1. THE ENTREPRENEURIAL
MIND-SET IN
INDIVIDUALS
2–1

2. Chapter Objectives
1. To identify and discuss the most commonly
cited characteristics found in successful
entrepreneurs through “The Trait Approach”
2. To describe the entrepreneurial mind-set by
through “OC theory” whilst elaborating the
crucial role of “optimism and chance”.
3. To present the major sources of information
useful in profiling the entrepreneurial mind-set
2–2

3. ENTREPRENEUR AS A SET OF TRAITS
(THE TRAIT APPROACH)
2–3

4. Entrepreneurship Theory
• Entrepreneurs cause entrepreneurship.
 Entrepreneurship is a function of the entrepreneur:
E + f (e )
 Entrepreneurship is the interaction of skills related to
inner control, planning and goal setting, risk taking,
innovation, reality perception, use of feedback,
decision making, human relations, and independence.
2–4

5. The Trait approach
• As in the case of leadership research, initially
there was a quest to dis­cover the trait or set of
traits distinguishing entrepreneurs from non­
entrepreneurs and/or managers (Brockhaus,
1980)
• The Big Three’ (Chell, 2008):
 Need for achievement (NAch);
 Locus of control (LOC); and
 Risk-taking propensity
2–5

6. The Trait Approach
• They should be strongly motivated to overcome
obstacles and to achieve, as originally described
by McClelland (1961);
• They should feel a great sense of personal control
over outcomes (Rotter, 1966); and,
• Given the uncertain nature of the context in
which entrepreneurial activity is engaged, they
appear to need to manage risk (Knight, 1921).
2–6

7. From “Big Three” to “Big Five”
• Empirical Studies showed mixed evidence
• There is some support for NAch and mixed
support for ILOC
• Thus researchers turned to consider other traits
• The ‘Big Five’
 (Lower) Neuroticism
 (More) Extraversion,
 (Higher) Openness,
 (Lower) Agreeableness and
 (Higher) Conscientiousness
2–7

8. Neuroticism
(sensitive/nervous vs.secure/confident)
• Individuals high on this trait experience negative
emotions like anxiety, hostility, depression,
impulsiveness and vulnerability. Those low on
this trait are considered emotionally stable and
are characterized as self­confident, calm, even
tempered, and relaxed. Entrepreneurs have to be
very self­confident and resilient in the face of
stress.
2–8

9. Extraversion
(outgoing/energetic vs.solitary/reserved)
• Extraversion is "the act, state, or habit of being
predominantly concerned with and obtaining
gratification from what is outside the self".[3]
Extraverts tend to enjoy human interactions and
to be enthusiastic, talkative, assertive, and
gregarious.
2–9

10. Openness
(inventive/curious vs.consistent/cautious)
• Openness to Experience : Someone that is
intellectually curious, creative, imaginative,
reflective, and untraditional.
• Openness has moderate positive relationships
with creativity, intelligence and knowledge.
2–10

11. Agreeableness
(friendly/compassionate vs.cold/unkind)
• Agreeableness : individuals high on
agreeableness are trusting, forgiving, caring, and
cooperative, while those low on this trait are
manipulative, self­centered, suspicious and
ruthless. It’s a jungle out there, and
entrepreneurs have to be tough to survive.
2–11

12. Conscientiousness (efficient/organized vs. ea
sy-going/careless)
• Conscientiousness : indicates an individual’s
degree of organization, persistence, hard work,
and motivation to accomplish goals.
Conscientious individuals are achievement
oriented and dependable. This personality type
is the most consistent predictor of job
performance across a wide variety of work and
occupations.
• For comprehensive comments search Wikipedia
for “Big Five”
2–12

13. The Big Five and venture success: Is there a
linkage (Ciavarella et al., 2004)
(
• In Examining the relationship of the entrepreneur’s
personality to long­term venture survival, we measure
survival in two ways: (1) the likelihood the venture will
survive for at least 8 years and (2) the overall life span of the
venture. The ‘‘Big Five’’ personality attributes—extraversion,
emotional stability, agreeableness, conscientiousness, and
openness to experience provide the measures of the
entrepreneur’s personality.
• Ciavarella, M. A., Bucholtz, A. K., Riordan, C. M., Gatewood, R.
D., & Stokes, G. S. 2004. The Big Five and venture success: Is there
a linkage? Journal of Business Venturing, 19: 465– 483.
2–13

14. The Big Five and venture success: Is there a
linkage (Ciavarella et al., 2004)
(
• As hypothesized, the entrepreneur’s
conscientiousness was positively related to long­
term venture survival.
• Contrary to expectations, we found a negative
relationship between the entrepreneur’s
openness and long­term venture survival.
• Extraversion, emotional stability, and
agreeableness were unrelated to long­term
venture survival.
2–14

15. Common Characteristics of Entrepreneurs
• Commitment, • Calculated risk taking
determination, and • Tolerance for failure
perseverance
• High energy level
• Drive to achieve
• Creativity and
• Opportunity orientation
Innovativeness
• Initiative and • Vision
responsibility
• Self­confidence and
• Persistent problem solving
optimism
• Seeking feedback • Independence
• Internal locus of control • Team building
• Tolerance for ambiguity
2–15

16. Comment on The Trait Approach
• We do not argue that personality theory
provides a complete theory of entrepreneurship
or even exhausts the range of topics that can be
explored at the level of the individual
entrepreneur. Rather, our results show that
personality must be considered as one
important component of a multidimensional
model of the variables, processes, and
environmental factors affecting
entrepreneurship and new venture creation
(Zhao and Seibert, 2006, p. 268). 2–16

17. Outline of the Entrepreneurial Organization
Imagination
Imagination
Acceptance
Acceptance
Flexibility
Flexibility of Risks
of Risks
2–17

18. WHO IS AN
ENTREPRENEUR : THE
“OC THEORY”
2–18

19. Who Are Entrepreneurs?
 Independent individuals, intensely committed
and determined to persevere, who work very
hard (Persistence).
 They are confident optimists who strive for
integrity (optimism)
 They burn with the competitive desire to excel
and use failure as a learning tool (Learning
from failure- learners)
2–19

20. Optimism and Chance: The Elephants in the
Entrepreneurship Room
• Storey, D. (2011) ‘Optimism and Chance: The
Elephants in the Entrepreneurship Room’,
International Small Business Journal, 29, 4, 303­
321.
2–20

21. Entrepreneurial Mindset: Optimism, Chance and
Learning
• How can persistence be achieved? How does
it relates to the element of chance?
• How is chance a matter of individual choice
and an opportunity offered (or encouraged by
the society)?
• What is optimism and how does it relates to
the previous point?
2–21

22. Optimism and Chance
• Optimism
(1) A disposition or tendency to look on the more
favorable side of events or conditions and to expect
the most favorable outcome.
(2) The principle that the existing world is the best of all
possible worlds.
• Chance
(1) The unknown and unpredictable element in
happenings that seems to have no assignable cause.
(2) An accidental or unpredictable event.
2–22

23. Optimism and Chance (OC) Theory
1. Optimistic individuals are attracted to self
employment
2. They enter self-employment if they have access
to wealth
3. In self-employment they enter a game of chance
4. The lucky ones for a period of time have an
alignment between their skill set and what the
customer wants
2–23

24. Optimism and Chance (OC) Theory
5. The unlucky ones encounter problems
immediately
6. The extent to which the unlucky ones survive
depends on access to wealth (+) and alternative
employment options
7. If they have wealth they can ride out losses and
hope to have a longer run at the table and they
luck may turn
2–24

25. OC Theory in Practice
1. Assume a collection of individuals with different
levels of optimism and access to resources and
alternative uses of their time.
2. They are faced by a roulette wheel where they
know the odds are against them but where there is
the possibility of a big win
2–25

26. OC Theory in Practice
3. Who plays the game? Answer – the optimists
are more likely to play and those who have some
resources and those without good alternatives.
This is precisely what we observe.
4. Who stays in the game? The optimists, those
with more resources and those with poor
alternatives
5. Who drops out of the game? Those who run out
of resources and those with better alternatives
2–26

27. OC Theory in Practice
6. Performance of the survivors: Driven by
external circumstances over which the
player/business has no control, so good when you
have a good run; but a bad run finishes you
7. If you have a good run you acquire resources,
you gain the confidence of others – leading to
more resources – what is referred to as a track
record
8. You also become more confident- and plausible
to others all of which generates more resources
which enables you to make lots of mistakes whilst
still surviving 2–27

28. OC Theory and Learning
• What sort of learning takes place?
• Are entrepreneurs really better “learners” than
non­entrepreneurs or is it only a matter of being
optimistic, getting many chances (thus getting
experience) and ultimately succeeding?
2–28

29. OC Theory assumes Jovanovic learning
• Only Jovanovic learning takes place.
• Jovanovic (1982) assumes that the longer
individuals are in business, the better informed
they become about their own entrepreneurial
talent. The value of this form of learning is that it
enables individuals to make a more informed
‘stay or quit’ business deci­sion.
2–29

30. Jovanovic Learning
• Therefore, the crucial distinction is that by being
in business, the individual makes a more
informed distinction between the option of
staying in business and moving to an alternative
state – employment, unemployment, or exiting
from the labour force – but not that they become
a more talented or more able entrepreneur.
2–30

31. Jovanovic learning
• It does not assume that entrepreneurial talent θ
increases with time. Time only enhances the
ability of the individual to assess that talent. The
value of that greater accuracy is that the
individual is able to make a better informed
judgement about whether or not to continue in
business
2–31

32. Conclusion of OC Theory
•You can do the “right” things and fail
•You can do the wrong things and succeed
•Learning is really hard for new/small firms
because of noise
•Forecasting performance is so much harder than
“backcasting”
•Entrepreneurs are optimists 2–32

33. Conclusion of OC Theory
A theory based on optimism and chance implies:
• The wealthy survive in business
•Performance fluctuates wildly over time
•Many one-shot growers
•Those who re-start after failure do NOT
(Necesarrily) perform better than novices
2–33

34. SOURCES OF RESEARCH
ON ENTREPRENEURS
2–34

35. Sources of Research on Entrepreneurs
Research and
Research and Speeches,
Speeches,
Direct
Direct
Popular
Popular Seminars and
Seminars and
Observation
Observation
Publications
Publications Presentations
Presentations
The
The
Entrepreneurial
Entrepreneurial
Mindset
Mindset
2–35

36. Sources of Research on Entrepreneurs
(cont’d)
• Publications • Direct Observation of
 Technical and professional Practicing Entrepreneurs
journals  Interviews
 Textbooks on entrepreneurship  Surveys
 Books about entrepreneurship  Case studies
 Biographies or autobiographies • Speeches, Seminars, and
of entrepreneurs
Presentations by
 Compendiums about
entrepreneurs Practicing Entrepreneurs
 News periodicals
 Venture periodicals
 Newsletters
 Proceedings of conferences
 The Internet
2–36

37. The Dark Side
of
Entrepreneurship
2–37

38. The Dark Side of Entrepreneurship
• The Entrepreneur’s Confrontation with Risk
 Financial risk versus profit (return) motive varies in
entrepreneurs’ desire for wealth.
 Career risk—loss of employment security
 Family and social risk—competing commitments of
work and family
 Psychic risk—psychological impact of failure on the
well-being of entrepreneurs
2–38

39. Figure
2.1 Typology of Entrepreneurial Styles
Source: Thomas Monroy and Robert Folger, “A Typology of Entrepreneurial Styles:
Beyond Economic Rationality,” Journal of Private Enterprise IX(2) (1993): 71.
2–39

40. Stress and the Entrepreneur
• Entrepreneurial Stress
 The extent to which entrepreneurs’ work demands and
expectations exceed their abilities to perform as
venture initiators, they are likely to experience stress.
• Causes of Entrepreneurial Stress
 Loneliness
 Immersion in business
 People problems
 Need to achieve
2–40

41. Entrepreneurs: Type A Personalities
• Chronic and severe sense of time urgency.
• Constant involvement in multiple projects
subject to deadlines.
• Neglect of all aspects of life except work.
• A tendency to take on excessive responsibility,
combined with the feeling that “Only I am
capable of taking care of this matter.”
• Explosiveness of speech and a tendency to speak
faster than most people.
2–41

42. The Entrepreneurial Ego
• Self­Destructive Characteristics
 Overbearing need for control
 Sense of distrust
 Overriding desire for success
 Unrealistic optimism
• Entrepreneurial Motivation
 The quest for new-venture creation as well as the
willingness to sustain that venture.
• Personal characteristics, personal environment, business
environment, personal goal set (expectations), and the
existence of a viable business idea.
2–42

43. The Entrepreneur as Manager and Co-worker
• The traits and behaviors responsible for the
entrepreneur’s success also lead to their
undoing/ failure as managers and co­workers.
• Study of 38 entrepreneurs in USA and Canada
shows a strong need for control and suspicion
about authority.
• Thus they are unable to work in structured
situation where authority is delegated (unless
they have created the structured and work is
done on their terms).
The Dark Side of Entrepreneurship Manfred (1985)

44. The Entrepreneur as Manager and Co-worker
• They are unable to shows submission expected of
subordinate and shows great deal of concern
with minute details that is stifling.
• They are poor collaborator, they are ready for the
worst.
• Entrepreneurs require more appreciation
• Together they can be problematic as employees
The Dark Side of Entrepreneurship Manfred (1985)

45. Entrepreneurs: The Need for Shifting Between
Role

46. The small firm management process

47. Entrepreneurs: The Need for Shifting Between
Role

48. Entrepreneurs: The Need for Shifting Between
Role

49. Entrepreneurs: The Need for Shifting Between
Role

50. Entrepreneurial Traits as Barrier: The case of
Transition Towards a Managerial Role

51. Entrepreneurial Traits as Barrier: The case of
Transition Towards a Managerial Role

52. Entrepreneurial Traits as Barrier: The case of
Transition Towards a Managerial Role

53. Dealing with Stress
• Networking
• Getting away from it all
• Communicating with employees
• Finding satisfaction outside the company
• Delegating
• Exercising Rigorously
2–53