Entrepreneur
James J. Chrisman and Franz Kellermanns
‘‘Entrepreneurs are individuals or groups of in dividuals, acting independently, or as part of a corporate system, who create new organizations, or instigate renewal or innovation within an existing organization’’ (Sharma and Chrisman, 1999: 17). As the definition suggests, entre preneurs can act either independently or in affiliation with an existing organization (see corporate entrepreneurship), although the former is more prevalent and has received the most attention.
The notion that entrepreneurs are key to a nation’s economic development and recovery has been suggested by prominent scholars in the field (e.g., Schumpeter, 1934; Stevenson and Jarillo, 1990). However, the use of the term ‘‘entrepreneur’’ (see entrepreneurship) has been the subject of much debate. Judgments range from rejection or skepticism about univer sally acceptable definitions, to a clear stated need for a definition in order to further understanding among researchers and practitioners (Gartner, 1988; Sharma and Chrisman, 1999).
An early definition by Richard Cantillon (1734) characterizes entrepreneurs as indi viduals driven by profit, who have the ability to realize such profit by buying low and selling high. In his Treatise on Political Economy, Jean Baptiste Say (1816) also focuses on the quest for profit as characteristic of entrepreneurs, while emphasizing that entrepreneurs use periods of change and uncertainty to reallocate resources. Thus, Say describes the entrepreneur as a person involved in creating newness. These early definitions of the term focus on entrepre neurial creation and thus are behavioral in nature. However, entrepreneurs were always regarded as individuals with unique qualities. For example, Say (1816) attributes special qual ities like judgment, perseverance, and know ledge to entrepreneurs (see history of the academic study of entrepreneur ship).
By contrast, the most important contempor ary theory of entrepreneurship focused ex clusively on the behavioral aspects of an entrepreneur. Schumpeter (1934) conceptual ized the entrepreneur as an innovator (see in novations), who realizes new means of production without necessarily being an owner. In fact, Schumpeter argues that risk bearing is inherent to owners and capitalists and is not an entrepreneurial function (see entrepreneur ial ri sk). To Schumpeter, an individual is an entrepreneur only when he or she is engaged in the development of new combinations. An indi vidual ceases to be an entrepreneur once that set of tasks is completed and the individual turns to new occupations, most typically the manage ment of the enterprise created to exploit a new combination.
Two economic perspectives contribute to an appreciation of the economic role of en trepreneurs. For Schumpeter (1934), the entre preneurial act, termed creative destruction (see creative destruction), disturbs existing equilibrium situations in an economy. By contrast, the Austrian school suggests that the economy is in disequilibrium and that entre preneurs take advantage of imperfections in the market to guide the economy toward an equilib rium situation (Kirzner, 1973). Thus, entrepre neurs can create new ventures under diverse market conditions, be it by exploiting inefficien cies or by creating new resource combinations.
Schumpeter (1934) focuses on innovative be havior as the defining characteristic of entrepre neurs. Kirzner (1973), on the other hand, highlights the ability to perceive opportunities in the environment as the factor that distin guishes entrepreneurs from non entrepreneurs (see entrepreneurial discovery). His notion of entrepreneurial alertness (see entre preneurial alertness) goes beyond the assumption that entrepreneurs possess superior information; instead, alertness refers to the ability to find market information that helps exploit opportunities. Both of these viewpoints suggest that being an entrepreneur is a behavior an individual might display at certain points in his or her life. Ronstadt (1988) has further entrepreneur 61 shown that this behavior may be recurring and can expose individuals to ideas and opportunities that make it likely that they will display that behavior again in the future. An implication of Ronstadt’s work is that habitual entrepreneurs (see habitual entrepreneurs) learn from their venturing efforts, making the likelihood of a successful entrepreneurial career higher than the likelihood of success with any single ventur ing foray.
However, until recently, research on en trepreneurship outside of economics focused largely upon personal and psychological charac teristics of entrepreneurs. Labeled the ‘‘trait ap proach’’ (Gartner, 1988), this school of thought often presented entrepreneurs as great inspir ational leaders. Among others, risk taking pro pensity, need for achievement, perceived locus of control, autonomy, perseverance, com mitment, vision, creativity, single mindedness, physical attractiveness, popularity, sociability, intelligence, diplomacy, decisiveness, and birth order were considered important determinants of whether an individual became an entrepre neur as well as whether the individual was suc cessful in that endeavor (Gartner, 1988).
Among the most prominent of the adherents to this perspective was McClelland (1961). His book The Achieving Society, and others like it, helped set the direction of the field for approxi mately a quarter of a century. He argued that individuals with a high need for achievement compared to other members of society are prone to engage in entrepreneurial activities, since opportunity exploitation (see opportun ity exploitation) satisfies their need for accomplishment. However, subsequent studies with more careful control features demonstrated that the trait approach was limited in its ability to distinguish entrepreneurs from managers or members of the general population (Gartner, 1988).
By contrast, the ‘‘behavioral approach’’ does not concentrate on personality characteristics, but regards contextual factors, such as the way entrepreneurs find opportunities, acquire re sources, and formulate entry strategies, as more important. Thus, this line of research focuses on the decisions an entrepreneur makes and what an entrepreneur does, not who he or she is (Gart ner, 1988). Most scholars have moved toward the behavioral approach, as it appears to be more fruitful for addressing why entrepren eurs act, how entrepreneurs seek, discover, and pursue opportunities, and what the conse quences are of their actions (Stevenson and Jar illo, 1990). For example, research has suggested that individuals who procrastinate or plan too extensively are less likely to start businesses than individuals who are prepared to act, albeit with imperfect information, to find out if their ideas are feasible (Carter, Gartner, and Reynolds, 1996).
On the other hand, more recent attempts to understand how personal attributes affect entrepreneurial success have been reframed to focus on factors such as entrepreneurial net works (see entrepreneurial networks), industry, management, and venturing experi ence, skills and abilities, and educational back ground. This revised focus is consistent with the conventional wisdom of venture capitalists (see venture capital) who believe that the be haviors and characteristics of an entrepreneur are more important than a venture’s strategy (see business plan; strategic entre preneurship). In fact, research has indicated that the initial size, survival, and growth of a venture are each related to some of the following characteristics: the number of entrepreneurs involved in a start up, education levels, manage ment experience, industry experience, age, entrepreneurial experience, goals, and parental role models (Cooper, Gimeno Gascon, and Woo, 1994; Cooper, Woo, and Dunkelberg, 1989).
See also entrepreneurial decisions; entrepreneurial growth; entrepreneurial leadership; nascent entrepreneur
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