Ch. 2 Outline
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2.
3.
4.
Introduction
The Entrepreneurial Personality
Entrepreneurial Cognitions
Entrepreneurial Attitudes
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The Individual Entrepreneur
• “The entrepreneur is a person who shifts
economic resources out of an area of lower and
into an area of higher productivity and yield.” - J.
B. Say, French economist.
– However Say’s definition does not tell us who this
entrepreneur is.
• The commonplace definition of the entrepreneur
is a person who starts his or her own new and
small business.
– Entrepreneurs serve customers in new ways, enter
underserved markets, and exploit opportunities that
others have missed—this is what entrepreneurship
means.
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The Individual Entrepreneur (cont.)
• Research into the personality of entrepreneurs
continues, but the focus now is on what traits are
useful in which contexts.
• Research has become more refined, reflecting the belief that
there is not a single entrepreneurial “type” but that different
behaviors, thoughts, and attitudes are more or less effective
depending on the entrepreneurial context.
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Context is defined simply as the environment in which
entrepreneurs find themselves.
It includes such aspects as the economic climate, availability of
capital, support networks, and technological resources.
• Management research in general has followed a
path similar to the one being traversed by
scholarly research into entrepreneurship.
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Entrepreneurial Behaviors
• Entrepreneurs exhibit many different
personality types:
– Researcher David McClelland, a noted social
psychologist, determined that founders of highgrowth companies appear to share a distinct
cluster of personal characteristics:
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High need for achievement
Low need to conform
Persistence
High energy level
Risk Takers
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Entrepreneurial Behaviors (cont.)
• Risk-taking tendency: Five personal
characteristics identified by McClelland can be
further condensed into four fundamental
behaviors that all successful entrepreneurs
exhibit:
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Belief
Commitment
Focus
Drive
– Another important factor to entrepreneurial success is the
ability to work with others to achieve goals.
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The Entrepreneur’s Social Network
• Social network: The social environment in which
entrepreneurs build their ventures by gaining
support, knowledge, and access to distribution
channels.
– Researchers have begun to assess the importance of the
entrepreneur’s social network as a means to gain
support, knowledge, and access to distribution
channels.
– Research has shown that an entrepreneur’s social
network varies from time to time depending on the
different phases of the venture’s life.
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The Entrepreneur’s Social Network
• Phases of venture development from this
perspective:
• Phase 1: The motivation phase
• Phase 2: The planning phase
• Phase 3: The establishment phase
• Entrepreneurs need capital, skills, knowledge, and
labor to start new ventures.
• Social capital: The networks of contacts that help bring about
success are the entrepreneur’s social capital.
• Entrepreneur’s social network has several characteristics.
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Size
Positioning
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The Entrepreneur’s Social Network
• Some of the social relationships are singlestranded
• Other relationships known as multiplex ties play
multiple roles in the network
– Research has demonstrated significant differences in
social network size between phases 1 and 2.
– Social networks play an important role in the success of
entrepreneurial ventures.
– Entrepreneurs use their social capital differentially
throughout the phases of venture development.
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Entrepreneurial Cognitions
– A currently fruitful line of research into what
makes entrepreneurs successful examines them
from a cognitive perspective.
• Cognition and cognitive psychology are concerned
with the study of individual memory, perception,
thinking, and information processing.
• Entrepreneurial cognitions have been defined as
“the knowledge structures that people use to make
assessments, judgments, or decisions involving
opportunity, evaluation, venture creation and
growth.”
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Entrepreneurial Cognitions
• The study of entrepreneurial cognitions shows
how entrepreneurs use mental models to simplify
and piece together previously unconnected
information that helps them identify and invent
new products and services and to assemble the
necessary resources to launch new ventures.
• Cognitive biases: Perceptive tendencies among
entrepreneurs that enable them to make complex
decisions despite incomplete information.
– Entrepreneurs display distinct cognitive biases in
decision environments characterized by uncertainty and
complexity.
– Yet, it is often these biases that enable entrepreneurs
to
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take action despite incomplete information.
Entrepreneurial Cognitions
• Entrepreneurial research has found a
variety of cognitive tendencies among
entrepreneurs at the opportunity
evaluation phase of a new venture. These
tendencies include:
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Overconfidence
Belief in the law of small numbers
Planning fallacy
The illusion of control
Reasoning by analogy
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Entrepreneurial Cognitions
• Minimizing Risks on Biased Cognitions
– The following are a few approaches entrepreneurs can
use to minimize the risk that their business decisions
are based on biased cognitions:
• Active versus passive searching
• Personal versus impersonal information
• External versus internal sources
– Entrepreneurs develop a sense of self-efficacy by virtue
of their market search, planning, and execution
strategies. This sense of efficacy leads to actions that
bring new products and services into the market.
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Five Dimensions of EI
1. Self-Awareness—being aware of what you are
feeling
2. Self Managing—the ability to manage your own
emotions and impulses
3. Self Motivation—the ability to persist in the face
of setbacks and failures
4. Empathy—the ability to sense how others are
feeling
5. Social Skills—the ability to handle the emotions
of others
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