What is entrepreneurship?

Entrepreneurship is the act of being entrepreneurial . It is a behaviour that is exemplified by starting a new business, introducing a new product or service to the market, or introducing an innovation to the manufacturing, marketing or management process. Almost always it involves acting with insufficient information in an environment that poses greater business and financial risk than does the general business environment.

Who are entrepreneurs?

Individuals can be entrepreneurs, but so too can entire businesses and organisations, including governments ! Individuals can be entrepreneurial either as employees of an organisation or as self- employed owner/operators of their own business. All new business ventures , whether in a newly-established firm or within an existing (perhaps old and large) firm, involve some degree of entrepreneurship, since the managers will be acting with imperfect information and facing an extraordinary level of business risk.

Entrepreneurial abilities and attitudes increase the business productivity of a manager, whether they operate their own business, work for an employer, or are in the public or the private sector. So, smart organisations will seek to hire employees with entrepreneurial abilities and attitudes, since they will probably augment the organisation s profitability and add value to the business. Such entrepreneurial persons, who might otherwise be inclined to start their own businesses, may willingly remain employed by an organisation that provides appropriate monetary compensation and opportunities to exercise their entrepreneurial talents.

Entrepreneurial behaviour in an organisation usually derives from an internal culture that actively fosters such activities. This in turn is generally due to the entrepreneurial nature of the chief executive officer and/or other senior managers. Alternatively, senior managers might be quite conservative but nonetheless recognise the need for entrepreneurship, and thus nurture and tolerate entrepreneurial activity by other senior or more junior managers in the organisation. (Entrepreneurial business cultures will be examined later in this chapter. )

It is important to reject the widespread folklore that entrepreneurs are special people who can walk on water, do not perspire, and so on. While some successful entrepreneurs do amaze us with their personal abilities, others seem just like ordinary people who somehow managed to be in the right place at the right time. Conversely, many self-employed entrepreneurs failed at their first attempt, and some fail again and again. And many an intrapreneur ^[1] has been too innovative for their boss s liking and been fired as a result. We must avoid the ˜ survivor bias involved in judging all entrepreneurs by the characteristics of those who have been highly successful in the process.

Characteristics of entrepreneurs

Are entrepreneurs special people with innate talents that few of us can replicate? One study lists 49 characteristics of successful self- employed entrepreneurs (see list opposite ). ^[2]

Now seriously, this list reads like a litany of perfection . Anyone this good must be successful at whatever they try, right? In reality, some of these characteristics are found in some entrepreneurs while others are found in others, and probably very few entrepreneurs have all these virtues. Indeed, some very successful entrepreneurs seem to lack many of these characteristics!

Equally condemning of this ˜characteristics approach to identifying entrepreneurs is the fact that many people with the same characteristics choose not to be entrepreneurs. Indeed, most studies have been unable to distinguish between self-employed entrepreneurs and managers who work for someone else ”that is, the characteristics of corporate managers and owner-managers are not significantly different! What comes out of the research on entrepreneurship is that, in general, people who choose to be entrepreneurial possess two major attitudinal differences.

• Preference for independence. Studies of self-employed entrepreneurs have shown that they tend to have a stronger preference for independence and decision-making autonomy than those who choose to be employees. ^[3] Their locus of control tends to be internal, rather than external, and they prefer to make their own decisions and to be their own boss. They tend to have a higher need for achievement and by being self-employed can make decisions that will best fulfil that need. But this is not to say that employees and managers of firms may not also have a strong preference for independence and decision-making autonomy, and indeed many do have. As mentioned above, they work for an employer because they are sufficiently rewarded for so doing and/or they are allowed plenty of decision-making autonomy.

Characteristics of successful self-employed
1 Ability to get along with people	26 Initiative
2 Ability to influence others	27 Integrity
3 Ability to learn from mistakes	28 Intelligence
4 Ability to make decisions quickly	29 Leadership
5 Ability to trust workers	30 Maturity
6 Accuracy	31 Need for achievement
7 Aggressiveness	32 Optimism
8 Capacity for enjoyment	33 Oriented to clear goals
9 Commitment	34 Perceptiveness
10 Confidence	35 Perseverance
11 Cooperativeness	36 Personal balance
12 Courage	37 Pleasant personality
13 Creativity	38 Positive response to challenges
14 Determination	39 Profit orientation
15 Diligence	40 Resourcefulness
16 Dynamism	41 Responds to suggestions and criticism
17 Efficacy	42 Responsibility
18 Efficiency	43 Sense of power
19 Egotism	44 Sensitivity to others
20 Energy	45 Thoroughness
21 Flexibility	46 Time competence
22 Foresight	47 Toleration for ambiguity
23 Honesty	48 Versatility
24 Imagination	49 Willingness to take calculated risk
25 Independence

• Willingness to take risks. Entrepreneurship is inherently more risky than general business practice. There is greater risk of financial failure for new firms or ventures due largely to the lack of information concerning the reactions of potential customers, the technical issues and problems in production processes, and the optimal management practices required for the new business.

Does that mean that those who step forward to act like entrepreneurs are likely to be devil -may-care risk-takers? Not necessarily . It may be that they are relatively intolerant of risk, but they happen to have a good idea and access to capital. Perhaps they can take on the risk because they hold a diversified investment portfolio, or because their employer effectively shields them from bearing any extraordinary or personal risk. Risk is only one of the considerations they take into account before acting entrepreneurially ”they derive satisfaction from other factors such as decision-making autonomy and a sense of achievement. ^[4]

Entrepreneurial abilities and attitudes

There is a difference between the entrepreneurial abilities and the entrepreneurial attitudes of an individual, and this difference will affect the individual s productivity, employability and the likelihood of the person choosing to become self-employed.

Entrepreneurial abilities (or skills applicable to particular problems) include:

• creativity

• foresight

• idea generation

• opportunity recognition

• viability screening

• lateral thinking

• problem solving.

Good entrepreneurial managers will also have strong skills in business planning, strategic marketing, financial management, human resource management, leadership and persuasion.

Attitudes are the way people think about things or phenomena.

As discussed earlier, the major entrepreneurial attitudes relate to independence and risk bearing . In general, we expect that entrepreneurial people will be more tolerant of risk bearing and prefer independence or decision-making autonomy. Put another way,we expect entrepreneurs to generally be less averse to risk, and to value highly the right to make their own business decisions. But note that in particular cases an individual may be quite risk averse, or not happy making decisions, yet still want to be an entrepreneur because of the utility derived from a superior income and the other working conditions (perquisites) that are available to the entrepreneur.

The person who has ˜the right stuff in terms of entrepreneurial attitudes and abilities might nonetheless have to wait for years until he or she has accumulated sufficient business and technical education, sufficient industry and market experience, and sufficient wealth, before ˜taking the plunge into self-employment . Indeed this is surely the smart way to go, since so many new venture failures are attributed to lack of management knowledge, lack of relevant prior experience, and/or insufficient funding.

^[1] Employees who act entrepreneurially within an organisation may be called ˜intrapreneurs .

^[2] J Hornaday, ˜Research about Living Entrepreneurs , in C Kent, D Sexton and K Vesper (eds), Encyclopedia of Entrepreneurship , Prentice-Hall, Englewood Cliffs, NJ, 1982.

^[3] I Ajzen, ˜The theory of planned behavior , Organizational Behavior and Human Decision Processes ,vol. 50, 1991, pp. 179 “211. J Burger, ˜Desire for control and achievement- related behaviours , Journal of Personality and Social Psychology ,vol. 48, 1985, pp. 1520 “33.

^[4] See E Douglas & D Shepherd, ˜Entrepreneurship as a utility- maximising response , Journal of Business Venturing ,vol. 15, no 3, May 2000, pp. 231 “51.