Professional Documents
Culture Documents
Defining Entrepreneurship: by J. Barton Cunningham and Joe Lischeron
Defining Entrepreneurship: by J. Barton Cunningham and Joe Lischeron
We continue to know very little about 1987), and entrepreneurs and small
entrepreneurs, even though there is business owners (Carland et al. 1984).
much interest and many publications The literature abounds with criteria
on the subject. Much ofthe material is ranging from creativity and innovation
fragmented and highly controversial. to personal traits such as appearance
For example, self-employed individuals and style. Models ofthe entrepreneurial
and business proprietors may be sur- leader are almost as plentiful as the
prised to learn tbat some academics number of authors who write about
and researchers would suggest they them.
are not really "entrepreneurs" but A large literature has developed
"small business owners." Indeed, many ranging from academic studies to pre-
people who have long perceived them- scriptive blueprints for setting up new
selves to be successful entrepreneurs ventures. Tbe term "entrepreneur" has
would not fit some of the definitions often been applied to the founder of a
which are now being proposed. new business, or a person "wbo started
Selection oftheappropriate basis for a new business where there was none
defining and understanding the entre- before" (Gartner 1985). In this view,
preneurial person creates a challenging anyone who inherits (Henry Ford II),
problem for academic researchers and or buys an existing enterprise (George
writers. The field of research has been Steinbrenner's purchase of the Yan-
described as young, at a formative kees), or manages a turnaround as an
stage, and still in its infancy (Paulin et employee {Lee Iacocca) is by definition
al. 1982, Perryman 1982, Peterson and not an entrepreneur. Others reserve the
Horvath 1982, Sexton 1982). There is term to apply only to the creative
generally no accepted definition or activity of the innovator (Schumpeter
model of what the entrepreneur is or 1934). With this last definition, the
does (Churchill and Lewis 1986). In the majority of those pursuing entrepre-
past decade, a number of trends have neurial and business activities would
emerged which distinguish between be excluded. Yet, others refer to the
individual entrepreneurship and cor- identification and exploitation of an
porate entrepreneurship (Wortman opportunity as entrepreneurial (Peter-
Dr, Cunningham is an associaW professor in the
son 1985). Those who develop a niehe
School of Public AdminiBtration al the University of in the market or develop a strategy to
Victoria, He is currently working on projects concerned
with crifliB management, entrepreneurship. management satisfy some need are also, by some,
skills, and action research. called entrepreneurs (Garfield 1986).
Dr, Liecheron is an associate professor on the Faculty
of Management at the University of Calgary, His current
research interests are in the areas of organization ai and
There exist a number of schools of
personal stress, entrepreneurship, and organizational thought which view the notion of
change. entrepreneurship from fundamentally
January 1991 45
different perspectives. The term has or skills. The hehaviors and skills of
been used to define a wide range of different schools of thought are pre-
activities such as creation, founding, sented in tahle 1 and described in the
adapting, and managing a venture. No following paragraphs.
single discipline provides the tools for The "Great Person"
managing an entrepreneurial venture School of Entrepreneurship
(Stevenson 1988). With such a variation Are entrepreneurs (like leaders) horn,
in viewpoints, it is not surprising that a or are they made? Can one teach
consensus has not been reached ahout another or learn to be a manager,
what entrepreneurship is. leader, or entrepreneur, or does the
This article descrihes six schools of individual come into this world carry-
thought and attempts to show how ing the genes or the inborn natural
they may he useful for understanding capacity to perform these activities? As
the entrepreneurial process. These there is (or was) a school that helieves
schools offer unique viewpoints to in the charismatic leader, so there is (or
illustrate what the entrepreneur does was) a school that might he called the
and what functions and processes are "great person" school of entrepre-
key. neurship.
SCHOOLS OF THOUGHT Newspaper columnists of the day
ON ENTREPRENEURSHIP provide snippets of current "great
Although an agreed-upon definition people" ranging from the Fords or the
may serve to unite the field, research Kennedys to a Lee Iacocca, an Enzo
activity seems to fall within six schools Ferrari, a Rockefeller, a Trump, or a
of thought, each with its own under- Bronfman. Television stories depict
lying set of beliefs. Each of these fictional characters and biographies of
schools can he categorized according to this genre. Writers of magazines such
its interest in studying personal char- as Fortune and Business Week offer
acteristics, opportunities, management, documentaries, not on the daily lives of
or the need for adapting an existing the hard-working, persevering entre-
venture. preneur, but on the exceptional flashy
Assessing Personal Qualities story ofthe successful "great people."
1. The "Great Person" School of The picture presented is usually one
Entrepreneurship of power, success, and wealth, the
2. The Psychological Characteristics image of our husiness elite. To be
School of Entrepreneurship inspirational, these individuals must
Recognizing Opportunities he ahle to present ideas, concepts, and
3. The Classical School of Entrepre- heliefs that others find interesting,
neurship intriguing, or stimulating. This sug-
Acting and Managing gests that they are endowed with
4. TheManagementSchoolofEntre- certain traits or qualities that differ-
preneurship entiate them from others (Garfield 1986,
5. The Leadership School of Entre- Hughes 1986, Silver 1985).
preneurship Biographies frequently identify the
Reassessing and Adapting intuitive ahiiity of the "great people" to
6. The Intrapreneurship School of recognize an opportunity and make the
Entrepreneurship appropriate decision. They imply that,
Different entrepreneurial situations of without this "inborn" faculty for intui-
start-up, growth, and maturity of a tion, the individual would be like the
venture may require different hehaviors rest of us mortals who lack the instinct
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January 1991 47
that an Estee Lauder has for which depend upon elaborate concepts and
fragrances will sell and which will not. jargonistic definitions; (2) the theory
The editors oi MAD Magazine reported defines an entrepreneur by the concepts
that they respond more to their instinct, and traits most valued; and (3) the
feel, and intuition while other maga- theory is commonly understood by
zine editors respond to market forecasts others and contains common sense
and analyses. Iacocca described this as truths about people.
a feel for the problem and a decisive
ability to make decisions when others The Psychological Characteristics
are still looking for facts (Iacocca School of Entrepreneurship
1984). It is widely thought that one's needs,
drives, attitudes, beliefs, and values
The successful entrepreneur is also are primary determinants of behavior
described as having strong drives for (i.e., what one does). People behave in
independence and success, with high accordance with their values far more
levels of vigor, persistence, and self- often than not, despite variations in
esteem. This individual has, if nothing situations. Similarily, one's behavior
else, an exceptional belief in himself results from attempts to satisfy needs,
(herself) and his (her) abilities. The be they for power, recognition, achieve-
individual "is what he/she is" and ment, or acceptance and love.
significant change may not be possible
(Roscoe 1973). Attention is paid to such This psychological school, wbich
traits as energy, perseverance, vision, focuses on personality factors, believes
and single-mindedness, or such abil- that entrepreneurs have unique values
ities as being inspirational or moti- and attitudes toward work and life.
vational- Other traits frequently men- These, along with certain dominant
tioned include physical attractiveness needs, propel the individual to behave
(including height, weight, and phy- in certain ways. Entrepreneurs can be
sique), popularity and sociability, intell- differentiated from non-entrepreneurs
igence, knowledge, judgment and flu- by personality characteristics.
ency of speech; also tact, diplomacy, People who possess the same char-
and decisiveness. acteristics as entrepreneurs do, will have
Which of these traits is most im- a higher tendency (or potential) to
portant? Are some important all of the perform entrepreneurial acts, than do
people who do not possess such char-
time, or are all of them important some acteristics (Lachman 1980).
of the time? There is little evidence to
suggest that certain traits are asso- Three personality characteristics
ciated with successful entrepreneurs. have received considerable attention
Early leadership research, attempting in the research: (1) the personal values
to describe the "great people" by such as honesty, duty, responsibility,
identifying inborn traits, came to a and ethical behavior; (2) risk-taking
similar conclusion. Researchers did, propensity; and (3) the need for achieve-
however, conclude that traits will not ment.
totally describe the elements of leader- Personal value system. Is it merely
ship and that many situational ele- socially desirable for entrepreneurs to
ments influence who will be a suc- be honest and upright, have a sense of
cessful leader and who will not (Yukl responsibility and duty to other people,
1981). be ethical, incorruptible, scrupulous,
The stories of many "great people" dependable, and conscientious? Are
are widely read for several reasons; (1) these values necessary for success?
the theory is simple and does not There are numerous portrayals—both
48 Journal of Small Business Management
fictional and real-life—which present skills in Las Vegas. Instead, ent-repre-
the entrepreneurs as unethical, unscrup- neurs prefer to take moderate risks in
ulous, dishonest, and totally self-ori- situations where they have some degree
ented. However, studies of entrepre- of control or skill in realizing a profit.
neurs indicate that many are highly They do not prefer situations which
ethical and socially responsible, com- involve either extremes of risk or
pared to the general population {Cun- certainty {McClelland 1961, McClel-
ningham and Lischeron, forthcoming). land and Winter 1969).
This school generally believes that Much ofthe entrepreneurial literature
entrepreneurs cannot he developed or has included risk taking as a major
trained in classroom situations. Much characteristic of the entrepreneur.
ofthe entrepreneur's ahiiity relates to a Practicing entrepreneurs and business
personality or style of hehavior which managers have also felt it to be im-
develops over time, primarily through portant. The current chairman of the
relationships with parents and teachers Ford Motor Company provided the
early in life. Values and ideals, fostered following statement on risk-taking in
in one's family, school, church, com- entrepreneurship;
munity, and even culture, stay with the
individual and guide him or her for a We are allowing our managers to act
lifetime. These values are learned and more like entrepreneurs, like the owners
of their own business—to let them know
internalized, and reflect the process of there are rewards for sensible risk-taking.
socialization into a culture. Personal Whenlsay"risk-takmg," I'm not talking
values are hasic to the way an indi- about "seat-of-the-pants" adventurism.
vidual behaves and will be expressed I'm not talking ahout a Las Vegas roll of
regardless ofthe situation. the dice. I'm talking ahout a seasoned
Risk-taking propensity. John judgement that allows decisions to be
Stuart Mill, in introducing the term made in a timely way—judgement that
doesn't require every issue to he studied
"entrepreneurship" to the field of tothe point of exhaustion (Gordon 1985).
economics, suggested that risk-bearing
is the key factor in distinguishing Some writers (the Classical School)
entrepreneurs from managers (Mill pointedly distinguish entrepreneurial
1984). Some writers suggest that the activity from management activity by
entrepreneurial function primarily in- insisting that one is no longer an
volves risk measurement and risk- entrepreneur once the innovative/cre-
taking (Palmer 1971). The risks involve ative activity is completed. Yet, as early
not only financial success, hut career as the late seventeenth century, Can-
opportunities, family relations, and tillion described the entrepreneur as a
psychic well-being (Liles 1974, Sara- rational decision-maker "who assumed
chek 1978). Schumpeter (1934) dis- the risk and provided the management
agreed, avowing that risk-taking is ofthe firm" {Kilhy 1971).
inherent in ownership and that entre- Need for Achievement. Industrious-
preneurs, the combiners, are not neces- ness and the need for achievement are
sarily owners. Nevertheless, three specific values broadly held by many
recent dictionary definitions of entre- individuals in certain cultures. The
preneurship {Random House 1967, individual who has learned the value
Webster's 1966, Funk and Wagnalls of industriousness in the process of
1968) all include the notion of assuming growing up is most likely to have a
the risk of husiness. high need to work hard and achieve
As this school defines it, risk-taking something meaningful. Weber's classic
is not a desire to try one's gambling text on The Protestant Ethic and the
January 1991 49
Theory of Capitalism concluded that tinguishes between a "manager" and
aome cultures achieve more than others an "entrepreneur." The word derives
because of the values of their people. from the French verb "entreprendre,"
The development of capitalism and meaning "to undertake" and was trans-
entrepreneurial drive are largely due to lated from the German verb "unter-
the cultural values whieh are dominant nehmen" which also means "to under-
in certain countries. Protestant values take." In the early sixteenth century,
encourage the need for achievement entrepreneurs were thought of as
since a person's life is to be judged by Frenchmen who undertook to lead
his or her aecomplishments (Hagen military expeditions. The term was
1962; MeClelland 1961; McClelland and broadened by 1700 to include contrac-
Winter 1969; McClelland, Atkinson, tors who undertook to build for the
Clark, and Lowell 1976; Weber 1905, military: roads, bridges, harbors, forti-
1958). fications, and the like. At that time,
French economists also used the word
The belief that entrepreneurs might to describe people who bore risk and
have a distinctly higher need for uncertainty in order to make innova-
achievement is widely held (McClelland tions (de Farcy 1973, Berthold 1951).
1965), However, the need for achieve- These definitions encompass the notion
ment, isolated from other variables, of undertaking (or founding) a venture
may be a weak predictor of an indi- (or adventure) which has an element of
vidual's tendency to start a business risk and requires some creativity or
(Hull, Bosley, and Udell 1980). Having innovativeness.
such a need and finding oneself blocked
and frustrated by the bureaucracy of One might argue that the dilution of
large organizations provides the con- the term, and hence today's confusion,
ditions, according to this school, to began around the turn of the century.
propel the individual into an entrepre- In 1885, the Oxford University Dic-
neurial venture. tionary used the term to describe "the
In summary, the psychological school director or manager of a public musical
of entrepreneurship believes that cer- institution: one who gets up entertain-
tain individual values and needs are ments . . . . A contractor acting as
the necessary preconditions for entre- intermediary between capital and
preneurship. Since these values are labour." This definition reinforces the
learned early in life and are well- notion of innovation and organization
established prior to adulthood, entre- of talent or people, but excludes the
preneurial characteristics are hard to element of risk by an owner (i.e., a
inculcate in universities and schools. public institution is not owned by a
Characteristics whieh have received a single individual). Hence, the critical
great deal of attention include: need for aspect of entrepreneurship appears to
achievement, locus of control, risk- be the process of "doing" rather than
taking, tolerance of ambiguity, and "owning" a venture or business(Hebert
type A behavior (Begley and Boyd and Link 1982).
1987; Brockhaus, Sr. and Horwitz 1986). Indeed, according to Schumpeter
(1934), the key ingredient of entrepre-
The Classical School neurship lies in the innovativeness of
of Entrepreneurship the individual and may not involve
An examination of the etiology ofthe ownership at all. If the principal
term "entrepreneur" provides insight function ofthe entrepreneur is to carry
into the classical viewpoint which dis- out new combinations of means of pro-
important than anotber is like trying tions and emphasizes the development
to say that one religion is more godly of teams for creative problem solving.
than another. The definitions and These schools of entrepreneurship
criteria of each school in table 2 are address a range of entrepreneurial
based on their own traditions and have perspectives such as evaluating one's
their own assumptions and implica- personal values, identifying opportun-
tions for research, training, and educa- ities, planning and acting, and re-
tion. Definitions of entrepreneurship assessing. Figure 2 suggests that
vary widely and involve creating, entrepreneurship might be viewed as a
finding opportunities, managing, con- reiterative process and that each ofthe
trolling, and changing. They are based schools might provide insights into
on criteria ranging from decision different aspects ofthe phenomenon.
making, creativity, technical expertise/ The psychological and great person
knowledge, experiences, and values to schools might be very helpful in a
the way in which entrepreneurs lead personal assessment of one's entrepre-
and develop groups of employees to neurial values and a questioning of
work for them. which values are most useful for
The criteria of each school provide an success. This should not imply that
example of the type of research and there is a need to search for personal
training emphasized by that school. psychological "laws" of entrepreneur-
The classical school emphasizes criteria ial effectiveness. Conceivably, one can
such as creativity and decision making learn a great deal about oneself by
and focuses on seeing opportunities understanding one's values and drives,
and getting the venture started. The in addition to those that describe
histories, principles, and life stories of successful entrepreneurs. Rather, what
successful people offer valuable ex- are one's values, behaviors, and atti-
amples and may, in some cases, provide tudes toward work? How do they com-
valuable personal guidance. The re- pare with those held by successful
search and training provided by the entrepreneurs? Judging from this com-
psychological school suggests that parison, what are one's strengths and
certain values and behaviors are im- weaknesses?
portant, such as risk-taking, the need Other schools provide important in-
for achievement, and others. The tech- sights about the process of recognizing
nical knowledge of the management and creating an opportunity. The
school provides tools for managing, classical school has described the
ranging from planning to accounting; process for identifying opportunities
the leadership school offers sugges- and taking action. The management
tions for leading and motivating and leadership schools might be very
people. Finally, the intrapreneurship helpful for understanding the range of
school encourages entrepreneurial technical and interpersonal skills
activity within established organiza- necessary for making an operation
January 1991 55
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RECOGNIZING
OPPORTUNITIES
REASSESSING NEED
FOR CHANGE
efficient and for motivating people. has sought to avoid the debate over
These skills involve technical tasks which school or set of criteria is most
such as planning and financing and useful. The judgment concerning each
the human relations know-how neces- model's appropriateness depends upon
sary for dealing with employees. the researcher's assessment of its facil-
Every entrepreneurial venture, at ity for explaining and improving
some stage, must question its present certain aspects of the entrepreneurial
operation and future direction. In this process. The selection of an entrepre-
regard, the intrapreneurship school can neurial model depends on the informa-
assist in redirecting present operations. tion the researcher or educator wishes
The foregoing conception of the entre- to emphasize in focusing on different
preneurial process does not attempt to aspects of the entrepreneurial process.
mix the assumptions and philosophies The psychological and great person
of the different schools. Rather, entre- schools might be helpful in a personal
preneurship is seen as a reiterative assessment of an entrepreneur's val-
process of personal evaluating, plan- ues, while the classical sehool might
ning, acting, and reassessing which provide insights about the process of
encourages people to take on responsi- creating an opportunity. The manage-
bility for creation and innovation. This ment and leadership schools might be
process involves creating the idea, helpful for understanding the range of
assessing one's personal abilities, and technical and interpersonal skills
taking actions now and in the future. It necessary for making an operation
assumes that entrepreneurs have the efficient and for motivating people.
responsibility for the venture, or share The intrapreneurship school might
some of the risks and rewards of it. assist in redirecting the present
CONCLUSION operations.
This article has presented six differ- The entrepreneurial process is reiter-
ent schools of thought important in ative and emphasizes personal eval-
descrihing entrepreneurial activity. It uating, planning, acting, and reassess-
January 1991 57
ing. It assumes people have the Wayne A. Long, W. Ed McMullan,
respbnsibility for the venture, or that Karl H. Vesper, and William E.
they assume some of the risk and Wetzel,Jr.,WellesIey,Mass.;Bahson
rewards of it. The various schools of College, 660-661.
thought provide different insights for Brockhaus, R. H., Sr. and P. S. Horwitz
recognizing underlying values, respond- (1986), "The Psychology of the
ing to the future, improving manage- Entrepreneur," in The Art and
ment, and changing and adapting. Science of Entrepreneurship, ed. D.
Selectively utilizing the insights of the L. Sexton and R. W. Smilor, Cam-
different schools of thought depends bridge: Bailinger, 25-48.
upon one's research agenda or practical
goals. However, it may not be prudent Burgelman, R. A. (1983), "Corporate
to suggest that our knowledge of entre- Entrepreneurship and Strategic
preneurs can he ohtained hy focusing Management; Insights from a Pro-
on the criteria of only one school of cesB Study," Management Science
thought. An understanding of entre- 29,1349-1364.
preneurs and their ventures requires Carsrud, A. L., C. M. GagHo, and K. W.
criteria from each facet of the overall Olm (1986), "Entrepreneurs—Men-
process: entrepreneurs' personal per- tors, Networks, and Successful New
spective, their ways of identifying Venture Development An Explora-
opportunities, their methods of acting tion," in Frontiers of Entrepreneur-
and managing, and their mechanisms ial Research, ed. Robert Ronstadt,
for adapting and reassessing. John A. Hornaday, and Karl H.
Vesper, 229-235.
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January 1991 61