The Entrepreneurial Mindset

in Individuals

Prof. Sudipto Bhattacharya

The Evolution of Entrepreneurship

• Entrepreneur is derived from the French

entreprendre, meaning ―to undertake.‖

– The entrepreneur is one who undertakes to organize,

manage, and assume the risks of a business.

• Although no single definition of entrepreneur exists

and no one profile can represent today’s

entrepreneur, research is providing an increasingly

sharper focus on the subject.

A Summary Description

of Entrepreneurship

• Entrepreneurship (Robert C. Ronstadt)

– The dynamic process of creating incremental wealth.

– This wealth is created by individuals who assume major

risks in terms of equity, time, and/or career commitment

of providing value for a product or service.

– The product or service itself may or may not be new or

unique but the entrepreneur must somehow infuse value

by securing and allocating the necessary skills and

resources.

An Integrated Definition

• Entrepreneurship – A dynamic process of vision, change, and creation.

• Requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions or developing unique features in existing solutions.

– Essential ingredients include:

• The willingness to take calculated risks—in terms of time, equity, and/or career.

• The ability to formulate an effective venture team; the creative skill to marshal needed resources.

• The fundamental skills of building a solid business plan.

• The vision to recognize opportunity where others see chaos, contradiction, and confusion.

The Myths of Entrepreneurship

• Myth 1: Entrepreneurs Are Doers, Not Thinkers

• Myth 2: Entrepreneurs Are Born, Not Made

• Myth 3: Entrepreneurs Are Always Inventors

• Myth 4: Entrepreneurs Are Academic and Social Misfits

• Myth 5: Entrepreneurs Must Fit the ―Profile‖

• Myth 6: All Entrepreneurs Need Is Money

• Myth 7: All Entrepreneurs Need Is Luck

• Myth 8: Ignorance Is Bliss For Entrepreneurs

• Myth 9: Entrepreneurs Seek Success But Experience High Failure Rates

• Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers)

Entrepreneurial Schools-of-Thought

Macro View: External Locus of Control

• The Environmental School of Thought

– Considers the external factors that affect a potential entrepreneur’s lifestyle.

• The Financial/Capital School of Thought

– Based on the capital-seeking process—the search for seed and growth capital.

• The Displacement School of Thought

– Alienation drives entrepreneurial pursuits • Political displacement (laws, policies, and regulations)

• Cultural displacement (preclusion of social groups)

• Economic displacement (economic variations)

Financial Analysis Emphasis

Micro View: Internal Locus of Control

• The Entrepreneurial Trait School of Thought – Focuses on identifying traits common to successful

entrepreneurs. • Achievement, creativity, determination, and technical knowledge

• The Venture Opportunity School of Thought – Focuses on the opportunity aspect of venture

development—the search for idea sources, the development of concepts, and the implementation of venture opportunities. • Corridor principle: New pathways or opportunities will arise that

lead entrepreneurs in different directions.

Definitions and Criteria of One Approach

to the Micro View

Source: Adapted from J. Barton Cunningham and Joe Lischeron, ―Defining Entrepreneurship,‖ Journal of Small Business Management

(January 1991): 56.59(1) (winter 1994): 21-31.

Definitions and Criteria of One Approach to the

Micro View (cont’d)

Source: Adapted from J. Barton Cunningham and Joe Lischeron, ―Defining Entrepreneurship,‖ Journal of Small Business Management

(January 1991): 56.59(1) (winter 1994): 21-31.

Definitions and Criteria of One Approach to the

Micro View (cont’d)

Source: Adapted from J. Barton Cunningham and Joe Lischeron, ―Defining Entrepreneurship,‖ Journal of Small Business Management

(January 1991): 56.59(1) (winter 1994): 21-31.

Micro View… (cont’d)

• The Strategic Formulation School of Thought

– Emphasizes the planning process in successful venture

development.

• Ronstadt’s View

– Strategic formulation is a leveraging of unique elements:

• Unique Markets: mountain gap strategies

• Unique People: great chef strategies

• Unique Products: better widget strategies

• Unique Resources: water well strategies

Process Approaches to Entrepreneurship

• Integrative Approach

– Built around the concepts of input to the entrepreneurial

process and outcomes from the entrepreneurial process.

– Focuses on the entrepreneurial process itself and

identifies five key elements that contribute to the process.

– Provides a comprehensive picture regarding the nature of

entrepreneurship that can be applied at different levels.

An Integrative Model of Entrepreneurial Inputs and

Outcomes

Source: Michael H. Morris, P. Lewis, and Donald L. Sexton, ―Reconceptualizing Entrepreneurship: An Input-Output Perspective,‖ SAM

Advanced Management Journal 59(1) (winter 1994): 21–31.

Process Approaches… (cont’d)

• Entrepreneurial Assessment Approach

– Stresses making assessments qualitatively,

quantitatively, strategically, and ethically in regard to the

entrepreneur, the venture, and the environment

• Multidimensional Approach

– Views entrepreneurship as a complex, multidimensional

framework that emphasizes the individual, the

environment, the organization, and the venture process.

Entrepreneurial Assessment Approach

Source: Robert C. Ronstadt, Entrepreneurship (Dover, MA: Lord Publishing Co., 1984), 39.

The Entrepreneurial Mindset

• Entrepreneurial Mindset

– Describes the most common characteristics associated

with successful entrepreneurs as well as the elements

associated with the ―dark side‖ of entrepreneurship.

• Who Are Entrepreneurs?

– Independent individuals, intensely committed and

determined to persevere, who work very hard.

– They are confident optimists who strive for integrity.

– They burn with the competitive desire to excel and use

failure as a learning tool.

Common Characteristics of Entrepreneurs

Commitment, determination,

and perseverance

Drive to achieve

Opportunity orientation

Initiative and responsibility

Persistent problem solving

Seeking feedback

Internal locus of control

Tolerance for ambiguity

Calculated risk taking

Tolerance for failure

High energy level

Creativity and Innovativeness

Vision

Self-confidence and optimism

Independence

Team building

Characteristics Often Attributed to Entrepreneurs

Source: John A. Hornaday, ―Research about Living

Entrepreneurs,‖ in Encyclopedia of Entrepreneurship, ed.

Calvin Kent, Donald Sexton, and Karl Vesper, © 1982, 26–27.

21st. Century Characteristics of Entrepreneurs

Source: Soo Ji Min, ―Made Not Born,‖ Entrepreneur of the Year Magazine (fall 1999): 80.

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

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.

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.

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.

• Sources of Stress

– Loneliness

– Immersion in business

– People problems

– Need to achieve

Dealing with Stress

• Networking

• Getting away from it all

• Communicating with employees

• Finding satisfaction outside the company

• Delegating

• Exercising Rigorously

The Entrepreneurial Ego

• Self-destructive Characteristics

– An 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.

A Model of Entrepreneurial Motivation

Source: Douglas W. Naffziger, Jeffrey S. Hornsby, and Donald F. Kuratko, ―A Proposed Research Model of

Entrepreneurial Motivation,‖ Entrepreneurship Theory and Practice (spring 1994): 33.