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

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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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