ENTREPRENEURS, ARE THEY BORN OR MADE?

I. Introduction

Entrepreneurship is difficult to define. Scholars and experts have tried to formulate a definition that embodies the very essence of entrepreneurship in order to capture this abstract idea. Though the idea has been identified and indicated by a diverse set of interpretations, no single idea of entrepreneurship has been unanimously accepted and embraced by all economists or applicable in all circumstances. There are so many interpretations now available that help people grapple with the nature of entrepreneurship, though none can offer an answer with clear authority. This paper, which is library research based, aims to find the answer to that question that sparks the debate whether entrepreneurs are born or made. The definitions of entrepreneurship and the behaviors that are associated with entrepreneurial characteristics will be provided along with some examples of entrepreneur or entrepreneurial activities. Finally, the conclusion will be given at the end of the paper.

II. Supporting Theory For Entrepreneurship

An 18th French economist Richard Cantillon first introduced the word “entrepreneur”. He stated that the entrepreneur is an “agent who buys means of production at certain prices in order to combine them into new product” (Schumpeter, 1951,pp.248-250). Another French economist, J.B. Say, later added to Cantillon’s definition by stating that an entrepreneur is someone who brings other people together in order to build a single productive organism (Schumpeter, 1951). Overtime, “writers have identified entrepreneurship with the function of uncertainty-bearing, others with the coordination of productive resources, others with the introduction of innovation, and still others with the provision of capital” (Hoselitz, 1952.vol2).

In the 19^th century, scholars proposed various opinions on the matter as suggested by the British economists such as Adam Smith, David Ricardo who tend to undervalue the importance of entrepreneurship to Jon Stuart Mill who goes so far as to stress how significant is entrepreneurship for economic growth. In his writings he claims that entrepreneurship requires “no ordinary skills”, and he laments the fact that there is no good English equivalent word to encompass the specific meaning of the French term entrepreneur (Schumpeter, 1951). A more recent definition comes up in a research on entrepreneurship, which adopts the following definition of entrepreneurship:

“Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilize human, financial and material resources necessary to bring a project to fruition.” (Kao & John, 1984).

It is this significance of entrepreneurship for economic growth that make the question of whether the entrepreneurs are born or made that makes all these issues relevant, how to identify them and how to foster and encourage these traits.

II.1. Entrepreneur are Born

A lot of studies and research have been done on this particular matter. In the beginning many theorists believe that people are either born entrepreneur or they are not. Professor of Psychology Alan Jacobowitz, after conducting interviews to more than 500 entrepreneurs in a period of 3 years, concludes that entrepreneurs are born not made by interviewing more than 500 entrepreneurs in a period of 3 years. He claims that entrepreneurs are born, not made (Cohen, 1980). He maintains that his subjects share common characteristics, which include: restlessness, independence, a tendency to be a loner, and extreme self confidence (Cohen, 1980). Still, other researchers maintain that there are other personality characteristics that are uniquely entrepreneurial including innovative, action oriented, high on need for personal control and highly autonomous (Schein, 1994, Solomon, 1989).

In addition to this, Jacobowitz also devised a chronological schema of entrepreneurial indicator that he calls the five ages of entrepreneur. The ages are early childhood exposure, trouble in school, problems with work, desire to risk, and bliss in business independence. Jacobowitz believes that entrepreneurial aptitude is static, which means that people are either born with the said characteristic or not (Cohen, 1980). Initially this theory was supported by the majority of theorists but other scholars criticize that it has yet to be empirically proven (Naffziger, Hornsby, & Kurtado 1994).

John Kao, in his attempt to define entrepreneur in a more satisfying manner, holds that they are catalysts. They make things happen. They use creativity to conceive new things and zeal to implement them. In short, they are both creator and innovator. They both generate new idea and serve as the human vehicle by which implementation of that idea occurs. They take the ball and run with it, overcoming obstacles in the way (Kao & John, 1984).

Still others have also suggested what they term as entrepreneurial traits; Thomas (1999) and his colleague summarized the following traits in what they call the characteristics of entrepreneur distilled from 50 research studies. These traits include:

· Total commitment, determination, and perseverance

· Drive to achieve and grow

· Opportunity and goal orientation

· Taking initiative and personal responsibility

· Persistent problem solving

· Realism and a sense of humor

· Seeking and using feedback

· Internal locus of control

· Calculated risk-taking and risk-seeking

· Low need for status and power

· Integrity and reliability

In many instances, entrepreneurs are often described as impulsive, gambling adventurer, intoxicated by his or her own adrenaline (Kao & John, 1984). But though they put themselves at risk, they are actually motivated to achieve something greater, which is what separates them from the rest of people. Research also shows that they are more of a risk manager rather than risk-seeker. In addition, McLelland’s work on achievement motivation may also help to understanding the entrepreneurship. McLelland holds that human beings are driven by 3 motives: the need for achievement (accomplishing things), for affiliation (being with others) and for power (controlling others). Of these, the need for achievement is considered to be most relevant in understanding the entrepreneur.

McLelland further maintains that this particular need derives from people who want to be responsible for solving their problems, setting their goals and reaching these goals through their own efforts. In addition to this they also desire some kind of measure for their accomplishments. This need for achievement is highly linked to entrepreneurial tendency. The entrepreneurial characteristics largely refer to innate qualities, which separate entrepreneurs from other people who do not seem to possess entrepreneurial traits. These qualities are what drive them to have a vision and remain motivated to pursue their life long goals either for personal or practical reasons. It is these qualities that in turn provide jobs for people.

One very good example that embodies most of the innate sense of characteristics attributed to entrepreneurial traits is Henry Ford. Undeniably one of the greatest entrepreneurs the world has ever seen, “he placed himself at the forefront of social revolution that had an immeasurable impact on American life” (Thomas, 1999). Not only did he change the way American travels but also caused an agricultural revolution. Ford’s dropping out of school at age 16 and his interest in building a horseless carriage that attracted investors and eventual business startups and his determination to build cars that has appeal and affordable to the masses are the proof of his talent as entrepreneur. The way he ran his business was also typical entrepreneur who often desired total control; it is often said that “he distrusted bankers and kept large sums of cash so he would not have to borrow money...delighted in pitting executives against one another” (Thomas, 1999).

Based on this description, some people are clearly born entrepreneur. They may not have the proper educational background or environment that fosters or encourages them to become entrepreneur but they have an innate sense of entrepreneurial traits; an intuition that guides them in building their enterprises. These people see while other don’t and recognize opportunities while others fail to do so. Much of their undertaking derives from the resources within themselves.

II.2.Entrepreneur are Made

Trait theories are not completely condoned by entrepreneurial researchers. Though many agree with what Jacobowitz identifies as entrepreneurial-type characteristics, mostly choose a more dynamic perspective on the matter. Trait theory approach does not provide a distinction particularly to those of managers “because traits that are used to describe the characteristics of an entrepreneur can just as easily apply to many managers: it lacks specificity, refers largely to men, and is not applicable in all cultures (Kao & John, 1989, p.98). In his book, he further holds that “entrepreneurship is environmentally determined”, which means that there are certain conditions that will encourage entrepreneurial activities. (Kao & John, 1989, p.98). This includes capital availability, mechanisms for realizing value, and availability of other resources namely human resources, information resources such as libraries and data banks, and infrastructure resources such as inexpensive space. Other factors would also prove useful in creating an atmosphere conducive to entrepreneurial environment; media attention, idea-generating institution, and cultural environment (Kao & John, 1989, pp.94-95).

David Burnett claims that entrepreneurs can be supplied if two important factors are present: opportunity and willingness to become an entrepreneur. According to Praag (1995), opportunity “is the possibility to become self-employed if one wants to.” And willingness is the relative valuation of work in self-employment compared to one’s other options for employment. An individual’s willingness is positive if self-employment is considered as the best available career option, thus inherently affected by the anticipated market incentives that are available for would be entrepreneurs, namely and economic benefits (Praag, 1995, 513-40).

The supply of entrepreneurship is dependent on both individual level factors and general economic factors. Therefore policymakers can foster potential entrepreneurs by creating a supportive atmosphere through initiative market reforms that both increase the market incentives and the availability of capital that available for entrepreneurs (Wilken, 1979, xi-8).

Krueger and Brazeal (1994) offer a dynamic model in their approach towards understanding the entrepreneurial behaviors. It suggests that entrepreneurial intention is based on the interaction between personal characteristics, perceptions, values, beliefs, background, and environment (situational context). They base their approach on Shapero’s models of the entrepreneurial event in which entrepreneurship is defined as “the pursuit of an opportunity irrespective of existing processes” (Krueger & Brazeal, 1994, pp.91-103).

Basically the model places emphasis on the notion that beliefs, perceptions and assumptions are learned within the context of a given environment (such as business or community). The attitudes and perceptions bring about intentions, which in turn affect behaviors. Through indirect relationship, the Krueger and Brazeal model proposes the following order: individual’s perceptions, attitudes and assumptions are formed through environment or event. This later translates into intention, or potential, which is reflected in behavior. Thus, this approach suggests that entrepreneurial not only can be learned but can vary across individuals and situations (Krueger & Brazeal, 1994, pp.91-103). Naffziger (1994, pp.29-42) even suggests a step further by stating that the intention to act entrepreneurially is influenced by the interaction of several factors namely individual characteristics, individual environment, business environment, an individual’s personal set of goal, and the existence of a viable business idea. They will make comparisons between their perceptions and probable outcome intended targets, intended behavior and actual outcomes. If the outcomes meets or exceeds perceived outcomes, positive behavior toward entrepreneurial endeavors is reinforced. The same thing occurs if otherwise takes place.

Though at the dawn of entrepreneurial researches, many believed that entrepreneurs were born, things have changed now. A lot has been understood about the nature of this idea. The processes involved in the business startups have been observed and analyzed to help people better equipped in embarking an entrepreneurial attempt. An increasing number of higher learning institutions, namely tertiary college education, support the idea that entrepreneurship can be taught. Twenty two percent of the MBA class of 1998 (national) indicated that they made plans to establish ventures within 5 years of graduating (Lord, 1999). The growing number of interested people who wanted to study entrepreneurship have been responded by appropriate programs and centers throughout the 317 accredited business schools in the United States. At the moment, entrepreneurship centers are opened at a rate of one per month and 120 business schools worldwide provide similar programs in this discipline (twice as many existed 3 years earlier) (Lord, 1999).

While these schools may not produce entrepreneurs of Ford and Gates caliber, persuasive arguments for this notion have been made. The following examples would be cases in point in entrepreneurship-led development strategies further showing that entrepreneurs can actually be made:

III. Entrepreneurship in Practice

III.1.Indonesia

Indonesia is a developing country. In most developing countries, governments have played a major role in setting the course for development. Many state owned companies were created, which were unfortunately run inefficiently due to rampant corruption and inefficient bureaucracy. The companies were not run according to cost-cutting and profit-maximizing manner. As a result, the performances of these companies were substandard. (Elkan, 1988, pp.41-42).

State owned enterprises also prevent entrepreneurs from entering the market. In the mid 1980s this was about to change, however. Indonesia disbanded its marketing board, which initially prevented entry into certain industries and opened its market to competition from domestic entrepreneurs. It was coupled by lowered taxes and increased price ceilings to give incentives to entrepreneurs. The result suggests evidence that favorable response by the private sector to the new entrepreneurial opportunities thus created” (Elkan, 1988, pp.41-42).

III.2.Technopreneurship in Singapore

The term “technopreneur” arose from Singapore to describe an individual who attempts to pursue entrepreneurial endeavors on a technology-centered enterprise (Burnet, 2000). The government of Singapore supports this endeavor by launching initiatives to promote technopreneurship as a means of economic development.

Singapore is a small island city-state that has almost no natural resources. Since it has to rely on its people, the government allocated a large sum of its annual budget to education expenditure, a move that later proves to have adverse effects because of the high literacy rates, human capital development is no longer reasonable to sustain economic growth.

Recognizing the need for new strategy, the government then turned to technology sector. Singapore began to encourage technopreneur by providing favorable policies. Some of these initiatives are government sponsored university courses on technopreneurship and helps connect potential technopreneurs to venture capital companies. This positive openness has encouraged many business startups to form. The success of these initiatives prompted other Asian countries to do likewise. Malaysia has established its Multimedia Super Corridor towards helping budding technopreneurs and Hong Kong recently completed its CyberPort, a technopreneurship-friendly business district.

IV. Conclusion

Are entrepreneurs born or made? As the theory of entrepreneurship has evolved and more understanding has been gained of this idea and as shown in the exposition outlined in the previous pages, it is apparent that no clear-cut response can be provided to answer this question but according to my opinion entrepreneurs can be made. Since entrepreneurship involves a set of characters and behaviors that are a complex interaction of innate, background and environmental factors, the same thing can be said about entrepreneurship. Since small businesses, which are notably run by entrepreneurs, help boost the economic growth of its environment, the question to be asked should be substituted by one of how entrepreneurship can best be fostered and supported.

References:

Schumpeter, Joseph A., Essays of J.A. Schumpeter, Cambridge, MA: Addison Wesley Press, Inc., 1951, Pp.248-250

Hoselitz, B.F., “Entrepreneurship and Economic Growth,” American Journal of Economic Sociology, 1952, Vol. 12

Cohen, N., “The Five Ages of the Entrepreneur.” Venture. 1980 July. Pp.40-42.

http://www.celcee.edu/news/c982364.html (May 2003)

Schein, E.H., “Entrepreneurs: What they’re really like.” Vocational Education Journal. 1994. 64(80). 42-44.

http://www.celcee.edu/news/c971204.html (May 2003)

Naffziger, D.W., Hornsby, J.S., Kurtako, D.F., “A Proposed Research Model of Entrepreneurial Motivation.” Entrepreneurship Theory and Practice. 1994. 18(3). Pp.29-42. http://www.celcee.edu/news/c970773.html (May 2003)

Kao, John J., Entrepreneurship, Creativity and Organization, Harvard Business School, Boston, MA, 1989, 98

Stewart, Thomas A; Taylor III, Alex; Petre, Peter; Schlender, Brent, November 22, 1999, The Businessman of the Century, Fortune magazine, p. 77

Burnett, David, The Supply of Entrepreneurship and Economic Development

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Lord, M. March 29, 1999. Attention, aspiring capitalists; B-school students are studying entrepreneurship. U.S. News Online. Available: usnews.com. http://www.c992600.html. (May 2003)

Krueger, N.F. and Brazeal, D.V., 1994, “Entrepreneurial potential and potential entrepreneurs.” Entrepreneurship Theory and Practice. Vol. 18(3), pp91-103, http://www.celcee.edu/journal/c970769.html (May 2003)

Elkan, Walter, December 1988, “Entrepreneurs and Entrepreneurship in Africa,” Finance & Development, Vol. 20, 41-42

Wilken, Paul H, 1979, Entrepreneurship: A Comparative and Historical Study, Norwood, NJ: Ablex Publishing Corporation, xi-8