Entrepreneurship Education and Training - Term Paper Example

Traits Approach to Entrepreneurial Personality of the Introduction It is well known that economic and social factors impact decision making of an individual and this, in turn affects entrepreneurial ventures. This can apparently imply that there is an entrepreneurial stereotype which means that a specific person with similar traits is expected to become an entrepreneur. Hence, it would be easier if there was prototype that reflected entrepreneurial personality. This prototype would help in identifying and separating entrepreneurs from the crowd. This approach has been known as the trait approach. The personality approach or the trait approach derives behavioural traits through observation patterns. Traits can be defined as habitual behavioural and thought patterns of people. Traits have been measured to reflect how much of a particular trait does a specific category of people reflect. This also implies that individuals that behave in a similar fashion can be compared and norms for various categories of people can be identified based on trait patterns. The trait approach has set down these patterns for entrepreneurs (Okhomina, 2010). The trait approach has set down certain parameters based on this very measurable feature of behavioural pattern and the paper seeks to study this approach. It moves on to explore the drawbacks of the trait approach and discusses the reason behind the failures of the theory. Defining Entrepreneurship Entrepreneurship can be narrowly defined as a person who establishes and runs his or her own business. An aspiring entrepreneur is a one that hopes to establish and run his or her own business at some point in time. Entrepreneurship can also be defined as creation of something that adds value with appropriate time and efforts going towards its development. This definition assumes that personal satisfaction and monetary gains are rewards for various risks (social, physical and financial) undertaken. Entrepreneurship and the entrepreneur have changed that path for markets and economies. They have contributed in developing new services and products and have given way to creativity and innovation that made economic development and prosperity possible. It is because of this importance that entrepreneurs hold in shaping the economic future of the country, that studies have been conducted to study entrepreneurial behaviour and define traits that would in turn help in developing entrepreneurial ability in the nations. There are many traits for an entrepreneur but the trait that has been identified as one of the critical ones is the ability to identify opportunity and making profits by their ability of initiative and risk. After this broad definition, the trait approach to entrepreneurship is discussed which assumes and there are specific motivations and traits that affect a person’s entrepreneurial behaviour (S. Hashemi & B. Hashemi, 2003) Literature Review The entrepreneurial traits approach to entrepreneurship started behind the observation that some people were always better than others in identifying opportunities and exploiting the benefits in business. The question arose as to why this happened. This question might not be supported with scientific reasoning but it is understood that there must be certain specific personality traits that makes them successful as entrepreneurs. McClelland pioneered the task of trying to find out the reason behind entrepreneurial activities. He tried to find out what personality differences and traits led to entrepreneurial ability. The assumption was that people who are entrepreneurs have a separate set of behavioural traits that is not available in people who are not entrepreneurs. These personality traits distinguished them from the rest of the crowd. It was also found that these traits had a high degree of correlation with entrepreneurial success. In totality, the trait approach tries to establish that new ventures form primarily based on entrepreneurial personality (Ahmad, 2010). The key components of entrepreneurial trait measurement were: 1. Need for achievement: This factor explains that entrepreneurs have a tendency of performing only those tasks that have a chance of a reasonable degree of success or chance of personal accomplishment without unnecessary risk of disappointment. Need for achievement highlights that in competitive setting, entrepreneurs displayed a powerful desire to perform well and excel. Those with a high need for achievement view profits as a measure of their success. High need for achievement in entrepreneurs also reflects an attitude for taking risks, ability to take decisions and dislike for routine work. The need for achievement can be further subcategorised into need for affiliation, need for power and need for autonomy. Need for affiliation reflects the attitude for taking risks and denying any approval seeking behaviour. Need for power is derived from the ability to take decisions and thereby guide people and actions. Need for autonomy is drawn from the ability to take on responsibility for actions that a person seeks to do as per his wishes. 2. Locus of Control: Locus of control has been explained as personal perception of causes of events that occur in one’s life. The individual believes that personal behaviour is guided by personal effort and decisions. These set of people believe that luck and such other external factors play a relatively insignificant role in determining their future. People who have a locus of control for their inner selves willingly take on responsibility for any success or failure they might achieve. There is a separate set of people who attribute their failures and successes on fate and luck. These set of individual external factor considerations have an external locus of control. In the event of any success and failure, fate, luck and such external factors receive a major credit for occurrence of the result (Stokes & Wilson, 2010). It was argued that entrepreneurs characteristically saw themselves under control and this attitude empowered them to tackle and deal with demanding situations. 3. Risk taking propensity: This factor explains individual behaviour where one takes forward his decision knowing that probability of success is low. The trait theory suggests that entrepreneurs are comparatively high risk takers when compared to non entrepreneurs. Risk taking ability reflects that ability of an individual to deal with ambiguity and uncertainty and his willingness to take on psychological and economic risk. It is observed that an entrepreneur is an inventor of risk rather than a taker of it. He operates on someone else’s money and undertakes risks for them. Therefore, an entrepreneur not only tolerates the risk, but also prepares to cope with any failure. 4. Ambiguity Tolerance: This factor explains that entrepreneurial ability views ambiguous situations as favourable. By ambiguous situation, it is meant that the given circumstances appear contradictory, are inadequate or are too complex. Entrepreneurs can be viewed as individuals that have the capability and sustenance of determination and a drive towards their choice of action despite the fact that results may be unpredictable. These people prefer uncertainty over certainty and view challenge in ambiguous situations. Successful entrepreneurs have the ability to cope up with stress and tension in the work environment. Drawbacks What remained undefined and ambiguous in formulation of the trait theory are; 1. Which stage of entrepreneurship must be taken as the exact point of time when the psychological traits of an entrepreneur can be measured? 2. Is it perfectly ok to think that personality traits alone define entrepreneurial ability for any individual? 3. How stable the traits were? If personality traits could be judged and clearly defined for entrepreneurial ability, investors and bankers could have done a simple personality test of the entrepreneur of a business facility and made their investment decisions. The main criticisms to the trait theory are: 1. The degree of correlation between the trait defined and the actual behaviour is extremely low. 2. The primary assumption that entrepreneurs are people who have expressed consistent traits is faulty. In reality people are not that consistent. 3. The theory fails to establish conclusion as to whether people are entrepreneurial because of the particular trait set, or they can become entrepreneurs if they have this set of traits (Henry, Hill & Leitch, 2003). Reasons for Failure in Proper Prediction In studies that followed, it was increasingly observed that that the traits approach fell short of covering many different aspects of individual behaviour and that the four dimensions of the traditional approach covered only few aspects on entrepreneurial behaviour. All efforts that were directed to segregating demographic and psychological traits common to entrepreneurs at large were unsuccessful because of weak results. The problems associated can be listed as; 1. The numbers of traits that can be identified as common between entrepreneurs at large are too many in number. This makes development of a mutual agreement extremely difficult with such large a data of traits and definitions associated with them. 2. The basic assumption in developing the trait theory has been that human understanding is similar or one dimensional but the fact remains that every human is different and every personality is multi dimensional and each dimension of this human behaviour needs to be measured. 3. The third problem associated with the trait theory is that personality is a developing factor. Every individual who becomes an entrepreneur does not possess all entrepreneurial qualities by birth, some develop over time. Also, human nature is such that they get easily adapted to changing scenarios. In this view, a lot of traits that might have remained since birth get adapted depending on the external impacts (Gustafsson, 2006). 4. Strong evidence of correlation was not observed between entrepreneurial ability and the first trait of need for achievement. The reason given was that some individuals might start up their own business with a simple motive of getting an attractive mode of earning livelihood and not for achievement of some personal goal. Hence achievement need was a weak predictor of one’s decision to start his or her own business. 5. It was observed that in most situation, a large number of entrepreneurs fail to appreciate the presence of risks associated with their business venture. This is because different people have different view about whether a particular action is risky or not. In other words, perceptions of risk are largely dependent on a person’s insight and knowledge of a particular situation. Hence there was a low degree of correlation observed between risk bearing and trait for entrepreneurs. Entrepreneurs only take risks that they can calculate and make sense out of. 6. Inner locus of control was tested empirically for correlation with entrepreneurial tests and it was observed that there was a better correlation between the two factors. However, locus of control has been criticised on the grounds that this trait is present with entrepreneurs as well as high level managers and hence, the measure fails to be a valid discriminator between managers and entrepreneurs (Burns, 2010). Conclusion Traits only provide a snapshot of how does an entrepreneur appear. It is static and fails to recognise that entrepreneurship is a process where value creation drives entrepreneurial ability and various factors help people to develop the value creation process over time (Stokes, Wilson and Mador, 2010) Additionally, entrepreneurship is an option that is available to anybody and cannot be a trait available by birth. It can occur by a simple accidental event where the individual stumbles upon an opportunity to start a business or even the result of adversary of losing a job (S. Hashemi & B. Hashemi, 2003) The psychological or trait approach might have been criticised on many grounds but it has to be given credit for one of the beginnings of study of entrepreneurial behaviour. It has successfully helped in deriving that nothing called entrepreneurial personality is present. Secondly, it helped in identification of the reality that there indeed exists a commonality of traits between entrepreneurs like internal locus of control. Despite this, the trait approach was unsuccessful in making any differentiation between non entrepreneurs and entrepreneurs. It also fails to provide any measure for successful entrepreneurial behaviour. Therefore, the trait approach can be regarded as a base for development of further theories on entrepreneurial behaviour. References Ahmad, H. M. (2010). Personality Traits among Entrepreneurial and Professional CEOs in SMEs. Retrieved from http://ccsenet.org/ijbm Burns, P. (2010). Entrepreneurship & Small Business. Hampshire: Palgrave Macmillan Gustafsson, V. (2006). Entrepreneurial Decision-making: Individuals, Tasks and Cognitions. Cheltenham: Edward Elgar Publishing Limited Hashemi, S., & Heshemi, B. (2003). Anyone Can Do It: Building Coffee Republic from Our Kitchen Table. Chatsworth : Capstone Henry, C., Hill, F. & Leitch, C. (2003). Entrepreneurship Education and Training. Burlington: Ashgate Publishing Company Okhomina, D. A. (2010). Entrepreneurial postures and psychological traits: the sociological influences of education and environment. Retrieved from http://www.aabri.com/manuscripts/10464.pdf Stokes, D. & Wilson, N. (2010). Small Business Management & Entrepreneurship. Connecticut: Cengage Learning Stokes, D., Wilson, N. & Mador, M. (2010). Entrepreneurship. Connecticut: Cengage Learning Read More