participants to
consciously and critically deal with their own and each other’s attitudes.
In line with current development in entrepreneurship education, various
methods of teaching and training will be used. The lectures will be combined
with role plays, group discussions, team work, case studies, self-analysis (of own
strengths and weaknesses related to entrepreneurship), elevator pitches, problem-
based learning, and discussion with a successful entrepreneur. Finally, a web page
will be further used to enhance the learning process.
The IP program is designed for Master and PhD Social Science and
Management students, because of their future involvement in research activities
and in teaching and guiding entrepreneurship students. Moreover, the IP will
benefit the student’s entrepreneurial capabilities themselves, so that they can
become effective role models for the students they will teach and/or become
interested in an entrepreneurial career themselves.
The results of this project will be used to develop and/or improve study
programmes at the participating institutions. A new PhD course will be developed
in the Department of Social and Organizational Psychology of Spanish National
Distance University (UNED). At Prague University of Economics, this project will
help to innovate the current “Psychology of Entrepreneurship” course taught in
Czech and will be a basis for teaching “Psychology of Entrepreneurship” in
English. Similarly, the experience with the course will be fed back to re-design the
course ‘Psychology of Successful Entrepreneurship’ taught at the Philipps-
University Marburg and prepare its teaching in English (Master-level courses). At
PSYCHOLOGY OF ENTREPRENEURSHIP
20
the University of Verona this project will be used to design a Master in
“Entrepreneurship: psychological, sociological and economic perspectives”.
4. PARTNERSHIP COMPOSITION
The Spanish National Distance University (UNED), is similar to other
Spanish public Universities. It awards the same qualifications, which are equally
valid and it is run under the same general legislation. However, the special features
of UNED make it different from most other Spanish Universities. This is due to
the fact that it is nationwide in scope, uses different methodology, and has a wide
social influence. It is UNED's teaching methodology, what actually makes it special
within the spectrum of Spanish higher education. The keystones of this
methodology are printed and audiovisual teaching material, tutorial teaching, and
an ever-increasing use of new information and communications technologies.
At present, the Spanish National Distance University (UNED) alsocoordinates
and participates in the following European projects: E-Learning: “E-xcellence,
creating a standard of excellence for e–learning” (2004-3536/001-001ELE-
ELEB14.), Leonardo: “Proyecto Parmenide (Promoting Advanced Resources and
Methodologies for New Teaching and Learning solutions in Digital Education”
(2005-I/05/I/PP-154064), Erasmus Mundus: “Red ACTIVE: AIESAD-EADTU
Credit Transfer in Virtual and distance Education” (2005-3263/001-001MUN-
MUNB41), Erasmus Mundus: “EDU-CONTACT”, EUMEDIS – “Avicenna
Virtual Campus” (B7-4100/2000/2165-084-P510), Sócrates – Comenius “A
practical guide to implement intercultural communication” (106223-CP-1-2002-
1-ES-COMENIUS-C21), Sócrates – Comenius – “Dimensión Europea de los
problemas de convivencia escolar: prevención, diagnóstico e intervención”
(106377-CP-1-ES-COMENIUS-C21), Leonardo “International comparative
studies and course development on SME-s” (2003-3448001-001-LE2-51OREF)
and Sócrates - Grundtvig: Los programas de Educación Superior en Instituciones
penitenciarias: Diagnóstico europeo y propuestas de mejora” (225396-CP-1-2005-
1-ES-GRUNDTVIG-GI).
The University of Verona was established fairly recently but its cultural
background goes back in time. Since the 14th century Lectures in Law,
Medicine, Literature and Philosophy were held in the cultural circles of the
town. Nowadays, with 690 faculty staff and 552 administrative and technical
ERASMUS INTENSIVE PROGRAMME
21
staff, the University educates more than 20.000 students. In spite of its steady
growth, the University still retains the atmosphere of a small campus where
students and teachers can meet both on and off the University premises.
The University devotes special attention to the city of Verona and its
territory by implementing research projects and various forms of co-operation
that increase the mutual potential for cultural and economic growth. It receives
research grants by local, national, European and world-wide agencies. More than
190 co-operation agreements signed with foreign Universities and the extensive
participation to international exchange and co-operative programmes both in
and outside Europe involving students and researchers, show the international
vocation of this University.
The University of Verona counts 8 Faculties, 35 Bachelor degrees, 29 Master
degrees, 49 Postgraduate specialization courses and approximately 30 PhD
courses. The new didactic system adopted by the University of Verona from the
Academic Year 2001/2002 is organized in 3 study cycles: the first cycle, three
years length, is characterized by a professional training type content and will
conclude with the award of a Bachelor Degree (L). The second cycle, lasting
two years, will lead to the award of a Master Degree (LS). The organization of
the courses at the Faculty of Medicine is similar for paramedical professions,
whereas the Degree in Medicine and Surgery and the Degree in Dentistry can
be obtained at the end of a single cycle period of study of 5 years. The third
cycle, lasting two to four years, delivers a Doctorate or a Postgraduate
Specialized Degree.
The University of Economics, Prague (UEP) is a state funded University
that was established in 1953. UEP offers the high quality business and economic
education at the bachelor’s, master’s and doctoral levels to both Czech and
international students (more than 15.000 together). UEP has a proven reputation in
the field of international co-operation. It is a member of CEMS, PIM, efmd,
AACSB, EAIE etc. UEP provides a mix of professional academic background and
high research potential. It is also highly experienced with participation in
international projects (e.g. 5th FP, 6 th FP, Socrates, Leonardo, Jean Monnet). The
Department of Managerial Psychology and Sociology focuses in both research and
teaching activities on four broadly conceived areas - problems of managerial
psychology and sociology in firms and organizations, entrepreneurial potential
development, recent issues of culturo logical concept of a firm and its management
in the environment of national and corporate cultures clashes within the integrating
Europe and the development of managerial competence of firm’s executives. In
PSYCHOLOGY OF ENTREPRENEURSHIP
22
2005, members of the department published a book, “Psychology of
Entrepreneurship,” in the Czech language.
In its present form, the Erasmus University Rotterdam has been in
existence since 1973. Its history, however, dates back to 1913, the year in which
the Netherlands School of Commerce was established through private initiatives
with broad support from the Rotterdam business community. Erasmus University
Rotterdam has bundled its education and research into three domains, in which
the university enjoys international recognition. The cohesion in domains is
conducive to multidisciplinary collaboration in education and research. Theory
driven scientific teaching and research programmes are linked to programmes
driven by society's needs. The three domains are linked to the seven faculties of the
EUR.
Both the Rotterdam School of Management (home of Prof. Dr. Uhlaner) and
the Faculty of Social Sciences (home of Dr. Gorgievski) have significant experience
with participation in international projects. The Faculty of Social Sciences has
much experience with student and teacher mobility programs (Erasmus, Socrates)
and it has been participating in a successful annual IP programme “On the future of
work” since 2003, which was a follow up of two earlier series “Social and Cultural
Change in Europe”. In addition, the Institute of Psychology in particular
collaborates in international programmes aimed at developing, implementing and
evaluating student centred teaching methods (e-learning, problem based Learning).
Most recent are a project aimed at promoting PBL-teaching in Thailand financed
by Asia-Link, and the evaluation of a training programme for police officers in
South Africa. The Institute of Psychology has also won several awards for the
development of e-learning methods (e.g. ICT Award 2004 and the European
Academic Software Award 2004).
The Technical University Dresden (Technische Universität Dresden ) dates
back to the 1828 and ranks among the oldest technical-academic
educational establishments in Germany. The TU Dresden has about 35.000
students and almost 4.200 permanent employees, 419 professors among
them, and, thus, is the largest university in Saxony, today. Having been
committed to sciences and the engineering before the reunification of Germany,
TU Dresden now is a multi-discipline university, also offering humanities and
social sciences as well as medicine. There are only few universities in Germany
which are able to match this broad scientific spectrum. Many degrees which
can be obtained at TU Dresden are internationally acknowledged. At the
outset of the 1990s TU Dresden was restructured and has since then consistently
ERASMUS INTENSIVE PROGRAMME
23
turned toward competitiveness. This, of course, includes a business-oriented
way of thinking and action as well as expanding already existing
partnerships of science with industry and economy. Students also benefit
from this practice-oriented and interdisciplinary co-operation as teachings
and research are based on the principle of incorporating students and graduates
into current research tasks as soon as possible. The faculty of Psychology at the
TU Dresden is embedded in the Faculty of the Mathematics and Nature
Sciences and offers Students broad Spectrum from Clinical Psychology and
Psychotherapy to Cognitive Neurosciences and Human Factors. Faculty of
Work and Organisational and Economical Psychology enables traditional and
excellent reinforcement in this field.
PSYCHOLOGY OF ENTREPRENEURSHIP
24
25
CHAPTER 2
THE INTERNATIONAL NETWORK OF PSYCHOLOGY OF
ENTREPRENEURSHIP RESEARCH AND EDUCATION (INPERE)
Dominika Dej
Department of Work and Organizational Psychology
University of Technology in Dresden
1. STORY OF THE NETWORK
Mutual interest to promote and foster psychological perspective of the
entrepreneurship stimulated young and ambitious researches from the six EU
member states to form and develop international Network valueing unity,
integrity, cooperation, activity and respect. Basing on these pursuits born the
idea to create common network.
The International Network of Psychology of Entrepreneurship Research and
Education was finally created in May 2005 during the conference of the
European Association of Work and Organizational Psychology in Istanbul.
Today INPERE bounds researchers and educators from the six countries:
Poland, Germany, Netherlands, Czech Republic, Italy and Spain. Associated
with INPERE are many further advisors and students from different countries.
PSYCHOLOGY OF ENTREPRENEURSHIP
26
2. STRUCTURE AND MEMBERS OF THE NETWORK
INPERE as a network has its own council being in charge. Senior advisors
support INPERE in developing research and exchanging knowledge and skills.
2.1. Member of the council
Dr. Mª Evelina Ascalon - The Netherlands
Dr. M Evelina Ascalon is a Filipino-American who works as a post-doctoral
researcher in The Netherlands. She received her Ph.D. in Industrial-
Organizational Psychology from the University of Tulsa, although her
dissertation was jointly completed at the Erasmus University Rotterdam. Her
main areas of research include: Entrepreneurship, Leadership Development,
Cross-cultural Issues, Performance Assessment, Training and Evaluation.
Prof. Dr. Adalgisa Battistelli - Italy
Prof. Dr. Adalgisa Battistelli is associate professor of Work and Organizational
Psychology at the University of Verona. She received her degree in psychology
at University of Padua and her Ph.D in Work and Organizational Psychology at
University of Bologna. Her main areas of research include: learning, training and
development in organizations; attitudes in organization; work motivation;
psychology of entrepreneurship. In this last area, the research focus is on
entrepreneurial process from intention to enterprise creation and the role of
motivations, personality and beliefs in interaction with social, economic and
cultural environment.
Mgr. Dominika Dej - Poland - Germany
Mgr. Dominika Dej is PhD Student and lecturer at the Institute of Work and
Organization Psychology at the University in Dresden. She completed her study
at the University of Silesia (Poland). Since 2002, she is involved in research
among entrepreneurs in Poland, Germany, Czech Republic and Bulgaria. Her
INPERE
27
research area includes the factors of entrepreneurial success and heath. To her
interests belongs cross- culture psychology
Dr. Marjan Gorgievski - The Netherlands
Dr. Marjan Gorgievski is assistant professor at the Institute of Psychology at the
Erasmus University in Rotterdam. Her area of expertise is occupational health
psychology. Her current research interest includes the bi-directional relationship
between well-being and performance. Marjan has been involved in research
among agricultural entrepreneurs since 1996 and research among entrepreneurs
since 2002.
Martin Lukeš - Czech Republic
Martin Lukeš, born 1976, graduated in WO Psychology at Charles University,
Prague and in Business Administration at University of Economics, Prague. At
this university he works as a senior researcher and lecturer. His professional
interest lies in the fields of entrepreneurship research and education, cross-
cultural research, and managerial trainings. He published a book Psychology of
Entrepreneurship. In the past he worked as a HR consultant for SIEMENS and
for U.S. based Media Company. He is a member of the board of Czech
Association of Work and Organizational Psychologists.
Ute Stephan - Germany
Ute Stephan is a lecturer at the Philipps-University Marburg, Unit of Work and
Organizational Psychology. Her research interests lay in entrepreneurship, cross-
cultural psychology and occupational health psychology. She recently completed
a 3 year interdisciplinary and cross-cultural entrepreneurship research project
that she co-led with Prof. Peter G. Richter at the Dresden University of
Technology. She also works as consultant and trainer to companies.
Dr. Juan Antonio Moriano León - Spain
Dr. Juan Antonio Moriano León is Assistant Professor in the Department of
Social and Organizational Psychology at the Spanish University for Distance
Teaching (UNED). He received his University degree and Doctorate (PhD)
from the Spanish University for Distance Teaching (UNED). His research focus
is on the entrepreneurship from a psychosocial perspective. Juan Antonio
Moriano is author of several articles in Spanish journals about Individualistic and
Collectivistic Values, Self-Efficacy and Entrepreneurship.
PSYCHOLOGY OF ENTREPRENEURSHIP
28
2.2. Senior members and advisors of INPERE
Prof. Lorraine Uhlaner, Erasmus University Rotterdam,
http://people.few.eur.nl/uhlaner/index.html
Prof. Michael Frese, University of Giessen,
http://www.psychol.uni-giessen.de/ma/dat/frese/
Prof. Christian Korunka, University of Vienna,
http://homepage.univie.ac.at/christian.korunka/
3. INPERE MEETINGS AND COMMON ACTIVITIES
3.1. Istanbul
15
th
of May 2005 European Association of Work and Organizational
Psychology ( EAWOP) Istanbul. Organisation of Common Symposium “Value
of the Entrepreneurship” and common interests in the area of the entrepreneurship
connected future INPERE members.
INPERE
29
3.2. Marburg & Giessen
In Marburg we met on 24.09. -25.09. 2005. We developed and established
our network, decided on our goals and missions as well as on further activities
and cooperation.
On 26.09.2005 we participated in the workshop led by Prof. Michael Frese
at the Justus Universität in Giessen, targeting on how to publish in
international journals and how to conceptualise good research.
3.3. Verona
In April 2006, we spent the Eastern Time working on the research proposal,
integrating different perspectives and putting together our point of views into the
research model. We developed common model of each stage of entrepreneurial activity.
PSYCHOLOGY OF ENTREPRENEURSHIP
30
3.4. Athens 2006
At the 26
th
International Congress of Applied Psychology INPERE
organized following activities connecting researchers of Entrepreneurship in
Europe:
1. Research Symposium: “Entrepreneurial values and intentions across European
cultures”
2. Panel Discussion: “The value of applying psychological perspectives to
Entrepreneurship”
3. Poster Symposium: “Explorations of Entrepreneurship from an Entrepreneurial
Psychological Perspective“
3.5. Dresden
In Dresden we were working on a research project and we developed the first draft
of the research proposal.
INPERE
31
4. MISSION STATEMENT AND GOALS OF INPERE
The keynote goal of the group is researching undiscovered areas of the
psychology of entrepreneurship and creating entrepreneurial mindset in
European Countries. INPERE pursue to provide a medium in which
researchers in the field of entrepreneurial psychology can learn from one
another, exchange feedback, receive assistance, and work together on
independent and common projects, while presenting ourselves as a unified group
and to publish in international journals.
INPERE intend to conduct research of issues identified as crucial on
European political and economical level and is highly embedded in European
Commissions directives and policy. In addition, our network aspire to conduct
research basing on multidisciplinary methods and to tights both theoretical
approach and practical use. Common research and educational programs target
on potential and existing entrepreneurs and aims to endow useful results
supporting these groups through training and educational programmes.
5. HOW WAS BORN THE INTENSIVE PROGRAMME SOCRATES
ERASMUS?
The idea to create and lead the program targeted on students interessted in
entrepreneurship and probbaly willing to star up in the future was born durng
the first meeting of INPERE. This idea developed and finally it found its frames
in the Intensive Programme Socrates Erasmus. Preparations to the program
started in January 2006 with the preparations of the application, calculating costs
and creating the program. Afterwards we have started with further activities,
including organizational and content issues.
6. RESEARCH PROJECT PROPOSAL
After working on the research project proposal and developing the model of
entrepreneurial activities from start up till the succession, we finally decided to
concentrate on the entrepreneurial intention and start up phase. To our target
group belongs graduated and students who are potentially successfully
entrepreneurs as well as unemployed who have high intention to be self-
employed.
PSYCHOLOGY OF ENTREPRENEURSHIP
32
For our theoretical frame we have chosen the Theory of Planned Behaviour
(Ajzen, 1988, 1991), the Individualistic and Collectivistic Values Theory
(Schwartz, 1992, 1996), the Conservation of Resources Theory (Hobfoll,
1989,2001) and the Action Theory (Hacker,1989,2003; Tomaszewski
1969,1996; Frese&Zapf, 1994)
33
CHAPTER 3
ENTREPRENEURSHIP AS A PROCESS
Juan A. Moriano, Aneta Zarnowska and Francisco J. Palací
Department of Social and Organizational Psychology
UNED
1. LEARNING GOALS
In this course you will learn how entrepreneurship is considered to be a
process with distinct stages.
1) You will learn what factors influence entrepreneurs’ behaviors during
pre- launch, start-up and post-launch phases.
2) You will learn what barriers prevent people from launching a new
venture.
3) You will learn what trigger events lead an entrepreneur to actually form a
new venture.
2. THEORETICAL BACKGROUND
There are two distinctly different approaches to defining entrepreneurship.
The first approach is to define what an entrepreneur is and then observe them.
Based upon the observations, entrepreneurship would be defined inductively in
terms of what the individuals do. The second approach is to propose a general
definition of entrepreneurship and its related behaviors, thereby defining
entrepreneurs as those who engage in entrepreneurial activity.
The study of entrepreneurship from a psychological point of view began
with the first approach centering only on the analysis of individual differences
between entrepreneurs and non – entrepreneurs. This approach draws the
entrepreneurship as a “state of being” (Bygrave, 1989) and assumes that there are
PSYCHOLOGY OF ENTREPRENEURSHIP
34
some unique characteristics of the entrepreneur that can be separated and
identified in order to build a personality profile of the typical entrepreneur. The
most widely used traits are the need for achievement (Langan-Fox & Roth, 1995;
McClelland, 1965), the risk taking propensity (Brockhaus, 1980; Miner & Raju,
2004), the internal locus of control (Furnham, 1986; Kaufmann & Welsh, 1995)
and the general self–efficacy (Chen, Green, & Crick, 1998; Markman, Balkin, &
Baron, 2002). Nevertheless, this personality perspective has been criticized for
the methodological as well as theoretical (Gartner, 1988; Robinson, Stimpson,
Huefner, & Hunt, 1991; Shane & Venkataraman, 2000; Shaver & Scott, 1991).
Several authors have proposed that the focus of the field of entrepreneurship
change from the focus on the characteristics of the entrepreneur to the
entrepreneurial process (Gartner, 1988; Shane & Venkataraman, 2000; Shaver &
Scott, 1991). By focusing on the process, entrepreneurs are identified by their
participation in the process, not by a unique set of characteristics. Many models
of entrepreneurship as a process have been proposed (e.g. Baron, 2002; Carton,
Hofer, & Meeks, 1998). In general, these models divide entrepreneurship in
three distinct stages: prior to the launch of a new venture (pre-launch phase), the
period following the launch of a new venture (the start-up phase), and further
development beyond the initial start-up period.
Figure 1. Entrepreneurial process
Entrepreneurship Management
Pre-launch Launch
Business
Idea
New
Venture
Organization
Building
Sustainability
New Venture Formation
New Venture
Performance
Growing
Bankruptcy
Post-launch
Opportunity
Identification
Individual, interpersonal and
social factors
Individual, interpersonal and social
factors
ENTREPRENEURSHIP AS A PROCESS
35
There are two primary dimensions of the entrepreneurship paradigm: 1) new
venture formation and 2) new venture performance. New venture formation
deals with the antecedents to the formation of a new venture and its creation
(Carton, Hofer, & Meeks, 1998). The pre-launch phase of the entrepreneurial
process is normally characterized as merely consisting of the psychological
development of the entrepreneurial person and the cognitive processing of the
anticipated entrepreneurial tasks. The psychological development of the person
can be seen to build on attitudinal, motivational and self-perceptual factors of the
person. The favorable attitudes towards entrepreneurship, the subjective norms,
the entrepreneurial self-efficacy, etc. are necessary but not sufficient conditions
for one to become an entrepreneur (Pihkala & Vesalainen, 2000).
Being committed to the start up, the nascent entrepreneur is cognitively
oriented to instantly looking for opportunities and weighing between different
alternative routes for carrying out the entrepreneurial trait. However, even if
attitudes and motivations are in favor by the entrepreneurial decision, the
personal and social barriers obstruct the choice for entrepreneurship. The
Research on career behavior suggests that age, education and career dependency
are examples of personal barriers to entrepreneurship. Recognizing the barriers,
it is likely that entrepreneurial education be refocused in an attempt to enhance
the formation of entrepreneurial intentions (Pihkala & Vesalainen, 2000).
The second element of the paradigm is new venture performance. This
includes the development and implementation of new venture strategy, the
nature of the external environment munificence and industry structure, the
accumulation of resources, building of an organization including developing
distinctive competences, establishing strategic networks, capturing customers,
and establishing an organization culture and values. When a company reaches
self-sustainability, it exits the entrepreneurship paradigm. At that time, the
organization is generally not dependent upon the founding team, risk has been
reduced, sustainable competitive advantage(s) have been created, the rate of
change has been drastically reduced, and repetition in the functions of the
organization have occurred. The venture must have also achieved sufficient
financial success in order to fund ongoing growth (Carton, Hofer, & Meeks,
1998).
PSYCHOLOGY OF ENTREPRENEURSHIP
36
3. LITERATURE LIST
Article 1: OB and Entrepreneurship: the reciprocal benefits of closer
conceptual links. Robert A. Baron (2002)
One widely accepted definition of the field by entrepreneurship
(Venkataraman, 1997, 6) suggests that it is “A scholarly field that seeks to
understand how opportunities to bring into existence “future” goods and
services are discovered, created, and exploited, by whom, and with what
consequences.” This definition indicates that entrepreneurship involves a
complex process in which specific individuals recognize opportunities and then
act to convert them into tangible economic benefits (e.g. by creating new
ventures). It is a central thesis of this paper that entrepreneurs play a key role in
this process and that because they do, OB – the branch of management science
that focuses on human behavior – can contribute much to understanding the
entrepreneurial process. More specifically, OB can help answer questions long
addressed by entrepreneurship research such as these:
1. Why do some persons but no others choose to become entrepreneurs?
2. What factors influence entrepreneurs’ success? And
3. Why do some persons, but no others, recognize economically
advantageous opportunities?
Article 2: The entrepreneur and entrepreneurship: operational
definitions of their role in society. Carton, Hofer and Meeks (1998).
The role of the entrepreneur in society is difficult to establish if the concept
of entrepreneurship is inadequately defined. This lack of a clear entrepreneurship
paradigm poses problems for both policy makers and for academics. This paper
proposes an operational definition of the entrepreneur and entrepreneurship,
synthesizing past definitions into operationalizable constructs. Entrepreneurship
is the pursuit of a discontinuous opportunity involving the creation of an
organization (or sub-organization) with the expectation of value creation to the
participants. The entrepreneur is the individual (or team) that identifies the
opportunity, gathers the necessary resources, creates and is ultimately responsible
for the performance of the organization. Therefore, entrepreneurship is the
means by which new organizations are formed with their resultant job and
ENTREPRENEURSHIP AS A PROCESS
37
wealth creation. A critical component of the proposed definition is the necessary
condition that the organization created actually provides goods and/or services
to society, not merely for internal consumption. Clearly this definition favors the
behavioral school of thought on entrepreneurship, but it should not be taken to
discount the importance of the traits and characteristics of the entrepreneur from
the perspective of their propensity to act. Although growth, innovation, and
tenacity to overcome hurdles are commonly cited as elements of
entrepreneurship, we argue that these are consequences, not antecedents, to
entrepreneurial activity.
Article 3: Barriers to entrepreneurship - educational opportunities.
Pihkala and Vesalainen (2000).
The paper focuses on the prerequisites of targeting entrepreneurial education
to meet the needs of people in different situations. The paper set out three main
objectives: to examine, whether there are different patterns (or types) of barriers
associated with entrepreneurial intention; to investigate whether the perceived
barriers are associated with the personal level of education, age or career
development; and whether the barriers could reflect different opportunities of
offering entrepreneurial education. The analysis of a survey response provides a
useful picture of the perceived barriers to entrepreneurship, and of the
possibilities for entrepreneurship education to affect these perceptions.
REFERENCES
BARON, R. A. (2002). OB and Entrepreneurship: the reciprocal benefits of closer conceptual
links. In B. M. STAW & R. M. KRAMER (Eds.), Research in Organizational Behavior - An
annual series of analytical essays and critical reviews (Vol. 24, pp. 225-270). Oxford: Elsevier
Science.
BROCKHAUs, R. H. (1980). Risk taking propensity of entrepreneurs. Academy of Management
Journal, 23, 509-520.
CARTON, R. B., HOFER, C. W., & MEEKS, M. D. (1998). The entrepreneur and entrepreneurship:
operational definitions of their role in society. Paper presented at the Frontiers of
Entrepreneurship Research, Babson College, Wellesley.
CHEN, C. C., GREEN, P. G., & CRICK, A. (1998). Does entreprenurial self-efficacy distinguish
entrepreneurs from managers? Journal of Business Venturing, 13, 295-316.
PSYCHOLOGY OF ENTREPRENEURSHIP
38
FURNHAMM, A. (1986). Economic locus of control. Human Relations, 39(1), 29-43.
GARTNER, W. B. (1988). "Who is an entrepreneur" is the wrong question. American Journal of Small
Business, 13 (spring), 11-32.
KAUFMANN, P., & WELSH, D. (1995). Locus de control and entrepreneurship en the Russian Republic.
Entrepreneurship: Theory and Practice, 20 (1), 43-56.
LANGAN-FOX, J., & ROTH, S. (1995). Achievement motivation and female entrepreneurs. Journal of
Occupational and Organizational Psychology, 68, 209-218.
MARKMAN, G. D., BALKIN, D. B., & BARON, R. A. (2002). Inventors and New Venture
Formation: the Effects of General Self-Efficacy and Regretful Thinking. Entrepreneurship Theory
and Practice, 27(2), 149-165.
MCCLELLAND, D. C. (1965). Need Achievement and Entrepreneurship: A longitudinal study. Journal
of Personality and Social Psychology, 1, 389-392.
MINER, J. B., & RAJU, N. S. (2004). Risk Propensity Differences Between Managers and Entrepreneurs
and Between Low- and High-Growth Entrepreneurs: A Reply in a More Conservative Vein. Journal
of Applied Psychology, 89(1), 3-13.
PIHKALA, T., & VESALAINEN, J. (2000). Barriers to entrepreneurship - educational opportunities. Paper
presented at the IntEnt 2000 Conference, July 11 - 13, Tampere.
ROBINSON, P., STIMPSON, D., HUEFNER, J., & HUNT, H. (1991). An attitude approach to the
prediction of entrepreneurship. Entrepreneurship Theory and Pratice, 15 (4), 13-32.
SHANE, S. A., & VENKATARAMAN, S. (2000). The promise of entrepreneurship as a field of research.
Academy of Management Review, 25, 217-226.
SHAVER, K. G., & SCOTT, L. R. (1991). Person, Process, Choice: The Psychology of New Venture
Creation. Entrepreneurship Theory and Practice, 16, 23-45.
39
CHAPTER 4
ENTREPRENEURIAL INTENTIONS
Francisco Liñán and Juan A. Moriano
Department of Apply Economy I, Universidad de Sevilla
Department of Social and Organizational Psychology. UNED
1. LEARNING GOALS
In this course you will learn how prior entrepreneurial intentions determine
eventual entrepreneurial behaviors.
1. You will learn what psychosocial factors influence entrepreneurial
intentions.
2. You will learn what models explain the formation of entrepreneurial
intentions.
3. You will learn how entrepreneurial intentions and other unobserved
variables may be measured.
4. You will learn how to use the Entrepreneurial Intentions Questionnaire
(EIQ).
2. THEORETICAL BACKGROUND
Starting a new venture is, in the first place, an individual’s personal decision.
This is so obvious that it is quite often forgotten. Most research in
entrepreneurship concentrates on analyzing the firm-creation process once the
decision to create has already been taken, completely overlooking the internal
process that leads people to that decision. From this viewpoint, the important
thing is not which particular individuals will create a new firm. It is understood
that at least some of them will take the decision to start new ventures. Taken to
the extreme, ecological approaches to entrepreneurship could be an example of
this view (Aldrich & Wiedenmayer, 1993). However, it does not answer why
there are such important differences in regional start-up rates.
PSYCHOLOGY OF ENTREPRENEURSHIP
40
The publication of the Green Paper on Entrepreneurship in Europe
(European Commission, 2003) raised an important question regarding this
subject. How to improve people’s inclination toward developing new
entrepreneurial initiatives? Approaching entrepreneurship as an attitude, the
Green Paper broadens the range of business politics, going beyond the mere
elimination of the barriers that obstruct business development and growth, with
the main goal being to encourage more people to become entrepreneurs and
prepare them for it.
The individual’s decision to become an entrepreneur is sometimes assumed
to depend on personality traits: “If you have the proper personality profile, you
will become an entrepreneur sooner or later”. This is what Shaver & Scott
(1991) call the “personological” approach, which seems to have proved largely
fruitless in predicting start-up decisions by individuals (Liñán & Santos, 2007).
Even though some statistically significant relationships have been found between
certain personality traits and being an entrepreneur, predictive capacity has been
very limited (Reynolds, 1997). In addition, this approach has been criticized for
the methodological as well as theoretical aspects (Gartner, 1988; Robinson,
Stimpson, Huefner, & Hunt, 1991; Shane & Venkataraman, 2000; Shaver &
Scott, 1991).
A response to the limited success of the personality approach has been to
study entrepreneurship as a career choice. Since the decision to become an
entrepreneur may be plausibly considered as voluntary and conscious (Krueger et
al., 2000), it seems reasonable to analyze how that decision is taken. In this sense,
the entrepreneurial intention would be a previous and determinant element
towards performing entrepreneurial behavior (Kolvereid, 1996). Keeping in
mind that creating a new company requires time, involving both considerable
planning and a high degree of cognitive processing, the entrepreneurial behavior
could be considered as a type of planned behavior for which the intention
models are ideally convenient (Bird, 1988; Katz & Gartner, 1988; Krueger et al.,
2000).
Several models aiming to explain entrepreneurial intention have been
developed, such as the Entrepreneurial Event Model of Shapero (1982), the
Model of Implementing Entrepreneurial Ideas (Bird 1988) or Maximization of
the Expected Utility (Douglas and Shepherd 2000). Although these models
represent a step forward in entrepreneurial intentions research, they are
individualistic in nature and do not take into the account the social factors.
Therefore, several authors began focusing on Social Psychology in search of a
ENTREPRENEURIAL INTENTIONS
41
model that would explain entrepreneurial intention from the point of view of
the interaction between social and personal factors. Consequently the Theory of
Planned Behavior (TPB, Ajzen, 1991) has become the most frequently used
theoretical framework in recent studies of entrepreneurial intention (Alexei and
Kolvereid 1999; Audet 2002; Autio et al. 2001; Krueger, Reilly and Carsrud
2000; van Gelderen et al. 2006)
From the TPB comes the proposal that the intention is a function of the
attitude towards the behavior, the subjective norm and the perceived control
(see figure 1). The fundamental difference of this theory with respect to the
previously mentioned models is in the role of the subjective norm, i.e. the
emphasis of the social context on the person to carry out the behavior.
Figure 1.
TPB model (Ajzen, 1991)
The first component of the TPB is the attitude toward the behavior, that is a
person’s overall evaluation of the behavior (Ajzen, 1991). Previous studies on
the subject of the entrepreneurial intention have measured this variable in a
general way through items which focus on the personal attractiveness of starting
Attitude
toward the
behavior
Subjective
norm
Perceived
behavioral
control
Intention Behavior
PSYCHOLOGY OF ENTREPRENEURSHIP
42
a business (Autio, Keeley, Klofsten, Parker, & Hay, 2001; Krueger, Reilly, &
Carsrud, 2000).
The second component of the model is the subjective norm, which is defined
as a person’s own estimate of the social pressure to perform, or not perform, the
entrepreneurial behavior (Ajzen, 1991). These pressures can become a trigger or
a barrier in the development of the entrepreneurial career, depending on the
social environment. For example, in Europe, the failure of a new business is very
negatively perceived, whereas in the United States, it is assumed that a person
can go through several failures before becoming a successful entrepreneur.
The third component is the Perceived Behavioral Control that relates to
perceptions of the behavior’s feasibility, which is an essential predictor of the
behavior. Individuals usually choose behaviors they believe they will be able to
control and master. This variable is very similar to the Self-Efficacy notion
constructed by Bandura (1986), because both are concerned with perceived
ability to perform a behavior. Self-Efficacy has been used in numerous studies of
entrepreneurship. De Noble, Jung and Ehrlich (1999) developed an
Entrepreneurial Self-Efficacy Scale (ESE) and found that it’s score had a
significant positive correlation with students’ intention to pursue a new venture
opportunity. In particular, the ESE dimensions Developing new opportunities,
Innovative environment and Unexpected challenges had significant positive
correlations with Entrepreneurial intention.
If we compare these explanatory variables of the TPB with those considered
by Shapero and Sokol (1982), we can see that perceived feasibility -as it has been
mentioned above corresponds quite well with perceived behavioral control. On
the other hand, the willingness to carry out that behavior (perceived desirability)
can be understood as being composed of the attitude towards it and the
perceived subjective norms. In this sense, it may be remembered that Shapero
and Sokol (1982) considered desirability as a result of social and cultural
influences.
When the entrepreneurial process is carefully analyzed (see chapter 3), it
comes out that there are at least three kinds of variables involved in any start-up:
(a) the person(s) leading the project; (b) the environment in which it is
embedded; and (c) the characteristics of the opportunity to be exploited. It is
very common for entrepreneurship education initiatives focus on, first, building
a balanced entrepreneurial team and, second, how to detect a viable opportunity
ENTREPRENEURIAL INTENTIONS
43
to be seized. In such situations, teaching concentrates on how to manage the
project: i.e., business planning, locating resources, marketing the goods or
services, and so on. Thus, this leads to a higher percentage of successful start-ups.
However, there are still numerous individuals left undecided about becoming
entrepreneurs.
In our view, entrepreneurship education may act on the three elements of
the entrepreneurial process, but to a different extent, and with distinct
instruments (Guzmán & Liñán, 2005; Liñán, 2007). Its major role will be
prepare the person for successfully attempting the start-up. In this sense,
intention models (Ajzen, 1991) provide a very promising tool to explain the
decision to become an entrepreneur, and the variables that affect it (Fayolle &
DeGeorge, 2006; Liñán, 2004). Regarding leading the project, entrepreneurship
education may be very useful in providing specific knowledge and network
contacts within the local environment. Finally, its role with respect to the
economic opportunity it is somehow more controversial. There is considerable
debate regarding whether such opportunities are discovered or enacted. The
latter would mean a greater role for entrepreneurship education. But the former
also implies the need to transmit techniques to actively search for the existence
of new opportunities (see chapter 6).
3. ENTREPRENEURIAL INTENTION QUESTIONNAIRE (EIQ)
3.1. Project summary:
1. The EIQ has been used on different samples with good results. The most
widely used version has been EIQ v.2.05. It has been used on 400
students from Andalusia, 1000 from Portugal, 133 from Taiwan, 94 from
Maastricht (Netherlands) and 60 from Bolivia (as far as I am aware).
Other researchers have received the EIQ, but have not reported their
results, nor sent the data yet.
2. The analyses carried out at the moment are highly satisfactory. Statistical
reliability and validity of the constructs used has been very high, and
results from different countries are consistent.
3. However, some possible drawbacks of the questionnaire design have
been highlighted by reviewers and researchers. Therefore, an “EIQ
PSYCHOLOGY OF ENTREPRENEURSHIP
44
version 3.0” (EIQ-3, for short) is being developed (and almost finished
in English and Spanish) to try to overcome those problems.
4. The first question now (A.-) includes the 20 items used to measure the
central elements of the entrepreneurial intention model. They are
(semi)randomly ordered with one negative every two or three of them.
In this way, acquiescence problem should be solved. The items
corresponding to each scale are the following:
a. Attraction: A02(Reversed), A10, A12(R), A15, A18
b. Social Norms: A03, A08, A11
c. Self-efficacy: A01, A05(R), A07, A14, A16(R), A20
d. Intention: A04, A06, A09(R), A13, A17, A19(R)
5. Most items have been kept as they were before (but rearranged). Only
sentences that have become negative have been changed, and little more:
a. Items in the old q.12 and q.13. They have been written as a
sentence.
b. Some items in the old q.14 have been reversed to make them
positive.
6. The section on entrepreneurship education and q.3 (reasons for choosing
studies) have been deleted, as they were not essential, to keep the EIQ as
short as possible.
7. From now on, therefore, the local project researchers should use EIQ-3.
8. The following steps should be kept to ensure consistency and
comparability of results.
3.2. Participating teams:
• This is a collaborative project open to any local team interested.
• Any interested team should contact the EIRP Steering Group (F. Liñán,
Nigel Bradley & Dana T. Redford) to agree the terms of their
participation.
ENTREPRENEURIAL INTENTIONS
45
• All participating teams should sign a collaboration agreement accepting the
‘communication of results” policy (see below)
• Participating teams will use the Spanish or English version of the EIQ if
possible. When translation is needed they will proceed as follows:
1. Two native speakers will translate the EIQ to the local language
separately. Discrepancies will be solved and a final version will be
produced.
2. A native English or Spanish speaker will translate back to his/her
language. Any discrepancy will be discussed and solved at this
stage.
3. The final local version will be sent to the EIRP Steering Group for
feedback and final approval. At least one of the members of the
Steering Group will share the copyright of each local version.
4. Once the EIQ has been translated to a language, no more
translations will be made. New teams will use the accepted
translated version.
• The final version will keep items and questions in the EIQ as they are.
Any supplementary item the local team wants to include will be added in
separate questions; always after questions A to E. Added items/questions
will preferably be included just before or after the Personal data section.
• The EIRP logo will be used in all versions of the EIQ. It will be located at
the left-hand side of the heading. The logo corresponding to the local
university, centre, institution or group, will be located at the right-hand
side of the heading.
• All publications and documents produced out of this project should
mention the EIRP and acknowledge its role.
3.3. Steps of the Project:
1. Sample selection: last year university business students. This should be
the reference sample for international comparisons. Each local team may,
of course, decide to study a wider sample, comprised of other students,
but it is suggested that the “reference sample” should be the one used for
PSYCHOLOGY OF ENTREPRENEURSHIP
46
multi-country analyses. Thus, it is made sure that results will be
meaningful and completely comparable.
2. Fieldwork for the first survey: the EIQ (version 3) should be used for
the fieldwork. Translations to different languages should be checked by a
native speaker. It is advisable that some colleagues and students answer
the EIQ as a pilot study, to check for possible problems. Whenever
possible, try to complete the fieldwork in the shortest time period,
ideally, during a single month (with no breaks or exams in between).
3. Data analysis. There are several different analyses that may be
performed. The basic steps to confirm the validity of results is indicated
here.
a. Exploratory factor analysis over the 20 items in Question A (A01 to
A20). With EIQ-2 (principal component analysis with varimax
rotation), four factors emerged fully in accordance with a priori
expectations. However, some items loaded sizeably on a second factor.
This was solved using an oblique rotation (promax rotation). It seems
that orthogonal rotations (such as varimax) consider the factors to be
unrelated, and this is an unrealistic assumption in our case. For EIQ-3,
results are not still available.
b. Different factor analysis using a wider set of items may cause problems
(too many factors together are difficult to interpret, and some items do
mix up). Therefore, unless there is a good reason for doing it, it is
suggested that those 20 items are not mixed with others in factor
analysis.
c. Structural equation analysis. PLS, LISREL or others could be used for
the analysis. So far, this has been done for Spain and Taiwan. The
results regarding the four main factors (entrepreneurial intention and its
three antecedents) are highly satisfactory.
d. Confirmatory factor analysis. This is not really necessary, but if you are
writing a paper, this will serve as a confirmation of the results, and thus
make it much more “sellable” / “publishable”.
e. Besides, using structural equation systems, the influence of many
different elements on entrepreneurial intention and its antecedents may
be tested: age, gender, labour experience, role models, etc.
ENTREPRENEURIAL INTENTIONS
47
4. Communication of results. As this is a collaborative project, there
should be a compromise between “ownership” of results and “sharing”
them with other participants. Suggested guidelines are as follow:
a. All local results remain the property of the local research team
obtaining them.
b. All data should be shared with the remaining teams throughout the
project.
c. All participants may use their own data for publication or research
purposes.
d. Any publication should acknowledge participation in the EIRP project
and the copyright of the EIQ version being used.
e. Participants may not use others’ data without express consent from
them.
PSYCHOLOGY OF ENTREPRENEURSHIP
48
4. ENTREPRENEURIAL INTENTION QUESTIONNAIRE (EIQ)
Version 3.1
The research group “SMEs and Economic Development” at University of
Seville, in collaboration with other universities, is undertaking an international
study on firm creation by students and alumni. Our aim is to periodically follow
up with respondents to evaluate their personal and professional status. For this
reason you are asked to provide your contact data at the end of the
questionnaire. If you prefer not to participate in the follow-up, simply leave that
section blank.
In the questionnaire value-scales below, some statements are positive while
others are negative. For each statement, you are asked to indicate your level of
agreement with it, (1) representing total disagreement, and (7) representing total
agreement. Please respond to the items by marking what you consider to be the
appropriate answer, or filling in the blanks. Choose only one answer to each
question.
Thank you very much for your cooperation.
Questionnaire
A. Indicate your level of agreement with the following statements about the
Entrepreneurial Activity from 1 (total disagreement) to 7 (total agreement).
1 2 3 4 5 6 7
A01.- Starting a firm and keeping it viable would be
easy for me
A02.- A career as an entrepreneur is totally
unattractive to me
A03.- My friends would approve of my decision to
start a business
A04.- I am ready to do anything to be an
entrepreneur
A05.- I believe I would be completely unable to
start a business
ENTREPRENEURIAL INTENTIONS
49
A06.- I will make every effort to start and run my
own business
A07.- I am able to control the creation process of a
new business
A08.- My immediate family would approve of my
decision to start a business
A09.- I have serious doubts about ever starting my
own business
A10.- If I had the opportunity and resources, I
would love to start a business
A11.- My colleagues would approve of my decision
to start a business
A12.- Amongst various options, I would rather be
anything but an entrepreneur
A13.- I am determined to create a business venture
in the future
A14.- If I tried to start a business, I would have a
high chance of being successful
A15.- Being an entrepreneur would give me great
satisfaction
A16.- It would be very difficult for me to develop
a business idea
A17.- My professional goal is to be an entrepreneur
A18.- Being an entrepreneur implies more
advantages than disadvantages to me
A19.- I have a very low intention of ever starting a
business
A20.- I know all about the practical details needed to
start a business
B. Considering all advantages and disadvantages (economic, personal, social recognition,
job stability, etc.), indicate your level of attraction towards each of the
following work options from 1 (minimum attraction) to 7 (maximum
attraction).
1 2 3 4 5 6 7
B1 - Employee
B2.- Entrepreneur
PSYCHOLOGY OF ENTREPRENEURSHIP
50
C. Indicate your level of agreement with the following sentences about the values
society put on entrepreneurship from 1 (total disagreement) to 7 (total
agreement).
1 2 3 4 5 6 7
C1.- My immediate family values entrepreneurial
activity above other activities and careers
C2.- The culture in my country is highly favourable
towards entrepreneurial activity
C3.- The entrepreneur’s role in the economy is
generally undervalued in my country
C4.- My friends value entrepreneurial activity above
other activities and careers
C5.- Most people in my country consider it
unacceptable to be an entrepreneur
C6.- In my country, entrepreneurial activity is
considered to be worthwhile, despite the risks
C7.- My colleagues value entrepreneurial activity
above other activities and careers
C8.- It is commonly thought in my country that
entrepreneurs take advantage of others
D. How do you rate yourself on the following entrepreneurial abilities/skill sets?
Indicate from 1 (no aptitude at all) to 7 (very high aptitude).
1 2 3 4 5 6 7
D1.- Recognition of opportunity
D2.- Creativity
D3.- Problem solving skills
D4.- Leadership and communication skills
D5.- Development of new products and services
D6.- Networking skills, and making professional
contacts
ENTREPRENEURIAL INTENTIONS
51
E. Have you ever seriously considered becoming an entrepreneur? Yes No
Education and experience
1. What degree or other qualifications are you studying? _________________
2. When do you expect to complete your studies?
This year? Next year? Later
3. Do you have any employment experience? Yes No
If yes:
a. In what capacity? (If several, in which were you employed the longest)
__________________________________________________
b. Have you been in charge of other people? Yes No
c. How much work experience do you have? (Total number of years) ________
d. How long is it since you left your last job? (Number of years, if still working
write 0) ________
e. How many employees did your current/last employer have? ________
4. Have you ever been self-employed or the owner of a Small or Medium-sized
Enterprise (SME)? Yes No
If yes:
a. How long? (number of years) __________
b. How long is it since you ceased to be self-employed? (Number of years, if still
self-employed write 0) ______
Entrepreneurial knowledge
5. Do you personally know an entrepreneur or entrepreneurs? Yes No
If yes, indicate your relationship to them, and evaluate the following questions from
1 (not at all) to 7 (extremely well).
PSYCHOLOGY OF ENTREPRENEURSHIP
52
1 2 3 4 5 6 7
Family
- To what extent do you know about his/her activity
as entrepreneur?
- To what extent may he/she be considered a ‘good
entrepreneur’?
Friend
- To what extent do you know about his/her activity
as entrepreneur?
- To what extent may he/she be considered a ‘good
entrepreneur’?
Employer / Manager
- To what extent do you know about his/her activity
as entrepreneur?
- To what extent may he/she be considered a ‘good
entrepreneur’?
Other
- To what extent do you know about his/her activity
as entrepreneur?
- To what extent may he/she be considered a ‘good
entrepreneur’?
6.- Indicate your level of knowledge about business associations, support bodies and
other sources of assistance for entrepreneurs from 1 (no knowledge) to 7
(complete knowledge).
1 2 3 4 5 6 7
- Private associations (e.g. Southampton Chamber of
Trade, Institute of Directors, etc.)
- Public support bodies (e.g. Business Link, South
East England Development Agency (SEEDA)
etc.)
- Specific training for young entrepreneurs
- Loans in specially favourable terms
- Technical aid for business start-ups
- Business centres
ENTREPRENEURIAL INTENTIONS
53
Entrepreneurial objectives
7. If you ever started a business, what size would you like it to ultimately achieve
(number of employees)?
Self-employed Micro-enterprise Small enterprise
(No employees) (Up to 10 employees) (10 to 50 employees)
Medium enterprise Large enterprise
(50 to 250 employees) (250 employees +)
8. To what extent do you consider the following factors to contribute to
entrepreneurial success? Indicate from 1 (not at all important) to 7 (extremely
important).
1 2 3 4 5 6 7
- Competing effectively in world markets
- Reaching a high level of income
- Doing the kind of job I really enjoy
- Achieving social recognition
- Helping to solve the problems of my community
- Keeping the business alive
- Keeping a path of positive growth
9. How important would it be for you to continuously develop and grow your
business?
- Indicate from 1 (not at all important) to 7
(extremely important)
10. To what extent would you use the following strategies to expand your
business? Indicate from 1 (not at all likely) to 7 (extremely likely).
- Exporting a significant share of production
- Regularly introduce new products/services for my
customers
- Regularly introduce new processes or systems of
production
- Developing research and development projects
PSYCHOLOGY OF ENTREPRENEURSHIP
54
- Planning the different areas of the firm in detail
- Reaching cooperative agreements or partnerships
with other firms
- Offering specialized training for employees
- Growing your business (personnel, premises, etc.)
Personal Data
11. Age: __________
12. Gender: Male Female
13. Place of birth: _______________________________ .
Place of residence: _____________________________
14. What level of education have your parents achieved?
Father: Primary Secondary Vocational training University
Other
Mother: Primary Secondary Vocational training University
Other
15. What are their present occupations?
Private sector Public sector Self-employed Retired Unemployed Other
Employee employee or entrepreneur
Father:
Mother:
16. How many people are living in your household? (Including yourself) __________
17. Roughly speaking, what is the total monthly income in your household?
(Adding up all revenues from any person living in the household)
Up to 500 From 500 to 1000 From 1000 to 2000
From 2000 to 4000 From 4000 to 7000 From 7000 to 10000
Over 10000
ENTREPRENEURIAL INTENTIONS
55
Contact Data
Filling in the following details will allow us to follow up your evaluations. All
information provided will be considered as strictly confidential, and will only be
used for the aims of this research project.
Name:_________________________________________________________
Address: ________________________________________________________
City/town (State): ____________________ Post Code (ZIP):____________
E-mail: __________________________________ Telephone:____________
REFERENCES
AJZEN, I. (1991). Theory of planned behavior. Organizational Behavior and Human Decision
Processes, 50, 179-211.
ALEXEI, T., & KOLVEREID, L. (1999). Self-employment intentions among Russian students.
Entrepreneurship and Regional Development, 11(3), 269-271.
AUDET, J. (2004). A Longitudinal Study of the Entrepreneurial Intentions of University Students.
Academy of Entrepreneurship Journal, 10 (1 et 2), 3-16.
AUTIO, E., KEELEY, R. H., KLOFSTEN, M., PARKER, G. G. C., & HAY, M. (2001).
Entrepreneurial Intent among Students in Scandinavia and in the USA. Enterprise and Innovation
Management Studies, 2(2), 145-160.
BANDURA, A. (1986). Social foundations of thought and action: a social cognitive theory. Englewood
Cliffs, N.J.: Prentice-Hall.
BIRD, B. (1988). Implementing Entrepreneurial Ideas: The Case for Intentions. Academy of
Management Review, 13(3), 442-453.
Cámaras de Comercio, & Fundación INCYDE. (2003). Factores para consolidar una empresa. Madrid:
Fundación INCYDE.
DE NOBLE, A., JUNG, D., & EHRLICH, S. (1999). Entrepreneurial self-efficacy: The development of a
measure and its relationship to entrepreneurial actions. Paper presented at the Frontiers of
Entrepreneurship Research, Waltham.
DOUGLAS, E. J., & SHEPHERD, D. A. (2000). Entrepreneurship as Utility-Maximizing Response.
Journal of Business Venturing, 15(3), 231-251.
PSYCHOLOGY OF ENTREPRENEURSHIP
56
European Commission. (2003). Green paper: entrepreneurship in Europe [Electronic Version].
Retrieved January 2003 from
http://www.europa.eu.int/comm/enterprise/entrepreneurship/green_paper/green_paper_final_
en.pdf.
GARCÍA-TABUENCA, A., MORENO, J. D. J., & MARTÍ, F. P. (2004). Emprendedores y espíritu
empresarial en España. Madrid.
GARTNER, W. B. (1988). "Who is an entrepreneur" is the wrong question. American Journal of
Small Business, 13 (spring), 11-32.
KRUEGER, N. F., JR., REILLY, M. D., & CARSRUD, A. L. (2000). Competing models of
entrepreneurial intentions. Journal of Business Venturing, 15, 411-432.
MCCLELLAND, D. C. (1961). The achieving society. Princeton: Van Nostrand.
ROBINSON, P., STIMPSON, D., HUEFNER, J., & HUNT, H. (1991). An attitude approach to the
prediction of entrepreneurship. Entrepreneurship Theory and Pratice, 15 (4), 13-32.
SHANE, S. A., & VENKATARAMAN, S. (2000). The promise of entrepreneurship as a field of research.
Academy of Management Review, 25, 217-226.
SHAPERO, A. (1982). Social Dimensions of Entrepreneurship. In C. A. KENT, D. L. SEXTON &
K. VESPER (Eds.), The Encyclopedia of Entrepreneurship (pp. 72-90). Englewood Cliffs:
Prentice Hall.
SHAVER, K. G., & SCOTT, L. R. (1991). Person, Process, Choice: The Psychology of New Venture
Creation. Entrepreneurship Theory and Practice, 16, 23-45.
VAN GELDEREN, M., BRAND, M., VAN PRAAG, M., BODEWES, W., POUTSMA, E., & VAN
GILS, A. (2006). Explaning Entrepreneurial Intentions by Means of the Theory of Planned Behavior.
Research Working Papers Series, 2, 1-33.
VEGA, I., CODURAS, A., & JUSTO, R. (2005). Global Entrepreneurship Monitor. Informe
ejecutivo GEM España 2004. Madrid: Instituto de Empresa.
57
CHAPTER 5
MOTIVATION TO BECOME ENTREPRENEUR
Dominika Dej
Department of Work and Organizational Psychology
University of Technology in Dresden
“Being an entrepreneur and creating a new business venture is analogous to raising children- it
takes more time and effort than you ever imagine and it is extremely difficult and painful to get out
of the situation. Thank goodness you cannot easily divorce yourself from either situation.
When people ask me if I like being in business, I usually respond: On days when there are
more sales than problems, I love it; on days when there are more problems than sales, I wonder
why I do it. Basically, I am in business because it gives me a good feeling about myself. You learn
a lot about your capabilities by putting yourself on the line. Running the successful business is not
only a financial risk; it is an emotional risk as well. I get a lot of satisfaction from having dared it-
done it- and been successful”.
Remarks of two successful entrepreneurs,
In “Entrepreneurship”
PSYCHOLOGY OF ENTREPRENEURSHIP
58
1. LEARNING GOALS
In this course you will get familiar with following issues:
1) Definition and different approaches to the entrepreneurial motivation
2) Role of the motivational traits and specific motivators
3) Predictors of entrepreneurial motivation
4) How to foster entrepreneurial motivation in given context
2. THEORETICAL BACKGROUND
Why do some people create a business and others do not? How can we
explain that some people manage to become entrepreneur and even succeed
whereas others do not even implement their start up intention or fail as
entrepreneurs? What motivates people to take risks and start up a new firm?
Possessing the most adequate entrepreneurial knowledge, beliefs and abilities
in addition to having supportive external situation are still not sufficient for
starting a new venture. A lot of people possess necessary financial resources, but
not every one decides to pursue an entrepreneurial career. Those who prefer
secure jobs and predictable lives do not take the risks associated with starting a
new venture. However, starts up motives vary strongly across countries, time,
gender and social groups. Even the best cognition, education and encouraging
contextual factors (opportunities) seem to be useless without motivation. But
what makes motivation so irreplaceable? How can it be described?
Entrepreneurial motivation is an important drive that energizes one’s action
toward related goals, directs one’s attention and sustains taken actions.
Individual motivation is based on one’s needs, values, desires and intentions thus
it’s often associated with internal factors exclusively. According to the Locke and
Baum (2007), there are some personal traits related to entrepreneurial
motivation. The best-known entrepreneurial drive results from the need for
independence and being one’s own boss. This exciting feeling of sovereignty
and autonomy pushes people to accept social and financial risks, invest many
working hours and sacrifice to create their own company. Developing a
successful new venture demands much time, effort and other resources. Other
entrepreneurial drives are presented in Table1.
MOTIVATION TO BECOME ENTREPRENEUR
59
TABLE 1
Entrepreneurial Motivators.
Motivational aspect Characteristic
Independence - wish to make key decision
- think independently and unconventional
- ability to make independent judgments
General self-confidence/ self efficacy - belief to be able to perform successfully, achieve goals
and defeat obstacles
Achievement motivation - desire to improve, meet high standards and attain goals
Proactivity - tendency to act and make things happen
Ambition (Healthy ambition) - strong desire to attain high results
willingness to make something real great meeting high
standards
Energy - hardiness, endurance, stamina
Egoistic passion - acting in one’s own interests
- passion in following own goals
- does not mean ignoring other people
- scarifying other things in order to follow own priorities
Tenacity - being persistent in case of troubles
- not giving up if failed
- following determinedly own ideas
Motivators playing a role in the entrepreneurial motivation results from
business directed goals and vision.
Vision generates motivation through anticipation of desired future results
which work as rewards and thus it gives power to follow the action. The better
the visualization of the goal, the higher is the pull to achieve it. According to the
goal setting theory higher goals leads to better performance (Locke & Latham,
2002), thus they produce more motivation which predicts appropriate behaviors
and increase probability of goal attainment. It happens because motivation
PSYCHOLOGY OF ENTREPRENEURSHIP
60
influences intention which in turn indicates how much effort will be invested in
order to reach the goals.
Motivators presented in the table above do not scoop all aspects relevant to
the entrepreneurial drive, these are only general aspects. In addition, there are
also some specific situational motivators, such as task and situation related self-
efficacy, and situation-specific goals and visions. Specific self-efficacy is related to
the certain tasks and how well an entrepreneur has accomplished this task in the
past as well as whether good performance was attributed externally or internally
(i.e. whether a person believes that success could be attributed to their own skills
and actions (internally) or whether success had been caused by luck (externally)).
Although specific self-efficacy is generally considered important for
entrepreneurial success, marked overconfidence may have some negative
consequences, e.g. ignoring the environmental changes, underestimating risks
and working less intensively. Situationally specific goals and vision help people
to conduct certain tasks through formulation of suitable tasks strategies. In
particular, difficult goals lead to the higher performance. On the other hand,
coping with new complex tasks can sometimes be difficult, thus learning and not
performance orientation is recommended in that case. Specific visions if they are
enough ambitious, play also important motivational role.
Not only individual factors explain entrepreneurial motivation. Start-up
across countries, time, gender and social groups. Each entrepreneurial action
takes place in certain environment, where external factor can both prevent and
promote entrepreneurial activity. There are several important contextual features
fostering or inhibiting entrepreneurial activity, such as for example economic
freedom or an open market providing opportunities and last but not least the
“Culture of failure” and stigmatization of failuring entrepreneurs. However,
entrepreneurs determine volitionally whether to start up or not. Therefore,
outside factors play only an indirect role.
The most acknowledged differentiation between internally and externally
simulated start-up motivation are the presented in Table 2.
According to these goals, researchers distinguish between opportunity and
necessity entrepreneurship. The first one regards to the classical type of
entrepreneur, who seeks for independence, self- realization and profit
maximization. This kind of entrepreneur will probably strive to follow his
business idea and look for opportunity to turn it into action. Opportunity driven
entrepreneurs are typical for developed economies.
MOTIVATION TO BECOME ENTREPRENEUR
61
TABLE 2
Push and Pull motivational factors
Factor Push Pull
What trigger the
entrepreneurial
intention?
Environment Individual
Main purpose away from current situation future orientation
Motives unemployment
avoiding unemployment
emergency situation
dissatisfaction with own
vocational situation
dissatisfaction with working
conditions, contents and
time
recognition, prestige,
reputation
free time
work-life balance
decision attitude
to be own boss
risk taking, independence
initiative
implementation of own ideas
good income
success
interesting tasks
self realization and
development
opportunity
positive examples
In contrast to the opportunity entrepreneurship, necessity entrepreneurs seek
for workplace security or even for secure existence thus their start up results
from lacking alternatives or needs. Necessity entrepreneurship is typical for
developing and transition economies.
In this context the question about further implications of classification arises.
What kind of information can we infer from this classification and how can we
use it? Different types of motivation among nascent and opportunity
entrepreneurs are of the great importance on the political and institutional level.
For instance, when an entrepreneur applies for funds, credits and loans, we want
to know whether the business will be successful. Opportunity entrepreneurs
have been found to be more successful. Their goals are higher and they are also
better equipped in resources. This perspective corresponds with psychological
PSYCHOLOGY OF ENTREPRENEURSHIP
62
argumentation that the chances to implement start-up goals increase when the
goals possess higher pull function, which gives energy and persistence.
The way between motivation and start up is sometimes very long and not
every nascent entrepreneur can launch new enterprise.
What factors are of importance as possible moderators of the relationship
between motivation and future start up? This graphic in Figure 1 shows the
most relevant factors influencing motivation and potential start up relationship.
Figure 1.
Factors influencing the relationship between motivation and start up.
In sum, motivation drives nascent entrepreneurs to start up and it also
facilitates to continue their actions and that what most strongly differentiates
successful nascent entrepreneurs from those who will never go beyond planning
and preparation.
In terms of European Commission, high-expectation and high-growth
entrepreneurship should be encouraged. It is very important for job creation and
development on the national level. According to the GEM Reports from 2007,
motivation to start up high growing venture is underrepresented. The patterns of
entrepreneurial growth expectations vary according to the individual countries
and individual factors such as education, household income, entrepreneurial
Motivation Start up
• Estimation of start up chances in given environment
• Perception of own necessary abilities and skills
• Availability of role models
• Fear of failure ands its personal, social and financial
consequences
MOTIVATION TO BECOME ENTREPRENEUR
63
attitudes and activities. Further information about entrepreneurial motivation, its
influence on business success and these relations on the country level will be
provided during the course.
2.1. Related in-class activities
1. In this course you will receive different vignettes connected to the
entrepreneurial motivation. You will analyze given texts and try to
identify motivational traits leading to the start up and performance.
2. Imagine that you participate in the program on entrepreneurial
motivation targeting on education and training for nascent
entrepreneurs. How would do encourage people to become
entrepreneur and which techniques would you apply?
3. What should politician, bank and credit institutions know about
entrepreneurial motivations? How should they use this information in
order to support entrepreneurs?
REFERENCES
Aution, E. (2007) Global Report on High-Growth Entrepreneurship. Babson College, London
Business School, and Global Entrepreneurship Research (GERA) Entrepreneurship in
Europe (2003). In Green Paper, 4-8.
GALAIS, N., (1998). Motive und Beweggründe für die Selbständigkeit und ihre Bedeutung für
den Erfolg. In FRESE, M., RAUCH., A, FRESE., M. (1998). Erfolgreiche Unternehmensgründer.
Göttingen: Verlag für Angewandte Psychologie.
STERNBERG, R., BRIXY, U., HUNDT, C. (2007). Global Entrepreneurship Monitor (GEM).
Länderbericht Deutschland 2006.
LANG-VON WINS, T. (2004). Der Unternehmer. Berlin, Heidelberg: Springer.
LOCKE, E. A, BAUM, J.R.(2007). Entrepreneurial Motivation. In J.R. BAUM, M. FRESE, R.A.
BARON (Ed.), The Psychology of Entrepreneurship. New Jersey: Lawrence Erlbaum Associates.
PSYCHOLOGY OF ENTREPRENEURSHIP
64
65
CHAPTER 6
OPPORTUNITY RECOGNITION AND DEVELOPMENT
Martin Lukeš
Department of Managerial Psychology and Sociology
Prague University of Economics
“When one door closes another door opens; but we often look so long and so regretfully
upon the closed door, that we do not see the ones which open for us”
Alexander Graham Bell
“Opportunity is missed by most people because it is dressed in overalls and looks like
work”
Thomas Alva Edison
PSYCHOLOGY OF ENTREPRENEURSHIP
66
Real-@uction
changing the Real Estate market…
In the last year, a group of CEMS students presented their business model in
our entrepreneurship class. Their main idea was to improve the matching
mechanism in the housing and office rental market in the Czech Republic by
introducing an auction system.
Their customers were: 1. People searching flats or offices for rent (demand
side customers) and 2. People willing to rent flats or offices (supply side
customers). The customers would meet on the internet based auction platform.
People willing to rent flats or buildings would set up an entry in the database via
Internet. They would be asked to fulfill some requisites as property information,
pictures and preferences, so that all information is standardized. Additional
services such as 360° pictures or virtual tours would be provided at a later stage,
which might help to attract further customers. In an auction similar to those
known from eBay, the supply side customer would set a minimum price and
demand side customers might place their bids during a preset time period. Initial
prices would be between the reservation price of the supply side customer and
the market price. Consumers would be attracted by offers starting below the
market price. The demand side client with the highest bid at the end of the
auction period would receive the contract. The firm would also act at a later
stage as a broker for services related to the renting of flats and houses such as
reallocation services, cleaning services and other.
The revenue model was based on registration fees from “sellers” (approx. 28
EUR for every new customer), percentage of the rent above the minimum price
(30% from the difference) and selling customer database upon agreement.
Possible fees in the future might also include commission on the monthly rent,
payments for costly services such as 360° pictures or solvency checks, etc.
Is it a good opportunity? Is it a good business idea?
1. LEARNING GOALS
1) Understand what entrepreneurial opportunities are, what their origin is
and why some people recognize certain opportunities and others don't.
OPPORTUNITY RECOGNITION AND DEVELOPMENT
67
2) Learn how to develop business ideas and how can be some opportunities
recognized.
3) Learn how to further develop opportunities into business concepts and
models.
2. THEORETICAL BACKGROUND
2.1 Opportunity
Opportunity recognition, development and the final selection of the
right ones is one of the key capabilities of a successful entrepreneur.
It is a difficult task. The entrepreneur needs to be alert, sensitive to market
needs and inefficiently used resources and sometimes even search systematically
for additional information. However, it is only the start of the process -
entrepreneurial opportunities need to be developed, evaluated, further
developed and modified and again evaluated and so on repeatedly. Such effort
may (or not) result in new venture creation (Ardichvili, Cardozo & Ray, 2003).
In general, opportunity can be defined as a possibility to satisfy market needs
trough a new combination of resources that will offer added value (Kirzner,
1973). Alternatively, Shane and Venkataraman (2000) define opportunity as a
„situation in which new goods, services, raw materials, and organizing methods
can be introduced and sold at greater price than their cost of production“ (p.
220). There can be found many other definitions, therefore Baron (2004)
summarize that opportunities have three central characteristics:
– potential economic value (i.e. potential to generate profit),
– newness (i.e. something what did not exist previously) and
– perceived desirability (of the new product or service in society).
Opportunities start as initial ideas and simple concepts that are
further developed by entrepreneurs.
Opportunities emerge from the complex of changing technological, economic,
legal, social and demographic conditions (Baron, 2004). Kirzner (1973) says that
PSYCHOLOGY OF ENTREPRENEURSHIP
68
opportunity starts when the entrepreneur recognizes a commercial value of his
or her idea. The question is whether opportunities exist and they just need to be
recognized (Kirzner, 1973) or whether it is necessary to create them actively by
an entrepreneur (Hills, Hansen & Hultman, 2004). An interesting view is
provided by Sarasvathy, Venkataraman, Dew and Velamuri (2002). According to
them, opportunity recognition is the case when both sources of supply and
demand exist rather obviously, the opportunity for bringing them together has
to be only "recognized" and then implemented (e.g. franchising). Opportunity
discovery is a situation where only one side exists. Then, the nonexistent side
has to be "discovered" before the match-up can be implemented. Examples
include cures for diseases (market demand exists; supply has to be discovered)
and better use of inefficiently used resources (e.g. animals may be used not only
for meat and other products but also for agro-tourism). Opportunity creation is
the most difficult situation when neither supply nor demand exist in an obvious
manner and have to be "created", and several inventions in marketing, financing
etc. have to be made for the opportunity to come into existence. Examples
include Edison's General Electric or Google.
Generally, opportunities always involve either unfulfilled market needs
(queues at state offices; bad can openers; wireless connections), unused or
inefficiently used resources (possibilities for advertisement: bench, own
forehead; brownfields; ideas of university researchers that are not
commercialized) or the possibility to connect specific market needs with specific
resources. Opportunities are also situational. The window of opportunity must
be open long enough to enter, but narrow enough to keep others out.
Factors influencing opportunity recognition
The process of opportunity development starts when entrepreneurial alertness
exceeds some threshold level and we realize that the idea might be a good one.
The alertness is higher when the potential entrepreneur is optimistic and
creative, have prior knowledge and experiences and available social networks.
Entrepreneurial alertness can be defined as a propensity to notice and be
sensitive to information about objects, incidents, and patterns of behavior in the
environment, with special sensitivity to maker and user problems, unmet needs
and interests, and novel combinations (Ardichvili, Cardozo & Ray, 1996).
OPPORTUNITY RECOGNITION AND DEVELOPMENT
69
Higher alertness is related to higher likelihood to recognize an opportunity.
Hills, Hansen and Hultman (2004) suggest that entrepreneurs recognize, not
actively search for the opportunities. In this sense, entrepreneurial alertness can
be understood as a „passive search“, i.e. to be prepared to recognize value of
new information.
Another factor that plays an important role is information asymmetry and
prior knowledge. People have tendency to notice information that is related to
something they already know. Prior knowledge creates a „knowledge corridor“
and triggers recognition of the value of the new information. Key areas of prior
knowledge are prior knowledge of markets, prior knowledge of ways to serve
markets, and prior knowledge of customer problems (Ardichvili, Cardozo &
Ray, 2003).
Social networks are also important for entrepreneurs. Hills, Lumpkin and
Singh (1997) found that entrepreneurs with different contacts were able to
identify more opportunities. These social networks usually consist of four areas:
– inner circle (long-term, stable relationships with close people)
– „action set“ (employees)
– partnerships (start-up team members)
– weak ties (acquaintances and distant friends).
Whereas strong ties to close relatives and friends serve as a perfect support
and source of financing or cheap labor, weak ties often play the role of bridges
to key information. To use his or her social networks, the entrepreneur cannot
be just passive. De Koning (1999) identified three cognitive activities
(information gathering, thinking through talking, and resource assessing) that are
crucial for opportunity recognition.
Sources of new ideas
Many sources of new ideas can be used:
– customers who say „it would be good, if such a service ...“, „we looked
for this product, but nobody …“ can be informally mapped (what is
needed?) and more formally surveyed (how much demand exists?)
PSYCHOLOGY OF ENTREPRENEURSHIP
70
– existing companies offer products and services that can be analyzed and
their strengths and weaknesses found
– other individuals may come up with different gadgets and refinements
that might be improved and sold to a wider audience with similar needs
– different players in the distribution channel may have unmet needs –
wholesale can have problems with quality of products, retail with
wholesale logistics, etc.
– government regulations create large and certain demand, e.g. the new
law that reflex vests are obligatory for drivers on business trips created
large demand
– research and development at universities and research institutes that is not
commercialized
– different creative techniques as brainwriting or brainstorming may spark
the idea.
Opportunity development
Between the initial business idea and a real firm foundation is usually a long
process of idea development and evaluation. When the idea is first developed,
potential advantages and values for specific users start to emerge and also
resources are better defined. The idea is evaluated for the first time by rather
informal and unspoken evaluation. When the idea passes this evaluation, it needs
to be developed to a business concept. Business concept consists of three basic
areas:
• what products and/or services will be offered?
• to whom they will be offered and what specific customer needs will be
satisfied?
• how will be the products and services delivered to the market (i.e.
concept of production, sales, marketing and logistics).
OPPORTUNITY RECOGNITION AND DEVELOPMENT
71
To precise your business concept, the questions and
recommendations in Appendix 1: Elevator pitch guidelines may be
useful.
After further work on developing the opportunity, the potential entrepreneur
gets to the stage of business model. Business model have to be simple, logical
and measurable, on the other hand comprehensive and meaningful. The aim of
the model is to present viability of a business and therefore it must clearly answer
how the products and services will be sold to customers in order to get higher
revenues than costs and expected returns of investment. Morris (2004)
recommends elaborating six main areas:
1. How will the firm create value?
2. For whom will the firm create value?
3. What is the firm’s internal source of advantage?
4. How will the firm differentiate itself?
5. How will the firm make money?
6. What are the entrepreneur’s time, scope and size ambitions?
To develop and present your business model, see also Appendix 2:
Business model presentation guidelines and Appendix 3: 50 questions
that may help to improve the quality of your business model.
Opportunities are evaluated on each stage of their development (see
picture 1). The suggested process is illustrative; entrepreneurs do not always go
through all the stages. In practice, entrepreneurs often do not prepare a formal
business plan which is needed mainly when external financing is required.
However, the key moment is to judge well whether the idea has a potential to
create an expected profit. Criteria focusing
- on market (e.g. are customers loyal to competition or sensitive to
potential new offers? Is the market quickly growing?),
- economic (e.g. will be break even point sooner than in two years? Are
capital requirements low?),
PSYCHOLOGY OF ENTREPRENEURSHIP
72
- competitive advantage (e.g. is it possible to patent the product? Do we
have clear time advantage?),
- entrepreneurial team (e.g. is experienced, with past results?) and
- risk issues (e.g. are risks low or high?) are used (Timmons, 1990).
Figure 1: The process of opportunity development
3. RELATED IN-CLASS ACTIVITIES
1. Discussion about the case in the introduction (July 18)
Students will discuss whether there is an opportunity and whether the
presented business model is good. The teacher will provide comments
on how the different parts of the presented business model were
evaluated and why.
2. Dragon's den (July 18)
Students will see two scenes from Dragon's Den. Dragon's Den is a BBC
show in which nascent / young entrepreneurs come to give an elevator
pitch about their idea to potential investors - experienced business angels.
Behavior and elevator pitches of the entrepreneurs will be discussed;
recommendations for an elevator pitch will be formulated.
3. Country specific opportunities (July 18)
Students will be divided into groups according to their nationalities
(universities they are from). Their task will be to discuss in 15 minutes
the opportunities that are according to their opinion existing in their
country. These opportunities will be then presented to other students.
4. Business Ideas development (July 18)
Step 1: Individual students will generate a list of so many new venture
ideas as possible and present them shortly
Business
Idea
Business
concept
Business
model
Business
plan
Firm
foundation
OPPORTUNITY RECOGNITION AND DEVELOPMENT
73
Step 2: Students will create teams in which they will discuss the ideas of
their members and select the best ones
5. Elevator pitches (July 20)
See Appendix 1: Elevator pitch guidelines for detailed information.
Students will receive feedback from the teacher and from other students.
Individual consulting of business concepts will take place afterwards in
the workshop.
6. Business model presentations (July 21)
See Appendix 2: Business model presentation guidelines and Appendix 3:
50 questions that may help to improve the quality of your business model
for detailed information.
REFERENCES
ARDICHVILI, A., CARDOZO, R., RAY, S. (2003) A theory of entrepreneurial opportunity
identification and development. Journal of Business Venturing 18 (2003): 105 – 123.
BARON, R.A. (2004) Opportunity recognition: A cognitive perspective. Academy of Management Best
Conference Paper 2004 ENT, A1-6.
BHAVE, M. (1994) A process model of entrepreneurial venture creation. Journal of Business
Venturing, 9: 223-242.
De KONING, A. (1999) Conceptualizing Opportunity Recognition as a Socio-Cognitive Process.
Stockholm: Centre for Advanced Studies in Leadership.
DRUCKER, P.F. (1985) Innovation and Entrepreneurship: Practice and Principles. New York: Harper
& Row.
ECKHARDT, J.T., SHANE, S.A. (2003) Opportunities and entrepreneurship. Journal of
Management, 29(3): 333-349.
GAGLIO, C.M., KATZ, J.A. (2001) The psychology basis of opportunity identification:
entrepreneurial alertness. Journal of Small Business Economics, 16 (2): 95-111.
HILLS, G.E., LUMPKIN, G.T., SINGH, R.P. (1997) Opportunity recognition: perceptions and
behaviors of entrepreneurs. Frontiers of Entrepreneurship Research. WELLESLEY, MA: Babson
College, 203-218.
PSYCHOLOGY OF ENTREPRENEURSHIP
74
HILLS, G.E., HANSEN, D.J., HULTMAN, C. (2004) Opportunity Recognition Processes: A Value
Creation Context.
www.kmu.unisg.ch/rencontres/RENC2004/Topics/Hills_Hultman_Renc_04_Topic_D.pdf
HISRICH, R.D., PETERS, M.P. (1995) Entrepreneurship: starting, developing, and managing a new
enterprise. 3rd edition, Irwin / McGraw-Hill.
KIRZNER, I.M. (1973) Competition & Entrepreneurship. Chicago, IL: University of Chicago Press.
KIRZNER, I.M. (1979) Perception, Opportunity and Profit. Chicago, IL: University of Chicago
Press.
KRUEGER, N.F. (2000) The cognitive infrastructure of opportunity emergence. Enterpreneurship
Theory and Practice. Spring, 5-23.
MORRIS, M., (2004) Understanding the Business Model of the Entrepreneur. Material presented at
Experiential Classroom V., 16.-19.9.2004, Syracuse University, NY.
MORRIS, M., SCHINDEHUTTE, M. (2004) Teaching Entrepreneurship Students the Concept of a
Business Model. Material presented at Experiential Classroom V., 16.-19.9.2004, Syracuse
University, NY.
SARASVATHY, S.D., VENKATARAMAN, S., DEW, N., VELAMURI, N. (2002) Three views of
entrepreneurial opportunity. Invited book chapter in the Entrepreneurship Handbook edited by
Acs et.al. (Revised January 4, 2002)
SHANE, S., VENKATARAMAN, S. (2000) The promise of entrepreneurship as a field of research.
Academy of Management Review, 25: 217 – 226.
TIMMONS, J.A. (1990) New Venture Creation. 3rd ed., Homewood, IL: Irwin.
OPPORTUNITY RECOGNITION AND DEVELOPMENT
75
APPENDIX 1:
Elevator pitch guidelines
Describe simply the core of your idea. You must sell your idea to the
investors. You have max. 3 minutes for the presentation. You can use the
following structure:
1. What products and/or services do you offer?
2. Who are your customers? What their needs do you satisfy?
3. How big is your market? How will the market develop in the future?
4. What is current domestic and international competition and what is your
advantage (your unique selling point) against this competition?
5. How will you make money in this business?
6. How will your customers get to know you? What marketing strategies
will you use?
7. How do you plan to sustain your competitive advantage for the future?
8. How much money do you need and for what they will be used?
9. How profitable is your business? What returns on investment do you
expect?
10. Who are the members of your team and what are its strengths?
Some further recommendations:
• Use a hook in the beginning. Something what will interest the audience
and you get their attention.
• Elevator‘s pitch is usually your only chance to attract the investor. Be
persuasive and enthusiastic. Investor usually sees when you don't believe
in what you are saying.
PSYCHOLOGY OF ENTREPRENEURSHIP
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• Specify your customers well. Prefer to solve urgent problems of small
growing market to improving already solved problem of a large stable
market.
• Avoid using "fancy" adjectives and terms as dynamic, intelligent, next
generation, etc.
• Present your competitive advantage in a positive way (i.e. what you can,
not what your competition can't)
• Being first on the market is only a temporary advantage. How will you
prolong it?
• Tell the concrete names of your team members. Avoid saying "I".
Always say "we". You need to demonstrate that you are a good team.
• Don't focus on details of your products and services but on the value it
brings to your customers.
• In case it is possible, you can show a model or picture of your product. It
is illustrative and it usually helps.
• Don't underestimate marketing. Think about guerilla strategies, i.e. how
can you do something cheaply and with a large impact on customers?
• Be ambitious and realistic! For one small bakery you don't need
investors. For development of a multi-billion office building you do not
have probably enough experience yet.
OPPORTUNITY RECOGNITION AND DEVELOPMENT
77
APPENDIX 2:
Business model presentation guidelines
This assignment consists of two main points: 1: presentation of the business
model and 2: an extended version of the executive summary of the business
model in 3-5 pages.
1. Presentation part: business model
• Each team has a max of 15 minutes for presentation and must be
prepared for 10-15 minutes Q&A based on the presentation and the
extended summary.
• Each team can choose the form of presentation, which seems most
appropriate for them (Overhead, beamer, …)
Key points:
• teams of 4 to max. 5 students
• from 1 university there can be only 1 person in 1 team, i.e. teams
will be always created by people from as many different
universities as possible
• duration of the presentation: 15 minutes
• questions and answers: 10-15 minutes
• aids are up to you: overhead projector, beamer, whiteboard, free
speech...
• to give you some other ideas for your pitch:
http://www.mootcorp.org/plansandvideos/plansvideoslist.asp
2. Written part: executive summary.
PSYCHOLOGY OF ENTREPRENEURSHIP
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We don’t expect a fully written business plan but an extended version of the
executive summary in about three to five pages length. The executive
summary will be provided at 10.00 a.m. on Saturday 21, 2007 at the
latest.
What’s the purpose of such a summary: after having read it, a potential
investor or partner should be interested in knowing more about your business
idea and your company and invite you for a more thorough personal
presentation.
Evaluation criteria:
• innovativeness of the idea (newness, own original idea)
• competitive advantage of the business model (unique,
defendable, sustainable)
• profitability of the business model (market attractiveness,
market volume, market growth, profit margin)
• realism (can be realized by a presenting team, internally
consistent concept)
• overall quality of the presentation (interesting, time well used,
team cooperation, original, examples provided)
OPPORTUNITY RECOGNITION AND DEVELOPMENT
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APPENDIX 3:
50 questions that may help to improve the quality of your business
model
Products and Services
1. What products and/or services do you offer?
2. Why is it unique?
3. What specific need of your customers your product/service solves?
4. How is this need satisfied in the present?
5. What are the disadvantages of current solutions that are available on the
market?
6. In what steps will you develop your product/service in the future?
7. Describe the production of your product/service?
8. How will you protect your intellectual property related to your
product/service?
Team
9. Who are the team members?
10. What experiences your team has with the market of your product/service?
11. What are responsibilities and authorities of particular team members?
12. What knowledge, experiences and skills are missing in your team? How will
you solve the issue?
Customer
13. Who is your customer? Be as specific as possible.
14. How many potential customers exist? How will their number develop in the
future?
PSYCHOLOGY OF ENTREPRENEURSHIP
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15. How many of these potential customers you want to serve in the beginning
and in the future?
16. How will behavior of your customers change in the future?
Competition
17. What companies are your today's competition?
18. What are strengths and weaknesses of your competition?
19. What is their market share and what development can be expected?
20. What new competition can come to your market?
Competing products/services
21. What competing products/services exist on the market today?
22. What is their price, quality, added value, history?
23. What are the strengths and weaknesses of these products/services?
24. What are the substitutes of your products/services on the market?
25. What will be the price, quality, and added value of your products/services?
Suppliers and key clients
26. Who are your suppliers (e.g. for production)?
27. Who are the key ones and why?
28. How will you ensure cooperation with these key suppliers?
29. Who are your potential key clients?
30. How will you ensure cooperation with these key clients?
Sales
31. How will you sell your products/services? Directly or through mediators?
OPPORTUNITY RECOGNITION AND DEVELOPMENT
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32. What are your sales revenues goals for the future?
33. What is your prediction of total sales revenues from your products/services
for the next year?
34. Are the sales dependent on season?
35. Will you sell your products/services also in other countries? When?
36. What after-sales service do you offer to your customers?
Marketing
37. How specifically will you promote your product/service during the launch?
38. How much money will you need for such promotion?
39. What you need to do before you start to promote your products/services?
40. How will you analyze your competition reactions after you launch your
products/services?
Firm
41. What are the goals of your firm and in what time periods?
42. What is your strategy to reach these goals?
43. Describe your firm after three years.
44. How much time are you able to devote to the firm now and in the future?
45. How long are you willing to work in the firm for free?
46. What are the major risks you can face?
47. What will you do in case these potential risks become realities?
Investor / Bank
48. How much money you need for a successful start and for what specifically
they will be used?
49. How much of your own money will you invest?
PSYCHOLOGY OF ENTREPRENEURSHIP
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50. Who else besides investor/bank and you will provide financing?
83
CHAPTER 7
PERSONALITY AND COMPETENCIES OF THE ENTREPRENEURS
Dominika Dej
Department of Work and Organizational Psychology
University of Technology in Dresden
Personality can be defined as a dynamic and organized set of characteristics possessed
by a person that uniquely influences his or her cognitions, motivations and behaviors in
various situations. The word “personality” originates from the Greek persona, which
means mask…
Ryckman, 2004
Case 1
MR. X began to show an interest in what he is doing now at the age of 13. Seven years later
he started up and now his company has more than 1,000 employees and $200 million in sales. His
personal beliefs revolve around working hard and trying your hardest to succeed. He believes that
if you are intelligent and know how to apply your intelligence you can accomplish anything. MR.
X thinks that if you don't work your hardest you will never succeed. MR. X is obviously a
visionary but he also works very hard and very competitively to carry out his vision. He
continuously looked for ways to grow his company. His belief in high intelligence and hard work
is what put him where he is today, as well as being in the right place at the right time. He doesn't
believe in luck or any sort of god, just hard work and competitiveness. MR. X simply sees it as
good competition and he will continue to stomp out the competition until he dies.
PSYCHOLOGY OF ENTREPRENEURSHIP
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1. THEORETICAL BACKGROUND
The past decades, interest in entrepreneurship has increased. Research on
entrepreneurship developed and entrepreneurship has gained a major position in
economical and political debates as an answer to issues such as unemployment,
and stagnating economic growth and development. If entrepreneurs and the
entrepreneurial processes are highly important phenomena, future entrepreneurs
should be made easily identifiable for selection purposes. Unfortunately the
complex and undiscovered nature of entrepreneurship has caused some
difficulties with universally defining the term entrepreneurship, which
complicates the search for typical entrepreneurial personality profiles.
Current definitions recognize entrepreneurs to be active actors
embedded in the broad context of organizational, social, environmental, and
even cultural factors. From a psychological perspective, entrepreneurs are
described as active individuals involved in the “entrepreneurial processes”.
Certain behaviours have been identified as characteristic for this entrepreneurial
process (Cromie, 2000; Chell, 91; Frese 2007). First, entrepreneurs tend to
Case 2
In the mid-1970s, at the age of 18, MR. Y set off from his native Québec to travel around
Europe, supporting himself for four years as a street performer — playing accordion, juggling, stilt
walking and breathing fire to earn a living. When he returned home in 1979 he remained as a
street performer. In 1984, the province of Québec was celebrating the 450th anniversary of
Canada's discovery and looking for innovative shows to mark the occasion. Laliberté proposed the
first Cirque du Soleil show and the company was born. Today more than 50 million spectators
have seen a Cirque du Soleil production and close to 10 million will have seen one during 2007.
The original show in 1984 employed 73 people. Today the business has more than 3,500
employees, including close to 900 performing artists. Cirque's employees and artists represent more
than 40 nationalities and speak 25 different languages. MR. Y commitment to his artistic vision
and the passion he has for his work were what swayed the judges in his favor to become the
Entrepreneur of the year. He has taken a great entrepreneurial journey from street performer to
CEO of a globally recognized brand. Entrepreneurs sometimes talk about the luck they've had in
their careers, but luck contributes little to these leaders' successes. Passion, vision, innovation —
and a lot of hard work — are what make these entrepreneurs and their companies exceptional.
MR. Y demonstrates these traits in abundance.
PERSONALITY AND COMPETENCIES OF THE ENTREPRENEURS
85
create their own business organisations. They actively map their environment
and seek out new opportunities. Second, entrepreneurs develop innovative
solutions, formulate plans and implementation strategies and organise resources
in order to make their products and services marketable. They monitor the
execution of their actions and search for feedback. Behaviours of entrepreneurs
are profit and growth oriented.
The entrepreneur is the central figure in the entrepreneurial process.
Therefore the entrepreneur can be expected to influence business success to a
certain extent. Not surprisingly, predicting entrepreneurial success based on
personal characteristics of the entrepreneur has been one of the oldest
contributions of psychologists to the entrepreneurship literature. Since the
introduction of the concept “need for achievement” as one of the core
characteristics of entrepreneurs, the personality approach has been the most
traditional, but also one of the most controversial approaches in the field of
entrepreneurship research. This is due to the large inconsistencies in research
findings. There is some evidence of relationships between personality traits,
business creation and performance, but still no clear personality profile has been
identified differentiating entrepreneurs from non-entrepreneurs, or groups of
entrepreneurial self-employed (who aim for growth, wealth creation and
innovation) from non entrepreneurial small business owners. Moreover,
identification of distinguishing characteristics of different types of entrepreneurs
is still largely missing.
Another, newer line of research on the entrepreneurial profile focuses on
entrepreneurial competencies and their relationship with entrepreneurial activity
and performance. The differences between personality variables and
competencies are that competencies refer to characteristics that the are less stable,
more proximal to actual behaviour, and can more easily be learned. Therefore
the value of competencies for education is larger. Thorough job-analyses based
on leading to a comprehensive and coherent set of entrepreneurial competencies
are scarce (Frese, Chell & Klandt, 200). However, there is general agreement
that individual level competencies are closely linked to the entrepreneurial
processes and thus they may increase our understanding of why some
entrepreneurs are successful and others are not. Entrepreneurial competencies are
understood as the “total sum of entrepreneurs’ requisite attributes: attitudes, values,
beliefs, knowledge, skills, abilities, personality, wisdom, expertise (social, technical,
managerial,) mindset, and behavioural tendencies needed for successful and sustaining
entrepreneurship” (Kiggundu, 2002).
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1.1. Personality variables and entrepreneurship
The personality approach to entrepreneurship probably has as many
protagonists as opponents. Researchers intending to explain relationships
between entrepreneurial performance and personality traits have met
methodological and definitional problems, which in turn have lead to
inconsistencies of the results and misunderstandings. Personality researchers agree
that individual differences are stable over time and consistent across various
situations. There is some evidence that personality traits influence vocational
choice and that people try to fit their jobs to certain preferred job and work
environments. This research is based on the attraction-selection- attrition model
(Schneider, 1987), according to which people are more attracted to activities
that match their personalities and also find these more satisfying than other
occupational categories. Additionally, if people follow their own interests in
environments that match their personalities would increase their persistency and
lead to the success. However, personality variables (e.g. conscientiousness) are
behavioural dispositions that do relate to general, broad categories of behaviour
(e.g. being organized), but they often cannot predict very specific behaviour
(clean the kitchen at least once a week). The predictive power of traits increases
when the interaction between personality and the situation is taken into
account.
Researchers differentiate between distal-broad personality traits and proximal
or specific personality traits. The most important distal personal variables can be
organised in five-factor model of personality (FFM; Costa &McCrae, 1992). The
five dimension of the model include following sets of the constructs:
Neuroticism, Extraversion, and Openness to Experience, Agreeableness and
Conscientiousness.
The big five model has often been used to compare individual differences
among diverse groups. In entrepreneurship research this was for example
differentiating entrepreneurs from managers. The main objective of these studies
was to discover personality factors leading to becoming an entrepreneur and
being successful as entrepreneur.
In addition to distal personality factors, researchers have also focused their
attention to proximal individual differences. These are lower order, specific
personality constructs that are more likely related to specific behaviours than the
first category of broad personality variables (Tett et. al., 2003). Research has
PERSONALITY AND COMPETENCIES OF THE ENTREPRENEURS
87
produced a long list of proximal personality variables related to entrepreneurial
intentions and success (Rauch & Frese, 1996, Zao & Seibert, 2006). The most
important ones are listed in Table 2. These personality variables may relate
directly to the entrepreneurial tasks that were mentioned in the introduction.
TABLE 1
Definitions of the Big-Five personality variables.
Dimension Description High scores on the scale Law scores on the
scale
Neuroticism Represents individual
differences in emotional
stability
Experiencing negative
emotions: anxiety, hostility,
depression, self-
consciousness,
impulsiveness, vulnerability
Self-confidence, calm,
relax
Extraversion Represents the extension
to which individual is
assertive, dominant,
energetic, talkative,
enthusiastic
Tendency to be cheerful,
like people and big groups,
look for excitement and
stimulation
Tendency to spend
time alone, being
reserved, quiet,
independent
Openness to
Experience
Describes tendency to
seek new experiences,
exploration of novel
ideas
Being creative, innovative,
imaginative, reflective,
untraditional
Being narrow,
conventional, non-
analytical
Agreeableness Represents one’s
interpersonal orientation
Trusting, forgiving, caring,
altruistic, gullible, tendency
to have good interpersonal
relationships
Law need for
affiliation, unforgiving,
able to make difficult
decisions
Conscientiousness Describes individual’s
degree of organisation,
persistence, hard work
and motivation in
pursuit the goal
accomplishment
High need of achievement,
persistence and
dependability (reflects the
extend to which one is
organised, deliberate, fulfil
duties and responsibilities)
Low need of
achievement and law
dependability
The big five model has often been used to compare individual differences
among diverse groups. In entrepreneurship research this was for example
differentiating entrepreneurs from managers. The main objective of these studies
PSYCHOLOGY OF ENTREPRENEURSHIP
88
was to discover personality factors leading to becoming an entrepreneur and
being successful as entrepreneur.
TABLE 2
Definitions of proximal personality variables that have often been related to entrepreneurial intentions and
entrepreneurial success.
Dimension Description Characteristics for the high scores on
this dimension
Need of
achievement
Denotes individual’s need to
strive hard to attain success
Setting demanding targets for oneself, being
proactive, tendency to take immediate
responsibility for tasks, plan and control
events. Want to receive feedback about their
level of performance
Locus of control One aspect of the cognitive style
which represents the extension to
which individual feels in charge
Perception of control over the environment
by the action, belief that luck and fate do not
really determine what happens
Risk taking Describes the individual cognitive
style with respect to taking risks
Actively seeking risky assignments and having
greater propensity to take risks
Tolerance of
ambiguity
Describes one’s ability to make
decision with incomplete
information
Making decision in the situation of high
uncertainty
Creativity Describes tendency to
experimentation, trial and error,
lateral thinking
Thinking in non-conventional ways,
challenge existing assumptions, flexibility and
adaptability in problem solving
Need of
autonomy
Represents one’s strive to be
independent and having control
Avoiding restrictions, rules, procedures and
strong need for independence and autonomy
Self- efficacy Describes optimistic self-beliefs to
cope with a variety of difficult
demands
Belief that one's actions are responsible for
successful outcomes
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89
In some group of studies researchers investigated whether personal
characteristics of entrepreneurs differed from non-entrepreneurs, especially
comparisons of entrepreneurs and managers in regard to the need for
dominance, autonomy and affiliation have been considered (Baum, 1992;
McGrath 1992b). Both, manages and entrepreneurs seems to be special groups
with some similarities and differences. Concerning the differences, managers
work within established business organisations where established procedures and
regulations are available. Entrepreneurs on the contrary work under unspecified
conditions and are responsible for all aspects of the enterprise. Entrepreneurs face
work- life imbalance as well as social, financial and personal risks, which can
produce high levels of psychological and even physical stress. Entrepreneurial
activity therefore demands self-confidence, calm and low anxiety. Further,
entrepreneurial activity includes hard bargains, negotiations and following one’s
own interests, and sometimes even requires using manipulation and persuasion.
These activities do not go along with interpersonal orientation and
agreeableness. Given these differences, entrepreneurs and manages should differ
on two personality dimensions: Neuroticism and Agreeableness. A recent meta-
analysis (Zhao & Seibert, 2006) confirms these assumptions. Results show that
entrepreneurs score significantly lower than managers on both of these
personality dimensions.
Additionally Zhao and Seibert proofed whether entrepreneurs scored
significantly higher on Openness to Experience and Conscientiousness.
Openness to the Experience and emphasis on innovation and creative solutions
has been considered to be main characteristics of entrepreneurs (Schumpeter,
1997). Starting up a new venture and exploring new opportunities requires more
creativity and novelty than working in an established business organization. In
addition, the daily activities of entrepreneurs require hard working in order to
achieve goals. Not only high achievement motivation but also dependability and
good self-organization are expected. These aspects are very important for the
self-made environment and day- to-day situation of entrepreneurs.
Conform the Hypotheses, entrepreneurs achieved higher results on the
dimension of Openess to Experience and the dimension Conscientiousness,
which covers both need for achievement and dependability. By the way, the
fifth psychological dimension- Extraversion seems not distinguishes between
managers and entrepreneurs, although the results are not consistent and vary
over studies.
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The results of research in the field of entrepreneurship and personality are
not constant. As many studies have been conducted in different countries,
inconsistencies may be explained according to national differences, in particular
cultural differences. For example, McGrath (1992b) reports, that entrepreneurs
in 13 investigated counties differentiate from career professionals regarding to
some culture dimensions. According to Hofstede (Hofstede, 2001, 2002)
uncertainty avoidance, a cultural dimension regarded to rely on norms, rules and
procedures and avoiding ambiguous situations, has been found to be valued
lower among entrepreneurs McGrath & MacMillan, 1992). In contrary,
individualism, masculinity and power distance were valued consistently higher
among entrepreneurs. These results suggest that culture dimensions may
contribute to our understanding of successfully entrepreneurship and discovery
connections between personality and entrepreneurship.
1.2. Entrepreneurial Competencies
Entrepreneurial competencies aggregate into sets of
knowledge, skills and abilities and have been shown to
relate positively to business success (Markman, 2007).
In Table 3 some selected entrepreneurial competences
are described. Although entrepreneurial competencies
are of great importance for performance in general,
they influence entrepreneurial activity in different ways depending on the stage
of entrepreneurial development and the external situation the entrepreneur
needs to cope with. Entrepreneurial competencies correspond not only with
entrepreneurial tasks and their characteristics but also with the broader
environment in which entrepreneurial tasks are executed. This means that there
are some relevant contextual factors determining the importance of particular
competencies in a given environment where the entrepreneurial activity is
preformed. One such environmental factor is for example stability of the market.
Entrepreneurs who operate in a stable market may experience less uncertainty
than entrepreneurs who operate in a continually changing market characterized
by fast technological progress. A competency such as “widened perception” (See
Table 1) may be more important for an entrepreneur in a changing market and
hence for them may relate stronger to business success.
Contextual aspects vary across cultures, but they also change over time and
relate to stages of the entrepreneurial activity. Consequently, different types of
entrepreneurial competencies are relevant in each stage of entrepreneurial
PERSONALITY AND COMPETENCIES OF THE ENTREPRENEURS
91
activity; starting with pre- start up phases which includes formulation of business
idea, developing business plan, opportunity recognition and evaluation, as well
as further on in the survival, growth and development stages.
TABLE 3
Definitions of selected entrepreneurial competencies
Competence Definition
Entrepreneurial Career
Vision
Includes formulation of long term goals and preparation of action-
implementation plan
Self confidence One’s belief to be able to complete demanding tasks implies having
the necessary knowledge, human and professional capacity, and the
correct attitude and energy to achieve goals.
Widened Perception Ability to explore beyond the boundaries of one’s circle of experience
and reference in order to find new opportunities.
Flexibility One’s disposition to change focus in order to follow better fitting
options that allow tasks to be well executed.
Empathy Ability to understand other’s emotions, necessities and interests and to
integrate them to our own.
Conceptual thinking One’s disposition to identify the relation existing among different
components in complex situations that are not directly related and
ability to construct models those are easy to apply.
Management Ability to gather, integrate and manage required resources in order to
start, maintain and grow within the organization.
Entrepreneurial
networking
Includes establishing, maintaining and taking advantages of
interpersonal and institutional relations in order to achieve
entrepreneurial goals.
Decision Taking Is to analyze the different alternatives available in order to determine
the best path to follow assuming full responsibility of the outcomes.
Action Orientation Is understood as the energy, force, courage and dedication necessary
to put into action and make real, all the ideas, proposals, opportunities
and entrepreneurial projects.
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To understand the way entrepreneurial competencies function in achieving
success across situations and the business life cycle, the distinction between
“weak” and “strong” situations is very helpful (Mischel, 1973, in Markman
2007). The concept of “weak” and “strong” situations refers to the external
conditions determining whether high or low levels of expression of individual
differences will occur. In a “strong” situation peoples’ roles are well defined,
unambiguous hierarchies exist and there are clear rules, norms and regulations.
In contrast, small and new ventures seem to create “weak” situations, where
personal differences, in particular entrepreneurial competencies, play a crucial
role influencing firm level outcomes. Entrepreneurial competences from this
perspective gain in special importance.
2. LEARNING GOALS
In this course you will get familiar with following issues:
1) Research on personality dimensions in entrepreneurial context
2) Assesing attributes of entrepreneurs and non entrepreneurs
3) Personality approach to the entrepreneurial success
4) Controversies and critical points of assessing entrepreneurial traits and
performance
5) Recognition and defining core entrepreneurial competencies
6) Role of the competencies in entrepreneurial activity and performance
7) Development of entrepreneurial competencies
3. RELATED IN-CLASS ACTIVITIES
1. You will conduct a brainstorm exercise on personality variables that may
predict entrepreneurial success in small groups. In the beginning of this
course you will get a task and further instructions how to proceed.
Afterwards you will present and evaluate your results in plenum.
2. For the second exercise you will receive 2 different vignettes and
questions concerning personality as a predictor of business start up.
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Basing on these vignettes you will learn to understand the role of
entrepreneurial attributes. Your results and reflections will be discussed.
3. For the third exercise you will be asked to imagine that you are working
in a Business School and your boss ordered you to develop a course on
development of entrepreneurial competencies. You have to provide
information on how you are going to proceed, which contents and
methods you will choose and how they should be implemented.
Afterwards you will present your program and the course participants
will provide you feedback concerning its strengths and weakness.
REFERENCES
BARON, R. A. (2007). Entrepreneurship: A Process Perspective. In J.R. BAUM, M. FRESE, R.A.
BARON (Ed.), The Psychology of Entrepreneurship. New Jersey: Lawrence Erlbaum Associates.
COSTA, P.T., Jr., & MCCRAE, R.R. (1992). Revised NEO Personality Inventory (NEO-PI-R) and
NEO Five Factor Inventory (NEO-FFI) professional manual. Odessa, FL: PAR.
CROMIE, S. (2000). Assessing entrepreneurial inclinations: Some approaches and empirical evidence.
European Journal of Work and Organizational Psychology, 9 (1), 7-30.
FRESE, M. CHELL, E., KLANDT, H. (2000). Introduction. European Journal of Work and
Organisational Psychology, special issue on psychological approaches to entrepreneurship, 9,
3-6
HAYTON, J. C., GEORGE, G., ZAHRA, S. A. (2002). National Culture and Entrepreneurship: A
Review of Behavioral Research. Entrepreneurship Theory and Practice,.No 14 (4), 33-52.
HISRICH, R. D, PETERS., M. P (2002). The nature and Importance of Entrepreneurs. In R.D.
HISRICH, M.P. PETERS (Ed.), Entrepreneurship. International Editon: McGraw-Hill
Companies.
HOFSTEDE, G.J., PEDERSEN, P.B., HOFSTEDE, G. (2002). Exploring culture. Exercises, Stories and
Synthetic Cultures. Intercultural Press Inc., USA
HOFSTEDE, G. (2001). Culture’s Consequences: Software of the mind. 2d ed. Thousand Oaks,
CA:Sage.
KIGGUNDU, M. N. (2002). Entrepreneurs and Entrepreneurship in Africa: What is Known and What
Needs to be Done. Journal of developmental Entrepreneurship: Vol. 7. No. 3.
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LANG-VON WINS, T. (2004). Der Unternehmer. Berlin, Heidelberg: Springer.
MARKMAN, G. D. (2007). Entrepreneurs’ Competencies. In J.R. BAUM, M. FRESE, R.A.
BARON (Ed.), The Psychology of Entrepreneurship. New Jersey: Lawrence Erlbaum Associates.
MINER, J. B. (1997). The Expanded Horizon for Achieving Entrepreneurial Success. Organizational
Dynamics, 54-66.
MCGRATH, R.K., MACMILLAN,I.C. (1992). More like each other than anyone else? A cross-cultural
study of entrepreneurial perceptions. Journal of Venturing, 7, 419-429
MCGRATH, R.K., MACMILLAN,I.C., YANG,E.A.,& TSAI,W. (1992b). Does culture endure, or is it
malleable? Issues for entrepreneurial economic development. Journal of Business Venturing, 7, 441-
458.
RAUCH, A., FRESE, M. (1998). Erfolgreiche Unternehmensgründer. Göttingen: Hubert & Co.
SCHNEIDER, B.(1987). The people make the place. Personnel Psychology, 40, 437-453.
SCHUMPETER, J.(1997). Theorie der wirtschaftlichen Entwicklung. Berlin: Duncker & Humblot.
TETT, R. P., STEELE, J. R., & BEAUREGARD, R. S. (2003). Broad and narrow measures on both
sides of the personality-job performance relationship. Journal of Organizational Behavior, 24 (3),
335-356.
VARELA, V.R. (2006). The development of Entrepreneurs based upon entrepreneurial competences: The
“Jovenes Con Empresa”Program. Entrepreneurship in United Europe. Challanges and
Opportunitie, Bulgaria 2006.
ZHAO, H., SEIBERT, S. E. (2006). The Big Five Personality Dimensions and Entrepreneurial Status: A
Meta-Analitical Review. Journal of Applied Psychology, Vol. 91, No. 2, 259-271.
95
CHAPTER 8
MANAGING BUSINESS GROWTH
Martin Lukeš
Department of Managerial Psychology and Sociology
Prague University of Economics
“There are three types of people in this world: those who make things happen, those
who watch things happen and those who wonder what happened”.
Mary Kay Ash, Founder of Mary Kay Cosmetics.
1. THE GROWTH OF RIM-TECH
Mr. Jaromir Vaja received his degree from Prague University of Chemistry
and Technology and his PhD. from Czech Academy of Science at the end of
80's. Then he started to work in Research Institute for Rubber and Plastics
where he cooperated with a Dutch company DSM using reaction injection
moulding (RIM) technology. After societal changes in 1989 the Czech state just
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stopped to pay researchers, thus he decided he should start a business. It was a
great opportunity because they were the only one organization on the East-
European market that used RIM technology. The goal was to produce big
plastic parts in medium-size series, mainly for bus and truck producers, e.g.
Karosa, Tatra or Avia. However he had absolutely no money and for the
modern production line 1.2 mil. EUR was needed.
Because he lacked financial resources and also all the necessary technical
know-how, he founded the company with five other former colleagues from the
research institute. Dutch partners helped them to get in touch with customers
and provided expert advice concerning production process. Mr. Vaja was CEO
and the main contact person as he was the only one with English knowledge.
On the other hand, his economic knowledge was very low. Thus they hired Mr.
Zatloukal who became firm economist. From the bankrupted research institute
they bought some devices enabling them to use RIM technology in small
volumes. However no bank provided financing, venture capital funds were not
yet on the Czech market, and thus the only available resources were from
themselves and their families, unfortunately not in amount that would enable
quick growth.
After one year, Mr. Zatloukal proved himself to be very capable, therefore
he became a co-owner. In the early years they paid themselves almost no
salaries. There was no money for that. Their manual workers earned twice as
much as the owners, otherwise they would leave. All money were reinvested
and used to buy and improve machines and technologies. For the next seven
years they struggled to grow financially in order to be able to buy that
envisioned expensive production line. After 5 years, in 1996, they had 20
employees and got the first loan of 100.000 EUR that enabled to grow further.
In the beginning Mr. Vaja controlled the most of activities himself, however
when he saw that some of his co-owners can do something better, he was happy
to give them responsibility for the task.
In 1998 bus and truck producers started to bankrupt. Fortunately, Mr. Vaja
was able to see the signals on the market in time, and despite the 30% decrease
they were able to survive and focus on other market segments. Because they
needed money, they decided to sell 50% of shares to an investment company
EPIC. Also, Mr. Vaja was able to reflect his own strengths (intuition, market
understanding, and visionary) and weaknesses (poor management skills, choleric
personality) and came to a decision that Mr. Zatloukal will be much better CEO
than he himself is. Thus he stepped off and became a Marketing Director
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responsible for company strategy, sales and technology. Mr. Zatloukal became
CEO. The new focus was related to average annual growth of 25%. The
company received an award "subcontractor of the year 2003", serves clients as
Skoda, VW, or John Deer, has more than 200 employees and in December 2005
was successfully sold to a multinational corporation Polimoon for approx. 70
mil. EUR.
2. LEARNING GOALS
1) To understand criteria for the selection of good entrepreneurial team
2) To understand changes that take place in the process of firm growth
3) To identify growth barriers and learn how to overcome them
3. THEORETICAL BACKGROUND
The firm growth is one of the main goals of many entrepreneurs. However,
large differences between entrepreneurs exist. It is possible to outline the four
general motivation-investment models (Morris, Kuratko, Schindehutte,
2001):
1. substitution model - entrepreneurship is an alternative to
unemployment and the main goal is to survive,
2. income model - entrepreneurship is a more attractive alternative to
employment and the goal is to reach and sustain a good standard of
living,
3. growth model - the entrepreneur accepts in the first years minimal
income, reinvests all the profits, and looks for additional financing in
order to become number one in the market and a true multi-millionaire,
4. speculative model - the entrepreneurs wants to start a venture,
demonstrate its success and viability and sell it to the highest bid as soon
as this can be obtained.
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The first two models are connected with either no or small growth, but for
entrepreneurs with growth or speculative model in their heads is professional
growth management necessary.
The purpose or goal of the entrepreneur (e.g. growth) is the final cause for
guiding movement of the organization. The entrepreneur uses his or her vision
as a future state which pulls the organization forward. The business venture sets
goals and by taking actions it tries to reach these goals. Development can be seen
as a cycle of goal formulation, implementation, evaluation, and modification of
goals based on what was learned by the organization.
Business growth is the most frequently illustrated by increase in the number
of employees. Based on empirical research (e.g. Boeker, Karichalil, 2002) this is
the main signal of business growth that requires the change in business
management, According to Timmons (1990), when there are less then 25
employees it is about doing, when there are between 25 and 75 it is about
managing, and when there are more than 75 employees, it is about managing
managers. Generally, the growth exhibits in three main dimensions:
1. financial growth relates to the development of the business as a
commercial entity, it can be measured by sales, profit, assets, profit margin
and other financial criteria
2. strategic growth relates to the changes that take place in the way the
organization interacts with its environment. It is concerned with the way the
business develops its capabilities to exploit a presence in the marketplace. It
can be measured by market share, reputation, number of customers, prestige
of customers, new product lines etc.
3. organizational growth relates to the changes that take place in the
organizational structure, processes, and culture as it grows and develops. It
can be measure e.g. by number of employees, number of locations, number
of hierarchy levels or number of top managers.
All the three dimensions are interrelated. Financial growth enables
acquisition of resources for strategic growth, assets are used for organizational
growth. On the other hand strategic growth provides direction for
organizational growth and leads to improvements in financial performance and
so on.
It is understandable that the longer a firm operates on the market, the slower
is usually its growth (Davidsson et al., 2002). On the other hand research
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suggests that it is possible to build a successful venture in many geographical
locations and different business areas. There are naturally high growth
opportunities in ICT field as Google, YouTube, Skype and other relatively new
companies proved. However, in the list of the quickest growing European firms
the first three places were occupied by British firm operating in facility
management, Dutch firm focusing on maternity care and a firm from Iceland
specialized in pre-prepared food. It illustrates well that it is possible to found a
successful business in many business areas.
However, there are many potential barriers that limit the firm growth.
Basically, three groups of factors can be described (Lukeš, Nový at al., 2005):
1. external barriers, for example high taxation, bad payment morale, and
cheap Asian competition. These factors can be dealt with only partially. The
entrepreneur may decide to found a branch in other country with cheaper
workforce, to move the seat to a country with lower taxes, or to start in
some other area of business.
2. organizational barriers relates either to "hard" barriers (e.g. bad cash flow
management, bad selection of location, underestimated differentiation of
own products and services) or "soft" barriers. They include bad company
climate and low level of mutual trust, employees who are afraid of change,
inefficiently used human resources, mistakes in communication, unsolved
problems in division of responsibilities and authorities or different goals and
interests of stakeholders.
3. personal barriers, for example a clear vision is missing, or it has no growth
related aspects. Also it is possible that the entrepreneur is overwhelmed by
operative agenda and a lot of time devotes to unimportant things. Other
examples may include entrepreneurs who enjoy their own importance and
are not willing to learn new things, entrepreneurs who have their firm as a
hobby and prefer products to customers, entrepreneurs who are afraid of
losing control or entrepreneurs who invested too much energy to their
business and are burned-out and without motivation.
3.1. Framework for managing a growing venture
It includes the three major parts - growth strategy, POCD framework and
the change of role from the entrepreneur to the manager.
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3.2. Growth strategy
Most ventures begin by proving their business model in a narrowly defined
market space. As the venture comes to the growth phase, its business become
more stable. This stability, however, does not reduce the need for critical
choices. The first set of strategic choices deals with how the venture is to grow.
It can focus on new customers, new products, new geographical locations or
combination of these three options.
3.3. Framework PCDO (people, context, deal, opportunities)
A useful tool for understanding how the situation of the growing firm
changed is so called PCDO framework. It emphasizes the need for a dynamic fit
between four interrelated areas of people, context, deal and opportunities
(Sahlman, 1996). The entrepreneur must ensure a fit between them and flexibly
adapt to changes. People are those who actively participate or bring resources for
the venture. People’s skills, attitudes, knowledge, contacts, goals, and values
provide the resource mix that contributes centrally to success. Context is defined
as those elements outside the control of the entrepreneur that will influence
success or failure and include e.g. economic, regulatory, and sociopolitical
environment. Deal is the substance of the bargain that defines who in a venture
gives and gets what, and when those transactions will take place. Opportunities
are derived from the choice of the venture‘s growth strategy, i.e. geographic,
product line, or customer extension growth. Capitalizing on initial success often
requires the rapid achievement of national or global scale in order to achieve a
„temporary monopoly.“ Change in one area of the PCDO framework usually
requires a quick change also in other areas. Changing people often requires a
different deal. Changing context can make the skill set of current employees
insufficient and make another people’s skills more important. Amending a deal
may attract new players and drive away the old, etc.
3.4. Change of role: from the entrepreneur to the manager
When firm grows to some 25 employees, it is usually time when an
entrepreneur should recognize the need for change from purely entrepreneurial
to more organized managerial approach. Successful execution requires a more
disciplined approach to management than is usually seen in the early phase
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of a business. It requires a more hierarchical organizational structure, with
clearly defined tasks and responsibilities, and brings the need for more formal
and tighter control mechanisms. Entrepreneur also needs to delegate
responsibilities and develop human resources in order to create a space both for
himself/herself and them to grow together with the company.
Successful organizations must have both effective entrepreneurship and
effective management as can be seen from the RIM-Tech case. Whereas
entrepreneurship is about exploration, setting a direction, leading change and
transition, and redefining and breaking constraints, management is on the other
hand about exploitation, continuity, efficiency and getting the results, and
requires ability to work within constraints.
3.5. The stages of growth
Greiner (1998) describes firm growth as going through series of
developmental phases (see Picture 1). Each phase starts with a period of
evolution with steady growth and stability and ends with crisis where the
revolution and change are needed. When the change is successful the period
of further stable growth starts and ends up in other type of crisis.
For an example, the first phase is characterized by creativity. The founders
are entrepreneurial and all energy is devoted to making, selling, delivering, and
supporting the new product or service in a creative way. Communication with
the few employees is frequent and informal. Long hours are rewarded by low
salaries but high promises for the future. Control of activities comes from
immediate customer feedback and fast management reaction. However as
company grows, new problems start. New employees are not motivated by the
intense dedication of the original founders, some business activities are neglected
(e.g. human resource management, productivity control) and the founders still
try to act as they did in the past. Therefore strong, new leadership skills are
required. There is a need to add business functional expertise, and also founders
often give responsibilities for day to day business decisions to newly recruited
executive level officers. Firms who are successful in going through the first crisis
usually adopt functional organizational structure, accounting and controlling
systems, incentives, formal communication systems etc. Focusing energy of
employees in one direction leads to growth. However, after some time,
employees have better direct knowledge about the market and production
processes than top-management. Centralized processes lead to demotivation of
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capable employees on lower levels who leave the company. The crisis of
autonomy starts and a new phase begins.
Figure 1.
Source: Greiner, L.E. (1998) Evolution and revolution as organizations grow. Harvard Business Review,
May-June, s. 55-67.
4. RELATED IN-CLASS ACTIVITIES
1. Case discussion: The growth of RIM-Tech.
What were the key decisions of Mr. Vaja that helped the firm to be
successful?
Would you be able to do the same decisions in your company?
2. Discussing potential co-ownership.
Imagine you want to start your own business during your studies or after
graduation. Also imagine, you wish to have your business in the same area
(business consulting) as your neighbour sitting next to you and you both are
looking for a co-owner. Discuss, whether you two would be good partners in
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the business based on the agreement in your business philosophy (values, growth
ambitions, attitude to debts, personal time devoted to business, exit strategy)
3. Movie: Startup.com
Startup.com is a 2001 documentary film about the dot-com start-up
phenomenon, following govWorks.com and its founders Kaleil Isaza Tuzman
and Tom Herman from May 1999 to December 2000 as the Internet bubble is
bursting. The movie evokes the rush of late '90s capitalism, a period just seven
years ago, when a business plan and a confident handshake could secure millions
of dollars in venture capital; when it seemed anyone could get filthy rich on an
idea.
Friends from childhood, ambitious young business school graduate and
Goldman Sachs employee Kaleil and software geek and single dad Tom have an
idea: a website for people to conduct business with municipal governments.
Kaleil raises the money, Tom is the technical chief. A third partner wants a buy
out. Tom's daughter needs attention. And the need for cash and for improving
the website is always present. Venture capital comes in by the tens of millions.
Kaleil is on CNN, magazine covers, and shakes hands with Bill Clinton.
However, the business requires lifestyle compromises and personal sacrifices and
the competition seems to have a better website. The clash of philosophies and
personalities of the co-owners almost tear Tom and Kaleil apart. Will the
business or the friendship crash first?
Students are required to analyze the movie while watching it and then to
discuss what lessons can be learned in the strategic, human resources, financial,
marketing, and operational areas.
REFERENCES
BAUM, J.R., LOCKE, E.A., SMITH, K.G. (2001) A multi-dimensional model of venture growth.
Academy of Management Journal, 44 (2), s. 292-303.
BOEKER, W., KARICHALIL, R. (2002) Entrepreneurial transitions: factors influencing founder departure.
Academy of Management Journal, 45(3), s. 818-826.
CATLIN, K., MATTHEWS, J. (2001) Leading at the speed of growth. Journey from entrepreneur to CEO.
PSYCHOLOGY OF ENTREPRENEURSHIP
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DAVIDSSON, P., KIRCHHOFF, B., HATEMI-J, A., GUSTAVSSON, H. (2002) Empirical analysis of
business growth factors using Swedish data. Journal of Small Business Management, 40(4), s. 332-
349.
GREINER, L.E. (1998) Evolution and revolution as organizations grow. Harvard Business Review,
May-June, s. 55-67.
MORRIS, M.H., KURATKO, D.F., SCHINDEHUTTE, M. (2001): Towards integration: understanding
entrepreneurship through frameworks. Entrepreneurship and Innovation. February, s. 35-49.
SAHLMAN, W.A. (1996). Some thoughts on business plans. In W.A. SAHLMAN, H. STEVENSON,
M.J. ROBERTS, & A.V. BHIDE (Eds), The entrepreneurial venture. Boston: Harvard Business
School Press.
SPREITZER, G.M., MISHRA, A.K. (1999) Giving up control without losing control. Group and
Organization Management, 24(2), s. 155-187.
TIMMONS, J.A. (1990): New Venture Creation. 3rd ed., Homewood, IL: Irwin.
105
CHAPTER 9
INTRAPRENEURSHIP OR CORPORATE ENTREPRENEURSHIP
M. Evelina Ascalon
Human Capital Core Processes
Credit Suisse
1. LEARNING GOALS
1) Understand the difference between entrepreneurship and
intrapreneurship
2) Learn about the various types of intrapreneurial activities
3) Learn the challenges faced in trying to successfully implement
intrapreneurial activities
4) Learn how to overcome those challenges
2. THEORETICAL BACKGROUND
Entrepreneurship attracts those who are interested in starting something that
is their own. However, for many reasons many of those potential entrepreneurs
do not take the step (at least not right away). Rather they choose for a life as an
employee with a fixed income, regular hours, and a pension plan. Life in a
company, however, does not have to mean the loss of one’s dream to build
something of their own. One can choose to be an entrepreneur – with a safety
net – otherwise known as a corporate entrepreneur or intrapreneur.
Companies who want to succeed in highly competitive market places need
to innovate and in turn they need innovators and entrepreneurs. The term
innovate is loosely used in organizations; its meaning ranges from improvements
in daily activities to the development of new products and new markets. A
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taxonomy of intrapreneurial activities outlines the various types of
entrepreneurial activities in a corporation (Kunkel, 2001). These are outlined in
the figure below.
Figure 1.
Kunkel’s (2001) taxonomy of entrepreneurial activities
The taxonomy outlines both entrepreneurial activities and corporate
entrepreneurial activities. We will focus only on learning about the latter types
of activities.
Enterprise level intrapreneurship concerns a change in the direction or focus
of the organization.
Entrepreneurial
activities
Independent/
Entrepreneurship
High Growth:
- Need driven
- Technology driven
Low Growth:
- Income substation
Corporate/
Intrapreneurship
Enterprise level
Corporate level
Functional level
Business level:
- Founding new business unit
- New directions for existing units
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Corporate level intrapreneurship (also known as a corporate turnaround)
refers to a radical restructuring of the business units or a dramatic
transformation of the organization.
Business level intrapreneurship can be further categorized depending on
whether the activity occurs within an existing business unit or concerns the
founding of a new business unit. The founding of a new business unit is also
known as corporate venturing and is the more widely recognized type of
corporate entrepreneurship. The second, the business turnaround, concerns
the transformation of a business unit.
Functional level intrapreneurship refers to the development and
improvement of new products, processes, technologies, etc.
These four types of intrapreneurship will be further investigated during the
course using case studies.
Challenges to Intrapreneuring within the Business Environment
In preparing to undertake an intrapreneurial activity, it is important to be
aware of the challenges one may face. Following are some challenges outlined by
Sathe (2003) and Van de Ven, Polley, Garud, & Venkataraman (1999).
Expect conflict between intrapreneurs and management
Successful, growing businesses may not see the need for new business
creation
Management may choose to deny needed resources
Product liability fears can hinder the development of new products
Fear that new products will harm existing products may discourage
innovation
Suppliers may block new development
Customers may not accept the innovation, which can hurt the prospects for
success
PSYCHOLOGY OF ENTREPRENEURSHIP
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Successful Intrapreneurship
Pinchot & Pellman (1999), Sathe (2003), and Van de Ven, et al., (1999)
outlined some rules, tips, and tricks to increase your chances of succeeding in
the intrapreneurial venture.
Gain support from people with power and influence
Convince your company to develop a program that finances and supports
new initiatives
Competition for financing can be fierce and a sound business plan will help
Choose activities that fit well with the company’s overall strategies, strengths,
and values
Conduct the activity with a good team and outline the following roles 1) an
inventor or idea generator, 2) the intrapreneur, 3) the intrapreneurial team,
4) the sponsor(s), and (5) the innovation climate maker
Have the courage, vision, and the willingness to take charge and make it
happen
Do not talk about your idea too much too early in the process as it may scare
off those who are sceptical of or threatened by change
Get customer input early in the process and continue to gather their
feedback during product or service development
Be persistent, but also practical
Repeatedly communicate the vision of the new venture
To highlight your learning, we will go through several case studies from, for
example, the finance, engineering, and energy industry. We will also review
additional studies in corporate entrepreneurship, such as a study that assessed the
differences between entrepreneurial and intrapreneurial competencies
(Zwemstra, Ascalon, & Gorgievski, 2006).
INTRAPRENEURSHIP OR CORPORATE ENTREPRENEURSHIP
109
REFERENCES
KUNKEL, S.W. (2001). Toward a typology of entrepreneurial activities. Unpublished study.
PINCHOT, G., & PELLMAN, R. (1999). Intrapreneuring in Action. Berrett-Koehler Publishers.
SATHE, V. (2003). Corporate Entrepreneurship. Cambridge University Press.
VAN DE VEN, A. H., POLLEY, D. E., GARUD, R., & VENKATARAMAN, S. (1999). The
Innovation Journey. Oxford University Press.
ZWEMSTRA, J., ASCALON, M. E., & GORGIEVSKI, M. (2006). Differentiating between Entrepreneurs
and Intrapreneurs. Unpublished Master’s thesis.
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111
CHAPTER 10
ENTREPRENEURIAL STRESS
Marjan Gorgievski
Department of Industrial and Organisational Psychology
Erasmus University Rotterdam
SWEDISH, IRISH AND DUTCH
ENTREPRENEURS: NO
STRESS
30-05-07. Entrepreneurs in
Sweden, Ireland and The
Netherlands are suffering the least
stress. Less than four out of ten
entrepreneurs reported more
stress in 2006 than in 2005.
This contrast sharply with China,
where you can find the most rushed
business people in the world. More
than 8 out of 10 entrepreneurs in this
huge growth-economy indicated that
their stress levels increased since the
year before (International Business
Report (IBR); Arenthals Grant
Thornton).
The IBR also shows that
entrepreneurs on average work 53
hours per week. Entrepreneurs in
Europe work the fewest number of
hours, namely 50. In East-Asia and the
NAFTA-countries this is respectively
53 and 54 hours. Entrepreneurs in the
new economies work even longer.
India and Argentina lead with 57
hours per week, Australia, Armenia
and Botswana follow closely with 56
hours per week. Entrepreneurs
working the least number of hours can
be found in the EU. Italian
entrepreneurs take it easy with 47
hours per week. Entrepreneurs from
the Netherlands, Sweden, Spain, and
Ireland spend 48 hours on business
related tasks.
http://www.agt.nl/actueel/persberichten/nederlan
dse_ondernemers_behoren_tot_minst_gestresste_on
dernemers_ter_wereld/?cid=38&pid=48
PSYCHOLOGY OF ENTREPRENEURSHIP
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WHY WORKING HARD IS
BAD FOR YOUR BUSINESS
14-02-07. Many self-employed are
prepared to work many hours and
go to any length for their business
or practice. Coach Maud de Vries
warns: “The temptation to say
yes to everything that comes your
way is strong, but before you
know it, you are simply surviving
instead of thriving, and the
quality of your work starts to
erode.”
No matter how hard you are
willing to work, there are limits. Time
limits seem easy to stretch. You sleep a
little less, work in your private hours.
But at some point you will notice that
you start making mistakes and you are
not as creative as you used to be.
Instead of trying to work 25% more
hours in your work week, it is far
more lucrative to work on a long-
term strategy that helps you charge
25% more for your output. You can
achieve that by spending your non
productive hours better.
1. LEARNING GOALS
In this course you will learn about entrepreneurial stress.
1) From a Conservation of Resources perspective (Hobfoll, 1989, 2001)
you will learn about stress versus activation.
2) You will learn about typical entrepreneurial demands and resources
3) You will receive a two-hour introductory training in techniques that can
help you create balance in your life.
2. THEORETICAL BACKGROUND
Building on a motivational stress theory, the Conservation of Resources
(COR-) Theory (Hobfoll, 1989, 2001), we will explain two fundamental
processes related to entrepreneurs’ job content and their personal and job-
characteristics. First is a stressful downward spiral of resource loss, and second is
an upward, motivational spiral of resource gain.
ENTREPRENEURIAL STRESS
113
2.1. Conservation of Resources Theory
Conservation of Resources (COR-) Theory (Hobfoll, 1989, 2001) is a
motivational stress theory, according to which people strive to protect, maintain
and increase their resources. Resources can be any objects, conditions, social and
personal resources, and energies (e.g. time, money), that have intrinsic or
instrumental value. When people experience a threat
to their resources, or when they loose resources,
people are expected to experience stress. When they
perceive a (potential) gain, they are expected to feel
well and get motivated. People are expected to try to
counteract (potential) losses and strive for perceived
opportunities of resource gain, by investing other
resources they posses. However, there is a risk that the
investment of resources causes these resources to get
lost as well. When the investment of resources does
not lead to the expected gains, this will also be
stressful.
In the work situation it has been shown that a balance between job-demands
and job-resources predicts whether job incumbents will be caught in either a
positive gain spiral of resources, leading to motivation for the job, work
engagement and high performance, or a negative, resource depleting loss spiral
resulting in poor well-being and performance (Demerouti, Nachreiner, Bakker,
& Schaufeli, 2001). Job demands refer to physical, social, or organizational
characteristics of the job that require sustained physical and/or mental effort and
that are thus associated with certain physiological and psychological costs. Job
resources refer to physical, social, or organizational aspects of the job that are
functional in achieving work goals, reducing job demands, or stimulating
personal growth, learning, and development.
Empirical evidence exists that the core resources that are depleted as a
consequence of high work demands are intrinsic energetic resources, such as
vigor, emotional stability and cognitive abilities (e.g. Demerouti et al., 2001;
Shirom & Hobfoll, 2001). In other words, people get tired, irritable and start
making mistakes if they work for a longer period of time, especially if they are
performing difficult tasks that exceed their cognitive and emotional capacities.
Furthermore, loss of other resources may occur as secondary losses, resulting
from peoples’ attempts to deal with their demands. Most common are
PSYCHOLOGY OF ENTREPRENEURSHIP
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diminished sense of personal competency and erosion of social support networks
(Buchwald & Hobfoll, 2004; Hobfoll & Shirom, 2001). In the long run this will
even lead to health impairment, for example burnout and coronary heart disease.
On the other hand, job-resources can either foster intrinsic motivation by
growth, learning and development, or extrinsic motivation by achieving work
goals. Resources are expected to motivate especially if demands are high, and
even if people are tired and exhausted. Individuals do not completely depend on
the resources their jobs provide. They also have their own personal resources.
Resource rich individuals are less likely to get caught into a loss spiral, and more
likely to enter gain spirals of resources (Hobfoll, 1989, 2001).
2.2. Entrepreneurship and Entrepreneurial activities
It is our contention that each job has its own specific demands and provides
its own specific resources. One can wonder whether it is legitimate to focus on
entrepreneurs as an occupational group, because a large diversity exists between
one type of entrepreneur and another (e.g., Carland, Hoy, Boulton, & Carland,
1984; Gartner, Mitchell, & Vesper, 1989). We focus on self-employed
individuals who are engaged in activities that are distinctively entrepreneurial in
nature, rather than people who run an existing small business or a professional
practice. Various studies have shown that entrepreneurial activities can be
identified, and distinguished from, for example, managerial activities (Kunkel,
1991; McDougall & Oviatt, 1996; McDougall, Robinson, & DeNisi, 1992;
Sandberg & Hofer, 1987).
Most authors agree that entrepreneurship is a process. Crucial element in this
process is that the entrepreneur and his or her venture are closely intertwined.
Another important element is the creation of new value (not necessarily a
venture). Entrepreneurial activities have broadly been characterized by on the
one hand creating and gaining resources, and on the other hand shaping through
rearranging resources in a new way (Morris, 2001). In this context, resources are
defined as assets, capabilities, routines and knowledge that are tied to or
controlled by the organization the entrepreneur is operating. Another general
feature is that entrepreneurs take on assignments with certain levels of risk.
More specifically the entrepreneurial activities include, but are not restricted
to (Shane, Locke, & Collins, 2003): (1) entrepreneurial opportunity recognition;
(2) formulating ideas of how to exploit these opportunities; (3) product or
service development; (4) resource acquisition, such as financial, human, and
ENTREPRENEURIAL STRESS
115
personal resources (knowledge, skills, attitudes); (5) organizational design,
starting-up, (re)organizing social and economic mechanisms (new ventures, new
departments within existing organizations, etc.); (6) formulating and
communicating long-term vision, to have a visualization of what you aim to
accomplish in the future; (7) evaluating ideas and performance. Entrepreneurs
may also be performing tasks that are similar to other occupational groups, such
as managerial tasks, inter-personal and relational tasks (sales), leadership tasks, or
administrative tasks (e.g., Born & Altink, 2003; Nandram & Samson, 2000), but
they typically perform these tasks in a different context than people working on
pay role.
2.3. The Entrepreneurial Process, an Activating Process
The focus of the entrepreneurial process is by definition on resource gain.
This may be the reason that overall, entrepreneurship is perceived as an active,
motivating job, rather than a stressful one. According to Brockhaus (1980), the
propensity of the entrepreneur too would be to focus on gains, rather than
losses, which would explain why entrepreneurs chose for other options than
non-entrepreneurs do. They see gains in situations where other people only
perceive losses.
Thinking of the resources entrepreneurs aim to gain, the first resources that
come to mind are of course business resources. Business resources can be
tangible or intangible representing organizational capabilities (Morris, 2003). In
addition, there are also personal gains. One needs to know what entrepreneurs
value in order to understand what they want to gain. Research on the reasons
why people want to start their own business (Kuratko, Hornsby, & Naffziger,
1997) and research on rewarding aspects of entrepreneurship (Boyd & Gumpert,
1983; Lewin-Epstein & Yuchtman-Yaar, 1991) showed that people seek
freedom, autonomy, a higher income than they could possibly get working on
pay role, status, and social recognition. A positive entrepreneurial gain spiral
would ideally lead to business growth (gain of business resources) and personal
growth (gain of private resources).
Resource rich individuals are more likely to experience such resource gain
cycles. Research on entrepreneurial success has identified a list of personality
characteristics and competencies predictive of entrepreneurial success. These
include independence, risk taking propensity, tolerance of ambiguity,
entrepreneurial self-efficacy, creativity, market orientation and leadership skills.
PSYCHOLOGY OF ENTREPRENEURSHIP
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The job itself provides resources as well, in particular decision latitude (schedule
flexibility, job variety, skill utilization and autonomy). On the other hand, the
entrepreneurial job also lacks some resources, such as supervisors and peers in the
organisation who can provide feedback and social support.
2.4. The Entrepreneurial Stress Process
Under what conditions will entrepreneurship be experienced as stressful?
Entrepreneurial tasks require sustained effort and the investment of resources,
and as such would fit our definition of demands. Returns on these investments
may often be unsure. We need to keep in mind that demands become stressors if
they lead to real or expected resource loss cycles. The question is, what demands
may set a loss cycle into motion? Unfortunately, previous entrepreneurial stress
studies did not provide much insight into the entrepreneurial stress as a process
of resource loss. Based on qualitative and cross-sectional designs, they did
provide the following “laundry-list” of entrepreneurial stressors.
The most often reported entrepreneurial stressor is work overload, especially
quantitative work overload (Chay, 1993; Harris, Saltstone, & Fraboni, 1999;
Tetrick, Slack, Da Silva, & Sinclair, 2000). Working with deadlines causes time
pressure and a feeling of having too much to do in too little time.
Another form of work overload is qualitative overload, which relates to a
lack of skills and abilities to perform a given task. Qualitative overload may
especially occur among starting entrepreneurs who meet new and unexpected
challenges, and who need to learn how to deal with those new challenging tasks
on the job. One of such tasks is dealing with people. This includes finding and
selecting new employees as the business grows (Boyd & Gumpert, 1983) Gibb &
Davies, 1991), moving employees into a new direction or mission (Boyd &
Gumpert, 1983), and properly defining relationships with employees, delegating
the right tasks and allowing them to develop (Gumpert & Boyd, 1984). A
second, task related challenge relates to boundary spanning activities. These are
activities related to communication between the organisation and the external
environment the organisation is part of. These include communication problems
with customers and suppliers, for example related to closing deals, and dealing
with debtors (Richter & Kemter, 2000). A third task related challenge is
changing the products or services that are being delivered. Self employed
individuals have been found to feel more comfortable delivering well-known
products and services than occasional or new ones (Mack & McGee, 2001).
ENTREPRENEURIAL STRESS
117
A third type of stressor is frustration and disappointment experienced in
relationship with business partners. This includes acquiring new partners as well
as terminating from a partner (Boyd & Gumpert, 1983; Gumpert & Boyd, 1984;
McMullan, 1996). Frustration may not only arise from differences in personality
but also from differences in expectations, abilities and contributions to the firm.
In family businesses, stressors between business partners may take on a special
form, such as intergenerational conflicts and rivalries between parents and
children (Johnson, 1995; Rosenblatt, DeMik, Anderson, & Johnson, 1990).
Finally, one of the main challenges entrepreneurs experience is finding the
right balance between work and private life. Entrepreneurs may face
overwhelming dominance of professional life and personal sacrifices, because of
the long hours they make. Entrepreneurs reported they barely have time for
family, recreation or further education (Boyd & Gumpert, 1983; Buttner, 1992).
The entrepreneurial stressors described above mainly appear to center around
loss of energetic resources, which can be both external (finances, loss of which
may pose a threat to continuity of the business) and internal (physical vigor,
mental well-being). In addition, entrepreneurial stressors may lead to erosion of
social networks, and threats to valued personal resources, such as autonomy.
These losses spill from the professional domain into entrepreneurs private life.
Loss of these resources may render people more vulnerable to experiencing
further loss.
2.5. To conclude
In this contribution we focused on typical demands and resources of
entrepreneurs that play an important role in setting into motion either a
motivating spiral of resource gain or a stressful and health impairing spiral of
resource loss.
Based on an overview of the entrepreneurial stress literature we have
identified four important groups of stressful entrepreneurial demands. We need
to bear in mind that these demands are experienced as stressful, because they set
into motion a loss cycle of resources. Reason why people get entangled in loss
spirals is because they lack resources to deal with certain demands. In order to
prevent stressful loss spirals of resources, competencies such as time management
skills, marketing skills, managerial competencies, and social competencies
(Markman & Baron, 2003)(Gibb and Davies, 1991).
PSYCHOLOGY OF ENTREPRENEURSHIP
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3. RELATED IN-CLASS ACTIVITIES
How to create balance exercise
In this exercise you will learn how to increase some important personal
resources, namely skills for creating balance in your life. For this exercise you
make your own life balance assessment. Next we will
REFERENCES
BOYD, D. P., & GUMPERT, D. E. (1983). Coping with entrepreneurial stress. Harvard Business
Review, 44-64.
BROCKHAUS, R.H. (1980) Risk taking propensities of entrepreneurs. Academy of Management
Journal, 23, 509-520.
BUCHWALD, P. & HOBFOLL, S. E. (2004). Burnout aus ressourcentheoretischer
Perspektive Burnout in the Conservation of Resources Theory. Psychologie-in-
Erziehung-und-Unterricht. Vol 51(4) 247-257.
BUTTNER, E. H. (1992). Entrepreneurial stress: is it hazardous to your health? Journal of Managerial
Issues, 4(2), 223-240.
CARLAND, J. W., HOY, F., BOULTON, W. R., & CARLAND, J. A. C. (1984). Differentiating
entrepreneurs from small business owners: A conceptualisation. Academy of Management Review,
9(2), 354-359.
CHAY, Y. W. (1993). Social support, individual differences and well-being: A study of small business
entrepreneurs and employees. Journal of Occupational and Organizational Psychology, 66, 285-
302.
DEMEROUTI, E., NACHREINER, F., BAKKER, A. B., & SCHAUFELI, W. B. (2001). The job
demands-resources model of burnout. Journal of Applied Psychology, 86, 499-512.
GARTNER, W. B., MITCHELL, T. R., & VESPER, K. H. (1989). A taxonomy of new business
ventures. Journal of Business Venturing, 4, 169-186.
GUMPERT, D. E., & BOYD, D. P. (1984). The loneliness of the small-business owner. Harvard
Business Review, 18-24.
ENTREPRENEURIAL STRESS
119
HARRIS, J. A., SALTSTONE, R., & FRABONI, M. (1999). An evaluation of the job stress questionnaire
with a sample of entrepreneurs. Journal of Business and Psychology, 13(3), 447-455.
HOBFOLL, S. E. (1989). Conservation of resources, a new attempt at conceptualising stress. American
Psychologist, 44 (3), 513-524.
HOBFOLL, S. E, SHIROM, A (2001) Conservation of resources theory: Applications
to stress and management in the workplace. In: GOLEMBIEWSKI, R.T.(Ed.)
Handbook of organizational behavior (2nd. ed.). (pp. 57-80). New York, NY,
US: Marcel Dekker.
HOBFOLL, S. E. (2001). The influence of culture, community and the nested-self in the stress process:
advancing Conservation of Resources theory. Journal of Applied Psychology, 50, 337-396.
JOHNSON, D. (1995). Stress and stress management among owner-managers of small and medium-sized
enterprises. Employee Counseling Today, 7(5), 14-19.
KUNKEL, S. W. (in press). Toward a typology of entrepreneurial activities. Academy of
Entrepreneurship Journal.
KURATKO, D. F., HORNSBY, J. S., & NAFFZIGER, D. W. (1997). An Examination of owners's
Goals in Sustaining Entrepreneurship. Journal of Small Business Management, 35(1), 24.
LEWIN-EPSTEIN, N., & YUCHTMAN-YAAR, E. (1991). Health risks of self-employment. Work and
Occupations, 18 (3), 291-312.
MACK, D.A. & MCGEE, J.E. (2001). Occupational stress and the small business owner"the role of Task
complexity and Social support. Paper submitted to the USASBE/SBIDA conference.
MARKMAN, G. D., & BARON, R. A. (2003). Person–entrepreneurship fit: why some people are more
successful as entrepreneurs than others. Human Resource Management Review, 13(2), 281.
MCDOUGALL, P. P., & OVIATT, B. M. (1996). New venture internationalization, strategic change, and
performance: a follow-up study. Journal of Business Venturing, 11(1), 23-40.
MCDOUGALL, P. P., ROBINSON, R. B. J., & DENISI, A. S. (1992). Modeling new venture
performance: an analysis of new venture strategy, industry structure, and venture origin. Journal of
Business Venturing, 7(4), 267-289.
MCMULLAN, W. E. (1996). An entrepreneurial tragi-comedy: Exploring the dark side of venturing.
Technovation, 16(9), 515-517.
PSYCHOLOGY OF ENTREPRENEURSHIP
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MORRIS. M.H. 2001. The critical role of resources. Journal of developmental entrepreneurship, 6,
pV, 4p.
121
CHAPTER 11
CREATE ENTREPRENEURIAL MINDSETS
Adalgisa Battistelli
Department of Psychology and Cultural Anthropology
University of Verona
1. LEARNING GOALS
In this course you will learn:
The importance to develop and entrepreneurial mindset in Europe and
some possible strategies to develop it through education and guidance starting
from some essential psychosocial aspects of entrepreneurship.
2. THEORETICAL BACKGROUND
“Europe needs to foster entrepreneurial drive more effectively. It needs more
new and thriving firms willing to reap the benefits of market opening and to
embark on creative or innovative ventures for commercial exploitation on a
larger scale” (Entrepreneurship in Europe, Green Paper 2003).
The importance of developing an entrepreneurial mind in Europe is
highlighted in several “communications” and European documents. The most
and last well knew is the Green Paper on Entrepreneurship in Europe of the
2003. This important document is the result of a large consultation process in
the European countries and has the objective to indicate the strategies and the
actions that European countries should be realize to improve entrepreneurship in
Europe.
In policy options for entrepreneurship is indicate that “to promoting
entrepreneurship must work on three levels – individual, firm and society.
PSYCHOLOGY OF ENTREPRENEURSHIP
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To motivate individuals to become entrepreneurs, they should be aware of
the concept of ‘entrepreneurship’, and this should be made a sufficiently
attractive option. They should be equipped with the right skills to turn
ambitions into successful ventures.
For entrepreneurial ventures to develop into healthy firms, supportive
framework conditions are essential. These should allow firms to develop and
grow, and not unduly hinder contraction and exit.
Entrepreneurial activity depends on a positive appreciation of entrepreneurs
in society. Entrepreneurial success should be valued and the stigma of failure
reduced.
Entrepreneurship policy aims to enhance entrepreneurial vitality by
motivating and equipping entrepreneurs with the necessary skills. A supportive
environment for businesses is key for businesses to start, take over, thrive and
survive” (Entrepreneurship in Europe, Green Paper 2003).
In the 2006 the Commission of European Communities in order to
implementing the Community Lisbon programme has produced a
communication [COM(2006) 33 final] for entrepreneurship: “Fostering
entrepreneurial mindsets through education and learning”. “There is a need to
create a more favourable societal climate for entrepreneurship, based on an
integrated policy with a view to not only changing the mindset but also
improving the skills of Europeans removing obstacles to the start-up, transfer and
growth of businesses”.
Education and learning are considered the key to improve entrepreneurial
mindsets and entrepreneurship is viewed as key competence for growth,
employment and personal fulfilment. “Entrepreneurship refers to an individual’s
ability to turn ideas into action. It includes creativity, innovation and risk taking,
as well as the ability to plan and manage projects in order to achieve objectives.
This supports everyone in day-to-day life at home and in society, makes
employees more aware of the context of their work and better able to seize
opportunities, and provides a foundation for entrepreneurs establishing a social
or commercial activity”. At the end, the communication indicates a series of
recommendations for concrete action that should be taken at national and local
level. The proposals aim to help formulate more systematic approaches to
entrepreneurship education and to enhance the role of education in creating a
more entrepreneurial culture in European societies. These recommendations are
synthesized here:
CREATE ENTREPRENEURIAL MINDSETS
123
A coherent framework (a. national and regional authorities should establish
cooperation between different departments, leading to developing a strategy
with clear objectives and covering all stages of education in the context of the
Lisbon national programmes; b. curricula for schools at all levels should explicitly
include entrepreneurship as an objective of education);
Support for schools and teachers (a. Schools should be given practical support
and incentives to encourage take-up of entrepreneurship activities and
programmes, through a range of different instruments; b. Special attention
should be given to training teachers, through initial and in-service training as
well as practical experience)
Fostering entrepreneurship in higher education (a. Higher education
institutions should integrate entrepreneurship across different subjects and
courses; b. Public authorities’ support is especially needed to provide high-level
training for teachers and to develop networks that can share good practice; c.
Teacher mobility between university and the business world should be
encouraged together with the involvement of business people in teaching).
Finally, in the October of 2006, the conference on Entrepreneurship
Education in Europe: “Fostering entrepreneurial mindsets through education
and learning” held in Oslo, has produced a final agenda that indicates clearly the
strategies that European countries need to realize in education and learning. This
document contains the important guidelines to improve entrepreneurial mindsets
in Europe.
REFERENCES
Commission of the European Communities (2003). Entrepreneurship in Europe, Green Paper .
Commission of the European Communities (2006). Report on the implementation of
Entrepreneurship Action Plan.
Commission of the European Communities (2006). Fostering entrepreneurial mindsets through
education and learning. COM (2006) 33 final.
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125
CHARTER 12
SOCIAL ENTREPRENEUR (SHIP)
Adalgisa Battistelli
Department of Psychology and Cultural Anthropology
University of Verona
1. LEARNING GOALS
In this course you will learn:
1) Tthe essential characteristics of social entrepreneurship
2) The differences between business and social entrepreneurs
3) The role of social entrepreneurship in economic and social development
in Europe.
2. THEORETICAL BACKGROUND
“Social entrepreneurs play the role of change agents in the social sector, by:
adopting a mission to create and sustain social value (not just private value),
recognizing and relentlessly pursuing new opportunities to serve that mission,
engaging in a process of continuous innovation, adaptation, and learning,
acting boldly without being limited by resources currently in hand, and
exhibiting heightened accountability to the constituencies served for the
outcomes created” (Dess, 1998, 2001).
The concept of ‘social entrepreneurship’ has been rapidly emerging in the
private, public and non-profits sectors over the last few years, and interest in
social entrepreneurship continues to grow. The non-profit sector is facing
intensifying demands for improved effectiveness and sustainability in light of
diminishing funding from traditional sources and increased competition for this
PSYCHOLOGY OF ENTREPRENEURSHIP
126
scarce resources. At the same time, the increasing concentration of wealth in the
private sector is promoting calls for increased corporate social responsibility and
are proactive responses to complex social problems, while governments at all
levels are grappling with multiple demands on public funds.
In light of this, social entrepreneurship is emerging as an innovative approach
for dealing with complex social needs. With its emphasis on problem-solving
and social innovation, socially entrepreneurial activities blur the traditional
boundaries between the public, private and non-profit sector, and emphasize
hybrid models of for-profit and non-profit activities. Promoting collaboration
between sectors is implicit within social entrepreneurship, as is developing
radical new approaches to solving old problems. Social entrepreneurship has a
strong intuitive appeal, and several recently documented examples highlight its
potential in a variety of contexts. However, this is still a very new area, and
research on social entrepreneurship lags far behind the practice.
In this course we will focus to explore two essential aspects of social
entrepreneurship: a) background/context (contextual factors influencing the
emergence and development of social entrepreneurship); b) defining social
entrepreneurship and examine the characteristics and motivations of social
entrepreneurs.
Finally, a particular reference will be made on training and capacity building
for social entrepreneurship.
REFERENCES
AUSTIN, J., STEVENSON, H., WEI-SKILLERN, J. (2006). Social and Commercial Entrepreneurship:
Same, Different, or Both? Entrepreneurship Theory and Practice, 30(1), 1-22.
DEES, J.G. (1998). The meaning of “social entrepreneurship. Comments and suggestions contributed
from the Social Entrepreneurship Founders Working Group. Durham, NC: Center for the
Advancement of Social Entrepreneurship, Fuqua School of Business, Duke University.
Available at http://faculty.fuqua.duke.edu/centers/case/files/dees-SE.pdf
THOMPSON, J. (2002). The world of the social entrepreneur. International Journal of Public Sector
Management, 15(5), 412–431.
127
CHAPTER 13
CULTURE AND ENTREPRENEURSHIP OR WHICH COUNTRY IS
MOST ENTREPRENEURIAL?
Ute Stephan
Work and Organizational Psychology Work Group
Philipps-Universitaet Marburg,
1. INTRODUCCIÓN
Mark is German, he has just graduated in business and is meeting his friend
Walter, who is about to finish his degree in information technology. The two
have been discussing to start a small internet marketing company for some time
now. They have already had a couple of small orders from customers. Mark and
Walter felt that they have done a good job and also received very positive
feedback from their customers.
When they are meeting Mark starts ‘I am not sure what we should do next
really. We went to all these business preparation courses, we wrote a good
business plan – our consultants said so and even the banks agreed that our
concept was great! I don’t understand why they would not give us a loan!’
Walter: ‘I know, I’m absolutely frustrated as well. And, it’s not just the banks. I
tried to fill out the forms for the government subsidies we would be eligible for
… hopeless. Also, I think, my parents and also a couple of my friends try to tell
me that it is not a good idea for us to start a business.’ Mark: ‘How can they?
Have they even an idea of how good our concept is?’ Walter: ‘It’s not that, they
just generally feel that it would be a bad idea. What is if we fail? Will we get a
job afterwards? You know, big companies don’t like to employ people who
failed.’ Mark: ‘Well, to be honest with you, I’ve also had second thoughts. We
wouldn’t even get unemployment benefits, if we failed…. or pension money, or
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stuff like that.’ Walter ’It seems the only one, who strongly encourages me to just
do it is my brother, but I think he’s simply picked up that American ‘can-do’
attitude when he stayed there.’
2. LEARNING GOALS
In this course you will learn about the association of culture and
entrepreneurship.
1) Understand what culture is and how it influences entrepreneurship
2) Understand which cultural values and practices relate to entrepreneurship
3) Learn about other factors that influence a nation’s entrepreneurship
besides culture
3. THEORETICAL BACKGROUND
I. Why culture and entrepreneurship?
“…the relative stability of differences in entrepreneurial activity across
countries suggests that factors other than economic ones are at play.” (Freytag &
Thurik, 2007, p. 118)
The idea that culture could be associated with entrepreneurship and thus be a
driver of economic growth has quite a long tradition. McClelland (1961/1976)
built on Weber’s idea that the protestant work ethic was the main cultural driver
behind the occurrence of capitalism and industrialization. McClelland
introduced Need of Achievement (nAch) – “the desire to do something better,
faster, more efficiently, with less effort“ (McClelland, 1976, p. A). He found
nAch not only to be a characteristic of successful entrepreneurs and was able to
train them accordingly (McClelland & Winter, 1969), but he also found nAch to
be predictive of national economic growth rates (McClelland, 1976).
McClelland used an innovative measure of ‘cultural nAch’, he analyzed the
motivational content of popular literature – something we would call today a
measure of cultural practices.
Since McClelland, only a few authors looked into the culture and
entrepreneurship relationship. The editors of a special issue on culture and
entrepreneurship that was published earlier this year concluding that there is still
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129
a ‘paucity of contributions dealing with cultural influences’ (Freytag & Thurik,
2007, p. 122).
II. What is culture?
There are hundreds, if not thousands of definitions of culture to be found in
the literature, however as Smith (2002) summarizes ‘… none of them suggests an
individual has a culture of his or her own. Culture is something that is shared
among people.’ (p.1).
Figure 1:
Iceberg Model of Cultural Practices and Values (upward arrows indicate that values are enacted in
behaviours)
Mainly two manifestations of culture can be differentiated. The most
common perspective sees shared values as the basis of a culture - similar to traits
being core to a person’s personality. A second, connected perspective focuses on
practices, i.e. societal behaviours, practices and policies, which result from enacted
values (House et al., 2002). This view of culture corresponds to understanding a
person through his/her behaviour and outcomes of his/her behaviour. The first,
Cultural Practices
(behaviors, prescriptons …)
Can be observed, perceived
& reported
Cultural Values
(basic assumptions, transsituationally
& transtemporally desired goals)
Can be experienced & reported
Cultural Practices
(behaviors, prescriptons …)
Can be observed, perceived
& reported
Cultural Values
(basic assumptions, transsituationally
& transtemporally desired goals)
Can be experienced & reported
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values-view of culture asks respondents to indicate how much they value and
desire a certain thing (cf. Hofstede, 2001; Schwartz, 1992). These value
statements are then aggregated, i.e. mean country scores are calculated and
further analyzed (i.e. analyses are conducted on the country level). The second,
practices view of culture asks respondents to describe their society as they
presently perceive it to be regarding ‘common behaviours, institutional practices,
proscriptions and prescriptions’ (House et al., 2002, p. 5). Similarly, mean
country scores are calculated and further culture-level analyses conducted.
In interpreting cultural data one has to keep in mind that ‘Cultures are not
king-size individuals: They are wholes, and their internal logic cannot be
understood in the terms used for personality dynamics of individuals.’ (Hofstede,
2001, p. 17).
III. How does culture influence entrepreneurship?
There are mainly two views of how culture influences entrepreneurship (cf.
Davidsson & Wicklund, 1997; Hayton et al., 2002; Freytag & Thurik, 2007).
The ‘aggregate trait’ explanation of entrepreneurship is that if a society contains
more people with ‘entrepreneurial values’ and ‘entrepreneurial traits’ more
people will become entrepreneurs. The second view refers to the degree of
‘societal legitimation’ or ‘moral approval’ of entrepreneurship within a culture
(Etzioni, 1987). A higher overall level of ‘legitimation’ of entrepreneurship
within a society is evident in that society’s ‘behavior’. That is, societies
legitimating entrepreneurship will pay more attention to entrepreneurship
within the educational system, will regard entrepreneurship as something
desirable, and also e.g. will allow more tax incentives to encourage business
start-ups. Thus, the environment including societal culture is thought to be
more supportive of entrepreneurship. While the ‘aggregate trait’ view
corresponds to the perspective of culture as aggregated values, the societal
legitimation view corresponds to the perspective of culture as societal practices
(Stephan & Uhlaner, 2007).
IV. Which cultural dimensions influence entrepreneurship?
The review of culture and entrepreneurship by Hayton, George and Zahra
(2002) indicates that cultures that value individualism (vs. collectivism), low
power distance and low uncertainty avoidance are conducive to
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entrepreneurship and innovation (controlling for national wealth). Individualism
vs. collectivism largely refers to the independence vs. inter~ of the individual
with his immediate and larger group (e.g., family, organization). Power distance
captures in how far a society values providing equal chances to its members or
whether hierarchy is valued. Low uncertainty avoidant societies tolerate
ambiguity and do not prescribe - via rules and regulations - ‘one best way to do
things’. The opposite is true for societies that value uncertainty avoidance
highly.
TABLE 1
Total Entrepreneurial Activity and Country Score
for Cultural Values and Practices for Selected Countries
Hofstede’s Value Indices
GLOBE Practices
Indices
TEA*
Indivi-
dualism
Power
Distance
Uncer-
tainty Av.
Humane
Orientatio
n
Assertive-
ness
United States 11,3 91 40 46 4,2 4,5
New Zealand 15,4 79 22 49 4,4 3,5
China 14,0 20 80 30 4,3 3,8
Ireland 8,4 70 28 35 5,0 3,9
Czech Republic 7,9 58 57 74 - -
Poland 6,6 60 68 93 3,7 4,1
Spain 6,1 51 57 86 3,3 4,4
Germany 4,8 67 35 65 3,3 4,7
Netherlands 4,8 80 38 53 4,0 4,5
Italy 4,3 76 50 75 3,7 4,1
Japan 2,2 46 54 92 4,3 3,7
*Total Entrepreneurial Activity (averaged 2002-2006, calculated from data provided by the Global
Entrepreneurship Monitor study), for all cultural dimensions: high scores indicate ‘more’ of a dimension,
‘ – ‘ no data available, scores taken from Hofstede (2001) and House et al. (2004)
PSYCHOLOGY OF ENTREPRENEURSHIP
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Concerning cultural practices and entrepreneurship Stephan and Uhlaner
(2007) found high humane orientation and low assertiveness practices to be
associated with national rates of new business formation and established
businesses, but not nascent entrepreneurship (controlling for national wealth).
Humane orientation reflects how friendly, fair and concerned people in a society
treat each other and whether it is accepted to mistakes. Assertiveness refers to
how assertive, aggressive, dominant and confrontational people are in social
relationships. Table 1 provides a descriptive overview of entrepreneurial activity
as well as cultural values and practices in selected countries.
V. Which factors other than culture play a role in facilitating
entrepreneurship?
“… there is some intriguing evidence that the level of business ownership
displays a U-shaped relationship when related to economic development ... The
implication of such a U-shape is that, as economies develop, the rate of new
business startups or that of nascent entrepreneurship declines, but picks up again
in highly developed economies. This reversal marks the regime switch between
the managed and the entrepreneurial economy…” (Freytag & Thurik, p. 120-
121).
According to the Global Entrepreneurship Monitor project the following
entrepreneurial framework conditions are immediately relevant for small and
medium-sized businesses as well as for the existence and perception of
entrepreneurial opportunities (and thereby for new firm formation): Capital
availability, government policies, government programs, education and training, research
and development transfer, commercial and legal infrastructure, internal market openness,
access to physical infrastructure, as well as cultural and social norms (cf. Minniti,
Bygrave & Autio, 2006).
VI. So, which country is the world’s most entrepreneurial country?
Guesses? … you will get to know in class.
Summary
Taken together evidence exists that both cultural values and cultural practices
influence a nation’s rates of entrepreneurship. Thus, empirical research so far
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133
suggests that culture has effects both through ‘providing’ more people with
entrepreneurial values and traits (‘aggregate trait’ perspective) and though
providing a more supportive environment (‘societal legitimation’ perspective).
Altogether, few studies have been done up to now relating national cultures to
national entrepreneurship rates (i.e. on the country-level of analysis). More
research is clearly needed that should take the interdependencies among cultural
variables and other framework conditions into account.
4. RELATED IN-CLASS ACTIVITIES
1. ‘The typical Spanish, Dutch, Czech, …. Person?’ (small-group work
and discussion)
Instructions will follow in class.
2. ‘If you were a politician …’ (small-group work and discussion)
The European Commission is trying to implement an entrepreneurial
mindset in Europe (see Green Paper ‘Entrepreneurship in Europe’, 2003 and
‘Action plan: The European agenda for Entrepreneurship’, 2004). Based on your
knowledge about culture and entrepreneurship try to develop a broad political
initiative to revamp entrepreneurship in Europe. How could you create such an
‘entrepreneurial mindset’? In which areas would you try to intervene, and how?
Maybe you know about some policies, institutions, .etc. that facilitate
entrepreneurship and that your home government has implemented?
REFERENCES
DAVIDSSON, P. & WIKLUND, J. (1997). Values, beliefs and regional variations in new firm formation
rates. Journal of Economic Psychology, 18, 179-199.
ETZIONI, A. (1987). Entrepreneurship, adaptation and legitimation: A macro-behavioral perspective.
Journal of Economic Behavior & Organization, 8 (2), 175-189.
FREYTAG, A. & THURIK, R. (2007). Entrepreneurship and its determinants in a cross-country setting.
Journal of Evolutionary Economics, 17(2), 117-131.
HAYTON, J. C., GEORGE, G. & ZAHRA, S. A. (2002). National culture and entrepreneurship: A
review of behavioral research. Entrepreneurship Theory and Practice, 26, 33-52.
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HOFSTEDE, G. (2001). Culture's Consequences. Comparing values, behaviors, institutions and
organizations across nations (2nd edition). Thousand Oaks: Sage.
HOUSE, R. J., HANGES, P. J., JAVIDAN, M., DORFMAN, P. W. & GUPTA, V. (2002).
Understanding cultures and implicit leadership theories across the globe: An introduction to project
GLOBE. Journal of World Business, 37, 3-10.
HOUSE, R. J., HANGES, P. J., JAVIDAN, M., DORFMAN, P. W. & GUPTA, V. (2004). Culture,
Leadership and Organizations: The GLOBE Study of 62 Societies. Thousand Oaks, CA: Sage.
MCCLELLAND, D.C. (1976). The achieving society. New York, NY: Irvington.
MINNITI, M., BYGRAVE, W.D. & AUTIO, E. (2006). Global entrepreneurship monitor. 2005
executive report. Babson College, Babson Park, USA and London Business School, London,
UK.
SCHWARTZ, S. H. (1992). Universals in the content and structure of values: Theoretical
advances and empirical tests in 20 countries. In M. P. ZANNA (Ed.), Advances in experimental
social psychology (Vol. 25, pp. 1-65). San Diego, CA: Academic Press.
STEPHAN, U. & UHLANER, L.M. (2007). Societal Legitimation: Cultural Practices and
Entrepreneurship in 35 Countries. Unpublished Manuscript, University of Marburg.
WENNEKERS, S., VAN STEL, A.J., THURIK, A.R., & REYNOLDS, P. (2005) Nascent
entrepreneurship and the level of economic development. Small Business Economics, 24(3), 293–
309.
135
CHAPTER 14
POSITIVE PSYCHOLOGICAL CAPITAL AND ENTREPRENEURSHIP
Mariola Laguna
Institute of Psychology
The John Paul II Catholic University of Lublin
1. LEARNING GOALS
In this course you will learn the idea of positive psychological capital, its
connections with the entrepreneurship and management, and the ways to
augment it.
1) You will learn what is the role of self-efficacy in entrepreneurial process
2) You will learn how we can define optimism and how optimistic thinking
may influence entrepreneurial process
3) You will learn the idea of hope and its role in goal-attainment process
2. THEORETICAL BACKGROUND
Although economic, social, and political factors, which create the overall
climate for new economic initiatives, play an important role in the development
of entrepreneurship (cf Douglas & Sheperd, 2000), the emergence of a new firm
depends, in the final analysis, on the decision of the person who intends to
undertake the task. At the same time, comparatively few individuals make such a
decision and many new firms collapse (Blanchflower, 2000). Despite the
development of psychological research on the entrepreneurial process we still
know little about the entrepreneur’s role (Phan, 2004; Sarasvathy, 2004).
Research in this field to date has shown that personality traits are weak
predictors of entrepreneurial behavior (Berings, De Fruyt & Bouwen, 2004;
Ciavarella et al., 2004; Wooten, Timmerman & Folger, 1999); it suggests,
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however, that it is self-referent beliefs and convictions regarding the world that
may constitute a determinant of entrepreneurial success (Krueger, Reilly &
Carsrud, 2000; Markman, Baron & Balkin, 2005; Shook, Priem & McGee,
2003). They are treated as important behavior regulators in the socio-cognitive
approach (Bandura, 2001) as well as in positive psychology research referring to
this approach.
Positive psychology, which found expression in the publications of Seligman
and Csikszentmihalayi (2000) and has been developing in recent years, postulates
a shift in researchers’ attention toward studying human potentialities, the
strengths and talents, which manifest themselves also in the workplace. In
management as well as entrepreneurship, alongside the traditional financial,
physical, or technological resources, also human resources such as knowledge,
competence, or social capital, e.g. membership of a network of social contacts,
trust, reputation (Luthans & Youssef, 2004; Vecchio, 2003) have been isolated.
The new proposal put forward by Luthans and his research team (Jensen &
Luthans, 2006; Luthans & Youssef, 2004) takes into consideration also the so-
called positive psychological capital, that is, the strengths of the organization’s
employees, including, first of all, positive beliefs. Hope, optimism, and
confidence, identified with self-efficacy, as well as resiliency – these, among
others, were recognized as important positive resources for the organization that
may increase its competitiveness in the marketplace (Jensen & Luthans, 2006). It
is emphasized that these resources are not as constant as, for instance, personality
traits, that they can be modified, and that they can contribute to the market
advantage of those firms, which can use and develop them. Jensen and Luthans
(2006) point to the connections between these variables and leadership in the
context of management. In the model proposed, they treat positive beliefs as
variables that have an impact on entrepreneurial leadership. The findings of their
research, conducted on a group of 148 entrepreneurs who established their firms
by themselves, have confirmed this model.
Taking positive psychology variables into consideration in research on
entrepreneurship is further supported by the fact that these variables proved to
be of significance to functioning in other areas. Research findings in the fields of
health, sport, and education psychology indicate this (cf the overview of research
in: Bandura & Locke, 2003; Snyder, 2002). They have seldom been taken into
account in research on entrepreneurship to date, although more and more
studies that point to the significance of positive convictions to the success of the
organization (cf Jensen & Luthans, 2006). For this reason, interest in variables
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such as self-efficacy, optimism, and hope appears justified – interest in variables,
that is, which may be related to successful goal-attainment in entrepreneurs.
Self-efficacy, the factor most frequently taken into account in research to
date, is the subjective conviction that one is capable of action in a given
situation, of coping with a task (Bandura, 1997). The need is pointed out for
entrepreneurial self-efficacy (Chen, Greene & Crick, 1998) as well as for general
self-efficacy, particularly important in the face of complex, multidimensional
tasks (Jerusalem & Schwarzer, 1992; Stajkovic & Luthans, 1998). This general
self-efficacy is treated as one of the important resources used for coping with
stress.
Research to date points to a positive relationship between self-efficacy and
the choice of entrepreneurial activity (Chen, Greene & Crick, 1998).
Entrepreneurial self-efficacy differentiates entrepreneurs from managers (Chen,
Greene & Crick, 1998), as well as individuals who have created their own
ventures from those who have not decided to do so (Markman, Balkin & Baron,
2002; Markman, Baron & Balkin, 2005). In both cases, it is higher in
entrepreneurs. High self-efficacy also correlates with high annual income
(Markman, Balkin & Baron, 2002). Research conducted on 217 randomly
chosen medical equipment inventors, 55 of whom started firms based on their
own patents, has shown that general self-efficacy is considerably higher in those
who have started firms than in those who have not (Markman, Baron & Balkin,
2005). Self-efficacy, general as well as entrepreneurial, is an important predictor
of entrepreneurial intention in unemployed individuals. It is also higher in those
who intend to create their own venture (Laguna, 2006a).
Optimism has had at least two theoretical conceptions in psychology.
According to Seligman (1990) it refers to the interpretation of causes of past
successes and failures. In Scheier’s and Carver’s conception it is understood as a
general expectancy of positive events in the future (Scheier & Carver, 1985).
The latter explanation seems interesting in the context of entrepreneurial action.
Individuals with higher level of optimism can motivate co-workers better as well
as induce an orientation toward the future and commitment in them (cf Jensen
& Luthans, 2006). Expecting positive results, a person puts greater effort into
his/her activities. Optimists are more strongly convinced than pessimists that the
obstacles encountered can be overcome, and because of this they continue
action, which enables them to succeed more often (Scheier & Carver, 1985).
Optimistic thinking about the future is connected with setting high standards
and aspirations as well as with success in problem solving (Oettingen & Mayer,
PSYCHOLOGY OF ENTREPRENEURSHIP
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2002). It also favors the application of more adaptive strategies of handling
difficult situations (Schweizer & Koch, 2001).
In the context of taking entrepreneurial action, optimism is pointed to as one
of the important characteristics of individuals who start their own firms
(Markman & Baron, 2003; Shook, Priem & McGee, 2003). However, research
findings are inconclusive: some indicate the tendency of entrepreneurs to
perceive situations optimistically (Cooper, Dunkelberg & Woo, 1988; Palich &
Bagby, 1995), others – that optimism has no significance for the decision to start
a firm (Simon, Houghton & Aquino, 1999). It can have an indirect impact by
affecting goal perception. In studies on potential entrepreneurs a higher level of
optimism favored a higher assessment of chances of success in starting one’s own
venture and, by influencing the expectancy of goal attainment, indirectly
contributed to the formulation of entrepreneurial intention (Laguna, 2006b).
Hope, in Snyder’s conception (2002), is defined as interrelated agentic
thoughts and pathway thoughts. Clear goal formulation may be accompanied by
agentic thoughts, the conviction that one can initiate and sustain movement
toward a goal. It gives energy, which enables one not to be discouraged even
when difficulties and obstacles emerge. The other component of hope thus
understood, of confidence in one’s own success, is the perception of oneself as a
person capable of inventing effective ways, alternative pathways leading to goal
attainment (Snyder, Cheavens & Sympson, 1997).
Research has shown that individuals with a high level of hope approach goals
as challenge, concentrate on the possibilities of success rather than failure, and
assess highly the probability of goal attainment. At the same time they generate
more goals, because of which they are capable of turning to a new goal more
easily when the initial one proves to be unattainable (Snyder, 2002). Though so
far studies of hope in relation to entrepreneurship are few, they point to its
connection with satisfaction from running one’s own firm (cf Jensen & Luthans,
2006). Hope also turned out to be significant predictor of the entrepreneurial
intention as well as of the assessment of this goal importance and of the
assessment chances of success and of readiness to try to accomplish of that
undertaking (Laguna, 2006b).
All these positive convictions are not as constant as, for example, personality
traits; they can be developed and modified, e.g. through trainings (Luthans &
Youssef, 2004). At the same time they are measurable, and have verified
operationalization methods. Although they show a number of similarities, in
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theoretical analyses (cf Snyder, 2002) as well as in empirical research they are
differentiated from one another and treated as distinct variables (Bryant &
Cvengros, 2004; Magaletta & Oliver, 1999). Some of them, e.g. self-efficacy,
have been fairly thoroughly researched by now in connection with
entrepreneurship, while others seem to be an interesting area for further
research.
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52, 1-26.
BANDURA, A. & LOCKE, E.A. (2003). Negative self-efficacy and goal effects revisited. Journal of
Applied Psychology, 88, 87-99.
BERINGS, D., De FRUYT, F. & BOUWEN, R. (2004). Work values and personality traits as predictors
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KRUEGER, N.F., REILLY, A.L. & CARSRUD, A.L. (2000). Competing models of entrepreneurial
intentions. Journal of Business Venturing, 15, 411-432.
LAGUNA, M. (2006a). Ogólna samoocena czy przekonanie o skutecznosci? Badania nad intencja
przedsiebiorcza [Self-esteem or domain-specific self-efficacy? Predictors of entrepreneurial
intention in unemployed]. Przeglad Psychologiczny, 49, 259-274.
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LUTHANS, F. & YOUSSEF, C. (2004). Human, social, and now positive psychological capital
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143-160.
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MARKMAN, G.D. & BARON, R.A. (2003). Person-entrepreneurship fit: why some people are
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MARKMAN, G.D., BARON, R.A. & Balkin, D.B. (2005). Are perseverance and self-efficacy
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PHAN, P.H. (2004). Entrepreneurship theory: possibilities and future directions. Journal of
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SARASVATHY, S.D. (2004). The questions we ask and the questions we care about: reformulating
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of Vocational Behavior, 54, 82-101.
PSYCHOLOGY OF ENTREPRENEURSHIP
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LITERATURE LIST
Article 1:
Luthans, F. & Youssef, C. (2004). Human, social, and now positive
psychological capital management: investing in people for competitive
advantage. Organizational Dynamics, 33, 143-160.
The purpose of this article is to analyze what constitutes competitive
advantage from traditionally recognized sources. The authors propose to treat
human resources as a capital investment for competitive advantage. Specific
attention is given to the increasingly recognized human and social capital and the
newly proposed positive psychological capital. After providing the theoretical
and research background, attention is given to guidelines on how to manage and
increase positive psychological capital.
Article 2:
Snyder, C.R., Cheavens, J. & Sympson, S.C. (1997). Hope: An individual
motive for social commerce. Group Dynamics: Theory, Research, and Practice, 1,
107-118.
The authors suggest that people of all ages are goal-oriented and that two
related thought processes typically accompany this goal-related thinking. First,
there are pathway thoughts, which tap the perceived capability to generate
workable routes to desired goals. Second, there are agentic thoughts, which
reflect the perception that one can initiate and sustain movement toward a goal
along the given pathways. Together, pathway and agentic goal-directed thinking
define hope. After describing how hope develops, the self-report instruments for
measuring hope are reviewed. How hope is sustained in the context of larger
groups is explored, and the importance of shared goals is described.
143
CHAPTER 15
ENTREPRENEURSHIP: AN ALTERNATIVE CAREER FOR
SCIENTISTS
Fidel Rodríguez-Batalla,
Aneta Zarnowska and Juan A. Moriano
Department of Social and Organizational Psychology
UNED
1. LEARNING GOALS
In this course you will learn how scientist entrepreneurs have an inherent
advantage over other entrepreneurs. They have the opportunity to start
businesses based on science that are truly breakthrough in nature. Wouldn't it be
great to be a successful scientist entrepreneur like Marie Curie or Thomas
Edison?
1) You will learn what barriers are in the entrepreneurial process for
scientists.
2) You will learn what factors influence scientist entrepreneur’ behaviour
during entrepreneurial process.
3) You will learn what main events lead scientists to choose an
entrepreneurial career.
2. THEORETICAL BACKGROUND
Universities and research centers are involved in a transformation process in
which they have to show to the society their legitimacy, giving clear reason why
they have to exist and continue their mission. Since more than 100 years, the
Academia has been rethinking which its role is in the society: Education or
Research. Nowadays, everyone agrees both tasks are their mission. However, in
PSYCHOLOGY OF ENTREPRENEURSHIP
144
the last 20 years, a new path has been opened as a new mission of these research
centers and universities, the transfer of the technology from labs to the society
(Siegel, Waldman, Atwater, & Link, 2004).
There are several ways of knowledge and technology transfer to the society,
one of them it is the creation of new business to commercialize new
technologies. Usually, this type of new business is created by a scientist or a
group of scientists that decide to change their life by focusing on a new business
idea and leaving aside their research career. Thus, we can define a "scientific
entrepreneur" to be a scientist (or engineer in a field heavily dependent on
science) who turns scientific knowledge to practical purposes and finds ways to
take it to market (George, Jain, & Maltarich, 2005).
Traditionally, scientists have provided industry, communities and
governments their professional expertise and research findings. Scientific
entrepreneurial activities date back to the medieval period when members of law
and medical faculties engaged in professional practice to supplement their
university salaries. In the initial decades of the twentieth century, the growth of
the service element in the university mission, coupled with technological
advancement, provided a strong impetus for scientific entrepreneurship by
linking research to the needs of businesses. The railroad industry, petroleum
refining, and polymer industries are just a few examples of commercial
endeavors that benefited from these linkages. In the second half of the twentieth
century, entrepreneurial activities of researchers and university lecturers played
an instrumental role in the development of the computer industry and also
contributed to the emergence and rapid growth of biotechnology.
Researchers and university lecturers may take advantage of the new
opportunities to set up new ventures in great numbers. The motivation to start
up a small new venture may be the low level of university salaries and general
financial pressures. Starting a new venture promised more flexibility and a better
standard of living. Most of these new ventures at first just would continue with
sharing projects out or diverting contracts from universities and research centers
into the private sector (Balázs, 1996).
Nevertheless, the scientific career, at least in Spain, is still mainly focused on
researching and writing academic papers. Collaborating with the industry,
licensing a new patent or creating new business is not rewarded or even
admitted as legitimate activity for scientists. Therefore, scientists are more
concerned about consolidating their career by publishing articles in international
ENTREPRENEURSHIP: AN ALTERNATIVE CAREER FOR SCIENTISTS
145
journals, than pursuing opportunities for new business based on their research
products.
In addition, there are many possible reasons for the unwillingness of scientists
to start and run a new business. Scientists have been considered to have strong
theoretical orientation and a lack proper knowledge about how to start and run a
new business. On the other hand, it has been speculated that scientists, as their
knowledge accumulates, get more conscious about risks related to
entrepreneurship. Also, scientists’ orientation is, at least in Europe, traditionally
towards jobs in the public sector. Scientists learn the wage earner way of
thinking because most of their family members are also government employee.
2.1. Marie Curie: scientific entrepreneur
Marie Curie is best known for her discovery
of radium one hundred years ago this month,
but she also worked closely with industry in
developing methods to make and monitor
radioactive material.
More than one hundred years ago, Marie
Sklodowska-Curie and Gustave Bémont published a
paper in Comptes-rendus - the journal of the French
Academy of Sciences. In the paper they announced
that they had discovered a new element with
astonishing properties: radium. But for one of the
authors, Marie Curie, the paper was more than just
the result of outstanding work: it showed that a
woman could succeed in what was then very much
a male-dominated scientific world.
Having arrived in Paris from Poland in 1891, Marie Curie became the first
woman in France to obtain a PhD in physics, the first woman to win a Nobel
prize and the first woman to teach at the Sorbonne. She also helped to found a
new scientific discipline: the study of radioactivity.
She became an icon and a role-model for other women to follow, someone
who succeeded - despite many difficulties - in imposing herself on the world of
science.
PSYCHOLOGY OF ENTREPRENEURSHIP
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Although Curie's life story is a familiar and well documented one, there is
one side to her that is less well known: her interaction with industry. As well as
training many nuclear physicists and radiochemists in her laboratory, she also
became a scientific pioneer in industrial collaboration.
In 1904 French industrialist Armet de Lisle, whose factory would soon
provide radium to the medical profession, began to collaborate with the Curies.
De Lisle benefitted from the Curies' technical suggestions on the best treatments
for pitchblende. In return the Curies were able to accumulate larger samples of
radioactive material than they would have been able to prepare on their own. At
a time when few research posts were available in France, de Lisle also provided
jobs in the new radium industry for a number of scientists who had trained with
the Curies.
REFERENCES
BALÁZS, K. (1996). Academic Entrepreneurs and their Role in 'Knowledge' Transfer. Sussex, U.K.:
Science Policy Research Unit.
GEORGE, G., JAIN, S., & MALTARICH, M. (2005). Academics or Entrepreneurs? Entrepreneurial
Identity and Invention Disclosure Behavior of University Scientists. Presented at the 2005
Technology Transfer Society Conference, Kansas City.
SIEGEL, D. S., WALDMAN, D. A., ATWATER, L. E., & LINK, A. N. (2004). Toward a model of the
effective transfer of scientific knowledge from academicians to practitioners: qualitative evidence from the
commercialization of university technologies. Journal of Engineering and Technology
Management, 21, 115-142.
147
CHAPTER 16
THE IMPORTANCE OF PLANNING/SELF-MANAGEMENT FOR
ENTREPRENEURIAL SUCCESS
Ute Stephan
Work and Organizational Psychology Work Group
Philipps-Universitaet Marburg
1. INTRODUCTION
Tanja owns a small training company that offers social skills trainings along
with consultancy in organizational development to local small businesses and
administrations. She always feels completely overworked and stressed out.
Usually she comes into the company office at 8 in the morning and does not
leave before 10 in the evenings. On days she is conducting in-house trainings it
is even worse. However, it is not so much the amount of time she spends in the
office that bothers her, it is the feeling that she just does
not get anything done. For three months now she wants
to develop a new training concept for personal self-
management, because a lot of her clients asked her to do
so. She is afraid to loose these clients now. It seems to
her that whenever she sits down to work on it
something else happens such as an urgent email from
another client, a request from her colleague, diverse
phone calls, and so forth. Today Tanja feels especially
desperate, because she met up with Christina last night.
Christina is a friend of hers, who also runs a small training company and who
she always envied for how much she gets done in so little time. Also her friend
seems to be able to delegate work easily and efficiently to her two employees –
something Tanja has always had problems with although her two employees are
very competent. Christina told her last night that she is really exited, because she
just signed a contract with the local city council to conduct 20 self-management
PSYCHOLOGY OF ENTREPRENEURSHIP
148
trainings over the next year. The local city council used to be Tanja’s client, but
Christina did not know that.
2. LEARNING GOALS
In this course you will learn about the role and the consequences of self-
management planning for entrepreneurs.
1) Understand the difference of planning on the level of the firm and individual
planning (i.e. self-management)
2) Understand what self-management is and how, why and when it can
contribute to entrepreneurial success
3) Get to know your own self-management skills and reflect how
entrepreneurs’ self-management skills could be strengthened
3. THEORETICAL BACKGROUND
3.1. What is planning/self-management?
Management scholars and research teach us that among other things strategic
planning is key to business success – even in small enterprises (Miller & Cardinal,
1994; Schwenk & Schrader, 1993). Such kind of firm-level planning is also
common practice for business founders when they have to develop their business
plans, which are often the prime vehicle for being granted loans or state
subsidies. For small, entrepreneurial businesses the individual planning habits of
the entrepreneur are likely to be of high importance. These individual planning
habits of the entrepreneur are here referred to as self-management strategies. Self-
management is understood here as how one goes about structuring and planning
ones work.
While firm-level planning is usually more formal and in large firms
institutionalized in separate departments for strategic business development, the
entrepreneurs’ self-management strategies refer to the personal, informal,
everyday planning approach. For both firm- and individual-level planning
content and process can be differentiated (Frese et al., in press). The content of
what is being planned is not the focus of this course; we will look into how the
planning is done, i.e. the process of planning.
THE IMPORTANCE OF PLANNING FOR ENTREPRENEURIAL SUCCESS
149
3.2. Why are we interested in individual planning and self-management?
According to action theory (e.g. Frese, 2007; Hacker, 1986) researching
personality characteristics of entrepreneurs and relating them to business success
must yield relatively small effects. Our personality characteristics are but only
one influence on our actions, which in turn affect business success. Thus, Frese
(2007) posits that the effects of personality characteristics on business success are
mediated by actions – more specifically individual action planning. Similar to
how people differ in their personality, people also differ in their typical
approaches to action planning.
Indeed, several studies find individual planning to be substantially related to
business success in the Netherlands, Africa, Germany, Poland, and the Czech
Republic (Frese et al., in press; Frese, 2007; Frese, van Gelderen, & Ombach,
2000; Stephan, Spychala & Lukes, 2006; van Gelderen, Frese & Thurik, 2000).
Different kinds of planning approaches (or ‘styles’) can be differentiated. And not
all of them have similarly strong associations with business success.
Unsurprisingly, if the entrepreneur does not engage in planning (the so-called
‘reactive strategy’), this has negative effects on business success. Typically an
entrepreneur, who does not engage in planning is driven by the situation and is
busy reacting to situational demands (e.g., the entrepreneur would start working
each day mainly reacting to what tasks he finds on his desk and incoming calls,
requests, emails etc. rather than following through a certain task such as a
customer order. He will get back to working on the order however when it
becomes urgent, either because the customer
reminds him or because the deadline approaches).
Furthermore, studies show elaborate, also
called complete planning to be positively associated
with business success. Complete planning is
characterized by a very thorough and structured
planning approach with a long-term focus and the
development of fallback plans. Another, slightly
less structured form of planning that is also typically positively associated with
business success is critical point planning. Here the entrepreneur concentrates on
the most difficult, unclear and most important point first, i.e. he sets a priority
which goal is the most important to achieve. Accordingly plans are made on
how to achieve this ‘critical point’, while other things are left unplanned. The
fourth approach is the opportunistic one, which is similar to the reactive strategy
in that the entrepreneur is mostly driven by the situation. Although the
PSYCHOLOGY OF ENTREPRENEURSHIP
150
entrepreneur would start with rudimentary planning, he does deviate easily from
doing so when the situation offers distracting cues, e.g. a phone call. He shows,
however, more proactive behavior, i.e. he jumps on opportunities, but never
follows them through.
3.3. Is planning always useful? For everybody?
The question whether planning is always useful, i.e. under all conditions,
refers to whether there are variables moderating the planning – success
relationship.
Conditions in the environment: Van Gelderen et al. (2000) suggest that different
kinds of individual planning approaches are differentially effective depending on
the characteristics of the firm’s environment. Complete planning, e.g. would be
particularly useful in complex rather than fast changing environments. While in
low complexity environments opportunistic approaches are used more often.
Another environmental variable are cultural characteristics. Two studies found
evidence that especially in high uncertainty avoidant and future orientated
cultures complete planning is especially effective. Planning is an effective means
to reduce uncertainty and is expected within these societies. The more flexible,
critical-point planning approach, however, is more effective in rather
uncertainty tolerant and present orientated societies (Rauch, Frese & Sonnentag,
2000, Stephan et al., 2006).
Conditions within the firm: Frese, Brantjes and Horn (2002) found that
businesses owners with a complete planning approach were particularly
successful, when their firm displayed a particular strategic orientation: an
entrepreneurial orientation (which consist of a firm’s striving for autonomy,
innovativeness, competitive aggressiveness, and risk taking).
Conditions within the individual: Escher, Grabarkiewicz, Frese, van
Steekelenburg, Lauw and Friedrich (2002) found a moderating effect for
cognitive ability on the relationship between individual planning and business
success. More specifically they found a compensating effect, i.e. business owners
with low cognitive ability could compensate their lower cognitive ability with
detailed planning and consequently were as successful as entrepreneurs with a
high degree of cognitive ability. For the latter it did not matter much whether
they planned very detailed or not.
THE IMPORTANCE OF PLANNING FOR ENTREPRENEURIAL SUCCESS
151
Summary
Self-management defined as a person’s habitual approach to structuring and
planning their work predicts entrepreneurs’ business success. The practical
implication of these findings is to teach entrepreneurs effective self-management
skills, e.g. via training. Here the advantage of a theoretical concept closely
related to action becomes apparent - a person’s action and behaviour are easier
trained and changed than their personality.
RELATED IN-CLASS ACTIVITIES
1. Self-assessment and group discussion
With the questionnaire given in Appendix A you can assess your self-
management behaviour. After doing this, do you have ideas how you could
strengthen the self-management skills of entrepreneurs? How would you go
about it? Can you think of specific exercises? How would you ‘sell’ to
entrepreneurs that self-management is a useful thing to do? What other
advantages besides being important for business success might self-management
have for the entrepreneur?
2. Self-management into practice
Divide into four groups. Each group will be a ‘mini-enterprise’. All your
enterprises compete in the same local market. You will be handed out goods,
which you need to sell in the streets within the next hour. Before you leave the
classroom you will receive instructions on how you should go about selling
‘your products’. Please keep to the instructions as closely as possible. The aim of
the exercise is to experience how effective different kinds of self-management
are.
REFERENCES
ESCHER, S., GRABARKIEWICZ, R., FRESE, M., VAN STEEKELENBURG, G., LAUW, M. &
FRIEDRICH, Ch. (2002). The moderator effect of cognitive ability on the relationship between
planning strategies and business success of small scale business owners in South Africa: A longitudinal
study. Journal of Developmental Entrepreneurship, 7(3), 305-318.
PSYCHOLOGY OF ENTREPRENEURSHIP
152
FRESE, M. (2007). The psychological actions and entrepreneurial success: An action theory approach. In
J.R. BAUM, M. FRESE & R.A. BARON (eds.) The psychology of entrepreneurship. (pp.
151-188). Mahwah, NJ: Lawrence Erlbaum.
FRESE, M., VAN GELDEREN, M. & OMBACH, M. (2000). How to plan as a small scale business
owner: Psychological process characteristics of action strategies and success. Journal of Small Business
Management, 38(2), 1-18.
FRESE, M., BRANTJES, A. & HOORN, R. (2002). Psychological success factors of small scale businesses
in Namibia: The roles of strategy process, entrepreneurial orientation and the environment. Journal of
Developmental Entrepreneurship, 7, 259-282.
FRESE, M., KRAUSS, S.I., KEITH, N., ESCHER, S., GRABARKIEWICZ, R., LUNENG, S.T.,
HEERS, C., UNGER, J., & FRIEDRICH, C. (in press). Business Owners’ Action Planning and Its
Relationship to Business Success in Three African Countries. Journal of Applied Psychology.
HACKER, W. (1986). Arbeitspsychologie: Psychische Regulation von Arbeitstätigkeiten [Work psychology:
Psychological regulation of work actions]. Bern: Huber.
MILLER, C. C. & CARDINAL, L. B. (1994). Strategic planning and firm performance: A synthesis of
more than two decades of research. Academy of Management Journal, 37, 649-1665.
RAUCH, A., FRESE, M., & SONNENTAG, S. (2000). Cultural differences in planning-success
relationships: A comparison of small enterprises in Ireland, West Germany, and East Germany.
Journal of Small Business Management, 38(4), 28-41.
STEPHAN, U., SPYCHALA, A. & LUKES, M. (2006). Firm-level and individual-level planning and their
relationship to entrepreneurial success. Manuscript submitted for publication. University of
Marburg.
SCHWENK, C. R. & SHRADER, C. B. (1993). Effects of formal strategic planning on financial
performance in small firms: A meta-analysis. Entrepreneurship Theory & Practice, 17, 53-64.
VAN GELDEREN, M., FRESE, M, & THURIK, R. (2000). Strategies, uncertainty and performance of
small business startups. Small Business Economics, 15, 165-181.
ZEMPEL, J. (2003). Strategien der Handlungsregulation [Strategies of action regulation]. Doctoral
dissertation, University of Giessen [Retrieved April 4, 2003 from http://geb.uni-
giessen.de/geb/volltexte/2003/1083/].
THE IMPORTANCE OF PLANNING FOR ENTREPRENEURIAL SUCCESS
153
APPENDIX A:
Self-Assess Your Self-Management Strategies
(by Zempel, 2003, translation by author)
The following questions pertain to your usual working habits. Please indicate,
how often you employ the following strategies in your work.
Please think of your usual situation at work and chose the answer that
describes best how you actually act. Please do not indicate how you ideally
would like to act!
very
rarely/
never
rarely
occasional
ly
often
very
often/
always
1 I plan my work step by step in
advance.
very
rarely
rarely
occasional
ly
often
very
often
2 I simultaneously work on the
solution of several problems.
very
rarely
rarely
occasional
ly
often
very
often
3 I rather let things happen/come up to
me, in doing so I do not follow a
certain plan.
very
rarely
rarely
occasional
ly
often
very
often
4 I systematically plan my next steps at
work in regular intervals.
very
rarely
rarely
occasional
ly
often
very
often
5 I start with planning my actions at
the most difficult and critical
point in the work-flow.
very
rarely
rarely
occasional
ly
often
very
often
6 I handle problems in the order in
which they come up to me.
very
rarely
rarely
occasional
ly
often
very
often
7 I try to gain a detailed overview,
before planning next steps in my
work,
very
rarely
rarely
occasional
ly
often
very
often
8 First I try to get a handle on the
most critical point, the next steps
very
rarely
occasional
often
very
PSYCHOLOGY OF ENTREPRENEURSHIP
154
very
rarely/
never
rarely
occasional
ly
often
very
often/
always
then follow automatically. rarely ly often
9 I decide about next steps in the
work-flow spontaneously, i.e.
when they acutely have to be
taken care of.
very
rarely
rarely
occasional
ly
often
very
often
1
0
I switch to and fro between the
detailed planning of single steps and
the development of an overall
concept for my work.
very
rarely
rarely
occasional
ly
often
very
often
1
1
First I determine how to deal with
the most difficult and critical point in
my work and after that I just adapt
all other steps to that.
very
rarely
rarely
occasional
ly
often
very
often
1
2
I plan ahead alternative strategies
of acting in order to handle potential
weaknesses in the work-flow.
very
rarely
rarely
occasional
ly
often
very
often
1
3
I do not think too much about
possible future problems at work,
because I am fully occupied with
solving the current ones.
very
rarely
rarely
occasional
ly
often
very
often
1
4
It happens that I discontinue my
current actions, because I found a
solution for another problem.
very
rarely
rarely
occasional
ly
often
very
often
1
5
Going from the most critical point,
I think about possible variants till I
found the most adequate way.
very
rarely
rarely
occasional
ly
often
very
often
1
6
My working habit may seem chaotic
to other people, but I myself
never loose the overview.
very
rarely
rarely
occasional
ly
often
very
often
THE IMPORTANCE OF PLANNING FOR ENTREPRENEURIAL SUCCESS
155
Evaluation
Add the scores as follows:
Complete Planning: Item 1 __+ Item 4 __ + Item 7 __ + Item 12 __ = ___ / 4 : ____
Reactive: Item 3 __ + Item 6 __ + Item 9 __ + Item 13 __ = ___ / 4 :___
Critical Point: Item 5 __ + Item 8 __ + Item 11 __ + Item 15 __ = ___ / 4 :___
Opportunistic: Item 2 __ + Item 10 __ + Item 14 __ + Item 16 __ = ___ / 4 :___
The final scores range between 1 and 5. Higher scores indicate that you use
this self-management approach more frequently in your work. When comparing
the four strategies the highest score gives you some indication about your
dominant self-management approach. Enter the mean scores per approach in the
following table to allow easy comparison.
5
4
3
2
1
Complete Planning Reactive Critical Point Opportunistic
Scores of a comparison group (German IT entrepreneurs, N=82))
3,6
2,6
3,3 3,4
2,6
PSYCHOLOGY OF ENTREPRENEURSHIP
156
APPENDIX B:
Self-Management - 10 Rules to Gain Time
(adapted from Seiwert, 2004, translation by author)
1. Goal-orientation “Aiming”: Use time like you would use arrow and
bow: aim first! Orient your daily work and activities towards fulfilling your
goals
2. Prepare: Plan your next day the evening before – in writing. Allow enough
time for routine tasks (e.g., checking email), but also for the unexpected
(60:40 rule).
3. Set Priorities: Tackle important things first and leave unimportant stuff.
Beware of the tyranny of urgency!
More courage to use the litter bin!
4. Summarize: Allocate similar tasks (such as phone calls, mail
correspondence, short meetings) to the same time slot, so you won’t be
constantly interrupted by them when working on A and B tasks.
5. Simplify: Divide difficult tasks into small steps. Schedule the order you will
work on these steps and set deadlines for each step.
6. Let others do it: Don’t forget to delegate: What? Who? Why? Till when?
Don’t be afraid to say NO and fight off time thieves!
B-Tasks
(important)
schedule (resp. delegate)
A-Tasks
(important and urgent)
Do immediately!
C-Tasks
(low importance, but
urgent)
Delegate
Urgency
Importance
THE IMPORTANCE OF PLANNING FOR ENTREPRENEURIAL SUCCESS
157
7. Shield: You don’t have to always be available for everybody. Make
appointments - also with yourself and use them!
8. Be considerate & respectful: Being late, overrunning meetings, and
rescheduling appointments are taboos. Determine goals and endpoints of
meetings beforehand.
9. Telephoning: Ask for an adequate time instead of interrupting. Arrange
binding appointments for phone calls and call-backs.
10. Enjoy success: Perceive settled tasks and things as success! Reward yourself
and others.
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159
CHAPTER 17
SUCCESSFUL ENTERPRISES
Marjan Gorgievski
Department of Industrial and Organisational Psychology
Erasmus University Rotterdam
1. WHICH ONE OF THE THREE?
My name is Senna Oldshorn. I am a successful entrepreneur. I started my business one
year ago. I am the figure head of the free market economy.
Senna 1: “I feel that starting a business after having been on sick benefit for
more than a year is a great victory”. He and his wife Janet own a soil sanitation
company. They clean soil without using chemical processes. It was a deliberate
choice to run the business in an environmental friendly way. Both Senna and
Janet have a medical background, because of which both of them lost their
former jobs. The three people they hired to work for them all have medical
backgrounds. They claim that people who do not have experience with
disablement for work do not fit into their companies’ culture, which they
describe as striving for understanding and welfare of all people and for nature.
The company has many clients, and they have received a permit from the local
government to expand their business on the current location next year. Since
the local newspaper has written an article about the company a few weeks ago,
26 people with a work disablement have applied for a job.
Senna 2 is running a florist business. She is famous for her artistic and classy
flower arrangements. Being very successful is important to her. She likes to stand
out and to impress other people. Shortly after she had opened a small flower
shop, the demand for flower arrangements grew exponentially. Soon she had to
disappoint a large number of potential customers. She hired personnel to support
her, both with the administration and with creating bouquets. However, she was
PSYCHOLOGY OF ENTREPRENEURSHIP
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never satisfied with the artistic quality of her assistants, and she was afraid that
they would damage her reputation. After a few months she closed her shop and
fired all her employees. She now only accepts orders by fax, and she produces a
maximum of three flower arrangements per week for prohibited large sums of
money.
Senna 3 is 25 years old. He started his own clothes company a year ago. At that
time he had worked for a large retail company for five years, and he had worked
himself up from shop floor to top management. Senna operates in a niche
market. He sells trendy casual wear at low prices for children from 6 to 16 years
old. His formula turned out to be a success. He opened his second shop six
months after the first, and now owns three shops (Rotterdam, The Hague and
Utrecht). Senna is planning to own about 30 shops 5 years from now, and to
control the niche market for children’s casual wear. In order to keep costs down
he buys his products in Asia. In addition he hires very young people to work in
his shops. He confesses that he is not very good for his employees. They work
long hours for small salaries. They hardly get any extra benefits. Senna wants to
give them more in return once the business is large enough. However, at this
point it does not seem necessary, because everyone is in a flush of victory.
2. LEARNING GOALS
In this course you will learn how entrepreneurial success can be defined.
1) You will learn what criteria of business success are generally used in the
business literature
2) You will learn how different entrepreneurs themselves define success
3) You will get background information on issues related to the construction of
performance criteria for research purposes
3. THEORETICAL BACKGROUND
The aim of this contribution is to discuss the content of the entrepreneurial
success construct in more detail. We will present a multi-dimensional success
construct, and show how different success criteria may conflict with one
another. In addition, we aim to provide insight into the way different types of
SUCCESSFUL ENTREPRISES
161
entrepreneurs can balance the tradeoffs of striving for different types of success in
a way that is personally satisfying.
3.1. Criteria of entrepreneurial success
A recent review of the entrepreneurship and small business literature
(Gorgievski & Ascalon, submitted) has revealed nine important criteria that are
often used as indicators of business success. Profit, growth and innovation are the
top three criteria most often used, because these are expected to relate closely to
wealth acquisition. Firm innovation is often not considered the bottom line,
though. It is generally seen as a critical characteristic of a firm that helps to
increase profitability. A fourth criterion that can be identified is firm-survival or
longevity. In research on business start-up, the fact that the business manages to
survive the first year is often considered quite an accomplishment. In this sense,
firm survival may not seem a very high standard for business success. However,
when this criterion is being defined as being able to continue the business in the
long run, it becomes a very relevant criterion. In order to have favorable
business prospects in the long run, the business needs to have good solvency so
that it can finance possible large reorganizations in order to maintain its
competitive advantage. Longevity of the firm as defined in this way has
particular importance for family businesses, where it relates to the (financial)
possibility to transfer the business to future generations. A fifth business criterion
is social and environmental performance, or in other words contributing back to
society. This is defined as meeting goals related to further social and
environmental welfare beyond the direct economic, technical, and legal interest
of the firm. This may include philanthropic behaviors, such as giving to
charities, supporting community activities, and pursuing environmentally
friendly practices.
There are also a variety of performance criteria of a softer nature. Research
on business owner objectives (Kuratko, Hornsby, & Naffziger, 1997; Newby,
Watson, & Woodliff, 2003) shows that business owners strive for several
personally oriented objectives in addition to financial returns or extrinsic
rewards, although these are far less often studied than economic performance
criteria. The sixth criterion is therefore entrepreneurs’ personal satisfaction with
their business (Cooper & Artz, 1995). Personal satisfaction can be considered a
basic measure of performance, which influences many business decisions, such as
whether to invest more time and money, whether to cut back, or even to shut
down the business. The seventh criterion is satisfied stakeholders, in particular
customer satisfaction and employee satisfaction. These criteria have been
PSYCHOLOGY OF ENTREPRENEURSHIP
162
included in many performance measures that link to business strategy, such as
the Balanced Score Card, Performance Prism, and the Business Excellence
model (for example Adams et al., 2003). The eighth criterion is the achievement
of work-life balance. Work has often been found to interfere with one’s personal
life and one’s personal life has also been found to interfere with one’s work life
(Nelson & Burke, 2000). A subgroup of business owners has been identified that
chose their career to allow them more time with their families. They used the
autonomy and flexibility that their position allowed to balance the
responsibilities at work and at home. In in-depth interviews, business owners
called a positive work-life balance the crowning glory of their hard work in the
early start-up years. Finally, public recognition can be identified as the ninth
criterion. This criterion emerged mainly from scanning the popular media that
typically give special attention to award winning entrepreneurs and their
companies and products. In addition, Kuratko et al. (1997) found that public
recognition may be among business owners’ intrinsic rewards.
3.2. Conflicts and compatibilities between criteria of business success
Different criteria for business success may conflict with one another, whereas
others are highly compatible. Profit, growth, innovation and client satisfaction
have typically been shown compatible, and related to creation of wealth and
influence. One famous conflict is the trade-off between economic criteria, such
as making a profit, and social and environmental performance, or so-called
“green entrepreneurship” (Orlitzky, Schmidt, & Rynes, 2003). This leads to
discussions in society about whether and how we can motivate entrepreneurs to
at least adhere to a “minimum behavioral standard”, including abiding by the
law, and generally maintaining standards of honesty and integrity, if it hinders
them in attaining success. Another famous conflict occurs between criteria
related to work-home balance and profit and business growth. It seems fair to
say that conflict occur between criteria related to different systems that interact
with each other, namely the business, the family and society.
3.3. Personal differences in weighing entrepreneurial success
Different kinds of entrepreneurs weight the tradeoffs between different
performance criteria differently, and hence strive for different types of success. In
order to have a rewarding entrepreneurial life, it is important for entrepreneurs
to recognize what is important to them. Knowing what is really important in life
SUCCESSFUL ENTREPRISES
163
will more likely keep entrepreneurs motivated to accomplishing their personal
goals, while at the same time keeping the business solvent.
Schwarz’ theory of universal human values is a helpful tool to explore what
people find important (Schwarz & Bardi, 2001). Values are concepts or beliefs
about desirable end-states or behaviors that transcend specific situations, and
guide selection or evaluation of behaviors and events (Schwartz and Bilsky,
1987; p. 551). Schwartz universal value system consists of ten main value
dimensions (see Table 1): conformity, tradition, benevolence, universalism, self-
direction, stimulation, hedonism, achievement, power, and security. These
values are theoretically structured based on the complimentary or conflicting
nature of their relationships. Two dimensions are distinguished. One dimension
leads from self-enhancing to self-transcendent. On the self-transcendent side of the
circle are benevolence and universalism, because both involve a high regard for
the welfare of others. On the self-enhancing side of that dimension are the
values of power and achievement, because they both involve increasing and
demonstrating an individuals’ own worth. The other dimension leads from
openness to experience to conservation. Self-direction and stimulation are both at the
openness to experience side, because both involve striving for independence,
new experiences and change, while tradition, security and conformity are on the
opposite side, because these values emphasize maintaining the status quo, such as
accepting and acting on tradition and adhering to group norms. Values have
been found to predict value congruent behavior (Bardi & Schwartz, 2003).
Results of our research (Gorgievski & Ascalon, submitted) have shown that
entrepreneurs find success criteria more or less important, depending on their
personal values. Most importantly, the traditional success criteria, making a
profit, growth, and innovation have been shown to relate positively to self-
enhancing (power, achievement) and change oriented (stimulation) value
orientations. In line with value theory, conflicting goals fit contrasting value
orientations. The self-transcendent (universalism, benevolence) and conservative
counterparts related to lower rankings of the traditional success criteria growth
and making a profit. In contrast, universalism promoted “making a social
contribution”, whereas benevolence was associated with having satisfied clients
and employees as well as personal satisfaction. These more socially oriented
criteria related to lower rankings by their self-enhancing counterparts in the
value domain. Likewise, the conservative value orientations related to a lower
ranking of innovation. This may have important consequences for their
businesses. According to Miner (1997), “the type of person an individual is
PSYCHOLOGY OF ENTREPRENEURSHIP
164
determines the route he or she should follow” (p. 55). Striving for business
growth may make an entrepreneur who places high value on benevolence feel
unhappy. On the other hand, adjusting business activities to fit with family
obligations may jeopardize the future of the business. It is important to realize
such internal conflicts, and handle them in a satisfactory way.
TABLE 1
Definitions of Schwartz’ value orientations (Schwartz & Bilsky, 1987)
Power: Social status and prestige, control or dominance over people and resources.
Achievement: Personal success through demonstrating competence according to social standards.
Hedonism: Pleasure and sensuous gratification for oneself.
Stimulation: Excitement, novelty, and challenge in life.
Self-direction: Independent thought and action-choosing, creating, exploring.
Universalism: Understanding, appreciation, tolerance and protection for the welfare of all people
and for nature.
Benevolence: Preservation and enhancement of the welfare of people with whom one is in
frequent personal contact.
Tradition: Respect, commitment and acceptance of the customs and ideas that traditional
culture or religion provide the self.
Conformity: Restraint of actions, inclinations, and impulses likely to upset or harm others and
violate social expectations or norms.
Security: Safety, harmony and stability of society, of relationships, and of self.
3.4. To Conclude
We argue that entrepreneurial success cannot only be measured using hard
criteria on the business level, but it is also necessary to include softer criteria on
the personal level. Moreover, different success criteria can be in conflict, so
striving for success on only one dimension has tradeoffs on other dimensions.
For example, striving for better financial performance and growth may conflict
with softer personal success criteria such as being able to balance work and
private life. Based on their personal values, different types of entrepreneurs
weigh those trade-offs differently. For starting entrepreneurs it is important to
gain a holistic view of entrepreneurial success. In addition it is important they
are aware of their own personal values that serve as guiding principles in their
SUCCESSFUL ENTREPRISES
165
lives. Knowing what factors are internally motivating will help recognize
possible pitfalls that may cause people to either fail as entrepreneurs, or to get
captured in an unsatisfactory enterprise. Knowing what is really important in life
will more likely keep the entrepreneur focused towards accomplishing his/her
goals, while at the same time keeping the business solvent.
4. RELATED IN-CLASS ACTIVITIES
Group discussion
We will start this class with a group discussion. We will be discussing your
opinions, and also what you have already learnt about entrepreneurial success.
To help you formulate your ideas you can start by thinking which one of the
three entrepreneurs in the introductory example you find most successful and
why? Another question that might help you is “when would I consider myself
to be successful?”
Success and values exercise
For this exercise you fill in a questionnaire based on which you will be able
to create your own values profile. Next we will split into small groups based on
these profiles. Your small group will be required to identify personal strengths
and weaknesses when starting up a business related to these values.
REFERENCES
Adams, B. & Sykes, V. (2003). Performance measures and profitability factors of successful
African-American entrepreneurs: An exploratory study. Journal of American Academy of
Business, 2(2): 418-424.
Bardi, A. & Schwartz, S. H. (2003). Values and Behavior, strength and structure of relations.
Personality and Social Psychology Bulletin, 10: 1207-1220.
Cooper, A. C., & Artz, K. W. (1995). Determinants of satisfaction for entrepreneurs. Journal of
Business Venturing, 10, 439-457.
PSYCHOLOGY OF ENTREPRENEURSHIP
166
Evers, G.E., De Feyter, M.G., Hartog, F.M.J., Jurrij, E. (2001). Een onbetrouwbaar lijf,
zelfstandig ondernemen met een arbeidshandicap. [An unreliable body. Disabled workers
starting their own business.] Houten: TNO.
Gorgievski M.J. & Ascalon, M.E.A. (submitted) business owners’ success criteria, a values
approach to personal differences.
Kuratko, D. F., Hornsby, J. S., & Naffziger, D. W. (1997). An Examination of owners' Goals in
Sustaining Entrepreneurship. Journal of Small Business Management, 35(1): 24-33.
Miner, J. B. 1997. The expanded horizon for achieving entrepreneurial success. Organizational
Dynamics: 54-67.
Nelson, D. L. & Burke, R. J. (2000). Women Executives: Health, stress, and success. Academy
of Management Executive, 14(2): 107-121.
Newby, R., Watson, J., & Woodliff, D. (2003). Using focus groups in SME research: The case
of owner-operator objectives. Journal of Developmental Entrepreneurship, 8(3): 237-246.
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance:
A meta analysis. Organization Studies, 24, 403-441.
Schwartz, S.H. & Bilsky, W. (1987). Toward a universal psychological structure of human
values. Journal of Personality and Social Psychology, 53(3): 550-562.
Schwartz, S.H. & Bardi, A. (2001). Value Hierarchies Across Cultures: taking a similarities
perspective. Journal of Cross-cultural psychology, 32(3): 268-290.
SUGGESTED FURTHER READINGS
(Articles relevant to criterion construction)
Austin, J. T., & Villanova, P. (1992). The criterion problem: 1917-1992. Journal of Applied
Psychology, 77(6), 836-874.
Tett, R. P., Steele, J. R., & Beauregard, R. S. (2003). Broad and narrow measures on both sides
of the personality-job performance relationship. Journal of Organizational Behavior, 24(3):
335-356.
doc_791360421.pdf
This book would not have been possible without the support of many individuals and institutions.
Psychology of Entrepreneurship
Research and Education
Juan Antonio Moriano León
and Marjan Gorgievski (coordinators)
UNIVERSIDAD NACIONAL DE EDUCACIÓN A DISTANCIA
VARIA (37327PB01A01)
PSYCHOLOGY OF ENTREPRENEURSHIP: RESEARCH AND EDUCATION
Quedan rigurosamente prohibidas, sin la
autorización escrita de los titulares del
Copyright, bajo las sanciones establecidas
en las leyes, la reproducción total o
parcial de esta obra por cualquier medio
o procedimiento, comprendidos la reprografía y
el tratamiento informático, y la distribución
de ejemplares de ella mediante alquiler
o préstamo públicos.
© Universidad Nacional de Educación a Distancia
Madrid 2007
Librería UNED: c/ Bravo Murillo, 38 - 28015 Madrid
Tels.: 91 398 75 60 / 73 73
e-mail: [email protected]
© Juan Antonio Moriano León and Marjan Gorgievski (coordinators)
ISBN: 978-84-362-5493-8
Depósito legal: M. 30.748-2007
Primera edición: julio de 2007
Impreso en España – Printed in Spain
Imprime y encuaderna: CLOSAS-ORCOYEN, S.L.
Polígono Igarsa. Paracuellos de Jarama (Madrid)
This book would not have been possible without the support of many individuals and institutions.
We want to express our appreciation to Francisco Claro Izaguirre who serves as the dean of the
Faculty of Psychology and Francisco J. Palací Descals, former head of the Department of Social
and Organizational Psychology at UNED. We would like also to thank to Encarna Valero,
Erasmus coordinator at UNED, for her encouragement and support.
We are grateful to all members of INPERE
(International Network for Psychology of Entrepreneurship Research and Education)
for the valuable perspectives and ideas contained into this book.
9
INDEX
Chapter 1. ERASMUS INTENSIVE PROGRAMME ........................................ 15
1. Background......................................................................................... 15
2. Aims and objectives of the programme ................................................ 16
2.1. The project contributes to the aims and priorities described in the european
policy statement .......................................................................................... 17
2.2. The ip ties in with the existing teaching programs of the participating
institutions .................................................................................................. 18
3. Main pedagogical and didactical approaches......................................... 18
4. Partnership composition ...................................................................... 20
Chapter 2. INPERE................................................................................... 25
1. Story of the network ........................................................................... 25
2. Structure and members of the network................................................ 26
2.1. Member of the council ......................................................................... 26
2.2. Senior members and advisors of inpere ................................................. 28
3. INPERE meetings and common activities ........................................... 28
3.1. Istanbul ................................................................................................ 28
3.2. Marburg & giessen ............................................................................... 29
3.3. Verona ................................................................................................. 29
3.4. Athens 2006......................................................................................... 30
3.5. Dresden................................................................................................ 30
4. Mission statement and goals of inpere .................................................. 31
5. How was born the intensive programme socrates erasmus? .................. 31
10
6. Research project proposal.................................................................... 31
Chapter 3. ENTREPRENEURSHIP AS A PROCESS ....................................... 33
1. Learning goals ..................................................................................... 33
2. Theoretical background....................................................................... 33
3. Literature list ....................................................................................... 36
References .............................................................................................. 37
Chapter 4. ENTREPRENEURIAL INTENTIONS............................................ 39
1. Learning goals ..................................................................................... 39
2. Theoretical background....................................................................... 39
3. Entrepreneurial intention questionnaire (eiq) ....................................... 43
3.1. Project summary: ................................................................................. 43
3.2. Participating teams:............................................................................... 44
3.3. Steps of the project:.............................................................................. 45
4. Entrepreneurial intention questionnaire (eiq) ....................................... 48
References .............................................................................................. 55
Chapter 5. MOTIVATION TO BECOME ENTREPRENEUR .......................... 57
1. Learning goals ..................................................................................... 58
2. Theoretical background....................................................................... 58
2.1. Related in-class activities ...................................................................... 63
References .............................................................................................. 63
Chapter 6. OPPORTUNITY RECOGNITION AND DEVELOPMENT ............. 65
1. Learning goals ..................................................................................... 66
2. Theoretical background....................................................................... 67
3. Related in-class activities ..................................................................... 72
References .............................................................................................. 73
Appendix 1: ............................................................................................ 75
11
Appendix 2: ............................................................................................ 77
Appendix 3: ............................................................................................ 79
Chapter 7. PERSONALITY AND COMPETENCIES ....................................... 83
1. Theoretical background....................................................................... 84
1.1. Personality variables and entrepreneurship ............................................ 86
1.2. Entrepreneurial competencies ............................................................... 90
2. Learning goals ..................................................................................... 92
3. Related in-class activities ..................................................................... 92
References .............................................................................................. 93
Chapter 8. MANAGING BUSINESS GROWTH ............................................. 95
1. The growth of rim-tech ...................................................................... 95
2. Learning goals ..................................................................................... 97
3. Theoretical background....................................................................... 97
3.1. Framework for managing a growing venture ........................................ 99
3.2. Growth strategy..................................................................................... 100
3.3. Framework pcdo (people, context, deal, opportunities).......................... 100
4. Related in-class activities ...................................................................... 102
References ............................................................................................... 103
Chapter 9. INTRAPRENEURSHIP ................................................................. 105
1. Learning goals ...................................................................................... 105
2. Theoretical background........................................................................ 105
References ............................................................................................... 109
Chapter 10. ENTREPRENEURIAL STRESS.................................................... 111
1. Learning goals ...................................................................................... 112
2. Theoretical background........................................................................ 112
2.1. Conservation of resources theory........................................................... 113
12
2.2. Entrepreneurship and entrepreneurial activities ...................................... 114
2.3. The entrepreneurial process, an activating process.................................. 115
2.4. The entrepreneurial stress process .......................................................... 116
3. Related in-class activities ...................................................................... 118
References ............................................................................................... 118
Chapter 11. CREATE ENTREPRENEURIAL MINDSETS................................ 121
1. Learning goals ...................................................................................... 121
2. Theoretical background........................................................................ 121
References ............................................................................................... 123
Charter 12. SOCIAL ENTREPRENEUR (SHIP) .............................................. 125
1. Learning goals ...................................................................................... 125
2. Theoretical background........................................................................ 125
References ............................................................................................... 126
Chapter 13. CULTURE AND ENTREPRENEURSHIP ..................................... 127
1. Introducción ........................................................................................ 127
2. Learning goals ...................................................................................... 128
3. Theoretical background........................................................................ 128
4. Related in-class activities ...................................................................... 133
References ............................................................................................... 133
Chapter 14. POSITIVE PSYCHOLOGICAL CAPITAL..................................... 135
1. Learning goals ...................................................................................... 135
2. Theoretical background........................................................................ 135
References ............................................................................................... 139
Literature list ............................................................................................ 142
Chapter 15. AN ALTERNATIVE CAREER FOR SCIENTISTS......................... 143
1. Learning goals ...................................................................................... 143
13
2. Theoretical background........................................................................ 143
2.1. Marie curie: scientific entrepreneur ....................................................... 145
References ............................................................................................... 146
Chapter 16. SELF-MANAGEMENT FOR ENTREPRENEURIAL SUCCESS........147
1. Introduction..........................................................................................147
2. Learning goals .......................................................................................148
3. Theoretical Background ........................................................................148
3.1. What is planning/self-management? .......................................................148
3.3. Is planning always useful? For everybody?...............................................150
Summary ......................................................................................................151
Related in-class activities ...........................................................................151
References ................................................................................................151
Appendix A:..............................................................................................153
Appendix B:..............................................................................................156
Chapter 17. SUCCESSFUL ENTERPRISES ......................................................159
1. Which one of the Three? ......................................................................159
2. Learning Goals ......................................................................................160
2. Theoretical Background ........................................................................160
3.1. Criteria of entrepreneurial success...........................................................148
3.2. Conflicts and compatibilities between criteria of business success ............150
3.3. Personal differences in weighing entrepreneurial success .........................148
3.4. To Conclude..........................................................................................150
4. Related in-class activities .......................................................................159
References ................................................................................................160
Suggested further readings .........................................................................160
14
15
CHAPTER 1
ERASMUS INTENSIVE PROGRAMME
Juan A. Moriano and Encarna Valero
Department of Social and Organizational Psychology
UNED
1. BACKGROUND
The European Commission and national governments world-wide are
calling for an increase in Entrepreneurship (e.g. Reynolds, Bygrave, & Autio,
2004, Observatory of European SMEs, 2004). They have recognized the impact
of entrepreneurship on: economic growth, a reduction of unemployment,
regional development, innovation, and individual growth. These calls for
entrepreneurship include the study, promotion, and development of both the
entrepreneurial business and the entrepreneur. As a result, it is one of the fastest
growing fields in the social sciences (Katz, 2003).
While there are many different career options, few offer as much potential
for personal achievement and independent wealth creation as starting or running
a new business. However, compared to the US, significantly fewer EU citizens
prefer to be self-employed (Flash Eurobarometer 160, Entrepreneurship),
furthermore new businesses in the EU grow significantly slower than those in
the US. Furthermore, the Global Entrepreneurship Monitor (GEM, who
identifies entrepreneurship needs of countries across the world) reports that the
level of entrepreneurial activity is low in the EU (approx. 6%), and even lower
in Central Europe (approx. 4%), especially compared to the U.S. (more than
10%). According to GEM experts, better education and training are important
tools that can strongly motivate entrepreneurial activity. This indicates a strong
need for increasing the quality of entrepreneurship education and training in EU
countries (EU final report Education for Entrepreneurship, 2004).
PSYCHOLOGY OF ENTREPRENEURSHIP
16
With the objective to study entrepreneurship from the Social Sciences
perspective (Psychology, Education and Management and Business
Administration), researchers/educators from 6 European countries founded in
2005 the International Network for Psychology of Entrepreneurship Research
and Education (INPERE, www.inpere.org). Its main goal is to conduct research
that will advance the field of psychology of entrepreneurship and to apply the
findings to practical use, most importantly for use in education and training.
The European universities that are part of INPERE are the following:
Spanish National Distance University (UNED), University of Verona (Italy),
Erasmus University Rotterdam (The Netherlands), University of Economics
Prague (the Czech Republic), Philipps-University Marburg (Germany),
University of Technology (Dresden, Germany) and Silesian University
(Katowice, Poland).
The EU definition of entrepreneurship starts with “entrepreneurship is a
mindset...” (Green Paper on Entrepreneurship, 2003, p. 6). However, most
educational approaches to entrepreneurship focus on developing technical skills
(e.g., entrepreneurial finance). The first step to development, to enhance the
motivation and drive of the students, is often underestimated. This clearly
indicates a deficiency in the current entrepreneurial education. INPERE intends
to help the creation of an entrepreneurial mindset through the development of
psychological approaches within the interdisciplinary field of entrepreneurship.
This goal is in-line with the findings of the EFER survey on Entrepreneurship
education in Europe (Wilson, 2004). They recommend that more attention
should be devoted to culture, attitudes, skills, growth, success and
intrapreneurship.
In order to advance academic research, to facilitate the sharing of knowledge
between the European member countries and to get the useful results for
helping entrepreneurs through training and education, INPERE strives to create
this Erasmus Intensive Programme, Psychology of Entrepreneurship Research
and Education.
2. AIMS AND OBJECTIVES OF THE PROGRAMME
The main objective of this project is to bring together professors, researchers,
lecturers and university students from various European countries to share the
ERASMUS INTENSIVE PROGRAMME
17
knowledge of how to educate, guide and promote entrepreneurship in Europe
through the use of psychological approaches.
The specific aims are the following:
1. Provide students an overview of entrepreneurship and develop an
understanding of specific entrepreneurial challenges and opportunities.
2. Offer methods and techniques to develop the skills required to become
an entrepreneur and to elaborate an entrepreneurial approach.
3. Teach students the latest research in Entrepreneurship from social
sciences and show them how to apply the findings to practice.
4. Transfer of know-how in entrepreneurship training and education for
graduates, and higher education students between EU universities.
5. Promote interdisciplinary teamwork and self-starting behaviour among
participants as well as the creation of multidisciplinary research groups
between participants in the intensive program for entrepreneurship. For
example, the students from different universities will be encouraged to
work on the common research topics in their thesis following the
intensive program.
6. Creation of new educational and training programs, and development of
quality training materials (in the form of printed materials, a CD-ROM
and a practical handbook).
7. Dissemination of the products to target groups (e.g., potential and
current entrepreneurs, entrepreneurial trainers) to be used to develop
entrepreneurs. The final products of the Intensive Program (a handbook,
a web page and CD-ROM) will be promoted and distributed to as many
individuals from the project target groups as possible via advertisements
and active distribution by all the project members.
2.1. The project contributes to the aims and priorities described in the
European Policy Statement
The development of the Educational European Space is a major part of the
European Policy Statement of Spanish National Distance University (UNED). The
project involves the establishment of international agreements with multiple
PSYCHOLOGY OF ENTREPRENEURSHIP
18
European universities. The contributions of the project include bringing together
premier entrepreneurial researchers and educators to educate students on the latest
developments in entrepreneurship research and the stimulation of discussion among
an international group of students and scholars.
2.2. The IP ties in with the existing teaching programs of the
participating institutions
This IP about Psychology of Entrepreneurship Research and Education is
innovative in its interdisciplinary and international character. The professors who
participate in the IP come from different European countries and have diverse
backgrounds ranging from Work and Organizational Psychology, HR
Management and Organizational Behaviour to Management and Business
Administration. Therefore, the content of the program will be very
interdisciplinary, starting with psychosocial variables, such as motivations,
personality traits, attitudes, abilities, cognitions, and including opportunity
recognition and development, entrepreneurial team selection, encouraging
company growth, self-development, and health issues.
This programs ties with the following teaching programs of the participating
universities: “Educate how to become an entrepreneur” (UNED, Spain),
“Psychology of Successful Entrepreneurship” (Philipps-University Marburg,
Germany), “Training of Social and Managerial Skills” and “Psychology of
Entrepreneurship” (University of Economics Prague, Czech Republic),
psychological education in coaching, personal development and training (“Training
the trainer”), and Entrepreneurship education (start-up and growth, Business
Planning) (Erasmus University Rotterdam, The Netherlands).
3. MAIN PEDAGOGICAL AND DIDACTICAL APPROACHES
The learning method is explicitly ‘student-centred’ rather than ‘teacher-
centred’. This means that the students will first spend time exploring and
discussing what they already know about particular topics, which will enable
them to recognize where and how the new material fits into their current
knowledge base. We will stimulate the students to have an active role in the
ERASMUS INTENSIVE PROGRAMME
19
learning process, and they will be trained to apply what they have learned to
practice. The student learns to learn, analyse and solve problems. The advantage
of this method is that it increases retention, because the student acquires
knowledge that is directly useable and applicable.
During the intensive program, students experience the importance of
interdisciplinary knowledge for solving problems. They learn the relationship
between information derived from different disciplines and how to integrate this
information efficiently in order to acquire new knowledge and to solve the
problems. The student’s knowledge develops cumulatively throughout the study
program through progressive acquisition of new information.
Additionally, the program also pays attention to the development of attitudes
with concomitant knowledge of culture-related values and norms. They will
work in small teams, which will stimulate discussion and force participants to
consciously and critically deal with their own and each other’s attitudes.
In line with current development in entrepreneurship education, various
methods of teaching and training will be used. The lectures will be combined
with role plays, group discussions, team work, case studies, self-analysis (of own
strengths and weaknesses related to entrepreneurship), elevator pitches, problem-
based learning, and discussion with a successful entrepreneur. Finally, a web page
will be further used to enhance the learning process.
The IP program is designed for Master and PhD Social Science and
Management students, because of their future involvement in research activities
and in teaching and guiding entrepreneurship students. Moreover, the IP will
benefit the student’s entrepreneurial capabilities themselves, so that they can
become effective role models for the students they will teach and/or become
interested in an entrepreneurial career themselves.
The results of this project will be used to develop and/or improve study
programmes at the participating institutions. A new PhD course will be developed
in the Department of Social and Organizational Psychology of Spanish National
Distance University (UNED). At Prague University of Economics, this project will
help to innovate the current “Psychology of Entrepreneurship” course taught in
Czech and will be a basis for teaching “Psychology of Entrepreneurship” in
English. Similarly, the experience with the course will be fed back to re-design the
course ‘Psychology of Successful Entrepreneurship’ taught at the Philipps-
University Marburg and prepare its teaching in English (Master-level courses). At
PSYCHOLOGY OF ENTREPRENEURSHIP
20
the University of Verona this project will be used to design a Master in
“Entrepreneurship: psychological, sociological and economic perspectives”.
4. PARTNERSHIP COMPOSITION
The Spanish National Distance University (UNED), is similar to other
Spanish public Universities. It awards the same qualifications, which are equally
valid and it is run under the same general legislation. However, the special features
of UNED make it different from most other Spanish Universities. This is due to
the fact that it is nationwide in scope, uses different methodology, and has a wide
social influence. It is UNED's teaching methodology, what actually makes it special
within the spectrum of Spanish higher education. The keystones of this
methodology are printed and audiovisual teaching material, tutorial teaching, and
an ever-increasing use of new information and communications technologies.
At present, the Spanish National Distance University (UNED) alsocoordinates
and participates in the following European projects: E-Learning: “E-xcellence,
creating a standard of excellence for e–learning” (2004-3536/001-001ELE-
ELEB14.), Leonardo: “Proyecto Parmenide (Promoting Advanced Resources and
Methodologies for New Teaching and Learning solutions in Digital Education”
(2005-I/05/I/PP-154064), Erasmus Mundus: “Red ACTIVE: AIESAD-EADTU
Credit Transfer in Virtual and distance Education” (2005-3263/001-001MUN-
MUNB41), Erasmus Mundus: “EDU-CONTACT”, EUMEDIS – “Avicenna
Virtual Campus” (B7-4100/2000/2165-084-P510), Sócrates – Comenius “A
practical guide to implement intercultural communication” (106223-CP-1-2002-
1-ES-COMENIUS-C21), Sócrates – Comenius – “Dimensión Europea de los
problemas de convivencia escolar: prevención, diagnóstico e intervención”
(106377-CP-1-ES-COMENIUS-C21), Leonardo “International comparative
studies and course development on SME-s” (2003-3448001-001-LE2-51OREF)
and Sócrates - Grundtvig: Los programas de Educación Superior en Instituciones
penitenciarias: Diagnóstico europeo y propuestas de mejora” (225396-CP-1-2005-
1-ES-GRUNDTVIG-GI).
The University of Verona was established fairly recently but its cultural
background goes back in time. Since the 14th century Lectures in Law,
Medicine, Literature and Philosophy were held in the cultural circles of the
town. Nowadays, with 690 faculty staff and 552 administrative and technical
ERASMUS INTENSIVE PROGRAMME
21
staff, the University educates more than 20.000 students. In spite of its steady
growth, the University still retains the atmosphere of a small campus where
students and teachers can meet both on and off the University premises.
The University devotes special attention to the city of Verona and its
territory by implementing research projects and various forms of co-operation
that increase the mutual potential for cultural and economic growth. It receives
research grants by local, national, European and world-wide agencies. More than
190 co-operation agreements signed with foreign Universities and the extensive
participation to international exchange and co-operative programmes both in
and outside Europe involving students and researchers, show the international
vocation of this University.
The University of Verona counts 8 Faculties, 35 Bachelor degrees, 29 Master
degrees, 49 Postgraduate specialization courses and approximately 30 PhD
courses. The new didactic system adopted by the University of Verona from the
Academic Year 2001/2002 is organized in 3 study cycles: the first cycle, three
years length, is characterized by a professional training type content and will
conclude with the award of a Bachelor Degree (L). The second cycle, lasting
two years, will lead to the award of a Master Degree (LS). The organization of
the courses at the Faculty of Medicine is similar for paramedical professions,
whereas the Degree in Medicine and Surgery and the Degree in Dentistry can
be obtained at the end of a single cycle period of study of 5 years. The third
cycle, lasting two to four years, delivers a Doctorate or a Postgraduate
Specialized Degree.
The University of Economics, Prague (UEP) is a state funded University
that was established in 1953. UEP offers the high quality business and economic
education at the bachelor’s, master’s and doctoral levels to both Czech and
international students (more than 15.000 together). UEP has a proven reputation in
the field of international co-operation. It is a member of CEMS, PIM, efmd,
AACSB, EAIE etc. UEP provides a mix of professional academic background and
high research potential. It is also highly experienced with participation in
international projects (e.g. 5th FP, 6 th FP, Socrates, Leonardo, Jean Monnet). The
Department of Managerial Psychology and Sociology focuses in both research and
teaching activities on four broadly conceived areas - problems of managerial
psychology and sociology in firms and organizations, entrepreneurial potential
development, recent issues of culturo logical concept of a firm and its management
in the environment of national and corporate cultures clashes within the integrating
Europe and the development of managerial competence of firm’s executives. In
PSYCHOLOGY OF ENTREPRENEURSHIP
22
2005, members of the department published a book, “Psychology of
Entrepreneurship,” in the Czech language.
In its present form, the Erasmus University Rotterdam has been in
existence since 1973. Its history, however, dates back to 1913, the year in which
the Netherlands School of Commerce was established through private initiatives
with broad support from the Rotterdam business community. Erasmus University
Rotterdam has bundled its education and research into three domains, in which
the university enjoys international recognition. The cohesion in domains is
conducive to multidisciplinary collaboration in education and research. Theory
driven scientific teaching and research programmes are linked to programmes
driven by society's needs. The three domains are linked to the seven faculties of the
EUR.
Both the Rotterdam School of Management (home of Prof. Dr. Uhlaner) and
the Faculty of Social Sciences (home of Dr. Gorgievski) have significant experience
with participation in international projects. The Faculty of Social Sciences has
much experience with student and teacher mobility programs (Erasmus, Socrates)
and it has been participating in a successful annual IP programme “On the future of
work” since 2003, which was a follow up of two earlier series “Social and Cultural
Change in Europe”. In addition, the Institute of Psychology in particular
collaborates in international programmes aimed at developing, implementing and
evaluating student centred teaching methods (e-learning, problem based Learning).
Most recent are a project aimed at promoting PBL-teaching in Thailand financed
by Asia-Link, and the evaluation of a training programme for police officers in
South Africa. The Institute of Psychology has also won several awards for the
development of e-learning methods (e.g. ICT Award 2004 and the European
Academic Software Award 2004).
The Technical University Dresden (Technische Universität Dresden ) dates
back to the 1828 and ranks among the oldest technical-academic
educational establishments in Germany. The TU Dresden has about 35.000
students and almost 4.200 permanent employees, 419 professors among
them, and, thus, is the largest university in Saxony, today. Having been
committed to sciences and the engineering before the reunification of Germany,
TU Dresden now is a multi-discipline university, also offering humanities and
social sciences as well as medicine. There are only few universities in Germany
which are able to match this broad scientific spectrum. Many degrees which
can be obtained at TU Dresden are internationally acknowledged. At the
outset of the 1990s TU Dresden was restructured and has since then consistently
ERASMUS INTENSIVE PROGRAMME
23
turned toward competitiveness. This, of course, includes a business-oriented
way of thinking and action as well as expanding already existing
partnerships of science with industry and economy. Students also benefit
from this practice-oriented and interdisciplinary co-operation as teachings
and research are based on the principle of incorporating students and graduates
into current research tasks as soon as possible. The faculty of Psychology at the
TU Dresden is embedded in the Faculty of the Mathematics and Nature
Sciences and offers Students broad Spectrum from Clinical Psychology and
Psychotherapy to Cognitive Neurosciences and Human Factors. Faculty of
Work and Organisational and Economical Psychology enables traditional and
excellent reinforcement in this field.
PSYCHOLOGY OF ENTREPRENEURSHIP
24
25
CHAPTER 2
THE INTERNATIONAL NETWORK OF PSYCHOLOGY OF
ENTREPRENEURSHIP RESEARCH AND EDUCATION (INPERE)
Dominika Dej
Department of Work and Organizational Psychology
University of Technology in Dresden
1. STORY OF THE NETWORK
Mutual interest to promote and foster psychological perspective of the
entrepreneurship stimulated young and ambitious researches from the six EU
member states to form and develop international Network valueing unity,
integrity, cooperation, activity and respect. Basing on these pursuits born the
idea to create common network.
The International Network of Psychology of Entrepreneurship Research and
Education was finally created in May 2005 during the conference of the
European Association of Work and Organizational Psychology in Istanbul.
Today INPERE bounds researchers and educators from the six countries:
Poland, Germany, Netherlands, Czech Republic, Italy and Spain. Associated
with INPERE are many further advisors and students from different countries.
PSYCHOLOGY OF ENTREPRENEURSHIP
26
2. STRUCTURE AND MEMBERS OF THE NETWORK
INPERE as a network has its own council being in charge. Senior advisors
support INPERE in developing research and exchanging knowledge and skills.
2.1. Member of the council
Dr. Mª Evelina Ascalon - The Netherlands
Dr. M Evelina Ascalon is a Filipino-American who works as a post-doctoral
researcher in The Netherlands. She received her Ph.D. in Industrial-
Organizational Psychology from the University of Tulsa, although her
dissertation was jointly completed at the Erasmus University Rotterdam. Her
main areas of research include: Entrepreneurship, Leadership Development,
Cross-cultural Issues, Performance Assessment, Training and Evaluation.
Prof. Dr. Adalgisa Battistelli - Italy
Prof. Dr. Adalgisa Battistelli is associate professor of Work and Organizational
Psychology at the University of Verona. She received her degree in psychology
at University of Padua and her Ph.D in Work and Organizational Psychology at
University of Bologna. Her main areas of research include: learning, training and
development in organizations; attitudes in organization; work motivation;
psychology of entrepreneurship. In this last area, the research focus is on
entrepreneurial process from intention to enterprise creation and the role of
motivations, personality and beliefs in interaction with social, economic and
cultural environment.
Mgr. Dominika Dej - Poland - Germany
Mgr. Dominika Dej is PhD Student and lecturer at the Institute of Work and
Organization Psychology at the University in Dresden. She completed her study
at the University of Silesia (Poland). Since 2002, she is involved in research
among entrepreneurs in Poland, Germany, Czech Republic and Bulgaria. Her
INPERE
27
research area includes the factors of entrepreneurial success and heath. To her
interests belongs cross- culture psychology
Dr. Marjan Gorgievski - The Netherlands
Dr. Marjan Gorgievski is assistant professor at the Institute of Psychology at the
Erasmus University in Rotterdam. Her area of expertise is occupational health
psychology. Her current research interest includes the bi-directional relationship
between well-being and performance. Marjan has been involved in research
among agricultural entrepreneurs since 1996 and research among entrepreneurs
since 2002.
Martin Lukeš - Czech Republic
Martin Lukeš, born 1976, graduated in WO Psychology at Charles University,
Prague and in Business Administration at University of Economics, Prague. At
this university he works as a senior researcher and lecturer. His professional
interest lies in the fields of entrepreneurship research and education, cross-
cultural research, and managerial trainings. He published a book Psychology of
Entrepreneurship. In the past he worked as a HR consultant for SIEMENS and
for U.S. based Media Company. He is a member of the board of Czech
Association of Work and Organizational Psychologists.
Ute Stephan - Germany
Ute Stephan is a lecturer at the Philipps-University Marburg, Unit of Work and
Organizational Psychology. Her research interests lay in entrepreneurship, cross-
cultural psychology and occupational health psychology. She recently completed
a 3 year interdisciplinary and cross-cultural entrepreneurship research project
that she co-led with Prof. Peter G. Richter at the Dresden University of
Technology. She also works as consultant and trainer to companies.
Dr. Juan Antonio Moriano León - Spain
Dr. Juan Antonio Moriano León is Assistant Professor in the Department of
Social and Organizational Psychology at the Spanish University for Distance
Teaching (UNED). He received his University degree and Doctorate (PhD)
from the Spanish University for Distance Teaching (UNED). His research focus
is on the entrepreneurship from a psychosocial perspective. Juan Antonio
Moriano is author of several articles in Spanish journals about Individualistic and
Collectivistic Values, Self-Efficacy and Entrepreneurship.
PSYCHOLOGY OF ENTREPRENEURSHIP
28
2.2. Senior members and advisors of INPERE
Prof. Lorraine Uhlaner, Erasmus University Rotterdam,
http://people.few.eur.nl/uhlaner/index.html
Prof. Michael Frese, University of Giessen,
http://www.psychol.uni-giessen.de/ma/dat/frese/
Prof. Christian Korunka, University of Vienna,
http://homepage.univie.ac.at/christian.korunka/
3. INPERE MEETINGS AND COMMON ACTIVITIES
3.1. Istanbul
15
th
of May 2005 European Association of Work and Organizational
Psychology ( EAWOP) Istanbul. Organisation of Common Symposium “Value
of the Entrepreneurship” and common interests in the area of the entrepreneurship
connected future INPERE members.
INPERE
29
3.2. Marburg & Giessen
In Marburg we met on 24.09. -25.09. 2005. We developed and established
our network, decided on our goals and missions as well as on further activities
and cooperation.
On 26.09.2005 we participated in the workshop led by Prof. Michael Frese
at the Justus Universität in Giessen, targeting on how to publish in
international journals and how to conceptualise good research.
3.3. Verona
In April 2006, we spent the Eastern Time working on the research proposal,
integrating different perspectives and putting together our point of views into the
research model. We developed common model of each stage of entrepreneurial activity.
PSYCHOLOGY OF ENTREPRENEURSHIP
30
3.4. Athens 2006
At the 26
th
International Congress of Applied Psychology INPERE
organized following activities connecting researchers of Entrepreneurship in
Europe:
1. Research Symposium: “Entrepreneurial values and intentions across European
cultures”
2. Panel Discussion: “The value of applying psychological perspectives to
Entrepreneurship”
3. Poster Symposium: “Explorations of Entrepreneurship from an Entrepreneurial
Psychological Perspective“
3.5. Dresden
In Dresden we were working on a research project and we developed the first draft
of the research proposal.
INPERE
31
4. MISSION STATEMENT AND GOALS OF INPERE
The keynote goal of the group is researching undiscovered areas of the
psychology of entrepreneurship and creating entrepreneurial mindset in
European Countries. INPERE pursue to provide a medium in which
researchers in the field of entrepreneurial psychology can learn from one
another, exchange feedback, receive assistance, and work together on
independent and common projects, while presenting ourselves as a unified group
and to publish in international journals.
INPERE intend to conduct research of issues identified as crucial on
European political and economical level and is highly embedded in European
Commissions directives and policy. In addition, our network aspire to conduct
research basing on multidisciplinary methods and to tights both theoretical
approach and practical use. Common research and educational programs target
on potential and existing entrepreneurs and aims to endow useful results
supporting these groups through training and educational programmes.
5. HOW WAS BORN THE INTENSIVE PROGRAMME SOCRATES
ERASMUS?
The idea to create and lead the program targeted on students interessted in
entrepreneurship and probbaly willing to star up in the future was born durng
the first meeting of INPERE. This idea developed and finally it found its frames
in the Intensive Programme Socrates Erasmus. Preparations to the program
started in January 2006 with the preparations of the application, calculating costs
and creating the program. Afterwards we have started with further activities,
including organizational and content issues.
6. RESEARCH PROJECT PROPOSAL
After working on the research project proposal and developing the model of
entrepreneurial activities from start up till the succession, we finally decided to
concentrate on the entrepreneurial intention and start up phase. To our target
group belongs graduated and students who are potentially successfully
entrepreneurs as well as unemployed who have high intention to be self-
employed.
PSYCHOLOGY OF ENTREPRENEURSHIP
32
For our theoretical frame we have chosen the Theory of Planned Behaviour
(Ajzen, 1988, 1991), the Individualistic and Collectivistic Values Theory
(Schwartz, 1992, 1996), the Conservation of Resources Theory (Hobfoll,
1989,2001) and the Action Theory (Hacker,1989,2003; Tomaszewski
1969,1996; Frese&Zapf, 1994)
33
CHAPTER 3
ENTREPRENEURSHIP AS A PROCESS
Juan A. Moriano, Aneta Zarnowska and Francisco J. Palací
Department of Social and Organizational Psychology
UNED
1. LEARNING GOALS
In this course you will learn how entrepreneurship is considered to be a
process with distinct stages.
1) You will learn what factors influence entrepreneurs’ behaviors during
pre- launch, start-up and post-launch phases.
2) You will learn what barriers prevent people from launching a new
venture.
3) You will learn what trigger events lead an entrepreneur to actually form a
new venture.
2. THEORETICAL BACKGROUND
There are two distinctly different approaches to defining entrepreneurship.
The first approach is to define what an entrepreneur is and then observe them.
Based upon the observations, entrepreneurship would be defined inductively in
terms of what the individuals do. The second approach is to propose a general
definition of entrepreneurship and its related behaviors, thereby defining
entrepreneurs as those who engage in entrepreneurial activity.
The study of entrepreneurship from a psychological point of view began
with the first approach centering only on the analysis of individual differences
between entrepreneurs and non – entrepreneurs. This approach draws the
entrepreneurship as a “state of being” (Bygrave, 1989) and assumes that there are
PSYCHOLOGY OF ENTREPRENEURSHIP
34
some unique characteristics of the entrepreneur that can be separated and
identified in order to build a personality profile of the typical entrepreneur. The
most widely used traits are the need for achievement (Langan-Fox & Roth, 1995;
McClelland, 1965), the risk taking propensity (Brockhaus, 1980; Miner & Raju,
2004), the internal locus of control (Furnham, 1986; Kaufmann & Welsh, 1995)
and the general self–efficacy (Chen, Green, & Crick, 1998; Markman, Balkin, &
Baron, 2002). Nevertheless, this personality perspective has been criticized for
the methodological as well as theoretical (Gartner, 1988; Robinson, Stimpson,
Huefner, & Hunt, 1991; Shane & Venkataraman, 2000; Shaver & Scott, 1991).
Several authors have proposed that the focus of the field of entrepreneurship
change from the focus on the characteristics of the entrepreneur to the
entrepreneurial process (Gartner, 1988; Shane & Venkataraman, 2000; Shaver &
Scott, 1991). By focusing on the process, entrepreneurs are identified by their
participation in the process, not by a unique set of characteristics. Many models
of entrepreneurship as a process have been proposed (e.g. Baron, 2002; Carton,
Hofer, & Meeks, 1998). In general, these models divide entrepreneurship in
three distinct stages: prior to the launch of a new venture (pre-launch phase), the
period following the launch of a new venture (the start-up phase), and further
development beyond the initial start-up period.
Figure 1. Entrepreneurial process
Entrepreneurship Management
Pre-launch Launch
Business
Idea
New
Venture
Organization
Building
Sustainability
New Venture Formation
New Venture
Performance
Growing
Bankruptcy
Post-launch
Opportunity
Identification
Individual, interpersonal and
social factors
Individual, interpersonal and social
factors
ENTREPRENEURSHIP AS A PROCESS
35
There are two primary dimensions of the entrepreneurship paradigm: 1) new
venture formation and 2) new venture performance. New venture formation
deals with the antecedents to the formation of a new venture and its creation
(Carton, Hofer, & Meeks, 1998). The pre-launch phase of the entrepreneurial
process is normally characterized as merely consisting of the psychological
development of the entrepreneurial person and the cognitive processing of the
anticipated entrepreneurial tasks. The psychological development of the person
can be seen to build on attitudinal, motivational and self-perceptual factors of the
person. The favorable attitudes towards entrepreneurship, the subjective norms,
the entrepreneurial self-efficacy, etc. are necessary but not sufficient conditions
for one to become an entrepreneur (Pihkala & Vesalainen, 2000).
Being committed to the start up, the nascent entrepreneur is cognitively
oriented to instantly looking for opportunities and weighing between different
alternative routes for carrying out the entrepreneurial trait. However, even if
attitudes and motivations are in favor by the entrepreneurial decision, the
personal and social barriers obstruct the choice for entrepreneurship. The
Research on career behavior suggests that age, education and career dependency
are examples of personal barriers to entrepreneurship. Recognizing the barriers,
it is likely that entrepreneurial education be refocused in an attempt to enhance
the formation of entrepreneurial intentions (Pihkala & Vesalainen, 2000).
The second element of the paradigm is new venture performance. This
includes the development and implementation of new venture strategy, the
nature of the external environment munificence and industry structure, the
accumulation of resources, building of an organization including developing
distinctive competences, establishing strategic networks, capturing customers,
and establishing an organization culture and values. When a company reaches
self-sustainability, it exits the entrepreneurship paradigm. At that time, the
organization is generally not dependent upon the founding team, risk has been
reduced, sustainable competitive advantage(s) have been created, the rate of
change has been drastically reduced, and repetition in the functions of the
organization have occurred. The venture must have also achieved sufficient
financial success in order to fund ongoing growth (Carton, Hofer, & Meeks,
1998).
PSYCHOLOGY OF ENTREPRENEURSHIP
36
3. LITERATURE LIST
Article 1: OB and Entrepreneurship: the reciprocal benefits of closer
conceptual links. Robert A. Baron (2002)
One widely accepted definition of the field by entrepreneurship
(Venkataraman, 1997, 6) suggests that it is “A scholarly field that seeks to
understand how opportunities to bring into existence “future” goods and
services are discovered, created, and exploited, by whom, and with what
consequences.” This definition indicates that entrepreneurship involves a
complex process in which specific individuals recognize opportunities and then
act to convert them into tangible economic benefits (e.g. by creating new
ventures). It is a central thesis of this paper that entrepreneurs play a key role in
this process and that because they do, OB – the branch of management science
that focuses on human behavior – can contribute much to understanding the
entrepreneurial process. More specifically, OB can help answer questions long
addressed by entrepreneurship research such as these:
1. Why do some persons but no others choose to become entrepreneurs?
2. What factors influence entrepreneurs’ success? And
3. Why do some persons, but no others, recognize economically
advantageous opportunities?
Article 2: The entrepreneur and entrepreneurship: operational
definitions of their role in society. Carton, Hofer and Meeks (1998).
The role of the entrepreneur in society is difficult to establish if the concept
of entrepreneurship is inadequately defined. This lack of a clear entrepreneurship
paradigm poses problems for both policy makers and for academics. This paper
proposes an operational definition of the entrepreneur and entrepreneurship,
synthesizing past definitions into operationalizable constructs. Entrepreneurship
is the pursuit of a discontinuous opportunity involving the creation of an
organization (or sub-organization) with the expectation of value creation to the
participants. The entrepreneur is the individual (or team) that identifies the
opportunity, gathers the necessary resources, creates and is ultimately responsible
for the performance of the organization. Therefore, entrepreneurship is the
means by which new organizations are formed with their resultant job and
ENTREPRENEURSHIP AS A PROCESS
37
wealth creation. A critical component of the proposed definition is the necessary
condition that the organization created actually provides goods and/or services
to society, not merely for internal consumption. Clearly this definition favors the
behavioral school of thought on entrepreneurship, but it should not be taken to
discount the importance of the traits and characteristics of the entrepreneur from
the perspective of their propensity to act. Although growth, innovation, and
tenacity to overcome hurdles are commonly cited as elements of
entrepreneurship, we argue that these are consequences, not antecedents, to
entrepreneurial activity.
Article 3: Barriers to entrepreneurship - educational opportunities.
Pihkala and Vesalainen (2000).
The paper focuses on the prerequisites of targeting entrepreneurial education
to meet the needs of people in different situations. The paper set out three main
objectives: to examine, whether there are different patterns (or types) of barriers
associated with entrepreneurial intention; to investigate whether the perceived
barriers are associated with the personal level of education, age or career
development; and whether the barriers could reflect different opportunities of
offering entrepreneurial education. The analysis of a survey response provides a
useful picture of the perceived barriers to entrepreneurship, and of the
possibilities for entrepreneurship education to affect these perceptions.
REFERENCES
BARON, R. A. (2002). OB and Entrepreneurship: the reciprocal benefits of closer conceptual
links. In B. M. STAW & R. M. KRAMER (Eds.), Research in Organizational Behavior - An
annual series of analytical essays and critical reviews (Vol. 24, pp. 225-270). Oxford: Elsevier
Science.
BROCKHAUs, R. H. (1980). Risk taking propensity of entrepreneurs. Academy of Management
Journal, 23, 509-520.
CARTON, R. B., HOFER, C. W., & MEEKS, M. D. (1998). The entrepreneur and entrepreneurship:
operational definitions of their role in society. Paper presented at the Frontiers of
Entrepreneurship Research, Babson College, Wellesley.
CHEN, C. C., GREEN, P. G., & CRICK, A. (1998). Does entreprenurial self-efficacy distinguish
entrepreneurs from managers? Journal of Business Venturing, 13, 295-316.
PSYCHOLOGY OF ENTREPRENEURSHIP
38
FURNHAMM, A. (1986). Economic locus of control. Human Relations, 39(1), 29-43.
GARTNER, W. B. (1988). "Who is an entrepreneur" is the wrong question. American Journal of Small
Business, 13 (spring), 11-32.
KAUFMANN, P., & WELSH, D. (1995). Locus de control and entrepreneurship en the Russian Republic.
Entrepreneurship: Theory and Practice, 20 (1), 43-56.
LANGAN-FOX, J., & ROTH, S. (1995). Achievement motivation and female entrepreneurs. Journal of
Occupational and Organizational Psychology, 68, 209-218.
MARKMAN, G. D., BALKIN, D. B., & BARON, R. A. (2002). Inventors and New Venture
Formation: the Effects of General Self-Efficacy and Regretful Thinking. Entrepreneurship Theory
and Practice, 27(2), 149-165.
MCCLELLAND, D. C. (1965). Need Achievement and Entrepreneurship: A longitudinal study. Journal
of Personality and Social Psychology, 1, 389-392.
MINER, J. B., & RAJU, N. S. (2004). Risk Propensity Differences Between Managers and Entrepreneurs
and Between Low- and High-Growth Entrepreneurs: A Reply in a More Conservative Vein. Journal
of Applied Psychology, 89(1), 3-13.
PIHKALA, T., & VESALAINEN, J. (2000). Barriers to entrepreneurship - educational opportunities. Paper
presented at the IntEnt 2000 Conference, July 11 - 13, Tampere.
ROBINSON, P., STIMPSON, D., HUEFNER, J., & HUNT, H. (1991). An attitude approach to the
prediction of entrepreneurship. Entrepreneurship Theory and Pratice, 15 (4), 13-32.
SHANE, S. A., & VENKATARAMAN, S. (2000). The promise of entrepreneurship as a field of research.
Academy of Management Review, 25, 217-226.
SHAVER, K. G., & SCOTT, L. R. (1991). Person, Process, Choice: The Psychology of New Venture
Creation. Entrepreneurship Theory and Practice, 16, 23-45.
39
CHAPTER 4
ENTREPRENEURIAL INTENTIONS
Francisco Liñán and Juan A. Moriano
Department of Apply Economy I, Universidad de Sevilla
Department of Social and Organizational Psychology. UNED
1. LEARNING GOALS
In this course you will learn how prior entrepreneurial intentions determine
eventual entrepreneurial behaviors.
1. You will learn what psychosocial factors influence entrepreneurial
intentions.
2. You will learn what models explain the formation of entrepreneurial
intentions.
3. You will learn how entrepreneurial intentions and other unobserved
variables may be measured.
4. You will learn how to use the Entrepreneurial Intentions Questionnaire
(EIQ).
2. THEORETICAL BACKGROUND
Starting a new venture is, in the first place, an individual’s personal decision.
This is so obvious that it is quite often forgotten. Most research in
entrepreneurship concentrates on analyzing the firm-creation process once the
decision to create has already been taken, completely overlooking the internal
process that leads people to that decision. From this viewpoint, the important
thing is not which particular individuals will create a new firm. It is understood
that at least some of them will take the decision to start new ventures. Taken to
the extreme, ecological approaches to entrepreneurship could be an example of
this view (Aldrich & Wiedenmayer, 1993). However, it does not answer why
there are such important differences in regional start-up rates.
PSYCHOLOGY OF ENTREPRENEURSHIP
40
The publication of the Green Paper on Entrepreneurship in Europe
(European Commission, 2003) raised an important question regarding this
subject. How to improve people’s inclination toward developing new
entrepreneurial initiatives? Approaching entrepreneurship as an attitude, the
Green Paper broadens the range of business politics, going beyond the mere
elimination of the barriers that obstruct business development and growth, with
the main goal being to encourage more people to become entrepreneurs and
prepare them for it.
The individual’s decision to become an entrepreneur is sometimes assumed
to depend on personality traits: “If you have the proper personality profile, you
will become an entrepreneur sooner or later”. This is what Shaver & Scott
(1991) call the “personological” approach, which seems to have proved largely
fruitless in predicting start-up decisions by individuals (Liñán & Santos, 2007).
Even though some statistically significant relationships have been found between
certain personality traits and being an entrepreneur, predictive capacity has been
very limited (Reynolds, 1997). In addition, this approach has been criticized for
the methodological as well as theoretical aspects (Gartner, 1988; Robinson,
Stimpson, Huefner, & Hunt, 1991; Shane & Venkataraman, 2000; Shaver &
Scott, 1991).
A response to the limited success of the personality approach has been to
study entrepreneurship as a career choice. Since the decision to become an
entrepreneur may be plausibly considered as voluntary and conscious (Krueger et
al., 2000), it seems reasonable to analyze how that decision is taken. In this sense,
the entrepreneurial intention would be a previous and determinant element
towards performing entrepreneurial behavior (Kolvereid, 1996). Keeping in
mind that creating a new company requires time, involving both considerable
planning and a high degree of cognitive processing, the entrepreneurial behavior
could be considered as a type of planned behavior for which the intention
models are ideally convenient (Bird, 1988; Katz & Gartner, 1988; Krueger et al.,
2000).
Several models aiming to explain entrepreneurial intention have been
developed, such as the Entrepreneurial Event Model of Shapero (1982), the
Model of Implementing Entrepreneurial Ideas (Bird 1988) or Maximization of
the Expected Utility (Douglas and Shepherd 2000). Although these models
represent a step forward in entrepreneurial intentions research, they are
individualistic in nature and do not take into the account the social factors.
Therefore, several authors began focusing on Social Psychology in search of a
ENTREPRENEURIAL INTENTIONS
41
model that would explain entrepreneurial intention from the point of view of
the interaction between social and personal factors. Consequently the Theory of
Planned Behavior (TPB, Ajzen, 1991) has become the most frequently used
theoretical framework in recent studies of entrepreneurial intention (Alexei and
Kolvereid 1999; Audet 2002; Autio et al. 2001; Krueger, Reilly and Carsrud
2000; van Gelderen et al. 2006)
From the TPB comes the proposal that the intention is a function of the
attitude towards the behavior, the subjective norm and the perceived control
(see figure 1). The fundamental difference of this theory with respect to the
previously mentioned models is in the role of the subjective norm, i.e. the
emphasis of the social context on the person to carry out the behavior.
Figure 1.
TPB model (Ajzen, 1991)
The first component of the TPB is the attitude toward the behavior, that is a
person’s overall evaluation of the behavior (Ajzen, 1991). Previous studies on
the subject of the entrepreneurial intention have measured this variable in a
general way through items which focus on the personal attractiveness of starting
Attitude
toward the
behavior
Subjective
norm
Perceived
behavioral
control
Intention Behavior
PSYCHOLOGY OF ENTREPRENEURSHIP
42
a business (Autio, Keeley, Klofsten, Parker, & Hay, 2001; Krueger, Reilly, &
Carsrud, 2000).
The second component of the model is the subjective norm, which is defined
as a person’s own estimate of the social pressure to perform, or not perform, the
entrepreneurial behavior (Ajzen, 1991). These pressures can become a trigger or
a barrier in the development of the entrepreneurial career, depending on the
social environment. For example, in Europe, the failure of a new business is very
negatively perceived, whereas in the United States, it is assumed that a person
can go through several failures before becoming a successful entrepreneur.
The third component is the Perceived Behavioral Control that relates to
perceptions of the behavior’s feasibility, which is an essential predictor of the
behavior. Individuals usually choose behaviors they believe they will be able to
control and master. This variable is very similar to the Self-Efficacy notion
constructed by Bandura (1986), because both are concerned with perceived
ability to perform a behavior. Self-Efficacy has been used in numerous studies of
entrepreneurship. De Noble, Jung and Ehrlich (1999) developed an
Entrepreneurial Self-Efficacy Scale (ESE) and found that it’s score had a
significant positive correlation with students’ intention to pursue a new venture
opportunity. In particular, the ESE dimensions Developing new opportunities,
Innovative environment and Unexpected challenges had significant positive
correlations with Entrepreneurial intention.
If we compare these explanatory variables of the TPB with those considered
by Shapero and Sokol (1982), we can see that perceived feasibility -as it has been
mentioned above corresponds quite well with perceived behavioral control. On
the other hand, the willingness to carry out that behavior (perceived desirability)
can be understood as being composed of the attitude towards it and the
perceived subjective norms. In this sense, it may be remembered that Shapero
and Sokol (1982) considered desirability as a result of social and cultural
influences.
When the entrepreneurial process is carefully analyzed (see chapter 3), it
comes out that there are at least three kinds of variables involved in any start-up:
(a) the person(s) leading the project; (b) the environment in which it is
embedded; and (c) the characteristics of the opportunity to be exploited. It is
very common for entrepreneurship education initiatives focus on, first, building
a balanced entrepreneurial team and, second, how to detect a viable opportunity
ENTREPRENEURIAL INTENTIONS
43
to be seized. In such situations, teaching concentrates on how to manage the
project: i.e., business planning, locating resources, marketing the goods or
services, and so on. Thus, this leads to a higher percentage of successful start-ups.
However, there are still numerous individuals left undecided about becoming
entrepreneurs.
In our view, entrepreneurship education may act on the three elements of
the entrepreneurial process, but to a different extent, and with distinct
instruments (Guzmán & Liñán, 2005; Liñán, 2007). Its major role will be
prepare the person for successfully attempting the start-up. In this sense,
intention models (Ajzen, 1991) provide a very promising tool to explain the
decision to become an entrepreneur, and the variables that affect it (Fayolle &
DeGeorge, 2006; Liñán, 2004). Regarding leading the project, entrepreneurship
education may be very useful in providing specific knowledge and network
contacts within the local environment. Finally, its role with respect to the
economic opportunity it is somehow more controversial. There is considerable
debate regarding whether such opportunities are discovered or enacted. The
latter would mean a greater role for entrepreneurship education. But the former
also implies the need to transmit techniques to actively search for the existence
of new opportunities (see chapter 6).
3. ENTREPRENEURIAL INTENTION QUESTIONNAIRE (EIQ)
3.1. Project summary:
1. The EIQ has been used on different samples with good results. The most
widely used version has been EIQ v.2.05. It has been used on 400
students from Andalusia, 1000 from Portugal, 133 from Taiwan, 94 from
Maastricht (Netherlands) and 60 from Bolivia (as far as I am aware).
Other researchers have received the EIQ, but have not reported their
results, nor sent the data yet.
2. The analyses carried out at the moment are highly satisfactory. Statistical
reliability and validity of the constructs used has been very high, and
results from different countries are consistent.
3. However, some possible drawbacks of the questionnaire design have
been highlighted by reviewers and researchers. Therefore, an “EIQ
PSYCHOLOGY OF ENTREPRENEURSHIP
44
version 3.0” (EIQ-3, for short) is being developed (and almost finished
in English and Spanish) to try to overcome those problems.
4. The first question now (A.-) includes the 20 items used to measure the
central elements of the entrepreneurial intention model. They are
(semi)randomly ordered with one negative every two or three of them.
In this way, acquiescence problem should be solved. The items
corresponding to each scale are the following:
a. Attraction: A02(Reversed), A10, A12(R), A15, A18
b. Social Norms: A03, A08, A11
c. Self-efficacy: A01, A05(R), A07, A14, A16(R), A20
d. Intention: A04, A06, A09(R), A13, A17, A19(R)
5. Most items have been kept as they were before (but rearranged). Only
sentences that have become negative have been changed, and little more:
a. Items in the old q.12 and q.13. They have been written as a
sentence.
b. Some items in the old q.14 have been reversed to make them
positive.
6. The section on entrepreneurship education and q.3 (reasons for choosing
studies) have been deleted, as they were not essential, to keep the EIQ as
short as possible.
7. From now on, therefore, the local project researchers should use EIQ-3.
8. The following steps should be kept to ensure consistency and
comparability of results.
3.2. Participating teams:
• This is a collaborative project open to any local team interested.
• Any interested team should contact the EIRP Steering Group (F. Liñán,
Nigel Bradley & Dana T. Redford) to agree the terms of their
participation.
ENTREPRENEURIAL INTENTIONS
45
• All participating teams should sign a collaboration agreement accepting the
‘communication of results” policy (see below)
• Participating teams will use the Spanish or English version of the EIQ if
possible. When translation is needed they will proceed as follows:
1. Two native speakers will translate the EIQ to the local language
separately. Discrepancies will be solved and a final version will be
produced.
2. A native English or Spanish speaker will translate back to his/her
language. Any discrepancy will be discussed and solved at this
stage.
3. The final local version will be sent to the EIRP Steering Group for
feedback and final approval. At least one of the members of the
Steering Group will share the copyright of each local version.
4. Once the EIQ has been translated to a language, no more
translations will be made. New teams will use the accepted
translated version.
• The final version will keep items and questions in the EIQ as they are.
Any supplementary item the local team wants to include will be added in
separate questions; always after questions A to E. Added items/questions
will preferably be included just before or after the Personal data section.
• The EIRP logo will be used in all versions of the EIQ. It will be located at
the left-hand side of the heading. The logo corresponding to the local
university, centre, institution or group, will be located at the right-hand
side of the heading.
• All publications and documents produced out of this project should
mention the EIRP and acknowledge its role.
3.3. Steps of the Project:
1. Sample selection: last year university business students. This should be
the reference sample for international comparisons. Each local team may,
of course, decide to study a wider sample, comprised of other students,
but it is suggested that the “reference sample” should be the one used for
PSYCHOLOGY OF ENTREPRENEURSHIP
46
multi-country analyses. Thus, it is made sure that results will be
meaningful and completely comparable.
2. Fieldwork for the first survey: the EIQ (version 3) should be used for
the fieldwork. Translations to different languages should be checked by a
native speaker. It is advisable that some colleagues and students answer
the EIQ as a pilot study, to check for possible problems. Whenever
possible, try to complete the fieldwork in the shortest time period,
ideally, during a single month (with no breaks or exams in between).
3. Data analysis. There are several different analyses that may be
performed. The basic steps to confirm the validity of results is indicated
here.
a. Exploratory factor analysis over the 20 items in Question A (A01 to
A20). With EIQ-2 (principal component analysis with varimax
rotation), four factors emerged fully in accordance with a priori
expectations. However, some items loaded sizeably on a second factor.
This was solved using an oblique rotation (promax rotation). It seems
that orthogonal rotations (such as varimax) consider the factors to be
unrelated, and this is an unrealistic assumption in our case. For EIQ-3,
results are not still available.
b. Different factor analysis using a wider set of items may cause problems
(too many factors together are difficult to interpret, and some items do
mix up). Therefore, unless there is a good reason for doing it, it is
suggested that those 20 items are not mixed with others in factor
analysis.
c. Structural equation analysis. PLS, LISREL or others could be used for
the analysis. So far, this has been done for Spain and Taiwan. The
results regarding the four main factors (entrepreneurial intention and its
three antecedents) are highly satisfactory.
d. Confirmatory factor analysis. This is not really necessary, but if you are
writing a paper, this will serve as a confirmation of the results, and thus
make it much more “sellable” / “publishable”.
e. Besides, using structural equation systems, the influence of many
different elements on entrepreneurial intention and its antecedents may
be tested: age, gender, labour experience, role models, etc.
ENTREPRENEURIAL INTENTIONS
47
4. Communication of results. As this is a collaborative project, there
should be a compromise between “ownership” of results and “sharing”
them with other participants. Suggested guidelines are as follow:
a. All local results remain the property of the local research team
obtaining them.
b. All data should be shared with the remaining teams throughout the
project.
c. All participants may use their own data for publication or research
purposes.
d. Any publication should acknowledge participation in the EIRP project
and the copyright of the EIQ version being used.
e. Participants may not use others’ data without express consent from
them.
PSYCHOLOGY OF ENTREPRENEURSHIP
48
4. ENTREPRENEURIAL INTENTION QUESTIONNAIRE (EIQ)
Version 3.1
The research group “SMEs and Economic Development” at University of
Seville, in collaboration with other universities, is undertaking an international
study on firm creation by students and alumni. Our aim is to periodically follow
up with respondents to evaluate their personal and professional status. For this
reason you are asked to provide your contact data at the end of the
questionnaire. If you prefer not to participate in the follow-up, simply leave that
section blank.
In the questionnaire value-scales below, some statements are positive while
others are negative. For each statement, you are asked to indicate your level of
agreement with it, (1) representing total disagreement, and (7) representing total
agreement. Please respond to the items by marking what you consider to be the
appropriate answer, or filling in the blanks. Choose only one answer to each
question.
Thank you very much for your cooperation.
Questionnaire
A. Indicate your level of agreement with the following statements about the
Entrepreneurial Activity from 1 (total disagreement) to 7 (total agreement).
1 2 3 4 5 6 7
A01.- Starting a firm and keeping it viable would be
easy for me
A02.- A career as an entrepreneur is totally
unattractive to me
A03.- My friends would approve of my decision to
start a business
A04.- I am ready to do anything to be an
entrepreneur
A05.- I believe I would be completely unable to
start a business
ENTREPRENEURIAL INTENTIONS
49
A06.- I will make every effort to start and run my
own business
A07.- I am able to control the creation process of a
new business
A08.- My immediate family would approve of my
decision to start a business
A09.- I have serious doubts about ever starting my
own business
A10.- If I had the opportunity and resources, I
would love to start a business
A11.- My colleagues would approve of my decision
to start a business
A12.- Amongst various options, I would rather be
anything but an entrepreneur
A13.- I am determined to create a business venture
in the future
A14.- If I tried to start a business, I would have a
high chance of being successful
A15.- Being an entrepreneur would give me great
satisfaction
A16.- It would be very difficult for me to develop
a business idea
A17.- My professional goal is to be an entrepreneur
A18.- Being an entrepreneur implies more
advantages than disadvantages to me
A19.- I have a very low intention of ever starting a
business
A20.- I know all about the practical details needed to
start a business
B. Considering all advantages and disadvantages (economic, personal, social recognition,
job stability, etc.), indicate your level of attraction towards each of the
following work options from 1 (minimum attraction) to 7 (maximum
attraction).
1 2 3 4 5 6 7
B1 - Employee
B2.- Entrepreneur
PSYCHOLOGY OF ENTREPRENEURSHIP
50
C. Indicate your level of agreement with the following sentences about the values
society put on entrepreneurship from 1 (total disagreement) to 7 (total
agreement).
1 2 3 4 5 6 7
C1.- My immediate family values entrepreneurial
activity above other activities and careers
C2.- The culture in my country is highly favourable
towards entrepreneurial activity
C3.- The entrepreneur’s role in the economy is
generally undervalued in my country
C4.- My friends value entrepreneurial activity above
other activities and careers
C5.- Most people in my country consider it
unacceptable to be an entrepreneur
C6.- In my country, entrepreneurial activity is
considered to be worthwhile, despite the risks
C7.- My colleagues value entrepreneurial activity
above other activities and careers
C8.- It is commonly thought in my country that
entrepreneurs take advantage of others
D. How do you rate yourself on the following entrepreneurial abilities/skill sets?
Indicate from 1 (no aptitude at all) to 7 (very high aptitude).
1 2 3 4 5 6 7
D1.- Recognition of opportunity
D2.- Creativity
D3.- Problem solving skills
D4.- Leadership and communication skills
D5.- Development of new products and services
D6.- Networking skills, and making professional
contacts
ENTREPRENEURIAL INTENTIONS
51
E. Have you ever seriously considered becoming an entrepreneur? Yes No
Education and experience
1. What degree or other qualifications are you studying? _________________
2. When do you expect to complete your studies?
This year? Next year? Later
3. Do you have any employment experience? Yes No
If yes:
a. In what capacity? (If several, in which were you employed the longest)
__________________________________________________
b. Have you been in charge of other people? Yes No
c. How much work experience do you have? (Total number of years) ________
d. How long is it since you left your last job? (Number of years, if still working
write 0) ________
e. How many employees did your current/last employer have? ________
4. Have you ever been self-employed or the owner of a Small or Medium-sized
Enterprise (SME)? Yes No
If yes:
a. How long? (number of years) __________
b. How long is it since you ceased to be self-employed? (Number of years, if still
self-employed write 0) ______
Entrepreneurial knowledge
5. Do you personally know an entrepreneur or entrepreneurs? Yes No
If yes, indicate your relationship to them, and evaluate the following questions from
1 (not at all) to 7 (extremely well).
PSYCHOLOGY OF ENTREPRENEURSHIP
52
1 2 3 4 5 6 7
Family
- To what extent do you know about his/her activity
as entrepreneur?
- To what extent may he/she be considered a ‘good
entrepreneur’?
Friend
- To what extent do you know about his/her activity
as entrepreneur?
- To what extent may he/she be considered a ‘good
entrepreneur’?
Employer / Manager
- To what extent do you know about his/her activity
as entrepreneur?
- To what extent may he/she be considered a ‘good
entrepreneur’?
Other
- To what extent do you know about his/her activity
as entrepreneur?
- To what extent may he/she be considered a ‘good
entrepreneur’?
6.- Indicate your level of knowledge about business associations, support bodies and
other sources of assistance for entrepreneurs from 1 (no knowledge) to 7
(complete knowledge).
1 2 3 4 5 6 7
- Private associations (e.g. Southampton Chamber of
Trade, Institute of Directors, etc.)
- Public support bodies (e.g. Business Link, South
East England Development Agency (SEEDA)
etc.)
- Specific training for young entrepreneurs
- Loans in specially favourable terms
- Technical aid for business start-ups
- Business centres
ENTREPRENEURIAL INTENTIONS
53
Entrepreneurial objectives
7. If you ever started a business, what size would you like it to ultimately achieve
(number of employees)?
Self-employed Micro-enterprise Small enterprise
(No employees) (Up to 10 employees) (10 to 50 employees)
Medium enterprise Large enterprise
(50 to 250 employees) (250 employees +)
8. To what extent do you consider the following factors to contribute to
entrepreneurial success? Indicate from 1 (not at all important) to 7 (extremely
important).
1 2 3 4 5 6 7
- Competing effectively in world markets
- Reaching a high level of income
- Doing the kind of job I really enjoy
- Achieving social recognition
- Helping to solve the problems of my community
- Keeping the business alive
- Keeping a path of positive growth
9. How important would it be for you to continuously develop and grow your
business?
- Indicate from 1 (not at all important) to 7
(extremely important)
10. To what extent would you use the following strategies to expand your
business? Indicate from 1 (not at all likely) to 7 (extremely likely).
- Exporting a significant share of production
- Regularly introduce new products/services for my
customers
- Regularly introduce new processes or systems of
production
- Developing research and development projects
PSYCHOLOGY OF ENTREPRENEURSHIP
54
- Planning the different areas of the firm in detail
- Reaching cooperative agreements or partnerships
with other firms
- Offering specialized training for employees
- Growing your business (personnel, premises, etc.)
Personal Data
11. Age: __________
12. Gender: Male Female
13. Place of birth: _______________________________ .
Place of residence: _____________________________
14. What level of education have your parents achieved?
Father: Primary Secondary Vocational training University
Other
Mother: Primary Secondary Vocational training University
Other
15. What are their present occupations?
Private sector Public sector Self-employed Retired Unemployed Other
Employee employee or entrepreneur
Father:
Mother:
16. How many people are living in your household? (Including yourself) __________
17. Roughly speaking, what is the total monthly income in your household?
(Adding up all revenues from any person living in the household)
Up to 500 From 500 to 1000 From 1000 to 2000
From 2000 to 4000 From 4000 to 7000 From 7000 to 10000
Over 10000
ENTREPRENEURIAL INTENTIONS
55
Contact Data
Filling in the following details will allow us to follow up your evaluations. All
information provided will be considered as strictly confidential, and will only be
used for the aims of this research project.
Name:_________________________________________________________
Address: ________________________________________________________
City/town (State): ____________________ Post Code (ZIP):____________
E-mail: __________________________________ Telephone:____________
REFERENCES
AJZEN, I. (1991). Theory of planned behavior. Organizational Behavior and Human Decision
Processes, 50, 179-211.
ALEXEI, T., & KOLVEREID, L. (1999). Self-employment intentions among Russian students.
Entrepreneurship and Regional Development, 11(3), 269-271.
AUDET, J. (2004). A Longitudinal Study of the Entrepreneurial Intentions of University Students.
Academy of Entrepreneurship Journal, 10 (1 et 2), 3-16.
AUTIO, E., KEELEY, R. H., KLOFSTEN, M., PARKER, G. G. C., & HAY, M. (2001).
Entrepreneurial Intent among Students in Scandinavia and in the USA. Enterprise and Innovation
Management Studies, 2(2), 145-160.
BANDURA, A. (1986). Social foundations of thought and action: a social cognitive theory. Englewood
Cliffs, N.J.: Prentice-Hall.
BIRD, B. (1988). Implementing Entrepreneurial Ideas: The Case for Intentions. Academy of
Management Review, 13(3), 442-453.
Cámaras de Comercio, & Fundación INCYDE. (2003). Factores para consolidar una empresa. Madrid:
Fundación INCYDE.
DE NOBLE, A., JUNG, D., & EHRLICH, S. (1999). Entrepreneurial self-efficacy: The development of a
measure and its relationship to entrepreneurial actions. Paper presented at the Frontiers of
Entrepreneurship Research, Waltham.
DOUGLAS, E. J., & SHEPHERD, D. A. (2000). Entrepreneurship as Utility-Maximizing Response.
Journal of Business Venturing, 15(3), 231-251.
PSYCHOLOGY OF ENTREPRENEURSHIP
56
European Commission. (2003). Green paper: entrepreneurship in Europe [Electronic Version].
Retrieved January 2003 from
http://www.europa.eu.int/comm/enterprise/entrepreneurship/green_paper/green_paper_final_
en.pdf.
GARCÍA-TABUENCA, A., MORENO, J. D. J., & MARTÍ, F. P. (2004). Emprendedores y espíritu
empresarial en España. Madrid.
GARTNER, W. B. (1988). "Who is an entrepreneur" is the wrong question. American Journal of
Small Business, 13 (spring), 11-32.
KRUEGER, N. F., JR., REILLY, M. D., & CARSRUD, A. L. (2000). Competing models of
entrepreneurial intentions. Journal of Business Venturing, 15, 411-432.
MCCLELLAND, D. C. (1961). The achieving society. Princeton: Van Nostrand.
ROBINSON, P., STIMPSON, D., HUEFNER, J., & HUNT, H. (1991). An attitude approach to the
prediction of entrepreneurship. Entrepreneurship Theory and Pratice, 15 (4), 13-32.
SHANE, S. A., & VENKATARAMAN, S. (2000). The promise of entrepreneurship as a field of research.
Academy of Management Review, 25, 217-226.
SHAPERO, A. (1982). Social Dimensions of Entrepreneurship. In C. A. KENT, D. L. SEXTON &
K. VESPER (Eds.), The Encyclopedia of Entrepreneurship (pp. 72-90). Englewood Cliffs:
Prentice Hall.
SHAVER, K. G., & SCOTT, L. R. (1991). Person, Process, Choice: The Psychology of New Venture
Creation. Entrepreneurship Theory and Practice, 16, 23-45.
VAN GELDEREN, M., BRAND, M., VAN PRAAG, M., BODEWES, W., POUTSMA, E., & VAN
GILS, A. (2006). Explaning Entrepreneurial Intentions by Means of the Theory of Planned Behavior.
Research Working Papers Series, 2, 1-33.
VEGA, I., CODURAS, A., & JUSTO, R. (2005). Global Entrepreneurship Monitor. Informe
ejecutivo GEM España 2004. Madrid: Instituto de Empresa.
57
CHAPTER 5
MOTIVATION TO BECOME ENTREPRENEUR
Dominika Dej
Department of Work and Organizational Psychology
University of Technology in Dresden
“Being an entrepreneur and creating a new business venture is analogous to raising children- it
takes more time and effort than you ever imagine and it is extremely difficult and painful to get out
of the situation. Thank goodness you cannot easily divorce yourself from either situation.
When people ask me if I like being in business, I usually respond: On days when there are
more sales than problems, I love it; on days when there are more problems than sales, I wonder
why I do it. Basically, I am in business because it gives me a good feeling about myself. You learn
a lot about your capabilities by putting yourself on the line. Running the successful business is not
only a financial risk; it is an emotional risk as well. I get a lot of satisfaction from having dared it-
done it- and been successful”.
Remarks of two successful entrepreneurs,
In “Entrepreneurship”
PSYCHOLOGY OF ENTREPRENEURSHIP
58
1. LEARNING GOALS
In this course you will get familiar with following issues:
1) Definition and different approaches to the entrepreneurial motivation
2) Role of the motivational traits and specific motivators
3) Predictors of entrepreneurial motivation
4) How to foster entrepreneurial motivation in given context
2. THEORETICAL BACKGROUND
Why do some people create a business and others do not? How can we
explain that some people manage to become entrepreneur and even succeed
whereas others do not even implement their start up intention or fail as
entrepreneurs? What motivates people to take risks and start up a new firm?
Possessing the most adequate entrepreneurial knowledge, beliefs and abilities
in addition to having supportive external situation are still not sufficient for
starting a new venture. A lot of people possess necessary financial resources, but
not every one decides to pursue an entrepreneurial career. Those who prefer
secure jobs and predictable lives do not take the risks associated with starting a
new venture. However, starts up motives vary strongly across countries, time,
gender and social groups. Even the best cognition, education and encouraging
contextual factors (opportunities) seem to be useless without motivation. But
what makes motivation so irreplaceable? How can it be described?
Entrepreneurial motivation is an important drive that energizes one’s action
toward related goals, directs one’s attention and sustains taken actions.
Individual motivation is based on one’s needs, values, desires and intentions thus
it’s often associated with internal factors exclusively. According to the Locke and
Baum (2007), there are some personal traits related to entrepreneurial
motivation. The best-known entrepreneurial drive results from the need for
independence and being one’s own boss. This exciting feeling of sovereignty
and autonomy pushes people to accept social and financial risks, invest many
working hours and sacrifice to create their own company. Developing a
successful new venture demands much time, effort and other resources. Other
entrepreneurial drives are presented in Table1.
MOTIVATION TO BECOME ENTREPRENEUR
59
TABLE 1
Entrepreneurial Motivators.
Motivational aspect Characteristic
Independence - wish to make key decision
- think independently and unconventional
- ability to make independent judgments
General self-confidence/ self efficacy - belief to be able to perform successfully, achieve goals
and defeat obstacles
Achievement motivation - desire to improve, meet high standards and attain goals
Proactivity - tendency to act and make things happen
Ambition (Healthy ambition) - strong desire to attain high results
willingness to make something real great meeting high
standards
Energy - hardiness, endurance, stamina
Egoistic passion - acting in one’s own interests
- passion in following own goals
- does not mean ignoring other people
- scarifying other things in order to follow own priorities
Tenacity - being persistent in case of troubles
- not giving up if failed
- following determinedly own ideas
Motivators playing a role in the entrepreneurial motivation results from
business directed goals and vision.
Vision generates motivation through anticipation of desired future results
which work as rewards and thus it gives power to follow the action. The better
the visualization of the goal, the higher is the pull to achieve it. According to the
goal setting theory higher goals leads to better performance (Locke & Latham,
2002), thus they produce more motivation which predicts appropriate behaviors
and increase probability of goal attainment. It happens because motivation
PSYCHOLOGY OF ENTREPRENEURSHIP
60
influences intention which in turn indicates how much effort will be invested in
order to reach the goals.
Motivators presented in the table above do not scoop all aspects relevant to
the entrepreneurial drive, these are only general aspects. In addition, there are
also some specific situational motivators, such as task and situation related self-
efficacy, and situation-specific goals and visions. Specific self-efficacy is related to
the certain tasks and how well an entrepreneur has accomplished this task in the
past as well as whether good performance was attributed externally or internally
(i.e. whether a person believes that success could be attributed to their own skills
and actions (internally) or whether success had been caused by luck (externally)).
Although specific self-efficacy is generally considered important for
entrepreneurial success, marked overconfidence may have some negative
consequences, e.g. ignoring the environmental changes, underestimating risks
and working less intensively. Situationally specific goals and vision help people
to conduct certain tasks through formulation of suitable tasks strategies. In
particular, difficult goals lead to the higher performance. On the other hand,
coping with new complex tasks can sometimes be difficult, thus learning and not
performance orientation is recommended in that case. Specific visions if they are
enough ambitious, play also important motivational role.
Not only individual factors explain entrepreneurial motivation. Start-up
across countries, time, gender and social groups. Each entrepreneurial action
takes place in certain environment, where external factor can both prevent and
promote entrepreneurial activity. There are several important contextual features
fostering or inhibiting entrepreneurial activity, such as for example economic
freedom or an open market providing opportunities and last but not least the
“Culture of failure” and stigmatization of failuring entrepreneurs. However,
entrepreneurs determine volitionally whether to start up or not. Therefore,
outside factors play only an indirect role.
The most acknowledged differentiation between internally and externally
simulated start-up motivation are the presented in Table 2.
According to these goals, researchers distinguish between opportunity and
necessity entrepreneurship. The first one regards to the classical type of
entrepreneur, who seeks for independence, self- realization and profit
maximization. This kind of entrepreneur will probably strive to follow his
business idea and look for opportunity to turn it into action. Opportunity driven
entrepreneurs are typical for developed economies.
MOTIVATION TO BECOME ENTREPRENEUR
61
TABLE 2
Push and Pull motivational factors
Factor Push Pull
What trigger the
entrepreneurial
intention?
Environment Individual
Main purpose away from current situation future orientation
Motives unemployment
avoiding unemployment
emergency situation
dissatisfaction with own
vocational situation
dissatisfaction with working
conditions, contents and
time
recognition, prestige,
reputation
free time
work-life balance
decision attitude
to be own boss
risk taking, independence
initiative
implementation of own ideas
good income
success
interesting tasks
self realization and
development
opportunity
positive examples
In contrast to the opportunity entrepreneurship, necessity entrepreneurs seek
for workplace security or even for secure existence thus their start up results
from lacking alternatives or needs. Necessity entrepreneurship is typical for
developing and transition economies.
In this context the question about further implications of classification arises.
What kind of information can we infer from this classification and how can we
use it? Different types of motivation among nascent and opportunity
entrepreneurs are of the great importance on the political and institutional level.
For instance, when an entrepreneur applies for funds, credits and loans, we want
to know whether the business will be successful. Opportunity entrepreneurs
have been found to be more successful. Their goals are higher and they are also
better equipped in resources. This perspective corresponds with psychological
PSYCHOLOGY OF ENTREPRENEURSHIP
62
argumentation that the chances to implement start-up goals increase when the
goals possess higher pull function, which gives energy and persistence.
The way between motivation and start up is sometimes very long and not
every nascent entrepreneur can launch new enterprise.
What factors are of importance as possible moderators of the relationship
between motivation and future start up? This graphic in Figure 1 shows the
most relevant factors influencing motivation and potential start up relationship.
Figure 1.
Factors influencing the relationship between motivation and start up.
In sum, motivation drives nascent entrepreneurs to start up and it also
facilitates to continue their actions and that what most strongly differentiates
successful nascent entrepreneurs from those who will never go beyond planning
and preparation.
In terms of European Commission, high-expectation and high-growth
entrepreneurship should be encouraged. It is very important for job creation and
development on the national level. According to the GEM Reports from 2007,
motivation to start up high growing venture is underrepresented. The patterns of
entrepreneurial growth expectations vary according to the individual countries
and individual factors such as education, household income, entrepreneurial
Motivation Start up
• Estimation of start up chances in given environment
• Perception of own necessary abilities and skills
• Availability of role models
• Fear of failure ands its personal, social and financial
consequences
MOTIVATION TO BECOME ENTREPRENEUR
63
attitudes and activities. Further information about entrepreneurial motivation, its
influence on business success and these relations on the country level will be
provided during the course.
2.1. Related in-class activities
1. In this course you will receive different vignettes connected to the
entrepreneurial motivation. You will analyze given texts and try to
identify motivational traits leading to the start up and performance.
2. Imagine that you participate in the program on entrepreneurial
motivation targeting on education and training for nascent
entrepreneurs. How would do encourage people to become
entrepreneur and which techniques would you apply?
3. What should politician, bank and credit institutions know about
entrepreneurial motivations? How should they use this information in
order to support entrepreneurs?
REFERENCES
Aution, E. (2007) Global Report on High-Growth Entrepreneurship. Babson College, London
Business School, and Global Entrepreneurship Research (GERA) Entrepreneurship in
Europe (2003). In Green Paper, 4-8.
GALAIS, N., (1998). Motive und Beweggründe für die Selbständigkeit und ihre Bedeutung für
den Erfolg. In FRESE, M., RAUCH., A, FRESE., M. (1998). Erfolgreiche Unternehmensgründer.
Göttingen: Verlag für Angewandte Psychologie.
STERNBERG, R., BRIXY, U., HUNDT, C. (2007). Global Entrepreneurship Monitor (GEM).
Länderbericht Deutschland 2006.
LANG-VON WINS, T. (2004). Der Unternehmer. Berlin, Heidelberg: Springer.
LOCKE, E. A, BAUM, J.R.(2007). Entrepreneurial Motivation. In J.R. BAUM, M. FRESE, R.A.
BARON (Ed.), The Psychology of Entrepreneurship. New Jersey: Lawrence Erlbaum Associates.
PSYCHOLOGY OF ENTREPRENEURSHIP
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65
CHAPTER 6
OPPORTUNITY RECOGNITION AND DEVELOPMENT
Martin Lukeš
Department of Managerial Psychology and Sociology
Prague University of Economics
“When one door closes another door opens; but we often look so long and so regretfully
upon the closed door, that we do not see the ones which open for us”
Alexander Graham Bell
“Opportunity is missed by most people because it is dressed in overalls and looks like
work”
Thomas Alva Edison
PSYCHOLOGY OF ENTREPRENEURSHIP
66
Real-@uction
changing the Real Estate market…
In the last year, a group of CEMS students presented their business model in
our entrepreneurship class. Their main idea was to improve the matching
mechanism in the housing and office rental market in the Czech Republic by
introducing an auction system.
Their customers were: 1. People searching flats or offices for rent (demand
side customers) and 2. People willing to rent flats or offices (supply side
customers). The customers would meet on the internet based auction platform.
People willing to rent flats or buildings would set up an entry in the database via
Internet. They would be asked to fulfill some requisites as property information,
pictures and preferences, so that all information is standardized. Additional
services such as 360° pictures or virtual tours would be provided at a later stage,
which might help to attract further customers. In an auction similar to those
known from eBay, the supply side customer would set a minimum price and
demand side customers might place their bids during a preset time period. Initial
prices would be between the reservation price of the supply side customer and
the market price. Consumers would be attracted by offers starting below the
market price. The demand side client with the highest bid at the end of the
auction period would receive the contract. The firm would also act at a later
stage as a broker for services related to the renting of flats and houses such as
reallocation services, cleaning services and other.
The revenue model was based on registration fees from “sellers” (approx. 28
EUR for every new customer), percentage of the rent above the minimum price
(30% from the difference) and selling customer database upon agreement.
Possible fees in the future might also include commission on the monthly rent,
payments for costly services such as 360° pictures or solvency checks, etc.
Is it a good opportunity? Is it a good business idea?
1. LEARNING GOALS
1) Understand what entrepreneurial opportunities are, what their origin is
and why some people recognize certain opportunities and others don't.
OPPORTUNITY RECOGNITION AND DEVELOPMENT
67
2) Learn how to develop business ideas and how can be some opportunities
recognized.
3) Learn how to further develop opportunities into business concepts and
models.
2. THEORETICAL BACKGROUND
2.1 Opportunity
Opportunity recognition, development and the final selection of the
right ones is one of the key capabilities of a successful entrepreneur.
It is a difficult task. The entrepreneur needs to be alert, sensitive to market
needs and inefficiently used resources and sometimes even search systematically
for additional information. However, it is only the start of the process -
entrepreneurial opportunities need to be developed, evaluated, further
developed and modified and again evaluated and so on repeatedly. Such effort
may (or not) result in new venture creation (Ardichvili, Cardozo & Ray, 2003).
In general, opportunity can be defined as a possibility to satisfy market needs
trough a new combination of resources that will offer added value (Kirzner,
1973). Alternatively, Shane and Venkataraman (2000) define opportunity as a
„situation in which new goods, services, raw materials, and organizing methods
can be introduced and sold at greater price than their cost of production“ (p.
220). There can be found many other definitions, therefore Baron (2004)
summarize that opportunities have three central characteristics:
– potential economic value (i.e. potential to generate profit),
– newness (i.e. something what did not exist previously) and
– perceived desirability (of the new product or service in society).
Opportunities start as initial ideas and simple concepts that are
further developed by entrepreneurs.
Opportunities emerge from the complex of changing technological, economic,
legal, social and demographic conditions (Baron, 2004). Kirzner (1973) says that
PSYCHOLOGY OF ENTREPRENEURSHIP
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opportunity starts when the entrepreneur recognizes a commercial value of his
or her idea. The question is whether opportunities exist and they just need to be
recognized (Kirzner, 1973) or whether it is necessary to create them actively by
an entrepreneur (Hills, Hansen & Hultman, 2004). An interesting view is
provided by Sarasvathy, Venkataraman, Dew and Velamuri (2002). According to
them, opportunity recognition is the case when both sources of supply and
demand exist rather obviously, the opportunity for bringing them together has
to be only "recognized" and then implemented (e.g. franchising). Opportunity
discovery is a situation where only one side exists. Then, the nonexistent side
has to be "discovered" before the match-up can be implemented. Examples
include cures for diseases (market demand exists; supply has to be discovered)
and better use of inefficiently used resources (e.g. animals may be used not only
for meat and other products but also for agro-tourism). Opportunity creation is
the most difficult situation when neither supply nor demand exist in an obvious
manner and have to be "created", and several inventions in marketing, financing
etc. have to be made for the opportunity to come into existence. Examples
include Edison's General Electric or Google.
Generally, opportunities always involve either unfulfilled market needs
(queues at state offices; bad can openers; wireless connections), unused or
inefficiently used resources (possibilities for advertisement: bench, own
forehead; brownfields; ideas of university researchers that are not
commercialized) or the possibility to connect specific market needs with specific
resources. Opportunities are also situational. The window of opportunity must
be open long enough to enter, but narrow enough to keep others out.
Factors influencing opportunity recognition
The process of opportunity development starts when entrepreneurial alertness
exceeds some threshold level and we realize that the idea might be a good one.
The alertness is higher when the potential entrepreneur is optimistic and
creative, have prior knowledge and experiences and available social networks.
Entrepreneurial alertness can be defined as a propensity to notice and be
sensitive to information about objects, incidents, and patterns of behavior in the
environment, with special sensitivity to maker and user problems, unmet needs
and interests, and novel combinations (Ardichvili, Cardozo & Ray, 1996).
OPPORTUNITY RECOGNITION AND DEVELOPMENT
69
Higher alertness is related to higher likelihood to recognize an opportunity.
Hills, Hansen and Hultman (2004) suggest that entrepreneurs recognize, not
actively search for the opportunities. In this sense, entrepreneurial alertness can
be understood as a „passive search“, i.e. to be prepared to recognize value of
new information.
Another factor that plays an important role is information asymmetry and
prior knowledge. People have tendency to notice information that is related to
something they already know. Prior knowledge creates a „knowledge corridor“
and triggers recognition of the value of the new information. Key areas of prior
knowledge are prior knowledge of markets, prior knowledge of ways to serve
markets, and prior knowledge of customer problems (Ardichvili, Cardozo &
Ray, 2003).
Social networks are also important for entrepreneurs. Hills, Lumpkin and
Singh (1997) found that entrepreneurs with different contacts were able to
identify more opportunities. These social networks usually consist of four areas:
– inner circle (long-term, stable relationships with close people)
– „action set“ (employees)
– partnerships (start-up team members)
– weak ties (acquaintances and distant friends).
Whereas strong ties to close relatives and friends serve as a perfect support
and source of financing or cheap labor, weak ties often play the role of bridges
to key information. To use his or her social networks, the entrepreneur cannot
be just passive. De Koning (1999) identified three cognitive activities
(information gathering, thinking through talking, and resource assessing) that are
crucial for opportunity recognition.
Sources of new ideas
Many sources of new ideas can be used:
– customers who say „it would be good, if such a service ...“, „we looked
for this product, but nobody …“ can be informally mapped (what is
needed?) and more formally surveyed (how much demand exists?)
PSYCHOLOGY OF ENTREPRENEURSHIP
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– existing companies offer products and services that can be analyzed and
their strengths and weaknesses found
– other individuals may come up with different gadgets and refinements
that might be improved and sold to a wider audience with similar needs
– different players in the distribution channel may have unmet needs –
wholesale can have problems with quality of products, retail with
wholesale logistics, etc.
– government regulations create large and certain demand, e.g. the new
law that reflex vests are obligatory for drivers on business trips created
large demand
– research and development at universities and research institutes that is not
commercialized
– different creative techniques as brainwriting or brainstorming may spark
the idea.
Opportunity development
Between the initial business idea and a real firm foundation is usually a long
process of idea development and evaluation. When the idea is first developed,
potential advantages and values for specific users start to emerge and also
resources are better defined. The idea is evaluated for the first time by rather
informal and unspoken evaluation. When the idea passes this evaluation, it needs
to be developed to a business concept. Business concept consists of three basic
areas:
• what products and/or services will be offered?
• to whom they will be offered and what specific customer needs will be
satisfied?
• how will be the products and services delivered to the market (i.e.
concept of production, sales, marketing and logistics).
OPPORTUNITY RECOGNITION AND DEVELOPMENT
71
To precise your business concept, the questions and
recommendations in Appendix 1: Elevator pitch guidelines may be
useful.
After further work on developing the opportunity, the potential entrepreneur
gets to the stage of business model. Business model have to be simple, logical
and measurable, on the other hand comprehensive and meaningful. The aim of
the model is to present viability of a business and therefore it must clearly answer
how the products and services will be sold to customers in order to get higher
revenues than costs and expected returns of investment. Morris (2004)
recommends elaborating six main areas:
1. How will the firm create value?
2. For whom will the firm create value?
3. What is the firm’s internal source of advantage?
4. How will the firm differentiate itself?
5. How will the firm make money?
6. What are the entrepreneur’s time, scope and size ambitions?
To develop and present your business model, see also Appendix 2:
Business model presentation guidelines and Appendix 3: 50 questions
that may help to improve the quality of your business model.
Opportunities are evaluated on each stage of their development (see
picture 1). The suggested process is illustrative; entrepreneurs do not always go
through all the stages. In practice, entrepreneurs often do not prepare a formal
business plan which is needed mainly when external financing is required.
However, the key moment is to judge well whether the idea has a potential to
create an expected profit. Criteria focusing
- on market (e.g. are customers loyal to competition or sensitive to
potential new offers? Is the market quickly growing?),
- economic (e.g. will be break even point sooner than in two years? Are
capital requirements low?),
PSYCHOLOGY OF ENTREPRENEURSHIP
72
- competitive advantage (e.g. is it possible to patent the product? Do we
have clear time advantage?),
- entrepreneurial team (e.g. is experienced, with past results?) and
- risk issues (e.g. are risks low or high?) are used (Timmons, 1990).
Figure 1: The process of opportunity development
3. RELATED IN-CLASS ACTIVITIES
1. Discussion about the case in the introduction (July 18)
Students will discuss whether there is an opportunity and whether the
presented business model is good. The teacher will provide comments
on how the different parts of the presented business model were
evaluated and why.
2. Dragon's den (July 18)
Students will see two scenes from Dragon's Den. Dragon's Den is a BBC
show in which nascent / young entrepreneurs come to give an elevator
pitch about their idea to potential investors - experienced business angels.
Behavior and elevator pitches of the entrepreneurs will be discussed;
recommendations for an elevator pitch will be formulated.
3. Country specific opportunities (July 18)
Students will be divided into groups according to their nationalities
(universities they are from). Their task will be to discuss in 15 minutes
the opportunities that are according to their opinion existing in their
country. These opportunities will be then presented to other students.
4. Business Ideas development (July 18)
Step 1: Individual students will generate a list of so many new venture
ideas as possible and present them shortly
Business
Idea
Business
concept
Business
model
Business
plan
Firm
foundation
OPPORTUNITY RECOGNITION AND DEVELOPMENT
73
Step 2: Students will create teams in which they will discuss the ideas of
their members and select the best ones
5. Elevator pitches (July 20)
See Appendix 1: Elevator pitch guidelines for detailed information.
Students will receive feedback from the teacher and from other students.
Individual consulting of business concepts will take place afterwards in
the workshop.
6. Business model presentations (July 21)
See Appendix 2: Business model presentation guidelines and Appendix 3:
50 questions that may help to improve the quality of your business model
for detailed information.
REFERENCES
ARDICHVILI, A., CARDOZO, R., RAY, S. (2003) A theory of entrepreneurial opportunity
identification and development. Journal of Business Venturing 18 (2003): 105 – 123.
BARON, R.A. (2004) Opportunity recognition: A cognitive perspective. Academy of Management Best
Conference Paper 2004 ENT, A1-6.
BHAVE, M. (1994) A process model of entrepreneurial venture creation. Journal of Business
Venturing, 9: 223-242.
De KONING, A. (1999) Conceptualizing Opportunity Recognition as a Socio-Cognitive Process.
Stockholm: Centre for Advanced Studies in Leadership.
DRUCKER, P.F. (1985) Innovation and Entrepreneurship: Practice and Principles. New York: Harper
& Row.
ECKHARDT, J.T., SHANE, S.A. (2003) Opportunities and entrepreneurship. Journal of
Management, 29(3): 333-349.
GAGLIO, C.M., KATZ, J.A. (2001) The psychology basis of opportunity identification:
entrepreneurial alertness. Journal of Small Business Economics, 16 (2): 95-111.
HILLS, G.E., LUMPKIN, G.T., SINGH, R.P. (1997) Opportunity recognition: perceptions and
behaviors of entrepreneurs. Frontiers of Entrepreneurship Research. WELLESLEY, MA: Babson
College, 203-218.
PSYCHOLOGY OF ENTREPRENEURSHIP
74
HILLS, G.E., HANSEN, D.J., HULTMAN, C. (2004) Opportunity Recognition Processes: A Value
Creation Context.
www.kmu.unisg.ch/rencontres/RENC2004/Topics/Hills_Hultman_Renc_04_Topic_D.pdf
HISRICH, R.D., PETERS, M.P. (1995) Entrepreneurship: starting, developing, and managing a new
enterprise. 3rd edition, Irwin / McGraw-Hill.
KIRZNER, I.M. (1973) Competition & Entrepreneurship. Chicago, IL: University of Chicago Press.
KIRZNER, I.M. (1979) Perception, Opportunity and Profit. Chicago, IL: University of Chicago
Press.
KRUEGER, N.F. (2000) The cognitive infrastructure of opportunity emergence. Enterpreneurship
Theory and Practice. Spring, 5-23.
MORRIS, M., (2004) Understanding the Business Model of the Entrepreneur. Material presented at
Experiential Classroom V., 16.-19.9.2004, Syracuse University, NY.
MORRIS, M., SCHINDEHUTTE, M. (2004) Teaching Entrepreneurship Students the Concept of a
Business Model. Material presented at Experiential Classroom V., 16.-19.9.2004, Syracuse
University, NY.
SARASVATHY, S.D., VENKATARAMAN, S., DEW, N., VELAMURI, N. (2002) Three views of
entrepreneurial opportunity. Invited book chapter in the Entrepreneurship Handbook edited by
Acs et.al. (Revised January 4, 2002)
SHANE, S., VENKATARAMAN, S. (2000) The promise of entrepreneurship as a field of research.
Academy of Management Review, 25: 217 – 226.
TIMMONS, J.A. (1990) New Venture Creation. 3rd ed., Homewood, IL: Irwin.
OPPORTUNITY RECOGNITION AND DEVELOPMENT
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APPENDIX 1:
Elevator pitch guidelines
Describe simply the core of your idea. You must sell your idea to the
investors. You have max. 3 minutes for the presentation. You can use the
following structure:
1. What products and/or services do you offer?
2. Who are your customers? What their needs do you satisfy?
3. How big is your market? How will the market develop in the future?
4. What is current domestic and international competition and what is your
advantage (your unique selling point) against this competition?
5. How will you make money in this business?
6. How will your customers get to know you? What marketing strategies
will you use?
7. How do you plan to sustain your competitive advantage for the future?
8. How much money do you need and for what they will be used?
9. How profitable is your business? What returns on investment do you
expect?
10. Who are the members of your team and what are its strengths?
Some further recommendations:
• Use a hook in the beginning. Something what will interest the audience
and you get their attention.
• Elevator‘s pitch is usually your only chance to attract the investor. Be
persuasive and enthusiastic. Investor usually sees when you don't believe
in what you are saying.
PSYCHOLOGY OF ENTREPRENEURSHIP
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• Specify your customers well. Prefer to solve urgent problems of small
growing market to improving already solved problem of a large stable
market.
• Avoid using "fancy" adjectives and terms as dynamic, intelligent, next
generation, etc.
• Present your competitive advantage in a positive way (i.e. what you can,
not what your competition can't)
• Being first on the market is only a temporary advantage. How will you
prolong it?
• Tell the concrete names of your team members. Avoid saying "I".
Always say "we". You need to demonstrate that you are a good team.
• Don't focus on details of your products and services but on the value it
brings to your customers.
• In case it is possible, you can show a model or picture of your product. It
is illustrative and it usually helps.
• Don't underestimate marketing. Think about guerilla strategies, i.e. how
can you do something cheaply and with a large impact on customers?
• Be ambitious and realistic! For one small bakery you don't need
investors. For development of a multi-billion office building you do not
have probably enough experience yet.
OPPORTUNITY RECOGNITION AND DEVELOPMENT
77
APPENDIX 2:
Business model presentation guidelines
This assignment consists of two main points: 1: presentation of the business
model and 2: an extended version of the executive summary of the business
model in 3-5 pages.
1. Presentation part: business model
• Each team has a max of 15 minutes for presentation and must be
prepared for 10-15 minutes Q&A based on the presentation and the
extended summary.
• Each team can choose the form of presentation, which seems most
appropriate for them (Overhead, beamer, …)
Key points:
• teams of 4 to max. 5 students
• from 1 university there can be only 1 person in 1 team, i.e. teams
will be always created by people from as many different
universities as possible
• duration of the presentation: 15 minutes
• questions and answers: 10-15 minutes
• aids are up to you: overhead projector, beamer, whiteboard, free
speech...
• to give you some other ideas for your pitch:
http://www.mootcorp.org/plansandvideos/plansvideoslist.asp
2. Written part: executive summary.
PSYCHOLOGY OF ENTREPRENEURSHIP
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We don’t expect a fully written business plan but an extended version of the
executive summary in about three to five pages length. The executive
summary will be provided at 10.00 a.m. on Saturday 21, 2007 at the
latest.
What’s the purpose of such a summary: after having read it, a potential
investor or partner should be interested in knowing more about your business
idea and your company and invite you for a more thorough personal
presentation.
Evaluation criteria:
• innovativeness of the idea (newness, own original idea)
• competitive advantage of the business model (unique,
defendable, sustainable)
• profitability of the business model (market attractiveness,
market volume, market growth, profit margin)
• realism (can be realized by a presenting team, internally
consistent concept)
• overall quality of the presentation (interesting, time well used,
team cooperation, original, examples provided)
OPPORTUNITY RECOGNITION AND DEVELOPMENT
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APPENDIX 3:
50 questions that may help to improve the quality of your business
model
Products and Services
1. What products and/or services do you offer?
2. Why is it unique?
3. What specific need of your customers your product/service solves?
4. How is this need satisfied in the present?
5. What are the disadvantages of current solutions that are available on the
market?
6. In what steps will you develop your product/service in the future?
7. Describe the production of your product/service?
8. How will you protect your intellectual property related to your
product/service?
Team
9. Who are the team members?
10. What experiences your team has with the market of your product/service?
11. What are responsibilities and authorities of particular team members?
12. What knowledge, experiences and skills are missing in your team? How will
you solve the issue?
Customer
13. Who is your customer? Be as specific as possible.
14. How many potential customers exist? How will their number develop in the
future?
PSYCHOLOGY OF ENTREPRENEURSHIP
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15. How many of these potential customers you want to serve in the beginning
and in the future?
16. How will behavior of your customers change in the future?
Competition
17. What companies are your today's competition?
18. What are strengths and weaknesses of your competition?
19. What is their market share and what development can be expected?
20. What new competition can come to your market?
Competing products/services
21. What competing products/services exist on the market today?
22. What is their price, quality, added value, history?
23. What are the strengths and weaknesses of these products/services?
24. What are the substitutes of your products/services on the market?
25. What will be the price, quality, and added value of your products/services?
Suppliers and key clients
26. Who are your suppliers (e.g. for production)?
27. Who are the key ones and why?
28. How will you ensure cooperation with these key suppliers?
29. Who are your potential key clients?
30. How will you ensure cooperation with these key clients?
Sales
31. How will you sell your products/services? Directly or through mediators?
OPPORTUNITY RECOGNITION AND DEVELOPMENT
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32. What are your sales revenues goals for the future?
33. What is your prediction of total sales revenues from your products/services
for the next year?
34. Are the sales dependent on season?
35. Will you sell your products/services also in other countries? When?
36. What after-sales service do you offer to your customers?
Marketing
37. How specifically will you promote your product/service during the launch?
38. How much money will you need for such promotion?
39. What you need to do before you start to promote your products/services?
40. How will you analyze your competition reactions after you launch your
products/services?
Firm
41. What are the goals of your firm and in what time periods?
42. What is your strategy to reach these goals?
43. Describe your firm after three years.
44. How much time are you able to devote to the firm now and in the future?
45. How long are you willing to work in the firm for free?
46. What are the major risks you can face?
47. What will you do in case these potential risks become realities?
Investor / Bank
48. How much money you need for a successful start and for what specifically
they will be used?
49. How much of your own money will you invest?
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50. Who else besides investor/bank and you will provide financing?
83
CHAPTER 7
PERSONALITY AND COMPETENCIES OF THE ENTREPRENEURS
Dominika Dej
Department of Work and Organizational Psychology
University of Technology in Dresden
Personality can be defined as a dynamic and organized set of characteristics possessed
by a person that uniquely influences his or her cognitions, motivations and behaviors in
various situations. The word “personality” originates from the Greek persona, which
means mask…
Ryckman, 2004
Case 1
MR. X began to show an interest in what he is doing now at the age of 13. Seven years later
he started up and now his company has more than 1,000 employees and $200 million in sales. His
personal beliefs revolve around working hard and trying your hardest to succeed. He believes that
if you are intelligent and know how to apply your intelligence you can accomplish anything. MR.
X thinks that if you don't work your hardest you will never succeed. MR. X is obviously a
visionary but he also works very hard and very competitively to carry out his vision. He
continuously looked for ways to grow his company. His belief in high intelligence and hard work
is what put him where he is today, as well as being in the right place at the right time. He doesn't
believe in luck or any sort of god, just hard work and competitiveness. MR. X simply sees it as
good competition and he will continue to stomp out the competition until he dies.
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1. THEORETICAL BACKGROUND
The past decades, interest in entrepreneurship has increased. Research on
entrepreneurship developed and entrepreneurship has gained a major position in
economical and political debates as an answer to issues such as unemployment,
and stagnating economic growth and development. If entrepreneurs and the
entrepreneurial processes are highly important phenomena, future entrepreneurs
should be made easily identifiable for selection purposes. Unfortunately the
complex and undiscovered nature of entrepreneurship has caused some
difficulties with universally defining the term entrepreneurship, which
complicates the search for typical entrepreneurial personality profiles.
Current definitions recognize entrepreneurs to be active actors
embedded in the broad context of organizational, social, environmental, and
even cultural factors. From a psychological perspective, entrepreneurs are
described as active individuals involved in the “entrepreneurial processes”.
Certain behaviours have been identified as characteristic for this entrepreneurial
process (Cromie, 2000; Chell, 91; Frese 2007). First, entrepreneurs tend to
Case 2
In the mid-1970s, at the age of 18, MR. Y set off from his native Québec to travel around
Europe, supporting himself for four years as a street performer — playing accordion, juggling, stilt
walking and breathing fire to earn a living. When he returned home in 1979 he remained as a
street performer. In 1984, the province of Québec was celebrating the 450th anniversary of
Canada's discovery and looking for innovative shows to mark the occasion. Laliberté proposed the
first Cirque du Soleil show and the company was born. Today more than 50 million spectators
have seen a Cirque du Soleil production and close to 10 million will have seen one during 2007.
The original show in 1984 employed 73 people. Today the business has more than 3,500
employees, including close to 900 performing artists. Cirque's employees and artists represent more
than 40 nationalities and speak 25 different languages. MR. Y commitment to his artistic vision
and the passion he has for his work were what swayed the judges in his favor to become the
Entrepreneur of the year. He has taken a great entrepreneurial journey from street performer to
CEO of a globally recognized brand. Entrepreneurs sometimes talk about the luck they've had in
their careers, but luck contributes little to these leaders' successes. Passion, vision, innovation —
and a lot of hard work — are what make these entrepreneurs and their companies exceptional.
MR. Y demonstrates these traits in abundance.
PERSONALITY AND COMPETENCIES OF THE ENTREPRENEURS
85
create their own business organisations. They actively map their environment
and seek out new opportunities. Second, entrepreneurs develop innovative
solutions, formulate plans and implementation strategies and organise resources
in order to make their products and services marketable. They monitor the
execution of their actions and search for feedback. Behaviours of entrepreneurs
are profit and growth oriented.
The entrepreneur is the central figure in the entrepreneurial process.
Therefore the entrepreneur can be expected to influence business success to a
certain extent. Not surprisingly, predicting entrepreneurial success based on
personal characteristics of the entrepreneur has been one of the oldest
contributions of psychologists to the entrepreneurship literature. Since the
introduction of the concept “need for achievement” as one of the core
characteristics of entrepreneurs, the personality approach has been the most
traditional, but also one of the most controversial approaches in the field of
entrepreneurship research. This is due to the large inconsistencies in research
findings. There is some evidence of relationships between personality traits,
business creation and performance, but still no clear personality profile has been
identified differentiating entrepreneurs from non-entrepreneurs, or groups of
entrepreneurial self-employed (who aim for growth, wealth creation and
innovation) from non entrepreneurial small business owners. Moreover,
identification of distinguishing characteristics of different types of entrepreneurs
is still largely missing.
Another, newer line of research on the entrepreneurial profile focuses on
entrepreneurial competencies and their relationship with entrepreneurial activity
and performance. The differences between personality variables and
competencies are that competencies refer to characteristics that the are less stable,
more proximal to actual behaviour, and can more easily be learned. Therefore
the value of competencies for education is larger. Thorough job-analyses based
on leading to a comprehensive and coherent set of entrepreneurial competencies
are scarce (Frese, Chell & Klandt, 200). However, there is general agreement
that individual level competencies are closely linked to the entrepreneurial
processes and thus they may increase our understanding of why some
entrepreneurs are successful and others are not. Entrepreneurial competencies are
understood as the “total sum of entrepreneurs’ requisite attributes: attitudes, values,
beliefs, knowledge, skills, abilities, personality, wisdom, expertise (social, technical,
managerial,) mindset, and behavioural tendencies needed for successful and sustaining
entrepreneurship” (Kiggundu, 2002).
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1.1. Personality variables and entrepreneurship
The personality approach to entrepreneurship probably has as many
protagonists as opponents. Researchers intending to explain relationships
between entrepreneurial performance and personality traits have met
methodological and definitional problems, which in turn have lead to
inconsistencies of the results and misunderstandings. Personality researchers agree
that individual differences are stable over time and consistent across various
situations. There is some evidence that personality traits influence vocational
choice and that people try to fit their jobs to certain preferred job and work
environments. This research is based on the attraction-selection- attrition model
(Schneider, 1987), according to which people are more attracted to activities
that match their personalities and also find these more satisfying than other
occupational categories. Additionally, if people follow their own interests in
environments that match their personalities would increase their persistency and
lead to the success. However, personality variables (e.g. conscientiousness) are
behavioural dispositions that do relate to general, broad categories of behaviour
(e.g. being organized), but they often cannot predict very specific behaviour
(clean the kitchen at least once a week). The predictive power of traits increases
when the interaction between personality and the situation is taken into
account.
Researchers differentiate between distal-broad personality traits and proximal
or specific personality traits. The most important distal personal variables can be
organised in five-factor model of personality (FFM; Costa &McCrae, 1992). The
five dimension of the model include following sets of the constructs:
Neuroticism, Extraversion, and Openness to Experience, Agreeableness and
Conscientiousness.
The big five model has often been used to compare individual differences
among diverse groups. In entrepreneurship research this was for example
differentiating entrepreneurs from managers. The main objective of these studies
was to discover personality factors leading to becoming an entrepreneur and
being successful as entrepreneur.
In addition to distal personality factors, researchers have also focused their
attention to proximal individual differences. These are lower order, specific
personality constructs that are more likely related to specific behaviours than the
first category of broad personality variables (Tett et. al., 2003). Research has
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87
produced a long list of proximal personality variables related to entrepreneurial
intentions and success (Rauch & Frese, 1996, Zao & Seibert, 2006). The most
important ones are listed in Table 2. These personality variables may relate
directly to the entrepreneurial tasks that were mentioned in the introduction.
TABLE 1
Definitions of the Big-Five personality variables.
Dimension Description High scores on the scale Law scores on the
scale
Neuroticism Represents individual
differences in emotional
stability
Experiencing negative
emotions: anxiety, hostility,
depression, self-
consciousness,
impulsiveness, vulnerability
Self-confidence, calm,
relax
Extraversion Represents the extension
to which individual is
assertive, dominant,
energetic, talkative,
enthusiastic
Tendency to be cheerful,
like people and big groups,
look for excitement and
stimulation
Tendency to spend
time alone, being
reserved, quiet,
independent
Openness to
Experience
Describes tendency to
seek new experiences,
exploration of novel
ideas
Being creative, innovative,
imaginative, reflective,
untraditional
Being narrow,
conventional, non-
analytical
Agreeableness Represents one’s
interpersonal orientation
Trusting, forgiving, caring,
altruistic, gullible, tendency
to have good interpersonal
relationships
Law need for
affiliation, unforgiving,
able to make difficult
decisions
Conscientiousness Describes individual’s
degree of organisation,
persistence, hard work
and motivation in
pursuit the goal
accomplishment
High need of achievement,
persistence and
dependability (reflects the
extend to which one is
organised, deliberate, fulfil
duties and responsibilities)
Low need of
achievement and law
dependability
The big five model has often been used to compare individual differences
among diverse groups. In entrepreneurship research this was for example
differentiating entrepreneurs from managers. The main objective of these studies
PSYCHOLOGY OF ENTREPRENEURSHIP
88
was to discover personality factors leading to becoming an entrepreneur and
being successful as entrepreneur.
TABLE 2
Definitions of proximal personality variables that have often been related to entrepreneurial intentions and
entrepreneurial success.
Dimension Description Characteristics for the high scores on
this dimension
Need of
achievement
Denotes individual’s need to
strive hard to attain success
Setting demanding targets for oneself, being
proactive, tendency to take immediate
responsibility for tasks, plan and control
events. Want to receive feedback about their
level of performance
Locus of control One aspect of the cognitive style
which represents the extension to
which individual feels in charge
Perception of control over the environment
by the action, belief that luck and fate do not
really determine what happens
Risk taking Describes the individual cognitive
style with respect to taking risks
Actively seeking risky assignments and having
greater propensity to take risks
Tolerance of
ambiguity
Describes one’s ability to make
decision with incomplete
information
Making decision in the situation of high
uncertainty
Creativity Describes tendency to
experimentation, trial and error,
lateral thinking
Thinking in non-conventional ways,
challenge existing assumptions, flexibility and
adaptability in problem solving
Need of
autonomy
Represents one’s strive to be
independent and having control
Avoiding restrictions, rules, procedures and
strong need for independence and autonomy
Self- efficacy Describes optimistic self-beliefs to
cope with a variety of difficult
demands
Belief that one's actions are responsible for
successful outcomes
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In some group of studies researchers investigated whether personal
characteristics of entrepreneurs differed from non-entrepreneurs, especially
comparisons of entrepreneurs and managers in regard to the need for
dominance, autonomy and affiliation have been considered (Baum, 1992;
McGrath 1992b). Both, manages and entrepreneurs seems to be special groups
with some similarities and differences. Concerning the differences, managers
work within established business organisations where established procedures and
regulations are available. Entrepreneurs on the contrary work under unspecified
conditions and are responsible for all aspects of the enterprise. Entrepreneurs face
work- life imbalance as well as social, financial and personal risks, which can
produce high levels of psychological and even physical stress. Entrepreneurial
activity therefore demands self-confidence, calm and low anxiety. Further,
entrepreneurial activity includes hard bargains, negotiations and following one’s
own interests, and sometimes even requires using manipulation and persuasion.
These activities do not go along with interpersonal orientation and
agreeableness. Given these differences, entrepreneurs and manages should differ
on two personality dimensions: Neuroticism and Agreeableness. A recent meta-
analysis (Zhao & Seibert, 2006) confirms these assumptions. Results show that
entrepreneurs score significantly lower than managers on both of these
personality dimensions.
Additionally Zhao and Seibert proofed whether entrepreneurs scored
significantly higher on Openness to Experience and Conscientiousness.
Openness to the Experience and emphasis on innovation and creative solutions
has been considered to be main characteristics of entrepreneurs (Schumpeter,
1997). Starting up a new venture and exploring new opportunities requires more
creativity and novelty than working in an established business organization. In
addition, the daily activities of entrepreneurs require hard working in order to
achieve goals. Not only high achievement motivation but also dependability and
good self-organization are expected. These aspects are very important for the
self-made environment and day- to-day situation of entrepreneurs.
Conform the Hypotheses, entrepreneurs achieved higher results on the
dimension of Openess to Experience and the dimension Conscientiousness,
which covers both need for achievement and dependability. By the way, the
fifth psychological dimension- Extraversion seems not distinguishes between
managers and entrepreneurs, although the results are not consistent and vary
over studies.
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The results of research in the field of entrepreneurship and personality are
not constant. As many studies have been conducted in different countries,
inconsistencies may be explained according to national differences, in particular
cultural differences. For example, McGrath (1992b) reports, that entrepreneurs
in 13 investigated counties differentiate from career professionals regarding to
some culture dimensions. According to Hofstede (Hofstede, 2001, 2002)
uncertainty avoidance, a cultural dimension regarded to rely on norms, rules and
procedures and avoiding ambiguous situations, has been found to be valued
lower among entrepreneurs McGrath & MacMillan, 1992). In contrary,
individualism, masculinity and power distance were valued consistently higher
among entrepreneurs. These results suggest that culture dimensions may
contribute to our understanding of successfully entrepreneurship and discovery
connections between personality and entrepreneurship.
1.2. Entrepreneurial Competencies
Entrepreneurial competencies aggregate into sets of
knowledge, skills and abilities and have been shown to
relate positively to business success (Markman, 2007).
In Table 3 some selected entrepreneurial competences
are described. Although entrepreneurial competencies
are of great importance for performance in general,
they influence entrepreneurial activity in different ways depending on the stage
of entrepreneurial development and the external situation the entrepreneur
needs to cope with. Entrepreneurial competencies correspond not only with
entrepreneurial tasks and their characteristics but also with the broader
environment in which entrepreneurial tasks are executed. This means that there
are some relevant contextual factors determining the importance of particular
competencies in a given environment where the entrepreneurial activity is
preformed. One such environmental factor is for example stability of the market.
Entrepreneurs who operate in a stable market may experience less uncertainty
than entrepreneurs who operate in a continually changing market characterized
by fast technological progress. A competency such as “widened perception” (See
Table 1) may be more important for an entrepreneur in a changing market and
hence for them may relate stronger to business success.
Contextual aspects vary across cultures, but they also change over time and
relate to stages of the entrepreneurial activity. Consequently, different types of
entrepreneurial competencies are relevant in each stage of entrepreneurial
PERSONALITY AND COMPETENCIES OF THE ENTREPRENEURS
91
activity; starting with pre- start up phases which includes formulation of business
idea, developing business plan, opportunity recognition and evaluation, as well
as further on in the survival, growth and development stages.
TABLE 3
Definitions of selected entrepreneurial competencies
Competence Definition
Entrepreneurial Career
Vision
Includes formulation of long term goals and preparation of action-
implementation plan
Self confidence One’s belief to be able to complete demanding tasks implies having
the necessary knowledge, human and professional capacity, and the
correct attitude and energy to achieve goals.
Widened Perception Ability to explore beyond the boundaries of one’s circle of experience
and reference in order to find new opportunities.
Flexibility One’s disposition to change focus in order to follow better fitting
options that allow tasks to be well executed.
Empathy Ability to understand other’s emotions, necessities and interests and to
integrate them to our own.
Conceptual thinking One’s disposition to identify the relation existing among different
components in complex situations that are not directly related and
ability to construct models those are easy to apply.
Management Ability to gather, integrate and manage required resources in order to
start, maintain and grow within the organization.
Entrepreneurial
networking
Includes establishing, maintaining and taking advantages of
interpersonal and institutional relations in order to achieve
entrepreneurial goals.
Decision Taking Is to analyze the different alternatives available in order to determine
the best path to follow assuming full responsibility of the outcomes.
Action Orientation Is understood as the energy, force, courage and dedication necessary
to put into action and make real, all the ideas, proposals, opportunities
and entrepreneurial projects.
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To understand the way entrepreneurial competencies function in achieving
success across situations and the business life cycle, the distinction between
“weak” and “strong” situations is very helpful (Mischel, 1973, in Markman
2007). The concept of “weak” and “strong” situations refers to the external
conditions determining whether high or low levels of expression of individual
differences will occur. In a “strong” situation peoples’ roles are well defined,
unambiguous hierarchies exist and there are clear rules, norms and regulations.
In contrast, small and new ventures seem to create “weak” situations, where
personal differences, in particular entrepreneurial competencies, play a crucial
role influencing firm level outcomes. Entrepreneurial competences from this
perspective gain in special importance.
2. LEARNING GOALS
In this course you will get familiar with following issues:
1) Research on personality dimensions in entrepreneurial context
2) Assesing attributes of entrepreneurs and non entrepreneurs
3) Personality approach to the entrepreneurial success
4) Controversies and critical points of assessing entrepreneurial traits and
performance
5) Recognition and defining core entrepreneurial competencies
6) Role of the competencies in entrepreneurial activity and performance
7) Development of entrepreneurial competencies
3. RELATED IN-CLASS ACTIVITIES
1. You will conduct a brainstorm exercise on personality variables that may
predict entrepreneurial success in small groups. In the beginning of this
course you will get a task and further instructions how to proceed.
Afterwards you will present and evaluate your results in plenum.
2. For the second exercise you will receive 2 different vignettes and
questions concerning personality as a predictor of business start up.
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93
Basing on these vignettes you will learn to understand the role of
entrepreneurial attributes. Your results and reflections will be discussed.
3. For the third exercise you will be asked to imagine that you are working
in a Business School and your boss ordered you to develop a course on
development of entrepreneurial competencies. You have to provide
information on how you are going to proceed, which contents and
methods you will choose and how they should be implemented.
Afterwards you will present your program and the course participants
will provide you feedback concerning its strengths and weakness.
REFERENCES
BARON, R. A. (2007). Entrepreneurship: A Process Perspective. In J.R. BAUM, M. FRESE, R.A.
BARON (Ed.), The Psychology of Entrepreneurship. New Jersey: Lawrence Erlbaum Associates.
COSTA, P.T., Jr., & MCCRAE, R.R. (1992). Revised NEO Personality Inventory (NEO-PI-R) and
NEO Five Factor Inventory (NEO-FFI) professional manual. Odessa, FL: PAR.
CROMIE, S. (2000). Assessing entrepreneurial inclinations: Some approaches and empirical evidence.
European Journal of Work and Organizational Psychology, 9 (1), 7-30.
FRESE, M. CHELL, E., KLANDT, H. (2000). Introduction. European Journal of Work and
Organisational Psychology, special issue on psychological approaches to entrepreneurship, 9,
3-6
HAYTON, J. C., GEORGE, G., ZAHRA, S. A. (2002). National Culture and Entrepreneurship: A
Review of Behavioral Research. Entrepreneurship Theory and Practice,.No 14 (4), 33-52.
HISRICH, R. D, PETERS., M. P (2002). The nature and Importance of Entrepreneurs. In R.D.
HISRICH, M.P. PETERS (Ed.), Entrepreneurship. International Editon: McGraw-Hill
Companies.
HOFSTEDE, G.J., PEDERSEN, P.B., HOFSTEDE, G. (2002). Exploring culture. Exercises, Stories and
Synthetic Cultures. Intercultural Press Inc., USA
HOFSTEDE, G. (2001). Culture’s Consequences: Software of the mind. 2d ed. Thousand Oaks,
CA:Sage.
KIGGUNDU, M. N. (2002). Entrepreneurs and Entrepreneurship in Africa: What is Known and What
Needs to be Done. Journal of developmental Entrepreneurship: Vol. 7. No. 3.
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LANG-VON WINS, T. (2004). Der Unternehmer. Berlin, Heidelberg: Springer.
MARKMAN, G. D. (2007). Entrepreneurs’ Competencies. In J.R. BAUM, M. FRESE, R.A.
BARON (Ed.), The Psychology of Entrepreneurship. New Jersey: Lawrence Erlbaum Associates.
MINER, J. B. (1997). The Expanded Horizon for Achieving Entrepreneurial Success. Organizational
Dynamics, 54-66.
MCGRATH, R.K., MACMILLAN,I.C. (1992). More like each other than anyone else? A cross-cultural
study of entrepreneurial perceptions. Journal of Venturing, 7, 419-429
MCGRATH, R.K., MACMILLAN,I.C., YANG,E.A.,& TSAI,W. (1992b). Does culture endure, or is it
malleable? Issues for entrepreneurial economic development. Journal of Business Venturing, 7, 441-
458.
RAUCH, A., FRESE, M. (1998). Erfolgreiche Unternehmensgründer. Göttingen: Hubert & Co.
SCHNEIDER, B.(1987). The people make the place. Personnel Psychology, 40, 437-453.
SCHUMPETER, J.(1997). Theorie der wirtschaftlichen Entwicklung. Berlin: Duncker & Humblot.
TETT, R. P., STEELE, J. R., & BEAUREGARD, R. S. (2003). Broad and narrow measures on both
sides of the personality-job performance relationship. Journal of Organizational Behavior, 24 (3),
335-356.
VARELA, V.R. (2006). The development of Entrepreneurs based upon entrepreneurial competences: The
“Jovenes Con Empresa”Program. Entrepreneurship in United Europe. Challanges and
Opportunitie, Bulgaria 2006.
ZHAO, H., SEIBERT, S. E. (2006). The Big Five Personality Dimensions and Entrepreneurial Status: A
Meta-Analitical Review. Journal of Applied Psychology, Vol. 91, No. 2, 259-271.
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CHAPTER 8
MANAGING BUSINESS GROWTH
Martin Lukeš
Department of Managerial Psychology and Sociology
Prague University of Economics
“There are three types of people in this world: those who make things happen, those
who watch things happen and those who wonder what happened”.
Mary Kay Ash, Founder of Mary Kay Cosmetics.
1. THE GROWTH OF RIM-TECH
Mr. Jaromir Vaja received his degree from Prague University of Chemistry
and Technology and his PhD. from Czech Academy of Science at the end of
80's. Then he started to work in Research Institute for Rubber and Plastics
where he cooperated with a Dutch company DSM using reaction injection
moulding (RIM) technology. After societal changes in 1989 the Czech state just
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stopped to pay researchers, thus he decided he should start a business. It was a
great opportunity because they were the only one organization on the East-
European market that used RIM technology. The goal was to produce big
plastic parts in medium-size series, mainly for bus and truck producers, e.g.
Karosa, Tatra or Avia. However he had absolutely no money and for the
modern production line 1.2 mil. EUR was needed.
Because he lacked financial resources and also all the necessary technical
know-how, he founded the company with five other former colleagues from the
research institute. Dutch partners helped them to get in touch with customers
and provided expert advice concerning production process. Mr. Vaja was CEO
and the main contact person as he was the only one with English knowledge.
On the other hand, his economic knowledge was very low. Thus they hired Mr.
Zatloukal who became firm economist. From the bankrupted research institute
they bought some devices enabling them to use RIM technology in small
volumes. However no bank provided financing, venture capital funds were not
yet on the Czech market, and thus the only available resources were from
themselves and their families, unfortunately not in amount that would enable
quick growth.
After one year, Mr. Zatloukal proved himself to be very capable, therefore
he became a co-owner. In the early years they paid themselves almost no
salaries. There was no money for that. Their manual workers earned twice as
much as the owners, otherwise they would leave. All money were reinvested
and used to buy and improve machines and technologies. For the next seven
years they struggled to grow financially in order to be able to buy that
envisioned expensive production line. After 5 years, in 1996, they had 20
employees and got the first loan of 100.000 EUR that enabled to grow further.
In the beginning Mr. Vaja controlled the most of activities himself, however
when he saw that some of his co-owners can do something better, he was happy
to give them responsibility for the task.
In 1998 bus and truck producers started to bankrupt. Fortunately, Mr. Vaja
was able to see the signals on the market in time, and despite the 30% decrease
they were able to survive and focus on other market segments. Because they
needed money, they decided to sell 50% of shares to an investment company
EPIC. Also, Mr. Vaja was able to reflect his own strengths (intuition, market
understanding, and visionary) and weaknesses (poor management skills, choleric
personality) and came to a decision that Mr. Zatloukal will be much better CEO
than he himself is. Thus he stepped off and became a Marketing Director
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97
responsible for company strategy, sales and technology. Mr. Zatloukal became
CEO. The new focus was related to average annual growth of 25%. The
company received an award "subcontractor of the year 2003", serves clients as
Skoda, VW, or John Deer, has more than 200 employees and in December 2005
was successfully sold to a multinational corporation Polimoon for approx. 70
mil. EUR.
2. LEARNING GOALS
1) To understand criteria for the selection of good entrepreneurial team
2) To understand changes that take place in the process of firm growth
3) To identify growth barriers and learn how to overcome them
3. THEORETICAL BACKGROUND
The firm growth is one of the main goals of many entrepreneurs. However,
large differences between entrepreneurs exist. It is possible to outline the four
general motivation-investment models (Morris, Kuratko, Schindehutte,
2001):
1. substitution model - entrepreneurship is an alternative to
unemployment and the main goal is to survive,
2. income model - entrepreneurship is a more attractive alternative to
employment and the goal is to reach and sustain a good standard of
living,
3. growth model - the entrepreneur accepts in the first years minimal
income, reinvests all the profits, and looks for additional financing in
order to become number one in the market and a true multi-millionaire,
4. speculative model - the entrepreneurs wants to start a venture,
demonstrate its success and viability and sell it to the highest bid as soon
as this can be obtained.
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The first two models are connected with either no or small growth, but for
entrepreneurs with growth or speculative model in their heads is professional
growth management necessary.
The purpose or goal of the entrepreneur (e.g. growth) is the final cause for
guiding movement of the organization. The entrepreneur uses his or her vision
as a future state which pulls the organization forward. The business venture sets
goals and by taking actions it tries to reach these goals. Development can be seen
as a cycle of goal formulation, implementation, evaluation, and modification of
goals based on what was learned by the organization.
Business growth is the most frequently illustrated by increase in the number
of employees. Based on empirical research (e.g. Boeker, Karichalil, 2002) this is
the main signal of business growth that requires the change in business
management, According to Timmons (1990), when there are less then 25
employees it is about doing, when there are between 25 and 75 it is about
managing, and when there are more than 75 employees, it is about managing
managers. Generally, the growth exhibits in three main dimensions:
1. financial growth relates to the development of the business as a
commercial entity, it can be measured by sales, profit, assets, profit margin
and other financial criteria
2. strategic growth relates to the changes that take place in the way the
organization interacts with its environment. It is concerned with the way the
business develops its capabilities to exploit a presence in the marketplace. It
can be measured by market share, reputation, number of customers, prestige
of customers, new product lines etc.
3. organizational growth relates to the changes that take place in the
organizational structure, processes, and culture as it grows and develops. It
can be measure e.g. by number of employees, number of locations, number
of hierarchy levels or number of top managers.
All the three dimensions are interrelated. Financial growth enables
acquisition of resources for strategic growth, assets are used for organizational
growth. On the other hand strategic growth provides direction for
organizational growth and leads to improvements in financial performance and
so on.
It is understandable that the longer a firm operates on the market, the slower
is usually its growth (Davidsson et al., 2002). On the other hand research
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suggests that it is possible to build a successful venture in many geographical
locations and different business areas. There are naturally high growth
opportunities in ICT field as Google, YouTube, Skype and other relatively new
companies proved. However, in the list of the quickest growing European firms
the first three places were occupied by British firm operating in facility
management, Dutch firm focusing on maternity care and a firm from Iceland
specialized in pre-prepared food. It illustrates well that it is possible to found a
successful business in many business areas.
However, there are many potential barriers that limit the firm growth.
Basically, three groups of factors can be described (Lukeš, Nový at al., 2005):
1. external barriers, for example high taxation, bad payment morale, and
cheap Asian competition. These factors can be dealt with only partially. The
entrepreneur may decide to found a branch in other country with cheaper
workforce, to move the seat to a country with lower taxes, or to start in
some other area of business.
2. organizational barriers relates either to "hard" barriers (e.g. bad cash flow
management, bad selection of location, underestimated differentiation of
own products and services) or "soft" barriers. They include bad company
climate and low level of mutual trust, employees who are afraid of change,
inefficiently used human resources, mistakes in communication, unsolved
problems in division of responsibilities and authorities or different goals and
interests of stakeholders.
3. personal barriers, for example a clear vision is missing, or it has no growth
related aspects. Also it is possible that the entrepreneur is overwhelmed by
operative agenda and a lot of time devotes to unimportant things. Other
examples may include entrepreneurs who enjoy their own importance and
are not willing to learn new things, entrepreneurs who have their firm as a
hobby and prefer products to customers, entrepreneurs who are afraid of
losing control or entrepreneurs who invested too much energy to their
business and are burned-out and without motivation.
3.1. Framework for managing a growing venture
It includes the three major parts - growth strategy, POCD framework and
the change of role from the entrepreneur to the manager.
PSYCHOLOGY OF ENTREPRENEURSHIP
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3.2. Growth strategy
Most ventures begin by proving their business model in a narrowly defined
market space. As the venture comes to the growth phase, its business become
more stable. This stability, however, does not reduce the need for critical
choices. The first set of strategic choices deals with how the venture is to grow.
It can focus on new customers, new products, new geographical locations or
combination of these three options.
3.3. Framework PCDO (people, context, deal, opportunities)
A useful tool for understanding how the situation of the growing firm
changed is so called PCDO framework. It emphasizes the need for a dynamic fit
between four interrelated areas of people, context, deal and opportunities
(Sahlman, 1996). The entrepreneur must ensure a fit between them and flexibly
adapt to changes. People are those who actively participate or bring resources for
the venture. People’s skills, attitudes, knowledge, contacts, goals, and values
provide the resource mix that contributes centrally to success. Context is defined
as those elements outside the control of the entrepreneur that will influence
success or failure and include e.g. economic, regulatory, and sociopolitical
environment. Deal is the substance of the bargain that defines who in a venture
gives and gets what, and when those transactions will take place. Opportunities
are derived from the choice of the venture‘s growth strategy, i.e. geographic,
product line, or customer extension growth. Capitalizing on initial success often
requires the rapid achievement of national or global scale in order to achieve a
„temporary monopoly.“ Change in one area of the PCDO framework usually
requires a quick change also in other areas. Changing people often requires a
different deal. Changing context can make the skill set of current employees
insufficient and make another people’s skills more important. Amending a deal
may attract new players and drive away the old, etc.
3.4. Change of role: from the entrepreneur to the manager
When firm grows to some 25 employees, it is usually time when an
entrepreneur should recognize the need for change from purely entrepreneurial
to more organized managerial approach. Successful execution requires a more
disciplined approach to management than is usually seen in the early phase
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101
of a business. It requires a more hierarchical organizational structure, with
clearly defined tasks and responsibilities, and brings the need for more formal
and tighter control mechanisms. Entrepreneur also needs to delegate
responsibilities and develop human resources in order to create a space both for
himself/herself and them to grow together with the company.
Successful organizations must have both effective entrepreneurship and
effective management as can be seen from the RIM-Tech case. Whereas
entrepreneurship is about exploration, setting a direction, leading change and
transition, and redefining and breaking constraints, management is on the other
hand about exploitation, continuity, efficiency and getting the results, and
requires ability to work within constraints.
3.5. The stages of growth
Greiner (1998) describes firm growth as going through series of
developmental phases (see Picture 1). Each phase starts with a period of
evolution with steady growth and stability and ends with crisis where the
revolution and change are needed. When the change is successful the period
of further stable growth starts and ends up in other type of crisis.
For an example, the first phase is characterized by creativity. The founders
are entrepreneurial and all energy is devoted to making, selling, delivering, and
supporting the new product or service in a creative way. Communication with
the few employees is frequent and informal. Long hours are rewarded by low
salaries but high promises for the future. Control of activities comes from
immediate customer feedback and fast management reaction. However as
company grows, new problems start. New employees are not motivated by the
intense dedication of the original founders, some business activities are neglected
(e.g. human resource management, productivity control) and the founders still
try to act as they did in the past. Therefore strong, new leadership skills are
required. There is a need to add business functional expertise, and also founders
often give responsibilities for day to day business decisions to newly recruited
executive level officers. Firms who are successful in going through the first crisis
usually adopt functional organizational structure, accounting and controlling
systems, incentives, formal communication systems etc. Focusing energy of
employees in one direction leads to growth. However, after some time,
employees have better direct knowledge about the market and production
processes than top-management. Centralized processes lead to demotivation of
PSYCHOLOGY OF ENTREPRENEURSHIP
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capable employees on lower levels who leave the company. The crisis of
autonomy starts and a new phase begins.
Figure 1.
Source: Greiner, L.E. (1998) Evolution and revolution as organizations grow. Harvard Business Review,
May-June, s. 55-67.
4. RELATED IN-CLASS ACTIVITIES
1. Case discussion: The growth of RIM-Tech.
What were the key decisions of Mr. Vaja that helped the firm to be
successful?
Would you be able to do the same decisions in your company?
2. Discussing potential co-ownership.
Imagine you want to start your own business during your studies or after
graduation. Also imagine, you wish to have your business in the same area
(business consulting) as your neighbour sitting next to you and you both are
looking for a co-owner. Discuss, whether you two would be good partners in
INTRAPRENEURSHIP OR CORPORATE ENTREPRENEURSHIP
103
the business based on the agreement in your business philosophy (values, growth
ambitions, attitude to debts, personal time devoted to business, exit strategy)
3. Movie: Startup.com
Startup.com is a 2001 documentary film about the dot-com start-up
phenomenon, following govWorks.com and its founders Kaleil Isaza Tuzman
and Tom Herman from May 1999 to December 2000 as the Internet bubble is
bursting. The movie evokes the rush of late '90s capitalism, a period just seven
years ago, when a business plan and a confident handshake could secure millions
of dollars in venture capital; when it seemed anyone could get filthy rich on an
idea.
Friends from childhood, ambitious young business school graduate and
Goldman Sachs employee Kaleil and software geek and single dad Tom have an
idea: a website for people to conduct business with municipal governments.
Kaleil raises the money, Tom is the technical chief. A third partner wants a buy
out. Tom's daughter needs attention. And the need for cash and for improving
the website is always present. Venture capital comes in by the tens of millions.
Kaleil is on CNN, magazine covers, and shakes hands with Bill Clinton.
However, the business requires lifestyle compromises and personal sacrifices and
the competition seems to have a better website. The clash of philosophies and
personalities of the co-owners almost tear Tom and Kaleil apart. Will the
business or the friendship crash first?
Students are required to analyze the movie while watching it and then to
discuss what lessons can be learned in the strategic, human resources, financial,
marketing, and operational areas.
REFERENCES
BAUM, J.R., LOCKE, E.A., SMITH, K.G. (2001) A multi-dimensional model of venture growth.
Academy of Management Journal, 44 (2), s. 292-303.
BOEKER, W., KARICHALIL, R. (2002) Entrepreneurial transitions: factors influencing founder departure.
Academy of Management Journal, 45(3), s. 818-826.
CATLIN, K., MATTHEWS, J. (2001) Leading at the speed of growth. Journey from entrepreneur to CEO.
PSYCHOLOGY OF ENTREPRENEURSHIP
104
DAVIDSSON, P., KIRCHHOFF, B., HATEMI-J, A., GUSTAVSSON, H. (2002) Empirical analysis of
business growth factors using Swedish data. Journal of Small Business Management, 40(4), s. 332-
349.
GREINER, L.E. (1998) Evolution and revolution as organizations grow. Harvard Business Review,
May-June, s. 55-67.
MORRIS, M.H., KURATKO, D.F., SCHINDEHUTTE, M. (2001): Towards integration: understanding
entrepreneurship through frameworks. Entrepreneurship and Innovation. February, s. 35-49.
SAHLMAN, W.A. (1996). Some thoughts on business plans. In W.A. SAHLMAN, H. STEVENSON,
M.J. ROBERTS, & A.V. BHIDE (Eds), The entrepreneurial venture. Boston: Harvard Business
School Press.
SPREITZER, G.M., MISHRA, A.K. (1999) Giving up control without losing control. Group and
Organization Management, 24(2), s. 155-187.
TIMMONS, J.A. (1990): New Venture Creation. 3rd ed., Homewood, IL: Irwin.
105
CHAPTER 9
INTRAPRENEURSHIP OR CORPORATE ENTREPRENEURSHIP
M. Evelina Ascalon
Human Capital Core Processes
Credit Suisse
1. LEARNING GOALS
1) Understand the difference between entrepreneurship and
intrapreneurship
2) Learn about the various types of intrapreneurial activities
3) Learn the challenges faced in trying to successfully implement
intrapreneurial activities
4) Learn how to overcome those challenges
2. THEORETICAL BACKGROUND
Entrepreneurship attracts those who are interested in starting something that
is their own. However, for many reasons many of those potential entrepreneurs
do not take the step (at least not right away). Rather they choose for a life as an
employee with a fixed income, regular hours, and a pension plan. Life in a
company, however, does not have to mean the loss of one’s dream to build
something of their own. One can choose to be an entrepreneur – with a safety
net – otherwise known as a corporate entrepreneur or intrapreneur.
Companies who want to succeed in highly competitive market places need
to innovate and in turn they need innovators and entrepreneurs. The term
innovate is loosely used in organizations; its meaning ranges from improvements
in daily activities to the development of new products and new markets. A
PSYCHOLOGY OF ENTREPRENEURSHIP
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taxonomy of intrapreneurial activities outlines the various types of
entrepreneurial activities in a corporation (Kunkel, 2001). These are outlined in
the figure below.
Figure 1.
Kunkel’s (2001) taxonomy of entrepreneurial activities
The taxonomy outlines both entrepreneurial activities and corporate
entrepreneurial activities. We will focus only on learning about the latter types
of activities.
Enterprise level intrapreneurship concerns a change in the direction or focus
of the organization.
Entrepreneurial
activities
Independent/
Entrepreneurship
High Growth:
- Need driven
- Technology driven
Low Growth:
- Income substation
Corporate/
Intrapreneurship
Enterprise level
Corporate level
Functional level
Business level:
- Founding new business unit
- New directions for existing units
INTRAPRENEURSHIP OR CORPORATE ENTREPRENEURSHIP
107
Corporate level intrapreneurship (also known as a corporate turnaround)
refers to a radical restructuring of the business units or a dramatic
transformation of the organization.
Business level intrapreneurship can be further categorized depending on
whether the activity occurs within an existing business unit or concerns the
founding of a new business unit. The founding of a new business unit is also
known as corporate venturing and is the more widely recognized type of
corporate entrepreneurship. The second, the business turnaround, concerns
the transformation of a business unit.
Functional level intrapreneurship refers to the development and
improvement of new products, processes, technologies, etc.
These four types of intrapreneurship will be further investigated during the
course using case studies.
Challenges to Intrapreneuring within the Business Environment
In preparing to undertake an intrapreneurial activity, it is important to be
aware of the challenges one may face. Following are some challenges outlined by
Sathe (2003) and Van de Ven, Polley, Garud, & Venkataraman (1999).
Expect conflict between intrapreneurs and management
Successful, growing businesses may not see the need for new business
creation
Management may choose to deny needed resources
Product liability fears can hinder the development of new products
Fear that new products will harm existing products may discourage
innovation
Suppliers may block new development
Customers may not accept the innovation, which can hurt the prospects for
success
PSYCHOLOGY OF ENTREPRENEURSHIP
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Successful Intrapreneurship
Pinchot & Pellman (1999), Sathe (2003), and Van de Ven, et al., (1999)
outlined some rules, tips, and tricks to increase your chances of succeeding in
the intrapreneurial venture.
Gain support from people with power and influence
Convince your company to develop a program that finances and supports
new initiatives
Competition for financing can be fierce and a sound business plan will help
Choose activities that fit well with the company’s overall strategies, strengths,
and values
Conduct the activity with a good team and outline the following roles 1) an
inventor or idea generator, 2) the intrapreneur, 3) the intrapreneurial team,
4) the sponsor(s), and (5) the innovation climate maker
Have the courage, vision, and the willingness to take charge and make it
happen
Do not talk about your idea too much too early in the process as it may scare
off those who are sceptical of or threatened by change
Get customer input early in the process and continue to gather their
feedback during product or service development
Be persistent, but also practical
Repeatedly communicate the vision of the new venture
To highlight your learning, we will go through several case studies from, for
example, the finance, engineering, and energy industry. We will also review
additional studies in corporate entrepreneurship, such as a study that assessed the
differences between entrepreneurial and intrapreneurial competencies
(Zwemstra, Ascalon, & Gorgievski, 2006).
INTRAPRENEURSHIP OR CORPORATE ENTREPRENEURSHIP
109
REFERENCES
KUNKEL, S.W. (2001). Toward a typology of entrepreneurial activities. Unpublished study.
PINCHOT, G., & PELLMAN, R. (1999). Intrapreneuring in Action. Berrett-Koehler Publishers.
SATHE, V. (2003). Corporate Entrepreneurship. Cambridge University Press.
VAN DE VEN, A. H., POLLEY, D. E., GARUD, R., & VENKATARAMAN, S. (1999). The
Innovation Journey. Oxford University Press.
ZWEMSTRA, J., ASCALON, M. E., & GORGIEVSKI, M. (2006). Differentiating between Entrepreneurs
and Intrapreneurs. Unpublished Master’s thesis.
PSYCHOLOGY OF ENTREPRENEURSHIP
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111
CHAPTER 10
ENTREPRENEURIAL STRESS
Marjan Gorgievski
Department of Industrial and Organisational Psychology
Erasmus University Rotterdam
SWEDISH, IRISH AND DUTCH
ENTREPRENEURS: NO
STRESS
30-05-07. Entrepreneurs in
Sweden, Ireland and The
Netherlands are suffering the least
stress. Less than four out of ten
entrepreneurs reported more
stress in 2006 than in 2005.
This contrast sharply with China,
where you can find the most rushed
business people in the world. More
than 8 out of 10 entrepreneurs in this
huge growth-economy indicated that
their stress levels increased since the
year before (International Business
Report (IBR); Arenthals Grant
Thornton).
The IBR also shows that
entrepreneurs on average work 53
hours per week. Entrepreneurs in
Europe work the fewest number of
hours, namely 50. In East-Asia and the
NAFTA-countries this is respectively
53 and 54 hours. Entrepreneurs in the
new economies work even longer.
India and Argentina lead with 57
hours per week, Australia, Armenia
and Botswana follow closely with 56
hours per week. Entrepreneurs
working the least number of hours can
be found in the EU. Italian
entrepreneurs take it easy with 47
hours per week. Entrepreneurs from
the Netherlands, Sweden, Spain, and
Ireland spend 48 hours on business
related tasks.
http://www.agt.nl/actueel/persberichten/nederlan
dse_ondernemers_behoren_tot_minst_gestresste_on
dernemers_ter_wereld/?cid=38&pid=48
PSYCHOLOGY OF ENTREPRENEURSHIP
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WHY WORKING HARD IS
BAD FOR YOUR BUSINESS
14-02-07. Many self-employed are
prepared to work many hours and
go to any length for their business
or practice. Coach Maud de Vries
warns: “The temptation to say
yes to everything that comes your
way is strong, but before you
know it, you are simply surviving
instead of thriving, and the
quality of your work starts to
erode.”
No matter how hard you are
willing to work, there are limits. Time
limits seem easy to stretch. You sleep a
little less, work in your private hours.
But at some point you will notice that
you start making mistakes and you are
not as creative as you used to be.
Instead of trying to work 25% more
hours in your work week, it is far
more lucrative to work on a long-
term strategy that helps you charge
25% more for your output. You can
achieve that by spending your non
productive hours better.
1. LEARNING GOALS
In this course you will learn about entrepreneurial stress.
1) From a Conservation of Resources perspective (Hobfoll, 1989, 2001)
you will learn about stress versus activation.
2) You will learn about typical entrepreneurial demands and resources
3) You will receive a two-hour introductory training in techniques that can
help you create balance in your life.
2. THEORETICAL BACKGROUND
Building on a motivational stress theory, the Conservation of Resources
(COR-) Theory (Hobfoll, 1989, 2001), we will explain two fundamental
processes related to entrepreneurs’ job content and their personal and job-
characteristics. First is a stressful downward spiral of resource loss, and second is
an upward, motivational spiral of resource gain.
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113
2.1. Conservation of Resources Theory
Conservation of Resources (COR-) Theory (Hobfoll, 1989, 2001) is a
motivational stress theory, according to which people strive to protect, maintain
and increase their resources. Resources can be any objects, conditions, social and
personal resources, and energies (e.g. time, money), that have intrinsic or
instrumental value. When people experience a threat
to their resources, or when they loose resources,
people are expected to experience stress. When they
perceive a (potential) gain, they are expected to feel
well and get motivated. People are expected to try to
counteract (potential) losses and strive for perceived
opportunities of resource gain, by investing other
resources they posses. However, there is a risk that the
investment of resources causes these resources to get
lost as well. When the investment of resources does
not lead to the expected gains, this will also be
stressful.
In the work situation it has been shown that a balance between job-demands
and job-resources predicts whether job incumbents will be caught in either a
positive gain spiral of resources, leading to motivation for the job, work
engagement and high performance, or a negative, resource depleting loss spiral
resulting in poor well-being and performance (Demerouti, Nachreiner, Bakker,
& Schaufeli, 2001). Job demands refer to physical, social, or organizational
characteristics of the job that require sustained physical and/or mental effort and
that are thus associated with certain physiological and psychological costs. Job
resources refer to physical, social, or organizational aspects of the job that are
functional in achieving work goals, reducing job demands, or stimulating
personal growth, learning, and development.
Empirical evidence exists that the core resources that are depleted as a
consequence of high work demands are intrinsic energetic resources, such as
vigor, emotional stability and cognitive abilities (e.g. Demerouti et al., 2001;
Shirom & Hobfoll, 2001). In other words, people get tired, irritable and start
making mistakes if they work for a longer period of time, especially if they are
performing difficult tasks that exceed their cognitive and emotional capacities.
Furthermore, loss of other resources may occur as secondary losses, resulting
from peoples’ attempts to deal with their demands. Most common are
PSYCHOLOGY OF ENTREPRENEURSHIP
114
diminished sense of personal competency and erosion of social support networks
(Buchwald & Hobfoll, 2004; Hobfoll & Shirom, 2001). In the long run this will
even lead to health impairment, for example burnout and coronary heart disease.
On the other hand, job-resources can either foster intrinsic motivation by
growth, learning and development, or extrinsic motivation by achieving work
goals. Resources are expected to motivate especially if demands are high, and
even if people are tired and exhausted. Individuals do not completely depend on
the resources their jobs provide. They also have their own personal resources.
Resource rich individuals are less likely to get caught into a loss spiral, and more
likely to enter gain spirals of resources (Hobfoll, 1989, 2001).
2.2. Entrepreneurship and Entrepreneurial activities
It is our contention that each job has its own specific demands and provides
its own specific resources. One can wonder whether it is legitimate to focus on
entrepreneurs as an occupational group, because a large diversity exists between
one type of entrepreneur and another (e.g., Carland, Hoy, Boulton, & Carland,
1984; Gartner, Mitchell, & Vesper, 1989). We focus on self-employed
individuals who are engaged in activities that are distinctively entrepreneurial in
nature, rather than people who run an existing small business or a professional
practice. Various studies have shown that entrepreneurial activities can be
identified, and distinguished from, for example, managerial activities (Kunkel,
1991; McDougall & Oviatt, 1996; McDougall, Robinson, & DeNisi, 1992;
Sandberg & Hofer, 1987).
Most authors agree that entrepreneurship is a process. Crucial element in this
process is that the entrepreneur and his or her venture are closely intertwined.
Another important element is the creation of new value (not necessarily a
venture). Entrepreneurial activities have broadly been characterized by on the
one hand creating and gaining resources, and on the other hand shaping through
rearranging resources in a new way (Morris, 2001). In this context, resources are
defined as assets, capabilities, routines and knowledge that are tied to or
controlled by the organization the entrepreneur is operating. Another general
feature is that entrepreneurs take on assignments with certain levels of risk.
More specifically the entrepreneurial activities include, but are not restricted
to (Shane, Locke, & Collins, 2003): (1) entrepreneurial opportunity recognition;
(2) formulating ideas of how to exploit these opportunities; (3) product or
service development; (4) resource acquisition, such as financial, human, and
ENTREPRENEURIAL STRESS
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personal resources (knowledge, skills, attitudes); (5) organizational design,
starting-up, (re)organizing social and economic mechanisms (new ventures, new
departments within existing organizations, etc.); (6) formulating and
communicating long-term vision, to have a visualization of what you aim to
accomplish in the future; (7) evaluating ideas and performance. Entrepreneurs
may also be performing tasks that are similar to other occupational groups, such
as managerial tasks, inter-personal and relational tasks (sales), leadership tasks, or
administrative tasks (e.g., Born & Altink, 2003; Nandram & Samson, 2000), but
they typically perform these tasks in a different context than people working on
pay role.
2.3. The Entrepreneurial Process, an Activating Process
The focus of the entrepreneurial process is by definition on resource gain.
This may be the reason that overall, entrepreneurship is perceived as an active,
motivating job, rather than a stressful one. According to Brockhaus (1980), the
propensity of the entrepreneur too would be to focus on gains, rather than
losses, which would explain why entrepreneurs chose for other options than
non-entrepreneurs do. They see gains in situations where other people only
perceive losses.
Thinking of the resources entrepreneurs aim to gain, the first resources that
come to mind are of course business resources. Business resources can be
tangible or intangible representing organizational capabilities (Morris, 2003). In
addition, there are also personal gains. One needs to know what entrepreneurs
value in order to understand what they want to gain. Research on the reasons
why people want to start their own business (Kuratko, Hornsby, & Naffziger,
1997) and research on rewarding aspects of entrepreneurship (Boyd & Gumpert,
1983; Lewin-Epstein & Yuchtman-Yaar, 1991) showed that people seek
freedom, autonomy, a higher income than they could possibly get working on
pay role, status, and social recognition. A positive entrepreneurial gain spiral
would ideally lead to business growth (gain of business resources) and personal
growth (gain of private resources).
Resource rich individuals are more likely to experience such resource gain
cycles. Research on entrepreneurial success has identified a list of personality
characteristics and competencies predictive of entrepreneurial success. These
include independence, risk taking propensity, tolerance of ambiguity,
entrepreneurial self-efficacy, creativity, market orientation and leadership skills.
PSYCHOLOGY OF ENTREPRENEURSHIP
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The job itself provides resources as well, in particular decision latitude (schedule
flexibility, job variety, skill utilization and autonomy). On the other hand, the
entrepreneurial job also lacks some resources, such as supervisors and peers in the
organisation who can provide feedback and social support.
2.4. The Entrepreneurial Stress Process
Under what conditions will entrepreneurship be experienced as stressful?
Entrepreneurial tasks require sustained effort and the investment of resources,
and as such would fit our definition of demands. Returns on these investments
may often be unsure. We need to keep in mind that demands become stressors if
they lead to real or expected resource loss cycles. The question is, what demands
may set a loss cycle into motion? Unfortunately, previous entrepreneurial stress
studies did not provide much insight into the entrepreneurial stress as a process
of resource loss. Based on qualitative and cross-sectional designs, they did
provide the following “laundry-list” of entrepreneurial stressors.
The most often reported entrepreneurial stressor is work overload, especially
quantitative work overload (Chay, 1993; Harris, Saltstone, & Fraboni, 1999;
Tetrick, Slack, Da Silva, & Sinclair, 2000). Working with deadlines causes time
pressure and a feeling of having too much to do in too little time.
Another form of work overload is qualitative overload, which relates to a
lack of skills and abilities to perform a given task. Qualitative overload may
especially occur among starting entrepreneurs who meet new and unexpected
challenges, and who need to learn how to deal with those new challenging tasks
on the job. One of such tasks is dealing with people. This includes finding and
selecting new employees as the business grows (Boyd & Gumpert, 1983) Gibb &
Davies, 1991), moving employees into a new direction or mission (Boyd &
Gumpert, 1983), and properly defining relationships with employees, delegating
the right tasks and allowing them to develop (Gumpert & Boyd, 1984). A
second, task related challenge relates to boundary spanning activities. These are
activities related to communication between the organisation and the external
environment the organisation is part of. These include communication problems
with customers and suppliers, for example related to closing deals, and dealing
with debtors (Richter & Kemter, 2000). A third task related challenge is
changing the products or services that are being delivered. Self employed
individuals have been found to feel more comfortable delivering well-known
products and services than occasional or new ones (Mack & McGee, 2001).
ENTREPRENEURIAL STRESS
117
A third type of stressor is frustration and disappointment experienced in
relationship with business partners. This includes acquiring new partners as well
as terminating from a partner (Boyd & Gumpert, 1983; Gumpert & Boyd, 1984;
McMullan, 1996). Frustration may not only arise from differences in personality
but also from differences in expectations, abilities and contributions to the firm.
In family businesses, stressors between business partners may take on a special
form, such as intergenerational conflicts and rivalries between parents and
children (Johnson, 1995; Rosenblatt, DeMik, Anderson, & Johnson, 1990).
Finally, one of the main challenges entrepreneurs experience is finding the
right balance between work and private life. Entrepreneurs may face
overwhelming dominance of professional life and personal sacrifices, because of
the long hours they make. Entrepreneurs reported they barely have time for
family, recreation or further education (Boyd & Gumpert, 1983; Buttner, 1992).
The entrepreneurial stressors described above mainly appear to center around
loss of energetic resources, which can be both external (finances, loss of which
may pose a threat to continuity of the business) and internal (physical vigor,
mental well-being). In addition, entrepreneurial stressors may lead to erosion of
social networks, and threats to valued personal resources, such as autonomy.
These losses spill from the professional domain into entrepreneurs private life.
Loss of these resources may render people more vulnerable to experiencing
further loss.
2.5. To conclude
In this contribution we focused on typical demands and resources of
entrepreneurs that play an important role in setting into motion either a
motivating spiral of resource gain or a stressful and health impairing spiral of
resource loss.
Based on an overview of the entrepreneurial stress literature we have
identified four important groups of stressful entrepreneurial demands. We need
to bear in mind that these demands are experienced as stressful, because they set
into motion a loss cycle of resources. Reason why people get entangled in loss
spirals is because they lack resources to deal with certain demands. In order to
prevent stressful loss spirals of resources, competencies such as time management
skills, marketing skills, managerial competencies, and social competencies
(Markman & Baron, 2003)(Gibb and Davies, 1991).
PSYCHOLOGY OF ENTREPRENEURSHIP
118
3. RELATED IN-CLASS ACTIVITIES
How to create balance exercise
In this exercise you will learn how to increase some important personal
resources, namely skills for creating balance in your life. For this exercise you
make your own life balance assessment. Next we will
REFERENCES
BOYD, D. P., & GUMPERT, D. E. (1983). Coping with entrepreneurial stress. Harvard Business
Review, 44-64.
BROCKHAUS, R.H. (1980) Risk taking propensities of entrepreneurs. Academy of Management
Journal, 23, 509-520.
BUCHWALD, P. & HOBFOLL, S. E. (2004). Burnout aus ressourcentheoretischer
Perspektive Burnout in the Conservation of Resources Theory. Psychologie-in-
Erziehung-und-Unterricht. Vol 51(4) 247-257.
BUTTNER, E. H. (1992). Entrepreneurial stress: is it hazardous to your health? Journal of Managerial
Issues, 4(2), 223-240.
CARLAND, J. W., HOY, F., BOULTON, W. R., & CARLAND, J. A. C. (1984). Differentiating
entrepreneurs from small business owners: A conceptualisation. Academy of Management Review,
9(2), 354-359.
CHAY, Y. W. (1993). Social support, individual differences and well-being: A study of small business
entrepreneurs and employees. Journal of Occupational and Organizational Psychology, 66, 285-
302.
DEMEROUTI, E., NACHREINER, F., BAKKER, A. B., & SCHAUFELI, W. B. (2001). The job
demands-resources model of burnout. Journal of Applied Psychology, 86, 499-512.
GARTNER, W. B., MITCHELL, T. R., & VESPER, K. H. (1989). A taxonomy of new business
ventures. Journal of Business Venturing, 4, 169-186.
GUMPERT, D. E., & BOYD, D. P. (1984). The loneliness of the small-business owner. Harvard
Business Review, 18-24.
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HARRIS, J. A., SALTSTONE, R., & FRABONI, M. (1999). An evaluation of the job stress questionnaire
with a sample of entrepreneurs. Journal of Business and Psychology, 13(3), 447-455.
HOBFOLL, S. E. (1989). Conservation of resources, a new attempt at conceptualising stress. American
Psychologist, 44 (3), 513-524.
HOBFOLL, S. E, SHIROM, A (2001) Conservation of resources theory: Applications
to stress and management in the workplace. In: GOLEMBIEWSKI, R.T.(Ed.)
Handbook of organizational behavior (2nd. ed.). (pp. 57-80). New York, NY,
US: Marcel Dekker.
HOBFOLL, S. E. (2001). The influence of culture, community and the nested-self in the stress process:
advancing Conservation of Resources theory. Journal of Applied Psychology, 50, 337-396.
JOHNSON, D. (1995). Stress and stress management among owner-managers of small and medium-sized
enterprises. Employee Counseling Today, 7(5), 14-19.
KUNKEL, S. W. (in press). Toward a typology of entrepreneurial activities. Academy of
Entrepreneurship Journal.
KURATKO, D. F., HORNSBY, J. S., & NAFFZIGER, D. W. (1997). An Examination of owners's
Goals in Sustaining Entrepreneurship. Journal of Small Business Management, 35(1), 24.
LEWIN-EPSTEIN, N., & YUCHTMAN-YAAR, E. (1991). Health risks of self-employment. Work and
Occupations, 18 (3), 291-312.
MACK, D.A. & MCGEE, J.E. (2001). Occupational stress and the small business owner"the role of Task
complexity and Social support. Paper submitted to the USASBE/SBIDA conference.
MARKMAN, G. D., & BARON, R. A. (2003). Person–entrepreneurship fit: why some people are more
successful as entrepreneurs than others. Human Resource Management Review, 13(2), 281.
MCDOUGALL, P. P., & OVIATT, B. M. (1996). New venture internationalization, strategic change, and
performance: a follow-up study. Journal of Business Venturing, 11(1), 23-40.
MCDOUGALL, P. P., ROBINSON, R. B. J., & DENISI, A. S. (1992). Modeling new venture
performance: an analysis of new venture strategy, industry structure, and venture origin. Journal of
Business Venturing, 7(4), 267-289.
MCMULLAN, W. E. (1996). An entrepreneurial tragi-comedy: Exploring the dark side of venturing.
Technovation, 16(9), 515-517.
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MORRIS. M.H. 2001. The critical role of resources. Journal of developmental entrepreneurship, 6,
pV, 4p.
121
CHAPTER 11
CREATE ENTREPRENEURIAL MINDSETS
Adalgisa Battistelli
Department of Psychology and Cultural Anthropology
University of Verona
1. LEARNING GOALS
In this course you will learn:
The importance to develop and entrepreneurial mindset in Europe and
some possible strategies to develop it through education and guidance starting
from some essential psychosocial aspects of entrepreneurship.
2. THEORETICAL BACKGROUND
“Europe needs to foster entrepreneurial drive more effectively. It needs more
new and thriving firms willing to reap the benefits of market opening and to
embark on creative or innovative ventures for commercial exploitation on a
larger scale” (Entrepreneurship in Europe, Green Paper 2003).
The importance of developing an entrepreneurial mind in Europe is
highlighted in several “communications” and European documents. The most
and last well knew is the Green Paper on Entrepreneurship in Europe of the
2003. This important document is the result of a large consultation process in
the European countries and has the objective to indicate the strategies and the
actions that European countries should be realize to improve entrepreneurship in
Europe.
In policy options for entrepreneurship is indicate that “to promoting
entrepreneurship must work on three levels – individual, firm and society.
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To motivate individuals to become entrepreneurs, they should be aware of
the concept of ‘entrepreneurship’, and this should be made a sufficiently
attractive option. They should be equipped with the right skills to turn
ambitions into successful ventures.
For entrepreneurial ventures to develop into healthy firms, supportive
framework conditions are essential. These should allow firms to develop and
grow, and not unduly hinder contraction and exit.
Entrepreneurial activity depends on a positive appreciation of entrepreneurs
in society. Entrepreneurial success should be valued and the stigma of failure
reduced.
Entrepreneurship policy aims to enhance entrepreneurial vitality by
motivating and equipping entrepreneurs with the necessary skills. A supportive
environment for businesses is key for businesses to start, take over, thrive and
survive” (Entrepreneurship in Europe, Green Paper 2003).
In the 2006 the Commission of European Communities in order to
implementing the Community Lisbon programme has produced a
communication [COM(2006) 33 final] for entrepreneurship: “Fostering
entrepreneurial mindsets through education and learning”. “There is a need to
create a more favourable societal climate for entrepreneurship, based on an
integrated policy with a view to not only changing the mindset but also
improving the skills of Europeans removing obstacles to the start-up, transfer and
growth of businesses”.
Education and learning are considered the key to improve entrepreneurial
mindsets and entrepreneurship is viewed as key competence for growth,
employment and personal fulfilment. “Entrepreneurship refers to an individual’s
ability to turn ideas into action. It includes creativity, innovation and risk taking,
as well as the ability to plan and manage projects in order to achieve objectives.
This supports everyone in day-to-day life at home and in society, makes
employees more aware of the context of their work and better able to seize
opportunities, and provides a foundation for entrepreneurs establishing a social
or commercial activity”. At the end, the communication indicates a series of
recommendations for concrete action that should be taken at national and local
level. The proposals aim to help formulate more systematic approaches to
entrepreneurship education and to enhance the role of education in creating a
more entrepreneurial culture in European societies. These recommendations are
synthesized here:
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A coherent framework (a. national and regional authorities should establish
cooperation between different departments, leading to developing a strategy
with clear objectives and covering all stages of education in the context of the
Lisbon national programmes; b. curricula for schools at all levels should explicitly
include entrepreneurship as an objective of education);
Support for schools and teachers (a. Schools should be given practical support
and incentives to encourage take-up of entrepreneurship activities and
programmes, through a range of different instruments; b. Special attention
should be given to training teachers, through initial and in-service training as
well as practical experience)
Fostering entrepreneurship in higher education (a. Higher education
institutions should integrate entrepreneurship across different subjects and
courses; b. Public authorities’ support is especially needed to provide high-level
training for teachers and to develop networks that can share good practice; c.
Teacher mobility between university and the business world should be
encouraged together with the involvement of business people in teaching).
Finally, in the October of 2006, the conference on Entrepreneurship
Education in Europe: “Fostering entrepreneurial mindsets through education
and learning” held in Oslo, has produced a final agenda that indicates clearly the
strategies that European countries need to realize in education and learning. This
document contains the important guidelines to improve entrepreneurial mindsets
in Europe.
REFERENCES
Commission of the European Communities (2003). Entrepreneurship in Europe, Green Paper .
Commission of the European Communities (2006). Report on the implementation of
Entrepreneurship Action Plan.
Commission of the European Communities (2006). Fostering entrepreneurial mindsets through
education and learning. COM (2006) 33 final.
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125
CHARTER 12
SOCIAL ENTREPRENEUR (SHIP)
Adalgisa Battistelli
Department of Psychology and Cultural Anthropology
University of Verona
1. LEARNING GOALS
In this course you will learn:
1) Tthe essential characteristics of social entrepreneurship
2) The differences between business and social entrepreneurs
3) The role of social entrepreneurship in economic and social development
in Europe.
2. THEORETICAL BACKGROUND
“Social entrepreneurs play the role of change agents in the social sector, by:
adopting a mission to create and sustain social value (not just private value),
recognizing and relentlessly pursuing new opportunities to serve that mission,
engaging in a process of continuous innovation, adaptation, and learning,
acting boldly without being limited by resources currently in hand, and
exhibiting heightened accountability to the constituencies served for the
outcomes created” (Dess, 1998, 2001).
The concept of ‘social entrepreneurship’ has been rapidly emerging in the
private, public and non-profits sectors over the last few years, and interest in
social entrepreneurship continues to grow. The non-profit sector is facing
intensifying demands for improved effectiveness and sustainability in light of
diminishing funding from traditional sources and increased competition for this
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scarce resources. At the same time, the increasing concentration of wealth in the
private sector is promoting calls for increased corporate social responsibility and
are proactive responses to complex social problems, while governments at all
levels are grappling with multiple demands on public funds.
In light of this, social entrepreneurship is emerging as an innovative approach
for dealing with complex social needs. With its emphasis on problem-solving
and social innovation, socially entrepreneurial activities blur the traditional
boundaries between the public, private and non-profit sector, and emphasize
hybrid models of for-profit and non-profit activities. Promoting collaboration
between sectors is implicit within social entrepreneurship, as is developing
radical new approaches to solving old problems. Social entrepreneurship has a
strong intuitive appeal, and several recently documented examples highlight its
potential in a variety of contexts. However, this is still a very new area, and
research on social entrepreneurship lags far behind the practice.
In this course we will focus to explore two essential aspects of social
entrepreneurship: a) background/context (contextual factors influencing the
emergence and development of social entrepreneurship); b) defining social
entrepreneurship and examine the characteristics and motivations of social
entrepreneurs.
Finally, a particular reference will be made on training and capacity building
for social entrepreneurship.
REFERENCES
AUSTIN, J., STEVENSON, H., WEI-SKILLERN, J. (2006). Social and Commercial Entrepreneurship:
Same, Different, or Both? Entrepreneurship Theory and Practice, 30(1), 1-22.
DEES, J.G. (1998). The meaning of “social entrepreneurship. Comments and suggestions contributed
from the Social Entrepreneurship Founders Working Group. Durham, NC: Center for the
Advancement of Social Entrepreneurship, Fuqua School of Business, Duke University.
Available at http://faculty.fuqua.duke.edu/centers/case/files/dees-SE.pdf
THOMPSON, J. (2002). The world of the social entrepreneur. International Journal of Public Sector
Management, 15(5), 412–431.
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CHAPTER 13
CULTURE AND ENTREPRENEURSHIP OR WHICH COUNTRY IS
MOST ENTREPRENEURIAL?
Ute Stephan
Work and Organizational Psychology Work Group
Philipps-Universitaet Marburg,
1. INTRODUCCIÓN
Mark is German, he has just graduated in business and is meeting his friend
Walter, who is about to finish his degree in information technology. The two
have been discussing to start a small internet marketing company for some time
now. They have already had a couple of small orders from customers. Mark and
Walter felt that they have done a good job and also received very positive
feedback from their customers.
When they are meeting Mark starts ‘I am not sure what we should do next
really. We went to all these business preparation courses, we wrote a good
business plan – our consultants said so and even the banks agreed that our
concept was great! I don’t understand why they would not give us a loan!’
Walter: ‘I know, I’m absolutely frustrated as well. And, it’s not just the banks. I
tried to fill out the forms for the government subsidies we would be eligible for
… hopeless. Also, I think, my parents and also a couple of my friends try to tell
me that it is not a good idea for us to start a business.’ Mark: ‘How can they?
Have they even an idea of how good our concept is?’ Walter: ‘It’s not that, they
just generally feel that it would be a bad idea. What is if we fail? Will we get a
job afterwards? You know, big companies don’t like to employ people who
failed.’ Mark: ‘Well, to be honest with you, I’ve also had second thoughts. We
wouldn’t even get unemployment benefits, if we failed…. or pension money, or
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stuff like that.’ Walter ’It seems the only one, who strongly encourages me to just
do it is my brother, but I think he’s simply picked up that American ‘can-do’
attitude when he stayed there.’
2. LEARNING GOALS
In this course you will learn about the association of culture and
entrepreneurship.
1) Understand what culture is and how it influences entrepreneurship
2) Understand which cultural values and practices relate to entrepreneurship
3) Learn about other factors that influence a nation’s entrepreneurship
besides culture
3. THEORETICAL BACKGROUND
I. Why culture and entrepreneurship?
“…the relative stability of differences in entrepreneurial activity across
countries suggests that factors other than economic ones are at play.” (Freytag &
Thurik, 2007, p. 118)
The idea that culture could be associated with entrepreneurship and thus be a
driver of economic growth has quite a long tradition. McClelland (1961/1976)
built on Weber’s idea that the protestant work ethic was the main cultural driver
behind the occurrence of capitalism and industrialization. McClelland
introduced Need of Achievement (nAch) – “the desire to do something better,
faster, more efficiently, with less effort“ (McClelland, 1976, p. A). He found
nAch not only to be a characteristic of successful entrepreneurs and was able to
train them accordingly (McClelland & Winter, 1969), but he also found nAch to
be predictive of national economic growth rates (McClelland, 1976).
McClelland used an innovative measure of ‘cultural nAch’, he analyzed the
motivational content of popular literature – something we would call today a
measure of cultural practices.
Since McClelland, only a few authors looked into the culture and
entrepreneurship relationship. The editors of a special issue on culture and
entrepreneurship that was published earlier this year concluding that there is still
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a ‘paucity of contributions dealing with cultural influences’ (Freytag & Thurik,
2007, p. 122).
II. What is culture?
There are hundreds, if not thousands of definitions of culture to be found in
the literature, however as Smith (2002) summarizes ‘… none of them suggests an
individual has a culture of his or her own. Culture is something that is shared
among people.’ (p.1).
Figure 1:
Iceberg Model of Cultural Practices and Values (upward arrows indicate that values are enacted in
behaviours)
Mainly two manifestations of culture can be differentiated. The most
common perspective sees shared values as the basis of a culture - similar to traits
being core to a person’s personality. A second, connected perspective focuses on
practices, i.e. societal behaviours, practices and policies, which result from enacted
values (House et al., 2002). This view of culture corresponds to understanding a
person through his/her behaviour and outcomes of his/her behaviour. The first,
Cultural Practices
(behaviors, prescriptons …)
Can be observed, perceived
& reported
Cultural Values
(basic assumptions, transsituationally
& transtemporally desired goals)
Can be experienced & reported
Cultural Practices
(behaviors, prescriptons …)
Can be observed, perceived
& reported
Cultural Values
(basic assumptions, transsituationally
& transtemporally desired goals)
Can be experienced & reported
PSYCHOLOGY OF ENTREPRENEURSHIP
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values-view of culture asks respondents to indicate how much they value and
desire a certain thing (cf. Hofstede, 2001; Schwartz, 1992). These value
statements are then aggregated, i.e. mean country scores are calculated and
further analyzed (i.e. analyses are conducted on the country level). The second,
practices view of culture asks respondents to describe their society as they
presently perceive it to be regarding ‘common behaviours, institutional practices,
proscriptions and prescriptions’ (House et al., 2002, p. 5). Similarly, mean
country scores are calculated and further culture-level analyses conducted.
In interpreting cultural data one has to keep in mind that ‘Cultures are not
king-size individuals: They are wholes, and their internal logic cannot be
understood in the terms used for personality dynamics of individuals.’ (Hofstede,
2001, p. 17).
III. How does culture influence entrepreneurship?
There are mainly two views of how culture influences entrepreneurship (cf.
Davidsson & Wicklund, 1997; Hayton et al., 2002; Freytag & Thurik, 2007).
The ‘aggregate trait’ explanation of entrepreneurship is that if a society contains
more people with ‘entrepreneurial values’ and ‘entrepreneurial traits’ more
people will become entrepreneurs. The second view refers to the degree of
‘societal legitimation’ or ‘moral approval’ of entrepreneurship within a culture
(Etzioni, 1987). A higher overall level of ‘legitimation’ of entrepreneurship
within a society is evident in that society’s ‘behavior’. That is, societies
legitimating entrepreneurship will pay more attention to entrepreneurship
within the educational system, will regard entrepreneurship as something
desirable, and also e.g. will allow more tax incentives to encourage business
start-ups. Thus, the environment including societal culture is thought to be
more supportive of entrepreneurship. While the ‘aggregate trait’ view
corresponds to the perspective of culture as aggregated values, the societal
legitimation view corresponds to the perspective of culture as societal practices
(Stephan & Uhlaner, 2007).
IV. Which cultural dimensions influence entrepreneurship?
The review of culture and entrepreneurship by Hayton, George and Zahra
(2002) indicates that cultures that value individualism (vs. collectivism), low
power distance and low uncertainty avoidance are conducive to
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entrepreneurship and innovation (controlling for national wealth). Individualism
vs. collectivism largely refers to the independence vs. inter~ of the individual
with his immediate and larger group (e.g., family, organization). Power distance
captures in how far a society values providing equal chances to its members or
whether hierarchy is valued. Low uncertainty avoidant societies tolerate
ambiguity and do not prescribe - via rules and regulations - ‘one best way to do
things’. The opposite is true for societies that value uncertainty avoidance
highly.
TABLE 1
Total Entrepreneurial Activity and Country Score
for Cultural Values and Practices for Selected Countries
Hofstede’s Value Indices
GLOBE Practices
Indices
TEA*
Indivi-
dualism
Power
Distance
Uncer-
tainty Av.
Humane
Orientatio
n
Assertive-
ness
United States 11,3 91 40 46 4,2 4,5
New Zealand 15,4 79 22 49 4,4 3,5
China 14,0 20 80 30 4,3 3,8
Ireland 8,4 70 28 35 5,0 3,9
Czech Republic 7,9 58 57 74 - -
Poland 6,6 60 68 93 3,7 4,1
Spain 6,1 51 57 86 3,3 4,4
Germany 4,8 67 35 65 3,3 4,7
Netherlands 4,8 80 38 53 4,0 4,5
Italy 4,3 76 50 75 3,7 4,1
Japan 2,2 46 54 92 4,3 3,7
*Total Entrepreneurial Activity (averaged 2002-2006, calculated from data provided by the Global
Entrepreneurship Monitor study), for all cultural dimensions: high scores indicate ‘more’ of a dimension,
‘ – ‘ no data available, scores taken from Hofstede (2001) and House et al. (2004)
PSYCHOLOGY OF ENTREPRENEURSHIP
132
Concerning cultural practices and entrepreneurship Stephan and Uhlaner
(2007) found high humane orientation and low assertiveness practices to be
associated with national rates of new business formation and established
businesses, but not nascent entrepreneurship (controlling for national wealth).
Humane orientation reflects how friendly, fair and concerned people in a society
treat each other and whether it is accepted to mistakes. Assertiveness refers to
how assertive, aggressive, dominant and confrontational people are in social
relationships. Table 1 provides a descriptive overview of entrepreneurial activity
as well as cultural values and practices in selected countries.
V. Which factors other than culture play a role in facilitating
entrepreneurship?
“… there is some intriguing evidence that the level of business ownership
displays a U-shaped relationship when related to economic development ... The
implication of such a U-shape is that, as economies develop, the rate of new
business startups or that of nascent entrepreneurship declines, but picks up again
in highly developed economies. This reversal marks the regime switch between
the managed and the entrepreneurial economy…” (Freytag & Thurik, p. 120-
121).
According to the Global Entrepreneurship Monitor project the following
entrepreneurial framework conditions are immediately relevant for small and
medium-sized businesses as well as for the existence and perception of
entrepreneurial opportunities (and thereby for new firm formation): Capital
availability, government policies, government programs, education and training, research
and development transfer, commercial and legal infrastructure, internal market openness,
access to physical infrastructure, as well as cultural and social norms (cf. Minniti,
Bygrave & Autio, 2006).
VI. So, which country is the world’s most entrepreneurial country?
Guesses? … you will get to know in class.
Summary
Taken together evidence exists that both cultural values and cultural practices
influence a nation’s rates of entrepreneurship. Thus, empirical research so far
CULTURE AND ENTREPRENEURSHIP
133
suggests that culture has effects both through ‘providing’ more people with
entrepreneurial values and traits (‘aggregate trait’ perspective) and though
providing a more supportive environment (‘societal legitimation’ perspective).
Altogether, few studies have been done up to now relating national cultures to
national entrepreneurship rates (i.e. on the country-level of analysis). More
research is clearly needed that should take the interdependencies among cultural
variables and other framework conditions into account.
4. RELATED IN-CLASS ACTIVITIES
1. ‘The typical Spanish, Dutch, Czech, …. Person?’ (small-group work
and discussion)
Instructions will follow in class.
2. ‘If you were a politician …’ (small-group work and discussion)
The European Commission is trying to implement an entrepreneurial
mindset in Europe (see Green Paper ‘Entrepreneurship in Europe’, 2003 and
‘Action plan: The European agenda for Entrepreneurship’, 2004). Based on your
knowledge about culture and entrepreneurship try to develop a broad political
initiative to revamp entrepreneurship in Europe. How could you create such an
‘entrepreneurial mindset’? In which areas would you try to intervene, and how?
Maybe you know about some policies, institutions, .etc. that facilitate
entrepreneurship and that your home government has implemented?
REFERENCES
DAVIDSSON, P. & WIKLUND, J. (1997). Values, beliefs and regional variations in new firm formation
rates. Journal of Economic Psychology, 18, 179-199.
ETZIONI, A. (1987). Entrepreneurship, adaptation and legitimation: A macro-behavioral perspective.
Journal of Economic Behavior & Organization, 8 (2), 175-189.
FREYTAG, A. & THURIK, R. (2007). Entrepreneurship and its determinants in a cross-country setting.
Journal of Evolutionary Economics, 17(2), 117-131.
HAYTON, J. C., GEORGE, G. & ZAHRA, S. A. (2002). National culture and entrepreneurship: A
review of behavioral research. Entrepreneurship Theory and Practice, 26, 33-52.
PSYCHOLOGY OF ENTREPRENEURSHIP
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HOFSTEDE, G. (2001). Culture's Consequences. Comparing values, behaviors, institutions and
organizations across nations (2nd edition). Thousand Oaks: Sage.
HOUSE, R. J., HANGES, P. J., JAVIDAN, M., DORFMAN, P. W. & GUPTA, V. (2002).
Understanding cultures and implicit leadership theories across the globe: An introduction to project
GLOBE. Journal of World Business, 37, 3-10.
HOUSE, R. J., HANGES, P. J., JAVIDAN, M., DORFMAN, P. W. & GUPTA, V. (2004). Culture,
Leadership and Organizations: The GLOBE Study of 62 Societies. Thousand Oaks, CA: Sage.
MCCLELLAND, D.C. (1976). The achieving society. New York, NY: Irvington.
MINNITI, M., BYGRAVE, W.D. & AUTIO, E. (2006). Global entrepreneurship monitor. 2005
executive report. Babson College, Babson Park, USA and London Business School, London,
UK.
SCHWARTZ, S. H. (1992). Universals in the content and structure of values: Theoretical
advances and empirical tests in 20 countries. In M. P. ZANNA (Ed.), Advances in experimental
social psychology (Vol. 25, pp. 1-65). San Diego, CA: Academic Press.
STEPHAN, U. & UHLANER, L.M. (2007). Societal Legitimation: Cultural Practices and
Entrepreneurship in 35 Countries. Unpublished Manuscript, University of Marburg.
WENNEKERS, S., VAN STEL, A.J., THURIK, A.R., & REYNOLDS, P. (2005) Nascent
entrepreneurship and the level of economic development. Small Business Economics, 24(3), 293–
309.
135
CHAPTER 14
POSITIVE PSYCHOLOGICAL CAPITAL AND ENTREPRENEURSHIP
Mariola Laguna
Institute of Psychology
The John Paul II Catholic University of Lublin
1. LEARNING GOALS
In this course you will learn the idea of positive psychological capital, its
connections with the entrepreneurship and management, and the ways to
augment it.
1) You will learn what is the role of self-efficacy in entrepreneurial process
2) You will learn how we can define optimism and how optimistic thinking
may influence entrepreneurial process
3) You will learn the idea of hope and its role in goal-attainment process
2. THEORETICAL BACKGROUND
Although economic, social, and political factors, which create the overall
climate for new economic initiatives, play an important role in the development
of entrepreneurship (cf Douglas & Sheperd, 2000), the emergence of a new firm
depends, in the final analysis, on the decision of the person who intends to
undertake the task. At the same time, comparatively few individuals make such a
decision and many new firms collapse (Blanchflower, 2000). Despite the
development of psychological research on the entrepreneurial process we still
know little about the entrepreneur’s role (Phan, 2004; Sarasvathy, 2004).
Research in this field to date has shown that personality traits are weak
predictors of entrepreneurial behavior (Berings, De Fruyt & Bouwen, 2004;
Ciavarella et al., 2004; Wooten, Timmerman & Folger, 1999); it suggests,
PSYCHOLOGY OF ENTREPRENEURSHIP
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however, that it is self-referent beliefs and convictions regarding the world that
may constitute a determinant of entrepreneurial success (Krueger, Reilly &
Carsrud, 2000; Markman, Baron & Balkin, 2005; Shook, Priem & McGee,
2003). They are treated as important behavior regulators in the socio-cognitive
approach (Bandura, 2001) as well as in positive psychology research referring to
this approach.
Positive psychology, which found expression in the publications of Seligman
and Csikszentmihalayi (2000) and has been developing in recent years, postulates
a shift in researchers’ attention toward studying human potentialities, the
strengths and talents, which manifest themselves also in the workplace. In
management as well as entrepreneurship, alongside the traditional financial,
physical, or technological resources, also human resources such as knowledge,
competence, or social capital, e.g. membership of a network of social contacts,
trust, reputation (Luthans & Youssef, 2004; Vecchio, 2003) have been isolated.
The new proposal put forward by Luthans and his research team (Jensen &
Luthans, 2006; Luthans & Youssef, 2004) takes into consideration also the so-
called positive psychological capital, that is, the strengths of the organization’s
employees, including, first of all, positive beliefs. Hope, optimism, and
confidence, identified with self-efficacy, as well as resiliency – these, among
others, were recognized as important positive resources for the organization that
may increase its competitiveness in the marketplace (Jensen & Luthans, 2006). It
is emphasized that these resources are not as constant as, for instance, personality
traits, that they can be modified, and that they can contribute to the market
advantage of those firms, which can use and develop them. Jensen and Luthans
(2006) point to the connections between these variables and leadership in the
context of management. In the model proposed, they treat positive beliefs as
variables that have an impact on entrepreneurial leadership. The findings of their
research, conducted on a group of 148 entrepreneurs who established their firms
by themselves, have confirmed this model.
Taking positive psychology variables into consideration in research on
entrepreneurship is further supported by the fact that these variables proved to
be of significance to functioning in other areas. Research findings in the fields of
health, sport, and education psychology indicate this (cf the overview of research
in: Bandura & Locke, 2003; Snyder, 2002). They have seldom been taken into
account in research on entrepreneurship to date, although more and more
studies that point to the significance of positive convictions to the success of the
organization (cf Jensen & Luthans, 2006). For this reason, interest in variables
POSITIVE PSYCHOLOGICAL CAPITAL AND ENTREPRENEURSHIP
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such as self-efficacy, optimism, and hope appears justified – interest in variables,
that is, which may be related to successful goal-attainment in entrepreneurs.
Self-efficacy, the factor most frequently taken into account in research to
date, is the subjective conviction that one is capable of action in a given
situation, of coping with a task (Bandura, 1997). The need is pointed out for
entrepreneurial self-efficacy (Chen, Greene & Crick, 1998) as well as for general
self-efficacy, particularly important in the face of complex, multidimensional
tasks (Jerusalem & Schwarzer, 1992; Stajkovic & Luthans, 1998). This general
self-efficacy is treated as one of the important resources used for coping with
stress.
Research to date points to a positive relationship between self-efficacy and
the choice of entrepreneurial activity (Chen, Greene & Crick, 1998).
Entrepreneurial self-efficacy differentiates entrepreneurs from managers (Chen,
Greene & Crick, 1998), as well as individuals who have created their own
ventures from those who have not decided to do so (Markman, Balkin & Baron,
2002; Markman, Baron & Balkin, 2005). In both cases, it is higher in
entrepreneurs. High self-efficacy also correlates with high annual income
(Markman, Balkin & Baron, 2002). Research conducted on 217 randomly
chosen medical equipment inventors, 55 of whom started firms based on their
own patents, has shown that general self-efficacy is considerably higher in those
who have started firms than in those who have not (Markman, Baron & Balkin,
2005). Self-efficacy, general as well as entrepreneurial, is an important predictor
of entrepreneurial intention in unemployed individuals. It is also higher in those
who intend to create their own venture (Laguna, 2006a).
Optimism has had at least two theoretical conceptions in psychology.
According to Seligman (1990) it refers to the interpretation of causes of past
successes and failures. In Scheier’s and Carver’s conception it is understood as a
general expectancy of positive events in the future (Scheier & Carver, 1985).
The latter explanation seems interesting in the context of entrepreneurial action.
Individuals with higher level of optimism can motivate co-workers better as well
as induce an orientation toward the future and commitment in them (cf Jensen
& Luthans, 2006). Expecting positive results, a person puts greater effort into
his/her activities. Optimists are more strongly convinced than pessimists that the
obstacles encountered can be overcome, and because of this they continue
action, which enables them to succeed more often (Scheier & Carver, 1985).
Optimistic thinking about the future is connected with setting high standards
and aspirations as well as with success in problem solving (Oettingen & Mayer,
PSYCHOLOGY OF ENTREPRENEURSHIP
138
2002). It also favors the application of more adaptive strategies of handling
difficult situations (Schweizer & Koch, 2001).
In the context of taking entrepreneurial action, optimism is pointed to as one
of the important characteristics of individuals who start their own firms
(Markman & Baron, 2003; Shook, Priem & McGee, 2003). However, research
findings are inconclusive: some indicate the tendency of entrepreneurs to
perceive situations optimistically (Cooper, Dunkelberg & Woo, 1988; Palich &
Bagby, 1995), others – that optimism has no significance for the decision to start
a firm (Simon, Houghton & Aquino, 1999). It can have an indirect impact by
affecting goal perception. In studies on potential entrepreneurs a higher level of
optimism favored a higher assessment of chances of success in starting one’s own
venture and, by influencing the expectancy of goal attainment, indirectly
contributed to the formulation of entrepreneurial intention (Laguna, 2006b).
Hope, in Snyder’s conception (2002), is defined as interrelated agentic
thoughts and pathway thoughts. Clear goal formulation may be accompanied by
agentic thoughts, the conviction that one can initiate and sustain movement
toward a goal. It gives energy, which enables one not to be discouraged even
when difficulties and obstacles emerge. The other component of hope thus
understood, of confidence in one’s own success, is the perception of oneself as a
person capable of inventing effective ways, alternative pathways leading to goal
attainment (Snyder, Cheavens & Sympson, 1997).
Research has shown that individuals with a high level of hope approach goals
as challenge, concentrate on the possibilities of success rather than failure, and
assess highly the probability of goal attainment. At the same time they generate
more goals, because of which they are capable of turning to a new goal more
easily when the initial one proves to be unattainable (Snyder, 2002). Though so
far studies of hope in relation to entrepreneurship are few, they point to its
connection with satisfaction from running one’s own firm (cf Jensen & Luthans,
2006). Hope also turned out to be significant predictor of the entrepreneurial
intention as well as of the assessment of this goal importance and of the
assessment chances of success and of readiness to try to accomplish of that
undertaking (Laguna, 2006b).
All these positive convictions are not as constant as, for example, personality
traits; they can be developed and modified, e.g. through trainings (Luthans &
Youssef, 2004). At the same time they are measurable, and have verified
operationalization methods. Although they show a number of similarities, in
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139
theoretical analyses (cf Snyder, 2002) as well as in empirical research they are
differentiated from one another and treated as distinct variables (Bryant &
Cvengros, 2004; Magaletta & Oliver, 1999). Some of them, e.g. self-efficacy,
have been fairly thoroughly researched by now in connection with
entrepreneurship, while others seem to be an interesting area for further
research.
REFERENCES
BANDURA, A. (1997). Self-efficacy. The exercise of control. New York: Freeman & Co.
BANDURA, A. (2001). Social cognitive theory: An agentic perspective. Annual Review of Psychology,
52, 1-26.
BANDURA, A. & LOCKE, E.A. (2003). Negative self-efficacy and goal effects revisited. Journal of
Applied Psychology, 88, 87-99.
BERINGS, D., De FRUYT, F. & BOUWEN, R. (2004). Work values and personality traits as predictors
of enterprising and social vocational interests. Personality and Individual Differences, 36, 349-364.
BLANCHFLOWER, D.G. (2000). Self-employment in OECD countries. Labour Economics, 7, 471-
505.
BRYANT, F.B. & CVENGROS, J.A. (2004). Distinguishing hope and optimism: two sides of a coin, or
two separate coins? Journal of Social and Clinical Psychology, 23, 273-302.
CIAVARELLA, M.A., BUCHHOLTZ, A.K., RIORDAN, Ch.M., GATEWOOD, R.D. & STOCKES,
G.S. (2004). The Big Five and venture survival: is there a linkage? Journal of Business Venturing,
19, 465-483.
CHEN, Ch.C., GREENE, P.G. & CRICK, A. (1998). Does entrepreneurial self-efficacy distinguish
entrepreneurs from managers? Journal of Business Venturing, 13, 295-316.
COOPER, A.C., DUNKELBERG, W.C. & WOO, C.Y. (1988). Entrepreneurs’ percived chances for
success. Journal of Business Venturing, 3, 97-109.
DOUGLAS, E. J. & SHEPERD, D.A. (2000). Entrepreneurship as a utility maximizing response. Journal
of Business Venturing, 15, 231-251.
JENSEN, S.M. & LUTHANS, F. (2006). Relationship between entrepreneurs’ psychological capital and
their authentic leadership. Journal of Managerial Issues, 2, 254-273.
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JERUSALEM, M., SCHWARZER, R. (1992). Self-efficacy as a resource factor in stress appraisal
processes. In: R. Schwarzer (ed.). Self-efficacy. Thought control of action (pp. 195-213).
Washington: Hemisphere Publishing Corp.
KRUEGER, N.F., REILLY, A.L. & CARSRUD, A.L. (2000). Competing models of entrepreneurial
intentions. Journal of Business Venturing, 15, 411-432.
LAGUNA, M. (2006a). Ogólna samoocena czy przekonanie o skutecznosci? Badania nad intencja
przedsiebiorcza [Self-esteem or domain-specific self-efficacy? Predictors of entrepreneurial
intention in unemployed]. Przeglad Psychologiczny, 49, 259-274.
LAGUNA, M. (2006b). Optymizm i nadzieja a intencja za?ozenia w?asnej firmy [Hope, optimism,
and entrepreneurial intention]. Przeglad Psychologiczny, 49, 193-217.
LUTHANS, F. & YOUSSEF, C. (2004). Human, social, and now positive psychological capital
management: investing in people for competitive advantage. Organizational Dynamics, 33,
143-160.
MAGALETTA, P.R. & OLIVER J.M. (1999). The hope construct, will, and ways: the relations
with self-efficacy, optimism, and general well-being. Journal of Clinical Psychology, 55, 539-
551.
MARKMAN, G.D., BALKIN, D.B. & BARON, R.A. (2002). Inventors and new venture
formation: The effects of general self-efficacy and regretful thinking. Entrepreneurship Theory
and Practice, 4, 149-165.
MARKMAN, G.D. & BARON, R.A. (2003). Person-entrepreneurship fit: why some people are
more successful as entrepreneurs than others. Human Resource Management Review, 13, 281-
301.
MARKMAN, G.D., BARON, R.A. & Balkin, D.B. (2005). Are perseverance and self-efficacy
costless? Assessing entrepreneurs’ regretful thinking. Journal of Organization Behavior, 26, 1-
19.
OETTINGEN, G. & MAYER, D. (2002). The motivating function of thinking about the future:
expectations versus fantasies. Journal of Personality and Social Psychology, 83, 1198-1221.
PALICH, L.E. & BAGBY, D.R. (1995). Using cognitive theory to explain entrepreneurial risk-
taking: challenging conventional wisdom. Journal of Business Venturing, 10, 425-438.
PHAN, P.H. (2004). Entrepreneurship theory: possibilities and future directions. Journal of
Business Venturing, 19, 617-620.
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SARASVATHY, S.D. (2004). The questions we ask and the questions we care about: reformulating
some problems in entrepreneurship research. Journal of Business Venturing, 19, 617-620.
SCHEIER, M.F. & CARVER, Ch.S. (1985). Optimism, coping, and health: generalized outcome
expectancies. Health Psychology, 4, 219-247.
SCHWEIZER, K. & KOCH, W. (2001). The assessment of components of optimism by POSO-E.
Personality and Individual Differences, 31, 563-574.
SELIGMAN, M.E.P. (1990). Learned Optimism. New York: Knopf.
SELIGMAN, M.E.P. & CSIKSZENTMIHALAYI, M. (2000). Positive psychology: An introduction.
American Psychologist, 55, 5-14.
SHOOK, Ch.L., PRIEM, R.L. & McGee, J.E. (2003). Venture creation and the entreprising
individual: a review and synthesis. Journal of Management, 29, 379-399.
SIMON, M., HOUGHTON, S.M. & AQUINO, K. (1999). Cognitive biases, risk perception, and
venture formation: how individuals decide to start companies. Journal of Business Venturing,
15, 113-134.
SNYDER, C.R. (2002). Hope theory: rainbows in the mind. Psychological Inquiry, 13, 249-275.
SNYDER, C.R., CHEAVENS, J. & SYMPSON, S.C. (1997). Hope: An individual motive for social
commerce. Group Dynamics: Theory, Research, and Practice, 1, 107-118.
STAJKOVIC, A.D. & LUTHANS, F. (1998b). Social cognitive theory and self-efficacy: going
beyond traditional motivational and behavioral approaches. Organizational Dynamics, 26, 62-
74.
VECCHIO, R.P. (2003). Entrepreneurship and leadership: common trends and common threads.
Human Resource Management Review, 13, 303-327.
WOOTEN, K.C., TIMMERMAN, T.A. & FOLGER, R. (1999). The use of personality and the
Five-Factor Model to predict new business ventures: from outplacement to start-up. Journal
of Vocational Behavior, 54, 82-101.
PSYCHOLOGY OF ENTREPRENEURSHIP
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LITERATURE LIST
Article 1:
Luthans, F. & Youssef, C. (2004). Human, social, and now positive
psychological capital management: investing in people for competitive
advantage. Organizational Dynamics, 33, 143-160.
The purpose of this article is to analyze what constitutes competitive
advantage from traditionally recognized sources. The authors propose to treat
human resources as a capital investment for competitive advantage. Specific
attention is given to the increasingly recognized human and social capital and the
newly proposed positive psychological capital. After providing the theoretical
and research background, attention is given to guidelines on how to manage and
increase positive psychological capital.
Article 2:
Snyder, C.R., Cheavens, J. & Sympson, S.C. (1997). Hope: An individual
motive for social commerce. Group Dynamics: Theory, Research, and Practice, 1,
107-118.
The authors suggest that people of all ages are goal-oriented and that two
related thought processes typically accompany this goal-related thinking. First,
there are pathway thoughts, which tap the perceived capability to generate
workable routes to desired goals. Second, there are agentic thoughts, which
reflect the perception that one can initiate and sustain movement toward a goal
along the given pathways. Together, pathway and agentic goal-directed thinking
define hope. After describing how hope develops, the self-report instruments for
measuring hope are reviewed. How hope is sustained in the context of larger
groups is explored, and the importance of shared goals is described.
143
CHAPTER 15
ENTREPRENEURSHIP: AN ALTERNATIVE CAREER FOR
SCIENTISTS
Fidel Rodríguez-Batalla,
Aneta Zarnowska and Juan A. Moriano
Department of Social and Organizational Psychology
UNED
1. LEARNING GOALS
In this course you will learn how scientist entrepreneurs have an inherent
advantage over other entrepreneurs. They have the opportunity to start
businesses based on science that are truly breakthrough in nature. Wouldn't it be
great to be a successful scientist entrepreneur like Marie Curie or Thomas
Edison?
1) You will learn what barriers are in the entrepreneurial process for
scientists.
2) You will learn what factors influence scientist entrepreneur’ behaviour
during entrepreneurial process.
3) You will learn what main events lead scientists to choose an
entrepreneurial career.
2. THEORETICAL BACKGROUND
Universities and research centers are involved in a transformation process in
which they have to show to the society their legitimacy, giving clear reason why
they have to exist and continue their mission. Since more than 100 years, the
Academia has been rethinking which its role is in the society: Education or
Research. Nowadays, everyone agrees both tasks are their mission. However, in
PSYCHOLOGY OF ENTREPRENEURSHIP
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the last 20 years, a new path has been opened as a new mission of these research
centers and universities, the transfer of the technology from labs to the society
(Siegel, Waldman, Atwater, & Link, 2004).
There are several ways of knowledge and technology transfer to the society,
one of them it is the creation of new business to commercialize new
technologies. Usually, this type of new business is created by a scientist or a
group of scientists that decide to change their life by focusing on a new business
idea and leaving aside their research career. Thus, we can define a "scientific
entrepreneur" to be a scientist (or engineer in a field heavily dependent on
science) who turns scientific knowledge to practical purposes and finds ways to
take it to market (George, Jain, & Maltarich, 2005).
Traditionally, scientists have provided industry, communities and
governments their professional expertise and research findings. Scientific
entrepreneurial activities date back to the medieval period when members of law
and medical faculties engaged in professional practice to supplement their
university salaries. In the initial decades of the twentieth century, the growth of
the service element in the university mission, coupled with technological
advancement, provided a strong impetus for scientific entrepreneurship by
linking research to the needs of businesses. The railroad industry, petroleum
refining, and polymer industries are just a few examples of commercial
endeavors that benefited from these linkages. In the second half of the twentieth
century, entrepreneurial activities of researchers and university lecturers played
an instrumental role in the development of the computer industry and also
contributed to the emergence and rapid growth of biotechnology.
Researchers and university lecturers may take advantage of the new
opportunities to set up new ventures in great numbers. The motivation to start
up a small new venture may be the low level of university salaries and general
financial pressures. Starting a new venture promised more flexibility and a better
standard of living. Most of these new ventures at first just would continue with
sharing projects out or diverting contracts from universities and research centers
into the private sector (Balázs, 1996).
Nevertheless, the scientific career, at least in Spain, is still mainly focused on
researching and writing academic papers. Collaborating with the industry,
licensing a new patent or creating new business is not rewarded or even
admitted as legitimate activity for scientists. Therefore, scientists are more
concerned about consolidating their career by publishing articles in international
ENTREPRENEURSHIP: AN ALTERNATIVE CAREER FOR SCIENTISTS
145
journals, than pursuing opportunities for new business based on their research
products.
In addition, there are many possible reasons for the unwillingness of scientists
to start and run a new business. Scientists have been considered to have strong
theoretical orientation and a lack proper knowledge about how to start and run a
new business. On the other hand, it has been speculated that scientists, as their
knowledge accumulates, get more conscious about risks related to
entrepreneurship. Also, scientists’ orientation is, at least in Europe, traditionally
towards jobs in the public sector. Scientists learn the wage earner way of
thinking because most of their family members are also government employee.
2.1. Marie Curie: scientific entrepreneur
Marie Curie is best known for her discovery
of radium one hundred years ago this month,
but she also worked closely with industry in
developing methods to make and monitor
radioactive material.
More than one hundred years ago, Marie
Sklodowska-Curie and Gustave Bémont published a
paper in Comptes-rendus - the journal of the French
Academy of Sciences. In the paper they announced
that they had discovered a new element with
astonishing properties: radium. But for one of the
authors, Marie Curie, the paper was more than just
the result of outstanding work: it showed that a
woman could succeed in what was then very much
a male-dominated scientific world.
Having arrived in Paris from Poland in 1891, Marie Curie became the first
woman in France to obtain a PhD in physics, the first woman to win a Nobel
prize and the first woman to teach at the Sorbonne. She also helped to found a
new scientific discipline: the study of radioactivity.
She became an icon and a role-model for other women to follow, someone
who succeeded - despite many difficulties - in imposing herself on the world of
science.
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Although Curie's life story is a familiar and well documented one, there is
one side to her that is less well known: her interaction with industry. As well as
training many nuclear physicists and radiochemists in her laboratory, she also
became a scientific pioneer in industrial collaboration.
In 1904 French industrialist Armet de Lisle, whose factory would soon
provide radium to the medical profession, began to collaborate with the Curies.
De Lisle benefitted from the Curies' technical suggestions on the best treatments
for pitchblende. In return the Curies were able to accumulate larger samples of
radioactive material than they would have been able to prepare on their own. At
a time when few research posts were available in France, de Lisle also provided
jobs in the new radium industry for a number of scientists who had trained with
the Curies.
REFERENCES
BALÁZS, K. (1996). Academic Entrepreneurs and their Role in 'Knowledge' Transfer. Sussex, U.K.:
Science Policy Research Unit.
GEORGE, G., JAIN, S., & MALTARICH, M. (2005). Academics or Entrepreneurs? Entrepreneurial
Identity and Invention Disclosure Behavior of University Scientists. Presented at the 2005
Technology Transfer Society Conference, Kansas City.
SIEGEL, D. S., WALDMAN, D. A., ATWATER, L. E., & LINK, A. N. (2004). Toward a model of the
effective transfer of scientific knowledge from academicians to practitioners: qualitative evidence from the
commercialization of university technologies. Journal of Engineering and Technology
Management, 21, 115-142.
147
CHAPTER 16
THE IMPORTANCE OF PLANNING/SELF-MANAGEMENT FOR
ENTREPRENEURIAL SUCCESS
Ute Stephan
Work and Organizational Psychology Work Group
Philipps-Universitaet Marburg
1. INTRODUCTION
Tanja owns a small training company that offers social skills trainings along
with consultancy in organizational development to local small businesses and
administrations. She always feels completely overworked and stressed out.
Usually she comes into the company office at 8 in the morning and does not
leave before 10 in the evenings. On days she is conducting in-house trainings it
is even worse. However, it is not so much the amount of time she spends in the
office that bothers her, it is the feeling that she just does
not get anything done. For three months now she wants
to develop a new training concept for personal self-
management, because a lot of her clients asked her to do
so. She is afraid to loose these clients now. It seems to
her that whenever she sits down to work on it
something else happens such as an urgent email from
another client, a request from her colleague, diverse
phone calls, and so forth. Today Tanja feels especially
desperate, because she met up with Christina last night.
Christina is a friend of hers, who also runs a small training company and who
she always envied for how much she gets done in so little time. Also her friend
seems to be able to delegate work easily and efficiently to her two employees –
something Tanja has always had problems with although her two employees are
very competent. Christina told her last night that she is really exited, because she
just signed a contract with the local city council to conduct 20 self-management
PSYCHOLOGY OF ENTREPRENEURSHIP
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trainings over the next year. The local city council used to be Tanja’s client, but
Christina did not know that.
2. LEARNING GOALS
In this course you will learn about the role and the consequences of self-
management planning for entrepreneurs.
1) Understand the difference of planning on the level of the firm and individual
planning (i.e. self-management)
2) Understand what self-management is and how, why and when it can
contribute to entrepreneurial success
3) Get to know your own self-management skills and reflect how
entrepreneurs’ self-management skills could be strengthened
3. THEORETICAL BACKGROUND
3.1. What is planning/self-management?
Management scholars and research teach us that among other things strategic
planning is key to business success – even in small enterprises (Miller & Cardinal,
1994; Schwenk & Schrader, 1993). Such kind of firm-level planning is also
common practice for business founders when they have to develop their business
plans, which are often the prime vehicle for being granted loans or state
subsidies. For small, entrepreneurial businesses the individual planning habits of
the entrepreneur are likely to be of high importance. These individual planning
habits of the entrepreneur are here referred to as self-management strategies. Self-
management is understood here as how one goes about structuring and planning
ones work.
While firm-level planning is usually more formal and in large firms
institutionalized in separate departments for strategic business development, the
entrepreneurs’ self-management strategies refer to the personal, informal,
everyday planning approach. For both firm- and individual-level planning
content and process can be differentiated (Frese et al., in press). The content of
what is being planned is not the focus of this course; we will look into how the
planning is done, i.e. the process of planning.
THE IMPORTANCE OF PLANNING FOR ENTREPRENEURIAL SUCCESS
149
3.2. Why are we interested in individual planning and self-management?
According to action theory (e.g. Frese, 2007; Hacker, 1986) researching
personality characteristics of entrepreneurs and relating them to business success
must yield relatively small effects. Our personality characteristics are but only
one influence on our actions, which in turn affect business success. Thus, Frese
(2007) posits that the effects of personality characteristics on business success are
mediated by actions – more specifically individual action planning. Similar to
how people differ in their personality, people also differ in their typical
approaches to action planning.
Indeed, several studies find individual planning to be substantially related to
business success in the Netherlands, Africa, Germany, Poland, and the Czech
Republic (Frese et al., in press; Frese, 2007; Frese, van Gelderen, & Ombach,
2000; Stephan, Spychala & Lukes, 2006; van Gelderen, Frese & Thurik, 2000).
Different kinds of planning approaches (or ‘styles’) can be differentiated. And not
all of them have similarly strong associations with business success.
Unsurprisingly, if the entrepreneur does not engage in planning (the so-called
‘reactive strategy’), this has negative effects on business success. Typically an
entrepreneur, who does not engage in planning is driven by the situation and is
busy reacting to situational demands (e.g., the entrepreneur would start working
each day mainly reacting to what tasks he finds on his desk and incoming calls,
requests, emails etc. rather than following through a certain task such as a
customer order. He will get back to working on the order however when it
becomes urgent, either because the customer
reminds him or because the deadline approaches).
Furthermore, studies show elaborate, also
called complete planning to be positively associated
with business success. Complete planning is
characterized by a very thorough and structured
planning approach with a long-term focus and the
development of fallback plans. Another, slightly
less structured form of planning that is also typically positively associated with
business success is critical point planning. Here the entrepreneur concentrates on
the most difficult, unclear and most important point first, i.e. he sets a priority
which goal is the most important to achieve. Accordingly plans are made on
how to achieve this ‘critical point’, while other things are left unplanned. The
fourth approach is the opportunistic one, which is similar to the reactive strategy
in that the entrepreneur is mostly driven by the situation. Although the
PSYCHOLOGY OF ENTREPRENEURSHIP
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entrepreneur would start with rudimentary planning, he does deviate easily from
doing so when the situation offers distracting cues, e.g. a phone call. He shows,
however, more proactive behavior, i.e. he jumps on opportunities, but never
follows them through.
3.3. Is planning always useful? For everybody?
The question whether planning is always useful, i.e. under all conditions,
refers to whether there are variables moderating the planning – success
relationship.
Conditions in the environment: Van Gelderen et al. (2000) suggest that different
kinds of individual planning approaches are differentially effective depending on
the characteristics of the firm’s environment. Complete planning, e.g. would be
particularly useful in complex rather than fast changing environments. While in
low complexity environments opportunistic approaches are used more often.
Another environmental variable are cultural characteristics. Two studies found
evidence that especially in high uncertainty avoidant and future orientated
cultures complete planning is especially effective. Planning is an effective means
to reduce uncertainty and is expected within these societies. The more flexible,
critical-point planning approach, however, is more effective in rather
uncertainty tolerant and present orientated societies (Rauch, Frese & Sonnentag,
2000, Stephan et al., 2006).
Conditions within the firm: Frese, Brantjes and Horn (2002) found that
businesses owners with a complete planning approach were particularly
successful, when their firm displayed a particular strategic orientation: an
entrepreneurial orientation (which consist of a firm’s striving for autonomy,
innovativeness, competitive aggressiveness, and risk taking).
Conditions within the individual: Escher, Grabarkiewicz, Frese, van
Steekelenburg, Lauw and Friedrich (2002) found a moderating effect for
cognitive ability on the relationship between individual planning and business
success. More specifically they found a compensating effect, i.e. business owners
with low cognitive ability could compensate their lower cognitive ability with
detailed planning and consequently were as successful as entrepreneurs with a
high degree of cognitive ability. For the latter it did not matter much whether
they planned very detailed or not.
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Summary
Self-management defined as a person’s habitual approach to structuring and
planning their work predicts entrepreneurs’ business success. The practical
implication of these findings is to teach entrepreneurs effective self-management
skills, e.g. via training. Here the advantage of a theoretical concept closely
related to action becomes apparent - a person’s action and behaviour are easier
trained and changed than their personality.
RELATED IN-CLASS ACTIVITIES
1. Self-assessment and group discussion
With the questionnaire given in Appendix A you can assess your self-
management behaviour. After doing this, do you have ideas how you could
strengthen the self-management skills of entrepreneurs? How would you go
about it? Can you think of specific exercises? How would you ‘sell’ to
entrepreneurs that self-management is a useful thing to do? What other
advantages besides being important for business success might self-management
have for the entrepreneur?
2. Self-management into practice
Divide into four groups. Each group will be a ‘mini-enterprise’. All your
enterprises compete in the same local market. You will be handed out goods,
which you need to sell in the streets within the next hour. Before you leave the
classroom you will receive instructions on how you should go about selling
‘your products’. Please keep to the instructions as closely as possible. The aim of
the exercise is to experience how effective different kinds of self-management
are.
REFERENCES
ESCHER, S., GRABARKIEWICZ, R., FRESE, M., VAN STEEKELENBURG, G., LAUW, M. &
FRIEDRICH, Ch. (2002). The moderator effect of cognitive ability on the relationship between
planning strategies and business success of small scale business owners in South Africa: A longitudinal
study. Journal of Developmental Entrepreneurship, 7(3), 305-318.
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FRESE, M. (2007). The psychological actions and entrepreneurial success: An action theory approach. In
J.R. BAUM, M. FRESE & R.A. BARON (eds.) The psychology of entrepreneurship. (pp.
151-188). Mahwah, NJ: Lawrence Erlbaum.
FRESE, M., VAN GELDEREN, M. & OMBACH, M. (2000). How to plan as a small scale business
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FRESE, M., BRANTJES, A. & HOORN, R. (2002). Psychological success factors of small scale businesses
in Namibia: The roles of strategy process, entrepreneurial orientation and the environment. Journal of
Developmental Entrepreneurship, 7, 259-282.
FRESE, M., KRAUSS, S.I., KEITH, N., ESCHER, S., GRABARKIEWICZ, R., LUNENG, S.T.,
HEERS, C., UNGER, J., & FRIEDRICH, C. (in press). Business Owners’ Action Planning and Its
Relationship to Business Success in Three African Countries. Journal of Applied Psychology.
HACKER, W. (1986). Arbeitspsychologie: Psychische Regulation von Arbeitstätigkeiten [Work psychology:
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relationships: A comparison of small enterprises in Ireland, West Germany, and East Germany.
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SCHWENK, C. R. & SHRADER, C. B. (1993). Effects of formal strategic planning on financial
performance in small firms: A meta-analysis. Entrepreneurship Theory & Practice, 17, 53-64.
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small business startups. Small Business Economics, 15, 165-181.
ZEMPEL, J. (2003). Strategien der Handlungsregulation [Strategies of action regulation]. Doctoral
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APPENDIX A:
Self-Assess Your Self-Management Strategies
(by Zempel, 2003, translation by author)
The following questions pertain to your usual working habits. Please indicate,
how often you employ the following strategies in your work.
Please think of your usual situation at work and chose the answer that
describes best how you actually act. Please do not indicate how you ideally
would like to act!
very
rarely/
never
rarely
occasional
ly
often
very
often/
always
1 I plan my work step by step in
advance.
very
rarely
rarely
occasional
ly
often
very
often
2 I simultaneously work on the
solution of several problems.
very
rarely
rarely
occasional
ly
often
very
often
3 I rather let things happen/come up to
me, in doing so I do not follow a
certain plan.
very
rarely
rarely
occasional
ly
often
very
often
4 I systematically plan my next steps at
work in regular intervals.
very
rarely
rarely
occasional
ly
often
very
often
5 I start with planning my actions at
the most difficult and critical
point in the work-flow.
very
rarely
rarely
occasional
ly
often
very
often
6 I handle problems in the order in
which they come up to me.
very
rarely
rarely
occasional
ly
often
very
often
7 I try to gain a detailed overview,
before planning next steps in my
work,
very
rarely
rarely
occasional
ly
often
very
often
8 First I try to get a handle on the
most critical point, the next steps
very
rarely
occasional
often
very
PSYCHOLOGY OF ENTREPRENEURSHIP
154
very
rarely/
never
rarely
occasional
ly
often
very
often/
always
then follow automatically. rarely ly often
9 I decide about next steps in the
work-flow spontaneously, i.e.
when they acutely have to be
taken care of.
very
rarely
rarely
occasional
ly
often
very
often
1
0
I switch to and fro between the
detailed planning of single steps and
the development of an overall
concept for my work.
very
rarely
rarely
occasional
ly
often
very
often
1
1
First I determine how to deal with
the most difficult and critical point in
my work and after that I just adapt
all other steps to that.
very
rarely
rarely
occasional
ly
often
very
often
1
2
I plan ahead alternative strategies
of acting in order to handle potential
weaknesses in the work-flow.
very
rarely
rarely
occasional
ly
often
very
often
1
3
I do not think too much about
possible future problems at work,
because I am fully occupied with
solving the current ones.
very
rarely
rarely
occasional
ly
often
very
often
1
4
It happens that I discontinue my
current actions, because I found a
solution for another problem.
very
rarely
rarely
occasional
ly
often
very
often
1
5
Going from the most critical point,
I think about possible variants till I
found the most adequate way.
very
rarely
rarely
occasional
ly
often
very
often
1
6
My working habit may seem chaotic
to other people, but I myself
never loose the overview.
very
rarely
rarely
occasional
ly
often
very
often
THE IMPORTANCE OF PLANNING FOR ENTREPRENEURIAL SUCCESS
155
Evaluation
Add the scores as follows:
Complete Planning: Item 1 __+ Item 4 __ + Item 7 __ + Item 12 __ = ___ / 4 : ____
Reactive: Item 3 __ + Item 6 __ + Item 9 __ + Item 13 __ = ___ / 4 :___
Critical Point: Item 5 __ + Item 8 __ + Item 11 __ + Item 15 __ = ___ / 4 :___
Opportunistic: Item 2 __ + Item 10 __ + Item 14 __ + Item 16 __ = ___ / 4 :___
The final scores range between 1 and 5. Higher scores indicate that you use
this self-management approach more frequently in your work. When comparing
the four strategies the highest score gives you some indication about your
dominant self-management approach. Enter the mean scores per approach in the
following table to allow easy comparison.
5
4
3
2
1
Complete Planning Reactive Critical Point Opportunistic
Scores of a comparison group (German IT entrepreneurs, N=82))
3,6
2,6
3,3 3,4
2,6
PSYCHOLOGY OF ENTREPRENEURSHIP
156
APPENDIX B:
Self-Management - 10 Rules to Gain Time
(adapted from Seiwert, 2004, translation by author)
1. Goal-orientation “Aiming”: Use time like you would use arrow and
bow: aim first! Orient your daily work and activities towards fulfilling your
goals
2. Prepare: Plan your next day the evening before – in writing. Allow enough
time for routine tasks (e.g., checking email), but also for the unexpected
(60:40 rule).
3. Set Priorities: Tackle important things first and leave unimportant stuff.
Beware of the tyranny of urgency!
More courage to use the litter bin!
4. Summarize: Allocate similar tasks (such as phone calls, mail
correspondence, short meetings) to the same time slot, so you won’t be
constantly interrupted by them when working on A and B tasks.
5. Simplify: Divide difficult tasks into small steps. Schedule the order you will
work on these steps and set deadlines for each step.
6. Let others do it: Don’t forget to delegate: What? Who? Why? Till when?
Don’t be afraid to say NO and fight off time thieves!
B-Tasks
(important)
schedule (resp. delegate)
A-Tasks
(important and urgent)
Do immediately!
C-Tasks
(low importance, but
urgent)
Delegate
Urgency
Importance
THE IMPORTANCE OF PLANNING FOR ENTREPRENEURIAL SUCCESS
157
7. Shield: You don’t have to always be available for everybody. Make
appointments - also with yourself and use them!
8. Be considerate & respectful: Being late, overrunning meetings, and
rescheduling appointments are taboos. Determine goals and endpoints of
meetings beforehand.
9. Telephoning: Ask for an adequate time instead of interrupting. Arrange
binding appointments for phone calls and call-backs.
10. Enjoy success: Perceive settled tasks and things as success! Reward yourself
and others.
PSYCHOLOGY OF ENTREPRENEURSHIP
158
159
CHAPTER 17
SUCCESSFUL ENTERPRISES
Marjan Gorgievski
Department of Industrial and Organisational Psychology
Erasmus University Rotterdam
1. WHICH ONE OF THE THREE?
My name is Senna Oldshorn. I am a successful entrepreneur. I started my business one
year ago. I am the figure head of the free market economy.
Senna 1: “I feel that starting a business after having been on sick benefit for
more than a year is a great victory”. He and his wife Janet own a soil sanitation
company. They clean soil without using chemical processes. It was a deliberate
choice to run the business in an environmental friendly way. Both Senna and
Janet have a medical background, because of which both of them lost their
former jobs. The three people they hired to work for them all have medical
backgrounds. They claim that people who do not have experience with
disablement for work do not fit into their companies’ culture, which they
describe as striving for understanding and welfare of all people and for nature.
The company has many clients, and they have received a permit from the local
government to expand their business on the current location next year. Since
the local newspaper has written an article about the company a few weeks ago,
26 people with a work disablement have applied for a job.
Senna 2 is running a florist business. She is famous for her artistic and classy
flower arrangements. Being very successful is important to her. She likes to stand
out and to impress other people. Shortly after she had opened a small flower
shop, the demand for flower arrangements grew exponentially. Soon she had to
disappoint a large number of potential customers. She hired personnel to support
her, both with the administration and with creating bouquets. However, she was
PSYCHOLOGY OF ENTREPRENEURSHIP
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never satisfied with the artistic quality of her assistants, and she was afraid that
they would damage her reputation. After a few months she closed her shop and
fired all her employees. She now only accepts orders by fax, and she produces a
maximum of three flower arrangements per week for prohibited large sums of
money.
Senna 3 is 25 years old. He started his own clothes company a year ago. At that
time he had worked for a large retail company for five years, and he had worked
himself up from shop floor to top management. Senna operates in a niche
market. He sells trendy casual wear at low prices for children from 6 to 16 years
old. His formula turned out to be a success. He opened his second shop six
months after the first, and now owns three shops (Rotterdam, The Hague and
Utrecht). Senna is planning to own about 30 shops 5 years from now, and to
control the niche market for children’s casual wear. In order to keep costs down
he buys his products in Asia. In addition he hires very young people to work in
his shops. He confesses that he is not very good for his employees. They work
long hours for small salaries. They hardly get any extra benefits. Senna wants to
give them more in return once the business is large enough. However, at this
point it does not seem necessary, because everyone is in a flush of victory.
2. LEARNING GOALS
In this course you will learn how entrepreneurial success can be defined.
1) You will learn what criteria of business success are generally used in the
business literature
2) You will learn how different entrepreneurs themselves define success
3) You will get background information on issues related to the construction of
performance criteria for research purposes
3. THEORETICAL BACKGROUND
The aim of this contribution is to discuss the content of the entrepreneurial
success construct in more detail. We will present a multi-dimensional success
construct, and show how different success criteria may conflict with one
another. In addition, we aim to provide insight into the way different types of
SUCCESSFUL ENTREPRISES
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entrepreneurs can balance the tradeoffs of striving for different types of success in
a way that is personally satisfying.
3.1. Criteria of entrepreneurial success
A recent review of the entrepreneurship and small business literature
(Gorgievski & Ascalon, submitted) has revealed nine important criteria that are
often used as indicators of business success. Profit, growth and innovation are the
top three criteria most often used, because these are expected to relate closely to
wealth acquisition. Firm innovation is often not considered the bottom line,
though. It is generally seen as a critical characteristic of a firm that helps to
increase profitability. A fourth criterion that can be identified is firm-survival or
longevity. In research on business start-up, the fact that the business manages to
survive the first year is often considered quite an accomplishment. In this sense,
firm survival may not seem a very high standard for business success. However,
when this criterion is being defined as being able to continue the business in the
long run, it becomes a very relevant criterion. In order to have favorable
business prospects in the long run, the business needs to have good solvency so
that it can finance possible large reorganizations in order to maintain its
competitive advantage. Longevity of the firm as defined in this way has
particular importance for family businesses, where it relates to the (financial)
possibility to transfer the business to future generations. A fifth business criterion
is social and environmental performance, or in other words contributing back to
society. This is defined as meeting goals related to further social and
environmental welfare beyond the direct economic, technical, and legal interest
of the firm. This may include philanthropic behaviors, such as giving to
charities, supporting community activities, and pursuing environmentally
friendly practices.
There are also a variety of performance criteria of a softer nature. Research
on business owner objectives (Kuratko, Hornsby, & Naffziger, 1997; Newby,
Watson, & Woodliff, 2003) shows that business owners strive for several
personally oriented objectives in addition to financial returns or extrinsic
rewards, although these are far less often studied than economic performance
criteria. The sixth criterion is therefore entrepreneurs’ personal satisfaction with
their business (Cooper & Artz, 1995). Personal satisfaction can be considered a
basic measure of performance, which influences many business decisions, such as
whether to invest more time and money, whether to cut back, or even to shut
down the business. The seventh criterion is satisfied stakeholders, in particular
customer satisfaction and employee satisfaction. These criteria have been
PSYCHOLOGY OF ENTREPRENEURSHIP
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included in many performance measures that link to business strategy, such as
the Balanced Score Card, Performance Prism, and the Business Excellence
model (for example Adams et al., 2003). The eighth criterion is the achievement
of work-life balance. Work has often been found to interfere with one’s personal
life and one’s personal life has also been found to interfere with one’s work life
(Nelson & Burke, 2000). A subgroup of business owners has been identified that
chose their career to allow them more time with their families. They used the
autonomy and flexibility that their position allowed to balance the
responsibilities at work and at home. In in-depth interviews, business owners
called a positive work-life balance the crowning glory of their hard work in the
early start-up years. Finally, public recognition can be identified as the ninth
criterion. This criterion emerged mainly from scanning the popular media that
typically give special attention to award winning entrepreneurs and their
companies and products. In addition, Kuratko et al. (1997) found that public
recognition may be among business owners’ intrinsic rewards.
3.2. Conflicts and compatibilities between criteria of business success
Different criteria for business success may conflict with one another, whereas
others are highly compatible. Profit, growth, innovation and client satisfaction
have typically been shown compatible, and related to creation of wealth and
influence. One famous conflict is the trade-off between economic criteria, such
as making a profit, and social and environmental performance, or so-called
“green entrepreneurship” (Orlitzky, Schmidt, & Rynes, 2003). This leads to
discussions in society about whether and how we can motivate entrepreneurs to
at least adhere to a “minimum behavioral standard”, including abiding by the
law, and generally maintaining standards of honesty and integrity, if it hinders
them in attaining success. Another famous conflict occurs between criteria
related to work-home balance and profit and business growth. It seems fair to
say that conflict occur between criteria related to different systems that interact
with each other, namely the business, the family and society.
3.3. Personal differences in weighing entrepreneurial success
Different kinds of entrepreneurs weight the tradeoffs between different
performance criteria differently, and hence strive for different types of success. In
order to have a rewarding entrepreneurial life, it is important for entrepreneurs
to recognize what is important to them. Knowing what is really important in life
SUCCESSFUL ENTREPRISES
163
will more likely keep entrepreneurs motivated to accomplishing their personal
goals, while at the same time keeping the business solvent.
Schwarz’ theory of universal human values is a helpful tool to explore what
people find important (Schwarz & Bardi, 2001). Values are concepts or beliefs
about desirable end-states or behaviors that transcend specific situations, and
guide selection or evaluation of behaviors and events (Schwartz and Bilsky,
1987; p. 551). Schwartz universal value system consists of ten main value
dimensions (see Table 1): conformity, tradition, benevolence, universalism, self-
direction, stimulation, hedonism, achievement, power, and security. These
values are theoretically structured based on the complimentary or conflicting
nature of their relationships. Two dimensions are distinguished. One dimension
leads from self-enhancing to self-transcendent. On the self-transcendent side of the
circle are benevolence and universalism, because both involve a high regard for
the welfare of others. On the self-enhancing side of that dimension are the
values of power and achievement, because they both involve increasing and
demonstrating an individuals’ own worth. The other dimension leads from
openness to experience to conservation. Self-direction and stimulation are both at the
openness to experience side, because both involve striving for independence,
new experiences and change, while tradition, security and conformity are on the
opposite side, because these values emphasize maintaining the status quo, such as
accepting and acting on tradition and adhering to group norms. Values have
been found to predict value congruent behavior (Bardi & Schwartz, 2003).
Results of our research (Gorgievski & Ascalon, submitted) have shown that
entrepreneurs find success criteria more or less important, depending on their
personal values. Most importantly, the traditional success criteria, making a
profit, growth, and innovation have been shown to relate positively to self-
enhancing (power, achievement) and change oriented (stimulation) value
orientations. In line with value theory, conflicting goals fit contrasting value
orientations. The self-transcendent (universalism, benevolence) and conservative
counterparts related to lower rankings of the traditional success criteria growth
and making a profit. In contrast, universalism promoted “making a social
contribution”, whereas benevolence was associated with having satisfied clients
and employees as well as personal satisfaction. These more socially oriented
criteria related to lower rankings by their self-enhancing counterparts in the
value domain. Likewise, the conservative value orientations related to a lower
ranking of innovation. This may have important consequences for their
businesses. According to Miner (1997), “the type of person an individual is
PSYCHOLOGY OF ENTREPRENEURSHIP
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determines the route he or she should follow” (p. 55). Striving for business
growth may make an entrepreneur who places high value on benevolence feel
unhappy. On the other hand, adjusting business activities to fit with family
obligations may jeopardize the future of the business. It is important to realize
such internal conflicts, and handle them in a satisfactory way.
TABLE 1
Definitions of Schwartz’ value orientations (Schwartz & Bilsky, 1987)
Power: Social status and prestige, control or dominance over people and resources.
Achievement: Personal success through demonstrating competence according to social standards.
Hedonism: Pleasure and sensuous gratification for oneself.
Stimulation: Excitement, novelty, and challenge in life.
Self-direction: Independent thought and action-choosing, creating, exploring.
Universalism: Understanding, appreciation, tolerance and protection for the welfare of all people
and for nature.
Benevolence: Preservation and enhancement of the welfare of people with whom one is in
frequent personal contact.
Tradition: Respect, commitment and acceptance of the customs and ideas that traditional
culture or religion provide the self.
Conformity: Restraint of actions, inclinations, and impulses likely to upset or harm others and
violate social expectations or norms.
Security: Safety, harmony and stability of society, of relationships, and of self.
3.4. To Conclude
We argue that entrepreneurial success cannot only be measured using hard
criteria on the business level, but it is also necessary to include softer criteria on
the personal level. Moreover, different success criteria can be in conflict, so
striving for success on only one dimension has tradeoffs on other dimensions.
For example, striving for better financial performance and growth may conflict
with softer personal success criteria such as being able to balance work and
private life. Based on their personal values, different types of entrepreneurs
weigh those trade-offs differently. For starting entrepreneurs it is important to
gain a holistic view of entrepreneurial success. In addition it is important they
are aware of their own personal values that serve as guiding principles in their
SUCCESSFUL ENTREPRISES
165
lives. Knowing what factors are internally motivating will help recognize
possible pitfalls that may cause people to either fail as entrepreneurs, or to get
captured in an unsatisfactory enterprise. Knowing what is really important in life
will more likely keep the entrepreneur focused towards accomplishing his/her
goals, while at the same time keeping the business solvent.
4. RELATED IN-CLASS ACTIVITIES
Group discussion
We will start this class with a group discussion. We will be discussing your
opinions, and also what you have already learnt about entrepreneurial success.
To help you formulate your ideas you can start by thinking which one of the
three entrepreneurs in the introductory example you find most successful and
why? Another question that might help you is “when would I consider myself
to be successful?”
Success and values exercise
For this exercise you fill in a questionnaire based on which you will be able
to create your own values profile. Next we will split into small groups based on
these profiles. Your small group will be required to identify personal strengths
and weaknesses when starting up a business related to these values.
REFERENCES
Adams, B. & Sykes, V. (2003). Performance measures and profitability factors of successful
African-American entrepreneurs: An exploratory study. Journal of American Academy of
Business, 2(2): 418-424.
Bardi, A. & Schwartz, S. H. (2003). Values and Behavior, strength and structure of relations.
Personality and Social Psychology Bulletin, 10: 1207-1220.
Cooper, A. C., & Artz, K. W. (1995). Determinants of satisfaction for entrepreneurs. Journal of
Business Venturing, 10, 439-457.
PSYCHOLOGY OF ENTREPRENEURSHIP
166
Evers, G.E., De Feyter, M.G., Hartog, F.M.J., Jurrij, E. (2001). Een onbetrouwbaar lijf,
zelfstandig ondernemen met een arbeidshandicap. [An unreliable body. Disabled workers
starting their own business.] Houten: TNO.
Gorgievski M.J. & Ascalon, M.E.A. (submitted) business owners’ success criteria, a values
approach to personal differences.
Kuratko, D. F., Hornsby, J. S., & Naffziger, D. W. (1997). An Examination of owners' Goals in
Sustaining Entrepreneurship. Journal of Small Business Management, 35(1): 24-33.
Miner, J. B. 1997. The expanded horizon for achieving entrepreneurial success. Organizational
Dynamics: 54-67.
Nelson, D. L. & Burke, R. J. (2000). Women Executives: Health, stress, and success. Academy
of Management Executive, 14(2): 107-121.
Newby, R., Watson, J., & Woodliff, D. (2003). Using focus groups in SME research: The case
of owner-operator objectives. Journal of Developmental Entrepreneurship, 8(3): 237-246.
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance:
A meta analysis. Organization Studies, 24, 403-441.
Schwartz, S.H. & Bilsky, W. (1987). Toward a universal psychological structure of human
values. Journal of Personality and Social Psychology, 53(3): 550-562.
Schwartz, S.H. & Bardi, A. (2001). Value Hierarchies Across Cultures: taking a similarities
perspective. Journal of Cross-cultural psychology, 32(3): 268-290.
SUGGESTED FURTHER READINGS
(Articles relevant to criterion construction)
Austin, J. T., & Villanova, P. (1992). The criterion problem: 1917-1992. Journal of Applied
Psychology, 77(6), 836-874.
Tett, R. P., Steele, J. R., & Beauregard, R. S. (2003). Broad and narrow measures on both sides
of the personality-job performance relationship. Journal of Organizational Behavior, 24(3):
335-356.
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