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31S A8U
SMALL BUSINESS OWNER-MANAGERS AND CORPORATE MANAGERS:
A COMPARATIVE STUDY OF ACHIEVEMENT MOTIVATION,
RISK TAKING PROPENSITY AND PREFERENCE FOR INNOVATION
DISSERTATION
Presented to the Graduate Council of the
University of North Texas in Partial
Fulfillment of the Requirements
For the Degree of
DOCTOR OF PHILOSOPHY
By
Wayne H. Stewart, Jr., B.S.B.A., M.B.A.
Denton, Texas
May, 1995
31S A8U
SMALL BUSINESS OWNER-MANAGERS AND CORPORATE MANAGERS:
A COMPARATIVE STUDY OF ACHIEVEMENT MOTIVATION,
RISK TAKING PROPENSITY AND PREFERENCE FOR INNOVATION
DISSERTATION
Presented to the Graduate Council of the
University of North Texas in Partial
Fulfillment of the Requirements
For the Degree of
DOCTOR OF PHILOSOPHY
By
Wayne H. Stewart, Jr., B.S.B.A., M.B.A.
Denton, Texas
May, 1995
WgtjO
Stewart, Wayne H. Jr., Small business owner-managers and
corporate managers: A comparative study of achievement
motivation, risk taking propensity and preference for
innovation. Doctor of Philosophy (Management), May, 1995,
229 pp., 14 tables, 1 figure, references, 386 titles.
Despite the economic significance of entrepreneurship,
relatively little is known about the entrepreneur,
particularly how the entrepreneur differs from the corporate
manager. This problem is both cause and symptom of the
discord regarding definitions of the entrepreneur, rendering
sampling, research replication and generalizations about
entrepreneurs problematic. As a result, inquiry has failed
to adequately establish how entrepreneurs differ from
managers, a problem partially stemming from a dearth of
methodologically rigorous comparisons of entrepreneurs with
managers.
The primary purpose of this study was to investigate
the potential of psychological constructs to predict a
proclivity for entrepreneurship. Moreover, differences in
types of small business owner-managers were also
investigated. Included in the research model were three
common themes in the entrepreneurship literature:
achievement motivation, risk taking propensity and
preference for innovation. Also incorporated were the
interactions of the psychological constructs, as well as
individual and firm demographic variables.
A broad survey of 767 small business owner-managers and
corporate managers was assembled from a 20 state region,
primarily the Southeastern United States. The subjects
completed a guestionnaire composed of the Achievement Scale
of the Personality Research Form, the Risk Taking and
Innovation Scales of the Jackson Personality Inventory and
questions pertaining to individual and organizational
variables. The owner-managers were categorized into two
groups, entrepreneurs and small business owners. Both
groups were simultaneously compared to managers using
hierarchical set multinomial LOGIT regression.
The results indicated that the psychological constructs
are associated with small business ownership. Entrepreneurs
exhibited the classical profile of high levels of
achievement motivation, risk taking and preference for
innovation relative to both small business owners and
managers. The only psychological factor which distinguished
the small business owners from managers was a higher
propensity for risk taking. The results suggest that,
ecumenically, it is the willingness to assume risk which
psychologically distinguishes the small business owner-
manager from the corporate manager.
TABLE OF CONTENTS
Page
LIST OF TABLES iv
LIST OF FIGURES
Chapter
I. INTRODUCTION 1
Statement of Research Problem Theoretical Basis for the Proposed Research
The Determinants of Behavior Entrepreneurs: Behaviors or
Psychological Traits? Streams of Research in Entrepreneur
Characteristics Significance of the Research Methodology Definition of Terms Chapter Summary Organization of the Research
II. REVIEW OF LITERATURE 24
Psychological Constructs Achievement Motivation
Comparative Studies of Small Business Owner-Managers and Corporate Managers
Achievement Motivation and Entrepreneurial Success
Summary of Achievement Motivation Propensity for Risk Taking
Summary of Risk Taking Preference for Innovation
Summary of Preference for Innovation Interrelationships Among Achievement Motivation,
Risk Taking and Innovativeness Linkages Between Risk Taking and
Achievement Motivation Linkages Between Risk Taking and
Innovativeness Linkages Between Achievement Motivation
and Innovativeness Individual and Firm Demographic Characteristics
Age
Education Gender and Race Organizational Demographic Characteristics Summary of Individual and Firm Demographics
Typologies of Small Business Owner-Managers Summary of Small Business Owner-Manager
Typologies Summary of the Literature
Hypotheses Achievement Motivation Risk Taking Propensity Preference for Innovation The Interaction of Psychological Factors
Chapter Summary
III. RESEARCH PROCEDURE AND METHODOLOGY 99
The Sample and Procedure Instrumentation
Achievement Motivation Reliability and Validity of the PR
Risk Taking Propensity and Preference for Innovation Reliability and Validity of the JPI Demographics
The Variables Data Analysis Chapter Summary
IV. ANALYSIS OF RESULTS 126
Analysis of the Sample Descriptive Statistics, Intercorrelations
and Reliabilities Confirmatory Factor Analysis Model Determination and Predictive Efficacy
Analysis of Predictors Tests of Individual Demographics and
Type of Organization Hypothesis Tests
Differences Between Entrepreneurs and Managers
Differences Between Small Business Owners and Managers
Differences Between Entrepreneurs and Small Business Owners
Elasticities Chapter Summary
V. EVALUATION OF RESULTS 161
Discussion of Results
ii
Theoretical Contributions and Implications Limitations of the Research
Methodological Limitations Statistical Conclusion Validity Internal Validity Construct Validity External Validity
Theoretical Limitations Directions for Future Research
Directions for Research Methodology Topic Areas for Additional Research
Personality and Performance The Entrepreneur and Organizational
Life Cycle Intrapreneurship Assistance and Education Programs Venture Teams Modes of Business Entry Planning in Small Businesses
Chapter Summary
APPENDIX 195
REFERENCES 197
111
LIST OF TABLES
Page Table
1. Selected Empirical Research of Achievement Motivation and Entrepreneurs 32
2. Selected Studies of Achievement Motivation and Entrepreneurial Performance 42
3. Selected Empirical Studies of Risk Taking and Entrepreneurs 54
4. Selected Empirical Studies of Preference for Innovation and the Entrepreneur 68
5. Selected Summary of the Demographic Characteristics of the Entrepreneur 79
6. Summary of Major Elements of Research
Procedure 100
7. Sample Characteristics 128
8. Descriptive Statistics and Correlation Matrix 130
9. Confirmatory Factor Analysis of Dependent Variable Categoriation 133
10. Significance Tests for the LOGIT Model and Steps 138
11. Results of Hierarchical Set Multinomial
LOGIT Regression 141
12. Summary of Tests of Hypotheses 152
13. Results of Wald Tests Across Entrepreneurs and Small Business Owners 157
14. Individual Variable Elasticities for Significant Variables Averaged Over All Observations 159
IV
List of Figures
Page Figure
1. Research Framework 91
CHAPTER 1
INTRODUCTION
The phenomenon of entrepreneurship has evoked intensive
academic and managerial attention, particularly over the
past ten years. Sexton (1987) observed that more was
learned about entrepreneurship in the period of 1982 to 1987
than in the previous 25 years combined. The field of
entrepreneurship has become a generally recognized academic
discipline (Block & Stumpf, 1992) and it continues to
burgeon as entrepreneurs become the darlings of the American
public, as more people seek business ownership and as
researchers redouble inquiry into the phenomenon.
Given the significance of the activity, this curiosity
is readily comprehensible. Entrepreneurs are economic
catalysts, generating economic growth and employment through
new venture creation (Schumpeter, 1934; Kilby, 1971; Olson,
1985; Birley, 1987; Reynolds, 1987; Kirchhoff & Phillips,
1991). Wheelen and Hunger (1989) identified small
businesses, the creations of entrepreneurs, as the backbone
of the U.S. economy. The authors ascertained that small
businesses accounted for more than half of total employment,
and over eighty percent of employment growth during the
decade of the 1980s. In fact, it has been proposed that
small businesses render the social mobility which is an
1
2
integral component of a dynamic, free society (Sandberg &
Hofer, 1982), and entrepreneurship may be central to
responding to organizational, economic and even social
challenges (Acs & Audretsch, 1992).
Once the domain of small business research and
practice, much of the focus of entrepreneurship is being
directed toward large organizations. Intrapreneurship, the
corporate entrepreneurial activity, is synonymous with
flexibility (Jennings, 1987), and is routinely discussed as
a catalyst of organizational renewal and growth (Ancona &
Caldwell, 1987). For instance, Chittipeddi and Wallett
(1991) predicted that the organizational archetype of the
future will reflect the leadership, strategies and structure
of entrepreneurial thinking with accompanying traits such as
flexibility, innovativeness and problem-solving action
orientation. Davis, Morris and Allen (1991) depicted
entrepreneurship as a proactive corporate response to
dynamic, complicated and threatening environments.
According to the authors, entrepreneurship represents an
organizational orientation centered on creativity,
innovativeness, flexibility and risk taking. These
considerations emphasize the importance of cultivating our
understanding of the purposes, activities and outcomes of
entrepreneurs in organizations of all sizes.
3
Statement of Research Problem
Despite the apparent economic centrality and
significance of entrepreneurial activity and the emergence
of entrepreneurship as a legitimate area of academic
inquiry, sound theories and models of entrepreneurship are
sparse. This condition led Wortman (1987) and Bygrave and
Hofer (1991) to the conclusion that the field of
entrepreneurship lacks an adequate theoretical foundation.
The theoretical void limits progression in this nascent
field. Nowhere is this more apparent than in the
fundamental definition of the entrepreneur.
A consensual definition of the entrepreneur remains
elusive (Timmons, 1978; Carland, Hoy, Boulton & Carland,
1984; Olson, 1985; Carsrud, Ohm & Eddy, 1985; Brockhaus &
Horwitz, 1986; Churchill & Lewis, 1986; Low & MacMillan,
1988; VanderWerf & Brush, 1989; Bygrave, 1989; Gartner,
1990; Cunningham & Lischeron, 1991; Bygrave & Hofer, 1991;
Hornaday, 1992; Bull & Willard, 1993; Huefner & Hunt, 1994).
This condition has caused one exasperated researcher to call
for the abandonment of the use of the term entrepreneur
(Hornaday, 1992). Nevertheless, entrepreneurship must be
discernible from other concepts (Hornaday, 1992); otherwise,
meaningful inquiry is jeopardized. The lack of a definition
renders sampling, research replication and generalizations
about entrepreneurs problematic (Sexton, 1987; Johnson,
1990) because there are currently no identified boundaries
4
for discussing entrepreneurial activities (Olson, 1985). An
acceptable definition of entrepreneurship would provide
consistency in sampling frames and unity of inquiry (Low &
MacMillan, 1988), as well as facilitate the evolution of an
integrated conceptual framework in the field (Wortman,
1987).
While this definitional conundrum may be partially due
to the complexity of the phenomenon and the diversity of
perspectives in this multidisciplinary field, the problem of
making distinctions between the entrepreneur and the
professional manager exacerbates the definitional dilemma.
Yet, entrepreneurial activities must be distinguishable from
managerial activities (Penrose, 1968) in the process of
learning more about both the entrepreneur and the manager.
Such distinctions have appeared in the literature. Hoselitz
(1962) traced the theoretical basis for distinguishing
entrepreneurs to Sombart, noting that such a distinction
extends beyond economic roles to possibly include different
motivations and personality types.
In an early conceptual work, Hartman (1959) reviewed
historical discussions about potential differences between
entrepreneurs and managers. Hartman identified the
conceptual bases and advantages of such a distinction,
agreeing with Weber (1917) that the entrepreneur was the
ultimate source of authority within an organization.
Litzinger (1965) refined the distinction, defining an
5
entrepreneur as one who is goal- and action-oriented,
whereas a manager executes policies and procedures to
achieve the goals. Empirical studies have indicated that
managers and entrepreneurs have different management styles,
particularly with regard to decision making style (Carland,
1982; Smith, Gannon, Grimm & Mitchell, 1988; Richard, 1989;
Carland & Carland, 1992; Busenitz, 1992/1993). Delineations
between entrepreneurs and managers, however, remain nebulous
and tend to be grounded in anecdotal descriptions rather
than in rigorous empirical investigation. For instance,
Timmons (1990) described the common conception that a good
entrepreneur is typically not a good manager because the
entrepreneur lacks the requisite experience and management
skill. Alternatively, it is assumed that a manager is not
an entrepreneur because the manager lacks the personal
qualities and orientation to create a new business venture.
Although copious research on the entrepreneur has been
generated, there is insufficient agreement on how an
entrepreneur differs from a manager in a large organization,
a problem partly stemming from the fact that not many
studies have compared entrepreneurs and managers
(Greenberger & Sexton, 1988). The comparative studies which
have been conducted have generated inconsistent results
(e.g., see Brockhaus & Horwitz, 1986; Perry, 1990).
Ginsberg and Buccholtz (1989) recently echoed Gartner's
(1985) cogent observation that empirical studies have not
6
clearly established the extent to which entrepreneurs are
different from other types of business persons, particularly
managers. Few studies have investigated differences in the
two groups in a theoretically, methodologically sound
fashion. For example, most studies of entrepreneurial
psychology have used small sample sizes and convenience
samples (Greenberger & Sexton, 1988). In a review of the
nature of the entrepreneur, Ginsberg and Buccholtz (1989)
noted that the studies were highly fragmented in terms of
sample size, type of population sampled, instrumentation and
analytical technique. The authors concluded that much of
the contradictory results among the studies may be a
function of conceptual and methodological differences.
Confusion in the literature has initiated calls for
additional research, particularly comparative
investigations, in order to definitively identify the
salient features of the entrepreneurial personality (Hoy &
Carland 1983; Sexton & Bowman, 1983; Johnson, 1990; Herron &
Robinson, 1993) and to cultivate theory development in
entrepreneurship beyond the contributions of the seminal
sciences which spawned the field of entrepreneurship
(Bygrave, 1989). Because we still know relatively little
about the entrepreneur (Begley & Boyd, 1987a; Cunningham &
Lischeron, 1991), such efforts would contribute to theory
building in the field. One of the major challenges
confronting entrepreneurship researchers is to develop
7
models and theories based upon solid foundations from the
social sciences (Bygrave & Hofer, 1991).
This study is a response to the challenge for
additional inquiry. Research suggests that there are a host
of psychological, sociological, demographic and economic
factors which influence the decision to become an
entrepreneur (Sexton & Bowman, 1985; Cunningham & Lischeron,
1991; Herron & Robinson, 1993). The psychological traits of
the entrepreneur are a significant element of an overall
model of entrepreneurship (Powell & Bimmerle, 1980; Martin,
1984; Sandberg, 1986; Herron & Robinson, 1993). Moreover,
evidence suggests that managerial style, particularly
decision making, is related to personality (Richard, 1989),
and the personality of entrepreneurs influences the
organizations which they create (Schein, 1983; Kets de
Vries, 1985; Mintzberg, 1988; Chandler & Jansen, 1992; Dyke,
Fischer & Reuber, 1992). Given these observations,
psychological characteristics are the focus of the
investigations in this study.
The central problem which is addressed in this study is
to investigate the psychological predispositions of small
business owner-managers and corporate managers to determine
if there are any distinctive differences. Specifically,
three commonly identified psychological driving forces are
investigated to determine if small business owner-managers
and corporate managers exhibit significant differences.
8
These psychological characteristics are risk taking
propensity, achievement motivation and preference for
innovation. The fundamental research question in this study
is:
Do the psychological predispositions, as evidenced by achievement motivation, risk taking propensity and preference for innovation, differentiate between individuals* decisions to become a corporate manager or small business owner-manager?
Subordinate research questions include:
1. Do risk taking, achievement motivation and preference for innovation interact in their association with the decision to become a small business owner-manager?
2. Do individual demographic factors, age, education, gender and race, as well as the type of organization, influence the association between psychological predisposition and the ownership of a small business?
3. Because of potential variation in types of small business owner-managers, are there differences in the achievement motivation, risk taking propensity and preference for innovation among subsamples of small business owner-managers which are based upon founding motivations and planning practices?
Theoretical Basis for the Research
A host of research has been devoted to developing
psychological theories of the entrepreneur. Elements of
this psychological research have included job
dissatisfaction, motivation, risk taking propensity,
attitudes, intentions, creativity, values, tolerance of
ambiguity and locus of control. As indicated by Wortman
(1987), this area of research in the behavior of
entrepreneurs is a subset of the organizational behavior
9
literature. It is this area of research which provides the
theoretical foundation for this study.
The theoretical underpinning for research in
entrepreneurial characteristics is derived from the field of
psychology. The appropriate theoretical model for studying
individual behavior, however, continues to be a source of
debate in both fields. The central assumption of psychology
that internal dispositions have an important influence on
behavior has been a point of controversy over the past three
decades.
The Determinants of Behavior
The original proposition, the trait model, suggested
that traits existed within the individual and would
influence people to behave relatively consistently in
similar situations. Mischel (1968) marshalled the attack
against the prevailing theoretical and methodological
approach of trait theory by arguing that predicting behavior
from personality traits is arduous because behavior is not
stable over situations and time. Mischel hypothesized that,
with few exceptions, trait-behavior and cross-situational
correlations do not exceed the magnitude of .30. Mischel
cautioned that, to the extent that behavior is situation
specific, demonstrated generalized consistencies are an
impossibility.
There were numerous retorts to Mischel's proposition,
and responses from personality theorists (see Kenrick &
10
Funder (1988), and Chell, Haworth & Brearley (1991) for
comprehensive discussions). Some researchers have argued
that the ensuing debate about whether traits or situations
are the primary source of behavior variance has been a
"pseudo controversy" of little value (Endler, 1973; Endler &
Magnusson, 1976; Carlson, 1984). Nonetheless, the relative
merits of personality models such as traits, psychodynamics,
situationism and interaction continue to be a source of
contention.
Endler and Magnusson (1976) completely and elaborately
presented the characteristics of the aforementioned
personality models. Of the models, trait and situationism
are polar in approach, while the interactionism model
incorporates elements of both. The trait model is based
upon the supposition that traits are the basis for
individual differences, are primary determinants of behavior
and provide a predispositional basis for behavioral
consistencies across different situations. Traits,
therefore, are the basis for analyzing individual or group
differences. Nevertheless, it should be noted that the
trait model does include a recognition of the behavioral
influence of situational factors and does not assume that
individual behavior is consistent in different situations.
Alternatively, the situationalism model focuses upon
the stimuli in situations as the fundamental determinants of
behavior. Situationalism can be described basically as a
11
stimulus-response approach to understanding behavior.
Kenrick and Funder (1988) presented a series of hypotheses
which have been advanced by situationists as problems
associated with tests of consensus, discriminativeness,
behavior foundation and internality with regard to traits
having a behavioral basis. The authors suggested that
available data provide a strong argument against these
concerns. Nevertheless, many situationists, including
social behavior theorists, have not excluded person factors
in their descriptions of behavior.
Interactionism is based on the tenet that behavior is
influenced by the confluence of personality, the situation
and their interaction (Chell et al., 1991). Here,
situational and trait effects are not mutually exclusive.
Instead, the importance of the interaction between person
and situation is emphasized. Behavior is affected by
situations, but an individual also selects situations and
influences the nature of these situations (Endler &
Magnusson, 1976). Researchers have demonstrated how person
and situations interact. Traits: influence behavior in
relevant situations (Allport, 1966; Bern & Funder, 1978); may
change situations (Rausch, 1977); may be more easily
expressed in certain situations (Monson, Keel, Stephens &
Genung, 1982; Price & Bouffard, 1974; Schutte, Kenrick &
Sadalla, 1985); may lead people to choose different
situations (Snyder & Ickes, 1985); and have proved
12
remarkably stable over time (Anderson, 1977; Anderson,
Hellriegel & Slocum, 1977; Anderson & Schneier, 1978;
Epstein & O'Brian, 1985).
Entrepreneurs: Behaviors or Psychological Traits?
Entrepreneurship research can be clustered into three
primary categories: why entrepreneurs act; how they act;
and what happens when they act (Stevenson & Jarillo, 1990).
As in psychology, considerable debate in the field of
entrepreneurship has centered on the relative importance of
the first two of these categories because these particular
research areas require an ability to define who the
entrepreneur is before it can be discerned why and how an
entrepreneur acts. Yet, the value of identifying
entrepreneurs has been criticized (Kilby, 1971; Van de Ven,
1980; Gartner, 1988).
Gartner (1988) delivered the most critical of the
attacks on psychological trait studies of the entrepreneur.
Building on Vesper's (1982) contention that the primary
phenomenon of entrepreneurship is the creation of an
organization, Gartner argued that the study of the
entrepreneur was one step removed from organization
creation. Alternatively, Gartner advocated a behavioral
approach which views the creation of an organization as a
contextual event and focuses upon the organization as the
primary level of analysis. According to this viewpoint,
entrepreneurs should be defined by what they do in
13
organization creation, not who they are. Behavior is a
specific sample of observable actions (Fishbein & Ajzen,
1975). These observable actions of entrepreneurs are the
focus of the proponents of what might be labelled the
"behavioral school". Hence, entrepreneurship may be
understood by focusing upon individual entrepreneurial
activities, processes and outcomes, rather than
characteristics (Chell, 1985).
Carland, Hoy and Carland (1988) provided the rejoinder
to Gartner's thesis, contending that if more knowledge about
small business ventures is the objective, then more must be
learned about the individuals who create and manage them
because the two are inextricably bound. Carland et al.
suggested that researchers who debate the relative
importance of the alleged "trait" or "behavioral" schools
have lost direction provided by the concept of
entrepreneurship because the definitional issue is only an
intermediary step in addressing the question of "why".
Further, the authors argued that research efforts cannot be
limited to a part of the whole because all of the parts and
their interaction must be investigated in order to fully
understand entrepreneurship.
Subsequently, Bygrave and Hofer (1991) and Hofer and
Bygrave (1992) have suggested shifting the focus from the
characteristics and functions of the entrepreneur to a focus
14
on the nature and characteristics of the entrepreneurial
process or system, the primary characteristics of which are:
1. the importance of human volition,
2. change occurring at the individual firm,
3. a change of state,
4. discontinuity,
5. entrepreneurship as a holistic, dynamic and unique
process,
6. the role of numerous antecedent variables, and
7. sensitivity to the initial conditions of these
variables.
The selection of an entrepreneurial model is contingent upon
the information which the researcher desires to emphasize in
selecting different aspects of the entrepreneurial process
(Cunningham & Lischeron, 1991). Yet, a fully descriptive
model of the entrepreneurship process or system must include
the entrepreneur. For example, Martin's (1984) often cited
model of entrepreneurship portrays the decision to initiate
a business as a function of a number of factors, including
the individual's personality. Personality also plays a
central role in the entrepreneurship models of Sandberg
(1986), Greenberger and Sexton (1988), Herron and Robinson
(1993) and Naffziger, Hornsby and Kuratko (1994).
Clearly, situational factors and social function are
integral components of the entrepreneurial process (e.g.,
Shapero, 197 5; Martin, 1984; Greenberger & Sexton, 1988;
15
Herron & Robinson, 1993), but all people will not become
entrepreneurs under comparable circumstances. Some type of
individual predisposition toward entrepreneurship may exist,
and if one operates under the assumption that behavior is
best understood by studying the person and the situation,
then psychological traits and motives should be an integral
part of entrepreneurship research (Johnson, 1990; Carland et
al., 1984; Goldsmith & Kerr, 1991). This does not mean that
situational circumstances are irrelevant, but attention to
personality can help explain why entrepreneurial behavior
differs under comparable situational circumstances.
Therefore, individual personality features are a necessary
(Cromie & Johns, 1983), if insufficient condition, for the
process of entrepreneurship. To understand behavior, one
must look at both elements and their interaction. Shaver
and Scott (1991) proposed that a psychological approach to
new venture creation must involve cognitive processes which
occur within an individual, and counseled that an approach
based on persons, process and choice holds promise for
theoret ica1 deve1opment.
A more complete understanding and definition of the
entrepreneur is to be gained by examining the
characteristics, the behaviors and the interaction of the
two. A comprehensive model of entrepreneurship must
demonstrate how the predispositions and cognition of
entrepreneurs are transformed into action (Shaver & Scott,
16
1991). Few studies have examined the connections between
the psychological predisposition and the individual
behaviors of entrepreneurs, and concomitant organizational
outcomes (Johnson, 1990). While testing all of the proposed
linkages is beyond the scope of this research, this study
may clarify some of the psychological predispositions of
entrepreneurs. Therefore, this study may serve an important
function in providing a foundation for additional research
directed at a comprehensive model of the entrepreneur.
While such a model based solely upon a psychological trait
approach would be poorly specified, so would a model of
entrepreneurship that did not include the primary forces of
human volition, psychological predisposition. In other
words, personality characteristics may be indicative of a
predisposition toward, or potential for, entrepreneurship
(Lachman, 1980).
Streams of Research in Entrepreneur Characteristics
In evaluating a psychological predisposition for
entrepreneurship, this study employs three streams of
research which are evidenced in the classical descriptions
of the entrepreneur. The areas of research are achievement
motivation, risk taking propensity and innovativeness, which
are widely considered to be the classical hallmarks of the
entrepreneur. While a host of psychological traits have
been studied in the entrepreneur, these characteristics are
most habitually cited in descriptions of the entrepreneur.
17
One of the central roles for a business person is
decision making in complex, uncertain circumstances. Risk
taking can be effectively conceptualized as an individual's
orientation toward taking chances in a decision making
scenario (Sexton & Bowman, 1985). Entrepreneurs are
generally believed to have a higher propensity for risk
taking than other groups (Hull, Bosley & Udell, 1980; Sexton
& Bowman, 1983, 1984, 1986). Three different approaches
have been proposed concerning coping with risk in decision
making (Schwer & Yucelt, 1984). The first of these
approaches, expected utility theory, is founded upon
economic principles and the assumption of rationality. The
second is based on information processing and relaxed
assumptions of rationality. The third theory is grounded
primarily in psychology, and is concerned with psychological
effects on the decision making process, such as achievement
motivation. This last approach is the basis for
investigating the propensity for risk taking in this study.
Murray (1938) identified the need for achievement as a
basic need which influences behavior. The extension of need
for achievement to entrepreneurship through a series of
investigations by McClelland (1961, 1965) entrenched the
construct in the entrepreneurship literature. Subsequent
studies have indicated that high achievement motivation is a
salient characteristic of entrepreneurs (Hornaday & Bunker,
18
1970; Hornaday & Aboud, 1971; Komives, 1972; DeCarlo &
Lyons, 1979; Ahmed, 1985).
The last construct, innovativeness, was sparked by the
work of Schumpeter (1934) in classical theories of
economics, and continues to be frequently identified as a
functional characteristic of the entrepreneur (McClelland,
1961; Hornaday & Aboud, 1971; Timmons, 1978; Carland et al.,
1984; Drucker, 1985; Carland, Carland, Hoy & Boulton, 1988;
Gartner, 1990). This stream of literature has demonstrated
that the entrepreneur tends to be more innovative or
creative. Yet, of the literature dealing with the
characteristics of entrepreneurs, the predisposition toward
innovation has been the least empirically investigated.
Significance of the Research
The entrepreneur is the central figure in
entrepreneurship (Lachman, 1980; Carland et al., 1988;
Johnson, 1990; Shaver & Scott, 1991; Herron & Robinson,
1993; Naffziger et al., 1994). Moreover, Cole (1951)
suggested that to study the businessman was to study the
principal figure in economic activity. DeCarlo and Lyons
(1979) elaborated on this proposition by suggesting that the
entrepreneur is the central figure in economic activity.
Given the significance of entrepreneurial activities in
economic outcomes (Kilby, 1971; Birley, 1987; Reynolds,
1987) , encouragement of entrepreneurship is beneficial to
society (Hull, Bosley & Udell, 1980). Kent (1982) posited
19
that entrepreneurship is instrumental in both the supply and
demand sides of the economic growth equation.
The business behaviors of two types of business people,
managers and entrepreneurs, are clearly quite different and
may extend beyond the act of new venture creation. The
genesis for understanding behavioral differences between
entrepreneurs and managers may lie in understanding the
differences in the two groups' psychological
predispositions. Obtained differences in these two groups
have important implications in terms of both theory and
practice for both the field of entrepreneurship and the
field of management.
For the field of entrepreneurship, the potential
significance of the research lies in contributing to the
resolution of the definitional quandary, in understanding
more about venture teams, in understanding more about
organizational growth and in maximizing entrepreneurship
education and assistance programs. The research may
ultimately also have indirect implications for the field of
management. While a focus on the psychological
predispositions of managers is exterior to the scope of this
research, corporate managers are used as a reference group
to ascertain the distinctiveness of small business owner-
managers. Nonetheless, if small business owner-managers are
different than corporate managers, then there could be
implications for researchers who are analyzing phenomena
20
such as the phases of the organizational life cycle and
corporate entrepreneurship. Improved knowledge in all of
these areas may lead to ameliorative prescriptions for the
individual, the organization and the broader society.
Methodology
This study entails the investigation of psychological
variables which are not readily amenable to reliable, valid
direct observation. The study is also intended to be
broadly based and to use a large sample. For these reasons,
a survey design is the chosen research methodology.
Buckley, Buckley and Chiang (1976) proposed that surveys are
best suited to research on attitudes, impressions and
beliefs. Zikmund (1994) identified the behavioral component
of an attitude as that which reflects behavioral
expectations and reflects a predisposition to action. The
survey methodology is also suitable for the research
questions because it has acceptable levels of holism,
precision and external validity (Buckley et al., 1976).
Definition of Terms
The following terms are defined as they are utilized in
this study:
1. Small Business Owner-Manager - As indicated, there is
disagreement over the definition of the entrepreneur.
The use of the term small business owner-manager helps
elude some of the definitional problems associated with
21
the term entrepreneur. A small business owner-manager
is an individual who owns and operates a small
business. New venture creation is not a necessary
prerequisite. Two types of small business owner-
managers (Carland et al., 1984) will be investigated in
this research:
la. Entrepreneur - An individual who owns and operates
a business with the primary goals of profit and
growth and is likely to utilize strategic
management practices. In most other studies, the
entrepreneur is defined as an individual who
founded a new business venture, although other
stipulations have sometimes been added. Because
of the definitional imprecision, the meaning of
the term entrepreneur which was used for each
study is specified in the review of the
literature.
lb. Small Business Owner - An individual who owns and
operates a small business as an extension of
personal goals. The primary goal is family
income. The small business owner views the
business as an extension of his or her
personality.
Intrapreneur - An individual with duties in the context
of a large organization which are considered
entrepreneurial, including: developing internal
22
markets and operating in relatively small, independent
units designed to create, to internally test-market and
to expand improved and/or innovative staff services,
technologies or methods within the organization
(Nielsen, Peters & Hisrich, 1985).
3. Small Business - According to Peterson, Albaum and
Kozmetsky (1986), the Small Business Administration's
definition is most frequently used: A small business
is one which is independently owned and operated, and
which is not dominant in its field of operation.
4. Manager - An individual who holds a position of
responsibility in an organization. This individual's
responsibilities include: supervision of employees or
officers within the organization, protection or
conservation of organizational assets, performance of a
unit of the organization, or involvement in planning
for the organization (Carland & Carland, 1992).
5. New Business Venture- A new organization existing where
none existed before (Gartner, 1985), which, for the
purposes of this study, is an independent entity.
Chapter Summary
This chapter was organized to provide a broad, thorough
overview of the study. First, an introduction to the
significance of entrepreneurship was provided, followed by
the research problem of the study. The theoretical
foundation of the study was presented next. Subsequently,
23
the elements of the significance of the research were
presented. This was followed by an overview of the research
methodology to be used, followed by the definitions of
relevant terms which are used in the study.
Organization of the Research
The research is organized into five chapters. An
introduction and overview of the study including the
statement of the problem, purpose of the research,
terminology, significance of the research and the
methodology of the study were provided in this first
chapter. A review of the literature pertaining to
achievement motivation, risk taking propensity,
innovativeness, entrepreneurial types and individual and
organizational demographic variables are presented in the
second chapter. In the third chapter, the research
methodology and procedure for the execution of the study are
outlined. The fourth chapter contains the analysis of the
data. A discussion of the results, the implications of the
findings, the limitations of the research and directions for
future inquiry are rendered in the fifth, and final,
chapter.
CHAPTER II
REVIEW OF LITERATURE
Researchers have taken varied approaches to the study
of entrepreneurship, employing a multitude of definitions of
the term "entrepreneur", applying different theoretical
assumptions and studying numerous facets of the phenomenon
of entrepreneurship. Primary attention has been devoted to
the individual, the entrepreneur. Cole (1942) initiated a
significant research effort devoted to ascertaining the
motivating forces and characteristics of the entrepreneur.
Subsequently, many researchers have assumed that the process
of entrepreneurship is initiated by an act of human volition
(Bygrave & Hofer, 1991), and thus, the individual
entrepreneur is the nucleus of entrepreneurship (Gasse,
1982; Mitton, 1989). Therefore, the entrepreneur has been
studied as the primary factor in organization creation, as
researchers have sought to discover personality traits and
psychological characteristics which could differentiate
individuals who initiate new ventures from those who do not
(McClelland, 1961; Palmer, 1971; Hornaday & Aboud, 1971;
Brockhaus, 1982; Brockhaus & Horwitz, 1986; Wortman, 1987;
Carsrud, 01m & Eddy, 1985; Gartner, Mitchell & Vesper,
1989) .
24
25
Much of the research in entrepreneurship has been
founded upon the premise that entrepreneurs embody
distinctive personality characteristics which can be
identified (Cooper & Dunkelberg, 1987) and used to indicate
a potential for entrepreneurship (Lachman, 1980). Timmons,
Smollen and Dingee (1985) posited that there are in excess
of twenty personal characteristics which differentiate
entrepreneurs from the general population. Researchers have
also used demographic characteristics to profile
entrepreneurs. These demographic factors have included age,
gender, education, occupation of parents, job displacement
and race. Also, studies have included demographic variables
as potential confounders in the relationship between
personality characteristics and entrepreneurial inclinations
(Schwer & Yucelt, 1984). These factors have been evident in
typologies of entrepreneurs.
This review of the literature is not intended to be
representative of the entirety of the studies of the
psychological nature of entrepreneurs. Nevertheless, even a
cursory gleaning of the entrepreneurship literature
indicates the ubiquity of certain psychological
characteristics. In a comprehensive review of definitions
of entrepreneurship, Long (1983) identified three common
themes: uncertainty and risk, complementary managerial
competence and creativity or innovativeness. According to
26
Long, these characteristics delimit the essential nature of
the entrepreneur.
Psychological Constructs
This review is focused upon three primary streams of
research on variables which have been most frequently
studied in relation to the entrepreneur. These variables
are achievement motivation, risk taking propensity and
innovativeness. These three primary themes are evidenced in
the rich history of theorizing about the entrepreneur (Long,
1983; Carland et al., 1984; Bellu, 1987/1988), and empirical
research has generally supported relationships between these
three psychological constructs and the entrepreneur (Gasse,
1982) . Given the ubiquity of these constructs, it is
proposed that these three variables can be used to specify a
model of the entrepreneur which differentiates small
business owner-managers from managers. The most intensely
researched of these characteristics is achievement
motivation.
Achievement Motivation
The origins of the achievement motivation, or the need
for achievement, construct can be traced to the work of
James (1890), who discussed how the achievement of self-
determined goals results in improved self-regard and a sense
of wellbeing. Fineman (1977) attributed the formalization
of the achievement motive construct to Murray (1938), who
27
identified need for achievement as one of the personality
needs which influences behavior. Murray described
achievement motivation as a desire or tendency to accomplish
tasks expeditiously and/or as well as possible. Murray also
identified achievement motivation as a desire: to
accomplish something difficult, to overcome obstacles and to
attain a high standard, to excel one's self and to rival and
surpass others and to increase self-regard by successfully
utilizing talent.
The work and theory of Murray influenced the research
of McClelland (1961), who was the first to apply theories of
achievement motivation specifically to entrepreneurial and
managerial behavior. According to McClelland,
entrepreneurship is the intervening phenomenon which
transforms need for achievement into economic growth.
Similarly, Meyer, Walker and Litwin (1961) hypothesized that
achievement motivation would seem to be particularly
pertinent in the competitive environment which characterizes
many industrial roles.
In a study of behavior in young men, McClelland (1961)
found that a high need for achievement score was related to
"entrepreneurial" behavior on laboratory tasks, preference
for business occupations when they represent a moderately
high level of aspiration, and occupational status as a
business executive versus specialist or professional in the
United States, Poland and Italy. McClelland concluded that
28
a high need for achievement would influence the self
selection of an "entrepreneurial" position, defined as a
salesman, company officer, management consultant,
fund-raiser or owner of a business.
McClelland (1961) also made comparisons of managers.
In a study of managers and staff specialists in the United
States, McClelland discovered that managers scored
significantly higher on need for achievement than did the
staff specialists. Examining middle level executives and
students of law, medicine and theology in Italy, McClelland
concluded that the middle level managers demonstrated
significantly higher need for achievement than did the
students. Finally, McClelland investigated differences
between managers and professionals in Poland. Here the
managers scored higher in need for achievement than did the
professionals.
McClelland posited that a high need for achievement
predisposes a young person to seek out an entrepreneurial
position in order to attain more achievement satisfaction
than could be derived from other types of positions.
Alternatively, a manager tends to be high in need for power
and lower in need for achievement (McClelland & Winter,
1969). McClelland suggested that those individuals with a
high level of need for achievement tended to exhibit a
certain pattern of role behavior, including:
1. Risk-taking as a function of skill, not of chance,
29
2. Energetic and/or novel instrumental activity,
3. Assumption of individual responsibility,
4. Knowledge of results of decisions, /
5. Money as a measure of results and
6. Anticipation of future possibilities.
Subsequently, McClelland distilled these outcomes associated
with achievement motivation into three main traits: assumes
personal obligation for finding solutions to problems, sets
moderate goals and takes calculated risks to achieve them
and desires explicit feedback pertaining to performance.
McClelland (1965) sought to confirm the 1961 results
with a longitudinal study. McClelland had tested the need
for achievement of 58 students at Wesleyan University in
late 1947. In 1961, the occupational status of 55 of those
students was available. At least for U.S. white college
educated males, the results corroborated the theory that
individuals with a high need for achievement tend to
gravitate toward business occupations of an
"entrepreneurial" nature. McClelland concluded that need
for achievement is a fairly stable personality
characteristic.
Additionally, McClelland attempted to cross-validate
the findings with a sample of 158 additional students to
whom the Thematic Apperception Test (TAT) had been
administered in 1950 and 1951. The results confirmed the
findings that males who were high in achievement motivation
30
tended to seek entrepreneurial business occupations. There
are methodological concerns here, however, because the
testing of need for achievement of the groups was different,
using different and variable procedures, and the latter
group may not have had time to settle into a preferred
occupational position.
Despite the ubiquitous influence of McClelland on
subsequent researchers, some have questioned his findings.
Frey (1984) critiqued the McClelland thesis on a number of
grounds, including empirical validity, particularly noting
that the need for achievement had been assessed from content
analyses of small samples of literature and other artifacts
of culture. Frey also argued that the samples were biased
in terms of size and population representativeness, and that
the interpretation of the data does not confirm that social
factors have a circumscribed impact on the relationship
between need for achievement and entrepreneurial activity.
Also, the TAT has been criticized for low predictive
validity (Klinger, 1966) and low test-retest reliability
(Entwisle, 1972; Miner, 1980). Moreover, these studies did
not actually link need for achievement with the founding or
ownership of a business, the classical hallmark of the
entrepreneur.
Despite the potential limitations on its usefulness,
the work of McClelland has spurred a flurry of analyses
which have included achievement motivation as a variable in
31
studies of the entrepreneur. Selected summaries of these
studies are provided in Table 1. Because of the variation
in samples and instrumentation in this line of research,
care has been taken to explicitly include these
considerations in displaying these studies. The studies
presented here demonstrate the myriad of samples and
instruments used in the study of the achievement motivation
of entrepreneurs. Many researchers subsequent to the work
of McClelland have demonstrated a positive relationship
between achievement motivation and entrepreneurship.
Hornaday and Bunker (1970) undertook a pilot study of
20 males as the first step in a research program to
systematically determine the importance of several
characteristics which had been suggested in previous
research, and to identify and assess additional
characteristics which could be important in identifying the
successful entrepreneur. The researchers used a structured
interview and three objective instruments to gather data.
For the purposes of the study, success was defined as an
individual who had started a business and continued for a
period of at least five years. Using the Edwards Personal
Preference Schedule (EPPS), the researchers found that male
entrepreneurs scored considerably higher than norms on the
achievement scale. Yet, because of the small sample size,
inconsistencies in the selection and application of tests,
and no statistical analysis, the reported results must be
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36
considered inconclusive.
Following the work of Hornaday and Bunker (1970),
Hornaday a,nd Aboud (1971) supplemented the original Hornaday
and Bunker sample with an additional 4 0 "successful"
entrepreneurs to examine the characteristics of successful
entrepreneurs. The authors defined successful entrepreneurs
as those who had founded a new business venture which had
been established for at least five years and had at least
eight employees. Hornaday and Aboud also used a scale from
the EPPS to measure the need for achievement in white and
black men. The results indicated that compared to men in
general, entrepreneurs are significantly higher on scales
reflecting need for achievement. Additionally, on self-
evaluation scales, the entrepreneurs ranked themselves
significantly above average on need for achievement. No
significant difference was discovered by race, and gender
differences were not analyzed.
Subsequently, Komives (1972) posited that entrepreneurs
are high in achievement and decisiveness compared to
population norms. Investigating 20 high technology
entrepreneurs who tended to be successful, Komives
ascertained that these entrepreneurs were indeed high in
achievement motivation and decisiveness compared to
population norms. These findings were inconsistent with an
earlier, comparable study. Schrage (1965), using
McClelland's TAT, found that a sample of 22 research and
37
development scientists did not rank consistently high in
need for achievement. There was no apparent comparison
group. Wainer and Rubin (1969) questioned the validity of
Schrage's findings when they reanalyzed the data with the
same protocols. Nevertheless, resolution of these
discrepant findings is arduous because the studies of both
Komives and Schrage are limited by small sample sizes, and
each used different measures of achievement motivation.
Based upon a study of a group of 29 black
businesspeople who were owners or managers of small
businesses, Durand and Shea (1974) posited that individuals
with high achievement motivation tended to engage in more
business-related activity than those with a low need to
achieve. For the study, the measure of business activity
was adapted from Timmons' (1968) study of entrepreneurial
activities. The results indicated that individuals with a
high achievement motive participated in more entrepreneurial
activities than those with a low achievement motive.
A couple of researchers have investigated the
achievement motivation of business founders in other
countries. Ahmed (1985) studied the achievement motivation
of a group of immigrants from Bangladesh who had founded a
business in the United Kingdom. While not specifically
stated, it appears that those labelled non-entrepreneurs in
this study were managers. Ahmed discovered that
38
entrepreneurs had a higher achievement motivation than did
non-entrepreneurs.
Nandy (1973) studied business founders in two Indian
subcultures in Calcutta. The sample included individuals
who had been in business for at least five years, and
individuals who lived in the area for at least five years
but were not in business. The results indicated that need
for achievement was positively correlated with entry into
enterprise, but was not related to entrepreneurial
competence. Perry, Meredith and Cunnington (1986) also
identified a higher level of achievement motivation of
entrepreneurs compared to the general population of
Australia.
The aforementioned studies of achievement motivation
were primarily limited to men although gender differences
may be significant (Mehrabian, 1968). In a review of the
literature, Watkins (1982) cited only one study of the
motivation of female entrepreneurs. This study was
conducted by Schwartz (1976) of female founders, and
indicated that achievement was a primary motivation. A
couple of subsequent studies have specifically analyzed
women.
Waddell (1983) found no significant differences in the
achievement motivation of female business owners and female
managers, but the female business owners were higher in
achievement motivation than were female secretaries. In a
39
study of 122 minority and nonminority females, DeCarlo and
Lyons (1979) found that female entrepreneurs, defined as
business owners, scored significantly higher on achievement
motivation than did females from the general population.
Also, nonminority female entrepreneurs placed a higher value
on support, recognition, independence and achievement than
did the minority females.
Other studies have shown that need for achievement is
not the most important variable for predicting the
likelihood of starting a business. Frequently, researchers
have studied students who are assumed to be aspiring, or
potential entrepreneurs. Borland (1974/1975) surveyed
students who intended to become entrepreneurs and those who
did not, and found that achievement motivation did not
distinguish between the two groups. Sexton and Bowman
(1983) used the Personality Research Form (PRF-E) to analyze
401 college students. Using a sample of general business
majors, non-business majors and entrepreneurship majors, the
authors found that entrepreneurship majors did not score
significantly differently than other students on achievement
motivation. Yet, the question of whether students' majors
are an appropriate surrogate for aspiring entrepreneurs
limits the usefulness of this study. Some entrepreneurship
majors may not found a business, and some non-
entrepreneurship majors may ultimately found businesses.
40
Potentially more conclusive results were provided by Hull,
Bosley and Udell (1980).
Hull et al. (1980) surveyed business school alumni who
had founded a business and others who had not. The business
owners were subdivided into those who had participated in
start-up and those who had not. The researchers also
categorized the non-business owners into three groups based
upon the likelihood of establishing a business. Hull et al.
found that need for achievement did not indicate a
difference in the likelihood of starting a business. There
were no significant differences among any of the groups.
Comparative Studies of Small Business Owner-Managers
and Corporate Managers. Notably, relatively few studies
have actually been conducted which compare small business
owner-managers and corporate managers on achievement
motivation, 'and the results are mixed. Singh (1970), using
a modified TAT, found no significant differences in
achievement motivation among eight subgroups of Indian
managers and business owners. Cromie and Johns (1983)
compared entrepreneurs, defined as those who had started a
business, with middle and upper level managers in Ireland.
While entrepreneurs scored slightly higher than managers on
achievement motivation, the difference was not statistically
significant. Despite the findings of these two studies, the
preponderance of evidence suggests that entrepreneurs are
higher in achievement motivation than are managers.
41
Schere (1982), using the Manifest Needs Questionnaire,
discerned that entrepreneurs were significantly higher in
achievement motivation than were middle and top level
managers. These results confirmed the findings of Hines
(1973), who investigated a group of businesspeople in New
Zealand. The researcher discovered that the entrepreneur,
someone who owns a business, had higher need for achievement
scores than did the engineers, accountants or middle
managers. Lachman (1980) identified a discriminant
function, including 14 achievement motivation items, which
successfully discriminated between individuals who started a
new enterprise and those who were general managers and
presidents of firms. Subsequent studies have corroborated
the hypothesis that entrepreneurs are higher in achievement
motivation than are managers (Ray, 1981/1982; Begley & Boyd,
1987a). These findings tend to support the McClelland and
Winter (1969) proposition that managers who work for someone
else tend to be high in need for power and significantly
lower on need for achievement than entrepreneurs.
Achievement Motivation and Entrepreneurial Success.
In addition to studies of the correlations between
achievement motivation and the decision to become an
entrepreneur, some researchers have pursued the
investigation of potential associations between achievement
motivation and performance. These studies are outlined in
Table 2. A host of studies have demonstrated that
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45
achievement motivation is associated with entrepreneurial
success. Perhaps the most fundamental indicator of
entrepreneurial success is the founding of the business.
Kemelgor (1985) discovered that aspiring entrepreneurs who
had been successful in venture start-up were higher in
achievement motivation than were aspiring entrepreneurs who
had failed in start-up. Potentially, this relates to the
Durand and Shea (1974) findings concerning the business
activities of those who are higher in achievement
motivation.
Wainer and Rubin (1969), using the TAT, determined that
a high need for achievement and need for power were
correlated with higher firm performance; however, need for
achievement alone provided superior predictive efficiency.
The link between achievement motivation and firm performance
was corroborated by Morris and Fargher (1974), who found
that the achievement motivation and creativity of Australian
owner-managers were associated with firm performance.
Higher scores on either variable were associated with
success, and low scores on both were associated with static
or declining businesses.
Begley and Boyd (1987a) studied the psychological
characteristics of entrepreneurs (founders) and small
business managers (nonfounders) which were predicted to be
associated with firm performance. Founders scored
significantly higher than nonfounders on achievement
46
motivation, risk taking propensity and tolerance for
ambiguity. In terms of performance, a high need for
achievement was associated with high return on assets.
Smith and Miner (1984, 1985) studied fast- and slow-
growth entrepreneurs. Successful entrepreneurs, those
labeled fast-growth, scored significantly higher on need for
achievement motives than did the slow-growth entrepreneurs
and non-entrepreneurs. There were no significant
differences between the slow-growth entrepreneurs and non-
entrepreneurs. Smith, Bracker and Miner (1987) extended
these research findings by discovering a significant
positive correlation between achievement and measures of
company success. Despite these results, a caveat to this
series of research efforts should be noted. All three
studies used Miner's (1982) limited domain theory of
individual behavior which is based upon McClelland's (1961)
theory of need for achievement. While the two theories may
be linked, and both use projective measures of achievement,
direct comparison of investigations is not possible (Smith &
Miner, 1985).
The study of the relationship between need for
achievement and successful entrepreneurial activity has been
cross-culturally extended. Singh (1978), in a longitudinal
study of farmers in India, found that farmers who had a
relatively high need for achievement continued to produce
more agricultural output than did farmers with a low need
47
for achievement. Singh (1978) posited that achievement
motivation was a stable characteristic. Also, Sutcliffe
(1974) investigated need for achievement and entrepreneurial
success of Palestinian farmers in Jordan and Israel. The
researcher measured successful entrepreneurial behavior by
assessing agricultural innovativeness and income. The need
for achievement did not differentiate between successful and
unsuccessful farmers. In a study of Australian
entrepreneurs, Perry, Meredith and Cunnington (1986)
concluded that achievement motivation is important for
venture creation, but does not affect subsequent growth.
Carsrud and 01m (1986) posited that the reason for the
inconsistent results was that achievement motivation is a
multidimensional construct, but researchers have frequently
used unidimensional instruments for measurement. The
researchers reported the results of two studies which used
the Work and Family Orientation Inventory (WOFO), which has
three subscales. In the first study, all three WOFO scales
were strong predictors of sales for male business owners who
were in the one to forty-nine percent ownership category.
In the second study, no predictive ability of the WOFO was
demonstrated for female business owners.
Summary of Achievement Motivation. In summary, the
achievement motivation of the entrepreneur has been widely
but inconclusively investigated. While it appears that
entrepreneurs exceed managers in achievement motivation, the
48
findings are equivocal. Brockhaus and Horwitz (1986)
concluded that a definitive relationship between achievement
motivation and entrepreneurship had not been demonstrated.
The assumption that the entrepreneur is higher in
achievement motivation than the corporate manager has not
been demonstrated. Johnson (1990) suggested that the
inconclusiveness of the theorized relationship was a
function of the variability of the samples, different
operationalizations of the achievement motive and convergent
validity problems in instrumentation. It should be noted
that the cross-cultural studies of achievement motivation
are also susceptible to methodological concerns such as
conceptual equivalency, particularly with the use of
projective measures of achievement motivation. Johnson
concluded that the lack of definitive empirical results was
more likely a result of flawed research methodology than the
absence of a positive relationship.
Maybe the most pervasive limitation in this stream of
research has been the variability and the absence of
demonstrated validity, particularly convergent validity, of
the measures of achievement motivation. Evidence suggests
that achievement motivation measures suffer from poor
construct validity and cannot be used interchangeably. For
instance, Weinstein (1969) reported only two statistically
significant correlations in 21 analyses of pairs of
achievement measures. Fineman (1977) found only 22
49
significant correlations in 78 analyses of achievement
measures. In addition to low intercorrelation of measures,
Klinger (1966) raised concerns over the low internal
consistency and minimal test-retest reliabilities of the
measures, a concern reiterated by Weinstein (1969). Of
particular concern is the TAT. McClelland (1961)
acknowledged that situational differences from occasion to
occasion reduced the reliability of the TAT, as did the
sensitivity of product-moment correlations to large shifts
in score. Entwisle (1972), noting the unreliability of the
TAT, actually warned against its further use. According to
Entwisle, studies using the EPPS may be more useful because
the EPPS is more reliable than the TAT.
Sampling frames have also been problematic. VanderWerf
and Brush (1989) suggested that it was tempting to conclude
that there was no relationship between entrepreneurship and
achievement motivation. Instead, the authors scrutinized
the sample selection criteria of the Schrage (1965), Wainer
and Rubin (1969) and Begley and Boyd (1987a) studies. When
recategorized, the results of the studies which attempted to
correlate the achievement motivation of the entrepreneur
with company growth rate neatly followed the expectations of
an a priori investigation. Nonetheless, the research
linking achievement motivation with new venture creation is
more conclusive than that which links achievement motivation
to entrepreneurial performance (Herron & Robinson, 1993).
50
Clearly, more research is necessary to prove a definitive
link between achievement motivation and entrepreneurship.
Propensity for Risk Taking
Interest in decision making processes has led
researchers to study individual orientations toward risk in
decision making scenarios (Kusyszyn, 1973). Much of the
research in risk orientation is based upon the premise that
an individual's risk orientation is pervasive, affecting
perceptions and behaviors. Studies generally support the
notion that risk taking is predispositional and not simply a
situational variable (Plax & Rosenfeld, 1976; Jackson,
Hourany & Vidmar, 1972). Jackson et al. (1972) identified
four dimensions of risk taking: monetary, physical, ethical
and social. While the authors found evidence supporting
this multiplicitous risk model, there was also strong
evidence for an underlying dimension of risk taking. It is
this dimension, a general propensity for risk taking, that
has been of interest to researchers of entrepreneurs.
McClelland (1961) believed that a high need for
achievement was accompanied by a moderate risk taking
propensity. Therefore, because the entrepreneur was high in
need for achievement, it follows that the entrepreneur would
also have a predisposition toward moderate levels of risk.
Notably, the task roles of the entrepreneur and the manager
both entail risk taking because both make decisions under
conditions of uncertainty. Yet, entrepreneurs are generally
51
believed to take more risks than do managers (Masters &
Meier, 1988) because the entrepreneur actually bears the
ultimate responsibility for the decision (Gasse, 1982). In
fact, the earliest identified entrepreneurial characteristic
was risk taking. In possibly the first reference to the
entrepreneur, Cantillon (circa 1700) differentiated between
a capitalist and an entrepreneur, portraying an entrepreneur
as the individual who assumed the risk for the firm (Kilby,
1971), a perspective echoed by Mill (1848). Mill posited
that risk bearing was the quintessential feature which
distinguished an entrepreneur from a manager.
Knight (1921) further refined the theory of the
entrepreneur as a manager of uncertainty. Knight viewed the
entrepreneur as an individual who dealt with the problem of
what to do and how to do it under conditions of imperfect
knowledge. The reward was profit for exercising what Knight
referred to as the ultimate responsibility which cannot be
insured, capitalized or salaried. While managers work under
relatively detailed employment contracts, the entrepreneur
faces a less structured and more uncertain set of
possibilities (Bearse, 1982).
Palmer (1971) proffered that risk assessment and risk
taking are the primary elements of entrepreneurship. This
view is widely held as evidenced by the ubiquity of risk
considerations in various definitions of the entrepreneur.
Atkinson (1957) proposed that need for achievement was
52
associated with a preference for moderate probabilities of
success and also included the expectancy of success and the
perceived consequences of success. Brockhaus (1982)
suggested that the two primary considerations in becoming an
entrepreneur may be the perceived degree of risk and the
perceived likelihood of failure associated with a new
venture that is financially unsuccessful. Brockhaus argued
that there were three important elements of entrepreneurial
risk: the general risk taking propensity of an
entrepreneur, the perceived probability of failure for a
given new business venture and the perceived consequences of
failure. Therefore, truly understanding the risk attitudes
of entrepreneurs would require attention to all of the
aforementioned elements, but Brockhaus noted the
difficulties of studying these variables and their
interactions. A good beginning could be to learn more about
general risk taking propensity because it could affect other
elements of risk taking, particularly expectancies.
One of the earliest studies of risk taking vis-a-vis
entrepreneurs was that of Meyer, Walker and Litwin (1966).
The entrepreneurial groups indicated a preference for
intermediate risk. This confirmed McClelland's (1961)
hypothesis that individuals who are high in achievement
motivation prefer intermediate levels of risk. This
hypothesis was also confirmed by Litzinger (1963), whose
less entrepreneurial groups showed a higher preference for
53
extreme risk, very safe and/or highly speculative. It
should be cautioned, however, that the samples in these
studies may not be indicative of entrepreneurs. Meyer et
al. compared shop operations managers (entrepreneurial) and
staff specialists (non-entrepreneurial), whereas Litzinger
compared centralized branch bank managers (categorized as
less entrepreneurial) and decentralized managers (labelled
more entrepreneurial). These studies appear to have been
comparing different types of managers, not comparing
entrepreneurs with any other group.
Subsequent studies have produced mixed conclusions.
Summaries of this research stream are presented in Table 3.
Again, because of the variation in samples and
instrumentation, careful attention has been given to
outlining the studies for the purpose of comparison. Some
studies have indicated no significant differences in the
risk taking propensities of entrepreneurs as compared to the
general population. The most widely cited studies are those
of Brockhaus.
Brockhaus and Nord (1979) analyzed 31 entrepreneurs who
had initiated a new venture within the past three months, 31
managers who had transferred to another organization and 31
managers who had been promoted in their organizations during
the same period of time. Using the CDQ, the authors found
no significant differences in risk taking propensity among
the three groups. Moreover, there were no differences in
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58
risk taking between any of the three groups and population
norms as reported by Kogan and Wallach.
Brockhaus (1980a), using the Kogan-Wallach Choice
Dilemmas Questionnaire (CDQ), discovered that risk taking
propensity failed to distinguish entrepreneurs from
managers. Both groups evinced moderate levels of risk
taking. The results substantiated the Brockhaus (1976)
findings that entrepreneurs did not differ in their
propensity for risk taking from the general population, nor
from managers. Furthermore, Brockhaus (1980b), using the
same instrument, also discovered that risk taking propensity
failed to distinguish between successful and unsuccessful
entrepreneurs.
Ray (1986) raised concerns over the findings of
Brockhaus (1980a), noting two problems: (1) the variability
in the Brockhaus sample and (2) the problems associated with
the Wallach and Kogan questionnaire. Ray suggested that
because of the variability in the sample, issues of socio-
economic class, type of firm and education level could have
limited the validity and generalizability of the Brockhaus
results. Moreover, according to Ray, the CDQ is
ethnocentric and relies on projected assessments of risk
which may not provide a valid indication of an
entrepreneur's risk taking behavior.
Other researchers have questioned the CDQ. Cartwright
(1971) criticized the practice of summing the scores on
59
individual CDQ items because the CDQ does not measure a
unitary disposition. Therefore, because the CDQ cannot be
assumed to measure a general disposition to take risks, its
use for such purposes may be misleading. In fact, Brockhaus
(1980a) had summed the scores on the individual items of the
CDQ, leading one to query the validity, or at least, the
meaning of the findings. Cartwright cautioned that the
significance of research findings is contingent upon the
meaning that can be attributed to the choices.
Higbee (1971) raised additional concerns about the CDQ.
Higbee determined that people classified as high or low risk
takers on the CDQ did not differ in their actual risk taking
behavior on tasks. Potentially, this is because respondents
are asked to make decisions for another person, not for
themselves (Shaver & Scott, 1991). Higbee suggested that
the CDQ might be a more appropriate indicator of
anticipated, rather than actual, riskiness under complex
decision making conditions. Yet, this evaluation may not
even be correct given that choice shift makes the CDQ
theoretically inappropriate for measuring risk taking
propensity (Shaver & Scott, 1991). Notably, all of the
aforementioned studies used the CDQ, raising the dilemma
that the results are an artifact of measurement.
Nonetheless, other researchers, using different measures of
risk taking, have supported the supposition that
60
entrepreneurs are not significantly unique in their
propensity for risk taking.
Peacock (1986) used an adaptation of the Opinion
Questionnaire to measure risk taking. The researcher found
no significant differences in the risk taking patterns of
successful and unsuccessful entrepreneurs. Both groups
evidenced moderate risk taking patterns.
Masters and Meier (1988) discerned that owners of small
businesses and the managers of small businesses did not
significantly differ with regard to risk taking propensity,
and there were no significant differences in risk taking
among males and females. In another study, Litzinger (1965)
studied the motel industry and found that the two groups,
motel owner-operators and managers in five Arizona cities,
did not differ in terms of riskiness per se, nor in the
propensity of risk preference toward taking extreme or
intermediate risks. Litzinger, however, assessed risk using
an investment risk scenario, and the reliability and
validity of the measurement was not demonstrated. In fact,
the author stated that the risk weights "provided a rough
relative measure to distinguish relative risks inherent in
the various categories" (p. 270).
Others have discovered a higher propensity for risk
taking among entrepreneurs, particularly when confronted
with business risk (Ray, 1986), but moderated by business
experience, age, education and type of business (Schwer &
61
Yucelt, 1984). Colton and Udell (1976), in a study of
university alumni, discerned that risk taking, along with
creativity and flexibility, is a better indicator of the
likelihood of starting a business than is achievement
motivation. Research has also shown that entrepreneurs
evince low uncertainty avoidance irrespective of culture
(McGrath, MacMillan & Scheinberg, 1992). Therefore,
entrepreneurial attitudes toward risk in decision making may
not be bound by culture.
A research program by Sexton and Bowman (1983, 1984),
using a different test instrument than Brockhaus (1980a,
1980b), showed that significant differences in risk taking
propensity existed between entrepreneurship majors and other
business majors. Also, the researchers developed a modified
test instrument based upon the Jackson JPI/PRF-E, which
included measurement of those traits which had previously
been found to be statistically significant. Here,
entrepreneurship majors scored significantly higher in risk
taking than did business administration majors and non-
business majors.
Sexton and Bowman (1985) concluded from their series of
research efforts that a higher propensity for risk taking
was a characteristic which delineated entrepreneurs from
managers. Further evidence was provided for this assertion
by Sexton and Bowman (1986), who corroborated that
entrepreneurship students have a higher propensity for risk
62
taking than do business students. Moreover, female
entrepreneurs scored significantly higher in risk taking
than did female managers.
Hull et al. (1980) used a four-item risk questionnaire
and found that individuals with at least some ownership in a
business scored significantly higher in risk taking than
those individuals who had no ownership. Moreover, those who
were involved in the creation of a new venture evinced
higher risk taking than owners who were not involved in
start-up. This finding was confirmed by Begley and Boyd
(1987b) who determined that founders had a higher risk
taking propensity and tolerance for ambiguity than did the
nonfounders who were managing the small business. Others
have corroborated that entrepreneurs take moderate or higher
risks as compared to non-entrepreneurs (Liles, 1974; Broehl,
1978) .
Summary of Risk Taking. In summary, while the subject
of risk taking is pervasive in conceptual discussions of the
entrepreneur, the empirical evidence concerning the risk
taking propensities of entrepreneurs is mixed. Despite the
attention to the risk attitudes of entrepreneurs,
researchers are undecided about the role of the risk taking
propensity of entrepreneurs (Brockhaus, 1987). As with
achievement motivation, researchers have used widely varied
definitions of the entrepreneur and measures of risk taking
in the investigations. Many of the researchers have relied
63
upon the CDQ, an instrument that has been characterized as
dubious in reliability and validity, to measure risk taking.
The same is true of conceptual discussions of the
entrepreneur. Palmer (1971) suggested that the necessity of
making decisions under conditions of uncertainty is a
relatively consistent element of the entrepreneurial
function; therefore, an individual's willingness to deal
with uncertainty appears to be an appropriate measure of
entrepreneurial potential. Yet, authors are not unanimous
in this view. Schumpeter (1934) posited that the burden of
risk was inherent in ownership, and because entrepreneurs
were not necessarily owners, the propensity for assuming
risk should not be included as an entrepreneurial trait.
Instead, according to Schumpeter, the central characteristic
of entrepreneurship is innovation.
Preference for Innovation
Innovation appears repeatedly in the academic lexicon
concerning the entrepreneur. In the entrepreneurship
literature, as in the literature concerning organizational
innovation, the terms creativity and innovation are
frequently used synonymously. Any distinction between
innovation and creativity may be the result of emphasis
rather than of substance (Mumford & Gustafson, 1988; West &
Farr, 1990). There is broad agreement that a common set of
personality characteristics describe creative people (Barron
& Harrington, 1981), resulting in calls for more attention
64
to individual and psychological perspectives in studying
innovation (West & Farr, 1989). West and Farr (1989)
described individual innovation as the implementation of new
and different objectives, methods, working relationships and
skills.
Drucker (1985) defined systematic innovation as the
purposeful and organized search for changes, and the
systematic analysis of the opportunities such changes might
offer for economic or social innovation. Drucker advised
that systematic innovation requires monitoring seven sources
for innovative opportunity. Four of these sources are
endogenous to the organization or the industry: the
unexpected, incongruity, process needs and changes in
industry or market structure. The remaining three sources
are exogenous to the organization: demographic changes,
changes in perception, mood and meaning and new knowledge.
Drucker noted that none of these seven areas is inherently
more important or productive than the others.
Schumpeter's (1934) view of entrepreneurial innovation
is rooted in the classic theories of economists such as Say
and Marshall (Hornaday, 1992). Schumpeter hypothesized that
innovation was the single constitutive entrepreneurial
function (Kilby, 1971). This distinction, according to
Schumpeter, separated acts of entrepreneurship from the more
common managerial activities which are non-entrepreneurial.
Entrepreneurs innovate by uniquely combining means of
65
production, by discovering new products, markets or methods
of manufacturing or distribution, by identifying new sources
of material or by generating new forms of organization
(Schumpeter, 1934). These types of innovation are the
essential results of entrepreneurial activities (Zaltman,
Duncan & Holbek, 1973). According to Schumpeter,
entrepreneurs organize new ventures, then become owner-
managers when the business is established. Nonetheless,
because entrepreneurs are confronted by numerous challenges
and problems, innovativeness in problem solving is a major
issue (Brockhaus & Horwitz, 1986).
Drucker (1985) actually defined entrepreneurship as
innovation in a business setting as the entrepreneur
generates new capacity for wealth from limited resources.
Drucker likened innovation to Say's definition of
entrepreneurship, stating that both change the yield of
resources. According to Drucker, innovation is the specific
instrument of entrepreneurs; the means by which they exploit
change as an opportunity for a different business or a
different service. From this perspective, not all business
owners are entrepreneurs if they do not create new
satisfaction or stimulate new consumer demand. Likewise,
members of large organizations may be entrepreneurs if they
do create new satisfaction or consumer demand.
In the literature, innovation remains a frequently
identified functional characteristic of entrepreneurs (e.g.,
66
McClelland, 1961; Hornaday & Aboud, 1971; Timmons, 1978;
Brockhaus, 1982; Carland et al., 1984; Corman, Perles &
Vancini, 1988; Gartner, 1990). Hornaday (1992) included
innovation as one of the three dimensions of entrepreneurial
activity, along with organization creation and profit
seeking. Timmons (1978) suggested that creativity and
innovation were conditions inherent in the role of
entrepreneurship. Timmons (1990) noted that managers and
entrepreneurs are comparable in general management skills,
business know-how and networks. It is creativity and
innovation which separate the two.
Olson (1985) included invention, an activity analogous
to innovation, as a primary entrepreneurial activity. This
contention was intensified by Carland et al. (1984), who
proposed that innovation was the critical factor in
distinguishing entrepreneurs from managers and small
business owners. Swayne and Tucker (1973) also believed
that entrepreneurs are more innovative than managers. In
fact, innovation has been the integral component in the
definition of the entrepreneur proposed by a number of
theorists (see also, Hagen, 1962; Longnecker & Shoen, 1975;
Harwood, 1982; Siropolis, 1986). Hornaday (1992) deftly
illustrated that while innovation is a necessary element of
entrepreneurship, it is insufficient alone to fully
circumscribe entrepreneurial behavior because of the broad
parameters of the function. Despite the often stated
67
significance of creativity and innovation vis-a-vis
entrepreneurs, relatively few studies have empirically
investigated the proposed relationship. These studies are
summarized in Table 4.
Some promising research has been conducted which was
based upon Kirton's (1976, 1987, 1989) Adaption-Innovation
(KAI) Theory, which elucidates different cognitive styles of
creativity, problem-solving and decision making in the
context of organizations. Kirton's theory focuses upon the
style by which people create, solve problems and make
decisions. The individual's style is based on a continuum
with extreme adaption at one pole and extreme innovation at
the other pole. Innovators are more likely to change the
context of the situation in generating solutions, to
generate novel solutions, to prefer less structured work
environments and to focus on effectiveness rather than
efficiency.
A series of studies using the KAI have been conducted
in organizations. Managers from departments that focus on
efficiency and internal processes such as production and
accounting have more adaptive KAI scores than the population
mean (Thomson, 1980; Kirton, 1989; Kirton & Pender, 1982;
Foxall, 1986; Foxall, Payne, Taylor & Bruce, 1990; Gul,
1986; Holland, 1987). Alternatively, managers from
departments where goals do not focus upon efficiency, and
which require more boundary spanning such as sales,
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marketing and planning, tend to exhibit more innovative KAI
scores (Kirton, 1980, 1987, 1989; Kirton & Pender, 1982;
Foxall, 1986; Foxall, et al., 1990; Thomson, 1980; Clapp &
DeCiantis, 1989; Ettlie & O'Keefe, 1982; Keller, 1986;
Keller & Holland, 1978; Lowe & Taylor, 1986).
Some researchers have used the KAI to study
entrepreneurship. For instance, Dewan (1982) used the KAI
to study entrepreneurs and managers in Iran and India. The
results indicated that entrepreneurs in the two countries
tended to be more innovative than comparable managers. Both
groups were more innovative than government officers.
Goldsmith and Kerr (1991) sought to apply KAI Theory to
entrepreneurship to determine if the KAI could be useful in
predicting entrepreneurial tendencies. The results
indicated that entrepreneurship attracts people who tend to
be more innovative in adaption-innovation terms. The
significance of their findings is, however, tempered by the
fact that they used a relatively small sample (N=34) of
students in an undergraduate entrepreneurship class, as
compared to other students and the population average.
Buttner and Gryskiewicz (1993) actually used the KAI to
compare entrepreneurs, those who founded, owned and actually
managed the business, to managers. The authors concluded
that the entrepreneurs were significantly more innovative
than the managers of large organizations. In sum, even
though the validity and factor structure of the KAI have
71
been questioned (Torrance & Horng, 1980; Payne, 1987;
Goldsmith & Matherley, 1987), these studies suggest a
discernible prevalence of innovativeness in the
psychological predisposition of entrepreneurs. Other
studies provide concurring evidence.
Kets de Vries (1977) conducted in-depth interviews with
40 entrepreneurs. The researcher found that entrepreneurs
are innovative, taking novel approaches to situations during
the course of conducting their business. In two
investigations, Sexton and Bowman (1983, 1984) empirically
verified de Vries' supposition using students as "potential
entrepreneurs" and "potential managers". Entrepreneurship
students scored significantly higher in innovativeness than
general business majors in both studies, leading the authors
to conclude that innovativeness was one of the
characteristics which differentiated the aspiring
entrepreneur from his or her aspiring corporate counterpart.
These results have been further supported by Robbins
(1986/1987), who found that entrepreneurs scored
significantly higher than managers on preference for
innovation.
Carland, Carland, Hoy and Boulton (1988), in a study of
small business founders, investigated the preference for
innovation of two groups based upon the work of Schumpeter
(1934) and extended by Carland et al. (1984). Entrepreneurs
found a business principally for profit and growth, utilize
72
strategic management practices and tend to display
innovative behaviors. Alternatively, small business owners
found a business primarily as an avenue of personal goal
attainment and family income. The researchers discovered
that the entrepreneurs demonstrated a significantly higher
preference for innovation than small business owners. No
significant differences were discovered for achievement
motivation, social status or power. This confirmed an
earlier study by Carland (1982) which used the same owner-
manager distinctions. Carland observed no differences in
achievement needs, social status or power, but the
entrepreneurial venture owners exhibited a higher preference
for innovation than the other group.
Smith and Miner (1983) discovered that founders of
rapidly growing firms ranked significantly higher in
personal innovation than individuals in managerial
positions. Subsequently, Smith and Miner (1984) found that
entrepreneurs expressed a desire to introduce novel,
innovative or creative solutions. Both of these studies
support the widely held assumption that entrepreneurs tend
to be more innovative in their predispositions than do their
corporate counterparts.
Brockhaus and Horwitz (1986) believed that research
supports the contention that entrepreneurs are creative, but
not necessarily more innovative than managers. Yet,
research indicates that the career patterns of entrepreneurs
73
are circumscribed by opportunities for creativity and
innovation (Pickel, 1964; Collins & Moore, 1964; Bendit,
1970; Lippitt & Schenck, 1972). Alternatively, managers1
careers tend to be anchored by competence and efficiency
(Schein, 1975).
Summary of Preference for Innovation. The research
which investigates the innovativeness or creativity of the
entrepreneur is limited in quantity and diversity as
compared to the study of achievement motivation and risk
taking. Potentially, this sparsity is a function of the
relatively recent emphasis on innovation in the organization
science literature. Yet, this line of inquiry holds promise
for furthering understanding of the entrepreneur. Tyler
(1978) argued that creativity is a function of recognizing
possibilities. In a business context, the entrepreneur is
unsurpassed in recognizing possibilities and opportunities.
Interrelationships Among Achievement Motivation. Risk Taking
and Innovativeness
Linkages Between Risk Taking and Achievement
Motivation. Numerous studies have explored the
interrelationships of achievement motivation and risk
taking. Many of these studies have been largely based upon
the work of Atkinson (1957). Atkinson demonstrated that a
risk situation where the chances of success are
approximately even is most attractive to a person who is
strongly motivated to achieve. Atkinson (1964) believed
74
that high achievers prefer situations of intermediate risk,
while low achievers prefer relatively low or high risk
situations. These propositions have been supported in
empirical studies.
In a study of school children, McClelland (1958) found
that achievement motivation was significantly related to the
tendency to prefer moderate rather than extreme risks on a
ring toss game. In separate studies of college students,
Atkinson and Litwin (1960), Atkinson, Bastian, Earl and
Litwin (1960) and Litwin (1958) found that high need for
achievement was related to a preference for intermediate
level risks in game situations. Meyer, Walker and Litwin
(1961) studied two groups of managers labelled entrepreneurs
and non-entrepreneurs based upon the initiation of
decisions, individual responsibility assumed for the
decisions and the amount of risk the job entailed. The
"entrepreneurs" scored significantly higher in need for
achievement than did the non-entrepreneurial specialists,
and the "entrepreneurial" managers tended to prefer
intermediate odds in risk taking.
Mehrabian (1968) posited that the level of achievement
motivation affected an individual's attitude toward the
outcomes of risky situations, and therefore, the
individual's proclivities toward risk. The researcher
stated that high achievers are individuals who have a
stronger motive to achieve relative to the motive to avoid
75
failure, while alternatively, low achievers have a stronger
motive to avoid failure relative to their motive to achieve.
Positive correlations between achievement motivation and
risk taking propensity have also been shown by Ahmed (1985).
Linkages Between Risk Taking and Innovativeness.
Studies of the relatedness between risk taking and
innovation are sparse and mixed. Drucker (1985) believed
that innovation was inherently risky. He also believed that
successful innovators are conservative and not "risk-
focused", but "opportunity-focused". Nonetheless, it has
been empirically demonstrated that Kirton's innovators are
more likely to take risks than are the adaptors (Goldsmith,
1984, 1986, 1989). In the decision making, problem solving
context where the individual was innovative, Kirton (1986)
described the core characteristics of creative style as
self-confident, risk taking, sensation seeking, impulsive,
original and non-conformist. The resolution of this
theoretical discrepancy may lie in the multiplicitous
concept of creativity.
Goldsmith (1987) hypothesized that there may be two
dimensions of creativity, ability and style, and individuals
may differ on both dimensions. In fact, pure measures of
creative ability and creative style might be orthogonal.
Goldsmith used data from 96 college students to blend
theories of organizational decision making and problem
solving with creativity, and to test this supposition.
76
Using correlations and factor analysis of five measures, one
specifically for risk taking, Goldsmith found that risk
taking is related to creative style where equally creative
people could have different inclinations to take risks.
Therefore, risk taking could be included in a list of
descriptive adjectives for creative style which includes
intuitive, confident, curious, imaginative, original and
adventurous (Yarnell, 1971; Barron & Harrington, 1981).
Nevertheless, the results of this study are limited by the
sample, and the findings can only be considered tentative.
Howell and Higgins (1990) also investigated the
relationship between innovativeness and risk taking as
personality factors which influence innovation champions.
The innovation literature has likened innovation champions
to intrapreneurs and entrepreneurs (Collins & Moore, 1970;
Maidique, 1980; Pinchot, 1985) and described champions as
risk takers (Schon, 1963; Cox, 1976). Howell and Higgins
found that champions were significantly higher in
achievement, risk taking and innovativeness. Innovativeness
was significantly intercorrelated with risk taking, as was
innovativeness and achievement (p < .01). Therefore, there
appears to be a connection between creativity or
innovativeness and risk taking.
No studies in entrepreneurship have investigated the
interaction between innovation and risk taking in explaining
the predisposition of the entrepreneur. Ray (1986) called
77
for such research. Ray believed that innovation inherently
involves considerable risk, particularly when business
behavior is deeply rooted in cultural norms.
Linkages Between Achievement Motivation and
Innovativeness. Morris and Fargher (1974) extended the
traditional study of the effects of achievement motivation
on entrepreneurship by including a measure of creativity as
an additional correlate. The authors proposed that high
achievement drive and its relationship with business success
is mediated by a cognitive style which generates flexible,
creative ways of dealing with problems. According to the
researchers, this cognitive style is conceptually analogous
to creativity or innovativeness. While both achievement
motivation and creativity were associated with performance
of small business under the control of the owner-manager,
the nature of the relationship between achievement
motivation and creativity was not specifically tested.
Barron and Harrington (1981), in a review of the
creativity literature, discerned that there was a definitive
set of personality characteristics associated with
creativity irrespective of field of endeavor. Among these
characteristics was a concern with work and achievement.
While the potential linkage between achievement motivation
and innovativeness is intuitively and conceptually
appealing, scant empirical evidence of the relationship
exists.
78
Individual and Firm Demographic Characteristics
The demographic characteristics of both the individual
and the firm are of importance in this study. The
demographic characteristics of individual entrepreneurs have
generated substantial research. Summaries of the major
propositions concerning the demographic characteristics of
the entrepreneur are outlined in Table 5. The age of the
entrepreneur at the time of new venture creation has been of
particular interest.
Age
In general, entrepreneurs have been demographically
characterized as between the ages of 25 and 40 when the
decision to become an entrepreneur is made (Mayer &
Goldstein, 1961; Shapero, 1971; Howell, 1972; Cooper, 1973;
Liles, 1974). Yet, Susbauer (1969) discovered that the age
of the high technology entrepreneurs in his study did not
significantly deviate from the age distribution of the
general population, who were between the ages of 25 and 60.
Gasse (1982) believed that the age at which new ventures are
initiated is widely dispersed.
Education
The education level of the entrepreneur has been of
research interest because of the implications of training
for the entrepreneur. Generally, entrepreneurs appear to be
better educated than the general population, but less
educated than managers (Collins & Moore, 1970; Howell, 1972;
79
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Brockhaus & Nord, 1979; Brockhaus, 1982). Moreover,
education levels may vary by mode of business entry. Cooper
and Dunkelberg (1981) found that a larger percentage of
small business owners who start or purchase the organization
have less than a college degree compared to those who
inherit or are brought in to run the business. Begley and
Boyd (1987b) discovered that business founders are less
educated than nonfounders. Gasse (1982) reported the
results of four studies where entrepreneurs are better
educated than the general public. Additionally, the
education level tended to vary by industry.
Gender and Race
Distinctive differences in entrepreneurs also occur
according to gender and race. Brush (1992) hypothesized
differences in male and female owned businesses, proposing
that women perceive their businesses as cooperative networks
of relationships. Humphreys and McClung (1981) studied
female entrepreneurs from Oklahoma. The results indicated
that female entrepreneurs were more educated than both males
and females in general, and more educated than male managers
and administrators. Other studies have verified that female
entrepreneurs tend to be older (Hisrich & O'Brien, 1981;
Cuba, DeCenzo & Anish, 1983) and more educated (Hisrich &
O'Brien, 1981) than the general populace or the average
adult female (DeCarlo and Lyons, 1979). Wallach and Kogan
(1959, 1961) discovered that women are more risk averse than
81
men, and that age differences influence risk taking. This
supposition was supported by Sexton and Bowman-Upton's
(1990) finding that female entrepreneurs have a lower risk
taking propensity than do male entrepreneurs. Schwer and
Yucelt (1984) posited that the risk taking propensities
of small business entrepreneurs and managers were different
according to the individual's age, education and number of
years the business has been owned.
Most studies of entrepreneurs have used samples of
Caucasians. Few studies have been systematically conducted
to investigate any potential effects of race on the
entrepreneur. DeCarlo and Lyons (1979) found that
achievement, conformity and benevolence discriminated
between minority and nonminority female entrepreneurs. It
has also been purported that blacks are relatively low in
achievement motivation as compared to whites (Rose, 1956;
Rosen, 1959). In a study of achievement motivation in
Asian, native American, Hispanic and black entrepreneurs,
there were no significant differences among the groups
(Feldman, Koberg & Dean, 1991).
Much of the research in demographic characteristics has
been conducted using sampling frames either limited by
geographic area or by business type (e.g., Mayer &
Goldstein, 1961; Hoad & Rosko, 1964; Susbauer, 1972). These
efforts have been hampered by external validity concerns.
82
Fortunately, a few more broadly-based demographic studies
have been conducted.
Cooper and Dunkelberg (1987) surveyed 1805
owner-managers and discovered the existence of a distinctive
profile. These individuals tended to come from families
where the parents owned a business, and tended to be better
educated. Perhaps the most inclusive study of the
demographic profiles of entrepreneurs was conducted by
Petrof (1981), who incorporated eight demographic
characteristics with four individual perceptions. Petrof
concluded that successful entrepreneurs tended to be first
born, relatively older, job stable, technically oriented and
experienced in starting a business.
Organizational Demographic Characteristics
Relatively few researchers have investigated the
connections between the entrepreneur and the characteristics
of the business. Mescon and Montanari (1981) employed a
sample of independent and franchise realtors to compare
personality characteristics to the type of enterprise
founded by the entrepreneur. The authors concluded that the
context of the new venture in terms of the type of
enterprise, franchise or independent, interacts with
sociocultural background to influence the characteristics of
the individual who will start a new business.
Schwer and Yucelt (1984) discovered that the risk
taking propensities of small business entrepreneurs and
83
managers were different according to individual
characteristics, as well as the size and type of their
business. Cooper and Dunkelberg (1981) also demonstrated
the potential for entrepreneurs to vary widely in different
industries.
Brockhaus and Horwitz (1986), in a review of the
psychology of the entrepreneur, stated that one of the major
limitations of entrepreneurship research is a failure to
identify the type of business being studied. The authors
cautioned that the characteristics associated with opening a
service business, for example, might be different than those
associated with opening a manufacturing business.
Therefore, the authors suggested comparing'entrepreneurs in
several different industries. Deeks (1973) also thought it
important to examine owner-managers who had entered the
business through different modes.
Summary of Individual and Firm Demographics. While it
is arduous to predict who will be an entrepreneur by using
demographic variables, these demographic variables are
important in the study of personality factors and an
entrepreneur's behavior. Although the demographic
characteristics of the entrepreneur and the firm are not
central to this study, they are important considerations.
The first consideration is to heed the calls of Brockhaus
and Horwitz (1986) and Cooper and Dunkelberg (1986) for a
broadly based study which includes these variables. Second,
84
because of the potentially confounding effects of individual
and firm demographic factors, it is important to control for
the effects of these variables in conducting an analysis of
the psychological variables of the entrepreneur.
Typologies of Small Business Owner-Managers
A wide range of owner-managers, new business ventures,
venture founding processes and new venture environments
exists (Gartner, 1985). Researchers have provided
typologies of entrepreneurial types based upon owner
motivations or management methods (Dunkelberg & Cooper,
1982). Smith (1967) distinguished two types of
entrepreneurs, craftsman and opportunistic. According to
Smith, the opportunistic owners were broadly educated,
varied in work experience, more proactive and likely to
develop innovative and diverse competitive strategies.
Alternatively, craftsman were narrowly educated, utilized
personal relationships in marketing and tended to pursue
rigid strategies. Collins and Moore (1970) also
differentiated two types of "organization makers", the
independent and administrative entrepreneur. The
independent entrepreneur creates new ventures, while the
administrative entrepreneurs create new organizations within
or adjunct to existing business structures.
Other studies have provided more classes of
entrepreneurs. For instance, Filley and Aldag (1978), using
factor analysis, identified craftsman, promotion and
85
administration types. The authors discovered that craftsmen
were nonadaptive, tended to avoid risk and focused on
providing family income. Promotion owners tended to
organize informally, pursue a unique competitive advantage
and maintain centralized control. Administrative owners
were more like professional managers, utilizing planning,
formalization and control.
Dunkelberg and Cooper (1982) also discovered three
discernible entrepreneurial types: growth oriented,
independence oriented and craftsman oriented. The authors
likened their growth oriented entrepreneurs to Filley and
Aldag's promoters, and their craftsman oriented
entrepreneurs to those labelled craftsman in the prior
studies. No opportunistic or administrative types were
discovered, and the authors' independence oriented
entrepreneurs appeared to be a novel group compared to those
of previous studies.
These studies demonstrate the variety of entrepreneurs.
Clearly, there is no one entrepreneurial type. There may be
a significant degree of variation within the population of
owner-managers which, if overlooked, limits inquiry (Gartner
et al. 1989). Carland et al. (1984), in one of the most
frequently cited works in the field, elucidated two distinct
types of owner-managers:
1. Entrepreneur: An entrepreneur is an individual
who establishes and manages a business for the
86
principal purposes of profit and growth. The
entrepreneur is primarily characterized by
innovative behavior, and will employ strategic
management practices in the business. The
"entrepreneur" approximately corresponds to Filley
and Aldag's (1978) promotion entrepreneurs,
Dunkelberg and Cooper's (1982) growth oriented
entrepreneurs and Smith's (1967) opportunistic
entrepreneurs.
2. Small Business Owner: A small business owner is
an individual who establishes and/or manages a
business for the principal purpose of furthering
personal goals. The owner perceives the business
as an extension of his or her personality, and the
business is the primary source of family income.
The small business owner is analogous to the
craftsman entrepreneurs of Smith (1967), Filley
and Aldag (1978) and Dunkelberg and Cooper (1982).
Carland et al. (1988) subsequently empirically verified
the distinction between the entrepreneur and the small
business owner. The two types of owner-managers could be
distinguished by articulated venture strategies. The
entrepreneurs were also characterized by significantly
different personality traits and behavioral preferences.
Compared to small business owners, entrepreneurs exhibited a
significantly higher preference for innovation, a thinking
87
orientation in decision making, intuition in information
gathering and a perception orientation in dealing with
people.
Intrinsic in the distinction between the entrepreneur
and the small business owner is the purpose of the new
venture, which may be linked to entrepreneurial
characteristics and planning. Noting a paucity of planning
in small firms, Carland et al. (1989) investigated need for
achievement, risk taking propensity, preference for
innovation and an array of demographic variables with
owner-manager strategic planning. The authors discovered
that owners who engage in formal, written planning tend to
have a higher preference for innovation, a higher propensity
for risk taking and a greater need for achievement than do
owners who plan informally or who do not engage in planning.
Also, owners who developed informal, unwritten plans have a
higher propensity for risk taking than owners who did not
engage in planning. The authors concluded that personality
traits were critical to planning. Applying the Carland et
al. (1984) definitions, entrepreneurs plan while small
business owners do not plan with the same depth.
Summary of Small Business Owner-Manager Typologies
Typologies are an effective vehicle for developing and
presenting theory (Doty & Glick, 1994). Numerous
classification systems of small business owner-managers have
been proposed. The most completely developed and
88
empirically investigated typology of small business owner-
managers is that presented by Carland et al. (1984). The
proposal that small business owner-managers can be
classified as entrepreneurs or small business owners
inculcates different owner goals and behaviors.
Potentially, the entrepreneur or small business owner
dichotomy engenders the potential for reconciling the
difficulties associated with the term entrepreneur.
Summary of the Literature
In summary, the research in entrepreneurship
encompasses a wide array of definitions and variables, often
with conflicting findings. In studying the psychological
characteristics of entrepreneurs, sampling frames,
operationalizations and instrumentation have varied
significantly. Additionally, problems have occurred when
the studies have lacked clear definitions and comparable
samples of entrepreneurs, when small sample sizes limited
statistical power, and when inaccuracy, non-reliability and
poor construct validity were evident in measurement (Sexton
& Bowman, 1984). These conditions led Cooper and Dunkelberg
(1987) to caution that examining contrasting findings across
the studies requires care. Nowhere are these conditions
more evident than in studies of the achievement motivation
and risk propensity of entrepreneurs.
Robinson, Stimpson, Huefner and Hunt (1991) argued that
the lack of progress in personality research of the
89
entrepreneur is not due to a lack of psychological
characteristics that distinguish entrepreneurs from other
people, but to problems with the theories and methods used
to identify those characteristics. In fact, when the
aforementioned methodological issues have been surmounted,
studies of the psychological characteristics of
entrepreneurs have yielded statistical relations that are of
practical significance and are replicable (Sexton & Bowman,
1984, 1986). Thus, there is a definite need for additional
research.
The contradictory findings may also be attributable to
studying entrepreneurs at different stages of the
entrepreneurial process (Goldsmith & Kerr, 1991). Brockhaus
(1982) pointed out the existent bias in the literature
toward the successful entrepreneur. This may be a function
of convenience because effective, efficient sampling of
unsuccessful entrepreneurs is arduous. Nonetheless, the
focus on successful entrepreneurs may confuse temporal
sequence in the proposed relationships. Brockhaus (1982)
suggested that entrepreneurial success may contribute to a
higher achievement motivation, rather than the reverse.
Similar arguments are also feasible for risk taking
propensity and preference for innovation.
Because much of the research has investigated small
numbers of entrepreneurs in limited types of businesses in
particular areas, Cooper and Dunkelberg (1987) called for
90
broadly-based research to provide bases of comparison.
Cooper and Dunkelberg (1987) urged inquiry into business
owners in many industries, at different times and in
different parts of the country. This call for a broad
research effort reiterates that made by Brockhaus and
Horwitz (1986). Such research might also provide more
understanding of different types of entrepreneurs.
Understanding why individuals behave in particular
patterns is as important in entrepreneurship as it is in
other areas of the behavioral sciences (Gartner, Bird &
Starr, 1992). Johnson (1990) believed that careful study of
the individual, including his or her psychological profile,
is important because the entrepreneur is the energizer of
the entrepreneurial process. Studies of individual
differences which might affect the founding and performance
of new ventures have been limited of late (Shaver & Scott,
1991; Chandler & Hanks, 1994). At this time, no definitive
conclusions about the entrepreneur can be confidently drawn.
Nonetheless, the preponderance of the evidence suggests that
there are potential correlates between psychological
features and the entrepreneur, as well as different types of
entrepreneurs. The proposed research framework, based upon
the review of the literature, is presented in Figure 1.
91
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92
Hypotheses
The review of the literature provides a foundation for
the specification of hypotheses concerning the psychological
constructs of interest in this study. The following
hypotheses are grouped according to the psychological
constructs and are constructed so that different types of
small business owner-managers are investigated. The
entrepreneur focuses on profit and growth and more fully
utilizes strategic management principles than does the small
business owner. The small business owner views his or her
firm as an extension of his or her personality and the
primary goal is family income. Therefore, differences in
entrepreneurs and small business owners are proposed, and
both groups are compared to corporate managers.
Achievement Motivation
The research of McClelland (1961,1965), Hornaday and
Aboud (1971) and Nandy (1973) indicates that entrepreneurs
tend to have a higher achievement motivation than the
population norm. Studies which have specifically compared
entrepreneurs with managers converge upon a comparable
conclusion. Studies by Hines (1973), Lachman (1980), Schere
(1982), Ahmed (1985) and Sexton and Bowman (1986) indicate
that entrepreneurs are higher in achievement motivation than
are corporate managers. The contradictory studies, those by
Singh (1970), Cromie and Johns (1983) and Sexton and Bowman
(1983), are clouded by questions of instrumentation and
93
sample choice. Also, those studies which indicate that high
achievement motivation is correlated with performance
(Wainer and Rubin, 1969; Morris and Fargher, 1974; Begley
and Boyd, 1987b; Smith and Miner, 1983, 1984; Smith et al.,
1987; Carsrud and 01m, 1986) could be construed to indicate
that not only will the achievement motivation of the
entrepreneur influence the ownership decision, but will also
influence the viability of the organization, and thus, the
durability of the entrepreneur. Based upon these findings,
the following hypothesis is proposed:
Hla. Entrepreneurs will demonstrate a greater need for achievement than will corporate managers.
Numerous types of entrepreneurs have been identified in
the entrepreneurship literature. This study utilizes the
aforementioned Carland et al. (1984) distinction between
entrepreneurs and small business owners. The common factor
among these two types of individuals tends to be the fact
that all are owner-managers of their organizations. In
studies of the small business owner-manager, both of the
Carland et al. types have generally been defined as
entrepreneurs. Given this definitional approach in the
literature, the following hypothesis is proposed:
Hlb. Small business owners will demonstrate a greater
need for achievement than will corporate managers.
One of the primary differences between entrepreneurs
and small business owners is the goal for the business. The
goals of profit and growth which are associated with the
94
entrepreneur may indicate a different achievement motivation
than that of the small business owner who focuses on family
income. This difference in goals could be related to the
difference in the planning practices of entrepreneurs and
small business owners. The planning practices of
entrepreneurs are more extensive than those of small
business owners. Based upon the Carland et al. (1989)
discovery that a greater achievement motivation is
associated with a higher degree of planning, the following
hypothesis is suggested:
Hlc. Entrepreneurs will display a greater achievement motivation than will small business owners.
Risk Taking Propensity
The literature concerning the risk taking propensity of
entrepreneurs is probably more mixed in its indications than
any other stream of research devoted to the psychological
dispositions of the entrepreneur. As with achievement
motivation, variation in instrumentation and sampling may be
the source of confusion. Meyer et al. (1966) and Litzinger
(1963) actually seemed to be comparing different types of
managers. The studies by Brockhaus (1980a), Litzinger
(1965) and Peacock (1986) are subject to question based upon
instrumentation. The evidence presented by Colton and Udell
(1976), Sexton and Bowman (1983, 1984), Ahmed (1985) and Ray
(1986) indicates that entrepreneurs are significantly
different in their risk taking profiles. Based upon these
95
findings and the rich conceptual discussions of risk taking
and the entrepreneur, the following hypothesis is proposed:
H2a. Entrepreneurs will exhibit a higher risk taking propensity than will corporate managers.
Again, because of the focus on ownership and management
of the organization in definitions of the entrepreneur, both
of the Carland et al. (1984) small business owner-managers,
entrepreneurs and small business owners, have been included
under the moniker of entrepreneur. Because of this broad
inclusion, and the research evidence in the literature, the
following hypothesis is proposed:
H2b. Small business owners will exhibit a higher risk taking propensity than will corporate managers.
Carland et al. (1984) suggested that small business
owners would not engage in any new marketing or innovative
practices. Alternatively, the authors intimated that the
entrepreneur, because of the focus on profits and growth,
would be more likely to pursue new avenues for the business
and would engage in more extensive planning. Perhaps this
explains the Carland et al. (1989) finding that a higher
propensity for risk taking is associated with more
meticulous planning. Based upon this premise, the following
hypothesis is proposed:
H2c. Entrepreneurs will exhibit a higher risk taking propensity than will small business owners.
Preference for Innovation
There is a long history of theorizing about the
creativity or innovativeness of the entrepreneur. Only
96
relatively recently has empirical study been undertaken to
test the ubiquitous belief that a preference for innovation
is a distinguishing characteristic of the entrepreneur.
Potentially, the relatively recent and sparse inquiry
explains the general consensus that the entrepreneur tends
to be more innovative than the corporate manager. Based
upon the studies by Colton and Udell (1976), Carland (1982),
Sexton and Bowman (1983, 1984), Smith and Miner (1983,
1984), Robbins (1986/1987), Goldsmith and Kerr (1991) and
Buttner and Gryskiewicz (1993), the following hypothesis is
proposed:
H3a. Entrepreneurs will display a higher preference for innovation than will corporate managers.
As with the previous psychological constructs,
researchers have investigated the predisposition for
innovation of a wide range of business owner-managers.
Therefore, based upon the research evidence and the
inclusion of many types of small business owner-managers in
the aforementioned studies, the following hypothesis is
proposed:
H3b. Small business owners will display a higher preference for innovation than will corporate managers.
Carland et al. (1984) contended that one of the major
distinctions between entrepreneurs and small business owners
is innovation. The authors suggested that the entrepreneur
was characterized by a preference for creating activity
which is manifested by some innovative combination of
97
resources for profit. This hypothesis was supported by
Carland et al. (1988) in the finding that entrepreneurs
exhibit a higher preference for innovation than do small
business owners, suggesting the following hypothesis:
H3c. Entrepreneurs will display a higher preference for innovation than will small business owners.
The Interaction of Psychological Factors
Few studies have investigated any interaction effects
in the psychological constructs which have been studied as
predictors of entrepreneurship. Based upon the theoretical
evidence suggesting a relationship between achievement
motivation and risk taking (Atkinson, 1957, 1958; Atkinson &
Litwin, 1960; Atkinson et al., 1960; McClelland, 1961; Meyer
et al., 1961; Mehrabian, 1968) and between risk taking and
innovation (Drucker, 1985, Kirton, 1986; Goldsmith, 1984,
1986, 1987, 1989; Howell & Higgins, 1990), interactions
between these two sets of psychological constructs are also
tested.
Chapter Summary
Provided in this chapter was a review of the three
primary psychological constructs which are most prevalent in
theorizing about the entrepreneur. These constructs are
achievement motivation, risk taking propensity and
innovativeness. In addition to examining linkages among the
psychological constructs, a review of the effects of
individual and firm demographic characteristics upon the
98
entrepreneurial decision was provided. Concluding the
literature review was a presentation of different types of
small business owner-managers. Based upon the review of the
literature, the research framework was presented, followed
by explication of the hypotheses for the study.
CHAPTER III
RESEARCH PROCEDURE AND METHODOLOGY
Smith, Gannon and Sapienza (1989) offered several
factors for consideration by entrepreneurship researchers in
selecting a research approach. These factors included the
objective of the research. One hallmark of a good research
hypothesis is that it suggests which form of research design
is likely to be most appropriate (Emory, 1985). The nature
of the hypotheses for this study suggests that the most
advantageous research design is a survey. In view of these
considerations, a questionnaire composed of individual and
firm demographic questions, and scales pertaining to
achievement motivation, preference for innovation and risk
taking propensity was assembled.
This chapter is devoted to outlining the methodological
elements and procedures of the study. Particular emphasis
is placed on the elements of sampling, instrumentation and
analysis. An overview of the methodological procedures is
provided in Table 6.
The Sample and Procedure
Proper sampling is particularly crucial in this study
because of the aforementioned problems associated with the
definition of an entrepreneur. Gartner (1989) cautioned
99
100
Table 6
Summary of Major Elements of Research Procedures
Procedural Element Description
Sampling
Instrumentation
Dependent Variable Categorization
Data Analysis
Convenience sample where sampling was conducted by graduate business students, resulting in a sample of 767 owner-managers of small businesses and corporate managers.
Instrument contains the Achievement Motivation Scale of the Personality Research Form (Jackson, 1967), the Risk Taking and Innovation Scales of the Jackson Personality Inventory (Jackson, 1976) and questions pertaining to individual and firm demographics and owner goals and planning practices.
Small business owner-managers classified as either entrepreneurs or small business owners (Carland et al., 1984) and firms classified as small or large businesses using the Small Business Administration definitions. Both categorized by a panel of experts.
First step is a confirmatory factor analysis of the small business owner-manager categorization using owner goals and planning practices (Carland et al., 1984). Second step is a hierarchical set multi-nomial LOGIT regression analysis to evaluate the research model and test hypotheses.
101
that careful selection of samples of entrepreneurs and non-
entrepreneurs assists in identifying and controlling for
variation. Gartner believed that careful attention to
sampling was imperative for research in entrepreneurial
traits so that the sample would most appropriately represent
the types of individuals who are to be investigated.
Graduate business students selected the participants of
the study on a convenience basis. The students primarily
solicited responses from employers, employers of their
parents, acquaintances or individuals with whom they had
some other form of contact. The questionnaire was
administered to a total of 767 owner-managers of small
businesses and managers of large organizations.
Participants in the study came from 20 states; however, most
respondents lived in the Southeast United States.
Although the sample is convenience in nature, there are
several benefits from this sampling technique. First, the
sample was not anonymous and the data set was controlled.
Respondents were asked to give their names, addresses and
telephone numbers. Also, the respondents were asked for a
statement of the philosophy of the organization and about
the goals of the organization. Asking for this information
dramatically reduced the likelihood that a participating
student would personally complete the survey. Moreover,
because the respondents were typically approached by people
whom they knew, it is probable that the questionnaires were
102
more likely to be completed by the intended persons, an
obvious advantage over a mail survey. Given these
conditions, the researcher is confident of the integrity of
the data. The questionnaires were examined upon submission,
and most incomplete questionnaires were returned for
completion.
Second, the rate of response was greater than that of
the typical mail survey. It has been noted that surveys of
entrepreneurs, in particular, produce notoriously low
response rates (Gasse, 1982; Aldrich, 1992). Less than one
in twenty individuals who were approached refused to
participate in the study, indicating that individuals
participated in the survey who might not otherwise have
responded. Therefore, while still existent, nonresponse
bias is not as problematic as with the typical mail survey.
Also, because responses were checked for completeness as
they were submitted, item nonresponse error was also
dramatically minimized. Only 20 of the 7 67 completed
surveys had missing data.
Third, the technique engendered the ability to generate
a large sample size. The central limit theorem (Mason,
1982) suggests that the level of confidence of a sample of
this size approaches that of a random sample. Also, the
size of the sample improves statistical power. Using a
conservative estimate of effect size, that labelled 'small'
by Cohen (1988), the statistical power is between .96 and
103
.98 for an alpha level of .05, and between .88 and .92 for
an alpha level of .01.
One particular disadvantage of the sampling technique
should be noted. Jackson (1967) pointed out that the
Personality Research Form could be given in a variety of
situations, but the best results would be achieved by using
standardized supervised group or individual testing
conditions because the test was standardized under these
conditions. Jackson felt that standardization under these
conditions would yield the most reliable results, and
cautioned that in other circumstances, it was important to
impress upon subjects the seriousness of the purpose of the
testing and to emphasize care in completing the test. While
the basic purpose of the study was specified in a cover
letter which accompanied the questionnaire, no other control
over respondent conditions could be achieved.
Another issue is the appropriateness of the sample.
VanderWerf and Brush (1989) surmised that sampling from
different populations has hindered empirical research in
entrepreneurship. This has been largely due to the
aforementioned definitional dilemma in the field.
VanderWerf and Brush advanced a set of criteria for sample
specification including criteria for business unit variation
and for individual variation. For business units, these
criteria included the age, size and industry. For
individuals, the criteria included roles in founding,
104
ownership and management of the business. While no a priori
selection criteria were used for this sample because there
were no lists or groups identified, data concerning these
criteria, plus additional variables, were gathered. This
information will allow for the investigation of potential
moderator variables (Hunter, Schmidt & Jackson, 1983) and
will provide the parameters for the dependent variables in
the study.
Despite attentiveness to the sampling frame, it is
possible that this sample of small business owner-managers
and managers could be patently different from the target
population of small business owner-managers. As suggested
by Gartner et al. (1989), a comparison will be made between
the subjects of this sample to other research samples that
provide comparable sample size and statistics concerning the
makeup of the sample. These comparisons should provide
additional insight about the sampling frame.
One of the objectives is to maximize the external
validity of the study. Neale and Liebert (1986) described
two types of external validity, population and ecological
validities. In terms of population validity, the intent is
to generalize the findings to the population of small
business owner-managers. The population validity is
hampered in this study by the use of a convenience sample.
Nevertheless, because of the size of the sample and the
central limit theorem (Mason, 1982) the sample approaches
105
that of a random sample. With regard to ecological
validity, because the sample is drawn primarily from the
Southeastern U.S., generalizing across geographic areas is
limited. Yet, the comparison with other entrepreneur
research populations, the size and demographic breadth of
the sample, and the relative geographic dispersion of the
sample should maximize the generalizability of the results
within the constraints of the study (Neale & Liebert, 1986).
It is frequently assumed that personality and
entrepreneurial motivation and competence do not vary across
cultures, but this assumption may not be valid (Nandy,
1973). De Vos (1968) and McGrath et al. (1992) cautioned
that this assumption of cross-cultural consistency may be
untenable. In light of this evidence, the results cannot be
extrapolated to other cultures.
Instrumentation
Instrumentation, always an important element of a
survey design, has been a crucial issue in the study of the
psychological characteristics of the entrepreneur. Thus,
careful attention must be devoted to the instrumentation for
the study. One issue of concern in instruments for
psychological measurement is response sets (Cronbach, 1946,
1950), which is a moniker for a host of biases such as
acquiescence, evasiveness, tendency to guess and working for
speed instead of accuracy. Cronbach (1946) provided a
detailed examination of the potential deficiencies of a
106
survey design. The major criticism was the potential bias
which the researcher introduces in the design of
questionnaires. Cronbach believed that by defining the
questions, response sets and the conditions for
participation, the researcher may introduce systematic forms
of bias into the study. Moreover, there may also be
problems associated with the research participants.
Respondent error is also of concern, and includes a
number of considerations. Sletto (1937) first identified
the phenomenon of acquiescence response set in which the
respondents tend to more frequently endorse favorable
statements and not endorse negative statements. Also, there
is a tendency on the part of respondents to endorse strong
statements rather than weak statements (Webb, Campbell,
Schwartz & Sechrest, 1971). The perception of the social
desirability of the respondent vis-a-vis the question
(Zikmund, 1994) may also be problematic. Additionally, one
of the significant concerns in a survey is nonresponse error
because those who respond to the survey may be statistically
different from those who do not (Zikmund, 1994). In short,
all of these potential threats to the usefulness of the
research are potential limitations inherent in the research
methodology which must be addressed.
Achievement Motivation
Hermans (1970) emphasized the need for objectivity in
measuring need for achievement, stating that measurement had
107
been the most difficult problem in studies in the area of
achievement motivation. One of the major issues has been
the use of projective measures which treat achievement
motivation as an unconscious variable, versus questionnaire
measures which treat the construct as conscious. Sherwood
(1966) found no significant differences between projective
and self-report measures of achievement motivation as
predictors of behavior; both are useful measures of the
motives underlying behavior. There is no clear theoretical
case for treating achievement motivation as an exclusively
unconscious variable (Fineman, 1977). Holmes and Tyler
(1968) indicated that achievement motivation is a conscious
phenomenon, and therefore, amenable to direct self-report.
Thus, a concerted effort was made to choose a measurement
instrument for achievement motivation which would maximize
reliability and validity. The Achievement Scale of the
Personality Research Form (Jackson, 1967) was used to
measure achievement motivation.
Jackson's (1967) Personality Research Form-F (PRF) is
based on the 20 manifest needs described by Murray (1938).
It is intended to yield scores for personality traits which
are broadly relevant to the functioning of the individual in
a wide array of situations. The PRF was chosen because of
its use in previous research and the rigorous process by
which the scales were developed and validated (Jackson,
1974). Wiggins (1973) stated that the PRF is the only
108
multitract personality inventory where the development was
guided explicitly by the substantive, structural and
external considerations of the construct viewpoint.
The PRF is composed of bipolar scales for each of the
twenty personality characteristics and two validation
scales, labeled desirability and infrequency. Because a low
score could indicate the absence of a trait or the presence
of the trait's opposite, some traits may be in theoretical
opposition. The PRF dimensions were conceived, both
theoretically and in measurement, as bipolar. The bipolar
construction reduces the likelihood of confusion and the
redundancy in the use of alternative concepts to define
essentially the same dimension (Jackson, 1967). Defining
both ends of a dimension with test items helps specify what
was being measured, and assists in controlling for response
biases such as acquiescence (Cronbach, 1946, 1950; Jackson &
Messick, 1958; Jackson, 1967).
Methods were used in the construction of the PRF to
reduce the role of response styles. Acquiescence was
suppressed by using equal numbers of true and false keyed
items. Moreover, the attention to content saturation in the
construction of the scales has been demonstrated to reduce
the role of acquiescence (Clunis & Jackson, 1966). High
differential content saturation and selection of items on
the basis of relatively low correlations with desirability
also reduce the potential for response bias. Each item was
109
analyzed for response consistency and was found to correlate
more highly with its own total scale than with a
desirability scale, indicating that each item is more
saturated with content variance than with desirability
variance (Jackson, 1967). This technique maximized
reliability and discriminant measurement.
The PRF also includes an Infrequency Scale directed at
identifying careless or non-purposeful responses (Sechrest &
Jackson, 1963). High scores on Infrequency are unlikely for
reasons other than non-purposeful responding. The
Infrequency scale will be examined for all cases, and when
the score exceeds 4, the case will be examined for errors in
responding as suggested by Jackson (1967).
The definition of achievement motivation used for this
study is as follows:
Achievement motivation, or the need for achievement, is evident in an individual who: aspires to accomplish difficult tasks; maintains high standards; works toward the attainment of distant goals; responds positively to competition; or is willing to put forth effort to attain excellence (Jackson, 1967).
Reliability and Validity of the PRF. Two properties of
reliability, homogeneity and stability, should be examined
in psychological testing (Jackson, 1967; Rosenthal & Rosnow,
1991). Jackson (1967) reported estimates of homogeneity
which were derived from item analysis statistics. In a
study of 142 students, the Kuder-Richardson formula 20 value
for the achievement scale was .93. In a sample of New
Jersey male high school students (N = 71), the Kuder-
110
Richardson formula 20 value for achievement was .73. A
sample of 202 college students produced a Kuder-Richardson
formula 20 value of .72. The author also reported odd-even
reliability of .77 (N = 192). These values represent an
acceptable level of internal consistency.
In terms of stability over time, Bentler (1964/1967)
administered the PRF to male and female students in three
California colleges on two occasions, separated by a one
week interval. Bentler found a test-retest reliability
score of .80 for achievement. Jackson (1967) postulated
that this reliability could be considered a lower bound
estimate because the testing conditions were not identical
and the estimate of reliability, the intraclass correlation,
is generally smaller in size than the simple
intercorrelation. Jackson (1967) also evaluated parallel
form reliability over two testing sessions separated by two
weeks (N = 135). The test-retest reliability for
achievement was .80. While these indicators of stability
are good, one concern in these studies is the relatively
short periods of time between tests because recall could
have a significant influence on the retest score (Fineman,
1977) .
Convergent and discriminant validation of the PRF
Scales has been undertaken. Jackson (1967) reported a
series of PRF validation studies which used trait
attribution data to evaluate convergent validity. Judges
Ill
were presented with a list of traits exemplifying the
variables in the PRF, and carefully phrased definitions for
each of the personality traits. Each judge was asked to
rate each person being judged on a nine point scale
concerning the degree to which the trait was present or
absent. The pooled ratings were used as a consensus of the
degree to which a given trait was present. Subjects were
also asked to indicate the presence or absence of each trait
in themselves from a rating form containing 660 adjectives.
The first study used two samples of university students
at two different California universities. For achievement,
behavior ratings were .53 (N = 40) and .52 (N = 51). Self
ratings were .55 and .42, respectively. A second study by
Jackson and Guthrie (1968) of 202 students at a Pennsylvania
university produced behavior ratings for achievement of .46
and self ratings of .65. All of the above validity
coefficients were significant at the alpha .01 level.
Jackson pointed out that these results: were based on
cross-validational data, were complete, represented a
predicted correlation and were free from any form of
statistical adjustment.
Another validation study was undertaken by Kusyszyn
(1968), who correlated PRF scale scores with judgments of
the degree to which the subject possessed a particular
trait. Here the subjects were 94 members of five
fraternities. For the group which lived together, the
112
validity coefficient for achievement was .52 (.62 when
corrected for attenuation) and .44 for the total sample (.50
when corrected for attenuation). All of these statistics
were significant at an alpha level of .01. All of the above
correlations exceed .40, which indicates acceptability,
given that several of the most important effects in
psychology are of a size between .30 and .40 (Funder & Ozer,
1983), and a prediction based on a correlation of .40 will
be correct more than twice as often as it is wrong
(Rosenthal & Rubin, 1982) .
Funder and Dobroth (1987) addressed a pertinent issue
in the aforementioned studies of validity, the degree to
which judgments of traits might or might not be accurate.
The authors identified three sources of differential
accuracy: individual differences between judges, individual
differences among persons being judged and the possibility
that some traits can be judged more accurately than others.
Funder and Dobroth's study indicated that a trait will most
easily be visible when the trait is readily tied to
confirming or disconfirming behaviors, the behavior is
apparent in many occasions, only a few confirming behaviors
are necessary to indicate the trait, and the trait seems
subjectively easy to judge. Achievement motivation seems to
fit readily with these criteria.
In studying the discriminant validity of the PRF,
Jackson reported the use of multimethod factor analysis,
113
which orthogonalizes those portions of the multitrait-
multimethod correlation matrix common to a given method of
measurement (Jackson, 1966). The result of this technique
is a correlation matrix where only heteromethod validity
coefficients are obtained because the monomethod values have
been replaced by zeros. Jackson maintained that by using
this technique, method variance common only to a single
method of measurement cannot intrude to determine common
factors. When a rotation to simple structure is performed,
the factors which result are interpretable as being due
primarily to the correlation of traits across different
methods of measurement, rather than as a result of artifacts
of the method of measurement.
Jackson and Guthrie (1968) applied multimethod factor
analysis to the evaluation of the convergent and
discriminant validity of the PRF scales. Self and peer
rating of traits of the characteristics were obtained for a
sample of 202 subjects who had also taken the PRF. Using
the varimax criterion, the PRF scales loaded on the
appropriate factor. The self ratings, peer ratings, and PRF
scores of achievement all loaded on one factor with factor
loadings of .82, .61, and .83 respectively. The authors
concluded that the results of the factor analysis provided
substantial evidence for the convergent and discriminant
validity of the PRF scales. Furthermore, it is possible to
treat each PRF scale as distinct.
114
Convergent validity has been further demonstrated for
the PRF. Edwards, Abbott and Klockars (1972) demonstrated
that the Edwards Personal Preference Schedule was
significantly correlated with the PRF on achievement
motivation. Mehrabian (1969) found that the Mehrabian
Achievement Scale (Mehrabian, 1968) significantly correlated
with the PRF on achievement motivation. Numerous other
studies have verified the reliability and validity of the
PRF scales (e.g., Jackson & Guthrie, 1968; Vesper, 1980;
Jackson, 1974; Campbell, Miller, Lubetsky & O'Connell, 1964;
Jackson & Lay, 1967; Kusyszyn & Jackson, 1967).
One concern in the validation of the PRF has been the
use of students. Face validity can be low for non-student
populations (Fineman, 1975). Yet, demonstrations of cross-
validity have not been made for the PRF, nor most other
achievement motivation instruments. Nonetheless, the PRF
has been ubiquitously identified as a sound personality
assessment instrument (Anastasi, 1972; Kelly, 1978; Hogan,
1978). In fact, Wiggins (1973) referred to the PRF as the
best example of a large scale personality inventory. It is
believed that this achievement motivation instrument is the
most well suited for this study.
Risk Taking Propensity and Preference for Innovation
Risk taking propensity and preference for innovation
were measured using the Risk Taking Scale and Innovation
Scale of the Jackson Personality Inventory (JPI) (Jackson,
115
1976). The JPI is a structured personality inventory which
includes 16 personality variables, 15 of which are
substantive, and the last addresses validity. The
construction and features of the JPI parallel those of the
PRF. The JPI consists of 320 true-false statements, each
scale containing ten true-keyed and ten false-keyed
statements. As with the PRF, Jackson (1976) advised that
this design minimized the role of acquiescence response set,
and permitted definition of each pole of bipolar scale
dimensions with positively-worded content.
The JPI was developed for use on populations of average
or above average ability. Jackson (1976) proposed that the
JPI is most appropriate for studies of personality in a
variety of settings, particularly those which investigate
the personality correlates with particular occupations, and
is appropriate for business and industry. Given these
suggested applications, the instrument is appropriate for
the purpose of this study. Moreover, Dyer (1985) stated
that the development of the JPI was rigorous and painstaking
and the results have been generally praised.
The Risk Taking Scale of the JPI allows examination of
four relatively independent components of risk taking:
social, physical, monetary and ethical. While assessing all
four elements of risk taking, the scale tends to weight
monetary risk taking more heavily than the other three types
(Jackson, 197 6). In terms of theoretical approach, the Risk
116
Taking Scale is comparable to Palmer's (1971) definition of
risk taking, which involves the willingness to commit to a
decision which could lead to success or failure and
accompanying rewards and penalties. The following is a
description of the high scorer on the Risk Scale (Jackson,
1976):
Enjoys gambling and taking a chance; willingly exposes self to situations with uncertain outcomes; enjoys adventures having an element of peril; takes chances; unconcerned with danger.
The Innovation Scale of the JPI is a measure of the
predisposition to be innovative. In this sense, innovation
on the JPI is conceptually synonymous with creativity. The
Innovation Scale is highly similar to several personality-
type indicators of creative personality style (Goldsmith,
1987). The following is a definition of the high scorer on
the Innovation Scale (Jackson, 1976):
A creative and inventive individual, capable of originality of thought; motivated to develop novel solutions to problems; values new ideas; likes to improvise.
Reliability and Validity of the JPI. Research has
verified the reliability and validity of the JPI for
measuring generalized risk taking. For risk taking
propensity, Jackson (1977) tested the internal consistency
reliability with two samples of male and female college
students in California and Pennsylvania (N=82 and N=307,
respectively). For several reasons, reliability was
estimated using Bentler's coefficient theta. Because risk
117
taking was composed of four facets, physical, monetary,
social and ethical risk taking, Jackson argued that
coefficient theta was more appropriate because, unlike
coefficient alpha, coefficient theta is not restricted to an
assumption of a single unidimensional attribute. In cases
of departure from unidimensionality, alpha will yield an
underestimate of the lower-bound reliability (Bentler,
1972). Nonetheless, Jackson did calculate alpha
coefficients for the purposes of comparison.
For the Risk Taking Scale, Bentler's coefficient theta
was .93 for the California sample and .91 for the
Pennsylvania sample. Coefficient alpha was .81 for the
California sample and .84 for the Pennsylvania sample. The
internal consistency reliability of the Innovation Scale
produced values of .94 and .93, respectively, using
Bentler's coefficient theta, and .83 and .87, respectively,
using coefficient alpha. Jackson argued that these scores
were relatively high and that they attest to the value of
content saturation in the construction of the test.
Other studies have supported the reliability of the two
scales. Goldsmith (1987) reported alpha values of .85 for
innovation and .81 for risk taking in a sample of 96
undergraduate business students. Begley and Boyd (1987b)
reported an alpha value for risk taking of .784. Howell and
Higgins (1990) discovered an alpha of .84 for both risk
taking and innovation.
118
Testing for validity (N = 70), Jackson (1976) reported
multitrait-multimethod matrix correlations with the
completion of an adjective checklist, with self ratings and
with peer ratings. For the Risk Taking Scale, the
convergent validities were .74, .73 and .52, respectively.
For the Innovation Scale, the convergent validities were
.79, .72 and .37, respectively. All of the validity
coefficients were significant at an alpha level of .01.
Jackson also used a revised multimethod factor analysis
technique. The results indicated that the predicted
measures were highly loaded on their respective factors,
supporting convergent and discriminant validity at the
factorial level.
A second study reported by Jackson (1976) involved
correlations between JPI scale scores, self ratings and
roommate ratings for 116 college females. The correlations
with self ratings and peer ratings were .65 and .43,
respectively, for risk taking and .75 and .23, respectively,
for innovation. Jackson attributed a portion of the
relatively lower peer correlations to the reduced
reliability of a single judge. Nonetheless, all of the
aforementioned correlations were significant at an alpha
level of .01. Notably, neither scale was significantly
correlated with measures of acquiescence or desirability.
Jackson provided additional evidence of validity by
presenting correlations between the JPI and a number of
119
other instruments, including the Bentler Psychological
Inventory, the Bentler Interactive Psychological Inventory,
the Personality Research Form and the Minnesota Multiphasic
Personality Inventory. The correlations provided additional
evidence of discriminant and convergent validity.
Additional support has been shown for the reliability and
validity of the JPI (Jackson, Hourany & Vidmar, 1972; Sexton
& Bowman, 1984b).
Demographics
Demographic data concerning both the individual and the
firm were gathered. These variables included the education,
age, race and gender of the respondents. Owners were asked
how they acquired the business, the age of the venture and
the type of organization it represented. Strategic
questions addressed owner goals and perceptions of the
business, the relationship of the business to their families
and the practice of strategic planning.
Jackson (1971) stated that "to construct psychological
measures in disregard for sources of method variance is to
court disaster" (p. 240). This principle is evident in
Jackson's construction of the PRF and JPI. In both
instruments, the careful attention to scale construction is
justified by the weight of contemporary writing (Dyer,
1985). Despite the attention to scale construction in the
PRF and JPI, self-report data can be problematic.
120
Verification of the data concerning demographics, goal
and purpose is arduous because of the size of the sample and
a lack of knowledge of other organizational members.
Neither are the self-report measures of the psychological
variables verifiable by independent means. The potential
problem of common method variance arises when interpreting
correlations among these self-report measures (Campbell &
Fiske, 1959), particularly single source bias where the
measures are generated from a single source (Podsakoff &
Organ, 1986; Spector, 1987; Avolio, Yammarino & Bass, 1991).
Both the PRF and JPI were constructed to minimize response
sets (Jackson, 1967, 1976). Also, the information used to
categorize the dependent variable came from simple
statements asked of the respondents. Nonetheless, the issue
of method variance cannot be ignored, and will be addressed
in the study.
The Variables
The dependent variable is categorical, with respondents
classified as being either managers or small business owner-
managers. The distinction between the small and large
businesses was made based upon the most widely used
definition of a small business (Peterson, Albaum &
Kozmetsky, 1986), that provided by the Small Business
Administration. Based upon the number of employees and the
amount of sales, all small firms in the sample complied with
the Small Business Administration's guidelines, i.e., a
121
small business is independently owned and operated, and not
dominant in its field. All of the firms in the sample which
are classified as small would qualify for assistance under
the Small Business Administration's guidelines. The
remaining firms, all of which were publicly held, were
classified as large businesses. This classification system
led to the identification of 425 small business owner-
managers and 342 managers from the sample.
For the purpose of further partitioning the sample of
small business owner-managers in this study, the definitions
of entrepreneur and small business owner are those posited
by Carland et al. (1984). An entrepreneur establishes and
manages a business for the principal purposes of profit and
growth, is innovative and employs strategic management in
the operation of the business. Alternatively, a small
business owner establishes and/or manages a business for the
primary purpose of attaining personal goals. The business
is an extension of the owner's personality, and is
inextricably bound with family needs and desires.
The categorization of the owner-managers as
entrepreneurs or small business owners was accomplished by a
panel of experts composed of Drs. Jo Ann and James Carland,
the originators of the definitions. The researchers
independently categorized the individuals and then compared
the results of the classifications. There were no
disagreements on the classification of the individuals as
122
entrepreneurs or small business owners by the judges,
producing an interjudge reliability of 100 percent. The
utilization of these definitions in this study resulted in
the classification of 101 entrepreneurs and 324 small
business owners. Three respondents did not provide enough
information for a distinction to be made and were excluded
from the analysis.
A total of eight independent variables are employed in
the study. These variables include individual and firm
demographic characteristics, risk propensity, achievement
motivation and preference for innovation. These variables
are thought to fully specify the model.
Data Analysis
The first step of the analysis is to factor analyze the
dependent variable in order to assess the criteria from the
definitions of Carland et al. (1984) used to categorize the
responses. The analysis is guided by theory in factor
structures of the data (Kerlinger, 1986). This confirmatory
factor analysis enables a partial assessment of the internal
consistency of the Carland et al. definition. Thus, an
evaluation of the proposal that the goals and planning
behaviors of entrepreneurs and small business owners may
differentiate between the two groups of small business
owner-managers will be undertaken.
The second stage of the analysis entails a hierarchical
set multinomial LOGIT regression procedure which is used to
123
evaluate the research model and to test the hypotheses.
LOGIT analysis generates a linear model for a categorical
response (Demaris, 1992). The advantages of this form of
analysis are numerous for this study. There is no
requirement that the predictor variables have the
multivariate normal distribution (Press & Wilson, 1978).
The hierarchical method has the ability to partial variance
with correlated independent variables and is useful for
extracting maximal causal inference from the data (Cohen &
Cohen, 1983). The focus upon sets also helps control the
investigationwise, or omnibus, risk of committing a Type 1
error because protected t-tests are performed on each set
(Cohen & Cohen, 1983).
The analysis was constructed so that the managers were
the reference group. The individual demographic variables
were entered into the analysis in the first set. The type
of organization, the second set of variables, was entered
next. Entering these variables in the first two steps
partials out their effects from the variables of primary
interest in the study (Cohen & Cohen, 1983).
There is no sound causal theory to guide the entry of
the primary independent variable. For this reason, six
models, which represent all possible orders of entry, were
analyzed. Each step represents an analysis of covariance of
the previously entered set, and the focus is upon the set
which has been entered into the model (Cohen and Cohen,
124
1983). As suggested by Cohen and Cohen (1983) and Jaccard,
Turrisi and Wan (1990), the hypothesized interactions will
be tested by using the multiplicative form and by entering
the interaction term into the hierarchy subsequent to the
entry of the main effect variables. Again, the interactions
were entered in both possible sequences.
Chapter Summary
This chapter is an outline of the research methodology
for the study. A survey research design is utilized for the
study. The survey instrument contains the Achievement
Motivation Scale of the PRF and the Risk Taking and
Innovation Scales of the JPI. The reliability and stability
of both instruments have been thoroughly established, and
the instruments have been repeatedly designated as
psychometrically sound (Anastasi, 1972, 1976; Hogan, 1978).
A large, broad sample of small business owner-managers and
managers of large companies was attained by the distribution
of the questionnaire by graduate business students.
Hierarchical set multinomial LOGIT is the principal data
analytic technique.
Throughout the chapter, careful attention has been
devoted to issues which can be problematic in correlational
research (Mitchell, 1985). The model has been adequately
specified through attention to potential confounds, thereby
enhancing internal validity. The reliability and validity
of the measures, the statistical power analysis, the
125
attention to potential method variance and the appropriate
application of the analytic technique enhance the construct
validity and statistical conclusion validity of the study.
External validity is strengthened by using a large,
representative sample of individuals from a 20 state region.
CHAPTER IV
ANALYSIS OF RESULTS
The analysis of the data of this study is composed of
several procedures. First, an analysis of the sample is
presented, including comparisons to the samples of other
major studies of entrepreneurs. Next, the results of the
confirmatory factor analysis of the criteria which define
the categorization of the dependent variable are presented.
Finally, the development of the model, the analysis of the
predictive efficacy of the model and the testing of the
proposed hypotheses are presented. A complete discussion of
the results is provided in the subsequent chapter.
Analysis of the Sample
One consideration with the data is that the sample
might be different from the general population of managers
and small business owner-managers, an ubiquitous concern in
entrepreneurship research. Given this possibility, it is
important to assess the representativeness of the sample.
For this purpose, the sample is compared to other research
samples where comparable information was available.
Particular emphasis is placed on the sample characteristics
of the study by Cooper and Dunkelberg (1987), who believed
126
127
that their sample (N=1805) was the largest and most varied
to date.
The sample characteristics for both the individuals and
their companies are displayed in Table 7. Individual
characteristics are given for respondent age, gender,
education and race. Predictably, the sample includes more
males than females, and more whites than non-whites, both
common phenomena in samples of small business owner-
managers. The distribution of gender was comparable across
all the levels of the dependent variable, but only two non-
white entrepreneurs were identified. The age and education
of the individuals were also comparable to similar studies.
The vast majority of the individuals in the sample were
between the ages of 26 and 55, and most were also well
educated. The demographics of the respondents for this
sample are comparable to the sample of Cooper and Dunkelberg
(1987) .
The company characteristics consist of the type of
firm, number of employees and sales volume. Most of the
organizations in the sample are retail or service
organizations. This is particularly true of the firms
associated with entrepreneurs and small business owners.
Most of the managers were associated with manufacturing
organizations. The statistics for the number of employees
and volume of sales are consistent with the categorization
of the individuals as entrepreneurs, small business owners
128
Table 7
Sample Characteristics
Individual Characteristics Number Reporting
Gender: Female Male
Race:
Age:
White Black Other
25 or younger 26 to 35 36 to 45 46 to 55 56 or older
Education: Less than high school High school graduate Some college College graduate Graduate study
206 561
736 13 18
36 216 270 164 74
33 193 155 282 104
Company Characteristics Number Reporting
Industry: Retail 241 Wholesale 22 Manufacturing 193 Construction 33 Service 275
Number of Employees: Less than 10 376 10 to 50 82 51 to 100 34 101 to 250 29 More than 250 209
Sales Volume: Under $100,000 199 $100,000 to $500,000 155 $501,000 to $1,000,000 59 Over $1,000,000 302
129
or corporate managers. Again, all of these firm
characteristics were approximately comparable with the
sample of Cooper and Dunkelberg (1987).
In general, the comparisons between the characteristics
of this sample and the characteristics of the samples in
other studies indicate similar sampling frames. Moreover,
the individuals in this study appear to be representative of
individuals in the population. Nevertheless, given
incomplete information from other samples, inadequate
information about the population and convenience sampling,
it can not be determined with absolute confidence that the
sample is wholly representative of individuals and firms in
the general population.
Descriptive Statistics, Intercorrelations and Reliabilities
Means, standard deviations (s.d.) and intercorrelations
of the variables in the study are presented in Table 8. Of
particular importance here are the three primary independent
variables, risk taking, achievement motivation and
innovativeness. There is more dispersion in the scores for
risk taking than there are for either of the two other
independent variables. Also, these three variables are all
significantly positively correlated, with the highest
intercorrelation between risk taking and innovativeness (P =
.43) .
Reliability for the instruments pertaining to risk
taking propensity, preference for innovation and need for
130
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achievement were analyzed in the current study using
Cronbach's Alpha. The alphas were .76, .77 and .72,
respectively, and are of a magnitude which should produce
valid results (Bruning & Kintz, 1987). These scores,
combined with previous investigation, suggest that the
instrument accurately measures the characteristics, and that
the individual items on the test produce comparable patterns
of responses over all cases.
Confirmatory Factor Analysis
The first step of the analysis was to factor analyze
the criteria used to categorize the dependent variable,
particularly with regard to different types of small
business owner-managers. This confirmatory factor analysis
is an assessment of the definitions of entrepreneurs and
small business owners which were proffered by Carland et al.
(1984). The distinction between the two groups is based
upon differences in the goals and planning behaviors of
entrepreneurs and small business owners. Questions
pertaining to the existence and degree of formalization of
planning and to the focus of the goals for the organization
were asked of all respondents. The respondents were asked
if they engaged in planning, and if so, whether their plans
were written or unwritten. The respondents were also asked
if the primary purpose of the organization was profit and
growth, or to produce family income. These questions were
then factor analyzed utilizing Systat. Because of the
132
categorical nature of the variables, a phi correlation
method was used. Furthermore, no communalities were used in
defining the factor analysis.
The first issue was to determine the number of
extracted factors. When factor analyzed, the planning and
goal criteria produced three unrotated factors. Three
factors were considered optional for two reasons. First,
there were three factors with eigenvalues which were greater
than one. Second, beyond three factors the sums of squares
of the loadings on the extracted factors no longer declined,
but remained at a low and approximately uniform level
thereby reaching a point were factor extraction is
reasonably terminated (Comrey & Lee, 1992).
The second decision concerned factor rotation. When
two or more factors are extracted, rotations helps produce
and identify meaningful and useful factor constructs, as
well as producing comparable results from different methods
of factor extraction (Comrey & Lee, 1992). The factor
loadings were rotated using the Varimax rotation procedure.
Varimax was chosen because it enhances interpretability by
maximizing the variance of the squared factor loadings by
column and is more invariant from one sample to another
because it gives equal weight to all variables in
determining the rotations (Kaiser, 1958, 1959). The results
of the factor analysis are displayed in Table 9.
The three rotated factors account for a combined 81.662
Table 9
Confirmatory Factor Analysis of Dependent Variable Categorization
133
Criteria 1 Factors3
2 3 h!
Written Plan 0. 012 -0.205 0. 855 .7732 Unwritten Plan -0. 004 0.980 -0. 099 .9702 No Plan 0. 800 -0.181 0. 083 .6796 Profit and Growth -0. 179 0.562 0. 713 .8562 Family Income 0. 867 0.132 -0. 182 .8022
Eigenvalues 1. 665 1.279 1. 139
Percentage of total variance explained 28. 482 27.369 25. 811
Cumulative explained variance 28. 482 55.851 81. 662
a where Factor 1 is small business owners Factor 2 is entrepreneurs Factor 3 is managers
134
percent of the total explained variance. Moreover, the
communalities (h-) show considerable overlap with the
factors in what they measure. The proportion of variance in
the variables which is accounted for by scores in the
factors is particularly high for unwritten plans (h =
.9702), a goal of profit and growth (h = .8562) and a goal
of producing family income (hf = .8022). Also of interest
are the factor scores. Although there is no known
statistical test that can be used to establish the
significance level of a rotated factor loading, a commonly
accepted cutoff level is a factor score with an absolute
value which is greater than .30 (Comrey & Lee, 1992) which
is considered a rigorous level (Child, 1970). The values
which exceed this criterion are underlined in Table 8 and
are the basis for the following identification of the
factors.
No plan (.800) and family income (.867) load on the
first factor. Theory suggests that this factor be labelled
small business owners because it corresponds with minimal
strategic planning and a goal orientation focused on family
income. The second factor is characterized by high loadings
of unwritten plans (.980) and profit and growth (.562),
however, profit and growth also loads on the third factor.
This makes distinctions between factors two and three less
definitive. Written plans (.855) loads on factor three.
Research indicates that planning in small businesses tends
135
to be less frequent and formalized than planning in large
businesses (Shuman & Seegar, 1986). For this reason, factor
two is labelled entrepreneurs, corresponding with a greater
emphasis on strategic planning, although informal, and a
goal orientation focused on profit and growth. The third
and final factor, labelled managers, is characterized by a
high degree of formalized strategic planning and a profit
and growth orientation.
The results of the confirmatory factor analysis
indicate that the three identified dimensions correspond
with proposed theory and the categorization criteria which
were used to define the dependent variable. Furthermore,
while these results do not provide conclusive support for
the Carland et al (1984) definitions, the factor analysis
does provide partial validation of those definitions because
it evinces internal consistency. The goals and planning
behaviors of entrepreneurs and small business owners
appeared to allow differentiation between the two groups in
this data set. Yet, some caveats are prudent here.
Although the size of this sample (N = 767) increased
the reliability of the correlation coefficients (Guertin &
Bailey, 1970), caution is in order when factor analyzing
dichotomous variables because they are less reliable and
subject to distortion (Comrey & Lee, 1992). Also, only a
small number of variables were included in the analysis.
More dependable factor results are produced with the
136
inclusion of more variables (Comrey & Lee, 1992). Also, the
correctness of an interpretation which is based on factor
analytic results should be confirmed by evidence outside the
factor analysis itself (Comrey & Lee, 1992). For these
reasons, the results of this analysis must be considered
tentative.
Model Determination and Predictive Efficacy
The primary analysis in this research entails modelling
the research framework and performing a series of
hierarchical set multinomial LOGIT regressions. The first
step was to determine the appropriate entry of variables
into the model for analysis. The intention was to hold
constant the effects of the demographic characteristics of
the individuals and the type of industry of the organization
so that these variables would not confound the analysis of
the primary variables of interest in the study. For this
reason, the individual demographic variables, age,
education, race and gender, were entered as a set into the
model in step 1 of the analysis. Subsequently, in step 2,
the variables comprising the type of organization,
wholesale, retail, manufacturing, service and construction,
were entered into the model as a set.
The next phase was to enter the primary independent
variables. Given that there are three variables of interest
and no conclusive theory to guide the order of entry, six
models were created which encompassed every possible order
137
of entry. In these models, each of the main variables was
entered singularly so that each comprised a set. Finally,
both of the interaction terms were entered, again in both
possible orders.
All of the models were significant (alpha = .05)
overall, as were the steps which included the covariates and
the main independent variables. For the purposes of
discussion, the model which has the most conceptual appeal
is presented. Based upon the literature, the sequence of
achievement motivation, preference for innovation and risk
taking is a theoretically appealing order of variable entry
into the model. McClelland (1961) believed that achievement
motivation was established very early in life and its
presence led to a preference for tasks requiring
originality. The originality may beget additional risk.
The significance of the overall model and the
individual steps are shown in Table 10. The McFadden's Rho-
squared, a global test of the significance of the predictor
set, is the first statistic of interest in the table. It is
a statistic which is roughly comparable to the coefficient
of determination in ordinary least squares regression,
however, McFadden's Rho-squared tends to be much lower.
Values of McFadden's Rho-squared between .20 and .40 are
generally considered very satisfactory (Hensher & Johnson,
1981). At each step, McFadden's Rho-squared is significant
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and of primary importance is the score for the fully
partialled model, .245, indicating a satisfactory model.
Given that the model is significant, it can be concluded
that at least one of the predictors has a significant impact
on at least one of the LOGITs (Demaris, 1992).
The next area of concern is the significance of the
sets of variables. The steps were tested for predictive
impact using the G-Statistic which is twice the difference
in the log likelihoods of the new and previous steps (Hosmer
& Lemeshow, 1989). The G-statistic has a Chi-square
distribution with the degrees of freedom equal to the number
of parameters in the new step. Using this statistic, steps
1 through 5 are significant. Steps 6 and 7, which are
composed of the interaction terms, are not significant.
These tests of the steps now provide the latitude to test
the individual predictors within the significant steps.
Analysis of Predictors
In addition to the analysis of the predictive efficacy
of the model, it is important to analyze and present the
predictive capabilities of each individual independent
variable. The fact that the overall model is significant
allows the testing of individual variables within the sets
that are significant. In a hierarchical set regression
analysis, it is appropriate to test the estimates for
significance as they come into the model if the overall set
is significant (Cohen & Cohen, 1983). This technique allows
140
for the testing of the proposed hypotheses. The estimates
attained for the variables as the set enters the analysis
represent the total effects of the variables and the fully
partialled model indicates the direct effects of the
variables (Cohen and Cohen, 1983) .
The analysis was constructed so that the reference
group is the corporate managers. Two separate LOGIT
regressions were estimated at each step of the analysis.
The first LOGIT compares the entrepreneurs to the managers.
The second LOGIT compares the small business owners to the
managers. A comparison of the two LOGITs to each other,
thereby comparing entrepreneurs and small business owners,
is provided later in the analysis.
The results of the hierarchical set multinomial LOGIT
regression are displayed in Table 11. In addition to the
estimates (B) for each variable, the standard error (SE), t-
statistic (t), p-value (g) and the change in estimate
(change in B) is provided for each step. In each step, the
LOGIT for the entrepreneur (Entrep) is provided first,
followed by the LOGIT for the small business owners (SBO).
It should also be noted that the p-values for the variables
achievement motivation, risk taking and innovation have been
cut in half to conduct the one-tailed tests suggested by the
directional hypotheses incorporating those variables.
Additionally, the p-values are presented to three decimal
points as provided by Systat. P-values marked by * are
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150
significant at an alpha value of .05, while p-values marked
by ** are signficant at an alpha value of .10.
Tests of Individual Demographics and Type of Organization
The first area of interest in assessing the
significance of the predictors is the covariates which
represent the control variables. The only variable which is
significant in the set of individual demographic predictors
for entrepreneurs is education. Entrepreneurs exhibit a
significantly lower (t = -2.69, p =.007) education level
when compared to managers. Alternatively, small business
owners had scores significantly different from managers in
two of the variables. Small business owners were also
significantly less educated than managers (t = -4.09, p <
.0001), as well as older than managers (t = 5.17, p <
.0001). No significant differences in race or gender were
found for either group relative to managers.
Two of the organization type variables were significant
in the second step. Both entrepreneurs (t = 3.223, p =
.001) and small business owners (t = 3.20, p = .001) are
significantly more likely to be involved in retail
organizations than are managers. Conversely, managers are
significantly more likely than both entrepreneurs (t = -
3.02, p = .002) and small business owners (t = -6.41, p <
.0001) to be associated with organizations involved in
manufacturing.
151
Also of interest are the changes in the estimates for
age and education when the type of organization was entered
into the analysis. The values of the estimates for age in
the entrepreneur group and the estimates for both age and
education in the small business owner group increased in
step 2. This indicates suppression with these variables and
the set of variables representing the type of organization.
Hypothesis Tests
The primary focus of the research was to test the
proposed hypotheses concerning the differences in the three
groups with respect to the psychological constructs of
interest. A summary of the results of the tests of the
hypotheses is provided in Table 12. Following is a
discussion of the tests for each of the hypotheses.
Differences Between Entrepreneurs and Managers.
Hypotheses la, 2a and 3a posited that entrepreneurs would
exhibit higher scores on achievement motivation, risk taking
and preference for innovation, respectively, than would
corporate managers. Achievement motivation was strongly
significant (t = 4.26, p < .0001) in discriminating between
the two groups. Entrepreneurs also exhibited a
significantly higher level of preference for innovation (t =
3.54, p < .0001), as well as a significantly higher
propensity for risk taking (t = 4.86, p < .0001) as compared
to managers. These results support hypotheses la, 2a and
3a.
152
Table 12
Summary of Tests of the Hypotheses
Hypothesis Results
Hla: Entrepreneurs will demonstrate a greater S need for achievement than will corporate managers.
Hlb: Small business owners will demonstrate a NS greater need for achievement than will corporate managers.
Hlc: Entrepreneurs will demonstrate a greater S need for achievement than will small business owners.
H2a: Entrepreneurs will exhibit a higher risk S taking propensity than will corporate managers.
H2b: Small business owners will exhibit a higher S risk taking propensity than will corporate managers.
H2c: Entrepreneurs will exhibit a higher risk taking S propensity than will small business owners.
H3a: Entrepreneurs will display a higher preference S for innovation than will corporate managers.
H3b: Small business owners will display a higher NS preference for innovation than will corporate managers.
H3c: Entrepreneurs will display a higher preference S for innovation than will small business owners.
S = Supported NS = Not Supported
153
The parameter estimates also changed as variables were
added to the analysis. For instance, when preference for
innovation was added to the model, the estimate for
achievement motivation fell, but remained significant.
Also, when risk taking was added to the model, the estimates
for both preference for innovation and achievement
motivation dropped again, but also remained significant.
These declines in the estimates of the previously entered
variables suggests redundancy among the variables. This is
not unexpected given the high intercorrelations among these
three variables.
When the interaction term for achievement motivation
and risk taking was added to the model, the estimates for
both risk taking and achievement motivation increased, and
they remained significant. The estimate for preference for
innovation did not change; however, the P-Value for
innovation was pushed upward. Moreover, when the preference
for innovation and risk taking interaction was added to the
analysis, a marked change occurred in the innovation
variable. The main effect for preference for innovation, as
previously shown, was significant. Yet, upon the entry of
the interaction term, preference for innovation became
nonsignificant (t = .77, p = .22). This suggests that some
of the importance that was originally attached to the main
effect of preference for innovation is actually attributable
154
to the interaction between preference for innovation and
risk taking.
Differences Between Small Business Owners and Managers.
Hypotheses lb, 2b and 3b posited that small business owners
would exhibit higher scores on achievement motivation, risk
taking and preference for innovation, respectively, than
would corporate managers. The results support only one of
these hypotheses. No significant differences between small
business owners and managers were found for achievement
motivation (t = .20, jo = .422), nor for preference for
innovation (t = .97, g = .165). Yet, the results supported
the hypothesis that small business owners tend to exhibit
higher risk taking than do managers (t = 3.78, p < .0001).
Some interesting changes occurred in the estimates of
the variables as new variables were entered into the
analysis. For example, the estimated coefficient for
achievement increased when preference for innovation was
added to the model, indicating suppression. When risk
taking was added, the estimated coefficients for both
achievement motivation and preference for innovation fell.
This suggests redundancy vis-a-vis these two variables and
risk taking.
The addition of the two interaction terms also produced
interesting results in this LOGIT. Although neither the
step nor the interaction term for risk taking and
achievement motivation is significant, when it was added to
155
the analysis, the main effect for risk taking became
nonsignificant (t = .84, p = .202). This phenomenon
suggests that some of the variance which was attributed to
risk taking in the previous step is actually attributable to
the interaction of risk taking with achievement motivation.
This may indicate a lesser importance for risk taking in
small business owners due to the effect of the interaction.
The interaction term for risk taking and preference for
innovation was significant at alpha = .10 (t = .01, p =
.085), but the step was not significant, disallowing any
interpretation of the interaction term. Yet, when this
interaction was included in the final step, the estimate for
the main effect of preference for innovation increased and
became significant (t = -1.72, p = .043). This would
suggest that the pure effect of preference for innovation is
negative for small business owners. Also, the introduction
of this interaction changed the signs of the estimates for
both preference for innovation and risk taking, indicating a
confounding effect.
Differences Between Entrepreneurs and Small Business
Owners. Hypotheses 3a, 3b and 3c predicted that
entrepreneurs would exhibit higher scores on achievement
motivation, risk taking and preference for innovation,
respectively, than would small business owners. The testing
of this stream of hypotheses requires a comparison of the
156
two groups through a series of Wald tests. The results of
the Wald tests are provided in Table 13.
Age is the only significant difference in entrepreneurs
and small business owners (Chi2 = 5.75, p = .016) in terms
of the set of individual demographic variables. This test
indicates that the entrepreneurs were, on average, younger
than the small business owners. No significant differences
were found with regard to gender, education nor race among
the two groups. Neither were any significant differences
indicated between the two groups with regard to the type of
organization.
The entrepreneurs and small business managers did
differ on the main independent variables. Entrepreneurs
displayed significantly higher scores on achievement
motivation than did the small business owners (Chi2 = 10.75,
E < .0001). This finding supports hypotheses lc. Also,
entrepreneurs evinced significantly higher scores on risk
taking than did the small business owners (Chi2 = 5.42, p =
.020). Additionally, entrepreneurs were also higher on
preference for innovation than were the small business
owners (Chi2 = 9.56, p = .002). These findings provide
support for hypotheses 3a, 3b and 3c.
Wald tests are also included for the two interaction
terms, although neither of the steps (6 and 7) for the
interaction terms were significant. The results also show
that neither of the interaction terms is significant in
157
Table 13
Results of Wald Tests Across Entrepreneurs
and Small Business Owners8
Step Variables Chi2 E
1 age 5.75 .016* education . 10 .754 white .68 .408 black .15 .695 gender .03 .859
2 wholesale 1.04 .308 manufacturing . 19 . 666 retail .77 .379 service .43 .511
3 achievement 10.75 .000*
4 innovation 9.56 .002*
5 risk 5.42 .020*
6 risk*achievement 2.19 .139
7 risk* innovation .95 .331
a one degree of freedom for each test * significant at alpha=.05
158
predicting a difference between entrepreneurs and small
business owners.
Elasticities. Elasticities are another tool for
assessing the predictive efficacy of the variables in the
model. Elasticities indicate the percentage change in the
probability of being classified in a given group given a
percentage change in the value of a given predictor. The
individual variable elasticities are shown in Table 14. The
elasticities for each variable are taken from the step where
the variable was introduced to the model, thereby producing
an elasticity coefficient for the total effect of the
variable.
According to the elasticities, the best predictor of
being classified as an entrepreneur is achievement
motivation. A given percentage change in the value of
achievement motivation produces the largest percentage
change in the probability of being classified as an
entrepreneur. The elasticities for the preference for
innovation and risk taking variables also indicate good
classification power.
Chapter Summary
The results of the analysis of the data for this study
were presented in this chapter. The analysis of the data
was multifaceted. An analysis of the characteristics of the
sample indicated that the sample is comparable to other
research samples, and is likely indicative of the
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population. Also, a confirmatory factor analysis of the
criteria used to categorize the dependent variable was
conducted. The results of this factor analysis can be
considered as a partial validation of the theory predicting
differences among small business-owner managers, and
provides an impetus for partitioning them into two groups,
entrepreneurs and small business owners.
The crux of the analysis involved determining and
evaluating a hierarchical set multinomial LOGIT regression
model, and testing the hypotheses. A model with significant
predictive efficacy was produced. Support was found for
including age, education and type of business as covariates.
The testing of the hypotheses suggested that
entrepreneurs are significantly higher in their achievement
motivation, preference for innovation and risk taking
compared to both small business owners and corporate
managers. Support was also evident for small business
owners having a higher risk taking propensity than corporate
managers. Interaction terms for achievement motivation and
risk taking, and preference for innovation and risk taking
were not statistically significant. The best model,
therefore, would exclude these interaction terms. Yet,
while the tests of the interactions did not indicate
moderation, the evidence did suggest that the interaction
terms were confounders.
CHAPTER V
EVALUATION OF RESULTS
The final chapter is devoted to a discussion of the
results of the study. Elements of this discussion include
an explanation of the results and the implications of the
findings. Furthermore, both the methodological and
practical limitations of the research are delineated and
analyzed. Finally, both methodological directions and topic
areas for future research are suggested.
Discussion of Results
While many of the expectations conveyed in the
hypotheses were supported, the results did not support all
of the hypotheses. In terms of the entrepreneurs, the
findings were consistent with the majority of the
literature. It is with the small business owners, who were
expected to be more like the entrepreneurs than like the
managers, where inconsistencies are apparent. The following
discussion of the results is organized around the variables
of interest in the study.
The individual and firm demographics were primarily
included in the study to control for extraneous sources of
variance. Nonetheless, these variables provided some
interesting insights into individuals in the three
161
162
categories. The entrepreneurs tended to be younger than the
small business owners in this study. Entrepreneurs have
typically been found to be younger when compared to other
groups. Nevertheless, the fact that entrepreneurs are
younger than the small business owners is somewhat
surprising, given the discussion of the experience factor in
entrepreneurship. Much attention has been focused on the
backgrounds of small business owner-managers, and experience
is typically one of the factors associated with
entrepreneurial success. It appears questionable how
significant the experience factor is in new venture creation
and/or growth if the entrepreneur is relatively youthful to
the point of diminished meaningful business experience.
It is interesting to speculate how the age difference
might affect the planning and goals in the organizations
which are owned by these two types of individuals. It is
possible that the relative youth of the entrepreneurs is a
factor in determining their goals of profit and growth for
their organizations. The older, maybe more entrenched,
small business owners could be in a stage in their lives
which engenders a focus on more constrained goals such as
family income. Stability appears to be more important to
the small business owners and this possibility is also
reflected in their risk profiles. The higher propensity for
risk taking in the entrepreneurs may also be a partial
163
determinant of a focus on profit and growth, rather than the
relatively more conservative goal of family income.
Both the entrepreneurs and the small business owners
are less educated than the managers. This result is
relatively predictable. In most organizations, an education
is a prerequisite to assuming managerial positions.
Alternatively, a lack of education may be a barrier to
becoming a business owner only if it affects the ability to
acquire the necessary capital to enter the business.
Moreover, for managers, the additional time spent on
education might influence an individual's desire for
stability rather than the risks associated with new venture
creation. In fact, education could conceivably influence a
manager's perceptions of risk and risk taking propensity,
making the relatively more predictable managerial position
more psychologically comfortable.
The results concerning the types of business in which
the individuals were involved are also straightforward. The
entrepreneurs and small business owners were mostly
associated with firms engaged in retail businesses. The
managers were more likely to be associated with
manufacturing organizations. The capital requirements
demanded by participation in manufacturing organizations may
largely preclude their establishment by owner-managers.
Retail organizations are potentially less restrictive for
the owner-managers to enter. Education may also influence
164
the type of organization because owning and operating a
manufacturing firm would probably demand more education,
particularly in technical areas.
The nucleus of the study was the investigation of the
psychological constructs. Many of the assertions made in
the literature were confirmed in this study. It appears
that the psychological constructs in this study are elements
of the entrepreneurial vision of the small business owner-
manager. A key element of entrepreneurship is opportunity.
These psychological constructs appear to be important to the
process of seeking and exploiting entrepreneurial
opportunities. Moreover, the results point to marked
differences in the psychological profiles of the small
business owner-managers.
As hypothesized, the entrepreneurs were higher in
achievement motivation, risk taking propensity and
preference for innovation than were the managers. This is
consistent with the classical profile of the entrepreneur.
The archetypal portrait of the entrepreneur is an individual
who is highly driven to succeed. This motivation is also
connected with a particular risk taking posture. The
entrepreneur assumes the risk of the initiation and
operation of the organization. Concomitantly, the
entrepreneur sparks innovation by mutating the economic
characteristics of products, markets or industries. Decades
of research and theorizing about the entrepreneur indicate
165
the confluence of these factors in distinguishing
entrepreneurs from their corporate counterparts. The
results of this study reinforce this conceptualization of
the entrepreneur as an achieving, creative risk taker.
Notably, this profile of those generally labeled as
entrepreneurs is not consistent across both of the types of
small business owner-managers in this study. Small business
owners present a different portrait. The only
characteristic which differentiated the small business
owners from the managers was the small business owners1
relatively higher proclivity toward taking risks. This
outcome suggests that, more than any other factor, it is
risk taking that distinguishes the small business owner-
manager from the corporate manager. There is a measure of
riskiness inherent in business ownership which is not
necessarily present in the managerial role. This propensity
to take more risks appears to delineate between the choice
of business ownership and the choice to assume a managerial
position.
The differences exhibited between the small business
owners and the entrepreneurs provide the most interesting
outcome of the research. Not only did the entrepreneurs
differ dramatically from managers, but they also differed
from small business owners. Small business owners are less
risk oriented and are not as highly motivated to achieve as
are entrepreneurs. Small business owners also lack the same
166
degree of innovativeness as entrepreneurs. Given the
relative significance of innovativeness in entrepreneurs, it
would appear that creativity necessitates extended risk
because it entails coping with the potential outcomes which
are associated with untried venues. Small business owners
appear to lack this coalition of creativity and risk taking.
These findings logically coincide with the differences
in the goals of small business owners and entrepreneurs.
Psychological antecedents appear to influence
entrepreneurial aspirations. Small business owner-managers
have goals which are related to their personalities.
Entrepreneurs exhibit the psychological profile that is
consistent with their goals of growth and profit, and the
use of systematic planning. It is intuitively appealing
that high achievement motivation, high risk taking and a
proclivity to innovate are coupled with an emphasis on
profit and growth. Alternatively, the psychological
predispositions and actions of small business owners are
more attuned to their personal goals and family income. The
small business owner appears to be a conceptual link between
the entrepreneur and the manager, exhibiting characteristics
that are likened more to the manager than to the
entrepreneur. These findings have a plethora of
implications.
167
Theoretical Contributions and Implications
If confirmed by future research, these findings have
important implications. From a theoretical perspective, if
indeed the individual entrepreneur is the most salient unit
of analysis in entrepreneurship research and theory
(Lachman, 1980; Mitton, 1989; Herron & Sapienza, 1992), then
a more complete understanding of the entrepreneur is a
necessary antecedent to the development of a more complete
understanding of the process of entrepreneurship. These
results reinforce the assumption that human volition is
essential to a model of entrepreneurship (Bygrave & Hofer,
1991). The results of this study suggest that a personal
predisposition toward entrepreneurship may be the foundation
for a more rigorous, robust model of the entrepreneurial
process.
This research lies at the crux of two major theoretical
debates. For decades, disagreement has existed in the field
of psychology concerning the determinants of behavior. This
debate has been the genesis of a parallel flurry of
contention in the field of entrepreneurship concerning
whether to study the entrepreneur or the behaviors of the
entrepreneur. The results of this study suggest that
studying traits and behaviors may not be mutually exclusive.
This study incorporates elements of both perspectives.
While the focus was on identifying the significance of
personality constructs, the inclusion of goals and planning
168
practices in the study links psychological antecedents with
individual behavior. The results provide numerous insights
into the nature of different types of small business owner-
managers relative to corporate managers.
Individuals who evidence the significant
characteristics and behaviors will not necessarily found new
ventures. It is likely that there are triggering events
which cause an entrepreneurial predisposition to be realized
into action. Yet, a more complete understanding of the
entrepreneur, coupled with a broader theoretical framework,
provides the basis for understanding which triggering events
are significant and how they bear upon the individual.
Numerous types of entrepreneurs have been identified by
researchers, but the literature is mixed concerning the
validity and usefulness of distinguishing between different
types of small business owner-managers. The results of this
study suggest that taxonomies of entrepreneurial types could
be useful in more fully understanding the entrepreneur.
Furthermore, this analysis lends credence to those who argue
that the distinctions which have been made between
entrepreneurs and small business owners are more than a
question of semantics. This study suggests that a profit
and growth orientation, and the utilization of strategic
management practices do differentiate entrepreneurs from
small business owners. Risk propensity, achievement
motivation and preference for innovation, variables
169
ubiquitous in their connections with the entrepreneur, are
also useful in making this distinction.
The results of this study also reinforce the
differentiation that is made between entrepreneurship and
small business management (Luchsinger & Bagby, 1987).
Luchsinger and Bagby discussed the potential for firms
headed by entrepreneurs to be larger and associated with
higher profit potential and higher risk than the
conventional small business. Given the entrepreneurs'
psychological predisposition, goals and planning practices,
their association with larger, growth oriented firms is not
a surprising outcome. The confluence of factors associated
with small business owners would tend to link them with
organizations which are more static. The more these two
groups of owner-managers are understood, the more likely it
will be to meaningfully circumscribe the areas of
entrepreneurship and small business management.
Potentially the most important implication from this
study is for research methodology in entrepreneurship. To
be complete, research definitions of entrepreneurs must
extend beyond new venture creation. It is important to
fully circumscribe the sampling frame. Incomparable
sampling frames may be the reason for the morass of
inconsistencies in this line of research. One sample of
small business owner-managers may be markedly different than
another sample. This makes comparability of research
170
problematic and hinders theoretical development in the
field. Hence, by launching into a study of small business
owner-managers, it behooves the conscientious researcher to
fully describe the sampling frame. Only in this way may a
clear, acceptable definition of the entrepreneur actually be
developed. A distinct operational definition of the
entrepreneur would serve to enhance theoretical rigor by
improving methodological precision, particularly in defining
the characteristics of appropriate sampling frames.
The results of this study indicate the value of
studying the entrepreneur. A myriad of characteristics have
been associated with the entrepreneur. Additional
characteristics may be important in predicting or indicating
entrepreneurial endeavors. If the characteristics can be
successfully linked with entrepreneurial behaviors, the
potential for learning how to enhance the practice of
entrepreneurship and its success would be greatly improved.
In summary, this study may be the first step in the
reconciliation of the inconsistent findings of past
research, and may thus lead to progression in the field of
study. Moreover, an individual's psychological
characteristics will affect behaviors in the business, and
presumably, the outcomes of the business. Additionally, the
predictors of entrepreneurship identified here can be used
to enhance both theory and practice through additional
171
research. These findings suggest a multitude of additional
directions for supplementary research.
Limitations of the Research
As with all research, there are potential limitations
associated with this study. It is important to acknowledge
the limitations of the research. These limitations are of
two genres: limitations imposed by the research problem and
limitations associated with the research methodology. Of
these two types, the limitations of primary concern are
those which are methodological in character, particularly
those inherent in a survey design and the concomitant
reliance on self-report data. This concern is due to the
fact that methodological limitations might restrict the
usefulness of the research.
Methodological Limitations
The analysis of the methodological limitations is
primarily guided by the work of Cook and Campbell (1979) and
the applications to correlational research provided by
Mitchell (1985). The methodological issues are presented
according to the major categories of research validity.
Specifically, these areas include construct validity,
statistical conclusion validity, internal validity and
external validity. Notably, these validity issues are
interrelated. Issues in the research which overlap one or
172
more of these areas of validity will be analyzed primarily
under the area where the issue is most applicable.
Statistical Conclusion Validity. There are potential
issues associated with the findings given the specified
alpha level and the obtained variances. Of paramount
importance is the lack of control over the administration of
the questionnaire and the conditions during response. The
lack of standardization in implementing the questionnaire is
a problem, as are sources of possible error variance due to
factors associated with the settings of the respondents.
Both factors could contribute to increased error variance.
While the potential for these effects is recognized, they
are not believed to be significant for this study due to the
relatively high reliability, both internal consistency and
stability, of the measures and the acceptable reliability
estimates in this study.
Other factors associated with statistical conclusion
validity do not appear problematic. The size of the sample
afforded high statistical power in the testing of the
hypotheses. Nonetheless, significant differences between
small business owners and managers were not obtained for
risk taking propensity and preference for innovation. A
post hoc power analysis indicated that the failure to find
significance in these hypotheses was not a function of the
sample size for an effect size of .10. Therefore, the
validity of these findings appears satisfactory.
173
The logistic regression model is robust with regard to
the violation of most assumptions. The utilization of sets
and protected t-tests reduced the error rate problem and the
potentially biasing effects of multicolinearity in the
independent variables. Finally, appropriate model
specification resulted in model parsimony and a reduction in
the potential bias of the estimates.
There are limitations associated with the confirmatory
factor analysis. While the theoretical guidelines for the
analysis were supported, statistical hypothesis testing was
not possible. This limits the definitiveness of the factor
analysis. Although, it should be recognized that
substantive interpretation of the factors is not necessarily
dependent upon statistical significance because a
statistically significant factor may not always be
identified correctly in terms of the empirical phenomena
(Anderson, Basilevsky & Hum, 1983) . Nonetheless, the factor
results should be subsequently verified by second-order
factor analysis (Kerlinger, 1986) and more sophisticated
confirmatory factor techniques which use covariance
structure analysis (Comrey & Lee, 1992).
Internal Validity. There is a possibility that there
is an alternative explanation of the identified
relationships between the variables in this study. As with
any cross-sectional, correlational design, there was a lack
of control over the independent variables. It is possible
174
that spurious relational patterns have been identified and
that the direction of potential causal influence was
misconstrued, presenting a host of speculative rival
plausible hypotheses.
One area of obvious concern is selection. The
researcher had no control over who completed the survey. It
is conceivable that those respondents who participated in
the study were patently different from those who did not
participate. Most of the respondents had some personal
association with the individual who sought their
participation in the study. This may have introduced bias
into the study through the convenience method of sampling.
Alternatively, the method of data collection produced a high
response rate. Because nonresponse was low for a survey
design, it minimizes the potential distortions introduced by
the special characteristics of the respondents. Although
nonresponse was minimized in this study, it is still an area
of concern. It is feasible that selection may have
adversely influenced the internal validity of the study.
Nonetheless, potentially of more concern are alternative
hypotheses resulting from possible confounds.
A large number of uncontrolled variables are inherent
in the phenomenon itself, as well as the research
circumstances. The potential interaction of these variables
is unpredictable. Despite this situation, the lack of
control over the potential confounds may not be problematic
175
in this study for a couple of reasons. The first reason is
the model specification for the study. Individual
demographic factors which might have affected the
hypothesized relationships were included in the design of
the study and controlled. The second explanation is the
diversity and size of the sample.
The sample includes individuals from a large variety of
situations, thereby including individuals with different
amounts and combinations of the uncontrolled variables. By
mixing them all, chance imbalances may have been cancelled
(Isaac & Michael, 1990), thereby exerting some level of
control over extraneous variables. The size of the sample,
approaching that of a random sample, is likely to have
positively influenced the internal validity of the study, as
well as enhancing the external validity of the findings.
Nonetheless, the lack of control over the variables remains
a potential limitation and poses the most significant threat
to internal validity.
Construct Validity. Another issue is the degree to
which the operationalized variables in this study measure
the constructs of interest. Response sets, hypothesis
guessing and common method variance represent the most
important potential threats to construct validity in this
study. Notably, the instruments used in this research were
carefully constructed to maximize content saturation and to
avoid problems associated with response sets. Also, the
176
instruments have repeatedly been demonstrated to have
divergent and convergent validity. Additionally, the
privacy of the response situation would tend to minimize the
likelihood of evaluation apprehension (Dillman, 1983). For
these reasons, it is not believed that instrumentation poses
a vital question of validity in this study.
Hypothesis guessing on the part of the respondents
could also present a construct validity problem. While
hypothesis guessing is possible, it is not probable given
the nature of the study. Moreover, the instrumentation is
such that hypothesis guessing would not likely result in
serious concerns about validity. Potentially of more
significance is common method variance.
Only one method of measuring each of the variables of
interest was used, precluding triangulation on the referent.
Moreover, the data for the independent and dependent
variables were collected from the same respondents, sparking
concerns about single source bias. Under these
circumstances, any defect in the source contaminates all
measures (Podsakoff & Organ, 1986). Contributing factors
include a consistency motif in responses, questionnaire
items similar in content, social desirability, respondent
mood and stimulus setting effects (Podsakoff & Organ, 1986).
While potentially existent, common method variance is
not believed to be a significant threat in this study for
several reasons. First, the construction of the instruments
177
included careful attention to consistency motif, item
content and social desirability. The strong validity of the
instruments lessens concerns about mono-method bias. In
terms of single source bias, the data for the dependent
variable were based upon a series of direct questions
concerning the goals and practices of the individual. The
dependent and independent variables were not measured on.
scales with similar formats. These data were then used to
identify the small business owner-managers as either
entrepreneurs or small business owners. Additionally, the
results of the confirmatory factor analysis do not indicate
a problem with single source bias (Williams, Cote & Buckley,
1989). Because of the differences in the measurement of the
independent and dependent variables, and the aforementioned
attentiveness to the design of the measurement of the
independent variables, it is unlikely that artifactual
covariance is problematic. Nonetheless, the data is not
independently verifiable, there were no controls for
stimulus effects upon response and there were no means by
which to assess respondent mood. Hence, while common method
variance is not believed to be problematic, its existence
cannot be ruled out with certainty.
External Validity. Most of the issues pertaining to
external validity are a function of the sample for the
study. While sampling for heterogeneity was not deliberate,
it was an outcome of the sampling procedure. There are a
178
host of divergent situations and subjects included in the
sample. Moreover, the sample appears to be representative
of the specified target population. These factors, coupled
with the size and relative dispersion of the sample,
indicate favorable conditions for the generalization of the
results. Nonetheless, there are potential external validity
limitations.
One consideration is that little is known about the
characteristics of the population of small business owner-
managers. While the sample for this study compares
favorably to other samples of entrepreneurs, all of the
samples could be mistargeted. A notable potential example
in this sample is the small number of non-white respondents.
This might be due to convenience sampling. Also, because of
the fact that the sample was obtained in a particular
geographic region, primarily the Southeast, the results may
have limited generalizability. Clearly, cultural
differences would preclude the extrapolation of these
results to other cultures. Moreover, it should be
recognized that to the extent that the internal validity of
the results are hampered, so is external validity.
Ultimately, the generalizability of the findings can only be
assessed through systematic testing with different subjects,
settings and responses (Flanagan & Dipboye, 1980).
In summary, a number of trade-offs were made in the
design of the study, a dilemma associated with any research
179
effort. Where possible, attempts were made to address the
potential concerns associated with statistical conclusion,
internal, construct and external validity. Despite these
efforts, it should be noted that the aforementioned
limitations represent potential threats to the usefulness of
this research.
Theoretical Limitations
There are also theoretical limitations which
circumscribe the research due to the research problem and to
the nature of this study. First, it should be noted that
this is not a study of prospective entrepreneurs. The fact
that the small business owner-managers in this study had
realized the entrepreneurial event may have implications.
For instance, Cromie and Johns (1983) suggested that
aspiring entrepreneurs may exhibit a different profile than
would entrepreneurs who were established in their
businesses. The authors found that aspiring entrepreneurs
possessed a distinctive personal profile, but after some
years of managing the business, the entrepreneurial
gualities diminish as the established entrepreneurs become
more like career managers. While the results of this study
do not support this conclusion, it is possible that the
entrepreneurial event affects the psychological condition of
the entrepreneur.
Not only may the actual entrepreneurial event be of
significance, but so may be the time elapsed since the
180
event. In other words, it is also feasible that the
psychological constructs, achievement motivation,
innovativeness and attitudes toward risk, change over time.
For instance, achievement motivation may have a temporal,
contextual quality. Theoretically, an individual's success
may erode the need for achievement (McClelland, 1961;
McClelland & Winter, 1969). Also, from an evolutionary
perspective, different characteristics may be emphasized at
different stages of the organizational life cycle. Nandy
(1973) found that need for achievement was the most
important individual factor for entry and survival in the
business, while education is more influential in developing
business competence. Nandy proposed that after entering and
attaining some level of stability in an entrepreneurial
role, the entrepreneur becomes less dependent upon
personality motives, and more dependent upon personality
resources for better entrepreneurial functioning.
Comparable issues may be associated with risk taking
and preference for innovation. For example, Brockhaus
(1982) hypothesized that established entrepreneurs might be
characterized by a different risk profile, suggesting that
the process of entrepreneurship might increase the desire
for moderate levels of risk. Similarly, Timmons, Smollen
and Dingee (1985) argued that risk taking decreases as net
worth accumulates.
181
No effort was made to differentiate between successful
and unsuccessful small business owner-managers, nor
investigate the potential relationships between the
psychological constructs and entrepreneurial success. Yet,
there is an element of success inherent in the individuals
in the study. At the time of the sampling, all of the
respondents were members of organizations. The small
business owner-managers had started or assumed ownership of
a business, some of the businesses had been highly
successful and some individuals had been in business for
several years. Many of the managers had ascended to
positions of influence in their organizations. Nonetheless,
because the research problem did not incorporate success, it
is beyond the scope of the study to suggest that the
presence or absence of the identified personality variables
ensures success in either group.
The study deals with psychological factors which
indicate intentions to engage in a particular type of
business role. It should be noted that intentions do not
automatically transfer into a specified behavior. All
individuals who exhibit the psychological profile of the
entrepreneur will not necessarily behave entrepreneurially.
It is likely that triggering environmental events also
affect the realization of entrepreneurial proclivities.
182
Directions for Future Research
The results of this study suggest a host of additional
directions for research. The proffered suggestions for
additional research are composed of two basic types. First,
the methodological factors which are inferred from this
research that bear on future research are presented.
Second, specific research topics which are suggested by the
results of this study are detailed.
Directions for Research Methodology
The lack of significant theoretical development in the
field of entrepreneurship may be partially attributable to a
limited theoretical approach. Researchers who focus
singularly on the person or the situation may lose portions
of important elements of the phenomenon of entrepreneurship.
Sufficient empirical evidence concerning both the traits of
the entrepreneur and the situation of the entrepreneur
exists. Efforts aimed at combining the two may hold
promise. This entails including a broader theoretical
approach, i.e., interactionism. The personality x situation
model of behavior has been suggested as the next logical
step in theory and research (Magnusson and Endler 1976) .
For entrepreneurship, this entails a systematic,
comprehensive set of analyses of situations which influence
the entrepreneurial process. Then, situation and
personality variables could be incorporated into research
designs. An area of future research would be to identify
183
the interplay between the variables presented here and
contextual events which might initiate entrepreneurial
actions. Such studies could then be used to construct a
contingency framework for entrepreneurial activities. A
framework of this type would allow the development of more
complete, refined paradigms for entrepreneurship.
Another line of research with methodological, as well
as theoretical implications, is establishing causal
inference in this research stream. Establishing causality
entails elaboration on research designs. The classic method
of investigating causal relations is, of course,
experimentation. Experimentation in all areas of inquiry in
entrepreneurship has been inadequate. Other methods of
drawing causal inferences, although less conclusive, are
also warranted. These methods include longitudinal designs
and path analytic techniques.
Longitudinal research designs have been infrequently
used in entrepreneurship research. If indeed the
entrepreneurial event unfolds over a significant period of
time, cross-sectional research designs may be inadequate in
fully understanding the nature of the process. This
suggests an additional research effort based upon these
findings. What happens to the psychological antecedents of
entrepreneurship over time? Sexton and Bowman (1983)
proposed that the question of whether the entrepreneur
possessed characteristics at the initiation of the
184
entrepreneurial activity and if so, how the magnitude of
characteristics changed temporally was important and
inadequately addressed in the literature. Longitudinal
analyses would help establish the temporal sequence of
covariation.
Finally, this study concentrated primarily on the total
effects of the individual variables. One important
extension is to study the interrelatedness of the variables
which were included in this study. A more complete causal
model in the form of a path analysis would provide more
insight into both the direct and indirect effects of the
variables.
Topic Areas for Additional Research
The results of this study suggest a host of topic areas
for additional research. These areas include: associations
between personality and performance, the organizational life
cycle, intrapreneurship, educational and assistance programs
for the entrepreneur, venture team composition, modes of
business entry and planning in small organizations.
Personality and Performance. An important topic in
this line of research is the effects of psychological
characteristics on performance. Performance could be
considered as the establishment and ownership of an
organization, as well as the performance of the
organization. The research which has focused on this line
of research has been largely inconclusive (Perry, 1990).
185
This should not discourage inquiry in this area. If
psychological factors are associated with performance,
understanding and predicting the relationships is essential.
Research which produces ameliorative solutions to
performance problems is potentially the most useful type of
organization research.
The Entrepreneur and Organizational Life Cycle. Much
attention has been devoted to managerial issues associated
with the progression of an organization through the
organizational life cycle. This evolution has important
implications for our understanding of entrepreneurs and
managers. One of the earliest and most well known works in
organizational life cycles is the work of Greiner (1972).
In his theory of organizational evolution, Greiner suggested
that the founding entrepreneur should be replaced by a
capable business manager if the organization is to grow and
prosper. Similar propositions have been advanced by Tuason
(1973) and by Clifford (1973). Smith and Miner (1983) noted
a similar central theme in the theories of organizational
progression.
Organizations may indeed require different managerial
styles as they grow, and the entrepreneur must undergo a
style change or be replaced by a manager more capable of
dealing with a given organizational stage. For instance,
Novellie and Tullar (1988) contended that characteristics of
the entrepreneurial personality made it difficult to
186
delegate tasks to subordinates. Therefore, a more complete
understanding of psychological correlates of organization
behavior and the differences between managers and
entrepreneurs could be used to investigate the interface
between the entrepreneurial business and its growth into a
large organization. More fully understanding psychological
antecedents may be the most appropriate beginning in this
area of research.
Intrapreneurship. Interest in corporate
entrepreneurship has escalated, and scholarly research has
been devoted to entrepreneurship in the established
organization (e.g., Burgelman 1983, 1984; Nielsen, Peters &
Hisrich, 1985; Hisrich & Peters, 1986; MacMillan & Day,
1987), as well as popular books (e.g., Pinchot, 1985;
Brandt, 1986; Hisrich, 1986; Kanter, 1983, 1989).
Alternatively, some researchers consider entrepreneurship to
be the opposite of corporate management (Vesper, 1985). The
idea of entrepreneurship in the context of a large
corporation seems oxymoronic to some entrepreneurship
researchers (Stevenson & Jarillo, 1990). Yet,
entrepreneurial features such as innovation, opportunity
recognition, growth and flexibility are also desirable in
the area of corporate entrepreneurship as organizations
strive to be successful in complex, dynamic environments.
An understanding of entrepreneurial traits could be
cogent to the development of effective selection and
187
training of intrapreneurs, and is necessary for the creation
of organizational climates which are conducive to internal
entrepreneurship (Sexton & Bowman, 1983). For example,
McClelland (1961) argued that those with high need for
achievement are not necessarily the best managers, a
conclusion also implied by Hines (1973). Ross and Unwalla
(1986) portrayed innovation as an element of the
intrapreneurial personality. There is also evidence that
when people are given the latitude to seek creativity in
doing things their own way at work, they are better adjusted
in their environments and they have lower work stress levels
(Nicholson & West, 1988).
It is important to learn more about how intrapreneurs
and entrepreneurs are psychologically similar or diverse and
how the environments in which they operate influence the
outcomes of psychological factors. Furthermore, research
which links the fields of entrepreneurship and corporate
management is important to the continued development of both
fields (Stevenson & Jarillo, 1990). For example, Luchsinger
and Bagby (1987) advised that an enhanced understanding of
entrepreneurship and intrapreneurship could be used to
improve productivity. Clearly, more research is necessary
to determine how intrapreneurial behaviors may be fostered
in large organizations.
Assistance and Education Programs. More knowledge
about the psychological nature of entrepreneurs could
188
provide useful information to capital institutions such as
banks, to franchising organizations, to government programs
(both domestically in terms of small business assistance and
internationally in terms of assistance programs in economic
development) and to educational programs targeted at
providing entrepreneurial education (Hornaday & Bunker,
1970). Research has suggested that training might be used
to increase the supply of entrepreneurs (Leibenstein &
Ronen, 1987). For instance, McClelland and Winter (1969)
have demonstrated that achievement motivation training can
produce increases in business activity, and a host of
studies have demonstrated that achievement motivation can be
enhanced through training (Kolb, 1965; Timmons, 1968;
McClelland & Winter, 1969; Arnoff & Litwin, 1971; Jackson &
Shea, 1972). Miron and McClelland (1979), reviewing the
literature and reporting the results of their studies,
concluded that achievement motivation training significantly
improves small business performance if there is support from
the economic infrastructure in terms of available loans,
market opportunities and a labor force. Moreover, the
results indicated that such programs are successful for \
disadvantaged minorities, and were useful in other countries
which provide less economic support. Similarly, Colton and
Udell (1976) reported that efforts at the National Science
Foundation's Innovation Centers had produced higher levels
of innovation and entrepreneurship among participating
189
students and, thereby, shortened the entrepreneurship
gestation period.
Increasing numbers of students are studying
entrepreneurship, and if entrepreneurs exhibit clusters of
psychological characteristics, it is also possible that they
will have different learning styles (Ulrich & Cole, 1987).
Research on these learning styles and their psychological
correlates could provide a basis for improving pedagogy in
teaching entrepreneur skills. Therefore, indicants of
entrepreneurial potential could signal opportunities for
educational intervention which fosters entrepreneurship.
McGrath, MacMillan and Yang (1992) noted the
considerable expenditure of resources to promote
entrepreneurial activities, but the transfer of such
programs to different cultures has frequently produced
discouraging results. Potentially this is because the U.S.
culture, with its emphasis on individualism and personal
achievement, is not accepted in other cultures (Peterson,
1988). Investigating psychological predispositions toward
entrepreneurship, to the extent that they are culture-based,
could produce fruitful results in the adaptation of
successful economic development programs which are intended
to foster entrepreneurship. A cogent example is the
entrepreneurship development program in India which has been
described by Gupta (1989). Selection criteria for the
program include individual need for achievement, capacity
190
for risk taking, positive self-concept, problem-solving
abilities and drive for autonomy. The program targets the
needs of each group and minimizes the costs of industrial
promotion strategies. Learning more about the
characteristics of entrepreneurs could improve the results
of these programs.
Venture Teams. Evidence suggests that new venture
teams can make a substantial difference in venture success
(Cooper & Bruno, 1977; Timmons, 1984, 1990; Obermayer, 1980;
Kamm, Shuman, Seeger & Nurick, 1990). Roure and Maidique
(1986) confirmed that experienced, well formulated and
balanced venture teams contribute to organizational
performance. Knowledge of the psychological predisposition
of aspiring entrepreneurs could also be salient in
establishing entrepreneurial teams, as well as being an
effective tool in evaluating established entrepreneurial
teams. For instance, a common source of conflict among
venture team members is ambiguous or inconsistent motives
associated with the new venture (Morris, 1989; Norman &
Zawacki, 1991; Greenberg & Weinstein, 1992). Achievement
motivation could be a salient issue in these circumstances.
Also, differences in risk taking and innovativeness may also
produce conflict in venture teams. More research is
necessary to identify the psychological associations with
conflict and the means of resolving those conflicts.
191
Psychological factors might also influence venture team
performance.
Modes of Business Entry. There are several means by
which an individual might become the owner-manager of a
venture. These vehicles to ownership include founding the
business, buying the business, franchising or inheriting the
business. Research suggests that there may be individual
differences which affect these different avenues to
ownership. Begley and Boyd (1986, 1987) discovered that
founders score significantly higher than nonfounders in
achievement motivation and risk taking propensity.
Comparable evidence has also been shown by Hull et al.
(1980), who found that owners who had taken part in creating
the business had a higher risk taking propensity than those
who were owners, but had not taken part in the creation of
the business. The need for achievement was not a
distinguishing factor between the two groups. More research
is necessary to determine how psychological factors are
associated with modes of ownership. Understanding more
about differences in individuals who pursue business
ownership through different modes may produce results that
are useful in fostering entrepreneurship.
Planning in Small Businesses. Robinson and Pearce
(1984) noted that planning in small businesses was not well
understood. The planning process in small firms, its
antecedents and outcomes remains imperfectly understood.
192
Yet, formal planning improves performance in small firms
(Schwenk & Shrader, 1993). Planning in small firms is
dominated by the owner-manager, and evidence suggests that
the characteristics of the owner-manager influence planning.
Carland, Carland and Aby (1989) found that owners of small
businesses who had formal plans had higher achievement
motivation, higher risk taking propensity and higher
preference for innovation than did those who planned
informally or did not plan at all. This suggests that
psychological factors influence the existence and nature of
planning in small firms. Moreover, evidence suggests that
the entrepreneur's personality affects information sources
(Welsch & Young, 1982) which might influence the content of
strategic decisions.
The study of strategic management processes in small
organizations in indispensable. Those labelled
entrepreneurs in this study engaged more extensively in
strategic planning than did the small business owners. It
is important to learn more about how psychological factors
influence the process and outcomes of strategic thinking in
small organizations. If entrepreneurs are more strategic in
their planning, much is to be learned from the process of
planning in these organizations, and the commensurate
effects on performance. Investigations of this type could
produce fruitful research in both entrepreneurship and
193
strategic management, and be invaluable to the foundation of
our economic system, the entrepreneur.
Chapter Summary
The purpose of this study was to determine if the
achievement motivation, risk taking propensity and
preference for innovation differed between small business
owner-managers and corporate managers. The observed
differences were discussed in the chapter. Moreover, the
implications of the research, both methodological and
theoretical, were detailed.
There are limitations associated with this research.
Both theoretical and methodological limitations were
discussed. Of the two types of limitations, the
methodological limitations are of primary concern. The
discussion of these limitations entailed scrutiny of the
statistical conclusion, construct, internal and external
validities of the study. It is believed that the potential
areas of concern do not pose significant threats to the
usefulness of the research.
Finally, directions for additional research were
proposed. The extended areas for subsequent inquiry are
aimed at identifying and refining components of the
entrepreneurial personality, and determining how the factors
influence entrepreneurial behaviors and outcomes.
Inculcating entrepreneurial behaviors in all organizations
194
may be the key to responding to the competitive challenges
with which modern organizations must contend.
APPENDIX
QUESTIONNAIRE
195
196
Major Elements of the Questionnaire
The following questions were asked of all respondents:
Company name and address
Type of company: [ ]retail, [ ]wholesale, [ ]manufacturing, [ ]construction or [ ]service
Sales range: [ ]less than $100,000, [ ]$100,000-$500,000, [ ]$501,000-$1,000,000 or [ ]over $1,000,000
Number of employees: [ ]under 10, [ ]10-50, [ ]51-100, [ ] 101-250 or [ ]over 250
Respondent1s sex, age and race
How many years of formal education have you had?
Date business was established
How many levels of management are there in this business?
The following questions were asked of all small business owner-managers:
Were you a principal in the establishment of this business? [ ]yes or [ ]no. If no, [ ]did you buy it or [ ]inherit it?
Is this the first business which you have started? [ ]yes or [ ]no. If no, how many other businesses have you owned?
What were your principal purposes for establishing this business? [ ]Profit and growth, or [ ]provide family income
Do you have a written plan for the development and growth of the business? [ ]yes or [ ]no. If no, do you have a formal unwritten plan for development and growth? [ ]yes or [ ]no
All respondents were also asked to complete the Achievement Scale of the PRF and the Risk Taking and Innovation Scales of the JPI.
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