Theories of entrepreneurship. Traits of an entrepreneur

Entrepreneurs play an important role in the society. They establish businesses that employ thousands of people and earn their owners profit.  They also pay taxes and other revenues to the government that enhances the government’s ability to provide essential services.  These are among the many other roles played by the entrepreneurs in the society. Due to the importance of entrepreneurs, many scholars have made attempts to explain and define entrepreneurship with the aim of ensuring the society understand and derive maximum benefits from the entrepreneurs. According to Thompson 2009, although intent is a concept that is difficult to explain, the objective of entrepreneurship is clear. Entrepreneurs make conscious initiatives aimed at driving business into a success.  These initiatives are directed towards initiating ideas, organizing resources, creating relationships to ensure a business realizes its goals. Successful entrepreneurs are highly regarded in the society and people seek to learn from the entrepreneurs to enhance their entrepreneurial capacities. Scholar has made attempts to explain entrepreneurship with the aim of helping aspiring entrepreneurs to succeed in their endeavors. Emphasis has been placed on highlighting the characteristics of successful entrepreneurs and theories of entrepreneurship. These scholarly interventions have provided a body of knowledge that has over the years shaped the perception of entrepreneurship.  The theories of entrepreneurship seek to explain why entrepreneurs behave the way they do. They explore the environmental and individual characteristics that influence entrepreneurial decisions.  Regarding the characteristics of successful entrepreneurs, scholars have provided diverse arguments about the features found in successful entrepreneurs.   Examining the theories of entrepreneurship and the characteristics of accomplished entrepreneurs would help to analyze Thompson’s statement.

2.0 Theories of Entrepreneurship

There are five major theories of entrepreneurship that seek to explain the entrepreneurship and the behaviours of entrepreneurs. These theories date to different historical times and some were developed to counter the arguments of previous theories. The theories have substantial differences as they present varying perspectives to understanding entrepreneurship.

2.1 Economic Theories

These theories are the oldest entrepreneurship theories and they were developed in the mid-eighteenth century. They view entrepreneurs as risk takers who monitor the economic conditions with the aim of identifying opportunities (Abosede & Onakoya 2013).  The economic environment is dynamic and the changes in the economic conditions present opportunities and threats. According to the economic theorists, successful entrepreneurs position themselves strategically to reap maximally from changes in the economic conditions. Critics of these theories argue that the theory fails to recognize other aspects of the environment and give too much emphasis on the economic conditions.

2.2 Resource-Based Theory

The resource-based theory argues that individual’s success as an entrepreneur is based on leverage on different types of resources. These resources include finances, human resources, and information among other resources (Fisher 2012). These resources are crucial in exploiting opportunities implying that a person who has mastery in utilizing these resources establishes successful enterprises.

2.3 Opportunity-based Theory

This theory suggests that entrepreneurs seek to exploit opportunities presented by all aspects of the environment that include technological, social, and economic aspects. It, therefore, provides a more advanced perspective than the economic theory as it brings into play the different aspects of the environment instead of only focusing on economic conditions. The environment is dynamic and entrepreneurs stay close to the environment with the aim of identifying the opportunities presented by the changes in environmental forces. According to Smith & Chimucheka 2014, businesses are affected by broad dimension factors of the environment and the success of a business is dependent on how best the manager is able to react to the threats and opportunities presented by the environment.  This theory has therefore received a backing from other studies that recognize the role of the environment in entrepreneurship.

2.4 Sociological Theories

These theories view entrepreneurship in a social context where entrepreneurs are viewed as individuals who are able to control opportunities emanating from dynamics in social contexts (Smith & Chimucheka 2014). According to sociological theorists, the social-political environment is unstable and it creates opportunities that are used by entrepreneurs to develop and expand a business. The theory recognizes social networks as a crucial resource in entrepreneurship where successful entrepreneurs create the right networks to support pursuing a certain course.

2.5 Psychological theories

These theories attribute entrepreneurship to emotional and mental characteristics. According to this theory, successful entrepreneurs have a belief that their actions can influence the environment.  Studies conducted to reinforce the theory shows that personal traits such as optimism and creativity influence the success of an entrepreneur.  This theory, therefore, attributes the success of an entrepreneur to personal attributes and not the environment.

3.0 Traits of an Entrepreneur

Successful entrepreneurs show similar traits that make it necessary to evaluate the importance each trait in supporting the entrepreneur. Different studies have made attempts to highlight the specific traits found in entrepreneurs. There have also been attempts to investigate how specific traits make one a successful entrepreneurs. The traits discussed below feature in many studies that make their roles in entrepreneurship clear.

3.1 Action Oriented

Action orientation is one of the features found in successful entrepreneurs.  The entrepreneur seizes an opportunity whenever it appears without giving anything a chance. Introducing a new idea gives a first movers advantage. Entrepreneurs are actively looking for opportunities in the environment with an aim of improving their businesses or establishing new businesses.  Successful entrepreneurs are quick actors and they do not take chances when it comes to implementing ideas. According to Chaganti & Greene 2002, some of the most successful entrepreneurs in the world were quick at implementing an idea that gave them the first mover’s advantage. Failure to act first can give competitors a chance to act on the same idea. For instance, Google remains the leading vendor of smartphone and tablet operating system vendor after grabbing the opportunity of creating an open source operating system.  It is worth noting that Apple Inc played a crucial role in developing the modern smartphone implying that the company was the first to develop a reliable smartphone operating system. Swift action by Google has earned the company the trust in the market making it the world’s leading smartphone and tablet operating system vendor.  Action orientation averts unnecessary procrastination that may make an idea irrelevant due to the changes in the environment.  For instance, an idea in the technology sector can easily become obsolete if it is not implemented swiftly.

3.2 Ability to Create Networks

The ability to create networks is another common feature among successful entrepreneurs. Entrepreneurs understand the role of networks in a business. They seek to establish beneficial networks with individuals and organizations to position their position in the business environment.  The motivation to create networks with other organizations stems from the knowledge that a business is not self-sustaining. As a result, an entrepreneur examines the value a chain of his/ her business and identifies areas that can be improved through networks. For instance, strategic alliances with suppliers may be necessary if an entrepreneur identifies vulnerabilities in the ability to acquire inputs on time. Entrepreneurs know the value of information and networking with the right people enables them to consolidate essential information.  According to Kozubíková, Belás, Bilan, & Bartos 2015, successful entrepreneurs are open-minded as they listen to other people with the aim of analysing their ideal and determine whether such ideas are important or otherwise. They allow others to challenge and criticise their ideas and this is used as a basis for improving these ideas. Networks also increase the entrepreneur understanding of the environment that increases the ability to deal with environmental forces.

3.3 Flexible

Flexibility is a common trait among the successful entrepreneurs.  According to Felício Caldeirinha & Rodrigues 2012, the success of an entrepreneur is influenced by the ability to deal with environmental forces. The business environment is made of unstable factors that produce opportunities and threats. Threats impede the realization of organizational goals thus requiring managers to implement sound strategies to counter the threats. On the other hand, opportunities present opening for a business to create value. They might take the shape of a chance to improve operations or an investment opening aimed at giving the entrepreneur money. Entrepreneurs invest heavily in research to make them conversant with the changes in the environment.  They are ready to alter their plans and systems to grab an opportunity or protect themselves from an imminent threat.  According to Kozubíková, Belás, Bilan,& Bartos 2015 successful entrepreneurs do not feel threatened by changes environment as they use their alertness to gain a competitive edge against inflexible competitors. They align their operations to reflect the prevailing environmental condition.  Flexibility on plans is a key entrepreneurship success factor. Plans set a path for an organization as it clearly identifies the goals and how to go about realizing these goals. Sometimes the changes in the environment can make the goals unrealistic or irrelevant.  Such a situation makes it necessary to alter the goals to make relevant to the organization. Dynamics in the environment can make strategies in place to realize organizational goals unpractical and such an occurrence calls for strategy revision.  Successful entrepreneurs revise their goals and strategies to position themselves well in a changing environment.

3.4 Strong Vision

Many studies recognize a strong vision as a feature found in most successful entrepreneurs. They have a vision for their organization that leads to the establishment of a clear vision and mission statements that are used for communicating to the relevant stakeholders what the organization stands for.  Entrepreneurs conceive ideas about establishing a business alone and they are therefore required to communicate the idea to other people aimed at winning their support. These ‘other people’ include employees, strategic partners, financiers, and venture capitalists. According to Nair & Pandey 2006, successful entrepreneurs articulate their vision clearly that wins other people’s commitment to supporting the entrepreneur’s course. Being visionary as a manager enables entrepreneurs to create the right culture in their organization that is in line with the organization’s ideals.

3.5  Management Skills

Successful entrepreneurs have outstanding managerial skills.  Management is concerned with using people and other resources to get work done. Successful entrepreneurs seek to realize high efficiency level in the utilization of resources to realize specific goals.  According to Chaganti & Greene 2002, there are three types of management skills that determine the success of an entrepreneur. Conceptual skills are essential in entrepreneurship as they determine the entrepreneur’s ability to have a bigger picture of their business. Successful entrepreneurs are able to understand the interrelationships among the key elements of their business and how these relationships affect the realization of the overall organizational goals.  These entrepreneurs are also able to project the end product of a system thus increasing their ability to alter systems to realize the best outcomes. In addition to conceptual skills, successful entrepreneurs have technical skills that enable them to understand the technical details of their idea. For instance, an entrepreneur in the field of information technology should be in a position to understand the technical details of processes involved so as to direct employees and other stakeholders properly.  Successful entrepreneurs also have good interpersonal skills that enhance their ability to manage human relationships in the work environment. Entrepreneurs know the importance of relating well with people and they, therefore, try their best to create sustainable interpersonal relationships.

3.6 Risk Takers

Successful entrepreneurs are risk takers. According to Beugelsdijk & Noorderhaven 2005, entrepreneurs have a high appetite for risk compared to ordinary investors. They seek to invest in high-risk-high-return ventures and this makes them realize outstanding results. They are also aware of the possibility of failure that makes them invest in contingency planning.   Entrepreneurs conduct a careful cost benefits analysis aimed at assessing the viability of an opportunity. They also use objective methods of assessing the risk to ensure that the returns associated with a risk outweigh risks. According to Beugelsdijk & Noorderhaven 2005, entrepreneurs can fail many times and still not give up due to their risk-taking attitude.  They view failure as learning chance and thus used as a basis for improving their future endeavours in entrepreneurship. They are not afraid of change and they are always willing to implement beneficial alterations in the processes even when such moves are associated with risk.

4.0 Conclusion

The importance of the entrepreneurship concept has led to the development of theories and principles seeking to improve the understanding of the concept. The intent of entrepreneurship is clear as the emphasis is put on creating successful ventures. There are five theories of entrepreneurship that seek to explain entrepreneurial behaviours and characteristics.  The economic theory of entrepreneurship holds that entrepreneurs are motivated by opportunities emanating from the economic environment. The resource-based theory holds that individual’s success in entrepreneurship stems from the extern to which they control resources. The resources in consideration are human, financial and information resources that increase the individual’s ability to control the environment.  The opportunity based theory holds that entrepreneurs are individuals who seek to exploit opportunities that arise in the technological, social, and economic environment. The entrepreneurs closely monitor the environment with the aim of identifying opportunities. Sociological theories of entrepreneurship view entrepreneurs as individuals who are able to control opportunities emanating from the dynamics in the social-political environment. Lastly, psychological theories attribute the success of entrepreneurs to the possession of psychological traits such as optimism and creativity.

Reviewing different studies has revealed that successful entrepreneurs possess some traits. Successful entrepreneurs are action-oriented and they move with speed to exploit emerging opportunities. Sometimes the swiftness gives them a first mover’s advantage thus creating a competitive edge. Successful entrepreneurs have the ability to create networks and this help in value creation. Effective networks enrich an entrepreneur and also help in addressing vulnerabilities in the value chain.   Entrepreneurs are flexible a trait that helps them to adapt to changes in the environment.  Successful entrepreneurs create adaptive plans and strategies that position their businesses favourably in a dynamic environment.  They also customize goals to make them relevant to the current environment.  Entrepreneurs have a strong vision that enables them to convince other stakeholders to support their course. They develop a clear and compelling vision and mission statements that are used as a tool for influencing other stakeholders. Successful managers have strong managerial skills that help them mobilize resources towards the realization of organizational goals.  The most important skills possessed by successful entrepreneurs include conceptual, interpersonal, and technical skills. Lastly, successful entrepreneurs are risk takers. They are ready to take risks that guarantee high returns.

5.0 Recommendations

A person seeking to be accomplished entrepreneurs need to be conversant with the traits of successful entrepreneurs. They should make some changes aimed at improving their entrepreneurship skills.  The following are recommendations for aspiring entrepreneurs.

  • Adaptability- aspiring entrepreneurs should be adaptive to ensure their ability to confronts dynamics in the environment.
  • Commitment to getting the right information-aspiring entrepreneurs should remain committed to acquiring the right information regarding the changes in the environment that makes them aware of opportunities and threats.
  • Self-belief- aspiring entrepreneurs should believe in themselves and this would enable them to assume risks.

6.0 List of References

Abosede, A.J. & Onakoya, A.B., 2013, ‘Intellectual Entrepreneurship: Theories, Purpose and Challenges.’ International Journal of Business Administration, vol.5,no.4, p.30.

Beugelsdijk, S. & Noorderhaven, N., 2005, ‘Personality characteristics of self-employed; an empirical study.’ Small Business Economics, vol.24, no.2, pp.159-167.

Chaganti, R. & Greene, P.G., 2002, ‘Who are ethnic entrepreneurs? A study of entrepreneursapos; ethnic involvement and business characteristics.’ Journal of Small Business Management, vol.40,no.2, pp.126-143.

Felício, J.A., Caldeirinha, V.R. & Rodrigues, R., 2012, ‘Global mindset and the internationalization of small firms: The importance of the characteristics of entrepreneurs.’ International Entrepreneurship and Management Journal, vol.8(, no.4, pp.467-485.

Fisher, G., 2012, ‘Effectuation, causation, and bricolage: A behavioral comparison of emerging theories in entrepreneurship research.’ Entrepreneurship theory and practice, vol.36, no.5, pp.1019-1051.

Kozubíková, L., Belás, J., Bilan, Y. & Bartos, P., 2015, ‘Personal characteristics of entrepreneurs in the context of perception and management of business risk in the SME segment.’ Economics & Sociology, vol.8, no.1, p.41.

Nair, K.R.G. & Pandey, A., 2006, ‘Characteristics of entrepreneurs: an empirical analysis.’ The journal of entrepreneurship, vol.15,no.1, pp.47-61.

Smith, W. & Chimucheka, T., 2014, ‘Entrepreneurship, economic growth and entrepreneurship theories.’ Mediterranean Journal of Social Sciences,vol. 5 no.4, p.160.

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