Creativity and Entreperunial Performance

Exploring Diversity in Entrepreneurship
W. Edward McMullan
Thomas P. Kenworthy
Creativity and
Entrepreneurial
Performance
A General Scientific Theory
Exploring Diversity in Entrepreneurship
Series editors
Alan L. Carsrud, bo Akademi University, Finland
Malin Brnnback, bo Akademi University, Finland and
Stockholm University, Sweden
More information about this series at http://www.springer.com/series/13172

W. Edward McMullan Thomas P. Kenworthy
Creativity and
Entrepreneurial Performance
W. Edward McMullan (Retired) Thomas P. Kenworthy
University of Calgary Management & Marketing Department
Haskayne School of Business University of Dayton School
Calgary, AB, Canada of Business Administration
Dayton, OH, USA
ISBN 978-3-319-04725-6 ISBN 978-3-319-04726-3 (eBook)

DOI 10.1007/978-3-319-04726-3
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Springer International Publishing Switzerland 2015

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Imagination is more important than knowledge.
(Albert Einstein)
All require leaps of imagination, the ability to see things afresh that is the mark of the
entrepreneur.
(David Birch 1987, p. 66)
Nor do scientists normally aim to invent new theories, and they are often intolerant of those
invented by others.
(Thomas Kuhn 1962, p. 24)
Acknowledgements
This book is really the result of 40 years of thinking, study, research and teaching.
Many people and institutions have contributed to its formulation. This book origi-
nates with Ed McMulllans PhD thesis on creativity which was finished in 1975 at
the University of British Columbia. At that time Ed was obsessed by the relation-
ship between creativity, innovation and entrepreneurship. He began teaching entre-
preneurship at the University of Calgary in 1976 and designed his first curriculum
based on the assumption that entrepreneurs were creative people. For the rest of his
career he taught a variety of entrepreneurship courses on this basis and even taught
the odd course in creativity. By 1990, Ed completed a textbook with a colleague
based on the assumption that entrepreneurship was a creative discipline. In the
1990s, he also spent approximately 7 years part-time trying to establish a technology
based firm learning first-hand some of the difficulties involved.
He found inspiration for this book while compiling literature on theory building
for a PhD course he was teaching to entrepreneurship students at the University of
Calgary. The beginnings of the theory were contained in the essentials of Chap. 5.
When he next reviewed the evidence in the essentials of Chap. 6, he realized that he
had something that he could not let go. Teaching a PhD course on research method-
ology focused on the philosophy of science also helped further this project.
Ed owes a debt of gratitude to his many undergraduate business and engineering
students as well as his MBAs who were sufficiently open-minded to embrace an
unpublished work by their professor over a period of maybe 57 years. In fact it was
the strong positive reaction by so many students that lead him to believe that this
book could be used more generally as a textbook. One of his MBA students, Andrew
Miller, took it upon himself to refine an earlier draft of his work by editing several
chapters of the text. There were five missing years of late spent in failed attempts at
publication near the beginnings of his retirement. Ed would also like to note that his
coauthor, Tom Kenworthy, was his former PhD student who began by engaging him
in discussions about the material years ago. Tom updated the material for five
missing years and enriched it with scores of new sources. Tom also pruned back
incomplete diversions and refined the existing text.
vii
viii Acknowledgements
We also owe a debt to the hundred or so scholars in the field who offered to read
the text. Many provided Ed with comments, criticisms and testimonials. So far, in
particular, we would like to thank Frank Hoy, Candida Brush, Mike Morris and
Dennis Ray for their special thoughtfulness. We want to also thank Alan Carsrud for
believing enough in the book to undertake its publication at Springer.
Ed would like to thank Sandeep Singh, his nephew, for his comments and promo-
tional assistance. Finally, the many drafts owe a large debt to his wife, Jessy. She
acted as a sounding board for his ideas, often probing them with penetrating ques-
tions. She later pushed him for organization and clarity, providing numerous
suggestions for improvement. Her appreciation of the value of the text was a
constant support.
Contents
1 Introduction ............................................................................................. 1
Some Methodological Background........................................................... 2
Some Theoretical Background .................................................................. 4
Theories and Testing ................................................................................. 5
Chapter by Chapter ................................................................................... 7
Chapter 2: Entrepreneurial Experience and Thinking........................... 8
Chapter 3: Entrepreneurship as Small(er) Business.............................. 8
Chapter 4: Entrepreneurship as Positivistic Social Science .................. 9
Chapter 5: The General Theory of Entrepreneurial Creativity ............. 9
Chapter 6: The Core Evidence .............................................................. 10
Chapter 7: A General Theory and its Explanatory Power ..................... 11
Chapter 8: Entrepreneurial Creativity ................................................... 12
Chapter 9: Entrepreneurial Dynamics ................................................... 12
Chapter 10: The Development of Personal Creativity .......................... 13
Chapter 11: A Macro Theory of Entrepreneurial Creativity ................. 13
Chapter 12: Implications and Conclusions ........................................... 14
Part I Understanding Entrepreneurial Problems
2 Entrepreneurial Work Experience ........................................................ 17

In Summary............................................................................................... 24
Part II Major Entrepreneurial Paradigms
3 Small Business Entrepreneurship: Is a Caterpillar a Butterfly? ........ 27

The Small Business Theory of Entrepreneurship ..................................... 29
Management Tools in an Entrepreneurial Context.................................... 30
Strategic Planning ................................................................................. 31
Accounting ............................................................................................ 32
Market Research ................................................................................... 32
ix
x Contents
Marketing Promotion ............................................................................ 34

Human Resource Management ............................................................. 35
Entrepreneurial Returns to Management Education ................................. 37
Entrepreneurial Returns to Entrepreneurial Education ............................. 39
On the Disadvantages of Current Thinking to the Practice
of Entrepreneurship ................................................................................... 40
A Contingency Approach .......................................................................... 41
Conclusion ................................................................................................ 42
4 The Positivistic Social Science of Entrepreneurship ............................ 43
Propositions, Not Theories........................................................................ 44
Entrepreneurial Strategy ....................................................................... 46
Industry Choice ..................................................................................... 47
New Venture Organizing ....................................................................... 47
Acquiring Financial Resources ............................................................. 48
Entrepreneurial Psychology .................................................................. 49
The Sociology of Entrepreneurship ...................................................... 50
Strengths of Shanes General Theory........................................................ 50
Potential Limitations of Shanes Propositions .......................................... 51
On the Problems of Using Scientific Knowledge in Education ................ 52
Conclusion ................................................................................................ 53
Part III A General Scientific Theory of Entrepreneurial Creativity
5 Modernizing Schumpeter: Toward a New General

Theory of Entrepreneurship .................................................................. 57
Developing an Entrepreneurship Theory .................................................. 58
Entrepreneurship and Creativity ............................................................... 60
Schumpeter, Entrepreneurship and Creativity .......................................... 61
Creativity................................................................................................... 65
Intellectual Abilities .............................................................................. 66
Knowledge ............................................................................................ 66
Thinking Styles ..................................................................................... 66
Personality............................................................................................. 67
Motivation ............................................................................................. 67
Environment .......................................................................................... 67
Innovation ............................................................................................. 69
Business Development and Performance .............................................. 69
Conclusion ................................................................................................ 72
6 The Core Evidence .................................................................................. 73
Pre-venturing............................................................................................. 74
New Venturing........................................................................................... 78
New Venture Outcomes............................................................................. 82
New Venture Survival ........................................................................... 82
Contents xi
Differences in Creativity between Entrepreneurs

and Small Business Owners .................................................................. 83
Growth and Performance ...................................................................... 85
Some Synopses of Studies Related to Financial Performance.............. 85
Creativity and Innovation ...................................................................... 92
Need for Achievement .......................................................................... 95
Discussion ............................................................................................. 96
Conclusion ............................................................................................ 98
7 A General Theory and Its Explanatory Power .................................... 99
The Explanatory Power of the General Theory
of Entrepreneurial Creativity .................................................................... 102
Personality............................................................................................. 102
Motivation ............................................................................................. 103
Thinking Styles ..................................................................................... 105
Intelligence............................................................................................ 106
Knowledge ............................................................................................ 107
Environment .......................................................................................... 109
Conclusion ................................................................................................ 110
Part IV Auxiliary Theories
8 Entrepreneurial Creativity ..................................................................... 115

The Negative Side of Creativity ................................................................ 116
When Creativity Is (not) Needed .............................................................. 116
Entrepreneurship as a Creative Applied Art/Science ................................ 117
Entrepreneurially Creative Intelligence ................................................ 118
What is Common to the Creative Intellect? .............................................. 121
Entrepreneurially Creative Personality ................................................. 121
What is Common to the Creative Personality? ......................................... 124
Entrepreneurially Creative Motivation.................................................. 124
What is Common to Creative Motivation? ............................................... 126
Entrepreneurially Creative Thinking Style ........................................... 126
What is Common to Creative Thinking Styles? ........................................ 128
Entrepreneurial Knowledge .................................................................. 128
What is Common to Creative Knowledge? ............................................... 131
Developing Measurement Instruments ..................................................... 131
Viewing Entrepreneurial Creativity Holistically....................................... 132
Confluence ................................................................................................ 132
Thresholds ................................................................................................. 133
Range of Applicability .............................................................................. 133
Contingencies............................................................................................ 134
The Direction of Causation ....................................................................... 134
Conclusion ................................................................................................ 135
xii Contents
9 Entrepreneurial Dynamics ..................................................................... 137

The Rationalist Model............................................................................... 137
Limits to Strategic Rationality .................................................................. 138
On the Limitations of the Small Business Model
of Entrepreneurship ................................................................................... 140
An Investment Theory of Entrepreneurial Creativity................................ 141
Entrepreneurial Vision .............................................................................. 142
Entrepreneurial Investments...................................................................... 144
Deal-Making under Adversity................................................................... 144
Entrepreneurial Improvisation .................................................................. 145
Investigating the Entrepreneurial Process ................................................. 146
A Provocative Study.................................................................................. 147
Conclusions ............................................................................................... 148
10 Developing Entrepreneurial Creativity ................................................. 149
Parents and Family .................................................................................... 149
Primary and Secondary Education ............................................................ 152
Post-Secondary Education ........................................................................ 153
Career Choices .......................................................................................... 153
Conclusion ................................................................................................ 154
11 Towards a Macro Theory of Entrepreneurial Creativity .................... 155
The Entrepreneur in Economic Development ........................................... 155
A Macro-Model of Entrepreneurial Creativity ......................................... 158
Scientific and Technological Creativity .................................................... 159
Spill-Over Creativity and Entrepreneurship ............................................. 160
Entrepreneurial Culture and Economic Development .............................. 161
Barriers to and Supports of Creative Entrepreneurship ............................ 161
Education .................................................................................................. 162
Conclusion ................................................................................................ 163
12 Some Implications and Conclusions ...................................................... 165
Three General Theories............................................................................. 165
General Principles from the General Theory
Some Points on Methodology ................................................................... 168
Normative Implications of the General Theory
A Hierarchic Model of Moral Entrepreneurial Imperatives...................... 172
Possible Implications upon Education ...................................................... 174
Research Implications ............................................................................... 176
In Summary............................................................................................... 178
References ........................................................................................................ 179
Index ................................................................................................................. 203

Synopsis of the Book
The essential problem in entrepreneurship is to improve the performance of entre-

preneurs. The most important theories will be the ones that most enable us to predict
and then ultimately influence entrepreneurial performance. This book develops a
new and more scientifically compelling theory of entrepreneurial performance
based on entrepreneurial creativity.
The theory construction was grounded in the philosophy of science. Karl Popper
(19021994), who is one of the most important philosophers of science in modern
times, defined scientific theory as before-the-fact predictive and not only after-the-
fact explanatory.1 For him, explanatory power is the secondary function of scientific
theory. This book boldly conjectures that entrepreneurial creativity will predict
3050 % of entrepreneurial performance variance all by itself, and be the dominant
predictor of entrepreneurial performance.
Before the new theory is presented an attempt is made to understand how entre-
preneurial performance is currently accounted for in the science of entrepreneur-
ship. Two main scientific approaches were identified. First, there is the view that
considers entrepreneurship merely as an extension of the business discipline the
small business approach. By studying what works in large firms and adjusting it to
small firms researchers hope to develop a convincing understanding of entrepre-
neurial performance through time. Then there is a second overall view that hopes
the solution will be found by empirically piecing together disparate data that indi-
vidual studies have found to be related to entrepreneurial performance at one time
or another. The second approach is examined through the work of one of the leading
scholars of the field. His approach was to develop an inventory of 80 plus different
propositions from a plethora of empirical studies.
The entrepreneurship discipline has a long tradition of expecting entrepreneurial
performance to be influenced by creativity, going back to Joseph Schumpeter and
1
Those theories that have been fully elaborated within the field of entrepreneurship are only
infrequently predictive, and therefore infrequently falsifiable. By discounting theories that do not
predict, Popper narrows down the field of theories that require serious consideration as part of the
science of the field.
xiii
xiv Synopsis of the Book
before. Joseph Schumpeter (18831950), who has been called the father of modern
entrepreneurial thought, defined entrepreneurship as creative-destruction creating
the new by supplanting or destroying the old. A number of aspects of Schumpeters
model of individual entrepreneurship were modified to change it into a scientifically
testable theory and bring it current with our times. In particular, Schumpeters con-
cept of entrepreneurial motivation evolved into a more general theory of creativity.
Robert Sternberg, who is one of a number of prominent modern creativity theo-
rists, theorized that creativity broadly encompasses aspects of personality, motiva-
tion, intellect, thinking style, relevant knowledge, as well as environmental factors.
Sternbergs creativity theory was used to link the findings from entrepreneurial cre-
ativity with those from entrepreneurial performance. Evidence was compiled to
demonstrate that the resulting theory could both predict entrepreneurial perfor-
mance and explain a range of existing findings under a single theoretical umbrella.
In order to scientifically tie entrepreneurship to creativity the book pursues a
number of major objectives:
1. The book begins by reminding us of our scientific challenge in the light of the
depressing levels of performance typically to be found in the real world of
entrepreneurship.
2. It next explores the dominant paradigms driving the research in the field of entre-
preneurship today: the first, an apparently over-optimistic faith in the power of
the business disciplines to provide the answers to our urgent questions; the sec-
ond, an inductive method of science with its attendant failings, attempting to
build knowledge atheoretically, one small piece of data at a time.
3. In Part III, the book brings together existing evidence to demonstrate that it is
plausible to predict substantial entrepreneurial performance variance on the
basis of the creativity of the lead entrepreneur alone. The book also demonstrates
that in addition to predictive power, modern definitions of creativity have extraor-
dinary explanatory power explaining a broad swath of existing findings in the
entrepreneurship field.
4. In Part IV, the book further explores the concept of entrepreneurial creativity as
a specific type of creativity. It explores the rationality for linking creativity with
entrepreneurial performance. In addition, we look at the evolution of entrepre-
neurial creativity in the individual. Finally we look at the evidence linking cre-
ativity to entrepreneurship at a macro or societal level.
In summary, the book offers a bold predictive theory linking entrepreneurial cre-
ativity to entrepreneurial performance. This resulting theory is a general scientific
theory that offers a serious challenge to entrepreneurial scholars who are pursuing
other means for understanding the causality of entrepreneurial performance.
Chapter 1
Introduction
Abstract There are both content and methodology issues introduced at the outset.
Content issues are relatively self-explanatory. Research methodology, a.k.a. the
philosophy of science, has a somewhat less obvious role to play. The book illus-
trates how the functionality of our knowledge is shaped by the philosophies of sci-
ence guiding our work. Arguments will be made throughout the book tying content
to methodology.
This book is intended to provide a broad new theoretical direction to the social
scientific field of entrepreneurship, focused upon predicting and explaining entre-
preneurial performance. Three entrepreneurial performance perspectives of the field
of entrepreneurship are provided, the first two of which might arguably be viewed
as the dominant or received views of the field today: (1) entrepreneurship as small
business, and (2) entrepreneurship as a selective inventory of empirical findings.
The first perspective draws on the business disciplines as its source of strength. The
second perspective draws on statistically significant empirical findings that help to
directly explain entrepreneurial performance. The third perspective, which consti-
tutes the main contribution of this book, ties the field of entrepreneurship to the field
of creativity. The theory, methodology, and evidence (i.e. the science) behind the
small business perspective are examined in Chap. 3. Some of the science behind the
inventory of findings is examined in Chap. 4. The rest of the book concerns itself
with the science behind entrepreneurial creativity. By the end of the book, the rela-
tive strengths and weaknesses of each general theory should be appreciated, as
should the rationale for assimilating entrepreneurial creativity as a mainstream per-
spective for the entrepreneurship discipline.
The general theory of entrepreneurial creativity (GTEC) advanced here stands on
a substantial body of supportive evidence. An appreciation of this theory should
help us better understand and explain entrepreneurial phenomena. It also should
enable us to better predict and perhaps ultimately control different aspects of entre-
preneurial success. Although primarily predictive, the GTEC has descriptive,
explanatory and normative implications. One can be hopeful that this theory will
enable an improvement in practice over time. Most importantly however, the new
theory is scientific in that it will stand, fall or undergo modification on the basis of
additional evidence. As such, The GTEC is refutable in a Popperian sense.
Springer International Publishing Switzerland 2015 1

W.E. McMullan, T.P. Kenworthy, Creativity and Entrepreneurial Performance:
A General Scientific Theory, Exploring Diversity in Entrepreneurship,
DOI 10.1007/978-3-319-04726-3_1
2 1 Introduction
What will readers take away from this book? They will be more aware that
entrepreneurship is a rather unforgiving endeavor with many losers and few big
financial winners. They will be less likely to expect that management knowledge will
facilitate new venture growth and development. They will appreciate the practical
limitations of implicitly theoretical and/or atheoretical findings. They will develop
an appreciation for the relevance of scientific theory. Finally, they will be able to
critically evaluate the importance of individual creativity to new venture activity.
Some Methodological Background
This book advances a new general scientific theory of entrepreneurship. In order to

appreciate what is meant by a theory being scientific, this book draws on the phi-
losophy of science as conceived by Karl Popper (1963), arguably the most impor-
tant philosopher of science in the twentieth century. Some of Poppers concepts, on
which this book relies, include refutability, bold conjecture and pre-science. Popper
drew strong distinctions between refutable theory that provides conjectures or pre-
dictions (predictive theory), and explanatory theory, that might explain a broad
range of outcomes but is basically non-refutable.
In Conjectures and Refutations (1963), Popper describes the circumstances in
19191920 that led him to conclude that the work of Newton and Einstein was sci-
entific while that of Marx, Freud and Adler was not. His (p. 45) problem was to
explain: What is wrong with Marxism, psycho-analysis and individual psychol-
ogy? Why are they so different from physical theories, from Newtons theory and
especially from the theory of relativity? He (p. 45, italics in original) noticed that
friends, who were admirers of Marx, Freud and Adler, were impressed by a
number of points common to these theories, and especially by their apparent explan-
atory power. These theories appeared to be able to explain practically everything
that happened in the fields to which they referred. Popper (p. 47) further observed
that these theories, were always confirmed. With regard to explanatory power,
he (p. 47) noted: It began to dawn on me that this apparent strength was in fact their
weakness. He (p. 48, italics in original) reasoned that it was not the after-the-fact
explanatory power of a theory that made it scientific but rather, the criterion of
the scientific status of a theory is its falsifiability, or refutability, or testability
before the fact.
Still, Popper did not disparage the works of people like Marx, Freud and Adler. He
recognized that their theories were general theories that offered a broad explanatory
power that might also evolve into predictive power. Popper characterized this combi-
nation of potential scientific usefulness, but no predictive power as pre-scientific.
According to Popper (1963, pp. 3738, brackets in original): I thus felt that if a
theory is found to be non-scientific, or metaphysical (as we might say), it is not
thereby found to be unimportant, or insignificant, or meaningless, or nonsensical.
But it cannot claim to be backed by empirical evidence in the scientific sense
although it may easily be, in some genetic sense, the result of observation.
Some Methodological Background 3
From Poppers (1935) perspective, a science is a system of theories and related

evidence directed to resolving the problems of a field. The science of entrepreneur-
ship is thus its centralizing models or theories of causation which enhance the
ability to predict and control the desired outcomes of new venture activity.
Entrepreneurship scholars have been gathering evidence in abundance since the
early 1980s. The result is hundreds of seemingly influential factors, e.g., education;
a growing market; a protected product; the availability of financial support; and,
so on. The entrepreneurship discipline informs would-be entrepreneurs of both fac-
tors to consider and problems to avoid. It is then up to the entrepreneur to combine
all these components into entrepreneurial judgments. Regrettably, there is little in
the way of bold conjecture that indicates how to weigh and organize the factors.
In this book, three general perspectives of entrepreneurship that have broad
explanatory power are advanced. The first theory assumes that that entrepreneurship
is a management discipline and that the functional areas of management somehow
apply. It is not unlike a guideline, suggesting that if practitioners use good business
terminology and follow generally recommended business practices, success will fol-
low. The theory is regularly used, ex post, to explain various new venture outcomes
the implication being: if one succeeds, one must have utilized the important factors
and if one fails, one did not. Ultimately, the theory lacks predictive power and hence,
the potential for refutation.
The second theory (Shane 2003) is an organized inventory of factors found to be
associated with new venture success. The attempt to classify the findings of the field
under approximately 80 different propositions is laudable. However, the theory has
no core and is subject to unending ad hoc adjustments the inventory can easily be
added to or subtracted from and hence, it easily evades refutability.
The third theory, a general theory of entrepreneurial creativity (GTEC), repre-
sents the principal focus of this book. The theory hinges on a central proposition
that entrepreneurship is a creative discipline, using ideas on a holistic theory of
creativity to extend the Schumpeterian vision of entrepreneurship. Schumpeters
(1934) theory may be viewed as two theories in one: a macro theory of economic
development and a micro theory of entrepreneurship as applied creativity.
Schumpeters micro theory of creative entrepreneurship is presented as the rela-
tionship between two simple factors: creative entrepreneurial motivation and new
business combinations. The GTEC designates a relationship between two com-
plex variables: (1) entrepreneurial creativity, as elaborated by a contemporary,
holistic model of creativity (Sternberg and Lubart 1991), and (2) entrepreneurial
outcomes, defined as degree of creativity in the outcome and stage of new venture
development.
Two central hypotheses are advanced to characterize the relationship between
entrepreneurial creativity and entrepreneurial outcomes. The first hypothesis is
that entrepreneurial creativity is substantially responsible for the development of
new business combinations (i.e. innovations). The second hypothesis is that
entrepreneurial creativity is substantially responsible for the development and
growth of new businesses. Support for each hypothesis is examined based on
the existing findings. There is yet limited empirical evidence to make a claim about
4 1 Introduction
the empirical status of the first proposition, that new business innovations are cre-
ative constructs. What is surprising is the amount and strength of evidence in sup-
port of the relationship between entrepreneurial creativity, and the development and
growth of businesses.
Ultimately, the empirical status of the GTEC requires more research. Nevertheless,
it is credible to argue that, based on the existing evidence, valid integrative instru-
ments probably can be built to reliably predict up to 50 % of new venture outcome
variance across time and space.
Some Theoretical Background
In 1990, McMullan and Longs book, New Venture Development: The Entrepreneurial
Option, was published. The book advanced a theory of entrepreneurial creativity
based on two primary assumptions that entrepreneurs develop growth ventures
and that developing growth ventures requires strategic creativity. The theory, char-
acterized here as formal in nature, can be viewed as a useful stepping-stone toward
scientific theory (Popper 1963). A formal theory cannot be directly validated but
rather is supported indirectly. To indirectly validate such a theory, there need be
many similarities between creative people and processes on the one hand, and
entrepreneurs and entrepreneurial processes on the other. For example, entrepre-
neurs and creative people might both be found to be unusually confident. The valid-
ity of such a formal model is thus partially demonstrated by empirically testing its
implications.
This current book is alternatively built on scientifically testable propositions
rather than formal assumptions. It treats individuals developing any type of new
venture, growth business or otherwise, as entrepreneurs. The GTEC indicates that all
types and levels of entrepreneurship require creativity; however, some new ventures
require more creativity than others. The greater the innovation, development and
growth anticipated, the greater the entrepreneurial creativity required. Additionally,
the creativity that is required is not just creativity for strategic decisions, but creativ-
ity in general for many of the tactical decisions that entrepreneurs make.
The secondary assumptions from the McMullan and Long formal theory have
remained relatively untouched and unexpanded, although instead of being underly-
ing assumptions, they are now treated as part of the conceptual background. In this
sense, the content of the first book acts as a complement to that of this one, i.e.,
potentially useful for some conceptual expansions and elaborations, but not a
requirement for understanding the GTEC.
Some design features are considered desirable for a scientific theory of entrepre-
neurial creativity. New ventures are treated as evolving vehicles changing media
for entrepreneurial creativity. Entrepreneurs are responsible for designing the vision
and for attracting and organizing the necessary resources.
In addition, a prototypic segment of entrepreneurs, namely the organization
builders, strategically strive to develop ventures from their beginnings into complete
Theories and Testing 5
self-sustaining enterprises. Risk-taking is treated as much as a consequence as a

cause of entrepreneurial action, since creativity entails risk.
Finally, the GTEC more explicitly integrates two new elements into its basic
structure. First, entrepreneurship is assumed to be focused on the future, and as such
is about unavoidable uncertainty (Cantillon 1755). Second, entrepreneurship is
assumed to be about very specific futures. Hence, it will always rely on imperfect
judgment (Knight 1921) and as a result, will never become a technology.
Theories and Testing
The idea that social science theories should predict a range of outcome variance
range is relatively novel, and not as yet widespread. According to prominent meth-
odologist Paul Meehl, it is past time for psychological theories not only to predict
the likelihood of relationships between variables but also to predict a likely range of
the independent variables effects upon dependent variables (Waller et al. 2006). We
need not only know that variables are related (p value) but also something about the
size of the relationship between them. The size of the relationship (effect size)
determines in part whether it is economical to spend time and money changing A in
order to accomplish B.
Even if it were true in reality that entrepreneurial creativity accounted for 50 %
of the ultimate financial performance of firms, it would still be difficult to demon-
strate this reality empirically. Serious methodological issues intervene. Even small
decrements in the reliability of measures can have large impacts on the testing of the
underlying reality of relationships between measures, and the reliability of creativ-
ity measures is often problematic. Serious questions about validity also plague cre-
ativity measures. Moreover, financial performance measures are often poorly related
to each other. So too, creativity measures are often only loosely inter-related. It
would therefore be surprising for many of the very different creativity measures to
relate to the many and varied measures of financial performance, especially when
outcomes are cross-sectioned in time. To make matters worse still, statistical mea-
sures are differentially sensitive to metrics (e.g. scales), and metrics can be quite
arbitrary. The fact that some current evidence collectively manages to generate con-
vincing results, as will be seen, is the only reason to believe that predicting variance
ranges will work in practice.
When future studies undertake a review of the performance of sizeable numbers
of entrepreneurs, according to the theory, entrepreneurial creativity should hold as a
statistically dominant predictor of entrepreneurial performance. It is expected, of
course, that the results of some studies will not support the GTEC. There will be
findings in which people of limited creative ability become successful, via other
possible causal explanations such as blind luck or even the fortuitous combination
of competing causal influences. Entrepreneurially creative people will fail because of
events beyond their control or even because of poor judgment at critical junctures,
or because they misjudge future developments. However, occasional null or nega-
6 1 Introduction
tive findings should not prove fatally damaging to scientific theories. It is only
repeated rejection, according to Popper (1935, p. 66), that will unseat the theory:
Thus a few stray basic statements contradicting a theory will hardly induce us to
reject it as falsified. We shall take it as falsified only if we discover a reproducible
effect which refutes the theory.
In addition to directly testing of the predictive power of the core propositions of
the theory, it makes sense to indirectly test the verisimilitude of the theory by
reviewing evidence that relates to auxiliary propositions that flow from considering
entrepreneurship to be fundamentally a creative discipline. The book examines in
detail the similarities between the attributes of creative and entrepreneurial people,
as well as similarities between creative and entrepreneurial processes.
From the standpoint of Popperian philosophy, a scientific theory is to be valued
not only by what it prescribes but more particularly by what it proscribes. For the
GTEC to be corroborated by future testing, researchers must attempt to refute its
key propositions. Hence, at a minimum, the theory proscribes research findings in
which entrepreneurial creativity and entrepreneurial performance are unrelated, or
worse still, negatively related. The GTEC also proscribes competing theories that
explain as much or more outcome variance, given that it is proposed as a dominant
theory of entrepreneurial performance. As a matter of record, broadscope theories
in the social sciences rarely, if ever, account for a high level of outcome variance in
empirical studies compiled to test them. What is being predicted here is a result of
the unusually strong pattern of findings to date. Strong findings from weak, limited,
and partial tests of the theory.
Theories dont operate in a vacuum but are intricately tied to other theories, of
necessity in the network of theories involved, Lakatos (1978) recognized some
theories as more critical than others. The methodological debate of our times has
been between Popper and Kuhn as represented in Fullers book (2003), Kuhn vs.
Popper: The Struggle for the Soul of Science. Lakatos tried to find a middle ground
in the argument. Popper appeared less conciliatory with negative findings than
Kuhn, who in turn viewed anomalous evidence (i.e. negative findings) as a matter
of course. Whereas Popper appeared to be saying that once a theory was refuted
you moved on to the next conjecture, Kuhn was saying these general theories or
paradigms were not overthrown until a newer and apparently stronger model comes
along, and even then, not until the scientific community religiously supporting the
old paradigm, dies out. Lakatos saw the testing of the hard core of the main theory
as more critical and less subject to modification. Whereas it was mandatory that a
program of related scientific research maintain the hard core of the theory or the
theory would fail, the auxiliary hypotheses were subject to modification. The
whole program of research could be progressive or degenerative depending on
whether accumulating evidence continued to add to or detract from the theorys
overall predictive and explanatory power.
The hard core of the GTEC uses entrepreneurial creativity to predict major
amounts of entrepreneurial performance variance. This core portion of the research
program offers umbrella support to the auxiliary hypotheses, providing credible con-
text and direction for a range of other related theories and hypotheses that more com-
pletely expound a web of related ideas - in this case, the predictive and explanatory
Chapter by Chapter 7
power of entrepreneurial creativity within the discipline of entrepreneurship. While

chapters 5 and 6 provide the theory and evidence supporting the hard core, chapter
8 through 12 provide auxiliary theories and related evidence that potentially expand
the usefulness of the general theory. Chapter 8, for instance, provides an early
stage development of an auxiliary theory intended to assist the process of more
accurately measuring entreprenurial creativity. Further development of measures
of entrepreneurial creativity might eventually veer off in different directions from
those suggested in the chapter without necessary damage to the hard core. Chapter
10 argues that becoming entrepreneurially creative is a long, slow, time-consuming
process. If short-cut methods could be developed to materially enhance entrepre-
neurial creativity, this auxiliary theory might be overturned, paradoxically, to the
potential benefit of the overall general theory.
A general theory, with or without its associated theories, should not be expected
to explain and predict everything about a field. Of course, one should have modest
expectations of what a general theory can achieve even if it is a powerful tool. The
best general scientific theories offer no more than a few guiding principles for future
research. For example, Keynes focused the field of economics on the problem of
business cycles as potentially controllable. Darwin offered the principle of natural
selection for understanding the evolution of the species. Both Keynes and Darwin
might be characterized as providing signposts for future research, rather than end
states for their respective fields. The GTEC offers the principle that creativity is at
the core of the field of entrepreneurship, stating not only that creativity will play a
key role in predicting new venture performance, but also that interested parties need
to acquire more knowledge about creativity in order to better understand
entrepreneurship.
For entrepreneurial science to progress, bold and refutable conjectures need to be
advanced, elaborated, seriously challenged and modified, or even rejected, through
time. As a general scientific theory, the GTEC advances the idea that creativity is the
key to both predicting and explaining entrepreneurial performance. Existing
research suggests that the theory has substantial merit as it currently stands. Future
testing is expected to further corroborate its evidence base. The implications of the
general scientific theory of entrepreneurial creativity are substantial, potentially
speaking to the very definition of entrepreneurship. The GTEC envisages entrepre-
neurship as an independent, creative, applied art and/or applied social science rather
than as a sub-discipline of the traditionally viewed technically-characterized field of
management. The entrepreneur is the creative artist; the manager, a technocrat.
Hence, an implication of having a general theory of entrepreneurship, based as it is
upon entrepreneurial creativity, is to view the field as not so much a sub-field of
management but more as a distinct creative discipline.
Chapter by Chapter
The remaining portion of this introduction serves as an overview of key aspects

presented in each of the ten chapters in this book.
8 1 Introduction
Chapter 2: Entrepreneurial Experience and Thinking
In this chapter, ten questions are posed about the nature and outcomes of entrepre-
neurial experience. Descriptive evidence informs the responses to the questions,
leading to the following characterization of entrepreneurial experience.
1. The participation rates in entrepreneurship are surprisingly high.
2. Entrepreneurs use a substantial amount of time to search for opportunities (par-
ticularly good ones).
3. Even professional investors have a difficult time identifying good
opportunities.
4. Most new ventures are started with limited financial resources.
5. Most entrepreneurs are not well-prepared to start ventures.
6. Entrepreneurs start businesses for a variety of reasons.
7. Entrepreneurs typically work long hours to develop their new ventures.
8. Typical levels of financial success are relatively unimpressive.
9. The non-financial outcomes of entrepreneurship are remarkably positive.
10. Only a few entrepreneurs achieve the promise of noteworthy financial success.
In general, the existing research suggests that entrepreneurship is characterized
by many people chasing relatively few quality opportunities that are difficult to
identify ex ante. These people begin new venture for a variety of reasons, start with
limited capital, work more than they would as employees and on average, experience
surprisingly low financial rewards. The only obvious upside is that entrepreneurs
generally feel high levels of satisfaction.
In summary, the lifestyle that entrepreneurs experience has much more in com-
mon with that of creative artists than of technologists or middle managers.
Chapter 3: Entrepreneurship as Small(er) Business
Today, the field of entrepreneurship might be described best as a many-headed

hydra. It is part derived discipline, part smaller-than-big (STB) business, part con-
ventional business rationality, part best practice and part common sense. The main
body of the beast is STB business in spite of aspirations to be something more
impressive. Scholars and practitioners predominantly view entrepreneurship
through this lens. In business schools, the management disciplines are implicitly
assumed to contain the knowledge foundation required for entrepreneurial success.
Each small business, like each big business, is judged by the extent to which it has
developed functional-area business expertise.
A predominately positivistic, empirical research agenda geared toward under-
standing entrepreneurship is substantially guided by expectations about the rele-
vance of marketing, finance, human relations, and so on. The insights of these core
management disciplines are expected to shed light on the successful practice of
entrepreneurship. This is the status quo of the field of entrepreneurship discipline.
Of course, neither the scholar, nor the practitioner or policy maker can afford to
be complacent with the status quo because of universally high levels of business
failure and related financial loss. Moreover, even in survival, only a minority of
firms do well enough for entrepreneurs to rationally justify the risk and investment
involved. Whatever the current level of knowledge, the status quo would appear
inadequate in general terms. In specific terms, one would expect those educated in
business to be clearly more effective in entrepreneurship than those differently
educated a proposition not well borne out by the evidence. One would also expect
that the tools derived from the functional business disciplines would provide relevant
and cost-effective guidance where new venture development is concerned another
proposition not well borne out by the existing evidence.
Chapter 4: Entrepreneurship as Positivistic Social Science
This chapter illustrates the strengths and limitations of attempting to piecemeal

scientific knowledge from a vast number of studies that have found data that is
apparently related to entrepreneurial performance. Shanes (2003) A General
Theory of Entrepreneurship is described as an attempt to apply the scientific knowl-
edge of the entrepreneurship field to the problem of explaining and even possibly
predicting entrepreneurial performance. Although the theory has a number of
noteworthy benefits it is also flawed by the method employed. Shanes theory pro-
vides a yardstick for future general theories such as the one presented here.
Chapter 5: The General Theory of Entrepreneurial Creativity
The general theory of entrepreneurial creativity developed herein was evolved from
Joseph Schumpeters theorizing in the early twentieth century. Schumpeters (1934)
theory of economic development is interpreted here as two theories in one: primar-
ily, a theory of economic development and secondarily, a theory of entrepreneurship
as applied creativity. As the latter, Schumpeters theory is modeled as a relationship
between a causal factor and an effect factor, with an intervening process. One limi-
tation of Schumpeters theory is that the factors are one-dimensional and univariate,
i.e. referencing constants. A second limitation is that it is not informed by modern
scientific understanding of personal creativity.
In the GTEC, entrepreneurial creativity is the primary causative variable. The
concept of entrepreneurial creativity is updated beyond Schumpeters one dimen-
sional notion of entrepreneurial motivation by drawing from a broad range of cre-
ativity research (Sternberg 1999; Kauffman and Sternberg 2010). In addition to
entrepreneurial motivation, the contemporary and more holistic concept of creativ-
ity includes creative aspects of five other resources of creative people: intellectual
ability; knowledge; styles of thinking; personality; and, of the environment.
10 1 Introduction
Entrepreneurial outcomes are broadened beyond Schumpeters new combinations

and developed as two complex variables: (1) the amount of change contained in a
new combination and (2) the level of venture development. New combinations vary
from incidental to incremental to radical. The level of venture development varies
from intention, to start-up, to early growth and development, and to later growth and
development.
The rationality for a relationship between entrepreneurial creativity and entre-
preneurial outcomes is jointly based on two distinct, but interrelated, explanations.
First, creativity scholars assume that creative outputs are produced by creative
minds the more creative the outcome, the more creative the thinking behind it.
Second, creativity researchers argue that particular types of problems (i.e. open-
ended, uncertain or ambiguous ones) are more suited to creative minds the more
open-ended the problem, the more creativity is required. While both rationales
explain a relationship between entrepreneurial creativity and the production of new
combinations, only the second explanation explains how creativity results in busi-
ness development and growth. The reason that business growth and development
demands creativity does not stem from the character of the outcomes, but rather
stems from the nature of the entrepreneurial development process.
Contemporary creativity theories do not predict the amount of outcome variance
explained by individual creativity under conditions of uncertainty, ambiguity and
open-endedness. It is proposed here that the demand for entrepreneurial creativity
increases with growing requirements to overcome larger and more creatively sig-
nificant entrepreneurial challenges. Entrepreneurial creativity will have declining
relevance as one shifts back from more radical innovations and higher-growth new
ventures.
The general theory of entrepreneurial creativity is advanced as a scientific theory
in the Popperian sense, meaning that it is both subject to change and refutation. If it
is well received by entrepreneurship scholars then it should refocus at least a portion
of entrepreneurial research. The field of creativity, on which the theory draws, is
suggestive of a number of different research designs that could enhance scientific
findings and ultimately, knowledge of entrepreneurial phenomena.
Chapter 6: The Core Evidence
Two central hypotheses in the GTEC are advanced relating entrepreneurial creativ-
ity and entrepreneurial outcomes. The review of evidence combines the results of a
significant number of empirical studies to test the empirical strength of the central
hypotheses.
Entrepreneurial creativity is presented as the prime causal variable. The effect
variable, entrepreneurial outcomes, is developed along two dimensions. One dimen-
sion is measured by the degree of development of the venture to date and the other
dimension is measured by the degree of change in the new business combination
under consideration.
In order to explore the predictive value of this general theory, seventy empirical
studies were compiled; each one separately tying entrepreneurial creativity to entre-
preneurial outcomes. The studies were organized by their criterion variables into
two types of outcomes those related to degree of creativity in the business concept
(i.e. business innovation) and those related to level of business development.
Evidence linking entrepreneurial creativity with launching innovative ventures
(i.e. based on new combinations) was limited. Eleven studies related entrepreneurial
creativity to innovation. Evidence related to the level of business development was
organized as follows: (1) pre-venturing (16 studies), (2) starting a business (17 stud-
ies), and (3) business growth and financial performance (38 studies). The designs of
these studies were such that researchers typically split samples between people
either succeeding or not along the road to development.
The evidence to date supports four steps in the process of developing new
ventures:
Those who do not intend to start businesses are less creative/innovative than
those who do intend to start them.
Those who start businesses are more creative/innovative than those who do not.
Those who grow businesses at early stages are more creative/innovative than
those who do not.
At later stages of business development, those who continue to grow their businesses
fastest tend to be more creative/innovative than those who grow their businesses at
slower paces.
Chapter 7: A General Theory and its Explanatory Power
Without theory, there are no facts, only data. Theory provides understanding
specifically with meaningful description, explanation, prediction and/or control.
It evolves from guesses and speculation through rigorous conception and hypothesis
building and ultimately, to systems of assumptions, accepted principles and rules of
procedure devised to analyze and to predict (Weick 1995).
A scientific theory must contain broad explanatory power to be considered a
general theory. According to Popper (2007, p. 189), What is important about the-
ory is its explanatory power, and whether it stands up to criticism and to tests. The
GTEC is characterized as a general theory for a variety of reasons. The first reason
is that its content and claims are independent of both time and geography. The sec-
ond reason is that the confluence theory of creativity upon which GTECs indepen-
dent variable is based helps to link together and otherwise explain a sizeable number
of otherwise unrelated findings in the field of entrepreneurship evidence. Moreover,
the field of creative science enters through the complex of independent variables,
contributing new and credible hypotheses for future study.
In this chapter, the GTEC is compared with a well-known and heavily-tested
general social science theory, the general theory of crime (Gottfredson and Hirschi
12 1 Introduction
1990). The GTEC, despite its limitations, is found to be broadly comparable with
the General Theory of Crime. According to Gottfredson and Hirschi (1990), a new
theory should initially be judged against the facts in its field. Each of the integrated
creativity variables brings some new additional knowledge to bear on our under-
standing of entrepreneurial performance. The evidence that is related to entrepre-
neurial creativity in this way is generally supportive of GTEC.
Chapter 8: Entrepreneurial Creativity
Entrepreneurial creativity is envisaged as a different type of creativity. It is not

expected that people with entrepreneurial creativity will be more likely to be cre-
ative artists, dancers or musicians any more than it is expected that creative musi-
cians would make naturally creative micro-biologists, mathematicians or chemists.
As discussed in the previous chapter, social scientists are pursuing knowledge
related to the various resources of entrepreneurial creativity. This chapter serves to
provide suggestions about the nature of each of the resources. It is conjectured that
the likely attributes of entrepreneurial intelligence include: opportunistic imagina-
tion; entrepreneurial judgment; persuasive ability; improvisational ability; and,
collaborative ability. Some of the likely attributes of entrepreneurial personality
include: self-efficacy; perseverance; selective risk-taking; a tolerance of ambiguity;
and, extraversion. Some of the attributes of entrepreneurial motivation include: a
desire for success; intrinsic motivation; developing a legacy; and, choosing attain-
able but challenging goals. Entrepreneurial thinking styles likely include: innova-
tion orientation; focus on problem; contrary thinking; intuition; deferred judgment
and ideation; and, analogical thinking. Entrepreneurial knowledge requirements are
probably the least understood. Candidates for inclusion may encompass: selling
know-how; negotiations know-how; knowledge of the competition; industry knowl-
edge; and, core technology knowledge.
Such a large list of attributes is informative for a variety of reasons. First, these
attributes provide additional ways of understanding successful entrepreneurs.
Second, it is anticipated that entrepreneurs will need different variations of the same
attributes that characterize other creative people. For instance, entrepreneurial
judgment will be markedly different than musical judgment. Third, the very exis-
tence of an entrepreneurial creativity model provides targets for entrepreneurial
development whether in the form of self-development or programmatic education.
Chapter 9: Entrepreneurial Dynamics
The entrepreneurial process is problematic to describe. In order to better understand

the role of creativity in entrepreneurship, it is probably more useful to (re)cast it as
a dynamic process rather than as a cross section of management functions (e.g.
finance, accounting, and marketing). It is also useful to view the entrepreneurial

problem as fundamentally involving the ambiguous, the uncertain, the unreliable
and the unknowable all environmental characteristics that diminish the effective-
ness of management technologies.
The objective of this chapter is to develop productive lines of thinking that move
the field beyond the dominant intellectual frameworks of entrepreneurial finance,
entrepreneurial marketing, and so on. A model of entrepreneurship is advanced as
the process of agglomerating commitments to both ideas and people. Time and
resource limitations may frequently push an entrepreneur towards improvisation,
making do with what is available, experimentation and heuristics. Ultimately, entre-
preneurial creativity may be viewed as relevant because entrepreneurs experience
many issues requiring creative thinking during the development of growth ventures.
Chapter 10: The Development of Personal Creativity
The development of entrepreneurial creativity, like other forms of creativity, is

probably best thought of as a long, personal development process. From the fateful
acquisition of parents onwards, events and choices may push an individual toward
or away from a productive entrepreneurial career. Some parenting practices develop
aspects of entrepreneurial creativity better than others. Some early childhood educa-
tion is to be preferred for the entrepreneur. Certain teaching styles and school
administration practices will be better for ones development through primary and
secondary school independent of course-content. Post-secondary education and
early career choices may also further develop entrepreneurial competence.
Chapter 11: A Macro Theory of Entrepreneurial Creativity
Schumpeters (1934) theory of entrepreneurship is a theory of economic develop-

ment. Since its original formulation, a number of different scholars have contributed
to the collective understanding of the importance of entrepreneurs to economic
development. Where Schumpeter seemed to focus on the great innovative contribu-
tions of the few, those who have come after have noticed that big contributions are
usually made up of many small innovations. Moreover, the number of innovative,
growth firms appear to be much larger than Schumpeter anticipated even though it
may be a relatively small proportion of firms (~3 %) that account for the great
majority of economic growth.
The macro model proposed here is an attempt to modify Schumpeters notion of
economic development to include education for creative development; outputs of
scientific and technological creativity; the extent of an entrepreneurial culture; and,
the extent of support for entrepreneurial activity. Some factors such as scientific and
technological creativity are more strongly indicated as influencing entrepreneurial
creativity and economic development.
14 1 Introduction
Chapter 12: Implications and Conclusions
The scientific field of entrepreneurship needs its own theory and fact base in order
to distinguish it from other social sciences. The general theory of entrepreneurial
creativity is advanced as an additional step in the direction of this distinctiveness.
The implications of the theory may be far-reaching. The field of entrepreneurship
may become viewed as a fundamentally creative art form in its own right rather than
as a sub-discipline of the business discipline. An intellectual shift of such magni-
tude could modify the character of future entrepreneurship research, education and
possibly even practice. The theory may change the way entrepreneurs view them-
selves. It may change the way venture capitalists and governments search for and
support entrepreneurs in developed and developing economies.
In the case of education, the theory of entrepreneurial creativity may shed valu-
able light on a variety of key issues such as who should receive entrepreneurial
education; who should deliver the education; the nature of program content and
teaching methodology; and, the nature of anticipated outcomes (Lobler 2006).
Part I
Understanding Entrepreneurial
Problems
Chapter 2
Entrepreneurial Work Experience
Abstract This chapter is concerned first of all with the nature of entrepreneurial
work and with the cognition that may well underlie this type of work. By under-
standing the nature of entrepreneurial work it is argued that we better understand
entrepreneurs the problems they live with and the way they think about them.
Popper writes that all sciences begin with problems. Problems are needed to direct
theorizing. The central problem that this book is directed towards is explaining and
predicting the financial performance of entrepreneurial firms. This chapter places
the problem of entrepreneurial performance within a social and economic context of
arguably related problems.
Never before has entrepreneurship been promoted in so many economies and
across so many forms of media. Governments regularly pledge ongoing support for
budding entrepreneurs. Universities educate many thousands of entrepreneurially-
minded or curious students. Magazines celebrate the existence of entrepreneurs and
television shows offer a glimpse into their lives. The objective of this chapter is to
provide an overview of the nature and outcomes of entrepreneurial experience. Ten
questions are posed about entrepreneurial activity and scientific evidence is pro-
vided to demonstrate the state of current knowledge. The answers are designed to
provide budding researchers, educators and practitioners with a sense of the extent
and limits of our knowledge.
Question 1: How common is entrepreneurship? How does frequency vary from one
country to another?
The extent to which entrepreneurship activity appears commonplace depends to a
great extent on where one lives. The Global Entrepreneurship Monitor (GEM) stud-
ies offer the best available broadly comparative data on global entrepreneurial activ-
ity. In 2011, the thirteenth GEM survey captured approximately 74 % of the global
population, responsible for 87 % of global gross domestic product. The survey find-
ings estimated that total early stage entrepreneurial activity (TEA) constituted 388
million people (aged 1864) across 54 economies studied.

DOI 10.1007/978-3-319-04726-3_2
18 2 Entrepreneurial Work Experience
In factor-driven economies,1 the estimated TEA ranged from 9.1 % (Pakistan) to

19.3 (Guatemala). In efficiency-driven economies, the estimated TEA ranged from
4.6 % (Russia) to 24 % (China). In innovation-driven economies, the estimated TEA
ranged from 3.7 % (Slovenia) to 12.3 % (USA). Women constituted approximately
42 % of all people engaged in early stage entrepreneurial activity. People between
the ages of 35 and 64 constituted almost 60 % of those engaged in early stage entre-
preneurial activity.
It is difficult to know the extent to which the rate of entrepreneurial activity has
changed for any one economy because GEM researchers have only been collecting
data since 1999. Further, the GEM studies do not include all of the same economies
each year.
Question 2: How much time do entrepreneurs spend looking for opportunities?
Do ideas just come to them when they are needed or are entrepreneurs constantly on
the lookout?
A key issue in entrepreneurship research is the extent to which potential entre-
preneurs can appreciate the nature and extent of opportunities in advance. Shane
(2003) suggests that, The information necessary to determine whether a particular
effort to exploit an opportunity will be profitable cannot be known with certainty at
the time that the opportunity is identified because that information does not come
into existence until the entrepreneur pursues the opportunity.
Another way of approaching the issue is to examine the length of time required
to undertake a new venture. Research findings suggest that the average time to
startup is approximately 1 year (Reynolds and White 1993; Reynolds and White
1997; Carter et al. 1996). Reynolds and White (1993) found that 20 % of individuals
completed gestation within 1 month and 90 % completed gestation within 3 years.
Carter et al. (1996, p. 163) found that those, who do not begin a business or
reach a decision to abandon efforts to start a business within a year are likely to
remain in a constant state of abeyance
The question regarding how business ideas emerge is also a complicated one to
answer. There are two main schools of thought on the issue: business ideas materi-
alize as a result of entrepreneurial alertness (Kirzner 1973) or methodical search
(c.f. Caplan 1999). There is some evidence that novice entrepreneurs actively
search for more information about business ideas than their more experienced
counterparts, serial and portfolio entrepreneurs (c.f. Cooper et al. 1995). There is
also some evidence that the best ideas are generated by systematic search, an
approach that leverages an individuals knowledge and experiences to find business
ideas (Fiet 2002).
Question 3: How difficult is it for entrepreneurs to find a quality idea? How fre-
quently are those ideas directed to generating good financial returns more than
likely to justify the risk and investment undertaken?
1
The World Economic Forums (WEF) Global Competitiveness Report provides definitions of
economy types.
2 Entrepreneurial Work Experience 19
The answer to the previous question provides some insight into the difficulties associated
with selecting a high-quality business idea. There is additional research that speaks
to this problem, but from other angles. Bhid (2000) examined INC 500 companies
and found that it was common for the founders of the fastest growing firms in the
US to select business ideas that were not innovative. Many of the business models
were replications of businesses found locally. Bhid (2000) also found that many of
the entrepreneurs believed that they were fortunate, in hindsight, to select business
ideas in niche markets that were of little interest to powerful companies looking for
markets with obvious growth potential.
Another angle that indicates the degree of difficulty associated with selecting
high quality business ideas is an examination of the track records of professional
investors such as venture capitalist firms (VCFs). VCFs maintain numerous advan-
tages over the average entrepreneur when it comes to selecting the best business
ideas. First, they are arguably more objective with respect to vetting deals than
entrepreneurs. Second, they invest substantial time (Fried and Hisrich 1994) and
utilize specialized talent to scrutinize many business opportunities. Third, they
eliminate considerable uncertainty by focusing on firms that are beyond the start-up
phase. Yet, almost 60 % of venture capital backed firms fail to reach a return on
investment as high as 15 % (Dean and Giglierano 1990). Zacharakis and Mayer
(2000, p. 324) draw a similar conclusion: In effect, combining data from various
failure studies results in a failure rate (from the VCs perspective) ranging from
35 % to 55 %.
Question 4: How well prepared financially are most people at the outset to under-
take the venture of their choice? How much money do they have or do they get from
their own savings and assets? How much do they get from friends, relatives and
business associates?
There are a number of funding sources available to entrepreneurs. The most
common and immediate available source of funds comes from family, friends and
personal savings. Generally speaking, the amounts are small. Bhids (2000, p. 37)
INC 500 entrepreneurs, bootstrapped their ventures with meager personal sav-
ings and borrowings or funds raised from families and friends; 26 % started with
less than $5000; only 21 % raised more than $50,000 and just two raised more than
$1 million. Bygraves (2004, p. 58) findings about early-stage financing amounts
also suggest that most entrepreneurial projects have humble beginnings from a
financial perspective: the 25th percentile was $379; the 75th percentile was
$6,667; the 90th percentile was $117,787.
The other types of funding, angel and venture capital, typically occur post-start-
up and are only relevant to a small number of companies. According to the US-based
National Venture Capital Association (NVCA), VCFs focus on select industries that
demonstrate innovation and growth such as software, Internet, media and entertain-
ment, biotechnology and medical devices. NVCA data indicate that a total of 2,749
firms received approximately $22 billion in 2010. Approximately 36 % (1,001) of
the firms received funds for the first time. According to Shane (2008), US-based
angel capital investors provide both debt and equity funding to approximately
57,300 companies per year. The number of funded companies drops to 49,800 if
only equity investments are included in the analysis, which equates to approxi-
mately 0.20 % of all companies.2
Question 5: How well prepared otherwise are people to undertake their ventures?
Do they generally know whatever they need to know before launching? How often
do they have the industry and business knowledge that might be most useful?
There are at least two means to evaluate the extent to which entrepreneurs are
prepared to undertake new business ventures. The first is to examine the new ven-
ture outcome data (see Question #8 below). The evidence indicates that the odds
of success are low. Cassar and Craig (2009) state that, The majority of actions
performed and investments made by individuals in attempting to start a new busi-
ness are in vain.
A second approach to examining entrepreneurial preparedness is through the lens of
expectations regarding new venture outcomes. In spite of well-publicized venture
odds, entrepreneurs tend to favor their chances of success. For example, Cooper
et al. (1988) found that existing entrepreneurs believed their odds of success to be
much higher than the historical odds and the odds for similar businesses. Recently,
Cassar (2010) examined such perceptions by investigating the ex-ante expectations
and ex post realizations of nascent entrepreneurs. He (p. 822) found, substantial
over optimism in nascent entrepreneurs expectations, in that they overestimate the
probability that their nascent activity will result in an operating venture. Further, for
those ventures that achieve operation, individuals overestimate the expected future
sales and employment.
Question 6: Why do people start businesses? What are the most common reasons
people give?
The reasons for starting a business are typically categorized by either push or pull
influences. The push influences are characterized by necessity, e.g., a lack of
employment opportunities and a need for personal income. The 2011 Global
Entrepreneurship Monitor study indicates that necessity-driven entrepreneurial
activity is strongest in factor-driven economies. For example, in countries such as
Guatemala, individuals report being pushed into new venturing as frequently as those
who report being attracted by such activity. In efficiency-driven economics such
as Malaysia, the percentage of respondents reporting push factors drops somewhat.
In innovation-driven economies such as Germany, pull factors tend to dominate the
reasons for new venturing.
The pull influences are many and varied. In 1988, Scheinberg and MacMillan
reported the findings of an investigation of 38 motivating factors for starting a
business amongst 1,402 owner-managers in 11 countries. The researchers used
2
It should be noted that the majority of new companies each year do not take a corporate form, a
requirement for most angel funding (Shane 2008).
principal component analysis to derive 21 items grouped into six uncorrelated

components: Need for Approval; Perceived Instrumentality of Wealth; Degree of
Communitarianism; Need for Personal Development; Need for Independence; and,
Need for Escape. The results indicated that the pull toward entrepreneurial activity
is not dominated by any one reason.
Shane et al. (1991) used the Scheinberg and MacMillan (1988) model of reasons
to examine the extent to which gender and nationality influence entrepreneurial
activity in the United Kingdom, New Zealand and Norway. They (p. 441) found
that, there are no universal reasons leading to new business formation across
gender and national boundaries save for job freedom.
Question 7: How difficult is developing a business for most people?
Existing research suggests that the experience of developing a new venture is more
satisfying than salaried employment, but much more demanding. Self-employed
people self-report higher levels of job satisfaction than do salaried employees
(Bradley and Roberts 2004; Parasuraman and Simmers 2001; Prottas and Thompson
2006). However, they work much longer hours and experience more stress and
health complications. Bradley and Roberts (2004) find that the self-employed typi-
cally work more than 60 h per week. Jamal (1997) found that self-employed people
spend 32 % more time at work per week than salaried employees in Canada. The
results are fairly similar for visible minorities in North America (Jamal and Badawi
1995). International results also track in the same direction (c.f. Ajayi-Obe and
Parker 2005).
The volume of work and/or the stress that comes with being the boss (Eden
1975) appears to take a substantial toll. Boyd and Gumpert (1983) found that
approximately 65 % of a sample of 450 entrepreneurs experienced physical stress
symptoms once or more per week regardless of the financial conditions of their
ventures. A number of more recent studies indicate that the health of self-
employed individuals is worse than that of salaried employees (Lewin-Epstein
and Yuchtman-Yaar 1991; Buttner 1992; Jamal and Badawi 1995; Jamal 1997;
Westerlund et al. 2004)
Question 8: What financial outcomes do people usually experience? What
proportion of people fail? What proportion survives for more than 5 years, 10 years,
etc.?
Research on the returns to entrepreneurship does not typically take into account
losses suffered by those who discontinue for whatever reason. It is important to
consider the data on discontinuance before discussing the outcomes for those
entrepreneurs who experience survival and growth. According to Aldrich (1999),
only about 50 % of pre-venture research and development activity results in the
creation of a new firm. This represents a loss of time and in many cases, money. Of
those ventures launched, only about 40 % survive six years (Kirchhoff and
Phillips 1989; Kirchhoff 1994). It is worth noting here that substantial evidence
indicates that salaried employment is much less turbulent than entrepreneurial
activity: self-employed workers face a greater hazard of involuntary exit from

their occupation (Evans and Leighton 1989; Phillips and Kirchhoff 1989; Taylor
1999). (Parker et al. 2005, p. C190)
For those entrepreneurs who beat the odds, the financial outcomes, generally
speaking, may not be particularly inspiring. Hamilton (2000) uses 1984 panel data
from the Survey of Income and Program Participation (SIPP) to generate earnings
differentials between self-employment and paid employment earnings. He (p. 628629)
concludes the following based on his analysis:
Many entrepreneurs have not only lower initial earnings than employees with the same
observed characteristics but also lower earnings growth. For example, the present value to
the median entrepreneur of a business lasting 25 years is over 25 percent less than the pres-
ent value of a paid job of the same duration. Even more striking, median self-employment
earnings never overtake the alternative entry wage available on a paid job with zero job
tenure. These results are generally robust to the measure of self-employment earnings used.
Moreover, this self-employment differential may be a lower bound for the difference in total
compensation across sectors since entrepreneurs are less likely to have health insurance.
Paid employees are more likely to have all or part of their health insurance paid for by their
employer. Such nonwage benefits may represent over 20 percent of paid employment
compensation.
A replication study by Moskowitz and Vissing-Jorgensen (2002, p. 745) finds

entrepreneurs earn returns below those who invest in passive index funds: we
find that the returns to private equity are no higher than the returns to public equity.
Given the large public equity premium, it is puzzling why households willingly
invest substantial amounts in a single privately held firm with a seemingly far worse
risk-return trade-off.
According to Carter (2011), there are two main criticisms that can be levied
against Hamiltons (2000) findings. The first criticism is that entrepreneurial earn-
ings are under-reported, possibly by as much as 40 % (Cagetti and De Nardi 2006;
Kesselman 1989; Williams 2005). The second criticism is that household expendi-
ture and consumption data for the self-employed is misrepresented because they
have access to business-related goods, e.g. cars and computers, at low or no charge.
The low cost or free goods and services effectively increase overall capability of
consumption by as much as 34 % (Bradbury 1996). Recently, Astebro and Chen
(2014) found, that entrepreneurs on average earn 4 % less per year than
employees. However, after correcting for income underreporting, the mean finan-
cial gain to entrepreneurship is positive and large, greater than 42 %. According
to the researchers, the finding is highly contingent on the assumptions underlying
their data. In summary, the evidence on typical earnings of average entrepreneurs
is mixed. Clearly more research is needed on the contingencies that account for
real differences in wages.
Question 9: What non-financial outcomes do people experience? How often do
people enjoy having their own businesses? How often do people resent the experi-
ence, in retrospect?
The existing research on non-pecuniary benefits of self-employment activity
suggests that there are other rewards that may compensate for unextraordinary
financial returns to entrepreneurship. The main factor of interest is job satisfaction,

which may be a function of autonomy and flexibility. Blanchflower and Oswald
(1998, p. 49) examined satisfaction through the lens of happiness and concluded
that the finding that the self-employed are happier appears to be robust. In
order to rule out concerns regarding causal directionality, Blanchflower (2004,
p. 22) undertook further research and found that, the direction of causality is
clear - self-employment makes people happy, it is not the reverse direction of cau-
sality that it is happy people who decide to become self-employed. Hundley (2001,
p. 302) also found that the self-employed are more satisfied with their work lives
than the organizationally employed, concluding that autonomy accounted for
approximately 60 % of the job-satisfaction difference. Hundley also observed that
the difference in job satisfaction tended to disappear when entrepreneurs were com-
pared with managers and established professionals. He (p. 310) speculated that the
negligible difference, may be traceable to the fact that the self-employed in
these groups have a smaller advantage in autonomy and no advantage at all in scope
for skill utilization.
It may be that satisfaction is gained, in part, by setting low or realistic success
thresholds that allow self-employed individuals to continue in the face of compara-
tively low performance (Gimeno et al. 1997). It is also conceivable that satisfaction
scores are influenced by financial success. Chrisman and McMullan (2000) found
that approximately two-thirds of entrepreneurs whose businesses provide an income
equivalent to paid employment possibilities were either satisfied or very satisfied.
By contrast, only one-third (approx.) of the entrepreneurs whose businesses had not
crossed the same performance barrier reported feeling satisfaction.
A second entrepreneurial outcome of interest to both researchers and practitio-
ners is health. A number of studies have investigated the topic, with some finding
concerns (Buttner 1992; Jamal 1997; Lewin-Epstein and Yuchtman-Yaar 1991;
Parslow et al. 2004; Rau et al. 2008) and others finding reassurances (Bradley and
Roberts 2004; Kawakami et al. 1996; Korunka et al. 1993; Subramanian et al.
1987; Tetrick et al. 2000). A very recent study by Stephan and Roesler (2010)
utilizes a nationally representative sample of entrepreneurs and employees finds the
following:
entrepreneurs exhibited better health on a number of the measures used. They showed
significantly lower overall somatic and mental morbidity, lower blood pressure, lower prev-
alence rates of hypertension, and somatoform disorders, as well as higher well-being and
more favourable self-reported behavioural health indicators (fewer physician visits and sick
days). For the rest of the measures used there were no significant differences between entre-
preneurs and employees. Thus, our findings lend support to the view that an entrepreneurial
career may have some health benefits.
This last finding is, of course, in opposition to evidence presented in question 7

above. One might conclude that there is some confusion on the health impact of
self-employment at this time.
Question 10: What proportion of entrepreneurs does exceptionally well? If you
were just an average person what chances would you have of making your personal
fortune with a business venture?
High financial returns to entrepreneurship appear to be enjoyed by relatively few

individuals or superstars (Rosen 1981). Birchs (1979) finding that approximately
3 % of firms are high-growth was an early indication of the odds of extreme success.
Since then, other studies have found that there are a select few big successes.
Hamilton (2000, p. 623, brackets added) found that, The EAD (equity-adjusted
draw) and wage profiles for the .75 quantile suggest that a small fraction of entre-
preneurs earn substantial returns, as predicted by the superstar model. Based on an
Examination of 1,091 Canadian inventions, Astebro (2003, p. 226) found: The
distribution of return is skew: only between 7-9 % reach the market. Of the 75
inventions that did, six realized returns above 1400 %, 60 % obtained negative
returns and the median was negative.
In Summary
Thus in summation, entrepreneurial work is herein described as commonplace in

participation, but uncommon in financial success. For a variety of reasons people
launch unprepared, partially explaining their low rate of success. Entrepreneurship
is therefore considered as work that has Herculean challenges, including finding a
high quality business opportunity. It is work that is demanding of time and not infre-
quently niggardly in what it offers in return. People enjoy entrepreneurial work but
usually because of the additional freedom it offers, and if that freedom is to be found
in employment, entrepreneurship may even lose its lifestyle advantage.
Entrepreneurship is a career with high uncertainty, much ambiguity and dubious
control. The winners can win big, but they are a small minority. What kind of person
will such working conditions attract? What cognitive style would such a game
encourage people to take? When we talk about entrepreneurship are we talking
about a technology or an art form? What becomes obvious from looking at the
normal practice of entrepreneurship is that the average practitioner has much to gain
from an effective science of entrepreneurship.
Part II
Major Entrepreneurial Paradigms
Chapter 3
Small Business Entrepreneurship:
Is a Caterpillar a Butterfly?
Abstract In Chap. 2 you may have been struck by the size of the challenge you
likely will face if you want to be above the 75 % or so of the population who earn less
overall as entrepreneurs than they would in comparable jobs. If you also want to
make enough to cover the cost of capital invested, you will have to be better prepared
than the next person. To get that edge many people will think of getting a business
education. This chapter will give you a sense of the small advantages a business edu-
cation will give you.
Thomas Kuhn, in his book The Structure of Scientific Revolutions, writes of scientific
paradigms guiding scientific research. His concept of a paradigm was subject to
many different interpretations, including 13 different definitions that he applied him-
self. Despite the ambiguity of meaning, the typical idea of a paradigm envisages it as
a general, guiding theory that directs the course of a science over time. Kuhn also left
it open to interpretation as to whether he intended his philosophy to be a guide to
better scientific practice or merely a description of the way normal science takes
place. The main paradigms he referenced in his book were the great dominating sci-
entific theories of the physical sciences that have had both substantial empirical back-
ing and predictive power. He was dubious about whether the social sciences even
possessed one theory deserving of such recognition. The social sciences have how-
ever chosen to use the paradigm concept liberally, calling any overarching guiding
theory a paradigm, whether or not it possessed much empirical support, or capacity
to predict. This book alludes loosely to the implicit theory developed in this chapter
as a paradigm only because it directs a great deal of research and behavior. Similarly,
the next chapter also alludes to another general view directing research in the field of
entrepreneurship research. The contention being advanced here is that these two par-
adigms direct the great bulk of the empiricist science of entrepreneurship at this time.
Both of these theories are examined and found wanting in different ways.
The purpose of this chapter is to describe and discuss an implicit theory of small
business entrepreneurship. We open with a discussion of the nature and relevance of
theory; the nature of entrepreneurship research; and, the nature of implicit theory.
The following section reveals and describes the small business theory of entrepre-
neurship. Then, the empirical research on the value of management tools and
management training are discussed.

DOI 10.1007/978-3-319-04726-3_3
28 3 Small Business Entrepreneurship: Is a Caterpillar a Butterfly?
A theory, according to Campbell (1990, p. 65), is, a collection of assertions,

both verbal and symbolic, that identifies what variables are important for what rea-
sons, specifically how they are interrelated and why, and identifies the conditions
under which they should be related or not related. Explicit theory is important for
a variety of reasons. Davidsson (2005, p. 33) speaks to the reasons here:
No matter how intriguing an empirical result may seem here and now, it is the sense making
of theory that makes it travel through space and stand the test of time. It is theoretical inter-
pretations that uncover the implications of empirical results, so that they can properly guide
practitioner behavior and the design of continued research efforts. In short, theory is cru-
cially important.
Theory creates meaning. Theory focuses on questions that are central and
germane to a field. It stimulates the usage of replication studies. It motivates
cumulative research. Theory also provides guidance for practitioners, policy makers
and educators. According to Davidsson (2005, p. 33), the absence of theory is far
from ideal: In the absence of theory, empirical research will be poorly designed,
and the results will have little meaning.
Entrepreneurship researchers far too often utilize a theory to inform hypotheses,
but neglect to explicitly mention the theory in their paper (c.f. Fried and Hisrich
1988). Researchers are also informed by implicit theories. Implicit theories are
beliefs and presuppositions about social phenomena that tend to reside in the minds
of experts and lay people (Lim et al. 2002; Polaschek and Ward 2002; Sternberg
et al. 1981). Implicit theories are not formally constructed by scholars to be both
internally and externally consistent but rather are often ambiguous; inconsistent in
regards to explanation for phenomena; descriptive of types or categories of phenom-
ena; and, deductive rather than inductive (Furnham 1988). The existence of implicit
theories has been discussed in management disciplines (c.f. Staw 1981; Quinn and
Rohrbaugh 1983; Gladstein 1984), as well as the entrepreneurship discipline (c.f.
Riquelme and Watson 2002).
The implicit theory under examination here will be called the small business
theory of entrepreneurship. In order to believe in the theory, one need only subscribe
to two underlying assumptions: (1) entrepreneurial phenomena fall under the
domain of business management; and (2) the various content areas of the manage-
ment domain are generally relevant to business people and entrepreneurs alike.
The evidence that many experts and lay people subscribe to the small business
theory of entrepreneurship is found in post-secondary institutions, entrepreneurship
assistance centers and elsewhere. Entrepreneurship courses are typically taught in
management schools to management students by management professors who sel-
dom have much distinctive formal education in entrepreneurship. It is reasonable to
assume that students are learning that business disciplinary content, e.g. marketing,
accounting, strategy and operations, can be applied in entrepreneurial contexts
(Hindle 2007). At entrepreneurship assistance centers, budding entrepreneurs are
typically assisted by MBA graduates who have received training in core manage-
ment content areas.
The Small Business Theory of Entrepreneurship 29
Even the research agenda in the field of entrepreneurship is dominated by

business school faculty who pursue business school issues, often using business
school terminology. Occasionally, a scholar will allude to the small business theory
of entrepreneurship in a published piece. For example, Fiet (2002, p. 2) contends
that the science of entrepreneurship need not focus on the execution of opportunities
because that subject matter is adequately treated by management disciplines.
Venkataraman disagrees:
As evidence of the need for a book on discovery, we find that most university-level
entrepreneurship courses consist of discussions of how entrepreneurs should perform such
responsibilities as marketing, finance and operations, which by themselves are undoubtedly
legitimate topics. Unfortunately, these discussions fail to describe what is distinctive about
what entrepreneurs do. (Venkataraman 1997)
For some, the small business theory of entrepreneurship presented next may con-
stitute a simple truth. For them, it is unquestionable. However, for those who view
scientific theory as tentative and fallible, the small business theory of entrepreneur-
ship is worthy of explicit development and rigorous testing.
The next section of this chapter attempts to make visible the implicit theory of
small business. It begins with a discussion and illustration of the small business
theory of entrepreneurship. Then, a review of scientific evidence is undertaken to
examine support for the theory.
The Small Business Theory of Entrepreneurship
The most general form of the small business theory of entrepreneurship is depicted
below. It suggests that new venture success is a function of management knowledge.
This theory may be strongly, though implicitly held on a wide scale because man-
agement language and concepts have become pervasive across many cultures.
As previously mentioned, belief in the small business theory of entrepreneurship is
predicated on two assumptions: (1) that entrepreneurial phenomena fall under the
domain of management; and (2) the various content areas of the management
domain are generally relevant to business people and entrepreneurs alike. The first
assumption appears to be a logical conclusion. Even though entrepreneurial ven-
tures are nascent businesses, they are nonetheless, businesses. Further, if larger
businesses require management knowledge, then newer, smaller ventures also
require management knowledge.
(More) Management Knowledge (More) New Venture Success
The general form of the theory runs the risk of being a tautology. It prescribes
that business knowledge equates to business success. Those who are successful
have business knowledge; those who are not successful lacked the requisite business
knowledge. However, the key to avoiding tautology is to ensure that the definition
of knowledge possession is determined independently of business success.
The small business theory of entrepreneurship is expanded below. This second

representation of the theory indicates that knowledge of each of the various man-
agement disciplines influences new ventures outcomes. This time, the operating
environment is also included in the model. The explicit form of the theory is not
intended to capture all variations of the implicit theory. Further, it does not indicate
the relative importance and required amounts of each type of management knowl-
edge, and any threshold effects that influence new venture outcomes.
Strategic Planning Knowledge
Accounting Knowledge
Market Research Knowledge (More) New Venture Success
Marketing Promotion Knowledge
Human Resource Management Knowledge
Operating Environment Knowledge
Inquiries about, for example, the influence of accounting and marketing appear
valid as they are core aspects of management knowledge. Of course, what appears
commonsense does not always turn out to be relevant. The next section examines
the extent to which empirical investigations provide insight into and support for the
small business theory of entrepreneurship.
Management Tools in an Entrepreneurial Context
Management training and advice to SMEs is based largely on textbook prescriptions that
require the adoption of formal management procedures more suited to large firms. (Kotey
and Slade 2005, p. 16)
The small business thesis may suggest that large firms are more able to utilize
formal management tools, techniques and practices than their smaller counterparts.
The rationale is that large organizations have far more types of facilitating capital
than new and small firms. This section reviews research focused on the use of large
firm management tools, techniques and practices in new ventures. The focus is
on five disciplines: strategic planning; accounting; market research; marketing/
promotion; and, human resource management.
The analysis below demonstrates that a number of issues exist with the transla-
tion of management procedures to new ventures. The first issue is that very few
Management Tools in an Entrepreneurial Context 31
studies focus on new ventures, preferring instead to focus on small and medium-
sized enterprises (SMEs), which range as high as 500 employees. The second issue
is that relatively few studies focus on firm performance research. The third issue is
that few replication studies exist.
Strategic Planning
In management, the pinnacle of organizational stewardship is strategic planning.

Strategic planning typically involves a 35 year time frame. It leads to the develop-
ment and communication of organizational vision, goals and objectives. Its equiva-
lent in the field of entrepreneurship is new venture business planning. Business
planning focuses on the launch of a new company. It typically includes research and
analysis of the potential for a product and/or service in one or more target markets.
There is no operating history and no existing customer base.
One estimate (Gumpert 2002) suggests that approximately ten million business
plans are written annually around the globe. This is not particularly surprising given
the contemporary emphasis on business planning (Karlsson and Honig 2009, p. 27):
A central assumption integrated into most educational books in entrepreneurship is
that business plans are necessary for the successful start-up of ventures. The entre-
preneurship field virtually abounds with books promoting business plans. There
are also many other outlets and professionals that reinforce the value of business
planning, e.g. business plan competitions, websites, high school teachers, and man-
agement consultants.
The extent to which formal business planning pays dividends is the subject of
ongoing research in the field of entrepreneurship. Schwenk and Schrader (1993)
demonstrated in their review of 23 empirical studies on venture planning that there
is only a small positive relationship between planning and business success.
Subsequent reviews (c.f. Castrogiovanni 1996; Ford et al. 2003; Delmar and Shane
2004) indicate that the planning-performance relationship should be viewed with
some skepticism.
Lange et al. (2007) find a lack of persuasive evidence to conclude that pre-
venture business planning produces superior performance. Current empirical
research reinforces such a conclusion. In a study of 623 nascent entrepreneurs dur-
ing a 6-year period, Honig and Samuelsson (2012, p. 365) found that, neither
formal planning nor changes in the business plan increased venture-level perfor-
mance over the six-year study period. Binckmann et al. (2011) found that financial
planning has little value during the start-up phase of a new venture. Finally, a recent
meta-analysis (Brinckmann et al. 2010) indicates that for new ventures, business
planning offers at least some value (mean effect size = 0.13; p = 0.002).
The conflicting findings raise many questions. One possible explanation for the
inconsistent findings is that some individuals benefit from planning while others
do not. Escher et al. (2002, p. 305) found that planning had the largest effect when
the planner had a lower IQ: For high cognitive ability owners, it did not matter
much whether they planned or not. It may also be that business planning explains
a very small amount of venture outcome variance if other more important factors are
involved. Some evidence (Karlsson and Honig 2009, p. 27) suggests that entrepre-
neurs may not take their plans very seriously: Entrepreneurs who wrote business
plans never updated or rarely referred to their plans after writing them. Other
evidence indicates that nascent entrepreneurs write business plans because of
institutional expectations and pressures (Honig and Karlsson 2004).
Accounting
Amongst other things, accounting is used to assess the financial health of an enter-
prise. It relies on the careful and deliberate collection of data that are ultimately
used to generate income and cash flow statements and balance sheets. A variety of
ratios are available to managers in order to compare and contrast current and past
circumstances. It is not hard to imagine how large organizations might benefit
greatly from the regular use of accounting. It is a little bit more difficult to imagine
how small, fast-growing firms can benefit.
There is a growing body of research on what sort of accounting systems are used
in new ventures (c.f. Cassar 2009). Maes et al. (2005, p. 217) found that financial and
cost accounting knowledge of 218 small Belgian construction companies had,
direct significant impact on financial performance. Brinckmann et al. (2011)
examined new firms in a variety of industries and found that financial controlling
competence increases sales growth, but not employment growth. Chrisman et al.
(2012) examined the effects of coursework and counseling on 256 entrepreneurs who
utilized services via the Pennsylvania Small Business Development Center. They found
no relationship between courses taken in finance and accounting and firm growth.
Another piece of research that is worth mentioning here is that by Granlund and
Taipaleenmaki (2005), who investigate the extent of implementation of manage-
ment control/accounting systems in venture-capital-funded new ventures. The
authors (p. 49) found that the firms did not utilize accounting systems because of
time limitations and venture capitalist actions and attitudes: It was surprising to
find out how little attention was paid to performance measurement, strategic plan-
ning, and in some cases, even internal financial analysis. The evidence for the use-
fulness of financial and accounting knowledge is currently mixed. It is hard to know
under what circumstances what formal accounting procedures should be employed.
Market Research
The scientific field of marketing began in the early twentieth century. Its focus has
been, for the most part, on the actions of large organizations. The extent to which
the research and related prescriptions are useful to entrepreneurs is debatable.
Hills et al. (2008, p. 100) argue against the usefulness of a conventional marketing
focus for entrepreneurs: The notion that firms operating in an entrepreneurial con-
text are not well served by the theories, processes and tools of mainstream market-
ing is pervasive and has been a core motivation that underlies the marketing and
entrepreneurship interface movement (Morris et al. 2002; Hills and LaForge 1992).
In order to develop a sense of why entrepreneurs may not find value in the conven-
tional marketing literature, we examine research in the marketing domain from the
research/environment scanning and promotional angles.
It is not unusual for marketing textbooks to prescribe the same market research
tools and practices for both large and small firms alike. Existing research suggests
that resource-constrained entrepreneurs do not perceive value in marketing plans
and the use of marketing professionals (Hills and Narayana 1989). They rarely ever
conduct formal market research (Robinson and Pearce 1984; Meziou 1991) yet they
are confident in their research abilities (Callahan and Cassar 1995). They prefer
informal methods and personal sources for gathering market information (c.f. Brush
1992; Hills 1995; Hills and Shrader 1998; Smeltzer at al. 1988; Schafer 1991;
Brush and Peters 1992), but do not trust gathered information for the purpose of
long-term planning (Callahan and Cassar 1995).
The research directed toward the relationship between market research/environ-
mental scanning and new venture performance is scarce and far from decisive at this
point. The results of the earliest studies were inconclusive (Dollinger 1985; Brush
1992). Peters and Brush (1996, p. 87) found that, Differences in scanning by type
of business showed manufacturers used a greater variety of services in collecting
market information. This does not seem to have any major effect on the growth of
service ventures, whereas it did play a significant role in influencing growth for
manufacturers. Keh et al. (2007, p. 607), did not find evidence supporting the
hypothesis that information acquisition is positively related to firm performance
The researchers sample included firms with less than 100 employees.
Song et al. (2010, p. 565) found that, new venture performance is an increas-
ing function of the use of formal processes for utilizing market information, and the
impact is again stronger in established markets. We also found that, in emerging
markets, the use of formal processes for collecting market information has a direct,
positive and significant relationship with new venture performance. We also found
two surprising results. Contrary to our hypotheses, our findings suggest that formal
processes are more valuable in established markets. We also found a negative rela-
tionship between the level of customer interaction and the level of formal processes
for information utilization. Their sample consisted of both venture capital-backed
firms and members of the Inc 500 list.
Parry and Song (2010, p. 1112) found that formal processes for market informa-
tion collection and use have a positive impact on firm performance. Their sample
firms had between 11 and 753 employees. Kawakami et al. (2012, p. 275) found
that, the use of a formalized process of market information utilization has a posi-
tive effect on new venture performance regardless of country. Their sample
included firms with less than 300 employees.
At the current time researchers are still attempting to establish if marketing

research has a consistent positive impact on new venture performance, and if so, on
what type of ventures under which circumstances. More research will be required to
determine the contingencies which favor different types and amounts of marketing
research expenditures, and the size of the return of such investments of time and
money.
Marketing Promotion
Hisrich (1992) criticized those who run new ventures and SMEs for having a poor
appreciation of marketing. In response, Coviello et al. (2000, p. 525) suggest that,
Such criticisms inevitably use traditional views of marketing as their reference
point; views developed in the 1950s and 1960s are based on the practices of large
organizations. In the past 20 years, there has been a great deal of discussion about
the nature and extent of new venture and SME marketing practices (c.f. Carson et al.
1995; Carson 1985; Hills 1987; Hills et al. 1983; Morris et al. 2002). Carson and
Gilmore (2000, p. 1) suggest that new ventures and SMEs, will progress from
existing in a relatively uncontrollable marketing circumstance to one where each
aspect of marketing it performs is relatively controlled.
Relatively uncontrollable marketing circumstances are driven by a series of fac-
tors that new ventures and SMEs share. According to Coviello et al. (2006, p. 41)
new ventures and SMEs:
are more likely to experience constraints in market power, capital, and managerial
resources and are driven by the hands-on involvement of the owner/manager (Carrier 1994;
Haugh and McKee 2004; McCartan-Quinn and Carson 2003). In these firms, cash flow for
survival is a management priority (Haugh and McKee 2004), and fixed costs usually absorb
a higher level of sales revenue leaving proportionately less for marketing expenditures
(Stokes 1994). As discussed by Dowling (2002), small firms also suffer from double jeop-
ardy in that although they have the ability to get closer to customers in a smaller market,
they have fewer buyers who may buy the brand less frequently. Finally, in comparison with
larger firms, smaller firms exhibit more informal planning; planning that is restricted in
scope and activity (McCartan-Quinn and Carson 2003) and with a short-term orientation.
(Brush 1992; Carrier 1994)
Research efforts that examine new venture and SME marketing are relatively
new. Coviello et al. (2000) examined the relevance of the traditional marketing para-
digm to smaller firms. To their surprise, they (p. 524) found, evidence that the
types of marketing practiced by smaller and larger firms are not, in fact, fundamen-
tally different. The linkage between marketing practices and new venture/SME
performance is a relatively unexamined area. Coviello et al. (2006) examined the
marketing practices of tourism accommodation SME organizations. In their sample,
63 % of the firms had less than 10 employees and 83 % of the firms had less than 50
employees. The researchers (p. 38) found that, success requires an emphasis on
both transaction marketing and interaction-based relationship marketing to acquire
customers and achieve sales growth. More contemporary practices such as database
marketing, e-marketing, and network marketing are in evidence, but they are not
found to influence performance. Furthermore, it is success with customer acquisi-
tion rather than customer retention that leads to profitability for these firms.
Eid and El-Gohary (2013) investigated the e-marketing practices of a breadth of
SME types. In their sample, approximately 56 % of the firms had between 10 and
19 employees and approximately 81 % of the firms had 39 or less employees. The
researchers (p. 31) found that, the use of EM tools has a positive influence on SBEs
pre-sales activities, after-sales activities, marketing performance and marketing
effectiveness.
It is difficult to know what conclusions should be drawn from this research at this
time. Researchers need to explore the nature of promotion required under different
business circumstances.
Human Resource Management
Many scholars have argued that human resource (HR) practices in entrepreneurial
firms are, or should be, different than HR practices in large firms. For example,
Klaas and Klimchak (2006, p. 248) state: The normative literature on high perfor-
mance organizations is premised on the idea that, left to their own devices, large,
stable and complex organizations will experience problems that stem from rigidity
and the lack of information flowEntrepreneurial firms are likely to be susceptible
to a very different set of problems.
To date, HR research has focused predominantly on large firms. Based on a
review of HR research, Cardon and Stevens (2004, p. 320) concluded: So too
should our scholarship concerning human issues in entrepreneurial ventures include
a more careful and comprehensive understanding of the evolving and dynamic
nature of HR management in small and emerging enterprises. In short, our respon-
sibility as scholars is to design carefully thought-out integrative studies that explore
what we do not yet know about managing non-founder employees in entrepreneur-
ial ventures. A number of researchers have responded to calls for greater focus on
new venture and SME HR issues. The studies described below provide an illustra-
tion of the status of knowledge. Very few of the studies focus on (1) new ventures
and (2) the HR practice firm performance linkage.
Barber et al. (1999) examined the recruiting practices of 119 small employers
(<500 employees) and 184 large employers (>1,000 employees). They found that
large firms tend to have more formal and bureaucratic practices than small firms.
Kotey and Slade (2005) investigated the adoption of formal human resource man-
agement (HRM) practices by Australian firms with no more than 200 employees.
The researchers (p. 16) found, a move toward division of labor, hierarchical struc-
tures, increased documentation, and more administrative processes as the number of
employees increase.
Zheng et al. (2006) examined the performance effects of HRM practices of

Chinese firms with between 20 and 500 employees. The results (p. 1798) indicated
that, SMEs should place greater emphasis on staff commitment than on staff
competency to improve the likelihood of achieving better firm performance.
Urbano and Yordanova (2008) examined 164 SMEs from the tourism sector in
Catalonia. The average firm had 69 employees and a 20-year operating history. The
findings were that HRM practices are more likely to be adopted when an HR depart-
ment exists within the firm and particularly, when the HR manager has similar prior
experience. In addition, the researchers found SMEs cooperating with other organi-
zations to be more likely to implement HRM practices.
De Grip and Sieben (2009) investigated whether HR systems in 549 Dutch phar-
macies could be associated with both higher performance and higher wages. The
authors (p. 1914) found that, more advanced HR systems do not have any effect
on firms productivity, and conjecture that in small firms, formal HR practices
are less important than personal relations between the employer and his or her
employees. Tocher and Rutherford (2009) examined perceived acute HRM prob-
lems in 1,693 firms that had no more than 500 employees. The study (p. 455)
reported the following findings: SME owners and managers who were running
higher-performing firms were less likely to perceive acute HRM problems.
Conversely, SME owners and managers who were more experienced, who were
more educated, and who were running larger SMEs were more likely to perceive
acute HRM problems. Finally, gender, owner age, firm age, and firm growth showed
no significant relationship with likelihood of SME owners and managers perceiving
acute HRM problems.
Zibarras and Woods (2010) examined employee selection practices across a
range of firm sizes. They (p. 507) found that SMEs do report using unstructured
methods, but proportions are no different to larger organizations. Messersmith and
Guthrie (2010) examined the role of HRM in 119 young firms (less than 10 years
old). The researchers (p. 115) found that firms that combined high-performance
work systems or partnership philosophy with entrepreneurial orientation (EO)
achieved substantially higher levels of growth than those firms that did not.
Storey et al. (2010) examined self-reported job quality across small and large
firms. They (p. 305) found: employee reports of job quality are highest in small
firms and decrease as firm size increases. Teo et al. (2011) investigated the strategic
management of frontline employees of 104 Australian manufacturing firms with
less than 200 employees. The researchers found that the presence of a human
capital-enhancing HRM system had direct and indirect impacts on manufacturing
performance outcomes. Further, the performance of frontline employees mediated
the impact of such systems on the performance outcomes.
Klaas et al. (2012) examined the impact of high-performance work systems on
294 US-based firms with no more than 500 employees. They (p. 487) found that,
leader perceptions of HR effectiveness are positively related to the use of
HPWSs and that this relationship is moderated both by the communication patterns
between the small-business leader and the HR consultant assigned to the firm and
the small-business leaders HR knowledge. Patel and Conklin (2012) examined
Entrepreneurial Returns to Management Education 37
how firms (n = 145) with less than 100 employees might realize mutually reinforcing
effects of group culture on high performance work systems to improve employee
retention and increase perceived labor productivity. They (p. 205) found that:
employee retention does not mediate the effects of HPWS on perceived labor
productivity, but that mediation becomes significant and increases with greater
levels of group culture.
Verreynne et al. (2011) investigated the interaction of human resources and capa-
bilities with firm performance in 50 Australian firms with less than 100 employees.
The researchers (p. 405) found that, higher performing firms had better rated
employment systems, with a cluster of human resource practices which included
greater informality, employee engagement and participation. Messersmith and
Wales (2011) examined the effects of HPWSs and partnership philosophy on the
relationship between EO and sales growth in 119 young firms (less than 10 years
old). The results (p. 115) indicate, a non-significant relationship between EO
and firm growth. However, firms combining HPWS or partnership philosophy with
EO realized significantly higher levels of growth. Chadwick et al. (2013) investi-
gated the boundary conditions of the relationship between firm-level high-investment
HR systems and objective labor productivity in 96 Canadian firms with less than
100 employees. They (p. 311) found that, the extent and nature of the influence
of high-investment human resource systems on objective small-firm labor produc-
tivity is contingent on internal (differentiation strategy and firm capital intensity)
and external boundary conditions (industry dynamism and industry growth).
At the current time, it is difficult to establish what human resource management
practices should be implemented to increase new venture performance. To date,
most of the research focuses on existing companies with sizable numbers of employ-
ees rather than new ventures. Further, very little research investigates the human
resource practice new venture performance link. Because there is little in the way
of testing predictive theories, the myriad of possible contingencies will need to be
studied piecemeal before practical evidence can be expected.
Entrepreneurial Returns to Management Education
Management education has been criticized by a number of key scholars. Pfeffer and
Fong (2002, p. 7980) note:
Porter and McKibbin (1988, 6465) noted that business school curricula were seen as too
focused on analytics, with insufficient emphasis on problem finding as contrasted with
problem solving and implementation (Leavitt, 1986), and as insufficiently integrative
across the various functional areas. More than a decade later, these criticisms remain rele-
vant. The themes - an overemphasis on analysis at the expense of both integration and
developing wisdom as well as leadership and interpersonal skills, or teaching the wrong
things in the wrong ways (and perhaps to the wrong people, or at least at the wrong time in
their careers) - have been picked up and expanded upon by others, including Henry
Mintzberg, who may have emerged as the most articulate critic of business school curricula
(e.g., Mintzberg, 1996; Mintzberg & Gosling, 2002; Mintzberg & Lampel, 2001), and
Harold Leavitt (1989). Leavitt asserted that we have built a weird, almost unimaginable
design for MBA-level education that distorts those subjected to it into critters with lop-
sided brains, icy hearts, and shrunken souls. (1989, p. 39)
Pfeffer and Fong (2002, p. 80) review the returns to management education for
management students and find:
When we examine the actual effects of business schools on the two outcomes of most
relevance and importance, the careers of their graduates and the knowledge they produce,
the picture is reasonably bleak. There is little evidence that mastery of the knowledge
acquired in business schools enhances people's careers, or that even attaining the MBA
credential itself has much effect on graduates' salaries or career attainment.
Despite the criticism of business education there is probably much greater reason
to believe in its merits for middle managers than it is for would-be entrepreneurs.
For one thing at least, it helps people get better higher-paying jobs in the middle
management structures of medium and largescale organizations.
The extent to which management education provides value to entrepreneurs has
also been questioned by a number of scholars. Chia (1996, p. 410) indicates a failure
of management education to encourage an entrepreneurial imagination.
Business schoolsunwittingly propagate a thought style and a mental attitude that pays far
too much regard to conventional academic priorities of analytical rigor at the expense of a
loss of imagination and resourcefulness in dealing with practical concerns.
Kirby (2004, p. 510) indicates that traditional management education stifles

entrepreneurs, rather than developing the requisite attributes and skills. The
empirical research focused on the new venture returns to business school education
is sparse. Further, the findings do not provide clear guidance to budding entrepre-
neurs considering an investment in a business school education prior to pursuing a
new venture. Each of the extant studies is discussed below.
Cooper and Gimeno-Gascon (1992) examined the influence of type of university
degree on new firm growth. The researchers found that business and engineering
degrees had a stronger effect on venture growth. They also noticed a threshold for
business school courses that once crossed, indicated a reduction in firm growth.
Sapienza and Grimm (1997) examined the backgrounds of founders of US-based
short line railways. They (p. 18) found that the, highest performance was
achieved for those founders who had around 10 to 11 business courses but was sig-
nificantly worse for those who had very few or very many.
Almus and Nerlinger (1999) investigated the education backgrounds of West
German entrepreneurs. They (p. 148) found that an MBA education only had posi-
tive and significant effects on the growth of non-innovative firms. Davidsson and
Honig (2003) examined the educations of 623 Swedish business founders. The
researchers found that the number of business classes taken distinguished between
the nascent entrepreneurs and a control group. However, the number of business
classes taken by nascent entrepreneurs was not related to sales made in the first 18
months nor the profitability of the firms during the time frame. Honig and Karlsson
(2004) found no relationship between business school education and new venture
performance.
Entrepreneurial Returns to Entrepreneurial Education 39
Chrisman et al. (2012) surveyed the counseled clients of the US Small Business
Development Center Program and found that the number of courses in the various
functional areas of business had limited or no impact on the growth of these same
firms. The researchers also tested, and failed to replicate, the curvilinear finding
between numbers of courses taken and subsequent venture performance reported by
Sapienza and Grimm (1997).
In summary at the current time, obtaining a business education would appear to
be dubious preparation for entrepreneurship.
Entrepreneurial Returns to Entrepreneurial Education
Arguably, current thinking is dominated by an understanding of entrepreneurship as

a business activity to be conducted by people with business knowledge. If current
thinking on entrepreneurship is an effective guide to education, then those who are
educated in entrepreneurship would be advantaged over others.
According to Kuratko (2005), the real emergence of entrepreneurship education
occurred in the 1980s. A number of scholars have examined its effectiveness. Each
study will be briefly described below, followed by a discussion of a recent meta-
analysis. Clark et al. (1984) investigated the results of exposure to a single entrepre-
neurship course. Out of 1,265 survey respondents, 129 had started a company.
Approximately, 82 % of the start-ups produced under $100,000 in gross annual
sales. Only three companies generated more than $1 million in gross annual sales.
McMullan and Gillin (1998) examined on the outcomes of 159 students of an
Australian modified MBA program focused on entrepreneurship and to some extent
on entrepreneurial creativity. The researchers found 47 new ventures, 22 of which
were in-company starts. The 25 new independent ventures produced approximately
$8 million in combined annual revenue at the time of the review.
Fletcher (1999) investigated the outcomes of 64 graduates of a masters-level
entrepreneurship program in Stirling, Scotland. Of the 53 respondents that started
businesses, 8 reported annual revenues between 100,000 and 500,000. Only one
respondent reported annual revenue in excess of over 1 million.
Charney and Libecap (2000) examined the outcomes of a 1-year undergraduate
entrepreneurship program in Arizona. They (p. 23) found that, Firms owned by
entrepreneurship graduates have an average employment of 199.9, sales of $50
million, and assets of $4.0 million. The researchers noted the presence of outliers
that substantially skewed the results of the analysis upwards but failed to produce
data on median level performance.
Menzies and Paradi (2003) compared new venture outcomes of Canadian engi-
neering students who had been exposed to entrepreneurship courses (n = 177) with
those who had not (n = 110). More than one-third of those who started ventures
claimed annual revenues over $500,000. The group of students with entrepreneur-
ship coursework had more ventures with annual revenues in excess of $1 million.
Rosa (2003) further evaluated the masters-level entrepreneurship program in

Stirling, Scotland. He (p. 435) concluded that although entrepreneurship course-
work appears to improve new venture performance, the improvement is rela-
tively small, and well short of the expectations of Government that the graduates
from the university sector should be producing a steady stream of high quality
wealth-creating businesses.
A recent meta-analysis provides insight into the extent to which entrepreneurship
coursework might provide a performance boost to new venture-minded post-
secondary students. Martin et al. (2013) found a weak relationship (r = .166) between
entrepreneurship education and new venture performance. The results may be even
less encouraging if self-selection bias is found to account for a substantial portion
of new venture successes.
Entrepreneurship education may not yet be sufficiently refined to provide much
value to students wishing to pursue new ventures. There is evidence of a wide vari-
ety of entrepreneurship content across universities (Fiet 2002). There is also evi-
dence that the entrepreneurship curriculum may not teach needed skills or content
(Edelman et al. 2008).
On average, it would appear that current thinking has generated a relatively
modest return to the education upon which it is based. The most important reason
for teaching entrepreneurship is to improve practice. It is questionable that the
mainstream of entrepreneurship education is helping entrepreneurs perform much
better than they otherwise would perform without it, although some programs are
beginning to show some promise.
On the Disadvantages of Current Thinking to the Practice

of Entrepreneurship
Some say that experience, and not education, is the best teacher. Current thinking
would be more convincing if people were at least able to learn from experience.
If our intellectual models are basically sound, then we should be able to reduce our
entrepreneurial experience into useful learning.
Bates (1990) examined a large sample of small US businesses and found that
managerial experience did not influence small firm survival. Stuart and Abetti
(1990) investigated 150 new US technology-based firms and found a factor that
included entrepreneurial experience and the previous management level (p < 0.01)
to positively influence firm performance. Brderl et al. (1992) surveyed 1,849
founders of German new ventures and found that industry-specific experience
reduces new venture fatality (p < 0.05), but prior self-employment experience had
no impact. Using the same database, Brderl and Preisendrfer (2000) observe that
prior managerial experience has a positive influence (p < 0.05) in fast growing firms.
Prior self-employment experience does not have an impact. Westhead and Cowling
A Contingency Approach 41
(1995) examined 227 UK-based technology firms and found that prior managerial
experience had no influence on firm performance.
Gimeno et al. (1997) surveyed 1,547 US-based entrepreneurs and found that
prior managerial (p < 0.10) and entrepreneurial experiences (p < 0.10) positively
influence new venture economic performances, but did not influence survival.
Chrisman and McMullan (2004) surveyed 159 US-based clients of Small Business
Development Centers and found that previous entrepreneurship experience had no
influence on new venture growth. Colombo and Grilli (2005) examined 506 new
technology based firms in Italy and found that prior entrepreneurship experience
influences growth (p < 0.05). Prior management experience was not found to have a
statistically significant impact on growth. West and Noel (2009) investigated 83
US-based new firms and found that previous founder start-up experience had no
impact on new venture performance. Further, they did not find a relationship
between the relatedness of industry knowledge gained through previous experiences
of the new venture CEO and venture performance.
Particularly when we take into consideration the weak p values in the positive
findings, experience appears to be an indifferent teacher of entrepreneurial prowess.
A Contingency Approach
Hopefully, the field may be able to develop the small business theory of entrepre-
neurship into contingency theory that predicts which types and amounts of manage-
ment knowledge will support entrepreneurs in various contexts. Gadennes (1998)
search for common management practices in small firms across a number of indus-
tries provides some support for this contention. He (p. 48) found that:
different management practices or strategies are associated with small firm performance
across major industry typesIn the retail industry it would appear that performance is posi-
tively related to a value for money factor (which includes the pricing of products lower than
competitors, emphasizing cost reduction and high sales turnover, and checking quality of
products); and negatively related to a financial leverage factor (including high usage of
outside borrowed funds, and searching for cheaper sources of finance). In the service indus-
try, performance appears to be positively related to an employee relations factor (related to
involvement of employees in decision-making, emphasis on a reward/discipline system and
staff training, and assessment of employees' job satisfaction and performance); and nega-
tively related to both financial leverage and high investment in working capital. In the man-
ufacturing industry, performance would appear to be positively related to a competitor
advantage factor (relating to pricing products lower than competitors and acquiring knowl-
edge of competitors' activities); and negatively related to financial leverage; yet positively
associated with reliance on professional financial advice.
Along these (contingency theory) lines, it may be useful to investigate new ven-
ture outcomes that combine venture-specific knowledge with management knowl-
edge. For example, an individual contemplating launching a restaurant might be
best served by completing a culinary education with some management program-
ming on the side.
Conclusion
The main purpose of this chapter is to argue that a general theoretical and conceptual
model underlies much of entrepreneurship research, entrepreneurship teaching and
entrepreneurship practice in todays world. It is argued, in part because entrepre-
neurship has been monopolized by the business discipline, that the small business
model of entrepreneurship is in effect an implicit general theory dominating and
directing the field of entrepreneurship. It is argued that the small business theory is
often treated as self-evident and that it sometimes even takes the form of a simple
tautology. However, when the evidence is gathered, there is little to demonstrate the
power of the small business approach to entrepreneurship. If anything, one is prob-
ably left wondering why business knowledge cannot as yet be shown to be more
practical. Furthermore, education in business seems to be of limited usefulness to
entrepreneurs. Finally, one would expect at a minimum that culturally implicit mod-
els of entrepreneurship as small business would be useful to guide learning from
experience. Again, the evidence fails to support the small business model. Eventually
however, one may hope that contingency theories are developed around the func-
tional areas of business to enable better understanding of when to use what business
tools. In any case, some sort of practical, predictive theorizing is unavoidable if we
are to avoid endless trial and error data collection. While the small business para-
digm provides some direction to researchers it is still fundamentally trying to
replace theorizing with semi-random evidence gathering. It remains a positivistic
approach to the science of entrepreneurship.
Chapter 4
The Positivistic Social Science
of Entrepreneurship
Abstract We may want to question the general usefulness of business tools and
teaching for enhancing entrepreneurial performance, but what about the rest of entre-
preneurial science what does it have to offer? Entrepreneurship as a positivistic
social science has been advancing our knowledge base, one piece at a time, on how
to more successfully develop businesses. How difficult is it to tap this knowledge?
In the general absence of strong predictive theory, entrepreneurship scholars were

not ill-advised to pursue a philosophy of positivism - searching instead for fact-like
findings. Many of these fact-like findings may appear as bricks in a brickyard.
MacMillan and Katz (1882, p. 7) advocated that the time was right for emergent
theory to make sense of this brickyard of entrepreneurial findings:
We have hundreds of pieces of entrepreneurship research of potential theoretical signifi-
cance. In practice, these theory pieces stand on their own merits, isolated from other pieces
of theory and from other disciplines. What is needed is for researchers to begin to forge
intellectual alliances with compatible theory pieces outside their own narrow interests, so
that more comprehensive and more realistic theories of entrepreneurship can emerge. Only
when isolated theoretical pieces can be fitted into competing theory sets will we be able to
make strides toward the identification of superior ways of understanding the complex pro-
cess of entrepreneurship.
A very different general theoretic approach to understanding entrepreneurial per-

formance is to build knowledge up piecemeal from the sciences empirical fact-
base. The small business approach to a general theory begins with the top-down
assumption that an entrepreneurial venture is, in fact, a small business, and as such,
subject to relatively the same logic as any other business. The search is then under-
taken to demonstrate the scientific functionality of various business techniques for
entrepreneurial ventures in varying contexts. Whatever has worked with large busi-
nesses is expected to be approximated in smaller enterprises. In contrast the social
science empiricist attempts to build from the findings upward. Whatever has been
found to be related to the performance of entrepreneurial firms can be brought
together into a composite, and one such composite, Shane (2003) has labelled a
general theory, presumably because it potentially constitutes another distinct holis-
tic strategy for understanding the discipline of entrepreneurship. Arguably, Shane

DOI 10.1007/978-3-319-04726-3_4
44 4 The Positivistic Social Science of Entrepreneurship
takes a positivistic methodology of science as far as it will go at the current time

towards a practical solution to the problem of entrepreneurial performance. The
limits of Shanes theory are likely the limits of positivism itself.
Propositions, Not Theories
Theories that are used by entrepreneurial science tend to be used for the general
guidance of researchers. New fields like entrepreneurship typically lack much the-
ory of their own and therefore have to borrow ideas from other fields. As a field
matures, its researchers draw from both endogenous theory and exogenous theory
alike. Recently, Kenworthy and McMullan (2012) reviewed a comprehensive list of
empirical studies over the life of a number of top entrepreneurship journals includ-
ing: the Journal of Business Venturing, Entrepreneurship: Theory and Practice, and
the Journal of Small Business Management. According to the findings, 95 % of the
theories claimed by researchers to be guiding their studies was found to have origi-
nated in another academic discipline. The dominant suppliers of 140 theories used
to guide a sample of recent empirical studies were from the fields of: strategic man-
agement, psychology, sociology and economics. Although a few theories were ref-
erenced more frequently, most theories were used only once across the timeframe of
the sample. In the 1980s it was rare for a researcher to mention a guiding theory. By
2012, almost half of these researchers were citing theories behind their chosen
hypotheses.
Overwhelmingly, in the empirical studies where theories are referenced, the the-
ories are used only to justify the formulation of hypotheses. It is not as if the hypoth-
eses are uniquely derived from the theories, but rather that they are merely consistent
with cited theories, if that. The so-called testing is certainly not critical testing in a
Popperian sense. Hypotheses are tested but the results are not formally used to eval-
uate the practicality of the theory within an entrepreneurial context. The researchers
may assume that the testing of hypotheses generated from theories puts the theory
to test. However, the question of whether imported theories are applicable in an
entrepreneurial context goes both unasked and unanswered. The theories that are
referenced are not actively challenged. Once evidence is gathered on the validity of
hypotheses the research exercise is complete. The studies are overwhelmingly left
unreplicated. Even constructive replication is uncommon. Evidence is not com-
pounded to weigh the merit of the theories. In a real sense, one might say the field
of entrepreneurship uses a minimalist approach to theory testing.
When a strong predictive theory is heavily tested using this minimalist strat-
egy the results can be strange and surprising. It may be a situation of using weak
methodology to test strong predictive theory. A case in point is the program of test-
ing that has been conducted on human capital theory. Most importantly, human
capital theory is a highly credible economic theory that makes real predictions about
the value of education. In effect, it boldly predicts that there will be a positive return
on investment in formal education all education everywhere. It is a Nobel prize-
Propositions, Not Theories 45
winning theory1 with considerable evidentiary support across a number of different

disciplines. It is only natural that entrepreneurship researchers would want to test its
merits in an entrepreneurial context. The question under consideration is to what
extent does formal education generates a return on educational investments, after
accounting for all the related costs. At the time of the review by Kenworthy and
McMullan (2010), authors of some 52 different empirical studies were claiming to
test hypotheses supposedly derived from human capital theory many published in
top journals. Not one of these studies took into consideration the cost of education as
part of the research, effectively assuming zero costs in peoples time and money. The
studies, even without including the cost side of the formula, produced mixed results
with most studies finding small positive relationship between formal education and a
surprising variety of measures of venture performance; effectively assuming that
venture performance (such as growth in employment) translates directly in some
unexplained way into a measureable financial return to the entrepreneur (which is
never calculated as financial compensation). None of the researchers critical appraised
the applicability of human capital theory to the entrepreneurship field even when
their hypotheses were rejected or the results generated were surprisingly anemic.
Currently as has been illustrated, entrepreneurship research tests hypotheses but
not theories; with the result of somewhat validating empirical propositions, but not
scientific theories. Empirically supporting stand-alone propositions appears to be
the real objective of the current science of entrepreneurship. Some sort of combina-
tion of such stand-alone findings is a natural next step for a positivistic science of
entrepreneurship. It is therefore not surprising that Scott Shane based his general
theory of entrepreneurship upon empirical propositions alone.
This chapter reviews Shanes (2003) supposedly comprehensive list of 80 plus
propositions that offer insight into the factors behind entrepreneurial performance,
from his A General Theory of Entrepreneurship. It appears that Shane has compiled
as much empirical data as he could find that relate a plethora of different apparent
factors to various measures of entrepreneurial performance. Then, in order to
simplify understanding he has grouped the large number of findings into different
propositions based on his appreciation of the similarities among them, and without
regard to the theories that may have inspired them. This exercise resulted in Shane
listing some 80 different propositions that have been correlated with desired entre-
preneurial outcomes. After having compiled his resulting propositions he then
grouped them under topic areas. This process may appear arbitrary (and to some
degree it is) since human judgment is unavoidable in such an exercise. At the time,
the approach was probably as close as one person could get to an objective,
empirically-based synthesis of important results-based, proposition-based evidence
in the field of entrepreneurship.
Shane related empirical findings in the field to either opportunity identification
or opportunity execution. Creativity was one of a few variables he chose to relate to
opportunity identification but not to opportunity execution. Technically speaking,
Shane failed to see creativity as a potential predictor of opportunity execution or
1
In actuality, human capital theory enabled Gary Becker to win the Nobel prize.
what is being called here, entrepreneurial performance. In reality, Shane failed to

find evidence linking the creativity of entrepreneurs to the financial performance of
their firms. So when we argue that creativity was one of 80 plus factors related to
entrepreneurial outcomes, we are being liberal in our interpretation, because in real-
ity Shane missed the relevant evidence that showed creativity to be a factor in sub-
sequent venture performance.
The opportunity execution propositions were organized in six topic areas:
Sections Entrepreneurial Strategy; Industry Choice; New Venture Organizing;
Acquiring Financial Resources; Entrepreneurial Psychology and The Sociology
of Entrepreneurship. The sum of the topic areas and the encompassed propositions
constitutes Shanes general theory. In this chapter Shanes findings were extended
one further pragmatic step into six groups of action implications in order to bring to
conscientiousness the potential pragmatic value of Shanes propositions.
Entrepreneurial Strategy
Shane (2003) lists the following twelve factors as important to entrepreneurial

strategy: legal barriers to imitation; scale; reputation; innovation; growth from small
scale; survival during the early years; focus on growth; entry by acquisition; a focus
strategy; flexibility and adaptability; forming alliances; and, legitimation. The fol-
lowing three examples provide insight into the nature of Shanes entrepreneurial
strategy propositions.
Several studies indicate that those new ventures that establish legal barriers to imitation of
their process for exploiting an opportunity are less likely to fail than other new ventures.
(p. 200)
Some empirical evidence supports the argument that exploiting an entrepreneurial
opportunity on a large scale deters imitation, thereby allowing the new venture to appropri-
ate the profits from the exploitation of its opportunity, and survive. (p. 201)
A strategy to build new venture reputation appears to enhance new venture growth.
(p. 203)
Practitioner Implications
Drawing from the entire entrepreneurial strategy section of Shanes book might lead
an entrepreneur to be mindful of quite a few factors. As a potential entrepreneur, one
should not be concerned about starting out small because many successful people
begin that way. It may make more sense to buy an existing firm than start a new firm.
One should remain flexible during the search for a winning strategy, basing it on a
single product, targeting a single market at the outset. One should establish what-
ever legal barriers possible (e.g. patents, trademarks) and attain desirable certifica-
tions. If one can survive the early years, one should work towards introducing other
innovative products. One should also focus on growth and the development of econ-
omies of scale, acquiring strategic alliances whenever possible.
Industry Choice
A chapter on industrial economics provides 18 factors that could help to facilitate

new venture success: R&D intensity; locus of innovation; size of the innovating
entities; uncertainty of the industry; market size; market growth; market segmenta-
tion; industry age; dominant design; presence of a density of firms; strength of pat-
ents; importance of complementary assets; profitability of the industry; cost of
inputs; capital intensity of the industry; advertising intensity of the industry; indus-
try concentration; and average firm size. Three of the propositions illustrating these
factors are as follows:
The research and development intensity of an industry should enhance opportunities for
new firms to be used to exploit opportunities (p. 121)
The degree to which an industry relies on public sector institutions to innovate should
enhance opportunity exploitation by new firms. (p. 122)
Industries in which small firms tend to be better innovators have higher rates of firm
formation than other industries (p. 123)
A potential entrepreneur should carefully examine the industry in which s/he wishes
to establish a new venture as some industries are more munificent than others. One
might select a large and fragmented industry that is innovative, profitable and grow-
ing, and as yet not dominated by any particular design. One should avoid industries
in which large firms have a dominant position in R&D, advertising and distribution.
Further, one should avoid capital-intensive industries and industries characterized
by economies of scale advantages.
New Venture Organizing
Shane (2003) identifies 12 different factors that fall under the organizing process
for a new venture: employment experience; planning; legal entity; team size;
number of employees; selection of employees; direct ties; indirect ties; organiza-
tional policies and procedures; communication mechanisms; specialization of
labor; and, monitoring. Shanes propositional knowledge included the following
three points.
new company human resources practices typically have their origin in founders employ-
ment models. (p. 220)
planning enhances the development and performance of start-ups after founding
(p.222)
newly established corporations are more likely to survive than partnerships or sole
proprietorships. (p. 235)
A would-be entrepreneur should be discriminating about his/her early employ-

ment choices, as entrepreneurs learn how to manage people through their early
work experiences. One should learn how to financially manage and control a busi-
ness. New venture success appears to be at least partially dependent upon meth-
ods of management, control and motivation. One should appreciate the need to
intelligently structure a new venture over time with meaningful policies and
procedures.
One should also consider a sophisticated approach to new venturing. A potential
entrepreneur should set up a corporation, develop an entrepreneurial team and get
involved in formal planning. One should appreciate the difficulties associated with
hiring and plan ahead. New hires may be new acquaintances. One should also rec-
ognize the value of knowing suppliers and customers at a personal level because
such people may supply the new business with leads for future employees.
Acquiring Financial Resources
Shane (2003) identified 13 factors related to financial resource acquisition that

influence new venture performance: adequate capitalization; debt/equity ratios;
self-financing; personal income and asset availability; due diligence; specialization;
localization; syndication; control; self-investments; business plans; founder attri-
butes; and, opportunity attributes. A number of the problems associated with new
venture financing exist due to uncertainty and information asymmetry. Information
asymmetry is based in part on the idea that potential entrepreneurs have greater
access to information about opportunities than do investors. Three of the proposi-
tions he provides are presented below.
The empirical evidence supports the proposition that adequate capitalization is important to
the exploitation of entrepreneurial opportunities.Firms with greater access to capital at
founding also appear to grow faster and larger.Initial capitalization also appears to
increase the profitability of new ventures.The amount of venture capital received by new
ventures increases their rate of employment and sales growth, reduces their likelihood of
failure and increases the likelihood of achieving an initial public offering. (pp. 162164)
Because ventures that have higher leverage actually obtain more capital to use for oper-
ating activities relative to the amount of their capitalization, one would expect that new
ventures with higher financial leverage would perform better than new ventures with lower
financial leverage. (p. 164)
The empirical literature demonstrates the importance of self-financing as a solution to
the uncertainty and information asymmetry problems present in new venture finance. (p. 168)
The source of start-up funding is likely to be from ones personal savings and assets.
As such, one should prepare in advance to be an entrepreneur by controlling
personal spending and acquiring some financial capital. Even if one expects to
acquire external funding, one should expect to use personal savings and assets in a
new venture. One should note that the relatively few ventures that are well-financed
in early stages succeed more often. The external financing may come with costs
such as behavior controls established by external investors.
One should acquire a good education as well as obtain experience in manage-
ment and other entrepreneurial ventures before launching a new venture. One should
learn the target industry of the new venture and find an opportunity with a number
of desirable characteristics. One should also prepare a quality business plan and
ensure that its financial projections are reasonably conservative.
Entrepreneurial Psychology
Shane (2003) identified the following 14 factors that can be considered as psycho-
logical in nature: extraversion; agreeableness; need for achievement; A-type person-
alities; risk-taking; tolerance of ambiguity; desire for independence; locus of
control; intrinsic motivation; Protestantism; self-efficacy; overconfidence;
representativeness; and, intuition. Three of the propositions that Shane advanced are
presented below.
people higher in extraversion are more likely to exploit opportunities than people lower
in extraversion because they are better able to assemble resources and organize under
conditions of information asymmetry and uncertainty. (p. 98)
Agreeableness is an aspect of personality that incorporates the attributes of friendli-
ness, socially conformity, compliance, flexibility, tendency to trust, cooperativeness, ten-
dency to forgive, tolerance, softheartedness and courteousness (Barrick and Mount 1991).
People possessing this aspect of personality are less likely than other people to exploit
opportunities. (p. 99)
Firm founders who are higher in need for achievement appear to have faster growing
ventures than firm founders who are lower in need for achievement. (p. 102)
In order to develop an entrepreneurial mindset, one should become extraverted, but

not friendly and trusting of others. One should develop a high need to achieve that
is oriented toward intrinsic, personally-set goals. One might even become obsessive
and driven towards their goals.
One needs to go ones own way, tolerate ambiguity well and take risks. A high
degree of confidence in oneself and ones intuition will be necessary, as well as
optimism about ones ability to accomplish goals. One should trust ones own judg-
ment regardless of supporting evidence. Finally, one should consider adopting
Protestant values.
The Sociology of Entrepreneurship
Shane identified 14 variables that might be roughly labeled as sociological in a

chapter titled Individual Differences and the Decision to Exploit: income; oppor-
tunity cost; unemployment; married/working spouse; education; general business
experience; functional business experience; industry experience; start-up experi-
ence; vicarious learning; age; social position; social status; and, social ties. Three
examples of propositions are presented below.
people who have higher incomes should be less likely to exploit opportunities (p. 63)
the likelihood that a person will exploit an entrepreneurial opportunity increases with
the gap between expected value of self-employment earnings and the persons current wage
employment earnings. (p. 64)
unemployed people should be more likely than employed people to exploit
entrepreneurial opportunities. (p. 64)
One should attempt to identify a business opportunity that will make current income
pale by comparison. Alternatively, one should not fear becoming unemployed as it
might provide the impetus to start a new venture. One should acquire a good
education and marry a spouse who is committed to full-time employment.
One should acquire general business, as well as start-up, experience. One should
seek out marketing, product development and management, rather than finance and
accounting experiences in an industry of ones choice.
It would be beneficial to have entrepreneurs for parents, but if such is not the
case, one should find friends who are. One should be aware that the optimal new
venturing window is between 25 and 44 years of age, with the earlier years better
for getting start-up experience, and the later years for capitalizing on it.
Finally, one should develop a social network and increase ones social status,
with further education being the most likely path towards both goals.
Strengths of Shanes General Theory
Shanes general theory allows for a practical simplification of a massive amount of

scientific complexity that could otherwise take enormous amounts of time to even
partially comprehend. Each single study is complex in terms of methods. Drawing
reasonable propositional inferences from raw data is also problematic. Deciding
what to include and what to omit adds more complexity, and requires more fine
judgment. Shanes manuscript takes a pool of thousands of findings and reduces it
to 80. Then he further organizes the hundreds into six groupings of a dozen or so
propositions each. Without doubt, information is lost along the way but this is to be
Potential Limitations of Shanes Propositions 51
expected. When one takes the further simplifying step of turning the propositions
into action implications, which was undertaken in this chapter, the resulting number
of practical implications is something that can be meaningfully contemplated in an
afternoon by an intelligent person.
Potential Limitations of Shanes Propositions
The limitations of Shanes general theory are threefold: limitations that originate
from the sheer complexity of the task; limitations that are a result of problems
within the underlying science of entrepreneurship; and, limitations that are a result
of Shanes methods. The process of reducing massive amounts of complexity will
understandably result in mistakes and errors. The fact that entrepreneurial science
is a formative social science means that the base findings are often unreliable.
Finally, Shane makes the following choices with his method that should make us
more wary yet.
There is inevitable subjectivity in Shanes choice of relevant factors. For instance,
Shane missed entrepreneurial creativity as a potential influence on venture per-
formance. This is more than a small oversight as will become evident by Chap. 6.
What other potentially important factors were missing from his overview? How
much larger than the 83 factors listed here would there be in a more comprehen-
sive list, compiled, for instance, by a group of scholars and not just one?
Shane provides only supportive data behind his propositions presumably to sim-
plify the task. Studies that yielded non-supportive or contrary data are omitted.
There are propositions in his list that have been well tested, but on balance are
not well supported. Given that there is a recognized bias against negative find-
ings in the management literature (c.f. Fanelli 2011), ignoring those negative
results that are reported is doubly serious.
Shane appears to be content to make his case for relevance based on p values
which only provide evidence of the probability of a relationship between two
variables. One might be able to say with some confidence that factor A may be
related to a measure of entrepreneurial success, and maybe even from the struc-
ture of some studies to imply some confidence in the direction of causation.
However, p values are not evidence of the amount of outcome variance explained
by the factor under consideration. A practitioner also needs to know if factor A
has a big enough impact on different measures of entrepreneurial success to jus-
tify his/her attention. (It should be noted that in most cases, published data is
limited to p values.)
Shane treats all the propositions as equally important. A proposition that has
1 weak supporting study behind it is given par status with one that has 20 or more
supportive studies. Neither are studies weighted by quality of methodology nor
strength of findings.
Shane provides no guidance on how to combine propositions. The propositions
are all stand-alone other than for being grouped by type.
Shane ignores the fact that his propositional base of findings is theoretically
impoverished, meaning that inferences (including the action implications
included here) are drawn with guesswork. Technically, inferences from each
proposition are limited to the tight set of circumstances surrounding each find-
ing, or more properly still, to the actual data itself. Without theory around every
individual proposition, findings are marginally interpretable, at best.
There is no rationale for why more propositions cannot be added and relation-
ships between variables not reformulated (e.g. from linear to curvilinear or con-
tingency relationships).
Shanes General Theory is not likely a general theory or even a theory since it
lacks the hallmarks of a theory. For one thing, the theory appears to be no more
than a list of unrelated, stand-alone hypotheses or propositions. Weick (1995,
p. 389) states that, stand-alone hypotheses are not theory because authors
remain silent about the reason for his choice of hypotheses. why these hypothe-
ses and not other ones are being stated.
Shanes theory is not testable and therefore, not really a scientific theory. There
is no over-arching assumptive base to his theory or any core propositions or core
implications that can be tested and rejected.
An inventory of 80 plus stand-alone propositions would tax even the best memo-
ries. What cant be remembered is hard to use.
Finally, with such a cumbersome model it would be extraordinarily difficult if
not impossible to check the model for additivity. How would it ever be possible
to determine empirically how much performance variance could be collectively
explained by the model as a whole? Without an ability to calculate the additive
contribution of the different independent variables it becomes impossible to
determine the practical value of the model.
On the Problems of Using Scientific Knowledge in Education
The effective delivery of scientific knowledge about entrepreneurial phenomena in

a post-secondary classroom setting may hinge on a number of issues:
The first issue is the extent to which incoming students are prepared to appreciate
social science knowledge presented in a classroom. There is a considerable body of
research focused on the ability and willingness of primary and secondary school
teachers to deliver lectures on the nature, history and philosophy of science (c.f.
King 1991; Hottecke and Silva 2011). Van Driel at al. (2001, p.138) indicate that
science is typically taught, as a rigid body of facts, theories, and rules to be
memorized and practiced, rather than a way of knowing about natural phenomena.
As such, it is likely that few undergraduate students will be well-prepared to cope
with the various issues associated with generating and interpreting social science
knowledge. Such training tends to occur at the masters level or higher, depending on
the intellectual field, and the worldwide location of the post-secondary institution.
An additional consideration here is that pragmatically-minded management and
Conclusion 53
entrepreneurship students may be less inclined than many other post-secondary stu-
dents towards any sort of science instruction.
The second issue that hinders the effective transmission of scientific knowledge
is the nature of social science research. It is subject to great deal of philosophical
and methodological debate. The disciplines of management science, in particular,
are prone to fads research streams and theories come and go regardless of their
empirical status. Replication studies are hard to get published and when they are
published, the findings often fail to support original findings (c.f. Evanschitzky
et al. 2007). In entrepreneurship, there is also a need to demonstrate stronger effect
sizes (which is starting to happen Connelly et al. 2010) in order to provide more
defensible findings.
A third issue also relates to the nature of research in entrepreneurship. A substan-
tial portion of research to date has not been explicitly theory driven. Atheoretical or
propositional research is problematic for a variety of reasons. It may typically be
method and context bound. It is subject to the problem of induction (Hume 1748;
Popper 1935). It is also subject to the problem of drawing appropriate inferences.
Here, Popper (1935, p. 88) argues, however rich a collection of statements that
might be collected in this way, it could never add up to a science. A science needs
point of view, and theoretical problems.
A fourth issue is the extent to which entrepreneurship textbooks provide instruc-
tion based on state of the art of scientific knowledge. Edelman et al. (2008) provide
evidence that the entrepreneurship curriculum may not teach needed skills or con-
tent. Rubin and Dierdorff (2009) warn that our educational content must be valid
and closely relevant to workplace needs or else students will not develop necessary
competencies and hence, will suffer from weak performance.
A fifth issue is the training of entrepreneurship educators. Many instructors are
not terminally educated. For a variety of reasons, it is common for management
schools to hire adjunct instructors with course-based MBA training to teach entrepre-
neurship courses. Of those instructors who are terminally educated, very few of them
are formally educated in the scientific field of entrepreneurship (Brush et al. 2003).
A sixth issue is the willingness of entrepreneurship instructors to teach scientific
findings to students. Some instructors may view the outcomes of such endeavors as
career-limiting or damaging.
Conclusion
Shanes General Theory of Entrepreneurship is an attempt by a leading scholar to

produce a broad reaching theory that has strong implications for entrepreneurial
practice and performance. It is solidly based in the science of the entrepreneurship
discipline and draws on a vast number of scientific studies. It provides for an appar-
ently intelligent synopsis of major propositions of the field. Yet in spite of its suc-
cesses, it also fails in a number of ways. It fails to make distinctions between weak
propositions with dubious support and propositions with strong support. It fails in
being no more than a list of independent, unrelated propositions, and in that sense is
not really a theory. Moreover, it is not directly testable so therefore not scientific.
What follows is an attempt to build a general scientific theory of entrepreneurship
that doesnt fall prey to so many of the criticisms listed here. Not unlike Shanes
model, the GTEC uses our existing brick-like knowledge that positivistic methodol-
ogy has provided, but this time the evidence is used to support the advancement of
an integrative, predictive theory of entrepreneurial performance.
Part III
of Entrepreneurial Creativity
Chapter 5
Modernizing Schumpeter: Toward
a New General Theory of Entrepreneurship
Abstract In Chap. 2 we saw how important it is for a person to have an edge to

succeed as an entrepreneur. In Chap. 3 we saw how formal knowledge of the busi-
ness disciplines and/or even ideas around good business practice did not seem to
offer much help to the would-be entrepreneur. In Chap. 4 we got some appreciation
of the value to be had from the numerous atheoretical studies in the field of entre-
preneurship, on the one hand, while on the other hand appreciating some of the
problems with atheoretical findings in the form of many different and somewhat
arbitrary propositions. At this point you should be ready to appreciate the value of a
good theory. In the next chapter you will be introduced to the ideas of perhaps the
greatest entrepreneurship theorist of the last century along with a number of sugges-
tions for modernizing his ideas from nearly a hundred years ago.
The purpose of this chapter is to build a new general theory of entrepreneurial

creativity. The resulting theory is a new combination that fuses the classical works
of Joseph Schumpeter with the works of modern researchers in the psychological
sub-discipline of creativity. In order to appreciate this new theory, it is desirable to
provide some background on the nature of theory and its scientific relevance.
Theory is not particularly easy to define or describe. Karl Weick (1995, p. 386,
italics in original) indicates that theory has been characterized in many ways:
Theory belongs to the family of words that includes guess, speculation, supposition,
conjecture, proposition, hypothesis, conception, explanation, model. The dictionaries per-
mit us to use theory for anything from guess to a system of assumptions, accepted prin-
ciples, and rules of procedure devised to analyze, predict. (American Heritage Dictionary)
Theory has been described elsewhere as taking on various levels propositional,

mid-range, general and grand. The focus here is on general theory, which aims to
provide insight across one social phenomenon, in this case entrepreneurial
performance.
It is conceivable that entrepreneurship scholars may be skeptical of general
theory, preferring instead to see more mid-range theories. One scholar, William

DOI 10.1007/978-3-319-04726-3_5
58 5 Modernizing Schumpeter: Toward a New General Theory of Entrepreneurship
Gartner, expresses his skepticism of grander scale theories. Gartner (2001, p. 34), as
he puts it, does not believe that a general theory can address all entrepreneurial
phenomena:
Is there an elephant in current entrepreneurship scholarship? Can the study of the parts of
current entrepreneurship lead to a comprehensive theory in entrepreneurship?
No
The conundrum, as I see it, is that the totality of current academic entrepreneurship does
not espouse (nor can it espouse) an entrepreneurship theory, per se: rather entrepreneurship
research espouses a diverse range of theories applied to various kinds of phenomena. There
is no theory of entrepreneurship that can account for the diversity of topics that are currently
pursued by entrepreneurship scholars.
Gartner (2001) is likely right to propose that no one general theory can account
for the entire range of entrepreneurial phenomena. There is no reason to assume,
however, that some entrepreneurship theories cannot be much more general in
nature than others some theories may only explain a single limited phenomena,
others will hopefully be developed to explain many and varied phenomena. This
book represents an attempt to advance a more general theory of entrepreneurship.
Developing an Entrepreneurship Theory
In order to engage in the theory building process, this section highlights key pieces
of related literature. It begins with a discussion of Hofer and Bygraves (1992)
important characteristics of the entrepreneurial process. It then briefly describes
some concerns about the nature of social science theory. Finally, it describes the
various aspects of the theory of creative entrepreneurship.
In 1992, Hofer and Bygrave (p. 14) asserted that, If researchers could develop
a model or theory to explain entrepreneurial processes, they would have the key
that unlocks the mystery of entrepreneurship. The scholars (p. 17, italics in origi-
nal) proposed the following nine 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; and
its outcomes are extremely sensitive to the initial conditions of these variables.
The authors (p. 17) argue that, Taken together, these characteristics create a set
of parameters and criteria that will have to be met by any ideal model of
entrepreneurship.
The general theory of entrepreneurial creativity proposed here appears to meet
Hofer and Bygraves (1992) criteria. First, the theory is initiated by an act of human
volition. The role of the entrepreneur is characterized as central to the process. The
process involves the creation of an individual firm through some stage development
model or another. Thus the work involves a change of state. In fact, in Schumpeters
model no change occurs without the entrepreneur. The creativity process implies
discontinuity, at least when new combinations are involved, because they may more
Developing an Entrepreneurship Theory 59
generally change the way business is conducted over time. The idea of new combi-
nations, whether of small or great significance, is important to the modified theory
of creative entrepreneurship, as it builds upon the work of Schumpeter. The new
theory, however, treats creativity as not only generic to new combinations but also
to growth and development as well. One of the main advances of this modified view
of Schumpeter is the press towards more holistic treatments of the entrepreneur, in
this case as suggested by the Sternberg model.
The entrepreneurial process is dynamic because it is grounded in the
Schumpeterian model in the first place and thereafter, in the continuing creativity
of the entrepreneur over time. The theory is unique mainly in the sense that
Schumpeters theory is unique. The modified theory is, arguably, an embellish-
ment of Schumpeters ideas. At this point, it should not be difficult to argue that
the theory, as it is currently provisioned (with a number of creative resources),
involves numerous antecedent variables. Finally, it is straightforward to argue
that the outcomes of the theory (i.e. entrepreneurial performance) are extremely
sensitive to the initial conditions of these variables (i.e. the creative capacity of
the entrepreneur) because that is the major prediction of the theory and finding of
the book.
The nature of scientific theory is a matter of considerable debate. The field of
management has been at the forefront of deliberation regarding social science the-
ory with related forums in Academy of Management Review [1989, 14(4)] and
Administrative Science Quarterly [1995, 40(3)]. Sutton and Staw (1995, p. 372)
argue that, Though there is conflict about what theory is and should be, there is
more consensus about what theory is not. The authors (p. 371) claim that,
references, data, variables, diagrams, and hypotheses are not theory. In
response, Weick (1995, p. 385) asserts that:
These substitutes for theory may result from lazy theorizing in which people try to graft
theory onto stark sets of data. But they may also represent interim struggles in which people
intentionally inch toward stronger theories. The products of laziness and intense struggles
may look the same and may consist of references, data, lists, diagrams, and hypotheses. To
label these five as not theory makes sense if the problem is laziness and incompetence.
But ruling out those same five may slow inquiry if the problem is theoretical development
still in its early stages.
Weick (1995, p. 385) also emphasizes the difficulties associated with develop-
ment of strong theory: most theories approximate rather than realize the condi-
tions necessary for a strong theory. Entrepreneurship scholars, Bygrave and Hofer
(1991, p. 91), provide a brief discussion of what should constitute theory in the field
of entrepreneurship:
theories are based on a limited number of underlying assumptions and have various
different types of basic structural characteristics including: (1) the number of dependent
variables involved (one vs. many); (2) the number of independent variables involved (one
vs. many); (3) the complexity of the variables involved (single-attribute constructs vs.
multi-attribute constructs); and (4) the complexity of the relationships involved (linear vs.
curvilinear vs. discontinuous).
Ultimately, the theory developed here is generally aligned with arguments

presented by Hofer and Bygrave (1992) and Bygrave and Hofer (1991). Hence, the
theory involves one complex independent variable and one complex dependent vari-
able. The relationship between these variables is straightforward as an explanation,
but somewhat more complex as a process. Finally, the model presents an environ-
mental moderating variable.
Entrepreneurship and Creativity
A number of scholars have advocated for a clear linkage between entrepreneurship

and creativity. Gilad (1984, p. 151) sought to, convince psychologists that cre-
ativity and entrepreneurship are inseparable and therefore economic behavior
deserves at least some attention from researchers in the field of creativity. Whiting
(1988, p. 182) proposed that the, tie between creativity and entrepreneurship
may be closer than is currently attributed. Nystrom (1993, p. 238) suggests a view
of entrepreneurship, inclusive of creativity, that is, more complex and multidi-
mensional than most approaches in the literature, which usually do not consider the
need to balance over time different, often contradictory aspects of change. Brazeal
and Herbert (1999, p. 33) suggest that, the next stage of the evolution of the
entrepreneurship field may include a more holistic orientation, to include relevant
concepts, topics, and selected information from the fields of creativity, change, and
innovation.
In an article focused on entrepreneurial alertness, Gaglio and Katz (2001,
p. 103) suggest the value of leveraging creativity research: The belief that
breaking the existing mean-ends framework is a necessary step for genuine inno-
vation can also be found throughout the creativity empirical literature (Amabile
1983; Csikszentmihalyi 1996). In an article focused on creativity and entrepre-
neurship, Ward (2004, p. 185, brackets added) promotes an integration of,
constructs from mainstream cognitive psychology (specifically those in creativ-
ity) and how those constructs can be applied to an important component of the
entrepreneurs task, namely, the generation and exploitation of novel and useful
ideas.
Ward (2004) anticipates using Sternbergs confluence theory to provide a theo-
retical linkage with entrepreneurship. Ward (2004) endorses greater focus on
Sternbergs theory in entrepreneurship research: Clearly, interactive models that
include knowledge, cognitive processes and skills, motivation, personality factors,
and environmental influences are needed to provide a complete theoretical account
(e.g., Amabile 1983; Sternberg and Lubart 1991).
In addition to those advocating the use of creativity concepts within the entrepre-
neurship field were those who built models emphasizing a direct relationship
between creativity and entrepreneurship. Joseph Schumpeter is foremost amongst
such creativity/entrepreneurship model builders.
Schumpeter, Entrepreneurship and Creativity 61
Schumpeter, Entrepreneurship and Creativity
Joseph Schumpeters entire professional life was spent in elaborating ideas about
the linkages amongst creativity, entrepreneurship and capitalism. The impact of his
intellectual endeavors has been tremendous, according to historian Thomas McCraw
(2007, p. 497):
Within universities, Schumpeters strongest influence has appeared not in economics
departments but in departments of sociology, political science and history, where his writ-
ings are frequently assigned. And far more than in any of these four traditional disciplines,
his ideas have thoroughly pervaded the curricula of post-graduate business schools all over
the world. These schools are much more numerous today (by a factor of about seven) than
when he died, and research within their environs has grown far more rigorous. By the
twenty-first century, every reputable business school offered numerous courses devoted to
entrepreneurship, innovation, and business strategy, and many housed full-blown depart-
ments devoted to these subjects.
Bull and Willard (1993, p. 186) have concluded that Schumpeters definition of
entrepreneurship remains as good as any available:
Recent attempts at redefinition use concepts and words like fundamental change (Murray,
1984), innovative, flexible, dynamic, risk-taking, creative (Stevenson and Gumpert, 1985)
and alertness (Kirtzner, 1985). To some extent these descriptions add insight but, upon
closer examination, merely rephrase the Schumpeter definition. We argue that Schumpeters
definition is adequately descriptive and discriminatory for academic purposes. There are no
compelling reasons for modifying it.
Schumpeters (1911, [1934]) theory of economic development provides a

defensible historical precedent for the work required to establish a link between
creativity and entrepreneurship. It is not unreasonable to cast Schumpeters theory
as not only a specific type of theory of economic development, but also as an applied
theory of creativity. In his first seminal book, The Theory of Economic Development,
Schumpeter (1911, [1934]) elaborated a theory of economic development as a cre-
ative process. The three key elements in the process are, as follows:
1. An economy without entrepreneurs, as a circular flow of goods and services:
The people who direct business firms only execute what is prescribed for them by wants or
demand and by the given means and methods of production. (1934, p. 21)
2. The introduction of superior new business combinations that create new pre-
ferred patterns of flow occasionally disrupt the circular flow:
The carrying out of new combinations we call enterprise; the individuals whose function
it is to carry them out we call entrepreneurs. (p. 74)
3. Old, outmoded patterns of commerce are replaced by new, preferred patterns in

a process called creative-destruction.
his (the entrepreneurs) characteristic task theoretically as well as historically consists
precisely in breaking up old, and creating new, tradition. Although this applies primarily to
his economic action, it also extends to the moral, cultural, and social consequences of it.
(p. 92, bracketed content added)
The three different aspects of Schumpeters theory of economic development

base-line circular flow, new combinations, and creative-destruction collectively
point to the role of the entrepreneur as the creative force within the economy, and
thus, Schumpeters ideas are wholly consistent with the field of creativity. The
notion that productive change in a system is brought about by creative people is
fundamental to the idea of creativity. According to Csikszentmihalyi (1996, p. 28),
Creativity is any act, idea, or product that changes an existing domain, or that
transforms an existing domain into a new one.
The creativity literature has long-recognized new combinations as creative out-
comes. Albert and Runco (1999, p. 25) indicate that, As early as 1837, Bethune
was interested in the ability to originat(e) new combinations of thought The
creativity literature also has recognized that the creative process has both destruc-
tive and constructive sides. These aspects are the well-known and well-understood
creative features of Schumpeters theory, and over the course of his career,
Schumpeter clearly establishes that he is self-consciously writing about creativity as
well as innovation and that the creative process is characterized by indeterminacy.
McGraw (2007, p. 474) supports this perspective:
A creative response, which can never be predicted and is therefore indeterminate, shapes
long-run outcomes in a country, industry, or firm. It often depends on the leadership of
specific individuals, and, Schumpeter argued, it changes social and economic situations for
good.
According to Rosenberg (1976, p. 66), Schumpeter was quite explicit that his
analysis was only intended to apply to major innovations of a kind which involved
significant shifts to an entirely new production function. Schumpeters entrepre-
neur was a grand figure who exerted substantial influence on economic equilibrium.
In Schumpeters (1908, p. 8) words:
the development of human culture and especially of knowledge proceeds in jumps to an
even greater extent; impetuous leaps are mixed with periods of stagnation, inspiring hopes
are singed with bitter disappointments, and, if the new may base itself on the old, progress
is not constant.
Schumpeter (1911, [1934]) asserted that the economic development process can
be divided into three clearly distinct stages: invention, innovation or commercializa-
tion; and, imitation. He distinguished a sharp contrast between invention and inno-
vation. Rosenberg (1976, p. 67) states that to Schumpeter, the making of the
invention and the carrying out of the corresponding innovation are, economically
and sociologically, two entirely different things.
From Schumpeters perspective, entrepreneurs and innovations are the keys to
economic growth. McCraw (2007, p. 356) supports this view:
It seemed plain to Schumpeter that continuous technical innovation and organizational
remodeling, not monopolistic profits, accounted for the prosperity of most great compa-
nies. Pushing his analysis to its limits, Schumpeter identifies capitalist entrepreneurship
with technological progress itself. As a matter of historical record, they were essentially
one and the same thing, the first being the propelling force of the second.
Schumpeter, Entrepreneurship and Creativity 63
The criterion variable in Schumpeters theory of economic growth is focused on

one type of business outcome: new combinations. Schumpeter (1934, p. 66) charac-
terized new combinations, or innovations, by type:
This concept (new combinations) covers the following five case: (1) The introduction of a
new good that is one with which consumers are not yet familiar or of a new quality of a
good. (2) The introduction of a new method of production, that is not yet tested by experi-
ence in the branch of manufacture concerned, which need by no means be founded upon a
discovery scientifically new, and can also exist in a new way of handling a commodity com-
mercially. (3) The opening of a new market that is a market into which the particular branch
of manufacture of the country in question has not previously entered, whether or not this
market has existed before. (4) The conquest of a new source of supply of raw materials or
half-manufactured goods, again irrespective of whether this source already exists or
whether it has first to be created. (5) The carrying out of the new organization of any indus-
try, like the creation of a monopoly position (for example through trustification) or the
breaking up of a monopoly position.
In Schumpeters (1911, [1934]) worldview, there are two types of people: hedo-
nistic economic beings and energetic entrepreneurs. The bulk of the population,
characterized as non-entrepreneurial hedonists, is consumed by the desire for utility
maximization and egocentric ends. According to Sanatarelli and Pesciarelli (1990,
p. 685), non-entrepreneurs dominate the static portion of the economy: In the stat-
ics (circular flow) economic agents choose their plans of action on the basis of given
environmental constraints, information and preferences.
Schumpeters energetic entrepreneur his predictor variable is an unusual,
atypically motivated individual who engages in a relatively undefined business
development process in the dynamic portion of the economy. Regarding the eco-
nomic interests, Sanatarelli and Pesciarelli (1990, p. 685) state: In the dynamics
the concept of rationality is a much broader one: in choosing new combinations
economic agents ignore environmental and historical constraints; these they trans-
form into variables.
With regard to entrepreneurial motivation, Sanatarelli and Pesciarelli (1990,
p. 685) find that, Whereas in the statics the motive is profit, in dynamics it com-
prises a set of goals. This is not to imply that in Schumpeters early writings entre-
preneurs are not profit-attracted; simply that profits are a means to achieve further
ends and are not, as in the case of adaptive types, an end in themselves.
Schumpeter (1934, p. 93) emphasizes the following three motives of energetic
entrepreneurs:
1. First of all, there is the dream and the will to found a private kingdom, usually,
though not necessarily, also a dynasty.
2. Then there is the will to conquer: the impulse to fight, to prove oneself superior
to others, to succeed for the sake, not of the fruits of success, but of success
itself.
3. Finally, there is the joy of creating, of getting things done, or simply of exercising
ones energy and ingenuity.
Creative Creative Entrepreneurial

Entrepreneur Process Outcomes
Creative/
Creative Destructive
New
Entrepreneurial indeterminate
Combinations
Motivation with many
unknowns
Exhibit 5.1 Schumpeters view of creative entrepreneurship
Schumpeters characterization of entrepreneurial motives is, generally speaking,

consistent with the motivation to create, although some highly creative people
such as artists and scientists may build legacies rather than found private king-
doms. His notion of the dynamic side of the economy can also be considered
consistent with the creative process characterized by uncertainty, ambiguity and
coping with many unknowns.
Schumpeters notions of entrepreneurship are illustrated in Exhibit 5.1 below.
The model contains the criterion and predictor factors mentioned above. The causal
factor is creative entrepreneurial motivation and the effect factor is the introduction
of new combinations. The intermediary variable is the process of creative/destruc-
tion decision making.
The variables in the exhibit above are all univariate, or in other words, constants.
New combinations are not described as varying along any type of continuum and
there is no description of variation in the degree of entrepreneurial motivation or the
number of unknowns in the creative process. Schumpeters model is descriptive and
explanatory, but not predictive. Schumpeter defines those people who create new
combinations as entrepreneurs, but he offers no method for predicting who the
entrepreneurs will be.
The limits of Schumpeters view of creative entrepreneurship have been dis-
cussed elsewhere. For example, Baumol (1993, p. 202) argues that there are serious
limits to the usefulness of the Schumpeterian model as an applied theory of
entrepreneurship:
The model makes no attempt to deduce what the innovating entrepreneur does or how he/
she can do it better. True, Schumpeter does provide a very generalized list containing five
broad classes of innovative activity. But that portion of the work makes no pretense of
constituting a piece of theoretical reasoning.
In order to develop a contemporary general theory of entrepreneurship, it is nec-

essary to modernize Schumpeters work by incorporating concepts from the field of
creativity. The end result is a general theory that should predict important entrepre-
neurial outcomes.
Creativity 65
Creativity
The field of creativity contains at least ten categories of theories (Kozbelt et al.
2010). The category of interest here is economic in nature because economic theo-
ries, offer testable hypotheses about creative efforts. (Kozbelt et al. 2010). Only
one of the theories, the investment theory of creativity (Sternberg and Lubart 1991),
focuses a part of its attention at the micro-economic level. Sternberg and Lubart
(1999, p.3), include entrepreneurship in the realm of creative endeavors: If one
wanted to select the best novelist, artist, entrepreneur, or even chief executive
officer, one would most likely want someone who is creative.
The investment theory of creativity (ITC) is utilized as a platform upon which to
build a general theory of entrepreneurial creativity for a number of reasons. The first
reason is that there is a great deal of empirical support for the relevance of creativity
to new venture outcomes (please see Chap. 6). The second reason is that the ITC is
a confluence theory, i.e. it indicates that multiple factors must converge in order to
produce creativity. Many prominent creativity scholars agree on the importance of
multi-factor confluence (Sternberg and Lubart 2006). Third, extant empirical
research has yielded support for the ITC (Sternberg 2012).
The ITC is presented in Exhibit 5.2. Each of the six factors is described by
Sternberg (2012, p. 56) below.
Intellectual X X Thinking X X X
Knowledge Personality Motivation Environment
Abilities Styles
Creative
Outcome(s)
Exhibit 5.2 The investment theory of creativity

Intellectual Abilities
Intellectual abilities are generally acknowledged to be necessary but not sufficient

for creativity (Kim et al. 2010; Renzulli 1986). According to Sternberg and Lubart,
three intellectual skills are particularly important: (a) the synthetic ability to see
problems in new ways and to escape the bounds of conventional thinking; (b) the
analytic ability to recognize which of ones ideas are worth pursuing and which are
not; and (c) the practicalcontextual ability to know how to persuade others of to
sell other people on the value of ones ideas.
As Sternberg and Lubart see it, the confluence of these three abilities is also
important. Analytic ability used in the absence of the other two abilities results in
powerful critical, but not creative, thinking. Synthetic ability in the absence of the
other two abilities results in new ideas that are not subjected to the scrutiny required
to make them work. And practicalcontextual ability in the absence of the other two
may result in the transmittal of ideas not because the ideas are good, but, rather,
because the ideas have been well and powerfully presented. To be creative, one must
first decide to generate new ideas, analyze these ideas, and sell the ideas to others.
A detailed analysis of cognition and intellectual processes in creativity can be found
in Ward and Kolomyts (2010).
Knowledge
Concerning knowledge, on the one hand, one needs to know enough about a field to
move it forward. One cant move a field forward if one doesnt know its current
limitations. On the other hand, extensive knowledge about a field can result in a
closed and entrenched perspective, resulting in a person being stuck in current
perspectives (Adelson 1984; Frensch and Sternberg 1989). Thus, one needs to
decide to use ones relevant knowledge as a bridge and not a barrier.
Thinking Styles
Thinking styles are related to creativity (Kogan 1973). With regard to thinking
styles, a legislative style is particularly important for creativity, that is, a preference
for thinking and a decision to think in new ways (Sternberg 1997; Zhang and
Sternberg 2006). Preference to think creatively needs to be distinguished from abil-
ity to think creatively. To think creatively it is also helpful to think globally as well
as locally, distinguishing the forest from the trees and thereby recognizing which
questions are important and which ones are not.
Creativity 67
Personality
Numerous research investigations have supported the importance of certain per-

sonality attributes for creative functioning (Barron 1969, 1988; Feist 2010). These
attributes include, but are not limited to, willingness to overcome obstacles, will-
ingness to take sensible risks, willingness to tolerate ambiguity, and self-efficacy.
In particular, buying low and selling high typically means defying the crowd, so
that one has to be willing to stand up to conventions if one wants to think and act
in creative ways. Note that none of these attributes are fixed, in the sense they may
change over time. One can decide to overcome obstacles, take sensible risks, and
so forth.
Motivation
Intrinsic, task-focused motivation is also essential to creativity (Hennessey 2010).

The research of Teresa Amabile (1996, 1999) and others has shown the importance
of such motivation for creative work, and has suggested that people rarely do truly
creative work in an area unless they really love what they are doing and focus on the
work, rather than the potential rewards. Motivation is not something inherent in a
person: One decides to be motivated by one thing or another.
Environment
Finally, one needs an environment that is supportive and rewarding of creative ideas
(Sternberg and Lubart 1995; Sternberg and Williams 1996). One could have all of
the internal resources needed to think creatively, but without some environmental
support (such as a forum for proposing those ideas), the creativity that a person has
within him or her might never be displayed. Different cultures support creativity
differentially and may even have different conceptions of what constitutes creativity
(Lubart 2010) so it is important to take the environment into account when assessing
creativity.
The nature of confluence in the ITC is worthy of mention here. According to
Sternberg (2012, p. 6), the thresholds and interactions of the six factors have yet to
be discovered:
Concerning the confluence of components, creativity is hypothesized to involve more than
a simple sum of a persons level on each component (Sternberg and Lubart 1991). First,
there may be thresholds for some components (e.g., knowledge) below which creativity is
not possible, regardless of the levels on other components. Second, partial compensation
may occur in which a strength on one component (e.g., motivation) counteracts a weakness
on another component (e.g., environment). Third, interactions may also occur between
components, such as intelligence and motivation, in which high levels on both components
could multiplicatively enhance creativity.
The following section uses Sternberg and Lubarts (1991) investment theory of
creativity in order to develop a general theory of entrepreneurial creativity. The
rationale for making adjustments to the ITC is located in the growing body of evi-
dence that creativity is domain specific. Baer (2012, p. 2), a scholar investigating
domain specificity, finds that:
the evidence for domain specificity has only grown stronger (for a recent summary, see
Baer 2010). The question is not one of whether or not the cognitive skills that underlie
creativity are domain-specific to some extent everyone now agrees that they are but
rather whether or not there are any creative thinking skills that are truly domain general.
The Independent Variable: Entrepreneurial Creativity
As previously mentioned, it is both necessary and possible to modernize and modify

Schumpeters work. The five individual-level creative factors in Sternberg and
Lubarts (1991) Investment Theory of Creativity provide a productive expansion of
Schumpeters independent univariate creative factor, creative entrepreneurial moti-
vation. The combination of the five multivariate creative factors when converted to
a measure will likely constitute a complex variable, given the potential for a variety
of thresholds and interactions of the separate factors. Each factor represents a vari-
able. Further, each factor can be divided into sub-components. For example, entre-
preneurial knowledge could be divided into various types of knowledge relevant to
entrepreneurs.
The Dependent Variables: Innovation and Business Development
Schumpeters new combinations were material innovations that changed the

functioning of business in substantial ways. The substance of his innovations was
such that they were important new innovations in both the sense that they involved
radical change (i.e. intermittent shocks in an otherwise static economy) and that
they had sizeable financial impact for the select few entrepreneurs. Modern thinking
about innovation (c.f. Rosenberg 1976) has refined Schumpeters views in much
more incremental terms, allowing for many more smaller-impact entrepreneurs to
generate a plethora of contributions to economic development.
Schumpeters entrepreneurs experienced incredible financial success, enabling
them to found private kingdoms. Although Schumpeters focus was new combina-
tions rather than entrepreneurial wealth generation, it can be argued that Schumpeter
indirectly spoke to other outcome variables, namely business development, growth
and financial performance. Hence, it is possible to recast Schumpeters entrepre-
neurial outcomes along at least two dimensions: (1) new combinations or innova-
tions and (2) financial performance. Each is discussed below:
Creativity 69
Innovation
Schumpeter suggested that entrepreneurial creativity led to new combinations (i.e.

radical innovations). The allusions in The Theory of Economic Development indi-
cate that the new combinations are momentous changes in the way the business
world operates. For example, Henry Fords strategic introduction of the assembly
line transformed the production of automobiles and would thusly be classified as a
major innovation.
The scholarly field of innovation, as mentioned above, has its own, more inclu-
sive, take on the nature of innovation. According to Johannessen and Olsen (2010,
p. 502), the innovation field is witnessing a stronger focus on, both wider variet-
ies of innovations (see Johannessen et al. 2001, for an overview) and on how inno-
vations come into being. Clearly, underneath the layer of rare Schumpeterian
innovations lie an array of business outcomes that are, at a minimum, of collective
economic significance, even if they do not involve innovations in a conventional
sense. Theoretically at least, one need not exclude non-innovative businesses from
a modified Schumpeterian model, as the concept of innovation is potentially as mal-
leable as one might wish it to be.
Business Development and Performance
Schumpeter, an economist, was predominantly focused on macro-economic develop-

ment rather than the development of individual businesses. His entrepreneurs enabled
economic growth through the production of more and better goods and services.
From the standpoint of entrepreneurship research, the key outcome measures lie at
the level of the firm or individual. Such measures include growth in sales, profits,
and entrepreneurial earnings, as well as growth in personnel.
The Relationship: The Causal Explanation
As previously mentioned, there is evidence in favor of creative domain specificity

(Baer 2012). This may be obvious for certain creative outlets. For example, devel-
oping an innovative, growth venture does not appear to bear much similarity to
painting a still life. First of all, the time frames are entirely different. Second, the
resource requirements are radically different. Third, the purpose or goal of the exer-
cise is much more subject to change or evolution in the case of the venture than in
the case of a single still life oil painting. Fourth, the nature of a venture changes
radically as it develops and grows.
If creativity for the domains of painting and new venturing are different, then it
may stand to reason that models for the creative processes underlying each genre
may need to be differently composed. There are some different available possible
models of the entrepreneurial process that might be useful for characterizing
Later growth and development

Level of Early growth and development
Creativity
Survival
Start-up
Intention to start
Level of Development
Exhibit 5.3 Staircase of creative development: creative sorting function
entrepreneurship as a creative process. One common process model is the stages

model. Perhaps the most popular variation today is Venkataramans (1997) two-
stage model of creativity as opportunity identification and execution. McMullan
and Longs (1990) ten-stage model of open-ended creative challenges provides a
more detailed alternative. Either of these process models could be used to orga-
nize evidence relating creativity to entrepreneurial outcomes over time. Here, a
five-stage model is proposed because it fits with a lot of existing evidence tying
creativity to entrepreneurial outcomes. Exhibit 5.3 below indicates that the model
combines both stages in the development of a business with a couple of growth
outcome measures, suggesting the ongoing need for entrepreneurial creativity as
a venture develops and progresses.
While entrepreneurial creativity might be viewed as an activity specific to certain
venture development tasks such as opportunity identification (Shane 2003), it is also
possible to view entrepreneurial creativity to be of continuing importance over the
subsequent development of a venture (McMullan and Long 1990). Whether entre-
preneurial creativity is more relevant to some particular stages of business develop-
ment than others is a scientific question worthy of some study.
In Exhibit 5.2 above, it is expected that the development and growth of an enterprise
is a monotonically increasing function of the creativity of the lead entrepreneur.
Moreover, it is expected that developing highly innovative enterprises is anticipated to
be more creatively demanding than developing non-innovative ones. Along similar
lines, it is expected that developing faster growing and more profitable enterprises is
anticipated to be more creatively demanding than developing less dynamic and less
profitable businesses. Growth is expected to be more demanding than survival; sur-
vival more demanding than start-up; and start-up more demanding than the expression
of an intention. The amount of creativity demanded by the activity will tend to climb
with each step along the staircase of venture development/growth.
The Environmental Moderator
Schumpeter put great stock in the role of a relatively small number of individuals
(i.e. highly-innovative, high-growth entrepreneurs) in order to fully explain eco-
nomic development. He ignored, or heavily discounted, a number of potentially
Creativity 71
relevant political and economic institutions (e.g. universities) and other individual
roles (e.g. central bankers). A modern reconceptualization of Schumpeters under-
socialized perspective would recast the entrepreneur as only one economic agent
amongst many agents and institutions. The reconceptualization provides, among
other things, a foundation for analysis of factors that explain regional variations in
entrepreneurial intensity.
Numerous scholars (c.f. David McClelland; Zoltan Acs and David Audretsch)
have investigated regional variations in entrepreneurial intensity. McClellands par-
ticular approach, for example, was to emphasize variations in need for achievement
between societies as a key factor for distinguishing have and have-not regions.
There are numerous other factors that might encourage more entrepreneurial cre-
ativity, including parenting practices, schooling practices, post-secondary educa-
tional opportunities and, career opportunities. It is conceivable that societies that
encourage more of their creative talent toward new venturing will (1) tend to empha-
size the value of entrepreneurship and (2) provide supporting institutions and (3)
generally remove barriers to success.
The Model
The objective here is to present a general scientific theory of entrepreneurial creativ-

ity (GTEC) that provides testable hypothesis at its core and hence, clear potential
for refutation. The scientific model, displayed in Exhibit 5.4 below, integrates
Schumpeters (1911, [1934]) formal model relating entrepreneurs to new combina-
tions and Sternberg and Lubarts (1991) investment theory of creativity with addi-
tional process and outcome variables. The enhanced testability of the GTEC over
Schumpeters a formal model is one substantive argument for its adoption.
Entrepreneurial Creativity (EC) Creative Process Performance Outcomes
1. EC Intelligence 1. Intention A. Level of new combinations

2. EC Personality 2. Start-up
3. EC Motivation 3. Survival B. Financial Performance
4. EC Thinking Style 4. Growth (low level)
5. EC Knowledge 5. Growth (high level)
Environmental Supportiveness
(for example)
1. Dynamism
2. Heterogeneity
3. Hostility
Exhibit 5.4 The general theory entrepreneurial creativity

In the GTEC, elements of entrepreneurial creativity combine to enhance the

subsequent process of venture development as well as the outcomes of that process.
The creative process is described as taking place across stages of development and
growth. Testable core hypotheses include, but are not limited to the following
hypotheses.
The degree of development of a venture is a monotonically increasing function of the level
of entrepreneurial creativity possessed by the lead entrepreneur.
The level of venture innovation is a monotonically increasing function of the level of entre-
preneurial creativity possessed by the lead entrepreneur.
The GTEC offers numerous secondary hypotheses, including potential relation-

ships between all of the separate elements of entrepreneurial creativity and all of the
separate elements of the creative process and each of the entrepreneurial perfor-
mance measures. Additional stages in the creative process than those in the diagram
are possible, yielding more possible hypothetical relationships between entrepre-
neurial creativity and the latter parts of the model. Further, the model provides
numerous potential hypothetical relationships between entrepreneurial character
variables, environmental variables, creative processes and creative outcomes.
Conclusion
The idea that Schumpeters model of entrepreneurship from his early work might be
used as a basis for a modern theory of entrepreneurship has been suggested by a
number of scholars over time. Schumpeters model is carefully presented to demon-
strate both its strengths and limitations. A model of creative resources is provided as
a first step towards the modernization of Schumpeters theory.
The changing knowledge base within the discipline of creativity can continue to
inform the content of creative entrepreneurship over time. As the concept has been
elaborated, creative entrepreneurship is composed of: creative entrepreneurial peo-
ple, creative processes, creative outcomes and creative environments. The conflu-
ence of creative entrepreneurial resources suggests that the creative aspects of a
number of resources might be jointly required for effective entrepreneurial perfor-
mance (i.e. intellectual abilities, knowledge, styles of thinking, personality, motiva-
tion, and environment). The threshold aspect of in the Sternberg model suggests that
minimal amounts of the different creative resources might be required to be entre-
preneurially effective.
In practice, creative decisions may be often required as entrepreneurs do not have
the time and/or resources to assimilate expert routines in many problem areas.
Conceivably, there are so many areas of expertise required to develop a business
concept into a successful, on-going enterprise, that one person cannot expect to
learn all of them in a timely manner. More creative entrepreneurs will be expected
to outperform less creative, over the entire cycle of business development, growth
and financial performance.
Chapter 6
The Core Evidence
Abstract Now that we have formulated a modernized version of Schumpeters

model, should we believe it? The next chapter is concerned with the empirical evi-
dence and how it relates entrepreneurial creativity with venture development.
The purpose of this chapter is to review empirical evidence central to a theory of

entrepreneurial creativity. The chapter will take existing evidence relating personal
creativity (PC) to a hierarchy of increasingly important entrepreneurial attitudes,
behaviors and outcomes, and use it to judge the predictive potential of the general
theory of entrepreneurial creativity. This chapter poses the following questions:
1. Is PC related to the intention to start a new business?
2. Are entrepreneurs more creative than people who do not start companies?
3. Is PC related to the survival of new ventures?
4. Does PC distinguish those who build entrepreneurial ventures from those who
manage small, traditional businesses?
5. Does personal creativity distinguish levels of entrepreneurial success both in
terms of employment growth and financial performance?
6. Is PC related to venture innovativeness?
The chapter will also attempt to better frame the current research needs around
the six questions. Ultimately, it provides insight into what is known and the gaps in
knowledge with respect to the general theory of entrepreneurial creativity.
The search for creativity studies presented below was undertaken via two search
methods. The first method was to explore various electronic databases for key
search terms such as creativity, and highly-related constructs such as personal inno-
vation, openness to experience, innovativeness, innovative orientation and improvi-
sation. The second method involved a review of all citations for articles found via
the first method. In both cases, the primary objective was to uncover research,
including meta-analyses, which focused on the following new venture process out-
comes: intentionality, start-up, survival, and growth/success. A secondary objective
was to find and examine empirical research regarding any creativity differences
between entrepreneurs and non-entrepreneurs, and between entrepreneurs and small

DOI 10.1007/978-3-319-04726-3_6
74 6 The Core Evidence
business owners. In every case, the researchers presented their measures as

measures of personal creative or innovative ability.
The search produced a database of 70 empirical studies starting in 1974 and
found in a wide range of fields including entrepreneurship, management and psy-
chology. The review revealed that research linking the personal creativity of lead
entrepreneurs with various outcome variables has been conducted in many countries
around the world: Austria, Australia, Costa Rica, Finland, Germany, Greece,
Indonesia, Ireland, Italy, Malaysia, Mexico, the Netherlands, Norway, Portugal,
Russia, South Africa, Singapore, Spain, Sweden, Taiwan, Turkey, Uganda, the
United Kingdom, the United States and Zimbabwe.
The research has involved a variety of research instruments including: the
Achievement Motive Questionnaire (Elizur 1979; Shye 1978), the Big Five
Personality Traits model, the Entrepreneurial Orientation scale (Khandwalla 1977),
the General Enterprising Tendency test (Caird 1991a), the Geometric Patterns Test
(Wallach and Kogan 1965), the Jackson Personality Inventory (JPI), the Kirton
Adaption-Innovation Inventory (KAI), the Miner Sentence Completion Scale
(Miner 1965), the Interest in Work Innovation Scale (Patchen 1965), the Personal
Characteristics Inventory (Barrick and Mount 1993), the Mini-Markers Inventory
Saucier (1994), as well as original, researcher-generated instruments. The various
instruments measure different aspects of creativity and some instruments, such as
the KAI, provide more comprehensive measures of it.
The independent variable, personal creativity, has been expressed in a number of
ways in the 70 studies: creativity, innovativeness, openness to innovation, the ability
to provide innovative solutions to problems, creative self-efficacy, proclivity for
improvisation, innovative orientation, personal innovation, innovation, preference
for innovation, expert idea generator type, integrative complexity, divergent think-
ing and generation of original business ideas.
The review also revealed that many researchers tested variables related to mod-
ern creativity theory such as need for achievement and propensity to take risks. The
creativity relationships, as well as those of the related variables, are reported below
in three sections: Pre-venturing, New Venturing, and New Venture Outcomes.
Pre-venturing
Numerous scholars have examined the extent to which individual creativity influ-
ences entrepreneurial intentions. The articles that focus on the relationship between
personal creativity and intention to start a new venture are displayed below in
Table 6.1. An example of the type of research in this area is the Vesalainen and
Pihkala (1999) study, which involved the participation of 2,899 people in Finland.
Six percent (174 people) had a clear intention to start a new venture within 1 year.
Those with entrepreneurial intentions were asked ten 3-point questions on each of
several scales: appealing aspects of their working environment; appealing rewards
from work; and, the degree to which an entrepreneurial career would provide the
Table 6.1 Creativity and new venture intentionality
Related findings and level
Article Creativity measures Outcome measures Level of significance of significance
Hull et al. (1980) Creativity Claim of wanting to start a business Significant at 0.01 Need for achievement
Pre-venturing
3-item personality scale significant at 0.01;

(unspecified) propensity to take risk
significant at 0.01
Koh (1996) Innovativeness Measure of entrepreneurial Significant at 0.0001 Propensity to take risks
Researcher created instrument inclination in next 3 years significant at 0.0001;
tolerance of ambiguity
significant at 0.01
Vesalainen and Creativity Differing levels of intentionality Significant at 0.001
Pihkala (1999) Factor analysis generated towards starting a business
measure
Sagie and Elizur Inclination to provide innovative Distinguishing small business Significant at 0.05 Facing uncertainty
(1999) solutions to problems students from other business students significant at 0.001;
Achievement Motive and economics students calculating risks
Questionnaire (Elizur 1979; significant at 0.001
Shye 1978)
Singh and DeNoble Openness to experience Intention to become self-employed Positive but not significant
(2003) Sauciers Mini-Markers Inventory
Baron and Markman Creative self-efficacy Intention to become an entrepreneur Not significant
(2005) NEO-FFI Scale (Costa and
McCrae 1992)
Frazier and Niehm Creativity Entrepreneurial intentions Significant at 0.000 (as Opportunity seeking
(2006, unpublished) Researchers created instrument reported in article) significant at 0.05
based on entrepreneurship
orientation (EO) literature
(continued)
75
76
Table 6.1 (continued)

Gurol and Atsan Innovativeness Distinguishing entrepreneurially- Significant at 0.002 Risk taking propensity
(2006) Jackson Personality Inventory inclined students from non-inclined significant at 0.001; locus
students of control significant at
0.001; need for
achievement significant at
0.01; tolerance for
ambiguity not significant
Hmieleski Proclivity for improvisation Entrepreneurial intentions Significant at 0.01
and Corbett (2006) Researchers created instrument
Zampetakis and Creativity Entrepreneurial intentions Significant at 0.001
Moustakis (2006) Researchers created instrument
Frank et al. (2007) Innovative orientation Entrepreneurial intentions Significant at 0.05 Need for achievement,
6
Researchers created instrument internal locus of control

and risk propensity
significant at 0.05
Gurel et al. (2010) Innovativeness Entrepreneurial intentions Significant at 0.01 Propensity to take risks
Jackson Personality Inventory significant at 0.05;
Tolerance for ambiguity
and locus of control not
significant
The Core Evidence
Obschonka et al. Openness to experience Entrepreneurial intentions Not significant
(2010) 45-item instrument (Ostendorf
1990)
Pre-venturing
Zhao et al. (2010) Openness to experience Entrepreneurial intentions Significant at 0.01 Risk propensity effect
Meta-analysis size: p = 0.40
Effect size: p = 0.24
Lin et al. (2011) Innovation, creativity and Entrepreneurial intentions Not significant in final model
detecting opportunities abilities
Researchers created instrument
Altinay et al. (2012) Innovativeness Entrepreneurial intentions Significant at 0.05 Tolerance for ambiguity,
Eight items from the Jackson risk taking, need for
Personality Inventory achievement and locus of
control not significant
Hormiga et al. (2013) Propensity to innovate Entrepreneurial intentions of Significant at 0.01 Risk taking not significant
Researchers created instrument employees Beta = 0.26
Marques et al. (2013) Creativity/innovation Entrepreneurial intentions Positive, significance not Motivational factors
reported significant at 0.05
Researchers created instrument Explains approximately 35 %
of intention variance
77
desired rewards. Factor analysis of the appealing rewards results yielded a growth/
creativity factor. This factor included responses to a question on the value of using
ones innovativeness and creativity; on the possibility to grow and learn; and on the
value of independence. This new factor variable was regressed against different
levels of intentionality, which was positive and statistically significant at the 0.001
level. The authors (p. 117) concluded: Regarding entrepreneurial motivation, the
growth/creativitydimension of valence appeared to function as the most powerful
ingredient of intentionality.
The majority of the existing intentionality research indicates the presence of a
statistically significant relationship. Further, a meta-analysis undertaken by Zhao
et al. (2010) reported an effect size ( p ) for openness to experience with intentional-
ity of 0.24. The effect size (p. 393) is the, estimated population effect size, after
correcting for measurement error in both the predictor and the criterion.
Many of the new venture intentionality studies also examined and reported dif-
ferences in other personal characteristics related to creativity. The other characteris-
tics that appear to influence new venture intentionality are need for achievement and
propensity to take risk.
New Venturing
A substantial amount of research has focused on the extent to which personal

creativity influences the decision to create a new venture (i.e. become an entre-
preneur). Most of the research examines personal creativity level differences
between those who found new ventures and those who do not. The non-entrepre-
neurs are typically non-founding managers of existing businesses. A small
amount of the research examines the relationship between personal creativity
and new venture creation. The articles that focus on differences in personal cre-
ativity levels between entrepreneurs and non-entrepreneurs are displayed in
Table 6.2 below.
An example of the type of research in this area is the Robinson et al. (1991) study,
which used an attitudinal instrument to distinguish 54 entrepreneurs from 57 non-
entrepreneurs. The authors (p. 21) non-entrepreneurs were career white-collar
non-managers from two high-tech companies, a municipal government, and the
financial department of a major university. The Entrepreneurial Attitude Orientation
had four subscales: innovation, achievement, personal control and self-esteem. In a
stepwise discriminant analysis, the innovation measure was entered first with a sig-
nificance of 0.0001.
The majority of the extant research indicates a statistically significant difference
between entrepreneurs and non-entrepreneurs with respect to personal creativity. A
meta-analysis undertaken by Zhao and Seibert (2006) finds a statistically significant
difference for openness to experience at the 0.01 level.
Many of the studies examined and reported differences in other personal charac-
teristics. The characteristics that appear to separate entrepreneurs from non-
entrepreneurs are need for achievement and propensity to take risk.
Table 6.2 Creativity levels: entrepreneurs versus non-entrepreneurs
Hull et al. (1980) Creativity At least some ownership in Significant at 0.05 Propensity to take risks
New Venturing
3-item personality scale (unspecified) a business significant at 0.01

Smith and Miner (1984) Personal innovations Distinguishing fast-growth Significant at 0.05 Self achievement
Miner Sentence Completion entrepreneurs from significant at 0.01
Scale and an instrument created managers
by the researchers
Miner Sentence Completion Scale entrepreneurs from significant at 0.01
and an instrument created by the managers
researchers
Miner (1990) Personal innovation Distinguishing high-growth Significant at 0.01 Self-achievement, avoiding
Miner sentence completion Scale entrepreneurs from risks, feedback of results
(Form T) managers and planning significant at
0.01
Caird (1991b) Creative tendency Distinguishing Business Significant at 0.05 for Need for achievement and
owners from other nurses and civil servants locus of control significant
General Enterprising Tendency occupational groups Significant at 0.01 for clerical at 0.01 for all occupational
Inventory trainees groups
Robinson et al. (1991) Innovation Distinguishing Significant at 0.0001 Measures of achievement,
Entrepreneurial Attitude Orientation entrepreneurs from career personal control and
Inventory while collar workers self-esteem significant at
0.001
(continued)
79
80

Cromie and ODonaghue Creativity Distinguishing Significant at 0.001 Need for achievement,
(1992) General Enterprising Tendency entrepreneurs from locus of control and risk
Inventory managers taking significant at 0.001
Rosenfeld et al. (1993) Innovation and three subscales: Distinguishing Significant at 0.01
originality, efficiency and rule entrepreneurs from
conformity managers
Kirton Adaption-Innovation The efficiency subscale was
Inventory not significant
Engle et al. (1997) Innovativeness and three subscales: Distinguishing Innovation and originality Locus of control not
originality, efficiency and entrepreneurs from significant at 0.001; significant
conformity employees non-conformity significant
Kirton Adaption-Innovation Inventory at 0.05; efficiency not
significant
Hyrsky and Kangasharju Innovativeness Distinguishing founders Significant at 0.001
(1998) Kirton Adaption-Innovation Inventory from non-founders
Stewart et al. (1999) Preference for innovation Distinguishing Significant at 0.0001 Need for achievement
Innovation Scale of the Jackson entrepreneurs from significant at 0.0001;
Personality Inventory corporate managers risk-taking propensity
significant at 0.0001
6
Utsch et al. (1999) Innovativeness Distinguishing Significant at 0.05 for Need for achievement
Patchens (1965) interest in entrepreneurs from readiness to change at work; significant at 0.001
innovation scale managers significant at 0.001 for
interest in innovation at work
Miner (2000) Expert idea generator type Post-graduation Significant at 0.01 Personal achiever
Four way psychological typology of entrepreneurial activity significant at 0.01
entrepreneurs
The Core Evidence
Hmieleski and Corbett Proclivity for improvisation Started a business Significant at 0.01 for MBA
(2006) Researchers created instrument students; not significant for
undergraduate students
Zhao and Seibert (2006) Openness to experience Distinguishing Significant at 0.01
entrepreneurs from
New Venturing
Meta-analysis
managers
Frank et al. (2007) Innovative orientation Start-up Not significant Risk propensity significant
Researchers created instrument at 0.05
Caliendo et al. (2014, Openness to experience Self-employment entry Significant at 0.01 Internal locus of control
unpublished) Short versions of established and high risk attitude
personality inventories increase the probability of
self-employment entry
81
New Venture Outcomes
This section examines the extent to which personal creativity influences four new
venture outcomes: survival, employment growth, financial performance and venture
innovativeness. A sub-section that investigates the level of personal creativity dif-
ferences between entrepreneurs and small business owners is included here.
New Venture Survival
A small amount of research has focused on the extent to which personal creativity
influences new venture survival. The articles that focus on the relationship between
personal creativity and new venture survival are displayed below in Table 6.3. An
Table 6.3 Creativity and new venture survival

Related findings
Creativity Outcome Level of and level of
Article measures measures significance significance
Johnson and Creativity and Surviving Significant Need for
Ma (1995) innovation versus at 0.05 achievement
Researchers non-surviving significant at 0.001;
developed business locus of control
instrument owners. significant at 0.000;
calculated
risk-taking
(strategy)
significant at 0.000
Ciavarella et al. Openness to Long-term new Negative and
(2004) experience venture survival significant at
(8+ years) 0.05
Personal Life span of Negative and
Characteristics new venture significant at
Inventory Form D 0.10
Beta = 0.592
Schmitt- Openness to Business Not
Rodermund experience survival significant
(2004) 45-item instrument
(Ostendorf 1990)
Caliendo et al. Openness to Business Not Internal locus of
(2014, experience survival significant control and high
unpublished) Short versions of risk attitude
established increase the
personality probability of
inventories self-employment
survival
New Venture Outcomes 83
example of the type of research in this area is the Johnson and Ma (1995) study,
which used a novel instrument to distinguish surviving from non-surviving business
owners. The authors creativity and innovation measure revealed a personal
creativity difference at the 0.05 level.
Overall, the small number of studies that relate personal creativity to the ten-
dency for businesses to survive is not convincing that creativity has much of a role
to play. The results lead the authors to more closely question whether such a rela-
tionship should have been expected in the first place.
Differences in Creativity between Entrepreneurs

and Small Business Owners
The articles that focus on creativity level differences between individuals who
founded high-growth companies and those who founded low-growth companies
(i.e. small businesses) are displayed below in Table 6.4. The definition of small
business remains a contentious one. In the articles presented here, the researchers
provide explanations of how to distinguish the groups. For example, Carland et al.
(1988, p. 99) offer the following definitions:
Small Business Owner: An individual who establishes and manages a business for the prin-
cipal purpose of furthering personal goals; the business must be the primary source of income
and will consume the majority of ones time and resources; the owner perceives the business
as an extension of his or her personality, intricately bound with family needs and desires;
Entrepreneur: An individual who establishes and manages a business for the principal
purpose of profit and growth; the entrepreneur is characterized principally by innovative
behavior and will employ strategic management practices in the business.
An example of the type of research in this area is the Stewart et al. (1999) study
that uses the innovation scale of the Jackson Personality Inventory to distinguish
entrepreneurs from small business owners. The authors (p. 204) find that, Small
business owners also lack the same degree of preference for innovation. Given the
relative significance of innovativeness in entrepreneurs, it would appear that creativ-
ity necessitates extended risk, because it entails coping with the potential outcomes
that are associated with untried venues. Small business owners appear to lack this
coalition of creativity and risk-taking.
Overall, the research findings suggest that the two groups differ in terms of level
of personal creativity. A number of the studies also report statistically-significant
differences between the two groups with respect to need for achievement and pro-
pensity to take risk.
84
Table 6.4 Creativity levels: entrepreneurs versus small business owners

Related findings
Article Creativity measures Outcome measures Level of significance and level of significance
Morris and Fargher (1974) Creativity Distinguishing owner-operators Significant at 0.01 Need for achievement
Geometric Patterns of high growth and low growth significant at 0.001
Test using the unique responses businesses
index (Wallach and Kogan 1965)
Carland et al. (1988) Preference for innovation Distinguishing entrepreneurs Statistical significance
Patchen Measure from small business owners suggested, but not
reported
Miner Sentence Completion Scale entrepreneurs from slow-growth significant at 0.01
and an instrument created by the entrepreneurs
researchers
Miner Sentence Completion Scale entrepreneurs from slow-growth significant at 0.01
and an instrument created by the entrepreneurs
researchers
Stewart et al. (1999) Preference for innovation Distinguishing entrepreneurs Significant at 0.01 Need for achievement
Innovation Scale of the Jackson from small business owners significant at 0.001;
6
Personality Inventory risk-taking propensity

significant at 0.05
Wagener et al. (2010) Creativity Distinguishing successful Significant at 0.05 Risk-taking significant at
Researchers created instrument entrepreneurs from successful 0.10; tolerance for
small business owners ambiguity significant at
0.05
The Core Evidence
Growth and Performance
The articles that focus on the relationship between personal creativity and new ven-
ture job creation are displayed below in Table 6.5. An example of the type of
research in this area is the Utsch and Rauch (2000) study, which used Patchens
(1965) interest in innovation scale to find a positive and statistically-significant rela-
tionship between innovativeness and new venture employment growth.
On balance, past research indicates a statistically significant relationship between
individual creativity and new venture employment growth. A meta-analysis that
might more effectively demonstrate the strength of relationship has not been under-
taken in this area.
Some of the articles also report a statistically-significant and positive relation-
ship between need for achievement and employment growth.
The research that addresses the relationship between the personal creativity of
the lead entrepreneur and new venture financial performance uses a variety of out-
come measures such as increase in gross sales, return on investment and profit
growth. The articles that focus on the relationships are displayed below in Table 6.6.
An example of the type of research in this area is the Bellu (2003) study, which used
the Miner Sentence Completion Scale to investigate personal innovation of 38
growth-oriented entrepreneurs in a depressed region of Italy. The author found that
personal innovation was positively correlated with growth in new venture sales at
the 0.01 level of statistical significance.
The majority of extant evidence indicates the existence of a positive, statistically-
significant relationship. Three meta-analyses have been undertaken. The first, by
Rauch and Frese (2007), report a corrected r of 0.273 and indicate statistical signifi-
cance but do not report it. Rauch et al. (2009) report a corrected r of 0.242 and
indicate statistical significance but do not report it. Zhao et al. (2010) find an effect
size of 0.21 and report statistical significance at the 0.01 level. The effect size
(p. 393) is the, estimated population effect size, after correcting for measure-
ment error in both the predictor and the criterion.
A number of the studies also report a positive and statistically-significant rela-
tionship between need for achievement and new venture financial performance.
Some Synopses of Studies Related to Financial Performance
The following studies are illustrative of the strength of the relationship between
various measures of the lead entrepreneurs personal creativity and different mea-
sures of the financial performance of their firms. The following studies illustrate the
potential of a lead entrepreneurs personal creativity measures to potentially predict
the financial outcome performance of their ventures.
McGaffey and Christy (1975) measured an aspect of cognitive complexity that
emphasizes the way a person combines information for adaptive and creative
86
Table 6.5 Creativity and new venture employment growth

Related findings and level of
Article Creativity measures Outcome measures Level of significance significance
Miner et al. (1989) Personal innovation Mean annual growth Significant at 0.01 Self-achievement significant at 0.01
Miner Sentence Completion in employees Avoiding risks significant at 0.05
Scale
Miner et al. (1994) Personal innovation Growth in employees Significant at 0.05 Self-achievement significant at 0.01
Miner Sentence Completion
Scale
Walsh and Anderson (1995) Innovativeness Employment growth Not significant
Kirton Adaption-Innovation
Inventory
Utsch and Rauch (2000) Innovativeness Employment growth Significant at 0.05
Patchens (1965) interest in
innovation scale
Tullar (2001) Personal innovation Employment growth Significant at 0.01 for Self-achievement significant at 0.01
Miner Sentence Completion Russians and 0.05 for for both groups on both dependent
Scale Americans variables
Krauss et al. (2005) Innovative orientation Employment Growth Not significant Achievement orientation and
6
Researchers created instrument risk-taking not significant

Frank et al. (2007) Innovative orientation Employment growth Not significant Risk propensity significant at 0.05
Researchers created instrument
The Core Evidence
Table 6.6 Creativity and new venture financial performance
Related findings and
Article Creativity measures Outcome measures Level of significance level of significance
McGaffey and Christy (1975) Integrative complexity Increase in Gross Sales Significant at 0.05
Integrative Complexity Assessment r = 0.85
Instrument (Schroder et al. 1967)
Khan (1986) Creativity Return on Investment Significant at p = 0.014
Researcher created instrument

Khan (1987) Creativity/Ingenuity Return on Investment Significant at p = 0.0396
Researcher created instrument Accounts for 71 % of the
performance variance
Miner et al. (1989) Personal innovation Mean annual growth in Not significant Self-achievement
sales significant at 0.01
Miner Sentence Completion Scale Avoiding risks
significant at 0.05
Miner et al. (1994) Personal innovation Growth in sales Significant at 0.05 Self-achievement
Miner Sentence Completion Scale Current yearly income Not significant significant at 0.01 for
both measures
Utsch and Rauch (2000) Innovativeness Profit growth Significant at 0.05
Patchens (1965) interest in innovation
scale
Tullar (2001) Personal innovation Sales growth Significant at 0.05 for Self-achievement
Miner Sentence Completion Scale Americans; not significant significant at 0.01 for
for Russians both groups on both
dependent variables
Bellu (2003) Personal Innovation Sales Growth Significant at 0.01 Self-achievement and
Miner Sentence Completion Scale Profitability growth Significant at 0.01 risk-avoidance
significant 0.01
(continued)
87
88
Related findings and

Article Creativity measures Outcome measures Level of significance level of significance
Schmitt-Rodermund (2004) Openness to experience Gross corporate income Significant at 0.10
45-item instrument (Ostendorf 1990)
Baron and Markman (2005) Openness to experience Personal Income from Negative and significant at
NEO-FFI Scale (Costa and McRae business 0.01
1992)
Krauss et al. (2005) Innovative orientation Business growth scale Not significant Achievement
(profit, customer and sales orientation significant
growth) at 0.01
Researchers created instrument Risk-taking
orientation not
significant
Rauch and Frese (2007) Innovativeness Business Success (multiple Significance indicated but Need for achievement
measures) not reported corrected r = 0.304
Meta-analysis Corrected r = 0.273
Hmieleski and Corbett (2008) Proclivity for improvisation Sales Growth No direct effect Self-efficacy
Researchers created instrument significantly
moderates the
relationship at 0.01
Lim et al. (2008) Creativity Business performance Negative and significant at
(fixed 0.01
Researchers created instrument costs divided by variable
6
costs or minimum cost

production)
Rauch et al. (2009) Innovativeness Business performance No significance reported Risk taking corrected
Meta-analysis (multiple measures) Corrected r = 0.242 r = 0.195
Nga and Shamuganathan Openness to experience Profit growth Significant at 0.05
(2010) Big Five personality measures (Schmit Beta = 0.278
et al. 2000)
The Core Evidence
Zhao et al. (2010) Openness to experience Entrepreneurial Significant at 0.01
Meta-analysis performance
Effect size: p = 0.21
Messersmith and Wales Innovativeness Sales growth Not significant Risk taking not
(2011) Covin and Slevin (1989) EO scale significant
Gielnik et al. (2012) Divergent thinking and generation of Business growth scale Original business ideas
original business ideas (profit, sales and customer significant at 0.01;
Researchers created instrument growth) divergent thinking not

significant
Kreiser et al. (2013) Innovativeness Satisfaction with Sales Significant at 0.05
Researchers created instrument Growth (curvilinear U shape)
Wales et al. (2013) Innovativeness Growth in sales, operating Significant at 0.05
Covin and Slevin (1989) EO scale profit and return on assets (curvilinear inverted U)
89
purposes. Highly complex integrative functioning entails multiple and simultane-

ous alternative perspectives, abstract thinking, and minimally fixed or rigid rules for
dealing with novel information (p. 858). The authors found the measure of cognitive
complexity on sentence completion exercises was significantly related to the rate of
business growth (measured by increase in sales) of 50 businesses (from 1 to 100
employees, all profitable businesses) in a major Midwestern US city. The multiple
correlation score between the measures of cognitive complexity and the measure of
financial growth yielded an R score of 0.85 (R squared = 0.72) at a probability of
less than 0.05.
Miner et al. (1989) based their research on task motivation theory, which they
claim is largely synonymous with McClellands achievement motivation theory. In
fact, the original objective was simply to recast the theory in role-motivation format.
In its final form, however, task theory appears to place somewhat greater emphasis
on the concept of role and specifies five separate motive patterns rather than the
single achievement motive.(p. 554). The five different role and related motivational
base are as follows:
Exhibit 6.1 Roles and motivational bases of task theory as originally stated
Role Motivational base
1. Self-achievement (or individual A desire to achieve through ones own efforts and to be
achievement) able to clearly attribute any success to personal causation
2. Risk taking A desire to take moderate risks that can be handled
through ones own efforts
3. Feedback of results (or seeking A desire for some clear index of the level of performance
results of behavior)
4. Personal innovation A desire to introduce novel, innovative, or creative solutions
5. Planning for the future (or A desire to think about the future and anticipate future
planning and goal setting) possibilities
The sample was composed of 118 American entrepreneurs who had won National
Science Foundation (NSF) grants for their ventures. A comparison sample was
composed of 41 additional NSF grant winners who were manager/scientists and not
founders of their companies. Over 60 % of the sample had PhDs with the remainder
holding other advanced degrees. The Miner Sentence Completion Scale T was used
to measure the different aspects of the motivational make-up of the independent
variable. The dependent variables included mean annual growth in number of
employees and in sales. The correlation between the MSCS-T sub-scales and mean
annual growth in employees and sales respectively were as follows: self-achievement
(.49** & .35**), avoiding risks (.18* & .24*), feedback of results (.28** & .21*),
personal innovation (.32** & .13), and planning for the future (.24** & .39**).1
Five and one half years later, Miner et al. (1994) conducted a follow-up on this
study. This time the study was on 59 responding entrepreneurs. The researchers
1
*p < 0.05 **p < 0.01
classified the companies into high and low growth firms by whether or not they had
increased their sales by $1 million a year or not. Twenty-one firms were classified
as high growth. The MSCS-T was administered again (1994, p. 629).
The total score results were quite consistent across all analyses, with correlations rising into
the high .40s in the case of follow-up data. Among the subscales, self-achievement and
planning for the future were strong in both the concurrent and predictive analyses. Feedback
of results was significantly related to the criterion initially, but not at follow-up. Personal
innovation was a significant predictor at follow-up, but was not significant in the initial
concurrent study. Although avoiding risks produced a minimally significant correlation in
the concurrent analysis, this relationship no longer obtained at follow-up.
In these two studies across time it is interesting that entrepreneurial creativity

was a useful predictor of high growth in a sample of technologically innovative
firms even though it failed to be demonstrated in concurrent data. This study is
exceptional in that the social sciences provide us with relatively little clear evidence
of the predictive validity of concepts and measures.
Wiklund (1999) used the Covin and Slevin measure of Entrepreneurial
Orientation on a sample of 132 small Swedish firms during three consecutive years.
The entrepreneurial orientation scale, the independent variable, was composed of
three subscales: innovation, proactiveness and risk-taking. The dependent variable
was a performance composite variable. The performance construct consisted of
three financial performance indicators and four measures of growth. Entrepreneurial
orientation correlated with performance at 0.16 (0.05 significance) in the first year
and at 0.25 (0.01 significance) in the second year. The author concluded that the
relationship between entrepreneurial orientation and performance increases over
time. Although this study buries creativity within a larger instrument it provides yet
additional evidence of the predictive potential of entrepreneurial creativity when it
comes to financial performance and growth. It is possible that the other measures in
the instrument might be at least partially descriptive of a broader conception of
entrepreneurial creativity such as the one provided by Sternberg and Lubart (1999).
Utsch and Rauch (2000) set out to discover if innovativeness was a mediator
between achievement orientation and venture performance. A sample was drawn of
201 German founding entrepreneurs who had started businesses between 1990 and
1992. The innovation scale was composed of two 5-point questionnaire items taken
from Patchen (1965). A second scale, achievement orientation, was created from
four other scales: locus of control, need achievement, higher order need strength,
and self-efficacy.2 Venture performance was measured by employment growth and
profit growth. Innovativeness was used to explain profit growth and employee
growth (both at a 0.23 correlation at a 0.05 level of significance). The achievement
orientation measure was also significantly correlated (0.38) with growth at a 0.001
level of significance. As with a number of these studies, this study suggests the
value of using measures of creativity based on a broader conception than is typically
found in entrepreneurship research.
2
All four factors loaded at a 0.001 level on this scale.
Bellu (2003) studied 38 growth-oriented entrepreneurs in a depressed region of

Italy. Eighty percent of the firms had been in business for over 5 years. Over 50 % of
the firms had more than 26 employees with some having over 150. Personal innova-
tion, self-achievement and risk avoidance were measured using the Miner Sentence
Completion Scale (e.g. Smith and Miner 1985). The criterion variable included both
sales and profit measures, as well as the average percentage increase in sales for the
five-year period which was 81 % and correspondingly that for profit was 83 %
(p. 169). Bellu (p. 169) states that the Miner sentence completion test overall showed
substantial correlations between the total score for MSCS-T with sales and profit: 0.69
and 0.78 respectively, both at p = <0.01.. The correlations and significance levels of the
three MSCS subscales and the growth in sales were respectively as follows: personal
innovation (0.58 with p < 0.01), self-achievement (0.58 with p < 0.01) and risk-avoid-
ance (0.70 with p < 0.01) for growth in sales. The correlations and significance levels of
the three MSCS subscales and the growth in profits were respectively as follows: per-
sonal innovation (0.47 with p < 0.01), self-achievement (0.65 with p < 0.01) and risk-
avoidance (0.67 with p < 0.01). Overall the total score of the MSCS-T scale correlated
0.89 with growth in sales (p < 0.01) and 0.78 with growth in profits (p < 0.01). In this
study of fast growing firms evidence is generated to demonstrate that entrepreneurial
creativity is useful for predicting differences between growth in sales and profitability
amongst the group. The comparisons are all amongst fast growing firms, making this a
strong test of the relationship between entrepreneurial creativity and growth.
The statistical measures provided in these five studies illustrate the potential of
creativity measures of lead entrepreneurs to be strongly related to the financial per-
formance of their firms. These studies are uncommon because much of the pub-
lished research at this time still limits itself to reporting p values. The emerging
evidence presented here suggests that the entrepreneurial creativity finding holds
across a spectrum of firm sizes and growth rates. It would appear that entrepreneur-
ial creativity is positively correlated with both initial and ongoing firm growth.
Creativity and Innovation
The articles that focus on the relationship between personal creativity and venture
innovativeness are displayed below in Tables 6.7 and 6.8. Table 6.7 presents find-
ings for creativity measured at the individual level. Table 6.8 presents findings for
creativity measured at the organization level. An example of the type of research in
this area is the Verhees and Meulenberg (2004) study, which used Leavitt and
Waltons (1975) scale to measure innovativeness and Goldsmith and Hofackers
(1991) to measure product innovation.
It should be noted that many of the studies in this section focus on small to
medium size enterprises that contain as many as 250 employees. In addition, two of
the studies are somewhat unusual. The Kraft (1989) piece uses percentage of sales
related to products developed in last 5 years to distinguish owner-managers and
hired managers. The de Jong and Vermeulen (2006) piece investigated the influence
Table 6.7 Creativity and venture innovativeness
Kraft (1989) % of sales related to products Distinguishing owner-managers Significant at 0.10
developed in last 5 years from hired managers
Salavou and Lioukas Proactivness Perceptual measure of new product Significant at 0.01
(2003) Risk taking innovativeness Significant at 0.10

Naman and Slevin (1993) scale
Verhees and Innovativeness Product innovation [model mediated Innovativeness domain-
Meulenberg (2004) by domain-specific innovativeness specific innovativeness:
(Goldsmith and Hofacker 1991)] significant at 0.01
Leavitt and Waltons (1975) Beta = 0.48
scale Domain-specific
innovativeness Product
innovation: significant at
0.01
Beta = 1.61
de Jong and Owner-Manager support for Recent product introductions: Significant at 0.05 for
Vermeulen (2006) innovation (self reported) 1. new to firm Wholesale and Transport,
2. new to industry Retail, Hotel and Catering
and Knowledge-intensive
Services; Significant at
0.01 for Construction
Significant at 0.10 for
Manufacturing, Hotel and
Catering, and Knowledge-
intensive Services;
Significant at 0.05 for
Construction
93
(continued)
94

Avlonitis and Entrepreneurial orientation New product uniqueness Significant at 0.00
Salavou (2007) Covin and Slevin (1986, 1988)
EO scale
Renko et al. (2009) Entrepreneurial orientation Product innovativeness Not significant
Knights (1997) scale
Rhee et al. (2009) Entrepreneurial orientation Innovativeness [mediated model EO positively influences
tested with three factors found to LO, significant at 0.01;
influence learning orientation (LO)] Beta = 0.16
Khandwallas (1977) scale LO positively influences
innovativeness, significant
at 0.01
Alam (2011) Innovativeness and openness to Firm innovation capability Innovativeness significant Need for achievement
experience at 0.05 significant at p = 0.012
Researcher created instrument Beta = 0.158 (Beta = 0.277); risk taking
Openness to experience behavior significant at
significant at 0.05 p = 0.006 (Beta = 0.211);
self-confidence significant
Beta = 0.130
at 0.002 (Beta = 0.348)
Baron and Tang Creativity Radicalness of innovations Significant at 0.05
(2011) Modes of problem solving
Shalley and Perry-Smith (2001)
6
Romero and Intrinsic motivation Product innovation Not significant

Martnez-Romn Process innovation Significant at 0.05
(2012)
Alegre and Chiva Entrepreneurial orientation Innovation performance Significant at 0.01
(2013) Covin and Slevin (1989) EO
scale
Martnez-Romn and Intrinsic motivation Degree of product innovation Significant at 0.05
The Core Evidence
Romero (2013)
Table 6.8 Firm-level creativity and venture innovativeness

Ar and Baki (2011) Creative capability Product innovation Significant at 0.05
CENTRIM innovation
model
Sok and OCass Innovation capability Innovation-based Significant at 0.01
(2011) Researchers created performance R2 = 0.16 (R2 = 0.5
instrument when learning
capability
mediates the
relationship)
of self-reported owner-manager support for innovation on recent product introduc-

tions. Each piece is included because it appears to shed light on the relationship
between personal creativity and innovation.
Most of the empirical findings indicate the existence of a positive, statistically-
significant relationship between individual creativity and innovation. The two firm-
level studies also suggest a positive and statistically-significant relationship.
Need for Achievement
Finally at the time of writing, research evidence on need for achievement was already
well understood to have a noteworthy impact on entrepreneurial performance, and it
was therefore decided only to overview this research. The remaining question was not
whether need for achievement was an impactful variable but whether a larger concept
of creativity could be demonstrated to have even more power as both a predictive and
an explanatory theory of entrepreneurial performance. A Collins et al. (2004) meta-
analysis revealed a mean correlation (r) between achievement motivation and perfor-
mance of 0.46 for known group studies and 0.18 for individual studies. The authors
(p. 111) suggest that, achievement motivation may be particularly potent at dif-
ferentiating between successful and unsuccessful groups of entrepreneurs. More
recently, Stewart and Roth (2007) employed a meta-analysis that used more powerful
statistics in its analysis. Stewart and Roth reported that growth-oriented owners differ
markedly from income-oriented owners on need for achievement (average observed
effect size (Cohens) d = 0.67). The Cohens d is a standardized measure of effect size
that removes some of the problems with social science scales. A Cohen d effect size
around 0.5 is considered a medium size effect while an effect size of above 0.8 is
considered large. The Stewart and Roth meta-analysis of impact of need for achieve-
ment, all by itself, on average, produces approximately a ten percent change in
normalized entrepreneurial performance variance.
While need for achievement has been theoretically integrated into a macro-level
understanding of the role of entrepreneurship in economic development (McClelland
1961) it was less developed at the micro level. At the level of the individual
entrepreneur, McClellands theory, as it stands, might be thought of as a small

theory with limited theoretical implications. Based on the weight of evidence to
date, need for achievement findings require a strong theoretical context to make
sense of its impact, or it is liable to be lumped in with other performance relevant
variables willy-nilly, as happened with Shanes general theory where need for
achievement is undifferentiated in importance from the other 80 plus disparate vari-
ables in his general theory model. Fortunately, throughout the discipline of creativity,
need for achievement is recognized, in parts or as a whole, as creative motivation.
Discussion
An examination of the 70 studies relating personal creativity to entrepreneurial

intentions, activities and outcomes provides a number of useful insights. It appears
that entrepreneurship scholars who examine the effects of creativity on aspects of the
new venture process have pushed beyond the original Schumpeter model, despite
often recognizing Schumpeter as the source of their idea. Implicitly at least, as is
demonstrated from the designs of these studies, they have expanded their ideas
regarding causal factors beyond Schumpeters concept of entrepreneurial motivation
and they have expanded their notions of relevant outcome variables beyond new
combinations. They appear to expect that entrepreneurial creativity should be useful
to predict a variety of other entrepreneurial outcomes.
The influence of personal creativity has been heavily investigated via a number
of instruments across numerous geographic contexts during the past four decades.
The research sheds substantial light on entrepreneurial intentions and behaviors, as
well as the differences amongst entrepreneurs, non-entrepreneurs and small busi-
ness owners. Table 6.9 below summarizes the overall findings.
Table 6.9 Summary of findings: personal creativity and aspects of new venturing
Relationship Finding
Intentionality Strong likelihood of a positive relationship
A meta-analysis finds an effect size ( p ) for openness to
experience of 0.24
Entrepreneurs versus Strong likelihood of a difference between the two groups
non-entrepreneurs A meta-analysis finds a statistically significant difference for
openness to experience at the 0.01 level
New venture survival Insufficient evidence to indicate the existence of a relationship
Entrepreneurs versus small Strong likelihood of a difference between the two groups
business owners
Employment growth Some evidence in favor of a positive relationship
Financial performance Strong likelihood of a positive relationship
Three meta analyses report the following findings: corrected r
of 0.273; corrected r of 0.242; and, an effect size ( p ) of 0.21
Innovation Some evidence in favor of a positive relationship
The existing personal creativity research appears (with limited exceptions) to

provide substantial support for the step model predicted by the general theory of
entrepreneurial creativity.
First, the dimension that is of greatest interest is that of financial performance.
Here, there are three meta-analyses that provide support for the contention that the
personal creativity of the lead entrepreneur is not only statistically significant in its
relationship with financial performance but practically significant as well.
Second, the dimension that has the least amount of support is new venture survival.
Third, the review here uncovered a number of non-significant findings and even
a few negative findings because the review was comprehensive of negative findings,
unlike Shanes review.
Fourth, the research emphasis on each aspect of entrepreneurial activity varies.
The financial performance, intentionality, entrepreneurs versus non-entrepreneurs
research and innovation streams contain 21, 18, 17 and 15 studies, respectively. The
employment growth, entrepreneurs versus small business owners and survival
research streams contain seven, six and four studies, respectively.
Fifth, a sufficient amount of research has been undertaken in certain veins to
allow for systematic reviews. The meta-analyses that are reported here shed greater
light on the extent to which varied limited measures of personal creativity influence
entrepreneurial intentions; distinguishes entrepreneurs from non-entrepreneurs;
and, impacts new venture financial performance.
Sixth, the research indicates that entrepreneurship scholars use personal creativ-
ity measurement instruments that only focus on personality variables or thinking
styles. They have not yet adopted modern, more complex and multi-dimensional
views of creativity (c.f. Sternberg 1999) that include creative aspects of personality,
thinking styles, intellect, motivation, knowledge, and environmental influences.
Entrepreneurship scholars often include a motivation variable, usually characterized
as need to achieve, in their research but they do not view it as a component of cre-
ativity. Knowledge and intellect are not considered.
In addition, the field of entrepreneurship has only begun to explore the complex char-
acter of entrepreneurial creativity. It is reasonable to posit that entrepreneurial creativity
is a distinct variation of creative ability. Further still, in the future it will be desirable to
scientifically study threshold and interaction effects.
Seventh, the research still focuses on p values, leaving a lot to learn about effect
sizes.
Eighth, the research designs found here represent a fairly limited set relative to
those employed in the field of creativity (c.f. Mayer 1999). Creativity researchers
utilize psychometric, experimental, biographical, biological, computational and
contextual research designs. The addition of more research designs may produce an
even more comprehensive understanding of entrepreneurial creativity and its rele-
vance to new venturing.
Ninth, the entrepreneurial creativity research has not yet focused its attention on
the upper end of entrepreneurial performance (i.e. those who amass substantial
wealth). Creativity researchers, by comparison, have more thoroughly investigated
the creativity levels of highly successful individuals from a variety of other disci-
plines such as fine arts and music.
Tenth, the research examined here does not shed light on the extent to which the
creative abilities of other entrepreneurial team members influences new venture
intentions and outcomes.
Eleventh and finally, need for achievement alone, may justify the centrality of
creativity within the entrepreneurship field. Important questions remain about how
much added predictive power other creativity variables provide. What will be the
relative predictive power of other creativity variables once they are more fully stud-
ied? What overall models of entrepreneurial creativity will yield the most predictive
power in the most economical way? As Popper states, a good scientific theory
should also possess substantial explanatory power. The next chapter demonstrates
the additional explanatory power of the entrepreneurial creativity theory over a min-
imalist theory of need-for-achievement.
Conclusion
A number of conclusions can be drawn from the survey of existing personal creativ-
ity research focused on entrepreneurial intention and activity. First, personal cre-
ativity distinguishes individuals with new venture intention from those without such
intentions. Second, individuals who start new ventures are more creative than their
non-start-up counterparts. Third, personal creativity is directly linked to business
performance with the exception of business survival. Then there is the intriguing
possibility that the apparent failure of more creative founders to better sustain their
ventures may not infrequently rather be the wisdom to let marginal ventures fail.
Fourth, single measures of creativity appear to have a substantial impact on entre-
preneurial performance. Fifth, since in the social sciences one needs to be con-
cerned whether findings are merely an artifact of methods or measures (Campbell
and Fiske 1959), it is important that entrepreneurial creativity findings tend to hold
across different conceptualizations, measures, samples and geographical contexts.
Sixth, the findings are not infrequently practically significant as well as statistically
significant. This is perhaps, all the more impressive given that measurement is par-
ticularly difficult in the field of creativity (c.f. Clapham 2004). Seventh, the existing
personal creativity research appears to provide substantial support for the step
model employed as a basis for prediction by the general theory of entrepreneurial
creativity. Finally, the need for achievement variable has been demonstrated to
possess a noteworthy effect size on its own as only one component of a confluence
theory of creativity.
Chapter 7
A General Theory and Its Explanatory Power
Abstract Now that we appreciate that entrepreneurial creativity might be relatively

well supported as a potentially predictive theory by the empirical literature, other
questions may occur to us. How well does this general scientific theory compare
with other existing general scientific theories? To what extent does the theory of
entrepreneurial creativity have broad explanatory power, explaining entrepreneurial
success?
There are few established general scientific theories in the social sciences. One of
the most recent is Gottfredson and Hirshis (1990) General Theory of Crime (GTC).
An analysis of the similarities and differences of the GTC and the general theory of
entrepreneurial creativity (GTEC) may provide a useful means of evaluating the
GTEC, given that few established criteria exist for evaluating any general social
scientific theory, and that GTC is self-consciously a general scientific theory.
The first similarity is that GTC and the GTEC attempt to empirically explain
central outcomes in their respective fields, crime and business success/innovation,
respectively, by reference to selected attributes of individuals, low self-control and
creativity, respectively. Second, the GTC and the GTEC intend to explain all
instances of central outcomes, independent of history and geography from the
Age of Rome to the New Millennium, and from Afghanistan to America. Third, the
GTC and GTEC do not attempt to differentiate focal individuals. The GTC does not
distinguish amongst burglars, smugglers or white collar criminals. The GTEC does
not distinguish amongst individuals launching convenience stores, professional
firms or biotechnology companies except to the degree that new venture financial
performance and/or innovation are involved.
Fourth, the theories focus on key outcome variables. It is a matter of no small
importance that development of the GTC began with an understanding of a key
dependent variable, the nature of crime. Gottfredson and Hirschi (1990, p. 82) argue
that the positivistic science practiced in fields such as sociology, psychology and
economics lays claim to independent variables, which in turn become respective
starting points:
Positivistic social science resists general schemes or theories. As a consequence, it
proliferates concepts without concern for their distinctiveness or significance. This pro-
duces endless distinctions among behavioral categories and generates apparent interest in

DOI 10.1007/978-3-319-04726-3_7
100 7 A General Theory and Its Explanatory Power
the countless permutations and combinations of units and their properties (e.g., internal
labor markets of multinational firms devoted to extractive economies; male gang drug-
related drive-by shootings; ideology and voting patterns among Southern workers in the
1930s).
The GTEC developed from an initial consideration of both the nature of the
entrepreneurial outcomes (i.e. new combinations) and the entrepreneurial process
(i.e. complex, ill-defined and open-ended). Although established business disci-
plines have carved up the entrepreneurship field for research purposes, they have
largely focused their attentions on independent variables and intermediate business
processes.
Fifth, the independent variables in each theory are not intended to be solely
determinative of the dependent variables. Although the independent variable of the
GTC, an individuals lack of self-control, may manifest itself via criminal behavior,
it may equally well manifest itself in a variety of non-criminal activities such as
accidents, smoking and alcohol abuse. Thus, the authors (1990, p. 91) note: Our
image therefore implies that no specific act, type of crime, or form of deviance is
uniquely required by the absence of self-control. Similarly, the high entrepreneur-
ial creativity test scores of artists and scientists may be associated with a strong
ability to convince others of the value of their ideas. There is no particular reason to
expect measures of entrepreneurial creativity to only predict growth and innovation
of independent, new ventures.
Sixth, the theories may share a similar limitation related to level of generaliz-
ability. Both the GTC and the GTEC may have societal level implications, but are
focused on micro-level issues. Accordingly, the theories say less about the societal
levels of crime and societal levels of entrepreneurship.
Seventh, both theories tend to raise questions about the emergence of the pre-
cipitating tendencies in people. What kinds of circumstances and environmental
factors predispose people towards low self-control or towards high entrepreneurial
creativity?
The first difference between the GTC and the GTEC lies in how explanatory
power is demonstrated for each theory. Here, Gottfredson and Hirschi (1990) faced
the problem of demonstrating the relative merits of their theory vis--vis a sizeable
number of existing theories within the field. Their strategy was to develop a compet-
ing theory that more effectively accounted for some of the most robust findings in the
field of criminology: (1) that overwhelmingly, criminals dont specialize by type of
crimes, moving fluidly from one type to another; (2) that choice of crime is typically
made not by potential payoff but by proximity, ease and convenience; (3) that crimi-
nal behavior peaks around age 1820 and declines rapidly after that; (4) that criminal
behavior can be predicted from an early age, and is in that sense, relatively stable
over time; (5) that gender accounts for marked differences in criminal participation;
and, (6) that some races and ethnicities are much more likely to participate in crimi-
nality than others. The entrepreneurship field, by contrast, lacks a similar small set of
extremely robust findings by which to challenge the veracity of a general theory.
Second, there is a substantial contrast in the degree and nature of historical con-
tinuity between the theories. As illustrated in Exhibit 7.1 below, the GTEC is built
7 A General Theory and Its Explanatory Power 101
Entrepreneurial Creativity Entrepreneurial Outcomes
New Combinations (including tech. innovations)

Creative Resources Incidental
Creative Intelligence Incremental
Creative Personality Radical
Creative Motivation
Creative Thinking Styles
Entrepreneurial Knowledge Degree of Development
Environment Intention
Start-up
Survival
Growth and Profitability
Exhibit 7.1
squarely on the thinking of a father of the field of Entrepreneurship and thus

possesses historical continuity. The theory builds upon Schumpeters (1934, 1913
originally in German) propositions that: (1) entrepreneurs develop new business
combinations, and (2) entrepreneurs are unusually motivated, not so much by direct,
near-term outcomes but rather, in part, by the joy of participating in the creative
process. Here, new combinations are converted into a variable from a constant. The
degree of development and growth is added as a second entrepreneurial outcome. In
addition, the explanatory variable is dramatically expanded from an allusion to
intrinsic motivation to an entire confluent model of creative resources. The GTEC
explains that entrepreneurial creativity is not only needed for the creative develop-
ment and implementation of new venture concepts, but more generally for the
development of any new venture. This occurs fundamentally because the business
development problem/process is an open-ended, ambiguous type of problem/process
that lends itself well to creativity.
Gottfredson and Hirschi (1990) also founded their thinking in that of a father of
their field. Classical theories in criminology are called control theories because
they attempted to control criminal behavior through negative consequences meted
out by the criminal justice system (e.g. Bentham 1970 [1789]). Bentham viewed
criminals pursuing self-interest, and as a means of control, argued to change the
external calculus of payoff for the criminal. Gottfredson and Hirschi (1990) observed
the criminal unwittingly trading off longer-term gain in favor of near instantaneous
payoff. From the perspective of the GTC, if criminals were in better control of their
thinking, they would make the necessary calculations and avoid criminal behaviors.
In that way, Gottfredson and Hirschi may be seen as turning Benthams thinking
inside out. As a result the GTC possesses less historical continuity than the modern-
ized Schumpetarian GTEC.
A third, and perhaps most important, difference between the GTC and GTEC is
the extent of pre-existing evidence in support of each theory. The empirical testing
and related evidence for the GTC has been overwhelmingly generated since its pub-
lication. In stark contrast, the GTEC has a substantial evidence base supporting its
two core propositions at the time of its inception. The GTEC predicts that personal
entrepreneurial creativity will strongly and positively correlate with a number new
venture behaviors and outcomes. The evidence reviewed in the previous chapter pro-
vides substantial evidence for both the efficacy and the verisimilitude of the theory.
The Explanatory Power of the General Theory

According to Popper, explanation is the second most important function of a scien-

tific theory prediction being the first. The evidence in Chap. 6 gives us confidence
that the personal creativity of a lead entrepreneur might be a reasonable basis for
predicting the performance of his or her ventures. Thus we can place reliance on the
predictive power of the GTEC. But what about its explanatory power? What exist-
ing findings in the field of entrepreneurship become more understandable as a result
of GTEC? Can the confluence theory headpiece (Sternberg and Lubart) of GTEC be
used to explain a number of important findings in the field of entrepreneurship? Are
there otherwise unrelated propositions that meaningfully become part of the creativ-
ity model? In this chapter, the six creative resources of the GTEC (i.e. personality,
motivation, thinking style, intelligence, knowledge, and environment) will be used
to channel findings from the science of creativity into the science of entrepreneur-
ship. Results from the two disciplines will be roughly compared. In the process,
ideas from the creativity field will be presented that also have the power to poten-
tially predict still more new findings within the entrepreneurship discipline. In that
sense the GTEC may also be viewed as a generative theory. Moreover, some of the
studies will continue to build the evidence base around GTECs primary or core
potentially predictive linkage between entrepreneurial creativity and entrepreneur-
ial performance.
Personality
Sternberg and Lubart (1999) list a number of personality attributes that are sup-
ported by numerous empirical findings: self-efficacy; take sensible risks; tolerate
ambiguity; non-conformity; and, willingness to overcome obstacles (perseverance).
Self-efficacy is defined by Bandura (1977) as a persons belief in her/his ability to
succeed in a specific situation. The taking of sensible risks involves the uncertain
development of ideas that are potentially to be admired and regarded as trend-
setting. The tolerance of ambiguity involves an individuals ability to neutrally and
openly perceive vague information. Non-conformity is an indication of an individ-
uals willingness to think and act independently with respect to the norms of a
group. Willingness to overcome obstacles is the inclination of an individual to con-
tinue on a path despite the difficulties.
The Explanatory Power of the General Theory of Entrepreneurial Creativity 103
Entrepreneurship scholars have made numerous attempts to test the relevance of

each personality attribute suggested by Sternberg and Lubart (1999). Rauch and
Frese (2007) conducted a meta-analysis and found that generalized self-efficacy had
effect sizes (corrected r) of 0.378 and 0.247 on business creation and business
success, respectively. Since then, Hmieleski and Corbett (2008) have found entre-
preneurial self-efficacy to positively moderate the relationship between an entrepre-
neurs improvisational behavior and new venture performance.
A number of meta-analyses have been conducted on risk taking. Stewart and
Roth (2001) found that entrepreneurs with growth aspirations had a higher risk
propensity than those with a current income focus and a much higher risk propen-
sity than that of managers. Miner and Raju (2004) found lower effect sizes than the
first meta-analysis, motivating Stewart and Roth to conduct yet another one. The
second Stewart and Roth (2004) meta-analysis resulted in a slightly lower, yet rela-
tively consistent effect size for the difference between entrepreneurs and managers.
Rauch and Frese (2007) found that risk taking propensity had effect sizes (cor-
rected r) of 0.102 and 0.103 on business creation and business success, respec-
tively. Zhao et al. (2010) found an effect size (p) for risk propensity on new venture
intentions of 0.40. Zhao et al. did not find relevant effect sizes for new venture
performance.
There is no meta-analysis for the tolerance for ambiguity attribute. The
empirical studies that examine it do not yet provide much insight. Koh (1996)
found that tolerance for ambiguity positive influences new venture intentional-
ity. However, Gurol and Atsan (2006), Gurel et al. (2010) and Altinay et al.
(2012) found no evidence of a relationship. Wagener et al. (2010) found that
tolerance for ambiguity distinguishes successful entrepreneurs from successful
small business owners.
There is also no meta-analysis for the non-conformity attribute. Sexton and
Bowman (1984, 1986) found that entrepreneurs and managers differ significantly
on need for conformity. Buttner and Rosen (1988) found that loan officers at banks
rated successful entrepreneurs as much higher on non-conformity than men and
women in general. Rosenfeld et al. (1993) found non-conformity distinguishes
entrepreneurs from managers. Engle et al. (1997) found that non-conformity distin-
guishes entrepreneurs from employees.
There is no meta-analysis for the perseverance attribute. Baum and Locke (2004)
found that tenacity did not have a direct effect on new venture performance.
Motivation
Psychological and psychosocial research has investigated the relationship between

motivation and personal creativity for more than 30 years. The Intrinsic Motivation
Principle of Creativity, which developed as a result of the research efforts,
indicates that intrinsic and extrinsic motivations represent opposing effects on
creativity. A contemporary view, however, argues that extrinsic motivation can,

under some conditions, provide a positive influence on creativity. Hennessey (2010,
p. 346) states that researchers, have a far more sophisticated and nuanced under-
standing of reward and evaluation effects and are quick to point out that not all
extrinsic contingencies can be expected to have the same deleterious impact.
Theresa Amabile (1997, p. 23), one of the leading creativity and motivation
scholars, has proposed that extrinsic factors may play an unusually supportive role
in stimulating entrepreneurial creativity. Nevertheless, Amabile is quick to note the
inherent dangers represented by extrinsic factors.
Because entrepreneurial creativity requires implementation of novel, appropriate ideas in
the world of business, synergistic extrinsic motivators may be especially important.
Attention to the outside world - to what others are doing, to what others want, to what others
will recognize and reward - is necessary to gather the information that will lead to com-
mercial success. However, if those extrinsic motivators begin to make the entrepreneur feel
controlled by external circumstances or constraints, and if they therefore begin to under-
mine the original intrinsic excitement of the work, they are likely to undermine creativity
and reduce the possibility of success.
The research on entrepreneurial motivations, i.e. the stimuli for creating new
ventures, can be separated into a number of categories at the individual level
(Hessels et al. 2008). The first category can be characterized as push versus pull
reasons. According to Hessels et al. (p. 325):
These types of studies, being mostly conducted in developed countries where push motives
are less prevalent, report mostly pull motives such as autonomy (independence, freedom),
income and wealth, challenge, and recognition and status (Kolvereid 1996; Feldman and
Bolino 2000; Carter et al. 2003; Wilson et al. 2004). Autonomy or independence is one of
the most cited pull factors for starting a business (Shane et al. 1991; Kolvereid 1996; Carter
et al. 2003; Van Gelderen and Jansen 2006). However, individuals may also be pushed into
entrepreneurship (Thurik et al. 2008). Necessity motives for example occur when (a threat
of) unemployment forces people into self-employment.
The second category, characterized as cost-benefit studies, involves the use of

economic analyses to examine start-up motivations. The first of these studies,
Douglas and Shepherd (2002, p. 88), does not rely on assumptions of rationality
(common for most economic studies) but investigates the black box of the entre-
preneur and reveals their decision/assessment policies. The researchers find that
work effort and income do not appear to be relevant motivators with respect to self-
employment decisions.
The third category of entrepreneurial motivation studies focuses on psychologi-
cal constructs. The dominant construct in this category is need for achievement
(McClelland 1961). There are two meta-analyses that provide insight into the rele-
vance of need for achievement (nAch) as a source of entrepreneurial motivation.
Stewart and Roth (2007) find nAch to be a prominent characteristic of entrepre-
neurs, specifically those who pursue new venture growth. Zhao and Seibert (2006)
find that entrepreneurs possess substantially more nAch than managers.
Thinking Styles
Cognitive or thinking style refers to the manner in which an individual prefers to

organize, represent and process information. Sternberg (1997) characterizes think-
ing styles as functions of self-government: legislative, executive and judicial.
He (1997, p. 20) argues that the legislative style, described below, is particularly
beneficial for creative efforts.
Legislative people like to come up with their own ways of doing things, and prefer to decide
for themselves what they will do and how they will do it. Legislative people like to create
their own rules, and prefer problems that are not pre-structured or prefabricated.
The entrepreneurship research focused on thinking style has been promoted by a

variety of scholars (c.f. Buttner and Gryskiewicz 1993; Baron 1998; Allinson et al.
2000; Mitchell et al. 2002). Mitchell et al. (2002, p. 97) characterize entrepreneurial
thinking style as, the knowledge structures that people use to make assessments,
judgments, or decisions involving opportunity evaluation, venture creation, and
growth.
A number of empirical studies have compared the thinking styles of entrepre-
neurs and non-entrepreneurs. Buttner and Gryskiewicz (1993, p. 29) used Kirtons
(1984) Adapter-Innovator Index (KAI) to examine problem solving styles and
found that, entrepreneurs have a more innovative problem-solving style than
their managerial counterparts in larger U.S. organizations. Rosenfeld et al. (1993)
also used the KAI and found that entrepreneurs scored significantly higher than
technology managers and the general population with respect to both means and
variances on KAIs Innovator-Adaptor scale. Using the Innovation Scale of the
Jackson Personality Inventory (Jackson 1976), Stewart et al. (1999) found that
entrepreneurs manifest a stronger predisposition to be innovative than small busi-
ness owners.
Groves et al. (2008) used the Linear/Nonlinear Thinking Style Profile (Vance
et al. 2007) to find that, successful entrepreneurs reflected a much greater level
of balance in linear/nonlinear thinking style than their professional actor and
accountant counterparts, whose predominant linear versus nonlinear profiles fol-
lowed expected directions (e.g., actors greatly favor a nonlinear thing style while
accountants favor a linear style). Groves et al. (2011) used the LNTSP again to find
that entrepreneurs exhibit much greater balance and versatility in linear and nonlin-
ear thinking than professional actors, accountants and frontline managers.
Entrepreneurs and senior managers, however, exhibited similar styles.
Allinson et al. (2000, p. 41) used the Cognitive Style Index (CSI) (Allinson and
Hayes 1996) and found that entrepreneurs (of high growth firms) are more intui-
tive than members of the general population and middle and junior managers, but
that, in terms of cognitive style, they are similar to senior managers. Barbosa et al.
(2007) used the CSI and found that people characterized by an intuitive thinking
style do not exhibit higher levels of entrepreneurial intentions than people with an
analytic style.
Brigham and Sorenson (2008) used the CSI to discover that high-technology
founding owner-managers are significantly more intuitive than the general popula-
tion and managers. They also found habitual (both serial and portfolio) entrepreneurs
to be significantly more intuitive than their novice counterparts. Armstrong and Hird
(2009) used the CSI to compare entrepreneurs and non-entrepreneurs, and found the
former group to be more intuitive and less analytical than non-entrepreneurs.
Cools and Van den Broeck (2008) used their Cognitive Styles Indicator to inves-
tigate the extent to which the creating, knowing and planning cognitive styles
distinguish entrepreneurs from non-entrepreneurs and found no difference with
respect to the creating style. They found that entrepreneurs scored lower than non-
entrepreneurs on the knowing and planning styles.
A small number of studies have investigated the influence of thinking style on
aspects of new venture development. Ginn and Sexton (1990) used the Myers-
Briggs Type Indicator to compare thinking styles of fast-growth and slower-grower
entrepreneurs and found the former group to be significantly more intuitive. Sadler-
Smith (2004) used Sternbergs (1997) Mental Self-Government Local and Global
Thinking Styles scales and Scott and Bruces (1995) General Decision-Making
Style questionnaire and found that global or local thinking styles had no impact on
firm performance and that intuitive decision style had a positive relationship with
sales growth. Ko (2008) used Sternberg and Wagners (1992) Thinking Styles
Inventory to find that only a liberal thinking style, which indicates a preference for
novel approaches to tasks, influenced the extent of firm-level innovation of technol-
ogy entrepreneurs.
Intelligence
A substantial amount of empirical research has examined the relationship between

IQ, the conventional measure of intelligence, and personal creativity. Many research-
ers subscribe to a threshold relationship which indicates a strong correlation between
intelligence and personal creativity up to IQ scores of 115 (~84th population per-
centile) to 120 (~91st percentile). Albert and Runco (1999, p. 28) review empirical
work and find that, Above IQ 115, creativity and IQ constitute more or less inde-
pendent sets of abilities from late childhood on This kink in the relationship at
IQ 115 between creativity and IQ which afterwards frees creativity from its depen-
dency on IQ is referred to as the threshold theory of creative intelligence.
The field of entrepreneurship has focused very little research attention on the
relevance of personal intelligence. de Wit and van Winden (1989, p. 271) used
LO-IV test scores to find that, A relatively high score on the IQ test applied at the
age of 12 appears to increase the likelihood of the individual becoming self-
employed. The study does not address new venture outcomes. van Praag and
Cramer (2001) examined the relationship between IQ scores, measured via knowl-
edge and comprehension tests concerning school subjects at age 12, and entrepre-
neurial talent, indicated by the number of employees hired by their future ventures.
The researchers (p. 56) found that, Intellectual capacity itself (as measured by IQ
score) has a positive influence on entrepreneurial talent.
In his book, Shane (2003) includes a small number of studies that use uncorrobo-
rated measures of IQ to develop greater insight into the relevance of personal intel-
ligence. Based on the studies findings, he (p. 55) suggests that, entrepreneurs
have better cognitive capacity than non-entrepreneurs and therefore can identify
opportunities by thinking about them, and that, intelligence is correlated with
the discovery of more valuable opportunities.
Knowledge
There are two key debates in the field of creativity regarding the relevance of knowl-
edge to creative outcomes. The first debate involves the extent to which creativity is
domain-specific or domain-general (Baer, 2012). If creativity is domain-general, it
means that individuals can produce highly-creative outputs in a number of different
disciplines. According to Baer (2012, p. 337): being highly creative in just two
domains is indeed extraordinary, and it is almost impossible to find an example of
anyone being creative at the very highest level in three or more domains. The
empirical evidence suggests that something may prevent highly creative people
from producing creative outputs in multiple domains. The mitigating factor may
simply be time (i.e. number of hours available to dedicate to assimilating requisite
knowledge).
The second debate directly addresses the extent to which knowledge plays a
fundamental role in creative output. The tension view proposes a non-linear rela-
tionship between knowledge and creativity. Weisberg (1999, p. 227) describes the
tension view:
Thus, while it is universally acknowledged that one must have knowledge of a field if one
hopes to produce something novel within it, it is also widely assumed that too much
experience can leave one in ruts, so that one cannot go beyond stereotypes responding. The
relationship between knowledge and creativity is assumed, therefore, to be shaped like an
inverted U, with maximal creativity occurring with some middle range of knowledge.
The foundation view, which stands in stark contrast to the tension view, proposes
that knowledge is positively correlated with creative outputs. Proponents of this
view (c.f. Hayes 10-year rule, 1989) suggest that deep immersion in fields such as
painting, poetry, music, physics and psychology is critical to producing creative
contributions. Weisberg (1999, p. 232) reviewed the research related to both views
and deemed that, At this point, the only conclusion to be drawn is that a long period
of time in a domain seems to be a necessary, although not sufficient, condition for
notable contribution.
The relationship between knowledge acquisition and entrepreneurial perfor-
mance has been tackled from a number of angles. The first angle is returns to formal
education. The most recent findings raise serious concerns about the extent to which
useful knowledge for successful new venturing is disseminated via formal education.
Iversen et al. (2010, p. 179) use Danish labor market data to demonstrate substantial
variance in returns to schooling for the self-employed:
We show that the estimated average return to schooling of 6.5 % per year hides substantial
differences across different educational levels. Specifically, we find a highly non-linear
relationship with very low returns to most educational levels in self-employment. The
exceptions are a few specialized graduate levels of education (doctors and lawyers).
Mayer-Haug et al. (2013, p. 1264) used a quantitative meta-analysis to reveal

that education does not appear to play a significant role in new venture success:
Education is distinctive in that it presents the lowest effect size against two of our measured
dependent variables (education with sales: effect size=0.011, p=0.694, education with
profit: effect size=0.011, p=0.739) and presents the lowest relationship with all perfor-
mance measures aggregated of any of our talent variables in direct effects (effect size=0.060,
p<0.001). This finding is also reflected in the meta-regression (see Table 6), indicating that
after controlling for different performance outcomes, every talent variable analyzed in the
models demonstrates a significantly stronger relationship to performance than education
since education is the excluded variable in the regression models.
The second research angle examines the efficacy of entrepreneurship education

with respect to specific new venture outcomes. There are two recent, related meta-
analyses. Rideout and Gray (2013, p. 329) used a qualitative meta-analytical
approach to review 12 entrepreneurship education outcome-based studies and made
the following conclusion: Our systematic critique of the studies research methods
found a variety of methodological weaknesses, undermining confidence in the
belief that E-ed can produce entrepreneurship. Martin et al. (2013) used a quantita-
tive meta-analytical approach to reveal a low effect size (weighted mean r = 0.166)
for entrepreneurship education and training (EET). The researchers (p. 221) pro-
posed that, EET is simply not developed enough at this point.
The third research angle focuses on the utility of work experience. The Mayer-
Haug et al. (2013) meta-analysis mentioned above also examines the efficacy of a
wide variety of personal experiences. The researchers find that experience has a
consistently small but still noteworthy characterizing impact on a variety of venture
outcome variables: (effect size = 0.054, p = 0.008); number of employees (effect
size = 0.055, p = 0.007); sales (effect size = 0.088, p = 0.002); and profit (effect
size = 0.065, p = 0.005).
A fourth research angle is known as outsider assistance. This research program
focuses on the extent to which nascent entrepreneurs benefit from counseling ser-
vices. The majority of such studies focus on clients of Small Business Development
Centers in the United States. The studies (Chrisman et al. 2005, 2012; Chrisman and
McMullan 2004) indicate a positive return on the taxpayer dollars spent on centers.
Indirectly, the findings suggest that there are some types of knowledge that provide
economic value when offered in a timely fashion.
A fifth research angle, which has yet to take shape, is auto-didacticism.1 This
angle may prove to be the best option for a couple of reasons. First, the meta-
1
It is not uncommon for autodidacts to seek advice and instruction from others (e.g. SBDC
counselors).
analyzed formal education and experience findings show only modest promise.
Second, there are numerous examples of self-taught highly creative individuals
from numerous disciplines. The list includes, among others, Leonardo da Vinci,
James Watt, and Frank Lloyd Wright. The Beatles used their many early live perfor-
mances to develop and refine their talent. It would appear that entrepreneurs such as
Bill Gates and Michael Dell fit on the list. They practiced and refined their entrepre-
neurship skills while being entrepreneurs in a way not dissimilar to that of the
Beatles who refined their artistry by performing more than once per day on average
beginning in 1960 (Weisberg 1999).
Environment
In the 1960s, Csikszentmihalyi (1999, p. 313) believed personal creativity to be a

purely intrapsychic process: I assumed that one could understand creativity with
reference to the thought processes, emotions, and motivations of individuals who
produced novelty. Over the years, he (p. 314) was compelled by research findings
to revise his thinking toward a much more socialized view of creativity: Creativity
is a process that be observed only at the intersection where individuals, domains and
fields interact. This systems view is illustrated in Exhibit 7.2 below.
Csikszentmihalyi (1999, p. 315) asserts that, The domain is a necessary compo-
nent of creativity because it is impossible to introduce a variation without reference
to an existing pattern. New is meaningful only in reference to the old. Original
thought does not exist in a vacuum. It must operate on a set of already existing
objects, rules, representations, or notations.Without rules there cannot be excep-
tions, and without tradition there cannot be novelty.
The system is insufficient, however, with only novelty. According to
Csikszentmihalyi (1999, p. 315), Changes are not adopted unless they are
Culture
Selects Domain Transmits

Novelty Information
Individual
Field Produces Novelty
Society Personal
Background
Stimulates Novelty
Exhibit 7.2 The systems view of creativity

sanctioned by some group entitled to make decisions as to what should or should

not be included in the domain. These gatekeepers are what we call here the field.
The term field is often used to designate an entire discipline or kind of endeavor. In
the present context, however, I want to define the term in a more narrow sense and
use it to refer only to the social organization of the domain to the teachers, critics,
journal editors, museum curators, agency directors, and foundation officers who
decide what belongs to a domain and what does not.
With respect to entrepreneurship, the cultural context varies somewhat from
country to country. Generally speaking, most Westernized countries no longer view
entrepreneurs as unemployed con artists and snake oil sellers. Instead, they are
viewed as key contributors of economic growth. All levels of government at least
pay lip service to fostering new venture creation via favorable political environ-
ments, regulatory policies and outreach centers, e.g. Small Business Development
Centers. The majority of post-secondary institutions provide some degree of entre-
preneurship education. Mainstream television programs showcase start-ups and
promote successful entrepreneurs. The World Wide Web provides an incredible
array of tips, tools and information to help budding entrepreneurs.
The social context for entrepreneurship is also quite supportive in most
Westernized countries. Creative destruction (Schumpeter 1934) occurs because
innovative product and service ideas are encouraged and supported. Increasing dis-
posable income allows people to buy more products and services and hence, take
risks or act whimsically with some purchases. Consumers, Csikszentmihalyi (1999,
p. 324) suggests, are frequently the ultimate authorities on what innovations become
successful: For mass-market products such as soft drinks or motion pictures, the
field might include not only the small coterie of product developers and critics, but
the public at large. For instance, if New Coke is not part of the culture, it is because
although it passed the evaluation of the small field of beverage specialists, it failed
to pass the test of public taste.
Conclusion
The main focus of this chapter has been on the explanatory power of the theory of
entrepreneurial creativity. A major reason for demonstrating explanatory power is
to provide evidence of the broad theoretical usefulness of entrepreneurial creativity
to make integrative sense of otherwise discrete findings in the field of entrepreneur-
ship. This review of GTEC implications provide a preliminary demonstration of the
power of the GTEC to make sense of different empirical findings from the science
of entrepreneurship. In addition it was shown that theories and evidence from the sci-
ence of creativity can also be channeled through the six creative resources of the
GTEC to provide different perspectives on entrepreneurship propositions. Some of
the propositions demonstrate the compatibility of the two fields for providing
mutual understanding. For example, personality evidence shows a strong overlap
between creative people, in general and entrepreneurs, in particular. Some creative
Conclusion 111
resources, have been better developed within the field of creativity than within
entrepreneurship. For example, there is a relative dearth of research on the relevance
of intellect to entrepreneurial behaviors and outcomes, in the entrepreneurship field.
In the process, more evidence was added on the potential predictive power of GTEC.
In addition to demonstrating the explanatory power of a scientific theory, evi-
dence on the veracity of unstated auxiliary propositions (that flow from viewing
entrepreneurship as fundamentally creative) is indirect support for the verisimili-
tude of GTEC. This chapter and the ones which follow provide a substantial number
of different studies that collectively provide a great deal of indirect support for this
theory. In order, to properly evaluate the theory, consideration must jointly be made
of the evidence behind both hard core and auxiliary propositions.
Ultimately, this chapter is yet one more step in demonstrating that a theory of
entrepreneurial creativity can claim to be a useful, general, scientific theory of
entrepreneurship. The case for acceptance of entrepreneurial creativity as a general
theory is supported by the following observations:
1. The general theory of entrepreneurial creativity is more than a conceptual frame-
work or philosophy. It contains core propositions that are testable. Ultimately,
the GTEC may be rejected or modified, based on evidence collected over time.
2. There is substantial evidence to support the central propositions of the theory.
3. The theory fits within a strong historical tradition relating creativity to entrepre-
neurship in general and to that of Schumpeter in particular. It extends what is
already known in a cumulative manner.
4. The theory integrates need to achieve findings into a more meaningful theoreti-
cal framework.
5. The theory has a large explanatory reach at a time when predictive theories in the
entrepreneurship field typically relate to few propositions.
6. There is substantial empirical support for auxiliary propositions related to the
GTEC.
7. The theory brings the benefits of a tested theory2 from another discipline, cre-
ativity, to bear on the development of the Entrepreneurship field. In particular,
the findings within the field of Creativity provide potential generative power to
the field of Entrepreneurship.
The implications of such a theory are large and may go to the very definition of
the entrepreneurship field. The GTEC envisages entrepreneurship as an indepen-
dent, creative, applied art and/or applied social science rather than as a sub-discipline
of the traditionally viewed, technically characterized field of business management.
The entrepreneur is the creative artist; the manager, a technocrat. One implication of
having a general theory of entrepreneurship, based as it is upon entrepreneurial
creativity, is probably to view the field as not so much a sub-field of management
but more as a distinct creative discipline, bringing to bear the science of creativity
upon the science of entrepreneurship.
2
The parts of the theory are much better tested than the whole.
Part IV
Auxiliary Theories
Chapter 8
Entrepreneurial Creativity
Abstract In the last two chapters you were given evidence that should give you
reason to believe that the theory of entrepreneurial creativity merits your serious
consideration. What, however, does it really mean to be entrepreneurially creative?
This next chapter elaborates the creative resources likely to be found in a prototypic,
entrepreneurially creative person; providing yet more evidence on the validity of
the theory.
Entrepreneurial creativity appears to be a driving force behind faster growing and

more successful business ventures (c.f. Rauch and Frese 2007; Rauch et al. 2009;
Zhao et al. 2010). Consequently, it is important that the field develop a sophisticated
model of the entrepreneurially creative individual. It is anticipated that the model
will provide substantial practical value to budding entrepreneurs, entrepreneurship
researchers, investors, policy makers and educators. Those considering an entrepre-
neurial endeavor will be able to judge for themselves the potential for success that
they possess. Policy makers will be able to modify outreach efforts to match
expected outcomes. Educators will be able to more effectively place students in new
venture-related programming.
Entrepreneurial creativity research efforts will need to develop more comprehen-
sive testing of the whole person, including creative aspects of the intellect, personal-
ity, motivation, thinking style and relevant knowledge (Sternberg and Lubart 1999).
In order to understand the specific nature of entrepreneurial creativity, it seems rea-
sonable to leverage the existing evidence linking different aspects of the creative indi-
vidual to entrepreneurs and entrepreneurial performance. It will also be necessary to
develop new instruments specifically designed to measure entrepreneurial creativity.
Before delving into the various aspects of entrepreneurial creativity, it is essen-
tial to provide brief discussions regarding the downside of creative thinking ability,
as well as explore the contexts in which creative thinking is justifiable. The next two
sections offer some contemporary views on the negative side of creativity and the
applicability of creativity within various contexts. The remainder of the chapter is
dedicated to providing an enhanced characterization of the entrepreneurially cre-
ative individual. In addition to concerns about the measurement of entrepreneurial
creativity, a variety of related issues such as confluence, thresholds, contingencies,
range of applicability, and direction of causality are discussed.

DOI 10.1007/978-3-319-04726-3_8
116 8 Entrepreneurial Creativity
The Negative Side of Creativity
It is dangerous to think of creativity as unquestionably desirable. Some of the more

likely negative consequences of a creative lifestyle are worth highlighting to avoid
a Pollyanna view of the subject.
Highly creative people tend to exhibit some common social personality traits.
According to Feist (2010, p. 121), they are, generally not sociable and outgoing,
but they are independent, confident and assertive (Chvez-Eakle et al. 2006; Feist
1999). Further, they, doubt, question, and often reject norms, traditions, and
conservative ideology. (p. 122)
With respect to clinical personality traits, the evidence is more problematic.
Feists (2010) review of the literature suggests that those in the arts tend to be mani-
fest stronger clinical personality traits than those in the sciences. His review also
suggests a link between psychoticism and creative thought and behavior. Those
who score high on psychoticism tend to be cold, aloof, eccentric, egocentric, impul-
sive and hostile. However, this relationship may hold for men, but not women
(Martindale 2007).
In the abstract, creativity is typically viewed as unambiguously positive. In the
concrete, highly creative people are often a pain to be around. They are typically not
deferential to authority. They often are confident to the point of arrogance. They
often fail to co-operate with others. They will be just as likely to undermine the
system as to support it.
Just as being creative is not an overall stroke of good luck, neither is being entre-
preneurial for most people. Being entrepreneurial often means working long hours,
often for very uncertain returns; and often for a lower wage than comparable
employees. Entrepreneurs are often driven personalities who may suffer from a
number of physical and psychological ailments (c.f. Boyd and Gumpert 1983; Jamal
1997; Parslow et al. 2004), as well as work-family conflict (c.f. Parasuraman and
Simmers 2001; Werbel and Danes 2010).
Of course, the decision to be creative or entrepreneurial is often not a choice.
Creative people need to be creative, and when they are not given the creative outlets
that they want (and they can be most specific in their demands) they may tend to be
destructive to others and to themselves. Entrepreneurship is one of those creative
outlets that such people need.
When Creativity is (not) Needed
To justify the need for a creative person, a job requires a relatively high number of
ambiguous, open-ended problems. Ford (1996) developed a theory of creative
action, which described circumstances in which creative activity is preferred over
conventional activity and vice versa. With respect to innovation, Ford (p. 1125) con-
cluded that creativity has a critical role to play, across levels and in all phases of
Entrepreneurship as a Creative Applied Art/Science 117
the innovation process. He (p. 1125) also concluded that the role of creativity is
limited: Unlike prior conceptualization of organizational creativity, this theory
implies that creative actions must hold a relative advantage to habitual actions in
terms of expected personal consequences before creative pursuits will be intention-
ally undertaken. When problems are sufficiently well understood to allow conven-
tional solutions, such solutions should normally prevail.
There is some limited evidence that creative people arent suited to particular
careers or work environments. Hayward and Everett (1983) found that government
employees who scored higher than fellow employees on the Kirton Innovation-
Adaption Inventory (KAI) were more likely to resign. Chan (1996) found that
Singaporean Civil Service engineers, who were materially more innovative than
their counterparts, as measured by the KAI, were more likely to leave positions in
which job expectations involved production and maintenance within a given techno-
logical system. Mitchell and Cahill (2005) found that new cadets (Plebes) at the US
Naval academy were materially less creative on the KAI. Moreover those students
who left the program were significantly more innovative than those who stayed.
Chilton et al. (2005) used the KAI to find that high innovator-type software develop-
ers experienced decreased performance and elevated stress levels in environments
suited to high adaptor types. Brigham et al. (2007, p. 42) found that, for less
structured work environments, intuitive owner-managers experience higher satisfac-
tion than those who are analytic, but for more structured work environments, intui-
tive owner-managers experience lower satisfaction than those who are analytic.
Entrepreneurship as a Creative Applied Art/Science
To date much of the work on creativity has either focused on the arts or the sciences
(Feist 1999), although some writers may include technological achievement as a
third general classification of career types (Ward et al. 1999, p. 190).
All creativity to some extent or another depends upon discovery, self-expression
and design. Some disciplines weigh more heavily on one of these factors than on the
other two. Great artistic work and great scientific discoveries have been inspira-
tional sources for studies of creative people and their times (i.e. Gruber and Wallace
1999; Simonton 1999). The fact that the creativity of the arts and sciences are
understood to contain systematic differences may attest to different guiding forces
driving practice in these two types of discipline. Creative outcomes in the fine arts
are probably driven more by self-exploration and self-expression than those in the
sciences, which are probably driven more by outward exploration and the drive to
discover the external world. Feist (1999, p. 283) appears to agree, arguing that,
One of the main differences between artistic and scientific creativity may be the
importance of getting more deeply into affective states and thematic material in
artistic creativity.
We argue that neither a focus on inner or outer exploration does justice to entre-
preneurship. It may be more useful to view entrepreneurship as an applied art or
an applied science. Entrepreneurs more closely resemble inventors, engineers,

architects and even medical practitioners. In an applied art, a creator tries to design
and implement a better working model of something. In this sense, an entrepreneur
engages in a discovery of what is already known before engaging in the process of
designing a better business concept. Here, discovery implies looking within, as well
as going beyond oneself into the world, to develop something new. Creating (prob-
ably implying self-expression) is hence not limited to looking within oneself.
The following sections explore creative entrepreneurial intelligence, personality,
motivation, thinking styles and knowledge requirements.
Entrepreneurially Creative Intelligence
It may be useful to think of the intelligence resource within entrepreneurial creativ-

ity as being broader than its conventional conceptualization. The theory of intelli-
gence, measured by conventional instruments such as the Wechsler Adult Intelligence
Scale, has been debated by, among others, Howard Gardner, who proposes contro-
versial models that promote multiple intelligences. Howard Gardner (1993), a
developmental psychologist, proposed a model of multiple intelligences by drawing
awareness to distinctive features that characterize a number of special types of
intellects, in particular: linguistic, musical, logical-mathematical, spatial, bodily-
kinesthetic, outward-directed personal and inward-directed personal. Robert
Sternberg has also used a number of different conceptual models of intelligence to
generate different types of insights in different settings (c.f. Sternberg and Kaufman
1998). In 2004, Sternberg (p. 189) argued that, successful intelligence, not just
a subset of its components (analytical, creative, and practical abilities), is needed for
entrepreneurial success.
An attempt is made here to propose five intellectual attributes that spur entrepre-
neurial creativity and hence, high growth entrepreneurship. Theoretical rationality
and/or empirical evidence are used to support the following intellectual attributes of
the entrepreneurially creative intellect: opportunistic imagination; entrepreneurial
judgment; persuasive ability; improvisational ability; and, collaborative ability. It is
hoped that these specific intellectual resources increase our understanding of the
nature of entrepreneurial creativity.
Opportunistic imagination. When Einstein observed that imagination was more
important than knowledge, he was probably thinking about his and other scientists
contributions in science. Knowledge would appear to be a precursor to meaningful
imagination in the hard sciences. If imagination is more important than knowledge
under conditions in which the acquisition of knowledge is incredibly demanding,
how much more important, relatively speaking, is imagination in a setting such as
entrepreneurship, in which (1) the subject matter is future oriented and (2) relevant
knowledge hurdles appear comparatively limited?
Entrepreneurship as a Creative Applied Art/Science 119
Opportunistic imagination implies a specific ability to imagine new venture

opportunities in the future. According to Klein (2008, p. 182): Entrepreneurs do
not, in other words, create the future, they imagine it, and their imagination can be
wrong as often as it is right. They generate hypotheses about future states how the
future might look and act (Gartner 2004).
Studies relating entrepreneurial imagination to entrepreneurial performance are
scarce. Rockey (1986, p. 346) surveyed over 1,500 potential respondents asking
them, to identify the areas in which they utilized visualization, to indicate the
degree of vividness of their mental pictures Of over 400 respondents, over 50
said that they had used visual thinking in the process of starting a new venture.
Rockey provided a questionable and an unconventional classification of areas in
which visualization was utilized that included the following: clarification and capi-
talization, feelings and entrepreneurship, facility planning, planning and foresight,
venturing with confidence, economical decision-making, clarification for structur-
ing and staffing, tragic envisioning, and outmaneuvering in the minds eye. One of
his interviewees reports as follows (p. 354):
When I started my own company 8 years ago, visualization polished my business plan even
to the point of the sale of the company. In business, the imagery can see about 1 years
into the future with good clarity. Past this point the images are faded but the general notion
is clear. Before the sale of the company, I used imagery to practice the delicate dance
required to outmaneuver bankers, creditors, personnel, etc..
Entrepreneurial judgment. Various noted economists have indicated the relevance

of entrepreneurial judgment over the years. According to Casson (2005)1:
Cantillons entrepreneur needs judgment to speculate on future price movements,
while Knights entrepreneur requires judgment because he deals in situations that
are unprecedented and unique. Schumpeters entrepreneur needs judgment to deal
with the novel situations connected with innovation.
Since entrepreneurial commitments are often long-lasting and they contain many
partially knowable consequences, entrepreneurs really see through a glass darkly.
Judging what to do, when and how to do it, and what to avoid doing, is viewed as
critical for entrepreneurs.
Persuasive ability. Diffusing an innovation (Rogers 1995) is partly about recogniz-
ing who to persuade and how. Sternberg and Lubarts (1999, p. 11) model of intel-
ligence for creative outputs includes, the practical-contextual ability to know
how to persuade others of to sell other people on the value of ones ideas. The
ability to persuade people partially distinguishes the art dealer from the artist and
the innovator from the inventor.
If one conceives a venture as nothing more than a series of contractual arrange-
ments, then entrepreneurship is fundamentally about developing, communicating
and securing deals. Here, persuasion likely involves, and provides the rationale to
1
There is no page reference for this. Others use the same quote and also do not include a page
reference.
tie together, a number of other related abilities such as sales skills, negotiation skills,
communications ability and emotional intelligence. In order to grow their ventures
over time, entrepreneurs need to maintain the confidence of a variety of different
groups of people. Maintaining confidence is probably a political/diplomatic skill.
More successful entrepreneurs may need social and emotional intelligence to under-
stand other people, whether they be customers, employees or resource suppliers.
Improvisational ability. The idea that entrepreneurs need to improvise is not a new
idea. Baker et al. (2003) provided a number of different examples of new technol-
ogy entrepreneurs improvising from the point of opportunity identification onwards.
Hmieleski and Corbett (2006) provided evidence that the tendency towards creative
improvisation was related to peoples tendencies to have the intention to start a
growth venture, to take a course in entrepreneurship, to work for a start-up and to
start a new venture. Sarasvathys (1998) documented the development strategies of
a number of extraordinarily successful entrepreneurs. Her research uncovered the
commonplace tendency of entrepreneurs to improvise in solving their problems.
Sarasvathy (2001) has since developed a theory of entrepreneurial action centered
on her concept of improvisation which she labelled effectuation. She likens the
entrepreneur to a cook who crafts possibilities from ingredients that are immedi-
ately available, rather than collecting necessary ingredients ahead of time in order
to follow a preset recipe.
Of course, improvisation is neither simple nor automatic. Even though improvi-
sation is the act of spontaneous composition, a lot of knowledge and practice is
required in order to learn how to be productively spontaneous. The premise of The
Book of Five Rings (Mushashi 1643), an ancient Japanese text on the relationship
between improvisation and deadly sword fighting, is that endless practice is needed
before a fight. When a fight begins, however, a swordfighter should lose himself in
the moment. In Jazz, a twentieth century art form founded on improvisation, artists
are educated for many years in order to learn how to meaningfully improvise. There
are many guidelines regarding effective and ineffective note sequences.
Collaborative ability. Shane (2003, p. 99) indirectly suggests that entrepreneurs
tend to be disagreeable, difficult people: The evidence supports the proposition
that people who are friendly, socially conforming, compliant, flexible, trusting,
cooperative, forgiving, tolerant, softhearted and courteous are likely to be less entre-
preneurial. He (2003, pp. 106107) also indicates that a, desire for indepen-
dence tends to be associated with the likelihood of self-employment. Interestingly,
people who have a greater desire for independence actually perform worse at
entrepreneurial activities (Shane 2003, p. 108).
It would appear then, that successful entrepreneurs are rather prickly people who
happen to know how to act interdependently. It appears that a strong spirit of inde-
pendence is needed to launch a promising venture, but it may be potentially toxic
once the venture is launched. These countervailing tendencies of the independent
entrepreneurial personality might be labeled the independence paradox.
What is Common to the Creative Intellect? 121
What is Common to the Creative Intellect?
Sternbergs (1985) definition of creative intelligence is based on three components:

the ability to see things in new and different ways; to be able to judge what is worth
exploring; and, to be able to persuade or sell other people on the value of ones
ideas. It should come as no surprise then that the first three abilities mentioned
above are commonly associated with creativity. Improvisation has elsewhere been
recognized as a creative ability (c.f. Hmieleski and Corbett 2006). The least-well
defined intellectual attribute of successful entrepreneurs described above, the ability
to collaborate, may be their only truly distinctive intelligence characteristic, as com-
pared with many other creative people. There are other comparable exceptions, of
course, such as film directors who also need to actively collaborate with others.
Otherwise, the entrepreneurial intellectual skill set is mainly a variant of creative
intelligence.
Entrepreneurs need to imagine opportunities rather than concertos. Entrepreneurs
specifically need business judgment rather than judgment regarding what consti-
tutes great literature. Entrepreneurs need to know how to persuade their relevant
stakeholders, which may be different than scientists influencing granting agencies
or reviewers of journals. It may also be the case that persuasion plays a larger and
more continuous role in the lives of entrepreneurs than it does for other creative
artists. The improvisational tactics and strategies of the successful entrepreneur will
also probably differ from that of other creative improvisers. The search for the
defining characteristics of the successful entrepreneurial intellect will need to be
on-going.
Entrepreneurially Creative Personality
The identification of a limited number of defining personality characteristics of

entrepreneurs is tricky. There are many potentially distinguishing personality char-
acteristics for both the highly creative and the entrepreneurial. The commonality
amongst entrepreneurs and other creative people has been noted elsewhere
(McMullan and Long 1990). Three of the four personality factors of creative people
that Sternberg and Lubart (1999) highlight (self-efficacy, willingness to overcome
obstacles, taking sensible risks and tolerating ambiguity) are also found amongst
Shanes (2003) factors that influence new venture outcomes (self-efficacy, risk-
taking and tolerating ambiguity2). The Entrepreneurial Attitude Orientation scale
(Robinson et al. 1991) includes self-esteem as one of its four variables.
Perhaps, we might view the creative entrepreneurial personality set as being a
syndrome of related attributes. Those with a strong sense of self-efficacy must be
persistent and selective in the way that they take risks. In an entrepreneurial setting
they will need to be tolerant of ambiguity.
2
Shane treats tolerance of ambiguity as a part of risk taking propensity.
Other personality factors might also influence entrepreneurial creativity. Some

other high potential inclusions may be intuitiveness (Allinson et al. 2000), extraver-
sion (Zhao et al. 2010) and open-mindedness. Here, five factors are selected to
characterize the personality of the entrepreneurially creative person for the purpose
of engendering productive controversy: self-efficacy, perseverance, selective risk-
taking, tolerating ambiguity and extraversion.
Self-efficacy. Self-efficacy is the belief in ones own ability to perform a given task.
According to Bandura and Locke (2003, pp. 8788), it is a key driver of motivation
and performance:
The evidence from these meta-analyses is consistent in showing that efficacy beliefs
contribute significantly to the level of motivation and performance. Efficacy beliefs predict
not only the behavioral functioning between individuals at different levels of perceived self-
efficacy but also changes in functioning in individuals at different levels of efficacy over
time and even variation within the same individual in the tasks performed and those shunned
or attempted but failed. Evidence that divergent procedures produce convergent results adds
to the explanatory and predictive generality of the self-efficacy determinant.
When confronted with an entrepreneurial challenge, the entrepreneur will tend to

think that s/he is capable of handling it. S/he can, in effect, turn inward for suste-
nance. According to Markman et al. (2005, p. 5), in the field of entrepreneurship,
self-efficacy is preferred to the closely related constructs of self-confidence and
self-worth because, research has shown that the former is a more robust predic-
tor of task performance (cf. Bandura 1997) and personal variability in entrepreneur-
ship (Baum et al. 2001; Chen et al. 1998). Rauch and Frese (2007) meta-analyzed
empirical findings related to generalized self-efficacy and found effect sizes of
r = 0.378 and r = 0.247 for business creation and success, respectively. Hmieleski
and Corbett (2008) have found entrepreneurial self-efficacy to positively moderate
the relationship between an entrepreneurs improvisational behavior and new ven-
ture performance.
Perseverance. Markman et al. (2005, p. 3) define perseverance as, ones ten-
dency to persist and endure in the face of adversity. Those who persevere, according
to the authors (p. 3),discover ways to circumvent constraints or change them by
their actions, whereas less resilient people are easily discouraged by impediments
and unexpected challenges (Bandura 1997; Eisenberger et al. 1992).
Perseverance has long been associated with entrepreneurship. Napoleon Hills
(1937) Think and Grow Rich, one of the first self-help books, focused on common
characteristics of successful entrepreneurs, including many of the most famous
American industrialists of the early twentieth century. Hills (p. 151) overwhelming
message was passionate persistence: Persistence is an essential factor in the proce-
dure of transmuting desire into its monetary equivalent. The basis of persistence is
the power of will.
Selective risk-taking. As mentioned in the previous chapter, a number of meta-
analyses have been conducted on risk propensity. A meta-analysis focused on risk
propensity (Stewart and Roth 2001) found that growth-oriented entrepreneurs have
What is Common to the Creative Intellect? 123
substantially higher levels of risk propensity than income-oriented entrepreneurs

(average effect size corrected for reliability d = 0.69). The results indicate that entre-
preneurs with high growth aspirations have higher risk propensities than other
entrepreneurs and managers (Stewart and Roth 2001, 2004). The results also indi-
cate that risk propensity positively influences new venture intentions (Zhao et al.
2010) and creation (Rauch and Frese 2007). There is conflicting evidence for the
impact of risk propensity on new venture performance. Rauch and Frese (2007) find
a small positive effect size, whereas Zhao et al. (2010) find no effect. The results of
the different meta-analyses appear to somewhat contradict one another. Zhao offers
a rationalization:
Our results for risk propensity are particularly interesting because they shed light on
inconsistent meta-analytic findings in the entrepreneurship literature (e.g., Miner and Raju
2004; Stewart and Roth 2001, 2004). Stewart and Roth (2001) conclude that risk propensity
is related to entrepreneurial status, whereas Miner and Raju (2004) provide evidence, based
on a different set of studies, that entrepreneurs are more risk avoidant On the one hand,
our current results show risk propensity to be moderately related to entrepreneurial inten-
tion, which we argue should lead to the higher level of risk propensity among entrepreneurs
found by Stewart and Roth (2001). On the other hand, our results also show that risk pro-
pensity is not significantly related to entrepreneurial performance.
Following Schumpeter, David McClelland (1961) saw achievement motivation

as the prime driver of entrepreneurial performance. He predicted the nature of the
relationship between risk-taking propensity and need for achievement as an inverse
U relationship, which across the entire spectrum of the population, might be consis-
tent with a zero correlation between risk-taking propensity and venture perfor-
mance. He argued that if risk-taking propensity were low then individuals would be
inclined to select easy tasks where their chances of failure were low. Such people
would be unlikely to consider an entrepreneurial career. If the individuals risk-
taking propensity were high then the individual would be likely to choose very dif-
ficult tasks where the chances of achieving were low and any failure could be easily
explained away. Neither would high risk takers under such a scenario be likely to
persist in entrepreneurship. It was only in the intermediate zone where people suited
to be entrepreneurs were to be found. These people were willing to take the substan-
tial risk of a venture but were not out-right gamblers.
Tolerating ambiguity. The requirement for tolerance of ambiguity speaks to the
open-endedness of entrepreneurial problems. Potential entrepreneurs must be or
become comfortable coping with substantial uncertainty, or else they should choose
another career path. Per the previous chapter, only a small number of empirical
studies examine tolerance for ambiguity. Wagener et al. (2010) found that tolerance
for ambiguity distinguishes successful entrepreneurs from successful small busi-
ness owners. Koh (1996) finds in favor of a positive relationship between tolerance
for ambiguity and new venture intentionality. Three studies find no evidence of such
a relationship (Gurol and Atsan 2006; Gurel et al. 2010; Altinay et al. 2012).
Extraversion. Abra and Abra (1999, p. 289) indicate that, creative people in
every field tend to be introverted, with some such as Newton and Emily Dickinson
being virtual recluses Shane et al. (2010, p. 1155) argue that, Entrepreneurship
is more appropriate for extraverts than introverts, because entrepreneurs need to
interact with investors, employees, and customers and sell them on the value of the
business. Costa and McCrae (1992) describe extraverted individuals as assertive,
dominant, active, energetic, talkative, cheerful and enthusiastic people who seek
excitement and stimulation. Costa et al. (1984) found that more extraverted indi-
viduals tend to have more interest in enterprising occupations than those who are
less extraverted.
To date, two meta-analyses have been conducted on extraversion. The first study,
by Zhao and Seibert (2006), hypothesized that entrepreneurs would have higher
extraversion scores than managers. The researchers did not find a statistically sig-
nificant difference between the groups. However, they (p. 266) indicated that the
confidence interval, was wide and included zero, suggesting the difference
between entrepreneurs and managers on this personality dimension is not reliable or
could not be measured with precision in this sample. The second study, by Zhao
et al. (2010), focused on the impact of extraversion on new venture intentions and
performance. The researchers reported effect sizes of 0.16 and 0.09, respectively.
Perhaps extraversion might be expected to have a curvilinear relationship with
venture performance. While entrepreneurs may need to aggressively interact with
others they also need to want to have alone time to ponder their evolving ideas.
After a certain threshold amount of extraversion, the relationship might turn
negative thus suggesting an upside-down U relationship between extraversion and
venture performance. Such a relationship might explain the relatively unimpressive
findings to date.
What is Common to the Creative Personality?
Self-efficacy, mindful persistence, selective risk-taking and tolerating ambiguity are

all features of the creative personality. It is in terms of extraversion that entrepre-
neurs are different from other creative people. The fact that entrepreneurs, of neces-
sity, work through and by other people, characterizes their specific art form setting
it apart from many other creative art forms. As with the entrepreneurially creative
intellect, the entrepreneurially creative personality is more similar to the personali-
ties of other creative people, than it is distinctive.
Entrepreneurially Creative Motivation
In the case of motivation, the achievement motive may be viewed as an integrating

entrepreneurial motivating syndrome (Miner et al. 1989). The achievement motive
has four elements that may have partly originated with Schumpeter: First, it is the
need for success itself that drives entrepreneurs whether in the form of
What is Common to the Creative Personality? 125
competition with others or with oneself. Second, it appears that it is the goal and not
the financial gain that is important; the joy of being involved in creation pulls entre-
preneurs as much as it pulls at other creative people. Third, creative people every-
where are driven by the need to create a body of work that will outlive them. These
first three goals were all described by Schumpeter as part of entrepreneurial motiva-
tion (Schumpeter 1911). McClelland (1961) not only sharpened the imagery around
the first three goals, he added a fourth dimension, that of credible goals, and shaped
all of components together into a single overarching entrepreneurial motive called
achievement motivation.
A Desire for success. The game that entrepreneurs choose to play is blatantly a
competitive one. Even if they begin the game with a competitive niche or a localized
monopoly of sorts, over time most goods become commodities and entrepreneurs
must compete. Competition is not foreign to creative artists or creative scientists
either (Abra 1993). It is important to realize that creative people, including entrepre-
neurs, may just as soon compete with themselves as with other people (Abra 1993).
Schumpeter (1911, p. 686) writes: there is the will to conquer: the impulse to
fight, to prove oneself superior to others, to succeed for the sake, not of the fruits of
success, but of success itself.
Intrinsic motivation. Schumpeter (1911, p. 686) appears to have recognized both
the joy derived from the creative process as well as the motivating force inherent in
the act: the joy of creating, of getting things done, or simply of exercising ones
energy and ingenuity. Csikszentmihalyi (1997, p. 29) has also documented the joy
of creating and related it to the experience of flow:
The metaphor of flow is one that many people have used to describe the sense of effortless
action they feel in the moments that stand out as the best in their lives. Athletes refer to it as
being in the zone, religious mystics as being in ecstasy, artists and musicians as aesthetic
rapture.
The notion that entrepreneurs are more driven by an intrinsic need for achieve-
ment rather than by a need for money or greed is emphasized in the work of
McClelland (The Achieving Society 1961), who popularized the idea of achievement
motivation. McClelland knowingly based his understanding of the achievement
motive on work by Atkinson. Referencing a series of three studies by Atkinson,
McClelland (p. 235) stated:
All three studies point to the same conclusion: people with high n Achievement are not
influenced much by money rewards; they are interested in achievement. People with low n
Achievement, on the other hand, are influenced by money and can be made to work harder
for money or other external incentives.
Stewart and Roth (2007) reported that growth-oriented owners differ markedly
from income-oriented owners on need for achievement (average observed effect
size (Cohens) d = 0.67).
A legacy. The sum and substance of a creative life is an individuals body of
work. The body of work lives beyond. Death and the durability of ones work may
be inextricably tied together in the minds of many creators (Abra 1995).
Schumpeter (1991, p. 686) characterized an entrepreneurs legacy as follows:

there is the dream and the will to found a private kingdom, usually, though not
necessarily, also a dynasty. The idea that many an entrepreneur might want to leave
a legacy after his passing may not be far-fetched.
Credible goals. McClellands (1961) ring toss game epitomized the idea of choos-
ing intermediate goals in which the chance of success on each toss was around
50 %. Coincidentally, the 5 year survival rate of new ventures is approximately
50 % (Shapero and Giglierano 1982; Audretsch 1991). These odds are probably
much better than those faced by many in the fine arts. Nevertheless, entrepreneur-
ship entails a high level of uncertainty, especially in terms of attaining financial
success. Entrepreneurs are likely to focus upon levels of financial gain as they
represent credible, concrete measures of goal attainment.
What is Common to Creative Motivation?
Creative artists and scientists strive for success and are sustained by intrinsic moti-
vation, desire to leave a legacy and pursue credible goals. Entrepreneurs are not
unlike artists and scientists in these regards. However, entrepreneurs may be some-
what distinguished by a stronger emphasis on money, since it is both a requirement
for participation and a measure of success.
Entrepreneurially Creative Thinking Style
As indicated in the previous chapter, a number of scholars have focused their

research efforts on entrepreneurial thinking styles (c.f. Buttner and Gryskiewicz
1993; Baron 1998; Allinson et al. 2000; Mitchell et al. 2002). For the most part, this
research is in an early stage of development. There may be a multi-dimensional
construct that characterizes the entrepreneurial thinking style in much the same way
that McClelland contrived the idea of achievement motivation to link together a
number of different aspects of entrepreneurial motivation. The dimensions may
include the following ones, described below: innovation orientation, focus on prob-
lem, contrary thinking, intuition, ideation and deferred judgment, and analogical
thinking.
Innovation orientation. The small amount of research to date on innovation orien-
tation indicates a relationship between innovation orientation and entrepreneurship.
Buttner and Gryskiewicz (1993, p. 29) used Kirtons (1984) Adapter-Innovator
Index (KAI) to examine problem solving styles and found that, entrepreneurs
have a more innovative problem-solving style than their managerial counterparts in
larger U.S. organizations. Rosenfeld et al. (1993) used the KAI to reveal that
entrepreneurs score significantly higher than technology managers and the general
What is Common to Creative Motivation? 127
population with respect to both means and variances on the I-A scale. Stewart et al.
(1999) used the Innovation Scale of the Jackson Personality Inventory (Jackson
1976) to find that entrepreneurs exhibit a stronger predisposition to be innovative
than small business owners.
Focus on problem. Since an evocative experiment by Csizkzentmihalyi and Getzels
(1970) that demonstrated a longitudinal impact of a problem focus orientation on
creative success, problem-finding has been a standard concept within the field of
creativity. Csizkzentmihalyi and Getzels (1970) filmed a number of art students
who attempted to paint a still life in a 1 hour session. Analysis of the film record
revealed that those student artists who spent a relatively larger portion of the hour
examining the fruit in the bowl and otherwise delaying their start (presumably
thinking) not only produced a more creative piece of art in the experimental setting
but also were subsequently more likely to develop successful careers as professional
artists.
More recently, a number of studies have found evidence that problem construction
ability is correlated with originality and quality of solutions to a number of real
world problems (c.f. Reiter-Palmon et al. 1997, 1998; Mumford et al. 1997). One
study, Mumford et al. (1994), asked two groups of undergraduate management
students to develop a marketing survey and advertisement for a fictitious product.
Only one group was given a problem construction condition which involved listing
important factors for consideration and a restatement of the problem before task
engagement. The researchers (1994) found that the problem construction condition
group generated higher quality and more original ideas than the other group.
Contrary thinking. Non-conformity indicates a disposition to think and act inde-
pendently with respect to group norms. As mentioned in the previous chapter, a
number of studies have examined the extent to which entrepreneurs are contrary
thinkers. Studies by Sexton and Bowman (1984, 1986) revealed that entrepreneurs
and managers differ significantly on the need for conformity. Buttner and Rosen
(1988) found that bank loan officers rated successful entrepreneurs as much higher
on non-conformity than average men and women. Rosenfeld et al. (1993) found that
non-conformity distinguishes entrepreneurs from managers. A study by Engle et al.
(1997) indicated that non-conformity distinguishes entrepreneurs from employees.
Intuition. Shane (2003, p. 115) describes intuition as, a belief or feeling that
something is true without actually gathering evidence to demonstrate its veracity.
As mentioned in the previous chapter, a number of studies have investigated the
relevance of intuition to new venture activity. Generally speaking, the existing
evidence suggests that high-growth entrepreneurs are more intuitive than low-
growth entrepreneurs and non-entrepreneurs (Ginn and Sexton 1990; Allinson et al.
2000; Brigham and Sorenson 2008; Armstrong and Hird 2009).
Deferred judgment and ideation. One of the fundamental requirements of brain-
storming is that of deferring judgment. The suppression of judgment delays a criti-
cal mindset that would otherwise prevent the emergence of new and potentially
valuable ideas. To date, only one study, by Ames and Runco (2005) connects
ideation to entrepreneurial thinking. The study was conducted on 47 successful

entrepreneurs to determine if ideation practices could distinguish the more success-
ful from the less successful entrepreneurs. Two measures of divergent thinking were
used. The first measure was based on the SWOT model of organizations. The sec-
ond measure was a self-report measure of ideational tendencies. Neither fluency nor
originality scores as judged on SWOT scores were meaningful correlates of entre-
preneurial success. Runco (2008) later explained the surprising finding: it was
fairly clear that they were drawing too much on actual experience about their busi-
nesses and not using their ideational skills to generate original ideas. They were
drawing from memory instead of ideational potentials.
It is interesting to note that those entrepreneurs who had started three or more
businesses reported using more ideation on the self-report measure than did those
starting only one or two businesses. Ames and Runco (2005, p. 314) concluded that
entrepreneurs seemed to frequently use their ideational skills in the natural envi-
ronment and relied more on their own thinking than on routine and rote solutions to
problems.
Analogical thinking. Analogical thinking involves using information from one
field in order to facilitate problem solving in another field. Ward (2004, p. 174) has
expressed confidence that useful applications of metaphorical thinking will be
found in entrepreneurship:
Analogy, or the mapping of knowledge from a familiar to a less familiar one, is central to
creative developments in science, art, music, and literature and may also have applicability
to entrepreneurship, as when a new successful venture is based on the principles that operate
in other currently successful ventures.
What is Common to Creative Thinking Styles?
The aspects of an entrepreneurial thinking style discussed above overlap with those
of creative artists and scientists. As such, it is entirely possible that entrepreneurs do
not differ with respect to thinking style from their creative colleagues in other
disciplines.
Entrepreneurial Knowledge
The deep and lengthy immersion required for certain fields suggests that a great
deal of knowledge is required for creative contributions (Hayes 1989). In the field
of entrepreneurship, there is also a sense that knowledge is important. Ward (2004,
p. 176) argues that, Creative ideas do not appear, ex nihilo, full-blown in the
minds of their originators, but rather must be crafted from the persons existing
knowledge.
What is Common to Creative Thinking Styles? 129
There is vagueness with respect to some of the modern definitions of the nature
of entrepreneurial knowledge. According to Kirzner (1979, p. 8), whose definition
of entrepreneurship is based on arbitrage: Entrepreneurial knowledge is a rarefied,
abstract type of knowledge the knowledge of where to obtain information and
how to deploy it. Birch (1987, p. 140) viewed growth entrepreneurship as being
based on innovation and argued that entrepreneurial knowledge comes from the
creation of new knowledge across a variety of disciplines: Universities particularly
those that concentrate upon research are the wellspring of the high-innovation
economy.
Other than for the ability to find knowledge and deploy it from the most innova-
tive of sources, are there other, more specific types of knowledge that are of general
usage to most growth entrepreneurs? As discussed in previous chapters, the most
recent education-related findings raise serious concerns about the extent to which
useful knowledge for successful new venturing is disseminated via formal educa-
tion. Finding specific knowledge that makes a difference to entrepreneurial success
is proving to be difficult. What constitutes the empirically-demonstrated, effective
knowledge base of the entrepreneurially creative person is not well understood at
the current time.
One place to look for key forms of entrepreneurial knowledge is the core tech-
nologies or art forms of most new growth ventures. Some types of entrepreneurial
knowledge that are probably useful, and maybe even important, for success in
entrepreneurship might include the following: selling know-how, negotiations
know-how, knowledge of the competition, knowledge about an industry and core
technology know-how.
Selling know-how. Steve Case (Gendron 2004, p. 307), the founder of AOL,
describes his notion of selling as, to try to look at things from somebody else's
perspective and then just try to position something that kind of makes sense. Shane
(2003, p. 98) suggests that, to make sales, entrepreneurs must satisfy customers
needs. The process requires them to be able to get beyond the customers initial
objections and overcome unarticulated fears to recognize unstated wants
requirements.
David Birch (Aronsson 2004) argues that selling is a critical skill that an entre-
preneur must know and master. This seems plausible, particularly in light of Bhides
(2000) finding that founders of INC 500 companies typically operate as the sole or
key salesperson suggesting both that it is difficult to attract key salespeople to new
firms and that the sales role is integral to entrepreneurial success.
Negotiations know-how. Carnevale and Pruitt (1992, p. 532) state that negotiation
is a procedure for, resolving opposing preferences between parties. Lewicki
(1992) suggests that the following four factors are present in negotiation: at least
two parties; the perception of conflict/disagreement, interpersonal exchange/
communication; and, a mutual desire to reach an agreement. The two main styles of
negotiation are integrative (win-win) and distributive (win-lose).
The research on negotiation in the field of entrepreneurship is in its infancy. The

first major undertaking, a dissertation by Dunne (2012, p. vi), reveals the following
findings:
Entrepreneurs tend to possess slightly more complex schema in regard to negotiation than
non-entrepreneurs. They also differ on how central a particular schema category was to
their thinking, putting more emphasis on building relationships, outcomes for others, and
risk taking. Additionally, entrepreneurs put less weight on extracting personal value from
negotiations.
Knowledge of the competition. This is an area of research that has also received
relatively little scientific attention. Peters and Brush (1996) found that new venture
outcomes benefited from knowledge of competitors marketing information. Zahra
et al. (2002, p. 21) found that development of formalized competitive analysis sys-
tems positively influence new venture success as strategic uncertainty in the envi-
ronment increases: The value of a comprehensive CA system increases in highly
uncertain environments as new ventures struggle to carve out their competitive
niche in complex and dynamic markets. Presumably, entrepreneurs benefit through
an appreciation of the relative merits of their products and services in fast changing
industries.
Knowledge about an industry. Shane (2000) asserts that, Three major dimensions
of prior knowledge are important to the process of entrepreneurial discovery: prior
knowledge of markets, prior knowledge of ways to serve markets, and prior
knowledge of customer problemsImportant prior knowledge about markets might
include information about supplier relationships, sales techniques, or capital equip-
ment requirements that differ across markets (Von Hippel 1988).
A number of studies have examined the link between industry knowledge and
entrepreneurial performance. In one of the earliest studies, Vesper (1979, p. 165)
noted that a large majority of the successful case studies he reviewed had a,
pattern of close connection between prior work and new-venture ideas. Feeser
and Willard (1990) found that growth rates of new ventures were positively influ-
enced by founders prior experiences with related products, technologies and
markets. Bosma et al. (2004) discovered that experience in the same industry sector
influenced the survival, profitability and number of employees of new ventures.
Colombo and Grilli (2005, p. 795) investigated the relevance of industry knowledge
in high-tech industries and found the following: prior work experience in the
same industry of the new firm is positively associated with growth while prior work
experience in other industries is not. Ganotakis (2012, p. 510) also finds that the
relationship holds in high-tech industries: Entrepreneurs with experience in differ-
ent industrial sectors seem to be less likely to affect the performance of a firm than
those with same-sector experience. The latter are more likely to have a better
knowledge of technological and marketing opportunities that can be exploited in
this specific market.
Core technology know-how. Core technological knowledge is distinct from the
knowledge gained from working in an industry. It refers to technical skills, such as
Developing Measurement Instruments 131
software development, that are honed by related education and training. There is
evidence supporting the proposition that entrepreneurs benefit from experiences
related to the technologies of a specific industries. Almus and Nerlinger (1999)
found that West German start-up firms who had founders with technical degrees
enjoyed greater growth in high, medium and low technology businesses. Colombo
and Grilli (2005, p. 795) found that, it is the technical work experience of found-
ers as opposed to their commercial work experience that determines growth in
high-tech industries.
What is Common to Creative Knowledge?
Selling and negotiations know-how may be common to all creative endeavors and
not specific to only new venturing. Scientists need to sell their ideas and artists need
to sell their creations, and both groups negotiate for the required resources. The
difference is one of degree, with entrepreneurs typically selling and negotiating
much more frequently than the other two groups. It may also be that artists and
scientists benefit from some industry and competition knowledge to function at
peak levels, but the differences here are also likely to be of degree. Finally, the art-
ists and scientists need to know about relevant core technologies. Overall, what
initially might look to be a difference of kind may be more a difference of degree.
There are, of course, material knowledge requirements differences among artists,
scientists and entrepreneurs, but those requirements are likely to be project specific
for each creator.
Developing Measurement Instruments
The development of concise and credible measurement instruments will be difficult

given the inherent complexity of the concept of entrepreneurial creativity. Currently,
creativity/innovation measures used in empirical studies tend to measure a single
creative resource, a couple of resources or a holistic notion of creativity or innova-
tion. Kirtons KAI (1976) measures cognitive style. Miners MSC-T (2000) mea-
sures managerial/leadership motivation. Robinsons EAO (1991) measures deeply
entrenched attitudes, as proxies for personality. Cairds GET (1991) measures per-
sonality and motivation.
There may be an opportunity to compose a more complete inventory that relies,
in part, on pre-existing sub-scales with demonstrated reliability and validity. A num-
ber of research questions will emerge. What sub-scales will be dominant in relation
to entrepreneurial success? To what degree will the newly formed scales function
additively to predict entrepreneurial outcomes? What will be the relative influence
of creativity in general versus entrepreneurship-specific resources in particular in
explaining entrepreneurial outcomes?
While it is critical to predict who the better performers will be, it is also necessary
to carefully explain how some individuals will be better performers than others. The
best tools for prediction will likely be composite tools that take features from vari-
ous aspects of the different creative resources. In order to determine which of the
various creative resources has the most predictive power, researchers will need to
drill down into each resource to uncover the aspects that produce the strongest
connections with venture performance.
Let us say for argument sake that beyond a 115 IQ, personality variables will
have the most power for explaining entrepreneurial performance. Then let us say
that of the various personality variables involved that self-efficacy explains most of
the subsequent performance variance. Next, researchers will try to explain why self-
efficacy is so important. Ultimately, the search for answers will hopefully not only
aid understanding but yield still better tools for prediction and control. Here, control
implies an enhanced ability to identify those who will be successful entrepreneurs.
Viewing Entrepreneurial Creativity Holistically
At the current time, scholars assemble the entrepreneurs character in a piecemeal

fashion, using aspects of motivation, personality, thinking style and knowledge in
no particular order. The various distinctive features of, for example, very successful
entrepreneurs are rather randomly observed, not unlike the blind men examining an
elephant (Gartner 2001). A shift toward the lens of entrepreneurial creativity pro-
vides an opportunity to examine entrepreneurial phenomena both holistically and
analytically. Theory testers would, hence, observe the whole elephant before pro-
ceeding to examine the various parts. A holistic view also encourages the imple-
mentation of more integrative measurement techniques. As Shaver and Scott (1991,
p. 32) state, dont send a scale to do an inventorys job.
To put the above argument in perspective, one might imagine investigating the
psychological profile of Miles Davis, the great creative jazz artist. It is not said that
Miles Davis was a driven musician who also happened to be creative. The drive is
part of the creative syndrome. It is creativity, thus, that allows for the linkage of
various constructs and ultimately, a clear view of the elephant.
Confluence
Sternberg and Lubart (1999) describe confluence as the convergence of multiple

components, which allows creativity to occur. In entrepreneurship research, the pre-
ponderance of empirical studies report multiple correlates of entrepreneurial cre-
ativity that influence entrepreneurial outcomes. Regrettably, the components are
treated as independent of one another. However, a small number of empirical stud-
ies do explore the additive nature of separate factor contributions. For example,
Range of Applicability 133
Robinson et al. (1991) used the entrepreneurial attitude orientation (EAO) scale to
distinguish entrepreneurs (n = 54) from white collar managers (n = 57). All four of
the EAO subscales were independently significant at the 0.001 level. When entered
into a stepwise discriminant analysis (pp. 2021), innovation, personal control and
self-esteem collectively provided, 77 % accuracy in predicting group member-
ship using the classification function coefficients.
Utsch et al. (1999) used Patchens (1965) interest in innovation scale to classify
75 East German Managers and 102 East German entrepreneurs. When combined,
the scores for the readiness to change at work and interest in innovation mea-
sures were able to predict the classification of managers and entrepreneurs, 80.6 %
and 79.3 % of the time, respectively, thereby implying that both scales were required
to develop such a high level of discrimination.
Hmieleski and Corbett (2008) used a novel research instrument to investigate the
influence of improvisational behavior and self-efficacy on new venture performance
with 159 firm founders. The researchers (p. 490) found that, the interaction of
improvisational behavior entrepreneurial self-efficacy on new venture performance
is indeed positive and significant ( = .21, p < .01)startups led by founders who
were high in entrepreneurial self-efficacy tended to grow at a greater rate when their
founders exhibited high levels of improvisational behavior, whereas startups led by
founders who were low in entrepreneurial self-efficacy tended to grow at a com-
paratively lower rate when their founders exhibited high levels of improvisational
behavior.
Thresholds
That fairly substantial evidence exists to demonstrate an IQ threshold in other cre-

ativity disciplines is suggestive of the usefulness of the concept of a threshold
(Albert and Runco 1999). To date, the evidence of minimum (or maximum) thresh-
olds of different element of entrepreneurial creativity is very limited. It is reason-
able to propose, though, that some minimum levels of self-confidence, tenacity or
tolerance of ambiguity are required for successful entrepreneurship. Similarly we
should anticipate thresholds in knowledge and thinking style. There will, of course,
be problems with respect to the measurement of such thresholds.
Range of Applicability
The focus here is on the creativity of entrepreneurs. The extent to which the general
theory of entrepreneurial creativity can extend beyond entrepreneurship to predict
other business outcomes is unclear. Nonetheless, there are empirical studies that
suggest an extended (or extendable) range of applicability. One potentially informa-
tive study by Howell and Higgins (1990) investigated a broad range of
characteristics in order to distinguish 25 champions of corporate innovation from a

matched group of non-champions. The researchers examined personality character-
istics (achievement motivation, persistence, innovativeness, persuasiveness, and
risk-taking), leadership behaviors (charisma, inspiration, intellectual stimulation,
and individualized consideration) and influence tactics. They (p. 333) found that,
An examination of factor loadings clearly indicates that two variables drive the
personality construct within the theoretical context of our model. They are risk tak-
ing and innovativenessThese results imply that risk taking and innovativeness are
the predominant personality characteristics of champions. A discriminant analysis
was significant at the 0.001 level with an overall classification rate of 84 %. Howell
and Higgins (p. 335) concluded that, champions manifest the personality char-
acteristics of risk-taking propensity and innovativeness, which are empirically
related to entrepreneurship
The question of how broadly entrepreneurial creativity might apply is, in effect,
a question of boundary conditions. While the what, why, and how are questions of
the functioning of the model; questions of where, when and who are concerned with
the boundaries of a theory (Whetten 1989). As it is, the existing evidence from the
empirical research would suggest that the boundaries of the theory may encompass
more than just entrepreneurs, i.e. new venture founders. Hence, the scope of the
usefulness of entrepreneurial creativity might be extended over time to include,
among others, corporate entrepreneurs, innovators and CEOs.
Contingencies
The environment is conceived as directly effecting both the creative development

and the creative undertakings of the entrepreneur. It is also conceived as influencing
the process of venture development itself. The environment may play a material role
in the influence of each of the various stages of venture development, from selecting
an opportunity at a promising time in a promising industry, onward. A useful start-
ing point for environmental munificence might be to follow the empirical research
of Miller and Friesen (1983) and Covin and Slevin (1989). Disciplines other than
creativity are likely needed to help with finding specific environmental characteris-
tics that will be supportive of entrepreneurial creativity.
The Direction of Causation
The expectation is that the direction of causation is from entrepreneurial creativity

to entrepreneurial outcome, and not the reverse. However, some degree of caution is
necessary here. Shaver (1995, p. 21) argued that entrepreneurial activity might be
able to induce creative personality attributes: Finally, the work on creativity, though
psychometrically sound, has typically compared people already identified as
Conclusion 135
entrepreneurs to other folks, leaving open the possibility that the differences were
obtained during the experiences gained in an entrepreneurial career rather than
beforeIn other words, entrepreneurs may not be born, but they might be made.
Conclusion
This chapter develops a more complete understanding of entrepreneurial creativity.

The chapter first drew on Sternberg and Lubarts (1999) conception of creative
resources. The section focused on motivation also drew on Schumpeters conception
of entrepreneurial motivation. Finally, the chapter used the balance of evidence link-
ing the various features of creativity resources with entrepreneurial performance.
The characterizing features chosen represent a credible list of the more important
elements of entrepreneurial creativity. Such a list of components of entrepreneurial
creativity will help to distinguish entrepreneurial creativity from other forms of cre-
ativity. As it is presented, entrepreneurial creativity appears to be similar to other
forms of creativity but for modest and understandable differences typically related
to differences in entrepreneurial media.
It should be noted that the creativity literature offers a variety of other possible
components of the five creative resources delineated by Sternberg and Lubart
(1999). Further research is needed to hone the fields understanding of entrepreneur-
ial creativity. Finally, the case for the GTEC possessing both potential predictive
and explanatory power continues to grow.
Chapter 9
Entrepreneurial Dynamics
Abstract Being entrepreneurially creative is one thing, knowing what to do as a

creative entrepreneur is something else again. The next chapter provides a creative
process model of entrepreneurial venture development. The role of creativity in the
entrepreneurial investment process is explored. We come to appreciate plausible pro-
cess linkages between entrepreneurial creativity and entrepreneurial performance.
As Schumpeter noted, entrepreneurs live in a world of dynamics. The statics he left to

conventional, non-innovative business. Thinking of entrepreneurship in terms of pro-
cess can provide different insight into both the problems entrepreneurs face and the
structure of their solutions. A process model of venture dynamics inevitably will need
to capture a multiple of variables interacting over an extended period of time as a ven-
ture proceeds from an idea in someones head to an evolved, growth organization.
If entrepreneurs need to be creative then they need to act creatively. What kinds
of creative actions do we expect that they will be engaging in? Are there plausible
tactical and strategic activities that would heavily draw on the creative talents of
entrepreneurs? What is needed is a process model or two to explore the nether world
between being a creative entrepreneur and having a high performing business. What
is needed is a process model of entrepreneurial dynamics. Before exploring the pos-
sible tactics and strategies of creative entrepreneurship it makes sense to review
some of the more popular alternative treatments of the entrepreneurial process.
The Rationalist Model
It is probably commonplace for management scholars to use various approxima-

tions of homo economicus across their teaching and research agendas. One of the
common first distinctions in the utilization of the rationalist models is between
means and ends. To avoid the folly of Lewis Carrolls Alice, one should clearly
establish ones destination in order to select the right path that leads to it. The great
strength of a means-ends model is it enables us to put technology in place, that is to
say, better standardized methods for accomplishing ends.

DOI 10.1007/978-3-319-04726-3_9
138 9 Entrepreneurial Dynamics
Values Goal(s) Strategies Tactics
Exhibit 9.1 A model of strategic rationality
In the organizational science realm, a goal is distinguished from a strategy. One

might also further elaborate a goal to introduce the values that precede it. A strategy
may be further refined to introduce finer-grained tactics. Hence, the model of strate-
gic rationality presented in Exhibit 9.1:
Homo economicus establishes a set of values which lead to one or more goals.
Each goal dictates the development of high-level strategies and relevant tactics. The
model appears to offer both consistency and derivability. A high degree of rational-
ity can theoretically be obtained by a thorough and comprehensive approach to
alternatives at each juncture of the model. In the realm of entrepreneurship, strategi-
cally rational thinking offers reason and order, thereby potentially influencing the
survival and success of a new venture.
However, there are substantial limits to rationality in general, and specifically to
the rationality in the type of model advocated here. In effect, the limits to rationality
impose limits to the use of standardized solutions and therefore to technology.
Where rationality is limited, creativity is often required.
Limits to Strategic Rationality
In 1959, Lindblom described and compared two decision making approaches:

rational-comprehensive (RC) and successive limited comparisons (SLC). Lindblom
(p. 80) described the hallmarks of the RC approach as, clarity of objective,
explicitness of evaluation, a high degree of comprehensiveness of overview, and,
wherever possible, quantification of values for mathematical analysis. He (p. 81)
characterized the RC approach, which he argues is the conventionally-advocated
strategic planning model, as follows:
1a. Clarification of values or objectives distinct from and usually prerequisite to
empirical analysis of alternative policies.
2a. Policy-formulation is therefore approached through means-ends analysis:
First the ends are isolated, then the means to achieve them are sought.
3a. The test of a good policy is that it can be shown to be the most appropriate
means to the desired ends.
4a. Analysis is comprehensive; every important relevant factor is taken into
account.
5a. Theory is often heavily relied upon.
Limits to Strategic Rationality 139
Lindblom disputed the viability of the rational-comprehensive approach for the

following reasons: (1) it is extraordinarily difficult to specify desired values at
useful levels of abstraction; (2) trade-offs among values are also hard to specify,
let alone quantify; (3) it is difficult or impossible to fully anticipate outcomes in
order to measure them against values; (4) one cannot derive objectives from values
because innumerable objectives may be consistent with different values; (5) outlin-
ing all possible alternative action sets could be extraordinarily demanding if not
downright impossible; (6) being comprehensive in ones analysis is both impossible
and wasteful in the attempt.
Ultimately, Lindblom claimed that goal-directed action was not a straight for-
ward proposition. Even in the case of higher-level strategic decisions, Lindblom
demonstrated that there are severe limits to control through logical reasoning. As an
alternative to the RC approach, he (1959, p. 81) offered the successive limited com-
parisons or muddling through approach:
1b. Selection of values, goals and empirical analysis of the needed action are not
distinct from one another but are closely intertwined.
2b. Since means and ends are not distinct, means-end analysis is often inappropri-
ate or limited.
3b. The test of a good policy is typically that various analysts find themselves
directly agreeing on a policy (without their agreeing that it is the most appro-
priate means to an agreed objective).
4b. Analysis is drastically limited:
(i) Important possible outcomes are neglected.
(ii) Important alternative potential policies are neglected.
(iii) Important affected values are neglected.
5b. A succession of comparisons greatly reduces or eliminates reliance on theory.
Since Lindblom (1959), a number of management scholars have developed
related ideas and models with the intention of shifting scholarship away from fully-
rational, decision-making models. Recently, Hmieleski and Corbett (2006) offer a
model that indicates the type of entrepreneurial action required for varying degrees
of novelty and resource constraints. They suggest that rational strategic planning
should be constrained to venture situations in which both resource constraints and
the demand for novelty are low. By contrast, improvisation is the desired decision
making style when resource constraints and the demand for novelty are high, the
circumstance facing most growth entrepreneurs. Trial and error (not unlike mud-
dling through) is suggested when required novelty is high and resource constraints
are low. The use of biases and heuristics is recommended when required novelty is
low and resource constraints are high.
The significance of less rational models is to indicate the limited viability of their
rational counterparts. This is not to suggest that less rational models lack flaws
they are merely more realistic or preferred (Simon and Houghton 2002) in many
circumstances. Of course, rationality need not be limited to the rational comprehen-
sive approach alone. Perhaps, entrepreneurs might aspire to root their logic within
the structure of the business disciplines.
On the Limitations of the Small Business Model

of Entrepreneurship
The third chapter of this book introduces the implicit small business theory of entre-
preneurship. The theory predicts that knowledge of each of the various management
disciplines positively influences new ventures outcomes. It is revealed that the theory
may possess value, though existing evidence does not yet weigh strongly in its favor.
Perhaps, the various parties involved with entrepreneurial endeavors maintain
belief in the functional areas of business because comfort is found in holding onto
business conventions. Each management discipline provide entrepreneurs with new
venture development checklists. Unfortunately, the checklists tend to be rather long
and overwhelming. It can easily be argued that there is an incredible array of tasks
required to transform the intellectual and physical infrastructure of a tiny start-up
into a large, successful company.
A second problem is that the management disciplines have yet to provide clear
direction regarding which actions to take first and/or which actions have the highest
return on investment. Some might argue that knowing the customer should be the
key driver of new venture development. This could imply an early requirement for
in-depth empathic product/service research (c.f. Leonard and Rayport 1997). It
could imply endless traditional market research. Supposedly, a budding entrepre-
neur should do enough market research to understand the customer and the
market whatever that means, particularly given the limited budget available for
most new ventures (Bhid 2000). Disturbing to this view however, it should be
noted here that one research stream indicates that it is dangerous to listen carefully
to what customers want when the anticipated products or services are based on new
technology unfamiliar to the customer (Christensen 1997). Then there is the prob-
lem of determining the best second and third steps, etc. problems not assisted by
functional business knowledge.
The upside of the management disciplines is that they offer structures that aid in
understanding business problems. The functional disciplines organize problems by
type and shed light on business issues, including how some are interrelated. For
example, although market research might not have method in common with promo-
tion (e.g. preparing advertising copy), there are important conceptual linkages
between these two sub-disciplines. When market research is conducted effectively,
it can provide direction to those who design ancillary features of products, including
promotional copy.
Moving beyond conventional management thinking probably means moving
beyond the comfort of structure (i.e. statics) towards the confusion of process (i.e.
dynamics). The only thing perhaps delaying this shift in thinking might be the belief
that new venture business planning provides insight into what action steps to take
and when to take them. A recent meta-analysis (Brinckmann et al. 2010) indicates
that for new ventures, business planning offers at least some promise of value (mean
effect size = 0.13; p = 0.002). Beyond the limits of business planning is the complexity
and uncertainty that calls for creative decision making.
An Investment Theory of Entrepreneurial Creativity 141
In order to effectively understand entrepreneurial dynamics, it is probably necessary

to utilize a model that does not stem from the management disciplines. Given the
nature of the general theory of entrepreneurial creativity, it is necessary to search for
a model that sheds light on how entrepreneurs might use their creativity. The model
should offer insight into what it means in practical terms for entrepreneurs to be
creative in this realm. It should also provide understanding regarding what happens
during new venturing other than marketing, finance, accounting, human resources
and information systems-related efforts. In other words, to what extent does being
an entrepreneur change the media and the processes of business activity from that of
a middle manager?
An Investment Theory of Entrepreneurial Creativity
Sternberg and Lubart (1999) described their confluence model of creativity as an

investment model a view of creative decision-making wherein the creative person
invests in ideas, when still relatively undervalued, then upgrades them in order to sell
at a higher price in the future. Their model of buying ideas at low prices and selling
them at high prices particularly fits the modus operandi of the entrepreneur. In the
case of entrepreneurs the investment decision is not one but many as they piece
together their venture, one investment decision at a time. This chapter favors an
interpretation of new venture development characterized as one of securing business
deals and arrangements, frequently under adverse conditions, in order to realize an
entrepreneurial vision. Entrepreneurial visions, per Lindblom (1959), encompass
end states as well as their methods of attainment. The process is further characterized
as both purposefully strategic, and opportunistically tactical and improvisational.
Exhibit 9.2 below portrays the entrepreneurial development process. The core of
the process involves arranging deals that constitute commitments (i.e. investments)
among the entrepreneur and others stakeholders who contribute in a variety of ways
to developing the venture. The arrows in the diagram represent the origin of deal
making as being either from (1) the entrepreneurs vision of what is needed for
development or (2) events that emerge along the way, creating unanticipated venture
development possibilities. Vision and improvisation independently exert influence
on the development of the enterprise.
The entrepreneurial process may begin with opportunities imagined or opportu-
nities presented. If the process is begun with a person identifying an opportunity and
developing a vision, the process next moves towards arranging productive invest-
ments to develop a related venture. Beyond the initial stage of opportunity identifi-
cation, strategy and improvisation become much more relevant. The term strategy
represents an entrepreneurs long-term perspective on how to develop a venture over
time, including but not limited to fundraising, finding partners, incorporating and so
on. The term improvisation represents an entrepreneurs short-term (re)actions with
respect to ideas, people and events that represent new and potentially profitable
investment possibilities during the venture development process. The ways in which
Exhibit 9.2 The creative

process Entrepreneurial Vision:
Goals and Strategy
Deal Making under Adversity:
Creating Entrepreneurial Commitments
Improvisation: Tactics
Time
unexpected deals present themselves can control the development of a venture more
than any strategic pre-commitment on the part of the entrepreneur. For instance, a
new realization about a need for external funding, due to growth in an unanticipated
market segment, makes its own demands upon an entrepreneur.
The characterization of a business venture as a combination of deals or contracts
through time enables it to be represented as a dynamic entity. As a business grows,
it develops more and different contractual relationships with numerous collabora-
tors such as customers, suppliers of financial capital, real estate owners, and employees.
Each contract will vary in sophistication and potential for financial return. There
may also be synergistic effects produced by combinations of contracts.
Entrepreneurial Vision
Vision is about both ends and means where one hopes to go and how one might
set about getting there. According to some scholars, entrepreneurship is vision-
driven (c.f. Tarabishy et al. 2005). Although the nature of an entrepreneurial vision
may vary in clarity and complexity, it may be useful for a budding entrepreneur to
spend substantial time crafting one (Rockey 1986). The importance of entrepreneur-
ial vision is underscored by Ensley et al. (2006), who examined owner/managers of
Inc. 500 companies. The researchers found that vision scores can (1) distinguish
lead entrepreneurs from other team members and (2) account for differences in new
venture sales growth.
From a Schumpeterian perspective, the core of any entrepreneurial vision is a
new combination. At the core is a powerful synthesis, rather than simple addition of
Entrepreneurial Vision 143
constituent parts. A powerful vision need not, however, be founded in radical

innovation. A new combination that represents an incremental advance may be just
as effective, from an entrepreneurial perspective, as a more radical one. In many
cases, an idea for a business may be no more than a copycat idea adopted by a
different individual in a different location. However, such new combinations tend to
be trivial, which suggests that a budding, high-growth-oriented entrepreneur who
proposes such a combination should carefully consider its nature and customer
value proposition.
Envisioning the entrepreneurial process means envisioning both the goal and the
necessary strategies. The goal is an end-state the creation of a functioning enter-
prise which accomplishes a pre-specified purpose. The strategy is the means how
the entrepreneur will reach the desired end state. A new venture execution strategy
may entail a series of tactics, hopefully culminating in the envisioned end state.
McMullan and Long (1990) offered a model for developing a self-sustaining
venture over time. The authors proposed a three-phase, ten-stage model in which
opportunity identification is the first stage and aspects of opportunity execution con-
stitute the remaining nine stages. The first phase of the McMullan and Long model
is preparation. This phase involves identifying realizable opportunities; designing a
feasible product / service offering; planning resource requirements (i.e. the imple-
mentation strategy); and, contracting resources for launch. The second phase is the
launch phase. It involves engineering for efficient production of products or ser-
vices; regularizing sales revenue; and, standardizing operating performance. The
third and final phase encompasses growth and survival. It includes expanding stra-
tegically and opportunistically both sales and employment growth; enhancing man-
agerial professionalization; and, institutionalizing an innovative capacity.
Each of these ten stages, or strategic challenges, provides a degree of ordered
direction to the process of venture development over time. Prior to the development
of a business plan, the logic is to first find a credible opportunity and second, design
the related product/service offering to fit a particular market. Business planning
occurs next, when there is a pressing need to determine how to find and use resources
to realize the opportunity. Each of the steps might intelligently direct new venture
activity through time since each step requires a conceptual answer at the very least
before proceeding. The model inherently involves an increasing amount of respon-
sibility with the advent of each new strategic challenge. Further, each strategic chal-
lenge is subject to continuous change as venture development continues. Hence, the
process is anything but a step-by-step, linear process. As Bhave (1994, p. 223)
discovered from 27 case studies of firms in up-state New York, the process of entre-
preneurial venture creation is, an iterative, nonlinear, feedback-driven, concep-
tual and physical process.
McMullan and Long (1990) also suggested that many of the activities across the
three phases could not be wholly delegated. Each of the strategic challenges is
thought to provide the very essence of a self-sustaining venture its DNA, so to
speak. As a new venture is created, its defining character is dependent on
entrepreneurial decisions. As such, this strategic creativity model provides some
discrimination with respect to what activities entrepreneurs can delegate and what
they must accomplish and / or directly supervise themselves.
An alternative, and possibly more strategic, perspective might view a new venture
by its constraints. During early development, a new venture is characterized as loosely
constrained due to a small number of investments in ideas, actors and organizations.
Over time, strategic options become increasingly constrained as entrepreneurs add
greatly to the number of investments to products, customers, employees, industry, a
marketing strategy, and so on. The process is thus one of successive constraint with
more creative latitude potentially offered earlier than later in the process.
Entrepreneurial Investments
There are a number of ways of characterizing entrepreneurial implementation. One

useful core concept may be that of entrepreneurial investments. An investment can
be made in an idea, a person or an organization. Commitments to (investments in)
people might be in the form of anything from the allusion of an intention (i.e. a
vague non-binding promise) at one end of the continuum to a legally binding con-
tract underwritten in cash at the other end. A commitment might be momentary and
contingent, for example to test if there is a financeable deal in the offing. A commit-
ment may also be longer-term and less contingent as is typically represented by the
acquisition of a business partner or full-time employee.
Initially, budding entrepreneurs must become committed to entrepreneurial
activity. Around that time, they must invest in a specific business idea. They also
need to generate commitments from other people and organizations in order to exe-
cute a chosen idea, with the understanding that many of the arrangements will
require a reciprocal commitment and be subject to legal recourse.
Deal-Making Under Adversity
Deal-making involves several phases deal-finding, deal-negotiation and deal-

management that involve creativity. Initially, entrepreneurs need to find the deals
that they want to secure. One such deal would be to obtain capable people. As
employee turnover can be costly, entrepreneurs need to find employees who have
the necessary knowledge and skills, as well as the willingness to work under cir-
cumstances of reduced certainty for an extended period. It may also be necessary to
attract people who are willing and able to forego some current wages in exchange
for (the possibility of) higher earnings later. Securing such people without investing
a great deal of time and/or money requires creative thinking.
A second example of deal finding involves the search for funding. Creativity is
used during the search for debt or equity capital. For many entrepreneurs it is not
easy to determine who, or what people, or organizations might be a source of funding.
Entrepreneurial Improvisation 145
A third example involves the search for accommodating suppliers. Many entrepreneurs
are faced with the prospect of harsh terms from suppliers as new ventures lack confi-
dence-inspiring track records. A fourth example involves the search for amenable
customers. For some products and services, entrepreneurs must be creative with
respect to selling in order to secure early customers (c.f. Wang and Netemeyer 2004).
Once entrepreneurs identify people and organizations with which they can do
business, they must create deals that benefit them in either the short or long term.
In order to effectively negotiate deals, entrepreneurs need to be able to appreciate
the various aspects of legal contracts and imagine how various terms and conditions
will impact their ventures in the future. Given that the other parties to contracts have
different interests, the ability to create (seemingly) mutually beneficial outcomes
under such adversity is of great significance.
Finally, entrepreneurship requires the continuing management of deals.
Entrepreneurs must be vigilant as some contracted parties may attempt to ignore
contractual obligations after some time in order to better self-interests elsewhere.
Ultimately, whether it concerns doing deals with employees, investors, customers,
or members of a board, entrepreneurs face more adversity than larger, more estab-
lished competitors.
Entrepreneurial Improvisation
Deal-making is inevitably tactical and improvisational because of the messiness of

the realism around each separate deal. Baker et al. (2003) characterize the widely-
held, linear and rational decision-making model for new ventures as design-
precedes-execution (DPE). The researchers (p. 256) suggest an alternative model
based on improvisation: Founders may plunge into the start-up process, designing
the firm as they create it. In some cases, design emerges as founders observe and
provide accounts for activities they have actually undertakenthe framework does
not require the entrepreneur to be a calculating actor driving forward through a chal-
lenging linear process.
Moorman and Miner (1998, p. 698) define improvisation as, the degree to
which the composition and the execution of an action converge in time. Hence, the
entrepreneurs mental short-cuts move towards improvisation when there is no time
for planning and no available heuristic to follow. The empirical research focused on
new venture improvisation is in its infancy. The small number of studies and their
key findings are described below.
Baker et al. (2003) conducted improvisation research via interview studies on
three different samples of American new ventures: (1) twenty-five firms in the com-
puter training and air pollution consulting industries; (2) twenty-one business-to-
business software companies, and (3) twenty-two faculty start-ups. The researchers
(p. 255) found that, not only may founding itself be improvisational in some
cases, but improvisational processes and issues permeate entrepreneurial activity
and have non-obvious implications for emergent firm strategies and competencies.
The latter finding (p. 264) is further described as follows: The crucial feature of this
process here is that the improvising team observes its own partially completed impro-
visational activity and makes sense of it in a way that shapes ongoing activity.
Baker et al. (2003, p. 265) also provided examples of firms that cleverly made-do
with resources at hand in order to further various interests relating to customers,
financing, suppliers, office space, advice and employees. The researchers further
noted that when improvisation was available in the start-up decision, entrepreneurs
were less likely to deviate from prior lines of work.
Hmieleski and Corbett (2006) used a sample of 430 American college students
to investigate the effects of, among other things, personality, motivation, cognitive
style, social models, and improvisation on entrepreneurial intentions. The research-
ers found the strongest relationship between improvisation and entrepreneurial
intentions. Improvisation accounted for 20.3 % (p < 0.01) of the variance in partici-
pants intentions to start a new business.
In 2008, Hmieleski and Corbett used a sample of 159 American entrepreneurs to
investigate the moderating effect of entrepreneurial self-efficacy on the relationship
between founders improvisational behavior and new venture performance. The
researchers (p. 482) found that, the interaction of improvisational behav-
ior entrepreneurial self-efficacy on new venture performance is indeed positive
and significant ( = 0.21, p < 0.01). The researchers (p. 491) conclude that,
entrepreneurs who are low in self-efficacy and frequently improvise might be shoot-
ing themselves in the foot. Improvisation for such individuals is more of a craps
shoot, because they do not have the confidence to actively seek out how resources
might be recombined. Moreover, their lack of confidence in their abilities is likely
to stifle their attempts to improvise.
In 2013, Hmieleski et al. (2013) used a sample of 207 American entrepreneurs to
examine the moderating effect of dispositional optimism on the relationship between
founders improvisational behavior and new venture performance. The researchers
(p. 143) found that, in dynamic environments, the effects of improvisational
behavior are greater (more positive) for firms led by entrepreneurs who are moder-
ate in optimism than for those led by entrepreneurs who are high in optimism. The
result was significant at the p < 0.05 level.
Investigating the Entrepreneurial Process
In addition to the studies on creative improvisation, there is a small amount of

empirical research focused on other creative aspects of the entrepreneurial process.
The existing evidence suggests a number of interesting process-based possibilities.
Sarasvathy et al. (1998) employed an experimental design to examine the thought
processes of four entrepreneurs and four bankers as they solved problems. The
researchers (p. 218) found that, Entrepreneurs accept risk as given and focus on
controlling outcomes at any given level of risk; they also frame their problem spaces
with personal values and consequently assume greater personal responsibility for
A Provocative Study 147
influencing outcomes. Bankers use target outcomes as reference points and operate
by attempting to control risk with the existing structured problem spaces, avoiding
situations where they risk higher levels of personal responsibility. They (p. 217,
italics in original) concluded that, entrepreneurship is more a problem-finding
process than merely a problem-solving one.
Buttner and Gryskiewicz (1993) used the Kirton Adapation-Innovation
Instrument on a random sample of 300 American entrepreneurs to discover that
entrepreneurs can become creatively stale with respect to a venture over time. The
entrepreneurs in business (p. 27), two years or less were significantly more inno-
vativethan entrepreneurs in business more than eight years which may suggest
that entrepreneurial creativity may die out over time when confined to a single ven-
ture. The result was significant at the p < 0.05 level.
Buttner and Gryskiewicz (1993) also found that more innovative entrepreneurs
started more businesses an average of 2.4 new businesses versus 1.2 for the adap-
tor group (p < 0.03). This may indicate that entrepreneurs shift from venture to ven-
ture over time to help maintain their creative edge. Finally, the researchers found
that innovators and adapters allocated their time differently once in business.
Specifically, innovators appear to spend less time on administering ongoing activi-
ties than adapters during the life of a venture (p < 0.01). This finding suggests that
creative entrepreneurs tend to avoid getting mired by administration.
Armstrong and Hird (2009, p. 424) used a sample of 131 UK-based entrepre-
neurs to find that a difference in entrepreneurial drive between entrepreneurs who
operate in earlier stages of venture creation and growth versus those operating in
more established operations. The result was significant at the p < 0.01 level.
Entrepreneurial drive was defined as, the drive to create and grow a venture
(Carland et al. 2002, p. 38).
A Provocative Study
Khan (1987) conducted a study of the decision-making of 36 Texas-based venture

capitalists. He asked that each venture capitalist (VC) identify one outstanding suc-
cess and one outstanding failure amongst his/her portfolio of investee companies.
Using a combination of methods, Khan elicited a set of six decision factors that the
VCs claim to use in choosing their investees. Khan obtained directly from the VCs
their own assessment of the relative importance of the six factors: entrepreneurs
desire for success; uniqueness of product or service relative to competition; enthu-
siasm/capacity for work; tenacity/courage; creativity/ingenuity; and, competence in
field of endeavor. Khan wanted next to mathematically determine which of those
factors best discriminated the winning investee firms from the loosing firms, and
how much of the success outcome each factor separately contributed. For start-up
ventures, the creativity/ingenuity measure by itself accounted for 71 % of perfor-
mance variance. Khan (p. 197) defined the creativity / ingenuity variable as, the
ability to be innovative, which in turn implies not just invention but the resourcefulness
and ingenuity to market that invention successfully.
There are a number of things that are provocative about the Khan (1987) study.
First, the VCs did not anticipate the predictive power of creativity. Second, the cre-
ativity measure was a global measure of creative performance. Third, the measure
is likely an after-the-fact measure of creative actions and outcomes observed by
each VC. Fourth, the assessments were done by people in a good position to make
such assessments because they were vitally interested in the performance of their
investees. Fifth, the measurement strategy is unique. Typically, people are assessed
on their creative potential before the fact. Instead of assessing the person, in all
likelihood, the VCs were assessing what they saw as creative outcomes produced by
the entrepreneur in the course of developing ventures. Fifth, from a collective per-
spective, the VCs were unknowingly assessing the role taken by creative action in
the development of ventures.
Chief amongst this studys weaknesses is the uncertainty around the meaning of
the creativity measure. Is it truly possible that the creative actions of lead entrepre-
neurs could really have such a powerful impact on the relative performance of such
high potential firms?
Conclusions
Some model is needed of the process that follows being a creative entrepreneur but
precedes the success of his/her enterprise. Existing models of entrepreneurship are
not particularly useful as models of creative entrepreneurship. A dominant model is
the means-end model. There are however practical limits to the logic of rational
decision-making and to reliance on business knowledge in an entrepreneurial con-
text. Yet, it is not straight-forward to simply shift away from a rational, planning
model to one based on creativity. To suggest that entrepreneurs need to be creative
to be successful raises as many questions as it answers. This is particularly obvious
if one concludes that creativity is needed for something more than the application of
business technology to business problems. What is it that entrepreneurs are doing
that they need to do more creatively in order to be more successful?
A model of evolving entrepreneurial investments (i.e. commitments) is advanced
here to offer insights into the possible nature of entrepreneurial dynamics. There is
a lot to say about the entrepreneurial process of deal making under adversity, but in
particular, it is at least partially uncertain, ambiguous, unknowable, and uncontrol-
lable. Entrepreneurs must envisage their goals, as well as strategies for attaining
them. The process of entrepreneurship may contain substantial elements of tactical
improvisation, as well as purposeful strategy. The process also may involve borrow-
ing many useful ideas over time from other contexts in order to perfect a business
idea (e.g. Walton and Huey 1993). In summary, perhaps entrepreneurial creativity is
important just because the development of growth ventures presents entrepreneurs
with so many open-ended issues.
Chapter 10
Developing Entrepreneurial Creativity
Abstract By now you might be wondering how people become entrepreneurially

creative. Is it simply a matter of taking a university course?
There is strong empirical evidence that growth entrepreneurs are central to economic
development (e.g. Birch 1979, 1987; Wong et al. 2005). There is also evidence that
the people who develop growth ventures are markedly more creative than other
entrepreneurs (see Tables 6.46.6 in Chap. 6). However, entrepreneurial program-
ming is indifferently successful at producing growth entrepreneurs (c.f. Martin et al.
2013; Rideout and Gray 2013). It would appear, hence, that there is more to devel-
oping growth entrepreneurs than what currently occurs in classrooms.
It is the purpose of this chapter to review some of the evidence that relates to the
development of creative people within a number of different contexts. A better
appreciation of how creativity is acquired over time should foster a stronger under-
standing of how entrepreneurial creativity might be developed.
The evidence that pertains to the development of creativity implies that the
development of entrepreneurial creativity is a time consuming process taking many
years, spanning a number of life stages. Some aspects of creative entrepreneurship
may tend to become more solidified at younger ages than others. Parenting during
the youngest years can be important, as can preschool experiences. Primary and
secondary schooling appear to play roles. Even adult career choices can strongly
influence entrepreneurial direction.
Parents and Family
Wright and Wright (1986) provided an overview of existing research focused on

the relationship between family and childhood creativity. They found that a lax
discipline/general permissiveness atmosphere was more effective for engendering
creativity than more authoritarian forms of discipline. More strict and punitive par-
ents produce less creative children. Parents who developed childrens autonomy and
provided opportunities to participate in family decision making produced more

DOI 10.1007/978-3-319-04726-3_10
150 10 Developing Entrepreneurial Creativity
creative children. Evidence tended to support the development of clear ethical

standards, but without strong pressures for children to conform to parental values.
Wright and Wright (1986) also found that parents of creative children tended to
be neither rejecting nor closely possessive. The parents were less anxious about
their children and tended to demonstrate respect for them. They accepted immature
or childish behavior and encouraged playful behavior. Children were encouraged
not to repress negative feelings. The researchers (p. 131) state: The family pattern
characterized by openness of expression, parental explanation, and acceptance of
regression illustrates the respect parents have for their creative children.
The parents of creative children typically encouraged their children to explore
their environments and make decisions for themselves. The researchers (p. 131)
found that achievements were celebrated but stress placed on school performance
was inversely related to childrens creativity. The parents appeared to be less con-
strained by sex-role stereotypes and even reported father-mother conflicts on
domestic values. Finally, creative children tend to come from more stimulating
homes with more creative adult models.
Kemple and Nissenberg (2000) also reviewed evidence related to parental disci-
pline and concluded that neither permissive nor authoritarian parents were best for
encouraging childrens creativity. Citing Baumrind (1966), these reviewers (p. 68)
favored a third strategy, which they labeled an authoritative parent: Authoritative
parents clearly communicate expectations and reasons for rules, set firm but reason-
able limits on a childs behavior, and display a high degree of nurturance.
In the field of entrepreneurship, a number of researchers have considered the
effects of parents behaviors. A number of studies have reported that the presence of
an entrepreneurial or self-employed parent increases the odds of venturing (c.f.
Collins and Moore 1970; Waddell 1983; Watkins and Watkins 1983; Hisrich and
Brush 1984; Ronstadt 1984; Cooper and Dunkelberg 1986; Scherer et al. 1989).
Such findings, for both males and females, suggest that entrepreneurial parents act
as positive role models (Brockhaus and Horwitz 1986).
McClelland (1961) suggested that the formative years have a strong role to play
in developing the capacity to become an entrepreneur. He suggested that a parents
ability to help a child internalize reasonably attainable goals was most important.
The goals should neither be too easy nor too difficult to reach. McClelland suggested
goals with a 50 % chance of achievement were best. He used a ring toss exercise to
demonstrate his notion. Individuals with a high need to achieve and thus most likely
to become entrepreneurs are the ones who would stand an intermediate distance
from a ring toss target. Those, standing closer or further away from the target, had a
lower need to achieve. They either made things too easy or too difficult for them-
selves. Those making the exercise too easy assured themselves of success without
risk. Those standing too far away provided themselves with an excuse for failure.
Schmitt-Rodermund (2004) used a measure of authoritative parenting that
included authority, warmth and supportiveness to find a correlation of 0.18 between
authoritative parenting and measures of early entrepreneurial competence. The
finding suggests that it is better to be permissive than coldly authoritarian, but being
warm and confidently directive is probably to be preferred over just being permis-
sive when it comes to developing entrepreneurial creativity in children.
Parents and Family 151
Some of the limited evidence on the childhoods of entrepreneurs uncovers a

range of other factors that might be playing a role. In addition to finding that entre-
preneurial intentions were related to having parents that had their own businesses,
Drennan et al. (2005) found that having a difficult childhood and relocating fre-
quently during childhood were material factors in perceiving entrepreneurship as
both desirable and feasible later in life. Their (p. 233) review of the literature on
difficult childhood experiences is both informative and provocative:
The childhood experiences of entrepreneurs have been found to be difficult, characterized
by poverty, insecurity and/or neglect (Collins and Moore 1964) and personal tragedies, such
as parents divorce, a parents death, family financial difficulties and/or serious illness (Cox
and Jennings 1995: Ohe and Ohe 1996). Clinical studies of entrepreneurs suggest that they
are often affected by poverty, poor relationships with their fathers, strong controlling
mothers, and feelings of rejection and remoteness, which result in hostility, guilt, anger and
suspicion of people in positions of authority (Kets de Vries 1976, 1977, 1996). Difficult
childhoods are also posited to increase ones self-reliance, which in turn increases ones
ability to cope with the risks and uncertainties of self-employment. (Scherer et al. 1989)
On the issue of frequent relocation Drennan et al. (2005, p. 234) had the following
to offer:
An individuals self-reliance and adaptability to new situations are related to entrepreneur-
ship, and such resilience and adaptability are associated with radical change during ones
life. Moving location frequently is seen as one aspect of radical change (Davidsson 1995).
Reynolds (1995) found nascent entrepreneurs were less likely to have lived their whole
lives in the same geographical area and more likely to have lived in several places during
their lives. Davidsson (1995) related frequent moves to general attitudes related to change,
achievement, money (negative) and autonomy
One might wonder how to square the findings which suggest that family func-
tionality is the basis of artistic or scientific creativity while family dis-functionality
seems to play a much greater role in the early up-bringing of entrepreneurs. Perhaps,
creative people, in general, need the support of a strong functional family up-
bringing, whereas creative entrepreneurs, in particular, have destructive elements in
their family backgrounds that shift them towards an entrepreneurial career. Negative
personal background influences may influence people to distrust others to the extent
that they want to work alone. Of course, it must be noted that the aforementioned
studies present nothing more than correlates and hence, it is entirely possible that
the influences that push people towards an entrepreneurial career path are different
than those that aid in their level of entrepreneurial success.
Then again, perhaps the studies that emphasize family functionality in the up-
bringing of creative children speak to the need to develop strong, imaginative and
independent people. The studies that emphasize family dysfunctionality may speak
to a need to socialize creative people and entrepreneurs alike, as somewhat more
marginal people: people who are at least mildly inclined to treat others as more means
than ends; people who are mildly independent of social constraints distrusting of
others and fiercely committed to their own direction not insiders, nor outsiders, but
rather marginal social actors driven to obsessive passions and/or extreme hours of
work. In any case, it is entirely possible that there is a dark side to both early entre-
preneurial preparation, specifically, and early creative preparation, in general.
Primary and Secondary Education
According to Russ and Fiorelli (2010), specific cognitive, affective and play skills
and abilities are generally considered to be drivers of creative outputs. The specific
cognitive processes are listed as: divergent thinking; transformational abilities;
sensitivity to problems and problem finding; task persistence and willingness to
engage in a variety of problem-solving approaches; a wide knowledge base and
range of interests; insight and the ability to synthesize; and, evaluative ability. The
specific affective processes are affect expression and affective fantasy. The specific
play process related to creativity is pretend or improvisational play.
In order to foster creativity in a child, Russ and Fiorelli (2010, p. 245) prescribe
the following steps:
1. Give children time to engage in pretend play.
2. Encourage exploration of different domains of activities so the child can find
what they deeply enjoy and develop their talents and abilities.
3. Foster an environment in which a child feels safe and comfortable to express
ideas that are unconventional.
4. Reinforce and enjoy acts of everyday creativity.
5. Encourage independence in problem solving, keeping in mind the principles of
optimal challenge and frustration.
6. Encourage expression of feelings in verbal exchange, in pretend play, and in
other media, so the child learns to feel comfortable with feelings and to integrate
them into easily accessible memories.
Lobler (2006) argued that younger children exhibit more entrepreneurial spirit
than high school children, citing a study by Kourilsky (1980) which reported that
25 % of kindergarten children versus 3 % of high school students demonstrate
important entrepreneurial characteristics. He (p. 20) observed that:
if we look carefully at children under the age of five or six we find several entrepreneurial
competencies to start a creative destruction. They are motivated to learn, they are interested
in many different topics, they do not care about conventions, they ask excellent questions,
they discover exciting things, they are impatient and so on.
Unfortunately, he (p. 20) found that, Then they go to school and seem to unlearn
these competencies. Young creative students are typically not treated well in the
education system. A number of studies have found that teachers often unfavorably
view the behaviors and personality traits of creative children (Torrance 1962; Raina
and Raina 1971; Rimm and Davis 1976; Ritchie 1980; Robinson 1980; Oliphant
1986; Cropley 1992; Davis and Rimm 1994; Scott 1999).
Westby and Dawson (1995) found a negative correlation between teachers judg-
ment regarding favorite students and student creativity. Teachers indicated a prefer-
ence for student characteristics that facilitate classroom management such as
unquestioning acceptance of authority; conformity; logical thinking; and, responsi-
bility. Other studies have also reported that teachers prefer socially acceptable and
conforming characteristics (Torrance 1963; Bachtold 1974; Kaltsounis 1977;
Kaltsounis and Higdon 1977).
Career Choices 153
Teachers who prefer socially-desirable, conforming behavior are characterized

as conservative autocratic. Teachers who support creative behavior, which includes
related socially undesirable behavior, are identified as more liberal democratic by
nature. Ng and Smith (2004) have found that over time the latter groups inclina-
tions shift more towards those of the former group with years of teaching
experience meaning that open-minded teachers become less supportive of creative
students as their career progresses.
Post-Secondary Education
Discussions of the efficacy of entrepreneurship education are provided in Chaps. 4

and 7. The most recent investigations by Rideout and Gray (2013) and Martin et al.
(2013) indicate that entrepreneurship education has a negligible to small impact on
new venture success. The training may not be effective for a variety of reasons.
First, it is possible that post-secondary programs do not train students capable of
benefiting from entrepreneurial programming. Second, students may forget the
knowledge gained as few of them start ventures during or immediately after gradu-
ation. Third, the programming may not effectively foster creative thinking skills.
Fourth, the knowledge base for entrepreneurship education may not be sufficiently
developed at this time.
Career Choices
Not all career paths provide an effective launch pad for new venturing (e.g. the pub-
lic sector zcan and Reichstein 2009). The most obvious route to launching busi-
nesses appears to be past entrepreneurial experience (Carroll and Mosakowski
1987; Delmar and Davidsson 2000; Rotefoss and Kolvereid 2005). Dobrev and
Barnett (2005) found that new venture founders become increasingly likely to leave
and start new ventures as their current ventures age and grow.
Short of being an entrepreneur, working for an entrepreneur might be a useful
training ground, as spin-off studies testify (Dahlstrand 1997; Elfenbein et al. 2010).
There may be limits to the duration of the experience, though. Dobrev and Barnett
(2005, p. 445) found that employees of new ventures, become unlikely to leave
their organizations to build new ones as their organizations age and growevidence
that organizations are effective in shaping and constraining the innovative behavior
of their members.
There is also some evidence in favor of a diverse set of work experiences for
pursuing new ventures, rather than extensive experience in a single industry or
occupation (Wagner 2003; Lazear 2004). The evidence regarding the impact of
specific types of work experience on new venture success is not very clear at this
point. Kenworthy and McMullan (2010) reviewed related findings in 56 published
empirical articles and found that only 38 % of the work-experience hypotheses were
supported. Four studies produced findings that reached a high level of statistical
significance (i.e. p 0.001). The researchers (p. 16) noted that the,
strongest findings suggest that 1) business failure is mitigated via prior work experience in
a similar industry; 2) prior new venture experience positively influences revenues; 3) prior
similar business experience positively influences the amount of money that an entrepreneurs
draws from a business; and 4) prior similar business experience substantially reduces the
odds of exiting a new venture. Additional findings at the p .01 level suggest that work
experience reduces the chance of failure and increases the probability of revenue growth
and firm profitability. However, the types of work experience that influence success are not
made clear from the findings. It is interesting to note that there is evidence, albeit weak, that
prior management experience hurts new venture survival probability.
Conclusion
It probably makes more sense to view entrepreneurship as a performance art than as

a business technology. The challenge of developing more entrepreneurially creative
people is not unlike the development of more creative artists in other fields. Creative
competence is developed over a lifetime. Parenting practices have been shown to be
related to the development of creative children as have the practices of the school
system. Choice of career can also contribute to entrepreneurial creativity.
Chapter 11
Towards a Macro Theory
Abstract At a societal level does creativity play a substantial role in economic

development? How important is entrepreneurial creativity at the macro-economic
level? What does the evidence show us?
The Entrepreneur in Economic Development
There are a number of lenses through which one can view the relevance of the
entrepreneur to economic development. The first lens is that of Joseph Schumpeter.
Schumpeters theory (1934) is a description of an economy characterized by
repetitive cycles of business activity that are occasionally changed by entrepreneurs
who introduce new business combinations. The entrepreneur acts as the fundamen-
tal agent of change, responsible for all economic progress. Progress is thus attributed
primarily to a relatively small group of individuals, namely innovative entrepre-
neurs, rather than to more impersonal institutions such as public education,
research and development, public infrastructure and/or the functioning of economic
institutions such as central banks and stock markets.
A second lens is that of Blanchflower and Oswald (1992). The scholars
developed two competing models to explain the general supply of entrepre-
neurs within any economy. Their (1992, pp. 34) first model, characterized by
free entry and no entrepreneurial rents, is a variant of competitive labor market
theory:
According to the theory, individuals are able to enter whichever labour market they wish,
and running an enterprise comprises one of those occupational markets. Individual 1 weighs
up his or her talents and interests and chooses a career path. If entrepreneurship gives higher
utility than being a regular worker, individual 1 will be more prone to choose to enter that
line of work. Thus he or she will be more likely to set up in businessGiven free entry,
long-run equilibrium has the characteristic that the utility of entrepreneurs has been pushed
down until it equals the utility of employees.

DOI 10.1007/978-3-319-04726-3_11
156 11 Towards a Macro Theory of Entrepreneurial Creativity
Blanchflower and Oswalds (1992, p. 4) second model, characterized by supply

constraints and entrepreneurial rents, views entrepreneurs as being generally in
short supply:
This model captures a rather different way of viewing the supply of entrepreneurs. It is one
in which, because some individuals have neither entrepreneurial vision nor the necessary
start-up capital, there can be a shortage of small business that allows entrepreneurs to earn
supernormal returns.
A third lens, developed by Nobel laureate Robert Solow, ties economic develop-
ment to innovation, particularly that of a technological nature, rather than entrepre-
neurship. Solow (1957) identified the central dominant role of innovation in
economic development by studying US macroeconomic data from 1909 through
1949. He (p. 320) concluded that, Gross output per man hour doubled over the
interval, with 87 percent of the increase attributable to technical change and the
remaining 12 per cent to increased use of capital.
The economic character and consequences of innovation has been under the
scholarly microscope for some time. Rosenberg (1976, p. 192) found that large
influential innovations were typically composed of many small ones: The essential
point to be grasped here is that inventive activity is itself, best described as a gradual
process of accretion, a cumulation of events where, in general, continuities are
much more important than discontinuitiesThus, even the big technological break-
throughs which are associated with such names as Darby, Watt, Cort, and Bessemer,
usually have much more gently declining slopes of cost reduction flowing from
their technical contributions than the historical literature would lead us to expect.
Bhid (2000, p. 331) provides an example of the incremental nature of innovation
leading to sensational change:
Automobile manufacture began in the United States in 1893, when the Duryea brothers of
Springfield, Massachusetts, built a carriage powered by a one-cylinder motor. Six years
later, in 1899, many individuals and about 30 American companies had built a grand total
of some 2,500 vehicles. Ten years later, reports the U.S. Bureau of the Census, total car
registrations reached 32,900 vehicles, with 11,200 passenger vehicles sold in 1903. The
unification phase of the automobile industry in the United States, which, according to
historians McCraw and Tedlow led to the development of a mass market, did not begin until
the introduction of Fords Model T. This was 1908, fifteen years after the Duryea brothers
and twenty-three years after the Daimler-Benz vehicles.
The very idea of innovation as the implementation of creative ideas raises the
question of the identity of the innovator. Different scholars since Schumpeter have
seen entrepreneurship as a major vehicle for the introduction of innovations. Some
scholars such as Davidsson (2003) even go so far as to even view all innovation as
a form of entrepreneurship. Specifically, Davidsson (2003) proposes that entrepre-
neurial activity encompasses both new ventures, and innovative and imitative entries
into new markets by established firms. According to Wong et al. (2005, p. 337),
Davidsson implies that, existing models linking innovation to growth have in
fact addressed a specific aspect of entrepreneurship, that of innovative entry.
The Entrepreneur in Economic Development 157
Accordingly, it may be sensible to modify Schumpeters concept of new

combinations to include the many smaller innovations that contribute over time to
economic development rather than only the large, sensational ones. It may also be
necessary to somewhat modify Schumpeters dramatic notion of creative destruc-
tion given some of the conflicting evidence. For example, Bhid (2000, p. 333)
describes the co-existence of the typewriter and the word processor:
The introduction of word processors in the 1970s led to predictions of the imminent
demise of typewriters. As I discovered in the course of a consulting study for a typewriter
manufacturer, in spite of a fourteenfold growth in the shipment of word processing units
between 1977 and 1981, the demand for typewriters in the United States had remained
steady, at about 1 million units per year.
Instead of completely replacing prior business activity, as suggested by Schumpeter,

innovations often appear to be added to the economic mix of goods and services
available. As a result, an economy may grow, in part, by adding to its variety.
Birch (1979) provides a fourth lens that sheds light on the importance of the
entrepreneur to economic development. Birch (1979) revolutionized thinking about
new ventures by empirically demonstrating that a relatively small segment of the
new firm population produced most of the job growth overall, small business was
responsible for approximately 80 % of net new job creation. According to Birch, the
average proportion of US-based growth firms or gazelles as a percentage of new
ventures was around 3 %. Further, the proportion of gazelles varied by region
from 0.5 % to 5 % of new ventures. Over time, a number of studies have replicated
Birchs finding in a variety of countries (c.f. Armington and Odle 1983 and the
Small Business Administration 1998 and 1999 in the US; Doyle and Gallagher
1987 and Blanchflower and Burgess 1996 in the UK; Picot et al. 1994 and 1998 in
Canada; Spilling 1996 in Norway; and, Davidsson et al. 1998 in Sweden).
In a 1987 book, Birch (p. 114) argued that the variation in the numbers of growth
firms as a proportion of small firms was so closely related to the economic strength
of different regions of the United States that it could almost be used as a surrogate
for economic development, since the loss rates from area to area were more or less
fixed: Virtually all the variation in growth was attributable to variation in the rates
at which new firms started and grew to replace the fixed losses.
In 2005, Wong et al. tested the impact on economic development of total entre-
preneurial activity versus that of only growth firms. The multivariate model used
cross-sectional data from the Global Entrepreneurship Monitor database of 37
countries. The researchers found that high-growth ventures were significant in
explaining economic growth, while in contrast, total entrepreneurial activity con-
tributed nothing to economic growth. According to Wong et al. (2005, p. 338), the
finding regarding total entrepreneurial activity may not be that surprising:
Some studies such as Picot et al. (1998) have found a Schumpeter effect where new firms
enhance employment levels by stimulating economic activity and creating new jobs. On the
other hand, a refugee or shopkeeper effect was discovered by Evans and Leighton (1989,
1990) and Reynolds et al. (1994) among others, where unemployment leads to individuals
seeking self-employment. Van Stel and Storey (2004) further emphasized that this refugee
push effect coupled with low entry barriers may lead to start-ups that guarantee employment
for the business owner but generate no growth.
It is worth noting that the impact of total entrepreneurial activity (TEA) may not
be quite so dire for some types of economies. Wennekers et al. (2005) used GEM
data to provide evidence for a U-shaped relationship between the economic impact
of the number of people in an economy starting businesses, on the one hand, and per
capita income and an innovative capacity on the other all under three levels of
economic development. According to the researchers, TEA is a positive economic
force in factor-driven economies ones in which production is driven by mobiliza-
tion of the primary production factors of land, primary commodities and unskilled
labor. In an investment-driven economy, characterized by more developed labor and
capital markets and foreign direct investment, TEA is a less effective, and poten-
tially negative, contributor to economic growth. In a knowledge or innovation-driven
economy, TEA once again becomes a more positive contributor to economic growth.
Ultimately, entrepreneurship must be both a cause and an effect of economic
development. At any time, the growth entrepreneur is likely a productive contributor
to economic development and as such, a causal contributor. Some growth entrepre-
neurs generate exports that produce increased wealth for a country. A growth of
national wealth, in turn, creates effective demand for goods and services to which
other entrepreneurs can more easily react.
A Macro-Model of Entrepreneurial Creativity
So the growth segments of the economy are those whose products and services have
relatively short half-lives; the stagnant and declining ones feature products with longer
ones. Anyway you look at it, innovation remains the basic theme. Short product half-lives
and high innovation rates are, of course, simply different ways of saying the same thing.
Both depend upon creativity, which is the hallmark of those small entrepreneurial compa-
nies we have been discussing. (Birch 1987, p. 63)
Birch (1987) argued that the variation in the proportion of high-growth entrepre-
neurs across regions was driven by five factors: the general level of education of the
population in the region; the presence of quality research universities; the amount of
money spent by local government; the quality of telecommunications infrastructure;
and, the attractiveness of the area to well educated people.
The research efforts undertaken since Birchs findings have supported and/or
added to his key criteria. A reasonable amount of research shows that scientific and
technological creativity is important to entrepreneurial activity. There is a mixed
evidence base underlying the proposition that artistic creativity in a region contrib-
utes to the amount of creative entrepreneurship. There is mixed evidence regarding
how community values may direct creativity towards or away from entrepreneur-
ship. There is also evidence indicating the relevance of the supports and barriers to
the entrepreneurial process provided or imposed by local institutions.
The macro-model of economic development in Exhibit 11.1 represents an
attempt to modify Schumpeters notion of economic development to include the
aforementioned factors that influence growth entrepreneurship. Each factor of the
macro-model is discussed in the following sections.
Scientific and Technological Creativity 159
Scientific and
Technological Entrepreneurial
Creativity Culture / Values
Education for
Creative Entrepreneurial Economic
Development Creativity Development
Spill-over and High Support-to-

Artistic Barriers Ratio
Creativity
Exhibit 11.1 A macro-model of economic development
Scientific and Technological Creativity
According to Rosenberg (1976, p. 189), The rate at which new techniques are
adopted and incorporated into the productive process is, without doubt, one of the
central questions of economic growth. A number of empirical studies suggest that
a link does exist between the implementation of scientific and technological creative
outputs and entrepreneurial creativity. Dean and Meyer (1992) found that the new
firm formation rate in manufacturing industries was positively influenced by
research and development intensity. Dean and Brown (1995) and Dean et al. (1998)
also found a similar effect across a number of industries. Eckhardt and Shane (2011,
p. 412) also found that new venture opportunities are positively influenced by tech-
nological innovation: increases in the proportion of employment of scientists
and engineers in industries are positively associated with counts of fast-growing
new firms.
There is also some evidence indicating that small firm innovation influences new
venture formation rates. Acs and Audretsch (1989) examined small firm entry rates
in 247 industries and found that the new firm entry rate was higher in industries
characterized by relatively higher small firm innovation rates.
Finally, there is indirect evidence that post-secondary activities may impact new
venture rates. Goldstein and Drucker (2006) found that knowledge-based activities
at US-based universities, particularly teaching and basic research, exhibited
substantially positive effects on regional earnings gains.
Spill-Over Creativity and Entrepreneurship
The idea that some communities might be more creative than others is not a new
idea. The further notion that this creativity might spill-over and separately impact
the creativity in specific fields is more formative. The idea that the artistic commu-
nity might impact the entrepreneurial community is one such relationship that has
received current attention from a number of researchers.
In 2002, Richard Florida presented evidence for the relevance of artistic creativ-
ity to entrepreneurship. His proxy for artistic creativity in a city, the Bohemian
Index (BI), was defined using proportional employment in artistic and creative
occupations. Gertler et al. (2002) found strong relationships between the bohemian
index and high-technology industrial output in both US-based and Canadian cities.
Lee et al. (2004) found that the overall rate of new firm formation is directly
impacted by cultural creativity. According to the authors (p. 881), their thinking was
drawn from an intellectual tradition of thinking about cities and regions as incuba-
tors of innovation:
An influential line of research suggests that cities and regions function as incubators of
creativity and innovation and that human capital factors in particular play an important role
in spurring regional growth (Park et al. 1925; Jacobs 1961; Thompson 1965; Lucas 1988).
Park et al. initially called attention to the role of cities in concentrating and spurring human
creativity. Jacobs later explained how cities function as open systems to attract talented
people from various backgrounds and stimulate their creative capacities. Lucas formalized
the insights of Jacobs to provide a basic theory, arguing that cities function as collectors of
human capital, thus generating new ideas and economic growth.
The data that Lee et al. (2004) used covered both cities and economic zones
constituting the US. The creativity index coefficients were all significant at the 0.01
level and they successively explained 26.2 % of start-ups overall (45.4 % of manu-
facturing start-ups and 20.7 % of service start-ups). The authors (p. 887) conclude
that, there is a close and positive relationship between entrepreneurship and
creativity in a region.
The relationship between artistic creativity and economic growth is not nearly as
straightforward as that for entrepreneurship. Marlet and van Woerkens (2004) found
that the BI only predicted employment growth in one (Amsterdam) of the 50 largest
Dutch cities. Rausch and Negrey (2006, p. 482) investigated US-based metropolitan
statistical areas (MSA) and found that, it does not appear that merely adding
creative class individuals in an MSA will lead to a stronger economy in terms of
GNP. Donegan et al. (2008, p. 189) also focused research on the US and found that
the BI was not relevant to job growth.
Reese et al. (2010) examined midsized Canadian metropolitan areas and failed to
find a relationship between the BI and overall economic health and growth. Polse
(2012) examined 135 Canadian cities and did not find a consistently significant
relationship between arts-related employment and subsequent employment growth.
Finally, Marrocu and Paci (2012) found no impact of the presence of bohemians on
Barriers to and Supports of Creative Entrepreneurship 161
regional development across 257 regions in the 27-member countries of the

European Union. All of these non-supportive findings are taking some of the bloom
off the idea that the relative numbers of employed artists in total in a city would
positively impact entrepreneurial creativity.
Entrepreneurial Culture and Economic Development
In his 1961 book, David McClelland empirically examined the differences in

economic development amongst cities and regions. He used per-capita growth in
electricity production as his measure of economic development and found that a
culture of achievement with many entrepreneurs produced a vibrant economy. The
need for achievement (nAch) culture was fostered in early childhood via the types
of stories communicated to children. In 1980, Tekiner retested and replicated
McClellands thesis through content analysis of elementary school textbook stories.
He used more conventional economic development measures national income
growth and national average rates of investment.
Since McClelland and Tekiner, a number of scholars have attempted to refine and
redefine what an entrepreneurial culture is for the purposes of theoretical develop-
ment and empirical research. Recently, Hayton and Cacciotti (2013) reviewed
extant entrepreneurial culture research and noted substantial progress. However,
they (p. 708) concluded that there is much work to be done before any definitive
arguments can be made:
work that connects culture to individual motives, beliefs and values has not built signifi-
cantly upon earlier work on entrepreneurial cognition. Evidence for the mediating pro-
cesses linking culture and behavior remains sparse and inconsistent, often dogged by
methodological challenges. Our review suggests that we can be less confident, rather than
more, in the existence of a single entrepreneurial culture
Barriers to and Supports of Creative Entrepreneurship
Entrepreneurship researchers have long been interested in the institutional environment,

both because the institutional context appears to influence entrepreneurial activity, and
because it is amenable to the policy levers that government officials can use to influence the
amount and form of entrepreneurial activity. (Shane 2003, p. 145)
Shane (2003, p. 145) argues that an entrepreneurs institutional environment is

composed of three contexts: economic, political and cultural: the institutional
environment includes both the rules of the game that economists believe gener-
ates incentives for certain types of action, and the social setting that sociologists
believe determines legitimate and acceptable behavior. The relevant economic
environment factors are societal wealth, economic stability, capital availability and
marginal tax rates. There is supporting evidence for the influence of societal wealth
on new venture rates (c.f. Audretsch and Acs 1994; Shane 1996). There is mixed
evidence for the impact of economic stability, as measured by the inflation rate (c.f.
Djankov et al. 2010; McMillan and Woodruff 2002). There is mixed evidence
regarding the influence of capital availability (c.f. Pennings 1982; McMillan and
Woodruff 2002; Kreft and Sobel 2005). There is also mixed evidence for the impact
of marginal tax rates (c.f. Gentry and Hubbard 2000; Schuetze and Bruce 2004;
Bruce and Mohsin 2006).
Political environment factors include political freedom, property rights and the
degree of centralization of power. There is very limited evidence regarding the
influence of political freedom on new venture rates. The existing evidence is
focused on economic development, which may be a proxy for entrepreneurial activ-
ity (c.f. Ali and Crain 2002; Roll and Talbott 2003). There is indirect evidence
regarding the influence of property rights. Weymouth and Broz (2013, p. 230)
report that, transitions to more right-wing governments are associated with
improved perceptions of property rights among firm owners. There is as yet no
direct evidence regarding the influence of degree of centralization of power on new
venture rates.
The socio-cultural environment factors are general attitudes and beliefs about
entrepreneurial activity and the presence of entrepreneurial role models. The exist-
ing evidence for attitudes and belief is suggestive that pro-entrepreneurial attitudes
and beliefs impact economic growth at the regional level (Beugelsdijk and
Noorderhaven 2004; Sternberg and Litzenberger 2004; Tamsy 2006; Bosma and
Schutjens 2011). There is a small amount of evidence supporting the efficacy of
role models and new venture intentions (van Auken et al. 2006).
Education
Birch (1987) found that the general level of education in a region and the pres-
ence of quality research universities promoted economic development. There is a
substantial body of evidence indicating the importance of education to macro-
economic development (Becker 1993). There are also a number of studies which
indicate a positive relationship between general education levels and rates of new
venture initiation (c.f. Schell and David 1981; Bull and Winter 1991; Grant 1996;
Black and Strahan 2002; Guesnier 1994). The evidence for the role of universi-
ties as regional engines of economic growth is mixed (see Anselin et al. 1997 for
a review).
Conclusion 163
Conclusion
A number of key scholars have sought to understand the relevance of the

entrepreneur to economic development. It would appear that the various models and
related research agendas result in a view of entrepreneurship as both a cause and an
effect of economic development. In this chapter, a macro-model that focuses on the
former is proposed and discussed. The model, an extension of Schumpeters thinking
about economic development, includes a series of factors that appear to influence
the extent of growth entrepreneurship in an economy. Importantly, despite our
increasingly sophisticated understanding of economic progress in the years since
Schumpeter, the role of the creative entrepreneur remains central to both innovation
and economic development.
Chapter 12
Some Implications and Conclusions
Abstract So what are the implications of this general social science theory of
entrepreneurship? How might it affect the behavior of entrepreneurs, education pro-
gramming, research agendas, and the future redesign of the entrepreneurship
discipline?
Three General Theories
This book might be described as a tale of three general theories. The first is an
implicit theory the small business theory of entrepreneurship. The second is
Shanes (2003) general theory an organizing framework for empirical findings
impacting opportunity identification and execution. The third theory is the general
scientific theory of entrepreneurial creativity, to which the bulk of the book has been
dedicated. Each theory has some peculiar strengths and weaknesses. They may be
viewed as both complementary and competitive.
The implicit small business theory of entrepreneurship is strong in the sense that
it is tied to a sizeable body of knowledge in the field of business. The theory is weak
in that it is not well explicated, leaving open fundamental questions. Should one
expect business knowledge in general to be relevant or only select aspects of
business knowledge that have been screened for usefulness in a new venture setting?
Are all management tools appropriate? Does the usage of each tool provide a
positive return on investment? There does not appear to be any general way of
knowing what business knowledge will be most relevant at what stage of business
development. The field may have to empirically test all of the various permutations
and combinations within myriad possible entrepreneurial contexts to discover the
answers unless some intelligent theorizing is forthcoming.
Shanes (2003) general theory of entrepreneurship is for the most part a frame-
work for organizing empirical entrepreneurship findings. It may encourage the
extraction of more pragmatically promising findings from the growing abundance
of empirical research. However, one cannot expect Shanes theory to be true or
predictive in any scientifically testable sense. Although the theory may be useful
to help compile the findings of scholars, one cannot expect it to provide direction
to researchers, other than to suggest further elaboration of earlier findings.

DOI 10.1007/978-3-319-04726-3_12
166 12 Some Implications and Conclusions
Practitioners will be puzzled as to how to weigh the relative importance of the

various propositions. Most of the cited findings are difficult to generalize. Further,
the great majority of the findings demonstrate statistical significance, but not prac-
tical significance, begging questions of usefulness and cost-effectiveness.
The theory of entrepreneurial creativity is arguably the most advanced model of
the three from a scientific standpoint, in the sense that it provides core hypotheses
to test. Its primary strength may be the multitude of evidence that is both directly
and indirectly supportive of the theory. Moreover, this theory is useful for explain-
ing and making sense of a sizeable number of otherwise unrelated findings in the
field. The theory is also generally tied to the discipline of creativity from which it
can expect to receive both general inspiration and more specific testable hypotheses
over time. However, creativity theory is not easy to understand or utilize, and thus
it imposes additional demands upon entrepreneurship practitioners, scholars and
educators. The theory of entrepreneurial creativity may also be regarded as an
under-socialized theory because it relies rather heavily on one central individual.
The theory of entrepreneurial creativity is difficult to apply. Developing ones
entrepreneurial creativity is clearly substantially more demanding than writing a
business plan.
The general theory of entrepreneurial creativity has important implications for
the entrepreneurship field. Arguably it is time to formally recognize entrepreneur-
ship as different from management in that it is a creative discipline, and that
developing a successful entrepreneur might be as problematic as developing any
other type of creative artist. A more unusual, and potentially most unexpected,
implication of defining more accomplished entrepreneurs as creative may be to
ennoble the entrepreneurial discipline. Artists who may be committed to the
crassest of social purposes can still look upward and see a De Vinci, a Shakespeare
or a Bach, and feel enriched. The inspirations and role models of creative artists
may provide meaningful sustenance and direction. Seeing some entrepreneurs as
markedly creative people may focus attention on creative outcomes. Of course,
one should not expect miracles. After all, the existence of a Shakespeare does not
automatically lead to many more his work simply encourages other writers to
raise their sights. Ultimately, the first step for the field of entrepreneurship will be
to clarify its understanding of a creative contribution, and next to treat it more as
a sacred obligation.
General Principles from the General Theory

The overarching general principle resulting from this book is: an entrepreneurs
need for creativity is proportional to an entrepreneurs aspirations. This prin-
ciple is derived from the theory and scientific findings that appear to support it.
General Principles from the General Theory of Entrepreneurial Creativity 167
A series of additional, distinct principles can be drawn from the book. They are
provided below with some brief, related remarks.
1. Entrepreneurship is a major challenge if your aspiration is to develop a success-
ful growth company.
(a) Many entrepreneurship enthusiasts (educators and advisors) encourage all
their students to believe that entrepreneurial success is a distinct likelihood
for everyone. How much value such enthusiasm provides should be care-
fully considered.
2. Entrepreneurs should not expect to extract much value from a business school
education until their firms becomes mid-sized or larger.
(a) The concepts and techniques of the management disciplines do not appear,
at this time, to much increase the odds of new venture success. The applica-
tion of some concepts and techniques may even reduce the odds of success
by putting additional uneconomical demands on a business.
3. Potential and existing entrepreneurs might derive value from relevant social
science findings if they are more frequently exposed to them.
(a) It is not easy to develop an appreciation of social science research.
Nonetheless, exposure to the body of theory and scientific findings repre-
sents the best means of acquiring reasonably robust knowledge.
4. Schumpeters insight into the creative character of entrepreneurial growth ven-
tures is an important inspiration for our times.
(a) There is little doubt that Schumpeters ideas continue to exert a tremendous
influence on the entrepreneurship field. It is impressive that scholars con-
tinue to appreciate and utilize his ideas so many decades later.
5. Entrepreneurial creativity may explain a sizeable range of existing findings in
the field of entrepreneurship.
(a) There is little doubt that there are complexities contained in the notion of
entrepreneurial creativity. Nevertheless, it appears useful and straightfor-
ward relative to the alternative of hundreds of free-standing propositions
attempting to explain entrepreneurial performance bit by bit.
6. As a general social science theory, the theory of entrepreneurial creativity
compares favorably to existing standards.
(a) The general theory of crime (Gottfredson and Hirschi 1990) greatly influ-
enced its field, generating thousands of academic citations since its publica-
tion in 1990. It would appear that the general theory of entrepreneurial
creativity can influence substantially both the entrepreneurship and
creativity fields.
7. In order to be entrepreneurially creative, rigorous demands are placed upon an

entrepreneurs intellect, personality, motivation, knowledge acquisition, and
thinking style.
(a) The multi-dimensional nature of entrepreneurial creativity, as well as the
complexities associated with thresholds and interactions are intriguing.
8. There are a number of competing explanations of entrepreneurial activity
beyond that of the functional disciplines of business.
(a) It may be useful to view the entrepreneurial process as the development of
commitments to ideas and to people through time.
9. It may take a substantial number of particular types of life experiences over
many years, starting from early childhood, to foster high levels of entrepreneur-
ial creativity.
(a) It may be that the development of a competent, creative entrepreneur is no
less difficult than the development of any other successful creative artist or
scientist.
10. There is evidence which suggests that variations in the levels of economic
development may in substantial portion be credited to the presence or absence
of creative, growth entrepreneurs.
11. Given current evidence, it is plausible that entrepreneurial creativity may be
useful for predicting up to half of the performance variance of entrepreneurial
ventures.
(a) Given the uncertainty and uncontrollability of many aspects of the entre-
preneurial process, and the myriad of other factors that might be competing
predictors, the evidence behind creativity as the prime determinant of entre-
preneurial performance is truly impressive at this point in time.
It is intriguing that the theory of entrepreneurial creativity may be supported at a
macro level as well as at a micro level.
Some Points on Methodology
According to Machlup (1978, p. 54, brackets in original), methodology is:

the study of the principles that guide students of any field of knowledge and especially any
branch of higher learning (science) in deciding whether to accept or reject certain propositions
as a part of the body of ordered knowledge in general or of their own discipline (science).
Further (p. 55),

although methodology is about methods, it is not a method, nor a set of methods, nor
a description of methods. Instead, it provides arguments, perhaps rationalizations, which
support various preferences entertained by the scientific community for certain rules of
intellectual procedure, including those for forming concepts, building models, formulating
hypotheses and testing theories.
Some Points on Methodology 169
In addition to propositions about content, this book offers a number of ideas

about methodology.
1. Be vigilant for and wary of both dogma and tautology they are still widespread
in the entrepreneurship discipline. Each promises much, but delivers little. Karl
Popper heightens our awareness of such types of non-scientific thinking.
2. A theory must be refutable, to be scientific in a Popperian sense. Theories with
broad explanatory power but no predictive power may be viewed as pre-
scientific or pseudo-scientific. In any case, one need be more suspicious about
their claims because they cannot be tested for truth.
3. It would appear that social science can provide knowledge despite its bewilder-
ing complexity. One should be prepared for both the slow accumulation of
evidence and the element of surprise.
4. Induction is not deduction. We can only know things about the world by degree
and not absolutely.
5. Scientific definitions are sometimes more about scientific measures and less
about formal dictionary definitions. Sometimes, as Karl Popper describes it,
definition is really more an after-the-fact labeling process. Definitions based on
other definitions is really an exercise in infinite regression. Scientific definitions
often depend directly on the measures that are used to test them even more than
on the terms that are used to characterize them.
6. Whether one seeks understanding or is generalizing from experience, one is (at
least) implicitly theorizing. Theorizing is unavoidable. It occurs all the time.
7. All of our findings and facts contain theory implicitly or, as Karl Popper puts it,
are theory laden.
8. Scientific conjectures have many roots but they are all risky by definition
according to Karl Popper.
9. One should appreciate formally constructed theory for its internal consistency
and for its pragmatic usefulness, and for its external consistency. Here, external
consistency means its fit with formal scientific evidence.
10. Scientific theory is not only tested for its predictive accuracy but also for its verisi-
militude. In the case of the GTEC verisimilitude is tested indirectly by various and
sundry propositions that flow from entrepreneurship being a creative discipline.
11. One should also appreciate formally constructed theory by its purpose: descrip-
tion, explanation, prediction and/or control.
12. One might think of scientific theory as micro, mid-range or general depending
mostly on its explanatory power. General theories typically add very few predic-
tive tenets to a field but those that are added tend to define the character of the field.
Much of the knowledge in the field of entrepreneurship at this time is primarily
and overwhelmingly propositional, as demonstrated by Shane (2003). Accordingly,
the philosophy of science of the field has been one of verificationism (Gorton 2006).
One possible explanation for the dominance of verificationism in entrepreneurship
research might be the prevalence of Kuhnian orthodoxy. Most modern researchers
may feel that they are involved in normal science in which their jobs are to support,
rather than challenge, prevailing knowledge paradigms (Kuhn 1962). If such be the
case, entrepreneurship researchers should rebalance their operational philosophies
of science towards a more Popperian framework of conjectures and refutations.

Theories languish when they are not critically tested.
One advantage of thoroughly integrating a Popperian framework within the
methodology of the entrepreneurship discipline would be to increase the efficiency
of the research process. Scientists will be encouraged to critically test predictive
theory, and in doing so, engage in more intelligent constructive replication research
than is currently common. Theories and not propositions will inevitably be moved
into the drivers seat of the discipline. Entrepreneurship scientists will more often be
forced to redraft existing theories to keep them current with the evidence in con-
trast to verificationist protocol, under which theoretical reformulation is typically a
very slow or even irrelevant process.
Normative Implications of the General Theory

Some theorists view only some types of entrepreneurship as socially desirable.

Baumol (1990) developed a theory in which entrepreneurship was strictly defined as
the accumulation of wealth. In a theory that spans various eras of history, Baumol
(p. 893) argues that if the accumulation of wealth is the sole criterion, a large range
of activities can constitute entrepreneurship including political/bureaucratic oppor-
tunism and even warfare for economic gain.
The basic hypothesis is that, while the total supply of entrepreneurs varies among societies,
the productive contribution of the societys entrepreneurial activities varies much more
because of their allocation between productive activities such as innovation and largely
unproductive activities such as rent seeking or organized crime. This allocation is heavily
influenced by the relative payoffs society offers to such activities. This implies that policy
can influence the allocation of entrepreneurship more effectively than it can influence its
supply.
Baumol (2004) envisages the allocation of entrepreneurs either to productive or

unproductive tasks to be a function of the rules of a society. In advanced modern
economies, Baumol (p. 11) argues that the rules tend to favor either innovation or
rent-seeking1 behavior.
Today, criminal activity aside, the primary type of effort that competes with production as
an attraction to entrepreneurs is something far less dramatic than military violence, but
nevertheless of critical importance. This alternative is rent-seeking, that generalization of
Henry Georges focus the pursuit of earnings primarily through redistribution in ones
own favor, rather than in return for any productive accomplishmentThe rule of law, along
with rights of property and its protection from arbitrary confiscation, the enforceability of
contracts and a variety of other protections have made productive activities less risky and
more effective avenues to wealth than they were before.
1
The search for economic gain without reciprocal value.
Normative Implications of the General Theory of Entrepreneurial Creativity 171
Baumols alternative to the innovative entrepreneur is the non-productive seeker

of rents. Rent seeking in economic terms refers to a variety of socially non-productive
activities that shift wealth to the entrepreneur. A common type of rent seeking
behavior comes from manipulating regulatory agencies in favor of business inter-
ests. From this perspective both types of entrepreneurs may be financially successful
but only one makes a social contribution in line with his/her returns.
Whether Schumpeter (1911) intended it or not, casting entrepreneurial activity in
terms of new business combinations, imbued entrepreneurship with a fundamen-
tally moral character his entrepreneur meaningfully assisted the economic devel-
opment process. Schumpeters entrepreneurs constructively contributed through an
innovation that is not only substantial but real, unlike the aforementioned business-
men, who might only be enriching themselves through monopolistic rent-seeking
behavior. His entrepreneurs were heroic figures, directly and meaningfully contrib-
uting to the social well-being. The intentions of innovative entrepreneurs were
something other than narrowly self-serving, though personal enrichment might be a
distinct outcome of their actions.
In order to understand the dynamics of entrepreneurship, it is necessary to under-
stand entrepreneurial purpose and method as something other than simply personal
enrichment through independent business. The dominating idea of personal achieve-
ment distinctively positions Schumpeterian entrepreneurship vis--vis other charac-
terizations of entrepreneurship. In this sense, the profit maximization model of the
management disciplines is too narrow for entrepreneurship. Entrepreneurs are
drawn by a vision of larger purpose, by seeing the possibility of something new and
important being brought into existence. Hence, these Schumpeterian entrepreneurs
are people of large mind and large purpose.
From a social perspective, even new venture failures can be socially desirable
when the enterprises are creative. There is no particular reason to believe that
creative contributions will always, or even usually, be well-received by the market-
place. Developing products that are both novel and useful does not of necessity
result in commercial success. Sometimes bold failures become the basis of future
economic successes.
Sarasvathy (2001, pp. 910) notes that:
entrepreneurs do not fail. Only the firms that they endeavor to create may fail. And even
they may not fail in any ultimate sense if they serve as a means for the economy to discover
what works and what does not work in a world of changing human imagination and aspira-
tions. More precisely, the terms successful entrepreneur and failed entrepreneur are
pragmatically bankrupt in their meaningWe need to move away from the vision of the
market as a monolithic construct that rides roughshod over vast farmlands of homogenous
commodities, relentlessly separating the wheat from the chaff, and start researching mar-
kets as groups of individuals and communities developing a variety of gardens and parks
based on their particular tastes in landscaping and architecture.
Ultimately, creative entrepreneurship may imply social contribution or a moral

imperative through productive innovation irrespective of a major accumulation of
wealth.
A Hierarchic Model of Moral Entrepreneurial Imperatives
As a concluding note, it is useful to ask, What are the real moral imperatives
behind entrepreneurship and is it reasonable to expect them to be similar for all
entrepreneurs? Some would advocate profit maximization and wealth creation, as
is emphasized by the logic of economics. Some would advocate the introduction
and diffusion of new technology. Others might suggest service to people, as empha-
sized by many religions. Ultimately, there are a mix of values and potential purposes
lying behind the institution of entrepreneurship.
As Baumol (2004) made clear, entrepreneurship has to be about something more
than self-enrichment or we would have to include a substantial range of socially
undesirable activities into the subject. Crime that makes money would be
entrepreneurship. Political corruption that is profitable might be a really advanced
form of entrepreneurship. Even war can be interpreted in entrepreneurial terms.
If entrepreneurship is to be viewed as a socially-responsible social institution,
however, it is necessary to appreciate what constitutes entrepreneurial contributions.
Some people create sole enterprises that only partly provide for their families. Those
who create profitable businesses may more typically hire people and pay taxes into
the public coffers. Providing employment can be construed as an important social
goal, given that psychological well-being is markedly affected by employment
status (e.g. Payne and Jones 1987). The maintenance and growth of the tax base
represents an opportunity to improve public infrastructure and social services.
At increasingly demanding levels of entrepreneurial contribution, there are con-
cerns that entrepreneurs not create shoddy or dangerous products, or that they mis-
represent their products to the public. There are concerns that entrepreneurs manage
their employees with some minimal level of humanity. There are concerns that they
not con or manipulate investors. There are also concerns about the treatment of all
other parties to whom entrepreneurs may be contractually bound, such as suppliers
and buyers.
A still higher level of challenge and social contribution is that of creativity and
innovation. Entrepreneurs can be judged against the quality and significance of the
innovations (technological, managerial and otherwise) that they bring forth, given
that entrepreneurship is the main avenue for introducing innovation. Further, entre-
preneurs can be judged by the extent to which they conduct business in an environ-
mentally sustainable fashion.
It is entirely possible that at some point in the not too distant future, entrepre-
neurs will be judged by the extent to which their contributions maintain or foster
well-being and happiness. Increasingly, we are becoming aware that material con-
sumption does not add in a substantial way to happiness. Peiro (2006, p. 349) finds
that, Today, there exists a certain consensus in that: (i) over time, happiness does
not increase significantly with per capita income, at least in developed countries
(Easterlin 1995; Blanchflower and Oswald 2004) and (ii) people in richer countries
are happier than people in poorer ones, though the relationship does not seem to be
linear. Such findings should not be taken lightly because measures of subjective
A Hierarchic Model of Moral Entrepreneurial Imperatives 173
Environmental Responsibility
and
Contribution to Happiness
Creating, Modifying and Diffusing

Innovations
Providing Quality to Various Stakeholders
Providing Jobs for Others and Paying Taxes
Making a Job for Oneself and providing for ones Family
Fig. 12.1 A hierarchy of entrepreneurial social contributions
well-being may be surprisingly robust. Here, Peiro (2006, p. 349) finds that,
people who call themselves happy are more likely to be rated as happy by friends
and less likely to suffer from psychosomatic illnesses, to attempt suicide or to seek
psychological counseling (Frank 1985, 1997).
Recent evidence suggests that happiness is brought about by certain circum-
stances and accomplishments, things such as being married, employed and edu-
cated things not easily purchased with money (Blanchflower and Oswald 2005).
Social and economic policy may begin to change to meet the growing understanding
of personal well-being. Entrepreneurs will need to make adjustments, accordingly.
What emerges for them is a hierarchy of social contributions (see Fig. 12.1 above).
Behind this Maslovian-style pyramid is the notion that the entrepreneur will
enrich her or himself by ascending the hierarchy. The entrepreneur moves from
basic survival needs on the first two levels towards being and becoming needs on the
last three (Maslow 1968). Those who are most enlightened and the most financially
successful will have most to offer, and at the highest reaches of the pyramid they
will find a way to make their offering real to the people around them without undue
damage to the environment. That entrepreneurs appear to be largely intrinsically
motivated may indicate that if they internalize such values as part of their living and
education, they will be more willing to strive towards them.
Possible Implications upon Education
Perhaps, it does not make sense to think of entrepreneurship education as a way to

effectively educate most people wanting to consider a career as an independent
businessperson. Though we have accepted the idea that a general management edu-
cation is good preparation for all intelligent would-be middle managers, maybe one
should not have similar expectations for entrepreneurship education. One would
never expect to replace veterinary medicine with entrepreneurship education for
future independently employed veterinarians. Should one expect that restaurateurs
or hoteliers are better prepared by entrepreneurship education than by education
directly related to their industries? Perhaps the future small business persons edu-
cation should be topped up with some small business training. Perhaps real entre-
preneurship education should be retained for those who are best suited to undertaking
growth ventures for those possessing exceptional entrepreneurial creativity.
The unexceptional performance of graduates of entrepreneurship education pro-
grams has been recorded elsewhere in this book. Apparently the current state of
entrepreneurship education at many universities leaves a lot to be desired. The cor-
nerstone of most entrepreneurship education is the new venture business plan. As
discussed in Chap. 3, existing research behind new venture planning is still only
marginally compelling. As Vesper (1996, p. 230) suggested, it may be that the
small improvement in performance is not worth the effort involved in strategic plan-
ning. But even as one meta-analysis suggests that business plans tend to work with
modest success in real life situations, it doesnt mean the artificial construction of a
business plan in a classroom situation is a productive learning experience.
Perhaps entrepreneurship education depends so much on learning from the
dubious plans that students typically produce because it is a type of educational
programing that adjunct professors can conduct without much difficulty. Since
adjuncts are typically business educated at the level of an MBA, they are well pre-
pared to handle the functional level knowledge contained in a business plan. They
are much less prepared to handle the science of the discipline because their degree
is usually a professional degree and not an academic degree. It is more than possible
that under-resourcing entrepreneurship departments with MBA-level educators is
holding back the effectiveness of entrepreneurship education. It is also more than
possible that entrepreneurship education is being held back by the immaturity of its
supporting science.
Advancing entrepreneurship education is neither an unimportant nor a trivial
problem. Chapter 11 provides mounting evidence regarding the relative centrality of
the entrepreneurial role in economic development. For those exceptional people that
have appropriate capabilities it is likely a big mistake not to attempt to better edu-
cate them. If we find it justifiable to educate people in the creative arts with all the
accompanying difficulties, should we not also attempt to educate them in entrepre-
neurship? Over the next couple of decades many changes will be needed. First, the
science of the field needs to be advanced. Second, the educators need to be appro-
priately educated. Third, programs that target the development of innovative, growth
Possible Implications upon Education 175
entrepreneurs must be designed and implemented. Fourth, ancillary entrepreneurial

education must be provided to entire campuses and not just to business school
students. Outreach programming needs to be prepared for would-be entrepreneurs
not connected with universities. Fifth, effective community outreach programming
might also be integrated into entrepreneurship education to enable a lot of contact
between students and practicing entrepreneurs. Finally, entrepreneurship education
needs to be given sufficient autonomy to be largely independent of business school
culture. As long as entrepreneurship programs are part of business schools they will
be dominated by their content and values.
The biggest weakness in entrepreneurial education at the current time is likely
the lack of available education at the doctoral level. As Brush et al. (2003) indicate,
only a fraction of entrepreneurship educators (11 %) in their sample are PhD
educated in entrepreneurship. Given that the sample probably dramatically over-
represented full-time faculty and under-represented adjunct faculty, the proportion
of those actually teaching entrepreneurship courses who are properly PhD educated
in this field is likely much smaller still. The number of credible PhD programs in
entrepreneurship is questionable at this time since some of those who are qualified
to teach at this level move around. It may be that the best education in entrepreneur-
ship is still derived from understudying a single professor who is solely committed
to entrepreneurship research and PhD education. High quality PhD programing is
needed so that students can learn from a number of different scholars with differing
perspectives and from a collectivity of similarly motivated students.
With properly educated faculty, the field can learn how to offer degree programs
in entrepreneurship worthy of the professional weight that it deserves. A potential
starting point might be to develop an MBA-equivalent program such as that
described by McMullan and Long (1987), which focuses on developing entrepre-
neurial creativity as a central component. It is not a matter of modifying the MBA
for entrepreneurs but of designing a program to specifically meet the needs of entre-
preneurs. With respect to educators, programs not only need PhD-educated faculty
but also a number of successful role models. The terminally-educated will be more
aware of the science of the discipline; the practitioner academics will be more aware
of the relevant institutions and networks that facilitate new venturing. Desired stu-
dents will be something other than typical high-IQ students with high GMAT scores
demanded by business schools. They may be older than typical MBA students and
more entrepreneurially experienced (McMullan and Gillin 1998), as well as ready
and willing to venture. In such a program, the goals may be as much or more about
generating quality new ventures in the short-term as they will be about the produc-
tion of post-secondary degree holders.
The program may contain management subjects. However, with the possible
exceptions of accounting and information systems, the related courses will be taught
from an entrepreneurial perspective. The course content may vary dramatically,
including the use of disciplinary innovations such as industrial design courses. Law
courses may be necessary. Courses in creativity, innovation and emerging markets
might provide value. It may be useful to include some history including selective
economic and business history, and some history of innovation. The program might
also incorporate biographies of entrepreneurs as well as include the regular presence

of successful guest entrepreneurs. An applications orientation is probably desirable
in a field still largely bereft of meaningful theory and with few important empirical
findings. Students may learn about the ethnography of business or about business
institutions from quality case studies. Case studies may also facilitate the apprecia-
tion of common entrepreneurial problems.
The program might involve substantial opportunity identification with some
screening, the odd feasibility analysis, and possibly, even a business plan for a
sophisticated new venture idea that requires external capital. The teaching method-
ology would emphasize skill development as well as knowledge acquisition.
Experiential learning would be utilized. Special resources for connecting with the
business community would be in place. An integrated or optional development
study would be conducted on a mid-sized, growth firm. Further, more experienced
and more advanced students might offer counseling assistance to entrepreneurs,
especially those in start-up mode (c.f. Chrisman and McMullan 2000; Chrisman
et al. 2012).
Research Implications
A general scientific theory can provide substantial focus for scholarly research. The
general theory of crime, for example, has elicited thousands of academic citations
and a meta-analysis (Pratt and Cullen 2000) since its publication in 1990. This is an
astounding impact for a scholarly work in any field.
Questions remain about the character of the impact of the various creative
resources upon new venture success. Many areas, such as the creative aspects of
intelligence and of thinking styles, have not been well studied as of yet. Relevant
models of entrepreneurial knowledge will need to be developed. In addition to better
understanding the individual resources and their respective subscales, it will be nec-
essary to understand their relative impacts as well. Further, scholars will need to
discover resource thresholds, and the nature and extent of resource confluence.
Entrepreneurship scholars may be encouraged to conduct studies of great entre-
preneurs in a similar fashion to how creativity scholars have examined the back-
ground, character, behavior and accomplishments of great contributors in other
creative fields. Such work may lead to insights brought forth by examining similari-
ties and differences amongst the various types of highly creative individuals.
Along the way, entrepreneurship scholars may struggle with some of the same
problems encountered by creativity scholars (Mayer 1999).
What are the distinctive characteristics of entrepreneurially creative people?
How do we measure someones creative entrepreneurial potential?
What are the biological and evolutionary bases of entrepreneurial creativity?
Which cognitive resources and processes are most germane to entrepreneurial
creativity?
Research Implications 177
What motivates the entrepreneurially creative beyond what we know about

achievement motivation?
Which life experiences most influence the development of entrepreneurial
creativity?
How does entrepreneurial creativity influence a new venture over time?
How do social and cultural contexts meaningfully affect entrepreneurial creativity?
How common or rare is entrepreneurial creativity?
To what degree is entrepreneurial creativity domain specific or domain general?
Can people learn to become more creatively entrepreneurial? If so, how and how
best?
In spite of the fact that creativity scholars generally agree on the nature of
creative outcomes, they often disagree on how to approach the subject and on what
to place greatest emphasis people, products or processes. According to Mayer
(1999, p. 450):
Authors who view creativity as a property of people tend to focus on individual differences
in peoples creativityor on the distinctive characteristics of creative peopleAuthors
who view creativity as a property of products tend to focus on case studies of creative
productionor on computer simulations of creative productionAuthors who view cre-
ativity as a property of cognitive processing tend to focus on analyzing the steps involved
in creative thinkingor in teaching creative cognitive processing
In creativity research, as in entrepreneurship research, scholars are divided over

whether to view their subject as a personal or a social phenomenon. Here, Mayer
(1999, p. 450) states that, According to the personal view, creativity involves
producing something new and useful with respect to the person doing the creating
According to the social view, creativity involves producing something new and
useful with respect to the social or cultural environment
In creativity, scholars are also divided over the frequency of creative outcomes.
According to Mayer (1999, p. 451), On the one side, some creativity researchers
view creative thought as a common aspect of everyday cognition so that all humans
are capable of creativityOn the other side, some researchers view creative thought
as a rare event that occurs only within a very small group of unique individuals
Interestingly, entrepreneurship scholars may be viewed as similarly uncertain. For
example, Brazeal and Herbert (1999, p. 34) argues that, Radical innovationsand
their exploitation are defined as classically entrepreneurial events; it is not so clear-
cut that stand-alone incremental innovations and their exploitation also may be
labeled as entrepreneurial activities.
In creativity research, scholars also debate whether or not the subject is domain-
specific (e.g. to music) or domain-general (e.g. to music, painting and physics). The
most recent perspective on the argument leans in the direction of domain-specificity.
Baer (2012, p. 337) finds that: being highly creative in just two domains is
indeed extraordinary, and it is almost impossible to find an example of anyone being
creative at the very highest level in three or more domains. With respect to entre-
preneurship research, it is not yet known if high levels of entrepreneurial creativity
can be coupled with high levels of other types of creativity.
Many of the questions faced by the creativity and entrepreneurship fields are
similar. It appears reasonable that the insights and knowledge generated by the for-
mer field could be meaningfully imported into the latter field with potential syner-
gies for both fields, particularly given the empirical support demonstrated in this
book. It does, however, make sense to draw distinctions between entrepreneurship
and creativity. First, in contrast to creativity, the field of entrepreneurship is not
centered on psychology. Second, creativity is not domain-specific but is a general
concept common to all creative domains. When creativity is applied, the elements
of the domain need to be emphasized. Musical creativity, for instance, will probably
emphasize the music more than the creativity. In the case of entrepreneurship, the
many domain specific issues around the identification and exploitation of opportu-
nities will also be expected to play a large role in this creative discipline.
In the case of the creativity discipline, entrepreneurship might be viewed as a
finalizing part of the creative process the part, where creative people promote and
sell their ideas, and the part where innovation takes over from basic creativity. In
any case, this general theory of entrepreneurial creativity is a relatively comprehen-
sive, applied theory of creativity. The creativity discipline may need to encourage
related scientific theorizing in other applied creative domains.
Ultimately, at least some scholars have been advocating a more complete con-
nection between entrepreneurship and creativity. Here, Brazeal (1999, p. 34) argues,
The importance of studying entrepreneurship through the solidification of broader
parameters that encase complementary fields cannot be overstated. At a minimum,
the conceptual exploration of a rudimentary process model may facilitate studies
within and across the three arenas of entrepreneurship innovation, change and
creativity
In Summary
The entrepreneurship field needs broad scientific theories that not only predict size-
able amounts of performance variance but also explain a broad swath of existing
findings. The general theory of entrepreneurial creativity has the potential to be such
a theory. It should be added to the existing spectrum of general theories used to
guide understanding of this relatively new field. If the relative advantages of the
GTEC persist in subsequent research then our understanding of entrepreneurship
should shift accordingly. We should adjust not only our research emphasis but also
our education programming in this direction. However our understanding evolves,
creative entrepreneurs should continue to be an inspiration to us all.
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Index
A scientific and technological creativity,

Ambiguity tolerance, 123 158, 159
Analogical thinking, 127 socio-cultural environment factors, 162
Solow model, 156
spill-over creativity, 160161
B Wennekers model, 158
Bohemian index (BI), 160 Wong model, 157
Entrepreneurial Attitude Orientation, 78
Entrepreneurial creativity
C applicability range, 133134
Cognitive style index (CSI), 105106 business development and performance,
Confluence theory, 11, 60, 132133 6869
explanatory power, 102 confluence, 132133
intellectual abilities, 66 contingencies, 134
ITC, 65, 67 development, 13
Conjectures and Refutations, 2 career choices, 153154
Contingencies, 22, 34, 37, 41, 104, 134 economic (see Economic development)
Contrary thinking, 126 parents and family, 149151
CSI. See Cognitive style index (CSI) post-secondary education, 153
primary and secondary education,
152153
E direction of causation, 134135
Economic development discovery, self-expression and design, 117
Birch model, 157, 158 domain specificity, 6970
Blanchflower and Oswald model, 155156 economic development, 155158
economic environment factors, 161162 environment, 6768
education, 162 environmental moderator, 7071
entrepreneurial culture, 161 holistic and analytic examination, 132
macro-model, 158159 independent variable, 68
political environment factors, 162 innovation, 69
Schumpeters theory, 13 intelligence (see Intelligence)
innovative entrepreneurs, 155 intuitive vs. analytic entrepreneur, 117
new combinations, 157 ITC, 65, 67

DOI 10.1007/978-3-319-04726-3
204 Index
Entrepreneurial creativity (cont.) Entrepreneurial thinking styles, 12, 66

knowledge requirements (see Knowledge analogical thinking, 127
requirements) contrary thinking, 126
measurement instruments, 131132 deferred judgment and ideation, 126127
motivation (see Motivation) explanatory power, 105106
need for, 116117 innovation orientation, 125126
negative side, 116 intuition, 126
personality (see Entrepreneurial problem focus orientation, 126
personality) Entrepreneurship education, 13
research implications advancement, 174175
entrepreneurship scholars, 176177 business ethnography, 176
entrepreneurship vs. creativity, 178 disadvantage, 175
thinking styles (see Entrepreneurial experiential learning, 176
thinking styles) graduates performance, 174
thresholds, 133 growth ventures, 174
Entrepreneurial development process knowledge acquisition, 176
commitments, 144 MBA-level educators, 174
creative process, 142 opportunity identification, 176
deal-making under adversity, 144145 PhD programs, 175
dynamic entity, 142 skill development, 176
empirical research, 146147 small business training, 174
entrepreneurial vision, 142144 Entrepreneurship education and training
goal and strategy envisioning, 143 (EET), 108
new combination, 142143 Explanatory power, 2, 3, 1112, 98
opportunity identification, 141, 143 confluence theory, 102
scores, 142 environment, 109110
improvisation, 141, 145146 intelligence, 106107
Entrepreneurial dynamics, 1213 knowledge, 107109
entrepreneurial development process motivation, 103104
(see Entrepreneurial development personality, 102103
process) thinking styles, 105106
small business model Explicit theory, 28
functional disciplines, 140
management discipline, 8, 140141
strategic rationality G
(see Strategic rationality) General theory of crime (GTC), 99102
Entrepreneurial performance, 7, 59, General theory of entrepreneurial creativity
115, 132 (GTEC), 1, 11
achievement motivation, 123 attributes, 6
entrepreneurial imagination, 119 complex variables, 10
GTEC, 6, 7172, 102 contemporary creativity theories, 9
and knowledge acquisition, 107, 130 definitions, 5758
need for achievement, 95 development process, 5859
personality variables, 132 empirical evidence (see Personal
perspectives, 1 creativity (PC))
Shanes general theory, 9, 45 entrepreneurial creativity and outcomes, 34
Entrepreneurial personality, 12, 66 entrepreneurial performance, 6
ambiguity tolerance, 123 entrepreneurship and creativity, 60
entrepreneurs and creative people, 121 (see also Schumpeters theory)
explanatory power, 102103 explanatory power
extraversion, 123124 environment, 109110
perseverance, 122 intelligence, 106107
risk propensity, 122123 knowledge, 107109
self-efficacy, 122 motivation, 103104
Index 205
personality, 102103 descriptive phenomena, 28

thinking styles, 105106 entrepreneurship courses, 28
financial performance, 4 explicit development and rigorous
vs. formal model, 71 testing, 29
GTC management education
difference, 100102 criticism, 3738
similarities, 99100 education backgrounds, West German
hypotheses, 72 entrepreneurs, 38
implications, 7 failure, 38
McMullan and Long formal university degree, 38
theory, 4 US Small Business Development
new combinations, 10 Center Program, 39
normative implications, 170171 management tools
outcome variance range, 5 accounting, 32
principles, 166168 HRM (see Human resource
scientific model, 71, 72 management (HRM))
self-sustaining enterprise, 4 marketing promotion, 3435
strategic and tactical decisions, 4 market research, 3234
structure elements, 5 strategic planning, 3132
venture plan and organization, 4 new venture success, management
Global Entrepreneurship Monitor (GEM), knowledge, 2930
1516 Intelligence, 12
GTC. See General theory of crime (GTC) analytic ability, 66
GTEC. See General theory of entrepreneurial collaborative ability, 120
creativity (GTEC) components, 121
conceptual models (Sternberg,
Robert), 118
H entrepreneurial judgment, 119
High-performance work systems (HPWSs), explanatory power, 106107
3637 improvisational ability, 120
Hofer and Bygraves model, 58 multiple intelligences (Gardner,
Homo economicus, 138 Howard), 118
HPWSs. See High-performance work systems opportunistic imagination, 118119
(HPWSs) persuasive ability, 119120
Human resource management (HRM) practicalcontextual ability, 66
evolving and dynamic nature, 35 synthetic ability, 66
higher performance and higher Wechsler Adult Intelligence Scale, 118
wages, 36 Intrinsic Motivation Principle of
HPWSs, 3637 Creativity, 103
labor productivity, 37 Investment theory of creativity (ITC), 65
performance effects, 36
recruiting practices, 35, 36
self-reported job quality, 36 K
Khans decision-making study, 147
Kirton Adaption-Innovation Inventory/Index
I (KAI), 74, 105, 117, 131
Implicit small business theory of Knowledge requirements, 12, 66, 128
entrepreneurship, 165 competition, 130
assumptions, 28, 29 core technology, 130131
business school terminology, 29 definitions, 129
contingency theory, 41 explanatory power, 107109
current thinking disadvantages industry knowledge, 130
educational disadvantages, 3940 negotiations, 129130
entrepreneurial experience, 4041 selling, 129
206 Index
M innovation, achievement, personal

Machlup method, 168170 control and self-esteem, 78
Management discipline, 3 outcomes (see New venture outcomes)
implicit theories, 2830 pre-venturing, 11
profit maximization model, 171 entrepreneurial intentions, 7477
small business model, 89, 140141 growth/creativity factor, 74, 78
McMullan and Long model, 143 population effect size, 78
Miner Sentence Completion Scale T search methods, 7374
(MSCS-T), 9092 Philosophy of science (Popper, Karl), 23
Moral entrepreneurial imperatives, 172173
Motivation, 12, 67
credible goals, 126 R
desire for success, 125 RC approach. See Rational-comprehensive
elements, 124125 (RC) approach
explanatory power, 103104 Refutable theory, 2
intrinsic motivation, 125
legacy, 125126
Schumpeters theory, 63 S
MSCS-T. See Miner Sentence Completion Schumpeters theory, 5859
Scale T (MSCS-T) economic development, 6162
Muddling through approach. See Successive energetic entrepreneurs, 63
limited comparisons (SLC) approach entrepreneurial motivation, 6364
hedonistic economic beings, 63
intellectual endeavors, 61
N limitations, 64
New Venture Development: The macro theory, 13
Entrepreneurial Option, 4 innovative entrepreneurs, 155
New venture outcomes new combinations, 157
employment growth, 85, 86 Shanes general theory, 9, 165166
entrepreneurs vs. small business owners, advantages, 5051
83, 84 entrepreneurial performance, 45
financial performance, 85, 8789 opportunity execution
cognitive complexity, 85, 90 entrepreneurial psychology, 49
entrepreneurial orientation scale, 91 entrepreneurial strategy, 46
lead entrepreneurs PC, 85 financial resource acquisition, 48
MSCS-T, 9092 industry choice, 47
personal innovation, 92 new venture organizing
risk avoidance, 92 process, 47
self-achievement, 92 sociology of entrepreneurship, 50
task motivation theory, 90 opportunity identification, 4546
innovativeness, 9295 potential limitations, 5152
need for achievement (nAch), 9596, 104 Small business entrepreneurship (SME)
survival, 8283 Campbell theory, 28
explicit theory, 28
functional disciplines, 9, 140
O implicit theory (see Implicit
Organized inventory, venture success, 3 small business theory of
entrepreneurship)
management discipline, 8, 140141
P Smaller-than-big (STB) business, 8
Personal creativity (PC), 13 SME. See Small business entrepreneurship
independent variable, 74 (SME)
new venture, 10, 9698 Social science
entrepreneurs vs. non-entrepreneurs, empirical propositions (see Shanes general
7881 theory)
Index 207
scientific knowledge, post-secondary V

classroom, 5253 Venture capitalist (VC), 147
theories Venture capitalist firms (VCFs), 19
endogenous and exogenous, 44
guiding, 44
human capital, 4445 W
hypotheses, 44 Weicks model, 59
Spill-over creativity, 160161 Work experience
Strategic rationality financial outcomes, 2122
improvisation, 139 funding sources, 1920
model, 138 high-growth rate, 24
RC approach, 138 high-quality business idea, 1819
SLC approach, 138139 industry and business knowledge, 20
trial and error, 139 new business venture
Successive limited comparisons (SLC) development difficulties, 21
approach, 138139 reasons for, 2021
non-financial outcomes, 2223
opportunities, 8, 16
T survival and growth rate, 2122
Total entrepreneurial activity (TEA), 1516, 158 TEA, 1516

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Exploring Diversity in Entrepreneurship

More information about this series at http://www.springer.com/series/13172

ISBN 978-3-319-04725-6 ISBN 978-3-319-04726-3 (eBook)

Library of Congress Control Number: 2014945640

Springer International Publishing Switzerland 2015

Printed on acid-free paper

Springer is part of Springer Science+Business Media (www.springer.com)

Part I Understanding Entrepreneurial Problems

2 Entrepreneurial Work Experience ........................................................ 17

Part II Major Entrepreneurial Paradigms

3 Small Business Entrepreneurship: Is a Caterpillar a Butterfly? ........ 27

Marketing Promotion ............................................................................ 34

Part III A General Scientific Theory of Entrepreneurial Creativity

5 Modernizing Schumpeter: Toward a New General

Differences in Creativity between Entrepreneurs

Part IV Auxiliary Theories

8 Entrepreneurial Creativity ..................................................................... 115

9 Entrepreneurial Dynamics ..................................................................... 137

References ........................................................................................................ 179

Index ................................................................................................................. 203

The essential problem in entrepreneurship is to improve the performance of entre-

Springer International Publishing Switzerland 2015 1

Some Methodological Background

This book advances a new general scientific theory of entrepreneurship. In order to

From Poppers (1935) perspective, a science is a system of theories and related

Some Theoretical Background

self-sustaining enterprises. Risk-taking is treated as much as a consequence as a

Theories and Testing

power of entrepreneurial creativity within the discipline of entrepreneurship. While

The remaining portion of this introduction serves as an overview of key aspects

Chapter 2: Entrepreneurial Experience and Thinking

Chapter 3: Entrepreneurship as Small(er) Business

Today, the field of entrepreneurship might be described best as a many-headed

Chapter 4: Entrepreneurship as Positivistic Social Science

This chapter illustrates the strengths and limitations of attempting to piecemeal

Chapter 5: The General Theory of Entrepreneurial Creativity

Entrepreneurial outcomes are broadened beyond Schumpeters new combinations

Chapter 6: The Core Evidence

Chapter 7: A General Theory and its Explanatory Power

Chapter 8: Entrepreneurial Creativity

Entrepreneurial creativity is envisaged as a different type of creativity. It is not

Chapter 9: Entrepreneurial Dynamics

The entrepreneurial process is problematic to describe. In order to better understand

finance, accounting, and marketing). It is also useful to view the entrepreneurial

Chapter 10: The Development of Personal Creativity

The development of entrepreneurial creativity, like other forms of creativity, is

Chapter 11: A Macro Theory of Entrepreneurial Creativity

Schumpeters (1934) theory of entrepreneurship is a theory of economic develop-

Chapter 12: Implications and Conclusions

Springer International Publishing Switzerland 2015 17

In factor-driven economies,1 the estimated TEA ranged from 9.1 % (Pakistan) to

principal component analysis to derive 21 items grouped into six uncorrelated

activity: self-employed workers face a greater hazard of involuntary exit from

A replication study by Moskowitz and Vissing-Jorgensen (2002, p. 745) finds

financial returns to entrepreneurship. The main factor of interest is job satisfaction,

This last finding is, of course, in opposition to evidence presented in question 7

High financial returns to entrepreneurship appear to be enjoyed by relatively few

Thus in summation, entrepreneurial work is herein described as commonplace in

Springer International Publishing Switzerland 2015 27

A theory, according to Campbell (1990, p. 65), is, a collection of assertions,

Even the research agenda in the field of entrepreneurship is dominated by

The Small Business Theory of Entrepreneurship

(More) Management Knowledge (More) New Venture Success

The small business theory of entrepreneurship is expanded below. This second