Theories of Entrepreneurship

Schools Of Thought on Entrepreneurship (Micro View)

Entrepreneurship Trait School of Thought

Although an agreed-upon definition may serve to unite the field, research activity seems to fall within six schools of thought, each with its own underlying set of beliefs. Each of these schools can be categorized according to its interest in studying personal characteristics, opportunities, management, or the need for adapting an existing venture.

1. The "Great Person" School of Entrepreneurship
2. The Psychological Characteristics School of Entrepreneurship Recognizing Opportunities
3. The Classical School Entrepreneurship Acting and Managing
4. The Management School of Entrepreneurship
5. The Leadership School of Entrepreneurship Reassessing and Adapting
6. The Intrapreneurship School of Entrepreneurship

The "Great Person" School of Entrepreneurship

Are entrepreneurs (like leaders) born, or are they made? Can one teach another or learn to be a manager, leader, or entrepreneur, or does the individual come into this world carrying the genes or the inborn natural capacity to perform these activities? As there is (or was) a school that believes in the charismatic leader, so there is (or was) a school that might be called the "great person' school of entrepreneurship.
Biographies frequently identify the intuitive ability of the "great people" to recognize an opportunity and make the appropriate decision.

The successful entrepreneur is also described as having strong drives for independence and success, with high levels of vigor, persistence, and self-esteem. This individual has, if nothing else, an exceptional belief in himself (herself) and his (her) abilities. The individual "is what he/she is" and significant change may not be possible. Attention is paid to such traits as energy, perseverance, vision, and single-mindedness, or such abilities as being inspirational or motivational. Other traits frequently mentioned include physical attractiveness (including height, weight, and physique), popularity and sociability, intelligence, knowledge, judgment and fluency of speech; also tact, diplomacy, and decisiveness.

Which of these traits is most important? Are some important all of the time, or are all of them important some of the time? There is little evidence to suggest that certain traits are associated with successful entrepreneurs. Early leadership research, attempting to describe the "great people" by identifying inborn traits, came to a similar conclusion. Researchers did, however, conclude that traits will not totally describe the elements of leadership and that many situational elements influence who will be a successful leader and who will not.
The stories of many "great people" are widely read for several reasons: (1) the theory is simple and does not depend upon elaborate concepts and jargonistic definitions; (2) the theory defines an entrepreneur by the concepts and traits most valued; and (3) the theory is commonly understood by others and contains common sense truths about people.

The Psychological Characteristics School of Entrepreneurship
It is widely thought that one's needs, drives, attitudes, beliefs, and values are primary determinants of behavior (i.e., what one does). People behave in accordance with their values far more often than not, despite variations in situations. Similarly, one's behavior results from attempts to satisfy needs, be they for power, recognition, achievement, or acceptance and love.
This psychological school, which focuses on personality factors, believes that entrepreneurs have unique values and attitudes toward work and life. These, along with certain dominant needs, propel the individual to behave in certain ways. Entrepreneurs can be differentiated from non-entrepreneurs by personality characteristics.
Three personality characteristics have received considerable attention (1) the personal values such as honesty, duty, responsibility, and ethical behavior; (2) risk-taking propensity; and (3) the need for achievement.

Personal value system. It is merely socially desirable for entrepreneurs to be honest and upright, have a sense of responsibility and duty to other people, be ethical, incorruptible, scrupulous, dependable, and conscientious? Are these values necessary for success? There are numerous portrayals--both fictional and real-life--which present the entrepreneurs as unethical, unscrupulous, dishonest, and totally self-oriented. However, studies of entrepreneurs indicate that many are highly, ethical and socially responsible, compared to the general population.

This school generally believes that entrepreneurs cannot be developed or trained in classroom situations. Much of the entrepreneur's ability relates to a personality or style of behavior which develops over time, primarily through relationships with parents and teachers early in life. Values and ideals, fostered in one's family, school, church, community, and even culture, stay with the individual and guide him or her for a lifetime. These values are learned and internalized, and reflect the process of socialization into a culture. Personal values are basic to the way an individual behaves and will be expressed regardless of the situation.

Risk taking propensity. John Stuart Mill, in introducing the term "entrepreneurship" to the field of economics, suggested that risk-bearing is the key factor in distinguishing entrepreneurs from managers.

Need for Achievement. Need for achievement is a specific value broadly held by many individuals in certain cultures. The individual who has learned the value of industriousness in the process of growing up is most likely to have a high need to work hard and achieve something meaningful. The belief that entrepreneurs might have a distinctly higher need for achievement is widely held. In summary, the psychological school of entrepreneurship believes that certain individual values and needs are the necessary preconditions for entrepreneurship. Since these values are learned early in life and are well-established prior to adulthood, entrepreneurial characteristics are hard to inculcate in universities and schools.