IMindsets and Motivations

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Centre for Entrepreneurial Learning 2011. You may use these notes for personal use and may circulate them without

permission as long as the source is acknowledged. Lecture note prepared by Dr. Mark DeLessio and Dr S Vyakarnam for

Enterprise Tuesday.

Session 1 Teaching Notes: Mindsets and Motivations 12 March 2013

The Oxford English Dictionary defines an entrepreneur as:

One who undertakes an enterprise; one who owns and manages a business; a person who takesthe risk of profit or loss.

The dictionary definition of entrepreneurship is very specific to the act of being an entrepreneur.However, the World Economic Forum takes a much broader view of entrepreneurship, to includethe pursuit of opportunities, whether they are to create start -ups, spin-outs, or entrepreneurialactivities in larger organisations or social ventures [1]. They cite Stevenson, Gumbert and Jarillo[2, 3] to describe entrepreneurship as:

The pursuit of opportunity beyond the resources you currently controlThey further distinguish between the different forms of the word entrepreneurship as follows(figure 1):

Figure 1Different forms of entrepreneurship World Economic Forum


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Stevenson states the entrepreneur and the entrepreneurship process is guided by the followingquestion:

Where is the opportunity?

How do I capitalise on it?

What resources do I need?

How do I gain control over them?

What structure is best?

However, what characteristics does such a management style entail? Do different types ofentrepreneurs possess different types of characteristics? Do all entrepreneurs, despite the type,share similar mindset and motivation that drive them to pursue entrepreneurial endeavours?

Learning Objective

The basis for this weeks session will include an overview of entrepreneurship by examining theactual case of an entrepreneurial company that has successfully transformed from an early stageidea to a real venture. It will specifically examine the perspective of entrepreneurship as a method

by exploring each of the three phases of the entrepreneurial process. Additionally, it will considerthe different economic theories of entrepreneurship and relate them to the entrepreneurialprocess. Understanding the entrepreneurial process, it will specifically examine the mindset andmotivation required to drive the intent of the entrepreneur.

You will be introduced to:

The overall entrepreneurial process

The key attributes of the three phases of entrepreneurship

The proposed economic theories of entrepreneurship

The mindset of an entrepreneur and what motivates them

Introduction

The term entrepreneur was first put forth by Richard Cantillon who described the entrepreneur as

someone who engages in exchanges for profit; specifically, he or she is someone who exercises

business judgement in the face of uncertainty [4, 5]. Throughout the years since Cantillon this

initial definition of the entrepreneur has not varied drastically. Some more modern interpretations

are shown in table 1.


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Bruyat & Julien(2000)

The entrepreneur is the individual responsible for the process of creating newvalue (an innovation and/or a new organization)- in other words, the individualwithout whom the new value would not be created.

Shane &Venkataraman(2000)

Entrepreneurship is the scholarly examination of how, by whom, and with whateffects opportunities to create future goods and services are discovered,evaluated, and exploited.

Davidsson &Wiklund (2001) Inspired by Low and MacMillans (1988) definition, the authors regardentrepreneurship as the creation of new enterprise... where enterprise isunderstood as economic activity and not as the label for a formal organizationalunit or structure.

Brush, Duhaime,Gartner, Stewart,Katz, Hitt,Alvarez, Meyer,Venkataraman(2003)

A fundamental characteristic of the field of entrepreneurship and of itsresearch is a focus on creation (of new ventures and organizations, newcombinations of goods and services, etc.). Such creation might occur atmultiple levels of analysis (individuals and teams, new ventures andorganizations, etc.) and in a wide variety of contexts (new ventures andorganizations, existing corporations, family businesses, franchises,etc.)....Entrepreneurship research thus includes the behaviours of individuals

as they identify and create opportunities leading to the emergence and growthof an organization, and encompasses industry emergence, new venture teamformation, wealth creation, and organizational transformation.

Hisrich (2004) An entrepreneur is someone who creates something new with value bydevoting the necessary time and effort, assuming the accompanying financial,psychic, and social risks, and receiving the resulting rewards of monetary andpersonal satisfaction and independence

Lundstrm &Stevenson (2005)

...entrepreneurs are people who, at different stages of life and at differentstages of starting, managing and growing their own business, are at differentstages of the entrepreneurial journey...Some start small and stay small, some

start a series of progressively larger businesses over time, and some make thetransition from micro-entrepreneur to high-growth entrepreneur as life andbusiness circumstances change.

Montanye (2006) Entrepreneurship is the process by which individuals acquire ownership(property rights) in economic rents of their creation.

Peneder (2009) Entrepreneurship is the pursuit and exploitation of profit opportunities. Thisstates in general terms, what is unique about that entrepreneurs do.

Ahmad &Seymour (2008)

Entrepreneurs are those persons (business owners) who seek to generatevalue, through the creation or expansion of economic activity, by identifyingand exploiting new products, or markets.

Spulber (2009) An entrepreneur is a consumer who establishes a firm.

Table 1Entrepreneurial Definitions [5]


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Economic th eories of Entrepreneursh ip [6, 7]

Economic theory is concerned with two major questions about society:

How does a society create new wealth?

How does a society distribute wealth among its members?

Wealth creation and distribution are absolutely fundamental to social progress andentrepreneurship along with the development of innovative scientific ideas is a major mechanismfor ensuring both wealth creation and distribution. Entrepreneurship has been around for a verylong time, and over the last 200 or more years three different theories have emerged.

Classical Capitalist Economic Theory

Adam Smith in 1776 described the capitalist as an owner-manager who combined basic resourcesinto a successful industrial enterprise. Later and during the 19th century the French wordentrepreneur (meaning to undertake) was introduced and used to identify the owner-manager of anew industrial enterprise.

Neoclassical Theory

These theorists towards the end of the 19th century saw no place for the entrepreneur. Theyargued that the market consists of many buyers and sellers who interact to ensure that supplyequals demand. The market, which they described as a perfect market would therefore be atequilibrium, and this would be achieved by fluctuations in prices with supply levels. It followed thatwealth would be created and distributed because of the way that this perfect market operates, andso did not allow for entrepreneurs to create new demand. They defined perfect markets as:

Having many buyers and sellers, so no single one has an influence on the market price

Prices are set by the operation of the marketby sales Products and services must all be equivalent in content so that they differ only in price

All buyers and sellers have complete knowledge of the market and the transactions thattake place


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The Austrian School

In the early 20th century Schumpeter argued against the Neoclassical theory and insisted thatentrepreneurship was a far too important part of capitalism to be ignored. He proposed thatinnovation or the use of an invention to create a new product or service was the driving forcebehind the creation of new demand for goods and services. The market was therefore not perfectbut chaotic because of the regular occurrence of entrepreneurs entering the markets with newinnovations. This process of creative destruction destroyed the static market described by theneo-classicists and created a dynamic market which had continuous changes in buyer andsupplier behaviour. It was these entrepreneurs who developed the innovations to create newdemand that was the mechanism of wealth creation and distribution. Influenced by the AustrianSchool, a further contribution to entrepreneurship theory was made by Kirzner. He definedentrepreneurs as individuals who grasp opportunities for pure entrepreneurial profit and that theydid this by uncovering unnoticed profit opportunities by being alert to them.

The Entrepreneur as a Decision Maker

A further study in the early 20th Century by Knight considered entrepreneurship in relation to risk

and uncertainty. He saw entrepreneurial gain as the reward for taking decisions under uncertainconditions and assuming responsibility for those decisions.

The entrepreneuria l Process [8, 9]

The entrepreneurial process consists of three stages:

1. Innovation phase time when entrepreneurs generate and select ideas for new products orservices

2. Implementation phase a triggering event and the acquisition of capital and other resources

3. Growth phasethe success of the new venture and the need to acquire new managerial skills

Each of these phases is influenced by a number of factors such as personal characteristics, the

environment and the characteristics of the innovation as shown in figure 2 [8].


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Figure 2The Entrepreneurial Process [3]

The entrepreneurial process essentially brings together an opportunity an entrepreneur orentrepreneurial team and resources as shown in figure 3 [9], and the forces behind the processare:

It is opportunity driven

Driven by a lead entrepreneur and an entrepreneurial team

It is resource thrifty and creative

It depends on the fit and balance among these

It is integrated and holistic

At the heart of the process is the opportunity. Not all ideas are opportunities, but the importantcharacteristics of good opportunities are that there is an underlying market demand for the productor service because of its value added properties, there is a market for it and that this market isgrowing, and that it will generate money.

Resources need to be understood and utilised wisely at the early stages as they are typically

scarce. Therefore, the entrepreneur needs to minimize and control them as opposed to maximizeand own.

The entrepreneurial team is a key ingredient for success. The leader needs to learn and teach;

deal with adversity; be resilient; exhibit integrity, dependability, honesty; and build entrepreneurial

culture. The team needs to have relevant experience and track record; motivation to excel;

commitment determination and persistence; tolerance of risk, ambiguity and uncertainty; creativity;

team focus of control; adaptability; opportunity obsession; leadership; communication.


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Figure 3 - Timmons Model of the Entrepreneurial Process [9]

The above entrepreneurial processes are presented in the very general terms of the opportunity,

and what entrepreneurs might do to stake advantage of it. However a new scientific discovery or

novel piece of technology must also have a process applied to it, in a very rigorous way if it is to

become a commercial success. The process can be seen in figure 3 above, which essentially

says that new science by itself will not be commercially viable; it needs to be developed into

products which have applications for markets. Within these markets there also needs to be

sufficient customers for whom the product and application solves a problem or meets a need. This

is a very broad overview of the process. In reality, research, analysis and a more in depth

evaluation, perhaps using supportive tools, needs to be done to help make key decisions about

products, applications, markets and strategies to reach customers


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Figure 4Evolving From the Core

The Entrepreneur

In understanding the entrepreneurial process it must be asked what type of individual pursues

such endeavours. Many in literature have proposed classifications of types of entrepreneurs as

table 2 indicates. However, when viewed more closely it is often difficult to determine what,

exactly, is being described by type of entrepreneur. Is the type of entrepreneurial opportunity

being referred to or is it the entrepreneurial personality that is being considered. In the first column

[10] the author seems to be referring to the former while in the second column [11] the author

seems to be referring to the latter, however, can entrepreneurs really be categorized and

described so succinctly. As the third column indicates the two categories are often intermixed in

such lists [12]. In this instance, familiar entrepreneurial opportunities such as intrapreneur and

franchisee are being described as specific personality types. Again it must be asked if individuals

associated with certain types of entrepreneurial categories can be so uniformly described.


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Types of Entrepreneurs

Cantillon: named for RichardCantillon who coined the termentrepreneur it denotes onewho assumes risk andmanagement responsibility ofthe business enterprise.

Idealist: likes innovation andenjoys working on somethingnew or creative or somethingpersonally meaningful.

Intrapreneur: enjoysindependent responsibilitieswithin a larger organizationwhere risks are part of theassignment.

Industry-Maker: a nationbuilding, hard working pioneerspirit who takes large risks,invests a total personal fortune,establishes an organizationand manages it into theindustry leader.

Optimizers: content with thepersonal satisfaction withsimply being a business owner.

Franchisee: desires fullownership butneeds/wants/sees the benefitof total systems associationand support.

Administrative: one whoalone, or with peers, creates

and an organization and thenremains on in a permanentcapacity to manage and controlthe managerial function of thebusiness entity created.

Hard Workers: enjoy putting inlong hours to build a larger

more profitable business.

Independent: owns and knowsthe business from day one.

That which is not known will befigured out and dealt with onthe fly.

Small Business Owner:includes merchants such asretail and wholesale merchantswhose operations are limited inscope with respect to sales,

geographical outreach andprofit potential.

Jugglers: likes the conceptthat the business gives them achance to handle everythingthemselves.

Practical Visionary (?):follows their heart and dreambut the question mark indicatesthat until the vision is proven itsvalue and acceptance by the

market place remains inquestion.

Independent: anenterprising individual whooperates without peers tocreate going ventures fromscratch and who is notparticularly prone towardlong-term management ofany one venture.

Sustainers: like the thought ofbalancing work and personallife.

Table 2Entrepreneurial Types


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Table 3 is another list of personality types of entrepreneurs [13]. However, it must be askedagain if entrepreneurs can be so easily categorised. For example, can all individuals who start acustomer service business be categorised as Advisors. Without arguing a position of yes or noto these questions, it does beg the question of whether there is a single characteristic that amajority of entrepreneurs share.

Personality Types of Entrepreneurs

The Improver Focused on using their company to improve the world

The Adviser Provides a high level of assistance to customers

The Superstar The business is centred around the charisma and high energy of theCEO

The Artist Reserved but highly creative

The Visionary Business is based on the future vision and thoughts of the founder

The Analyst Company is focused on fixing problems in a systematic way

The Fireball Runs a business full of life, energy and optimism

The Hero Has the will to lead the business through and challenge

The Healer Provides nurturing and harmony to the business

Table 3Entrepreneurial Personality Types

Many in literature refer to entrepreneurial mindset which is described as the ability to sense, actand mobilize under certain conditions [14]. Similar to above, however, while there is agreement bymany scholars regarding the definition, the proposal for its actual application varies. Haynie et al.suggest that foundations of an entrepreneurial mindset are metacognitive in nature, andsubsequently detail how, and with what consequence entrepreneurs formulate and inform higherorder cognitive strategies in pursuit of entrepreneurial ends [14]. To that effect they propose themetacognitive model which is shown in figure 4.

In their model, Haynie et. al. focus on the metacognitive as opposed to the cognitive level ofanalysis as it relates to entrepreneurial opportunities. They describe metacognition as a higherorder process that reflects ones awareness and cont ro l over the knowledge structures that areemployed to make assessments, judgements or decisions. This is contrasted to cognition whichthey reference Mitchell et. al. [15] to describe as more simply the knowledge structuresthemselves that people use to make assessments, judgements or decisions involving opportunityevaluation, venture creation or growth.


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Figure 4Metacognitive model of the entrepreneurial mindset [Haynie et. al. 2008]

Perhaps from more of an intrapreneurial perspective McGrath and MacMillan state that

successful executives will learn to master uncertainty through the skills of entrepreneurialleadership [16]. They further state that entrepreneurial leaders are distinguished from othermanagers by their personal practices which fall into three categories. They include:

Setting the work climate, which creates a pervasive sense of urgency for everyone towork on new business initiatives.

Orchestrating opportunity seeking, which involves removing uncertainty fromsubordinates by clearly specifying what type of entrepreneurial opportunities are wanted.

Personally moving particular ventures forward, which is based on the suggestion thatthe quest for insight is the single most important source of competitive differentiation amanagement team can bring to an organization.

While there has been much written in literature regarding types of entrepreneurs it is difficult to sayif any one proposal is uniformly correct. However, despite the different applications ofentrepreneurial mindset there does seem to be an underlying theme of recognizing and seizingopportunities. Is this the common characteristic of entrepreneurs? While it can probably not bestated matter of factly, many scholars would likely agree that this is where successfulentrepreneurship begins.


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Speaker Profiles

Professor Lyn Beazley - Chief Scientist of WA

A Professor of Zoology at the University of Western Australia and former leader of theWA Neurotrauma Research Program, Professor Beazley is well recognised for herwork in mapping the pathways through the brain and central nervous system to betterunderstand how to cure neurotrauma.

The Chief Scientist plays a part in providing the State Government with advice ontopics that are important to the future direction of science and innovation in WesternAustralia.

Professor Beazley brings extensive experience to the role and has been appointed as an ambassador andadvocate between the science community, industry and government.

As one of ScienceNetwork WAs Ambassadors for Science, Professor Beazley belongs to a growingnetwork of the State's most eminent scientists, researchers and fieldworkers from leading scientificorganisations.

http://www.commerce.wa.gov.au/scienceinnovation/content/About_Us/Our_partners/WA_Chief_Scientist.html

Peter Clarke

Peter Clarke has a Bachelor of Engineering from University of Western Australiaand a Master of Science from the University of Surrey.

He has spent most of his career in technology development and commercializationin a range of industries including mining, oil and gas, pharmaceuticals andagriculture.

Peter is the founding CEO of Scanalyse and has overseen the commercialization ofthe technology, its take up in the Australian market and the development of the

overseas market which has seen Scanalyse's services being provided in Chile, Peru, Brazil, Bolivia,Venezuela, USA, Canada, Mexico, Sweden, South Africa and Zambia.

http://www.scanalyse.com/

Neil Daly

Neil Daly grew up in Australia and graduated from the University of WesternAustralia with a Physics and Mathematics degree.

He also holds an EMBA from London Business School and has worked for theglobal trade association of mobile operators, the GSMA, as well as number ofstrategy and management consultancies.

He has led strategic projects including mHealth initiatives with brands such as Vodafone, Bharti Airtel andJohnson & Johnson

http://skin-analytics.com/
http://www.commerce.wa.gov.au/scienceinnovation/content/About_Us/Our_partners/WA_Chief_Scientist.htmlhttp://www.commerce.wa.gov.au/scienceinnovation/content/About_Us/Our_partners/WA_Chief_Scientist.htmlhttp://www.scanalyse.com/http://www.scanalyse.com/http://skin-analytics.com/http://skin-analytics.com/http://skin-analytics.com/http://www.scanalyse.com/http://www.commerce.wa.gov.au/scienceinnovation/content/About_Us/Our_partners/WA_Chief_Scientist.html


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Questions

The following questions are provided to provoke additional thought about the subject topic:

How do you think the speakers would define entrepreneurship based on their experiencesas entrepreneurs? Does one apply more than any others?

Do any of the economic theories listed characterise the entrepreneurial companiesdiscussed by the speakers? If not what theory would you suggest applies?

Does the type product/service affect the entrepreneurial process? What process did theentrepreneurial companies presented utilise?

Has new technology changed the concept of entrepreneurship? If so how?

Value Added Learning Material

The following reference material is suggested for this weeks topic:

Any of the cited sources in this document are recommended for additional reading.

Life entrepreneurship: Leading your life, C. Gergen and G. Vanourek, Leader to Leader;

Spring 2008, (48), p20-25 The alert and creative entrepreneur: a clarification, I.M. Kirzner, Small Business Economics;

Feb 2009, 32(2), p145-152

Entrepreneur and wealth creator, J. Freimann,Academy of Management Executive; Feb2001, 15(1), p40-48

Entrepreneur and wealth creator. W. Huizenga and D.L. Sexton,Academy of ManagementExecutive; Feb 2001, 15(1), p40-48

A typology of social entrepreneurs: Motives, search processes and ethical challenges, S.A.Zahra, Journal of Business Venturing, 24(5), 519-532.

6.4VideoWhy entrepreneurship is a real optionProfessor Henning Sirringhaus,

Martin Jackson, Bill Earner (on Camsys)


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References

1. World Economic Forum, (2009), Educating the Next wave of Entrepreneurs, InA Report ofthe Global Education Initiative, Switzerland

2. Stevenson, H.H and Gumbert, D.E. (1985), The Heart of Entrepreneurship, HarvardBusiness Review, 85(2), p85-94

3. Stevenson, H. and Jarillo, J., (1991), A New Entrepreneurial Paradigm, In Etzioni, A. andLawrence, P., (eds.), Socioeconomics:Toward a New Synthesis, M.E. Sharpe, Inc., NewYork, NY

4. McMullen, J.S. and Shepherd, D.A. (2006), Entrepreneurial Action and the Role ofuncertainty in the Theory of the Entrepreneur, The Academy of Management Review, 31(1),p132-152

5. Pitelis, C. N. & Pitsa, E-M., (2011), Entrepreneurship, Appropriability and the Role of Marketand Ecosystem Co-creation, Mimeo, University of Cambridge, Cambridge

6. Bygrave, E.W., (1997), Adapted from Kirchoff, B.A. Entrepreneurship Economics, In ThePortable MBA in Entrepreneurship, Wiley, p444-474

7. Ibrahim, G., Vyakarnam, S., (2003), Defining the Role of the Entrepreneur in EconomicThought: Limitations of Mainstream Economics

8. Moore, F., (1986). Understanding Entrepreneurial Behaviour: A Definition and Model.Academy of Management Proceedings, 46, p66-709. Timmons, J., (1999), The Entrepreneurial Process. In New Venture Creation:

Entrepreneurship for the 21st Century, 5th Edition, Irwin/McGraw Hill, Boston, MA, p27-5110. Webster, F.A., (1977). Entrepreneurs and Ventures: An Attempt at Classification and

Clarification, The Academy of Management Review, 2(1), p54-6111. Daft, R.L., (2008). The New Era of Management: Second Edition, Mason, OH, Thomson

South Western12. Bibby, N.A., Entrepreneurial Article Four: Entrepreneurial Types, http://emerging-

entrepreneurs.com/entrepreneur-types.php13. Zahorsky, D., The 9 Personality Types of Entrepreneurs,

http://sbinformation.about.com/cs/development/a/personality.php14. Haynie, J.M., Shepherd, D., Mosakowski, E., Earley, P.C., (2010).A situated metacognitive

model of the entrepreneurial mindset, Journal of Business Venturing, 25, p217-22915. Mitchel, R., Busenitz, L., Lant, T., McDougall, P., Morse, E., Smith, B., (2002), Toward a

theory of entrepreneurial cognition: rethinking the people side of entrepreneurship research,Entrepreneurship Theory & Practice, 26(4), p93-105

16. McGrath, R.G. MacMillan, T.C., (2000). The Entrepreneurial Mindset, Cambridge, MA,Harvard Business School Press

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IMindsets and Motivations