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There are several disagreements regarding whether there are differences in the behaviour and thinking of entrepreneurs compared to that of conventional managers in large organisations. Compared to the evidence which supports that entrepreneurs and managers do think and behaviour differently, the evidence opposing this is limited. This essay aims to critically evaluate this statement. This has been done by firstly explaining what entrepreneurs and conventional managers are. Theories and studies that support the idea that entrepreneurs think and behave differently to conventional managers have then been referred to, whilst also providing conflicting theories and studies. An overall conclusion is provided which summarises the content of this essay. In the conclusion I have provided my opinion on the topic as a whole, suggesting that in general I think that entrepreneurs and conventional managers do behave and think differently from each other. I have given reasons to back up my opinion.
What is an entrepreneur?
Entrepreneurs are described as individuals who are a 'breed apart' (Ginsberg and Buchholtz, 1989). They have characteristics such as being risk-takers (Begley and Boyd, 1987) and having an internal locus of control (Borland, 1974). McClelland (1961) suggests that entrepreneurs have an attitudinal factor which is the need for achievement. They tend to have a high tolerance of ambiguity (Sexton & Bowman, 1985) and also Type A behaviour (Liles, 1974). Other qualities that they have are that they are creative, innovative and usually have a vision. They have a need for autonomy and are self efficient. An example of an entrepreneur is Julia Gash who started up her own business - Bag It Don't Bin It.
What is a conventional manager?
Conventional managers in large organisations have been described as individuals who generally conform to norms of behaviour that are largely accepted (Pettigrew, 1973). The way in which they make decisions has been illustrated to be predictable and professional (Barnard, 1968) and (RHofer and Schendel, 1978). Also it has been found that managers tend to be risk-averse (Amihud and Lev, 1981) and hate to fail. Conventional managers usually enter an organisation where authority needs to be delegated.
Studies and theories which support the idea that entrepreneurs and conventional managers think and behave differently
The Personality Traits Approach
The way in which conventional managers in large organisations are described differs from the definition of entrepreneurs. This is because of the idea that entrepreneurs think and behave differently to conventional managers. The personality traits approach suggests that there are only a finite number of entrepreneurs. These are restricted to those that carry innate abilities, a set of characteristics making them special and insights which others do not possess. This approach supports the idea that entrepreneurs and conventional managers are different in their ways of thinking and behaving. If entrepreneurs inherit these characteristics, then entrepreneurs can be distinguished by their behaviour and the way they think from other individuals who are not born with these characteristics. Appendix 1 shows the key traits that entrepreneurs are said to have. However many of these traits are the same as the skills and abilities that most successful managers have. Thus it is difficult to separate the characteristics that apply to entrepreneurs. There are several other criticisms of this approach. Firstly, this approach suggests that the process of entrepreneurship is static. This may not always be the case because there are various definitions of entrepreneurship. The way in which an individual will practice entrepreneurship will be dependent on the definition they see to be true. Also an entrepreneur can gain more experience, which results in a change in his or her behaviour. This change can be a result of the company developing. An example of entrepreneurship being dynamic can be seen in Laker Airways. Freddie Laker's business failed the first time, thus for the re-launch of his business Freddie had to change his behaviour and ways of thinking in order to be successful. Freddie had a better understanding of his market and how he wanted his airline to be and this enabled him to have a better chance of surviving and being successful. The personality trait approach ignores environmental factors. Environmental factors are vital and can be more important than personality in helping to explain the behaviours and the way in which individuals think. Another limitation of the personality traits approach is that it ignores the role of preparation and serendipity in entrepreneurship. The suggestion made by the learning approach that behaviours can be learnt is also dismissed.
Intrapreneurs are members of an organisation that practice entrepreneurship. Kuratko et al., (1990) describe intrapreneurship as entrepreneurship inside the corporation. Intrapreneurs are also known as corporate entrepreneurs. Intrapreneurship can usually be found in large organisations that are made up of departments. Intrapreneurs are usually managers who are made in-charge of one of the departments. They therefore have the capability of initiating change and bringing innovation. They have control over the company's resources and team. Intrapreneurs have to be risk-takers. These attributes makes them similar to entrepreneurs. Thus it can be said that in order to practice intrapreneurship within an organisation, a blend of entrepreneurial and managerial skills are needed. This can be seen by looking at Appendix 2 where a manager, an entrepreneur and an intrapreneur are compared. This helps to show that managers and entrepreneurs think and behave differently and by combining attributes of both, it will help the intrapreneur bring innovation to the organisation.
Kirzner's Economic Theory
Kirzner (1973) suggests that an entrepreneur is someone who can spot and exploit an opportunity. He states that anyone can be an entrepreneur. If this is true then managers would be included in this. In order for them to be successful, they would have to have entrepreneurial attributes. This would make conventional managers similar to entrepreneurs. However, he states that the entrepreneur has additional knowledge or information which allows the spotting and exploitation of the opportunity to take place. This additional knowledge or information is what differentiates a manager from an entrepreneur. An example of this is Richard Mills who owned the Walnut club. He spotted and exploited an opportunity to open a Michelin star restaurant in Sheffield after visiting London's Michelin star restaurants. He had the additional knowledge from by living in Sheffield that there was no Michelin star restaurant there. He spotted and exploited the opportunity when he visited Michelin star restaurants in London and decided to open his own Michelin star restaurant in Sheffield. Although this started off as a single restaurant, he later opened another restaurant. Manimala (1992) and Busenitz and Barney (1996) recently looked into whether information is processed by entrepreneurs and managers in large organisations in similar ways but they found differences. This evidence can help explain Kirzner's theory when he says an entrepreneur has additional knowledge or information; it is because entrepreneurs have a different way of processing information.
Other studies suggesting conventional managers and entrepreneurs think and behave differently
Busenitz and Barney (1997) looked at the differences in decision making processes of mangers and entrepreneurs in large organisations. They found that entrepreneurs were more susceptible to use heuristics and decision-making biases than managers. Without the use of heuristics and biases, entrepreneurs would never make the decisions they make, for example when looking at entrepreneurial ventures, the window of opportunity would be gone before all the information necessary to make rational decisions had been obtained. The use of heuristics and biases may also help to explain why sometimes entrepreneurs make bad managers. This is a study that supports the idea of managers and entrepreneurs having different characteristics. Another study that backs this up is offered by Kaish and Gilad (1991). They researched into the manner in which entrepreneurs and managers in large organisations exposed themselves to information. This was examined against nine factors and the results showed that there were significant differences in five of the nine factors. Whilst entrepreneurs were more inclined to focus on the economics of an opportunity, entrepreneurs would search for information in their off hours from different sources compared to managers. They would pay special attention to risk cues attached to the opportunity. This study is an example of how managers think differently to entrepreneurs. Research into the decision-making styles of managers and entrepreneurs had been conducted and it was found that they have different styles of decision making (Busenitz 1992; Carland and Carland 1992; Richard 1989; Smith et al. 1988). This could be a result of different goals being involved for each of them. Litzinger (1965) provides evidence, from a study that was conducted which suggests that the goals of managers and entrepreneurs are different. More supporting evidence is provided by Sexton and Bowman (1986), who conducted an extensive series of studies which used a variety of psychological test instruments. They recognised a set of characteristics that differentiated entrepreneurs from managers. Another supporting study is provided by Ohe et al., (1988), who looked at Japanese entrepreneurs and managers. Ohe et al., (1988) conducted questionnaires to find out the two major ways in which entrepreneurs were different compared to managers of large corporations. The perceived difference between entrepreneurs and managers was measured and also the perceived difference between the entrepreneurs' firms and a typical large firm was measured. The results put forward that entrepreneurs tended to have much stronger measures in both compared to the managers that were surveyed. This study supports the idea that entrepreneurs think and behave differently from conventional managers in large organisations. The study was conducted on Japanese entrepreneurs and managers, which helps to indicate that entrepreneurs think and behave differently to managers in general and not just in particular areas or situations.
Studies and theories which go against the idea that entrepreneurs and conventional managers think and behave differently
The Learning Approach
Although there is evidence to suggest that the behaviour and way of thinking of entrepreneurs is different to that of managers, there are studies and theories which propose the opposite. The learning approach suggests that behaviours are learnt. It attempts to explain how entrepreneurs can adapt, change and therefore learn from dealing with uncertainty. This is emphasised by Levinthal (1996) who stresses the adaptive role of entrepreneurs as they adjust to their environment and their learning experience and as a result change behaviour. The way which learning takes place may follow a trial and error or a discovery activity; the behaviour of the entrepreneur becomes adapted because of this activity. An evolutionary adaptation can be said to have taken place. It is implied that evolutionary theories such as this may be able to explain entrepreneurial behaviour and development. An example of this is Danny Breslin, the founder of Donegal China. Although he had the inspiration to start-up the business, at the beginning he lacked the experience. He took responsibility for the marketing operation and learnt the skills required through experimentation and trial and error. If this approach was to be applied to managers, it would mean managers can learn how to become entrepreneurs either through discovery or trial and error. Their behaviour would eventually be adapted to be similar to that of entrepreneurs. However Miller (1987) provides evidence which indicates that there are teachable and non-teachable aspects of entrepreneurship. Thus entrepreneurs cannot be created.
Socio-behavioural approaches recognise important factors such as the influence of culture and the environment on individuals. These external factors help shape the entrepreneurial concern and the ability of the entrepreneur to be successful. Most of the characteristics of the entrepreneur can be learnt by others as they are primary interactive skills. Timmons (1994) suggests 15 learnable traits that the entrepreneur has. By proposing that these traits are learnable, this theory goes against the idea that managers and entrepreneurs think and behave differently because managers could potentially learn these traits. However, although these 15 learnable traits are put forward, 4 innate traits are suggested. These 4 traits would make entrepreneurs distinguishable from others and thus this suggests that managers can only behave and think like entrepreneurs to a certain extent.
A study which opposes the suggestion that conventional managers and entrepreneurs think and behave differently
Thornberry (2003) carried out a study to see whether managers can be trained into corporate entrepreneurs in large organisations. The results suggest that managers can be taught how to become entrepreneurs but there may be some problems that are caused when newly trained corporate entrepreneurs re-enter the organisation. Although this study suggests managers can be trained into entrepreneurs, the fact that there may be problems implies that the thinking and behaviour of managers may be different to that of entrepreneurs even after training.
A viewpoint article which opposes the idea that conventional managers and entrepreneurs think and behave differently
The viewpoint article 'Why managers can be entrepreneurs, too: Nature versus nurture' is an extension of Thornberry's study on whether or not managers can be trained into entrepreneurs. It questions whether certain skills can be taught or if they are innate. An example of this type of skill would be creative writing. Whether managers can learn to act and think like entrepreneurs is an extension of the same way of thinking. Field research was carried out to test the hypothesis of whether managers can learn to act and think like entrepreneurs. The findings suggest that the idea that entrepreneurial skills can be learnt should not be dismissed. However, when managers do learn entrepreneurial skills and re-enter into the organisation problems are created, especially relating to the attitudes of other employees.
The research into whether entrepreneurs and conventional managers in large organisations think and behaviour differently, is on-going. There are already numerous amounts of evidence from theories and studies suggesting they do think and behaviour differently and there is also evidence opposing this, though the opposing evidence is more limited when compared. My opinion towards this statement is that I do believe entrepreneurs behave and think differently to conventional managers. If managers behaved and had the same thought processes as entrepreneurs, there would be no such thing as an entrepreneur being separate to a manager; the two would be the same person. There is evidence which suggests that when managers are trained to become entrepreneurs, problems can occur. These problems are due to the manager still behaving like a manager and not an entrepreneur. Employees also have attitudinal problems with this. This is another reason why I believe that they are different. If they were similar, firstly training to make managers into entrepreneurs would not be required and also there would not be any problems caused. As well as this there is evidence which suggests that entrepreneurs can make bad managers. This emphasises the idea that conventional managers and entrepreneurs are two different people and thus they think and behave differently. Although, I do believe that entrepreneurs and managers think and behave differently, I think that there are some traits which both have that are similar. Either they are innate traits which both are born with or the behaviours have been learnt through training and personal experience.