Theories regarding entrepreneurship and environment

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Entrepreneurship being a very broad term can be attributed many meanings as defined by many authors for some (Ma and Tan, 2006; McClelland, 1961; Collins & Moore, 1964) it is an individual level activity concerned with the creation of wealth and personal fulfillment. Hamid & Abaidullah, (2006) termed SME's as entrepreneurship with no greater than Rs. 2.40 million having 10 to 99 employees. Cantillon can be attributed as the pioneer using the word 'entrepreneur,' explaining it "as someone buying at certain prices and selling at uncertain prices". Cantillon studied entrepreneurial activity on the economy, at that moment his focus on individual who performed the role was not the focus of discussion. The concept of entrepreneurship was developed as combining factors of production (Jean Baptiste). The view point on entrepreneurship has been developed by (Schumpeter) as driving force of an economy with innovation being at its essence. "He writes that 'the carrying out of new combinations we call "enterprise"; the individuals whose function is to carry them out we call "entrepreneurs" (1934: 74)". One area of problem which (Carland et al., 1984) identified is entrepreneurship becoming a symbol of small business management. Reaynolds, Reynolds, Van de Ven, Vesper, Cooper however focused on the start-up process. Baumol, (1986) attributes entrepreneurship as one of the omnipotent factors towards economic productivity and growth and flow of knowledge. This research paper rests with the definition taken by (McClelland, 1961; Collins & Moore, 1964) individual human beings with their background, environment, goals, values, and motivations are the real objects of analysis.

The worth and spread of the word entrepreneurship is clearly evident by its prominence in scholarly literature (Vesper, 1988). This trend can be seen evident as the formation of new business journals "Journal of Business Venturing" specifically on this topic (Churchill and Lewis, 1985). Along with its increasing publication in non-academic publication (See McClung, J. J. and J. A. Constantin, 'Nonaca-demic literature on entrepreneurship: An evalu-ation', in Kent et al., 1982). Porter and McKibben, (1988) has also stated its dominance as it is seldom to find any business school without a subject on entrepreneurship. The academic fame can be a reason of its industry prominence, contributing a major portion of industrial production in developed nations (otsuki, 2002) while about 60% to 90% of business activity in the whole world is comprised of SME's (Mohafi, 2008).

The approaches attributed towards entrepreneurial research are "why" (McClelland, 1961; Collins & Moore, 1964), "What" (Schumpeter, Kirzner, or Casson) and "How". Why deals with the notion that, why do an entrepreneur act?, What tells the outcomes derived when entrepreneurs act and finally how answers the questions related to how do they manage their aims, in spite of environmental affect or personal reasons for the fulfillment of these aims. This paper mostly explains the why form on entrepreneurial research by looking into which factor generates the real business formation.

Initiating entrepreneurship is not anything to be generated from outside, individuals initiating entrepreneurial act have inbound qualities for choosing either to start or not any entrepreneurial business (Morrison, A. 2000; Kirzner, 1979; Jarillo, C. 1990). Thus individual's poses entrepreneurial traits. Considerable literature can be found focusing on the concept of different entrepreneurial processes, as new business formation (Herron and Sapienza 1992), entrepreneurial motivation (Naffziger, Hornsby, and Kuratko 1994) and entrepreneurial potential (Krueger and Brazeal 1994).In order to understand the process of entrepreneurship one must have an understanding of entrepreneurial intentions being the reason that, they form the underpinnings of new organizations (Krueger, 1993b). Entrepreneurial phenomenon is not a onetime process but it occurs over time (Gartner et al. 1994) and entrepreneurial intentions might be viewed as the initial step of this long term process. The study of intentions as being determinants of becoming entrepreneur requires to be expanded towards entrepreneurial behavior (Michael, J. 1996). Among many determinates of behavior and attitude, characteristics and traits plays a pivotal role (Michael, J. 1996).

H1: Entrepreneurial values are related to new business formation

H0: Entrepreneurial values do not relate to new business formation

Gartner, (1990) states that entrepreneur's exhibit unique personality characteristic and abilities attached with individuals, identifying five attributes that are close to entrepreneurs, need for achievement, locus of control, risk-taking propensity, tolerance for ambiguity, and Type-A behavior (Brockhaus 1982; Brockhaus and Horwitz 1986; Furnham 1992). The view point of researchers on the school of thought concerning with "traits" have been opposed by many (Gartner, 1989a;1989b), to others this approach can be helpful in specific situations (such as PRO scientific and technical inventors) and their non-entrepreneurial counterparts. There is a need for entrepreneurship process to be studied in a more dynamic method (Robinson et al., 1991). Shaver and Scott (1991) argued trait research as methodologically weak thus arguing that there must be a consistency between constructs and there measures. Concluding the results of a meta analysis done by (Zahra, Shaker, 2002) values or beliefs as need for autonomy, need for achievement, change orientation) was not found consistently associated with new business formation which derives the need to discuss whether there are special values in Pakistani environment which enables new business formation or not.

McClelland's best-selling The Achieving Society (1961) framed entrepreneurship as a social role. The approach by McClelland in The Achieving Society rests on the notion that entrepreneurial behavior is dependent on environmental values. McClelland in his research inquires why there is a different rate in economic growth of different societies, what is the reason some economies show high while some show low growth.

H11: There is a relationship between entrepreneurial values and environmental values

H10: There is no relationship between entrepreneurial values and environmental values

The following hypothesis have been developed to know whether there is a relationship between entrepreneurial behavior and environmental values, looking into the strength of relationship and especially focusing on Pakistani environment.

Environmental factors as political, social and educational influence the choice of forming an entrepreneurship in any society (Timmons, 1994). Kirzner, (1979) argues that uncertainty and competition in environment initiates entrepreneurial values which in term are the reason for initiating an enterprise. Entrepreneurial act is also majorly influenced by the situation or environment in which an individual works (Shane 2002; Di Gregorio and Shane 2003; Lerner 2004; O'Shea et al. 2005; O'Shea et al. 2007).

H21: Environmental values moderate the choice of new business formation

H20: Environmental values does not moderate the choice of new business formation

Environmental values include the social, political conditions in the country which either initiates or stops the business processes.

Throughout the globe no one can deny the dominating and leadership role of businesses owned by Chinese (Limlingan, 1986), "Why" approach to entrepreneurial research explains this as the closeness of Chinese families (Jarillo, C. 1990). Krueger (1993a; 1993b) and Scott and Twomey (1988) concluded that entrepreneurial intentions are found to be denser in people whose parents are entrepreneurs. Many researchers have focused on family business and new business formation, although less attention has been directed towards family business as a mediator between entrepreneurial values and new business formation. Performance and perceptions are considered to be impacted by family business's (Kleinsorge, 1994; Lyman, 1991; Sharma, Chrisman, & Chua, 1997). Gartner, (2001) concerns whether family business studies have a legitimate role to play in understanding new venture creation.

H1: Family business mediates the new business formation process

H0: Family business does not mediates the new business formation process

Businesses that are managed and owned by one or more than one family members are termed as family business (Handler, 1989; Hollander & Elman, 1988). Davis and Tagiuri (1982) defined family firms as "…Organizations where two or more extended family members influence the direction of the business through the exercise of kinship ties, management roles, or ownership rights." For the purpose of this research family business is business as defined by (Handler, 1989; Hollander & Elman, 1988).

The study by Mosey and Wright (2007) found those with prior experience with entrepreneurship are subjected towards having better business as well as social network, hence were in a better stance to engage with investors and business people.