The analysis of entrepreneurial behavior and sustainable corporations

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Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. The most obvious form of entrepreneurship is that of starting new businesses (referred as Startup Company).

The entrepreneur is one of the main factors in micro-economics. In the 20th century, the understanding of entrepreneurship owes much to the contribution of economist Joseph Schumpeter in the 1930s and other economists. He was probably the first scholar to develop its theories. He believed that these individuals (entrepreneurs) are the ones who make things work in the economy of the country.

Within evolutionary economics, entrepreneurship is seen as the main force of economic change, as the agency of self-transformation within restless capitalist economic systems. Drucker extended the Schumperterian view of entrepreneurship as a meta-economic event to encompass a broader definition of the various forms of innovation which can deliver long term business success. Drucker posits the most critical time for innovation is during periods of environmental turbulence. The purpose of the paper is to examine whether during the current recession, superior market performance is achieved by firms exhibiting entrepreneurial behavior.

Survey results indicate that entrepreneurs in UAE, who were continuously expanding their business or diversifying, even in recession, and mainly not changing their behavior towards their employees & their customers, are able to sustain their profitability & succeed in the market. The research limitation is that the study is restricted to small quantity of entrepreneurs (15 entrepreneurs) & not able to cover all industries.

The practical implications from the study are in demonstrating the validity of some perspective that firms seeking to survive in turbulent times should:

Focusing on their business on hand;

Trying to expand in an organized way taking into consideration their internal capabilities & complying with customers requirements;

Trying to maintain their behavior internally & externally, means towards their employees & their customers.

This research was important as there are very few related researches being done on this topic. The UAE has seen the highest growth rate and has also been hit the most by the global recession when a comparison is done with all other GCC countries. The entrepreneurs within the UAE have seen both good and bad times and observing their behavior during these times was quite useful.

The main findings are:

The entrepreneurs in boom times tend to diversify their businesses;

The entrepreneurs curtail their businesses to their core business during recession.

Rationale for the study, Expectations & Conceptual framework

Due to the recent economic crisis, things in the business world have changed and the entrepreneurial behaviors and strategies have also changed. Our main focus in this study was to analyze the behavior of entrepreneurs in both good and bad times and try to identify the sustainability & success factors for entrepreneurs in the UAE.

As current employees & future entrepreneurs, we were trying to explore the environment in UAE to start-up a business, profiting from the experiences of current entrepreneurs & comparing their behaviors in both good & bad times. In the same time, we were trying to identify some behavioral patterns between entrepreneurs from various business sectors and evaluate the crisis impact on their business & how their behavior changed during recession.

There are many important sectors in the UAE. Since it is not possible to cover all of them in this study, we did select few entrepreneurs from the main sectors such as contracting, trading, technology & real estate. These entrepreneurs were based in various emirates of the UAE.

Accordingly, in our study, we tried to answer the below mentioned questions:

What are the motivational factors for business startup in the UAE? (family & technical background, liquidity, risk assessment, others)

What are the current situation of the business in UAE & the impact of the recession?

What are the entrepreneurs' future expectations about the business in UAE?

What are the main sustainability factors for entrepreneurs in the UAE

What are the main success factors for entrepreneurs in the UAE?

How is entrepreneurial attention impacted by handling different businesses at the same time?

What is the change in entrepreneurial behavior during good times & bad times?

What kind of entrepreneurs diversify in good times & bad times?

The expectations from the study are given below:

The entrepreneurs will not diversify in recession

The entrepreneurs will downsize during the economic downturn

The entrepreneurs will revert back to their core business during recession

Entrepreneurs cannot successfully give equal attention to all businesses in the portfolio

Entrepreneurs require capital for start-up, diversification and growth of their businesses

The most important motivational factor for entrepreneurs to start-up business is to have a family background

For doing this study, we did a conducted a detailed literature review on entrepreneurial behaviors, entrepreneurial strategies and the sustainability and success factors for entrepreneurs. This research was then merged with the empirical evidence during the analysis part in order to acquire the results.

Area of research

The areas of research were entrepreneurial theories, entrepreneurial behavior, entrepreneurial strategies, motivational factors for business startup, sustainability factors and success factors.

The theories that we researched were the Innovation theory by Joseph Schumpeter, Israel Kirtzner's Theory of Entrepreneurship, Leibenstein Theory of Entrepreneurship, McClelland's Theory of Achievement Motivation and Peter Drucker's Theory of Entrepreneurship.

Joseph Schumpeter's characterizes an entrepreneur as someone with creativity, foresight and above all innovation. The drawback of this theory is that it ignores the organizational skills and risk taking ability of entrepreneurs.

Kistzne's theory considers an entrepreneur with someone having the ability of alertness and spontaneous learning. He gives more weight to alertness as compared to innovation because it helps the individual in recognizing the opportunity.

Leibenstein consider entrepreneurs as gap-fillers and they recognize markets, develop new products and calculate profits.

McClelland considers achievement, need for power and a need for affiliation as three motives for accomplishment. He believes that entrepreneurs can make decisions during time of uncertainty and can do things in a better way as compared to others.

Finally Drucker believed that entrepreneurial behavior, innovation and resources are the three most important pillars of entrepreneurship.

We tried to associate the above mentioned theories to our qualitative research but none of them could be associated successfully. These theories offer a good framework for entrepreneurial research but they can only be used partially for real time cases.

Hypothesis

The basic hypothesis here is that entrepreneurs undertake diversification in times of boom periods unthinkingly only to leave some of the businesses in their portfolio to concentrate on core businesses in times of economic downturn. Entrepreneurs have limitations in terms of the span of attention they could have. This is put to test in challenging times, or in other words, economic downturns. The research will also try to identify the commonalities and differences between their behaviors during these times.

The three questions which will be tested are given below:

1) Do Entrepreneurs in UAE revert back to their core business (es) in the times of recession?

2) Do Entrepreneurs diversify their portfolios in favorable economic times?

3) Does entrepreneurs in the UAE downsize during recession?

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