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One definition of an entrepreneur is an individual who discovers opportunities 'then uses various means to exploit or develop them thus producing a wide range of effects' Shane and Venkataraman (2000). An entrepreneur is a person who owns and runs a business. The term frequently used is 'owner-manager'. This distinguishes between 'the boss' and the 'conventional manager' who is defined as 'an individual in charge of certain groups or tasks or a certain subset of a company' (Businessdictionary.com).
A distinct difference between the two is that an entrepreneur will start off with a small business, comprising of few employees, where they are their own boss, innovating their own ideas and exploring and exploiting opportunities. They will have more options and choices to make than conventional managers especially when their business undergoes revolutional change therefore it is important that they make strategic decisions when selecting certain resources. This affects their behaviour and the way they think which is different to conventional managers who inherit a working business and are answerable to others. Conventional managers only develop and support the implementation of an idea, usually in larger corporations where incremental changes and the controlling of resources tends to be what they are faced with. They concentrate on their own specialism, planning and controlling business systems. This does not mean however, that entrepreneurs and conventional managers do not share some behavioural similarities and characteristics.
Psychological Trait Approach
Much research has been carried out to establish whether certain characteristics and traits are specific only to entrepreneurs, ultimately affecting the way they behave and think. McClleland for instance, in his theory of 'Need for Achievement' (1961) states that individuals want to excel, take responsibility for decisions and achieve solutions in problematic situations. However, does this desire not apply to people in many occupations too - especially conventional mangers? It is true that McClelland himself believed that a manager who accepts the decision making responsibility, could be perceived as much of an entrepreneur as the founder of a business, even if it is only to a certain degree (McClelland, 1961). This notion leads on to the idea that people have one of two motivations; Achievement motivation or Power motivation. It would appear that entrepreneurs set high internal standards and therefore are primarily concerned with achieving them resulting in an achievement motivation. This could perhaps explain why entrepreneurs find difficulty in managing people, if their employees fail to meet their inconceivably high standards. Conventional managers on the other hand, are more motivated by power and status and so therefore are more likely to delegate work to others for them to review at a later date. In addition, the trait of high internal locus of control identified by Rotter (1966) is another characteristic said to be a contributing factor to the way entrepreneurs behave and think and ultimately separates them from conventional managers. Research carried out by Hull et al (1980) at the University of Oregon however, suggested that there was little significant evidence between the two groups (Krueger, 2003) therefore, it would be fair to say that this type of behaviour occurs in both managers and entrepreneurs. A criticism of this however, is that only successful managers and entrepreneurs were asked. Perhaps unsuccessful candidates in both parties should have also been interviewed to give a broader more insightful comparison between external and internal locus of control. Despite the above, it is worth adding that as entrepreneurs have 'freedom to act' they are in control of their own destiny and as a result of this they look internally for answers when things go wrong. Contrary to this, conventional managers do not have complete control over their futures, perhaps resulting in higher external locus of control where they can blame others for their problems.
It has been said that entrepreneurial behaviour and consequently the way entrepreneurs think can be explained by an examination of their upbringing. Kets de Vrie (1977) identified 'the deviants' or 'non conformists'. These are people who struggle to fit in with others, and who eventually break free from the bureaucracies that confine them. It would appear many entrepreneurs left jobs with which they were dissatisfied with but drew on their previous experience to help enhance the success of their venture. Conventional managers must possess characteristics which mean they are happy to work within the constraints of a bureaucracy.
The theory behind deviants as children is that there is an unstable family background where a poor relationship is established between entrepreneur and father and an over compensating one with the mother. This void within the child's emotional development then results in higher tolerance and acceptance of failure. This notion can be applied to entrepreneurs such as Sir Richard Branson and Starbucks coffee entrepreneur, Howard Schultz, who had similar backgrounds and both broke free, drawing from previous experience to help develop the opportunity they had identified. Can it be assumed therefore, that many people, including conventional managers, do not have good relationships with their families and yet an entrepreneur isn't created every time? To add to that query, McClelland rejects Kets de Vrie's analogy stating that people's motivations are not inherent of 'deprivation or trauma'. Motivations change over time like people do; for example a conventional manger may develop and become an entrepreneur and visa versa.
Many people open up small businesses, it does not mean they are entrepreneurial. 'To be entrepreneurial, an enterprise has to have special characteristics over and above it being new and small' Drucker (1985).Perhaps it is more to do with role models- Rosa (1993) stated that children of entrepreneurs were more likely to go into entrepreneurship themselves although the above examples did not draw upon role models. Focusing on traits alone does not give a fair picture on how entrepreneurs and conventional managers behave and think. In fact Drucker (1985) stated that entrepreneurship is 'not a personality trait; in thirty years I have seen people of the most diverse personalities and temperaments perform well in entrepreneurial challenges. People who need certainty are unlikely to make good entrepreneurs'. However, this would apply to many professions for example not just entrepreneurship such as that of a military commander so with any decision there is always some degree of risk. It has been said by many in literature that entrepreneurs have a higher 'risk propensity'and although they do choose challenging paths they try to reduce risk as much as they can by taking calculated ones as opposed to conventional managers who are very careful (Hisrich and Peters, 2002).
The business environment and cultural context must always be considered when evaluating behaviour as these can be contributors to the actions of both entrepreneurs and conventional managers.
Penrose (1968) believed that it was important to identify the differences between managerial activities and those of entrepreneurs to help identify the differences between them. For instance, as conventional managers in larger organizations have access to the economies of scale that come with working in a large business, they are less likely to be held down by constraints such as budgets and resources, whereas entrepreneurs are. Consequently, this can lead to behaviour managers do not exhibit as often-using intangible resources; personal connections and networks. This is social capital defined by Sirmon and Hitt (2003) as something that 'can affect a number of important firm activities such as interunit and interfirm resource exchange, the creation of intellectual capital, interfirm learning, suppliers intentions, product innovation and entrepreneurs as social capital is a highly important resource.' In the case of Sir Freddie Laker the founder of Laker Airlines, it was apparent that his method of problem solving was using his personal connections not professional expertise. In an industry as large as the airline industry it is important to have access to resources on a bulk buying economic basis to compete successfully with aggressive competition. However, due to Freddie Laker's extreme direct involvement, these relationships were never established resulting in the second demise of his business. In comparison, another airline entrepreneur Sir Richard Branson delegated responsibility to promote the growth of his company, behaviour that is difficult for entrepreneurs to do, but is essential if they want to achieve growth. Conventional managers delegate responsibility to subordinates and so therefore this is a contrasting behaviour between the two. Sir Freddie Laker surrounded himself with core competencies but he pulled the strings on everything, overseeing all, allowing no autonomy which resulted in his failure.
Sir Freddie Laker's business structure, (See Appendix Figure 1.) which was of a functional power nature, confined the growth of his venture. A strategic divisional structure would have increased the likelihood of success. It would appear that Laker did not learn from his previous mistakes something that Wickham (2004) said was a process entrepreneurs needed to do in order to survive.
Failure is another concept that is not seen as an enemy to entrepreneurs, whereas it is for conventional mangers. Sir Freddie Laker was driven by his previous failure thirteen years apart from his second. However, it is important to recognise that relationships with failure are highly dependent on the cultural context. To fail in America is seen as a learning process, inevitable for all entrepreneurs to enhance their skills. In Britain it is very hard to recover from business failure perhaps explaining Laker's thirteen year absence. Gibb (1997) proposed that the development and learning of entrepreneurs is influenced by the stakeholder relationships surrounding the firms' environment. This therefore implies that intervening improves entrepreneurial ability and performance placing great importance on external relationships. Contrary to this however, is Costello's evolutionary theory of behaviour and learning (1996) which states that small technological firms get into routines and consequently learn from them. Working in a routine is also associated with large corporations and conventional managers, presenting perhaps a similarity in behaviour and way of thinking. An example of this is IBM and 'the IBM way' where all staff are required to dress and speak in the same way. In fact, IBM believed that they knew better than their consumers resulting in a vast decline in sales, showing how routine culture is a very powerful, potentially harmful one which is difficult to change. When a conventional manager fails it infers incompetency in reaching their organizational goals and targets therefore, loss of bonus or promotion. This type of culture may explain many people's behaviour in terms of avoiding risk. For instance, Hofstede (1991) developed four dimensions of culture one being 'Uncertainty Avoidance'. Countries with high Uncertainty Avoidance Index, are often more cautious in situations of ambiguity as opposed to countries with a lower index therefore affecting the speed of decision making and first mover advantage opportunities. Despite the U.K's failure adverse culture, it has one of the highest figures for SME's. (See Appendix Figure 2.).
It is important to recognise also that entrepreneurs are constantly learning and adapting their behaviour, making it a dynamic process, so they can respond to a constantly changing environment. Whereas the behaviour of conventional managers in larger businesses is more static in nature
Many entrepreneurial businesses remain small to medium sized and this can be a result of how the entrepreneur behaves and thinks. They need to recognise that 'Growth needs both entrepreneurial and professional management' (Fuller-Love, 2006) in order to be successful. Due to entrepreneurs' reluctance to delegate, businesses can struggle to grow and remain very small. Many entrepreneurs are not trained in business management and so therefore do not have the necessary skills that help to develop a successful business. Drucker (1985) states that 'entrepreneurs need to learn how to manage' this therefore being one of their biggest challenges. In the case of Suite Dreams, a small futon company, the entrepreneur, Gary Hinton, knew the product well and was entirely dedicated to it but he didn't recognise a change in consumer demand. The barriers to growth were explicit, some of which are not problems faced by conventional managers. Lack of management training, few qualifications, access to finance and technology are some of many problematic issues faced by entrepreneurs. Conventional managers are trained in these skills with more access to resources, usually with a specialised team around them to help meet targets.
Entrepreneurs and small firms can experience what is called 'growth crises'. Due to Freddie Laker's leadership style being exceptionally autocratic in nature, he did not move with his business into phase 2 and 3 of Scott and Bruces' Growth model (1987). This model categorises small business growth into phases of crises and it is important that the business is in one particular phase so their mission is clear. Decisions made by the entrepreneurs will determine which phase they are in. In terms of Laker Airways, the entrepreneur and his business were in separate phases highlighting implicitly the companies disharmony. For an industry driven by costs and competitors it is important to grow.
Taking into account the current economic climate, it has been especially difficult for entrepreneurs to grow their businesses. Take for instance, the company 'Bag it Don't Bin it', set up by female entrepreneur Julia Gash. This small business has been very successful and undergone incremental growth. However, due to lack of Government support in terms of funding it hasn't experienced rapid growth reinforcing the challenges faced by entrepreneurs in relation to resources.
It is important to remember that unlike conventional managers, entrepreneurs have a heightened emotional degree of involvement towards their business perhaps making their behaviour more emotional when decisions are necessary. Therefore, the development and success of the business that they have personally created and developed is highly linked to the entrepreneur's emotions and motivations whereas this involvement may not be to the same extent for conventional managers. In fact, conventional managers usually only deal with the short term when making decisions ensuring that they stay in line with budgets and planning (Hisrich and Peters, 2002). In terms of Suite Dreams, it was obvious that although the market demand had changed and customers no longer wanted futons, Hinton did not want to let go, remaining open even though it was a massive loss to the business. Real entrepreneurs know their market well recognising the needs and wants of the consumer. Take for instance The Walnut Group PLC founded by Richard Mills. This entrepreneur opened two Michellin Star restaurants in Sheffield after discovering a niche for them. However, when the recession hit, he knew when to get out abandoning those ventures and exploited a new one.
As entrepreneurs go through the growth process with their business, another challenge they have to face as it is their responsibility to assume a lot of the pressure. The need for an adaptive role is vital in order to respond to changing environments which affects their learning experience and hence their behaviour (Levinthal,1996). Conventional managers do not have to cope with the pressures of growth on their own, in fact they only manage them. Steinmetz (1969) stated about an entrepreneur that 'the minute he commits himself, he is on the treadmill of forced growth, growth that requires his ability to change from an autocratic to a professional manager'. This is something entrepreneurs struggle to do as seen through Sir Freddie Laker. Entrepreneurs need to become more comfortable co-ordinating and assigning tasks from a far for success (Scott and Bruce,1987). Ultimately it would appear that more responsibility is assumed by the entrepreneur in comparison to conventional managers therefore affecting their behaviour.
According to Drucker (1985) it is the entrepreneurs job to 'upset and disorganize' in order to create new markets to new customers. Conventional managers on the other hand, behave in a manner to maintain a market share, focusing usually on an existing one building on a customer base already established. However, although entrepreneurs behave differently in terms of creating markets, they still need to use management skills to ensure success by asking questions such as 'what is the value to the customer?'.
Despite much literature commenting on the stagnant differences between entrepreneurs and conventional managers, there are people who embody both sets of behaviour combining each thought process. These people are called Intrapreneurs 'those who take hands on responsibility for creating innovation of any kind within an organization. The Intrapreneur may be the creator or inventor but is always the dreamer who figures out how to turn an idea into profitable reality' (Pinchot,1986). The idea that it is possible to incorporate the levels of thinking both subjects present, infers that conventional managers and entrepreneurs can think and behave in similar ways. In opposition to entrepreneurs, intrapreneurs still work within an organization and therefore, to an extent are inhibited by bureaucracies much like conventional managers. However, unlike entrepreneurs, they are not constrained in terms of resources. In addition, a major advantage both intrapreneurs and conventional managers have is that networks are bounded meaning they can discuss propriety issues without potential leakage to competitors. In terms of entrepreneurs however, they do not have this luxury therefore the result is a lack of communication and inhibitive behaviour.
It appears that although there are similarities between conventional managers and entrepreneurs, fundamentally they are different people who want different things out of their careers. This applies to many occupations, where some people are more suited and interested in particular jobs than others and this is really no different. Entrepreneurs have a vast need to achieve something, to make their mark and are not primarily motivated by money. Conventional managers seek promotion and remuneration as recognition of achievement, as opposed to Entrepreneurs who seek to achieve their personal goals.
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