c
  

 
 
 R

The personality of entrepreneurs

 R 


O ndividuals and opportunities

O
nderstanding the profile of an
entrepreneur
O The risks of a career in entrepreneurship
O elevant performance measures
O ntrepreneurs in a social context
    

O xplain the relation between the

entrepreneur and new value creation
O xplain why and how entrepreneurs
discover and exploit opportunities
O ist the roles and characteristics of
entrepreneurs
    

O dentify the relevant performance

measures for an entrepreneur
O efine the risks of a career in
entrepreneurship
O xplain entrepreneurial behaviour in a
social context
 j  
    

O The entrepreneur is the central actor in

the creation of a new venture.
O nitially, an opportunity is generally
recognised by a single individual, who
may decide to pursue it alone or with
others.
 j  
    

O The opportunity becomes an

entrepreneurial project and a process of
new value creation is initiated.

 
    
  
   

O The relationship between the individual 0

new value creation is a  
 , or a
system with a circular causality process.
O This dialogic means that the individual can
be called an entrepreneur Y
 because
s/he is pursuing a project to commercialise
a new product or service.

 
    
  
   

O n turn, this entrepreneurial project exists

Y
 because there is an individual who
has identified this opportunity and is
pursuing it.


   

 

a
Ô
  

 
Ô 
 

 
|
 

 


 !"

    
  
 
  

O pportunities rarely present themselves

in neat packages; they have to be
discovered and shaped.
O ifferences between people matter
regarding the discovery and exploitation
of opportunities.

    
  
 
  

O  main differences have to be considered:

± psychological characteristics
± information and knowledge availability
± creative processing
± cognitive heuristics

     !
 
 
  

The exploitation of an opportunity

depends on the joint characteristics of
the individual and the nature of the
opportunity:
O ndividuals are influenced by opportunity
costs, individual risk perception,
optimism, tolerance for ambiguity and
need for achievement.

     !
 
 
  

O xploitation is more common when

expected demand is large, industry
margins are high, the technology life cycle
is young and the level of competition in
the industry is low.

      "

 
O # 
$
make more money; keep the proceeds of the
business; reward according to effort
O R  $
use my own talents; a desire to create
something; control from begin to end;
passion about what am doing
O %    $
be my own boss; work my own hours; work
with people like, at a location of my choice

      "

& 
O '  $
weak management and marketing skills; lack
of information on start-ups; lack of finance
O R 
 $
high taxes and costs associated with
compliance to government legislation
O ( 
$
setting up a venture is harder than initially
expected; uncertainty; fear of failure
 #  !
  

 major institutional arrangements exist:

O the creation of new firms (hierarchies)
O the sale of opportunities to existing firms
(markets)
 #  !
  

ther exploitation modes are

nevertheless possible:
O joint-ventures
O licensing
O buying a franchise ...
 ë   
  


Two basic schools of thought shape the

profile of the entrepreneur:
O › Y Y who consider the
entrepreneur as an agent who specialises
in certain roles
O ›
Y  who concentrate on the
creative and intuitive character

 
   $
    

O rom the economist point of view,

entrepreneurship is considered as a
! Y .
O The status of the entrepreneur can be
analysed in terms of labour division which
explains this function based on › 

Y
›:

 
   $
    

± risk bearer
± arbitrageur
± innovator
± co-ordinator of scarce resources

     
$    


O arly studies in entrepreneurship typically

focused on the psychological
characteristics and the personality of the
individual as determinants of behaviour.

     
$    


O nly 3 of the endless list of

entrepreneurial traits have shown a high
level of validity:
± the need for achievement
± the internal locus of control
± the risk-taking propensity

  '    
 

There are  types of risks to consider

before embracing a career in
entrepreneurship:
± financial risks
± career risks
± social risks
± health risks
   
 '

O arge amounts of own money have to be

invested.
O fter start-up most of the profits are
usually reinvested.
   
 '

O
orrowing funds from bankers, venture
capitalists, or partners can reduce
financial risks.
O egal structures can help to minimise
financial risks.
 R  '

O uestions about (re-)employment after an

eventual failure must be considered.
O This risk is particularly acute for well-paid
specialists and people close to retirement.
O isks can be minimised by launching a
business on a part-time basis.
  
 '

O tarting a business venture requires

much of the entrepreneur¶s energy and
time.
O The decision to set up a venture should
therefore involve the family to reduce
conflict potential.
  
 '

O nother risk is linked to the (negative)

image of failed entrepreneurs like in
ingapore ² hence the r
 attitude ²
µafraid to lose¶.
 (
  '

O There is evidence that entrepreneurs

experience higher job stress and
psychosomatic health problems than
other people.
O ould-be entrepreneurs should make
sure that their health can cope with the
demands and challenges of starting and
running a business.
 =
   

O There are many motives for starting a

business, such as achieving social status
or having a new lifestyle
O owever, a business must generate a
profit to stay in the market place.
 =
   

O ust to break even, profits must cover

± compensation for bypassed
alternatives (opportunity cost)
± the cash, effort and time invested in
the venture (liquidity premium)
± a premium for risk
± a premium for uncertainty
 =
    


 
)*

$ dapted from . Venkataraman, µThe distinctive domain of entrepreneurship research¶, in . Katz (ed.),
Ô  ›

  › › › 

 
› › ›

 Y
, vol. 3, ai Press, Greenwich, Conn., 1997, p. 13.
ï    
!

3 features of a person¶s social context are

important to the perception of
entrepreneurial opportunities and the
decision to seize them:
± the stage of life
± position in social networks
± ethnicity
  
   

 

O There is no general theory indicating the

stage of life that is best for launching a
business venture, but empirical research
has shown that most of the entrepreneurs
start business 
Y-› Y  

›  Y  between the ages of  



with an ›

›
 ››
› Y

  
   

 

O ecent studies show that a strong team is

critical for new venture growth.
  
' 
 
 

O The networks that entrepreneurs build for

themselves stand out in a number of
respects:
± Networks are genuinely personal
± patial dimension is relevant
± ctive content of an entrepreneur¶s
network must vary over time to be
dynamic
  
' 
 
 

O Networks are important in both estern

and astern cultures. owever, they are
central to astern cultures and
particularly to the Chinese.
 ï     

O thnic entrepreneurship can be a

response to the lack of opportunities in the
dominant culture
O n this case, entrepreneurship is very often
triggered by a variety of µpush factors¶
 ï     

O
ut µpull factors¶ can also be important,
such as the presence of entrepreneurs in
the family as role models.
  

O ntrepreneurs and opportunities form a

dialogic ² a system with a circular
causality process.
O The existence of an opportunity does not
necessarily lead to its discovery and
exploitation, and is related to personal
differences of the entrepreneurs.
  

O  schools of thought exist on the

entrepreneurial perspective in individuals:
› Y Y and ›
Y .
O People considering a career in
entrepreneurship should be aware of the
risks and develop strategies to avoid
them, and also have the correct
performance measures in mind.