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Theories of entrepreneurial Behaviour The behavioural perspective

Theories of entrepreneurial Behaviour The behavioural perspective. Dominant ‘perspectives’ of entrepreneurship. Three dominant perspectives:. ‘Functional’ : Regards economic function of the entrepreneur ‘Personality’ : Regards identification of ‘entrepreneurial’ traits and

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Theories of entrepreneurial Behaviour The behavioural perspective

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  1. Theories of entrepreneurial Behaviour The behavioural perspective

  2. Dominant ‘perspectives’ of entrepreneurship Three dominant perspectives: • ‘Functional’: Regards economic function of the entrepreneur • ‘Personality’: Regards identification of ‘entrepreneurial’ traits and • characteristics • ‘Behavioural’: Regards set of activities and processes associated • with new venture creation

  3. Evolution of entrepreneurship theorising ‘Researchers wedded to the conception of entrepreneurship for studying the creation of organisations can learn much from the history of research on leadership. Like the studies of entrepreneurship, this research began by investigating the traits and personality characteristics of leaders. However, no empirical evidence was found to support the assertion that there exists a finite number of characteristics or traits of leaders and that these traits differentiate successful from unsuccessful leaders. More recently, research into leadership has apparently made some progress by focusing on the behaviour of leaders (that is, on what they do instead of what they are) and by determining what situational factors or conditions moderate the effects of their behaviour and performance’ (Van de Ven, 1980, p86; in Gartner, 1988; p22).

  4. A ‘sea-change’ in entrepreneurship theorising? • Peter Drucker (1980) coined term ‘sea-change’. It is a change that is substantial in • magnitude, comprehensive and pervasive in its impact on all aspects of the system • affected, enduring in its influence over time, and generally rapid and discontinuous • in its occurrence • Behavioural perspective grown in response to growing critique of personality-based • approach to understanding entrepreneurship • In contrast, focuses on the ‘entrepreneurial process’ of new venture creation – • movement away from research that focuses on the ‘entrepreneur’: • ‘The goal is not to smooth over any differences that might exist among these new ventures or • to throw these very different individuals into the same pot in order to extract the typical • qualities of the typical entrepreneur. The goal is to identify the specific variables that describe • how each new venture was created, in order that meaningful contrasts and comparisons among • new ventures can be made’ (Gartner, 1985; p701).

  5. What is a ‘new venture’ from the behavioural perspective? • Gartner (1988) uses the following definition: • An independent entity • A new profit centre within a company which has other established businesses or, • A joint venture which satisfies the following requirements: • a) Its founders must acquire expertise in products, process, market and/or • technology • b) Results are expected beyond the first year in which the investment is made • c) It is considered a new market entrant by its competitors • d) It is regarded as a new source of supply by its potential customers

  6. Defining the entrepreneurial process ‘The Entrepreneurial Process involves all the functions, activities, and actions associated with the perceiving of opportunities and the creation of organisations to pursue them’ (Byrgave and Hofer, 1991, p14). ‘Entrepreneurship is most fruitfully defined as the relentless pursuit of opportunity without regard to resources currently controlled…there is an underlying process in entrepreneurship that starts with the identification of opportunity and ends with harvesting the fruits of one’s labours’ (Stevenson and Sahlman, 1989; p104). ‘The study of the entrepreneur is actually one step removed from the primary phenomenon of entrepreneurship – the creation of organisations, the process by which new orgnisations come into existence. This behavioural approach views the creation of an organisation as a ‘contextual event’, the outcome of many influences. The entrepreneur is part of a complex process of new venture creation’ (Gartner, 1988; p21).

  7. Key characteristics of the entrepreneurial process • It is initiated by an act of human volition • It occurs at the level of the individual firm • It involves a change of state • It involves a discontinuity • It is a holistic process • It is a dynamic process • It is unique • It involves numerous antecedent variables • Its outcomes are extremely sensitive to the initial conditions of these variables From: Bygrave and Hofer (1991)

  8. Key research questions for the study of the entrepreneurial process Key research questions for the study of entrepreneurship Focused on the entrepreneur Focused on the entrepreneurial process • 1. Who become entrepreneurs? • 2. Why do people become • entrepreneurs? • 3. What are the characteristics of • successful entrepreneurs? • 4. What are the characteristics of • unsuccessful entrepreneurs? 1. What’s involved in perceiving opportunities effectively and efficiently? 2. What are the key tasks in successfully establishing new organisations? 3. How are these tasks different from those involved in successfully managing ongoing organisations? 4. What are the entrepreneur’s unique contributions to this process? From: Bygrave and Hofer (1991)

  9. Variables in new venturecreation • INDIVIDUAL • Need for achievement • Locus of control • Risk taking propensity • Job satisfaction • Previous work experience • Entrepreneurial parents • Age • Education • ENVIRONMENT • Venture capital availability • Presence of experienced entrepreneurs • Technically skilled labour force • Accessibility of suppliers • Accessibility of customers or new markets • Governmental influences • Proximity of universities • Availability of land or facilities • Accessibility of transportation • Attitude of the area population • Availability of supporting services • Living conditions • High occupational and industrial differentiation • High percentage of recent immigrants in the • population • Large industrial base • Larger size urban areas • Availability of financial resources • Barriers to entry • Rivalry among existing competitors • Pressure from substitute products • Bargaining power of buyers • Bargaining power of suppliers • ORGANISATION • Overall cost leadership • Differentiation • Focus • The new product or service • Parallel competition • Franchise entry • Geographical transfer • Supply shortage • Tapping unutilised resources • Customer contract • Becoming a second source • Joint ventures • Licensing • Market relinquishment • Sell off of division • Favoured purchasing by government • Governmental rule changes • PROCESS • The entrepreneur locates a business opportunity • The entrepreneur accumulates resources • The entrepreneur markets products and services • The entrepreneur produces a product • The entrepreneur builds an organisation • The entrepreneur responds to government and society From: Gartner (1988)

  10. The social dimension of the new venture creation process MOTIVATION AND DETERMINATION Of the individual/group, etc. Reflected in support of family, partners, and track record in already trying to achieve start-ups. Reflected also in the objectives of the individual or group IDEA AND MARKET Reflected in the viability of the Idea. Whether it can be demonstrated That it works. What needs it meets. How it is better than others. Who are The customers and how many of them are there. And what is the competition BASIC SUCCESS COMPONENTS ABILITY Of the individual, his/her family and Others involved. Previous track Record (employment and associated Knowledge and skill) and relevance To business. Technical and managerial ability RESOURCES Physical resources needed (Premises, Plant, materials, labour). Financial Resources available and needed From: Gibb and Ritchie (1982)

  11. Socially-based typologies Gibb and Ritchie (1982): ‘Improviser’: At early stage of career. Comparative fluidity of class position and style of life. Reference if not direct contact with parents and others from family of origin, still authorative source of reference and influence. Still likely to seek variety of attachment and and work possibilities. ‘Revisionist’: Slightly older and towards mid-career. Encouraged by doubts or conflicts with current position. Desire or actually make changes in practice of life and work on basis of cultural and personal experiences. Awareness of possibility of blocks in job and career development increasingly important. Need for greater self-determination. ‘Superceder’: Less openly doubtful and in conflict with values and meaning of earlier life and experience. Aware of opportunities already sacrificed and the more restrictive range of opportunities open to them. Some essentially “pulled” towards opportunities than “pushed” from present situation as revisionists are. ‘Reverter’: Much of life course negotiated and cannot be recovered. Original job and career problems now become “sunk costs”. May seek to “relive” some previous life experience and may consciously revert back to previously suspended projects for starting own business. Motives may be diverse and not as intense as during earlier stages of life and whole venture may be treated experientially.

  12. Where now? – Building on the behavioural perspective • Contentious implication that individuals only ‘entrepreneurial’ during • new venture creation stage • ‘the individual who creates the organisation as the entrepreneur takes on other roles at each • stage – innovator, manager, small business owner, division vice-president etc. Entrepreneurs are • identified by a set of behaviours which link them to organisation creation (Gartner, 1988; p26). • Understanding of complex relationship between the entrepreneur and • the business they create remains underdeveloped • Ability of entrepreneurs to learn and develop as manage business is • largely overlooked • Process of how organisations come into existence is the key focus of • entrepreneurship research – study of entrepreneur marginalised

  13. Is the study of the entrepreneur a worthwhile pursuit? ‘Economic circumstances are important; social networks are important; entrepreneurial teams are important; marketing is important; finance is important; even public agency assistance is important. But none of these will, alone, create a new venture. For that we need a person, in whose mind all of the possibilities come together, who believes that innovation is possible, and who has the motivation to persist until the job is done’ (Shaver and Scott, 1991; p39).

  14. References Chell, E., and Haworth, J. M. (1988), Entrepreneurship and entrepreneurial management: The need for a paradigm, Graduate Management Research, 4(1), 16-33. Gartner, W. B. (1985), A conceptual framework for describing the phenomenon of new venture creation, Academy of Management Review, 10(4), 696-706. Gartner, W. B. (1988), Who is an entrepreneur? Is the wrong question, American Journal of Small Business, 13(1), 11-32. Drucker, P (1980), Managing in Turbulent Times, London: Heinemann. Bygrave, W., and Hofer, C. W. (1991), Theorising about entrepreneurship, Entrepreneurship: Theory and Practice, 15(4), 13-22. Stevenson, H. H., and Sahlman, W. A. (1989), The entrepreneurial process, in Small Business and Entrepreneurship, P. Burns and J. Dewhurst, eds., Basingstoke: Macmillan. Gibb, A. A., and Ritchie, J. (1982), Understanding the process of starting small businesses, European Small Business Journal, 1(1), 26-45. Naffziger, D. W., Hornsby, J. S., and Kuratko, D. F. (1994), A proposed research model of entrepreneurial motivation, Entrepreneurship: Theory and Practice,(Spring), 29-42. Shaver, K. G., and Scott, L. R. (1991), Person, process, choice: the psychology of new venture creation, Entrepreneurship: Theory and Practice, 16(2), 23-45. Low, M. B., and MacMillan, I. C. (1988), Entrepreneurship: Past research and future challenges, Journal of Management, 14(2), 139-161.

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