Motivational Traits and Their Effect on Entrepreneurship

Shane et al. argued strongly that differences among people with respect to their personal motivations significantly influenced their actions during the entrepreneurial process and that it was incumbent upon researchers to incorporate individual-level variations in motivations into the study of entrepreneurship.[1]  They noted, for example, that people differ in their perceptions of risk[2] and that these differences may lead two people confronted with a similar opportunity to come to different conclusions about whether they are willing to expend their resources on the opportunity before having a better idea of the distribution of possible outcomes from the investment.  Similarly, persons who score higher on measures of optimism or self-efficacy may be more willing than persons with lower scores on those personal characteristics to take on pursuit of an opportunity that carries a fairly low likelihood of success.

Shane et al. provided a concise summary of some of the quantitative and qualitative research relating to human motivations and their effect on entrepreneurship.  They focused on previous research that had explored human motivations and their effect on entrepreneurship and divided the work into quantitative and qualitative studies.  Many of the quantitative studies compared the traits of “firm founders” (i.e., persons who start their own business), typically assumed to be the “entrepreneurs”, to other persons in the general population and also compared the traits of firm founders to persons who acted in a managerial capacity in businesses owned by others.  Shane et al. acknowledged that the comparison of firm founders and managers who worked for others as a means of capturing differences between entrepreneurial and non-entrepreneurial situations might not be completely appropriate since “serving as a manager in a rapidly growing high-technology company might demand greater entrepreneurial motivations than starting a corner grocery store”.[3]  Common motivational traits explored in the quantitative studies included need for achievement, risk taking, tolerance for ambiguity, locus of control, self-efficacy and goal setting.  Motivational traits explored in the qualitative studies included independence, competence and confidence, drive and egoistic passion.[4]

Shane et al. cautioned that their work did not constitute a complete review of prior empirical research due to the fact that the definitions of entrepreneurship used in previous studies were inconsistent with the definition used by Shane et al., making it impossible to draw direct implications of prior work for research using their definition, and their belief that prior research suffered from “significant methodological problems” which are discussed below.[5]  Shane et al. noted that many had expressed “disappointment” with the results of the prior research; however, they claimed that their discussion was useful and necessary in illustrating how personal motivation can influence different aspects of the entrepreneurial process and, as discussed below, offered their own suggestions for how entrepreneurial motivation might be incorporated into the study and understanding of the entrepreneurial process.[6]

Need for achievement

A high “need for achievement”, a concept made famous by McClelland, is often cited as a predictor of the likelihood that a person will be interested in pursuing entrepreneurial activities rather than other types of jobs.  Not surprisingly, need for achievement (“nAch”) has been frequently studied by researchers interested in entrepreneurship.  At the outset, McClelland postulated that “individuals who are high in nAch are more likely than those who are low in nAch to engage in activities or tasks that have a high degree of individual responsibility for outcomes, require individual skill and effort, have a moderate degree of risk, and include clear feedback on performance”.[7]  McClelland also believed that entrepreneurial roles have more of the aforementioned activity or task attributes than other roles, thus leading to the conclusion that high achievers will likely gravitate toward entrepreneurship.  In general, studies have confirmed the suspected relationship between nAch and entrepreneurship.[8]  In addition, nAch has been found to be a differentiator between firm founders from members of the general population and to be useful in differentiating between successful and unsuccessful firm founders; however, there appears to be little difference between firm founders and managers with respect to their levels of nAch.[9]

Risk taking

Not surprisingly, it has often been argued that persons with an entrepreneurial bent have a higher tolerance for accepting risk and uncertainty.[10] As noted above, one of the characteristics of high nAch cited by McClelland is a willingness and desire to engage in activities with a “moderate degree of risk” and Liles argued that entrepreneurs understand that they will be required to live with uncertainty with respect to financial and psychic well-being, career security and relations with their family members.[11]  There appears to be general agreement that extremely high levels of risk are not necessary in order for an activity to qualify as “entrepreneurial”—according to Shane et al., “risk-taking propensity has been defined in the entrepreneurship literature as the willingness to take moderate risks”.[12]  Interestingly, however, the feedback from studies on this issue is mixed and many researchers have failed to find significant differences between firm owners and the general population with respect to risk-taking propensity and studies that did find a difference between those two groups failed to find significant differences between firm founders and managers.[13]  Shane et al. suggest that the reason for these findings may be explained by “self-efficacy” and point to several evaluative studies based on interviews and expert evaluations that concluded that firm founders did indeed have a higher propensity for risk than the general population on objective scales of measurement yet often did not perceive their actions to be risky.[14]  Another study comparing firm founders to bankers found that while the bankers perceived information regarding certain opportunities as risky the firm founders were more interested in the opportunities associated with the information.[15]

Tolerance for ambiguity

The tolerance for ambiguity, which has been described as “the propensity to view situations without clear outcomes as attractive rather than threatening”[16], has been cited as an important trait for entrepreneurs given that starting and building a new business requires overcoming challenges that are unpredictable and it is extremely difficult to measure the chances for success.[17]  While this sounds reasonable, actual studies on this proposition have produced mixed results.  On the one hand, several researchers have found that founders have a significantly higher tolerance for ambiguity than managers.[18]  However, others were unable to replicate that result and found no significant differences between founders and managers with respect to their tolerance for ambiguity.[19]

Locus of control

Locus of control refers to “the belief in the extent to which individuals believe that their actions or personal characteristics affect outcomes”.[20]  Distinctions are made between persons that have an “external” locus of control and thus believe that outcomes are generally determined by factors outside of their control and persons with an “internal” locus of control who believe that they can have an impact on outcomes through the choices they make with regard to their personal actions.  Persons with high nAch generally have a preference for situations in which they can have direct control over outcomes and researchers have predicted that persons with an internal locus of control are more likely to seek out entrepreneurial roles in which their actions have a stronger influence on the results of their entrepreneurial activities.[21]  In general, research confirms that firm founders are more “internal” than the general public with regard to locus of control[22]; however, as is the case with nAch, comparisons of firm founders and managers usually find no significant differences between them with regard to locus of control.[23]

Self-efficacy

Bandura described “self-efficacy” as one’s belief in his or her own ability to muster and implement the necessary personal resources, skills and competencies that are required in order to attain a certain level of achievement on a given task.[24]  Simply put, individuals that are high on self-efficacy are more “self-confident” with respect to the particular task and, in fact, Shane et al. reported that “[s]elf-efficacy for a specific task has been shown to be a robust predictor of an individual’s performance in that task and helps to explain why people of equal ability can perform differently”.[25]  One study of entrepreneurs found that there was a strong and positive relationship between self-efficacy to grow a company and the growth actual realized by the company.[26]  The presence of self-efficacy explains why persons are willing to exert longer and harder effort on completion of a given task, persist in the face of setbacks, set higher goals with respect to financial performance, growth and innovation and develop and refine better plans and strategies to achieve their goals.[27]

Independence

Shane et al. described independence as “taking responsibility to use one’s own judgment as opposed to blinding following the assertions of others . . . [and] . . . taking responsibility for one’s own life rather than living off the efforts of others”.[28]  A number of studies have uncovered evidence to support the wide-held belief that entrepreneurship requires independence and that entrepreneurs score higher on measures of independence than members of the general public.[29]  Entrepreneurship is an attractive alternative for persons who seek independence in their careers and work activities and provide persons with the opportunity to set their own goals and be responsible for results, regardless of whether they are successful or not.

Drive

Drive is related to nAch; however, Shane et al. used the term to focus specifically on “the willingness to put forth effort—both the effort of thinking and the effort involved in bringing one’s ideas into reality”.[30]  Shane et al. argued that there were four aspects of “drive”, including ambition, goals, energy and stamina.  Ambition is particularly important since it influences the desire of entrepreneurs to achieve “great, important and significant” things when pursuing their entrepreneurial activities.  Ambition also causes entrepreneurs to set challenging goals and research has confirmed that creating high goals leads to performance that is better than when the goals are more modest.[31]  Other terms used to describe “drive” include “persistence” and “tenacity”.  Persons with high self-efficacy are more likely to have the drive necessary for the lengthy periods of hard work necessary for successful entrepreneurship.

Egoistic passion

Shane et al. referred to “egoistic passion” as “a passionate, selfish love of work” that is largely ego-driven: the entrepreneur is driven by his or her “love [of] the process of building an organization and making it profitable”.[32]  Apparently, passion has often been included in studies of motivations among entrepreneurs; however, one study conducted by Baum et al. did uncover evidence that passion had a direct and significant impact on the growth of firms.[33]

Are You a Scale-Up Entrepreneur?

One of the fundamental conditions for growth-oriented entrepreneurship is the desire of the entrepreneurs who are the members of the founding team to not only launch and navigate their businesses to the point of survival but to go beyond that to enjoy significant growth in revenues, employment and market impact.  Isenberg and others have argued that the skills necessary to get through the start-up phase, will obviously crucial, are not the same as those that entrepreneurs need to “scale-up” the business to the point where growth engines are mobilized.  Isenberg developed a simple set of assessment questions that entrepreneurs could peruse to determine whether they were “cut out to be a scale-up entrepreneur”.  These questions were based on interviews that Isenberg conducted with scale-up entrepreneurs from around the world and suggest that backgrounds and actions associated with success in moving through the risky launch stage of a new business to the point where scaling is feasible.  Specifically, entrepreneurs should make a note of whether they “agree” or “disagree” with the following statements:

·         Something inside compels me to make something that will impact the marketplace.

·         I am great at selling things to people that they may not know they want, nor think they have the money to buy.

·         I have people on my team who are better than me in several areas of knowledge or practice.

·         My venture already has the procedures, policies, and processes in place to be ten times the size we are today.

·         When I don’t know what my next step is, I have experienced people I can turn to for ideas.

·         There is money out there to fuel a venture that is growing fast; I just have to find it when I am ready.

·         When I achieve my objectives I keep raising the bar higher and higher.

·         I am one of the best sales people I know.

·         Think big; thinking small is a crime.

·         I know entrepreneurs just like me who have grown big, fast.

·         The sales process is just starting when the customer first says no.

·         If my venture stands in one place too long, it runs the risk of perishing. We have to keep moving forward.

·         I know how to find great people to hire.

·         Nothing gives me a bigger rush than closing a big sale.

·         It is more important to know of a big problem that customers have and then look for a solution, than it is to have a solution that is looking for important problems to solve.

·         I used to think our great technology would take us to leadership in our market — now I realize it is our team, our organization, our marketing and our ambition to sell.

·         Even though I am a startup, I think more like a market leader than a small business.

The greater the number of times that one “agreed” with a statement, the more likely that he or she had the motivation to scale up their new venture.  Two important themes were emphasized when compiling the questions: persistence and experience in all aspects of selling (e.g., sales organization, compensation, pipeline management, and selling skills) and attitude, particularly the ambition to grow the business and a vision for the business that is grand and large.

While sales is one of the most important skills for a scale up entrepreneurs, others areas for which founding teams might seek out training including personal leadership, effective communication, project management, managing performance, selecting a winning team, negotiation and managing change.

Sources: D. Isenberg, “Find Out if You’re a Scale-Up Entrepreneur with This Two-Minute Test”, Harvard Business Review (March 24, 2013).  See also D. Isenberg, Worthless, Impossible, and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value (Cambridge MA: Harvard Business Press, July 2013).  Suggestions for training program for scale up entrepreneurs are available from the “School for Scale-Up offered through the Cambridge Network.

This post is part of the Sustainable Entrepreneurship Project’s extensive materials on  Entrepreneurship.

[1] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 260.

[2] See, e.g., L. Palich and D. Bagby, “Using cognitive theory to explain entrepreneurial risk-taking: challenging conventional wisdom”, Journal of Business Venturing, 10 (1995), 425-438.

[3] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 267.

[4] The analysis included observations from an inductive study based on secondary sources of 70 wealth creators completed by Locke.  Locke explored the careers, actions and traits of legendary businesspersons such as J. P. Morgan, Steve Jobs, Sam Walton, Walt Disney, Jack Welch, Thomas Edison, Michael Dell, Henry Ford and Ray Kroc and identified several common characteristics such as independent vision, an active mind, competence and confidence, drive to action, egotistic passion and love of ability in others.  See E. Locke, The prime movers: traits of the great wealth creators (New York: AMACOM, 2000).

[5] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 263.  For example, other traits that researchers have focused on to differentiate entrepreneurs from non-entrepreneurs have included “values” (see, e.g., J. DeCarlo and P. Lyons, “A comparison of selected personal characteristics of minority and non-minority female entrepreneurs”, Journal of Small Business Management, 17 (1979), 22-29; J. Hornaday and J. Aboud, “Characteristics of successful entrepreneurs”, Personnel Psychology, 24 (1971), 141-153; D. Hull, J. Bosley and G. Udell, “Reviewing the heffalump: Identifying potential entrepreneurs by personality characteristics”, Journal of Small Business Management, 18 (1980), 11-18; J. Komives, “A preliminary study of the personal values of high technology entrepreneurs” in A. Cooper and J. Komives (Eds.), Technical entrepreneurship: A Symposium (Milwaukee, WI: Center for Venture Management, 1972), 231-242) and “age” (see, e.g., A. Cooper and W. Dunkelberg, “A new look at business entry: Experiences of 1805 entrepreneurs”, in K. Vesper (Ed.), Frontiers of Entrepreneurship Research: The Proceedings of the Babson conference on Entrepreneurship Research (Wellesley, MA: Babson College, 1981), 1-20; R. Howell, “Comparative profiles: Entrepreneurs versus the hired executives: San Francisco peninsula semiconductor industry”, in A. Cooper and J. Komives (Eds.), Technical entrepreneurship: A Symposium (Milwaukee, WI: Center for Venture Management, 1972), 47-62).

[6] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279.

[7] Id. (citing D. McClelland, The achieving society (Princeton, NJ: Van Nostrand, 1961).

[8] See, e.g., B. Johnson, “Toward a multidimensional model of entrepreneurship: the case of achievement motivation and the entrepreneur”, Entrepreneurship Theory and Practice, 14(3) (1990), 39-54; J. Komives, “A preliminary study of the personal values of high technology entrepreneurs” in A. Cooper and J. Komives (Eds.), Technical entrepreneurship: A Symposium (Milwaukee, WI: Center for Venture Management, 1972), 231-242; and D./ McClelland and D. Winter, Motivating economic achievement (New York: Free Press, 1969)..

[9] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 264 (citing C. Collins, E. Locke and P. Hanges, The relationship of need for achievement to entrepreneurial behavior: a meta-analysis.  Working paper, University of Maryland, College Park, MD, 2000).

[10] S. Venkataraman, “The distinctive domain of entrepreneurship research: an editor’s perspective”, in J. Katz and R. Brockhaus (Eds.), Advances in entrepreneurship, firm emergence and growth, Vol. 3 (Greenwich, CT: JAI Press, 1997), 119-138 (noting that several theories of entrepreneurship view entrepreneurs as willing to bear residual uncertainty).  See also R. Brockhaus, “Risk taking propensity of entrepreneurs”, Academy of Management Journal, 23(3) (1980), 509-520; D. Hull, J. Bosley and G. Udell, “Reviewing the heffalump: Identifying potential entrepreneurs by personality characteristics”, Journal of Small Business Management, 18 (1980), 11-18; and M. Palmer, “The application of psychological testing to entrepreneurial potential”, California Management Review, 13(3), 32-39.

[11] P. Liles, New business ventures and the entrepreneur (Homewood, IL: Irwin, 1974); and P. Liles, “Who are the entrepreneurs?”, MSU Business Topics, 22 (1974), 5-14.

[12] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 265 (citing T. Begley, “Using founder status, age of firm and company growth rate as the basis for distinguishing entrepreneurs from managers of small businesses”, Journal of Business Venturing, 10 (1995), 249-263).

[13] Id. (citing N. Kogan and M. Wallach, Risk taking, (New York: Holt, Rinehart and Winston, 1964; W. Litzinger, “The motel entrepreneur and the motel manager”, Academy of Management Journal, 8 (1961), 268–281; and M. Low and I. MacMillan, “Entrepreneurship: past research and future challenges”, Journal of Management, 14 (1988), 139–161).  However, in a study conducted by Bagley on the differences among New England business executives, risk-taking propensity was the only trait on which founders and non-founders differed. See T. Begley, “Using founder status, age of firm and company growth rate as the basis for distinguishing entrepreneurs from managers of small businesses”, Journal of Business Venturing, 10 (1995), 249-263.

[14] Id. (citing J. Corman, B. Perles and P. Vancini, “Motivational factors influencing high-technology entrepreneurship”, Journal of Small Business Management, 26 (1988), 36–42; and F. Fry, Entrepreneurship: A planning approach (Minneapolis-St. Paul, MN: West Publishing, 1993)).

[15] D. Sarasvathy, H. Simon and L. Lave, “Perceiving and managing business risks: differences between entrepreneurs and bankers”, Journal of Economic Behavior and Organization, 33 (1998), 207–225.

[16] S. Budner, “Intolerance of ambiguity as a personality variable”, Journal of Personality, 30 (1982), 29–50.

[17] J. Schere, Tolerance of ambiguity as a discriminating variable between entrepreneurs and managers, Academy of Management Best Paper Proceedings, 42 (1992), 404–408.

[18] T. Begley and D. Boyd, “A comparison of entrepreneurs and managers of small business firms”, Journal of Management, 13 (1987), 99–108; D. Miller and C. Drodge, “Psychological and traditional determinants of structure”, Administrative Science Quarterly, 31 (1986), 539–560; D. Sexton and N. Bowman, “Validation of a personality index: comparative psychological characteristics analysis of female entrepreneurs, managers, entrepreneurship students, and business students” in Frontiers of entrepreneurship research (Wellesley, MA: Babson College, 1986), 513-528.

[19] E. Babb and S. Babb, “Psychological traits of rural entrepreneurs”, Journal of Socio-Economics, 21 (1992), 353–362; and T. Begley, “Using founder status, age of firm, and company growth rate as the basis for distinguishing entrepreneurs form managers of smaller businesses”, Journal of Business Venturing, 10 (1995), 249–263.

[20] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 266.

[21] J. Rotter, “Generalized expectancies for internal versus external control of reinforcement”, Psychological Monographs: General and Applied, 80 (1966), 609.

[22] See, e.g., D. Bowen and R. Hisrich, “The female entrepreneur: a career development perspective”, Academy of Management Review, 11 (1986), 393–407; D. Durand, “Effects of achievement motivation and skill training on the entrepreneurial behavior of black businessmen”, Organizational Behavior and Human Performance, 14 (1975), 76–90; and A. Shapero, “The displaced, uncomfortable entrepreneur”, Psychology Today, 9 (1977), 83–88.

[23] See, e.g., E. Babb and S. Babb, “Psychological traits of rural entrepreneurs”, Journal of Socio-Economics, 21 (1992), 353–362; R. Brockhaus, “The psychology of the entrepreneur”. in C. Kent, D. Sexton and K. Vesper (Eds.), Encyclopedia of entrepreneurship (Englewood Cliffs, NJ: Prentice-Hall, 1982), 39-57; D. Hull, J. Bosley and G. Udell, “Renewing the hunt for heffalump: identifying potential entrepreneurs by personality characteristics”, Journal of Small Business, 18 (1980), 11–18; T. Begley, “Using founder status, age of firm, and company growth rate as the basis for distinguishing entrepreneurs from managers of smaller businesses”, Journal of Business Venturing, 10 (1995), 249–263; T. Begley and D. Boyd, “A comparison of entrepreneurs and managers of small business firms”, Journal of Management, 13 (1987), 99–108; R. Brockhaus, “Risk taking propensity of entrepreneurs”, Academy of Management Journal, 23(3) (1980), 509-520; R. Brockhaus and W. Nord, “An exploration of factors affecting the entrepreneurial decision: Personal characteristics vs. environmental conditions”, Proceedings of the Annual Meeting of the Academy of Management (1979); and P. Liles, “Who are the entrepreneurs?”, MSU Business Topics, 22 (1974), 5-14.  For further discussion of the literature relating to entrepreneurship and “internal locus of control”, see also S. Mueller and A. Thomas, “Culture and Entrepreneurial Potential: A Nine Country Study of Locus of Control and Innovativeness”, Journal of Business Venturing, 16 (2000), 51-75, 55-57 (including extensive citations).

[24] A. Bandura, Self-efficacy: the exercise of self control (New York: Freeman, 1997).

[25] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 267.

[26] Id. (citing R. Baum, The Relation of Traits, Competencies, Vision, Motivation, and Strategy to Venture Growth, Unpublished doctoral dissertation, University of Maryland, College Park, MD, 1994).  See also G. Chandler and E. Jansen, “The founders’ self-assessed competence and venture performance”, Journal of Business Venturing, 7 (1992), 223-236.

[27] Several studies have confirmed the importance of “goal setting” by reporting that the goals established by entrepreneurs with respect to financial performance, growth and innovation were significantly related to the corresponding outcomes.  Id. at 267 (citing K. Tracy, E. Locke and M. Renard, Conscious goal setting versus subconscious motives: longitudinal and concurrent effects on the performance of entrepreneurial firms. Paper presented at the meeting of the Academy of Management, Boston, MA, 1998; and J. Baum, E. Locke and K. Smith, “A multi-dimensional model of venture growth”,  Academy of Management Journal, 44(2) (2001), 292–303).

[28] Id. at 268.

[29] See, e.g., R. Hisrich, “The woman entrepreneur in the United States and Puerto Rico: a comparative study”, Leadership and Organizational Development Journal, 5 (1985), 3–8; and J. Hornaday and J. Aboud, “Characteristics of successful entrepreneurs”, Personnel Psychology, 24 (1973), 141–153.

[30] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 268.

[31]  E. Locke and G. Latham, A theory of goal setting and performance (Englewood Cliffs, NJ: Prentice-Hall, 1990).

[32] S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 268, 270-272.

[33] J. Baum, E. Locke and K. Smith, “A multi-dimensional model of venture growth”, Academy of Management Journal, 44(2) (2001), 292–303.

 

 

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