Is Entrepreneurship merely a special case of leadership - Research Paper Example

? 22 September Entrepreneurship: Merely a Social Case of Leadership? Introduction How entrepreneurship differs from leadership has long been debated by scholars. Some researchers argue for entrepreneurship as a distinct field of research and practice, while others indicate the importance and implications of the merger between entrepreneurship and leadership. Theoretically, leadership and entrepreneurship are different: where entrepreneur is the one who manages resources for profit in conditions of risk and uncertainty, leader is a person who provides a vision and guides others to achieve it. Practically, entrepreneurship and leadership exhibit considerable overlaps and create an array of confusion in contemporary business contexts. Entrepreneurship and leadership exhibit numerous commonalities and, for this reason, are often considered as the two different types of one and the same phenomenon. However, it is at least incorrect to say that the entrepreneurship is merely a special case of leadership. Not every entrepreneur is a leader and not every leader is necessarily an entrepreneur; as globalization draws together resources and business capabilities and turns innovation into the major source of competitive advantage in business, entrepreneurs and leaders must assume a new, different vision of business reality which brings both concepts together and creates a new entrepreneurial leadership paradigm. What is entrepreneurship? Who is an entrepreneur? These are the questions that stir the hearts and minds of researchers and business professionals. Different researchers provide different conceptualizations of entrepreneurship; the latter has already become a buzzword in present day organization studies. The meaning of entrepreneurship can be traced back to the beginning of the 19th century, when the French economist Jean-Baptist Say created the first feasible definition of entrepreneurship (Miller & Collier 81). According to Say, entrepreneur is the one who “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield” (Miller & Collier 81). More specifically, entrepreneur is believed to be the one who manages resources in ways that create value and profit in conditions of risk and uncertainty (Miller & Collier 81). The nature of entrepreneurship is too elusive to have a single, universal definition. Nonetheless, entrepreneurs can be described in terms of the so-called “big five” traits. These are “risk-taking propensity, need for achievement, need for autonomy, self-efficacy, and locus of control” (Vecchio 307-9). Entrepreneurs exhibit an unprecedented striving and willingness to take up risks (Vecchio 307). This risk-taking propensity is a distinctive feature of entrepreneurship. Unlike managers, entrepreneurs are inclined to identify and access business scenarios that offer greater incentives and opportunities for profitability and growth (Vecchio 307). They are more achievement-motivated than business owners and managers (Vecchio 308). Simultaneously, entrepreneurs naturally seek greater autonomy in their decisions; it is through autonomy that entrepreneurs exercise freedom of self-expression in business environments and enjoy better adaptability to changeable conditions of doing business (Vecchio 308). Entrepreneurs have the self-efficacy needed to exercise full control over business situations (Vecchio 308). They always possess locus of control which is integrally linked to self-efficacy (Vecchio 308). These and other features position entrepreneurship as a distinct and separate field of research and performance; yet, both in research and business activity entrepreneurship and leadership still go hand in hand. Yang defines leadership as the art of influencing others. Leadership is crucial to the future of business (1). Effective leaders exemplify a foundational predictor of profitability and growth in changeable business environments (Yang 1). An effective leader is a person who influences other people to aspire to the desired strategic goal (Yang 1). It goes without saying that leadership, as well as entrepreneurship, is an extremely vague concept. How leadership expresses and works depends on the context. In a similar vein, entrepreneurs exhibit a variety of personal and business characteristics. Both concepts have much in common and often create serious confusion in business practices. It is Schumpeter who wrote that entrepreneurship was “a special case of the social phenomenon of leadership” (379). Since then, entrepreneurship and leadership had been treated as the two concepts which cannot be separated. Schumpeter’s view of entrepreneurship has some seed of truth in it. The fact is that entrepreneurs and leaders have much in common. Significant overlaps between entrepreneurship and leadership continue to persist. There is much leaders can learn from entrepreneurs and vice versa. Vision is probably the most serious thematic overlap between entrepreneurship and leadership concepts (Cogliser & Brigham 778). Vision is the way and means by which leaders communicate strategic goals and inspire their followers (Cogliser & Brigham 778). In a similar vein, entrepreneurs rely on vision to motivate and inspire followers’ and partners’ confidence to utilize their resources for profit (Cogliser & Brigham 778). The nature of entrepreneurship by itself is about convincing people that it is worth switching their resources from known present to uncertain future outcomes (Cogliser & Brigham 778). Both leaders and entrepreneurs are expected to motivate their followers/ partners to work toward a common strategic goal. Influence is another commonality stretching across the myriad of conceptualizations of leadership and entrepreneurship (Cogliser & Brigham 778). Leaders influence the choice of strategies needed to pursue their objectives (Cogliser & Brigham 778). Entrepreneurs must identify available business opportunities and influence the choice of resources required to use their potential to the fullest (Cogliser & Brigham 778). Entrepreneurship creates an atmosphere of confidence, where entrepreneurs have greater opportunities to promote the spirit of innovation, even if they risk losing their position or cannot be certain about the future success of their ventures (Cogliser & Brigham 778). Creativity and planning are both at the heart of entrepreneurship and leadership. As long as entrepreneurship is associated with innovation, creativity will remain the definitive feature of entrepreneurs (Cogliser & Brigham 779). Both leaders and entrepreneurs must have skills, knowledge, and capacities to (1) generate ideas; (2) structure ideas; and (3) promote these ideas (Cogliser & Brigham 779). In a similar vein, leaders and entrepreneurs are equally committed to the importance of strategic planning; the latter has always been a fundamental component of the managerial process (Cogliser & Brigham 779). Entrepreneurs and leaders require a strong planning focus, to manage available resources wisely and ensure the success and profitability of their ventures. The complexity of planning behaviors in entrepreneurship and leadership cannot be overstated. Entrepreneurs are expected to be effective planners and, simultaneously, seek and identify opportunities that benefit their ventures (Cogliser & Brigham 779). Innovation and vision, personal drive, and risk acceptance bring together the concepts of leadership and entrepreneurship. Entrepreneurship is often treated as a concept, which is relatively new and rather confusing (Fernald, Solomon & Tarabishy 1). This is probably why entrepreneurship is sometimes treated as secondary and even inferior to leadership; a product of leadership and its simplified version (Schumpeter 379). Yet, it is at least incorrect to say that entrepreneurship is just a special case of leadership. Entrepreneurship and leadership are the two different fields of business performance and research. The significance of these conceptual differences is difficult to overestimate. These differences also suggest that not every leader can be entrepreneur and not every entrepreneur is necessarily a good, inspiring leader. At the very basic level, entrepreneurship is the phenomenon which comprises three essential components. First, entrepreneurs grasp profit opportunities with little to no regard to resources currently available and controlled (Fernald, Solomon & Tarabishy 2). Entrepreneurs expand the existing resources through either learning or boot-strapping (Fernald, Solomon & Tarabishy 2). Third, entrepreneurs promote innovation and change, which create new resource combinations and new ways of doing business (Fernald, Solomon & Tarabishy 2). Unlike leaders who are being driven by the resources they currently possess and control, entrepreneurs are inspired by the mere perception of a business opportunity (Fernald, Solomon & Tarabishy 2). The psychological traits important to entrepreneurs include seeking opportunities, goal-orientation, independence and autonomy, risk taking and innovation (Fernald, Solomon & Tarabishy 2). Similar to leaders, entrepreneurship is the spirit that comes from within and provides followers with greater confidence and stronger position while achieving a common goal. Leaders are also similar to entrepreneurs in that both experience some kind of estrangement from their environment; as a result, they turn toward their inner skills and capabilities and re-emerge with an acquired, not inherited, sense of personal and professional identity (Fernald, Solomon & Tarabishy 3). Yet, in distinction from entrepreneurship, leadership exhibits and operates through a different set of traits. These include drive (ambition and motivation, initiative and energy), leadership intuition, integrity and honesty, self-confidence, and superior cognitive abilities (Fernald, Solomon & Tarabishy 3). Certainly, that entrepreneurs and leaders are different does not mean that the former do not need honesty, integrity, energy, self-confidence, and cognitive abilities. Looking at these traits, entrepreneurship seems to be clearly a special case of leadership, as Schumpeter treats it (379). Simultaneously, leadership and entrepreneurship demonstrate several fundamental distinctions, which deny the validity of Schumpeter’s assumption and propose a new model of the entrepreneurship-leadership merger. A brief analysis of entrepreneurship texts shows that the principal building blocks of the entrepreneurship concept include innovation and risk acceptance, need for achievement, locus of control, ambiguity tolerance, independence and autonomy, market opportunities identification, and initiating new activities (Perren 10). In the meantime, the concept of leadership builds upon communication, social skills, motivation, integrity and honesty, dependability, inspiring trust, business knowledge, intelligence, team orientation and genuine interest in followers (Perren 11). Clearly, leadership is the phenomenon related to people and communication, while entrepreneurship is focused on the search and analysis of available market opportunities. Entrepreneurship is not a special case of leadership; rather the two concepts are the two sides of one business coin. Moreover, not all entrepreneurs can be good leaders and not all leaders can be good entrepreneurs. Entrepreneurs focus on identifying and using available market opportunities (Fernald, Solomon & Tarabishy 1). They have the intuition and confidence to operate in conditions of risk and uncertainty (Cogliser & Brigham 778). Not all of them can successfully communicate their vision to the audience; all they need to do is to find a perfect leader who will carry out these ‘visionary’ functions. Simultaneously, leaders are focused on the social aspects of business activity. They rely on communication and human relations and bring together current resources to achieve the desired strategic goal. Not all leaders can successfully identify market opportunities as entrepreneurs do. Moreover, not all leaders need these opportunities. Many leaders, especially in non-profit organizations, work to promote their vision and inspiration into the masses and, as a result, create not material but social or cultural wealth. Once leaders and entrepreneurs merge, they create a combustive but unbelievably successful business mixture – a blend of talents and capabilities, vision and inspiration, innovation and communication, which facilitates venture development and speeds up social progress. Undoubtedly, everything changes; and so is the definition of entrepreneurship. Entrepreneurship is being gradually redefined to incorporate the principles of value creation and virtue, which were absent in the previous models of entrepreneurship (Miller & Collier 85). Entrepreneurship is no longer limited to economic profits and innovations (Miller & Collier 85). A new, transformational model of entrepreneurship suggests that entrepreneurs are those, who “create an innovative virtue-based organization for the purpose of shifting resources out of an area of lower and into an area of higher purpose under conditions of risk and uncertainty, requiring a holistic perspective” (Miller & Collier 85). There is an impression that entrepreneurship is moving forward, leaving leadership behind and creating a serious challenge leaders must face, if they want to catch up with the pace of entrepreneurial development. Entrepreneurship is not a case of leadership, since it is entrepreneurship that sets the pace of organizational development and growth; leaders, with their dependability and emphasis on communication and people will also have to adopt new leadership perspectives (Fernald, Solomon & Tarabishy 2). Most likely, in the future, leadership will become a case and reflection of entrepreneurship. As of today, leaders and entrepreneurs have perfect opportunities to shape a business and conceptual union that benefits them, organizations, businesses, and the entire society. Schumpeter articulated the view that entrepreneurship was just a special case of leadership in 1928 (379). Twenty years later, in his essay Economic Theory and Entrepreneurial History, Schumpeter expressed a different viewpoint: he suggested that the relationship between leadership and entrepreneurship was too complex to avoid misunderstandings (Prendergast 259). This is mostly because leadership and its meaning vary across business contexts: at times, leadership entails influencing people to make them move toward the desired goal; at other times, leadership is just a set of direct measures on others to speed up their strategic progress (Prendergast 259). Apart from the fact that entrepreneurship is not a case of leadership, it is clear that both concepts will be continuously changed and redefined. These are the natural processes caused by globalization, market integration, and greater flexibility of business standards and norms. Most probably, entrepreneurship and leadership will be drawn closer, to create a new entrepreneurial leadership paradigm that benefits businesses and organizations and creates a good foundation for future stability and growth. Conclusion Early in the 20th century, Schumpeter articulated the view that entrepreneurship was merely a social case of leadership. Much has changed since then and both concepts have undergone profound shifts. On the one hand, leadership and entrepreneurship phenomena exhibit serious conceptual overlaps. Vision, mission, creativity, and innovation are all indispensable components of both entrepreneurship and leadership. Simultaneously, entrepreneurship and leadership demonstrate fundamental differences: where entrepreneurs focus on identifying and using available market opportunities and generating value, leaders are focused on the social aspects of business activity. To a large extent, it is leadership that exemplifies a social case of entrepreneurship: as entrepreneurship is moving forward, leaders must be able to adapt and adjust to the changing demands of doing business. Entrepreneurship is constantly redefined, crossing the boundaries of creativity and market growth. Virtue and holistic perspectives are becoming the vital elements of entrepreneurship, and leaders, with their dependency, have but to catch up with the growing pace and complexity of entrepreneurship. Not all entrepreneurs can be leaders, and not all leaders can be entrepreneurs. Yet, entrepreneurship is irrelevant without leadership; in a similar vein, leadership may not work without entrepreneurship. Most probably, as globalization draws together resources and business capabilities and turns innovation into the major source of competitive advantage in business, entrepreneurs and leaders must assume a new, different vision of business reality which brings both concepts together and creates a new entrepreneurial leadership paradigm. Works Cited Cogliser, Claudia C. & Brigham, Keith H. “The Intersection of Leadership and Entrepreneurship: Mutual Lessons to Be Learned.” The Leadership Quarterly, 15 (2004): 771-799. Print. Fernald, Lloyd W., Solomon, George T. & Tarabishy, Ayman. “A New Paradigm: Entrepreneurial Leadership.” Southern Business Review, 30.2 (2005): 1-10. Print. Miller, Robert A. & Collier, Elizabeth W. “Redefining Entrepreneurship: A Virtues and Values Perspective.” Journal of Leadership, Accountability and Ethics, 8.2 (2010): 80-89. Print. Perren, L. Comparing Entrepreneurship and Leadership: A Textual Analysis. London: SME Working Group, 2000. Print. Prendergast, Renee. “Schumpeter, Hegel and the Vision of Development.” Cambridge Journal of Economics, 30 (2006): 253-275. Print. Schumpeter, Joseph A. “The Instability of Capitalism.” Economic Journal, 38 (1928): 361- 386. Print. Vecchio, Robert P. “Entrepreneurship and Leadership: Common Trends and Common Threads.” Human Resource Management Review, 13 (2003): 303-327. Print. Yang, Chung-Wen. The Effect of Leadership and Entrepreneurial Orientation of Small and Medium Enterprises on Business Performance in Taiwan. University of the Incarnate Word, 2006. Print. Read More