Term Paper, 2007
28 Pages, Grade: 2,0
1 Historical approaches to define entrepreneurship
2 Entrepreneurship – a critical discussion
2.1 Environmental background
2.2 Personal attributes
3 The born or the made entrepreneur
4 Entrepreneurial roles
6 Source People limited – company profile
7 David Priestley’s environmental background
7.1 David Priestley’s family
7.2 David Priestley’s education
7.3 David Priestley’s experiences
8 David Priestley’s personal attributes
8.3 Taking and managing risks
9 Made or born
10 Source People limited: Entrepreneurial firm or small business?
11 Entrepreneurial Growth
Thanks are due to the following people:
I have my team members to thank for the great teamwork before, during and after the interview with David Priestley. We worked hand in hand and complemented one another. I should also like to thank the Source People Staff to assist so competently and to give us always quick feedbacks.
And last but not least a special Thanks goes to our interview partner David Priestley, Founder of Source People limited. He took his time to explain the company and allowed us to have a look into his personal life. Due to his directness and his interesting personality, a deep analyse of entrepreneurship was possible.
Entrepreneurs are doubtlessly not like other people. They differ possibly by personal attributes, family background or gained experiences in their private or professional life.
Not everyone has it in oneself to be an entrepreneur. The majority of start-ups worldwide need to declare bankruptcy after a short time. The art here is to assure the survival of the business and to guarantee its expanding. There are various theories trying to explain why some people can make it and others do not. Is it due to the education? Or is the individual’s character and temperament the crucial factor?
Another question in this context is, if it is possible to become a successful entrepreneur or if entrepreneurs have some inherent qualities or talents that others never will have.
The role of the entrepreneur in society has changed in recent years. He has improved his international standing; people recognise his creative innovations that simplify our lives, boosting the economy through self-exertion and adding new jobs. Harrell (1992) summarises that “If it were not for the entrepreneurs, we would be in a depression that would make 1929 seem like a boom“. The German Chamber of Industry and Commerce (2002) supports this point of view. “Entrepreneurs...facilitate productive change and vitalize competition and hence most cities support them.”
Nowadays, entrepreneurial studies of legends like Henry Ford, Thomas Edison, Bill Gates, Walt Disney and Anita Roddick play an important role in academic business lectures and are portrayed as role models for an assured economical future. In general, entrepreneurs can have different roles. Amongst others, they can be intrapreneurs, be a Me-Stock-Corporation and owners of an entrepreneurial company.
The entrepreneurial company is also an explored part in this essay. In comparison with the so called small business there are interesting differences that also help to clarify the term entrepreneurship itself.
In addition, the essay analyses some of the various theories of famous authors to explain the phenomenon of “entrepreneurship”. There are behavioural, psychological, social, economical and many other approaches to describe entrepreneurship. It is clear that it is hard to define the term entrepreneur and that there is no generally accepted answer. The face to face interview with David Priestley, founder of the local recruitment agency Source People limited, shows one aspect of the entrepreneurial diversity and analyses the complexity of the key question: “What is entrepreneurship?”
The French term “Entrepreneur” has its roots in the 14th century; the expression “celui qui entreprend” stands for a dynamic person that actively works on tasks. In the 15th century the term has been used to portray people that take risks, especially during wars.
The Irish banker Richard Cantillon (1680 – 1734) was the first person that brought the word entrepreneur into the context of the economic theory: “Entrepreneurship is defined as self-employment of any sort. Entrepreneurs buy at certain prices in the present and sell at uncertain prices in the future. The entrepreneur is a bearer of uncertainty.” In this context the term entrepreneur had a similar meaning to the word “Undertaker” and meant a person who is doing his business at his own risk. The French economist and businessman Jean-Baptiste Say (1767-1832) complemented that statement by focusing on entrepreneurs as co-ordinators of production factors. “The entrepreneur is the agent who unites all means of production and who finds in the value of the products . . . the reestablishment of the entire capital he employs, and the value of the wages, the interest, and rent which he pays, as well as profits belonging to himself.” In 1959 Edith Penrose added that “Entrepreneurial activity involves identifying opportunities within the economic system.” Rabbi and economist Israel Kirzner (1979) explained that an entrepreneur has the ability to explore and use opportunities. An entrepreneur was also described as “a large scale businessman who contracted to supply” (Elkjær, Jørgen R. (1991)). In the beginning of the 20th century Schumpeter added, that “the constitution of entrepreneurship is to identify and implement new possibilities in economic fields.” He was the first person to put the term entrepreneurship in relation to innovation.
“Entrepreneurship is elusive and difficult to define.“ (Kao (1991))
The historical examples above give an idea of the different approaches to define “Entrepreneurship”, but how do you describe exactly and concretely what an entrepreneur is or does? What makes the entrepreneurial personality of a person? Basically there is not a coherent, all-embracing, generally accepted definition of the term Entrepreneurship. In the international literature there are various attempts to define it; many authors had not only given economical, but also psychological, sociological and anthropological opinions. “We need to be aware, that when we talk about entrepreneurship we carry around a wide range of beliefs“. (Gartner Study 1990)
In the following chapter the entrepreneurial profile will be described in detail, using different approaches like observing external influences and analysing personality attributes.
An entrepreneur is affected by family, education and countless experiences as well as every human being. These surrounding influences mould him and play a decisive role in his life.
The personal entrepreneurial development depends on different factors such as standing in the family, first-born child, sisters or brothers, experiences in the childhood or general support by the family.
In addition to this scientific knowledge, Roberts (1991) found that “a disproportional number of entrepreneurs are the sons of entrepreneurs”. Bolton and Thompson (2000) would also add “daughters”. In all cases the emphasis is placed on the importance of the family background. There are various studies (for instance Timmons, 1986; Hisrich, 1990) that prove that there is a link between entrepreneurial parents and their entrepreneurial children. The number of children that become entrepreneurs is in families in which an entrepreneurial father or mother lived noticeably higher than in families without entrepreneurial parents. Parents exemplify approaches to different themes, opinions and the typical personality attributes as explained above to their children through their own life.
There is no proved connection between entrepreneurial success and education:
- Henry Ford had no possibility to enjoy an academic education. Because of the country side lifestyle of his parents and their poorness he just attended village schools.
- Thomas Alva Edison went for only a couple of years to his classes, after that his parents continued to tutor him.
Brockhaus and Nord (1979) showed in a study that “comparing the educational level of entrepreneurs and managers…the managers had more than two years’ extra education than the entrepreneurs.”
As a result, the level of education seems not as important as “academics like to think”. (Bill Bolton, John Thompson 2000)
There is a special need for expertise and knowledge in a respective industry to run a company successfully and to operate entrepreneurial. 90 per cent of entrepreneurs gained working experience as temporary help, trainee or employee in that sector in which they later opened their business (Brockhaus, 1982).
Besides working experiences entrepreneurs also gain private life-shaping experiences.
Nick Baxter, Founder and Chief Executive of Cornerstone Community Care for instance “was five years old, both his father and sister drowned in a tragic sailing accident.” (Cornerstone Case Study, 2007) His mother become depressed and was not able to take care of her son anymore and Nick lived many years in social care institutions. He discovered a deplorable state of the Health Care System and decided to work on. “These early childhood experiences made me deeply suspicious of large institutions and the negative cultures they can create…I suppose it was one of the main reasons I’ve always been interested in social work.” (Nick Baxter in the Cornerstone Case Study, 2007)
In general, there is no guaranteed method to become a successful entrepreneur and no code of practice that guarantees success of an entrepreneurial company. But there are typical soft skills, characteristics, abilities and talents that are important and essential parts of the entrepreneurial profile.
- Creativity and Innovation
The Irish Writer and Nobel Prize winner George Bernard Shaw summarises that “Entrepreneurial creativity = creativity × entrepreneurial action.” Entrepreneurs have new, fresh, functional and constructive ideas. These ideas make our lives in certain ways easier and more comfortable. But even the best idea is of no value if it is not implemented in practice.
There are different theories or explanations concerning the process of creativity. It can be God given, sometimes it can happen by chance or it can be a cognitive and rational utilisation of creativity techniques like brainstorming for example. But the fact is that entrepreneurs need a creative and innovative idea to start and run their business.
- Own Vision
The basis of a vision is a long-term and elementary strategy with planned aims and approaches to succeed. Entrepreneurs have the ability to implement their vision and dream: “You’ll always miss 100% of the shots you don’t take” Wayne Gretzky
- Taking and managing risks
Entrepreneurs are willing to take calculated and limited risks. Risks as well as mathematical expectations are ascertainable factors, whereas projects with a high risk factor often are more profitable as projects with low risk factor. In this connection, it is an individual decision depending on different decision rules by Hurwicz, Laplace or Savage-Niehans for example.
- Decisiveness and tenaciousness
It takes determination in unstructured problem areas to keep trying when challenges are unavoidably experienced and failure seems to be close. Everybody relapses sometimes but only the person who is tenacious despite failure is successful.
- Identifying and using opportunities
Changing businesses opens up new opportunities; globalisation, shorter product and service life cycles as well as faster communication are typical sources of opportunity (Hamel, 1997). Opportunities should be exploited to assure an enterprise’s improvement and survival.
Nowadays, an efficient network is more important than ever. External central decisions depend on knowing and liking each other. Entrepreneurs are good networkers, they know how and where to find useful help.
- Determination in the face of adversity and competition
To succeed, entrepreneurs should have the special talent and ability to turn problems into opportunities. Adversity and competition can be unexpected – it is essential to react considerately but fast.
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