Small Firm Growth Is the Only Measure of an Entrepreneurs Successes - Literature review Example

Entrepreneurship Name Institution Course Date Entrepreneurship Entrepreneurship has received a lot of attention from policy makers and scholars due to its importance in the society (Lundstorm and Stevenson, 2005). Entrepreneurship entails the establishment of a new business entity or even acquiring an existing business from another person. There are many things that motivate people to be entrepreneurs. Profit is the main driving force for most entrepreneurs. Entrepreneurs are known to contribute positively to economic progress (Lundstorm and Stevenson, 2005). Many business people argue that there is only one indicator of entrepreneur success, but there are other factors that can be used to measure the success of business. Due to the advancement in technology and economic changes, entrepreneurship has become popular with more and more people deciding to be self-employed (Shirokova et al., 2016). However, entrepreneurship is not an easy undertaking as many businesses have failed at a higher rate. Owing to the growing potential of entrepreneurs and the benefits that they bring, there is a need for insight in the measures of an entrepreneur’s successes. This paper will offer the validity of the statement: Small firm growth is the only measure of an entrepreneur’s successes. One important factor that determines who becomes an entrepreneur is creativity. All entrepreneurs are considered creative (Brettel, Chomik and Flatten, 2015). The entrepreneurs who have succeeded over the years are those who are the most creative and innovative. An entrepreneur’s ability to come up with new ideas and innovate quickly is often the key to business success (Brettel, Chomik and Flatten, 2015). Entrepreneurs who are creative and innovative do not copy what their competitors do; they however may use creative and innovative ideas from others to develop a unique product, service or operational style for themselves. Application of creativity and innovation to business operations enables an organisation stay ahead in the existing competitive and changing marketplace. Therefore, the creativity of people may determine their passion to start a business (Brettel, Chomik and Flatten, 2015). Risk tolerance also determines who becomes an entrepreneur. Rewards do not come without taking risk (Srimal et al., 2013). The ability to make the most of an opportunity depends partly on the ability to tolerate risk. People who fear taking risk do not succeed in business. People with high score in relation to openness to experience are imaginative, creative, risk-takers and subtle (Srimal et al., 2013). A good entrepreneur is one who has a vision, takes high personal risk, and is sensitive to the follower’s needs and engage in behaviours termed as novel. Risk taking is considered an important element of entrepreneurship, without it, business organisation cannot succeed. If an individual cannot afford to take risk financially and emotionally, the decisions made may be too tepid to bring success (Roger, 2006). Therefore, in order to succeed, an entrepreneur should be ready to take risk. According to resource-based theory, people control different types of resources in business in order to reinstate entrepreneurial efforts (Newbert, 2008). Access to enough financial resources may enable an entrepreneur get a new business off the ground. Every entrepreneur starts a new venture with little financial resources. With time, an organisation requires additional capital in order to grow (Newbert, 2008). Based on resource-based theory, other resources that are important in ensuring success of an entrepreneurial effort include social networks, human resources, and intangible resources such as leadership and creativity. In order to succeed, the resources of organisations should be rare, non-substitutable, non-imitable and valuable (Newbert, 2008). For instance, rare and non-imitable creativity and leadership may result to enhanced entrepreneurship. Therefore with unique leadership skills an individual is able to start and make a business succeed (Newbert, 2008). Effective leaders are very essential to the success of any business organisation. A leader aspires for productivity and change in employees towards a desired objectives and goals. Leadership not only influence the employees but also the leaders, to attain the set goals of any organisation. A successful leader is one who is suitable and accountable (Hughes, Ginnett and Curphy, 2009). The qualities of good leadership are the same. Good leadership is founded on respectable personality and unselfish commitment to the employees and the organisation. In order for an individual to become an effective entrepreneur, he or she must have good leadership skills. Without effective leadership, entrepreneurship is bound to fail. People who start their own business are considered effective leaders (Hughes, Ginnett and Curphy, 2009). In addition, money and capital determines a successful business. Financial capital is very important in buying inventory, marketing and promotion, and paying salaries among others (Chandler, Gaylen and Lyon, 2001). A successful entrepreneur should have the ability to manage money. It takes both dedication and self-control in order to be able to make sound financial decision and spend money. A potential entrepreneur should have money management as it is an important element of a successful business (Chandler, Gaylen and Lyon, 2001). Also, starting a business takes a lot of planning. Planning is an important skill that a person who wants to become an entrepreneur should have. Some people tend to jump into business with minimal planning and this may affect its success. Successful entrepreneurs plan ahead and analyse a venture before starting a business (Chandler, Gaylen and Lyon, 2001). Planning in an integral part of successful business and effective planning skills determine who becomes an entrepreneur. Different people start their own business due to different reasons. One essential reason is profitability. People start their own business in order to enjoy all the profits (Hakala, 2015). When working for someone else, the employer is the determinant of the income being paid. An entrepreneur is not limited with regard to the amount of income earned. An entrepreneur’s income is determined by other influences such as marketing strategy, size of the business, hard work and value of business ideas (Jalali, Jaafar and Ramayah, 2014). Some people become entrepreneurs due to their struggle with authority. They dislike being managed with people looking over their shoulders. Therefore, in order to avoid this, they seek business opportunities in order to have full control over their business operations (Sirimal et al., 2013). They believe that starting their own business venture will act as authority figure and will have full control of their actions. Another reason that motivates people from starting their own business is admiration from other entrepreneurs. Successful entrepreneur often inspire other people to follow the same route (Hakala, 2013). They act as role models and their success is reflected on their entrepreneurial actions. Seeing someone who has brought to success a small business is enough to inspire other people to save up money and start a new venture. Sociological theory offers various social contexts that promote entrepreneurship (Fulford and Rizzo, 2009). There are four social contexts that promote entrepreneurship; social-political factors, ethnic and cultural identification, desire for conformable life and social networks. Culture forces including cultural attitudes are able to shape the behaviour of entrepreneurs. In addition, social networks can create leverage for entrepreneurs and enhance success (Fulford and Rizzo, 2009). For instance, a role model in the society is able to motivate an individual to start his own business. Other people start a new venture with an aim of offering products or services that miss in the market (Chandler, Gaylen and Lyon, 2001). Entrepreneurs look for gaps in the market to fill. A gap may be in form of a product or a service and filling this gap maybe a start of a successful business. Others start business in pursuit of a passion. Some people leave their place of work and start their own business as a way of pursuing passion. For instance, an accountant may resign to pursue the dream of becoming a writer or artist. Some people start a business as a result of the availability of resources and capabilities (Lundstrom and Stevenson, 2005). Entrepreneurs are made up of people who can exploit the available resources and other opportunities for their own benefits. Opportunity-based theory illustrates that entrepreneurial efforts starts with opportunities (Lundstrom and Stevenson, 2005). In addition, entrepreneurial process entails elements such as growing a business, management and assembling resources among others. The theory highlights that entrepreneurship revolves around opportunities. Entrepreneurs become successful when they discover and take advantage of the opportunities created by economic, social, political, technological and cultural chances (Lundstrom and Stevenson, 2005). According to opportunity-based theory, entrepreneurship is an innovation and not an imitation. They find joy through innovation and invent new products, services or processes that lead to successful business (Lundstrom and Stevenson, 2005). Entrepreneurs may also take advantage of opportunities presented by nature. For instance, while people may assume that residents full of youngsters are death stroke, entrepreneurs may view this as an opportunity to open new clubs. New venture rarely yield profits and grow as a slow rate. Growth is an important measurement for a successful entrepreneurial effort. However, it is not the only measure o success. There are a number of factors that can be used as indications of success of new businesses (Hoffmann, Larsen and Oxholm, 2006). One of the methods used to measure entrepreneur’s success is financial worth. The more an entrepreneur is worth; the more successful he is considered. An entrepreneur starts a business with little capital. With time, this capital grows to yield profit. The financial worth grows with time and the society use this as a measure of entrepreneur’s success (Hoffmann, Larsen and Oxholm, 2006). Another measurement of entrepreneur’s success is savings and profits. Savings measures earning power as well as frugality. Frugal companies are considered successful. In addition, profit earnings differentiate between a successful and failing business. Businesses that earn more profits are considered more successful than those which earn less profit. However, according to Hoffmann, Larsen and Oxholm (2006), since businesses differ in sizes and operations, evaluating the profit level may not be the best success measurement. The success of an entrepreneur may be determined by stakeholders’ satisfaction. A stakeholder is either a person or a group of people who are directly affected by the operations of a company (Hakala, 2013). Stakeholders of an entrepreneurial venture include shareholders, customers, community, employees and business partners. The stakeholders are considered either internal or external or even both. They are significant to businesses since they bring very substantial impact to the performance of the company. In order for entrepreneurs to formulate their strategic plan, they should take into consideration stakeholders’ needs (Nordqvist and Zellweger, 2010). Stakeholders highly influence the success of a business. Stakeholders have different expectations and needs which can influence business decisions and strategies. Entrepreneurs are expected to satisfy the needs of the customers by offering quality products and services; they satisfy their employees by offering positive working environment and take care of community’s needs by conserving the environment and offering aids to different people; and they satisfy the partners and shareholders by generating profits (Freeman, Harrison and Wicks, 2007). Entrepreneurs who are able to satisfy the needs of all the stakeholders are considered successful. If the customers find a product useful, he or she will probably buy it over and over again and this will lead to future success of a business (Nordqvist and Zellweger, 2010). In addition, what an entrepreneur does for his employees will determine if he succeeds or fail. When the employees are treated well, they pride themselves in working for the entrepreneur. According to Maslow’s theory of needs, compensation package is not enough to satisfy and motivate the employees (Fredrick, Bernard and Barbara, 2011). Factors such as feedback and recognition, positive working environment, involvement in decision making, and work-life balance are able to motivate the employees to work hard in achieving business goals and objectives. Also, satisfying other stakeholders such as the society, shareholders and the government will lead to a successful business (Freeman, Harrison and Wicks, 2007). Sure, growth of a business in terms of size, revenue and profits can be used as a barometer of measuring success (Freeman, Harrison and Wicks, 2007). But it does not really paint the whole picture of a business especially when the business is still new. A true measure of entrepreneurial success is how much the entrepreneur has learnt about the market, the customers, offering and the entire business. It is about gaining knowledge of what he or she could not possibly have known before (Freeman, Harrison and Wicks, 2007). The knowledge of the stakeholders and the business itself will enable an entrepreneur succeed in the future. Early success of an entrepreneur is not about acquiring customers; it is about getting feedback of the offering and learning how to use these feedbacks to improve the business. Growth only indicates short-term success since a growing business may experience some changes that may lead to its failure (Freeman, Harrison and Wicks, 2007). But acquiring the knowledge about the business, the industry, the customers, the society and other stakeholders will enable an entrepreneur adapt to these changes and create a long-term success. In conclusion, people start their own business for a number of reasons such as pursuit of passion, motivation from other entrepreneurs, profit making and filling a gap in the market. Not all businesses succeed. There are some ingredients that are required for an entrepreneur to be successful. For instance, for a person to become an effective entrepreneur, he or she should have good leadership skills. Also, the ability to manage capital may determine whether an entrepreneurial venture will succeed or fail. Entrepreneurs are considered risk takers and without taking risk, it is impossible to succeed. Some measures of success may include revenue and profits, availability of savings and financial worth. Most money-focussed entrepreneurs measure the success of their business by these factors. Yet, the measures such as satisfying the needs of the stakeholders and acquiring knowledge of the market are often factors that small entrepreneurs should focus on. Growth in terms of size, profits, revenues and other financial terms is considered a short-term success. The true measure of entrepreneur’s success is how well a business satisfies different stakeholders and how well an entrepreneur understands the market, the customers, the business and his offerings. Entrepreneur’s success is best measured by what is done within the business. References Brettel, M., Chomik, C and Flatten, C 2015, “How Organizational Culture Influences Innovativeness, Proactiveness, and Risk-Taking: Fostering Entrepreneurial Orientation in SMEs,” Journal of Small Business Management, 53(4), pp. 868-885. Chandler, Gaylen J., and D. Lyon. 2001, “Issues of Research Design and Construct Measurement in Entrepreneurship Research: The Past Decade,” Entrepreneurship Theory and Practice, pp. 101-116. Fredrick, H., Bernard, M & Barbara, B 2011, The Motivation at Work: Volume 1 of organization and business, Transaction Publishers, London. Freeman, R., Harrison, J & Wicks, A 2007, Managing for stakeholders : survival, reputation, and success, New Haven, Yale University Press. Fulford, H & Rizzo, A 2009, A Conceptual Model For The Strategic Orientation Of Small Firms. Journal of Enterprising Culture, 17(01), 25-54. Hakala, H 2011, Strategic Orientations in Management Literature: Three Approaches to Understanding the Interaction between Market, Technology, Entrepreneurial and Learning. International Journal of management reviews, 13(2), pp. 199-217. Hakala, H 2013, Entrepreneurial and learning orientation: effects on growth and profitability in the software sector. Baltic Journal of Management, 8(1), pp. 102-118. Hakala, H 2015, Entrepreneurial Strategy Orientation. Journal of Economics, Business and Management, 3(2), pp. 212-215. Hoffmann, A., Larsen, M. and Oxholm, S 2006, Quality Assessment of Entrepreneurship Indicators, FORA, Copenhagen. Viewed 11th Sept. 2016 from http://ice.foranet.dk/upload/quality_assessment_of_entrepreneurship_indicators_002.pdf Hughes, R., Ginnett, R and Curphy. G 2009, Leadership: Enhancing the Lessons of Experience, McGraw-Hill, New York. Jalali, A., Jaafar, M and Ramayah T 2014, Entrepreneurial orientation and performance: the interaction effect of customer capital. World Journal of Entrepreneurship, Management and Sustainable Development, 10(1), pp. 48-68. Lundström, A and Stevenson, L 2005, Entrepreneurship Policy – Theory and Practices, ISEN International Studies in Entrepreneurship, Springer. Newbert, S 2008, Value, rareness, competitive advantage, and performance: A conceptual-level empirical investigation of the resource-based view of the firm, Strategic Management Journal, 29(7), pp. 745-768. Nordqvist, M & Zellweger, T 2010, Transgenerational entrepreneurship: exploring growth and performance in family firms across generations, Cheltenham, Edward Elgar. Roger, B 2006, Coping With Complexity And Turbulence - An Entrepreneurial Solution. Journal of Enterprising Culture 14(04), pp. 241-266. Shirokova, G., Bogatyreva, K., Beliaeva, T & Puffer, S 2016, Entrepreneurial orientation and firm performance in different environmental settings. Journal of Small Business and Enterprise Development, 23(3), pp. 703-727. Sirimal, E., Silva, Yue Wu, & U. Ojiako 2013, Developing Risk Management as a Competitive Capability. Strategic Change, 22(5-6), pp. 281-294. Read More